## SIERRA LEONE: FIRST AND SECOND REVIEWS UNDER THE EXTENDED CREDIT FACILITY ARRANGEMENT, REQUESTS FOR WAIVERS OF NONOBSERVANCE OF PERFORMANCE CRITERIA

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---

### Executive summary and context
- First review delayed amid program slippages in 2024; authorities exceeded the 2024 budget deficit and the BSL helped finance the overruns.
- Inflation declined to 4.4 percent by October 2025; the leone remains stable; growth near potential; borrowing costs dropped to sustainable levels.
- Reserves fell to 1.5 months of imports in September 2025; debt remains at high risk of distress.
- Authorities tightened policies in 2025 contributing to disinflation and lower borrowing costs; reserve pressures remain urgent.
- Key policy focus areas: strengthen fiscal effort, improve debt management, transition monetary policy toward neutral, advance monetary framework reforms and safeguards, rebuild reserves, bolster financial safety nets, implement Governance and Corruption Diagnostic (GCD) recommendations.

### Program performance and corrective actions
- Quantitative performance:
  - Missed QPCs/ITs: end-December 2024 QPCs on Net Credit to Government (NCG), Net Domestic Assets (NDA), and Net International Reserves (NIR); end-June 2025 NIR.
  - End-March ITs missed: NIR, social spending, domestic revenue, domestic primary balance.
  - End-June 2025: NIR QPC missed; revenue and social spending ITs missed.
  - End-September ITs missed: NIR, domestic revenue, social spending, domestic arrear ITs.
- Structural benchmarks (SBs) and prior actions:
  - Continuous SB to set fuel prices not met; 4 of 10 remaining SBs met; 1 completed with delay; 3 to be completed through Prior Actions.
  - SB to recapitalize the BSL reset to March 2026; SB to reform mining-sector oversight replaced with March 2026 SB informed by the GCD.
  - Prior Actions planned/completed for review: (i) submit to Parliament a 2026 Finance Bill with 1.5 percent of GDP in tax measures; (ii) submit to Parliament a 2026 budget consistent with program projections and include an annex detailing capital projects and publish a report confirming contracts not covered are canceled or delayed; (iii) initiate resolution proceedings for banks meeting Section 69 criteria as of end-December 2023; (iv) publish the GCD on the MoF website.
- Waiver requests:
  - Waivers for non-observance of end-December 2024 QPCs on NCG, NDA, and NIR, and the end-June 2025 QPC on NIR.
- Corrective actions proposed/implemented:
  - Address end-December NCG slippage through tax measures and PFM measures.
  - Bring NDA stock back to programmed path (NDA slippage corrected by June 2025).
  - Accumulate US$71 million in reserves through FX purchases and a domestic FX bond issuance to address end-December/end-June NIR slippages.
  - Amend TMU definitions: NIR (TMU¶11-13) and NCG (TMU¶6) for calculation/monitoring and treatment of recapitalizations.

### Recent economic developments and outlook
- Growth and inflation:
  - Real GDP growth: 4.3 percent in 2024; projected 4.4 percent in 2025; projected 4.5 percent in 2026.
  - Real GDP growth, excl. iron ore: 3.7 percent in 2024; 4.3 percent in 2025; 4.4 percent in 2026.
  - Inflation, end of period: 13.8 percent in 2024; 7.0 percent in 2025; 9.0 percent in 2026.
  - October 2025 inflation reported at 4.4 percent.
- Fiscal:
  - Domestic primary deficit declined from 2.9 percent of non-iron ore GDP in 2023 to 2.7 percent in 2024.
  - Authorities on track to achieve full-year domestic primary surplus target of 0.6 percent of GDP in 2025, representing a consolidation of 3.3 ppts of GDP relative to 2024.
  - Domestic primary surplus of 0.3 ppts of GDP above target in Q1–Q3 2025.
- Monetary and reserves:
  - BSL reduced the MPR by 6 ppts to 18.75 percent between May and September 2025.
  - Gross reserves fell to 1.5 months of imports as of end-September 2025; staff projects reserves to reach 2.0 months of imports by end-2025 after planned US$71 million accumulation and issuance of a 3-year domestic FX bond.
  - Authorities plan FX purchases and a domestic FX bond issuance; curtail FX spending (new FX spending QPC).
- External sector:
  - Current account (percent of non-iron ore GDP): -7.5 in 2024; -5.1 in 2025; -3.1 in 2026.
  - Gross reserves (months of imports): 2.1 in 2024; 2.0 in 2025 (projected); 2.5 in 2026 (projected).
  - External debt: 31.0 in 2024; 28.4 in 2025; 27.1 in 2026.
- Interest rates and borrowing:
  - T-bill rates remained above 40 percent until May 2025, then dropped and remained around 15-17 percent since mid-June 2025.
  - Authorities’ net domestic debt issuance was negative relative to May’s level between May and August 2025.

### Selected economic indicators (as presented)
- Output:
  - Real GDP growth: 4.3 (2024 Prel.), 4.4 (2025 Proj.), 4.5 (2026 Proj.)
  - Real GDP growth, excl. iron ore: 3.7 (2024 Prel.), 4.3 (2025 Proj.), 4.4 (2026 Proj.)
- Prices:
  - Inflation, end of period (%): 13.8 (2024 Prel.), 7.0 (2025 Proj.), 9.0 (2026 Proj.)
- Central Government Finances (percent of non-iron ore GDP):
  - Revenue, excl. grants: 10.1 (2024 Prel.), 10.8 (2025 Proj.), 11.8 (2026 Proj.)
  - Grants: 3.4 (2024 Prel.), 1.9 (2025 Proj.), 2.0 (2026 Proj.)
  - Expenditure and net lending: 19.1 (2024 Prel.), 18.1 (2025 Proj.), 16.2 (2026 Proj.)
  - Overall balance: -5.6 (2024 Prel.), -5.4 (2025 Proj.), -2.3 (2026 Proj.)
  - Public debt: 50.8 (2024 Prel.), 49.3 (2025 Proj.), 47.3 (2026 Proj.)
- Money and credit:
  - Broad money: 18.0 (2024 Prel.), 14.5 (2025 Proj.), 13.6 (2026 Proj.)
  - Credit to the private sector: 41.2 (2024 Prel.), 31.2 (2025 Proj.), 21.0 (2026 Proj.)
- Balance of payments:
  - Current account: -7.5 (2024 Prel.), -5.1 (2025 Proj.), -3.1 (2026 Proj.)
  - Gross reserves (months of imports): 2.1 (2024 Prel.), 2.0 (2025 Proj.), 2.5 (2026 Proj.)
  - External debt: 31.0 (2024 Prel.), 28.4 (2025 Proj.), 27.1 (2026 Proj.)

### Policy recommendations and priorities
- Fiscal policy:
  - Tighten fiscal policy more than previously anticipated to offset 2024 slippages.
  - Steadfast implementation of recent revenue measures; improve tax compliance and administration.
  - Strengthen PFM to avoid fiscal overruns and support expenditure restraint while protecting social spending.
- Debt sustainability and financing:
  - Adhere to the ambitious fiscal adjustment path.
  - Improve debt management: secure grants and concessional financing, lengthen maturities, broaden investor base, build buffers, ensure issuance at sustainable rates.
- Monetary and exchange rate policy:
  - Transition monetary policy toward a neutral stance given low inflation and continued fiscal consolidation.
  - Enhance central bank safeguards and monetary policy framework.
  - Rebuild reserves urgently; continue allowing exchange rate to adjust flexibly; curtail government FX spending.
- Financial sector:
  - Strengthen oversight, regulation, and safety nets.
  - Proactively address solvency issues; initiate resolution proceedings where prescribed.
- Governance and structural reforms:
  - Publish and implement the GCD; focus on steadfast implementation to enhance governance and address corruption vulnerabilities.

### Banking system vulnerabilities and financial sector outlook
- Key indicators (end-September 2025 unless noted):
  - Share of government securities in banks’ assets: 40.5 percent.
  - Tier 1 capital: 34.4 percent of risk-weighted assets (declined recently but higher than end-2024).
  - Non-performing loans: 12.3 percent of total loans (rise driven by mining sector).
- Systemic risks:
  - Strong sovereign-bank nexus remains; banks’ business models focused on government securities.
  - Regulatory capital ratios and liquidity indicators high (examples: Regulatory capital ratio and liquid assets to short-term liabilities rose; see main text for series).
- Crisis management and safety net actions:
  - BSL committed to resolve or liquidate banks meeting Section 69 criteria (Prior Action).
  - Emergency Liquidity Assistance framework operational (end-July 2025 SB).
  - Amendments to Deposit Protection Fund Act pending parliamentary approval; plan to operationalize bank resolution framework (new end-December 2026 SB).

### Debt sustainability, DSA findings, and financing
- DSA summary:
  - Debt judged sustainable but at high risk of distress; debt-carrying capacity downgraded to “weak.”
  - External debt service-to-revenue ratio breaches threshold until 2028.
  - PV of public debt-to-GDP breaches threshold until 2026.
  - Total debt service-to-revenue projected to peak at 140.5 percent this year, then fall below 100 percent by 2028.
  - All debt indicators decline over the medium term under baseline.
- Financing strategy and shortfalls:
  - Aim to reduce reliance on market financing to contain borrowing costs.
  - US$60 million financing shortfall in 2025 (due to lower-than-expected DPO grants) to be offset through SDR retrocession; proposed amount US$60 million (0.8 percent of GDP).
  - Program fully financed with firm commitments for next 12 months; overall Fund financing share increased from 46 percent to 55 percent due to a US$96 million shortfall in DPO grants.
- Key financing figures (Text Table 6 excerpt):
  - Total Projected Budget Support (Total): 467.2 (USD Million) — 100.0 percent
  - IMF ECF (Total): 256.9 (USD Million) — 55.0 percent
    - 2024: 49.6
    - 2025: 78.8
    - 2026: 64.2
    - 2027: 64.3
  - World Bank DPO (Total): 128.8 (USD Million) — 27.6 percent
    - 2024: 58.8
    - 2025: 0.0
    - 2026: 40.0
    - 2027: 30.0
  - EU PRBS (Total): 69.4 (USD Million) — 14.9 percent
    - 2024: 11.6; 2025: 15.8; 2026: 21.0; 2027: 21.0
  - AfDB Budget Support (Total): 12.0 (USD Million) — 2.6 percent (2026: 12.0)

### Monetary policy, reserves, and BSL reforms
- Monetary policy strategy:
  - Reserve money targeting framework envisaged; move to specialized liquidity instruments and central bank securities by June 2026.
  - BSL operates a hybrid framework: reserve money targeting, FX intervention, overnight interest rate corridor, and monetary policy rate.
  - Authorities committed to implementing monetary policy reform strategy by June 2026.
- Reserve accumulation:
  - Plan to accumulate an additional US$35 million in reserves every six months starting in H1-2026, preferably through FX auctions.
  - Corrective accumulation of US$71 million (Q4-2025) via FX purchases and a domestic FX bond issuance to address past NIR slippages.
  - MoF committed not to seek access to BSL’s FX for entities outside central government.
- Safeguards and recapitalization:
  - BSL published 2024 financial statements (July 2025 SB); reconciliation of cash in vault and ledger in progress.
  - Authorities plan to request IMF TA on IFRS implementation and include funds in 2026 budget to recapitalize the BSL (new end-March 2026 SB).

### Risks, stress tests, and contingency scenarios
- Risk assessment (Annex I highlights):
  - Downsides classified as high; key external risks: geopolitical tensions, escalating trade measures, commodity price volatility, financial market volatility, decline in international aid.
  - Social, climate, and governance risks: rising social discontent, climate change, cyberthreats, labor-supply gaps.
- Geopolitical shock example:
  - Oil accounts for 23 percent of goods imports.
  - A one-standard-deviation increase in oil prices would:
    - Widen current account deficit by 0.8 ppts of GDP.
    - Reduce FX reserve coverage by 0.2 months of imports.
    - Increase fiscal deficit by 0.3 ppts of GDP.
    - Damp growth by 1.6 ppts.
- DSA stress-test outcomes:
  - External DSA: Sierra Leone at high risk of external debt distress; PPG external debt indicators sensitive to shocks to exports and a one-time depreciation.
  - PV of PPG external debt-to-GDP and debt-service indicators decline under baseline but breach thresholds under historical and combined shocks.
- Contingency measures:
  - Reprioritize spending, frontload revenue measures (including introducing a new PIT threshold of 35 percent), implement short-term emergency measures including temporarily increasing the personal income tax.

### Public Financial Management, transparency, and structural reforms
- PFM corrective actions:
  - Establish spending envelopes for domestically financed roads construction and commit to refrain from new domestically financed roads projects until end-2027.
  - Cabinet Directive and ECDMC: MDAs submit quarterly commitment updates and monthly cashflow forecasts for 10 key MDAs.
  - All spending must be initiated through IFMIS purchase orders; procurement plans updated and ministerial approvals contingent on budget envelopes.
  - Audit of arrears and plan to clear them; publish independent audit report and arrears clearance plan (new end-April 2026 SB).
  - Transition to GFSM 2014 by end-September 2026.
- Revenue measures and administration:
  - New revenue measures total: 1.518 percent of GDP (annual). Selected items:
    - Raise CIT rate from 25 to 30 percent: 0.375
    - Corporate Income Tax MTRS actions: 0.100
    - Raise non-resident withholding tax from 10 to 20 percent: 0.106
    - Indirect tax measures (selected): raise petrol and diesel excises and RUC: 0.518; raise excise on cigarettes: 0.100; introduce excise on cement (NLe 10 per 50kg bag): 0.111; raise import duty on rice 5 to 10 percent: 0.106; remove GST exemption on supply of water: 0.080; remove GST exemption on magazines: 0.005; expand circulation levy to boats and vessels: 0.002
  - Revenue administration actions: operationalize iron ore safe harbor (new end-March 2026 SB); conduct Revenue Administration Governance and Integrity Assessment (new end-September 2026 SB); complete Customs Revenue Enhancement Project; introduce Electronic Single Window; formalize MoF-NRA performance management contract; audit ASYCUDA.
- Social protections:
  - Commit to protect social spending (Social Spending IT) and scale up school feeding program (new QPC).
  - School feeding program beneficiaries: over 800,000 pupils; school feeding budget projections shown in central government table (o/w school feeding program: 331 (2025), 1,311 (2026) in millions of Leone).

### Program modalities, conditionality, and monitoring
- Staff support completion of first and second ECF reviews and waivers for missed QPCs based on corrective actions.
- New conditionality proposed:
  - Ceiling on FX spending (QPC); floor on National School Feeding Program spending (QPC); one reset and nine new SBs including two continuous SBs; amendments to TMU definitions for NIR, NCG, domestic primary balance, social spending, and domestic arrears.
- Disbursements and IMF access:
  - Schedule of disbursements under the ECF arrangement (total disbursements): 186.663 (in millions, percent of quota 90.00).
  - Outstanding IMF credit projected to peak at end-2025 at 172.1 percent of quota.
  - Outstanding IMF credit amounts to 119.9 percent of gross reserves.
  - Annual gross repayments to the Fund projected to peak in 2026 at 4.1 percent of exports and 0.9 percent of GDP.
- Reporting and TMU:
  - TMU defines PCs and ITs evaluated in cumulative flows; TMU applies to test dates beginning with end-December 2025.
  - Authorities to report a range of fiscal, monetary, and external data at specified frequencies (Attachment A).

### Climate resilience and fiscal reform (Annex I summary)
- DIGNAD model used to evaluate fiscal/climate scenarios.
- Scenarios:
  - Baseline: extra public investment financed by grants 1.0 percent of GDP + concessional borrowing 1.0 percent of GDP.
  - Adaptation: climate-resilient infrastructure financed 1.0 percent grants + 1.0 percent concessional borrowing.
  - Adaptation and reform: adaptation plus 20 ppts increase in public investment efficiency and GST collection efficiency rising from 18 percent to 30 percent over five years.
- Findings:
  - Upfront climate-resilient investment combined with efficiency-enhancing reforms reduces disaster impact on growth and debt dynamics.
  - Adaptation plus improved investment and tax collection yields the most favorable outcomes.
- Related program updates:
  - Authorities accumulated $71 million in FX reserves to correct NIR misses; includes US$21 million in FX purchases and a US$50 million 4-year FX bond issuance.
  - Government support to close acquiring bank funding gap: $5.2 million.
  - Authorities submitted 2026 Finance Bill with measures quantified at 1.52 ppts of GDP by staff.

*Source: IMF staff report for Sierra Leone, discussions held October 2–10, 2025; December 1, 2025 document excerpts.*

### 1.5 months of imports as of end-September, and debt remains at high risk of distress. The

### SIERRA LEONE: FIRST AND SECOND REVIEWS UNDER THE EXTENDED CREDIT FACILITY ARRANGEMENT, REQUESTS FOR WAIVERS OF NONOBSERVANCE OF PERFORMANCE CRITERIA

### Executive summary and context
- The first review of the ECF was delayed amid program slippages in 2024; the authorities exceeded the 2024 budget deficit by a sizable margin and the BSL helped finance the overruns.
- Inflation declined to 4.4 percent by October 2025; the leone remains stable; growth is near potential; and the cost of borrowing has dropped to sustainable levels.
- Reserves fell to 1.5 months of imports in September 2025; debt remains at high risk of distress.
- Authorities have tightened policies in 2025, contributing to disinflation and lower borrowing costs, but reserve pressures remain urgent.
- Key policy focus areas: strengthen fiscal effort, improve debt management, transition monetary policy toward neutral, advance monetary framework reforms and safeguards, rebuild reserves, bolster financial safety nets, and implement Governance and Corruption Diagnostic (GCD) recommendations.

### Program performance and corrective actions
- Quantitative performance:
  - QPCs missed: end-December 2024 on Net Credit to Government (NCG), Net Domestic Assets (NDA), and Net International Reserves (NIR); and end-June 2025 NIR.
  - Structural Benchmarks (SBs): continuous SB to set fuel prices in line with the pricing formula not met; 4 of the 10 remaining SBs met; 1 completed with delay; 3 to be completed through Prior Actions. SB to recapitalize the BSL reset to March 2026; SB to reform oversight/accountability of new mining sector entities replaced with March 2026 SB informed by the GCD.
  - Prior Actions (PAs) planned: (i) submit to Parliament a 2026 Finance Bill with 1.5 percent of GDP in tax measures; (ii) submit to Parliament a 2026 budget consistent with program projections and include an annex detailing capital projects and publish a report confirming contracts not covered are canceled or delayed; (iii) initiate resolution proceedings for banks meeting criteria prescribed in Section 69 of the Banking Act 2019 as of end-December 2023; (iv) publish the GCD on the MoF website.
- Waiver requests: waivers for non-observance of end-December 2024 QPCs on NCG, NDA, and NIR, and the end-June 2025 QPC on NIR.
- Corrective actions proposed:
  - Address end-December NCG slippage through tax measures and PFM measures.
  - Bring the NDA stock back to its programmed path to address the December NDA slippage.
  - Accumulate US$71 million in reserves through FX purchases and a domestic FX bond issuance to address end-December/end-June NIR slippages.
  - Amend definitions: NIR (TMU¶11-13) and NCG (TMU¶6) for calculation/monitoring and treatment of recapitalizations.

### Recent economic developments and outlook
- Fiscal developments:
  - Domestic primary deficit declined from 2.9 percent of non-iron ore GDP in 2023 to 2.7 percent in 2024; adjustment fell 1.9 ppts of GDP short of program targets due to higher-than-budgeted roads construction spending.
  - Authorities on track to achieve full-year domestic primary surplus target of 0.6 percent of GDP in 2025, representing a fiscal consolidation of 3.3 ppts of GDP relative to 2024.
  - Supplementary budget in July 2025 offset a Q1 revenue shortfall with spending cuts; domestic primary surplus of 0.3 ppts of GDP above target in Q1–Q3 2025.
- Monetary and reserves:
  - BSL reduced the MPR by 6 ppts to 18.75 percent between May and September 2025 as inflation reached single digits.
  - Gross reserves fell to 1.5 months of imports as of end-September 2025; staff projects reserves to reach 2.0 months of imports by end-2025 after planned US$71 million accumulation and issuance of a 3-year domestic FX bond.
  - To rebuild reserves, authorities are curtailing FX spending (new FX spending QPC) and plan FX purchases and FX bond issuance.
- Growth and inflation:
  - Real GDP growth: 4.3 percent in 2024; projected 4.4 percent in 2025; projected 4.5 percent in 2026.
  - Real GDP growth, excl. iron ore: 3.7 percent in 2024; 4.3 percent in 2025; 4.4 percent in 2026.
  - Inflation, end of period: 13.8 percent in 2024; 7.0 percent in 2025; 9.0 percent in 2026.
  - October 2025 inflation reported at 4.4 percent (monthly note in text).
- External sector and borrowing costs:
  - Current account (percent of non-iron ore GDP): -7.5 in 2024; -5.1 in 2025; -3.1 in 2026.
  - Gross reserves (months of imports): 2.1 in 2024; 2.0 in 2025 (projected); 2.5 in 2026 (projected).
  - External debt: 31.0 in 2024; 28.4 in 2025; 27.1 in 2026.
  - T-bill rates remained above 40 percent until May 2025, then dropped and remained around 15-17 percent since mid-June 2025.
  - Authorities’ net domestic debt issuance was negative relative to May’s level between May and August 2025.

