## 1sleea2026002 - 116.664 million (about US$158.6 million)

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---

### Executive Board decision and program actions
- Executive Board approved waivers of nonobservance of:
  - the continuous performance criterion on the ceiling on concessional external debt, and
  - the end-December performance criterion on net domestic assets,
  based on corrective actions taken by the authorities.
- Executive Board approved an arrangement under the Resilience and Sustainability Facility (RSF) for Sierra Leone in the amount of SDR 155.550 million (about US$211.5 million), with disbursements to begin upon completion of the first review.
- RSF purpose: support climate-sensitive public investment management, climate resilience, and financial stability.

### Macroeconomic outlook and principal risks
- Growth and inflation
  - Growth accelerated in 2025 but is expected to fall to 4 percent in 2026.
  - End-year inflation will reach 11.6 percent in 2026.
- Key downside risks
  - Rising political tensions ahead of elections.
  - Spillovers from the war in the Middle East.
  - Possible reform fatigue amid sustained fiscal consolidation.
  - Further spikes in oil and fertilizer prices, trade restrictions, declining commodity prices, delays in budget support, and extreme climate events.
- Executive Board statement (Mr. Kenji Okamura, Acting Chair) highlights
  - Policy tightening helped stabilize the exchange rate, lower borrowing costs and inflation, and restore private credit access.
  - Reserve coverage remains low, and debt is at high risk of distress.
  - Authorities have some space to accommodate fiscal pressures from the Middle East war, but persevering on fiscal consolidation—while protecting critical social spending—is key to keep debt sustainable.
  - Fuel price subsidies can help avoid disruptive price movements but must remain temporary, transparent, and adhere to the agreed cost ceiling.
  - Recommend advancing energy and public financial management reforms, strengthening tax administration and mining revenue collection, and stronger debt management.
  - Monetary policy should be tightened if inflationary pressures persist; rebuild reserves; allow exchange rate to adjust; repay overdue budget support loans to the BSL.
  - Structural reforms: strengthen arrears management, operationalize the bank resolution framework, complete resolution of the problem bank, and implement recommendations of the Governance and Corruption Diagnostic.
  - The RSF will promote balance of payments stability by supporting resilience to climate shocks in public investment, social protection, fiscal planning, and financial risks.

### Program performance, waivers, and prior actions
- ECF performance summary
  - End-December 2025 PCs/ITs: All continuous PCs met except the US$100 million ceiling on new concessional external debt; missed PC on Net Domestic Assets and ITs on Domestic Arrears and Domestic Primary Balance.
  - End-March ITs: Met ITs on NCG, NDA, NIR, and all continuous PCs; missed FX Spending, School Feeding, Domestic Revenues, Domestic Primary Balance, Social Spending, and Domestic Arrears ITs.
  - Structural benchmarks: Mixed compliance; several SBs missed but some to be completed via prior actions or replaced.
- Corrective actions underpinning waiver requests
  - Reduce the 2026 concessional external debt ceiling by the amount of the 2025 slippage (reduced by US$8.5 million).
  - Bring the NDA on track, by end-March, to achieve the revised (tighter) end-June target.
- Three prior actions for the third ECF review
  - Operationalize the safe harbor for iron ore (apply pricing formula unless advance pricing agreement exists).
  - Share with IMF staff results of a comprehensive stock-taking of central government expenditure arrears (as of end-December 2025).
  - Provide evidence that all mining agreements ratified since December 2025 comply with the EIRA in their latest ratified form.

### RSF arrangement specifics and modalities
- Requested RSF arrangement
  - Duration until December 30, 2027, aligned with the remaining duration of the ECF arrangement.
  - Access of 75 percent of quota (SDR 155.55 million).
- RSF disbursement schedule (selected)
  - Proposed RSF disbursements total SDR 155.550 million (75.0 percent of quota); disbursements linked to RMs across 2026–2027 (see program schedule entries).
- RSF priority reform areas (three pillars)
  - Pillar 1 — Climate-sensitive public investment management.
  - Pillar 2 — Climate resilience.
  - Pillar 3 — Financial stability.

### Fiscal developments, measures, and recommendations
- Fiscal outcomes and measures
  - Domestic primary balance improved by 7 ppts of GDP since 2022; tax revenue gains contributed 3.5 ppts.
  - Domestic primary surplus of 1.3 percent of GDP in 2025, up from a deficit of 2.7 percent in 2024.
  - Revenues underperformed by 10 percent in Q1-2026 (preliminary data), largely due to poor compliance.
  - Most tax measures under the 2026 Finance Act—estimated to yield 1.5 percent of GDP in additional annual tax revenues—have been implemented; removal of GST exemptions on water and magazines and expansion of the circulation levy are pending.
  - IPP transfers: authorities expect to transfer US$42.5 million more than previously envisaged to EDSA for Independent Power Producers obligations.
  - Fuel price actions: As of early May, fuel prices raised by 28 (Petrol) and 46 percent (Diesel); temporary subsidies of 1.1 (Petrol) and 4.3 (Diesel) Nle per liter maintained since April; temporary subsidy envelope capped at 0.13 ppts of GDP in 2026 and expected to be terminated in July.
- Policy recommendations and contingency planning
  - Maintain fiscal consolidation while protecting critical social spending.
  - Fuel subsidies must remain temporary, transparent, and adhere to cost ceiling.
  - Create a fiscal buffer of 0.2 ppts of GDP in supplementary budget (to be spent only in Q4-2026 and if accommodable under the end-December NCG ceiling).
  - Contingency steps if buffer insufficient: rationalize domestically financed capital expenditure; reduce goods and services spending; frontload TADAT recommendations; increase energy tariffs; consider tax policy measures (including increases in tobacco excises and further rationalization of GST exemptions on food items).
  - Prioritize energy and PFM reforms; reinforce arrears management; operationalize bank resolution framework.

### Monetary policy, reserves, and central bank actions
- Monetary policy and reserves
  - BSL reduced policy rate by 200 bps to 16.75 percent in December 2025 and has refrained from further cuts amid the Middle East war.
  - Reserve coverage increased from 1.5 months of imports in September to 1.9 months in March, aided by US$26 million in BSL reserves purchases in Q1-2026; gross reserves projected at 2.7 months of imports by end-2026.
  - Staff recommends rebuilding reserves, allowing exchange rate adjustment to shocks, strengthening safeguards, implementing the new monetary policy framework, and repaying overdue budget support loans to the BSL (total overdue budget support loans ~1.5 percent of GDP, to be repaid by end-2026).
- Monetary policy operational reforms
  - BSL Board approved monetary policy strategy in December 2025; full implementation scheduled for Q4-2026.
  - Develop guidelines for 7-day repo operations; plan to use 7-day reverse repos as primary instrument by June 2026.
  - Limit outright purchases of government securities to structural liquidity management purposes.
- Recapitalization and safeguards
  - Recapitalization underway: first instalment via a 10-year bond with an 8 percent coupon in March; dedicated budget allocation Nle 971.5 million for recapitalization; three additional installments planned in 2026.
  - IMF TA requested for risk-based recapitalization needs via stress testing.
  - Audit of FY2025 financial statements expected by end June 2026.

### Financial sector status, bank resolution, and recommended reforms
- Financial sector indicators and risks
  - Banking sector profitable and highly capitalized but vulnerable to sovereign risk.
  - Tier 1 capital ratio at 47.4 percent of risk-weighted assets.
  - Gross loans grew by 36.4 percent year-on-year in March 2026; non-performing loans ratio declined to 9.4 percent.
  - FX deposits account for 44 percent of total deposits; high dollarization and exchange rate risk persist.
- Union Trust Bank (UTB) resolution
  - Authorities plan to resolve UTB by end-June; accounting firm hired to value assets/liabilities to be transferred and determine funding gap to be covered by government.
  - Legal instrument for transfer being finalized; estimated funding gap for problem bank NLe 192 million (0.1 percent of GDP) or less.
- Structural recommendations
  - Strengthen arrears management; operationalize bank resolution framework by end-December 2026; complete resolution of problem bank.
  - Strengthen FX supervision, bank FX risk management examinations, increase net open position reporting frequency, consider reserve requirements on FX deposits by end-September 2026.
  - Equip crisis management and resolution capacity; operationalize Deposit Protection Act when adopted by Parliament.

### External support, budget support delays, and financing risks
- External budget support and timing
  - EU delivered its 2025 budget support operation in February 2026 after delays.
  - WB operation postponed to Q4-2026; AfDB and EU expected to disburse in Q4-2026.
  - Authorities requested additional WB grant support through the Rapid Response Option.
- Program financing
  - ECF is fully financed with firm commitments for the next 12 months from the WB, AfDB, and EU and good prospects for the remainder of the program.
  - Overall share of Fund financing in official budget support for the program period estimated at 69.5 percent (55 percent excluding the RSF).
- Risks to financing
  - Further delays in budget support could increase fiscal pressures, raise debt related risks, and limit build-up of external buffers.

### Debt sustainability, debt management, and capacity to repay the IMF
- Debt sustainability assessment
  - Debt is sustainable but at high risk of distress.
  - Under baseline, external debt service-to-revenue ratio would breach its threshold until 2028.
  - Present value of public debt-to-GDP ratio would breach its threshold in 2026.
  - Staff project total debt service-to-revenues to fall below 100 percent by 2028.
- Domestic borrowing and debt management
  - Net government borrowing from domestic banking system: 4.4 percent of GDP in 2024; 2.4 percent of GDP in 2025; projected to turn negative by 2027.
  - Commitments: annually update Medium-Term Debt Strategy; issue debt securities through competitive auctions; restrict issuance of domestic FX-linked debt securities to exceptional circumstances with IMF consultation; strengthen market communication and investor relations; improve reporting of SOE debt and arrears.
- Capacity to repay IMF and Fund exposure metrics
  - Projected Fund credit outstanding would peak at 7.5 percent of GDP in 2027.
  - Peak projected Fund credit outstanding is equivalent to 244 percent of quota.
  - Projected Fund credit outstanding equals 114 percent of gross reserves.
  - Annual gross repayments to the Fund are projected to peak in 2026 at 4.2 percent of exports and 0.9 percent of GDP.
  - Given RSF’s 10.5-year grace period, repayments to the Fund would begin only after the ECF is repaid.

### Severe Downside Scenario (more protracted war in the Middle East)
- WEO scenario assumption: oil price increase of around 60 percent relative to April 2026 WEO global assumptions used for baseline.
- Staff estimates this shock would:
  - increase inflation to 13 and 14.5 percent in 2026 and 2027, respectively;
  - lower growth to 2.8 and 3.4 percent in 2026 and 2027, respectively;
  - lower the primary surplus and raise gross financing needs and debt related risks.
- Baseline vs April WEO Severe Scenario (2026 / 2027 exact comparisons)
  - GDP at constant prices (percent): Baseline 4.0 / 4.5; Severe Scenario 2.8 / 3.4
  - Consumer price (end-of-period, percent): Baseline 11.6 / 9.0; Severe Scenario 13.0 / 14.5
  - Revenue (excl. grants): Baseline 11.8 / 12.2; Severe Scenario 11.4 / 11.9
  - Domestic primary balance: Baseline 1.1 / 2.8; Severe Scenario 0.1 / 2.0
  - Current account balance (incl. grants): Baseline -5.7 / -4.9; Severe Scenario -8.7 / -8.0
  - Gross international reserves (months): Baseline 2.6 / 3.7; Severe Scenario 2.3 / 3.1

### Climate vulnerability, RSF pillars, and targeted reform measures
- Climate vulnerability highlights
  - Sierra Leone ranks 22nd on the 2021 IMF-adapted ND-GAIN index.
  - Agriculture accounts for half of employment and 30 percent of value added.
  - Average temperature increased by 1°C over the last 60 years; heat days increased from 30 to 40 over the last 20 years.
  - Total annual rainfall lower than in the 1950s, but more intense rainfall episodes occur.
  - Number of extremely hot days (>35°C) could exceed 45 annually by 2050.
  - Major events and estimated damages: 2017 landslide damages about US$36 million (0.5 percent of GDP); 1-in-25 years river flood estimated losses US$75 million (1 percent of GDP).
  - About half the population lacks access to treated water; about 20 percent of population reside in Freetown (~1.5 million people), average elevation < 15 meters above sea level.
  - Median sea level rise projections 2000–2100: 0.6 meters (moderate emissions) and 0.8 meters (very high emissions); annual average cost of sea level rise estimated at 0.3-0.4 percent of GDP without adaptation.
- RSF objectives and nine Reform Measures (RMs) across three pillars (selected RMs)
  - Pillar 1 — RM1: adopt framework for climate-sensitive public asset registry and begin implementation; RM2: develop maintenance plans for climate-vulnerable infrastructure.
  - Pillar 2 — RM3: MoF to develop methodology to quantify fiscal risks from natural disasters; RM4: NDMA to prepare national vulnerability map; RM5: create Digital Social Protection Registry (DSPR); RM6: expand DSPR to at least 100,000 additional households in climate-vulnerable areas; RM7: EWRC to develop multi-year water tariff methodology.
  - Pillar 3 — RM8: BSL require banks to report loan exposure by district and sector; RM9: BSL to publish report linking loan/collateral data with climate hazard data to develop forward-looking physical risk indicators.
- RSF links to climate finance
  - RM1–RM2 and RM3–RM9 aim to increase bankability of projects, quantify fiscal risks, support evidence-based adaptation planning, and strengthen financial sector climate risk monitoring to crowd in concessional climate finance.

