## Public Investment Management Assessment mission, December 4–17, 2019 (1sleea2021002)

## Source details

**Canonical URL:** [Public Investment Management Assessment mission, December 4–17, 2019 (1sleea2021002)](https://www.imf.org/-/media/files/publications/cr/2021/english/1sleea2021002.pdf)

## Other formats

- [Markdown version](/-/media/files/publications/cr/2021/english/1sleea2021002.pdf.md)
- [Structured JSON version](/-/media/files/publications/cr/2021/english/1sleea2021002.pdf.json)

---

### Mission, scope, and contacts
- Mission purpose:
  - Visit to Freetown, Sierra Leone during December 4–17, 2019.
  - Tasks: (i) assess Sierra Leone’s public investment management framework; (ii) assist authorities to prepare a prioritized action plan for strengthening management of public investment; (iii) recommend follow-up support by the IMF and other development partners.
- Team composition:
  - Yugo Koshima (FAD, head); Fazeer Rahim (FAD); Alok Verma (FAD); Kemoh Mansaray (World Bank); Innocent Kamugisha (World Bank).
- Senior counterpart meetings: Ministry of Planning and Economic Development (MoPED) and Ministry of Finance (MoF) senior officials listed; meetings with sector ministries, SLRA, NPPA, SALWACO, EDSA, EGTC, Mayor of Freetown, PPP Unit, district authorities, private sector, and development partners.

### Executive summary — context, trends, and key statistics
- Context and capital accumulation:
  - Public investment averaged 6.5 percent of gross domestic product (GDP) over 2008−18.
  - Estimated capital stock of about 65 percent in constant 2011 GDP (2018).
  - Capital stock per capita accumulation noted at about $600 in PPP-adjusted dollars (comparison to Liberia).
  - Public investment level about one percentage point lower than neighboring countries on average over the last 10 years.
- Macro and sectoral shocks, financing, and fiscal stance:
  - Public investment quadrupled between 2008 and 2010 and dropped by more than 40 percent in 2011.
  - Economic growth: 20.7 percent in 2013; negative 20.4 percent in 2015.
  - Public debt: 63 percent of GDP in 2018.
  - Accumulation of arrears approaching to 10 percent of GDP in 2019.
- Infrastructure performance and efficiency:
  - Energy capacity noted: 50 MW Bumbuna hydro plant; several small thermal plants totaling 40MW.
  - Efficiency gaps: 48 percent for Sierra Leone; average of sub-Saharan African countries 41 percent.
  - USD 200 million PPP project cited (road widening with limited traffic).
  - Despite a 60 percent increase in public capital stock over the last ten years, infrastructure outputs and quality have not correspondingly increased.
- Sector shares of capital stock or financing (reported):
  - Education, 5%; Health, 10%; Roads, 49%; Energy, 13%; Water, 12%; Other, 11%.

### Financing of public investment and fiscal constraints
- Sources and shifts:
  - Prior to 2009: grants and concessional loans funded almost all capital projects; domestic resources minimal.
  - Over time: shift towards external borrowing and, more recently, domestic resources.
  - Grants remain the principal source of funding in education and health.
- Key fiscal figures and commitments:
  - Government debt: 30 percent of GDP in 2013; 63 percent of GDP in 2018.
  - Short-term, high interest bearing, domestic debt increased substantially.
  - MoF committed to clear arrears; arrears accumulated to around 10 percent of GDP.
- Alternative financing and PPP pipeline:
  - Energy projects under negotiation: Phase II Bumbuna hydro (150 MW) and a 50 MW solar project; combined required investment about USD 1 billion (25 percent of 2018 GDP), alongside government-backed guarantees.
  - Transport projects: Wellington-Masiaka road concession; bridge tender for an USD 2 billion, 8-kilometer bridge expected with no public debt or guarantees.

### Institutional weaknesses and investment management failures
- Public Investment Management Department (PIMD) status:
  - PIMD of MoPED established in 2014; described as a young organization with limited gatekeeping and appraisal challenge capacity.
- Project appraisal and selection (Design—Low; Effectiveness—Low):
  - PFM Act 2016 requires appraisals; Public Investment Operational Manual still under preparation.
  - Some major domestically financed projects selected without full appraisals; March 2019 technical audit of 18 road projects found only four underwent full appraisal.
  - Examples of appraisal bypass and consequences: Lumley-Tokeh road (25 kms, 10 years, costing six times initial estimates); Presidential-initiated projects and loan agreements entered without appraisal.
- Procurement and contract management (Design—Low; Effectiveness—Low):
  - NPPA often excluded from major public works; amount of procurement of works captured by NPPA less than 25 percent of total domestic development expenditure in 2018.
  - NPPA reviewed 5,709 procurement activities for a total value of Le725,74 billion in 2018.
  - Key 2018 procurement values (SLL billion; percent of all captured procurement):
    - Total: 725.7 — 100
    - ICB goods and services: 357.9 — 49
    - NCB goods and services: 91.3 — 13
    - ICB works: 78.1 — 11
    - NCB works: 60.6 — 8
    - Others: 137.8 — 19
  - Legal requirement to publish contract awards exceeding SLL 600 million often not followed; remedies and sanctions by NPPA not fully exercised.
  - Contract amendments beyond 15 percent often flouted; examples of major contract cost increases presented (e.g., Tokeh-Lumely: Original 28 — Revised 140 (USD million)).
- Availability of funds, commitment control and arrears (Design—Low; Effectiveness—Low):
  - Commitment ceilings issued with significant delay; quarterly ceilings sometimes issued two months after quarter start.
  - At end-June 2019, printed but not cleared checks at AGD and BSL stood at SLE 1.1 trillion (3 percent of GDP).
  - External financing largely held outside the TSA; SLE 100.87 billion held in project-specific commercial bank accounts as of 31st December 2018.
  - Significantly delayed and unpredictable payments cited as a major cause of project delay and arrears accumulation.
- Portfolio management, monitoring and ex-post review (Design—Low; Effectiveness—Low to Medium):
  - Central agency monitoring limited; MDAs’ project trackers not consolidated; no systemic ex-post review of domestically financed major projects.
  - Examples of project failures and abandoned outputs: solar streetlight projects stopped functioning due to design flaws and unaffordability of parts; seven vocational schools completed but closed; thermal power plants ceased operation due to EGTC financial problems.
  - NaMED established 2018 to produce annual monitoring reports; operationalization recommended.
- Asset management (Design—Low; Effectiveness—Medium):
  - No comprehensive, regularly updated asset register or government capital stock statistics; some sectors (roads) maintain databases for maintenance prioritization.

### Performance and sectoral diagnostics
- Energy sector returns and utilization (Box 1):
  - Since 2010: capacity worth 60 MW added at a cost exceeding USD 100 million for thermal plants.
  - One-third of installed state-operated capacity fallen into disrepair; of remaining two-thirds, only 15 percent currently utilized due to cash shortages for fuel.
  - EGTC data in December 2019: Total technical capacity shown: 271.8; Total utilized capacity shown: 5.7 (figures in table).
  - Examples: Freetown Kingtom and BHR technical capacity 26.5; utilized capacity 0; condition "Good; No fuel for operation".
  - In 2019 government budget paid SLL 160 billion directly to IPPs, which were around half of EDSA’s revenue.
  - Ratio of net losses to electricity purchase costs increased from 9 percent in 2015 to 22 percent in 2018.
  - Installed capacity since 2015 increased from around 100 MW to 200 MW mainly via IPPs (e.g., 126 MW Turkish Karadeniz power-ship).
- Health, water, and education outcomes:
  - 2017 Statistics Sierra Leone: half of the population at very high risk of faecal contamination with Escherichia coli (>100 E. coli per 100 mL); Western Rural Area risk about 30 percent; many districts exceed 60 percent.
  - Around 18 percent of pregnant women do not receive key tests during pregnancy; in some districts proportion exceeds 25 percent.
  - Electricity generation per capita about half that of comparator countries despite increased investment.
- Roads and perceptions:
  - Roads account for estimated half of capital stock.
  - Road quality varies; vibration accelerometer readings on some unpaved roads produced shocks "equivalent to those experienced during a roller coaster ride".
  - Perception of infrastructure quality (World Economic Forum survey, scale 1 to 7) below peers; gap widened from 2012 to 2015, improved slightly since.

### Measured efficiency gaps
- Efficiency gap measured by physical output indicators: 48 percent for Sierra Leone (interpretation: "a half of public investments in Sierra Leone are not producing intended outputs").
- Efficiency gap measured by quality (perception) indicators: 25 percent for Sierra Leone, at the same level as the average of sub-Saharan African countries (41 percent average for physical output).

