Mineral rich Guinea secures $2.1 billion debt relief from IMF, World Bank

Guinea secured $2.1 billion in debt relief from the World Bank and the IMF Heavily Indebted Poor Countries (HIPC) initiative, paving the way for accelerated development of the minerals-rich West African state, officials said.

The debt relief comes as a vote of international confidence in Guinea's transition back to civilian rule since a 2008 military coup that hampered its economy, discouraged investment, and led partners to freeze aid.

Guinea is the world's top supplier of the aluminum ore bauxite and holds rich deposits of iron ore, gold and diamonds, but decades of political turmoil since independence have left most of its people in poverty.

"This gives us the historic opportunity for a new start," President Alpha Conde said in a press release issued by his office.

Conde's office said the debt relief would free up some $150 million a year for programmes to combat poverty in Guinea, and would allow the government to raise public salaries by 10 percent starting in October.

Conde won a hotly contested election in 2010, closing the book on nearly two years of military junta rule, but the government has since struggled to set the legislative elections needed to complete the transition.

Conde's regime has taken criticism from human rights groups and the United Nations for heavy-handed security crackdowns on opposition protesters, who claim his government is seeking to rig the parliamentary elections in advance.

Guinea's Finance Minister Kerfalla Yansane said the debt relief, which clears two-thirds of the country's total foreign debt, will allow the country invest in infrastructure, water, electricity, and food security.

He added that Guinea was aiming for double-digit growth within two years on the back of its development projects, up from the IMF's projected 4.7 percent in 2012.

Mining firms have signed billions of dollars worth of deals targeting Guinea's reserves, though ongoing political uncertainty, labour strife, and a government review of mining contracts has cooled recent investment.

Guinea said in July that world No. 1 miner BHP Billiton is pulling out of an iron ore project, and a source at Vale said on Tuesday the company was putting its planned Simandou development down its list of priorities.

Yansane said bad governance remained a top threat to Guinea's development plans, which he said was the main reason for the government reviewing existing contracts -- particularly those signed during the military junta rule. A report by the Paris Court of Accounting seen by Reuters showed that some 1.5 billion euros ($1.93 billion) of contracts were signed by the former military junta under opaque conditions.

Inflation in Guinea is running at about 14 percent, down from 40 percent in 2006, Yansane said. He added, however, that Guinea's poverty rate has risen to 55 percent in 2010 from 48 percent in 2002.