Amin Key Sesay: Sierra Leone Telegraph: 29 January 2021:
The European Union Office in Freetown has announced that it is giving 18 million Euros to the government of Sierra Leone to help pay for the country’s loan repayment to the IMF.
In a statement published last Monday, the EU said that debt service relief is a key instrument for countries to manage the impact of the COVID crisis.
It said that the IMF in April 2020 launched an urgent fundraising effort that would enable its Catastrophe Containment and Relief Trust Fund (CCRT) to provide further debt service relief to countries most seriously affected by the COVID-19 crisis.
“Initially established in February 2015 during the Ebola outbreak, the CCRT now seeks to provide debt service relief to eligible low- income countries on debts due to the IMF for 2021/2022, starting from April 2020,” the EU Commision statement reads.
It also says that in response to the call of the IMF, the EU on 23 November announced a €183 million contribution for 2021, making EU the largest donor to the CCRT, which so far has received over $500 million in grants from donor countries.
It stated that the EU’s contribution will fully cover the debt service of Sierra Leone to the IMF in 2021 (about 18 million EUR).
“This payment will also make a further contribution to Sierra Leone’s debt service relief until April 2022, allowing the GoSL to create fiscal space for priority public spending in sectors such as health and education… and ultimately contributing to protect the most vulnerable in Sierra Leone,” it says.
”The EU has been leading global efforts to do more on debt relief and debt restructuring efforts.” Josep Borrell, High Representative and Vice President for EU Foreign and Security Policy, said.
Jutta Urpilainen, European Commissioner for International Partnerships, said: “The Commission is determined to continue supporting its partner countries in maintaining their path toward the SDGs despite dire financial situations.”
Paolo Gentiloni, Commissioner for Economy, added: “Today, Europe makes an important contribution to multilateralism and debt relief. This contribution is a further demonstration of our firm commitment to helping low-income countries deal with their debt burden.”
Kristalina Georgieva, IMF Managing Director, said: “I am very thankful to the EU and its member countries for the generous contribution of 183 million euros to the CCRT – a critical step to help the world’s most vulnerable countries provide health care and economic support to their people during the ongoing pandemic. The EU and the IMF have a strong partnership on development financing. I urge other member countries to join the EU in contributing to the CCRT. Contributions from our member countries are instrumental in helping the Fund support the most vulnerable countries.”
It was highlighted that in total, the EU has provided a contribution of EUR 388.5 million for the debt service of African Caribbean and Pacific countries in 2021/ 2022.
But the EU warned against lack of transparency and accountability in the management and use of public funds.
The statement warns that the EU strongly demands proper accounting, monitoring and control of all COVID-19-related expenditures; adding that the ongoing EU’s dialogue with partner countries in the framework of budget support programmes, reinforces the CCRT framework and its monitoring capacities.
When the IMF launched its heavily indebted poor countries initiative in 1996, the aim was to help poor countries, like ours to manage its debt service programmes towards the IMF and other international financial institutions, in sustainable and manageable ways. Before that, many HIDC, were caught in a merry go round of debt service repayments to the IMF and World Bank, which some countries can ill afford. This phenomenon of debt service for which countries found themselves tied to, was hampering any form of developments taking place in those countries affected.
For example, a Country like ours with limited resources, and heavily dependent on international financial institutions , the government is forced to decides whether to go with investing in education, or repay the debt. Failing which , they get black listed for not honouring their debt service obligations towards this Financial institutions.We all know which one will take precedent. No country wants to be placed in the naughty corner of country’s that cannot repay their debts, like what happened to Mexico in the 2000s,and more recently Lebanon. This EU contribution to under right or refinanced our external debt obligations to the IMF should be welcomed.
Managing debt relief in more sustainable ways will go a long way to free up much needed budgetary funding in other competing government sectors that are crying out loud for help, or funding especially in a sluggish and corruption infected economy like ours. Since the EU and the IMF are continually working with the Bio government, by advising them on capacity-building development, and strengthening the government levers of debt management through transparency, accountability, and the fight against corruption, I think the EU and the IMF should be advising this Bio government to invest more in tangible programmes that yeild rapid results for the short term like education and vocational training for the youths, meaningful infrastructure, IT, support for small and medium-sized businesses that have for the most part bore the brunt of the Covid19 pandemic, and how it has reduced economic activity for the short term, especially on tax receipts.