### Selected economic indicators (preliminary/projections as presented)
- Output (annual percentage change):
  - Real GDP growth: 4.3 (2024 Prel.), 4.4 (2025 Proj.), 4.5 (2026 Proj.)
  - Real GDP growth, excl. iron ore: 3.7 (2024 Prel.), 4.3 (2025 Proj.), 4.4 (2026 Proj.)
- Prices (annual percentage change):
  - Inflation, end of period (%): 13.8 (2024 Prel.), 7.0 (2025 Proj.), 9.0 (2026 Proj.)
- Central Government Finances (percent of non-iron ore GDP):
  - Revenue, excl. grants: 10.1 (2024 Prel.), 10.8 (2025 Proj.), 11.8 (2026 Proj.)
  - Grants: 3.4 (2024 Prel.), 1.9 (2025 Proj.), 2.0 (2026 Proj.)
  - Expenditure and net lending: 19.1 (2024 Prel.), 18.1 (2025 Proj.), 16.2 (2026 Proj.)
  - Overall balance: -5.6 (2024 Prel.), -5.4 (2025 Proj.), -2.3 (2026 Proj.)
  - Public debt: 50.8 (2024 Prel.), 49.3 (2025 Proj.), 47.3 (2026 Proj.)
- Money and credit (annual percentage change):
  - Broad money: 18.0 (2024 Prel.), 14.5 (2025 Proj.), 13.6 (2026 Proj.)
  - Credit to the private sector: 41.2 (2024 Prel.), 31.2 (2025 Proj.), 21.0 (2026 Proj.)
- Balance of payments (percent of non-iron ore GDP):
  - Current account: -7.5 (2024 Prel.), -5.1 (2025 Proj.), -3.1 (2026 Proj.)
  - Gross reserves (months of imports): 2.1 (2024 Prel.), 2.0 (2025 Proj.), 2.5 (2026 Proj.)
  - External debt: 31.0 (2024 Prel.), 28.4 (2025 Proj.), 27.1 (2026 Proj.)

### Policy recommendations and priorities
- Fiscal policy:
  - Tighten fiscal policy more than previously anticipated to offset 2024 slippages.
  - Steadfast implementation of recent revenue measures; improve tax compliance and administration.
  - Strengthen public financial management to avoid fiscal overruns and support expenditure restraint while protecting social spending.
- Debt sustainability and financing:
  - Adhere to the ambitious fiscal adjustment path.
  - Improve debt management practices: secure grants and concessional financing, lengthen debt maturities, broaden the investor base, build buffers, and ensure debt securities are issued at sustainable rates.
- Monetary and exchange rate policy:
  - Transition monetary policy toward a neutral stance given low inflation and continued fiscal consolidation.
  - Enhance central bank safeguards and the monetary policy framework.
  - Rebuild reserves as an urgent priority; continue allowing exchange rate to adjust flexibly; curtail government FX spending.
- Financial sector:
  - Strengthen financial sector oversight, regulation, and safety nets.
  - Proactively address solvency issues in the banking system; initiate resolution proceedings where prescribed.
- Governance and structural reforms:
  - Publish and implement the Governance and Corruption Diagnostic report; focus on steadfast implementation to enhance governance and address corruption vulnerabilities.

### Risks to the program
- Reform fatigue due to the sizable magnitude of required fiscal adjustment.
- Food insecurity and governance challenges could fuel social tensions.
- An adverse shift in the cost of borrowing could push debt service needs to unsustainable levels.
- Global trade uncertainty, tighter financial conditions, and the sovereign-bank nexus pose additional risks.

*Source: IMF staff report for Sierra Leone, discussions held October 2–10, 2025; December 1, 2025 document excerpts.*

### 9. The banking system remains vulnerable to the strong sovereign-bank nexus. As of

### 9. The banking system remains vulnerable to the strong sovereign-bank nexus. As of

### Banking system vulnerabilities and recent developments
- Share of government securities in banks’ assets: 40.5 percent (end-September 2025).
- Tier 1 capital: 34.4 percent of risk-weighted assets (declined in recent months due to a drop in 364-day treasury bill rate but remains higher than at end-2024).
- Non-performing loans: 12.3 percent of total loans (rise driven by weakening asset quality in the mining sector).

### Downside risks to the baseline and scenario sensitivities
- Downside risks classified as high (Annex I).
- Key risk drivers:
  - Ambitious fiscal adjustment could trigger reform fatigue.
  - Persistent food insecurity and governance challenges could fuel social tensions.
  - A sharp increase in borrowing costs could render debt service obligations unsustainable given the strong sovereign-bank nexus.
  - Stricter trade barriers, geopolitical tensions, and lower commodity prices could reduce export receipts.
  - Extreme climate events could negatively impact agricultural production and raise food price inflation.
- Geopolitical shock (scenario analysis):
  - Oil accounts for 23 percent of goods imports.
  - A one-standard-deviation increase in oil prices could:
    - Widen the current account deficit by 0.8 ppts of GDP.
    - Reduce FX reserve coverage by 0.2 months of imports.
    - Increase the fiscal deficit by 0.3 ppts of GDP.
    - Damp growth by 1.6 ppts.

### Baseline macroeconomic projections (selected medium-term indicators)
- GDP at constant prices (percent change): 5.7 (2023), 4.3 (2024), 4.4 (2025 Prel.), 4.5 (2026 Proj.), 4.7 (2027 Proj.), 4.6 (2028 Proj.), 4.6 (2029 Proj.), 4.6 (2030 Proj.).
- Consumer prices (end-of-period): 52.2 (2023), 13.8 (2024), 7.0 (2025 Prel.), 9.0 (2026 Proj.), 9.0 (2027 Proj.), 9.0 (2028 Proj.), 9.0 (2029 Proj.), 9.0 (2030 Proj.).
- Revenue (excl. grants): 7.9 (2023), 10.1 (2024), 10.8 (2025 Prel.), 11.8 (2026 Proj.), 12.3 (2027 Proj.), 12.2 (2028 Proj.), 12.2 (2029 Proj.), 12.2 (2030 Proj.).
- Domestic primary balance: -2.9 (2023), -2.7 (2024), 0.6 (2025 Prel.), 1.6 (2026 Proj.), 2.9 (2027 Proj.), 2.6 (2028 Proj.), 2.9 (2029 Proj.), 2.9 (2030 Proj.).
- Overall balance: -5.3 (2023), -5.6 (2024), -5.4 (2025 Prel.), -2.3 (2026 Proj.), -0.7 (2027 Proj.), -0.8 (2028 Proj.), -1.0 (2029 Proj.), -0.7 (2030 Proj.).
- Public Sector Debt: 52.9 (2023), 50.8 (2024), 49.3 (2025 Prel.), 47.3 (2026 Proj.), 44.3 (2027 Proj.), 41.7 (2028 Proj.), 39.6 (2029 Proj.), 37.5 (2030 Proj.).
- Current account balance (incl. grants): -10.1 (2023), -7.5 (2024), -5.1 (2025 Prel.), -3.1 (2026 Proj.), -2.8 (2027 Proj.), -3.0 (2028 Proj.), -3.1 (2029 Proj.), -3.6 (2030 Proj.).
- Gross international reserves (months of next year's imports): 2.3 (2023), 2.1 (2024), 2.0 (2025 Prel.), 2.5 (2026 Proj.), 2.9 (2027 Proj.), 2.9 (2028 Proj.), 2.9 (2029 Proj.), 3.1 (2030 Proj.).
- External public debt (percent of non-iron ore GDP): 36.1 (2023), 31.0 (2024), 28.4 (2025 Prel.), 27.1 (2026 Proj.), 26.0 (2027 Proj.), 24.5 (2028 Proj.), 23.7 (2029 Proj.), 23.1 (2030 Proj.).

### Program performance (2024–Q3 2025)
- Overall: Weak in 2024 and Q1-2025 but improved thereafter; all continuous PCs met since program approval.
- Missed tests and targets:
  - End-December 2024 (1st review): QPCs on Net Credit to Government (NCG) and Net Domestic Assets (NDA) missed due to spending overruns and BSL securities purchases; Net International Reserves (NIR) QPC missed due to higher FX spending; primary balance IT missed.
  - End-March ITs: NIR, social spending, domestic revenue, and domestic primary balance ITs missed.
  - End-June 2025 (2nd review): NIR QPC missed amid higher FX spending and US$30 million in new FX swaps (contravention of ECF commitments); revenue and social spending ITs missed.
  - End-September ITs: NIR, domestic revenue, social spending, and domestic arrear ITs missed.
- Structural benchmarks (SBs):
  - Authorities did not meet continuous SB to set fuel prices in line with pricing formula.
  - Met 4 out of remaining 10 SBs, completed 1 more with delay, will complete 3 more through Prior Actions.
  - SB to recapitalize the BSL reset to March 2026.
  - SB to reform oversight and accountability frameworks of new mining sector entities replaced with March 2026 SB informed by GCD.

### Policy discussions and authorities’ plans
- Overarching objectives:
  - Increase fiscal effort, reinforce credibility of adjustment path, strengthen debt management.
  - Transition monetary policy to neutral stance while reforming the monetary policy framework, enhancing safeguards, and rebuilding reserves.
  - Reinforce the financial safety net.
  - Address recommendations of the Governance and Corruption Diagnostic (GCD).

A. Fiscal Policy
- Fiscal effort and targets:
  - Authorities on track to achieve a domestic primary surplus of 0.6 percent of GDP in 2025 (implying a 6.3 ppt consolidation relative to 2022, of which 3.5 ppts from tax revenue mobilization).
  - Aim to raise domestic primary balance by another 2.3 ppts of GDP by 2027, including 1.5 ppts of GDP from additional domestic revenues.
- New revenue measures (annual, in percent of GDP; total: 1.518):
  - Corporate Income Tax MTRS actions: 0.100
  - Restore MAT to low profitability companies; Abolish investment allowance
  - Raise CIT rate from 25 to 30 percent: 0.375
  - Raise non-resident withholding tax rate from 10 to 20 percent: 0.106
  - Personal Income Tax: 0.011
  - Indirect Tax measures (selected):
    - Raise Petrol and Diesel excises to Nle 4 and increase RUC by Nle 1: 0.518
    - Raise excises on cigarettes from Nle 2 to 3 per package: 0.100
    - Introduce an excise on cement (NLe 10 per each 50kg bag): 0.111
    - Raise import duty on rice from 5 to 10 percent: 0.106
    - Remove GST exemption on supply of water (56.2 W:P ratio): 0.080
    - Remove GST exemption on magazines (16.2 W:P ratio): 0.005
    - Expand circulation levy to boats and vessels: 0.002
- Revenue administration and compliance measures (MEFP¶14–16):
  - Operationalize iron ore safe harbor (new end-March 2026 SB).
  - Conduct Revenue Administration Governance and Integrity Assessment (new end-September 2026 SB).
  - Complete Customs Revenue Enhancement Project; introduce Electronic Single Window at customs.
  - Formalize MoF-NRA performance management contract; audit the ASYCUDA system.
  - Develop 2026 compliance improvement plans for extractive industries and large taxpayers.
  - Uphold EIRA terms in mining agreements (new continuous SB).
- Fuel policy:
  - Authorities committed to preserving fuel revenues and avoiding price subsidies; maintained fuel excise rates as established in 2024 Finance Act.
  - Did not update pricing formula between March and November 2025 (continuous SB) and temporarily reduced retail fuel price ceiling via debt recovery parameter.
  - New continuous SB commits to protecting revenues from all levies raised on fuel and refraining from subsidizing prices (MEFP¶13).
- Expenditure consolidation and social spending:
  - Wages and salaries: projected fall by 0.1 ppts of GDP relative to 2025; new wage bill strategy to curb payroll spending.
  - Goods and services: reduce by 0.4 ppts of GDP relative to 2025 while safeguarding Social Spending IT and scaling up school feeding by 0.3 ppts of GDP (new QPC).
  - Subsidies and transfers: reduce by 0.2 ppts of GDP relative to 2025, supported by a US$20 million cap on energy subsidies to EDSA and stepped-up energy sector reforms.
  - Domestically financed capital expenditure: projected to rise to 1.4 percent of GDP (return to original program level of 1.2 percent plus 0.2 ppts for population census).
  - Contingency measures if needed: reprioritize spending, frontload revenue measures (including introducing a new PIT threshold of 35 percent), and implement short-term emergency measures (including temporarily increasing personal income tax).

B. Public Financial Management (PFM)
- Measures implemented and planned:
  - 2025 public investment program (PIP) updated; MDAs instructed to update procurement plans.
  - Detailed PIPs for 2026 and 2027 to be included in 2026 budget with identification of canceled and delayed projects (Prior Action 3).
  - New cash management system operational; commitment controls tightened.
  - Timeline to transition to GFSM 2014 (new end-September 2026 SB).
- Further commitments:
  - Audit of arrears and plan to clear them alongside robust accounting system (new end-April 2026 SB).
  - Audit of rice distribution scheme for security services.
  - Submission of audited financial statements by all SOEs to MoF.

C. Debt Sustainability and Financing Strategy
- Debt sustainability assessment:
  - Debt judged sustainable but at high risk of distress; downgrade to “weak” debt-carrying capacity.
  - External debt service-to-revenue ratio breaches threshold until 2028.
  - PV of public debt-to-GDP ratio breaches threshold until 2026.
  - Total debt service-to-revenue projected to peak at 140.5 percent this year, then fall below 100 percent by 2028.
  - All debt indicators on a declining path over the medium term.
- Financing strategy highlights:
  - Aim to reduce reliance on market financing to contain borrowing costs.
  - US$60 million financing shortfall in 2025 (due to lower-than-expected DPO grants) to be offset through SDR retrocession to avoid increasing domestic borrowing or breaching external borrowing limits.
  - SDR retrocession details: proposed amount US$60 million (0.8 percent of GDP).
- Debt management reforms:
  - Allow T-bonds to be used as collateral for repos and develop guidelines on haircuts.
  - Update Medium-Term Debt Strategy annually.
  - Reinforce market communication via investor relations desk, quarterly meetings with banks, and market surveys on T-bond appetite.
  - Auction debt securities rather than placing them privately.
  - Issue FX-linked debt securities only in exceptional circumstances and after seeking non-objection from IMF staff.
  - Reject debt security bids at terms inconsistent with debt sustainability.

Box 1. Energy Sector Reforms (selected commitments and investments)
- Core objectives: improve revenues, reduce cost of energy supply, remain current on obligations; sharply reduce annual budgetary transfers to EDSA starting in 2026.
- Private sector participation:
  - Negotiations with potential private operator expected to conclude by end-2025; private operator could start managing EDSA’s operations in March 2026 if successful.
- Tariff reform:
  - Revised EWRC Act passed by Parliament in July 2025 and assented by the President; enables cost-reflective tariffs, mandates annual reporting to Parliament, establishes consumer complaint unit and legal framework for private sector participation.
- Revenue collection enhancements:
  - Single collection account and waterfall mechanism agreed; hire independent agency to operate it.
  - Prepaid smart meters installed in MDAs; procurement of 3,000 post-paid meters for industrial users commenced.
  - Measures to combat electricity theft: inspections, legal enforcement, public reporting hotlines, enhanced staff accountability.
- Performance-based management: KPIs to reduce losses, enhance billing and collections, improve customer service.
- Arrears: EDSA, supported by Government, negotiating payment plans and renegotiations to clear existing arrears (may include extending repayment time).
- External investments and projects:
  - AfDB-financed Bo and Kenema Distribution System Rehabilitation expected to enable import of up to 40 MW of firm energy via Transco CLSG line in 2026.
  - WB-funded RESPITE (52 MW Solar PV and 28 MW battery storage) launched in 2024 expected to start supplying cheaper power in late 2025 or early 2026.
  - US$480 million MCC grant to expand transmission infrastructure and improve sector governance and financial viability.
  - Natural gas generation project supported by US$292 million DFC loan, US$120 million political risk insurance from DFC, and US$40 million from ECOWAS Bank for Investment and Development aimed to double existing generation capacity.

*Source: Sierra Leonean Authorities and IMF staff calculations.*

### 23. Monetary policy is appropriately transitioning to a neutral stance. Reserve money

### 23. Monetary policy is appropriately transitioning to a neutral stance. Reserve money

### Monetary policy stance and targets
- Reserve money growth projections are consistent with the BSL’s medium-term single-digit inflation objective.
- With inflation in single digits, the authorities have begun to gradually reduce the policy rate toward its neutral level.
- The authorities are committed to implementing the monetary policy reform strategy by June 2026 (Box 2; end-February 2025 SB; MEFP¶28).

### Box 2. Monetary Policy Strategy (summary of envisaged reforms)
- Move the BSL to a reserve money targeting framework aimed at achieving price stability.
- Replace outright purchases of government securities with specialized liquidity instruments as the main monetary policy tool.
- The BSL currently operates a hybrid framework based on:
  - reserve money targeting,
  - FX intervention,
  - an overnight interest rate corridor, and
  - a monetary policy rate.
- Additional measures envisaged:
  - publish new guidelines for open market operations;
  - initiate new intraday liquidity facilities accepting a broadened collateral base;
  - introduce central bank securities;
  - operationalize the Minimum Reserve Requirement (MRR).
- Institutional reform and capacity development are key to success:
  - monitor the base money path daily;
  - establish a Monetary Policy Implementation Committee to recommend corrective actions for deviations;
  - transfer MRR compliance monitoring to the Financial Markets Department;
  - improve liquidity forecasting to attain the reserve money target.

### Reserve accumulation and exchange rate policy
- The authorities are committed to allowing the exchange rate to adjust flexibly to shocks while rebuilding an adequate reserve cover.
- The BSL plans to accumulate an additional US$35 million in reserves every six months starting in H1-2026, preferably through FX auctions.
- The authorities aim to reduce outflows by drastically cutting back on government FX spending (new FX Spending QPC; MEFP¶29).
- The BSL will report performance against the QPC on a weekly basis to MoF management and IMF staff, and at cabinet-level economic management team meetings.
- The MoF is committed not to seek access to the BSL’s FX for entities outside the central government; such entities will seek FX from commercial banks, except when drawing down their FX deposits at the BSL.

### BSL safeguards, accounting, and recapitalization
- BSL safeguards reforms are progressing, albeit with delays.
- The BSL published its 2024 financial statements (July 2025 SB).
- Reconciliation of cash in vault and general ledger balances remains in progress and is expected to be fully reflected in the BSL’s 2025 audited financial statements.
- The authorities plan to request IMF TA on IFRS implementation to achieve full compliance with the standards (MEFP¶31).
- The authorities intend to include funds in the 2026 budget to recapitalize the BSL, in line with findings of a BSL balance sheet analysis to be prepared with IMF technical support (new end-March 2026 SB; MEFP¶31).

### Financial sector policies: oversight, crisis management, and safety net
- Oversight and regulation need to be reinforced; solvency concerns must be addressed due to recent deterioration in bank asset quality.
- Plans to adopt components of Pillar 1 of the Basel II/III capital framework are underway.
- BSL commitment: resolve or liquidate banks meeting criteria in the Banking Act 2019 (Prior Action 1; end-February 2025 SB; MEFP¶32), while preserving critical functions and minimizing fiscal costs.
- Crisis management:
  - A Crisis Management Working Group will report to the Financial Policy Committee.
  - Remaining tasks include refining escalation protocols and finalizing crisis management procedures (MEFP¶36).
- Safety net strengthening:
  - Emergency Liquidity Assistance framework is operational (end-July 2025 SB).
  - Plans to enhance FX regulation and supervision.
  - Amended Deposit Protection Fund Act is pending parliamentary approval.
  - Operationalize the bank resolution framework (new end-December 2026 SB; MEFP¶33), addressing staffing and finalizing guidelines.

### Governance and institutional reforms
- Governance reforms will center on recommendations of the recent GCD (Annex IV); the GCD is to be published (end-May 2025 SB; Prior Action 4; MEFP¶37).
- GCD findings: systemic governance weaknesses persist, heightening corruption risks and undermining service delivery and growth.
- Near-term priorities:
  - ensure online publication and risk‑based verification of asset declarations for a targeted list of politically exposed persons (new end‑September 2026 SB; MEFP¶37).
- Mining sector governance measures (new end‑March 2026 SB):
  - publish the Mines and Minerals Development and Management Corporation’s (MMDMC) audited 2024 financial statements;
  - establish a transparent, merit‑based process for appointing independent directors to MMDMC and Mineral Wealth Fund (MWF) boards;
  - implement a KPI‑based performance framework for MMDMC with reporting to the MWF Board;
  - establish a formal dividend policy for the MWF consistent with good international practice.
- AML/CFT reforms:
  - national strategy informed by a risk assessment and broad consultations is nearing finalization;
  - amend the 2009 Companies Act to enhance beneficial ownership transparency;
  - strengthen risk-based supervision of NBFIs in line with the National Risk Assessment;
  - close regulatory gaps in the targeted financial sanctions regime (MEFP¶39).

