IMF Executive Board Completes First Review Under ECF Arrangement with Sierra Leone and Approves US$6.83 Million DisbursementPress Release No. 10/474
December 6, 2010
The Executive Board of the International Monetary Fund (IMF) today completed the first review of Sierra Leone’s economic performance under a program supported by an Extended Credit Facility (ECF) arrangement. The completion of the review enables the immediate disbursement of an amount equivalent to SDR 4.44 million (about US$6.83 million), bringing total disbursements under the arrangement to SDR 8.88 million (about US$13.67 million).
In completing the review, the Executive Board also approved the modification of a performance criterion related to the target on net domestic bank credit to the government. The three year ECF arrangement for Sierra Leone was approved with effect from July 1, 2010 for an amount of SDR 31.11 million (about US$47.88 million; see Press Release No. 10/228). The Executive Board also completed the financing assurances review.
Following the Executive Board’s discussion of Sierra Leone, Mr. Naoyuki Shinohara, Deputy Managing Director and Acting Chair, made the following statement:
“After the economic slowdown in 2009, the outlook this year for Sierra Leone is more favorable. Growth has picked up due to buoyant output in the service and agriculture sectors and a rebound in exports. However, inflation will remain in double digits this year owing to the one time jump in prices from the introduction of the goods and services tax and higher domestic fuel prices. Gross international reserves remain at comfortable levels.
“The government’s Agenda for Change envisages raising growth by removing infrastructure bottlenecks, while developing access to financial services. In the medium term, fiscal space for higher capital and social spending will be created by broadening the tax base, containing nonpriority spending, and raising public sector efficiency, especially in project selection and implementation.
“Fiscal spending, including on infrastructure, is projected to be higher than envisaged in 2010, resulting in higher domestic budget financing. Going forward, there is a need to strengthen budget discipline, increase revenue collection, contain nonpriority expenditures, and limit the use of direct credit to the government from the central bank. While the introduction of the goods and services tax has improved revenue collections, there is a need to adhere to the Mines and Minerals Act and continue to strengthen tax administration. The recent establishment of an automatic pricing framework for domestic fuel prices will eliminate fuel subsidies.
“Fiscal policy for 2011 appropriately focuses on scaling up investment in infrastructure and improving basic healthcare, while limiting domestic financing. To ensure fiscal sustainability, continued efforts to improve domestic revenue collection and to implement public sector pay reform will be important.
“Monetary policy will seek to bring inflation to single digits by next year. Exchange rate flexibility will be maintained to facilitate adjustment to external shocks,” Mr. Shinohara added.