On September 15, the IMF Executive Board approved $67.38 million in funding under the Rapid Financing Instrument. This is an important first step in addressing a large financing gap in Equatorial Guinea arising from the twin shocks.
In a conversation with IMF Country Focus, Valentin Ela Maye, Equatorial Guinea’s Minister of Finance, Economy and Planning, describes how the government will use the assistance in a transparent manner, providing much-needed resources to meet immediate humanitarian needs and continue economic reforms.
How will the emergency financing be used to support the economy?
With the collapse of international oil prices and the emergence of COVID-19, Equatorial Guinea’s economic indicators have deteriorated sharply since the start of the government’s financial program supported by the IMF Extended Fund Facility (EFF) signed in December 2019. These unanticipated events, coupled with the recent disaster in the city of Bata have produced a large funding gap in the national budget and the balance of payments, limiting the government’s ability to fully address the effects of the crises.
|Valentin Ela Maye,|
Equatorial Guinea’s Minister of Finance, Economy and Planning
The government plans to use the emergency funds provided by the IMF to continue economic support to the numerous victims of the Bata explosions, rehabilitate the social and economic infrastructure, including residential housing, schools, and utility lines destroyed by the explosions, and continue financing the pandemic containment plan. It is important to note that despite the efforts deployed in preventing COVID-19, the country’s capacity to continue managing the health emergency remains limited. It is imperative that we strengthen hospital infrastructure and increase medical staffing at all levels, particularly after the recent spike in the number of infections being monitored by the Health Department.
It is also critical that we allocate resources to support a post-COVID-19 strategy to aid the recovery of small and medium-size enterprises (SMEs) of the non-oil sector, which are the country’s principal engine of job creation.
What measures have the authorities taken during this difficult period?
A public health emergency was declared in March of last year, and economic measures were adopted to strengthen social protections and support SMEs. They included temporary tax benefits for non-oil businesses, a social assistance program for the most vulnerable population, and reforms to contain the fiscal deficit, despite the increase in public spending required to cope with the pandemic.The measures also included the formulation of a healthcare plan to prevent and mitigate COVID-19, the suspension of in-person educational activities, the closing of borders, nonessential retail trade and services, and strong preventive measures for essential sectors, which had also seen a contraction in activity.
Despite the adverse impact on the economy, the government succeeded in effectively containing the pandemic, mainly through the early start of the vaccination campaign, and conducting strict contact tracing despite the country’s geography.
In response to the Bata disaster, an assessment of damages and number of affected persons was undertaken with assistance from international experts, and work has begun on the design and evaluation of a reconstruction plan for the city. Senior government officials took the lead in providing economic assistance to the victims to meet basic housing and living expenses as well as medical assistance.
We also continued progress on the agenda of structural reforms agreed with the IMF, despite the drastic change in macroeconomic and financial conditions faced by the country since early 2020. An example of this is our commitment to improve governance and fight corruption with the adoption in May of the law on preventing and combating corruption, which was drafted with technical assistance from the IMF and in line with international standards.
In parallel, we moved ahead in other areas of utmost importance for public financial management, including the electronic customs system now in operation in the capital city of Malabo, the implementation of a software application for execution and control of current expenditure, and the capital expenditure monitoring system developed with technical assistance from the World Bank. We have also made progress with the online publication of national laws.
What are the government’s priorities to support the recovery?The adoption of the Anti-Corruption Law is a fundamental step to improve governance, attract foreign investment, promote fiscal transparency, and prevent the misuse of public funds, all of which will benefit the economic recovery. The government plans to approve regulations that will require senior officials to report their assets and have that information published as soon as possible, in addition to establishing an anti-corruption commission.
At the same time, we are determined to continue with other structural reforms such as the clearing of domestic arrears, which will not only strengthen the private business sector but also benefit the national banking system by improving financial indicators. We also continue to work to strengthen the tax and customs administration, to modernize the public financial management framework, and to advance all the actions that will help us increase revenue collection and improve the business climate. Another priority in our agenda is to promote economic diversification away from the hydrocarbon sector. In fact, the new Sustainable Development Strategy “Agenda Guinea Ecuatorial 2035” has been recently approved.
How will the government ensure the transparent use of funds? How will the government’s Good Governance and Anti-Corruption Plan come into play?
We are determined to implement the necessary actions to improve governance and fight corruption. This commitment is backed by the implementation of the prior actions concerning the transparent use of resources required for access to the IMF emergency loan.
Adoption of the anti-corruption law, which is aligned with the highest international standards, is a key step toward stronger management and increased transparency of public resources. The contracting of international audit firms to ensure the proper use of expenditure relating to both COVID-19 and the Bata emergency response attests to our government’s commitment. The terms of reference for the audits are published on the Ministry of Finance website. To increase transparency in the hydrocarbon sector, we are finalizing an information report on this sector and audits of the state oil and gas companies, and we will publish all these reports.
Last, but not least, I would like to emphasize that we are continuing efforts on the actions defined in the Good Governance and Anti-Corruption Plan approved in late 2019.
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