cr18310

IMF Country Report No.
18/310
REPUBLIC OF EQUATORIAL
GUINEA
FIRST REVIEW UNDER THE STAFF-MONITORED
November 2018
PROGRAM—PRESS RELEASE; AND STAFF REPORT
In the context of the First Review Under the Staff-Monitored Program with the Republic of
Equatorial Guinea, the following documents have been released and are included in this
package:
• A Press Release.
• The Staff Report prepared by a staff team of the IMF following discussions that
ended on July 11, 2018, with the officials of the Republic of Equatorial Guinea on
economic developments and policies. Based on information available at the time of
these discussions, the staff report was completed on October 25, 2018.
The documents listed below have been or will be separately released.
Letter of Intent
Memorandum of Economic and Financial Policies
Technical Memorandum of Understanding
The IMF’s transparency policy allows for the deletion of market-sensitive information and
premature disclosure of the authorities’ policy intentions in published staff reports and
other documents.
Copies of this report are available to the public from
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International Monetary Fund

Washington, D.C.
© 2018 International Monetary Fund

Press Release No. 18/418 International Monetary Fund
FOR IMMEDIATE RELEASE Washington, D.C. 20431 USA
November 12, 2018
IMF Management Completes First Review

of Staff-Monitored Program
• Program implementation through April 2018 was satisfactory;
• A revised 2018 budget is helping to strengthen the public finances;
• While the growth outlook remains difficult, there are signs of a slight recovery of the
non-oil sector;
• It would be important to sustain efforts to buttress the public finances and implement
pending measures to foster diversification and good governance.
On August 16, 2018, the Management of the IMF completed the first review under the Staff-
Monitored Program (SMP) 1 with Equatorial Guinea.
The authorities continue to see the program as an instrument for bolstering capacity and
helping build an adequate track record of performance that could serve as the basis for
discussions on a potential Fund-supported program.
Notwithstanding still difficult economic and financial conditions, program implementation

for the first review has been satisfactory. All but one of the end-April 2018 performance
measures and indicative targets were met, some by wide margins, and fiscal space was
created to increase social spending. The implementation of a revised 2018 budget has helped
strengthen the public finances. Progress has been made on the structural agenda and the
authorities remain committed to its implementation, but there are delays in some areas,
particularly in those related to governance and transparency.
Despite signs of an incipient recovery in the non-hydrocarbon sector, the overall growth
outlook remains challenging, reflecting mainly a continued decline in hydrocarbon output.
Inflation remains subdued, driven by the economic slack and low world inflation. That said,
macroeconomic imbalances have narrowed, reflecting the implementation of measures to
strengthen the public finances and higher international oil prices. This has allowed an
1
An SMP is an agreement between country authorities and Fund staff to monitor the implementation of the
authorities’ economic program. SMPs do not entail endorsement by the IMF Executive Board. The SMP is
supported by quantitative performance measures, indicative targets and structural measures.
2
increase in government deposits at BEAC and an improvement in Equatorial Guinea’s

reserves position at this institution, although the latter remains negative.
Going forward, it would be important to sustain efforts to further strengthen the public
finances, as well as to ensure the implementation of measures to support economic
diversification and improve governance and transparency.
IMF staff will remain engaged with the authorities to monitor progress with the
implementation of their economic program and will continue to provide technical assistance
and training to support Equatorial Guinea’s capacity-building efforts.
REPUBLIC OF
EQUATORIAL GUINEA
FIRST REVIEW UNDER THE STAFF-MONITORED PROGRAM
October 25, 2018
EXECUTIVE SUMMARY
Staff-Monitored Program. In May 2018, the IMF’s Management approved a 7-month
Staff-Monitored Program (SMP), covering the period January 1–July 31, 2018. The main
fiscal objectives of the SMP are to (i) reduce the budget deficit through non-
hydrocarbon revenue mobilization and expenditure reduction while protecting social
spending and (ii) address critical weaknesses in public financial management. The
program also contains measures to improve the business climate, foster economic
diversification, and lay the basis for improving governance and transparency. In addition,
the program is providing a framework for bolstering capacity and helping build an
adequate track record of performance as the basis for discussions on a potential Fund-
supported program later this year.
Macroeconomic context. Economic conditions remain difficult, although

macroeconomic imbalances have narrowed, reflecting recent fiscal consolidation,
satisfactory program implementation, and higher international oil prices. Government
deposits have risen and imputed reserves at the BEAC are recovering, but are still
negative. The growth outlook remains challenging, reflecting mainly a secular decline in
hydrocarbon output, but there are signs of an incipient recovery in the non-hydrocarbon
sector. Inflation remains subdued, driven by the economic slack and low world inflation.
Program implementation. Program implementation for the first review has been
satisfactory. All but one of the end-April 2018 performance measures (PMs) and
indicative targets were met, some by wide margins, and fiscal space was created to
increase social spending. The implementation of a revised 2018 budget, even if it was
not approved by end-April 2018 as planned, has helped strengthen the fiscal position.
Progress is being made on the structural agenda and the authorities remain committed
to its implementation, but there are delays in some areas.
Completion of first review. In view of the satisfactory program performance, staff

supports the completion of the first review. Although the PM on external arrears was
missed, the deviation was very small and due to logistical reasons to a large extent
outside the government’s control.
REPUBLIC OF EQUATORIAL GUINEA
Approved By Discussions were held in Malabo during July 2–11. The staff
Anne-Marie Gulde-Wolf team comprised Messrs. Abrego (head), Nicholls, Perez-Saiz, (all
(AFR) and Kevin Fletcher AFR), and Keim (SPR). Mr. Ondo Bile (OED) participated in the
(SPR) discussions. The mission held discussions with H.E. Lucas Abaga
Nchama, Minister of Finance, Economy and Planning; H.E.
Gabriel Mbega Obiang Lima, Minister for Mines and
Hydrocarbons; H.E. Milagrosa Obono Angüe, Secretary of State
for the Treasury; Mrs. Genoveva Andeme Obiang, National
Director of the Central Bank for Central African States (BEAC),
and other senior government officials. The mission also
exchanged views with representatives of the private sector, civil
society, and development partners. Mr. Mengistu provided
research support and Mr. Ogaja provided assistance in the
preparation of this report.
CONTENTS
RECENT DEVELOPMENTS, OUTLOOK AND RISKS ______________________________________________ 4
PROGRAM IMPLEMENTATION _________________________________________________________________ 6
POLICY DISCUSSIONS ___________________________________________________________________________ 8

A. Fiscal Policy ____________________________________________________________________________________ 9
B. Public Finance Management __________________________________________________________________ 10
C. Protecting the Poor and Improving Social Indicators __________________________________________ 10
D. Building Financial Sector Resilience ___________________________________________________________ 11
E. Structural Reforms to Boost Non-Hydrocarbon Growth _______________________________________ 12
F. Improving Governance and Transparency _____________________________________________________ 12
G. Capacity Building _____________________________________________________________________________ 14
STAFF APPRAISAL _____________________________________________________________________________ 14
TABLES
1. Selected Economic and Financial Indicators, 2014–23 _________________________________________ 16
2a. Balance of Payments, 2014–23 (Billions of CFA) ______________________________________________ 17
2b. Balance of Payments, 2014–23 (Percent of GDP) _____________________________________________ 18
3a. Quarterly Summary of Central Government Operations, 2014–18 (Billions of CFA) ___________ 19
3b. Summary of Central Government Operations, 2014–23 (Billions of CFA) _____________________ 20
3c. Summary of Central Government Operations, 2014–23 (Percent of GDP) ____________________ 21
4. Monetary Survey, 2014–23 (Billions of CFA) ___________________________________________________ 22
2 INTERNATIONAL MONETARY FUND

5. External Financing Requirements, 2013–23 (Millions of USD) __________________________________ 23

6. Prior and Structural Measures _________________________________________________________________ 24
7. Quantitative Performance Measures and Indicative Targets (Billions of CFA) __________________ 25
ANNEXES
I. Revision of National Accounts _________________________________________________________________ 26
II. Fiscal Consolidation Measures in 2018 ________________________________________________________ 27
III. External Debt from China _____________________________________________________________________ 28
IV. Reforming Public Financial Management Framework _________________________________________ 29
APPENDIX
I. Letter of Intent _________________________________________________________________________________ 31
Attachment I. Memorandum on Economic and Financial Policies ________________________ 34
Attachment II. Technical Memorandum of Understanding _______________________________ 50
INTERNATIONAL MONETARY FUND 3

RECENT DEVELOPMENTS, OUTLOOK AND RISKS

1. In May 2018, the IMF’s management approved a 7-month Staff-Monitored Program
(SMP). The SMP covers the period January 1–July 31, 2018 and is being supported by quantitative
performance measures, indicative targets and structural measures. The main fiscal objectives of the
SMP are to (i) reduce the budget deficit through non-hydrocarbon revenue mobilization and
expenditure reduction while protecting social spending and (ii) address critical weaknesses in public
financial management. The program also contains measures to improve the business climate, foster
economic diversification, and lay the basis for improving governance and transparency. In addition,
the program is providing a framework for bolstering capacity and helping build an adequate track
record of performance as the basis for discussions on a potential Fund-supported program later this
year. Domestic political support for and ownership of the SMP remains strong. Private sector
confidence appears to be improving, supported by the enhanced policy framework provided by the
program.
2. The pace of economic contraction has slowed and macroeconomic imbalances have
narrowed, but economic conditions remain challenging.
• In 2017 the real GDP contraction is estimated to have slowed to 3.2 percent, from 8.6 percent
the previous year. This performance was driven by a lower decline of hydrocarbon output and a
modest increase (0.2 percent) in non-hydrocarbon GDP, for the first time since 2013.
• In June 2018, inflation rose for the third consecutive month, but remained low (1.6 percent y/y),
following negative readings in December 2017 (-0.2 percent) and March 2018 (-1.2 percent
y/y). Economic slack and low international inflation are helping to keep domestic inflation
contained. The inflation performance since April has been driven by the depreciation of the
CFAF against the dollar.
• The fiscal deficit narrowed substantially. The government generated an overall surplus of
0.6 percent of GDP compared with a projected deficit of 1.3 percent for end-April 2018. This
supported a large increase in the government’s deposits at the BEAC. The surplus largely
reflected a surge in resource revenues, due to higher oil prices, and lower spending.
• External sector buffers at the BEAC are recovering, but remain depleted. Despite the narrowing
of the overall fiscal deficit and the higher export earnings from better oil prices, Equatorial
Guinea (EG) imputed net foreign assets (NFAs) at the BEAC remained negative through June
2018, although they increased during Q2. Large outflows by the private sector, at least partly
related to the payment of government arrears towards end-2017 and early 2018, have kept
imputed NFAs in negative territory.
• The authorities have revised their national accounts from 2014 through 2016. The new estimates
imply positive GDP growth in 2014 (vs. contraction in the vintage for the SMP request), a

somewhat lower economic contraction in 2016, an increase in the share of the non-hydrocarbon
sector, and an upward revision to nominal GDP (Annex I).
3. Banking system soundness indicators at end-April 2018 continued to show important

weaknesses amid the still difficult macroeconomic conditions (Text Table 1). While banks’
capitalization appears to exceed minimum requirements and profitability is steady, credit quality and
liquidity measures flag important vulnerabilities. Nonperforming loans (NPL) to total loans reached
28 percent at end-April 2018, down from the end-March reading of 32 percent, but are at the same
level as at end-December 2017. Two-thirds of NPLs are accounted for by construction companies,
with most of which the government has arrears. The NPL decline in April 2018 is related to a
reduction in such arrears, which shows the importance of settling these obligations after an
appropriate audit. NPL provisions remain low, but are broadly in line with COBAC regulations as a
large proportion of the NPLs are from companies that have government contracts and so do not
require provisions. Bank liquidity remains ample for now, but a decline in foreign assets (and thereby
of base money) over the last year has led to a reduction in private sector deposits (9 percent y/y in
April). However, this has been partly offset by higher government deposits and increased BEAC
refinancing to the banking system. The latter remains well below the ceiling set by the central bank.
Text Table 1. Financial Soundness Indicators, Jan. 2014–Apr. 2018

(Percent, unless otherwise indicated)
2014 2015 2016 2017 2018
Jan Jul Dec Jul Dec Jul Dec Apr Jul Dec Apr
Regulatory capital to risk-weighted assets 21.4 19.9 25.5 24.1 23.8 28.4 27.3 28.3 28.3 31.2 33.7
NPLs: ratio to total loans 20.7 15.2 20.8 17.0 17.9 28.6 26.1 28.8 28.5 27.8 28.4
Provisions to non-performing loans 42.4 50.3 45.6 52.8 51.4 36.5 38.9 39.5 39.1 40.3 41.7
Profitability (ROA)1 1.4 1.3 1.2 1.1 0.8 0.8 1.1 0.7 0.9
Liquidity ratio2 207.1 181.7 194.0 178.5 200.7 184.8 158.4 143.8 146.6 171.2 161.0
1
Moving average of the four previous available periods
2
Ratio of high liquid assets (<1 M), to short term obligations (<1 M)
Source: COBAC
4. There are signs that monetary conditions have begun to ease, but private credit
growth remains weak. The inflation pick-up since April has reduced ex post real interest rates. At
the same time, the pace of decline in broad money has slowed appreciably to -5.3 percent y/y in
April 2018 compared with -18 percent in April 2017, aided by increased government deposits.
Despite these favorable developments, private sector credit expanded by only 1.0 percent y/y in
April 2018, after averaging 2.7 percent for the first three months of 2018. Nevertheless, this modest
expansion of credit is being led by long and medium-term credit, which together comprise just over
half of this increase and could help support stronger non-hydrocarbon activity in 2018. In line with
SMP and regional commitments, BEAC’s new lending to the government has remained at zero.

5. The 2018 growth outlook remains challenging, but good program implementation is
supporting an improvement in private sector confidence. Despite continued increases in
international prices, real GDP is projected to decline by 7.7 percent, owing to an increase in the pace
of contraction of hydrocarbon output. Importantly, however, the non-hydrocarbon sector is
expected to continue to grow as confidence recovers and bank credit expands. Inflation should
remain subdued, owing to output still being below potential and low world inflation, despite a
depreciating CFAF. EG’s external buffers at the BEAC are expected to rise, in line with a narrower
current account deficit and, to a lesser extent, continued FDI flows and public-sector deposit
repatriation.
6. Risks to the outlook and the SMP, while subsiding somewhat, are still tilted to the
downside. On the positive side, higher oil prices (these were well above program projections
through June) and the public announcement of the SMP are supporting a recovery in private
confidence and a concomitant up-tick in the non-hydrocarbon sector. These developments should
help generate employment and additional revenues to the government, especially if complemented
by the tax reforms envisaged in the SMP. Higher oil prices should also strengthen the external sector
in the short-term and provide an opportunity for the government to reduce the fiscal deficit further.
On the downside, concerns still linger about the following:
• The underlying health of the financial sector may be weaker than suggested by COBAC’s data. In
this scenario, and notwithstanding the banks’ high reported capital cushions, the potential for
negative feedback loops between the banks and the real economy remain strong.
• Failure of a systemic bank, or spillovers from banking problems in other CEMAC countries, could
impact public debt, confidence, and lending conditions and thereby economic growth.
• While program performance for the first review has been satisfactory, the authorities need to
remain vigilant and fully implement all remaining SMP measures. Failure to do so would delay
transiting to any potential Fund-supported program, weakening confidence, deepening
financing constraints, and setting back progress toward macroeconomic and financial stability.
• Capacity constraints and governance vulnerabilities could pose challenges to implementing

fiscal and structural reforms.
PROGRAM IMPLEMENTATION
7. All quantitative performance measures and indicative targets for end-April 2018 were
met, except one, which was missed by a very small margin.
• Strong program performance on fiscal measures. All quantitative fiscal performance

measures and indicative targets for end-April 2018 were met. Non-resource tax revenue
increased to CFAF 49 billion through end-April, which is well above the program target (CFAF
37 billion). This performance reflects the impact of revenue mobilization measures

implemented as part of the SMP (Annex II). The non-resource primary deficit of the central
government is estimated to have narrowed to CFAF -273 billion, well below the program
ceiling of CFAF -300 billion. This performance was partly supported by a sharp decline in
spending on goods and services and by lower capital spending relative to the program
targets for end-April.
• External Arrears. The ceiling on the non-accumulation of external arrears was missed by a
very small amount (see Table 7). This was due to a logistical issue with the correspondent
bank, which returned the funds. The authorities are trying to find a solution to this logistical
problem to avoid a recurrence.
• Debt measures. The ceiling on contracting and guaranteeing new external debt was met.
Through end-April the authorities
contracted CFAF 70 billion in new Text Table 2. Central Government Fiscal
external loans, below the end-April Outturn
ceiling of CFAF 80 billion. On new BEAC (In Billions of CFAF, unless otherwise specified)
credit, the government has maintained End-April 2018
its gross new credit at zero through Prog. Outturn
end-April, as envisaged in the program. Revenue 289 412
Of which
• Indicative targets. The indicative Resource revenue 214 336
targets on net domestic bank credit to Non-resource tax revenue 37 49
Other non-resource revenue 38 27
the government and social spending
were both observed. Expenditure 386 366
Of which
Compensation of employees 48 51
8. The revised 2018 budget (a
Purchase of goods and services 124 83
structural measure for end-April) was Subsidies and transfers 48 73
approved with a delay. Since early 2018, the Net acquisition of non-financial assets 153 141
authorities have used the revised budget to Overall fiscal balance -97 47
guide their fiscal policy and help achieve the Non-resource primary balance -300 -273
SMP objectives. However, the revised budget Source: Equatoguinean authorities and IMF staff estimates
was approved by Parliament only at end-July.