### Priority institutional reforms and policy recommendations (selected and verbatim where numeric or specific)
- Investment Planning (A)
  - Publish a Road Sector Master Plan and review sectoral strategies prepared before the MTNDP to align them with the MTNDP.
  - Develop project appraisal templates and guidelines and publish the appraisals of all approved projects including PPPs.
- Investment Allocation (B)
  - Publish an annex of the annual budget presenting total costs, multiyear contracts, paid and unpaid invoice amount; clarify that a project change exceeding a threshold will be considered and deprioritized as a new project.
  - Require MDAs to publish a maintenance policy; create a separate line item for routine maintenance; present the RMFA budget in the budget document.
  - Publish the project selection criteria; develop methodologies for prioritizing projects based on feasibility studies and appraisals; design and maintain a prioritized pipeline of appraised projects including PPPs.
- Implementing Investments (C)
  - Revise the Procurement Law and Regulations to allow for joint approval of procurement plans and robust coordination between MoF and NPPA; strengthen NPPA capacity with sufficient financial and human resources and harmonize procurement processes in the public service.
  - Allow NPPA to exercise its mandate under Section 15 of the Public Procurement Act (PPA) to obtain information and impose remedial sanctions.
  - Expedite implementation of the online electronic procurement system (e-Procurement) and make it mandatory for all large investment projects.
  - Develop systems for managing contracts for capital projects and ensure all designs are comprehensive and approved by a panel of experts and NPPA.
  - Develop procedures for variations, price adjustments and contract amendments to ensure compliance with law and NPPA approval.
  - Organize regular training programs for the IPRP and raise public awareness about the independent review panel.
  - Implement recommendations of FAD’s in-depth assessment of quarterly allotment and commitment control processes.
  - Operationalize NaMED to produce an annual report on public investment projects and assess resourcing needs for the Audit Service to undertake regular ex-post audits.
  - Require re-appraisal and re-selection when (i) an increase in total costs exceeds a threshold or (ii) the project is ongoing for more than a certain number of years.
- Additional allocation and maintenance recommendations (selected exact actions):
  - Publish an annex of the annual budget which presents, for each project, (i) updated total costs, (ii) updated value of multiannual contracts, (iii) amount already paid, (iv) amount of unpaid invoices, and (v) updated project completion date.
  - Separate appropriations for recurrent and capital expenditure in the PIP.
  - Create a separate line item in the budget for routine maintenance of each MDA; present RMF budget with clear allocations to routine maintenance of SLRA and local districts.
  - Require each sector to prepare and publish a maintenance policy.
  - Publish the project selection criteria as part of the public investment guidelines and manuals required under the PFM Regulations; develop methodologies for scrutinizing feasibility studies and economic analysis and prioritize appraised projects; design and maintain a prioritized pipeline of appraised projects including PPPs.
- Procurement and contract management (selected exact issues and recommendations):
  - Recommendation 6.1: Revise the Procurement Law and Regulations to allow for joint approval of procurement plans and robust coordination between MoF and NPPA.
  - Recommendation 6.2: Strengthen capacity of NPPA by providing sufficient financial and human resources; allow NPPA to exercise mandate under Section 15 of the PPA.
  - Recommendation 6.3: Expedite implementation of e-Procurement and make it mandatory for all large investment projects.
  - Recommendation 6.4: Develop systems for managing contracts; ensure designs are approved by panel of experts and NPPA; develop procedures for variations, price adjustments and contract amendments.
  - Recommendation 6.5: Organize regular training for the IPRP and raise public awareness about the panel.
  - Recommendation 7: Improve the quarterly allotment and commitment controls for capital projects by implementing recommendations of the in-depth assessment report by the current mission.
  - Recommendation 8: Undertake ex post review and audit of major capital projects regularly by operationalizing NaMED and assessing Audit Service resourcing needs.
  - Recommendation 9: Require re-appraisal and re-selection when cost increases exceed a threshold or projects run beyond a certain number of years.
- Capacity and information systems:
  - Provide MoPED/PIMD access to IFMIS or at least recovery of IFMIS access to facilitate project monitoring.
  - Publish all existing appraisals of ongoing capital projects; develop and publish appraisal guidelines and template; enforce section 73 of the PFM Act 2016 requiring appraisals with cost information.
  - Improve transparency in sectoral strategies and their consistency with MTNDP (publish Road Master Plan and review pre-MTNDP sector strategies).

*Italic: Source — Public Investment Management Assessment mission, December 4–17, 2019 (1sleea2021002).*

### PREFACE ___________________________________________________________________________________________________ 5

### PREFACE

### Mission purpose and dates
- A FAD team visited Freetown, Sierra Leone during December 4–17, 2019.
- Tasks were to:
  - (i) assess Sierra Leone’s public investment management framework;
  - (ii) assist the authorities to prepare a prioritized action plan for strengthening the management of public investment;
  - (iii) recommend follow-up areas of support that could be provided by the IMF, and other development partners.

### Team composition
- Yugo Koshima (FAD, head)
- Fazeer Rahim (FAD)
- Alok Verma (FAD)
- Kemoh Mansaray (World Bank)
- Innocent Kamugisha (World Bank)

### Senior counterpart meetings at MoPED and MoF
- Ministry of Planning and Economic Development (MoPED):
  - Hon. Francis Kaikai, the Director of the Public Investment
  - Mr. Alpha K. Bangura, the Director of Planning and Research
  - Dr. Sheka Bangura, and staff of the Ministry
- Ministry of Finance (MoF):
  - Principal Deputy Financial Secretary, Mr. Matthew Dingie
  - Accountant General, Mr. Richard Williams
  - Director of Budget, Mr. Tasima Jah
  - Director of Macro-Fiscal Policy, Dr. Samuel Bonzu
  - Staff of the Ministry

### Other government and public-sector meetings
- Minister of Works and Public Assets, Mr. Peter Konteh, and his colleagues
- Permanent Secretaries of the Ministries of Energy, Basic and Secondary Education, and Technical and Higher Education, and their respective colleagues
- Staff of the Auditor General Office, and the Ministry of Health and Sanitation
- Management of:
  - Sierra Leone Road Authority (SLRA)
  - National Public Procurement Authority (NPPA)
  - Sierra Leone Water Company (SALWACO)
  - Electricity Distribution and Supply Authority (EDSA)
  - Electricity Generation and Transmission Company (EGTC)

### Other stakeholder meetings and field visit
- Mayor of Freetown Municipality, Ms. Yvonne Aki-Sawyerr, OBE
- Dr. John Tambi, Chairman of the Presidential Infrastructure Initiative, and staff of the Public Private Partnership Unit of the Office of the Vice President
- Travel to Moyamba district; meeting with the Chairman of the District Council, Mr. Joseph Mbogba, and colleagues
- In Freetown: meetings with directors of various private sector companies and staff of development partners, including the European Union, the World Bank, and the African Development Bank

### Acknowledgements
- The team expresses its gratitude for close cooperation to:
  - Ag. Director of PFM reforms, Ms. Princess Johnson, and her colleagues
  - IMF Resident Representative, Ms. Monique Newiak
  - Office Manager of the IMF office, Mr. Edison Jusu

*Source: PREFACE (1sleea2021002) — Public Investment Management Assessment mission, December 4–17, 2019.*

### EXECUTIVE SUMMARY

### EXECUTIVE SUMMARY

### Context and recent progress
- Sierra Leone started the post-conflict rebuilding of public infrastructure after the civil war ended in 2002, having been left with "virtually no power generation capacity", most roads unpaved, two-thirds of the population without a reliable source of water, and only two hospital beds remaining for every 10,000 inhabitants.
- Public investment averaged 6.5 percent of GDP over 2008−18.
- The stock of public capital is estimated at about 65 percent in constant 2011 GDP by 2018 (the stock is said to have doubled in constant 2011 GDP over the last ten years).
- The level of public investment is about one percentage point lower than neighboring countries on average over the last 10 years.
- Capital stock per capita is among the lowest in the region, slightly above Liberia (accumulation of capital per capita of about $600 in PPP-adjusted dollars is noted).

### Macro and sectoral shocks, financing, and fiscal stance
- Mining boom and project launches in the late 2000s caused a spike in public investment in 2009 and 2010; public investment quadrupled between 2008 and 2010 and then dropped by more than 40 percent in 2011.
- After major mines were operationalized in 2012, Sierra Leone experienced 20.7 percent of economic growth in 2013.
- The "twin-shocks" of the Ebola outbreak and commodity price collapse led to negative 20.4 percent of growth in 2015.
- The government increased investments in 2016 and 2017, but faces a high public debt of 63 percent of GDP in 2018 and accumulation of arrears approaching 10 percent of GDP in 2019.
- External financing has often been held in commercial bank accounts; delays and unpredictability of payments for capital projects have been a major cause of project delay and arrears accumulation.

### Institutional weaknesses and investment management failures
- Public Investment Management Department (PIMD) of the Ministry of Planning and Economic Development (MoPED) was established in 2014 and remains a young organization.
- Under pressure to meet infrastructure demands, top-down and politically-driven investment decisions increased, especially after the Ebola outbreak as financing sources expanded from grants to domestic revenue and loans.
- In the road sector several major domestically financed projects:
  - Were selected without appraisals;
  - Had contracts awarded by bypassing the procurement framework;
  - Commenced construction without complete designs;
  - Experienced frequent and significant project changes, causing cost overshoot and confusing implementation.
- Consequences included extremely delayed and unpredictable invoice payments; budget allocations far below unpaid multiyear contracts; projects delayed for up to a decade; and significant accumulation of arrears.
- Procurement and contract management shortcomings:
  - Projects not always tendered through open competitive bidding;
  - Public has limited access to procurement information;
  - Invitations for bids poorly prepared; NPPA (National Public Procurement Authority) lacks information on tendering; procuring entities do not publish contract awards; rules on contract amendments are flouted.
- Funding availability and commitment control weaknesses:
  - Commitment ceilings issued with significant delay;
  - Capital spending subject to cash rationing;
  - Significantly delayed and unpredictable payments cited as a major cause of project delay and arrears accumulation.
- Portfolio management and oversight gaps:
  - Monitoring and evaluation of capital projects by central agencies is limited;
  - No systemic ex-post reviews of domestically financed major projects; absence of ex-post review contributed to projects being abandoned or ceasing to generate outputs.
- Asset management deficiencies:
  - No comprehensive asset register and no statistics on public capital stock (some sectors maintain asset registers for maintenance purposes).

