IMF Staff Completes 2023 Article IV Mission to Equatorial Guinea

October 6, 2023

End-of-Mission press releases include statements of IMF staff teams that convey preliminary findings after a visit to a country. The views expressed in this statement are those of the IMF staff and do not necessarily represent the views of the IMF’s Executive Board. This mission will not result in a Board discussion.

Malabo, Equatorial Guinea: An
International Monetary Fund (IMF) team, led by Mr. Mesmin Koulet-Vickot,
visited Malabo during September 26-October 5 to hold discussions for the
2023 Article IV consultation. At the end of the visit, Mr. Koulet-Vickot
issued the following statement:

“In 2022, economic indicators registered improvements after a long
recession. Real GDP grew by 3.2 percent on account of both oil and non-oil
economic recovery. Thanks to high oil prices, both fiscal and current
account balances were in substantial surpluses, and part of the oil
windfall was saved. The non-oil primary fiscal deficit deteriorated
somewhat in 2022 relative to 2021, in part reflecting de 7M Bata
reconstruction-related expenditures.

“However, the recovery was short-lived, and the medium-term prospects are
negatively affected by the projected decline in oil production.

“Equatorial Guinea’s economy would fall back into recession in 2023, with
expectations of a 7.8 percent contraction in economic activity, reflecting
a resumed decline in oil production and the obtained growth in the non-oil
economy due to persistent domestic payment arrears and underlying
structural weaknesses.

“The overall fiscal surplus in 2023 would drop to 0.3 percent of GDP from
13.6 percent in 2022, while the non-oil primary fiscal deficit is projected
at 23.3 percent of non-hydrocarbon GDP, up from 22.7 percent of
non-hydrocarbon GDP in 2022. The external current account balance is
projected to turn into a deficit of 3.9 percent of GDP in 2023 from a
surplus of 9.6 percent of GDP in 2022.

“In the years ahead, the economy is projected to remain in recession with a
further continued decline in oil production and a lackluster
non-hydrocarbon economy held back by a not well-developed business
environment and weak human capital. Against this backdrop, an acceleration
of transformative reforms and prudent macroeconomic management are required
to reverse negative trends.

“Fiscal policy will need to balance growth and poverty reduction
considerations with the need to ensure fiscal sustainability in the face of
the trend decline in oil production. To this end, the fiscal framework
needs to be anchored on the nonhydrocarbon primary balance and be focused
on boosting nonhydrocarbon revenue collection and reducing non-priority
spending while improving spending efficiency and social
outcomes—particularly in health care and education—and supporting
vulnerable households through a well-targeted social safety net. The 2024
draft budget appropriately targets a reduction in the nonhydrocarbon fiscal
deficit by about 3.2 percentage points of nonhydrocarbon GDP. To achieve
this, the authorities are planning a series of impactful measures. On the
revenue side, they intend to (i) pass a new tax code to enlarge the tax
base and streamline tax exemptions; (ii) deploy the IT customs system in
additional offices in the country; and (iii) fully implement the single
window for vehicle clearance. On the spending side, they are committed to
phasing out regressive fuel subsidies, reducing non-priority capital
expenditure, and streamlining public entities. The steadfast implementation
of these revenue and expenditure measures, along with strengthened debt
management, will help ensure the achievement of the authorities’ fiscal
adjustment targets against the background of the projected depletion of
hydrocarbon reserves.

“It is crucial to restore the soundness of the banking sector to limit
fiscal and systemic risks and promote private sector-led growth. There are
encouraging signs that significative progress will be made in the coming
weeks for the large systemic bank. To minimize the cost to taxpayers, the
restructuring and recapitalization measures should be followed by efforts
to recover assets. Additionally, the mission encourages the authorities to
prioritize and accelerate repayments of bank-financed domestic arrears in a
transparent manner (see below) to shore up the financial situation of the
two undercapitalized private banks.

“Governance reforms are advancing but their pace should be stepped up. Key
recent achievements include the allocation of funding for the
anti-corruption commission and the adoption of a decree establishing a
treasury single account. With funding available, the authorities expect the
anti-corruption commission to be fully operational in the first quarter of
next year. This, together with the issuance of implementing decrees of the
anti-corruption law expected to be signed before the end of the year, would
pave the way to further the governance reform agenda, including the asset
declaration of senior public officials. The mission encourages the
authorities to engage with the EITI International Secretariat in the
ongoing process to address feedback received on the previous membership
application. Other pending important reforms include enabling the National
Financial Investigation Agency (ANIF) to develop and publish a guidance for
domestic financial institutions on identifying politically exposed persons
and reporting beneficial ownership, adopting a decree limiting the recourse
to non-competitive tender in public procurement, completing the publication
of beneficial ownership information of the COVID and 7M Bata-related
spending and publishing related procurement documents.

“Efforts to foster economic diversification and support sustainable
inclusive growth will need to be accelerated. While welcoming progress made
so far to settle domestic arrears, the mission calls for a comprehensive
plan that sets clear criteria for the repayment and contains strong
safeguards to ensure the transparency of the process. Additionally, the
mission encourages the authorities to focus on reforms aimed at reducing
the regulatory burden for business creation, boosting investment in basic
healthcare, education, and sanitation to support development of human
capital, and ensuring the well-functioning and efficiency of markets.
Policies aimed at supporting specific sectors need to be better justified
and tailored to the country’s capacity, including sunset clauses that are
evaluated periodically.

“The IMF team wishes to thank the authorities for their hospitality and
constructive discussions.”

During the visit, the IMF team met Minister of Finance and Budget,
Fortunato Ofa Mbo Nchama; Minister of Planning and Economic
Diversification, Gabriel Mbaga Obiang Lima; Delegate Minister of Treasury
and State Patrimony, Milagrosa Obono Angüe; Minister of Mines and
Hydrocarbons, Antonio Oburu Ondó; Delegate Minister of Education,
University Education, and Professional Training, Purificación Boari
Lasaquero, Vice-Minister of Education, University Education, and
Professional Training, Vicente Nsue Nsue; Vice-Minister of Finance and
Budget, Pedro Abeso Obiang Eyang; National Director of BEAC, Genoveva
Andeme Obiang, State Secretary of the Ministry of Finance and Budget, María
Ebiaka Mohete, and other senior government officials and of the general
state administration.