POLICY DISCUSSIONS
9. The policy discussions took place amid a somewhat improved macroeconomic
environment. The updated macroeconomic scenario reflects the impact of higher international oil
prices, which have contributed to a narrowing of the external current account, higher government
deposits, and higher imputed reserves at the BEAC. Going forward, the revised macroeconomic
framework assumes that the higher oil revenues would be used in a balanced manner to rebuild
deposit and reserve buffers and clear domestic arrears. Quantitative targets remain as in the original
program, as these are based on non-hydrocarbon fiscal variables and higher oil revenue will be
saved. By maintaining this tight fiscal stance, the authorities plan to take advantage of the higher oil
prices to strengthen buffers. While they are committed to locking in these gains over the medium
term, a further postponement of a large FLNG gas project due to financing delays has weighed on
the growth, fiscal and external outlooks in the outer years of the projection horizon relative to
expectations at the time of SMP approval.
Text Table 3. Medium Term Scenario, 2017–23

(In percent of GDP, unless otherwise indicated)
2017 2018 Projections
prel. Prog. Proj. 2019 2020 2021 2022 2023
Output and Inflation
Real GDP growth, percent -3.2 -7.9 -7.7 -2.6 -2.3 -1.4 -1.7 3.4
Hydrocarbon sector -5.6 -14 -14 -7.4 -7.9 -6.5 -7.5 2.6
Non-hydrocarbon sector 0.2 1.2 0.8 3.0 3.5 3.3 3.2 4.0
Inflation, percent (annual average) 0.7 0.6 0.9 1.4 1.9 2.5 3.0 3.0
Public Sector
Overall fiscal balance -2.5 -0.9 0.6 2.3 2.5 2.0 1.2 1.3
Non-resource primary balance -15.8 -14.0 -12.1 -9.2 -7.2 -6.2 -5.7 -5.2
1
Public debt 37.4 43.5 37.3 37.4 37.2 37.2 35.9 33.0
External Sector
Current account balance (- = deficit) -5.9 -2.4 -3.1 -3.6 -4.3 -4.4 -18.0 -6.0
Total external public debt 8.5 11.7 10.5 13.0 14.7 17.1 18.8 19.5
Sources: Equatoguinean authorities; and staff estimates and projections.

1
Public debt includes domestic arrears.

Fiscal Policy
10. The authorities remain committed to strengthening the fiscal position. 1 The 2018 fiscal
program targets an adjustment (measured by the change in the non-resource primary balance) of
3.7 percent of GDP, following the adjustment of 7.8 percent of GDP throughout last year. During the
first four months of 2018, fiscal consolidation was driven both by expenditure cuts and higher non-
resource tax revenues.
11. Fiscal consolidation in 2018 would continue to concentrate on reducing central

government capital spending and raising non-resource tax revenues.
• Expenditure reduction. Non-priority public spending is being reduced, including on public

investment. The authorities have confined capital projects to those with higher impacts. In
addition, tighter controls on the approval of spending have been adopted. In the area of fuel
subsidies, however, spending is growing at a faster pace than at the same period of 2017,
reflecting higher international fuel prices. If this trend continues, the authorities could surpass
their announced ceiling of CFAF 23 billion (see May 2018 MEFP, para. 11) on this item for 2018.
Staff urged adjusting the local price of fuel at the pump to contain the subsidy to the level
envisaged in the program. The authorities explained that it would be politically and socially
difficult for them to adjust fuel prices in a significant manner given other substantive fiscal
adjustments being implemented in other areas, but agreed to maintain the program target.
• Revenue mobilization. The authorities will continue to implement and fine tune their revenue
mobilization agenda. On the policy side, they plan to send to parliament in early August 2018
draft tax regulations to implement the measures recommended to increase non-resource tax
revenues. 2 The authorities also plan to continue implementing administrative measures to raise
additional resources. In particular, they plan to continue with measures aimed at limiting tax
fraud and exemptions, better enforcement at the border, and the requirement that companies
file their corporate taxes in Malabo. On customs, now that ASYCUDA is operational in Malabo,
the authorities plan to continue rolling out these new customs clearance procedures to Bata by
year-end. They also plan to join the World Customs Organization, a move that can help to
cement the customs reforms. Finally, to keep up the momentum on tax receipts, the authorities
plan to ramp up the public relations campaign and staff training. While acknowledging the
progress the authorities have made thus far, staff encouraged them to push ahead with the
computerization of the revenue departments, which is key to increasing overall efficiency.
1
Ratios to GDP have changed relative to the staff report for SMP approval due to the upward revision in nominal
GDP (Annex I).
2
Additional details on measures to increase non-resource tax revenue are provided in the authorities’ Memorandum
of Economic and Financial Policies, paragraph 10 and in Appendix I.

• Financing. As programed, the authorities have started drawing on the already established loan
facility with the Export-Import Bank of China to finance the 2018 budget (Annex III). At the same
time, the authorities continue their efforts to engage multilateral development banks on
providing budget support on the expectation that an IMF-supported program will be in place in
the coming months.
• Arrears. The authorities have developed draft terms of reference for the audit of domestic
arrears and plan to use these to hire an independent auditor. In the meantime, they continue to
talk with domestic creditors to build consensus on a path forward and pay down these arrears.
They are working on proposals for settling the validated domestic arrears once they have been
audited and plan to use part of the oil windfall to clear more domestic arrears than originally
envisaged, while strengthening deposit and reserve buffers at the BEAC. Staff supports using
part of the windfall to pay down arrears since reducing these is key to lowering NPLs in the
banking system—and reduce risks to financial stability—which would help a recovery of credit to
the non-hydrocarbon sector and support economic diversification.
Public Finance Management
12. Strong measures are being taken to revamp and strengthen the PFM framework. These
include the full devolution of budget implementation to the Ministry of Finance and the merger with
the Ministry of Economy. The Ministry of Finance has implemented specific procedures for spending
approvals and oversight for both current and capital spending. In the case of current spending,
these must be reviewed by the Directorate General of Budget Control. In the case of capital
spending, a standing committee of technicians reviews the projects and determines commitments.
The budget preparation process has also been revamped. In particular, all projects are now
considered and reviewed by a budget committee in the context of the government’s announced
policy priorities (Annex IV). The authorities thus appear to have met the end-July structural measure
on tracking expenditure commitments and strengthening expenditure controls (Table 6). Staff will
make a final assessment regarding compliance with this measure during the next program review.
While acknowledging progress made thus far, staff urged the authorities to unify the expenditure
control mechanism for overall spending and to improve the efficiency of expenditure monitoring by
computerizing the expenditure processes. While the Finance Ministry is now able to track spending
commitments and control expenditures for the current year, it would be important for the
authorities to move to multi-year budgeting in the future to further tighten fiscal management and
discipline.
Protecting the Poor and Improving Social Indicators
13. Expenditure is being reallocated toward social areas. In addition to raising expenditure
on health and education, the authorities indicated that they are prioritizing the construction of small
“urban districts” in remote rural and underserved regions of the country. They explained that a key
component of these centers is the construction of housing for low-income families living in the
districts, medical and educational facilities and other basic public services and infrastructure. This

spending is aimed at improving the population’s living conditions while helping to protect them
from the negative effects of fiscal adjustment. Staff urged the authorities to commence regular
household budget surveys to improve data collection on poverty and other social indicators. These
efforts will help inform ways of making needed improvements to social protection through better
targeting.
Building Financial Sector Resilience
14. Financial sector reforms are being addressed mainly at the regional CEMAC level, 3 but
domestic action can also contribute to financial stability.
• The authorities continue to support (i) COBAC’s action plan to address high NPLs and
strengthen supervision rules and (ii) the implementation of new provisioning rules, among other
measures. 4 In addition, they have asked COBAC to undertake an asset quality review of EG’s
banking system, which is expected to be conducted by end-2018.
• As suggested in paragraph 3, dealing with government arrears to construction companies is key

to sharply reducing NPLs and improving the overall level of solvency in the financial system. The
authorities are making progress towards that goal by reducing arrears and launching the arrears
audit process. Staff stressed the need for speeding up arrears auditing and settlement. 5
• Improved private confidence and fiscal discipline should help raise deposits and ameliorate
liquidity conditions of the banks in the medium term.
• The asset quality review might also be a useful input toward a strategy to reduce arrears not
related to the construction sector, which were already relatively high prior to the current crisis.
The long period of economic slack has led banks to initiate legal actions to repossess some of
the defaulting borrowers’ collateral, and banks have indicated that they are generally satisfied
with the legal and regulatory framework for foreclosures.
• Banks have also noted increased vigilance of the monetary and regulatory authorities in the
enforcement of existing rules on anti-money laundering, and the stricter enforcement of foreign
exchange regulations.
3
Details on the measures contained in the SMP to strengthen banks and manage potential risks are contained in
paragraph 15 of the SMP staff report (IMF Country Report 18/146).
4
More details on the COBAC action plan for 2018 can be found in the Staff Report on the CEMAC Common Policies
of Member Countries, and Common Policies in Support of Member Countries Reform Programs (IMF Country
Report 17/389).
5
The audit of arrears will also complement the future asset quality review as it will help determine the exact level of
future revenues committed by the government to the construction companies that have loans with the domestic
banks,

Structural Reforms to Boost Non-Hydrocarbon Growth
15. The authorities are steadily implementing their reform agenda to boost non-
hydrocarbon growth. The agenda focuses on economic diversification and improving the
environment for conducting business.
• Economic diversification. The authorities are preparing background studies to inform a

national conference (scheduled for March 2019) to revise the Horizonte 2020 strategy. A key
pillar of the proposed revised plan is the integration of the Millennium Development Goals and
environmental considerations with the economic strategy. The revised strategy will guide
economic diversification and sectoral policies for the next 5 to 10 years. In the meantime, work
on sectoral initiatives is moving ahead. In the area of tourism, the authorities are working on a
national tourism development plan, expected to be completed later this year, and are
discussing options to facilitate the issue of a tourist visa. Initiatives are also being implemented
to promote the fisheries sector. These include, the establishment of a training institute in Bata
for fisherfolk, and the construction of basic infrastructure to support the sector. Other sectoral
initiatives, including for the agricultural sector, are being developed. The authorities are also
implementing measures to reform autonomous agencies, focusing on improving corporate
governance and profitability.
• Business environment. In April 2018 the authorities amended the foreign investment law by
eliminating the requirement to have a local partner contributing 35 percent of the capital in the
non-hydrocarbon sector. They have already operationalized this new policy as they view it as a
key instrument for attracting new investment in the non-hydrocarbon sector. In this context,
they indicated that they have also operationalized the one-stop shop for foreign investment.
Later this year the authorities plan to launch a business climate diagnostic, jointly prepared with
the World Bank. The national business climate commission will review the diagnostic’s
recommendations with a view to implementing them. The authorities have also invited the
Singapore Corporation Enterprise to share with key stake holders in EG practical steps for
improving the business environment using the Singapore example. Additional plans to support
private investment include the creation of investment and export promotion agencies.
Improving Governance and Transparency
16. The authorities are pressing ahead with the implementation of their governance and
transparency agenda. Under the SMP they are focusing on the following elements:
• Strengthening governance and anti-corruption measures. In May 2018 the authorities

ratified the United Nations Convention Against Corruption (structural measure, July 2018). They
are now deliberating regulations to implement this convention. Moreover, as reported in para.
15, the amendment of the foreign investment decree to remove the requirement for a local
partner should help reduce opportunities for corruption. That said, no progress has as yet been

made on the authorities’ plan to fully operationalize the Accounts Tribunal Office, which is
expected to conduct annual audits of the budget outturn and publish the findings in a publicly
available annual report. The authorities have indicated that they will need to create the
necessary fiscal space for this entity and that equipping it with adequate personnel and
facilities will likely take them beyond 2018.
• Governance diagnostic. A Fund mission to conduct the governance diagnostic study visited
Malabo during 11-15 June 2018. The study, due by September 2018, will report on governance
and corruption challenges in Equatorial Guinea and propose measures to address them. It will
also inform the preparation of a governance strategy to be adopted by the government in
consultation with Fund staff. The authorities have reaffirmed their commitment to publishing
the study and the strategy, as part of their actions to help improve governance.
• Transparency in the hydrocarbon sector.
o The authorities noted progress in preparing for EITI membership, but have yet to submit an
application. In particular, they indicated that the EITI National Committee has completed
the necessary work program and plans for the coming year. They have also prepared a
budget for their planned activities. They have indicated that they will present their
membership application to the EITI by end-August. They explained that the delay reflects
changes in government personnel managing the EITI process, stemming partly from the
February 2018 government reshuffle. Staff stressed the need for submitting the application
promptly and for civil society groups that are part of the National Committee to endorse
the process so this can be validated by EITI.
o The authorities have launched the bidding process—based on terms of reference prepared
in consultation with staff—to hire independent firms for (i) auditing the accounts of the
state-owned oil and gas companies and (ii) conducting a detailed reconciliation of EG’s
gross hydrocarbon output with hydrocarbon revenues received by the budget in 2016 and
2017 (structural measure, July 2018). Staff is in discussions with the authorities to assess
whether the measure has been met.
• Data dissemination. The authorities have recently launched a new website of the Ministry of
Finance, which was used to post historical fiscal data. Staff recommended that the authorities
use this new website as a mechanism for disseminating more fiscal data and information—
including on fiscal legislation—and to regularly update the new website. Meanwhile, the
authorities have completed their preparatory work for subscribing to the general data
dissemination standards (e-GDDS). The next step is for an e-GDDS implementation mission to
EG. 6
6 An e-GDDS assessment mission took place in June 2016 and, subsequently, the authorities prepared draft metadata.
An e-GDDS mission is tentatively scheduled for the first quarter of 2019.