### Performance and quality of infrastructure
- Roads account for an estimated half of the capital stock.
- Energy infrastructure includes the 50 MW Bumbuna hydropower plant (operational in 2009) and several small thermal power plants installed between 2010 and 2017 with total capacity of 40MW.
- Examples of underperformance and failures:
  - In the energy sector, 27 power generators were installed in 10 thermal power plants of the Electricity Generation and Transmission Company (EGTC), but large technical and commercial losses by the Electricity Distribution and Supply Authority (EDSA) were not adequately addressed; EDSA effectively suspended payments to EGTC, leading fuel-powered generators to produce zero electricity in the absence of fuel and parts.
  - Solar-powered streetlight projects developed tens of streetlights in every main township, but most have stopped functioning due to design flaws and unaffordability of parts.
  - Some projects were abandoned mid-implementation (e.g., the new Audit House) or right after completion (e.g., seven vocational schools).
  - A USD 200 million PPP project was launched to widen an existing highway with limited traffic; an expensive tariff began to be charged in 2017 while construction was still ongoing and expanded lanes were not yet open.
- Despite a 60 percent increase in public capital stock over the last ten years, there is no corresponding increase in outputs of public infrastructure; quality is deteriorating (uneven surfaces of unpaved trunk roads; government buildings and school facilities in dilapidated conditions).
- The report quantifies "efficiency gaps" in Sierra Leone's public investments at 48 percent, larger than the sub-Saharan African countries' average of 41 percent.

### Key statistics and figures (preserved verbatim)
- Public investment averaged 6.5 percent of gross domestic product (GDP) over 2008−18.
- Estimated capital stock of about 65 percent in constant 2011 GDP (2018).
- Public debt: 63 percent of GDP in 2018.
- Accumulation of arrears approaching to 10 percent of GDP in 2019.
- Economic growth: 20.7 percent in 2013; negative 20.4 percent in 2015.
- Efficiency gaps: 48 percent for Sierra Leone; average of sub-Saharan African countries 41 percent.
- Energy capacity noted: 50 MW Bumbuna hydro plant; several small thermal plants totaling 40MW.
- USD 200 million PPP project cited.

### Priority institutional reforms and policy recommendations
The report prioritizes reforms across nine public investment management areas. Principal reform actions recommended include:

A. Investment Planning
- Publish a Road Sector Master Plan and review sectoral strategies prepared before the Medium-Term National Development Plan (MTNDP) to align them with the MTNDP.
- Develop project appraisal templates and guidelines and publish the appraisals of all approved projects including PPPs.

B. Investment Allocation
- Publish an annex of the annual budget presenting total costs, multiyear contracts, paid and unpaid invoice amount; clarify that a project change exceeding a threshold will be considered and deprioritized as a new project.
- Require Ministries, Departments, and Agencies (MDAs) to publish a maintenance policy; create a separate line item for routine maintenance; and present the RMFA budget in the budget document.
- Publish the project selection criteria; develop methodologies for prioritizing projects based on feasibility studies and appraisals; and design and maintain a prioritized pipeline of appraised projects including PPPs.

C. Implementing Investments
- Revise the Procurement Law and Regulations to allow for joint approval of procurement plans and robust coordination between MoF and NPPA; strengthen NPPA capacity with sufficient financial and human resources and harmonize procurement processes in the public service.
- Allow the NPPA to exercise its mandate under Section 15 of the Public Procurement Act (PPA) to obtain information and impose remedial sanctions.
- Expedite implementation of the online electronic procurement system (e-Procurement) and make it mandatory for all large investment projects.
- Develop systems for managing contracts for capital projects and ensure that all designs are comprehensive and approved by a panel of experts and the NPPA.
- Develop procedures for variations, price adjustments and contract amendments to ensure they are in accordance with the law and approved by NPPA in an open and transparent manner.
- Organize regular training programs for the IPRP and raise public awareness about existence of the independent review panel.
- Implement recommendations of FAD’s in-depth assessment of quarterly allotment and commitment control processes.
- Operationalize the NaMED to produce an annual report on public investment projects; assess resourcing needs for the Audit Service to undertake regular ex-post audit of major capital projects.
- Require a project to be re-appraised and re-selected when (i) an increase in total costs exceeds a threshold or (ii) the project is ongoing for a certain number of years.

- Additional specific process reforms highlighted:
  - Project appraisal templates and guidelines should be developed and the appraisals of all approved projects including PPPs should be published.
  - Total costs, contracts, unpaid invoice amount should be published in the budget document and a major project change should be treated as a new project.
  - A maintenance policy should be published.
  - Public Investment Guidelines/Manuals should be published and a prioritized pipeline of appraised projects including PPPs should be maintained.
  - Public procurement for capital projects should be reformed through a series of actions.
  - Quarterly allotment and commitment control processes should be streamlined.
  - Steps should be taken for systemic ex-post review and audits of capital projects.
  - Re-appraisal of a project should be required when a total cost increase exceeds a threshold, or a project is ongoing for a long period.

*Source: EXECUTIVE SUMMARY (1sleea2021002)*

### 5.      Foreign grants, external borrowing, and, increasingly, domestic resources have

### Foreign grants, external borrowing, and, increasingly, domestic resources have funded public investment

### Financing of public investment
- Prior to 2009, domestic resources were minimal; grants and concessional loans funded almost all capital projects.
- Over time there has been a shift towards external borrowing, and more recently, domestic resources (Figure 9).
- Grants remain the principal source of funding in education and health (Figure 10).
- Sector shares reported: Education, 5%; Health, 10%; Roads, 49%; Energy, 13%; Water, 12%; Other, 11%.
- Figure note: "65% GDP" appears adjacent to financing figures in the source.

### Fiscal outlook and constraints
- Significant increase of both capital and recurrent spending in 2016 and 2017 coincided with a collapse in iron ore revenue and a sharp deterioration in the fiscal deficit (Figure 11).
- Government debt: 30 percent of GDP in 2013; 63 percent of GDP in 2018 (Figure 12).
- Short-term, high interest bearing, domestic debt increased substantially.
- Government arrears to domestic suppliers and contractors accumulated to the tune of 10 percent of GDP; the government has committed to clear these arrears in coming years, which will limit fiscal space further.
- Medium-term program targets under the Extended Credit Facility:
  - Gradual reduction of domestic bank borrowing to around 2 percent of GDP over the program period.
  - A quantitative performance criterion on net credit to the government.
  - An indicative target on the domestic primary balance.

### Alternative financing and PPP pipeline
- Authorities are exploring alternative ways to fund infrastructure, including public private partnership (PPP) initiatives.
- Energy sector projects under negotiation:
  - Phase II of the Bumbuna hydro project (150 MW).
  - A solar energy project of 50 MW.
  - Combined required investment about USD 1 billion (25 percent of 2018 GDP), alongside government-backed guarantees.
- Transport sector projects:
  - Concession agreement signed with China Railways Seventh Group on the Wellington-Masiaka road; toll booth installed; road widening to four lanes at a cost of USD 163 million (concessionaire cost).
  - Tender launched for financing and construction of an USD 2 billion, 8-kilometer long bridge connecting Freetown to Lungi (airport town), with the expectation that no public debt will be incurred, or public guarantees required.

### Impact and efficiency of public investment — outcomes and diagnostics
- Sierra Leone underperforms comparator countries on three out of four outcome indicators (Figure 13).
  - Fewer teachers per capita and fewer hospital beds per capita than comparator countries (Figure 14).
  - Electricity generation per capita is about half that of comparator countries despite increased investment in the sector (see Box 1).
- Health and sanitation outcomes are low with significant regional disparities:
  - 2017 Statistics Sierra Leone study on household drinking water: half of the population at very high risk of faecal contamination with Escherichia coli (>100 E. coli per 100 mL).
  - Risk about 30 percent in the Western Rural Area of Freetown; exceeds 60 percent in many districts (Figure 15).
  - Around 18 percent of pregnant women do not receive key tests during pregnancy; the proportion exceeds 25 percent in some districts (Figure 16).
- Road quality varies significantly; vibration accelerometer readings on some unpaved roads produced shocks "equivalent to those experienced during a roller coaster ride" (Figure 17).
- Perception of infrastructure quality (World Economic Forum survey, scale 1 to 7) remains below peers and the gap widened from 2012 to 2015, improving slightly since (Figure 18).

### Returns to investment in thermal power plants (Box 1)
- Since 2010 the government invested heavily in thermal power plants; capacity worth 60 MW added at a cost exceeding USD 100 million.
- Many state-operated plants fell into disrepair due to lack of maintenance; a third of installed capacity has fallen into disrepair.
- Of the remaining two-thirds of capacity, only 15 percent are currently utilized; extreme cash shortages prevent fuel purchases to operate plants.
- EDSA is buying electricity from Independent Power Producers (IPPs); in December 2019 two privately owned power generating ships were supplying power to Freetown and outskirts.
- Condition and utilization table summary (EGTC data):
  - Total technical capacity shown: 271.8
  - Total utilized capacity shown: 5.7
  - Representative site entries:
    - Freetown Kingtom and BHR: technical capacity 26.5; condition "Good; No fuel for operation"; utilized capacity 0
    - Bo: technical capacity 7.6; condition "Shutdown; Need repairs"; utilized capacity 0
    - Lungi (one unit): technical capacity 2.0; condition "Good; in Operation"; utilized capacity 1.5
    - Kono 2017: technical capacity 6.0; condition "Operational"; utilized capacity 4.2
  - Note: Table shows thermal power plants for which data on utilized capacity are available.

### Efficiency gaps in public investment
- Sierra Leone has a 48 percent efficiency gap measured by physical output indicators — larger than the average of sub-Saharan African countries (Figure 19).
  - Interpretation in source: "a half of public investments in Sierra Leone are not producing intended outputs."
- Efficiency gap measured by quality (perception) indicators is 25 percent, at the same level as the average of sub-Saharan African countries (Figure 20).
- Large efficiency gaps suggest shortcomings in public investment management that prevent intended outputs or maintenance of infrastructure quality.

### Public Investment Management Institutions — PIMA framework and assessment
- The IMF Public Investment Management Assessment (PIMA) framework evaluates 15 "institutions" across the three stages of the public investment cycle: planning, allocation, and delivering public assets (Figure 21).
- For each institution three indicators are scored on:
  - Institutional design (objective facts on organizations, policies, rules, procedures).
  - Effectiveness (degree to which intended purpose is achieved).
  - Reform priority.
- Aggregate assessment for Sierra Leone:
  - Institutional design scores are lower than the average of African countries on almost all 15 institutions, except for budget comprehensiveness (Figure 22).
  - Four institutions received the lowest scores: project appraisal, project selection, availability of funds, monitoring of public assets.
  - Effectiveness is also generally lower than the African PIMA average (Figure 23).

### Investment planning — Fiscal principles and national/sectoral plans
- Fiscal principles or rules (Design—Low; Effectiveness—Medium):
  - Sierra Leone has a fiscal responsibility framework with a nominal debt ceiling of 70 percent of GDP.
  - PFM Act 2016 requires a prudent level of debt and balance between revenues and expenditures, but does not specify permanent numerical rules; new governments must set five-year fiscal objectives in their first Fiscal Strategy Statement (FSS).
  - FSS 2019 targets an average deficit, including grants, of 2.8 percent of GDP for 2019−23 and sets a ceiling to nominal debt of 70 percent of GDP.
  - The debt ceiling has not constrained fiscal policy: government debt rose from 30 percent of GDP in 2013 to 63 percent of GDP in 2018.
  - FSS is required to be submitted to Parliament in July but is currently only made available when the budget is submitted for approval.
- National and sectoral plans (Design—Medium; Effectiveness—Low):
  - The Medium-Term National Development Plan (MTNDP) 2019−23 provides broad strategic guidance, and many sectors have sectoral strategies, but the absence of a finalized master plan in the road sector affects investment planning across sectors.
  - MTNDP presents costing by sector but often does not disclose costs of individual projects; some sector strategies include project-level costing (e.g., NAPHS 2018−22), others do not (e.g., NREAP 2015−20/30).
  - Some sector strategies include both output and outcome targets (e.g., ESRR 2017−30); others include only broad objectives without measurable outcome targets (e.g., NAPHS).
  - Sectoral strategies prepared before the MTNDP have not all been reviewed for consistency with the MTNDP; example:
    - Energy sector costs in ESRR between 2019−23 are five times larger than the amount allocated by the MTNDP (Figure 24).
    - MTNDP allocates USD 428 million to health-care over five years while NAPHS estimates USD 291 million for its five-year costs; the source notes "There is no explanation of this difference."
  - Where sectoral strategies predate the MTNDP, MoPED should review and require MDAs to update them in light of the MTNDP to ensure coherent guidance on project planning.

*Source: Staff estimates and source content from the IMF chapter provided.*

### 3. Coordination Between Entities (Design—Medium; Effectiveness—Medium)

### 3. Coordination Between Entities (Design—Medium; Effectiveness—Medium)

### Coordination and disclosure of local government capital projects
- Major capital projects of local governments are formally discussed with the central government, but their budgets are not published on a website.
- Funding sources of local government capital projects include: (i) their own revenue; (ii) Local Government Development Grants (LGDG); and (iii) external financing.
- Review and approval processes:
  - Projects funded by own revenue are reviewed by the MoF through the budget process; the MoF and the Ministry of Local Government and Rural Development scrutinize draft local government budgets.
  - Financing from LGDG is reviewed by the MoF on a project-by-project basis.
  - The MoF negotiates and signs all agreements for external financing of local government projects.
- Gaps and risks:
  - Local government budgets that include lists of projects are yet to be published on a website.
  - Some externally financed local government projects do not appear in either the central or local governments’ budgets (example cited: the new Freetown City Hall Complex project).
  - The absence of a consolidated pipeline of all local government capital projects reduces effectiveness of coordination with the central government.
- Key figures and examples:
  - Capital projects of local governments were minimal in aggregate in recent years: 0.1 percent of GDP in 2017.
  - New development plan (“Transform Freetown”, 2018) includes major projects with total costs of USD 200 million.
  - Example of externally financed project: new Freetown City Hall Complex financed by a Korean EXIM Bank loan, raised by the MoF and on-lent to Freetown City Council.

### Local Government Development Grants (LGDG) allocation practice
- LGDG transfers do not follow a rule-based system:
  - Originally intended (2004) to be based on transparent criteria.
  - After donor support ended, transfers have been decided on a project-by-project basis, targeting a small number of selected ongoing projects.
  - Given cash constraints, a district council often does not know the amount of transfer until receiving disbursements.

### Contingent liabilities and disclosure
- Government guarantees are presented in the budget document, but broader contingent liabilities are not fully disclosed.
  - An annex of the budget document lists government guarantees: 0.3 percent of GDP in 2018.
  - The Fiscal Strategy Statement for 2019 includes a list of possible government guarantees required for planned PPP projects.
- Gaps:
  - Budget documents and Fiscal Strategy Statements do not include full disclosure of broader contingent liabilities such as on-lending (example: on-lending to Freetown City Council for the new city hall complex project), SOEs’ liabilities, or implicit contingent liabilities associated with PPPs.
- Public Debt Management Act 2011: Borrowing of local governments and public corporations are reported to, and subject to the limits set by, the MoF under this Act.

### 4. Project Appraisal (Design—Low; Effectiveness—Low)

### Status of appraisal processes
- Legal framework and guidance:
  - The PFM Act 2016 requires a proposing agency to submit an appraisal of its project to the MoF before approval, regardless of funding source.
  - The PFM Regulations 2018 requires a Public Investment Operational Manual to prescribe appraisal, selection and implementation processes; the Manual is still under preparation.
- Current practices:
  - Some domestically financed major projects undergo full appraisal, some partial, others bypass appraisal and move straight to implementation.
  - The March 2019 Technical Audit of the Social Security, Telecommunications, Civil Works and Energy Sectors reviewed 18 road projects; only four underwent full appraisal (technical and economic).
  - Some projects were assessed only on technical feasibility, without proper cost benefit and environmental impact assessments (examples include Freetown street Phase II and Waterloo township road projects).
  - Design-and-build approach used by SLRA contributes to lack of comprehensive appraisal, leading to frequent adjustments and additions during implementation.
- Notable project examples and consequences:
  - Lumley-Tokeh road: 25 kms, 10 years in the making, costing six times the initial estimates.
  - Presidential-initiated projects (example: proposed new Freetown airport) were in the past approved and loan agreements entered into without being appraised.

### Capacity constraints and political economy
- Central review capacity is limited and constrained by the selection process:
  - Technical capacity resides within implementing agencies (e.g., SLRA and EGTC); parent ministries often have weaker capacity than central ministries.
  - MoPED, which should challenge economic assessments, has little say on project selection; selection is perceived to be driven by political considerations.
  - Agencies often present proposals based on optimistic assumptions with insufficient appreciation of implementation risks.
- Transparency as a mitigant:
  - Enhanced transparency requirements on appraisal can hold decision makers accountable.
  - Publishing analysis of economic impact of selected projects would encourage better appraisal practice.
  - Currently, appraisals are only published for externally financed projects if required by the development partner.

### Case study — Wellington–Masiaka Toll Road (Box 3)
- Project structure:
  - PPP between Government of Sierra Leone and China Railway Seventh Group (CRSG) to widen 63 kms of the 240 kms highway connecting Freetown to Bo.
  - CRSG will build and maintain the road for 25 years, after which it will be handed over to the GoSL; CRSG will collect tolls over this period.
- Toll structure:
  - Mid-size private cars: about USD 0.40 (one-way usage).
  - Commercial trucks: USD 15 (one-way usage).
- Appraisal and controversy:
  - Appraisal is not published.
  - Appraisal estimates toll collection at USD 8 million initially, rising to USD 20 million at the end of the 25 years.
  - Estimated overall economic benefits: USD 30million annually (1 percent of current GDP).
  - Concerns: benefit assumptions appear to be based on freight traffic projections from railway projects in other countries; tolls being charged while construction is still under way; users question the toll structure.
  - Publishing the appraisal may help allay concerns.

