Press Release No. 09/465

Press Release: IMF Executive Board Completes Fifth Review Under PRGF Arrangement with Sierra Leone, Approves US$19.3 Million Disbursement, and Grants Waiver Related to Previous Noncomplying Disbursements

December 17, 2009

The Executive Board of the International Monetary Fund (IMF) has completed the fifth review of Sierra Leone’s economic performance under the Poverty Reduction and Growth Facility (PRGF) arrangement. Completion of the review, on December 16, 2009, will enable the immediate disbursement of SDR 12.185 million (US$19.3 million), bringing total disbursements under the arrangement to SDR 44.88 million (about US$71 million).

Performance under the authorities’ program in the first half of 2009 was satisfactory. In completing its review, the Executive Board granted a waiver for nonobservance of the continuous performance criterion on the introduction or modification of multiple currency practices in relation to special windows—now eliminated—for rice and oil importers at its weekly foreign exchange auctions.

Falling global demand and declining foreign inflows negatively affected economic activity in the first half of 2009. However, diamond and agricultural production has rebounded lately. Although down from 5.5 percent in 2008, real gross domestic product (GDP) growth is expected to reach 4 percent in 2009. Lower fuel prices and higher domestic food production helped bring inflation down from double digits in 2008 to 8.3 percent in August 2009. However, there are upside risks to inflation after the recent depreciation of the leone against the US dollar.

The three-year PRGF arrangement was approved in May 2006 in the total amount of SDR 31.11 million (about US$46 million, or 30 percent of quota—see Press Release 06/94). The arrangement was later extended by one year to May 9, 2010. Subsequently, two augmentations were approved for a total of SDR 20.77 million (about US$33 million--see Press Releases 08/341 and 09/235 ).

Following the discussion on Sierra Leone’s economic performance, Murilo Portugal, Deputy Managing Director and Acting Chair, made the following statement:

“The Sierra Leonean authorities’ commitment to sound macroeconomic policies has contributed to an improved economic outlook. Following a period of slowing global demand and declining inflows of remittances and foreign direct investment, indicators point to the strengthening economic activity in the second half of 2009, as the electricity supply rose, agricultural productivity improved, and spending on public infrastructure increased.

“Fiscal policy is targeted at improving revenue performance and containing spending pressures, while protecting social spending and expanding infrastructure outlays. The introduction of a goods and services tax in January 2010 will contribute to revenue enhancement, which will help create fiscal space for spending for poverty reduction and investment.

“The goal of monetary policy is to keep inflation in single digits and contain pressure on the exchange rate. To achieve this, it is important to explore options to expand short-term monetary instruments to increase flexibility in the conduct of monetary policy.

“The authorities’ structural reform agenda appropriately focuses on deepening the financial sector, reforming the electricity sector, enhancing efficiency in the use of public resources, promoting good governance, and establishing a transparent and automatic pricing framework for petroleum products.

“A special window for oil importers in the foreign exchange auction in Sierra Leone resulted in a multiple currency practice, which was not reported to the Fund, thus giving rise to non-complying disbursements under the PRGF arrangement. This special window has been eliminated and the Executive Board granted a waiver for the nonobservance of the associated performance criterion.”

Sierra Leone joined the IMF in September 1962 and has a Fund quota of SDR 103.7 million.