Sierra Leone Telegraph: 4 April 2020:
The Executive Board of the International Monetary Fund (IMF), yesterday announced the disbursement of $21.13 million to Sierra Leone, after completing its second review of the country’s economic performance, under the program supported by the IMF’s Extended Credit Facility (ECF).
This brings the total disbursements under this IMF arrangement to about US$63.39 million.
According to the IMF, the $21.13 Million underscores the Fund’s ongoing commitment to help Sierra Leone tackle any potential economic fallout from the COVID-19 pandemic, which analysts are expecting to be massive – possibly running into hundreds of millions of Dollars.
Sierra Leone’s economy is facing massive challenges, with falling export revenue after the government’s decision to terminate and suspend the operations of several mining companies in the country.
In the last three years, the country’s currency – the Leone, has seen a drop of over 40% in its value, against key global currencies; unemployment – especially youth unemployment is over 70%; and rising cost of living is seriously affecting millions of households.
With falling export revenue, the government is struggling to meet its commitment to maintaining basic public services such as healthcare, and reliable supply of clean, drinking water.
But the IMF says that the government’s continued reform efforts will help build the foundation necessary to support future development and tackle the exceptionally difficult external environment.
Yesterday’s announcement also includes the IMF’s approval of the government’s request for a waiver of non-observance of a performance criterion – the government’s “inadvertent omission of securities issued to the nonbank sector” which led to “a breach of the performance criterion on net credit to the government.”
But according to the IMF, “the authorities took the necessary corrective actions and measures to avoid re-occurrence of misreporting”.
Yesterday’s announcement also says – on a positive note, that “the government’s reform agenda, supported by the ECF, aims to create fiscal space for development needs by strengthening revenue mobilization, containing current spending and improving the efficiency of public investment”.
And that, “in the critical and uncertain period ahead, the Fund is committed to working closely with the Government to help address the priority health and economic needs to combat the fallout of the COVID‑19 pandemic”.
Following the IMF Executive Board’s discussion, Mr. Geoffrey Okamoto, Acting Chair and First Deputy Managing Director, made the following statement:
“Sierra Leone continued to make good progress under the Fund‑supported program. The authorities have demonstrated firm commitment to their reform agenda.
“While the program’s medium‑term goals remain appropriate to enable future growth and development, the dramatic onset of the global COVID‑19 pandemic poses significant near‑term risks.
“Combating the economic fallout of the crisis and protecting the health of Sierra Leoneans should be the immediate priority.
“The authorities’ cautious fiscal policy has been important. They have made commendable progress in mobilizing domestic revenue and prudent execution of budgeted expenditures. This has stabilized domestic borrowing needs and allowed inflation pressures to ease.
“The 2020 budget appropriately balances the tight fiscal position and meeting development needs. In line with the Government National Development Plan, the budget prioritizes investing in education and provisions for repaying legacy arrears as part of a broader arrears clearance strategy.
“The authorities will need to prioritize additional spending to help cushion the impact of COVID‑19.
“Managing fiscal risks and securing debt sustainability remain the medium‑term priority. Continued revenue mobilization will require both tax administration and policy reforms. Deeper public financial management reforms will further improve budget planning and execution, including preventing new arrears. A strategic plan for the two state‑owned banks will be instrumental in addressing underlying fiscal risks.
“Monetary policy remains appropriately focused on reducing inflation to single digits over the medium term. Redoubling efforts to implement the new central bank law and the forensic audit action plan will be critical to strengthening operational effectiveness.
“Continued actions to reduce strains on the foreign exchange market and preserve exchange rate flexibility are also critical to boost resilience.
“The inadvertent omission of securities issued to the nonbank sector gave rise to a breach of the performance criterion on net credit to the government. The authorities took the necessary corrective actions and measures to avoid re-occurrence of misreporting.’’
In the last forty-eight hours, the government of Sierra Leone has received a total of $28.63 million, from both the World Bank and the IMF to help the people of Sierra Leone combat the Coronavirus and the economic impact this crisis may have on the population of about 7 million people.
The Board had approved Sierra Leone’s 43‑month ECF arrangement for SDR124.44 million (about US$172.1 million) on November 30, 2018 (see Press Release No. 18/446).