10 July 2012
Unconfirmed report says that auditors of the African Development Bank (ADB), which has loaned the government of president Koroma hundreds of millions of dollars for infrastructural development, have uncovered huge discrepancies in the accounts.
It is understood that millions of dollars earmarked for capital projects, such as road construction cannot be accounted for by the ministry of finance.
The ADB is said to be considering a moratorium on further cash advances in order to protect its money.
When the IMF last met with government officials in Freetown three months ago, its representatives made their feelings known regarding the government’s mismanagement of funds.
Couched in diplomatic language, the IMF officials said that the government was spending money it did not have.
It says that there is a “need to enhance fiscal consolidation efforts, while also addressing Sierra Leone’s large infrastructure and social service needs. In this respect, the mission stressed that it was important to constrain non-priority expenditure in the remainder of 2012, and to enhance expenditure and treasury cash flow management.”
But while many observers and analysts have been expecting the government to heed the advice of the IMF and put its financial house in order, the situation has worsened.
The government has run out of cash.
Rather than pay its bills, the ministry of finance has been stalling huge payments to creditors, running into tens of millions of dollars.
This, despite the IMF reminding the government in April, that; “slippages in budget execution translated into a higher-than-anticipated overall deficit financed through accumulation of unpaid bills.”
The project has run out of money without functioning solar powered street lights.
Over $7 million owed to contractors working on the project have not been paid. The government says it has no money.
There are fears, money meant for such vital projects has gone into the pockets of government officials.
Opposition politicians are concerned that the quality and sustainability of several road building projects are being sacrificed by corrupt officials, putting contract kickbacks ahead of project objectives.
Some of those roads are contributing to serious flooding in poor neighbourhoods, as the rainy season takes its toll.
Poor road construction and top slicing of project funding by government officials have been blamed.
It is understood that the IMF has warned the Bank of Sierra Leone to refrain from printing new money in order to finance the government’s recurring expenditures.
Just months ago, the country’s commercial banks had run out of money.
Customers were unable to withdraw their savings from banks, as the government increased its borrowing from domestic banks to pay for fuel and the completion of Wilkinson road construction.
Interest rates remain very high at over 20%. Private businesses are struggling to raise finance to manage their cash flows and finance expansion programmes.
Unemployment continues to rise in Sierra Leone, despite $20 million funding support from the World Bank to help the government tackle rising youth unemployment.
The three main key sectors identified by the government in its Agenda for Change programme; fishing, tourism, agriculture, continue to suffer massive under-investment, with too much emphasis on attracting foreign investors.
The government’s private sector development effort is weak. Talk of public-private partnerships is yet to materialise into a sustained programme of economic development in those key sectors.
The private sector’s distrust of government officials is viscerally palpable, making it very difficult to envisage any meaningful economic development partnership to flourish.
Observers say that the government does not have the expertise nor the capacity to enter into such partnerships. The government does not seem to understand the needs of industry and the economy.
What is needed, they suggest, is for the government to act in an enabling role, and create a fairer and level playing field for indigenous private investors to get on with their business.
But talk of external funders now deciding to curtail funding and loan financing, does not auger well for the completion of the many grandiose infrastructure projects the government has unwisely started.
Many analysts believe that with general and presidential elections taking place in November, it is not surprising that responsible international funders and loan providers are now reigning in on government’s uncontrolled spending.
With the country’s optimistic 2012 economic growth forecast of 50% now questionable, there are further anxieties that the government will not now be able to continue to pay for its infrastructural development agenda.
According to the IMF, “real gross domestic product (GDP) growth in 2011 is estimated at 6 percent.”
Investments in vital public services such as health and education have suffered, as the government puts a high premium on its road building programme.
Over 90 children die every day due to poor health care.
Although the country’s National Revenue Authority is working hard to collect taxes, with its restructured departments and new technology systems in place, Sierra Leone is still suffering from low economic capacity and low productivity.
The country’s tax base is still very narrow and its economy too heavily dependent on mining and international aid for its survival.
Under the leadership of president Koroma, Sierra Leone’s debt has grown from almost zero in 2001 when it benefited from HIPC debt consolidation and forgiveness programme, to a high of over $1.5 billion in 2011.
International creditors are now said to be wary of the country’s ability to pay its debt, if it continues to borrow at this pace, and given the likelihood that the highly irresponsible 50% economic growth forecast by the government, does not materialise.
The IMF is cautious. It warned the government in April “to constrain non-priority expenditure in the remainder of 2012, and to enhance expenditure and treasury cash flow management.”
But the government it seems, is not listening. Contractors working on infrastructure projects are not receiving payments, now running into tens of millions of dollars, and government debt continues to rise.
Is the country’s weak economy now facing a meltdown?