### Program modalities, conditionality, and financing
- Staff support requests for completion of the first and second ECF reviews, and waivers of non-observance of:
  - end-December 2024 QPCs on NCG, NDA and NIR, and
  - end-June 2025 QPC on NIR, on the basis of corrective actions.
- Corrective actions implemented:
  - end-December NCG slippage addressed through tax measures and PFM measures (¶13; ¶19);
  - end-December NDA slippage addressed by returning NDA stock to programmed path by June 2025 (¶6);
  - end-December/end-June NIR slippages addressed by accumulating US$71 million in reserves through FX purchases and a domestic FX bond issuance (¶7).
- Staff proposes new conditionality, including:
  - a ceiling on FX spending (QPC; MEFP¶17);
  - a floor on spending on the National School Feeding Program (QPC; MEFP¶17);
  - one reset and nine new SBs, including two continuous SBs;
  - amendments to definitions in the TMU for NIR, NCG, domestic primary balance, social spending, and domestic arrears.
- Financing status:
  - Program is fully financed with firm commitments for the next 12 months and good prospects for the remainder.
  - Overall share of Fund financing in official budget support increased from 46 percent at program approval to 55 percent, reflecting a US$96 million shortfall in projected DPO grant support (Text Table 6).

### Key program financing figures (Text Table 6 excerpt)
- Total Projected Budget Support (Total): 467.2 (USD Million) — 100.0 percent
- IMF ECF (Total): 256.9 (USD Million) — 55.0 percent
  - 2024: 49.6
  - 2025: 78.8
  - 2026: 64.2
  - 2027: 64.3
- World Bank DPO (Total): 128.8 (USD Million) — 27.6 percent
  - 2024: 58.8
  - 2025: 0.0
  - 2026: 40.0
  - 2027: 30.0
- EU Poverty Reduction Budget Support (Total): 69.4 (USD Million) — 14.9 percent
  - 2024: 11.6
  - 2025: 15.8
  - 2026: 21.0
  - 2027: 21.0
- AfDB Budget Support (Total): 12.0 (USD Million) — 2.6 percent
  - 2026: 12.0

### Debt, IMF repayment capacity, and risks
- Outstanding IMF credit is projected to peak at end-2025 at 172.1 percent of quota, broadly unchanged from program approval.
- Outstanding IMF credit now amounts to 119.9 percent of gross reserves (Table 6).
- Annual gross repayments to the Fund are projected to peak in 2026 at 4.1 percent of exports and 0.9 percent of GDP.
- Main program risks: large adjustment need, capacity constraints, and the need for sizable future BSL FX purchases to achieve adequate reserve cover by end of program.
- Mitigating factors: authorities’ commitment to the ECF, strong conditionality, extensive capacity development plans, declining share of de facto senior and other multilateral debt over the medium term, and strong track record of meeting debt service obligations to the Fund.

### Staff appraisal: findings and policy recommendations
- Findings:
  - The authorities have brought the ECF back on track; the economy is responding positively.
  - Inflation has declined to single digits, the exchange rate remains stable, and growth is close to potential.
  - Since May, net domestic borrowing turned negative, contributing to a sharp drop in domestic borrowing costs.
- Policy recommendations and priorities:
  - Continue fiscal consolidation to contain domestic borrowing and keep borrowing costs sustainable; new tax revenue measures should be the cornerstone of revenue mobilization, complemented by tight expenditure restraint.
  - Strengthen Public Financial Management to address root causes of fiscal slippages.
  - Intensify efforts to secure additional concessional financing and reinforce debt management to lengthen maturities, broaden the investor base, build buffers, and ensure issuance at rates consistent with sustainable debt positions.
  - Transition monetary policy to a neutral stance: reserve money targets should continue to align with the BSL’s single-digit inflation objective; the policy rate can gradually move toward its neutral level; complementary reforms (modernizing the monetary policy framework and implementing safeguards) will improve policy effectiveness.
  - Rebuild reserves urgently: continue BSL FX purchases; MoF must contain FX spending—current FX spending levels are inconsistent with adequate reserves and require substantial reduction.
  - Address persistent banking sector solvency challenges, strengthen oversight and regulation, establish a comprehensive crisis management plan, and strengthen the financial safety net (implement Deposit Protection Act and operationalize bank resolution framework).
  - Advance governance and anti-corruption reforms, focusing on GCD recommendations and near-term priorities for public integrity and mining sector governance.

*Source: IMF staff and Sierra Leonean authorities (extracted from the specified content unit).*

### 44. Staff support completion of the first and second ECF reviews and the request for

### 44. Staff support completion of the first and second ECF reviews and the request for waivers of nonobservance of missed QPCs on the basis of corrective actions. Staff also propose new QPCs on school feeding expenditures as well as on the government’s FX spending.

### Policy actions, program reviews, and conditionality
- Staff support completion of the first and second ECF reviews and the request for waivers of nonobservance of missed QPCs on the basis of corrective actions.
- Staff propose new QPCs on:
  - school feeding expenditures, and
  - the government’s FX spending.
- Schedule of disbursements under the ECF arrangement (total disbursements): 186.663 (in millions, percent of quota 90.00).

### Real sector and inflation
- Real non-iron ore GDP growth remains subdued; Sierra Leone vs SSA series shown in Figure 1.
- Inflation developments:
  - Consumer prices (end-of-period): 52.2 (2023), 21.0 (2024), 13.8 (2025), 14.9 (2026), 7.0 (2027), 11.4 (2028), 9.0 (2029), 9.0 (2030).
  - Consumer prices (average): 47.7 (2023), 36.6 (2024), 28.4 (2025), 18.0 (2026), 8.3 (2027), 13.2 (2028), 9.6 (2029), 9.0 (2030).
- GDP growth (selected entries, GDP at constant prices):
  - 2023: 5.7; 2024: 4.0; 2025: 4.3; 2026: 4.5; 2027: 4.4; 2028: 4.7; 2029: 4.5; 2030: 4.7.

### External sector, trade, and reserves
- Exports and imports have continued to increase (Figure 1).
- Gross international reserves (excluding swaps), US$ millions (selected): 468 (2023), 449 (2024), 410 (2025), 514 (2026), 403 (2027), 558 (2028), 503 (2029), 601 (2030), 617 (2031), 655 (2032), 715 (2033).
- Reserves in months of next year’s imports (excluding swaps): 2.3 (2023), 2.4 (2024), 2.1 (2025), 2.7 (2026), 2.0 (2027), 2.9 (2028), 2.5 (2029), 2.9 (2030), 2.9 (2031), 2.9 (2032), 3.1 (2033).
- Current account (including official grants), percent of non-iron ore GDP: -10.1 (2023), -4.0 (2024), -7.5 (2025), -4.5 (2026), -5.1 (2027), -3.7 (2028), -3.1 (2029), -2.8 (2030).

### Fiscal sector: outcomes and projections
- Fiscal policy effort in 2024 was smaller than expected; domestic borrowing increased (Figure 2).
- Key fiscal aggregates (percent of non-iron ore GDP, selected):
  - Revenue (excluding grants): 7.9 (2023), 8.9 (2024), 10.1 (2025), 9.8 (2026), 10.8 (2027), 10.1 (2028), 11.8 (2029), 12.3 (2030).
  - Grants: 3.3 (2023), 4.1 (2024), 3.4 (2025), 4.6 (2026), 1.9 (2027), 4.4 (2028), 2.0 (2029), 1.8 (2030).
  - Total expenditure and net lending: 16.5 (2023), 16.1 (2024), 19.1 (2025), 16.2 (2026), 16.2 (2027), 14.8 (2028), 14.8 (2029), 14.0 (2030).
  - Overall balance including grants: -6.0 (2023), -5.3 (2024), -5.6 (2025), -3.9 (2026), -5.4 (2027), -1.8 (2028), -0.8 (2029), -1.0 (2030).
  - Overall balance excluding grants: -8.6 (2023), -7.2 (2024), -9.0 (2025), -8.5 (2026), -7.3 (2027), -6.1 (2028), -4.4 (2029), -2.5 (2030).
- Central government (millions of Leone, selected 2025-30 program/proj):
  - Total revenue and grants: 21,078 (2025), 25,935 (2026), 29,620 (2027), 33,075 (2028), 34,390 (2029), 38,482 (2030).
  - Tax revenue: 15,717 (2025), 19,021 (2026), 22,323 (2027), 24,795 (2028), 27,764 (2029), 31,201 (2030).
  - Wages and salaries: 7,170 (2025), 7,869 (2026), 8,800 (2027), 9,860 (2028), 11,059 (2029), 12,423 (2030).
  - School feeding program (o/w): 331 (2025), 1,311 (2026), 1,123 (2027), 1,200 (2028), 1,285 (2029), 1,374 (2030).
  - Transfers to energy IPPs (o/w): 875 (2025), 750 (2026), 795 (2027), 480 (2028), 513 (2029), 549 (2030).
  - Foreign financed capital expenditure: 5,061 (2025), 10,406 (2026), 4,538 (2027), 5,027 (2028), 5,655 (2029), 5,351 (2030).
- Domestic primary balance (percent of non-iron ore GDP): -2.9 (2024), -0.8 (2025), 0.3 (2026), 0.6 (2027), 0.8 (2028), 1.6 (2029), 2.9 (2030).

### Monetary and financial sector
- Base money growth and M3 (annual percent change, select):
  - Base money: 44.0 (2023), 16.5 (2024), 17.2 (2025), 14.5 (2026), 14.5 (2027), 13.6 (2028), 13.6 (2029), 13.6 (2030).
  - M3: 32.8 (2023), 16.5 (2024), 18.0 (2025), 14.5 (2026), 14.5 (2027), 13.6 (2028), 13.6 (2029), 13.6 (2030).
- Domestic credit to the private sector (growth): 25.0 (2023), 21.0 (2024), 21.0 (2025), with levels in percent of non-iron ore GDP: 3.5 (2025), 4.3 (2026), 4.9 (2027), 5.3 (2028), 5.7 (2029), 6.2 (2030).
- Bank behavior and indicators (Figure 3 and Table 8):
  - Banks’ business models remain focused on government securities; banks hold large volumes of excess reserves.
  - Interest rates on government securities and monetary policy rates have come down sharply.
  - Nonperforming loans to gross loans (percent): 15.5 (2021), 15.0 (2022), 13.0 (2023), 16.8 (2024), 12.3 (2025, September).
  - Regulatory capital ratio: 30.1 (2013) rising to 44.7 (2025, September); Regulatory tier 1 capital ratio: 26.3 (2013) to 34.4 (2025, September).
  - Return on assets: 2.2 (2013) to 11.4 (2025, September); Return on equity: 9.6 (2013) to 44.7 (2025, September).
  - Liquid assets to short-term liabilities: 81.3 (2013) to 106.6 (2025, September).
  - Net open position in FX to capital shows high variability: -1.2 (2013) to -14.7 (2025, September).

### External financing, balance of payments, and financing needs
- Balance of payments (millions of US$, selected):
  - Current account (US$): -319.4 (2023), -606.4 (2024), -279.4 (2025), -480.4 (2026), -329.1 (2027), -367.8 (2028), -278.0 (2029), -241.6 (2030).
  - Exports, f.o.b. (US$ millions): 1,257.3 (2023), 1,339.0 (2024), 1,366.4 (2025), 1,548.1 (2026), 1,372.7 (2027), 1,611.5 (2028), 1,438.3 (2029), 1,710.8 (2030).
  - Imports, f.o.b. (US$ millions): -1,690.4 (2023), -1,916.0 (2024), -1,812.4 (2025), -1,973.9 (2026), -1,877.9 (2027), -1,896.5 (2028), -1,898.0 (2029), -1,924.6 (2030).
- External financing requirements and sources (Table 5, millions of US$):
  - Financing needs (selected): -626 (2023), -487 (2024), -627 (2025), -631 (2026).
  - Identified financing sources (selected): 469 (2023), 373 (2024), 458 (2025), 476 (2026).
  - Financing gap / other financing sources (selected): 103 (2023), 114 (2024), 112 (2025), 155 (2026).
  - Disbursements from IMF (ECF) projected in Table 5: 42 (2023), 46 (2024), 46 (2025), 77 (2026), 79 (2027), 62 (2028), 64 (2029), 64 (2030).
- Indicators of capacity to repay the IMF (Table 6, millions of SDRs, selected):
  - Fund obligations based on existing credit, principal: 48.5 (2025), 51.2 (2026), 48.8 (2027), 48.0 (2028), 49.6 (2029), 41.5 (2030).
  - Fund obligations including charges and interest (millions of SDRs): 51.0 (2025), 54.0 (2026), 51.6 (2027), 50.8 (2028), 52.3 (2029), 44.3 (2030).
  - Outstanding Fund credit (existing and prospective, in millions of SDRs): 357.0 (2025), 352.5 (2026), 350.3 (2027), 302.3 (2028), 252.7 (2029), 211.2 (2030).
  - Net use of Fund credit (millions of SDRs): 9.8 (2025), -4.5 (2026), -2.2 (2027), -48.0 (2028), -49.6 (2029), -41.5 (2030).

### Public debt composition and debt service
- Total public debt (US$ millions): Total 3,238 (end period shown); external debt 1,977 (61.1 percent of total); domestic debt 1,261 (38.9 percent of total).
- Debt service (US$ millions, selected): 626 (2023), 597 (2024), 613 (2025).
- External debt creditors (US$ millions, percent of total debt, percent GDP, selected):
  - Multilateral creditors: 1,597 (49.3 percent of total), IMF component 453, World Bank 463, AfDB 171, Other multilaterals 509.
  - Bilateral creditors: 214 (6.6 percent of total), Paris Club 50.
  - Commercial creditors: 166 (5.1 percent of total).

### Key risks, operational notes, and reclassifications
- Risks to reserves and external positions are highlighted by continued decline in official reserves and the REER depreciation amid trading partner appreciation against the dollar (Figure 1).
- Several expenditure lines have been reclassified out of domestic capital expenditure to goods and services (notably: school feeding, examination fees for WASSCE; diet for boarding home schools; strengthening chiefdom governance; cluster eight: means of implementation; subsidies and transfers: school fee subsidies; clearance of grants in aid arrears to tertiary institutions).
- The total stock of arrears (memorial items) and its evolution are tracked: Total Stock of Arrears (millions of Leone): 2,012 (2023), 1,804 (2024), 1,398 (2025), 1,496 (2026), 1,112 (2027), 1,237 (2028), 804 (2029), 505 (2030), 255 (2031), 490 (2032), 255 (2033), 490 (2034) — as reported in Table 2a (stock values reported across years).
- Bank of Sierra Leone monetary survey and projections include detailed net foreign assets, net domestic assets, reserve money, and M3 paths (Table 3).

*Sources: Sierra Leonean authorities; and IMF staff estimates and projections.*

### Annex I. Risk Assessment Matrix

### Annex I. Risk Assessment Matrix

### External Risks
- Geopolitical Tensions
  - Relative Likelihood: High
  - Expected Impact if Realized: High. "Intensification of conflicts, coupled with the weakening of multilateralism, may trigger commodity price volatility, increase migration pressures, reignite inflation, and weigh on growth by undermining confidence, investment, tourism, trade, and supply chains. For Sierra Leone, supply chain disruptions can lead to higher prices for essential imports and weaker commodity exports. The effects of this shock on Sierra Leone are likely to come through the commodity market."
  - Policies to Mitigate Risks: "Policies to mitigate the risk would thus be the same as for 'Commodity Price Volatility.'"

- Escalating Trade Measures and Prolonged Uncertainty
  - Relative Likelihood: High
  - Expected Impact if Realized: Medium/High. "Rising trade barriers and prolonged policy uncertainty could reduce trade, investment, and growth. Inflationary pressures may re-emerge—especially in countries imposing tariffs. These effects can be amplified by strategic complementarities or bottlenecks in global value chains or inventory overhang. A growth slowdown in major economies would likely lower demand for Sierra Leone’s minerals exports."
  - Policies to Mitigate Risks: "Tighten fiscal policy to offset the potential decline in export-related revenues on the budget. Diversify the economy away from the mining sector."

- Commodity Price Volatility
  - Relative Likelihood: High
  - Expected Impact if Realized: Medium/High. "Shifts in supply and demand—driven by geopolitical tensions and conflicts, OPEC+ actions, or the green transition—may fuel commodity price swings, intensifying external and fiscal pressures, social unrest, and macroeconomic instability. For Sierra Leone, higher energy prices would increase inflation and heighten fiscal pressures, especially if the government responds with additional fuel subsidies. Rising and volatile food prices could increase food insecurity. A weakening current account could put further pressure on reserves."
  - Policies to Mitigate Risks:
    - "Apply the automatic fuel price adjustment mechanism to safeguard critical revenues."
    - "Reform the energy sector to shift away from reliance on fuel oil."
    - "Introduce targeted measures to mitigate the impact of the shock on the vulnerable, e.g., by expanding the social safety net, including the school feeding program, or by reallocating budgetary resources."
    - "Implement policies to boost domestic food production."
    - "Continue to safeguards reserves and rebuild the reserve cover as needed."

- Financial Market Volatility and Correction
  - Relative Likelihood: High
  - Expected Impact if Realized: Medium. "Stretched asset valuations, easy financial conditions, and subdued volatility in key markets could be significantly affected by a sudden and disruptive shift in investor sentiment or policy stance, triggering market corrections, exchange rate turbulence, spikes in sovereign bond yields, and capital flow volatility. Elevated leverage among Non-Bank Financial Intermediaries further amplifies these risks, as forced deleveraging during periods of stress could exacerbate asset price swings and propagate shocks. Rapid growth of unregulated crypto markets could add to these vulnerabilities by increasing the risk of redemption runs and market dislocations. The effects of this shock on Sierra Leone are likely to come through the commodity market."
  - Policies to Mitigate Risks: "Policies to mitigate the risk would thus be the same as for 'Commodity Price Volatility.'"

- Fiscal Vulnerabilities and Higher Long-Term Interest Rates
  - Relative Likelihood: High
  - Expected Impact if Realized: Medium. "Rising public debt and deficit levels may put upward pressure on long-term interest rates and increase the risk of sovereign bond market disruptions. These developments could amplify capital flow volatility, tighten financial conditions, threaten sovereign debt sustainability, and trigger global spillovers. To the extent that major economies are affected, market imbalances (such as reduced investor capacity to absorb sovereign debt) could emerge, exacerbating risks from a close sovereign-financial nexus."
  - Expected Impact on Sierra Leone: "For Sierra Leone, the direct effect of fiscal vulnerabilities and higher long-term interest rates in AEs and EMDEs is limited. Adverse knock-on effects could arise through decreased foreign demand for minerals and lower remittance inflows."
  - Policies to Mitigate Risks: "Tighten fiscal policy to offset the potential decline in export-related revenues on the budget. Continue with efforts to diversify the economy away from the mining sector."

- Decline in International Aid
  - Relative Likelihood: High
  - Expected Impact if Realized: High. "A further sharp reduction in international financial assistance, including development aid and humanitarian support, could severely affect low-income and fragile countries. Such an additional aid withdrawal would strain public finances, worsen current accounts, increase debt vulnerabilities, and lead to a further deterioration in living conditions and food security."
  - Policies to Mitigate Risks:
    - "Improve revenue mobilization to offset budget support shortfalls."
    - "Improve efficiency and prioritize provision of key public services in health and education."
    - "Implement policies to boost domestic food production."

Note: "Based on August 2025 Global Risk Assessment Matrix (G-RAM)."

### Social, Climate, and Other Risks
- Rising Social Discontent
  - Relative Likelihood: Medium
  - Expected Impact if Realized: High. "High living costs, weak growth, and inequality may fuel social unrest, hinder necessary reforms, and weaken countries’ capacity to address domestic and external shocks. For Sierra Leone, food insecurity has fed into the political space, materializing in social tensions. Reduced international aid for food and health may heighten social discontent."
  - Policies to Mitigate Risks:
    - "Continue to prioritize social programs that help vulnerable segments of the population to effectively participate in the economy."
    - "Improve governance, transparency and communication frameworks."

- New Trade Agreements
  - Relative Likelihood: Low
  - Expected Impact if Realized: Medium. "A breakthrough in trade talks could reduce uncertainty and protectionism, boost investment and productivity, and support broader reforms to lift medium-term growth. For Sierra Leone, higher global growth would lead to higher demand for its minerals."
  - Policies to Mitigate Risks: "Ensure mines have the capacity and infrastructure to meet higher demand for key minerals."

- Cyberthreats
  - Relative Likelihood: High
  - Expected Impact if Realized: Low. "Cyberattacks on physical or digital infrastructure, technical failures, or misuse of AI technologies could trigger financial and economic instability."
  - Policies to Mitigate Risks: "Develop and implement a national cyber security plan."

- Climate Change
  - Relative Likelihood: Medium
  - Expected Impact if Realized: Medium/High. "Extreme climate events and rising temperatures could cause loss of life, damage to infrastructure, food insecurity, supply disruptions, and heighten economic and financial instability. Sierra Leone is highly exposed to weather and climate-related shocks."
  - Policies to Mitigate Risks:
    - "Prioritize public investment in climate-resilient infrastructure."
    - "Seek grant financing for climate projects related to adaptation."
    - "Strengthen the social safety net."

- Labor-Supply Gaps
  - Relative Likelihood: Medium
  - Expected Impact if Realized: Low. "Tighter restrictions to migration could worsen labor shortages in aging economies, reducing potential output, fueling inflation, and straining fiscal balances through lower revenues. The effects on Sierra Leone are limited and likely to come through decreased demand for commodities."
  - Policies to Mitigate Risks: "Therefore, the authorities should continue efforts to diversify the economy away from the mining sector."

