Sierra Leone Telegraph: 28 June 2019:
The International Monetary Fund (IMF) has announced that it has today, 28 June 2019, completed its review of Sierra Leone’s economic performance. And as a result of this review, it has agreed to disburse the sum of $21.62 million to the government of Sierra Leone.
Expressing confidence in the Bio-led government, the IMF said that “the government’s reform agenda will secure fiscal sustainability, create space for priority spending, and lay the foundation for inclusive growth and poverty reduction”.
But what does the IMF make of the government’s implementation of the program, which is supported under the IMF Extended Credit Facility (ECF)?
This program includes the removal of subsidy on various consumer items – such as fuel, the withdrawal of massive tax waivers granted by the APC government, prudent government spending and tough fiscal policy.
The IMF says that “implementation of the program, supported by the IMF, has been satisfactory in the face of a challenging economic environment”.
The Sierra Leone Telegraph understands that completion of today’s review and the immediate disbursement of $21.62 million, brings the total disbursements under the current ECF arrangement to about $43.25 million.
The IMF also said it has today approved the government’s request for a waiver of non-observance of a performance criterion.
Sierra Leone’s 43‑month ECF arrangement for SDR124.44 million (about US$172.1 million or 60 percent of the country’s quota at the time of approval of the arrangement) was approved on November 30, 2018 (see Press Release No. 18/446).
The IMF says that the government’s reform agenda which is supported by the ECF, “aims to create fiscal space for priority spending by strengthening revenue mobilization, containing current spending and improving the efficiency of public investment”.
At the end of today’s review in Freetown, the Deputy Managing Director and Acting Chair of the IMF Executive Board – Mr. Tao Zhang, said:
“Performance under the ECF‑supported program has been satisfactory in the face of a challenging economic environment. Although progress on structural measures has been slower than anticipated, the government remains firmly committed to their reform agenda.
“Securing fiscal sustainability and creating space for priority spending will be crucial for tackling Sierra Leone’s development needs. The authorities have made commendable progress since the start of the program, both in mobilizing revenue and taking a cautious approach to expenditure.
“Going forward, durably higher revenue will be essential to boosting social spending and investing in infrastructure – key goals of the government’s new National Development Plan.
“The authorities’ more cautious medium-term fiscal approach is appropriate given fiscal risks. Managing fiscal risks expeditiously will provide more certainty about the space available for priority spending. In this regard, quick actions to complete the arrears stocktaking and the diagnostic of state‑owned banks will be particularly important.
“Structural reforms are a central component of the authorities’ fiscal strategy. Achieving the program’s revenue mobilization goals will entail continued tax policy and administration reforms. Improving public financial management will help control expenditure and avoid the emergence of new arrears, while reorienting spending to priorities with clear economic or social returns.
“Efforts to develop a Medium-Term Debt Management Strategy will help to better manage fiscal risks.
“Monetary policy remains appropriately focused on reducing inflation to single digits over the medium-term. Progress toward developing indirect instruments will, over time, improve policy effectiveness. Enhancing exchange rate flexibility and reserve buffers will be vital to boost the economy’s resilience to external shocks.
“Continued reforms to strengthen the Bank of Sierra Leone’s governance will be critical for the institution’s accountability and operational effectiveness. In this spirit, finalizing the new central bank law and the recently completed forensic audit were important milestones. Quickly acting on both will help advance the BSL’s reform efforts.”
Today’s review of the Bio-led government’s performance by the IMF, and its decision to approve $21.6 million to boost government spending, is significant.
It signals a strong show of confidence in the government’s handling of the difficult economic circumstances inherited from the Koroma APC government.
The IMF’s review comes almost ten days, after the government launched its expression of interest in seeking private sector investors, to fund the construction of a $2 Billion road bridge across the river from Freetown to the country’s airport town of Lungi, on a build, operate and transfer (BOT) business model.
Today, the IMF made no mention of the Lungi bridge proposal, nor did it express any views about such methods of funding future infrastructure development projects in Sierra Leone.