Capacity Building
17. The authorities are pressing ahead with their capacity building agenda. In early June
2018 the Fund delivered training in macroeconomic analysis and forecasting for public officials. The
authorities are discussing plans on how best to use the newly trained cohort to monitor, at a
technical level, progress on program work. At the same time, as they implement the various TA
recommendations, new TA needs are being generated. In this context, the authorities have
requested TA on implementing the tax and customs recommendations, particularly in the area of
training of tax inspectors. They have also requested additional assistance on further enhancing the
system of expenditure controls that they are implementing based on previous FAD TA. The
authorities have also expressed a strong interest in computerization of the expenditure processes.
They are working on enhancing debt management by expanding training opportunities, and
revamping systems and platforms.
STAFF APPRAISAL
18. Program performance has been satisfactory thus far. The authorities have made a
satisfactory effort to reduce macroeconomic imbalances, in most cases overperforming quantitative
program targets. The implementation of the revised 2018 budget made an important contribution
to the improved fiscal outturn through April. More broadly, commitment to the program and
willingness to take tough, but needed measures, is helping bolster the public finances and rebuild
private confidence.
19. Although the overall economy continues to contract, the outlook for the non-
hydrocarbon sector has improved, albeit, modestly. After posting modest growth in 2017, the
non-hydrocarbon sector is expected to continue to expand this year. The operationalization of a
one-stop shop for foreign investors, along with initiatives to improve the business environment,
would make EG more attractive for foreign investors by reducing transactions costs and other bottle
necks to business development. Other reforms, such as the proposed national development plan for
tourism and the creation of investment and export promotion agencies would bring a practical focus
to the diversification efforts. Their plan to include the Millennium Development Goals as a key pillar
of a revised Horizonte 2020 development plan, to be discussed in March 2019, is also welcome.
20. The authorities have rightly decided to use the excess revenues from the recent oil
revenue windfall to rebuild external and fiscal buffers. They are taking advantage of the recent
increases in oil prices to reduce the fiscal deficit and accumulate more deposits at the BEAC than
originally envisaged under the program. This is helping strengthen imputed NFA buffers at the
BEAC, which are expected to turn positive by end-2018. Staff also welcomes the authorities’ efforts
and continued commitment to change the composition of public expenditure and create room for
higher social spending to improve the living conditions of low-income groups.
21. The measures taken to enhance expenditure control and treasury management were
key to initial program success. The recent decision to devolve implementation of the budget to
the Ministry of Finance, Economy, and Planning, and bring all capital spending on budget are steps

in the right direction. These actions, which have been crucially aided by the recent merger of the
Ministries of Finance and Economy, should help to entrench fiscal discipline, reduce the
opportunities for overspending, and avoid the accumulation of new arrears. In addition, the new
procedures being used for preparing the budget should also help to weed out low priority projects,
while promoting ownership and broad support for the fiscal program. Going forward, the authorities
could further strengthen the management of expenditures by improving the information systems
used in the spending control and tracking processes.
22. Protecting the hard-won fiscal consolidation gains and maintaining the nascent non-
hydrocarbon recovery requires a stable financial system. The fiscal consolidation measures
currently being undertaken and the halt to a further accumulation of domestic arrears are enhancing
financial stability and boosting confidence. The authorities now need to develop a clear and well-
defined strategy for repayment of existing arrears that would permit the elimination of most NPLs
while rebuilding deposit and reserve buffers at the BEAC. It would also be important to tackle non-
construction related NPLs, which would remain relatively high and could restrict banks’ ability to
fully support the non-hydrocarbon sector’s nascent recovery. In this context, it would be important
for the COBAC to conduct a banking sector asset review as early as possible and address any
additional financial sector vulnerabilities that this exercise may uncover.
23. The initial efforts being made to foster good governance and enhance transparency
are welcome, but more work is needed. In particular, staff welcomes the authorities’ ratification of
the UN Convention Against Corruption and their actions thus far in deliberating rules for its
implementation. The recent amendment to the foreign investment law to remove the domestic
partner requirement may also help to tackle corruption. After the completion of the diagnostic study
on governance, it would be important for the authorities to adopt a strategy to foster good
governance and fight corruption. The authorities also need to press ahead with the audits of the
state-owned oil and gas companies while moving forward with their membership application to the
EITI.
24. Risks to the program, while subsiding somewhat, are still tilted to the downside.
Potential risks identified previously concerning the underlying strength of the banking system and
public-sector management capacity are all still important concerns. Also, while program
performance for the first review has been satisfactory, the authorities need to remain vigilant as
future slippages would delay transiting to any potential Fund-supported program and set back
macroeconomic stability. Therefore, the authorities need to remain committed to implementing the
fiscal adjustment and structural reform agenda necessary to revive the economy. They also need to
continue saving the excess revenues from higher oil prices, thereby protecting the fiscal program
and strengthening public finances.
25. Staff supports the completion of the first review under the SMP arrangement.
Although the PM on external arrears was missed, the non-compliance with the ceiling is small and
does not imperil the successful implementation of the program.

Table 1. Selected Economic and Financial Indicators, 2014–23

Prel. Projections
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
p j (Annual
p percentage change, unless otherwise specified)
Production, prices, and money
Real GDP 0.4 -9.1 -8.6 -3.2 -7.7 -2.6 -2.3 -1.4 -1.7 3.4
1
Hydrocarbon sectors 1.3 -9.4 -8.5 -5.6 -13.9 -7.4 -7.9 -6.5 -7.5 2.6
Non-hydrocarbon sectors -0.8 -8.8 -8.7 0.2 0.8 3.0 3.5 3.3 3.2 4.0
GDP deflator -1.3 -20.2 -6.4 12.5 8.6 1.3 0.3 1.8 3.2 2.4
Hydrocarbon sectors -5.5 -36.5 -17.8 17.1 24.2 -2.2 -6.6 -4.4 -2.9 -0.9
Non-hydrocarbon sectors 4.9 1.1 3.2 1.0 1.2 1.7 2.2 2.8 3.3 3.3
Consumer prices (annual average) 4.3 1.7 1.4 0.7 0.9 1.4 1.9 2.5 3.0 3.0
Consumer prices (end of period) 2.6 1.6 2.0 -0.2 1.3 1.5 2.3 2.7 3.3 3.3
Monetary and exchange rate

Broad money -14.1 -10.9 -16.4 1.0 1.9 14.6 9.8 6.2 6.6 7.4
Nominal effective exchange rate (- = depreciation) -0.2 -9.1 1.1 1.7 … … … … … …
Real effective exchange rate (- = depreciation) 2.7 -7.9 1.6 0.5 … … … … … …
External sector
Exports, f.o.b. -9.9 -46.1 -26.9 10.5 6.0 -8.9 -12.5 -9.1 -8.6 2.6
Hydrocarbon exports -9.8 -47.5 -25.9 9.6 6.7 -9.6 -13.7 -10.5 -10.2 1.5
Non-hydrocarbon exports -16.2 34.6 -49.4 39.6 -13.0 11.9 18.4 16.1 14.9 14.4
Imports, f.o.b. -4.6 -23.1 -33.9 -12.9 -11.9 -3.7 -6.0 -8.6 95.4 -45.0
Terms of trade -14.1 -34.7 -5.1 28.4 32.3 -3.6 -6.1 -4.8 -2.7 -1.3
Government finance
Revenue -4.1 -19.9 -45.5 9.7 1.5 -1.1 -6.8 -3.6 -2.4 5.7
Expenditure 7.0 -4.4 -42.9 -23.3 -14.8 -10.9 -8.7 -0.8 2.8 4.6
(Percent of GDP, unless otherwise specified)

Investment and savings
Gross investment 28.7 24.7 16.6 12.0 10.8 11.3 11.9 11.7 24.4 13.3
Gross national savings 24.5 8.5 3.6 6.1 7.6 7.8 7.6 7.4 6.4 7.3
Government finance
Revenue 24.1 26.6 16.9 17.0 17.3 17.3 16.5 15.8 15.2 15.2
Of which : resource revenue 21.3 22.2 12.7 13.6 13.2 12.6 10.8 9.4 8.1 7.7
Expenditure 31.6 41.6 27.8 19.6 16.6 15.0 14.0 13.8 14.0 13.9
Overall fiscal balance (Comitment basis) -7.5 -15.1 -10.8 -2.5 0.6 2.3 2.5 2.0 1.2 1.3
Overall fiscal balance (Cash basis)2 -4.7 -2.9 -7.9 -4.8 -17.1 2.3 2.5 2.0 1.2 1.3
Non-resource primary balance3 -28.4 -36.9 -23.3 -15.8 -12.1 -9.2 -7.2 -6.2 -5.7 -5.2
Outstanding public debt4 12.6 33.6 43.3 37.4 37.3 37.4 37.2 37.2 35.9 33.0
Change in domestic arrears 2.8 12.2 3.0 -2.3 -17.7 0.0 0.0 0.0 0.0 0.0
External sector
Current account balance (including official transfers; - =
deficit) -4.3 -16.2 -12.9 -5.9 -3.1 -3.6 -4.3 -4.4 -18.0 -6.0
Total external public debt 6.1 9.0 9.5 8.5 10.5 13.0 14.7 17.1 18.8 19.5
Debt service-to-exports ratio (percent) 2.6 3.6 5.8 3.3 4.9 4.8 6.9 8.0 10.6 10.9
External debt service/government revenue (percent) 6.4 5.9 12.7 7.3 11.3 10.3 13.6 15.0 18.5 18.5
Memorandum items
CEMAC Foreign Reserves
(US$ billions, end-of-period) 15.8 10.3 5.0 5.8 7.5 9.1 10.2 11.7 13.1 14.3
(in months of extrazone imports) 5.8 4.3 2.3 2.4 3.1 3.7 3.9 4.5 4.9 5.2
Oil price (U.S. dollars a barrel)5 92.3 47.0 39.0 51.4 68.9 69.7 66.0 63.1 56.8 55.4
Nominal GDP (billions of CFA francs) 10,747 7,795 6,674 7,268 7,285 7,185 7,041 7,070 7,172 7,589
Nominal GDP (millions of US dollars) 21,737 13,180 11,253 12,487 13,225 12,962 12,869 13,002 13,290 14,111
Non-hydrocarbon GDP (billions of CFA francs) 4,629 4,272 4,025 4,074 4,154 4,350 4,603 4,890 5,213 5,598
Exchange rate (average; CFA francs/U.S. dollar) 494.4 591.4 593.1 582.1 550.8 554.3 547.2 543.8 539.6 537.8
Sources: Data provided by the Equatoguinean authorities; and staff estimates and projections.
1
Including oil, LNG, LPG, butane, propane, and methanol.
2
Includes a one-time clearance of outstanding arrears through securitization in 2018.
3
Excluding oil revenues, oil-related expenditures, and interest earned and paid.
4
Outstanding public debt includes domestic arrears.
5
The local price of crude oil is the Brent and includes a quality discount.

Table 2a. Balance of Payments, 2014–231/

(Billions of CFA Francs, unless otherwise specified)
Prel. Projections
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Current account -457 -1266 -864 -430 -228 -255 -301 -308 -1290 -452
Trade balance 3538 1286 1086 1524 1829 1612 1344 1217 204 1019
Exports of goods, f.o.b. 6251 3371 2464 2723 2885 2629 2300 2090 1911 1955
Hydrocarbon exports 6141 3223 2389 2618 2795 2527 2180 1951 1751 1771
Crude oil 4424 2457 1725 1738 1831 1627 1454 1313 1167 1112
Liquefied natural gas 1318 610 480 546 680 641 492 391 352 411
Liquefied petroleum gas 183 52 80 138 106 100 96 95 85 87
Methanol 217 104 104 196 178 159 138 151 147 161
Non-hydrocarbon exports 110 148 75 104 91 102 120 140 160 183
Imports of goods, f.o.b. -2713 -2085 -1377 -1199 -1056 -1017 -956 -874 -1708 -936
Petroleum sector -327 -271 -82 -51 -30 -99 -130 -69 -905 -95
Petroleum products -231 -214 -201 -204 -266 -278 -270 -264 -262 -271
Public sector equipment and construction -919 -756 -599 -579 -466 -392 -342 -331 -331 -349
2
Other -1235 -844 -495 -366 -294 -248 -216 -209 -209 -220
Services (net) -1674 -1202 -867 -808 -856 -764 -660 -615 -647 -612
Income (net)3 -2056 -1076 -828 -899 -974 -905 -793 -721 -659 -670
Current transfers -265 -274 -256 -246 -228 -198 -192 -190 -187 -189
Capital and financial account 51 142 168 475 230 328 370 283 1245 394
Capital account 0 0 0 0 0 0 0 0 0 0
Financial account 51 142 168 475 230 328 370 283 1245 393
Direct investment 562 702 189 358 154 297 337 265 1149 370
Portfolio investment (net) -12 -1 0 0 -1 -1 -1 -1 -1 -1
Other investment (net) -499 -558 -22 117 77 32 35 19 97 24
Medium- and long-term transactions -76 13 278 152 27 48 24 20 -8 -20
General government -137 -48 229 90 27 48 24 20 -8 -20
Of which : amortization -152 -106 -85 -76 -113 -77 -101 -105 -133 -145
Other sectors 61 61 49 63 0 0 0 0 0 0
Short-term transactions -423 -571 -300 -35 50 -16 11 -1 104 44
4
General government -132 -231 282 167 90 -22 -11 -9 4 3
Banks 167 -71 -20 45 -1 -1 -1 -1 -1 0
Other sectors -458 -269 -562 -247 -38 6 23 10 102 41
Errors and omissions -181 278 -15 -88 0 0 0 0 0 0
Overall balance -586 -846 -712 -43 2 72 69 -25 -45 -58
Financing 586 846 712 -43 -2 -72 -69 25 45 58

Change in gross international reserves5 (- = increase) 587 846 712 43 -110 -200 -159 -135 -107 -96
Financing gap 108 108 128 90 160 152 155
Memorandum items:
Growth of hydrocarbon exports (percent) -9.8 -56.1 -26.1 11.7 12.8 -10.1 -12.6 -10.0 -9.5 1.5
Growth of non-hydrocarbon exports (percent) -16.3 12.5 -49.5 42.3 -8.0 11.2 20.0 16.8 15.8 14.8
Reserve assets at the BEAC (months of next years' imports) 6.0 3.6 0.2 0.1 0.8 2.2 3.5 3.0 5.0 5.4

1
The BOP data in this table are not compiled in accordance with the IMF's Balance of Payments Manual, fifth edition. The historic data have not been derived from
customs' and bank records' data, but from estimates of BEAC. Fund staff have made ad hoc adjustments to the data.
2
Including private sector consumption and non-hydrocarbon sector investment imports.
3
Including investment income of oil companies, which includes reinvested earnings (with an offsetting entry in foreign direct investment).
4
Since 2000, entries represent changes in government deposits in commercial banks abroad.
5
Consists only of items on the balance sheet of the BEAC (i.e., excluding government bank deposits abroad).

Table 2b. Balance of Payments, 2014–231/

(Percent of GDP, unless otherwise specified)
Prel. Projections
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Current account -4.3 -16.2 -12.9 -5.9 -3.1 -3.6 -4.3 -4.4 -18.0 -6.0
Trade balance 32.9 16.5 16.3 21.0 25.1 22.4 19.1 17.2 2.8 13.4
Exports of goods, f.o.b. 58.2 43.2 36.9 37.5 39.6 36.6 32.7 29.6 26.7 25.8
Hydrocarbon exports 57.1 41.3 35.8 36.0 38.4 35.2 31.0 27.6 24.4 23.3
Crude oil 41.2 31.5 25.8 23.9 25.1 22.6 20.6 18.6 16.3 14.6
Liquefied natural gas 12.3 7.8 7.2 7.5 9.3 8.9 7.0 5.5 4.9 5.4
Liquefied petroleum gas 1.7 0.7 1.2 1.9 1.5 1.4 1.4 1.3 1.2 1.1
Methanol 2.0 1.3 1.6 2.7 2.4 2.2 2.0 2.1 2.1 2.1
Non-hydrocarbon exports 1.0 1.9 1.1 1.4 1.2 1.4 1.7 2.0 2.2 2.4
Imports of goods, f.o.b. -25.2 -26.7 -20.6 -16.5 -14.5 -14.2 -13.6 -12.4 -23.8 -12.3
Petroleum sector -3.0 -3.5 -1.2 -0.7 -0.4 -1.4 -1.8 -1.0 -12.6 -1.2
Petroleum products -2.2 -2.7 -3.0 -2.8 -3.6 -3.9 -3.8 -3.7 -3.7 -3.6
Public sector equipment and construction -8.6 -9.7 -9.0 -8.0 -6.4 -5.5 -4.8 -4.7 -4.6 -4.6
2
Other -11.5 -10.8 -7.4 -5.0 -4.0 -3.4 -3.1 -3.0 -2.9 -2.9
Services (net) -15.6 -15.4 -13.0 -11.1 -11.7 -10.6 -9.4 -8.7 -9.0 -8.1
3
Income (net) -19.1 -13.8 -12.4 -12.4 -13.4 -12.6 -11.3 -10.2 -9.2 -8.8
Current transfers -2.5 -3.5 -3.8 -3.4 -3.1 -2.8 -2.7 -2.7 -2.6 -2.5
Capital and financial account 0.5 1.8 2.5 6.5 3.2 4.6 5.3 4.0 17.4 5.2
Capital account 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Financial account 0.5 1.8 2.5 6.5 3.2 4.6 5.3 4.0 17.4 5.2
Direct investment 5.2 9.0 2.8 4.9 2.1 4.1 4.8 3.7 16.0 4.9
Portfolio investment (net) -0.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Other investment (net) -4.6 -7.2 -0.3 1.6 1.1 0.4 0.5 0.3 1.3 0.3
Medium- and long-term transactions -0.7 0.2 4.2 2.1 0.4 0.7 0.3 0.3 -0.1 -0.3
General government -1.3 -0.6 3.4 1.2 0.4 0.7 0.3 0.3 -0.1 -0.3
Of which : amortization -1.4 -1.4 -1.3 -1.0 -1.6 -1.1 -1.4 -1.5 -1.9 -1.9
Banks 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Other sectors 0.6 0.8 0.7 0.9 0.0 0.0 0.0 0.0 0.0 0.0
Short-term transactions -3.9 -7.3 -4.5 -0.5 0.7 -0.2 0.2 0.0 1.5 0.6
General government4 -1.2 -3.0 4.2 2.3 1.2 -0.3 -0.2 -0.1 0.1 0.0
Banks 1.6 -0.9 -0.3 0.6 0.0 0.0 0.0 0.0 0.0 0.0
Other sectors -4.3 -3.4 -8.4 -3.4 -0.5 0.1 0.3 0.1 1.4 0.5
Errors and omissions -1.7 3.6 -0.2 -1.2 0.0 0.0 0.0 0.0 0.0 0.0
Overall balance -5.2 -10.8 -10.7 -0.6 0.0 1.0 1.0 -0.4 -0.6 -0.8
Financing 5.5 10.9 10.7 -0.6 0.0 1.0 1.0 0.4 0.6 0.8
Change in gross international reserves5 (- = increase) 5.5 10.9 10.7 0.6 -1.5 -2.8 -2.3 -1.9 -1.5 -1.3
Financing gap 0.0 0.0 0.0 0.0 1.5 1.8 1.3 2.3 2.1 2.0
Memorandum items:
Non-hydrocarbon current account -26.8 -26.4 -22.0 -17.3 -14.7 -12.3 -10.8 -10.3 -11.0 -10.4
Current account without FLNG/Kosmos project -3.1 -2.6 -2.9 -3.7 -6.3 -5.0
Reserve assets at the BEAC (months of next years' imports) 6.0 3.6 0.2 0.1 0.8 2.2 3.5 3.0 5.0 5.4

1
The BOP data in this table are not compiled in accordance with the IMF's Balance of Payments Manual, fifth edition. The historic data have not been derived from
customs' and bank records' data, but from estimates of BEAC. Fund staff have made ad hoc adjustments to the data.
2
Including private sector consumption and non-hydrocarbon sector investment imports.
3
Including investment income of oil companies, which includes reinvested earnings (with an offsetting entry in foreign direct investment).
4
Since 2000, entries represent changes in government deposits in commercial banks abroad.
5
Consists only of items on the balance sheet of the BEAC (i.e., excluding government bank deposits abroad).

