Lisandro Abrego, IMF’s mission chief for Equatorial Guinea, said that
the IMF’s process of approval of the loan to Equatorial Guinea
took about two-and- a -half years to conclude. The major factor that weighed against approving the loan was the country’s successive years of drastic decline in hydrocarbon output and a contracting non-oil sector.
The staff-monitored program (SMP), which closely looked into the desirability of granting loan, approved the dole out in 2018. Before granting the IMF’s Extended Fund Facility (EFF), the category under which the loan is granted, the country was told to establish a track record of policy implementation for medium-term structural reforms, a perquisite for grating loans to ensure, among other things, the repaying capacity of the loan receiving country.
The EFF will be used for the recovery of the country’s economy, with an unprecedented focus on sustainable and inclusive growth. Economic diversification and elimination of corruption through good governance would also receive high priority in the structural reforms that are being carried out.
Equatorial Guinea has a long -standing governance and corruption challenges. IMF will create a super-structure for addressing this issue within Fund’s 2018 Framework for Enhanced Fund Engagement, which lays considerable importance to good governance. Ensuring transparency in the hydrocarbon sector, which of late has been ridden with charges of corruption, will be another agenda in the restructuring measures the country is asked to carry out. Money laundering, which is alleged to be very common, will be strictly prevented through suitable policy measures.
Importantly, Equatorial Guinea’s application to join the Extractive Industries Transparency Initiative was one of the “prior actions” that the authorities needed to fulfil before the IMF Board considered their program request. Adoption and publication of an action plan to improve transparency and governance and fight corruption, the establishment of a system to adequately track and control government spending, and presenting a budget for 2020 that is consistent with program targets are some of the conditionalities laid by the Fund while approving the loan.