*Annex I. Risk Assessment Matrix (excerpt).*

### Annex III. External Sector Assessment

### Annex III. External Sector Assessment

### Assessment summary
- Sierra Leone’s external position in 2024 was moderately weaker than the level implied by fundamentals and desirable policies.
- The assessment is subject to a wide margin of uncertainties given the low quality of official data and the sensitivity of the model results to parameter choices.
- The current account deficit as a percentage of GDP is projected to moderate over the medium term as export growth in key sectors picks up, while the tightening fiscal stance holds back imports.

### Potential policy responses
- Persevere on the fiscal adjustment path.
- Rely on highly concessional financing—largely grants—to contain external liabilities.
- Allow the exchange rate to flexibly adjust to shocks, while being mindful of the pass-through to inflation.
- Enhance productivity and improve competitiveness, keeping in mind that sustained external financial support and foreign direct investment (FDI) cannot necessarily be relied upon indefinitely.
- These policies are key to rebuilding adequate reserves over the medium term.

### Foreign assets and liabilities: position and trajectory
- NIIP at end-2024 is estimated at around -62.7 percent of GDP.
- Gross foreign assets: 20.8 percent of GDP.
- Gross foreign liabilities: 83.5 percent of GDP.
- Composition of foreign assets: deposit-taking corporations’ foreign assets constitute 57 percent; BSL’s gross official reserves constitute 30 percent; foreign assets of other non-official sectors constitute 12 percent.
- Composition of foreign liabilities: about 45 percent of foreign liabilities are FDI liabilities; the remainder is accounted for by other (mainly public sector) investment liabilities.
- NIIP had been worsening over 2018-2023 but improved in 2024 and is projected to moderate in the medium term.
- Assessment: Despite a large NIIP deficit, external stability is bolstered by its composition, including the large share of FDI liabilities in total foreign liabilities.
- Authorities recently published updated official IIP data, in collaboration with IMF TA.

### Current account
- Background:
  - Over the past five years, current account deficits were large in the context of large fiscal deficits and weak terms of trade amid the pandemic and Russia’s war in Ukraine.
  - A sizeable upward revision in imports, to account for differences in mirror data recommended by IMF TA, contributed to larger than previously projected current account deficits in 2020-2023.
  - Preliminary data show the current account deficit declined from 9.5 percent of GDP in 2023 to 6.9 percent of GDP in 2024 amid the tightening fiscal policy stance.
  - Trade balance improved as imports grew moderately due to fiscal tightening and import substitution activities; agricultural exports and some minerals (iron ore, heavy mineral concentrate, and zircon) strengthened.
  - The current account deficit as a percentage of GDP is projected to moderate over the medium term as export growth in key sectors picks up and the tightening fiscal stance holds back import growth.
- Assessment (EBA-lite CA model):
  - The EBA-lite CA model suggests Sierra Leone’s external position in 2024 was moderately weaker than implied by fundamentals and desirable policies.
  - Using preliminary estimates for 2024, the CA model indicates:
    - Overvaluation: 10.1 percent (REER gap from CA model).
    - CA gap: -1.3 percent of GDP.
    - Cyclically adjusted CA balance: -6.9 percent of GDP.
    - CA norm (cyclically adjusted, including multilateral consistency adjustments): -5.5 percent of GDP.
  - Text Table 1 model entries (percent of GDP):
    - CA-Actual: -6.9
    - Cyclical contributions (from model) (-): 0.0
    - Natural disasters and conflicts (-): 0.0
    - Adjusted CA: -6.9
    - CA Norm (from model) 2/: -5.5
    - Adjusted CA Norm: -5.5
    - CA Gap: -1.3
    - o/w Relative policy gap: 2.4
    - Elasticity: -0.1
    - REER Gap (in percent): 10.1

### Real exchange rate
- Background: The nominal exchange rate against the dollar remained remarkably stable since end-2023, but the resulting real effective exchange rate (REER) appreciation has started to reverse in 2025 amid trading partner appreciation against the dollar.
- Assessment:
  - The EBA-lite REER model indicates an overvaluation of 9.3 percent in 2024, implying a CA gap of -1.2 percent of GDP.
  - The results of the CA and REER models are consistent.
  - Staff relies on the CA model for the bottom-line external sector assessment, judging it offers stronger explanatory power for a country like Sierra Leone.

### Capital and financial accounts: flows and policy measures
- Background:
  - After strengthening in 2023, the capital account weakened in 2024 on the back of a continued decline in project grants.
  - FDI and other investment are the main components making up the financial account.
  - While the data is weak and the financial account suffers from large estimation errors, net inflows strengthened in 2024, despite lower FDI, due to decreased financial asset accumulation by deposit-taking corporations, except the central bank.
  - The financial account is projected to worsen before recovering over the medium term.
  - FDI inflows are projected to be sustained amid strong mining and resumed timber activity, while the high level of debt amortization will continue.
- Assessment and policy implications:
  - It is important to limit debt-creating flows by relying on grants and concessional loans in financing current account deficits.
  - Enhancing productivity and improving competitiveness is key, as external financial support and FDI cannot be counted on indefinitely, especially in the context of declining international financial assistance.
- Note: Capital account data was updated to more fully account for project support grants, leading to an upward revision in the capital account for 2021−2023.

### FX intervention and reserves level
- Background:
  - Gross international reserves excluding swaps dropped more than expected to 5.9 percent of GDP in 2024.
  - Factors contributing to the decline included:
    - Higher than projected FX spending on official-sector goods and services.
    - Significant external debt service obligations.
    - US$1.1 million in FX sales in 2024—down from US$23.1 million in 2023 and US$93.7 million in 2022.
- Assessment and projections:
  - Reserve coverage at end-2024 fell to 2.1 months of next year’s imports.
  - Authorities are taking corrective action; reserve coverage is projected to converge towards 3 months of imports over the medium term.
  - The authorities purchased $12 million in FX outright in Q2 2025 and plan to accumulate another US$71 million in Q4-2025, including through outright purchases.
  - Policy recommendations:
    - Continue ambitious action to rebuild reserves.
    - FX sales should be strictly limited to addressing excess volatility in case of very large temporary shocks.
    - Undertake reforms to support FX market development to facilitate exchange rate flexibility.
    - Pair FX market reforms with a tighter macroeconomic policy stance to aid in rebuilding reserve buffers.

_Annex III. External Sector Assessment_

### 2. The BSL’s monetary policy stance has been broadly appropriate. In 2024, base money

### 2. The BSL’s monetary policy stance has been broadly appropriate. In 2024, base money

### Monetary policy stance and reserves
- Base money growth in 2024 "exceeded its projection only slightly."
- End-December NDA PC was missed, but the impact on base money was largely offset by a shortfall in NFA.
- By June 2025, the NDA slippage was fully corrected.
- With inflation at the medium-term single digit inflation objective and fiscal policy tightening, the MPR was reduced by 6 ppts to 18.75 percent between May and September 2025.
- As of end-September, gross reserves stood at 1.5 months of imports.
- Reserve shortfall relative to projections is primarily attributed to government FX spending on goods and services and subsidies and transfers.

### Macroeconomic outcomes and projections
- Growth:
  - Growth slowed to 4.3 percent in 2024—mainly due to weak mining activity.
  - Growth is expected to rise to its potential of 4.6 percent over the medium-term as mining production stabilizes and the negative impulse from tighter macro policies subsides.
  - Agriculture expected to remain a key driver, supported by productivity measures under the Feed Salone initiative.
- Inflation:
  - Inflation declined from a peak of 55 percent YoY in October 2023 to 5.4 percent as of September.
  - Inflation is in line with the BSL’s medium term single digit inflation objective and is expected to remain in single digits amid prudent macroeconomic policies.
- External sector and exchange rate:
  - The current account strengthened in 2024 on the back of lower import growth and strong agricultural exports, which more than offset an unexpected decline in mineral exports.
  - The leone remained stable against the US dollar, but the REER has begun to depreciate.
- Cost of borrowing:
  - T-bill rates remained above 40 percent until May 2025.
  - Since mid-June 2025 T-bill rates have remained around 15-17 percent.
  - T-bond issuance was stepped up, with uptake mostly limited to public banks and NASSIT.

### Banking system risks and indicators
- As of end-September 2025, the share of government securities in banks’ assets had dropped slightly to 40.5 percent.
- Tier 1 capital declined to 34.4 percent of risk-weighted assets in recent months but remains higher than at end-2024.
- Non-performing loans rose to 12.3 percent of total loans, driven by weakening asset quality in the mining sector.
- Banking system remains well capitalized but is subject to risks from the strong sovereign-bank nexus.

### Program performance (PCs, ITs, SBs)
- End-December 2024 PCs/ITs:
  - Missed PCs: Net Credit to Government (NCG) and Net Domestic Assets (NDA) due to spending overruns partially financed by BSL securities purchases in the secondary market.
  - Missed PC: Net International Reserves (NIR) due to higher than projected FX spending on goods and services, and subsidies and transfers.
  - Missed IT: primary balance.
- End-March ITs:
  - Missed four ITs: floors on the NIR, social spending, total domestic government revenue, and the domestic primary balance.
- End-June 2025 PCs/ITs:
  - Only PC missed: NIR, driven by higher than projected FX spending on goods and services and US$30 million in new FX swaps (contravening ECF commitments).
  - Revenue and social spending ITs missed due to early-year revenue shortfall and failure to scale up the school feeding program.
- End-September ITs:
  - Missed ITs: NIR, domestic revenue, social spending, and domestic arrears.
- Structural benchmarks (SBs):
  - Did not meet the continuous SB on fuel pricing.
  - Met 4 out of 10 SBs, completed 1 more with a delay, and will complete 3 more through prior actions.
  - SB to recapitalize the BSL is reset to end-March 2026.
  - SB to reform oversight and accountability frameworks of new mining sector entities replaced with an end-March 2026 SB informed by the Governance and Corruption Diagnostic (GCD).

### Corrective actions and requests
- Authorities request waivers of non-observance for the missed PCs based on corrective actions:
  - Brought BSL net domestic assets back to programmed path by June 2025.
  - Plan to submit to Parliament a 2026 Finance Bill with tax measures yielding at least 1.5 percent of GDP in additional annual tax revenues.
  - Implementing public financial management reforms to address root causes of past fiscal slippages.
  - Plan to accumulate US$71 million in FX reserves through outright purchases and a 3-year domestic FX bond issuance.
- Prior actions committed for first and second reviews of the ECF:
  - (i) Submit to Parliament a 2026 Finance Bill with 1.5 percent of GDP in tax measures.
  - (ii) Submit to Parliament a 2026 budget consistent with program projections with an annex detailing capital projects to be financed by capital budget envelopes, and publish a report confirming cancellation or delay of contracts not covered by envelopes.
  - (iii) Initiate resolution proceedings for any bank meeting criteria in Section 69 of the Banking Act 2019 as of end-December 2023.
  - (iv) Publish the GCD on the MoF website.

### Program objectives
- ECF-supported program aims:
  - (i) Restore stability by bolstering debt sustainability, addressing fiscal dominance, maintaining low inflation and rebuilding reserves.
  - (ii) Support inclusive growth through reforms and targeted social spending.
  - (iii) Confront corruption, and strengthen governance, institutions, and the rule of law.

### Fiscal policy targets and consolidation
- Fiscal targets:
  - Target domestic primary surplus of 2.9 percent of GDP by 2027 (an adjustment of about 5.6 ppts of GDP relative to 2024 and more than 8 ppts of GDP relative to 2022).
- 2025:
  - Target domestic primary surplus of 0.6 percent of non-iron-ore GDP in 2025, up from a deficit of 2.7 percent of non-iron-ore GDP in 2024.
- 2026:
  - 2026 budget envisages increase in domestic primary surplus from 0.6 percent of GDP in 2025 to 1.6 percent of GDP.

### Revenue mobilization and tax policy (Text Table 1: Sierra Leone: New Tax Policy Measures)
- Total expected additional annual revenues: 1.518 percent of GDP.
- Measures and associated revenues (Annual, Percent of GDP):
  - Corporate Income Tax MTRS Actions: 0.100
    - Restore MAT to low profitability companies
    - Abolish investment allowance
  - Raise CIT rate from 25 to 30 percent: 0.375
  - Raise non-resident withholding tax rate from 10 to 20 percent: 0.106
  - Personal Income Tax: 0.011
  - Indirect Tax measures total: 0.518
    - Raise Petrol and Diesel excises to Nle 4 and increase RUC by Nle 1 *
  - Raise excises on cigarettes from Nle 2 to 3 per package: 0.100
  - Introduce an excise on cement (NLe 10 per each 50kg bag): 0.111
  - Raise import duty on rice from 5 to 10 percent: 0.106
  - Remove GST exemption on supply of water (56.2 W:P ratio) **: 0.080
  - Remove GST exemption on magazines (16.2 W:P ratio): 0.005
  - Expand circulation levy to boats and vessels ***: 0.002
  - Raise circulation levy from Nle 200 to 500 and expand it to three-wheeled vehicles (memo)
  - Raise resident withholding tax rate on rental income from 10 to 15 percent (memo)
- Notes from table:
  - Sources: 2025 FAD TP report, staff and authorities' calculations.
  - * While all other fuel levies (IDF, PF) are kept at the level of March 2025, and no subsidy is provided.
  - ** Exemptions with high ratios of consumption for wealthy versus poor households (W:P ratio) are regressive.
  - *** USD 1000 for large boats and industrial fishing vessels, Nle 500 for smaller motorized boats.

### Revenue administration and extractive industries
- Revenue administration actions:
  - Develop and implement by March 2026 a new performance management contract between MoF and NRA with performance indicators aligned with MTRS.
  - Complete an IMF Revenue Administration Governance and Integrity Assessment (new end-September 2026 SB).
  - Complete by end June 2026 all activities of the customs revenue enhancement plan with AFW2, including petroleum import valuation and control, customs declaration, suspension regime, and evaluation.
  - Conduct an ASYCUDA audit in partnership with UNCTAD by March 2026 to verify and align customs and tax rates and reconcile ASYCUDA with other data sources.
  - Develop compliance improvement plans for 2026 for extractive industries and large taxpayers by December 2025.
  - Introduce Electronic Single Window and fully operationalize it by end-September 2026.
  - Fully operationalize the revenue courts by December 2026.
- Extractive industries:
  - Ensure full implementation of the Extractive Industries Revenue Act (EIRA) 2018 going forward (new continuous SB).
  - Commit not to submit or ratify any concessions that supersede EIRA fiscal tax or non-tax obligations for new mining operations or renewals.
  - Renegotiate fiscal terms for each existing mining agreement as soon as permitted by fiscal stability clauses to ensure full compliance with EIRA.
  - NRA to continue tax audits for high-risk taxpayers, including extractive industries.

### Iron ore safe harbor
- Commit to fully operationalize the iron ore safe harbor framework:
  - Enforce full documentation requirement under iron ore safe harbor guidelines and transfer pricing regulation.
  - Either complete the advanced price agreement currently under negotiation, or enforce the safe harbor formula (new end-March 2026 SB).

### Medium-term expenditure framework and protections
- Wages and salaries:
  - Plan to maintain wages and salaries at around 4.2 percent of non-iron-ore GDP over the program period.
  - Implement a new wage bill strategy with recruitment quotas and stricter controls on in-year requests.
- Goods and services:
  - Contain goods and services spending while protecting social spending and scaling up the school feeding program.
  - Significant cuts expected, including on FX spending on goods and services (New FX spending PC).
  - BSL will report performance against the new PC on a weekly basis to MoF management and EMT meetings.
  - MoF commits not to seek foreign exchange for any entities outside the central government from the BSL; such entities must seek FX from commercial banks except when drawing down FX deposits at the BSL.
  - BSL retains ultimate responsibility for meeting NIR targets.
- Social spending:
  - Commit to protect social spending (Social Spending IT).
  - Restore school feeding program spending to the level envisaged at program approval (New School Feeding PC).
  - Over 800,000 pupils now benefit from the program; efforts to strengthen program implementation, accountability, and integration with local farmers under Feed Salone are ongoing.
- Domestically financed capital expenditure:
  - Spending projected to rise to 1.4 percent of GDP (return to original program level of 1.2 percent of GDP plus 0.2 ppts for population census).
- Subsidies and transfers:
  - Cap annual energy subsidies to EDSA at US$20 million starting in 2026.
  - Accompanying KPIs for EDSA to qualify for the subsidy.
  - Commitment to strengthen EDSA revenue effort, collect revenues, and reduce electricity theft.
  - Revised EWRC Act enacted to provide framework for cost reflective tariffs.
  - Negotiations with potential private operator for EDSA could begin early 2026.
  - Installed and commissioned 1,250 smart meters for high-value customers and at secondary substations in the year to end-September 2025.
  - Time-bound strategy to reduce dependence on fossil-fuel generation is underway.
- Arrears:
  - Commit to update arrears clearance strategy by end-June 2026 and avoid any net accumulation of arrears (New IT on Domestic Arrears Accumulation).

### Cap on budgetary FX spending (Text Table 2: Sierra Leone: Cap on Budgetary FX Spending, Millions of US$)
- Total: Est. 2025: 153.6; Proj. 2026: 109.3; Proj. 2027: 108.4
- 1. Goods and services: 114.3; 89.3; 88.4
  - Government travel: 21.9; 10.7; 10.7
    - Ordinary travel: 12.5; 8.0; 8.0
    - Statutory travel: 9.1; 6.5; 6.5
    - non-statutory travel: 3.5; 1.5; 1.5
    - Other travel, including charters: 9.4; 2.7; 2.7
  - Embassies/High Commissions: 48.8; 47.8; 47.5
    - Embassy_other expenses: 10.4; 9.8; 9.8
    - Repatriation expenses: 0.9; 0.7; 0.7
    - Wages_embassies: 37.5; 37.3; 37.0
  - Subscriptions: 9.7; 5.5; 5.5
  - Other Government FX Spending on goods and services: 33.8; 25.2; 24.7
    - o/w: Vehicles: 6.4; 0.0; 0.0
    - Medical supplies: 12.8; 15.0; 15.0
    - Medical bills: 0.2; 0.2; 0.2
    - N_Soft: 2.1; 0.0; 0.0
    - ECOWAS Levy: 2.8; 2.8; 2.8
    - Consultancies: 0.7; 0.7; 0.7
    - Security: 4.1; 3.1; 3.1
    - Other spending: 4.8; 3.6; 3.0
- 2. Subsidies and Transfer: 39.3; 20.0; 20.0
  - Electricity support: 37.0; 20.0; 20.0
    - IPPs: 37.0; 20.0; 20.0
    - Wartsila West Africa S.A: 2.3 (Est. 2025)
- 3. BSL: 8.4; 3.0; 3.0
  - Travel: 8.2; 3.0; 3.0
  - Printing of currency: 0.1; 0.0; 0.0

### Contingency planning and fiscal safeguards
- Contingency measures if needed to meet fiscal targets:
  - (i) Reprioritize spending, including further rationalizing domestically financed capital expenditure (quarterly profile backloaded and adjustable).
  - (ii) Frontload additional revenue measures, including introducing a new PIT threshold of 35 percent.
  - (iii) Implement short-term emergency measures such as a temporary increase in the personal income tax.
- Transparency and SOE contingent liabilities:
  - Continue to publish information on debt and guarantees of SOEs and fiscal risks in the SOE Financial Analysis report.
  - Since the 2025 budget, published summary information on SOE government transfers and contingent liabilities.
  - Any additional support to SOEs conditioned on ex-ante fiscal risk review.
  - NRA to publish annual reports on tax arrears owed by SOEs and independently act to collect arrears and enforce compliance.
  - Starting in September 2026, require all SOEs to submit audited financial statements to the MoF.
  - Revisit revenue sharing arrangements with revenue-generating TSA agencies by June 2026 to identify adjustments and ensure TSA agencies contribute to expenditure tightening.

*Source: 1sleea2026001-source-pdf.*

### 20. We are committed to transiting to GFSM 2014 for fiscal reporting. Our plan is to

### 1sleea2026001-source-pdf - 20. We are committed to transiting to GFSM 2014 for fiscal reporting. Our plan is to

### Transition to GFSM 2014 for fiscal reporting
- Transition to GFSM 2014 standards for fiscal reporting by September 2026 in time to facilitate preparation of the 2027 budget (new end-September 2026 SB).
- Implementation expected to improve transparency and bring fiscal reporting in line with international standards.
- Established a working group within the MoF to coordinate with relevant MDAs and agencies and drive the process forward.
- Plan to request additional TA from the IMF to ensure a smooth transition.

