Further economic decline expected as donors quit

[Guinea] An unhappy woman selling rice in Conakry. Food prices have increased six-fold in recent years while wages have stagnated.
Woman selling rice in Conakry market (IRIN)

Foreign donors said the halt in World Bank loan disbursements to Guinea was due to aggravate a worrying economic situation in a country where the population is already starved of essential goods and services.

The International Development Association (IDA), the Bank's lending arm for the poorest countries, announced last week it had halted the disbursement of further loans to Guinea by mid-June and suspended field projects following the government's failure to pay off debt servicing arrears of US $2.4 million.

"Everything has come to an end," said a Conakry-based Bank official, who declined to be named. "We did our best so far but the government doesn't make enough effort, the situation is becoming very bad for the population," he added.

Donor sources said the annual average inflation rate rose to 13 percent in 2003 from 6.8 percent in 2000, reflecting imprudent monetary management and climbing import prices.

Over the last 15 years, rice and other staple-foods have seen a six-fold price-rise, while salaries for civil servants have stayed at the same level.

"The poorest will suffer more from the deterioration of the economic crisis than anyone else," said one official at the Ministry of Social Affairs in Conakry.

The IDA, which provides some US $30 million of budgetary support to Guinea each year, is the last on a long list of foreign donors to suspend its cooperation with the authorities.

The International Monetary Fund withdrew from Guinea two years ago, leaving the country without economic guidelines.

The IMF also suspended its US $800 million-debt relief mechanism, the Heavily Indebted Poor Countries (HIPC) Initiative, agreed in 2000 to help Guinea advance its poverty reduction programme.

Exiting donors have deplored bad governance, lack of transparency in the management of public expenses, corruption and improper economic practices.

In one of its last papers on Guinea, published in 2002, the IMF deplored fiscal slippages in 2001 that stemmed from significant revenue shortfalls and higher-than-programmed spending on defence.

"These slippages led to expenditure cuts in priority sectors, which - while helping contain the fiscal deficit - resulted in a distribution of expenditure that did not advance the poverty reduction objectives of the programme," the IMF said.

Former Guinean Prime Minister, Francois Fall, severely denounced those practices when he resigned in May, after just two months in the job. From the safety of exile in France, Fall was later highly critical of President Lansana Conte and accused him of blocking attempts at political and economic reform.

Fall particularly complained that Conte, a former army colonel who came to power in a 1984 coup, was an obstacle to economic reform, renegotiation of external debt and the prospects of launching a new dialogue with the European Union.

The EU, a leading donor to Guinea, halted annual budgetary support worth about 40 million euros ($49 million) in 1998 amid concerns over bad governance, officials from the Conakry delegation said.

The EU continues to support development in Guinea through non-governmental projects in infrastructure provision, rural development, food security and good governance.

However, with no dialogue between the EU and Guinea, a 221 million euro (US$ 49 million) package promised to Guinea under a five-year programme between the EU and the African, Caribbean and Pacific countries (ACP) has been locked. Dispersal of funds could have begun two years ago.

"We're faced with many difficulties in Guinea," said a member of the EU delegation. "There's no political dialogue, which is a preliminary for delivering aid assistance to the government," he added.

However, EU officials said they were committed to a resumption of dialogue and hoped to sit down with Guinean authorities in Brussels next month. An agenda has yet to be set up.

"I think Guineans want to discuss, but it's clear that they don't want Europeans to lay down the law," a UN senior official said.

Guinea had declined an invitation to Brussels in April, said EU officials, but they expected a change of heart before a newly set deadline of mid-July.

"Guinea has no choice: at least half of the Guinean budget comes from external loans, and most of the payments have been suspended so far," a World Bank official said.

He warned that the suspension of the IDA's loans would cause disruptions on aid programmes with finance for AIDS, education and health projects interrupted.

"We have US $250 million to use in the social sectors here but we're sorry: the country is just not performing," the official said.

Donors worried about the impact: "We fear that more field projects will end because of the suspension of payments," said a Bank official in Conakry, talking on conditions of anonymity.

Public investment in local services, including hospitals, has failed to materialise over the past year, said government officials in both Conakry and the outer provinces.

In the remote Forest Region, in southern Guinea, the last public investment in hydraulic and electric services or highway infrastructures was in 1961. Since then, the population of the region has increased by five.

"We're worried, it's a very bad sign for us," said the Fadama Kourouma, head of social affairs for the Forest Region.

"French cooperation has already suspended and as a result we've lost a great grassroots development project based on community participation and fight against poverty," he said.

"It was one of the last which was still on track and it has not been replaced," he added. "We feel abandoned."

This article was produced by IRIN News while it was part of the United Nations Office for the Coordination of Humanitarian Affairs. Please send queries on copyright or liability to the UN. For more information: https://shop.un.org/rights-permissions

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