Table 3a. Quarterly Summary of Central Government Operations, 2014–18

2014 2015 2016 2017 2018

Prog.M4 Out.M4 Prog.M7 Q3 Q4
Revenue 2,585 2,071 1,129 1,238 289 412 832 1,004 1,257
Resource revenue 2,293 1,731 846 988 214 336 681 791 963
Tax revenue 800 662 241 273 27 42 246 261 283
Other revenue 1,493 1,069 604 715 187 294 435 531 681
Non-resource revenue 292 340 283 250 75 76 151 213 294
Tax revenue 190 221 181 147 37 49 90 140 180
Other revenue 103 119 102 103 38 27 61 72 114
Grants 0 0 0 0 0 0 0 0 0
Expenditure 3,396 3,247 1,853 1,422 386 366 713 808 1,212
Expense 764 685 689 732 233 224 418 486 710
Compensation of employees 112 121 139 143 48 51 90 106 148
Purchase of goods and services 417 345 350 392 124 83 201 229 360
Interest 50 30 27 30 14 18 26 32 44
Domestic 1 0 8 16 5 4 9 12 16
Foreign 49 30 19 14 9 14 16 20 28
Subsidies and transfers1 184 188 173 168 48 73 101 118 157
Other expense 0 0 0 0 0 0 0 0 0
Net acquisition of non-financial assets 2,632 2,562 1,164 689 153 141 295 323 502
Gross operating balance 1,822 1,386 440 506 56 188 415 518 548
Net lending/borrowing (overall fiscal balance) -810 -1,176 -724 -183 -97 47 120 196 46
Net financial transactions 810 1,176 724 183 97 -47 -120 -196 -154
2
Net change in domestic arrears 300 953 200 -165 0 -27 -27 -27 -1,288
Net acquisition of financial assets -21 -59 540 285 74 -90 -107 -166 -30
Domestic deposits 112 172 257 118 74 -64 -81 -140 -120
Foreign deposits -132 -231 282 167 0 -26 -26 -26 90
Net incurrence of liabilities 260 275 72 63 23 69 14 -2 1,165
3
Domestic 369 268 140 9 0 37 25 0 1,138
Foreign -109 7 -68 54 23 33 -11 -2 27
Loans 43 113 17 130 80 68 100 110 140
4
Amortization (-) -152 -106 -85 -76 -57 -35 -111 -112 -113
Other 271 8 -88 0 0 1 0 0 0
Financing gap 0 0 0 0 108
Memorandum items:
Overall fiscal balance -810 -1,176 -724 -183 -97 47 120 196 46
Percent of GDP -7.5 -15.1 -10.8 -2.5 -1.5 0.6 1.6 2.7 0.6
5
Non-resource primary balance -3,053 -2,876 -1,558 -1,151 -300 -273 -540 -569 -882
Percent of non-hydrocarbon GDP -66.0 -67.3 -38.7 -28.2 -8.0 -6.6 -13.0 -13.7 -21.2
Outstanding public debt6 12.6 33.6 43.3 37.4 43.3 37.3 36.4 36.2 37.3
Gross government deposits 1,163 1,218 761 536 462 625 642 702 566
Deposits with BEAC 490 323 177 113 69 190 174 283 263
Of which: available 71 57 91 18 18 107 130 239 219
Deposits abroad 604 835 553 385 385 411 411 411 296
Of which: available 453 544 248 110 110 136 136 136 0
Deposits with commercial banks (available) 70 60 32 37 7 24 57 7 7
Nominal GDP 10,747 7,795 6,674 7,268 7,285

Nominal non-hydrocarbon GDP 4,629 4,272 4,025 4,074 4,154
1
Includes social benefits and other transfers.
2
3
Statutory advances are assumed to be repayed in 10 years, starting in 2022. Includes payment of arrears in 2018.
4
Includes exceptional repayment of foreign debt for years 2014 and 2015.
5
Equal to the overall balance minus interest and resource revenues.
6

Table 3b. Summary of Central Government Operations, 2014–23

Prog. Projections
2014 2015 2016 2017 2018 2018 2019 2020 2021 2022 2023
Revenue 2,585 2,071 1,129 1,238 1,153 1,257 1,243 1,159 1,118 1,091 1,153
Resource revenue 2,293 1,731 846 988 859 963 903 759 662 580 584
Tax revenue 800 662 241 273 272 283 250 211 180 158 153
Other revenue 1,493 1,069 604 715 588 681 653 548 482 422 431
Non-resource revenue 292 340 283 250 294 294 340 400 456 511 570
Tax revenue 190 221 181 147 180 180 228 281 329 375 424
Other revenue 103 119 102 103 114 114 112 119 127 136 146
Grants 0 0 0 0 0 0 0 0 0 0 0
Expenditure 3,396 3,247 1,853 1,422 1,212 1,212 1,080 986 978 1,005 1,051
Expense 764 685 689 732 710 710 735 743 747 778 824
Expense (primary) 714 654 662 702 665 665 650 656 657 686 732
Compensation of employees 112 121 139 143 148 148 149 151 153 160 170
Purchase of goods and services 417 345 350 392 360 360 339 342 347 362 386
Interest 50 30 27 30 44 44 85 87 90 92 93
Domestic 1 0 8 16 16 16 34 30 27 23 19
Foreign 49 30 19 14 28 28 51 57 63 69 74
1
Subsidies and transfers 184 188 173 168 157 157 161 163 157 164 176
Other expense 0 0 0 0 0 0 0 0 0 0 0
Net acquisition of non-financial assets 2,632 2,562 1,164 689 502 502 346 243 231 227 227
Gross operating balance 1,822 1,386 440 506 444 548 509 416 371 313 329
Net lending/borrowing (overall fiscal balance) -810 -1,176 -724 -183 -58 46 163 173 140 86 102
Net financial transactions 810 1,176 724 183 -50 -154 -291 -263 -300 -238 -257
2
Net change in domestic arrears 300 953 200 -165 -1,288 -1,288 0 0 0 0 0
Net acquisition of financial assets -21 -59 540 285 19 -30 -144 -112 -160 -35 -36
Domestic deposits 112 172 257 118 -90 -120 -123 -101 -151 -39 -39
Foreign deposits -132 -231 282 167 110 90 -22 -11 -9 4 3
Net incurrence of liabilities 260 275 72 63 1,219 1,165 -147 -151 -140 -203 -221
3
Domestic 369 268 140 9 1,188 1,138 -195 -175 -160 -195 -201
Foreign -109 7 -68 54 31 27 48 24 20 -8 -20
Loans 43 113 17 130 140 140 125 125 125 125 125
Amortization (-)4 -152 -106 -85 -76 -109 -113 -77 -101 -105 -133 -145
Other 271 8 -88 0 0 0 0 0 0 0
Financing gap 108 108 128 90 160 152 155
Memorandum items:
Overall fiscal balance -810 -1,176 -724 -183 -58 46 163 173 140 86 102
Percent of GDP -7.5 -15.1 -10.8 -2.5 -0.9 0.6 2.3 2.5 2.0 1.2 1.3
5
Non-resource primary balance -3,053 -2,876 -1,558 -1,151 -882 -882 -662 -506 -441 -411 -397
Percent of non-hydrocarbon GDP -66.0 -67.3 -38.7 -28.2 -23.6 -21.2 -15.2 -11.0 -9.0 -7.9 -7.1
Non-resource revenue (percent non-hydro GDP) 6.3 8.0 7.0 6.1 7.9 7.1 7.8 8.7 9.3 9.8 10.2
Of which: Tax revenue 4.1 5.2 4.5 3.6 4.8 4.3 5.2 6.1 6.7 7.2 7.6
6
Outstanding public debt 12.6 33.6 43.3 37.4 43.5 37.3 37.4 37.2 37.2 35.9 33.0
7
Gross government deposits 1,163 1,218 761 536 516 566 710 823 983 1,018 1,054
Deposits with BEAC 490 323 177 113 239 263 386 487 639 678 717
Of which: available 71 57 91 18 143 168 291 392 543 582 621
Deposits abroad 604 835 553 385 276 296 317 328 337 333 330
Of which: available 453 544 248 110 0 0 0 0 0 0 0
Deposits with commercial banks (available) 70 60 32 37 2 7 7 7 7 7 7
Nominal GDP 10,747 7,795 6,674 7,268 6,288 7,285 7,185 7,041 7,070 7,172 7,589
Nominal non-hydrocarbon GDP 4,629 4,272 4,025 4,074 3,736 4,154 4,350 4,603 4,890 5,213 5,598
1
2
3
Statutory advances are assumed to be repayed in 10 years, starting in 2022. Includes amortization of advances in 2022-23, and payment of arrears in 2018-23.
4
5
6
7
It does not include deposits with commercial banks that are not available.

Table 3c. Summary of Central Government Operations, 2014–23

(In percent of GDP, unless otherwise specified)
Prog. Projections
2014 2015 2016 2017 2018 2018 2019 2020 2021 2022 2023
Revenue 24.1 26.6 16.9 17.0 18.3 17.3 17.3 16.5 15.8 15.2 15.2
Resource revenue 21.3 22.2 12.7 13.6 13.7 13.2 12.6 10.8 9.4 8.1 7.7
Tax revenue 7.4 8.5 3.6 3.8 4.3 3.9 3.5 3.0 2.5 2.2 2.0
Other revenue 13.9 13.7 9.1 9.8 9.3 9.3 9.1 7.8 6.8 5.9 5.7
Non-resource revenue 2.7 4.4 4.2 3.4 4.7 4.0 4.7 5.7 6.4 7.1 7.5
Tax revenue 1.8 2.8 2.7 2.0 2.9 2.5 3.2 4.0 4.7 5.2 5.6
Other revenue 1.0 1.5 1.5 1.4 1.8 1.6 1.6 1.7 1.8 1.9 1.9
Expenditure 31.6 41.6 27.8 19.6 19.3 16.6 15.0 14.0 13.8 14.0 13.9
Expense 7.1 8.8 10.3 10.1 11.3 9.7 10.2 10.5 10.6 10.9 10.9
Expense (primary) 6.6 8.4 9.9 9.7 10.6 9.1 9.0 9.3 9.3 9.6 9.6
Compensation of employees 1.0 1.6 2.1 2.0 2.4 2.0 2.1 2.1 2.2 2.2 2.2
Purchase of goods and services 3.9 4.4 5.2 5.4 5.7 4.9 4.7 4.9 4.9 5.1 5.1
Interest 0.5 0.4 0.4 0.4 0.7 0.6 1.2 1.2 1.3 1.3 1.2
Domestic 0.0 0.0 0.1 0.2 0.3 0.2 0.5 0.4 0.4 0.3 0.3
Foreign 0.5 0.4 0.3 0.2 0.4 0.4 0.7 0.8 0.9 1.0 1.0
1
Subsidies and transfers 1.7 2.4 2.6 2.3 2.5 2.2 2.2 2.3 2.2 2.3 2.3
Other expense 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Net acquisition of non-financial assets 24.5 32.9 17.4 9.5 8.0 6.9 4.8 3.5 3.3 3.2 3.0
Gross operating balance 16.9 17.8 6.6 7.0 7.1 7.5 7.1 5.9 5.2 4.4 4.3
Net lending/borrowing (overall fiscal balance) -7.5 -15.1 -10.8 -2.5 -0.9 0.6 2.3 2.5 2.0 1.2 1.3
Net financial transactions 7.5 15.1 10.8 2.5 -0.8 -2.1 -4.1 -3.7 -4.2 -3.3 -3.4
2
Net change in domestic arrears 2.8 12.2 3.0 -2.3 -20.5 -17.7 0.0 0.0 0.0 0.0 0.0
Net acquisition of financial assets -0.2 -0.8 8.1 3.9 0.3 -0.4 -2.0 -1.6 -2.3 -0.5 -0.5
Domestic deposits 1.0 2.2 3.9 1.6 -1.4 -1.6 -1.7 -1.4 -2.1 -0.5 -0.5
Net incurrence of liabilities 2.4 3.5 1.1 0.9 19.4 16.0 -2.0 -2.1 -2.0 -2.8 -2.9
3
Domestic 3.4 3.4 2.1 0.1 18.9 15.6 -2.7 -2.5 -2.3 -2.7 -2.6
Foreign -1.0 0.1 -1.0 0.7 0.5 0.4 0.7 0.3 0.3 -0.1 -0.3
Loans 0.4 1.4 0.3 1.8 2.2 1.9 1.7 1.8 1.8 1.7 1.6
Amortization (-)4 -1.4 -1.4 -1.3 -1.0 -1.7 -1.6 -1.1 -1.4 -1.5 -1.9 -1.9
Other 2.5 0.1 -1.3 -1.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Financing gap 0.0 0.0 0.0 0.0 1.7 1.5 1.8 1.3 2.3 2.1 2.0
Memorandum items:
Overall fiscal balance -7.5 -15.1 -10.8 -2.5 -0.9 0.6 2.3 2.5 2.0 1.2 1.3
5
Non-resource primary balance -28.4 -36.9 -23.3 -15.8 -14.0 -12.1 -9.2 -7.2 -6.2 -5.7 -5.2
6
Gross government deposits 10.8 15.6 11.4 7.4 8.2 7.8 9.9 11.7 13.9 14.2 13.9
Deposits with BEAC 4.6 4.1 2.7 1.6 3.8 3.6 5.4 6.9 9.0 9.4 9.4
Of which: available 0.7 0.7 1.4 0.2 2.3 2.3 4.0 5.6 7.7 8.1 8.2
Deposits abroad 5.6 10.7 8.3 5.3 4.4 4.1 4.4 4.7 4.8 4.6 4.4
Of which: available 4.2 7.0 3.7 1.5 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Deposits with commercial banks (available) 0.6 0.8 0.5 0.5 0.0 0.1 0.1 0.1 0.1 0.1 0.1
1
2
3
Statutory advances are assumed to be repayed in 10 years, starting in 2022. Includes amortization of advances in 2022-23, and payment of arrears in 2018-23.
4
5
6
It does not include deposits with commercial banks that are not available.

Table 4. Monetary Survey, 2014–23

Projections
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Net foreign assets 1,629 854 163 75 155 317 450 593 706 806
Bank of Central African States (BEAC) 1,546 700 -12 -55 24 184 316 458 570 670
Commercial banks 83 154 174 130 131 132 133 135 136 136
Net domestic assets -72 533 997 1,115 1,056 1,069 1,070 1,020 1,013 1,021
Domestic credit 360 938 1,403 1,535 1,461 1,445 1,447 1,444 1,486 1,565
Net claims on the public sector -610 -168 232 346 258 174 100 -3 -42 -81
Net credit to the central government -619 -176 224 339 251 167 92 -11 -50 -89
Central Bank -120 194 441 496 378 294 220 117 78 39
Claims 370 517 618 609 642 680 707 755 755 755
Credit under statutory ceiling 370 517 618 609 642 680 707 755 755 755
Deposits -490 -323 -177 -113 -263 -386 -487 -639 -678 -717
Commercial Banks -498 -370 -217 -157 -127 -127 -127 -127 -127 -127
Claims on the Treasury 10 29 76 82 82 82 82 82 82 82
Deposits -508 -398 -293 -239 -209 -209 -209 -209 -209 -209
Credit to public enterprises 9 8 8 7 7 7 7 7 7 7
Credit to financial institutions 2 1 19 22 22 22 22 22 22 22
Credit to the private sector 968 1,105 1,151 1,167 1,181 1,249 1,325 1,425 1,507 1,625
Credit to the economy 1/ 978 1,113 1,178 1,196 1,210 1,278 1,354 1,454 1,536 1,654
Other items (net) -432 -405 -405 -420 -405 -377 -377 -424 -473 -527
Broad money 1,557 1,387 1,160 1,172 1,194 1,368 1,502 1,596 1,701 1,827
Currency outside banks 280 222 175 165 177 203 222 236 261 282
Deposits 1,277 1,164 985 1,007 1,017 1,165 1,280 1,359 1,440 1,545
Of which: private deposits 1,212 1,100 918 979 957 1,091 1,205 1,277 1,352 1,452
Memorandum items:
Contribution to the growth of broad money (percentage points)
Net foreign assets -41.6 -49.8 -49.9 -7.6 6.9 13.5 9.7 9.5 7.1 5.9
Net domestic assets 27.5 38.8 33.5 10.1 -5.0 1.0 0.1 -3.3 -0.4 0.5
Of which : net credit to the central government 26.5 28.4 28.8 9.9 -7.5 -7.1 -5.4 -6.9 -2.4 -2.3
Credit to the economy (annual percentage change) 17.4 13.8 5.8 1.5 1.2 5.6 5.9 7.4 5.6 7.7
Credit to the private sector
Annual percentage change 18.4 14.1 4.2 1.3 1.2 5.8 6.1 7.6 5.7 7.8
In percent of GDP 9.0 14.2 17.3 16.1 16.2 17.4 18.8 20.2 21.0 21.4
Broad money (annual percentage change) -14.1 -10.9 -16.4 1.0 1.9 14.6 9.8 6.2 6.6 7.4
Currency outside banks 3.0 -20.7 -21.4 -5.8 7.3 14.6 9.8 6.2 10.6 8.0
Deposits -17.1 -8.8 -15.4 2.2 1.0 14.5 9.8 6.2 5.9 7.3
Velocity (GDP/ M2) 6.9 5.6 5.8 6.2 6.1 5.3 4.7 4.4 4.2 4.2
Sources: BEAC and staff estimates and projections.