### Key economic indicators (selected exact figures as presented)
- Output (annual percentage change)
  - Real GDP growth: 2024: 4.4; 2025: 5.0; 2026: 4.0
  - Real GDP growth, excl. iron ore: 2024: 3.8; 2025: 4.8; 2026: 4.0
- Prices (annual percentage change)
  - Inflation, end of period (%): 2024: 13.8; 2025: 4.3; 2026: 11.6
- Central Government Finances (percent of non-iron ore GDP)
  - Revenue, excl. grants: 2024: 10.1; 2025: 10.7; 2026: 11.5
  - Grants: 2024: 3.4; 2025: 2.6; 2026: 2.2
  - Expenditure and net lending: 2024: 19.1; 2025: 17.6; 2026: 16.6
  - Overall balance: 2024: -5.6; 2025: -4.3; 2026: -2.8
  - Public debt: 2024: 51.1; 2025: 49.3; 2026: 47.3
- Money and credit (annual percentage change)
  - Broad money: 2024: 18.0; 2025: 19.3; 2026: 13.6
  - Credit to the private sector: 2024: 41.2; 2025: 49.0; 2026: 23.4
- Balance of payments (percent of non-iron ore GDP)
  - Current account: 2024: -7.1; 2025: -5.4; 2026: -3.7
  - Gross reserves (months of imports): 2024: 2.1; 2025: 2.0; 2026: 2.7
  - External debt: 2024: 31.0; 2025: 26.9; 2026: 25.5

### Program monitoring, TMU, and performance criteria adjustments
- TMU and monitoring
  - Quantitative PCs and ITs evaluated in cumulative flows from start of calendar year; TMU applies to test dates starting end-June 2026.
  - Main PCs/ITs include NCG ceiling, NDA ceiling, NIR floor (US$ millions), budgetary FX spending ceiling, School Feeding spending floor, new concessional external debt ceiling (US$ millions, continuous), and others.
- Proposed modifications to PCs and definitions
  - Raise NCG ceiling by Nle 2242 million in June and by Nle 828 million in December 2026.
  - NDA ceiling tightened in June by 5.4 percent to correct end-December slippage; end-December NDA target remains determined by end-year reserve money objective.
  - End-June NIR target modified to reflect latest timing of budget support disbursements.
  - Continuous PC on new concessional external debt tightened by US$8.5 million in 2026.
  - Amend definitions for budgetary FX spending scope, school feeding reporting frequency, and adjustment clause for FX bonds.

### Implementation, TA risks, and capacity development priorities
- Risks to TA implementation
  - Constrained by small number of officials handling many tasks; cost of implementing TA recommendations; absorptive capacity and financing constraints.
- Mitigating initiatives
  - Two resident advisors at BSL (banking supervision and monetary policy) since 2022 and a PFM resident advisor at MoF in 2024.
  - Sierra Leone pilot country for FAD’s medium-term programmatic approach to CD planning and delivery.
- CD priorities (selected)
  - Public Financial Management: strengthen project appraisal/selection, fiscal risk management, cash forecasting, expand coverage to general government, adopt IPSAS-based accounting.
  - Revenue administration: increase compliance, broaden tax base, modernize governance of NRA, automate systems, integrate ITAS with other systems.
  - Financial sector: strengthen supervision, build tools for stress tests and systemic risk monitoring.
  - Statistics: improve macroeconomic and debt-related indicators and reporting frequency.

*IMF staff report, May 29, 2026.*

### 116.664 million (about US$158.6 million).

### 1sleea2026002 - 116.664 million (about US$158.6 million)

### Executive Board decision and program actions
- The Executive Board approved waivers of nonobservance of:
  - the continuous performance criterion on the ceiling on concessional external debt, and
  - the end-December performance criterion on net domestic assets,
  based on corrective actions taken by the authorities.
- The Executive Board approved an arrangement under the Resilience and Sustainability Facility (RSF) for Sierra Leone in the amount of SDR 155.550 million (about US$211.5 million), with disbursements to begin upon completion of the first review.
- The RSF will support climate-sensitive public investment management, climate resilience, and financial stability.

### Macroeconomic outlook and risks
- Growth and inflation:
  - Growth accelerated in 2025 but is expected to fall to 4 percent in 2026.
  - End-year inflation will reach 11.6 percent in 2026.
- Key downside risks:
  - Rising political tensions ahead of elections.
  - Spillovers from the war in the Middle East.
  - Possible reform fatigue amid sustained fiscal consolidation.
  - Further spikes in oil and fertilizer prices, trade restrictions, declining commodity prices, delays in budget support, and extreme climate events.
- Executive Board statement highlights (Mr. Kenji Okamura, Acting Chair):
  - Policy tightening helped stabilize the exchange rate, lower borrowing costs and inflation, and restore private credit access.
  - Reserve coverage remains low, and debt is at high risk of distress.
  - Authorities have some space to accommodate fiscal pressures from the Middle East war, but persevering on fiscal consolidation—while protecting critical social spending—is key to keep debt sustainable.
  - Fuel price subsidies can help avoid disruptive price movements but must remain temporary, transparent, and adhere to the agreed cost ceiling.
  - Recommend advancing energy and public financial management reforms, strengthening tax administration and mining revenue collection, and stronger debt management.
  - Monetary policy should be tightened if inflationary pressures persist; rebuild reserves; allow exchange rate to adjust; repay overdue budget support loans to the BSL.
  - Structural reforms: strengthen arrears management, operationalize the bank resolution framework, complete resolution of the problem bank, and implement recommendations of the Governance and Corruption Diagnostic.
  - The RSF will promote balance of payments stability by supporting resilience to climate shocks in public investment, social protection, fiscal planning, and financial risks.

### Program performance, waivers, and prior actions
- ECF performance summary:
  - End-December 2025 PCs/ITs: All continuous PCs met except the US$100 million ceiling on new concessional external debt; missed PC on Net Domestic Assets and ITs on Domestic Arrears and Domestic Primary Balance.
  - End-March ITs: Met ITs on NCG, NDA, NIR, and all continuous PCs; missed FX Spending, School Feeding, Domestic Revenues, Domestic Primary Balance, Social Spending, and Domestic Arrears ITs.
  - Structural benchmarks: Mixed compliance; several SBs missed but some to be completed via prior actions or replaced.
- Corrective actions underpinning waiver requests:
  - Reduce the 2026 concessional external debt ceiling by the amount of the 2025 slippage.
  - Bring the NDA on track, by end-March, to achieve the revised (tighter) end-June target.
- Proposed prior actions to strengthen structural reform performance:
  - Operationalize the safe harbor for iron ore.
  - Share with IMF staff results of a comprehensive stock-taking of central government expenditure arrears.
  - Provide evidence that all mining agreements ratified since December 2025 comply with the EIRA in their latest ratified form.

### RSF arrangement specifics
- Requested RSF arrangement:
  - Duration until December 30, 2027, aligned with the remaining duration of the ECF arrangement.
  - Access of 75 percent of quota (SDR 155.55 million).
- RSF priority reform areas:
  - Climate-sensitive public investment management.
  - Climate resilience.
  - Financial stability.

### Fiscal and monetary developments and policy recommendations
- Fiscal:
  - The domestic primary balance improved by 7 ppts of GDP since 2022; tax revenue gains contributed 3.5 ppts.
  - Authorities achieved a domestic primary surplus of 1.3 percent of GDP in 2025, up from a deficit of 2.7 percent in 2024.
  - Revenues underperformed by 10 percent in Q1-2026 (preliminary data), largely due to poor compliance.
  - Most tax measures under the 2026 Finance Act—estimated to yield 1.5 percent of GDP in additional annual tax revenues—have been implemented, but removal of GST exemptions on water and magazines and expansion of the circulation levy are pending.
  - IPP transfers: Authorities expect to transfer US$42.5 million more than previously envisaged to EDSA for Independent Power Producers obligations.
  - Fuel price actions: As of early May, fuel prices raised by 28 (Petrol) and 46 percent (Diesel); temporary subsidies of 1.1 (Petrol) and 4.3 (Diesel) Nle per liter maintained since April.
- Monetary and reserves:
  - BSL reduced the policy rate by 200 bps to 16.75 percent in December 2025 and has since refrained from further cuts amid the Middle East war.
  - Reserve coverage increased from 1.5 months of imports in September to 1.9 months in March, aided by US$26 million in BSL reserves purchases in Q1-2026; gross reserves projected at 2.7 months of imports by end-2026.
  - Staff recommends rebuilding reserves, allowing exchange rate adjustment to shocks, strengthening safeguards, implementing the new monetary policy framework, and repaying overdue budget support loans to the BSL.
- Financial sector:
  - Banking sector remains profitable and highly capitalized but vulnerable to sovereign risk.
  - Tier 1 capital ratio at 47.4 percent of risk-weighted assets.
  - Gross loans grew by 36.4 percent year-on-year in March 2026; non-performing loans ratio declined to 9.4 percent.
  - FX deposits account for 44 percent of total deposits; high financial dollarization and exchange rate risk persist.
  - Recommended structural actions: strengthen arrears management, operationalize bank resolution framework, complete resolution of the problem bank, implement Governance and Corruption Diagnostic recommendations.

### External support, budget support, and risks to financing
- External budget support delays:
  - EU delivered its 2025 budget support operation in February 2026 after delays.
  - WB operation postponed to Q4-2026; AfDB and EU expected to disburse in Q4-2026.
  - Authorities requested additional WB grant support through the Rapid Response Option; discussions ongoing.
- Risks to the program include higher oil and fertilizer prices, trade restrictions, geopolitical challenges, declining commodity prices, reform fatigue, rising domestic political tensions, spillovers from the war in the Middle East, further delays in budget support, and extreme climate events affecting agriculture and food prices.

### Key economic indicators (selected, as presented)
- Output (annual percentage change)
  - Real GDP growth: 2024: 4.4; 2025: 5.0; 2026: 4.0
  - Real GDP growth, excl. iron ore: 2024: 3.8; 2025: 4.8; 2026: 4.0
- Prices (annual percentage change)
  - Inflation, end of period (%): 2024: 13.8; 2025: 4.3; 2026: 11.6
- Central Government Finances (percent of non-iron ore GDP)
  - Revenue, excl. grants: 2024: 10.1; 2025: 10.7; 2026: 11.5
  - Grants: 2024: 3.4; 2025: 2.6; 2026: 2.2
  - Expenditure and net lending: 2024: 19.1; 2025: 17.6; 2026: 16.6
  - Overall balance: 2024: -5.6; 2025: -4.3; 2026: -2.8
  - Public debt: 2024: 51.1; 2025: 49.3; 2026: 47.3
- Money and credit (annual percentage change)
  - Broad money: 2024: 18.0; 2025: 19.3; 2026: 13.6
  - Credit to the private sector: 2024: 41.2; 2025: 49.0; 2026: 23.4
- Balance of payments (percent of non-iron ore GDP)
  - Current account: 2024: -7.1; 2025: -5.4; 2026: -3.7
  - Gross reserves (months of imports): 2024: 2.1; 2025: 2.0; 2026: 2.7
  - External debt: 2024: 31.0; 2025: 26.9; 2026: 25.5

*IMF staff report, May 29, 2026.*

### 9. The outlook would weaken under the IMF’s Severe Downside Scenario published in the

### 1sleea2026002 - 9. The outlook would weaken under the IMF’s Severe Downside Scenario published in the

### Severe Downside Scenario: impact of a more protracted war in the Middle East
- The WEO scenario assumes an oil price increase of around 60 percent relative to the April 2026 WEO global assumptions (GAS) used for the baseline projection in this report.
- Staff estimate that this shock would:
  - increase inflation to 13 and 14.5 percent in 2026 and 2027, respectively;
  - lower growth to 2.8 and 3.4 percent in 2026 and 2027, respectively;
  - lower the primary surplus and raise gross financing needs and debt related risks.

### Other significant risks to the outlook
- Trade restrictions, geopolitical tensions and intensification of conflicts, and declining commodity prices could negatively impact net exports and put pressure on reserves.
- Reform fatigue amid ambitious fiscal consolidation, rising political tensions ahead of the elections, and the fallout from the war in the Middle East.
- Further delays in budget support could:
  - increase fiscal pressures,
  - raise debt related risks,
  - limit the build-up of external buffers.
- Extreme climate events could adversely affect agriculture, with knock-on effects on food prices.

