IMF Executive Board Approves US$172.1 Million Arrangement Under the Extended Credit Facility for Sierra Leone

The Executive Board of the International Monetary Fund (IMF) on Friday approved a new 43 months arrangement for Sierra Leone under the Extended Credit Facility (ECF) for US$172.1 million, equivalent of 60 percent of Sierra Leone’s quota in the IMF, to support the country’s economic and financial reforms.

The Executive Board’s decision enables an immediate disbursement of SDR15.555 million (about US$21.5 million). The remaining amount will be phased over the duration of the program, subject to semi-annual reviews.

The authorities’ ECF-supported program aims at tackling new challenges that have arisen since June 2017 while at the same time, improving the prospects for long term growth. In particular, addressing the fiscal slippages, adjusting the medium-term framework to correct for these slippages and account for recent external shocks, and supplementing the structural reform agenda to better tailor it to current circumstances, including in the areas of central bank safeguards and governance. Forceful implementation of the program, especially on revenue mobilization and expenditure control, will be essential to achieve fiscal sustainability and medium-term growth objectives.

Following the Executive Board discussion on Sierra Leone, Deputy Managing Director Mr. Tao Zhang, and Acting Chair, said:

“The goals of the new program remain focused on reducing inflation, mobilizing revenue to allow for necessary spending consistent with debt sustainability, safeguarding financial stability, and maintaining external resilience to shocks. These are critical for strong, sustained growth.

“Revenue mobilization is central to the success of the program. In the near term, maintaining the improved revenue performance of the last several months is essential for preventing a reemergence of budget arrears and establishing budget credibility. Over the longer term, sustainably higher revenue is needed to support the government’s policy goals of boosting investment in infrastructure and social protection.

“Controlling expenditure commitments requires increasing the accountability, transparency, and oversight of quasi-government institutions and state-owned enterprises. Effective implementation of the public finance management regulations is an integral part of this effort. The government’s recent reform to operationalize the Treasury Single Account is a welcome step, as are policies to ensure that spending commitments are in line with the available financing envelope. More broadly, these efforts will lead to better governance, helping promote macroeconomic stability and inclusive growth.

“The program aims to reduce the country’s debt burden over the longer term . Infrastructure spending remains essential to improving growth prospects, but the country’s high debt means that priority should be given to projects with high economic returns. External borrowing will be anchored by the objective of reducing the risk of debt distress.

“Monetary policy will remain focused on bringing inflation down to single digits over the medium-term, while the Bank of Sierra Leone (BSL) continue to strengthen its capacity to use indirect instruments. The volatile external environment underscores the importance of increasing exchange-rate flexibility and maintaining reserve buffers.

“As banks’ role in the economy grows, the BSL’s supervisory and regulatory regime will need to be upgraded to ensure that the sector remains sound. Legislation pending parliament approval should improve the oversight and functioning of the financial system. The BSL’s enhanced supervision of the state-owned banks has improved their operations and balance sheets and should continue, but the banks need to be placed on a firmer commercial footing to prevent a reoccurrence of their politically-motivated, loss-making lending practices. Strengthening the BSL’s governance framework remains a priority, and the program’s measures to better safeguard the integrity of the BSL’s foreign exchange reserves will be important for increasing public trust in the institution.”

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