### 5. Alternative Infrastructure Financing (Design—Low; Effectiveness—Low)

### Market liberalization and regulators
- Power sector:
  - National Electricity Act 2011 unbundled National Power Authority into upstream (Electricity Generation and Transmission Company – EGTC) and downstream (Electricity Distribution and Supply Authority – EDSA).
  - EDSA is the sole power distributor; power generation market includes independent power producers (IPPs).
- Telecom sector:
  - Land-line service provided only by Sierratel (state-owned); private sector active in mobile markets.
- Water sector:
  - Two state-owned companies are sole suppliers: Guma Valley Water Company (Freetown and Western area) and Sierra Leone Water Company (SALWACO) for the rest of the country.
- Independent regulators: Electricity and Water Regulatory Commission and National Telecommunication Commission.

### PPP framework and practice
- Legal and institutional status:
  - PPP Act 2014 provides high-level principles, roles of the PPP Unit, and procurement process.
  - PPP policy that implements the PPP legal framework is yet to be published.
  - PPP Unit is under the Vice-President’s Office and plays a gatekeeping role.
  - Draft PPP regulations and guidelines for energy sector PPPs are being prepared and expected to be published next year.
- Process in practice:
  - For “solicited projects” initiated by government: MDAs prepare a project roadmap (pre-feasibility) and a feasibility study; both are scrutinized by the PPP Unit.
  - MoF (Fiscal Risk Division) assesses a “financial clause” that sets deadlines for private partners to secure funding.
  - With MoF and Ministry of Justice consent, Cabinet selects the project for implementation.
  - For “unsolicited projects” proposed by private partners: MDAs review project viability, sign an MOU, PPP Unit hires experts to prepare a feasibility study.

### Public corporations and MoF review
- Investment plans of public corporations are reviewed by MoF only when funded by donors or the budget.
- Some SOEs undertake capital investments with their own funds; these projects are approved by the shareholding line ministry but not reviewed by the MoF.
  - Example: EDSA project to connect a mining company in Kono to a transmission line funded with EDSA’s own funds.
- MoF Fiscal Risk Division has collected SOEs’ financial statements but has not produced a report on their investment plans or financial performance beyond budget document line items (revenue, expenditure, net profits).

### Fiscal risks from PPPs and SOEs
- The Fiscal Strategy Statement (September 2018) lists five PPP projects for power generation, adding around 215 megawatt (MW) to installed capacity; these are at preparatory stage and undergoing feasibility studies.
- MoF and PPP Unit control government guarantees by providing limited short-term guarantees (e.g., six months); if private sector fails to secure financing within this period, contract will be cancelled.
- MoF and PPP Unit have not completed assessment of implicit contingent liabilities arising from energy PPPs, which could substantially impact SOE financial viability.

### Box 4 — Impact of Energy PPPs on State-Owned Energy Companies
- Installed capacity:
  - Since 2015 (when EDSA and EGTC were operationalized) installed capacity increased from around 100 MW to 200 MW, mainly via IPPs (Turkish Karadeniz power-ship 126 MW and EMCO in Bo).
- EDSA financial performance and losses:
  - EDSA is suffering from losses from worn out transmission lines and tariff collection losses.
  - Tariff structure does not include transmission fees to compensate transmission losses.
  - Ratio of net losses to electricity purchase costs increased from 9 percent in 2015 to 22 percent in 2018.
  - Adding 215 MW through PPPs could double EDSA’s loss ratio if no measures are taken.
- Intercompany arrears and operational impacts:
  - Payments to IPPs are prioritized over payments to EGTC, resulting in EGTC accumulating large receivables owed by EDSA.
  - Lack of cash to buy fuels has effectively ceased EGTC operations (see Chapter II).
  - In 2019, the government budget paid SLL 160 billion directly to IPPs, which were around half of the EDSA’s revenue.

### Recommendations on Investment Planning
- Issue 1: Sectoral strategies do not adequately guide investment planning or support the implementation of the MTNDP.
  - Recommendation 1: Improve transparency in sectoral strategies and their consistency with the MTNDP by:
    - Publishing a Master Plan on Road Sectors for the MTNDP period, with costing information of individual projects;
    - Reviewing sectoral strategies prepared before the MTNDP approval and making updates necessary for aligning them with the MTNDP.
- Issue 2: Processes for appraising projects are not in place and many projects were not appraised before they were selected.
  - Recommendation 2: Appraisal should be strengthened by:
    - Enforcing section 73 of the PFM Act 2016 that requires all capital projects being proposed are accompanied with their cost and appraisal documents;
    - Developing and publishing the guidelines and template upon which the MoPED will review the appraisal of new projects;
    - Requiring the publication of the appraisal of approved projects including PPPs before their inclusion in the PIP.

### F. Investment Allocation — 6. Multiyear Budgeting (Design—Medium; Effectiveness—Low)

### Public Investment Program (PIP) and projections
- The budget document presents projections of capital spending broken down by individual projects over the next three years.
  - An annex includes a “Public Investment Program” (PIP) presenting, for each development project, (i) spending for the next three years broken down by domestic and external financing and (ii) names of donors and funding types (grants v. loans) for externally financed projects.
  - Projects are grouped by a cluster of the MTNDP.
- No multiyear ceiling:
  - PIP multiannual projections do not constitute ceilings.
  - Budget Call Circular multiyear ceilings on MDAs’ submissions cover only non-wage, non-interest, recurrent expenditure.
  - MoF determines budget allocations to capital expenditure by scrutinizing every individual project.
  - MDAs submit detailed “project profiles” for all new and ongoing projects in a template defined by a Budget Call Circular.

### Gaps in transparency on project costs and contracts
- No publication of total costs of major projects:
  - MDAs are required to provide MoF with updated total costs through project profiles, but these are not published in the budget document.
- MoF does not maintain a centralized, comprehensive database on multiannual contracts, although MoF approves all contracts with total costs exceeding SLL 200 million (around USD 20,000).

### Projection accuracy and budget credibility
- Projections for capital expenditure have included large forecast errors:
  - Until recent years, projections tended to be over-spent due mainly to lax in-year adjustment rules.
  - Since the 2018 budget, projections have been under-executed due mainly to cash shortages.
- Absence of information on total costs, multiannual contracts, paid amounts, and unpaid invoices reduces budget credibility.
  - Example: Makeni-Kamakwe-Madinaoula road
    - Total contract value: USD 119 million.
    - If paid equally before completion, budget would have spent USD 15 million every year.
    - Actual budget allocation was USD 3 million and actual spending USD 5 million on average between 2012 and 2019 (difference forms arrears).
  - Recommendation as first step: disclose in the budget document for each project (i) updated total costs, (ii) multiannual contracts, (iii) amount paid, (iv) amount of unpaid invoices, and (v) updated project completion date to verify gaps between budgets and commitments.

*Source: 1sleea2021002 - 3. Coordination Between Entities (Design—Medium; Effectiveness—Medium), IMF staff report content.*

### 43.      Budget documentation includes capital projects  undertaken or funded by central

### 1sleea2021002 - 43.      Budget documentation includes capital projects  undertaken or funded by central government, regardless of funding sources.

### Budget documentation and coverage
- Budget documentation includes capital projects undertaken or funded by central government, regardless of funding sources.  
- Annex 4 of the Budget Profile, which Parliament approves, contains the list of projects in the PIP and provides:
  - the name of the funding agency (GoSL, or donor);
  - the type of funding (grant or loan);
  - any GoSL copayment;
  - estimates of the outlays for the budget year, and two outer years.  
- The PIP includes projects implemented by subvented agencies (such as the SLRA) and by public corporations, provided they are funded through the budget.  
- Exclusions: capital spending done by local governments and public corporations from own revenue is not included. Local governments have little own source revenue and receive little or no grants for capex and tend to spend little on capital projects. Notable exception: the Freetown City Council Administrative Complex worth USD 50 million, funded by the Korean Exim Bank.  
- Recent public corporation capex has been minimal, even for capital intensive corporations such as EDSA, EGCT, Guma Valley Water Company, or Sierratel.

### Capital budgeting practice and limitations (Design—Medium; Effectiveness—Low)
- The capital budget is prepared by the MoPED, alongside the recurrent budget prepared by the MoF, but follows neither program nor functional classifications.  
- The capital budget is presented along three dimensions:
  - the eight policy clusters set in the MTNDP 2019-2023;
  - the ministries responsible for implementation;
  - the project description.  
- Neither a program structure nor the international classification of the functions of government (COFOG) are used in Sierra Leone.