1/ Credit to the economy includes credit to the public enterprises, financial institutions and private sector.

Table 5. External Financing Requirements, 2013–23

(In millions of U.S. dollars, unless otherwise indicated)
Projections
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
1. Total financing requirements 839 45 888 400 795 820 960 1,026 1,007 2,835 1,289
Current account deficit 526 924 2,140 1,457 738 415 461 550 567 2,390 840
Debt amortization 353 308 178 143 131 206 138 185 192 246 269
Change in gross reserves (increase=+) -40 -1,186 -1,431 -1,200 -75 200 361 291 248 199 179
2. Total financing sources 10 411 367 481 383 624 729 861 713 2,553 1,000
Capital transfers 0 0 0 0 0 0 0 0 0 0 0
Foreign direct investment (net) 2,146 1,138 1,186 319 615 280 535 615 487 2,130 688
Portfolio investment (net) 29 24 2 0 0 -2 -2 -2 -2 -2 -2
Debt financing 433 154 200 612 392 254 226 228 230 232 232
Public sector 324 30 98 529 285 254 226 228 230 232 232
Non-public sector 109 124 103 83 108 0 0 0 0 0 0
Other net capital inflows -2,599 -905 -1,022 -450 -624 92 -29 20 -2 193 81
Errors and omissions -829 -365 469 -25 -152 0 0 0 0 0 0
3. Financing gap 0 0 0 0 0 196 231 165 295 282 288
Source: Fund staff estimates and projections.

Table 6. Prior and Structural Measures

Macroeconomic Government Unit /
Measure Target date Status
objective instrument
Prior Measures
Secure congressional approval of a 2018 Before submitting first
Improve macro-fiscal Ministry of Finance and
budget consistent with targets under the Review of SMP to Met
management Economy
SMP management
Structural Measures
Secure congressional approval of a 2018
budget consistent with targets under the End-April 2018 Not met
management Economy
SMP
Hire an internationally reputable firm to (i)
audit the accounts of the state-owned oil
Ministry of Mines in
and gas companies and (ii) conduct a Foster transparency
End-July 2018 publication on official To be assessed
detailed reconciliation of EG’s gross and good governance
website
hydrocarbon output with hydrocarbon
revenue received by the budget for 2017
Hire an independent entity to conduct an Improve public Ministry of Finance and
audit of domestic arrears accumulated End-July 2018 financing Economy / submission of To be assessed
through end-2017 management document to Fund staff
Adopt mechanisms to track and control
Improve public Ministry of Finance and
expenditure commitments and strengthen End-July 2018 To be assessed
financial management Economy
treasury cash management
Submit a membership application to the Increased Ministry of Finance and
Extractive Industries transparency Initiative End-July 2018 transparency of the Economy / submission of Not met
(EITI) oil sector document to Fund staff
Ministry of Finance and
Ratify the United Nations Convention Foster good
End-July 2018 Economy publication on Met
Against Corruption governance
official website
Sources: IMF staff.

Table 7. Quantitative Performance Measures and Indicative Targets

(Billions of CFA Francs, cumulative for each quarter)
2018
SMP
End-Apr. End-Jul. End-Sep. End-Dec.
Prog. Actual Status Prog. Proj. Proj.
A. Quantitative performance measures
Floor on non-resource tax revenue of the central government 37 49 Met 90 140 180
Floor on non-resource Primary balance of the central government -300 -273 Met -540 -569 -882
1,2
Ceiling on external debt arrears accumulation 0 0 Not met 0 0 0
Ceiling on contracting and guaranteeing new external debt 80 70 Met 100 110 140
Ceiling on new BEAC credit to the government 0 0 Met 0 0 0
B. Indicative Targets
Ceiling on net domestic bank credit to the government -127 -127 Met -127 -127 -122
Floor on social spending (education and health) 3

30 30 Met 60 80 150
Sources: Equatorial Guinea authorities; and IMF staff estimates and projections.
1
This quantitative measure will apply continuously.
2
As of April 30th 2018, there is an external arrear of 160,000 USD with the Russian Federation.
3
The floor for social spending is based on SMP definition of social spending.

Annex I. Revision of National Accounts
The Institute of National Statistics of Equatorial Guinea (INEGE) has updated the national
accounts series from 2014 through 2017. This update is part of the normal finalization of the
estimates for 2014 and 2015 and revised estimates for 2016. It derives from the incorporation of more
accurate end of year results to the GDP estimates for the different sectors, including the public sector.
The revision has impacted both the nominal and real GDP series. The key features of the updated
national accounts series are as follows:
• A higher level of GDP. The level of both nominal and real GDP has increased relative to the
vintage contained in the SR of June 2018. In the case of nominal GDP, the level of GDP is 1.3
percent higher in 2014 and increases gradually to 14 percent by 2017. Real GDP is 1.1 percent
higher in 2014 and about 2.1 percent higher in 2017.
Revised GDP series compared with the SMP Vintage, 2014-2017 (in percent)
2014 2015 2016 2017
• GDP growth. With the revision to Real GDP series
real GDP, growth in 2014 was 0.4 percent New GDP relative to old 1.1 1.1 2.4 2.1
in contrast to the negative 0.7 reported in Growth

Old series -0.7 -9.1 -9.7 -2.9
the May 2018 staff report. In 2016 growth New series 0.4 -9.1 -8.6 -3.2
is slightly higher, but lower in 2017. Share of Non-hydrocarbon GDP
Old series 40.1 40.0 38.5 40.2
Nominal growth is however, higher New series 40.8 40.9 40.9 42.3
through 2017. Nominal GDP series
New GDP relative to old 1.3 8.4 10.6 14.0

• Composition of GDP. The share of
Growth
the non-hydrocarbon sector in total real Old series -2.1 -32.2 -16.1 5.7
GDP has increased, which is mainly driven New series -0.9 -27.5 -14.4 8.9
Share of Non-hydrocarbon GDP
by new estimates for public Old series 41.9 55.6 59.3 57.4
administration. New series 43.1 54.8 60.3 56.1

Annex II. Fiscal Consolidation Measures in 2018
Equatorial Guinea continued its strong fiscal adjustment program in the first four months of
2018, reducing the non-hydrocarbon primary deficit. This performance was supported by both
revenue and expenditure measures, and the bulk of the adjustment came from reductions in
expenditure.
The government has implemented a system of better control and tracking of expenditure along
with a reprioritization of spending. The key drivers of the fall in spending were purchase of goods
and services and public investment. On purchase of goods and services, the government has imposed
tighter controls on expenditures, including electricity/lighting. In addition, contingent and unforeseen
expenditures were smaller than expected. More broadly, all spending must now be approved by the
MFEP before implementation. In the area of capital spending, the authorities have reprioritized the
projects to be included in the budget based on its perceived impact on economic and social welfare.
Spending has increased in some other categories, notably on transfers and subsidies. For subsidies,
there is more expenditure on maintenance (especially for planes) and fuel subsidy. Subsidies to families
and other social expenditures have also increased.
Reforms to increase revenue mobilization, especially in the non-hydrocarbon sector, are being
rolled out. In particular, the authorities have hired a tax expert to help with implementing the
recommendations of the 2018 FAD TA report on tax policy and tax administration. On the policy side,
the expert is helping to draft regulations to implement the recommended measures to increase non-
resource tax revenues. 1
On the tax administration side, many measures have already been taken. These include the
creation of the large tax-payer unit; better enforcement of the existing corporate tax code; mandating
all corporate taxes be filed in Malabo; creation of a single bank account to collect non-hydrocarbon
revenues; and the unification of the Directorate General for Taxes and Contributions to better control
payments and collections. In addition, the authorities have tightened the granting of exemptions as
envisaged in Decree 134 of 2015. The tax amnesty law passed by parliament in late 2017 has not yet
been operationalized as the authorities are currently studying proposals for its amendment. On
customs, the authorities are moving ahead with the reorganization of customs services. In particular,
implementation of the new customs clearance procedures supported by the ASYCUDA software has
begun, as scheduled, in Malabo and is expected to be introduced in Bata by year-end. They have also
started to implement the CEMAC common external tariff.
To support of the revenue reforms, the authorities have launched two initiatives: (i) a public
relations campaign to encourage tax-payers to voluntarily comply with the tax laws; and (ii) a training
agenda to upgrade the skills of public officers.
1
Additional details on measures to increase non-resource tax revenue are provided in the authorities’ Memorandum
of Economic and Financial Policies, paragraph 10 and in Appendix I.

Annex III. External Debt from China
As economic cooperation efforts between China and Equatorial Guinea have strengthened,
China has become Equatorial Guinea’s main external creditor. Chinese lending to Equatorial
Guinea has thus far occurred through two modalities, official concessional loans and a credit
facility with the Export-Import Bank of China (Eximbank). Flows from these activities have been
used to finance several projects aligned with the authorities’ development objectives in various
areas, including housing programs and electrification. As of end-December 2017, debt owed to
China amounted to about CFAF 555 billion, or 20 percent of total public debt.
The Eximbank facility is the main debt obligation to China. It is governed by a framework that
links hydrocarbon exports to China, deposit arrangements, and loans. In particular, this credit line
allows Equatorial Guinea to borrow up to US$2 billion on non-concessional terms, though usage
of this credit has so far been below that amount. Credits have been drawn in tranches, which are
amortized, but the overall facility resembles revolving credits. These loans are secured by deposit
accounts opened by Equatorial Guinea in Eximbank, into which proceeds from Equatorial Guinea’s
hydrocarbon exports to China are deposited. The required deposit in Eximbank increases with the
utilization of the credit facility, and because they represent collateral, required balances are not
freely available to be repatriated. Moreover, additional amounts that are credited to Equatorial
Guinea’s deposits can be used to service the existing loans made under this facility. Given that this
is one of the few readily available sources of financing, staff has assumed that utilization of these
loans comprise the full amount of identified fiscal financing in the projection period.
Collateralization requirements are assumed to remain at the effective rate (about 50 percent),
though there may be two-sided risks to this projection.
Equatorial Guinea and other Chinese lenders have been discussing potential future lending
activities. In April 2015, China’s largest commercial bank, the Industrial and Commercial Bank of
China (ICBC) announced an infrastructure cooperation agreement with Equatorial Guinea. This
agreement entails potential lending of up to US$2 billion. The credits are expected to be made on
commercial terms and insured by the China Export and Credit Insurance Corporation (Sinosure);
therefore, they do not entail collateralization requirements as in the Eximbank facility. The
authorities have not yet drawn on these facilities, but are considering projects that they might
choose to finance with these funds.

Annex IV. Reforming Public Financial Management Framework
After several years of weaknesses, the authorities are strengthening the PFM framework by
implementing the recommendations of the 2017 FAD TA mission. In January 2018, the President
issued a circular to all ministries mandating that, starting immediately, all spending authorization
would need to be approved by the Ministry of Finance, Economy and Planning (MFEP) as prescribed in
Decree 134. Previously, spending and payment requests were sent directly to the pay master
(Ordenador de Pagos). These newly enforced procedures aim to separate spending into four
components: approval, commitment, implementation, and payment. Specifically, the measures already
implemented include the following:
• Institutional reorganization. The merger of the Ministry of the Economy and Planning with the
Ministry of Finance to form the Ministry of Finance, Economy, and Planning has had a very positive
effect, making the Minister of Finance responsible for both capital and current expenditure. Previously,
these were separate ministries, with little coordination between them.
• Capital spending. The MFEP works on a continuous basis with GE Projectos to keep projects
within approved budget ceilings. The MFEP and GE Projectos jointly sign spending authorizations. The
MFEP does not sign any contracts for capital projects proposed by GE Projectos that are not covered in
the budget. An internal committee of technical staff from MFEP and GE Projectos monitors and reviews
the projects and determines which ones are completed and ready to be submitted to the payments
council for payment.
• Control of current spending. All current spending must be approved by the Directorate of
finance control in the Ministry of Finance, Economy, and Planning before it can be undertaken. The
report is then sent to the Minister of Finance, who must approve before it is sent to the director of
budget who signs the payment order, on which treasury and the Ordenador de Pagos act.
• Budget execution. The MFEP has established a technical committee to monitor spending on a
monthly basis. However, the current system could be improved by strengthening interconnections with
various components of the expenditure chain.
• Budget preparation. The preparation of the national budget is now better coordinated. A
budget committee considers all submissions. Each department presents its request and these are
discussed within the context of the government’s announced policy priorities. In this structure all
ministries get a full understanding of the size of the resource envelope, the allocation of spending, and
the rationale for that allocation. Training seminars are organized so public officials are better aware of
the budget needs. Also, the merger of the Ministries of Economy and Finance will greatly improve the
information content of the capital spending element in future budgets.
• Budget coordination. All spending is now included in the national budget.
• Treasury cash management. The area of Treasury cash management has benefitted greatly
from improvements to the spending control and authorization function. Payments are now scheduled
with the availability of resources, and the treasury is no longer surprised by large payment requests.
The public accounts at the banks are monitored daily, and the banks have been told that payments
that bypass the treasury control mechanism will not be honored. The use of IT cash management
systems (SIGMA system used with BEAC) has also been reinforced through technical training seminars.

• Treasury accounts: The reception of hydrocarbon cash revenues is now better centralized in
one main BEAC account. Also, accounts in domestic commercial banks have been streamlined.
• Training and capacity building. To support these reforms the authorities have stepped up
training on budget preparation for technical staff within the various departments.
The authorities plan to build on these initial efforts on several fronts. In particular, they are
currently working on creating a unified control system for both capital and current spending. In the
area of budgeting, they plan to develop a multi-year budget. They have also requested technical
assistance to computerize spending control functions.

Appendix I. Letter of Intent
Malabo, October 23, 2018
Madame Christine Lagarde

Managing Director
International Monetary Fund
Washington, DC 20431
Dear Madame Lagarde:
The Government of Equatorial Guinea continues to implement its economic reform program, now
supported by a 7-month IMF Staff-Monitored Program (SMP), approved by the Fund’s management
in early May 2018. We are using the SMP as a framework to help us build capacity and an adequate
track record of successful policy implementation that could be a bridge to a program that could be
supported with IMF financial assistance, which we hope could be approved by the IMF’s Executive
Board this year.
Our policies under the SMP are focused on reducing macroeconomic imbalances, improving the
conditions for inclusive growth, fostering economic diversification, and strengthening governance,
while contributing to the regional CEMAC adjustment strategy. To achieve these objectives, we are
reducing public spending and re-orienting the budget composition toward growth-enhancing and
social spending. We have also begun the process of gradually reforming the public financial
management framework to make it more efficient and effective. On the revenue side, we are taking
measures to increase revenues through improved administration and measures to help raise non-
hydrocarbon revenues. In the financial sector, we have petitioned the COBAC to do an asset quality
review of the banks in Equatorial Guinea (EG) as part of the strategy to resolve the problem of high
NPLs. On structural policies aimed at improving the business climate, we have changed the foreign
investment law that previously required a local partner and have operationalized the one-stop shop
for investors. These measures, we believe, will help to encourage more investment, including foreign
direct investment in the non-hydrocarbon sector.
Aware of the need for continued public support for the economic reforms, our government has
created a new webpage in the Ministry of Finance, Economy, and Planning to disseminate

information to the population. On this website, we have already posted the fiscal outturn for the last
four years, inclusive of our analysis of fiscal trends. Going forward, we plan to post on the webpage
the 2018 revised budget, future annual national budget documents, quarterly reviews of the SMP,
and other relevant information to keep the population informed about the state of the economy
and the progress of our economic reform efforts. In line with our desire to strengthen governance,
in May of this year parliament ratified the UN Convention against Corruption, and it is discussing a
law to implement this Convention. These measures, we believe, demonstrate our government’s
commitment to enhanced governance and transparency in public administration.
We remain committed to the steadfast implementation of the policies agreed in our Letter of Intent
(LOI) of May 11, 2018. For the first review period ending April 2018, we have met all but one
quantitative performance measures (PMs). There was a small breach of the PM on the non-
accumulation of external debt payments arrears, owing to a logistical issue of the correspondent
bank when making the payment. We are working assiduously to solve this problem and will strive to
avoid a recurrence.
While we did not secure parliamentary approval of a revised 2018 budget by end-April (structural
measure), we have been conducting our fiscal affairs within the boundaries of this proposal. The
2018 revised budget was approved by parliament in late July 2018. At the same time, we have been
making progress towards delivering on our policy commitments for the review period for end-July
2018. In particular, as mentioned above, we have already ratified the UN Convention against
Corruption and are now deliberating regulations for its implementation. We have also strengthened
public expenditure control by devolving it to the Ministry of Finance, Economy, and Planning, and
have drafted terms of reference to hire independent auditors to audit the domestic arrears and the
state-owned oil and gas companies and to do a reconciliation of hydrocarbon revenues in the
budget with production for 2016 and 2017.
Our Memorandum of Economic and Financial Policies (Attachment 1) details our policy priorities.
The Government of Equatorial Guinea believes that the policies set forth therein are adequate to
achieve its programmed objectives at this juncture but stands ready to take any additional measures
that may become necessary. We will consult with the IMF on the adoption of these measures and in
advance of any revisions to the policies contained in this memorandum, in accordance with the
Fund’s policies on such consultation, and will continue to provide IMF staff with all relevant
information needed, as outlined in the Technical Memorandum of Understanding (Attachment 2).

On the basis of our performance under the program thus far, and our strong commitment to its
continued implementation, our Government requests that the IMF’s Management complete the first
review under the SMP.
Finally, we authorize the IMF to publish this letter, its attachments, and the staff report for this first
review under the SMP in line with the increased transparency and good governance commitment of
our government.
Very truly yours,
/s/
Lucas Abaga Nchama
Minister of Finance, Economy and Planning
Attachments
I. Memorandum of Economic and Financial Policies

II. Technical Memorandum of Understanding

Attachment I. Memorandum on Economic and

Financial Policies
Background
1. The Government of Equatorial Guinea’s reform program, supported by a seven-

month Staff-Monitored Program, is off to a good start. The SMP has allowed us to reinforce
our commitment to macroeconomic stability and to lay out the foundations of our broader
policy direction. Strong program implementation resulted in over performance on fiscal targets
owing to higher revenue, and strict spending controls. Despite the fiscal consolidation, social
spending increased to reduce poverty and income inequality. Meanwhile, structural reforms are
broadly moving ahead (Tables 1 and 2).
2. We remain fully committed to the objectives set forth in the May 2018
Memorandum of Economic and Financial Policies (MEFP). The measures underpinning these
objectives will be complemented with the policies described in this MEFP to ensure the
program’s goals remain within reach. The seeks to (i) reduce macroeconomic imbalances, (ii)
improve the conditions for inclusive growth, (iii) foster economic diversification, (iv) improve
social protection, (v) strengthen governance and fiscal transparency; (vi) protect financial stability;
and (vii) strengthen capacity. We will not lose sight of the fact that Equatorial Guinea must
continue to fulfil all its obligations to the CEMAC.
Macroeconomic Developments, Program Implementation and Outlook
3. Despite progress being made, macroeconomic conditions remain difficult. After the
measures adopted by the government to confront the crisis caused by the abrupt fall of
international crude oil prices in 2014, it is anticipated a contraction of 8 percent of real GDP in
2018. Although the recent increase in the international price of oil is a positive development, the
reduction of oil production, and restrictions on access to financing (which has had an impact on
investment in the non-hydrocarbon sector) continue to weigh on overall economic activity
Notwithstanding stricter enforcement with current foreign exchange regulations, our net
imputed reserves at the BEAC have not recovered, owing to persistent demand for foreign
exchange by the private sector.
4. We are steadfastly implementing the policies that we committed to in the SMP. For
the first review period ending April 2018, we have met all quantitative performance measures
(PMs), except for one, which was missed due to technical reasons not attributed to the
government.
• The non-resource primary deficit of the central government reached CFA Francs
-273 billion (target CFA Francs -300 billion) and non-resource tax revenue was CFA Francs
49 billion (target CFA Francs 37 billion). This over-performance reflected vigorous

revenue collection–––as well as expenditure control, including outlays on goods and

services and capital spending;
• The ceiling on contracting and guaranteeing new external debt has been met. The
government has contracted CFA Francs 70 billion in new external loans, below the ceiling
of CFA Francs 80 billion;
• On new BEAC credit, the government has maintained its gross new credit at zero, which
is the target for end-April;
• The indicative targets on net domestic bank credit to the government and social
spending have also been met.
• External arrears: There was a small breach of the PM owing to the fact that the
correspondent bank in the US could not process the payment for the creditor’s bank as it
is the subject of US government sanctions.
5. Our structural reform agenda is broadly moving ahead. While we could not present
the revised 2018 budget to parliament by end-April (structural measure), since the beginning of
the year we have been conducting our fiscal policy within the boundaries of this proposal. The
revised budget was approved by parliament at end -July 2018. At the same time, we have been
making progress towards delivering on our policy commitments for the review period for end-
July. In particular, we have already ratified in May 2018, the UN Convention against Corruption,
and parliament is now deliberating a law for its implementation. We have also strengthened
public expenditure control, and have drafted terms of references to hire independent auditors to
audit the public sector domestic payment arrears, the state-owned oil and gas companies, and to
do a reconciliation of hydrocarbon revenues in the budget with production for 2016 and 2017.
6. The macroeconomic outlook remains challenging. It is expected additional foreign

direct investments (FDI) in the hydrocarbon sector, which could change the trend of production
in the sector over the medium term. Additional fiscal adjustments will affect activity in the non-
hydrocarbon sector in the short term, although tis is expected to continue to expand. In this
context, real GDP growth is projected to contract by almost 8 percent in 2018 and by 2.6 percent
in 2019. We also expect inflation to remain low, broadly in line with 2017, owing partly to the
continued weak conditions in the economy. In the medium term, we anticipate that overall
growth will slowly return to a positive rate, as our improved policy mix—including continued
adjustment and prioritization of capital spending and structural reforms—takes hold and funding
restrictions are relaxed, boosting private sector confidence, and improving the outlook for the
non-hydrocarbon sector. The economic program is also expected to reduce the external current
account deficit and, therefore, contribute to an increase in BEAC reserves.

POLICY OBJECTIVES OF THE PROGRAM 1
7. The main objectives of our economic program are to reduce macroeconomic

imbalances and renew growth, while contributing to the regional adjustment strategy. We
believe that a seven-month SMP with good performance is a first step towards a financial
assistance program under a potential Fund-supported program, which we expect to access in
2018. The program consists of a planned fiscal adjustment (measured by the change in the non-
hydrocarbon primary balance) of 3.7 percent of GDP in 2018, with a 15 percent cut in
expenditure in nominal terms. This would also prevent further weakening of the banking sector
as it would stop the accumulation of domestic arrears. Furthermore, the government is making
every effort to focus economic policy on poverty reduction, by changing the composition of
spending, in order to protect vulnerable groups from the negative effects of the fiscal
adjustment. Finally, the government is also committed to fostering economic diversification,
strengthening governance (including in public financial management) and improving the legal
framework for combating corruption.
Fiscal Policy
8. Our strategy for 2018 is to minimize the financing gap and maintain public debt
sustainability. We have already made a great effort with respect to the primary deficit, reducing
it from -28.4 percent of GDP in 2014 to -15.8 percent in 2017, notwithstanding the fact that our
target for the non-hydrocarbon primary balance in 2018 is 12.1 percent of GDP, 3.7 percentage
points lower than the actual non-hydrocarbon primary balance in 2017. As outlined in the
revised budget, a large part of this adjustment will come from additional government spending
cuts. On the revenue side, steps are being taken to improve tax policy and administration to
increase non-hydrocarbon tax revenue.
9. Revenue: In 2018, we plan to increase total tax revenue by 0.5 percent of GDP. Of this
increase, 0.3 percentage points would come from improvements in the measures already
adopted. Our program to increase non-hydrocarbon tax revenue focuses principally on
administrative measures as follows:
• Large taxpayer unit. We have activated the large and medium-size taxpayer units, and
introduced a single taxpayer identification number, streamlined tax returns, and
transferred tax collection management from the Treasury to the tax and customs
administrations. All companies are now required to file their taxes in Malabo.
• Customs. We have started to reorganize the customs service and implement modern
procedures based on the ASYCUDA program. The number of inspectors at all border
crossings have also been increased.
1
See Appendix I for a more complete summary of SMP measures.

• Common sub-regional tariff. We have directed all the customs posts to begin applying
the prescribed tariffs on alcohol, cigarette and luxury goods. This is expected to generate
positive revenue inflows later in 2018.
• Exemptions. We have started to implement the measures provided in the Decree 134 of
2015. These measures are focused on penalizing tax evasion, reducing exemptions, and
increasing nontax revenue. As part of enforcement measures, all requests for exemptions
go through the Ministry of Finance, which prepares a study with recommendations for the
paymaster’s consideration. We are also considering including information on fiscal
spending costs in budget reporting documents in the future.
• Compliance with the 2004 tax law. We are negotiating with companies in the oil and gas
sector to have their tax obligations regulated by the 2004 tax law and not by the 1986 law.
We anticipate that the success of these negotiations will generate additional tax revenue
for the State.
• Strengthening revenue administration and auditing capacity. With technical assistance

from the IMF, we plan to strengthen our tax administration and our management of the
tax regime in the oil and gas sector with the aim of increasing government revenue. This
will require us to develop our capacity to carry out tax audits, including of companies
operating in the oil and gas sector. We are also seeking to better monitor compliance by
these companies with their contractual obligations to the government of Equatorial
Guinea, including their tax obligations, by conducting the relevant audits. In this context,
we plan to coordinate with Directorate General of state office to conduct joint audits of
these entities. More broadly we have unified the Directorate of taxes and collections with
the aim of having better controls for payments and collections. In addition, we hired a tax
expert to help us implement recommendations made in the IMF 2017 TA report.
• Revision to the 2017 Tax Amnesty Law. Although on the books, this law has not yet been
operationalized. That said, in the coming months, and during the period of the SMP, we
plan to work with Parliament to secure approval of amendments to the 2017 Tax Amnesty
Law to make it consistent with Equatorial Guinea’s tax administration capacity, and regional
and international best practices in this area. In particular, we will work with Parliament so
that existing provisions for a write-off of tax liabilities spanning several years are replaced
with provisions allowing negotiated payment arrangements for tax obligations covered by
the amnesty law. This proposed amendment will help to protect the government’s
potential revenue, and send a signal to economic agents of the need to comply with their
tax obligations, including those that are overdue.
• Revision of tax legislation. With technical assistance from the IMF, we are reviewing the
current tax laws. We plan to use the results of this review to reduce exemptions and
implement concrete measures to increase non-hydrocarbon tax revenue, including the
short-term measures identified in the report prepared in January 2018 by the mission from
the IMF’s Fiscal Affairs Department (FAD).

• Computerization of the tax administration. We plan to begin computerizing the tax

departments to facilitate voluntary filing, streamline procedures, and network them with
the rest of the economy.
• Training of tax administration personnel. We have begun training human resources to

create a specialized corps of tax inspectors.
• Use of the single card. We have introduced a single card for goods imports, which has
simplified customs procedures and allow for customs duties to be paid into the banks, with
the potential to improve revenue collection.
• Startup of the one-stop facility. Having completed all the procedures needed for funding
the proposed one-stop shop, we have operationalized it, which will help reducing red tape
and improving revenue collection.
10. Expenditure: The main component of the fiscal program is the additional cut in total
government spending. We have revised the 2018 budget to make it compatible with the SMP,
and it has been approved by parliament in late July 2018, and have managed our public finances
in line with its parameters. In this budget capital expenditure has been reduced, making room for
more social spending. Going forward we will continue creating room to increase, our social and
human capital development expenditure. The details of the expenditure program include:
• Capital expenditure. From 2014 to 2017, the government took the initiative to reduce
capital spending by 74 percent, reprogrammed and prioritized its investments executing only
the top priorities. We intend to decrease capital expenditure by 2.6 percent of GDP in 2018,
taking into account the volume of projects that are underway but not completed, their
economic impact, and our commitment to diversify the economy. We have established new
priorities for public investment, in the areas of education, health, housing, roads, and
waterworks. Based on these priorities, we will ensure that capital expenditure does not exceed
the government’s resources.
• Current expenditure. Our country is facing a number of exogenous factors that have a strong
impact on our economy, in general, and on public finances, in particular. These factors include
the decline in raw material prices since 2014 and sub-regional threats since December 2017,
such as terrorism, mercenaries, and other security problems, which have placed our
government defense and security forces on maximum alert. This second factor has put upward
pressure on public spending by creating additional financing needs. To limit the growth of
current expenditure and create more room for expanding social programs, we will limit the
fuel subsidy to its 2017 level (CFAF 23.3 billion). We plan to continue to target this subsidy to
the low-income population.
11. Stricter controls on public expenditure. Since 2014, we have adopted stronger public
expenditure measures. We created a database of public investment projects, which is the first
centralized repository of information on the wide variety of public investment projects and

undertakings. We also intend to continue taking the necessary measures to ensure that the
Ministry of Finance, Economy, and Planning has full control of the budget. In keeping with
regional requirements and supranational public financial management directives, we intend to
maintain strict control of expenditure by adopting mechanisms to monitor and control
expenditure commitments on an annual and multiyear basis, and to strengthen the Treasury’s
cash flow management. In addition, all government spending has been fully incorporated into
the national budget.
Protect the Most Vulnerable Segments of Society and Improve Social

Indicator Statistics
12. We have adopted measures to insulate low income groups from the impact of the
fiscal adjustment while developing our human capital. We are currently spending 1.8 percent
of GDP on the social sector but, in light of the ongoing fiscal adjustments implemented, we have
increased the social expenditure item in the 2018 budget to 2.0 percent of GDP. This is a floor on
social spending that guarantees continued support for our vulnerable groups, in the areas of
health and education. This increase is being financed by reallocating a portion of capital and
current expenditure to the social sectors and by increasing non-hydrocarbon tax revenue. Going
forward, we will need to fund periodic household budget surveys to improve data collection on
poverty and other social indicators. In this regard, we are working with the World Bank on a
social sector study that will shape the design of a national strategy for the social sector focused
on education, health, and social welfare. Through this initiative, we plan to adopt a more
strategic focus in the medium-term designed to develop human capital, achieve more inclusive
economic growth, and improve social outcomes in a sustainable manner.
Financing
13. In spite of the revenue and expenditure measures that have been announced, there
will be a financing gap in 2018. As these measures do not cover all of our government’s
financing needs, it is imperative that we have a financial assistance program. We have redoubled
our negotiation efforts with the World Bank (WB) and the African Development Bank (AfDB) to
obtain that financing. The negotiations, in combination with the present program, will lay the
basis for obtaining financial support from these institutions under a possible future IMF-
supported program. In any event, the government intends to continue using the existing line of
credit from China to support priority investment projects. We propose to issue short-term debt
instruments with one-year maturities on the national and regional markets and to apply a
proportion of available deposits to offset the public sector’s financing requirements. Consistent
with the regional strategy, the advances received from BEAC in recent years have been converted
into a long-term loan to be repaid over 10 years starting in 2022.
14. Domestic arrears. Our commitment under this program is to avoid accumulating
additional net arrears. We will achieve this by using available deposits and, as indicated above,
issuing domestic debt as needed to cover short-term financing needs. A possible program from

the IMF, along with budgetary support from the WB and the AfDB under that program, will help
us cover our financing needs throughout 2018 and avoid the accumulation of additional net
arrears. With respect to the accumulated domestic arrears, the government have drafted terms of
reference to hire an independent auditor to validate the claims before drawing up a payment
plan (structural measure, end-July 2018). Once the claims have been validated, we will issue
bonds to the creditors and create the necessary fiscal space to make cash payments to settle
these obligations. The terms of reference of the audit have been agreed upon with the IMF
technical staff. In the meantime, we continue to make small payments on these arrears, as our
public finances may permit.
15. Public Debt. The majority of our public debt is denominated in CFAs, with about half of
this consisting of domestic payment arrears discussed above (para. 14). Other domestic
components include loans from the BEAC, and securities issued in the nascent regional market–
also mainly held by banks. On the external side, our debt stock is relatively small, has a simple
structure and is mainly with one main creditor. Going forward, we plan to manage our debt
portfolio more closely. In this regard, we plan to strengthen our debt office. This would involve
strengthening the institutional structure and providing training in the area of debt management.
Also, we are committed to adhering to the ceiling of external debt envisaged in the SMP, in order
to keep our public debt under control.
Financial Sector Policies
16. Our program includes measures to strengthen the banks and manage potential
risks. To that end, we continue to support the work of COBAC and BEAC with respect to
compliance with prudential standards—provisioning standards, in particular—stricter banking
supervision and monitoring of the operations of systemic banks, money laundering and terrorism
financing, greater financial inclusion, and the implementation of monetary policy reform.
Recognizing COBAC’s independence, we have asked the Commission to conduct a quality
assessment of the banking system’s assets 2 in 2018. If COBAC sees fit, it could also hire the
services of a private firm of specialists to conduct a more comprehensive review of the assets of
those banks.
Structural Reforms to Stimulate Growth of the Non-Hydrocarbon