### Public Financial Management (PFM) — corrective actions and cash management
- Implementing three corrective actions to address root causes of fiscal slippages in previous years (Box 1).
- Specific 2026 budget actions:
  - Include an annex detailing which capital projects are to be financed by the capital budget envelopes for 2026 and 2027.
  - Publish a report on the MoF webpage confirming that contracts included in Annex 5 of the 2025 budget but not covered by updated capital budget envelopes for 2026 and 2027 are cancelled or delayed (Prior Action).
  - Commit not to contract any new fully domestically-financed roads projects until the end of the ECF arrangement.
- Cash management and forecasting measures implemented:
  - Cabinet Directive approved TOR for the Expanded Cash and Debt Management Committee (ECDMC).
  - All MDAs instructed to provide quarterly updates on all commitments (including outstanding invoices).
  - 10 key MDAs instructed to provide forecasts of monthly cash flow until the end of the year on a rolling basis.
  - Quarterly budget allotments to MDAs will be based on ECDMC cash flow projections.
  - MDAs with commitments/expenditures above quarterly allotments must submit a letter outlining measures to remain within budget ceilings.
  - All spending, regardless of revenue source, must be initiated through an IFMIS generated purchase order.
- Procurement alignment:
  - MDAs instructed to present updated procurement plans within envelopes established by the 2025 supplementary budget.
  - Circular clarifies all contracts must be approved by the Minister of Finance before awarding; approval contingent on consistency with procurement plans, budget envelopes, and available cash forecasts.
- Arrears management commitments:
  - Conduct an independent audit of arrears, including outstanding invoices at MDAs.
  - Publish the independent audit report on the MoF website.
  - Publish a plan to clear arrears, prepared with IMF technical support.
  - Design a robust accounting system to record and report payment arrears going forward (new end-April 2026 SB).
  - Audit the rice distribution scheme for the security services by end June 2026.
- Budget credibility and baseline budgeting:
  - Continue building capacity to improve the medium-term expenditure framework by issuing realistic medium-term expenditure ceilings.
  - MoF to provide capacity support to MDAs on designing credible medium-term strategic plans.
  - Developed, with FAD and AFW2 support, an action plan to implement baseline budgeting.
  - For the 2026 budget: take actions necessary to advance implementation of a fully-fledged baseline budget in line with AFW2 recommendations, including executing the budget calendar as determined in the PFM Regulations.

### Box 1 — PFM Corrective Actions (summary of measures)
- Measure 1 (roads spending envelopes and PIP):
  - Establish spending envelopes for domestically financed roads construction for 2025, 2026 and 2027 consistent with the 2025 supplementary budget and projections under the ECF arrangement with the IMF.
  - Identify specific projects to be financed from these envelopes.
  - Provide the comprehensive PIP for 2025—consistent with the 2025 supplementary budget—to the IMF and attach 2026 and 2027 PIPs to the 2026 budget.
  - Direct SLRA and other agencies to delay or cancel projects not covered by these envelopes, and publish a report on MoF webpage confirming cancellations/delays.
  - Commit to refrain from committing to any new domestically-financed roads construction projects until end-2027.
- Measure 2 (Cabinet Directive on commitments and cash forecasting):
  - All MDAs to provide MoF with quarterly updates on all commitments (including outstanding invoices).
  - 10 key MDAs to provide expected cash flows for expenditures for the current month and subsequent months until year-end on a rolling basis.
  - MoF to issue budget allotments in line with cash forecasts.
  - All spending must be initiated through an IFMIS generated purchase order.
  - Integrate cash forecasting into expenditure commitment controls by limiting commitments to available forecasted cash.
  - MDAs exceeding quarterly allotments must submit a letter outlining measures to remain within budget ceilings.
- Measure 3 (procurement circular):
  - MDAs to submit updated procurement plan for remainder of 2025.
  - MoF to approve based on assessment that planned purchases and expected costs align with the 2025 Supplementary Budget.

### Debt and Debt Management
- Overall and external public debts assessed as sustainable, but at high risk of distress.
- Commitments:
  - Issue domestic debt securities (local currency securities, FX swaps, or FX bonds) through competitive auctions.
  - Avoid issuance of FX swaps or any FX denominated securities except in exceptional circumstances when terms are highly favorable, as determined in agreement with, and by seeking non-objection from, the IMF.
  - Removed such issuances from issuance calendar.
- Debt management strengthening measures:
  - Ensure rates on government securities remain at sustainable levels and extend maturities on domestic debt.
  - Allow T-bonds to be used as collateral for repo agreements; developing guidelines on applicable haircuts to compensate for illiquidity and market risk.
  - Plans include:
    - Update the MTDS annually.
    - Step up market communication by establishing an active investor relations desk, publishing a quarterly calendar for meetings with banks, and conducting market surveys on the appetite for treasury bonds by end March 2026.
    - Continue to refrain from accepting T-bill or T-bond bids at rates inconsistent with a sustainable debt position, while remaining in accordance with the Bank of Sierra Leone Act.
    - Review primary dealership roles with AfDB support and other development partners.
    - Implement regulatory norms for institutional investors to invest in government securities while ensuring asset-liability management objectives are met.

### Monetary, Safeguards and Exchange Rate Policy
- Monetary policy objectives and actions:
  - Focused on maintaining low and stable inflation; medium-term inflation objective is to maintain single-digit inflation.
  - Remain committed to refraining from monetary financing over the program period.
  - Terminated securitization of the Ways and Means advances beginning with the outstanding stock at end-December 2024 and will continue to refrain from such securitization.
  - Strengthen internal capacity and liquidity management operations to meet reserve money target.
  - Plan to implement strategy for monetary policy operations by end-June 2026, including introducing the 7-day reverse repo as the main liquidity injecting instrument.
  - Outright purchases of government securities to be carried out transparently and strictly for structural liquidity management purposes.
- FX reserves and exchange rate:
  - As corrective action for end-December 2024 and end-June 2025 NIR target misses, the BSL will bolster gross reserves through US$71 million in outright FX purchases and a domestic 3-year FX bond issuance.
  - Commit to accumulate an additional US$35 million in reserves every six months, starting in H1-2026, preferably through FX auctions.
  - Firm commitment to the New FX Spending PC and ensure no FX is provided to the government beyond relevant ceilings.
- FX market development:
  - Started publishing the BSL FX reference rate on the day it is compiled.
  - Plan to (i) simplify rules of the FX interbank market; (ii) identify market makers; and (iii) conduct regular FX auctions as market conditions permit.
  - Will request relevant TA from the IMF to implement these measures by June 2026.
- Safeguards and BSL reforms:
  - Initial reconciliation of cash in vault and general ledger balances remains in progress and expected to be fully reflected in the 2025 audited financial statements.
  - Request IMF TA on IFRS implementation to achieve full compliance.
  - On conclusion of IMF technical support on BSL balance sheet scenario analysis, will recapitalize the BSL (new end-March 2026 SB).

### Financial Sector Policies
- Addressing bank solvency:
  - BSL will strictly enforce the Banking Act 2019, requiring banks violating minimum CAR to submit credible and implementable capital restoration plans.
  - Banks that consistently remain in violation will be resolved or liquidated; resolution proceedings to safeguard continuity of important functions and contain fiscal costs (Prior action).
- Financial safety net and resolution framework:
  - Deposit Protection Fund (DPF) Unit established in the BSL; a 2-year work plan for launching the DPF Act is underway.
  - Calculation of required premiums and initial seed capital for the DPF finalized.
  - Launch DPF once solvency challenges are addressed and amendments to the DPF Act finalized.
  - Plan to fully operationalize the bank resolution framework (new end-December 2026 SB); requires filling vacancies in the Crisis Management Section by end-March 2026.
- Supervision and macroprudential measures:
  - Continue regulatory and supervisory oversight using risk-based supervision (RBS).
  - Implement TA recommendations for adoption of certain elements of Pillar 1 Basel II/III capital frameworks by December 2026 and continue regular on-site supervision of SOBs.
  - Publish guidelines on foreign currency lending (published October 2024).
  - Introduce minimum reserve requirement on foreign currency deposits by end March 2026.
  - Strengthen foreign currency regulation and supervision through capacity building, updated bank examination procedures, prioritizing examination of banks’ FX controls, and reviewing banks’ risk controls on FX placements abroad.
  - Established a macroprudential policy framework and working to finalize a crisis management plan by December 2026.

### Governance
- Anti-corruption and governance priorities:
  - Plan to publish the GCD (Prior Action).
  - Share an action plan with Fund staff by June-2026 to address macro‑critical governance vulnerabilities across public resource management, the justice sector, extractives, and state participation in the economy, based on the GCD.
  - Ensure online publication and risk‑based verification of asset declarations for a targeted list of politically exposed persons, with sanctions for non‑compliance (new end‑September 2026 SB).
- Extractives governance:
  - Strengthen governance of MMDMC and MWF by:
    - (i) publish the MMDMC’s audited 2024 financial statements;
    - (ii) adopt a policy establishing a transparent, merit‑based process for appointing independent directors to MMDMC and MWF boards;
    - (iii) implement a KPI‑based performance framework for the operating company with reporting to the MWF Board (new end‑March 2026 SB).
  - Establish a formal dividend policy for the MWF consistent with good international practice.
- AML/CFT reforms:
  - National strategy, informed by a risk assessment and broad consultations, is nearing finalization.
  - Amend the 2009 Companies Act to enhance beneficial ownership transparency, targeted for adoption by mid-2026.
  - Continue improving oversight of NBFIs and high-risk DNFBPs; close regulatory gaps in the targeted financial sanctions regime under UNSCR with regulations and operational structures expected to be finalized by mid-2026.

### Inclusive, Green, and Sustainable Growth
- Productivity and investment climate:
  - Address barriers to trade by strengthening customs administration and transparency in line with the MTRS.
  - World Bank support to establish an online business registration system.
  - Support growth of SMEs and SME ecosystems, including capacity for incubators and accelerators and provision of financial support through the MUNAFA Fund.
- Agriculture and food security:
  - Continue implementing Feed Salone initiative: provision of fertilizer, seeds, chemicals, and support for land preparation through the electronic voucher system.
  - Work with DPs to (i) reform product markets and enhance food security; (ii) strengthen rice, cocoa, and horticulture value chains (with WB support); and (iii) review e-vouchers and subsidies to district farm machinery rigs to incentivize private sector participation.
- Gender and climate actions:
  - Enacted and implemented a progressive gender equity and empowerment law; budget framework incorporates a gender-based lens.
  - Climate actions include: National Adaptation Implementation Plan, National Disaster Management Agency, Disaster Risk Financing Strategy, Climate Finance Unit within the Ministry of Finance.
  - Begin updating Nationally Determined Contributions (NDC 3.0) to facilitate drafting of the National Climate Change Act.
  - Over the medium-term, press ahead with implementing recommendations from C-PIMA, CCDR, and Climate Policy Diagnostic (CPD).

### Capacity Development
- External sector statistics improvements:
  - Increase staffing, build technical capacity, and provide adequate financial resources to the BSL BOP unit to support surveys and improve BOP compilation.
  - Improve inter-agency coordination by establishing formal data-sharing agreements (MoUs) with agencies such as NRA and NMA.
  - Constitute and operationalize the Inter-Agency Technical Working Group on external sector statistics comprising relevant agencies.

### Program Monitoring and targets
- Program monitoring through semi-annual and continuous performance criteria (PCs), reviews, and quarterly indicative targets (ITs).
- Quantitative performance criteria targets set for end-December 2025, end-June 2026 and end-December 2026; indicative targets set for end-March 2026 and end-September 2026.
- Commit to provide IMF staff with data and statistical information identified in the attached TMU and any other requested information.
- MoF to establish an MOU with the BSL on respective responsibilities to repay the portion of IMF loans used for budget support.
- MoF and BSL to establish a framework agreement on responsibilities for servicing financial obligations to the IMF before carrying out any SDR retrocession transaction.
- Request that an amount of SDR 58.332 million is made available for the first and second reviews.
- The third review is scheduled to be completed on or after May 15, 2026; this review will be based on the December 31, 2025 test date.

*Source: 1sleea2026001-source-pdf - 20. We are committed to transiting to GFSM 2014 for fiscal reporting. Our plan is to*

### annex detailing which capital projects are to be financed

### annex detailing which capital projects are to be financed

### Structural benchmarks and prior actions (selected items)
- PA4: Publish the Governance and Corruption Diagnostic report on the MoF website.  
  - Objective: Strengthen governance.  
  - Due: 5 working days before the Board meeting.

- SB1: Authorities to set retail fuel prices at the end of each month in accordance with the automatic fuel price indexation mechanism, maintaining the excise rates established in the 2024 Finance Act.  
  - Objective: Protect the tax base and efficiency of public spending.  
  - Due: Continuous.  
  - Status: Not Met; replaced by SB12.

- SB2: Submit to Parliament a 2025 budget that is consistent with program projections for the primary balance, revenues, and expenditures, and includes a comprehensive roads budget with information on total cost, variations, allocations in FY2025, and expected funding needs for FY2026 and FY2027.  
  - Objective: Improve governance and efficiency of public spending.  
  - Due: End-November 2024.  
  - Status: Met.

- SB3: NRA to issue guidelines and a public notice establishing a safe harbor for iron ore.  
  - Objective: Protect revenue base.  
  - Due: End-December 2024.  
  - Status: Met.

- SB4: BSL to develop a strategy to revise and recalibrate the BSL’s monetary policy operational tools with a view to strengthening its capacity to achieve its reserve money target.  
  - Objective: Enhance the credibility and effectiveness of monetary policy.  
  - Due: End-February 2025.  
  - Status: Not Met, done with delay.

- SB5: Authorities to initiate resolution proceedings for any bank meeting the criteria prescribed in Section 69 of the Banking Act 2019 as of end-December 2023, in a way that safeguards the continuity of its important functions but contains fiscal costs.  
  - Objective: Promote financial stability.  
  - Due: End-February 2025.  
  - Status: Not Met; upgraded to prior action.

- SB6: Authorities to publish the Governance and Corruption Diagnostic (GCD) report, which will include an action plan.  
  - Objective: Enhance governance and transparency anti-corruption efforts.  
  - Due: End-May 2025.  
  - Status: Not Met; upgraded to prior action.

- SB7: BSL to operationalize the new Emergency Liquidity Assistance framework following close consultation with Fund staff.  
  - Objective: Promote financial stability.  
  - Due: End-July 2025.  
  - Status: Met.

- SB8: Publish the BSL’s audited 2024 financial statements that are audited by two audit firms within the same global network, a local firm, and an international firm with central banking and IFRS expertise.  
  - Objective: Strengthen central bank safeguards.  
  - Due: End-July 2025.  
  - Status: Met.

- SB9: Authorities to recapitalize the BSL with IMF technical support.  
  - Objective: Enhance the credibility and effectiveness of monetary policy.  
  - Due: End-August 2025.  
  - Status: Not Met; reset to March 2026 (SB15).

- SB10: Cabinet to (i) review the oversight and accountability frameworks of the Sierra Leone Mines and Minerals Development and Management Corporation and the Mineral Wealth Fund in close consultation with the IMF and the World Bank and (ii) submit to Parliament any revisions to their institutional frameworks needed to address identified concerns and ensure that the frameworks are fully consistent with good international practice and compliant with the domestic legal framework such as the PFM Act, including through the development of clearly defined performance and dividend policies.  
  - Objective: Enhance governance and transparency anti-corruption efforts.  
  - Due: End-August 2025.  
  - Status: Not Met; replaced by SB16.

- SB11: Authorities to submit to Parliament a 2026 Finance bill with measures projected to deliver at least 1 percent of GDP in additional annual tax revenues.  
  - Objective: To raise tax revenue yields.  
  - Due: End-November 2025.  
  - Status: tbd; upgraded to prior action.

- SB12: Authorities to: (i) refrain from providing any form of subsidy to retail fuel prices; (ii) maintain the rates of excise duties on fuels at least as high as those established by the 2024 Finance Act and any subsequent Finance Acts; (ii) maintain the sum of the rates of IDF and all other levies on fuels at least as high as those prescribed by the March 2025 fuel pricing formula; and (iv) update the legally binding fuel pricing ceiling formula monthly and communicate it to market operators and the IMF team.  
  - Objective: Protect the tax base and efficiency of public spending.  
  - Due: Continuous.

### Structural benchmarks for March–September 2026 (selected)
- SB14: Fully operationalize the safe harbor for iron ore by first enforcing the full documentation requirement under the iron ore safe harbor guidelines and transfer pricing regulation and then either (i) completing the advanced price agreement currently under negotiation, or (ii) enforcing the safe harbor formula.  
  - Objective: Protect revenue base.  
  - Due: End-March 2026.

- SB15: Authorities to recapitalize the BSL, including as informed by IMF technical support.  
  - Objective: Enhance the credibility and effectiveness of monetary policy.  
  - Due: End-March 2026.

- SB16: (i) Ministry of Finance to publish on its website MMDMC’s audited 2024 financial statements; (ii) Cabinet to adopt a policy for a transparent, merit-based process for appointing independent directors to the boards of MMDMC and MWF; and (iii) MMDMC to adopt and implement a KPI-based performance framework for Mountain View via a performance agreement between the MWF board and Mountain View with reporting to the MWF Board.  
  - Objective: Enhance governance and transparency anti-corruption efforts.  
  - Due: End-March 2026.

- SB17: Authorities to publish (i) an independent audit of government payment arrears on the MoF website, including the backlog of invoices at MDAs awaiting payment, and (ii) a plan to clear them, prepared with IMF technical support, and to design a robust accounting system to record and report payment arrears going forward.  
  - Objective: Improve governance and transparency in public finances.  
  - Due: End-April 2026.

- SB18: NRA to conduct an IMF-led Revenue Administration Governance and Integrity Assessment (RAGIA) and publish it on its website along with an action plan for addressing the identified weaknesses, developed in consultation with IMF staff.  
  - Objective: Improve governance of customs and revenue administration.  
  - Due: End-September 2026.

- SB19: Ministry of Justice to submit to Parliament an amended Anti-Corruption Act that entails a requirement for the online publication and risk-based verification of asset declarations for a targeted list of politically exposed persons (and the establishment of proportionate sanctions for non-compliance).  
  - Objective: Enhance governance and transparency anti-corruption efforts.  
  - Due: End-September 2026.

- SB20: Fully transition to GFSM 2014 standards for fiscal reporting in time to facilitate preparation of the 2027 budget.  
  - Objective: Enhance fiscal transparency.  
  - Due: End-September 2026.

- SB21: Operationalize the Bank Resolution Framework, including filling vacancies in the Crisis Management Section and developing guidelines for resolution planning.  
  - Objective: Promote financial stability.  
  - Due: End-December 2026.

### Technical Memorandum of Understanding (TMU): scope and evaluation dates
- TMU defines quantitative performance criteria (PCs) and indicative targets (ITs) for the ECF program.  
- PCs and ITs evaluated in terms of cumulative flows from the beginning of the calendar year.  
- TMU applies to test dates beginning with end-December 2025.  
- PCs cover December 2025 and June 2026; ITs cover March 2026 and September 2026.

### Program exchange rates (as specified)
- Cross Rates as of June 28, 2024:
  - SDR: Currency units per SDR = 1.000; Leones per currency unit = 29.604; US$ per currency unit = 1.315.
  - US$: Currency units per SDR = 1.315; Leones per currency unit = 22.507; US$ per currency unit = 1.000.
  - British Pound Sterling: Currency units per SDR = 1.039; Leones per currency unit = 28.485; US$ per currency unit = 1.266.
  - Japanese Yen: Currency units per SDR = 211.705; Leones per currency unit = 0.14 0; US$ per currency unit = 0.006.
  - Euro: Currency units per SDR = 1.229; Leones per currency unit = 24.093; US$ per currency unit = 1.070.
  - Renminbi: Currency units per SDR = 9.558; Leones per currency unit = 3.097; US$ per currency unit = 0.138.
- Note: All exchange rates except for the Leone/US$ exchange rate are as reported in the IMF’s International Financial Statistics. Leone / US$ exchange is the Bank of Sierra Leone mid-rate.

### Quantitative program targets (QPCs and ITs)
- Quantitative PCs are set on:
  - Net domestic bank credit to the central government (NCG) (ceiling).
  - Net domestic assets (NDA) of the Bank of Sierra Leone (BSL) (ceiling).
  - Net international reserves (NIR) of the BSL (floor).
  - Budgetary FX spending (ceiling).
  - Fiscal Spending on the National School Feeding program (floor).
  - New concessional external debt with original maturity one year or more contracted or guaranteed by the public sector, US$ million (cumulative ceiling).
  - New non-concessional external debt contracted or guaranteed by the public sector, US$ million (continuous ceiling).
  - Outstanding stock of external debt with maturities of less than one year contracted or guaranteed by the public sector (continuous ceiling).
  - External payment arrears of the public sector (continuous ceiling).

- Indicative targets (ITs) are set on:
  - Total domestic government revenue (floor).
  - Domestic primary balance (floor).
  - Domestic arrears (ceiling).
  - Social spending (floor).

- Continuous non-quantitative QPCs include:
  - Non-imposition or intensification of restrictions on payments and transfers for current international transactions.
  - Non-introduction or modification of multiple currency practices.
  - Non-conclusion of bilateral payments agreements inconsistent with Article VIII.
  - Non-imposition or intensification of import restrictions for balance of payments reasons.

### Net Domestic Bank Credit to the Central Government (NCG): definition and adjustors
- Definition: NCG = net banking system’s claims on the central government, excluding financing for recapitalizing or resolving financial institutions, calculated by the BSL. Components:
  - Net position of the government with commercial banks (ODC-2SR, line 656 – budget financing) including treasury bills, treasury bonds, loans and advances of commercial banks to the government; less government deposits in commercial banks (ODC-2SR, line 667).
  - Net position of the government with the BSL (CB-1SR, line 758, budget financing): BSL holdings of treasury bills and bonds including conversion/securitization bonds, ways and means advances, any other direct credit from the BSL to the government, including special lending arrangements relating to budget support. Excludes holdings of special bonds provided by government to cover BSL losses and/or to increase its capital (CB-1SR, line 771 – other financing).
  - Less central government deposits with the BSL (CB-1SR, line 783); and less any debt relief received (HIPC, MDRI, CCR Trust).

