The Sierra Leone government has requested a disbursement of 17 percent of quota SDR 35.26 million (US$50.37 million) by the International Monetary Fund (IMF) under its Rapid Credit Facility (RCF), the Gleaner has learnt.
According to a report by the Fund, which was seen by Gleaner, the government said the fund would help meet the urgent balance of payments and fiscal needs stemming from the deep and persistent impact of the ongoing Covid-19 pandemic.
According to the IMF Staff Country Reports, which was published last week, Sierra Leone continues to grapple with the serious and persistent economic and social effects of the pandemic. Containment measures and trade disruptions in 2020 weakened domestic demand and exports and caused domestic revenues to fall.
This follows the June 2020 RCF (50 percent of quota or SDR 103.7 million) and would bring total access for the past 12-month period to 82 percent of quota (or 5½ percent of GDP), well within the 150 percent of quota annual PRGT access limit. Sierra Leone, according to the IMF, also received debt relief under the Catastrophe Containment and Response Trust (CCRT) and the country is said to be participating in the Debt Service Suspension Initiative (DSSI). IMF data show that food insecurity has risen from its already-high pre-COVID-19 level.
The Fund predicts that 2021 is set to be another challenging year, with the ‘second wave’ of infections and vaccine-related uncertainties posing further risks to the recovery.
“As import growth picks up and development partner support returns to pre-2020 levels, Sierra Leone faces urgent external and fiscal financing needs (both around about 2 percent of GDP). Uncertainty about the outlook and larger near-term financing gaps have impeded the immediate resumption of the program under the Extended Credit Facility (ECF),” part of the IMF’s report reads.
It added that IMF Staff agreed that continued support is needed to maintain COVID-19-related priority spending, ease human suffering, and help the recovery. It noted that elevated—and intertwined—health and economic risks make for a highly uncertain outlook.
According to the IMF, with the added debt strains from the COVID-19 shock, sustained fiscal adjustment over the medium term and a cautious approach to financing will be vital to preserving debt sustainability. It goes on to say that to signal their commitment to sustainable policies, the Sierra Leone authorities have completed two prior actions to support better debt management and domestic revenue mobilization. Financial support mechanisms, it said, should aim to limit contingent risks and, if the central bank is involved, should remain temporary, limited and be governed by clear rules.
“Heightened financial risks require close monitoring. Renewed momentum in reporting the COVID-19-related emergency response will ensure accountability in the use of scarce public resources and support the authorities’ broader anti-corruption efforts. In this spirit, the authorities recently published the unaudited financial statements for their dedicated COVID-19 fund and all large COVID-19-related procurement contracts,” the report went on to note.
It concluded that in the staff’s view, Sierra Leone meets the eligibility criteria for a disbursement under the RCF.
“Although the COVID-19 shock has further strained the debt situation and Sierra Leone remains at high risk of debt distress, the DSA shows a debt to be sustainable on a forward-looking basis. The capacity to repay the Fund is adequate, though subject to risks over the medium-term,” it says.