### Baseline and April WEO Severe Scenario: selected macro-fiscal-external indicators (exact figures)
- Cross-year summary (Prel. series):
  - GDP at constant prices (percent change): 2025: 4.4; 2026 Prel.: 5.0; 2027 Prel.: 4.0; 2028: 4.5; 2029: 4.6; 2030: 4.6; 2031: 4.6; 2032: 4.6.
  - Consumer prices (end-of-period): 2025: 13.8; 2026 Prel.: 4.3; 2027 Prel.: 11.6; 2028: 9.0; 2029: 9.0; 2030: 9.0; 2031: 9.0; 2032: 9.0.
  - Revenue (excl. grants): 2025: 10.1; 2026 Prel.: 10.7; 2027 Prel.: 11.5; 2028: 12.3; 2029: 12.3; 2030: 12.3; 2031: 12.3; 2032: 12.3.
  - Domestic primary balance: 2025: -2.7; 2026 Prel.: 1.3; 2027 Prel.: 1.1; 2028: 2.9; 2029: 3.0; 2030: 3.0; 2031: 3.0; 2032: 3.0.
  - Overall Balance: 2025: -5.6; 2026 Prel.: -4.3; 2027 Prel.: -2.8; 2028: -0.5; 2029: -0.1; 2030: -0.4; 2031: -0.1; 2032: 0.4.
  - Public Sector Debt: 2025: 51.1; 2026 Prel.: 49.3; 2027 Prel.: 47.3; 2028: 43.5; 2029: 39.9; 2030: 36.9; 2031: 33.9; 2032: 31.1.
  - Current account balance (incl. grants): 2025: -7.1; 2026 Prel.: -5.4; 2027 Prel.: -3.7; 2028: -3.6; 2029: -3.8; 2030: -4.2; 2031: -4.3; 2032: -4.3.
  - Gross international reserves (months of next year's imports): 2025: 2.1; 2026 Prel.: 2.0; 2027 Prel.: 2.7; 2028: 3.8; 2029: 3.7; 2030: 3.7; 2031: 3.8; 2032: 3.8.
  - External public debt: 2025: 31.0; 2026 Prel.: 26.9; 2027 Prel.: 25.5; 2028: 26.1; 2029: 24.6; 2030: 23.6; 2031: 22.8; 2032: 21.8.
- Text Table 2: Baseline vs April WEO Severe Scenario (2026 and 2027 exact comparisons)
  - Baseline (2026 / 2027):
    - GDP at constant prices (percent): 4.0 / 4.5
    - Consumer price (end-of-period, percent): 11.6 / 9.0
    - Revenue (excl. grants): 11.8 / 12.2
    - Domestic primary balance: 1.1 / 2.8
    - Current account balance (incl. grants): -5.7 / -4.9
    - Gross international reserves (months of next year's imports): 2.6 / 3.7
  - April WEO Severe Scenario (2026 / 2027):
    - GDP at constant prices (percent): 2.8 / 3.4
    - Consumer price (end-of-period, percent): 13.0 / 14.5
    - Revenue (excl. grants): 11.4 / 11.9
    - Domestic primary balance: 0.1 / 2.0
    - Current account balance (incl. grants): -8.7 / -8.0
    - Gross international reserves (months of next year's imports): 2.3 / 3.1

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

### Program performance: recent outcomes and structural benchmarks
- Overall: Program performance has improved; authorities corrected PC slippages and are catching up with the structural reform agenda.
- End-December 2025 PCs and ITs:
  - Met all continuous PCs except the US$100 million concessional external debt ceiling, which they breached by US$8.5 million.
  - Previous years below the ceiling: US$62 million in 2024; US$35 million in 2023.
  - Corrected the breach by reducing the 2026 ceiling by US$8.5 million.
  - Missed Net Domestic Assets PC at year-end due to a temporary spike in liquidity demand; NDA was brought on track as of end-March to achieve the revised end-June target.
  - Missed ITs on Domestic Arrears and Domestic Primary Balance.
- End-March ITs:
  - Met continuous PCs and ITs on NCG, NDA, NIR.
  - Missed ITs: FX Spending, School Feeding, Domestic Revenues, Domestic Primary Balance, Social Spending, Domestic Arrears.
  - Domestic Revenues and Primary Balance ITs missed due to fiscal pressures in Q1-2026.
  - FX Spending IT missed mainly due to payments to medical equipment suppliers.
  - MoF and BSL will strengthen coordination; MoF will cease requesting FX from BSL for (i) transfers to IPPs and (ii) entities outside central government.
- Structural benchmarks:
  - Continuous SB on upholding EIRA not met but to be completed through a prior action.
  - Continuous fuel pricing SB missed due to temporary price subsidies in April.
  - End-March SB to recapitalize the BSL met.
  - End-March SB to operationalize safe harbor for iron ore not met but to be completed as a prior action.
  - End-March SB on mining governance missed due to entity name changes; elements completed for replacement entities.
  - End-April SB to strengthen arrears management will be replaced by a prior action and two new SBs.

### Policy discussions — Fiscal policy
- Authorities plan a supplementary budget (new end-September 2026 SB) envisaging a 0.5 ppts of GDP smaller domestic primary surplus than in the original budget (MEFP¶10).
- Revenues:
  - Authorities pledged to recover the Q1-2026 revenue shortfall via improved collection and implementing Finance Act 2026 tax measures.
  - Revenues are nonetheless expected to fall short of target by 0.3 ppts of GDP due to growth slowdown and lower demand for fuel imports.
- Policy support to mitigate impact of war in the Middle East:
  - Fuel price subsidies to be strictly temporary, capped at 0.13 ppts of GDP in 2026, with full pass-through of oil prices when envelope exhausted.
  - Continuous SB on fuel pricing updated to permit temporary price subsidies.
  - Seeking grants to finance higher social spending.
  - Creating a fiscal buffer in the supplementary budget of 0.2 ppts of GDP to guard against slippages; buffer to be spent only in Q4-2026 and only if accommodable under the end-December NCG ceiling.
- IPP transfers and capital spending:
  - Plan to more than offset IPP transfer overruns through capital spending cuts (reducing spending on balance by 0.1 ppts of GDP).
  - Supplementary budget to include updated PIP annex detailing allocations consistent with updated capital spending envelope.
  - Priority spending preserved: census, Feed Salone program, contributions to multilateral and bilateral projects.
- Contingency planning (first lines of defense and further measures):
  - First line: fiscal buffer.
  - If insufficient, consider: (i) further rationalizing domestically financed capital expenditure and reducing goods and services spending; (ii) frontloading TADAT recommendations; (iii) increasing energy tariffs; (iv) introducing tax policy measures (including increases in tobacco excises and further rationalization of GST exemptions on food items).
- Extractive industries focus:
  - End-March SB to operationalize iron ore safe harbor missed; to be completed as a Prior Action by applying pricing formula unless an advance pricing agreement exists.
  - Continuous SB to uphold EIRA terms in mining agreements; renegotiate agreements not compliant.
  - Prior Action: provide evidence that all mining agreements ratified since December 2025 are in full compliance with the Act (MEFP¶11).
- Tax and customs administration:
  - TADAT mission revealed significant weaknesses; progress slow.
  - End-September 2026 SB to undertake a RAGIA assessment replaced by end-April 2027 SB to enhance CRM framework.
  - New end-November 2026 SB: ensure core customs functions performed solely by customs authorities (Governance and Corruption Diagnostic recommendation).
- Energy sector reform:
  - EDSA arrears with IPPs, technical losses, and poor revenue collection are substantial fiscal risks.
  - Commit to accelerating WB-supported energy sector reforms, selecting private concessionaire to operate/maintain distribution network (new end-May 2027 SB).
  - Projected transfers to IPPs to decline from $62.5 million in 2026 to $20 million in 2030 as efficiency and collections improve and lower cost alternatives substitute for Diesel generation.
  - EDSA arrears amounted to US$113 million at end-February (monitored monthly by MoF fiscal risk unit).
  - Authorities committed to cutting other spending should IPP transfers continue to surprise on the upside.

### Debt sustainability and debt management
- Debt sustainability assessment:
  - Debt is sustainable but at high risk of distress.
  - Under baseline, external debt service-to-revenue ratio would breach its threshold until 2028.
  - Present value of public debt-to-GDP ratio would breach its threshold in 2026.
  - Staff project total debt service-to-revenues to fall below 100 percent by 2028.
- Domestic borrowing:
  - Net government borrowing from domestic banking system: 4.4 percent of GDP in 2024; 2.4 percent of GDP in 2025; projected to turn negative by 2027.
  - Reducing domestic borrowing and adhering to external borrowing limits is paramount.
- Strengthening debt management commitments:
  - Annually update Medium-Term Debt Strategy.
  - Issue debt securities through competitive auctions.
  - Restrict issuance of domestic FX-linked debt securities to exceptional circumstances in consultation with IMF staff.
  - Strengthen market communication through regular investor fora and a new investor relations desk.
  - Conduct market surveys on T-bond appetite.
  - Improve debt management arrangements and domestic market practices with WB and IMF TA support (MEFP¶21).
  - Enhance coverage of debt by improving reporting of SOE debt and arrears.

- Text Table 3: Summary of External Borrowing Plan for 2026 (exact figures)
  - PPG external debt contracted or guaranteed:
    - Volume of new debt, US million: 92
    - PV of new debt, US million: 60–66
    - Sources of debt financing:
      - Concessional debt: 92; PV: 60–66
      - Non-concessional debt: 0; PV: 0
    - Use of debt financing:
      - Project financing: 92; PV: 60–66
      - Budget financing: 0; PV: 0
  - Note: 2/ Debt with a grant element that exceeds a minimum threshold of 35 percent.
  - Note: 3/ Debt which does not meet the definition of concessional debt.
  - 1/ Contracting and guaranteeing of new debt (defined in the TMU). The present value of debt is calculated using the terms of individual loans applying the 5 percent program discount rate.

### Public Financial Management (PFM) and arrears management
- Arrears management roadmap:
  - End-April 2026 SB missed; replaced by:
    - Prior Action: share comprehensive stock-taking of central government expenditure arrears as of end-December 2025.
    - New end-November 2026 SB: publish audit of arrears stock and implement new arrears profiling system.
    - New end-April 2027 SB: publish updated arrears clearance strategy.
  - Gradual sequencing accounts for capacity constraints and aims to mitigate implementation and credibility risks.
  - Once audit and monitoring system complete, perimeter of domestic arrears IT can be expanded.
  - Authorities negotiating repayment of domestic FX-denominated legacy arrears to Compagnie Sahelienne d’Entreprises (CSE) amounting to about $60 million.
- Progress on other PFM reforms:
  - Expenditure controls improved following corrective actions during first and second ECF reviews.
  - Approved cash management system terms of reference; prepared detailed investment pipelines and procurement plans.
  - Overall spending remained within budgetary limits; stock of unpaid invoices returned to MDAs declined substantially.
  - Key MDAs started monthly submissions to cash management system; system informs quarterly budget allotments and auction calendar (MEFP¶18).
  - Authorities plan to improve data submission quality with IMF TA support.
  - Drafting updated PFM Act; expect SOE Act to be passed by Parliament later this year.

### Monetary, exchange rate, safeguards and central bank actions
- Monetary policy stance:
  - BSL stands ready to tighten should inflationary pressures persist.
  - With oil price shock expected transitory, BSL plans to maintain programmed reserve money path and refrain from further reducing policy rate.
  - Agreed that tighter policy may be needed if shock proves larger and more persistent (MEFP¶22).
- Monetary policy operational reforms:
  - BSL Board approved monetary policy strategy in December 2025; full implementation scheduled for fourth quarter of 2026.
  - Developing guidelines for 7-day repo operations; plan to use 7-day reverse repos as primary instrument for liquidity injection by June 2026.
  - Limit outright purchases of government securities to structural liquidity management purposes.
- Exchange rate and reserves:
  - BSL committed to allowing exchange rate to flexibly adjust while rebuilding reserve buffers (MEFP¶25).
  - BSL to purchase at least US$35 million in FX every six months until end of program.
  - Given higher-than-expected government FX spending in Q1-2026, an additional US$29 million in FX purchases estimated required in Q2-2026 to achieve end-June NIR target.
  - Government will not request FX from BSL for (i) transfers to IPPs or (ii) entities outside central government (FX spending PC).
- Recapitalization and safeguards:
  - Authorities began recapitalizing BSL: first instalment via a 10-year bond with an 8 percent coupon in March (end-March SB); three additional installments planned this year.
  - Intend to use dedicated budget allocation of Nle 971.5 million for recapitalization.
  - Requested IMF TA to assess risk-based recapitalization needs via stress testing.
  - Implementation of safeguards recommendations progressing but gaps remain: governance, IFRS capacity, controls in monetary operations, safeguarding BSL’s financial autonomy.
  - Audit of FY2025 financial statements expected to be published by end June 2026.
- Fiscal relationship with BSL:
  - BSL committed to refrain from monetary financing.
  - MoF agreed to repay overdue budget support loans to BSL.
  - Government will repay all overdue budget support loans to the BSL—totaling some 1.5 percent of GDP—as soon as possible, and no later than by end-2026 (MEFP¶24).

### 28. The authorities plan to resolve Union Trust Bank (UTB) by end-June. They initiated

### 1sleea2026002 - 28. The authorities plan to resolve Union Trust Bank (UTB) by end-June. They initiated

### Bank resolution and financial safety net
- The authorities plan to resolve Union Trust Bank (UTB) by end-June. Resolution proceedings for UTB were initiated as a prior action for the first and second ECF reviews.
- The Bank of Sierra Leone (BSL) hired an accounting firm to:
  - (i) provide an independent valuation of the assets and liabilities that will be transferred; and
  - (ii) determine the funding gap, which will be covered by the government.
- The government is finalizing the legal instrument to implement the transfer (MEFP¶28).
- Crisis management and resolution framework:
  - Approved by the BSL board in December 2025.
  - BSL’s resolution section drafted a manual now under internal review.
  - BSL plans to operationalize the resolution framework by end-December 2026 (end-December 2026 SB).
- Deposit Protection Act is awaiting adoption by parliament.

### FX supervision, bank lending, and prudential actions
- FX supervision and regulation:
  - Authorities committed to strengthening staff training and initiating bank FX risk management examinations, including on placements abroad.
  - Recommended actions include increasing the frequency of net open position reporting from banks and introducing reserve requirements on FX deposits by end-September 2026 (MEFP¶30).
- Private lending expansion:
  - Banks face a limited pool of high-quality borrowers; safe expansion requires good underwriting, credit risk management and NPL recovery practices.

