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 subdued 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 challenging 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.