IMF Executive Board Approves US$224.2 Million Under the ECF Arrangement for Sierra Leone

Zhang

Tao Zhang

The Executive Board of the International Monetary Fund (IMF) on June 5, 2017, approved a three-year arrangement under the Extended Credit Facility (ECF) for Sierra Leone for SDR 161.778 million (about US$224.2 million, or 78 percent of Sierra Leone’s quota) in support of the authorities’ economic development efforts.


  • The Executive Board’s decision will enable a first immediate disbursement of SDR39.166 million (about US$54.3 million).
  • Growth is expected to reach 7 percent in the medium-term. Under the program, inflation is expected to fall to 12 percent by end-2017, further declining to 9.5 percent in 2018 and narrowing by about 0.5 percent each year thereafter.
  • The program aims at supporting important policies targeted at reducing inflation and significantly increasing domestic revenues, while increasing infrastructure spending and bolstering the social safety net.

President K

President Ernest Bai Koroma

IMF Deputy Managing Director, Mr. Tao Zhang and Acting Chair, said the new program provides financing space in the short-run for funding critical spending; make a strong contribution to the reduction of poverty; and support a medium-term structural reform framework, most critically in domestic revenue mobilization, public financial management (PFM), and financial sector reform.

The program is aimed at supporting important policies targeted at reducing inflation and significantly increasing domestic revenues, including by eliminating numerous tax and duty exemptions, while increasing infrastructure spending and bolstering the social safety net.

The Executive Board’s decision will enable a first immediate disbursement of SDR39.166 million (about US$54.3 million). The remaining amounts will be phased over the duration of the program, subject to semi-annual reviews.

Zhang said growth is expected to reach 7 percent in the medium-term and that under the program, inflation is expected to fall to 12 percent by end-2017, further declining to 9.5 percent in 2018 and narrowing by about 0.5 percent each year thereafter.

“The main medium-term objective of the program is to unlock the growth potential of the country while reducing poverty. In that regard, it proposes front-loaded financing that would help improve the current account deficit in the medium-term to 18 percent by 2021 from the projected 21.8 percent in 2017,” he noted.

The team also states that the fiscal stance envisions gradual tightening in the medium-term to 2.4 percent domestic primary balance by the end of the program, from a projected 4 percent, adding that, to support the expansion of domestically financed capital spending as well as the replacement of gradually lower donor financing, there will be need for more forceful revenue mobilization and a strengthening of budget preparation and execution. Monetary policy in the medium-term will aim at containing the inflation below 10 percent.

Zhang also noted, “Sierra Leone’s risk of debt distress remains moderate. Financing needs, particularly for large-scale investment projects will need to be covered mostly with grants and concessional loans. In addition, non-debt generating options should be considered for the proposed new airport.”

Zhang said the authorities’ commitment to implement a fuel subsidy reform no later than the second ECF review is important for a sustainable budget.

“In the meantime, the alternative actions taken to compensate for the delay in the implementation of this reform are welcome. These measures are the elimination of all import duty and GST exemptions as well as the collection of royalties from mining companies based on published market prices,” he said.

 

Advertisements


Categories: Development, Sierra Leone

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: