Country Report Guinea

Outlook for 2008-09

The president, Lansana Conte, will reassert his control over government now that he has sacked the reformist prime minister, Lansana Kouyate, and replaced him with a loyal member of the old guard, Ahmed Tidian Souare. There is a strong possibility that this could lead to some form of political upheaval, even a military coup, as frustration with the government, which is blamed for the deteriorating standard of living, is high. Mr Kouyate’s wide-ranging fiscal, monetary, economic and political reforms are now in effect at an end, and the poverty reduction and growth facility (PRGF), which runs from July 2007 to June 2010, is expected to go off-track. A scarcity of goods, particularly food, and high international oil prices will keep average inflation high, at 30% in 2008 and 25% in 2009. The current-account deficit will rise from 10.5% of GDP in 2008 to 11.1% in 2009 as imports increase.

The political scene

The prime minister, Mr Kouyate, has been sacked by the president, Mr Conte, who had become increasingly uneasy with the reform process. Public response to the sacking has been relatively subdued, although junior officers in the army staged a brief mutiny. The new prime minister, Mr Souare, is a member of the old guard. Cote d’Ivoire has joined the Mano River Union, which is mainly focused on improving security in the subregion.

Economic policy

The sacking of Mr Kouyate has derailed the economic reform process, including efforts to instil sound public expenditure management and proper regulation of economic sectors, as well as to bring independence to the Central Bank and basic functionality to public services, such as water and electricity.

The domestic economy

Inflation has risen sharply in recent months, owing to increasing international food and oil prices and the depreciation of the Guinean franc. The cost of the staple food, rice, has risen from Gnf120,000 per 50-kg bag in May 2007 to Gnf130,000-160,000 (US$29-36) in May 2008. International mining group Rio Tinto now estimates the iron ore deposits at Simandou in the south-east at 2.25bn tonnes and is seeking a Chinese partner, particularly a steel company that is allied to a construction firm, to help to build and finance the mine.

Foreign trade and payments

Recent data from the IMF’s Balance of Trade Statistics show that Russia is Guinea’s top export destination, on account of its large demand for bauxite and alumina, while China is the top source of imports for Guinea, reflecting the country’s demand for cheap manufactured consumer goods.