CONAKRY 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.
"Reaching the HIPC completion point represents an important achievement for Guinea. It reflects the significant progress made in economic management following the first democratic elections in December 2010," Harry Snoek, IMF mission chief for Guinea, said in the IMF press statement.
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.
"I applaud the courage of the Guinean people, without whom this important step in restoring the confidence of our partners would never have been possible," President Alpha Conde said in a press release issued by his office.
"This gives us the historic opportunity for a new start."
Conde's office said the debt relief would free up some $150 million a year for programs 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.
"We must ensure that the daily needs of people are taken care of, but we must also lay the groundwork for longer-term productivity and self-reliance," he said.
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.
"This is a process that is going to pave the way for better controlled development and we hope that later, in the two years ahead, that we will hit double-digit growth."
Mining firms have signed billions of dollars worth of deals targeting Guinea's reserves, though ongoing political uncertainty, labor 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.
"Guinea needs to follow a more democratic path, in consultations, in collaboration, so that we can have a sustainable development and growth that can be shared by all including the poor," he said.
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. ($1 = 0.7788 euros)