The Executive Board of the International Monetary Fund (IMF) has approved a three-year arrangement under the Extended Credit Facility (ECF) for Sierra Leone for US$224.2 million, or 78 percent of Sierra Leone’s quota) in support of the authorities’ economic development efforts.
The IMF staff report mentioned that significant medium-term challenges remain amidst persistent economic fragilities. That there is a severe infrastructure gap with deficiencies in transportation, housing for the poor, sanitation and health facilities, as well as food security and energy supply.
Despite these problems, the economy holds tremendous potential. according to the report.
Following the Executive Board discussion on Sierra Leone, IMF Deputy Managing Director, Mr. Tao Zhang, said the new program provides financing space in the short-run to fund 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 first disbursement of US$54.3 million will be made available to the government while the remaining amounts will be phased over the duration of the program, subject to semi-annual reviews.
Zhang noted that Sierra Leone’s risk of debt distress remains moderate and that financing needs, particularly for large-scale investment projects will need to be covered mostly with grants and concessional loans.
“Non-debt generating options should be considered for the proposed new airport,” he said.
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.
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.