Sector
17. Our economic program also includes structural reforms to improve the business
climate, to promote efficiency and competitiveness for increased growth outside the oil
and gas sector, and to support diversification. We plan to earn rents from the majority of the
infrastructure created during the first phase of the National Plan of Development Horizon 2020
plan—which was concentrated on road networks, energy, water, various departments in the
2
An "asset quality assessment" typically examines the valuation of assets, the classification of overdue loans, the
level of provisioning, the value of collateral, etc.

public administration, airports, and ports—in order to develop the non-hydrocarbon sector. To
that end, we are working to develop plans for promoting tourism, fishing, agriculture, livestock,
and other sectors. Our agenda for structural reforms is designed to promote greater private
sector investment within a credible and transparent framework.
This agenda includes the following items:
• Economic diversification strategy. Before adopting Decree 134/2015 on economic and

financial policies, Holding Guinea Equatorial 2020 was created in 2014 for the purpose of:
(i) centralizing and improving the management, efficiency, and profitability of non-
hydrocarbon public sector assets; and (ii) providing joint funding with the private sector,
through the Co-Investment Fund (FCI), for non-hydrocarbon sector projects with a high
economic, fiscal, and social impact. While the Co-Investment Fund has not attracted any
private sector takers, we are moving forward with initiatives to reform the autonomous
agencies, focusing on improving corporate governance. We also continue with efforts to
improve the business climate.
• Revising Horizonte 2020. In March 2019, we plan to organize a national economic

conference to establish guidelines for updating the country’s economic development
strategy (Horizon 2020), taking into account the new reality facing Equatorial Guinea as a
result of the constant decline in oil production and persistently low oil prices in the
international markets, the integration of the millennium development goals, and
environmental considerations. This updated strategy will then be used to guide economic
and social transformation, with specific sectoral policies for the following five to ten years. In
the economic sphere, we will focus, in particular, on well-designed transformation policies
that carefully target sectors with high export potential and the ability to be integrated into
international value-added chains. On the social component, the focus will be poverty
reduction, social inclusion and empowerment of the youth. These actions could well reduce
the economy’s concentration on the oil and gas sector and promote sustainable, lasting, and
inclusive economic growth.
• Priority sectors. We have identified four priority sectors as part of the economic diversification
strategy: Tourism, fishing, agriculture and financial services. In the area of tourism, we are
working with stakeholders in the sector to draft a national tourism development plan. The work
of this group would include proposals on easing access to visas for tourism travel to EG. On
fishing, we are making advances in the development of a national fisheries industry. This
initiative would include the creation of a training institute for fisherfolk; creation of a tuna
factory; and construction of two fishing ports. We still working on firm proposals for the
agriculture and financial services sectors.
• Business climate diagnostics. We are conducting a diagnostic study of the business climate
with the World Bank to identify the main obstacles to foreign direct investment in the non-
hydrocarbon sector. We have created a National Technical Committee for Doing Business to
study and implement all the necessary reforms that emerge from our diagnostic study. To
launch this report, we are planning a national event to sensitize the key stake holders in EG on

the need for a favorable business environment. In this context, we have signed an agreement
with the Singapore Corporation Enterprise to do a practical seminar on how to reform the
business climate in EG.
• Private investment. In April 2018, we changed aspects of our legislation that could deter non-
hydrocarbon investment. In particular, the requirement to partner with a local entity
contributing 35 percent of the capital (prior action) has been eliminated by the Decree 72/2018
of April 18th. We have also operationalized the one-stop shop for investors (Article 23.6 of
Decree 134/2015). To further develop the private sector and encourage investment we plan to
create three new instruments: (i) special economic zones; (ii) a specific agency to promote
foreign direct investment in Equatorial Guinea, and (iii) a digital portal to provide strategic
access to information on business opportunities. As we move forward with the design of the
special economic zones, we will discuss their characteristics with the IMF staff.
Improved Governance and Transparency
18. To increase the effectiveness of macroeconomic policy, we are renewing our

emphasis on improving governance and introducing measures to enhance fiscal
transparency. Our strategy in this area is focused on the following:
• Governance diagnostics and strategy. We are working with the IMF to prepare a diagnostic
study on governance in Equatorial Guinea. This process, which started in December 2017 with
a scoping mission, continued in June with a follow up mission to Equatorial Guinea. We
propose to use the results of this study to address deficiencies in governance, ramp up
anticorruption efforts, and prepare a governance strategy. When the strategy is completed, we
plan to adopt and publish it within the framework of an IMF-supported program.
• Governance and corruption. We are committed to continuing our efforts to improve

governance and strengthen anticorruption measures. In this regard, we have ratified the United
Nations Convention Against Corruption (structural measure, end-July 2018), and are currently
deliberating regulations in parliament for its implementation. An additional step involves
making operational the Audit Court, which will conduct annual audits of budget execution and
publish its findings in an annual report released to the public.
• Hydrocarbon sector transparency. To enhance transparency in the hydrocarbon sector, we:

are in the process of completing all the necessary documentation and domestic consultations
with stakeholders to submit our membership application to the EITI (structural measure, end-
July 2018). As decided by National Commission, we will do a seminar presentation on the
proposed submission to the parliament before presenting our application to the EITI. We have
also shared all existing oil and gas contracts with the IMF staff.3 We have drafted the terms of
reference to hire an internationally recognized firm to audit the accounts of state enterprises
in the oil and gas sector for 2016–2017 and to conduct a detailed exercise to reconcile gross
production of oil and gas in Equatorial Guinea with the oil and gas revenue recorded in the
3
This will promote a better understanding of the existing tax regime in the sector and will improve
macroeconomic forecasts of oil and gas revenue, which is a fundamental component of the program. It will also
allow the current tax regime to be evaluated to determine whether it meets the country's needs.

budget (structural measure, end-July 2018). These terms of reference have been worked out in
collaboration with the IMF staff. We intend to start this audit in the third quarter of 2018.
19. Public financial management. We are implementing the measures recommended by

the recent IMF technical assistance mission on public financial management. Our efforts to make
improvements in this area were guided by a number of goals:
(i) to assign both capital and current expenditure to a single authority, the Ministry of
Finance, Economy and Planning;
(ii) to include all capital expenditure in the national budget and ensure that it is covered in
full by the available budgetary resources;
(iii) to improve coordination between the entities involved in preparing and executing the
investment budget;
(iv) to improve the monitoring of domestic arrears by holding periodic meetings with the
national payments committee;
(v) to improve the monitoring and control of annual and multiyear expenditure
commitments in order to ensure that spending is limited to resource allocations and avoid
the recurrence of arrears;
(vi) to adopt centralized control for expenditure approvals, whereby all spending decisions
are under the control of the Ministry of Finance, Economy, and Planning; and
(vii) to improve the application of government procurement procedures.
We will also improve administration of the funds related to oil and gas revenue by
documenting all the operating rules applicable to such funds as part of our general fiscal
policy framework. We have shared the details of the contracts governing the operation of
those funds with the IMF technical staff.
20. Data dissemination. We are committed to providing the data necessary for program
monitoring in a timely manner, including complete fiscal accounts reconciled with the monetary
data on net credit to the government. In May 2018, we launched a new webpage for the Ministry
of Finance, Economy, and Planning (www.minhacienda.gob.gq), on which we have published
quarterly data on central government budget performance for the period 2015–17. Going
forward, we also plan to publish the revise 2018 national budget on this website as well as future
budget, and also regularly report existing economic data to the IMF Statistics Department. Lastly,
we have shared the details about the foreign deposit contracts pertaining to the line of credit
provided by China, and shared the framework agreement on economic cooperation with China,
with the IMF technical staff.

21. Fiscal safeguards assessment. We will ask the IMF to conduct an assessment of our
public financial management framework. This assessment will focus on budget preparation and
execution, cash management, controls and audit procedures, supervision, and fiscal reporting.
The assessment will ensure that funds are used for budgetary expenditure through transparent
and efficient processes of budget preparation, accounting, banking, and auditing. The
conclusions of the assessment will be used as guidelines to strengthen cash management. In
addition, we will ask the IMF to provide us with technical assistance for a Fiscal Transparency
Assessment.
Capacity Building
22. We are committed to capacity building and institutional development in the public
sector. For some time now, we have been developing human capital, within the framework of
public financial management, through training programs in the IMF and other institutions. In
early June 2018 we continued with these efforts, and hosted the IMF capacity development
institute which delivered training to a cohort of 25 public officials (including BEAC staff) in
macroeconomic analysis and forecasting. We plan to leverage this training to establish a policy
unit within the Ministry of Finance, and Economy that would maintain the macro-fiscal
framework as the basis for supporting informed economic policy. We intend to ask the IMF for
additional financial support for training, which will cover public financial management (PFM), tax
reform, fiscal and economic data, revenue administration, and capacity building for
macroeconomic analysis and policymaking. We are very interested in receiving practical training
from resident experts, wherever possible. We believe that by adopting this strategy we will
further strengthen our institutional framework for policymaking and economic analysis and,
therefore, our ability to fully implement the requirements of this agreement.
Program Monitoring
23. The program has quarterly reviews monitored by means of quantitative

performance measures, indicative targets, and structural measures. These components are
set out in Tables 1 and 2. The first review (with data through end-April) was completed in early
August 2018 and the second review (with data through end-July), would be done by end-
October 2018. The government will provide detailed information for program monitoring, as
stated in the Technical Memorandum of Understanding (TMU). The TMU also includes definitions
and reporting procedures.
24. To ensure that the program remains on track, the government is committed to
consulting regularly with the IMF staff on program implementation. We have established a
high-level committee, with the support of the Minister of Finance, Economy, and Planning, and
the Secretary of State for the Treasury. The government continues to monitor the SMP through
that committee, which meets at least once a month to review SMP implementation and the
compliance of all relevant policy initiatives with program objectives and commitments.

Table 1. Quantitative Performance Measures and Indicative Targets

(Billions of CFA Francs, cumulative for each quarter)
2018
SMP
End-Apr. End-Jul. End-Sep. End-Dec.
Prog. Actual Status Prog. Proj. Proj.
A. Quantitative performance measures
Floor on non-resource tax revenue of the central government 37 49 Met 90 140 180
Floor on non-resource Primary balance of the central government -300 -273 Met -540 -569 -882
Ceiling on external debt arrears accumulation1,2 0 0 Not met 0 0 0
Ceiling on contracting and guaranteeing new external debt 80 70 Met 100 110 140
Ceiling on new BEAC credit to the government 0 0 Met 0 0 0
B. Indicative Targets
Ceiling on net domestic bank credit to the government -127 -127 Met -127 -127 -122
Floor on social spending (education and health)3 30 30 Met 60 80 150
Sources: Equatorial Guinea authorities; and IMF staff estimates and projections.
1
This quantitative measure will apply continuously.
2
As of April 30th 2018, there is an external arrear of 160,000 USD with the Russian Federation.
3
The floor for social spending is based on SMP definition of social spending.

Table 2. Prior Measures and Structural Measures for 2018

Macroeconomic Government Unit /
Measure Target date Status
objective instrument
Prior Measures
Secure congressional approval of a 2018 Before submitting first
budget consistent with targets under the Review of SMP to Met
management Economy
SMP management
Structural Measures
Secure congressional approval of a 2018
budget consistent with targets under the End-April 2018 Not met
management Economy
SMP
Hire an internationally reputable firm to (i)
audit the accounts of the state-owned oil
Ministry of Mines in
and gas companies and (ii) conduct a Foster transparency
End-July 2018 publication on official To be assessed
detailed reconciliation of EG’s gross and good governance
website
hydrocarbon output with hydrocarbon
revenue received by the budget for 2017
Hire an independent entity to conduct an Improve public Ministry of Finance and
audit of domestic arrears accumulated End-July 2018 financing Economy / submission of To be assessed
through end-2017 management document to Fund staff
Adopt mechanisms to track and control
Improve public Ministry of Finance and
expenditure commitments and strengthen End-July 2018 To be assessed
financial management Economy
treasury cash management
Submit a membership application to the Increased Ministry of Finance and
Extractive Industries transparency Initiative End-July 2018 transparency of the Economy / submission of Not met
(EITI) oil sector document to Fund staff
Ministry of Finance and
Ratify the United Nations Convention Foster good
End-July 2018 Economy publication on Met
Against Corruption governance
official website
Sources: IMF staff.

Appendix I. Key Policies and Structural Reform Program During 2018
Public Finance
Budget
• Adopt a budget for 2018 that is consistent with the central government’s targeted deficit under
the program (prior measure, before submitting the first Review of the SMP to management).
Tax Policy and Administration
• Ensure that the Large and Medium Taxpayers Unit is fully operational (end-July 2018).
• Introduce a single taxpayer identification number (end-July 2018).
• To increase non-hydrocarbon tax revenue, review the existing tax legislation with a view to
implementing the short-term measures identified by the November 2017 IMF technical
assistance mission (end-July 2018). 1
Customs Administration
• Improve and reorganize customs offices by adopting modern customs clearance procedures
using ASYCUDA software at the airport and at the port of Malabo (end-July 2018), and at Luba
and Bata (end-December 2018).
• Manage customs exemptions correctly with ASYCUDA once it is installed and operational.
Expenditure on Public Financial Management Measures
• Establish a minimum floor for social spending and limit capital expenditure to realistic plans
focusing on high priority projects (ongoing, for the program period).
• Adopt mechanisms to strengthen cash management and expenditure control, including

processes for monitoring and controlling expenditure (end-July 2018).
• Include all government spending in the national budget (from 2018, continuous).
• Ensure that the Ministry of Finance controls all spending decisions (2018).
1
See the technical assistance report Medidas para Aumentar la Recaudación con Equidad y Eficiencia, volumen I –
Política Tributaria. IMF, Fiscal Affairs Department (January 2018).

Arrears
• Hire an independent firm to audit public sector arrears (structural measure, end-July 2018).
• Complete the audit of domestic arrears (end-December 2018).
• Start holding quarterly meetings of the National Payments Committee to improve the
monitoring of domestic arrears (end-April 2018).
Social Policies
• Establish a minimum level of spending on social programs for the low-income population
(2018).
• Improve data on social indicators by conducting periodic surveys of household income and
expenditure to collect better data on poverty and other social indicators (2018).
Financial Sector
• Petition the COBAC to review the assets of the banks in Equatorial Guinea (end-July 2018).
• Work with COBAC to strengthen bank regulation and supervision and ensure compliance with
prudential norms (continuous).
Business Climate/Economic Diversification Policies
• Reform foreign investment legislation by eliminating local partner requirements (prior measure,
before submitting SMP request to management).
• Start operating the one-stop shop for investors (Article 23.6, Decree 134/2015) (end-July 2018).
• Conduct a diagnostic study of the business climate and review and update the government’s
strategy for economic diversification (2018).
Measures to Improve Governance and Reinforce the Anticorruption

Framework
• Apply for membership in the EITI (structural measure, end-July 2018) then work towards
continued compliance with standards, with a view to increasing transparency in the oil and gas
sector.
• Ratify the United Nations Convention Against Corruption (structural measure, end-July 2018).

• Begin operating the Audit Court, which will conduct annual audits of budget execution and
publish its findings in an annual report that is available to the public (2018).
• Strengthen the management of resource-related funds by documenting their operating rules

(including investment policies) as part of the general fiscal policy framework (2018).
• Carry out a diagnostic study of governance and adopt a governance strategy (2018).
• Conduct a fiscal safeguards assessment with technical assistance from the IMF (2018).
• Ask the IMF to perform a Fiscal Transparency Assessment (2018).
Measures to Promote Data Dissemination and the Transparency of

Information
• Share all oil and gas contracts with the IMF technical staff (prior measure, before submitting
SMP request to management).
• Hire an internationally recognized firm to (i) audit the accounts of state-owned oil and gas
companies; and (ii) perform a detailed crosscheck of gross oil and gas production in Equatorial
Guinea against oil and gas revenue reported in the budget, under the terms of reference
agreed upon with the IMF technical staff (structural measure, end-July 2018).
• Begin publishing the national budget on the Ministry of Finance website (end-April 2018).
• Start the publication of quarterly data on central government accounts for 2015–17 (prior
measure, before submitting SMP request to management).
• Periodically report existing macroeconomic data to the IMF Statistics Department (continuous).
• Share foreign deposit contracts with the IMF technical staff, including contracts related to the
line of credit from China (2018).