### Governance and institutions; anti-corruption and GCD implementation
- Governance and Corruption Diagnostic (GCD) implementation:
  - GCD published last year.
  - The end-March 2026 SB to strengthen governance arrangements of key mining sector entities was not met after the government discontinued the contract with Mountain View, abolished the Mineral Wealth Fund (MWF), and replaced it with a new Exploration and Mining Company (EMC).
  - Substantive progress on three SB elements:
    - (i) MMDMC’s audited 2024 financial statements were published.
    - (ii) Cabinet adopted a policy on appointment of independent directors applicable to MMDMC, EMC, and similar entities.
    - (iii) Cabinet adopted a KPI policy applicable to MMDMC and related entities.
- Action plan for remaining GCD recommendations:
  - Plan to set up a taskforce to oversee implementation by June 2026.
  - Develop a detailed action plan by October 2026 (MEFP¶31).
- Anti-corruption legislative reform:
  - Progress towards meeting end-September SB to amend the Anti-Corruption Act to require risk-based verification and publication of asset declarations for politically exposed persons (MEFP¶32).

### AML/CFT and supervisory capacity
- Progress made on implementing the 2025 National AML/CFT strategy:
  - Completed the 2023 National Risk Assessment and validation of the national AML/CFT strategy, with stakeholder engagement and capacity-building.
  - Drafted regulations to mandate disclosure and verification of beneficial ownership.
- Capacity and implementation gaps:
  - Implementation of targeted financial sanctions remains weak.
  - Limited capacity and resources hamper financial sector supervision.

### Climate vulnerability, impacts, and priorities
- Vulnerability overview:
  - Sierra Leone ranks 22nd on the 2021 IMF-adapted ND-GAIN index.
  - Agriculture: accounts for half of employment and 30 percent of value added.
- Temperature and precipitation trends:
  - Average temperature increased by 1°C over the last 60 years.
  - Average number of heat days per year increased from 30 to 40 over the last 20 years.
  - Total annual rainfall is lower than in the 1950s, but more intense rainfall episodes occur.
  - Number of extremely hot days (above 35°C) could exceed 45 annually by 2050.
- Projected impacts:
  - WB’s CCDR projects a decrease in yields for all rainfed crops and a 3-5 percent GDP loss from agriculture by 2050.
  - CPD projects GDP per capita could fall by 8 percent by 2100 in the fastest warming scenario, assuming slow adaptation.
- Natural disaster exposure and water access:
  - Sierra Leone experienced 14 occurrences of floods/landslides since 2004.
  - A major 2017 landslide caused damages of about US$36 million (0.5 percent of GDP).
  - Model estimates suggest a 1-in-25 years river flood would cause US$75 million in losses and damages (1 percent of GDP).
  - Only about half of the population has access to treated water; the remainder rely on rivers, lakes, and unprotected wells.
- Coastal exposure:
  - About 20 percent of the population reside in Freetown (about 1.5 million people); average elevation < 15 meters above sea level.
  - Median sea level rise projections from 2000 to 2100: 0.6 meters under a moderate emissions pathway; 0.8 meters under a very high emissions scenario.
  - Without adaptation, annual average cost of sea level rise estimated at 0.3-0.4 percent of GDP.

### RSF rationale, eligibility, access, and duration
- Authorities consider strengthening climate resilience a national priority (2024–2030 Medium-Term National Development Plan; updated NDC and NAP focus on adaptation).
- Staff support for Sierra Leone’s RSF request:
  - Eligibility: Sierra Leone meets RSF eligibility criteria based on per capita GNI; classified as a Group A country for IMF interest charges.
  - Access: Staff propose access of 75 percent of quota (SDR 155.55 million) for budget support.
  - Duration: Proposed RSF duration aligned with remaining ECF arrangement (until December 30, 2027).

### RSF objectives and pillars
- RSF objective: support resilience and balance of payments (BOP) stability through reforms at the intersection of climate and development.
- Three RSF pillars and associated RMs:
  - Pillar 1 — Climate-sensitive public investment management:
    - RM1. Climate resilient investment planning and risk management: adopt framework for climate-sensitive public asset registry and begin implementation by completing assessments for selected critical assets.
    - RM2. Maintenance plans for climate-vulnerable infrastructure: develop/adopt framework for climate-sensitive infrastructure maintenance (MOPED and NAGPC).
  - Pillar 2 — Climate resilience:
    - RM3. Assessing fiscal risks from climate change: MoF to develop a methodology to quantify fiscal risks from natural disasters with IMF TA; publish methodology and results on MoF website and include in fiscal risks statement accompanying yearly budget.
    - RM4. Mapping areas vulnerable to natural disasters and climate change: NDMA to prepare a national vulnerability map covering main climate hazards; map to be published on MoECC and/or NDMA websites; TA from GCA.
    - RM5. Creating a Digital Social Protection Registry (DSPR): National Social Protection Authority to establish a DSPR linking existing beneficiary registries (covers approximately 10 percent of extreme poor households) to national identification; protocols for dynamic updating and poverty ranking; TA from WB.
    - RM6. Expanding the DSPR to additional households: NSPA to expand DSPR to include at least 100,000 additional households in extreme poverty and climate-vulnerable areas; TA from WB.
    - RM7. Developing a water tariff methodology: EWRC to develop multi-year water tariff methodology and implement an appropriate increase in water tariffs; initial TA from FADEP and subsequent TA from WB.
  - Pillar 3 — Financial stability:
    - RM8. Reporting banks' loan exposure to climate risks by location and sector: BSL will require commercial banks to report loans and collateral data by 16 districts and sectors.
    - RM9. Identifying transmission channels of climate risks to the financial sector: BSL to prepare and publish a report linking RM8 loan/collateral data with climate hazard and vulnerability data from RM4 to develop forward-looking physical risk indicators; TA from IMF.

### Program modalities, prior actions, and performance criteria
- Staff support requests for:
  - Completion of the third ECF review.
  - Modification of performance criteria (PCs).
  - Waivers of non-observance of the end-December PC on NDA and continuous PC on concessional external borrowing, on the basis of corrective actions.
- Corrective actions taken by authorities:
  - Brought NDA on track, as of end-March, to achieve the revised end-June 2026 target.
  - Reduced the 2026 concessional external debt ceiling by US$8.5 million to correct the 2025 slippage.
- Three prior actions for the third ECF review:
  - Operationalize the iron ore safe harbor by applying the pricing formula unless an advance pricing agreement exists (¶14, MEFP¶11).
  - Share with IMF staff a comprehensive stock-taking of central government expenditure arrears (¶20, MEFP¶17).
  - Provide evidence that all mining agreements ratified since December 2025 comply with EIRA in their latest ratified form (¶14, MEFP¶11).
- Proposed modifications to performance criteria and definitions:
  - Raise NCG ceiling by Nle 2242 million in June and by Nle 828 million in December 2026 (MEFP¶47).
  - NDA ceiling tightened in June by 5.4 percent to correct end-December slippage; end-December target remains determined by end-year reserve money objective.
  - End-June NIR target modified to reflect latest timing of budget support disbursements.
  - Continuous PC on new concessional external debt tightened by US$8.5 million in 2026.
  - Amend definitions for:
    - (i) budgetary FX spending per TMU¶15 to clarify scope and source of information;
    - (ii) monitoring and reporting of fiscal spending on the National School feeding Program per TMU¶20 to require quarterly (rather than monthly) reporting with detailed breakdown;
    - (iii) adjustment clause for FX bonds per TMU¶14 to cover any new or re-issued FX bonds.

### Financing assurances and donor support
- ECF financing status:
  - ECF is fully financed, with firm commitments for the next 12 months from the WB, AfDB, and EU and good prospects for the remainder of the program.
  - Overall share of Fund financing in official budget support for the program period estimated at 69.5 percent (55 percent excluding the RSF, unchanged from the last ECF review).
  - WB and AfDB budget support disbursements were delayed until Q4 2026.

*Source: IMF country report content provided in the supplied PDF excerpt.*

### 49. Sierra Leone’s capacity to repay the IMF remains adequate, but downside risks are

### Sierra Leone’s capacity to repay the IMF remains adequate, but downside risks are significant

### Capacity to repay and exposure metrics
- Projected Fund credit outstanding would peak at 7.5 percent of GDP in 2027.
- Peak projected Fund credit outstanding is equivalent to 244 percent of quota.
- Projected Fund credit outstanding equals 114 percent of gross reserves.
- Annual gross repayments to the Fund are projected to peak in 2026 at 4.2 percent of exports and 0.9 percent of GDP.
- Under the baseline, the proposed RSF would push Sierra Leone’s total Fund credit outstanding into the top quartile of past PRGT-only arrangements and increase the already-high stock of senior debt.
- The BSL has rebuilt reserves, but they remain low.
- Given the RSF’s 10.5-year grace period, repayments to the Fund would begin only after the ECF is repaid.

### Staff appraisal — program performance and positives
- Authorities met most continuous and end-December performance criteria (PCs) and are addressing target slippages and reform delays.
- Positive factors cited:
  - Significant improvement of Sierra Leone’s fiscal position in recent years.
  - Authorities’ strong track record of servicing IMF debt.
  - Authorities’ commitment to reforms as demonstrated by improved program performance.
  - Continued donor support.

### Fiscal policy, risks, and recommendations
- Fiscal consolidation in recent years has created some fiscal space to counter the fallout from the war in the Middle East.
- Staff support accommodating revenue shortfalls in the supplementary budget and can allow modest fuel price subsidies provided they:
  - Remain strictly temporary and transparent.
  - Adhere to the agreed cost ceiling.
- Authorities are encouraged to seek grant support from donors to expand social programs.
- However, fiscal space is limited and continuation of fiscal consolidation is critical to keep debt on a sustainable path.
- Assessment of debt: Debt is sustainable but at high risk of distress.
- Recommended fiscal actions:
  - Continue consolidation to reduce borrowing from the domestic market.
  - Adhere to external borrowing limits.
  - Develop contingency planning in case fiscal outturns disappoint.
  - Steadfastly implement energy sector reforms.
  - Reinforce PFM and arrears management to avoid fiscal slippages.
  - Bolster debt management and lengthen debt maturities to contain debt-related risks.

### Revenue mobilization and tax administration
- Stepped-up tax administration will support revenue mobilization.
- Specific recommendations:
  - Enhance the CRM framework.
  - Strengthen customs operations, including ensuring core customs functions are performed solely by customs authorities.
- The safe harbor for iron ore should help boost mining sector revenues alongside the authorities’ commitment to uphold EIRA terms in new mining agreements.

### Monetary policy and central bank stance
- The BSL should stand ready to tighten monetary policy should inflationary pressures persist.
- Implementing the monetary policy strategy will:
  - Strengthen policy frameworks.
  - Introduce new liquidity tools.
- Staff welcome the authorities’ commitment to avoid monetary financing and to repay overdue budget support loans related to past ECF disbursements as soon as possible.

### Safeguards, recapitalization, and reserves
- Progress on safeguards reforms is critical.
- Steps to recapitalize the BSL are welcome.
- Authorities should carefully consider the terms of future recapitalization bonds and reassess the need for additional support in consultation with IMF TA.
- Rebuilding FX reserves is paramount; the BSL should continue purchasing FX in the markets.
- Coordination between the MOF, BSL and MDAs should improve to better track FX spending and ensure it does not exceed program targets.

### Financial sector monitoring and resolution
- As private lending expands, the BSL should monitor it carefully:
  - Banks have a limited pool of high-quality borrowers.
  - Expansion of the loan book will require good underwriting, credit risk management and NPL recovery practices.
- Staff encourage:
  - Swift progress in operationalizing the bank resolution framework.
  - Introducing FX reserve requirements.
  - Completing the resolution of the problem bank.

### Governance, anti-corruption, and program support
- Authorities have made progress on governance and anti-corruption reforms.
- Pursuing an action plan to implement the recommendations of the GCD will help focus and coordinate reform efforts.

### RSF request and resilience-focused reforms
- Staff welcome the authorities’ request for the proposed RSF arrangement.
- Reforms supported by the RSF are intended to strengthen resilience and BOP stability, including reforms to:
  - Strengthen climate-sensitive public investment management.
  - Strengthen household and service resilience.
  - Improve disaster preparedness.
  - Enhance social protection.
  - Improve water sector financial sustainability.
  - Strengthen the financial sector’s capacity to manage climate risks.

*Source: IMF staff appraisal and assessment from the Sierra Leone country chapter.*

### 60. On the basis of the authorities’ prior actions and corrective actions, staff support the

### 1sleea2026002 - 60. On the basis of the authorities’ prior actions and corrective actions, staff support the

### IMF staff recommendation
- On the basis of the authorities’ prior actions and corrective actions, staff support the requests for completion of the third ECF review, waivers of nonobservance of missed PCs, modification of PCs, and approval of the RSF arrangement.

### Real and external sector developments (figures and highlights)
- Non-iron ore growth accelerated in 2025.
- Inflation dynamics:
  - Inflation fell to the BSL’s single-digit objective last year but has since increased amid the oil price shock.
- Trade:
  - Exports have continued to grow while imports edged down last year.
- Reserves and exchange rate:
  - Official reserves declined further in 2025.
  - The nominal exchange rate against the dollar remains stable.
  - The REER appreciated in recent months.

### Fiscal sector (figures and highlights)
- The fiscal effort was substantial in 2025.
- Domestic borrowing decreased in 2025.
- Revenue collection continues to improve and expenditures decreased.

### Monetary and financial indicators (figures and highlights)
- Base money growth has come down from recent peaks.
- Private credit growth has picked up.
- The banking sector is well capitalized.
- NPL ratios have fallen below the 10 percent threshold.
- Banks remain liquid.
- Interest rates have remained stable since last year’s decline.