### Multiyear commitments and reallocations
- Capital outlays are appropriated annually, but the total project costs and multi-annual commitments are not included in the budget document.  
- Section 35 of the PFM Act 2016 requires disclosure of multiannual commitments in PIP, but this provision has not been implemented yet.  
- Reallocations from capital to recurrent expenditure are prohibited by the PFM Act 2016 (Section 43(5)) without parliamentary approval of supplementary budgets.  
- Budget classifications for projects use development expenditure concepts without breakdown between recurrent and capital expenditure. In PIP, around half of allocation to development expenditure seems to be of recurrent nature. Because reallocations between different projects included in PIP are permitted, they effectively allow reallocations from capital to recurrent projects.

### Prioritization and project changes
- Policy exists to prioritize ongoing projects over new projects (e.g., Budget Call Circular for 2019), but has been hindered by new projects being implemented as changes in ongoing projects (e.g., “addition” or “Phase II”).  
- Implementing new projects as project changes has complicated baseline costing of ongoing projects. Example: for 12 major road projects covered by the March 2019 technical audit:
  - project completion has been delayed for more than three years on average;
  - total costs of five projects have increased by more than 100 percent after project delay;
  - total costs of four projects have not changed although completion delayed by two to six years.  
- Implication: a project change exceeding a threshold needs to be considered as a new project and its costs separated from costs of completing existing works.

### Maintenance funding (Design—Low; Effectiveness—Low)
- A standard methodology for determining routine maintenance needs exists in some but not all sectors. Example: SLRA developed a database on road conditions using specific software and a methodology for selecting roads for routine maintenance. For many assets (government real estate, school buildings) comprehensive databases and maintenance policies are yet to be developed.
- The MTNDP and sectoral strategies include capital maintenance projects, but a standard methodology for identifying capital maintenance needs does not exist in all sectors (e.g., ESRR 2017–30, Education Sector Plan 2018-2020).
- Routine maintenance is not systemically identified in the budget. Capital maintenance can be identified in a PIP, but routine maintenance is not systemically identified because the budget uses activity classifications for non-wage, non-interest expenditure without breakdown to economic items.
- Road sector: routine maintenance financed through the Road Maintenance Fund Administration (RMFA), funded by earmarked fuel levy and vehicle registration fees. Between 2016 and 2018, RMFA financed not only recurrent maintenance but also major rehabilitation of roads. RMFA is an extrabudgetary entity and its budget is not included in the government budget, which shows only the amount of transfer to the RMF.
- Inadequate funding for routine maintenance reduces infrastructure outputs. Examples and figures:
  - Actual spending for recurrent maintenance of government buildings was limited to SLL 4 billion (USD 0.5 million) on average between 2015 to 2018.
  - A study shows failure rate of a distribution line increases exponentially as a function of age; given most distribution lines were built before the civil war in the 90s, roughly around 14 out of 100 power outages per year per user could be attributed to aging of distribution lines.
  - The budget for transfer to the RMFA has been under-executed for the last five years. In 2018, only 24 percent of the original budget amount (USD 4 million) was disbursed to the RMFA.
  - Between 2016 and 2018, around 80 percent of the RMFA’s funding was diverted to capital road projects.
  - In 2016 and 2017, the RMFA borrowed respectively around USD 5 million and USD 7 million with government guarantees to finance major road rehabilitation projects.
- Although in 2019 the RMFA adopted a new policy and disbursed its funding only to routine maintenance, it is important to protect maintenance funding by developing maintenance policies and increasing transparency in their budget allocation.

### Project selection (Design—Low; Effectiveness—Low)
- Existing project selection process: MoPED screens project proposals; a project is required to prepare a proposal, feasibility study, and design before civil work is included in the budget or donor financing arrangements. Several major projects followed this process (e.g., Makeni-Kamakwei-Medinaoula road project; rural electrification of six district towns).  
- Some major projects bypassed the process, particularly under political pressure. Examples:
  - Freetown International Airport project: loan agreement signed before a feasibility study was undertaken.
  - Waterloo township road project: included in the budget without cost-and-benefit analysis; contractor started civil work before full design.
  - Lumley-Tokeh road project: full design completed ten years after the project started in 2009, due mainly to significant and repeated project changes.
- The project selection process and criteria are not published. MoPED uses an internal scoring system based on:
  - needs assessment;
  - identification of key activities;
  - technical feasibility;
  - costing;
  - financing plan.  
  These criteria/process are prescribed only in an internal circular and not published, although PFM Regulations (Section 19(5)) requires publication of the “Public Investment Operational Manual.”
- Absence of published selection criteria has created perception of politically motivated project selection. Example: township road projects started in 2016—allocation of road work per township perceived as politically driven (northern townships e.g., Makeni, Kabala allocated longer lengths per population than southern townships e.g., Bo, Kailahun).
- MoPED maintains a consolidated list of all project ideas and proposals and a consolidated list prioritized by the scoring system, and collects feasibility studies and economic analysis. However, MoPED does not yet prioritize appraised projects based on feasibility studies and economic analysis. Maintaining a prioritized pipeline of appraised projects ready for financing and implementation is important to show which projects are more sustainable and generate more benefits.

### Recommendations on Investment Allocation (Issues 3–5)
- Issue 3: Multiyear contracts of ongoing projects are not factored in the budget and not protected from new projects implemented as changes in ongoing projects.  
  Recommendation 3: Increase transparency in total costs and multiyear contracts of capital projects and improve budget credibility by:
  - Publishing an annex of the annual budget which presents, for each project, (i) updated total costs, (ii) updated value of multiannual contracts, (iii) amount already paid, (iv) amount of unpaid invoices, and (v) updated project completion date;
  - Separating appropriations for recurrent and capital expenditure in the PIP;
  - Clarifying in the Budget Call Circular that a project change that increases total costs by a certain threshold is considered as a new project and is deprioritized in the budget process.
- Issue 4: Inadequate maintenance is deteriorating performance of infrastructures and assets.  
  Recommendation 4: Protect funding for routine maintenance by:
  - Requiring each sector to prepare and publish a maintenance policy;
  - Creating a separate line item in the budget for routine maintenance of each MDA;
  - Presenting in the budget document the RMF budget with clear allocations to routine maintenance of SLRA and local districts, separately from other expense.
- Issue 5: Project selection is often not guided by sustainability or economic benefits.  
  Recommendation 5: Establish a project selection process based on transparent criteria and a prioritized pipeline of projects by:
  - Publishing the project selection criteria which apply to all projects including PPPs, as part of the public investment guidelines and manuals required under the PFM Regulations;
  - Developing methodologies for scrutinizing the feasibility studies and economic analysis and prioritizing appraised projects;
  - Designing a prioritized pipeline of appraised projects including PPPs and maintaining it.

### Investment implementation — Procurement (Design—Low; Effectiveness—Low)
- Procurement system is decentralized to cover central government, local councils and SOEs. Decentralization of procurement functions and establishment of operational procurement units and procurement committees in all procuring entities is fully integrated into public sector administration.
- Procurement oversight is undertaken by the Sierra Leone National Public Procurement Authority (NPPA), established under the Public Procurement Act (PPA) of 2004 and revised in 2016. NPPA:
  - Does not have a mandate to review and approve procurement plans or contracts for procuring entities; responsibility for approving contracts rests with the MoF.
  - Is mandated to ensure compliance with procurement plans approved by the MoF, which has created lapses by allowing procuring entities to by-pass the regulatory authority.
  - Public access to procurement information is minimal; adverts for major projects are published in local newspapers but information on tendering stages or contract awards is not available to the public nor the NPPA.
- PPA and practice:
  - PPA 2016 Section 37 provides for open tendering as default, but the Act allows other methods that limit competition (sections 38–41) and permits donor procurement procedures to be used where PPA conflicts with donor procedures.
  - Section 26 of the PPA requires procuring entities to publish each contract award that exceeds SLL 600 million threshold for works, but this is not done on all major investment projects. NPPA does not impose sanctions for non-compliance.
- Data and reporting:
  - NPPA does not have a database on major investment projects and no mechanism to collect procurement data from procuring entities. Section 15(3) of the PPA requires mandatory reporting via the Procurement Committee, but reporting by most procuring entities is inconsistent and untimely.
  - NPPA conducts annual surveys to collect procurement information, making the exercise costly and time consuming. Procurement and contract management records in procuring entities are not comprehensive; some files are missing and some decisions are not recorded. No analytical reports on major investment projects by the regulatory authority.
- Contract management challenges:
  - Characterized by delays, amendments and variations far above original contract cost, price adjustments during implementation, and premature contract cancellations due to lack of funds.
  - Legal requirement that contract amendments beyond 15 percent of original amount be approved by NPPA is often flouted.
  - Advance payment guarantees and performance bonds issued by non-bank financial institutions are being accepted contrary to the Act.
  - Notification of award is not communicated to losing bidders nor published in major newspapers or NPPA’s website.
  - Contracts often miss major provisions such as liquidated damages, warranties, termination, breach, modification/variation and term.