Attachment II. Technical Memorandum of Understanding

1. This Technical Memorandum of Understanding (TMU) describes the concepts, definitions,
and procedures for reporting the data referred to in the Memorandum on Economic and
Financial Policies (MEFP) for the period January 1 to end-July 2018 and prepared by the
authorities of Equatorial Guinea. More specifically, it describes: (a) reporting procedures;
(b) definitions and calculation methods; (c) quantitative targets; (d) adjustors for quantitative
targets; (e) structural benchmarks; and (f) other commitments undertaken under the MEFP.
2. Within the framework of this program, all foreign exchange assets, liabilities, and flows
will be valued on the basis of the “program exchange rates” defined below, with the exception of
items that affect the government’s fiscal balances, which will be valued at the current exchange
rate. The program exchange rates are those in effect as at December 29, 2017, namely
CFAF 546.951 to USD 1; CFAF 655.957 to EUR 1; CFAF 83.98 to CNY 1; CFAF 739.008 to GBP 1;
and CFAF 778.929 to SDR 1.
REPORTING TO THE IMF
3. Data on all the variables subject to quantitative targets shall be transmitted periodically
to the IMF in accordance with the timetable shown in Annex 1. Any updates shall also be
promptly reported (within one week). In addition, the authorities shall consult with the IMF staff if
they obtain new information or data that are not specifically defined in this TMU but are relevant
for monitoring or measuring performance against program objectives.
QUANTITATIVE PERFORMANCE TARGETS: DEFINITION OF VARIABLES
4. Unless otherwise indicated, the term government shall refer to the central government
of the Republic of Equatorial Guinea, which includes all executive bodies, institutional units, and
any structure receiving special purpose public funds and whose scope and functions are included
in central government as defined in the 2001 Government Finance Statistics Manual (GFSM 2001),
paragraphs 2.48–2.50.
5. The fiscal year begins on January 1 of each calendar year and ends on December 31 of
the same year.
6. The quantitative targets listed below are broken down in Table 1 of the MEFP, unless
otherwise indicated, all the quantitative objectives shall be measured cumulatively from the start
of the calendar year to which they apply. The quantitative objectives and the details of their
assessment are listed below:
Cumulative Floor for Central Government Nonoil Tax Revenue
7. Definition. Non-hydrocarbon tax revenue is defined as total government tax revenue (as
defined in GFSM 2001, Chapter 5, recorded on a cash basis), less tax revenue from hydrocarbons.

8. Hydrocarbon tax revenue is defined in Article 456.1 (on Oil and Gas Sector income tax)
of the Tax Law of Equatorial Guinea, as the sum of corporate taxes (on contractors and
subcontractors), personal income tax, and taxes on the incomes of residents and nonresidents.
The authorities shall notify the IMF staff if changes in the system of taxation of oil and gas
production lead to fluctuations in revenue flows. Oil and gas revenue is recorded on a cash basis.
9. Reporting. The data shall be reported to the IMF no later than 45 days after the
assessment date.
Cumulative Floor of the Central Government’s Non-Hydrocarbon

Primary Balance
10. Definition. The non-hydrocarbon primary balance is defined as non-hydrocarbon

revenue (not including income from interest on government assets), less total government
expenditure, excluding payment of interest on the domestic and external debt.
11. Hydrocarbon revenue is defined as the sum of hydrocarbon tax revenue and oil nontax
revenue (royalties on gross production; premiums or fees for surface rights; transfer and sales
taxes charged on capital gains not invested in Equatorial Guinea; discovery, production, and
marketing bonuses; income in respect of export rights; net equity income from oil and gas;
income from shareholders’ interests and other income flows paid by oil and gas companies;
excluding indirect and special taxes (for example, the gasoline tax).
The authorities shall notify the IMF staff if changes in the system of taxation of oil and gas
production lead to fluctuations in revenue flows. Oil and gas revenue is recorded on a cash basis.
12. Total government expenditure is understood to be the sum of personal expenditure,

current expenditure on government goods and services, transfers and subsidies, interest
payments (domestic and foreign), and capital or investment spending. All these expenses are
recorded on an accrual basis, unless otherwise indicated. All expenditure items are defined
according to the GFSM 2001 (paragraphs 6.1–6.88).
13. Reporting. Data shall be sent to the IMF no later than 45 days after the assessment date.
14. Adjustor. In the event of any additional foreign grants for budgetary support to the
government, the floor of the non-hydrocarbon primary balance shall be adjusted upwards by the
amount of the grant.

Ceiling on New BEAC Loans to Central Government
15. Definition. New BEAC financing to the government is defined as BEAC’s gross lending to
the central government above the existing stock (CFA 609 billion) as of December 31, 2017.
16. Reporting. Data shall be reported to the IMF no later than 45 days after the assessment
date.
Ceiling on New External Loans and Loan Guarantees to the Central

Government
17. Definition. External debt, for the purposes of the relevant assessment target, is defined
as debt borrowed or serviced in a currency other than the CFA franc. The net increase in central
government debt, including guaranteed debt, is calculated as central government debt issuance
less repayments, and guaranteed debt, in billions of African Financial Community (CFA) francs.
The debt expressed in foreign exchange shall be converted to CFAF at the program exchange
rate.
18. For program monitoring purposes, external debt is considered to be debt contracted or
guaranteed, provided that all the conditions for the debt to take effect have been met, including
the pertinent approvals by the Republic of Equatorial Guinea.
19. For purposes of this memorandum, the term debt is defined as follows:
Definition of debt: 1 The term "debt" will be understood to mean a current, i.e., not contingent,
liability, created under a contractual arrangement through the provision of value in the form of
assets (including currency) or services, and which requires the obligor to make one or more
payments in the form of assets (including currency) or services, at some future point(s) in time;
these payments will discharge the principal and/or interest liabilities incurred under the contract.
Debts can take a number of forms, the primary ones being as follows:
• Loans, i.e., advances of money to the obligor by the lender made on the basis of an
undertaking that the obligor will repay the funds in the future (including deposits, bonds,
debentures, commercial loans and buyers' credits) and temporary exchanges of assets that
are equivalent to fully collateralized loans under which the obligor is required to repay the
funds, and usually pay interest, by repurchasing the collateral from the buyer in the future
(such as repurchase agreements and official swap arrangements).
1
For purposes of this program, the definition of debt is set out in paragraph 8(a) of the Guidelines on Public
Debt Conditionality in Fund Arrangements attached to Executive Board Decision No. 15688-(14/107), adopted on
December 5, 2014.

• Suppliers' credits, i.e., contracts where the supplier permits the obligor to defer payments
until sometime after the date on which the goods are delivered or services are provided.
• Leases, i.e., arrangements under which property is provided which the lessee has the right to
use for one or more specified period(s) of time that are usually shorter than the total
expected service life of the property. For program purposes, the debt is the present value (at
the inception of the lease) of all lease payments expected to be made during the period of
the agreement excluding those payments that cover the operation, repair, or maintenance of
the property.
• Under the definition of debt set out above, penalties and judicially awarded damages arising
from the failure to make payment under a contractual obligation that constitutes debt give
rise to debt. Failure to make payment on an obligation that is not considered debt under this
definition (e.g., payment on delivery) will not give rise to debt.
date.
21. Adjustor. The ceiling for new external debt contracted or guaranteed by the
government shall be increased by an amount equal to the value of the State’s capital investment
in the joint Fortuna FLNG project financed with public debt.
Ceiling on the Accumulation of Arrears on the Central Government’s

External Debt
22. Definition. External arrears are defined as any debt obligation (based on the definition of
external debt in paragraph 17) that is not paid on the terms specified in the contract or legal
document establishing the debt. Arrears on external debt payments are defined as the difference
between the amount owed under the contract or legal document and the amount actually paid
after the due date specified in the contract or legal document in question.
date. Given that this performance measure is applied continuously, the authorities will report to
staff any external payment arrears immediately when they arise.
24. Coverage. This quantitative performance target covers the central government and the
guarantees provided to public institutions. The current quantitative target does not include
arrears resulting from the failure to service debt in connection with which a liquidation
framework has been arranged or efforts are being made to obtain a rescheduling agreement.
Monitoring. This performance criterion is applied on a continuous basis.

Accumulation of Domestic Arrears by Central Government
25. Definition. Domestic arrears are defined as commitments owed to certain residents
under contractual obligations, which are still unpaid 90 days after the due date. According to this
definition, the due date refers to the deadline by which payment must be made under the
applicable contract, bearing in mind contractual grace periods. Domestic arrears of the central
government include direct arrears on central government debt, including to suppliers, recurring
payments, and capital expenditure. The accumulation is calculated as the change in the stock of
domestic arrears compared with the level at end-December 2017.
date.
QUANTITATIVE INDICATIVE TARGETS: DEFINITION OF VARIABLES
Ceiling on Net Credit to the Government from National Banks
27. Definition. Net financing for the government from national banks is defined as the
change in the government’s net position vis-à-vis the banking system (commercial banks) since
the end of the previous year. The cap on net domestic financing is not applicable to new
agreements on domestic debt restructuring and securitization of domestic arrears.
date.
Floor for Social Spending by the Central Government
29. Definition. Social spending is calculated as the sum of central government expenditure
on social safety net programs, as set out in the central government’s budget for a given fiscal
year. For purposes of the SMP, social programs include health, and education. Education includes
calculations of spending at the preschool, primary, secondary, and university levels; technical and
vocational training; assistance to children in low income households so that they can attend
school; and teacher training. Public health programs include: vaccination campaigns, HIV/AIDS
programs, maternal and child health, malaria control, assistance to low income children who are
hospitalized or sick, and financing for public hospitals. The social spending target includes
current and capital expenditure programs.
Reporting. Data shall be reported to the IMF no later than 45 days after the assessment date.
Treatment of Hydrocarbon Revenues in Excess of the Program level
30. In the event revenues from hydrocarbons are greater than expected under the program,
the government shall use the difference to reduce the deficit targeted under the program and
accumulate deposits at the BEAC. If this revenue is less than expected under the program, the

government shall take fiscal measures to maintain the budget deficit envisaged under the
program.
31. Adjustor. Revenues from oil shipments used to guarantee external borrowing up to the
ceiling on external borrowing in the program, under the framework agreement with the Chinese
government, is excluded from this requirement.
Structural Benchmarks
32. The structural benchmarks are detailed in Table 2 of the MEFP.

Table 1. Reporting to the IMF

Data Provided by Frequency and target
date
I. Monetary Data
Monetary survey. BEAC Monthly, within 45 days
from the end of the
month.
II. Fiscal Data
BEAC loans to central government. BEAC Monthly, within 45 days
from the end of the
month.
Central government position with commercial banks: (i) BEAC Monthly, within 45 days
loans to central government and (ii) deposits by central from the end of the
government. month.
Other sources of financing not specified above (including Ministry of Monthly, within 45 days
INSESO, bonds, Treasury notes and bills issued in CFAF). Finance, from the end of the
Economy, and month.
Planning (MFEP)
Foreign deposits by the central government, by type of MFEP Monthly, within 45 days
foreign currency and bank. from the end of the
month.
External financing: detailed information on disbursements, MFEP Monthly, within 45 days
amortization, interest, exceptional financing, zero coupon from the end of the
bonds, and accumulation of arrears. month.
Acquisition of financial interests (Fortuna FLNG or other MFEP Monthly, within 45 days
projects). from the end of the
month.
Central government budget execution, broken down by MFEP Monthly, within 45 days
category (revenues, current and capital expenditures). from the end of the
month.
Breakdown of tax revenue by type of tax. MFEP Monthly, within 45 days
from the end of the
month.
Total income, broken down by category. MFEP Monthly, within 45 days
from the end of the
month.
Income from hydrocarbons, broken down by type (tax or MFEP Monthly, within 45 days
nontax). from the end of the
month.
Social spending (broken down by program, capital MFEP Monthly, within 45 days
expenditure, and current expenditure). from the end of the
month.

Subsidies and transfers broken down by category. MFEP Monthly, within 45 days
from the end of the
month.
III. Domestic Debt
Stock of domestic debt by type. MFEP Monthly, within 45 days
from the end of the
month.
Domestic debt disbursements and service (interest and MFEP Monthly, within 45 days
principal) by type. from the end of the
month.
Stock of domestic arrears (including arrears on interest MFEP Quarterly, within 45 days
payments). from the end of the
quarter
IV. External Debt
Stock of external debt. Include values for each type of MFEP Monthly, within 45 days
foreign currency and the exchange rates used. from the end of the
month.
Loan-by-loan accounting of all new loans contracted or MFEP Monthly, within 45 days
guaranteed by the public sector, including detailed from the end of the
information on amounts, currency, and conditions, and the month.
relevant supporting documents.
Accounting of arrears on the external debt by creditor (if MFEP Monthly, within 45 days
any), with detailed explanations. from the end of the
month.
V. External Sector Data
Provisional balance of payments statistics. BEAC Annually, within three
months from the end of
the year.
Oil and gas exports (values, volumes, and prices) broken MMH Monthly, within 45 days
down by product and oilfield. from the end of the
month.
VI. Real Sector Data
Provisional national accounts (from the supply side and the INEGE Annually, within three
expense side). months from the end of
the year.
Consumer price index. INEGE Monthly, within 45 days
from the end of the
month.

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IMF Country Report No.

The documents listed below have been or will be separately released.

Copies of this report are available to the public from

International Monetary Fund • Publication Services

International Monetary Fund

© 2018 International Monetary Fund

IMF Management Completes First Review

• Program implementation through April 2018 was satisfactory;

• A revised 2018 budget is helping to strengthen the public finances;

Notwithstanding still difficult economic and financial conditions, program implementation

increase in government deposits at BEAC and an improvement in Equatorial Guinea’s

Macroeconomic context. Economic conditions remain difficult, although

Completion of first review. In view of the satisfactory program performance, staff

PROGRAM IMPLEMENTATION _________________________________________________________________ 6

POLICY DISCUSSIONS ___________________________________________________________________________ 8

STAFF APPRAISAL _____________________________________________________________________________ 14

2 INTERNATIONAL MONETARY FUND

5. External Financing Requirements, 2013–23 (Millions of USD) __________________________________ 23

INTERNATIONAL MONETARY FUND 3

RECENT DEVELOPMENTS, OUTLOOK AND RISKS

4 INTERNATIONAL MONETARY FUND

3. Banking system soundness indicators at end-April 2018 continued to show important

Text Table 1. Financial Soundness Indicators, Jan. 2014–Apr. 2018

INTERNATIONAL MONETARY FUND 5

• Capacity constraints and governance vulnerabilities could pose challenges to implementing

• Strong program performance on fiscal measures. All quantitative fiscal performance

6 INTERNATIONAL MONETARY FUND

INTERNATIONAL MONETARY FUND 7

Text Table 3. Medium Term Scenario, 2017–23

Sources: Equatoguinean authorities; and staff estimates and projections.

8 INTERNATIONAL MONETARY FUND

11. Fiscal consolidation in 2018 would continue to concentrate on reducing central

• Expenditure reduction. Non-priority public spending is being reduced, including on public

INTERNATIONAL MONETARY FUND 9

Public Finance Management

Protecting the Poor and Improving Social Indicators

10 INTERNATIONAL MONETARY FUND

Building Financial Sector Resilience

• As suggested in paragraph 3, dealing with government arrears to construction companies is key

INTERNATIONAL MONETARY FUND 11

Structural Reforms to Boost Non-Hydrocarbon Growth

• Economic diversification. The authorities are preparing background studies to inform a

Improving Governance and Transparency

• Strengthening governance and anti-corruption measures. In May 2018 the authorities

12 INTERNATIONAL MONETARY FUND

• Transparency in the hydrocarbon sector.

An e-GDDS mission is tentatively scheduled for the first quarter of 2019.

INTERNATIONAL MONETARY FUND 13

14 INTERNATIONAL MONETARY FUND

INTERNATIONAL MONETARY FUND 15

Table 1. Selected Economic and Financial Indicators, 2014–23

Monetary and exchange rate

(Percent of GDP, unless otherwise specified)

16 INTERNATIONAL MONETARY FUND

Table 2a. Balance of Payments, 2014–231/

Errors and omissions -181 278 -15 -88 0 0 0 0 0 0

Overall balance -586 -846 -712 -43 2 72 69 -25 -45 -58

Financing 586 846 712 -43 -2 -72 -69 25 45 58

Sources: Equatoguinean authorities; and staff estimates and projections.

INTERNATIONAL MONETARY FUND 17