### Capacity to repay and Fund exposure (Figure 5 and Table 6 highlights)
- Indicators compare Sierra Leone’s capacity-to-repay (CtR) metrics to PRGT country arrangements (median, interquartile ranges, comparator bars).
- Table 6 — Indicators of Capacity to Repay the IMF, 2026-40 (selected lines as presented):
  - Fund obligations based on existing credit (millions of SDRs):
    - Principal: 51.2, 48.8, 48.0, 49.6, 41.5, 37.7, 26.4, 23.3, 18.7, 11.7, 0.0, 0.0, 0.0, 0.0, 0.0 (2026–2040)
    - Charges and interest: 3.4, 3.5, 3.5, 3.5, 3.5, 3.5, 3.5, 3.5, 3.5, 3.5, 3.5, 3.5, 3.5, 3.5, 3.5 (2026–2040)
  - Fund obligations based on existing and prospective credit (millions of SDRs):
    - Principal: 51.2, 48.8, 48.0, 49.6, 41.5, 40.1, 38.1, 42.0, 37.3, 30.3, 16.3, 13.0, 15.6, 15.6, 15.6 (2026–2040)
    - Charges and interest: 3.4, 4.8, 7.0, 7.0, 7.0, 7.0, 7.0, 7.0, 7.0, 7.0, 7.0, 7.0, 6.8, 6.5, 6.1 (2026–2040)
  - Fund obligations (existing and prospective credit) totals:
    - In millions of SDRs: 54.6, 53.6, 55.0, 56.6, 48.6, 47.1, 45.1, 49.0, 44.4, 37.4, 23.4, 20.0, 22.4, 22.0, 21.7 (2026–2040)
    - In millions of US$: 75.1, 73.9, 75.9, 78.2, 67.2, 65.3, 61.4, 65.3, 58.0, 47.9, 29.3, 24.7, 27.0, 26.1, 25.1 (2026–2040)
    - In percent of exports of goods and services: 4.2, 4.0, 3.9, 3.9, 3.2, 3.0, 2.7, 2.8, 2.3, 1.8, 1.1, 0.9, 0.9, 0.8, 0.8 (2026–2040)
    - In percent of total debt service: 46.4, 43.1, 43.3, 45.0, 41.7, 43.0, 41.4, 41.4, 36.2, 30.2, 19.9, 16.5, 18.0, 17.4, 16.2 (2026–2040)
    - In percent of GDP: 0.9, 0.8, 0.8, 0.8, 0.6, 0.6, 0.5, 0.5, 0.4, 0.4, 0.2, 0.2, 0.2, 0.2, 0.1 (2026–2040)
    - In percent of gross international reserves: 14.7, 12.0, 12.3, 12.1, 9.6, 8.7, 7.8, 7.9, 6.6, 5.2, 3.0, 2.4, 2.5, 2.3, 2.1 (2026–2040)
    - In percent of quota: 26.3, 25.9, 26.5, 27.3, 23.4, 22.7, 21.8, 23.6, 21.4, 18.0, 11.3, 9.7, 10.8, 10.6, 10.4 (2026–2040)
  - Outstanding Fund credit (existing and prospective) (millions of SDRs): 387.0, 505.9, 457.8, 408.3, 366.7, 326.7, 288.5, 246.5, 209.2, 178.9, 162.6, 149.5, 133.9, 118.4, 102.8 (2026–2040)
  - Net use of Fund credit (millions of SDRs): 30.0, 118.8, -48.0, -49.6, -41.5, -40.1, -38.1, -42.0, -37.3, -30.3, -16.3, -13.0, -15.6, -15.6, -15.6 (2026–2040)
  - Memorandum items include nominal GDP, exports, gross international reserves and quota time series as presented in the source.

### Key quantitative projections and fiscal framework (selected rows from Table 1 and Table 2 series, preserved as in source)
- Table 1 (selected series as presented):
  - Growth
    - GDP at constant prices 4.44.45.04.54.04.74.54.64.64.64.6
    - GDP excluding Iron ore3.84.34.84.44.04.64.44.64.74.84.8
    - GDP excluding mining4.14.54.54.13.94.44.44.54.84.84.8
  - GDP deflator10.36.77.27.56.46.87.96.96.97.17.4
  - Inflation
    - Consumer prices (end-of-period)13.87.04.39.011.69.09.09.09.09.09.0
    - Consumer prices (average)28.48.37.69.69.39.09.99.09.09.09.0
  - External sector
    - Exports of goods15.64.14.56.25.93.75.04.32.83.44.8
    - Imports of goods6.4-3.9-7.01.53.92.33.84.13.34.24.7
  - Gross international reserves (excl. swaps) (months of next year's imports)2.12.02.02.52.72.93.83.73.73.83.8
  - Domestic credit to the private sector41.231.249.021.023.421.221.221.220.920.920.9
  - Public debt 51.149.349.347.347.344.343.539.936.933.931.1
  - Current account balance (including official grants)-7.1-5.1-5.4-3.1-3.7-2.8-3.6-3.8-4.2-4.3-4.3
  - Domestic primary balance 1/-2.70.61.31.61.12.92.93.03.03.03.0
  - Overall balance -5.6-5.4-4.3-2.3-2.8-0.7-0.5-0.1-0.4-0.10.4
  - Revenue (excluding grants)10.110.810.711.811.512.312.312.312.312.312.3
  - Total expenditure and net lending19.118.117.616.216.614.814.714.113.913.312.7
- Table 2a (selected nominal line items, Millions of Leone, preserved as in source):
  - Total revenue and grants 19,525 21,078 22,366 25,935 25,654 29,620 29,969 33,145 35,928 39,586 #####
  - Revenue 14,560 17,939 18,033 22,164 21,513 25,851 25,989 29,163 32,755 36,702 41,272
  - Tax revenue 12,424 15,717 15,720 19,021 18,532 22,323 22,461 25,216 28,340 31,753 35,716
  - Grants 4,965 3,140 4,332 3,771 4,140 3,770 3,979 3,983 3,173 2,884 2,398
  - Expenditures and net lending 27,643 30,029 29,639 30,336 30,925 31,061 31,104 33,391 36,931 39,736 #####
  - Current expenditures 18,238 22,283 22,144 21,651 23,002 23,069 23,366 25,243 27,344 29,562 31,945
  - Capital Expenditure 2/ 8,852 7,399 7,031 8,391 7,258 7,707 7,453 7,863 9,346 10,090 10,513
  - Arrears Paydown (cash) 457 287 331 259 259 250 250 250 207 49 0
  - Domestic primary balance 3/ -3,938 958 2,206 3,074 1,963 6,129 6,149 7,096 8,036 8,989 10,208
  - Overall balance including grants -8,118 -8,951 -7,274 -4,401 -5,271 -1,441 -1,135 -246 -1,003 -150 1,177
  - Financing: External financing (net) -537 410 -351 602 655 445 393 1,051 2,397 2,695 2,235
  - IMF Budget Support disbursements (selected lines): Disbursements 1,153 1,825 1,820 1,654 2,720 1,768 5,900 0 0 0 0; Repayments -147 -1,004 -851 -1,403 -1,442 -1,540 -1,426 -1,426 -1,406 -1,281 -1273

### Balance of payments and external financing (selected tables)
- Table 4 (Balance of Payments, Millions of US$, selected lines preserved):
  - Current account -480.4 -451.2 -367.8 -402.3 -241.6 -299.3 -226.0 -320.9 -358.6 -410.3 -444.7 -467.3
  - Trade balance -425.8 -576.8 -285.0 -358.6 -213.7 -340.6 -194.0 -333.0 -343.2 -363.1 -392.7 -408.8
  - Exports, f.o.b. 1,548.1 1,548.1 1,611.5 1,617.7 1,710.8 1,713.4 1,774.1 1,798.3 1,874.7 1,927.1 1,993.1 2,089.6
    - Iron ore (selected series) 779.3 779.3 798.1 915.2 775.5 987.0 765.3 946.2 914.0 874.8 888.0 933.5
  - Imports, f.o.b -1,973.9 -2,124.9 -1,896.5 -1,976.3 -1,924.6 -2,054.0 -1,968.1 -2,131.3 -2,218.0 -2,290.2 -2,385.8 -2,498.4
    - Oil (selected series) -418.9 -418.9 -381.4 -386.8 -380.4 -488.4 -397.2 -471.6 -482.3 -502.0 -523.4 -544.5
  - Transfers 387.6 536.8 365.9 316.2 435.8 416.8 427.6 390.6 405.1 389.8 405.0 420.7
  - Capital and financial account 386.6 607.1 352.5 376.5 354.1 431.8 333.1 435.2 416.0 487.7 537.7 582.7
  - Overall balance -37.8 -37.8 -15.2 -25.7 112.5 132.5 107.1 114.4 57.5 77.5 93.0 115.4
- Table 5 (External Financing Requirements and Sources, Millions of US$, selected lines preserved):
  - Financing needs (selected years) -627 -547 -555 -588 -679 -548 -652 -586 -633 -681 -688
  - Current account balance (excluding net official current transfers) -548 -401 -420 -331 -405 -294 -388 -428 -451 -486 -510
  - Debt amortization (excluding IMF) -70 -82 -82 -80 -77 -83 -85 -81 -75 -72 -64
  - Repayments to IMF -63 -69 -69 -74 -75 -71 -74 -76 -78 -67 -65
  - Identified financing sources 458 454 478 453 528 434 538 514 550 597 633
  - Disbursements from IMF (ECF) 46 79 79 64 64 64 64 0 0 0 0
  - Unidentified financing (selected projection years) 0 0 0 0 0 0 0 20 30 30 0

### ECF and RSF disbursement schedules (selected lines)
- Table 7 (Schedule under ECF arrangement, in millions of SDRs, preserved as presented):
  - Availability / Disbursements (selected entries)
    - October 31, 2024 34.999 16.88 — The approval of the ECF arrangement.
    - May 15, 2025 34.999 16.88 — Board completion of the first review based on observance of continuous and December 31, 2024 performance criteria
    - November 15, 2025 23.333 11.25
    - May 15, 2026 23.333 11.25 — Board completion of the third review based on observance of continuous and December 31, 2025 performance criteria
    - Total disbursements 186.663 90.00
- Table 8 (Proposed RSF disbursements, in millions of SDRs, preserved as presented):
  - Availability / Disbursements (selected entries)
    - November 15, 2026 17.284 8.3 — Reform measure 3 implementation review
    - November 15, 2026 17.283 8.3 — Reform measure 8 implementation review
    - May 15, 2027 17.284 8.3 — Reform measure 1 implementation review
    - Total disbursements 155.550 75.0
  - Quota in millions SDR: 207.4

### Financial soundness and public debt composition (selected highlights)
- Table 9 (Financial Soundness Indicators, selected end-period values and trends):
  - Regulatory capital ratio (total capital / risk-weighted assets) ranged in reported series up to 50.7 (most recent reported).
  - Nonperforming loans to total gross loans fell to single digits in recent periods (e.g., 9.4; with other entries 9.0, 8.1 reported).
  - Return on assets and return on equity show strong positive values (e.g., Return on assets up to 10.6; Return on equity up to 40.6 in the series).
  - Liquidity metrics: Liquid assets to short-term liabilities and to total assets remain high (examples: 115.7; 99.3; 78.3 etc).
  - Number of banks: 13–14 across the series.
- Table 10 (Decomposition of Public Debt and Debt Service by Creditor, selected lines preserved):
  - Total debt (In mil. US$): 3,636 (100.0 percent; 46.5 percent of GDP) with debt service lines 700 886 1,179 and percent GDP 8.9 11.3 15.1 (presented for 2023–2025).
  - External debt (In mil. US$): 1,985 (54.6 percent of total; 25.4 percent of GDP) with debt service flows 144 142 163 and percent GDP 1.8 1.8 2.1 (2023–2025).
  - Multilateral creditors (In mil. US$): 1,639 (45.1 percent of total; 21.0 percent of GDP)
    - IMF 696 (19.1 percent of total; 8.9 percent of GDP)
    - World Bank 469 (12.9 percent; 6.0 percent)
    - AfDB 160 (4.4 percent; 2.0 percent)
  - Domestic debt (In mil. US$): 1,651 (45.4 percent of total; 22.5 percent of GDP) with domestic debt service lines reported as n/a for some entries; T-Bills 1,202 (33.1 percent; 16.4 percent)

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

### Annex I. Risk Assessment Matrix

### Annex I. Risk Assessment Matrix

### RAM methodology
- The Risk Assessment Matrix (RAM) shows events that could materially alter the baseline. Likelihood reflects staff’s subjective assessment: “low” (below 10 percent), “medium” (10-30 percent), and “high” (30-50 percent).
- The RAM captures staff views on the source of risks and overall concern as of the time of discussions with the authorities. Risks may interact and materialize jointly. The conjunctural shocks reflect shorter-term risks (12-18 months) while structural risks are more persistent.

### Geopolitical Tensions and Intensification of Conflicts
- Relative Likelihood: High
- Expected Impact if Realized:
  - High. Rising geopolitical tensions, and a weakening of multilateralism, raise the risk of an escalation in military conflicts, accompanied by damage to key physical and financial infrastructure, disruptions in major transit routes and supply chains, higher migration pressures, additional financial frictions and market volatility.
  - 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.”

### Trade-related Risks: Protectionism and Trade Disruptions
- Relative Likelihood: High
- Expected Impact if Realized:
  - Medium/High. Tariff and nontariff measures disrupt global supply chains, weighing on activity while increasing inflation. Trade diversion triggers broader protectionism.
  - High inflation and slower growth in major economies could raise inflation in Sierra Leone and reduce demand for its mineral exports.
- Policies to Mitigate Risks:
  - Tighten fiscal policy to address falling export revenues, and maintain tighter monetary measures should inflationary pressures continue.
  - Diversify the economy away from the mining sector.

