IMF calls for strong policy efforts to help Sierra Leone’s recovery and safeguard economic stability

Sierra Leone Telegraph: 28 July 2021:

The Executive Board of the International Monetary Fund (IMF) says it has completed the third and fourth reviews of Sierra Leone’s performance under the program supported by an Extended Credit Facility (ECF).

Completion of these reviews it says has enabled the IMF to disburse SDR31.11 million (about US$ 44.2 million), bringing total disbursements under the arrangement to SDR 77.775 million (about US$ 111 million).

The Executive Board has also approved the government’s request for a waiver of non-observance of two performance criteria, as well as approving the re-phasing and extension of the ECF arrangement by 12 months, suggesting that the government is losing control of the economy.

The Government’s reform agenda, supported by the ECF, continues to aim at creating fiscal space for development by strengthening revenue mobilization, containing current spending and improving the efficiency of public investment.

According to the IMF statement, there are early signs of economic recovery, but Sierra Leone’s fiscal situation remains tight.

Economic activity dipped sharply in the second and third quarter of 2020 with inter-district lockdowns and disruptions to international trade and travel.

Depressed activity saw inflation trending downwards, though food price inflation remains elevated. Higher frequency indicators suggest a moderate pick-up of activity began in the fourth quarter of the 2020.

Mining is expected to drive the recovery in 2021 (growth of 3.2 percent) and 2022 on the back of normalization of production at existing mines and favourable prices.

However, fiscal space remains limited, reflecting a still low revenue base, an elevated public debt level, and substantial COVID-19-related and other priority expenditure and development needs.

Growth would recover to pre-COVID-19 levels in the medium term, but there are considerable risks to the outlook, the IMF warns.

Over the medium term, non-mining growth is projected to average around 4.5 percent. The external position would remain vulnerable as international reserve coverage is expected to decline.

Risks to the outlook are significant and include, for instance, unexpected global shifts in the COVID-19 pandemic or an intensification of the third wave, uncertainties in the mining sector, lower-than-expected support from development partners or slower-than-expected reform implementation.

At the conclusion of the Board discussion, Mr. Tao Zhang, Deputy Managing Director and Acting Chair, made the following statement:

“The COVID-19 pandemic has strained Sierra Leone’s effort to address its large development needs and exacerbated a difficult financing situation. The authorities’ strong economic and health responses helped mitigate the immediate impact of the crisis while exceptional external support, including from the Fund, helped cushion fiscal and external positions. There are early signs of economic recovery, but a third wave of infections and difficulties in vaccine rollout could delay a return to pre-crisis growth.

“The authorities have responded appropriately to the crisis within a tight budget envelope. The 2021 budget continues to prioritize health and other priority spending under the National Development Plan while allowing for a significant improvement in the primary balance.

“The authorities remain committed to securing fiscal and debt sustainability, through enhanced domestic revenue mobilization, improved expenditure efficiency and controls, and reliance on external grants and concessional financing.

“The Extended Credit Facility arrangement provides a critical policy anchor, including for the post-crisis recovery. The arrangement will help meet external and fiscal financing needs and support the authorities’ reform agenda amidst heightened uncertainty.

“The authorities continue to strengthen governance, including by making progress with the fraud prevention policy and the internal audit function at the Bank of Sierra Leone, and transparent reporting of COVID-19 related spending.

“Looking ahead, continued strong policy efforts are needed to help the recovery while safeguarding macroeconomic stability. With a high risk of debt distress, this requires enhanced revenue mobilization, prudent expenditure management, and continued external grant support.

“Mindful of the price stability objective, monetary and exchange rate policy should remain flexible to support the recovery while rebuilding external buffers and monitoring closely financial stability risks.”

 

2 Comments

  1. Fiscal discipline, and maintaining microeconomic stability is important for long term sustainable economic developments. Overall, for governments to be in position to reacts swiftly to economic after shocks, and reduce vulnerabilities that might follow in its wake. And if there is ever a moment we needed a government that has a clear agenda, and strategic economics goals, with a recovery and costed plan in place, this is it Covid19 have thrown the economic chips in the air, and no one knows where they will land. So far the IMF forcast even for countries that were in the right economic footing, is gloomy to put it mildly. Now if we factor corruption in Sierra Leone chances are, economically, it will take us years to recover from the effects of Covid19. Right now our relationship with the IMF and other international creditors are in shaky ground. What the IMF is doing, is like taking the horse to the river, but you can’t force it to drink.

    The IMf can try and advice Bio’s government about fiscal economic discipline, but failure to demand transparency and accountability, especially when it comes to our ballooning government payroll numbers, and how government contracts are awarded, with huge elephant projects that are of no use to the ordinary man and woman that survive on “GARI NA DEVIL HOLE “the IMF is trying to kick the day of reckoning with Bio’s government to the long grass . Generally, fiscal discipline can be seen as a way governments are able to come up with discretionary policy measures, so in both good and bad times elected representatives can meet, and fulfill their mandate to their peoples, with out cutting back investments earmarked for national developments . Building your nest while it is still sunny. But this being the incompetent Bio government, the Covid 19 thunder storm is upon us and every one is scrambling for shelter . Not for Bio and some of his corrupt ministers. They are taking shelter in their villas. Persistent miss use of policy discretionary measures, can lead a country to accumulate rising debt levels , that are unsustainable, and over a period of time the loss of any policy credibility.

    I suspect we are almost there. Especially, the uneasy relationship that exists between our international creditors, like the IMF, World Bank, and the African development bank with the undisciplined Bio government. This warning by the IMF to the Bio government about fiscal discipline, should be seen by our government that international financial institutions are getting jetty with Bio’s out of control economics discipline. The danger of course, if he fails to implement some of their advice, our country risk defaulting on its loans, and any extentions of our credit facilities will be blown out of the window. As its stands things are though, but it will be even tougher. Tighten your seat belt.

  2. Indeed,the borrower is always a servant to his lender and the hungry slave that still depends and relies on hand outs will always forever and ever remain indebted to his Master. President, Ministers, Members of Parliament, all of them in
    it,hand in glove,together facilitating the GREAT RIP-OFF schemes and stratagems of the IMF. Black people, African folks as dark as charcoal will always continue to look at White People as their saviors because we lack self esteem and
    self confidence; They borrow and refuse to pay their debts because their masters with hearts of gold will forgive their inadequacies by just simply adding more iron shackles and chains on them.

    A country with a foundation built on high interest loans will not stand the test of time,for it is not only flimsy but also superficial in its nature; A mundane minded leader, living a humdrum existence,that doesn’t understand the alchemy of transforming ordinary iron into pure gold in the interest of our struggling poor people has no business handling the highest office in the land. The IMF and their loans are nothing but shackles; A new day will soon be born when we will scrutinise all their dealings with us in the past thoroughly so that we can prove to them that they are the Fools and not our People.(lol)

Tell us what you think

This site uses Akismet to reduce spam. Learn how your comment data is processed.