IMF approves disbursement of $143 million loan for Sierra Leone’s COVID-19 response

Sierra Leone Telegraph: 03 June 2020:

The government of Sierra Leone has today received approval from the IMF, for almost half the government’s $300 million it had requested from the international community a few weeks ago, in support of its COVID-19 response programme.

Yesterday, the EU released Ten Million Euros to help the government “maintain macro-economic stability and support livelihoods, as well as help mitigate funding gaps created by the need to divert significant public development resources towards the Coronavirus response,” a statement by the government said.

Sierra Leone’s economy has been badly hit by the decision of the government taken last year, to terminate several mining contracts which accounted for almost 30% of government revenue.

According to a statement released today by the IMF, “the COVID 19 pandemic is taking a heavy toll on Sierra Leone’s economy, jeopardizing hard-won gains since the Ebola health crisis,” hence today’s decision of the Executive Board of the IMF to approve the disbursement of SDR 103.7 million (US$143 million or 50 percent of quota) under the Rapid Credit Facility (RCF) to Sierra Leone to help meet the urgent balance of payments and fiscal needs stemming from the COVID‑19 pandemic.

“A sharp contraction in external demand, and vital steps to contain the spread of the virus, are disrupting domestic activity and important mineral exports,” the IMF said.

The Sierra Leone authorities, the IMF says, “have taken swift action to combat the effects of the crisis, increasing health spending and social protection for the most vulnerable, as well as steps to support the private sector and secure critical supplies to address food insecurity. These substantial needs, together with the already tight financing situation, underline the importance of Fund support, and additional support from the international community.”

“In the context of their broader commitment to strengthen governance, the authorities are taking steps to ensure transparency and accountability in executing pandemic-related measures. IMF staff are working closely with the authorities to provide technical and policy advice to help Sierra Leone as it battles the pandemic,” the IMF statement reads.

Following the IMF Board’s decision to disburse the $143 million to Sierra Leone, Mr. Tao Zhang, Deputy Managing Director and Acting Chair, said:

“The COVID‑19 pandemic puts Sierra Leone’s population at risk and is a serious blow to the economy, which has just started to recover. The number of COVID-19 cases is increasing rapidly, threatening the fragile health system. The drop in external demand and essential measures to contain the spread of the virus are sharply curtailing economic activity.

“The authorities are taking decisive actions to mitigate the health and socio-economic impact of the pandemic. In collaboration with development partners, they are scaling up urgent health spending and introducing measures, including boosting social safety nets and ensuring access to credit for affected businesses.

“Beyond the crisis, the authorities remain committed to their National Development Plan and their reform program supported under the Extended Credit Facility. They are taking steps to maintain macroeconomic stability during the crisis and are continuing to strengthen governance, including by seeking IMF technical assistance to implement accountability structures for emergency spending. Once the crisis abates, resuming fiscal consolidation and accelerating structural reform will be important. The IMF stands ready to assist Sierra Leone as it fights the pandemic and to support its economic reforms going forward.

“The shock has generated a large balance of payments need. Emergency financing under the Rapid Credit Facility will help meet this financing gap and create room for pandemic-related spending. With significant downside risks and a tight financing situation threatening to reverse Sierra Leone’s progress toward the Sustainable Development Goals, additional grant support from the international community is urgently needed.”

There are fears the government of Sierra Leone is running out of cash to run the country, as tax receipts and export revenue fall by over 60%.

With the IMF now making such a big contribution to meeting the government’s $300 million COVID-19 Response Budget, there is every expectation the government would be looking to make up the shortfall, through grants and further loans from the African Development Bank as well as debt-forgiveness by countries such as China.

Yesterday, health workers and nurses responsible for contacting, tracing and caring for COVID-19 suspected cases, said they have not received their salaries for at least two months. Many, including  Junior doctors are threatening strike action, if their salaries are not paid.

Several private contractors and service prioviders have not been paid in the last few months, according to ministry of finance sources.

Will the government get its $300 million COVID-19 Response Budget?

 

2 Comments

  1. This is what the IMF said “The COVID‑19 pandemic puts Sierra Leone’s population at risk and is a serious blow to the economy, which has just started to recover. The number of COVID-19 cases is increasing rapidly, threatening the fragile health system. The drop in external demand and essential measures to contain the spread of the virus are sharply curtailing economic activity.”

    Bottom line, Sierra Leone received this loan on humanitarian grounds in my view. Although, I hate seeing the IMF increasing the debt that our country will never pay, I am happy about this one, because it helps the country from the economic and health devastation that has been caused by COVID-19. Sometimes, you have to swallow bitter pills to get well. Thumbs up for the IMF. We’ll talk about this never ending debt to our country later down the road. God bless the IMF and the EU.

  2. In times of crisis the international community will always respond to countries’ cry for help. Given the nature of this COVID19 pandemic, and the havoc it continues to wreak both in human and economic activities, it is heartening to see the IMF comes in with this package of assistance. The lockdown will always affect economic activity, given our limited resources. And the failure of governments both past and present – unable or unwilling to set up a mechanism for the purpose of collecting taxes. It is an open secret, not everyone in Sierra Leone pay their fair share of taxes. For many advanced economies this is their primary source of income. We cannot as a nation continue to beg our partners, just to meet the needs of paying public servants’ salaries.

    Surely if government has sound economic and monetary policies in place, our country should not be in that position. If we can’t pay our teachers what hope have we got for government to undertake huge projects? So all that speech the president was making was a smoke screen to secure this loan. My hope is when the IMF technical team comes in, they will trace and monitor how this money is spent. For far too long in our long run and tortured history, governments of all colours have gone and borrowed money from international financial institutions on our behalf, but in reality we hardly ever see a penny of that. Rather the money is distributed to cronies and the rest spent on elephant projects, that have no benefit for the people that these financial institutions have in mind when they approve loans.

    We Sierra Leoneans are forever saddled with debts, that even children that are yet to be born are not aware they owe money from the IMF. The IMF technical team can also be well advised to liaise with the anti corruption commission to see progress in that field – Like how many prosecutions and convictions they have secured? These are difficult questions but they need to be asked. Its no good just relying on the words of the anti corruption officials, “trust us we are working on it and making great progress”. Ask them: “have you got evidence in writing to back your claim.” Then all Sierra Leoneans will say hurrah, we were right to elect president Maada Bio.

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