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IMF approves new economic programme for Sierra Leone

22 December 2018 at 22:59 | 1892 views

In June 2017, the Executive Board of the International Monetary Fund (IMF) approved a three-year arrangement under the Extended Credit Facility (ECF) for Sierra Leone for SDR161.778 million (about US$224.2 million). Of this, the total amount of SDR39.166 million (about US$54.3 million) was disbursed to the previous administration aimed at supporting important policies targeted at reducing inflation and significantly increasing domestic revenues. In particular, the Fund advised on the elimination of numerous tax and duty exemptions, increasing infrastructure spending and bolstering the social safety net.

The programme went off track under the previous administration due to fiscal indiscipline and the failure to implement agreed reforms. Among key reforms agreed were the implementation of the Treasury Single Account (TSA), the liberalisation of fuel prices, the elimination of discretionary duty and tax waivers to companies, relatives and friends of political elites. The remaining amount of SDR122.612 million (about US$169.9 million) was withheld. Consequently, other Development Partners withheld disbursement of budgetary support since 2017.

As a mark of the commitment to fiscal discipline and the restoration of macroeconomic stability, the Government of President Julius Maada Bio re-engaged the IMF with a view to re- launching the programme. This was followed by technical negotiations culminating into an agreement on a number of prior actions including liberialisation of fuel prices, implementation of Treasury Single Accounts (TSAs), legislation of Extractive Industry Revenue Bill, and elimination of discretionary duty and tax waivers. In addition to these, Government has initiated home grown reforms including biometric verification of public sector workers and fleet management policies.

As a consequence of these reforms, there has been marked improvement in public financial management between April and November, 2018. This has enabled Government to pay for essential government services including wages and salaries, tuition subsidies and security without recourse to borrowing from either the Central Bank or Commercial Banks.

On November 30th, the Executive Board of the International Monetary Fund (IMF) approved a new 43-month (December 2018 – June 2022) arrangement under the Extended Credit Facility (ECF) for SDR124.44 million (about US$172.1 million) to support the country’s economic and financial reforms. In a Press Release (No. 18/446)1 issued on Friday November 30 2018, the IMF Executive Board’s decision will trigger an immediate disbursement of SDR15.555 million (about US$21.5 million). The remaining amount of SDR 108.885 million (about US$150.6 million) will be disbursed during the implementation period.

The main objectives of the new programme are to safeguard macroeconomic stability, deepen structural reforms, and advance Government’s Human Capital Development (The Free Quality School Education Programme) and poverty reduction agenda. The new ECF programme will focus on current efforts of Government to further mobilise domestic revenue, improve expenditure management and control, address the outstanding stock of budget arrears, whilst at the same time committed to implementing prudent sustainable debt management policies, as well as prioritizing public investments.

This is the first time in nearly 20 years that the Government of Sierra Leone has successfully concluded an IMF-supported economic management programme without requesting a waiver of performance criteria from the Executive Board.

The relaunch of the IMF programme has once more restored the international credibility of Sierra Leone with respect to efforts towards macro-economic stability and sustained economic growth. The relaunch of the programme gives confidence to development partners and private investors in the investment climate in Sierra Leone. As a result, in addition to the immediate disbursement of US$21.5 million by the IMF, the approval of the new programme will trigger additional disbursements of US$35.0 million by the World Bank; €23.5 million by the European Union and US$18.0 million by the African Development Bank for the 2019 Financial Year.

Government assures the public of its commitment to deepening fiscal consolidation through revenue mobilisation and improved expenditure management and control..

Source: Ministry of Finance, Freetown, Sierra Leone

Photo: Finance Minister J J Saffa

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