### Trade-related Risks: New Trade Agreements
- Relative Likelihood: Low
- Expected Impact if Realized:
  - Medium. Tangible progress in trade talks reduces uncertainty and trade barriers. Wider cooperation on services, FDI, and taxation boosts investment and bolsters public finances.
  - Higher global growth and increased FDI in Sierra Leone would raise demand and production for its minerals.
- Policies to Mitigate Risks:
  - Ensure mines have the capacity and infrastructure to meet higher demand for key minerals.

### Commodity Price Volatility
- Relative Likelihood: High
- Expected Impact if Realized:
  - Medium/High. Supply and demand imbalances—triggered by geopolitical tensions, coordinated production decisions, shifts in investor preferences, or structural changes in demand—fuel commodity price swings, amplifying external and fiscal pressures, social unrest, and macro 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 safeguard reserves and rebuild the reserve cover as needed.

### Disorderly AI Correction
- Relative Likelihood: High
- Expected Impact if Realized:
  - Medium. An abrupt revision in expectations of strong AI-led productivity gains causes a sharp market correction, investment decline, and wealth loss, which suppress demand and tighten financial conditions globally.
  - 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. Higher public debt and deficit levels put further upward pressure on long-term interest rates, sharply tightening global financial conditions, amplifying currency volatility, and reducing consumption and investment that exacerbate adverse debt dynamics.
  - Disruptions are amplified by increased role of price-sensitive investors and leveraged NBFIs in sovereign debt markets, limited market absorption capacity when NBFIs offload debt securities, higher roll-over needs on shorter sovereign debt maturities, and strong sovereign-financial nexus.
  - Concurrently, capital outflows from emerging and developing economies elicit a sharp increase in short-term rates.
  - 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.

### Policy Uncertainty
- Relative Likelihood: High
- Expected Impact if Realized:
  - High. Elevated and wide-ranging policy uncertainty weighs on sentiment and holds back consumption and investment. Political interference in independent economic institutions erodes public confidence and trust and raises the risk of policy mistakes.
  - Policy uncertainty may reduce mineral demand in Sierra Leone by slowing growth in advanced and emerging market economies.
  - This shock will likely affect Sierra Leone through trade-related risks.
- Policies to Mitigate Risks:
  - Risk mitigation policies should fall under “Trade-related Risks: Protectionism and Trade Disruptions.”

### Social Discontent
- Relative Likelihood: Medium
- Expected Impact if Realized:
  - High. Persistently high living costs, youth unemployment and inequality, amid an erosion in governance standards and pressures from geoeconomic realignments, trigger social unrest, political repression and instability, affecting countries’ capacity to pursue economic reforms.
  - 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.

### 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.

### Labor Shortages and Remittances
- Relative Likelihood: High
- Expected Impact if Realized:
  - Low. Tighter immigration policies exacerbate labor shortages in aging destination economies, reducing potential output, fueling inflation, and straining fiscal balances through lower revenues.
  - Origin countries see depressed remittances and incomes, and worsening external balances, though a larger labor force could partly offset the remittance decline over the medium term.
  - For Sierra Leone there are two opposite effects:
    - On one hand, the effects of tighter migration policies are limited on Sierra Leone and likely to come through decreased demand for commodities. Therefore, the authorities should continue efforts to diversify the economy away from the mining sector.
    - On the other hand, lower remittance inflows would negatively impact the external sector and further impoverish households dependent on them. The authorities should enhance social safety measures.
- Policies to Mitigate Risks:
  - Continue efforts to diversify the economy away from the mining sector.
  - Enhance social safety measures.

### 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.

### AI Acceleration
- Relative Likelihood: Low
- Expected Impact if Realized:
  - Medium. Rapid AI adoption significantly improves productivity, boosts growth, and revives business dynamism. Realizing these gains requires complementary policies to manage energy constraints, scale critical inputs, and support labor market transitions.
  - For Sierra Leone, higher global growth prospects through improved productivity 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.

*Annex I. Risk Assessment Matrix — International Monetary Fund*

### 6. Risks to TA implementation in Sierra Leone relate to absorptive capacity, and

### 1sleea2026002 - 6. Risks to TA implementation in Sierra Leone relate to absorptive capacity, and

### Risks to TA implementation
- TA implementation is often constrained by the small number of officials handling a large variety of tasks, which can become binding without careful prioritization, particularly with numerous and sometimes bunched TA missions and TA delivery by other development partners.
- The cost of implementing TA recommendations, especially those involving investments in hardware or new systems, has sometimes delayed implementation.
- Absorptive capacity and financing constraints are primary risks to CD delivery in Sierra Leone.

### Mitigating initiatives and recent support
- Placement of two resident advisors at the BSL in 2022, on banking supervision and monetary policy, and of a PFM resident advisor at the MoF in 2024 has helped support CD delivery in a fragile institutional setting.
- Sierra Leone’s incorporation as a pilot country for FAD’s medium-term programmatic approach to CD planning and delivery should support implementation of TA recommendations and the integration and sequencing of CD priorities.
- The authorities have requested that future TA should contain a training component to help build domestic capacity.

### Capacity Development Priorities (Table 1 — Public finance, revenue, and financial sector)
- Public Finance Management
  - Ensure fiscal sustainability through: (i) Implementing reforms to better manage public investment with stronger focus on project appraisal and selection; (ii) More effectively prioritize spending to critical sectors; (iii improve budget execution through advising on updates to reforming the PFM legislation, developing capabilities on strategic and baseline budgeting; (iv) Strengthening fiscal risk management, including SOEs; (v) Enhancing cash forecasting and cash management function; (vi) Accelerate transparency and governance reforms, including follow-up of audit recommendations.
  - Improve fiscal reporting by enhancing coverage of the whole of central government and gradually extending it to the general government, adopting IPSAS-based accounting and fiscal reporting, and improving data integrity of the financial statements.
- Tax Policy
  - Support revenue mobilization efforts and implementation of individual MTRS measures; strengthen tax policy analysis at the Ministry of Finance in cooperation with development partners, including the Joint Domestic Resource Mobilization Initiative (JDRMI).
- Revenue Administration
  - Improve efficiency of domestic resource mobilization by: (i) Increasing tax and customs compliance and supporting development of a compliance risk management framework; (ii) Broadening the tax base and strengthening border controls; (iii) Modernizing the governance structure of NRA; (iv) Building capacity in data analytics and audit of specialized industries; (v) Automating tax and customs administration and enhancing data integrity; (vi) Limiting and improving control and monitoring over tax and customs exemptions; (vii) Integrating the NRA system with other fiscal systems.
- Expenditure Policy
  - Sierra Leone is a pilot country for IMF’s medium-term engagement focusing on building government capacity to undertake expenditure reviews. Mission on wage bill management supported authorities’ development of a medium-term wage bill management strategy.
- Financial Sector Supervision and Regulation
  - Continue engagement on the assessment of financial sector safety and soundness and strengthening prudential supervision frameworks and processes.
- Financial Stability
  - Build tools to monitor systemic risk, conduct stress tests, and improve financial stability analysis.
- Debt Management
  - Improve debt recording and debt management, including at state-owned enterprises and self-accounting bodies.
- Central Banking Operations and Governance
  - Implement revised Banking and BSL Acts to strengthen BSL’s ability to supervise the banking system; discontinue monetary policy analysis for foreign exchange interventions and monetary policy transmission mechanism; continue IFRS implementation and supervisory framework for banks; strengthen governance and capacity to manage BSL’s balance sheet.
- Safeguards
  - Continue safeguards assessment and strengthening governance reforms.
- Statistics
  - Improve macroeconomic and debt-related indicators of economic activities in all sectors; enhance reporting, improve coverage, and leverage high-frequency data; convert monetary accounts to MFSMCG 2016 standard; improve estimation methodologies for foreign direct investment inflows, remittances, and unrecorded exports of minerals.
  - Note: net international position data has not been released since 2017.

### CD spending and focus areas (figure highlights)
- Sierra Leone has received as much CD as the AFR average country, both in terms of spending and number of projects.
- Most CD is delivered by FAD and is primarily focused on revenue administration and Public Finance Management.
- MCM’s CD is aimed at improving financial sector supervision and regulation, and monetary and macroprudential policies.
- Inclusion & gender, and governance were two priority areas of intervention in Sierra Leone.
- Selected sectoral shares (as presented): Financial Supervision and Regulation, 46.1%; Revenue Administration, 37.1%; Public Financial Management, 35.9%; Monetary and Macroprudential Policies, 22.1% (and other categories listed with their percentages).

### Climate vulnerability and macroeconomic implications (Annex IV)
- Temperature and precipitation trends and projections
  - Average temperature increased to 27°C during the past sixty years—from a historical average of 26°C—with higher averages in more densely populated regions near the coast.
  - Average number of heat days per year trended upward from 30 in 2005 to over 40 in 2025.
  - Average annual precipitation was approximately 2700 mm in 2020.
  - Annual maximum one-day precipitation (RX1DAY) shows an upward trend, reflecting more intense rainfall events.
- Projected impacts on labor, agriculture, and GDP
  - The number of extremely hot days (above 35°C) could exceed 45 days annually—more than double the current average under higher-warming scenarios.
  - CCDR projects heat stress to drive a GDP decline of about 3-5 percent by 2050.
  - CPD projects a decline in GDP per capita of approximately 8 percent by 2100 in the fastest warming scenario, assuming slow adaptation.
- Agriculture and food security
  - Agriculture accounts for half of employment and 30 percent of value added in the economy.
  - Food insecurity has been increasing since 2000 and affects over 80 percent of the population.
  - The WB’s CCDR projects a decrease in yields for all rainfed crops and a 3-5 percent GDP loss from agriculture by 2050.
- Floods, landslides, and disaster costs
  - Sierra Leone has experienced 14 landslide occurrences since 2004.
  - The 2017 landslide cost an estimated $36 million (around 0.5 percent of 2017 GDP).
  - The 2024 September floods displaced about 750 people and destroyed food supplies and livelihoods; in other areas floods submerged over 1,500 farmers’ lands with crops destroyed or damaged.
  - Models predict a 1-in-25 years river flood causing $75 million in losses and damages, around 1 percent of 2025 GDP.
  - Increased frequency and severity of climate shocks can lead to lower export earnings, higher import needs for reconstruction and food, and exacerbate balance of payments pressures in the medium to long term.
- Water access and contamination risks
  - In rural areas, only about half of the population has access to treated water; urban access is about 90 percent, but systems are overstretched.
  - Freetown’s watershed covers about 90 percent of Freetown’s water supply; informal settlements are not serviced.
- Sea level rise projections and costs
  - Median projections under RCP 4.5 suggest an increase of 0.61 meters by 2100 compared to 2000 levels; under RCP 8.5 the increase could reach 0.77 meters.
  - Without adaptation, the annual average cost of sea level rise is estimated between 0.3-0.36 percent of GDP annually in a Paris-aligned and extreme emissions scenarios.
- Institutional and planning gaps
  - The updated NDC and NAP outline national climate priorities; the NDC prioritizes seven sectors for adaptation and pledges a 25 percent reduction of greenhouse gas emissions by 2050 (partly conditional and compared to a business-as-usual scenario).
  - The Medium-Term National Development Plan (2024–2030) includes improving resilience to climate change as a cross-sectoral priority but is not fully aligned with international commitments (iNAP and NDC), and limited cross-sectoral coordination results in partially conflicting policies.
  - The Environment Protection Agency Act (2021) established a Climate Change Secretariat and the Ministry of Environment and Climate Change oversees coordination, but the secretariat is made up of only a few individuals and broader MDAs’ understanding of roles is needed.
  - The government is drafting a Climate Change Act; submitting this act to parliament is a trigger in the WB DPO.
- Public Financial Management and data gaps
  - Fiscal risks from climate shocks on public infrastructure and the economy are not adequately considered in the PFM framework.
  - Project appraisal guidelines insufficiently reflect climate adaptation and resilience considerations; the Public-Private Partnership framework does not include climate risk sharing.
  - The C-PIMA highlights the lack of a comprehensive registry of critical public assets including vulnerability assessments as a key obstacle to effective asset management and climate-aware maintenance planning.
  - Insufficient data limits Sierra Leone’s capacity to allocate scarce resources effectively and to integrate climate considerations into planning; macro-fiscal costs associated with disasters of varying magnitudes are not well known.
  - NDMA has some vulnerability data, but it is fragmented, out of date and incomplete; hazard vulnerability maps incorporating climate change scenarios are lacking, making long-term climate integration into MDAs’ planning difficult.

*Source: IMF staff compilation from the provided chapter content.*

### 11. Sierra Leone is at the beginning stages of establishing a social safety net system, and

### Sierra Leone is at the beginning stages of establishing a social safety net system, and administrative infrastructure is needed to efficiently respond to disasters

### Social protection system status and operational gaps
- The current system consists largely of a donor-financed cash transfer program for extreme poor households and community works programs led by the National Commission for Social Action (NaCSA).
- The system lacks formally defined structures and benefits despite progress:
  - Government adopted the National Social Protection Strategy (2022–2026).
  - Government prepared the National Social Protection Bill to establish the legal and institutional foundation for a life-course social protection system and calls for the formalization and digitalization of a social registry.
- Existing records and identification:
  - Country maintains beneficiary lists from previous programs covering around 10 percent of the extreme poor, using program ID numbers.
  - NDMA has a list of vulnerable households to hazards using a 2016 map, which does not include climate scenarios.
  - National Identification Number (NIN) cards were distributed, although a small subset of the vulnerable population has yet to receive one.
- Operational limitations:
  - Lack of a permanent, dynamic and digitalized social protection registry linked with the national electronic ID hinders targeting, allows for duplication, and reduces ability to rapidly scale up support in the event of shocks, including from donors.
  - Current approach uses on-demand community targeting that takes time to identify beneficiaries for social support.
- Institutional developments and recommended next steps:
  - The National Social Protection Authority was recently established, with responsibility of creating a social protection registry.
  - RM 5: Merge current beneficiary registries with the national identification system to strengthen the ability of the government and development partners to rapidly and effectively scale up support to extremely poor populations during disasters.
  - RM 6: Integrate the new social registry with updated hazard assessment data and expand coverage of extreme poor households in those areas to ensure support reaches disaster-affected households quickly, including those not previously program beneficiaries, while strengthening the capacity of the National Social Protection Authority to expand coverage over time.

