Press Release No. 12/316

Press Release: IMF Executive Board Completes Fourth Review Under ECF Arrangement for Sierra Leone and Approves US$6.9 Million Disbursement

September 17, 2012

The Executive Board of the International Monetary Fund (IMF) today completed the fourth review of Sierra Leone’s economic performance under a program supported by the Extended Credit Facility (ECF) arrangement. The completion of the review enables the disbursement of an amount equivalent to SDR 4.44 million (about US$6.9 million), bringing total disbursements under the arrangement to an amount equal to SDR 22.2 million (about US$34.4 million).

The three-year ECF arrangement for Sierra Leone was approved on June 4, 2010 in an amount equivalent to SDR 31.11 million (see Press Release No. 10/228).

Following the Executive Board’s discussion of Sierra Leone, Mr. Min Zhu, Deputy Managing Director and Acting Chair, issued the following statement:

“Economic growth has been robust and broad-based, reflecting the scaling-up of infrastructure investment and the implementation of projects in mineral sectors. External price shocks and a loose monetary policy stance through mid-2011 have kept inflation in the double digits. Medium-term prospects are favorable, as iron ore production in 2012 is expected to boost growth. However, the outlook is subject to downside risks, mostly stemming from the uncertain global environment.

“To address fiscal slippages incurred in 2011, the authorities have taken corrective measures, establishing a high-level Cash Management Committee and preparing monthly cash-flow statements. These measures improve fiscal management and enhance coordination between fiscal and monetary policies. Administrative efficiency gains and one-off payments from the extractive industries have supported revenues.

“The authorities maintain a prudent debt management strategy. They continue to make efforts to resolve arrears to commercial creditors accumulated before and during the civil war. The authorities are also taking measures to improve debt management capacity to ensure that new loan commitments are consistent with debt sustainability.

“After monetary policy conditions were appropriately tightened in late 2011, the statutory limit on direct central bank financing of the budget was observed, and the Bank of Sierra Leone used its money market instruments proactively to manage liquidity, thus helping lower inflation expectations. Continued tight monetary policy is needed in 2012 to support disinflation.

“Structural reform implementation has been backed by technical assistance from Sierra Leone’s development partners; and focused on public financial management, the financial sector; and private sector development. Continued progress in these areas is needed to underpin fiscal and monetary policy efforts, and support growth prospects.

“Inaccurate data on public sector new nonconcessional external debt provided in December 2011 at the time of the second and third reviews of Sierra Leone’s program under the ECF arrangement resulted in a noncomplying disbursement. In view of the corrective actions by the authorities, the Board decided to waive the nonobservance of the performance criterion that gave rise to the noncomplying disbursement,” Mr. Zhu added.