By Brima Sannoh
Commendably, the Sierra Leone authorities and International Monetary Fund (IMF) mission have concluded discussions, reaching staff-level agreement on economic policies to pave the way for the IMF Executive Board to consider the second review under the ECF‑supported program. While the economy is continuing to recover, the outlook remains challenging and improving the well-being of Sierra Leoneans is an ambitious endeavour. The 2020 budget strikes a balance between meeting the country’s large development needs and navigating the tight financing situation.
An International Monetary Fund (IMF) mission, led by Karen Ongley, visited Freetown during October 30-November 13, 2019 to conduct the 2019 Article IV consultation and the second review of the IMF arrangement under the Extended Credit Facility (ECF), approved by the Executive Board on November 30, 2018.
At the end of the visit, Ms. Ongley issued the following statement:
“The economy is continuing to recover, with economic growth set to pick up in 2019 to 5.1 percent, up from 3.5 percent in 2018, buoyed by improved activity in agriculture, mining, and construction. While external accounts have improved, the current account deficit is expected to narrow to 14.1 percent of GDP from 18.7 percent, and exchange rate pressures remain, in particular during the lean season in the third quarter of the year; thus overcoming the legacy of prolonged economic instability and numerous shocks, and improving the wellbeing of Sierra Leoneans remains challenging.
“In this regard, the Government’s National Development Plan (NDP) promises to put the country on a sustainable development path. It aspires to develop human and physical capital, while strengthening governance and accountability to build an economy that is macro-economically sound, inclusive and resilient to shocks. However, the authorities are pursuing this plan against a tight financing situation. Pursuing these important goals—boosting education, health, agriculture, and infrastructure—will require carefully calibrated policies.
“Progress under the ECF-supported program has helped stabilize the macro-economy—vital as a launch-pad for the NDP’s goals. The Government met all of the end-June 2019 quantitative performance criteria and indicative targets—net credit to the government and net domestic assets of BSL by large margins. They also met the indicative targets on domestic government revenue, poverty-related spending, and the domestic primary balance. The authorities made headway on structural reforms, such as by submitting draft amendments to the National Revenue Authority Act for IMF staff review, finalizing the stocktaking of domestic arrears in September, and publishing the forensic audit report in June. Steps toward developing a remedial action plan to address the findings of the forensic audit are advancing well.
“We appreciate the open dialogue on the 2020 budget, which strikes a balance between meeting priority spending needs and navigating the tight financing situation. To this end, the Government’s efforts to mobilize domestic revenue are advancing well, thanks to significant tax administration measures, such as operationalizing the Integrated Tax Administration System (ITAS). Looking ahead, continuing to generate strong revenues to finance Sierra Leone’s large priority spending needs requires a mix of both tax policy and administration reforms. The IMF team welcomes the Government’s committed efforts to promote more efficient spending and improve public finance management. Planning arrears clearance—most of which originated in 2016/17—in a manner that is transparent, equitable, fiscally sustainable, and limits the risks to financial stability is an important step in this direction.
“Ongoing efforts to bolster the independence and effectiveness of monetary policy will support the Bank of Sierra Leone’s (BSL) objective to bring inflation down to single-digits in the medium term. Limiting recourse to domestic bank financing of the budget will reinforce efforts to achieving this goal. Maintaining a flexible exchange rate system and continuing to build foreign exchange reserves will boost resilience to economic shocks, while the impact of recent foreign exchange directives should be closely monitored.
“The Government and the IMF team reached preliminary agreement on macroeconomic and financial policies that could pave the way for the IMF’s Executive Board to consider the second ECF review, scheduled for January 2020. Completion of the review would make available SDR 15.56 million (US$20.0 million), bringing total disbursements under the program to about SDR 46.56 million (US$62.2 million).
“The IMF team met with a range of government representatives—including President Bio, Minister of Finance Saffa, Minister of Planning and Economic Development Kai-kai, Bank of Sierra Leone Governor Kallon, Auditor General Taylor‑Pearce, Minister of Youth Affairs Bangura—as well as representatives from private and financial sectors, civil society organizations, and development partners. We thank all our partners for their warm hospitality, constructive and rich discussions.”