### Water services constraints and implications for climate resilience
- Sector viability and maintenance challenges:
  - The water sector is not economically viable and lacks financial resources for appropriate maintenance and investment.
  - Water availability is essential for an agricultural sector resilient to climate change; food security is the main priority with “Feed Salone” as the President’s flagship initiative.
- Tariff and financial performance issues:
  - EWRC established tariff rules in 2019 to guide cost-recovery methodologies for tariff setting.
  - Water companies report operations depend on government support as current water tariffs do not cover operational costs.
  - Guma Valley Water Company’s (GVWC) last tariff adjustment was approved in 2021. Despite the tariff increase, GVWC continued to operate below cost recovery, with a negative net cash flow of 11.3 million leones in 2022.
  - Sierra Leone Water Company (SALWACO) tariffs were last updated in 2023; tariffs remain among the lowest in Sub-Saharan Africa.
  - Low tariff levels and high non-revenue water continue to hinder full cost recovery.
- Technical assistance and recommended reform:
  - Recent TA from EP showed the need to develop a multi-year water tariff methodology that includes provisions for periodic comprehensive tariff reviews, efficiency targets, and interim indexation with targeted pass-throughs for verified exogenous costs. (RM 7)

### Financial stability risks and climate-related data gaps
- Institutional progress and limitations:
  - Creation of the Emerging Risks Unit at the central bank’s prudential supervision directorate overseeing climate risks is a welcoming development (IMF, CPD 2024).
  - Significant limitations exist in Sierra Leone’s conventional stress testing framework (IMF, FSSR 2020) and data collection capacities.
- Priorities for financial sector resilience:
  - Improve overall financial sector resilience by enhancing the conventional stress testing framework and data collection capacities, refocusing banks’ business models, and capital market development.
  - Given current constraints, complex climate-related exercises (scenario design, climate risk analyses, disclosures, green finance guidelines) are not well-suited at present.
- Practical, immediate actions:
  - BSL could step up efforts to understand potential pressure points from material climate risks such as floods and landslides.
  - All commercial banks are willing to gather geographic information related to their sectoral exposures in Sierra Leone; BSL could start by collecting banks’ sectoral loan and collateral exposures by geographic locations. (RM 8)
  - Sierra Leone should improve capacity to identify risk transmission channels to better understand the impact of climate-related physical risks on the banking sector. (RM 9)
- Long-run alignment:
  - Once appropriate sectoral policies and bankable projects are in place, a climate-related alignment approach (e.g., a taxonomy) covering mitigation and adaptation across key strategic sectors could help attract climate finance.

### Climate finance needs, flows, and structural impediments
- Estimated needs and financing gap:
  - NDC 3.0 estimates climate finance needs between 2025-2035 to be around $3 billion, with closer to two-thirds allocated for adaptation needs.
  - The mismatch between climate finance needs and current climate investment flows has produced a financing gap of around 50 percent of total needs.
- Historical flows and sectoral allocation:
  - Over one third of existing climate financing flows went into climate resilient investments in the energy sector; cross-sectoral projects and the agriculture sector attracted about 25 percent and 20 percent of climate finance, respectively (CPI, 2023).
- Domestic mobilization constraints:
  - Domestic public sector can mobilize only up to $10 million through the domestic budget reallocation and the contingency budget reserve (CCDR, 2024).
  - Given debt sustainability issues, meeting climate goals will require concessional non-debt-based climate financing and strong policy frameworks with extensive technical assistance.
- Composition of international finance and risks:
  - Most public financing originates from multilateral development banks (over 60 percent of total funding), while bilateral public financing contributes around 30 percent during the same period (OECD, 2023).
  - Most of this funding has come in the form of grants.
  - Private financing flows to Sierra Leone remain significantly lower, at less than 5 to 10 percent based on various estimates.
  - Official development assistance (ODA) could come under pressure going forward due to geopolitical tensions and reprioritization.
- Impediments to scaling climate finance in Sierra Leone:
  - Lack of a large bankable pipeline of projects, institutional challenges, high upfront costs, long-dated and volatile nature of climate investments, and risk-return mismatches.
  - No pipeline of appraised and prioritized projects and lack of criteria for informed decision-making; public investment pipeline includes many projects with insufficient funding (IMF, CPIMA 2024).
- Regulatory and coordination gaps:
  - NDC 3.0 calls for a National Climate Financing Facility (NCFF) to set out a National Investment Plan (NIP), which is yet to be developed.
  - The Medium-Term National Development Plan (MTNDP, 2024-2030) is not clearly aligned with the NDC and iNAP.
  - Presidential Initiative on Climate Change, Renewable Energy, and Food Security (2023) lacks a clear mandate and is understaffed.
  - No platform exists to bring institutions and initiatives together to coordinate climate investment (IMF, CPIMA 2024).
  - Recently finalized national climate finance strategy could help clarify institutional roles and coordination mechanisms, but its effectiveness is conditional on follow‑through, legal backing, operational rules, and sustained capacity building.
  - Completed disaster risk finance strategy could enhance disaster risk insurance penetration by creating a disaster emergency fund and employing insurance instruments such as accessing the African Risk Capacity (IMF Sierra Leone CPD, 2024).
- Suitability of financing instruments:
  - Climate-related sovereign debt instruments are ill-suited at the current juncture due to demand constraints, limited fiscal space, and debt sustainability concerns; investor base for debt instruments is limited by lack of international market access, underdeveloped domestic capital markets, and bank business models focused on sovereign debt securities.
  - Concessional non-debt financial instruments (grants, equity investments, other non-debt structures) could be more suitable to avoid adding to the debt burden.
  - Example cited: Acumen Resilient Agriculture Fund (equity fund) anchored in the Green Climate Fund (GCF), which provides first-loss capital and technical assistance grants (UNDP, 2023).
  - GCF has provided closer to $75 million in grant financing for 8 projects in Sierra Leone as of end-2025.
- REDD+ and forest finance potential:
  - NDC aims to implement REDD+ programs to attract additional financing in the long run; requires addressing deforestation, land tenure, and forest governance impediments.
  - REDD+ Strategy (2019) constrained by capacity gaps, tenure and governance weaknesses, uncertain financing, incomplete MRV systems, and limited integration with broader development policies.
  - Attracting REDD+ financing will require prioritizing improvements in MRV capacity and a robust national forest monitoring system.
- Role of RSF reform measures in unlocking climate finance:
  - RM1–RM2: Increase credibility and bankability of public investment projects for climate finance providers.
  - RM3: Improve government’s ability to quantify and disclose climate-related fiscal risks.
  - RM4: Support evidence-based adaptation planning and better targeting of investments to high-risk areas.
  - RM5–RM6: Strengthen adaptive social protection through a digitalized and scalable social registry linked to climate vulnerability data for faster, targeted donor support and shock-responsive financing.
  - RM8–RM9: Strengthen climate risk monitoring within the financial sector to target adaptation efforts in regions most exposed to material financial losses, potentially reducing risk premia and bolstering investor confidence.
  - Taken together, the RSF reform package would strengthen resilience and macroeconomic and financial stability, and create institutional systems, data infrastructure, and policy credibility needed to crowd in external climate financing.

### Development partner involvement and sectoral support
- Aggregate climate-related financing from development partners:
  - Between 2018 and 2022, Sierra Leone received approximately US$850 million in climate-related financing.
  - Breakdown: US$400 million toward adaptation, US$350 million toward mitigation, and US$100 million toward cross-cutting initiatives.
- Donor focus areas and examples:
  - Mitigation: Support for rural electrification and off-grid solar (WB, Germany, Japan, United Kingdom); UK’s US$50 million Rural Renewable Energy Project cited as an example.
  - WB support via DPO and TA targets resilience and financial sustainability of the energy sector, including a multi-year tariff methodology and separation of assets between Electricity Generation and Transmission (EGTC) and Energy Distribution and Supply Authority (EDSA).
  - Forestry: Drone-based forest monitoring (Project Sapling), remote sensing (WFP), community forest management (EU’s PAPFor and PAPBio), and clean cooking solutions; GCF and FAO support for monitoring systems, national forest inventory, and pipeline development.
  - Adaptation: EU’s Nature Nourishes initiative for climate-smart agriculture and value chains; UNICEF support for early warning systems and emergency preparedness; Iceland and Global Climate Facility investments in solar-powered emergency services and improved WASH infrastructure.
  - WB DPO supported creation of a National Country Planning Bill to integrate disaster and climate risk considerations into urban planning.
- Effectiveness constraints:
  - Persistent institutional challenges limit the effectiveness of external assistance despite alignment with Sierra Leone’s climate priorities.

*Source: IMF country analysis excerpt provided in the content unit.*

### 28. Development partners have also contributed to strategic planning and institutional

### 28. Development partners have also contributed to strategic planning and institutional strengthening.

### Development partner support and institutional constraints
- The Green Climate Fund (GCF) supported the development of Sierra Leone’s comprehensive National Adaptation Plan.
- Germany assisted with the third Nationally Determined Contribution.
- UNDP worked with authorities to integrate climate considerations into fiscal planning through a green budgeting framework.
- The World Bank Development Policy Operation (WB DPO) includes a trigger to submit a Climate Change Act to Parliament that consolidates existing climate change-related legislation and outlines clear roles and responsibilities related to climate change action across government.
- Persistent institutional challenges limit the effectiveness of external assistance; strengthening institutional capacity and improving governance are essential to translate donor engagement into sustained climate resilience.

### Climate profile and key data points (Figure 4 highlights)
- Sierra Leone contributes only a minimal share of global GHG emissions and has very low per capita emissions, but carbon intensity—emissions relative to GDP—is relatively high compared to other EMDEs and AFR countries.
- Sierra Leone is the 22nd most vulnerable country according to the IMF-Adapted NDGAIN Index, exhibiting low readiness.
- Emissions by sector: emissions are dominated by agriculture.
- Sierra Leone is prone to flooding and has experienced sporadic yet severe landslides.
- Electricity mix: 90% of Sierra Leone’s power is generated from hydropower; peak demand is near 100 MW and generation capacity is between 75-80 MW.
- Food security and adaptation: Sierra Leone is more vulnerable than other AFR countries to changes in cereal yields, food import dependency, and agricultural capacity; it faces greater vulnerability to changes in annual water runoff compared to the rest of the region.
- M4 – GHG Emissions vs. NDC Targets: The gap between Sierra Leone's NDC target and its baseline emissions is modest, indicating additional, yet manageable, mitigation efforts are needed to meet the target.
- A4 – Number of Hot Days and Consecutive Dry Days: Over the past 20 years, the average number of heat days per year has shown a significant upward trend.
- M5 – Public Investment in Renewable Energy: Public investment in renewable energy peaked in the early 2000s but is currently substantially below the AFR average.
- A5 – Access to Electricity: Access to electricity lags behind other AFR and climate-vulnerable countries, with a pronounced urban-rural disparity.
- CF1 – Climate Finance Vis-à-Vis the Region, 2020: Sierra Leone attracts only a small fraction of climate finance flows in Africa; note: this amounts to about 2.5 percent of GDP (ranked 17th).
- CF2 – Climate Finance Investor Base, 2021: Most climate finance to Sierra Leone is provided by Multilateral Development Banks.

### Annex V — Fiscal reform for climate resilience: DIGNAD model setup and assumptions
- Model: DIGNAD, a small open economy dynamic general equilibrium model (Marto, Papageorgiou, and Klyuev (2018)), used to analyze public investment, growth, debt sustainability, climate shocks, capital damage, productivity loss, investment efficiency, and creditworthiness; incorporates tax collection efficiency (C-efficiency ratio for GST performance).
- Calibration date: end-December 2024, with steady-state values based on 2018-2024 averages.
- Public investment in infrastructure: set at 4.5 percent of GDP; efficiency at 0.52 per IMF’s 2020 PIMA.
- Initial public debt: set at 44.0 percent of GDP based on the 2024 estimate.
- Climate-resilient infrastructure assumptions: costlier than standard types, depreciates more slowly, resilient to natural events.
- GST collection efficiency: estimated to average 18 percent during 2018-2023.
- Disaster simulation: a major natural disaster simulated in 2030.
- WB CCDR estimate: overall climate change projected to cause a GDP loss that could be as high as 10 percent by 2050 without adaptation actions.

