Guinea – A Decade of Public Financial Management Reforms

Posted By Abdoul Wane[1]

In this latest in the series of blog posts by IMF area department country teams, IMF Resident Representative Abdul Wane reviews the mixed progress of PFM reform in Guinea.

Against the backdrop of economic fragility and fiscal challenges, Guinea’s medium-term programs supported by Fund arrangements over the last decade aimed to reduce financial imbalances. The growth objectives were predicated on greater fiscal discipline and an improved quality of public spending. Fiscal consolidation was to be supported by tax policy and tax administration reforms and a gradual shift in budget allocations toward priority spending, including investment. To address these challenges structural measures in Fund programs – as well as program conditionality - focused largely on PFM reforms (Figure 1 below). The 2001 PRGF request included three structural performance criteria (PC) of which two were on PFM reforms. Likewise, the 2007 PRGF request included six PCs on PFM out of a total of nine PCs.

However, since Guinea never implemented fully a program supported by the IMF, several measures had to be reprogrammed in successor programs. The sluggish implementation of reforms partly reflects Guinea’s political and institutional fragility. Vested interests stalled the reform agendas, in the absence of checks and balances. Important structural measures could not be implemented fully or were reversed because of insufficient political support, and control systems were bypassed under the watch of the political leadership. As a result, overall performance in PFM reforms has been feeble as periods of regression followed episodes of progress.

Figure 1

What areas of PFM have been covered?

In the Fund-supported programs, the focus has been on revenue mobilization, including from the mining sector, together with reforms of budget formulation and execution. Given Guinea’s weak revenue base and to beef up basic services and infrastructure, reform strategies emphasized revenue-based fiscal consolidation combined with a growth-friendly rationalization of spending.

How much progress has been made in implementing the reforms?

Some progress was made, but challenges remain, especially on public expenditure management. Rising to these challenges will help reduce Guinea’s tax gap and improve the quality of government spending.

How have FAD and other TA providers supported the design and implementation of the PFM reform strategy?

Guinea has been an intensive user of IMF’s Fiscal Affairs Department (FAD) technical assistance. Since 2005 FAD has sent more than one hundred missions on tax policy, tax and customs administration, public expenditure management, budget classification, and treasury management (Figure 2). Technical assistance staff spent in Guinea more than 2,000 person-nights. Guinea’s use of technical assistance has also increased over the years, from four missions in 2005 to almost 30 missions in 2013. Technical assistance focused less on revenue reforms than on expenditure management and treasury operations, perhaps reflecting lackluster progress on the latter.

Figure 2
Other donors were involved in providing technical assistance on PFM as well. FAD led the dialogue on tax policy and tax administration with inputs from some bilateral donors on issues relating to governance and the credibility of tax processes. On expenditure management, FAD worked closely with the World Bank, which focused on strategic resource allocation and operational efficiency of public spending (MTEF, budget allocation process, procurement code, etc.). FAD focused on developing a new legal environment for public finance, strengthening government accounting, and on establishing a Treasury Single Account. A large part of PFM TA delivered by FAD over the last 18 months was financed by the European Union.

What impact is PFM reform providing to economic and fiscal performance in Guinea?

Periods of progress in redressing Guinea’s PFM system have generally been followed by fiscal consolidation and lower inflation. This was the case during the 2007 PRGF program and the ongoing ECF program, when the authorities engineered impressive policy shifts toward macroeconomic stability.

However, Guinea’s episodes of relative success in PFM reforms have been short-lived. The lack of steady and broad-based progress prevented reaping the benefits of the authorities’ efforts. Progress in boosting revenue provided fiscal space to address Guinea’s daunting challenges for reducing poverty. However, lackluster performance in strengthening public spending kept at bay improvements in service delivery and poverty reduction. The challenge for Guinea’s first democratically elected regime is thus to sustain the progress in PFM reforms. Implementing fully, for the first time, an economic program supported by the IMF will be a sign of its resolve to embrace a new route toward shared prosperity.

[1] IMF Resident Representative in Guinea.

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