- Adjustment clauses for the NCG ceiling:
  - Downward (upward) adjustment by the excess (shortfall) in external budgetary assistance — measured in leones at the BSL reference (not program) rate — with the downward (upward) adjustment capped at the equivalent of US$50 million.
  - Downward (upward) adjustment by the increase (decline) in the value of the cumulative net flow of electronic funds transfer (EFT) checks and other outstanding payments (relative to the end-December 2024 value).
  - Downward (upward) adjustment by the excess (shortfall) in Leone value of net issues of government securities to the non-bank private sector.
  - Downwards (upward) adjustment by the decrease (increase) in the cumulative net flow of non-tradeable securities issued to the non-bank sector for regularizing the stock of legacy arrears.

- Legacy arrears note: The stock of legacy arrears identified in the stocktaking exercise completed in September 2019 totals Le 3.287 trillion. The Government updated its arrears clearance strategy in October 2023 and, to date, has not yet issued any securities for the purpose of clearing these arrears.

- Data source for NCG: “Claims on Government (net)” series, submitted to IMF staff and reconciled with the monthly monetary survey prepared by the BSL.

- Central government definition for TMU: central government and those special accounts classified as central government in the BSL statement of accounts. Excludes the National Social Security and Insurance Trust and state-owned enterprises.

### Net Domestic Assets of the BSL (NDA)
- Definition: NDA = end-period stock of reserve money minus the net foreign assets of the BSL calculated at program exchange rates.
- Reserve money = currency in circulation (currency outside banks plus cash in vaults) + deposits of commercial banks with the BSL + BSL liabilities to other private-sector entities.
- Net foreign assets = BSL’s foreign assets (claims on nonresidents) minus BSL’s foreign liabilities (liabilities to nonresidents).

### Net International Reserves of the BSL (NIR): definition and adjustors
- Definition: NIR = reserve assets minus short-term and other foreign currency liabilities at program exchange rates.
- Reserve assets include:
  - BSL’s holdings of monetary gold (excluding amounts pledged as collateral).
  - Holdings of existing SDRs and any future SDR allocations by the IMF.
  - BSL’s holdings of foreign currencies in cash or in nonresident financial institutions (deposits, securities, or other financial instruments).
- Reserve assets exclude:
  - Frozen, pledged, or encumbered assets, including assets used as collateral or guarantees for third-party external liabilities, or assets received as part of foreign exchange derivatives such as swap, forward, and options arrangements including those with domestic commercial banks.
  - Foreign currency claims on residents.
  - Precious metals other than gold.
  - Assets in nonconvertible currencies.
  - Illiquid foreign assets.

- Short-term and other foreign currency liabilities include:
  - BSL’s foreign currency-denominated liabilities to residents and nonresidents with remaining maturity of one year or less, excluding liabilities with an asset counterpart that is excluded and excluding the foreign liability to China of US$8.4 million relating to a legacy clearing account for a previous bilateral trade agreement.
  - All credit outstanding from the IMF, excluding liabilities arising from existing and future allocation of SDRs and debt relief from the CCR Trust granted in 2015.
  - Government’s foreign currency deposits with the BSL with remaining maturity of less than 360 days.

- Adjustment clause for external budgetary assistance: Floor on change in NIR adjusted downward (upward) by US dollars equivalent cumulative shortfall (excess) in programmed external budgetary assistance.

- Adjustment clause for FX bonds (including FX-denominated zero-coupon bonds): Floor on change in NIR adjusted downward by amount paid on maturity of FX bonds or FX-denominated zero-coupon bonds, and upward by (i) the face value of any FX bonds or FX-denominated zero-coupon bonds with maturity of less than 3 years and issued in agreement with Fund staff; and (ii) the face value of any FX bonds or FX-denominated zero-coupon bonds issued absent agreement with Fund staff.

### Budgetary FX spending
- Definition: FX spending on the part of the budgetary central government and the BSL, including budget line items listed in Text Table 2 and BSL spending items listed under “Memo Items” in Text Table 2.
- Adjustor: FX spending floor can only be exceeded in the event of unforeseen foreign exchange inflows (grants), to be utilized by Government for a specified purpose, subject to the NCG adjustment clause in paragraph 7.
- Data source: BSL’s FX cashflow tables valued at market exchange rates.

### Fiscal Spending on the National School Feeding Program (NSFP)
- Definition: All domestically financed expenditures recorded under the budget classification for school feeding (currently under 301, Ministry of Basic and Secondary Education) in the Government of Sierra Leone’s Chart of Accounts. This includes:
  - Food procurement for school meals;
  - Transportation and logistics costs for delivery to schools;
  - Distribution and related operational expenses.

*Source: annex detailing which capital projects are to be financed (TMU and accompanying tables and benchmark list).*

### 18. Measurement:. Spending will be measured on a cash basis, as recorded in the Integrated

### 18. Measurement:

### Measurement and Monitoring of School Feeding Spending
- Spending will be measured on a cash basis, as recorded in the Integrated Financial Management Information System (IFMIS), under the functional classification for school feeding within the Ministry of Basic and Senior Secondary Education (MBSSE).
- The Ministry of Finance shall report monthly execution data for the school feeding program to IMF staff within 30 days after the end of each month. Reports shall include:
  - (i) actual spending against the budget line for school feeding;
  - (ii) source of financing (domestic vs. external); and
  - (iii) any adjustments applied under this TMU.

### Assumptions on External Budgetary Assistance (programed cumulative calendar year amounts by test date)
- December 31, 2025: US$ 15.8 million
- March 31, 2026: US$ 40 million
- June 30, 2026: US$ 52 million
- September 30, 2026: US$ 52 million
- December 31, 2026: US$ 73 million

### New Concessional External Debt (original maturity ≥ one year)
- Definition and treatment:
  - New external debt: all forms of new external debt with original maturity of one year or more contracted or guaranteed by the public sector based on residency of the creditor.
  - External debt definition applies to debt as defined in the Guidelines on Public Debt Conditionality in Fund Arrangements and to commitments contracted or guaranteed for which value has not been received.
  - Residency of the creditor is determined on the basis of incorporation in Sierra Leone as a subsidiary.
  - The “public sector” is defined in paragraph 27.
- Contracting date for program purposes: when signed by the government of Sierra Leone and ratified by Parliament.
- Exclusions: disbursements from the IMF and debts subject to rescheduling.
- Reporting requirement: government will report any planned external borrowing and its terms to Fund staff before debt is contracted or guaranteed.
- Application: the ceiling on new concessional external debt with original maturity of one year or more is applied on a continuous basis and evaluated in terms of cumulative changes within each calendar year.
- Concessionality threshold:
  - A debt is concessional if it includes a grant element of at least 35 percent.
  - Grant element = (nominal value − NPV) / nominal value, expressed as a percentage.
  - NPV is calculated by discounting future debt-service payments using a discount rate of 5 percent at the signing date.

### New Non-Concessional External Debt Contracted or Guaranteed by the Public Sector
- Definition: external debt on terms that do not meet the concessionality definition above.
- Reporting: External debt and its concessionality will be reported by the Debt Management Division of the Ministry of Finance and measured in US$ at current exchange rates.
- Application: This performance criterion (PC) applies on a continuous basis.
- PV calculation for variable-rate loans:
  - For loans with variable interest = benchmark rate + fixed spread, PV uses a program reference rate plus the fixed spread (in basis points) from the loan contract.
  - Program reference rate for six-month USD SOFR: 3.23 percent (will remain fixed for the remainder of the program).
  - Spreads of six-month benchmark rates over six-month USD SOFR:
    - Euro Short-Term Rate (ESTR): -50 basis points
    - JPY Tokyo Overnight Average Rate (TONAR): -300 basis points
    - GBP SONIA: 50 basis points
    - For currencies other than Euro, JPY, and GBP: spread over six-month USD SOFR is zero basis points.
  - If variable rate linked to a benchmark other than six-month USD SOFR, add a spread reflecting the difference between that benchmark and six-month USD SOFR (rounded to the nearest 50 basis points).
  - This PC applies on a continuous basis.

### Outstanding Stock of Short-term External Debt (maturities < one year)
- Definition: external debt stock with a maturity of less than one year contracted or guaranteed by the public sector.
- Exclusions: trade credit with maturity of one year or less for imports.
- Public sector definition: paragraph 27.
- Application: PC applies on a continuous basis.

### External Payment Arrears of the Public Sector
- Definition: include all debt-service obligations (interest and principal) arising from loans contracted or guaranteed by the public sector.
- Public sector for this PC comprises:
  - central government,
  - regional government,
  - state owned enterprises (as listed in Annex 9 of the 2023 budget documents),
  - and the BSL.
- The non-accumulation of external arrears is a continuous performance criterion during the program period.
- For this PC, external arrears are obligations not paid on due dates (taking into account contractual grace periods, if any).
- Exclusions from this PC:
  - (i) external arrears accumulated before the approval of this ECF arrangement;
  - (ii) debts subject to rescheduling or restructuring or that are under litigation.
- Application: this PC will apply on a continuous basis.

### Quantitative Indicative Targets (definitions)
- Domestic Revenue of Central Government:
  - Floor defined as total central government revenue, as presented in the central government financial operations table, excluding external grants.
- Domestic Primary Balance:
  - Definition: Central Government Revenue less expenditures and net lending adjusted for interest payments, foreign financed capital expenditure, foreign financed elections and foreign financed energy spending, foreign financed cash paydown of domestic arrears and capital transfers used to recapitalize financial institutions.
- Social Spending:
  - For the ECF arrangement, defined as sum of all non-salary, non-interest recurrent expenditure and domestic capital expenditure as defined in Attachment B covering:
    - (i) cash transfers;
    - (ii) free health care initiative;
    - (iii) education support programs, excluding the school feeding program;
    - (iv) other social assistance programs; and
    - (v) employment/active labor market programs.
- Domestic Arrears:
  - Defined as (i) the stock of legacy (pre-April 2018) arrears determined for the authorities’ arrears clearance strategy; and (ii) stock of outstanding cheques reconciled with the BSL.

### Program Monitoring
- A program-monitoring committee shall be maintained composed of senior officials from the MoF, the BSL, and other relevant agencies.
- Committee responsibilities:
  - monitor performance under the program;
  - recommend policy responses;
  - inform the IMF regularly about program progress;
  - transmit supporting materials necessary for evaluation of PCs and benchmarks.
- Reporting: committee will provide monthly reports to the IMF on progress in implementing the program’s quantitative targets and structural benchmarks.

### Annex I: Implementation of Public Debt Limits (definition of “debt”)
- The term “debt” follows point No. 8a of the Guidelines on Public Debt Conditionality in Fund Arrangements (June 30, 2015):
  - Debt understood as a current liability created under a contractual arrangement through provision of value (assets or services) requiring future payments (assets or services) to discharge principal and/or interest.
  - Primary forms include:
    - (i) loans (deposits, bonds, debentures, commercial loans, buyers’ credits, repurchase agreements, official swap arrangements);
    - (ii) suppliers’ credits (deferred payments for goods/services);
    - (iii) leases (present value at lease inception of expected lease payments, excluding operation/repair/maintenance payments).
  - Arrears, penalties, and judicially awarded damages from failure to pay under a contractual obligation that constitutes debt are debt.
  - Failure to make payment on obligations not considered debt under this definition (e.g., payment on delivery) will not give rise to debt.

### Attachment A: Summary of Data Reporting to IMF Staff (selected reporting frequencies and deadlines)
- Real sector:
  - National accounts: Annual; End of year + 9 months
  - GDP deflators by sector: Annual; End of year + 9 months
- Public finance:
  - Net government position and details of nonbank financing, including changes in stocks of arrears, stock of the float, treasury bills, and bonds: Monthly; End of month + 6 weeks
  - Government flow-of-funds table (Government Financial Operations Table): Monthly; End of month + 6 weeks
  - Details of all new external borrowing and guarantees provided by government on new borrowing, including associated concessionality calculation (percentage) for each new loan: Monthly; End of month + 4 weeks; the contracting or guaranteeing of external debt should be immediately reported to IMF staff
  - External debt service payments (principal and interest) to each creditor: Monthly; End of month + 4 weeks
  - Outstanding external arrears and repayments (if applicable): Monthly; End of month + 4 weeks; the occurrence of new external arrears should be immediately reported to IMF staff
- Monetary and financial data:
  - Monetary survey: Monthly; End of month + 6 weeks
  - Balance sheet of the BSL: Monthly; End of month + 6 weeks
  - BSL monitoring sheet of net financing of the financial sector to the government: Daily; COB + 2 days
- External sector:
  - Net official foreign reserves: Weekly; End of week + 1 week
  - Foreign exchange cash flow table, including details on government FX transactions: Monthly; End of month + 3 weeks

### Attachment B: Definition and Composition of Social Spending (selected items and figures)
- Total Social Spending: 0.65 percent of GDP
  - Non-Salary, Non-Interest Recurrent Expenditure: 1,217,064 (in thousands of Leones)
  - Domestic Capital Expenditure: 970,608 (in thousands of Leones)
  - Total Social Spending: 246,456 (in thousands of Leones)
- Cash Transfers:
  - 0.00 percent of GDP; 3,527 (in thousands of Leones)
  - Sierra Leone Social Safety Net (Cash Transfers to the Aged): 308 (in thousands of Leones)
- Free Health Initiative:
  - 0.19 percent of GDP; 362,126 (in thousands of Leones)
  - Free Health Care Initiative (All Health Expenditure): 304 (in thousands of Leones)
- Education Support Program:
  - 0.34 percent of GDP; 645,074 (in thousands of Leones)
  - Free Education Programme (All Education Expenditure): listed under MDA Code 300/301
- Other Social Assistance:
  - 0.06 percent of GDP; 118,245 (in thousands of Leones)
- Employment/Active Labour Market Program:
  - 0.05 percent of GDP; 88,092 (in thousands of Leones)
- Note: figures in Attachment B are presented in thousands of Leones.

### Debt Sustainability Analysis (selected findings and risk assessment)
- Overall assessment:
  - Sierra Leone’s public debt is sustainable, but risks of external and overall debt distress are high, unchanged from the previous DSA published in November 2024.
  - The downgrade to “weak” debt-carrying capacity underscores serious short-term liquidity and solvency vulnerabilities.
  - This assessment hinges on the authorities’ commitment to program objectives—including a very ambitious fiscal adjustment—and continued access to highly concessional external financing including grants.
- Key indicator outcomes and timing:
  - The external debt service-to-revenue ratio breaches its threshold until 2028.
  - The PV of the public debt-to-GDP ratio breaches its threshold until 2026.
  - The overall debt-service-to-revenue ratio remains above 100 percent until 2029.
  - All debt indicators decline over the medium to long term.
- Policy implications and risks:
  - Efforts to seek grant financing and lengthen the maturity of debt remain critical as debt service ratios and gross financing needs will remain elevated over the medium term.
  - Domestic rollover risks are mitigated by the authorities’ commitment to bringing down the domestic financing envelope.
  - Sierra Leone is highly susceptible to shocks to exports, commodity prices, the primary balance, and exchange rate, as well as contingent liabilities.
  - The risk to the required fiscal consolidation not being sustained is high given frequent fiscal overruns in recent years.
- Debt-carrying capacity:
  - Downgraded to “weak” with a composite indicator value of 2.65 based on the October 2025 IMF World Economic Outlook (WEO) and the 2024 World Bank Country Policy and Institutional Assessment (CPIA).
  - This provides a second signal for downgrade from “medium” to “weak” after the first signal in April 2025.

*Source: 1sleea2026001-source-pdf - 18. Measurement: (excerpt).*

### 3.      End-2024 stock data shows that Sierra Leone’s public external debt declined both in US

### 3.      End-2024 stock data shows that Sierra Leone’s public external debt declined both in US

### Debt stock and recent developments
- Total public debt declined to 44.4 percent of GDP amid strong nominal GDP growth and the stability of the nominal exchange rate against the dollar.
- Public external debt declined in US dollar terms and as a ratio to GDP (Text Figure 1).
- The authorities maintained new external borrowing below the Fund-supported program ceiling.
- As of end-2024:
  - External debt stock and domestic debt stock are shown in Text Figure 2 (figures presented in source charts).
  - Domestic 364-day T-bills composition: 35.9 percent held by the BSL, 52.2 percent by commercial banks, and 11.8 percent by non-banks.

### Composition of public debt and contingent liabilities
- Approximately 61 percent of total public and publicly guaranteed (PPG) debt is external debt.
- Of total PPG debt stock:
  - IMF: 14.0 percent (non-restructurable multilateral obligation)
  - WB: 14.3 percent (non-restructurable multilateral obligation)
- The remaining 39 percent is domestic debt.
- Contingent liabilities stress test coverage (Text Table 2):
  - 1. The country’s coverage of public debt: central government plus social security, central bank, government-guaranteed debt (default setting used).
  - 2. Other elements of the general government not captured in 1.: 0 percent of GDP (0.0)
  - 3. SOE’s debt (guaranteed and not guaranteed by the government): 2 percent of GDP (5.0) — Reflects authorities’ estimate of total indebtedness of SOEs and rebased GDP.
  - 4. PPP: 35 percent of PPP stock (0.0) — PPP capital stock is under 3 percent of GDP.
  - 5. Financial market (the default value of 5 percent of GDP is the minimum value): 5 percent of GDP (5.0)
  - Total (2+3+4+5) (in percent of GDP): 10.0

### New external arrears and central bank claims
- In February 2024 the authorities verified external arrears of US$23.4 million owed to two companies for road construction and penalty interest on delayed payment of civil war-related services.
  - The arrears were outside the program period and did not trigger a breach of the continuous PC.
  - The arrears are included in the debt and their clearance is accounted for in debt service projections.
- BSL net claims on the government:
  - Increased from 9,895 million leones (end-December 2023) to 12,074 million leones (end-December 2024), and to 15,298 million by end-September 2025.
- BSL monetary policy implementation:
  - Committed to replacing outright purchases of government securities with specialized short-term liquidity instruments as the main monetary policy instrument by June 2026, in line with the new monetary policy strategy.

### Macroeconomic assumptions and projections (DSA basis)
- Growth:
  - Decelerated to 4.3 percent in 2024 (primarily due to weak mining and construction).
  - Projected at 4.4 percent in 2025.
  - Projected to reach potential of 4.6 percent over the medium term.
- Inflation:
  - Fell to single digits by April 2025.
  - Expected to remain in single digits going forward.
- Fiscal:
  - The fiscal effort (change in domestic primary balance) amounted to 2.9 ppts of GDP between 2022 and 2024, and was 1.9 ppts short of its target in 2024.
  - As of Q3-2025, authorities on track toward domestic primary balance improvement of another 3.4 ppts of GDP in 2025.
  - Remaining fiscal effort between 2025 and end of IMF ECF arrangement in 2027: 2.2 ppts of GDP (0.7 ppts from spending cuts; 1.5 ppts from tax revenue mobilization).
  - After 2027 projections assume gradual loosening of the domestic primary balance.
- External:
  - Current account deficit projected to shrink to 4.8 percent of GDP in 2025 from 6.9 percent of GDP in 2024.
  - Reserves dropped to 1.5 months of imports at end-September (year not explicitly restated; context indicates 2025).
  - Authorities committed to accumulating US$71 million in reserves in Q4-2025 through market purchases and an FX bond issuance.

### New tax policy measures (Text Table 5)
- Measures and annual revenue impact (Percent of GDP unless otherwise indicated):
  - Corporate Income Tax: Restore MAT to low profitability companies; Abolish investment allowance; Raise CIT rate from 25 to 30 percent — 0.100 and 0.375 (items listed separately in table).
  - Raise non-resident withholding tax rate from 10 to 20 percent — 0.106
  - Personal Income Tax — 0.011
  - Indirect Tax measures:
    - Raise Petrol and Diesel excises to Nle 4 and increase RUC by Nle 1 — 0.518
    - Raise excises on cigarettes from Nle 2 to 3 per package — 0.100
    - Introduce an excise on cement (NLe 10 per each 50kg bag) — 0.005 and 0.111 (items listed separately)
    - Raise import duty on rice from 5 to 10 percent — 0.106
    - Remove GST exemption on supply of water (56.2 W:P ratio) — 0.080
    - Remove GST exemption on magazines (16.2 W:P ratio) — 0.005
    - Expand circulation levy to boats and vessels — 0.002
  - Total: 1.518 (annual, Percent of GDP)
- Ancillary details:
  - Circulation levy increases: Raise circulation levy from Nle 200 to 500 and expand to three-wheeled vehicles.
  - Raise resident withholding tax rate on rental income from 10 to 15 percent.
  - Sources: 2025 FAD TP report, staff and authorities' calculations.