*Italic: Source — 1sleea2021002 - 43.      Budget documentation includes capital projects  undertaken or funded by central government, regardless of funding sources.*

### 63.      The NPPA is often excluded from procurement of major public works, large part of

### 1sleea2021002 - 63.      The NPPA is often excluded from procurement of major public works, large part of

### NPPA coverage and procurement patterns (2018)
- NPPA reviewed 5,709 procurement activities performed by 136 entities for a total value of Le725,74 billion in 2018.
- In terms of value, a large majority of all procurement captured by the NPPA was through open competitive bidding methods.
- A large part of procurement activities captured by the NPPA were for the procurement of goods; a portion of procurement of goods made through competitive processes is higher than that of Works.
- The amount of procurement of works captured by the NPP is less than 25 percent of total domestic development expenditure in 2018, indicating exclusion from major public works often procured in non-competitive manners.
- Observed practice: many contracts below the threshold for open competitive bidding were split into smaller lots enabling use of Request for Quotations (RFQs).
- Planning: 89 percent (5,062) of the activities were planned with a value of Le 572,59 billion; declining unplanned procurement indicates improvement in planning.
- Key procurement indicators, 2018 (Value (SLL billion); Percent of all captured procurement):
  - Total procurement captured by the NPPA: 725.7 — 100
  - ICB goods and services: 357.9 — 49
  - NCB goods and services: 91.3 — 13
  - ICB works: 78.1 — 11
  - NCB works: 60.6 — 8
  - Others: 137.8 — 19

### Procurement reforms and institutional arrangements
- Government, through a World Bank funded project, is supporting:
  - Introduction of an electronic procurement system (e-GP) to improve transparency and efficiency of procurement processes;
  - Review of the PPA and Procurement Regulations to streamline with new technological requirements and remove ambiguities of some clauses;
  - Strengthening of the NPPA through technical assistance and staffing;
  - Capacity building of procurement cadre at both central level and local councils to improve efficiency.
- The PPA established the Independent Procurement Review Panel (IPRP) for independent administrative review of award decision challenges and complaints.
  - IPRP composition: three members appointed by the Minister of Finance from among eminent Sierra Leoneans with backgrounds in public procurement, the Sierra Leone Chamber of Commerce, Industry and Agriculture, the business community, university, legal profession, and other relevant fields.
  - Observed issues: few complaints reported due to fear of retaliation; where complaints are made there are significant delays in decision making and complaint resolutions are not published.

### Availability of funds (Design – Low; Effectiveness - Low)
- Commitment ceilings are not issued in a timely manner and not linked with cash availability shown in cashflow forecasts.
- Cashflow forecasts prepared by the Cash Management Unit in the Accountant General’s Department (AGD) are primarily used for cash rationing.
- Quarterly commitment ceilings for development projects are issued by the MoF using a Public Expenditure Tracking Form-1 (PET Form-1) on recommendations of the MoPED; MDAs are required to submit project profiles to the MoPED.
- Quarterly commitment ceilings are often issued with significant delay (e.g. two months after the beginning of a quarter) or sometimes not issued but combined with next quarter’s ceilings.
- Project payments are subject to cash rationing: payment vouchers for capital projects submitted to the AGD are sent to the MoF Finance Secretary for prioritization and approval; only approved vouchers proceed to cheque printing and payment by the Bank of Sierra Leone (BSL).
- At end-June 2019, a large amount of printed but not cleared checks at the AGD and BSL stood at SLE 1.1 trillion (3 percent of GDP).
- External financing is largely held outside the Treasury Single Account (TSA) and mostly in commercial bank accounts; for each externally financed project a separate government bank account is opened and managed by MDAs. According to annual accounts of the Government, an amount of SLE 100.87 billion was held in these bank accounts as of 31st December 2018.
- Significantly delayed and unpredictable payments for capital projects have been a major cause of project delay and arrears accumulation; example: March 2019 technical audit finds invoice payment delays for two road projects where payments were always delayed from the deadline (60 days after the invoice date) but one project was paid much faster than the other.

### Portfolio management and oversight (Design – Low; Effectiveness - Low)
- Central agency monitoring of major projects is limited; MDAs prepare monthly consultant reports on physical and financial progress, but MoF/MoPED monitoring is centered on processing quarterly allotments and invoice payments.
- MDAs’ project trackers are not consolidated into a central database; MoPED and MoF do not regularly produce reports that analyze and make recommendations on project progress.
- Funds can be reallocated between projects, but the process for budget adjustments has not been transparent.
  - PFM Act 2016: MoF can reallocate within same ministry up to 10 percent of total budget of that ministry; reallocation between different ministries requires approval of a supplementary budget (Section 43).
  - Progress in implementing PFM Act 2016 has been somewhat slow; budgets for road projects have been overspent for the last three years while budgets for other sectors such as energy and water tend to be under-executed.
- No systemic ex post review of major projects other than inspection of works for payments; ex post reviews for externally financed projects are produced as donor requirement but not regularly published for domestic projects.
- Absence of ex post review has led to abandonment or early cessation of outputs:
  - Solar-powered streetlight project: tens of streetlights installed but almost all stopped functioning soon after completion due to (i) design flaw—a solar battery designed for dry weather that fails in rainy season; and (ii) lack of economic analysis—maintenance parts not available in Sierra Leone and unaffordable.
  - Thermal power plants in district headquarters ceased to generate power due to EGTC’s financial problem.
  - Seven vocational schools built in late 2000s were all closed without being used; only one converted into a college by a development partner.
- National Monitoring and Evaluation Department (NaMED) of the MoPED, established in 2018, is planning to produce an annual monitoring report of government program and projects; ex post review is necessary.

### Management of project implementation (Design – Medium; Effectiveness - Low)
- Project management arrangements exist, but reliable implementation plans are not always available before budget approval.
  - Road sector: SLRA has 66 qualified engineers; consulting company is hired per project to review design, station engineers in field, review invoices and Interim Payment Certificates, and prepare monthly progress reports.
  - Energy and water sectors: SOEs responsible for project implementation and appoint project managers from engineers.
  - Some externally-financed projects establish Project Implementation Units.
- Significant and frequent project changes and delays make it difficult for MDAs to prepare reliable implementation plans; March 2019 technical audit found SLRA did not have an updated work program for 18 ongoing road projects.
- No standardized rules or procedures for project adjustments; no requirement to reappraise a project when significant adjustments occur.
  - Procurement Regulations: price variations exceeding 15 percent of the original price constitute a new procurement and require re-tendering; this rule has not been implemented for several capital projects.
- Absence of re-appraisal requirements motivates frequent and significant project changes, allowing new projects to bypass appraisal and procurement processes, causing cost overshoot and implementation delay.
  - Example: Tokeh-Lumely road project
    - Original Contract: 28 (USD million)
    - Revised Contract: 140 (USD million)
    - Project change: Changing from 2 lane to 4 lanes (total costs increased fivefold).
- Other examples of cost increases due to project changes (USD million):
  - Roads in Bo, Kenema Makeni, Magburaka: Original 10 — Revised 80 — Including 20.2km of additional roads in the original project of 21.2km of roads
  - Jomo-Kenyatta, Hill Cot Junction, Choithrams road: Original 23 — Revised 96 — Adding Jomo-Kenyatta road as “Phase II” of the original project
  - Roads in Western Area of Freetown: Original 9 — Revised 34 — Including various additional roads
  - Rokupr Spur – Mange – Mambolo road: Original 14 — Revised 37 — Including 11 km of additional township roads
  - Roads in Moyamba, Pujehun, Mattru Jong: Original 15 — Revised 36 — Adding a new bridge, a new walkway
  - Roads in Port Loko, Kambia, Lunsar: Original 9 — Revised 14 — Including 7.2 km of additional roads in the original project of 14 km of roads
- Audit activity: March 2019 technical audit was a one-off external audit of 18 major road projects assessing feasibility studies, economic analysis, designs, magnitude of delay and cost increases, procurement irregularities, and physical outputs versus designs; experts were invited from Kenya, Tanzania, and Uganda.
- Absence of systemic ex post audit and follow-up weakens incentives for MDAs to comply; Audit Service lacks an engineer or project management expert and has no plan to continue technical audits systemically; no process to follow up on technical audit recommendations.

### Monitoring of public assets (Design – Low; Effectiveness – Medium)
- Asset register is neither comprehensive nor updated regularly; National Asset and Government Property Commission is responsible but understaffed and undergoing reforms.
- Several government buildings appear to be occupied illegally and need to be stock-taken and recovered.
- No statistics on government nonfinancial assets; government finance statistics follow a cash basis and do not include public capital stock information.
- Some sectors maintain their own asset registers and monitor asset conditions:
  - Road sector maintains a road database used for prioritizing maintenance needs.
  - Health and education sectors are undertaking surveys of health and school facilities to inform maintenance policy and prioritization of capital projects.

