The Executive Board of the International Monetary Fund (IMF) has enables the immediate disbursement of US$21.62 million, bringing total disbursements under the arrangement to US$43.25 million.
The authorization was made after the Executive Board of the IMF completed the first review of Sierra Leone’s performance under the program supported by an Extended Credit Facility (ECF) on June 28, 2019.
The Executive Board approved the authorities’ request for a waiver of non-observance of a performance criterion. Sierra Leone’s 43-month ECF arrangement for US$172.1 million or 60 percent of the country’s quota at the time of approval of the arrangement was approved on November 30, 2018.
The government’s reform agenda, supported by the ECF, aims to create fiscal space for priority spending by strengthening revenue mobilization, containing current spending and improving the efficiency of public investment.
The Deputy Managing Director and Acting Chair, Tao Zhang, said performance under the ECF-supported program has been satisfactory in the face of a challenging economic environment but noted that progress on structural measures has been slower than anticipated, although the government remains firmly committed to their reform agenda.
Zhang also noted, “Securing fiscal sustainability and creating space for priority spending will be crucial for tackling Sierra Leone’s development needs. The authorities have made commendable progress since the start of the program, both in mobilizing revenue and taking a cautious approach to expenditure. Going forward, durably higher revenue will be essential to boosting social spending and investing in infrastructure—key goals of the government’s new National Development Plan.
“The authorities’ more cautious medium-term fiscal approach is appropriate given fiscal risks. Managing fiscal risks expeditiously will provide more certainty about the space available for priority spending. In this regard, quick actions to complete the arrears stocktaking and the diagnostic of state-owned banks will be particularly important.
“Structural reforms are a central component of the authorities’ fiscal strategy. Achieving the program’s revenue mobilization goals will entail continued tax policy and administration reforms. Improving public financial management will help control expenditure and avoid the emergence of new arrears, while reorienting spending to priorities with clear economic or social returns. Efforts to develop a Medium-Term Debt Management Strategy will help to better manage fiscal risks.
“Monetary policy remains appropriately focused on reducing inflation to single digits over the medium-term. Progress toward developing indirect instruments will, over time, improve policy effectiveness. Enhancing exchange rate flexibility and reserve buffers will be vital to boost the economy’s resilience to external shocks.
“Continued reforms to strengthen the Bank of Sierra Leone’s governance will be critical for the institution’s accountability and operational effectiveness. In this spirit, finalizing the new central bank law and the recently completed forensic audit were important milestones. Quickly acting on both will help advance the BSL’s reform efforts.”