### Financial assumptions and borrowing costs
- IDA financing assumptions:
  - Grant financing through 2028;
  - Zero-interest, 40-year credit in 2029 with an eleven-year grace period and no interest or service charge;
  - 100 percent regular IDA credits thereafter.
- Additional SDR retrocession planned in 2025:
  - Expect use of NLe1,400 million (US$60 million, or 0.8 percent of GDP).
  - Historical SDR retrocessions: Le 1,233 billion (1.3 percent of GDP) in 2022 and Le 1,866 billion (1.5 percent of GDP) in 2023.
- Post-program financing gap (PPFG) assumptions for 2028-30:
  - PPFG of $20, $30 and $30 million in 2028, 2029, and 2030 respectively, with a 0.5 percent interest rate, 5-year grace period, 15-year maturity, and overall grant element of 35.5 percent.
- Domestic financing assumptions:
  - 25 percent of new domestic debts financed by 1-3 year bonds in 2025.
  - 30 percent of new domestic debts financed by 1-3 years bonds between 2026-29.
  - 2.3 percent of new domestic debt projected to be financed by 4-7 years foreign currency-denominated bonds in 2025.
- Domestic borrowing costs:
  - Fell from 40 percent in May to around 15-17 percent in June-September 2025.
  - T-bill rates projected to remain around 15-17 percent through end of the program.
  - Inflation projected between 7 to 10 percent in the outlook; real borrowing costs expected to remain within 7 to 10 percent over the medium-term.

### Risks, realism assessment, and contingency planning
- Key risks:
  - High downside risks from domestic and external shocks, governance challenges, exposure to global volatility via mining and commodity prices, food insecurity, higher taxes and prices fueling social tensions.
  - Adverse shifts in domestic cost of borrowing could push debt service to unsustainable levels.
  - Risk of weakening government commitment to fiscal consolidation, especially pre-election.
  - Global trade uncertainty, tighter financial conditions, sovereign-bank nexus, climate shocks to rainfed agriculture, and technical/capacity delays in tax policy implementation.
- Mitigations:
  - Government commitment to low inflation and fiscal consolidation.
  - IMF and World Bank support for domestic revenue mobilization, expenditure rationalization, and governance strengthening.
  - Feed Salone program expected to boost agriculture, lower inflation and narrow current account deficit.
- Realism tools:
  - The required 3-year average primary balance adjustment is 4.0 ppts of GDP, near the 88th percentile of historical distribution for Sierra Leone’s peers; flagged as substantial optimism relative to historical trend.
  - Staff considers the adjustment achievable given authorities’ commitment and that much of the effort is expected to be completed by this year.
- Contingency planning (authorities prepared to, if needed):
  - (i) Reprioritize spending, including further rationalizing domestically financed capital expenditure.
  - (ii) Frontload additional revenue measures, including by introducing a new PIT threshold of 35 percent.
  - (iii) Implement short-term emergency measures, including temporarily increasing the personal income tax.

### Country classification and stress-test scenario
- Sierra Leone’s debt-carrying capacity was downgraded to “weak.”
  - A first signal for downgrade registered in April 2025.
  - Current Composite Indicator (CI) score: 2.65 based on latest data including the October 2025 WEO and the 2024 CPIA — constitutes the second signal and leads to downgrade to “weak.”

*Source: Sierra Leonean authorities and IMF staff estimates.*

### 11.      Stress tests generally follow standardized settings, with the addition of two tailored

### 11. Stress tests generally follow standardized settings, with the addition of two tailored stress tests to capture risks related to contingent liabilities and commodity price shocks

### Stress testing framework and tailored shocks
- Two tailored stress tests added: combined contingent liabilities and commodity price shock.
- Commodity price shock magnitudes are based on the commodity price outlook prepared by the IMF Research Department.
- The combined contingent liabilities stress test is described in ¶2 above.
- Stress tests indicate sensitivity especially to shocks to exports and a one-time depreciation, and to historical scenario shocks.

### Applicable thresholds for debt indicators (Text Table 7)
- PV of PPG external debt in percent of GDP: 30%
- PV of PPG external debt in percent of exports: 140%
- PPG external debt service in percent of exports: 10%
- PPG external debt service in percent of revenue: 14%
- PV of total public debt in percent of GDP: 35%

### External debt sustainability (External DSA)
- Assessment: Sierra Leone is at high risk of external debt distress; PPG external debt is assessed to be sustainable.
- Sustainability premised on: ambitious fiscal adjustment; continued reliance on concessional financing and grants; moderately high growth rates.
- Factors improving debt paths relative to last DSA: continued stability in the nominal exchange rate, tight policy mix, stable macroeconomic environment.
- Policy recommendation: authorities should continue limiting new external borrowing and restrict external borrowing to highly concessional loans.
- Under the baseline:
  - Both the PV of the PPG external debt-to-GDP ratio and the PV of the PPG external debt-to-export ratio decline over the medium term.
  - Projected decline reflects repayment of past ECF disbursements (including Ebola period) and projected growth in GDP and exports.
  - Historical scenario indicates increasing debt ratios due to COVID-19, Ebola, and recent large commodity price shocks.
- PPG external debt service-to-revenue ratio:
  - Exhibits a protracted breach from 2025 and declines below the new threshold of 14 percent only in 2029.
- PPG external debt service-to-exports ratio:
  - Remains below the new threshold of 10 percent over the medium and long term.
- Stress-test outcomes:
  - External debt indicators are sensitive to multiple shocks, particularly exports and a one-time depreciation.
  - All indicators are above thresholds over the medium term in response to the historical scenario shock.
  - All simulated shock scenarios cause the external debt service-to-revenue ratio to breach the threshold at least until 2028.
- Overall conclusion for external DSA:
  - Because the PPG external debt service-to-revenue ratio breaches its new lower threshold over the medium term under the baseline, Sierra Leone continues to be assessed at high risk of external debt distress.
  - All external debt indicators decline over the medium to long term.

### Composite Indicator and CI Score (Text Table 6 excerpt)
- Final Classification based on current vintage: Weak
- Classification based on the previous vintage: Weak
- Classification based on the two previous vintages: Weak (previously Medium)
- CI Score values (components A*B = C) and contributions:
  - CPIA: Coefficient 0.385; 10-year average value 3.113; CI Score component 1.204; Contribution 45%
  - Real growth rate (in percent): Coefficient 2.7; 10-year average value 1.94; CI Score component 0.124; Contribution 2%
  - Import coverage of reserves (in percent): Coefficient 4.05; 10-year average value 29.76; CI Score component 21.214; Contribution 45%
  - Import coverage of reserves^2 (in percent): Coefficient -3.99; 10-year average value 8.858; CI Score component -0.35; Contribution -13%
  - Remittances (in percent): Coefficient 2.02; 10-year average value 3.63; CI Score component 0.073; Contribution 3%
  - World economic growth (in percent): Coefficient 13.5; 10-year average value 0.3035; CI Score component 0.411; Contribution 15%
  - CI Score total: 2.65; CI rating: Weak

### Overall risk of public debt distress and public debt sustainability
- Assessment: Sierra Leone is at high overall risk of public debt distress; public debt is assessed to be sustainable.
- Domestic debt:
  - Domestic debt-to-GDP ratio projected to steadily decrease from about 19.8 percent of GDP in 2025.
  - Domestic debt-to-GDP ratio is below the median level across LICs for the projection period after 2028.
- Domestic debt service to revenues (including grants):
  - Very high at 129 percent in 2025, reflecting short tenor and rollover needs.
  - Expected to fall steadily after 2025 due to fiscal consolidation and enhanced debt management, including issuing longer-term debt as inflation falls to single digits.
- Net domestic debt issuances:
  - Large negative net domestic debt issuances through 2027 are predicated on strong front-loaded fiscal adjustment, reliance on concessional financing and grants, and moderately high growth rates.
- Under the baseline:
  - PV of public debt-to-GDP breaches the new lower threshold of 35 percent of GDP until 2026 and gradually declines over the medium term.
  - Overall debt service-to-revenue ratio is projected to fall below 100 percent by 2030 but remains relatively high throughout the projection horizon, suggesting a tight liquidity situation.
- Stress-test outcomes for public debt:
  - Shocks to combined contingent liabilities, commodity prices, and the primary balance are the most extreme shocks.
  - All simulated shocks lead the PV of debt-to-GDP to breach the threshold at least in the short run.
  - Because the total public debt burden indicator breaches its threshold and external debt service-to-revenue exceeds its threshold under the baseline, the country is assessed to have a high overall risk of debt distress.
- Policy implications:
  - (i) Sustained and significant fiscal adjustment; and
  - (ii) Continued reliance on highly concessional external financing (ideally grants), particularly from IFIs which account for a large share of Sierra Leone’s PPG external debt.

### Debt service, gross financing needs, and rollover risks
- Debt service and gross financing needs are high; reduction contingent on fiscal adjustment, lengthening debt maturities, and greater grant and concessional borrowing.
- T-bills rollover:
  - T-bills amortization accounts for around 60 percent of gross financing needs in 2025.
  - T-bills are largely held by domestic public banks and domestic subsidiaries of foreign banks; central bank holds substantial share associated with secondary market operations.
  - Rollover risk is high but somewhat mitigated by authorities’ commitment to sharply reduce the domestic borrowing envelope.
  - Staff assesses banks have capacity to absorb projected securities under the baseline.
  - Rollover risks expected to decline as net borrowing from the banking system is expected to turn negative in 2027 and beyond, maturities lengthen, and macroeconomic policies remain tight.

### Climate change risk and adaptation investment
- World Bank Country Climate and Development Report (2025) estimate: negative impact of climate change on GDP could range between 9 to 10 percent by 2050 in Sierra Leone should the risk materialize.
- DIAGNOSTIC simulation (Debt, Investment, Growth, and Natural Disaster model):
  - Upfront adaptation of climate-resilient investment combined with structural reforms to increase public investment efficiency reduces GDP losses in event of climate shock and allows faster recovery (Annex I).
  - Climate adaptation investments may initially have a negative impact on debt burden indicators, but improve these indicators in the long term by reducing need for additional post-disaster investments.
- Historical climate-related financing (2018–2022): about US$850 million (12.2 percent of GDP) received: US$400 million for adaptation; US$350 million for mitigation; US$100 million for cross-cutting programs.
- 2025 WHO award: US$20 million (0.3 percent of GDP) from the Pandemic Fund to strengthen disease surveillance, expand laboratory capacity, and build workforce.

### Risks, policy priorities, and mitigation
- Key risks:
  - Failure to achieve programmed fiscal adjustment (significant downside risk).
  - High overall public and external debt service-to-revenue ratios indicate liquidity-related vulnerabilities.
  - Debt indicators sensitive to shocks to exports, depreciation, and combined contingent liabilities.
- Policy priorities emphasized by the DSA:
  - Sustained fiscal consolidation underpinned by domestic revenue mobilization and strengthened public financial management.
  - Continued reliance on highly concessional financing and grants to preserve fiscal space and protect social and health spending.
  - Zero ceiling on non-concessional external debt in line with limits imposed under the requested ECF-supported program and WB SDFP and PPAs.
  - Development of deeper domestic debt market; limit future domestic borrowing and lengthen tenors through MTDS implementation.
  - Joint World Bank/IMF and AfDB technical assistance on MTDS and FY26 Performance and Policy Actions under Sustainable Development Finance Policy supported by World Bank to mitigate risks.

_Italicized source attribution: Content derived from the provided IMF PDF chapter/section._

### 19.      The authorities agreed with staff’s views on the DSA. They concurred with the urgency

### 1sleea2026001-source-pdf - 19. The authorities agreed with staff’s views on the DSA. They concurred with the urgency

### Authorities’ agreement and policy commitments
- Agreed with staff’s views on the DSA and the urgency of ensuring a sustained and credible fiscal adjustment in 2025 and beyond.
- Stated they have taken important steps and are on track towards implementing the 2026 supplementary budget.
- Committed to:
  - Continuing to prioritize grant resources.
  - Seeking only highly concessional financing.
  - Ratifying only loans within the agreed annual ceiling to safeguard debt sustainability.
  - Continuing to address high T-bill rollover risks by issuing medium-to-long-term bonds and supporting development of the domestic market.
  - Swift implementation of the medium-term debt strategy and regular public outreach to market participants.
  - Clearing domestic arrears.

### External Debt Sustainability: baseline indicators and projections (Table 1)
- External debt (nominal), of which PPG (Percent of GDP):
  - 2024: 28.5
  - 2025: 26.8
  - 2026: 25.8
  - 2027: 24.8
  - 2028: 23.5
  - 2029: 22.7
  - 2030: 22.1
  - 2035: 17.4
  - 2045: 11.4
- Change in external debt: -5.2 (2024), -1.7 (2025), -1.1 (2026), -0.9 (2027), -1.3 (2028), -0.7 (2029), -0.6 (2030), -0.9 (2035), -0.5 (2045)
- Identified net debt-creating flows: 1.5 (2024), 2.9 (2025), 0.3 (2026), 0.4 (2027), 1.0 (2028), 0.8 (2029), 0.8 (2030), 0.8 (2035), 1.3 (2045)
- Endogenous debt dynamics: -2.6 (2024), -0.9 (2025), -1.0 (2026), -1.0 (2027), -1.0 (2028), -0.9 (2029), -0.9 (2030), -0.7 (2035), -0.4 (2045)
  - Contribution from nominal interest rate: 0.2 (2024), 0.2 (2025), 0.1 (2026–2035 series)
  - Contribution from real GDP growth: -1.3 (2024), -1.1 (2025), -1.1 (2026), -1.2 (2027), -1.1 (2028), -1.0 (2029), -1.0 (2030), -0.8 (2035), -0.5 (2045)
- Residual: -6.7 (2024), -4.5 (2025), -1.3 (2026), -1.3 (2027), -2.4 (2028), -1.5 (2029), -1.4 (2030), -1.7 (2035), -1.8 (2045)
- Sustainability indicators:
  - PV of PPG external debt-to-GDP ratio: 18.7 (2024), 17.2 (2025), 16.3 (2026), 15.8 (2027), 15.0 (2028), 14.4 (2029), 14.0 (2030), 10.8 (2035), 6.9 (2045)
  - PV of PPG external debt-to-exports ratio: 80.2 (2024), 78.2 (2025), 74.6 (2026), 72.7 (2027), 70.6 (2028), 68.7 (2029), 69.3 (2030), 54.0 (2035), 33.9 (2045)
  - PPG debt service-to-exports ratio: 8.7 (2024), 9.6 (2025), 9.0 (2026), 8.7 (2027), 8.4 (2028), 7.4 (2029), 6.3 (2030), 6.2 (2035), 3.3 (2045)
  - PPG debt service-to-revenue ratio: 22.0 (2024), 20.7 (2025), 17.5 (2026), 16.1 (2027), 15.2 (2028), 13.3 (2029), 11.0 (2030), 10.6 (2035), 5.8 (2045)
- Gross external financing need (Million of U.S. dollars): 424.0 (2024), 455.7 (2025), 265.4 (2026), 280.8 (2027), 339.0 (2028), 299.3 (2029), 289.8 (2030), 339.2 (2035), 477.6 (2045)
- Key macroeconomic assumptions:
  - Real GDP growth (in percent): 4.3 (2024), 4.4 (2025), 4.5 (2026), 4.7 (2027), 4.6 (2028), 4.6 (2029), 4.6 (2030), 4.6 (2035), 4.6 (2045)
  - GDP deflator in US dollar terms (change in percent): 4.4 (2024), 5.7 (2025), 2.1 (2026), -0.1 (2027), -0.3 (2028), 0.1 (2029), 0.4 (2030), 0.2 (2035), 0.2 (2045)
  - Effective interest rate (percent): 0.5 (2024), 0.7 (2025), 0.6 (2026), 0.6 (2027), 0.6 (2028), 0.6 (2029), 0.6 (2030), 0.7 (2035), 0.8 (2045)
  - Growth of exports of G&S (US dollar terms, in percent): 17.3 (2024), 4.4 (2025), 6.2 (2026), 3.7 (2027), 2.1 (2028), 3.0 (2029), 1.7 (2030), 4.5 (2035), 5.1 (2045)
  - Growth of imports of G&S (US dollar terms, in percent): 7.4 (2024), -2.9 (2025), 2.0 (2026), 1.7 (2027), 3.3 (2028), 2.7 (2029), 4.2 (2030), 5.1 (2035), 5.2 (2045)
  - Grant element of new public sector borrowing (in percent): 33.0 (2025), 33.1 (2026), 33.1 (2027), 34.0 (2028), 40.8 (2029), 40.9 (2030), 45.6 (2035), 45.6 (2045)
  - Government revenues (excluding grants, in percent of GDP): 9.2 (2024), 10.2 (2025), 11.2 (2026), 11.7 (2027), 11.7 (2028), 11.7 (2029), 11.7 (2030), 11.7 (2035), 11.5 (2045)
  - Aid flows (Million of US dollars): 351.6 (2024), 296.1 (2025), 298.0 (2026), 294.8 (2027), 335.4 (2028), 339.3 (2029), 359.9 (2030), 377.6 (2035), 562.9 (2045)
  - Nominal GDP (Million of US dollars): 6,970 (2024), 7,687 (2025), 8,210 (2026), 8,586 (2027), 8,959 (2028), 9,377 (2029), 9,847 (2030), 12,416 (2035), 19,923 (2045)
- Memorandum items:
  - PV of external debt (in percent of GDP): 18.7 (2024), 17.2 (2025), 16.3 (2026), 15.8 (2027), 15.0 (2028), 14.4 (2029), 14.0 (2030), 10.8 (2035), 6.9 (2045)
  - Total external debt service-to-exports ratio: 8.7 (2024), 9.6 (2025), 9.0 (2026), 8.7 (2027), 8.4 (2028), 7.4 (2029), 6.3 (2030), 6.2 (2035), 3.3 (2045)
  - PV of PPG external debt (in Million of US dollars): 1300.1 (2024), 1322.4 (2025), 1340.0 (2026), 1355.2 (2027), 1343.2 (2028), 1346.0 (2029), 1381.9 (2030), 1345.2 (2035), 1374.1 (2045)

### Public Sector Debt: baseline indicators and projections (Table 2)
- Public sector debt (Percent of GDP):
  - 2024: 46.7
  - 2025: 46.6
  - 2026: 45.0
  - 2027: 42.3
  - 2028: 40.0
  - 2029: 38.0
  - 2030: 36.0
  - 2031: 33.8
  - 2032: 31.5
  - 2033: 29.8
  - 2034: 28.4
  - 2036: 25.4
  - 2045: 16.3
- Change in public sector debt: -2.8 (2024), -0.1 (2025), -1.6 (2026), -2.7 (2027), -2.3 (2028), -1.9 (2029), -2.0 (2030), -2.2 (2031), -2.3 (2032), -1.7 (2033), -1.4 (2034), -1.4 (2036), -0.5 (2045)
- Identified debt-creating flows: -1.5 (2024), 1.3 (2025), -1.0 (2026), -3.0 (2027), -2.7 (2028), -2.3 (2029), -2.4 (2030), -2.5 (2031), -2.5 (2032), -2.1 (2033), -1.8 (2034), -1.7 (2036), -0.7 (2045)
- Primary deficit: 2.2 (2024), 0.5 (2025), -1.2 (2026), -2.2 (2027), -2.0 (2028), -1.6 (2029), -1.8 (2030), -1.9 (2031), -1.9 (2032), -1.5 (2033), -1.3 (2034), -1.1 (2036), -0.3 (2045)
- Revenue and grants: 14.3 (2024), 14.1 (2025), 14.9 (2026), 15.2 (2027), 15.2 (2028), 14.3 (2029), 14.3 (2030), 14.3 (2031), 14.3 (2032), 14.3 (2033), 14.2 (2034), 14.0 (2036), 13.8 (2045)
  - of which: grants: 5.0 (2024), 3.9 (2025), 3.6 (2026), 3.4 (2027), 3.5 (2028), 2.6 (2029), 2.6 (2030), 2.6 (2031), 2.6 (2032), 2.6 (2033), 2.5 (2034), 2.3 (2036), 2.3 (2045)
- Automatic debt dynamics (contribution): -3.7 (2024), 0.8 (2025), 0.2 (2026), -0.8 (2027), -0.7 (2028), -0.6 (2029), -0.7 (2030), -0.6 (2031), -0.6 (2032), -0.6 (2033), -0.6 (2034), -0.5 (2036), -0.4 (2045)
  - Contribution from average real interest rate: 0.8 (2024), 2.7 (2025), 2.2 (2026), 1.2 (2027), 1.2 (2028), 1.1 (2029), 1.0 (2030), 0.9 (2031), 0.9 (2032), 0.8 (2033), 0.7 (2034), 0.6 (2036), 0.3 (2045)
  - Contribution from real GDP growth: -2.0 (2024), -2.0 (2025), -2.0 (2026), -2.0 (2027), -1.9 (2028), -1.7 (2029), -1.7 (2030), -1.5 (2031), -1.4 (2032), -1.4 (2033), -1.3 (2034), -1.2 (2036), -0.7 (2045)
- Residual: -1.3 (2024), -1.4 (2025), -0.6 (2026), 0.3 (2027), 0.3 (2028), 0.3 (2029), 0.4 (2030), 0.3 (2031), 0.2 (2032), 0.4 (2033), 0.4 (2034), 0.3 (2036), 0.2 (2045)
- Sustainability indicators:
  - PV of public debt-to-GDP ratio: 36.9 (2024), 37.4 (2025), 36.3 (2026), 33.9 (2027), 32.1 (2028), 30.3 (2029), 28.5 (2030), 26.6 (2031), 24.6 (2032), 23.2 (2033), 22.0 (2034), 19.5 (2036), 12.1 (2045)
  - PV of public debt-to-revenue and grants ratio: 258.3 (2024), 266.0 (2025), 244.0 (2026), 223.8 (2027), 211.4 (2028), 212.4 (2029), 199.0 (2030), 186.1 (2031), 172.1 (2032), 162.1 (2033), 155.5 (2034), 139.3 (2036), 87.7 (2045)
  - Debt service-to-revenue and grants ratio: 108.6 (2024), 144.1 (2025), 115.7 (2026), 112.0 (2027), 103.9 (2028), 105.4 (2029), 97.7 (2030), 90.4 (2031), 83.9 (2032), 69.9 (2033), 62.9 (2034), 56.6 (2036), 31.3 (2045)
  - Gross financing need: 17.7 (2024), 20.8 (2025), 16.0 (2026), 14.8 (2027), 13.8 (2028), 13.4 (2029), 12.3 (2030), 11.1 (2031), 10.1 (2032), 8.5 (2033), 7.7 (2034), 6.8 (2036), 4.0 (2045)
- Key macro/fiscal assumptions:
  - Real GDP growth (in percent): 4.3 (2024), 4.4 (2025), 4.5 (2026), 4.7 (2027), 4.6 (2028), 4.6 (2029), 4.6 (2030), 4.5 (2031), 4.5 (2032), 4.6 (2033), 4.6 (2034), 4.7 (2036), 4.6 (2045)
  - Average nominal interest rate on external debt (in percent): 0.6 (2024), 0.7 (2025), 0.6 (2026), 0.6 (2027), 0.6 (2028), 0.7 (2029), 0.7 (2030), 0.7 (2031), 0.7 (2032), 0.7 (2033), 0.8 (2034), 0.8 (2036), 0.8 (2045)
  - Average real interest rate on domestic debt (in percent): 9.1 (2024), 18.8 (2025), 10.2 (2026), 8.5 (2027), 9.2 (2028), 9.0 (2029), 8.8 (2030), 9.0 (2031), 9.3 (2032), 9.4 (2033), 9.4 (2034), 9.5 (2036), 9.5 (2045)
  - Inflation rate (GDP deflator, in percent): 10.5 (2024), 6.7 (2025), 7.5 (2026), 6.8 (2027), 6.6 (2028), 7.0 (2029), 7.4 (2030), 7.2 (2031), 7.2 (2032), 7.2 (2033), 7.2 (2034), 7.2 (2036), 7.2 (2045)
  - Growth of real primary spending (deflated by GDP deflator, in percent): 12.2 (2024), -7.3 (2025), -2.1 (2026), -1.0 (2027), 6.8 (2028), 0.0 (2029), 4.1 (2030), 3.4 (2031), 4.1 (2032), 8.2 (2033), 5.2 (2034), 6.4 (2036), 4.2 (2045)
  - Primary deficit that stabilizes the debt-to-GDP ratio: 5.0 (2024), 0.6 (2025), 0.4 (2026), 0.5 (2027), 0.3 (2028), 0.3 (2029), 0.3 (2030), 0.4 (2031), 0.4 (2032), 0.2 (2033), 0.2 (2034), 0.3 (2036), 0.2 (2045)

