“The Equato Guinean government puts people’s health above all other considerations, by ensuring the financing of the national health system through budget management consistent with the situation.”
In general terms, what do you think are the greatest challenges faced by the country with the emergence of COVID-19?
In 2019 as well as in previous years, several countries, including Equatorial Guinea, my country, made important policy decisions to define and prioritize national development aspirations, in alignment with the UN’s Agenda 2030 and the African Union’s Agenda 2063. Additionally, in order to leapfrog straight to the Fourth Industrial Revolution, we scaled up our investments in ITCs and empowering the capacity of our youth. And then, COVID-19 arrived! In just a few short months the world has changed, and the pandemic has shuttered normal life and the economy as we know it. By the time everything will return to its ‘normal’ course, it will be a ‘new normality’ and a brave new world.
COVID-19 is an existential crisis. It is severely testing Africa’s social, economic and political resilience. In a post-COVID-19 world, the continent’s leaders will therefore have to rethink many prior assumptions and find new balances for individual and collective behavior. COVID-19 is an existential challenge for Equatorial Guinea, just like elsewhere. Since the outbreak of the pandemic, our lives have changed in an unprecedented way, a normal habit like the Basic Handshake that was normal and very humane just a few months ago, today represents an act that can endanger your life and that of those around you. As a developing country, COVID-19 is also a developmental challenge, and now we have to adjust our aspirations. We have been forced to rethink the growth forecasts that were being handled at the end of 2019 and to take robust actions to mitigate the adverse effects of this global health crisis on the economic, social and political spheres.
What is the estimated impact of the COVID-19 pandemic on the country’s economy?
Well, previous to the outbreak, we estimated a growth rate of -1.6% for 2020, and even though it was a negative rate, we were optimistic about it as it reflected a trend of exiting from the economic recession the country was dragged since 2015. Today, with the current pandemic and followed an unexpected oil price shock, the growth rate we estimate for 2020 is -5.5%. These projections might change for good or for worse depending on the evolution and deepening of the crisis as well as the measures to palliate its impact.
If we combined this crude price shock with the current US-XAF dollar exchange rate, the temporarily shut down of businesses nationwide and other many actions put in place as part of the efforts taken by the Government to curb the spread of COVID-19, there is no doubt that it have all taken a massive toll on the economy, now we are facing a budgetary shortfall of around 6% of GDP, as a result of massively decreased revenue from all funding streams.
We forecast a drop in State revenues by 5% of GDP in the General State Budgets for 2020. In the global impact on expenses this year, a net effect is expected between the reorientation and rationalization of the General State Budget Current Expenditures and the higher expenses associated with public health and social protection. In this first exercise of reviewing budget expenses, no investment expenses are planned so far, and as a result of the impact of this crisis (lower income and higher expenses), we are facing a financing gap of about 6% of GDP this year.
As far as the African continent is concerned, which regions do you think will be most affected by the COVID-19 and why?
The Central African sub-region is one of the areas most exposed to an economic recession, due to the double danger we are facing, on the one head, we are fighting COVID-19 and with very limited financial resources and fragile health systems, and on the other hand, we are trying to mitigate the adverse economic effects of COVID-19 to safeguard our economies characterized by extreme dependence on the natural resources revenues.
With regard to Central Africa, which countries do you think will be most affected by COVID-19 and why?
It is not a secret that the most affected countries within Central Africa are Sao Tomé and Equatorial Guinea. In terms of the impact on the economy, we have been punched by COVID-19 like no other countries in the region. São Tomé is by far the most affected country. Both countries share a pattern which is the extreme dependency on income generated by oil activity (Equatorial Guinea) and Tourism (São Tome).
The quest for economic diversification is a debate we can no longer postpone. We have to face our perennial demon which is the fragility of our economies. Vis a vis our countries, oil sector and tourism industry are volatile and unpredictable. We should take control of our development aspirations by ensuring the diversification of the sources of economic growth and reducing the extreme dependency on natural resources revenues.
Which sectors of the country’s economy are affected the most by the COVID-19?
Airline and hospitality industry have been massively affected. In our case, it is especially dramatic. The state-owned airline company called Ceiba Intercontinental is the flagship airline company within the CEMAC area. Ceiba fleet counts on 9 aircrafts (4 ATR and 5 Boeing), and it travels to more than 14 destinations within Africa and also Europe. This is just an example to easily picture how affected we are today with the lockdown.
When it comes to hospitality, after being a not easily accessible country, it the last few months before COVID-19 outbreak we made significant reforms to ensure that the massive investments made in building many tourism’s facilities during the implementation of the Horizon 2020 Plan can boost the diversification of the economy and job creation.