### Recommendations on investment implementation (Issues and Recommendations)
- Issue 6.1: NPPA is mandated to ensure compliance with procurement plans approved by the MoF, which has created lapses by allowing procuring entities to by-pass the regulatory authority.
  - Recommendation 6.1: Revise the Procurement Law and Regulations to allow for joint approval of procurement plans and robust coordination between MoF and NPPA.
- Issue 6.2: NPPA and the wider public do not have complete information on the various stages of tendering or the award of contracts – legal requirement to publish contract award that exceeds the Le600 million threshold is often flouted.
  - Recommendation 6.2: Strengthen capacity of NPPA by:
    - providing the authority with sufficient financial and human resources to enforce the Law and harmonize public procurement processes in the public service;
    - allowing the NPPA to exercise its mandate as required by Section 15 of the PPA that gives it power to obtain information and impose remedial sanctions for noncompliance.
- Issue 6.3: Insufficient database and scrappy information covering all public procurement activities; NPPA does not have database on major investment projects and there is no mechanism to collect procurement data from procuring entities.
  - Recommendation 6.3: Expedite implementation of the online electronic procurement system (e-Procurement) and make it mandatory for all large investment project.
- Issue 6.4: Contract management of capital projects characterized by delays in implementation, variations to contract far above original cost, price adjustments during project implementation and cancellation of contracts prematurely due to lack of funds.
  - Recommendation 6.4: Develop:
    - systems for managing contracts for capital projects and ensure that all designs are comprehensive and approved by a panel of experts and the NPPA before implementation;
    - procedures for variations, price adjustments and contract amendments to ensure that they are in accordance with the law and approved by NPPA in open and transparent way.
- Issue 6.5: IPRP reviews complaints but has heard few complaints; where complaints are made there are significant delays in decision making due to lack capacity and its complaints’ resolutions are not published.
  - Recommendation 6.5: Organize regular training programs for the IPRP to enhance its capacity to complete reviews in a reasonable time; and raise public awareness and sensitization about existence of independent review panel to build public trust and confidence in the Panel and make its resolutions.
- Issue 7: Delayed and unpredictable invoice payments severely affected project implementation and led to accumulation of arrears.
  - Recommendation 7: Improve the quarterly allotment and commitment controls for capital projects by implementing recommendations of the in-depth assessment report by the current mission.
- Issue 8: Several projects are abandoned or ceased to generate outputs soon after completion.
  - Recommendation 8: Undertake ex post review and audit of major capital projects in a regular, systemic manner by:
    - Operationalizing the NaMED and producing an annual report on public investment projects, which should be published;
    - Assessing the resource needs for the Audit Service to undertake regular ex-post technical audits of major capital projects.
- Issue 9: Several new projects or significant project expansion have been implemented as changes in existing projects without being appraised.
  - Recommendation 9: Develop and implement project adjustment rules by:
    - Requiring a project to be re-appraised and re-selected when (i) an increase in the total costs exceeds a threshold or (ii) the project is ongoing for more than a certain number of years;
    - Applying this project adjustment policy to major ongoing projects which require more than few years to be completed.

*Source: 2018 annual assessment report of the NPPA and related mission documents in the provided chapter.*

### 82.      A computerized  information system for capital projects is available in some sectors

### A computerized information system for capital projects is available in some sectors

### Current status of project information systems
- A computerized information system for capital projects is available in some sectors but not at a central agency.
- The road sector uses a specific software to maintain a road database and prioritize maintenance needs.
- The MoPED uses an excel to monitor project progress.
- The NaMED is planning to procure a computerized system to support its monitoring activities.
- The Public Investment Management Department lost access to the IFMIS when the MoPED was separated from the MoF; it is expected to recover access to the IFMIS in the next months.
- Recommendation: The MoPED should be given at least access to the IFMIS to facilitate their project monitoring.

### Legal framework for public investment management
- The PFM Act 2016 and the PFM Regulations 2018 provide the legal framework for public investment management.
- Section 35(1) of the PFM Act 2016 requires the budget documents to include a “Public Investment Program,” presenting medium-term spending projections, multiannual commitments, and other details of all PPPs and development projects.
- The Minister of Finance is empowered to issue the methodologies for public investment management.
- PFM Regulations 2018 set out:
  - (i) the principles of affordability, economic viability, and best option for all major projects and PPPs (regulation 19(1));
  - (ii) the gatekeeping role of the Minister of Finance to assess these principles and refuse un-appraised projects to be included in the budget (regulations 19(1) 20(4));
  - (iii) the requirement of project preparation and appraisal to comply with the “Public Investment Operational Manual” published by the Minister of Finance (regulations 19(5) and 20(1));
  - (iv) the requirement of project costing information during the budget process (regulation 20(2));
  - (v) prohibition of moving to procurement process before a project is included in the budget (regulation 21(2)).
- Implementation note: Despite the robust legal framework, implementation has been slow. Developing and publishing the Public Investment Guidelines and Manuals is key to facilitate implementation.

### Staff capacity for public investment management
- The MoPED Public Investment Management Department (PIMD) is responsible for performing gatekeeping roles: screening and prioritizing project proposals and appraisals and maintaining a project pipeline.
- The PIMD is a young department developed in 2014; staff capacity needs enhancement to:
  - scrutinize and challenge feasibility studies and economic analysis prepared by MDAs;
  - monitor and advise on project progress.
- Follow-up technical support from development partners is needed. Short-term priority areas include:
  - (i) development of a template for project appraisal, in particular economic analysis;
  - (ii) design of a prioritized pipeline of appraised projects;
  - (iii) methodologies and outputs of project monitoring including ex post review.
- For the MoF and MoPED, technical support may also be needed for:
  - (i) development of an expanded annex on public investments in the budget document discussed in Institution 6;
  - (ii) costing methodologies for assessing impacts of project delay and changes on total and annual costs of projects as discussed in Institution 8.

### Proposed action plan (selected recommendations and timelines)
- Improve the transparency in sectoral strategies and their consistency with the MTNDP:
  - Publishing a Master Plan on Road Sectors for the MTNDP period, with costing information of individual projects (Responsible: MoWPA, SLRA).
  - Reviewing sectoral strategies prepared before the MTNDP approval and updating them to align with the MTNDP (Responsible: MoPED, MDAs).
- Project appraisal should be strengthened (Responsible: MoPED; Follow-up needs: Yes):
  - Publish all existing appraisals of ongoing capital projects.
  - Develop and publish guidelines and a template for MoPED to review appraisals of new projects.
  - Enforce section 73 of the PFM Act 2016 requiring all capital projects proposed to be accompanied with their cost and appraisal documents.
- Increase transparency in total costs and multiyear contracts of capital projects and improve budget credibility (Responsible: MoF, MoPED):
  - Clarify in the Budget Call Circular that a project change that increases total costs by a certain threshold is considered a new project and is deprioritized in the budget process.
  - Publish an annex of the annual budget presenting, for each project: (i) updated total costs, (ii) updated value of multiannual contracts, (iii) amount already paid, (iv) amount of unpaid invoices, and (v) updated project completion date.
- Protect funding for routine maintenance (Responsible: MoF, MoPED):
  - Create a separate line item in the budget for routine maintenance of each MDA.
  - Present in the budget document the RMF budget with clear allocations to routine maintenance of SLRA and local districts, separately from other expense.
  - Require each sector to prepare and publish a maintenance policy.
- Establish a project selection process based on transparent criteria and a prioritized pipeline (Responsible: MoPED; Follow-up needs: Yes):
  - Develop methodologies for scrutinizing feasibility studies and economic analysis and prioritizing appraised projects.
  - Publish the project selection criteria as part of the public investment guidelines and manuals required under the PFM Regulations.
  - Maintain a prioritized pipeline of all appraised projects.
- Strengthen the public procurement framework (Responsible: NPPA, MoF, GoSL; Follow-up needs: Yes):
  - Expedite the implementation of the online electronic procurement system (e-Procurement) and make it mandatory for all large investment projects.
  - Revise the Procurement Law and Regulations to allow for joint approval of procurement plans and robust coordination between MoF and NPPA.
- Strengthen capacity and authority of NPPA (Responsible: NPPA, MoF; Follow-up needs: Yes):
  - Provide the authority with sufficient financial and human resources to enforce the Law and harmonize public procurement processes.
  - Allow the NPPA to exercise its mandate as required by Section 15 of the PPA to obtain information and impose remedial sanctions for noncompliance.
- Improve contract management and enforce rules on variations, price adjustments, and contract amendments (Responsible: NPPA, MoF; Follow-up needs: Yes):
  - Develop procedures for variations, price adjustments and contract amendments to ensure they are in accordance with the law and approved by NPPA in an open and transparent way.
  - Develop systems managing contracts for capital projects and ensure designs are comprehensive and approved by a panel of experts and the NPPA before implementation.
- Strengthen capacity of IPRP (Responsible: IPRP, NPPA, MoF; Follow-up needs: Yes):
  - Organize regular training programs for the IPRP to enhance its capacity to complete reviews in a reasonable time.
  - Raise public awareness and sensitization about the existence of the independent review panel to build trust and make its resolutions effective.
- Improve quarterly allotment and commitment controls (Responsible: MoF, AGD; Follow-up needs: Yes):
  - Implement recommendations of the in-depth assessment report by the current mission in 2020, 2021, and 2022.
- Undertake ex-post review and audit of major capital projects in a regular, systemic manner (Responsible: MoF, MoPED, Audit Service; Follow-up needs: Yes):
  - Assess resource needs for the Audit Service to undertake regular ex-post technical audits of major capital projects.
  - Operationalize the NAME and produce an annual report on public investment projects to be published.
- Develop and implement project adjustment rules (Responsible: MoPED, MoF; Follow-up needs: Yes):
  - Require re-appraisal and re-selection when (i) an increase in total costs exceeds a threshold or (ii) the project is ongoing for more than a certain number of years.
  - Appraise major ongoing projects that require more than a few years to be completed.

*Source: https://www.imf.org/-/media/files/publications/cr/2021/english/1sleea2021002.pdf*

---


_Source: https://www.imf.org/-/media/files/publications/cr/2021/english/1sleea2021002.pdf_