The International Monetary Fund said on Friday that Sierra Leone had asked for a new 38-month Extended Credit Facility (ECF) arrangement worth about $253 million. The Fund said its staff and the Sierra Leonean authorities had reached a staff-level agreement on economic policies and reforms that could be supported by the facility, which is subject to approval by the IMF’s Executive Board.
“The new ECF arrangement would aim to restore stability by bolstering debt sustainability, addressing fiscal dominance, bringing down inflation and rebuilding reserves,” the IMF said in a statement.
An International Monetary Fund (IMF) mission, led by Mr. Christian Saborowski, visited Sierra Leone from September 4 to 13, 2024, to conduct the 2024 Article IV consultation and discuss with the Sierra Leonean authorities, economic and financial policies that could be supported by a new 38-month ECF arrangement, with requested access of SDR 187 million (about US$253 million). The staff-level agreement is subject to approval by the IMF’s Management and Executive Board.
Mr. Saborowski made the following statement:
“A new economic team took over last year and has since taken bold measures to tackle Sierra Leone’s macroeconomic imbalances, including a severe cost-of-living crisis. The authorities reduced the domestic primary deficit by 2.8 percent of GDP in 2023 and are on track toward reducing it by another 2.1 percent this year. They also tightened monetary policy sharply, by reducing year-on-year base money growth from a peak of 63.4 percent in June 2023, to 8.8 percent in June 2024, and raising the policy rate by 7.25 percentage points since end-2022.
“The reform momentum has borne fruit. Inflation declined to 25 percent in August 2024, down from a peak of 55 percent in October 2023, and the sharp exchange rate depreciation experienced in 2022 and early 2023 was arrested. However, T-bill rates remain stubbornly high, at over 40 percent, international reserves have fallen to less than two months of imports, and the electricity distribution company (EDSA) continues to make losses, resulting in significant fiscal pressures.
“Economic growth reached more than 5 percent in 2022 and 2023, buoyed by strong mining activity. Sierra Leone’s public debt continues to be assessed as sustainable, but at high risk of distress, while its external position in 2023 is assessed as broadly in line with the level implied by fundamentals and desirable policies.
“The new ECF arrangement would aim to (i) restore stability by bolstering debt sustainability, addressing fiscal dominance, bringing down inflation, and rebuilding reserves; (ii) support inclusive growth through reforms—including to narrow gender gaps—and targeted social spending; and (iii) confront corruption, as well as strengthening governance institutions, and the rule of law. These objectives would advance the poverty reduction and growth aspirations outlined in Sierra Leone’s Medium-Term National Development Plan (MTNDP) 2024-30.
“Restoring stability in the Sierra Leonean economy will require a continued ambitious macroeconomic adjustment over the program period. Enhancing revenue mobilization, boosting spending efficiency, and managing fiscal risks will be critical to making room for priority spending on social policies and investment. Strengthening the monetary policy framework and maintaining appropriately tight monetary conditions will be important to safeguard internal and external stability.
“Making durable progress in fighting poverty and raising standards of living will require a commitment to reform, sustained political and social consensus, and well-targeted social policies. Promoting gender equality and increasing women’s economic participation are crucial to boosting Sierra Leone’s growth potential. So too are reforms to enhance the business environment by improving EDSA’s operational and technical efficiency, strengthening customs administration and transparency, and addressing climate change risks. Guided by the MTNDP 2024-30, steadfast progress in addressing these challenges will be critical.
“The staff team is grateful to the authorities for the open and productive discussions. The team met with President Bio, Finance Minister Bangura, Deputy Finance Ministers Alie and Kalokoh, Financial Secretary Dingie, Bank of Sierra Leone (BSL) Governor Stevens, Deputy Governors Tucker and Sesay, Commissioner General Bangura of the National Revenue Authority, and senior government and BSL officials. The mission also had fruitful discussions with representatives from the private sector and development partners.”