The current situation is a big disappointment of our expectations. All the economy es bleeding: the commercial sector (of imported goods), the service sector (tourism, hotels and restaurants), the aviation sector (travel agencies and national companies), the financial sector (because of the risk of lack of liquidity) and SMEs and the self-employed are also hit significantly (hairdressers, clothing shops, taxis). But with COVID-19, despite the pain that ins inflicting on us, opportunities are also emerging, geniuses who were previously imprisoned by various interests or simply by laziness are coming out of the bottles. I frankly believe we will rise stronger after COVID-19.
What measures has the Government taken at the Ministry of Finance, Economy and Planning level to mitigate the effects of COVID-19 on the country’s economy?
The Government of Equatorial Guinea is taking all possible actions to slow down and contain the spread of COVID-19 but we also acknowledge that this is an uphill battle. Our immediate focus remains on the health and humanitarian front. There is a need to continue the awareness raising, testing, social distancing. Nevertheless, in accordance with the Government’s guidelines, the Ministry of Finance, Economy and Planning has focused its COVID-19 response in five top priority lines:
I. Putting people’s health above all other considerations, by ensuring the financing of the national health system through budget management consistent with the situation.
This budgetary management for COVID-19 times is widely covered in the Decree number 43/2020 dated 31 March.
I. Guaranteeing the necessary funding to cover the needs of SOCIAL PROTECTION, with the implementation of an integrated system of protection for the most vulnerable groups in times of COVID-19, which we called the “Basic Social Guarantees Program”. Our Social Protection Emergency COVID-19 Program, included in the Decree number 43/2020, was designed to respond and mitigate the social impact of the pandemic in the most vulnerable families in the country and is harmonized with the Social protection legislation drafted in 2018 and currently in process of approval and regulation. This program will be used as pilot to test the feasibility and applicability of a more integrated social protection system in Equatorial Guinea considering the current economic context that is now even more challenging with the emergence of COVID-19 pandemic.
II. Accelerating the implementation of necessary reforms in the area of economic governance, BUSINESS CLIMATE and ECONOMIC COMPETITIVENESS, with the recent adoption of the Automated Customs System (ASYCUDA WORLD) for the Customs Administration of Equatorial Guinea. This tool, will considerably reduce bureaucratic procedures from 20 procedures to only 8, impacting positively on the improvement of the business climate and economic competitiveness. We acknowledge the importance of the private sector for job creation and for the recovery effort. We have put in place liquidity facilities, refinancing and guarantee facilities to support the private sector.
III. Reducing the FINANCIAL SYSTEM STRESS and avoiding the contagion to other sectors, by accelerating the process of the regularization of the debt between the State and construction companies, fact that has been informed to all the internal creditors of the State and to the banks.
IV. Planning the RECOVERY OF THE ECONOMY in times of COVID-19 and avoiding the worsening of the crisis, as we are wide aware that COVID-19 will not last forever, it is within this context that the outputs of the Third National Economic Conference held last year (the Strategy for Diversification of Sources of Economic Growth and the Plan for Sustainable and Inclusive Development 2035), are both being reviewed in light of the change in the baseline.
Since Equatorial Guinea belongs to the CEMAC sub-region, and yourself are the monetary authority that represents the country before all important meetings held at the sub-region level, what are the economic mitigation measures that have been carried out at the level of the CEMAC sub-region in the face of a transnational threat of this nature?
o Through the Steering Committee of the Economic and Financial Reform Program (PREF-CEMAC) of CEMAC, a few measures have been taken such as the cancellation of external debts, or renegotiation of member countries’ debts on new terms according to the specificities of each country, just to highlight some of them;
o Through the Monetary Policy Committee (MPC), they have decided to reduce the Central Bank’s (BEAC) intervention rate from 3.5% to 3.25%, and also reduce the marginal interest rate of the loan from 6% to 5%.
o Through the CEMAC Commission, the highest representative body of the CEMAC sub-region, initiatives have been taken such us:
Ø Amending Finance Laws for 2020 have been adopted to align public finance management.
Ø Member countries have been urged to make the necessary efforts to rationalize public spending.
Ø All CEMAC countries has been urged to manage the measures from the budgetary framework.
Ø All CEMAC countries have been requested to present their fiscal measures regarding the support of the most affected sectors of the economy.
Ø The CEMAC Commission has established a community backing for the member countries to borrow in order to finance the increase in public spending that may be incurred in the fight against COVID-19