### Sensitivity analysis and stress tests (Tables 3 and 4)
- External DSA sensitivity:
  - PV of PPG external debt-to-GDP baseline: 17.2 (2025), 16.3 (2026), 15.8 (2027), 15.0 (2028), 14.4 (2029), 14.0 (2030), 13.4 (2031), 12.7 (2032), 12.1 (2033), 11.5 (2034), 10.8 (2035)
  - Threshold for PV of debt-to-GDP: 30 (table heading)
  - Tailored and bound tests reported including: real GDP growth, primary balance, exports, other flows, one-time 30 percent nominal depreciation, combination shocks, combined contingent liabilities, commodity price shock.
  - Note: A bold value in tables indicates a breach of the threshold.
- Public debt sensitivity:
  - PV of public debt-to-GDP baseline: 37.4 (2025), 36.3 (2026), 33.9 (2027), 32.1 (2028), 30.3 (2029), 28.5 (2030), 26.6 (2031), 24.6 (2032), 23.2 (2033), 22.0 (2034), 20.7 (2035)
  - Public debt benchmark: 35 (table heading)
  - Debt service-to-revenue baseline: 144.1 (2025), 115.7 (2026), 112.0 (2027), 103.9 (2028), 105.4 (2029), 97.7 (2030), 90.4 (2031), 83.9 (2032), 69.9 (2033), 62.9 (2034), 60.4 (2035)
  - Bound, alternative, and tailored tests reported; notable shocks include one-time 30 percent nominal depreciation and combined contingent liabilities.

### Key policy implications drawn from the DSA and authorities’ statements
- Fiscal consolidation in 2025 and beyond is critical to maintain debt sustainability trajectories shown in baseline projections (declining PV and ratios over 2025–35).
- Reliance on grant-equivalent and highly concessional financing is central to preserving favorable debt-service and PV outcomes (grant element figures and high shares of grant-equivalent financing in projections).
- Managing short-term rollover risks (notably T-bills) and lengthening maturities through medium-to-long-term bond issuance is a priority to reduce rollover vulnerability highlighted by stress tests.
- Developing the domestic market and implementing the medium-term debt strategy, combined with public outreach, are necessary to lower refinancing and market risks.
- Clearing domestic arrears is a stated commitment to strengthen debt sustainability and reduce exceptional financing / residual factors.

*Sources: Sierra Leonean authorities; and IMF staff estimates and projections as presented in the DSA tables and figures.*

### Annex I. Fiscal Reform for Climate Resilience

### Annex I. Fiscal Reform for Climate Resilience

### Model description and calibration
- Model: DIGNAD (small open economy, dynamic general equilibrium model).
- Model purpose: Analyze how public investment affects growth and debt sustainability, factoring in climate shocks, capital damage, productivity loss, investment efficiency, and creditworthiness; evaluates debt risks after disasters and impact of adaptation policies while considering inefficiencies and absorptive capacity limits.
- Version detail: Uses the version that incorporates tax collection efficiency (C-efficiency ratio for GST performance).
- Calibration date and steady state: Calibrated using Sierra Leonean economic data as of end-December 2024, with steady-state values based on 2018-2024 averages.
- Key calibration parameters:
  - Public investment infrastructure: 4.5 percent (of GDP).
  - Public investment efficiency: 0.52 (per the IMF’s 2020 PIMA).
  - Initial public debt: 44.0 percent of GDP (2024 estimate).
  - GST collection efficiency: estimated to average 18 percent during 2018-2023.
- Disaster timing: A major natural disaster is simulated in 2030.
- External projection referenced: World Bank's CCDR estimates that overall climate change is projected to cause a GDP loss that could be as high as 10 percent by 2050 without adaptation actions.

### Scenario design
- Common design element: For each scenario the government invests 2.0 percent of GDP in additional public infrastructure for each of the five years before the natural disaster and finances this expenditure through a mix of grants and concessional borrowing as specified below.
- Baseline scenario:
  - Investment type: Additional standard public infrastructure.
  - Financing: Grants 1.0 percent of GDP; concessional borrowing 1.0 percent of GDP.
  - Disaster timing in model narrative: A climate disaster is simulated in year 4 (as stated in the scenario text).
  - Expected effects: Decline in GDP, private investment, and private consumption; increase in public debt to GDP ratio following reconstruction spending and lower GDP.
- Adaptation scenario:
  - Investment type: Climate-resilient public infrastructure (instead of standard).
  - Financing: Grants 1 percent of GDP; concessional borrowing 1.0 percent of GDP.
  - Expected effects: Stronger real GDP growth than baseline due to higher return on adaptation investment; lower impact of the climate shock on output; faster GDP growth recovery; lower losses to private investment and consumption than baseline.
- Adaptation and reform scenario:
  - Combines adaptation investments with reforms to increase public investment efficiency by 20 percentage points (ppts) to reach the average level of estimated efficiency in the SSA region.
  - Assumes GST tax collection efficiency increases gradually in five years from 18 percent to 30 percent (just short of the average level in Sub-Saharan Africa, 35 percent).
  - These reforms reflect measures recommended under the ECF arrangement.
  - Expected effects: Lower output losses and faster recovery compared with the other two scenarios due to enhanced climate resilience and efficiency.

### Simulation results and macro-fiscal implications
- General finding: Upfront investment in climate-resilient infrastructure, combined with efficiency-enhancing fiscal reforms, reduces the adverse macroeconomic impact of natural disasters in Sierra Leone.
- DIGNAD simulation outcomes (qualitative and comparative):
  - Early resilience measures mitigate disaster effects on growth and debt.
  - Without revenue and spending reforms, initial costs of resilience investments worsen fiscal deficits.
  - Adaptation reduces the depth of real GDP decline from a disaster and accelerates recovery relative to baseline.
  - Combining adaptation with public investment efficiency gains and improved GST collection yields the most favorable outcomes for output and debt dynamics.
- Fiscal management implication: Mobilizing domestic revenue and improving public investment and tax collection efficiency are critical for long-term macroeconomic stability and to offset short-run fiscal costs of resilience investments.

### Related fiscal and program updates (staff statement excerpts)
- FX reserves and corrective action:
  - Authorities accumulated $71 million in FX reserves to correct repeated NIR target misses; this includes US$21 million in FX purchases and a US$50 million 4-year FX bond issuance.
  - Staff project reserves to reach 2 months of imports by end-2025 after remaining broadly flat since end-September ahead of corrective action and expected external financing disbursements.
- Bank resolution and fiscal cost:
  - Government support to close the funding gap for the acquiring bank will amount to $5.2 million.
- Revenue measures and budget actions:
  - Authorities submitted the 2026 Finance Bill, which includes tax measures estimated to yield more than 1.5 percentage points (ppts) of GDP in annual revenue.
  - Staff quantified measures in the Bill at 1.52 ppts of GDP, plus a new duty exemption of -0.01 ppts of GDP, and several additional revenue-enhancing measures not yet quantified by staff.
  - Authorities submitted to Parliament a budget consistent with key parameters of the macro-financial framework listed in MEFP Table 2; the budget speech establishes capital expenditure envelopes for both 2026 and 2027 and includes an annex detailing financed projects and delayed projects from Annex 5 of the 2025 budget.

*Source: Annex I. Fiscal Reform for Climate Resilience (IMF staff; DIGNAD simulation results and staff statement excerpts).*

### 5. The authorities met Prior Action 4 by publishing Sierra Leone’s Governance and

### 5. The authorities met Prior Action 4 by publishing Sierra Leone’s Governance and Corruption Diagnostic Report.

### Program Performance
- End-December 2024 quantitative performance criteria (QPC) on Net Credit to Government (NCG), Net Domestic Asset (NDA) and Net International Reserves (NIR) were missed.
  - NCG and NDA missed due to the Bank of Sierra Leone’s (BSL) indispensable liquidity intervention.
  - NIR missed due to higher than projected spending on essential goods and services using forex and subsidies and transfers to independent power producers.
- End-June and end-September QPCs were met except the NIR.
- Structural benchmarks (SB) reviewed during the combined first and second reviews:
  - Eight (8) SB reviewed; eight (8) completed, two (2) rescheduled.
  - Of completed SBs: four (4) completed earlier, three (3) completed through prior actions, one (1) completed with delay.
  - SB for recapitalizing the central bank rescheduled to March 2026.
  - SB on improving governance of MMDMC and the MWF replaced with a March 2026 SB to incorporate findings from the Governance and Corruption Diagnostic report.
- Corrective measures completed (four prior actions for the 1st and 2nd reviews):
  - Submission to Parliament of a Finance Bill for 2026 outlining measures expected to generate a minimum of 1.5 percent of GDP in increased annual tax revenues.
  - A 2026 budget consistent with program projections, including annexes on capital projects for 2026 and 2027 and those deferred beyond 2027.
  - Initiating resolution proceedings for the bank meeting criteria in Section 69 of the Banking Act 2019 as of end-December 2023.
  - Publishing the Governance and Corruption Diagnostic report on the Ministry of Finance website.
- Authorities seek Executive Directors’ support to conclude the first and second reviews under the Extended Credit Facility (ECF) arrangement and approval of waivers for Non-Observance of Performance Criteria.

### Recent Economic Developments and Outlook
- Real GDP growth projections and recent outcomes:
  - Real GDP growth: 4.3 (2024 Prel.), 4.4 (2025 Proj.), 4.5 (2026 Proj.) [from Selected Economic Indicators table].
  - Narrative projects rebound from 4.3 percent in 2024 to 4.5 percent in 2025, and further increase to an estimated 4.7 percent in 2026.
  - Real GDP growth, excl. iron ore: 3.7 (2024 Prel.), 4.3 (2025 Proj.), 4.4 (2026 Proj.).
- Inflation and interest rates:
  - Inflation, end of period (%): 13.8 (2024), 7.0 (2025), 9.0 (2026) [table].
  - Narrative: inflation peaked at 54.6 percent in October 2023, reached 13.8 percent by December 2024, and single digit at 4.4 percent in October 2025.
  - Cost of borrowing reduced from about 40 percent in May 2025 to a range of 15-17 percent since June 2025.
- External sector:
  - Current account (percent of non-iron ore GDP): -7.5 (2024), -5.1 (2025), -3.1 (2026) [table].
  - Gross reserves (months of imports): 2.1 (2024), 2.0 (2025), 2.5 (2026) [table].
  - Gross international reserves remained at 1.5 months of import (narrative) due to accumulated FX spending and less FX inflows.
  - Leone remains stable against the United States dollar.
- Risks and drivers:
  - Downside risks include economic slowdown in trading partner countries and energy supply challenges.
  - Positive contributors: developments in the mining sector, increased agricultural productivity, and authorities’ reform commitments with Fund support.

### Fiscal Policy and Debt Management
- Fiscal outcomes and targets:
  - Central Government Finances (percent of non-iron ore GDP) [table]:
    - Revenue, excl. grants: 10.1 (2024), 10.8 (2025), 11.8 (2026).
    - Grants: 3.4 (2024), 1.9 (2025), 2.0 (2026).
    - Expenditure and net lending: 19.1 (2024), 18.1 (2025), 16.2 (2026).
    - Overall balance: -5.6 (2024), -5.4 (2025), -2.3 (2026).
    - Public debt: 50.8 (2024), 49.3 (2025), 47.3 (2026).
  - Domestic primary balance:
    - Domestic primary surplus equal to 0.3 percentage points of GDP achieved in the first three quarters of 2025.
    - Target to reach 0.6 percent by end of 2025.
    - 2026 budget and finance bill targets a domestic primary surplus of 1.6 percent of GDP in 2026.
  - Fiscal consolidation since 2022 exceeded 5 percentage points of GDP, primarily via enhanced tax revenue mobilization.
- Revenue mobilization measures (Medium Term Revenue Strategy - MTRS):
  - Measures aim to generate additional revenues of 1.5 percent of GDP mainly through tax policy measures.
  - Key steps:
    - Setting revenue performance targets in a performance contract between Ministry of Finance and the National Revenue Authority (NRA).
    - Customs revenue enhancement strategies supported by AFRITAC West 2 to be completed by June 2026.
    - Audit of ASYCUDA planned with UNCTAD support.
    - Maximizing revenues from large taxpayers and the extractive sector through EIRA 2018.
    - Implementing Fund-supported Safe Harbour framework.
    - Improving oversight of the Mineral Wealth Fund (MWF) with Fund support.
    - Introducing electronic single window with World Bank support.
    - Accelerating efforts to operationalize revenue courts by end 2026.
- Expenditure control and priorities:
  - Wage bill target: maintain at 4.2 percent of non-iron ore GDP over the medium term.
  - Sustain school feeding program for a minimum of 800,000 pupils.
  - Plans to contain goods and services spending and reduce energy subsidies; update arrears clearance strategy by June 2026.
  - If revenues underperform, authorities will further rationalize domestically financed capital expenditures.
- Fiscal reporting and cash management:
  - Plan to adopt GFSM 2014 by September 2026.
  - Expanded cash and debt management committee (ECDMC) terms of reference approved by cabinet directive; require 10 key ministries, departments and agencies to submit monthly cashflow forecasts to underpin quarterly allocations.
  - Intention to conduct an independent audit of arrears and publish the report on the Ministry of Finance website; publish a plan for clearing arrears supported by the Fund.
- Debt management measures:
  - Steps to lengthen domestic debt maturities and issue debt instruments via competitive auctions.
  - Restrict issuance of FX swaps or FX denominated securities to exceptional circumstances with favourable rates and Fund approval.
  - Commit to annually updating the Medium Term Debt Strategy (MTDS) and improving market communication.
  - Avoid offering T-bills or T-bonds at unsustainable rates; enforce regulatory standards for institutional investors in government securities; review primary dealership roles with support from partners.

### Monetary, Exchange Rate, and Financial Sector Policies
- Monetary policy stance:
  - Bank of Sierra Leone maintained a tight monetary policy stance over the past two years to tame inflation and safeguard financial stability.
  - Inflation at 4.4 percent in October 2025 (narrative); authorities committed to sustaining single-digit inflation over the medium term.
- Interest rates and exchange rate:
  - Interest rates fell from 40 percent in May 2025 to a range of 15 to 17 percent between mid-June and November 2025.
  - Authorities committed to allowing the exchange rate to adjust flexibly and to continue outright FX purchases as needed to meet NIR targets and strengthen FX market development.
- Financial sector stability and supervision:
  - Continued strengthening of oversight through risk-based supervision.
  - Strict enforcement of the 2019 Banking Act provisions requiring banks violating minimum capital adequacy ratio to submit credible plans to restore capital; resolution measures for persistent violations.
  - Planned adoption of components of Pillar 1 Basel II/III capital framework and ongoing regular on-site supervision of state-owned banks consistent with Fund TA recommendations.
  - Establishment of the Deposit Protection Fund Unit following the Deposit Protection Act 2023.
  - Plans to strengthen foreign currency regulations and supervision by publishing minimum foreign currency reserve requirement on foreign currency deposits and enforcing minimum prudential guidelines for commercial banks.
  - Macroprudential policy framework established; work underway to complete the crisis management plan per 2021 FSSR and FSAP recommendations.

### Structural Reforms
- Anti-corruption, governance, and mining sector reforms:
  - Governance and management reforms for MMDMC and MWF guided by the Governance and Corruption Diagnostic report.
  - Commitments under new SB on mining entities:
    - Publish MMDMC’s 2024 audited financial statements.
    - Adopt transparent policies for appointment of independent board members for the MMMC and MWF.
    - Implement key performance based indicators for the operating company with regular reporting to the MWF board.
- AML/CFT and beneficial ownership transparency:
  - Enacted the 2024 AML/CFT Act and established the Financial Intelligence Unit promoting its independence.
  - National strategy for monitoring developed through comprehensive risk assessment is near completion.
  - Amendments to the 2009 Companies Act to enhance beneficial ownership transparency (disclosure, verification, and access by relevant authorities) targeted for adoption by mid-2026.
- Agricultural and climate measures:
  - Feed Salone initiative to increase food productivity via farming inputs, land preparation support, e-voucher system reforms, and subsidizing district farm machinery rings.
  - Established the National Disaster Management Agency, developed the National Adaptation plan, published a Disaster risk financing strategy, and established the Climate Finance Unit in the Ministry of Finance.
  - Steps to transition to a greener energy mix and implement recommendations from the C-PIMA, the CCDR and the Climate Policy Diagnostic.

### Key Statistics (Selected Economic Indicators)
- Output (annual percentage change)
  - Real GDP growth: 4.3 (2024 Prel.), 4.4 (2025 Proj.), 4.5 (2026 Proj.)
  - Real GDP growth, excl. iron ore: 3.7 (2024 Prel.), 4.3 (2025 Proj.), 4.4 (2026 Proj.)
- Prices (annual percentage change)
  - Inflation, end of period (%): 13.8 (2024), 7.0 (2025), 9.0 (2026)
- Central Government Finances (percent of non-iron ore GDP)
  - Revenue, excl. grants: 10.1 (2024), 10.8 (2025), 11.8 (2026)
  - Grants: 3.4 (2024), 1.9 (2025), 2.0 (2026)
  - Expenditure and net lending: 19.1 (2024), 18.1 (2025), 16.2 (2026)
  - Overall balance: -5.6 (2024), -5.4 (2025), -2.3 (2026)
  - Public debt: 50.8 (2024), 49.3 (2025), 47.3 (2026)
- Money and credit (annual percentage change)
  - Broad money: 18.0 (2024), 14.5 (2025), 13.6 (2026)
  - Credit to the private sector: 41.2 (2024), 31.2 (2025), 21.0 (2026)
- Balance of payments (percent of non-iron ore GDP)
  - Current account: -7.5 (2024), -5.1 (2025), -3.1 (2026)
  - Gross reserves (months of imports): 2.1 (2024), 2.0 (2025), 2.5 (2026)
  - External debt: 31.0 (2024), 28.4 (2025), 27.1 (2026)

*Sources: Central Bank, Ministry of Finance, Statistics Sierra Leone, and Fund staff estimates and projections*

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_Source: https://www.imf.org/-/media/files/publications/cr/2026/english/1sleea2026001-source-pdf.pdf_