### DIGNAD simulation scenarios and comparative outcomes
- Scenarios simulated (three):
  - Baseline scenario:
    - Government invests 2.0 percent of GDP in additional standard public infrastructure for each of the five years before the natural disaster.
    - Financing: grants 1.0 percent of GDP and concessional borrowing 1.0 percent of GDP.
    - Outcome: climate disaster in year 4 leads to decline in GDP, private investment, and private consumption; public debt to GDP ratio increases due to reconstruction spending and lower GDP.
  - Adaptation scenario:
    - Government invests 2.0 percent of GDP in climate-resilient public infrastructure (instead of standard) for each of the five years before the natural disaster.
    - Financing: grants 1 percent of GDP and concessional borrowing 1.0 percent of GDP.
    - Outcomes:
      - Real GDP growth stronger than baseline due to higher return on adaptation investment.
      - Impact of the climate shock on output is lower; GDP growth recovers more quickly than baseline.
      - Losses to private investment and consumption are lower than in the baseline.
  - Adaptation and reform scenario:
    - Combines adaptation investment with reforms increasing public investment efficiency by 20 percentage points to reach the average estimated efficiency in the SSA region.
    - GST tax collection efficiency increases gradually in five years from 18 percent to 30 percent (just short of the Sub-Saharan Africa average, 35 percent).
    - Aligned with the RMs set out in Annex III (Table 13).
    - Outcomes: output losses are lower and recovery is faster than other scenarios due to enhanced climate resilience and higher efficiency.
- Simulation insights:
  - Upfront investment in climate-resilient infrastructure combined with efficiency-enhancing fiscal reforms reduces the adverse macroeconomic impact of natural disasters.
  - Early resilience measures mitigate disaster effects on growth and debt, but without revenue and spending reforms, initial costs worsen deficits.
  - Mobilizing domestic revenue and improving public investment and tax collection efficiency are critical for long-term macroeconomic stability.

### Annex VI — RSF-targeted reform areas, desired outcomes, and prospective BoP risk reduction
- Reform areas covered by the RSF include:
  - (i) Public Financial Management
  - (ii) Disaster Risk Management and Social Safety nets
  - (iii) Adaptation reforms focused on water and land management; Coastal Resilience
  - (iv) Financial Sector Risk Management
- Public Financial Management current gaps and desired outcomes:
  - Current status: No internalization of fiscal risks in the budget process; No asset registry nor maintenance plans; No integration of climate into PIM.
  - Desired long-term policy outcomes:
    - More effective management of public non-financial assets.
    - Timely assessment and incorporation of fiscal risk into the budget for risk mitigation and contingency planning.
    - Improved fiscal and external sustainability.
  - Prospective BoP risk reduction:
    - Rationalizes fiscal expenditure on maintenance and reduces potential needs for rebuilding and related import demands.
    - Reduces fiscal costs in climate-related events and the need for external financing; reduces import demand for reconstruction; facilitates quick recovery of growth and exports.
  - Feasible RSF-supported actions and potential additional reforms listed in the document (e.g., asset registry, integrate climate into PIM, database of PPPs, clarify roles and responsibilities).
- Disaster Risk Management and Social Safety nets current gaps and desired outcomes:
  - Current status: No social protection registry; No vulnerability assessment; early warning systems; No clarity on how disaster response would be funded.
  - Desired outcomes:
    - Well-designed social protection incorporating climate vulnerability considerations.
    - Vulnerability assessment and Early warning systems informing policies and social protection.
    - Articulated Disaster Risk Financing (DRF) for fast and effective response.
  - Prospective BoP risk reduction:
    - Reduced economic losses when climate risks materialize, lowering the need for government support after disasters; improved fiscal and external sustainability; enables a more effective social protection system for vulnerable households, contributing to improved and more resilient human capital and stronger growth and export potential.
  - Feasible RSF-supported actions and potential additional reforms listed (e.g., vulnerability maps, digital social protection registry, early warning system, disaster risk financing strategy).
- Adaptation: Water and Land Management current gaps and desired outcomes:
  - Current status: No reliable information on water uses and costs; tariff below cost recovery; water-use conflicts and no comprehensive water management plan; inadequate land management and no cadastre.
  - Desired outcomes: Sustainable land and water use; improved fiscal and external sustainability; supports growth in export-oriented water-dependent sectors and provides foundation for economic activity and growth.
  - Potential additional reforms listed (e.g., land-use planning framework, zoning, building codes, resilient urban WASH services, forestry inventory, roadmap to bring water tariffs to cost-recovery).
- Financial Sector Risk Management current gaps and desired outcomes:
  - Current status: No data architecture for green finance; Lack of information on potentially bankable projects and climate-related risks; No taxonomies nor disclosure requirements.
  - Desired outcomes: Financial sector resilient to climate-related shocks and able to identify risks and opportunities in climate-related projects; safeguards financial stability and improves asset allocation, reducing economic losses after disasters.
  - Feasible RSF-supported actions and potential additional reforms listed (e.g., mandate climate risks and loan information, identify physical risk transmission channels, transition taxonomies, climate disclosure).

*Source: 1sleea2026002 - 28. Development partners have also contributed to strategic planning and institutional strengthening.*

### 1. To support the Reform Measures, the Trustee approves the RSF arrangement for Sierra Leone

### 1. To support the Reform Measures, the Trustee approves the RSF arrangement for Sierra Leone

### RSF Arrangement Terms
- The Trustee approves the RSF arrangement for Sierra Leone until December 30, 2027, in accordance with the RST Instrument.
- Sierra Leone has the right to obtain disbursements from the Trustee in a total amount equivalent to SDR 155.55 million, subject to availability of resources in the RST.
- Except as specified in Section II, Paragraphs 1(b)(4)(ii) and (iii) of the RST Instrument, the RSF Arrangement will terminate on the date of the expiration, termination or cancellation of the Arrangement under the ECF for Sierra Leone approved by the Executive Board on October 31, 2024, or when all amounts committed under this RSF Arrangement have been drawn.

### Disbursement Schedule Linked to Reform Measures
- At Sierra Leone’s request and subject to paragraph 3 conditions, disbursements will be available as follows:
  - On or after November 15, 2026:
    - Disbursement linked to RM 3: SDR 17.284 million
    - Disbursement linked to RM 8: SDR 17.283 million
  - On or after May 15, 2027:
    - Disbursement linked to RM 1: SDR 17.284 million
    - Disbursement linked to RM 4: SDR 17.283 million
    - Disbursement linked to RM 5: SDR 17.283 million
  - On or after November 15, 2027:
    - Disbursement linked to RM 2: SDR 17.284 million
    - Disbursement linked to RM 6: SDR 17.283 million
    - Disbursement linked to RM 7: SDR 17.283 million
    - Disbursement linked to RM 9: SDR 17.283 million

### Conditions for Disbursement
- Sierra Leone will not request a disbursement specified in paragraph 2 until:
  - The Trustee has completed a review under this RSF Arrangement (to take place concurrently with the completion of a review under the ECF Arrangement, or as otherwise specified in Section II, paragraph 1(b)(9) of the RST Instrument), and the Trustee has determined that for each disbursement the accompanying Reform Measure has been implemented, or that any deviation in implementation relative to its design and underlying objective was minor; or
  - After 30 calendar days have passed from the date of the completion of a review under this RSF Arrangement in accordance with Section II, paragraph 3(c) of the RST Instrument.

### Consultation and Information Requirements
- Sierra Leone will provide the Trustee with such information as the Trustee requests regarding progress in implementing the Reform Measures supported by this RSF Arrangement.
- During the RSF Arrangement period, Sierra Leone shall remain in close consultation with the Trustee:
  - Sierra Leone shall consult with the Trustee on the adoption of any measures that may be appropriate at the initiative of the government or whenever the Managing Director requests such a consultation.
  - After the RSF Arrangement ends and while Sierra Leone has outstanding financial obligations to the Trustee arising from loan disbursements under the RSF Arrangement, Sierra Leone will consult with the Trustee from time to time, at the initiative of the government or whenever the Managing Director requests consultation on Sierra Leone’s economic and financial policies.
  - Consultations may include correspondence and visits of officials of the Trustee to Sierra Leone or of representatives of Sierra Leone to the Trustee.

### Letter of Intent — Key Requests and Commitments (May 29, 2026)
- Requests to the IMF Executive Board:
  - Complete the third review of the ECF arrangement.
  - Approve Sierra Leone’s request for an RSF arrangement.
  - Approve disbursement of the fourth tranche of the ECF credit, following requests for waivers of non-observance for quantitative PCs relating to end-December 2025 NDA and the continuous ceiling on concessional external debt.
- Requested modifications of performance criteria (PCs):
  - Raise the June and December 2026 NCG ceilings.
  - Tighten the end-June 2026 NDA target while keeping the end-December target determined by the end-year reserve money objective.
  - Tighten the 2026 concessional external debt ceiling by US$8 million.
  - Reduce the end-June NIR target to reflect latest timing of budget support disbursements.
- Corrective actions noted:
  - Brought the NDA on track as of end-March to achieve the revised end-June 2026 target.
  - Reduced the 2026 external concessional debt ceiling to correct the 2025 slippage.

### Recent Economic Developments and Outlook (selected figures)
- Fiscal stance and pressures:
  - Domestic primary surplus in 2025: 1.3 percent of non-iron ore GDP (up from a deficit of 2.7 percent in 2024).
  - Revenues underperformed in Q1-2026, partly due to falling oil imports.
  - Transfers to clear EDSA's arrears to IPPs expected to exceed budgeted amounts.
  - Temporary fuel subsidies introduced in Q2-2026 to address fallout from the war in the Middle East.
- Monetary and reserves:
  - Policy rate cut by 200 bps to 16.75 percent in December 2025; no further reductions at March meeting.
  - Gross reserves: 1.9 months of imports at end-March 2026 (up from 1.4 months of imports in September 2025).
- Growth and inflation projections:
  - Growth in 2025: 5 percent.
  - Projected growth in 2026: 4.0 percent.
  - Projected medium-term potential growth: 4.6 percent.
  - Inflation: 10.8 percent YoY in April; under baseline expected to reach 11.6 percent by end-2026.
- External sector:
  - Current account deficit: estimated at 5.4 percent of GDP in 2025; projected to shrink to 3.7 percent of GDP in 2026.
  - Upward revisions in historical imports data contributed to a higher current account deficit than previously projected.

### Program Performance (selected outcomes and breaches)
- End-December 2025:
  - Met all continuous PCs except the US$100 million concessional external debt ceiling, which was breached by US$8.5 million.
  - Corrected the breach by reducing the 2026 ceiling (from US$100 million to US$91.5 million).
  - Missed the PC on Net Domestic Assets due to end-year liquidity spike; NDA was brought on track as of end-March to meet the revised end-June target.
  - Met most ITs except those on Domestic Arrears and the Domestic Primary Balance.
- End-March 2026:
  - Met the continuous PCs and the ITs on NCG, NDA and NIR.
  - Missed ITs on FX Spending, School Feeding, Domestic Revenues, Domestic Primary Balance, Social Spending and Domestic Arrears.
  - Missed the continuous fuel pricing SB (subsidized fuel prices since April).
  - Missed the continuous SB on mining agreements (to be completed through a prior action); other SBs met or to be replaced/completed as prior actions.
- Waivers requested for missed PCs based on corrective actions:
  - Corrected end-December 2025 NDA breach by bringing NDA on track as of end-March.
  - Corrected 2025 concessional external debt ceiling breach by reducing 2026 ceiling by the slippage amount (from US$100 million to US$91.5 million).

### Fiscal Policy and Key Budget Measures
- Supplementary budget planned with a domestic primary surplus of 1.1 percent of GDP (New end-September 2026 SB).
- Revenues:
  - Revenues expected to fall short of the annual target by 0.3 ppts of GDP relative to the original budget.
  - Plan to offset shortfall by bolstering enforcement and implementing remaining Finance Act 2026 tax measures.
- Spending adjustments:
  - Expected transfers to IPPs this year: US$42.5 million (0.5 ppts of GDP) more than budgeted to support EDSA in clearing arrears.
  - Planned cuts to domestically financed capital expenditure: US$47.5 million (0.6 ppts of GDP).
  - Temporary fuel subsidies capped at a cost of 0.13 ppts of GDP; full pass-through of oil prices to resume when envelope exhausted.
  - Seek financing from the WB contingency emergency spending and disbursements for increased social program spending.
  - Allocate 0.2 percent of GDP to a fiscal buffer in the supplementary budget, to be spent only in Q4-2026 and only if fiscal outturns allow without jeopardizing the end-December NCG target.

### Extractive Industries, Revenue Mobilization, and PFM Measures
- Extractive industries:
  - Prior Action commitment: provide evidence that all mining agreements ratified since December 2025 are in full compliance with EIRA.
  - Commitment to operationalize the iron ore safe harbor as a Prior Action.
- Tax and customs administration reforms and timelines:
  - Implement recommendations of the TADAT assessment under a dedicated oversight team and follow the TADAT 2025 field guide.
  - Incorporate human capital risk into the enterprise risk management framework and integrate ITAS with ECR, banks, SICPA FIS, and other IT systems.
  - Enhance NRA’s CRM framework (new end-April 2027 SB) by equipping the CRM unit, integrating compliance risk management across four principal taxpayer obligations, approving and publishing an annual Compliance Improvement Plan, and establishing an operational risk management committee.
  - By September 2026: Ministry of Finance to enter into a new performance management contract with the NRA with clear indicators and aligned targets.
  - By December 2026: Fully operationalize the revenue courts.
  - Customs:
    - Fully implement the customs revenue enhancement plan by end-December 2026.
    - Implement the National Electronic Single Window and fully operationalize the end-to-end customs integrated processing platform by end-September 2026.
    - Engage UNCTAD to audit ASYCUDA and deliver an approved report by August.

*Source: 1sleea2026002 - 1. To support the Reform Measures, the Trustee approves the RSF arrangement for Sierra Leone*

### 2026. The audit will identify weaknesses in NRA's ASYCUDA operation that could cause revenue

### 2026. The audit will identify weaknesses in NRA's ASYCUDA operation that could cause revenue 

### Customs, ASYCUDA, and governance-related reforms
- An audit will identify weaknesses in NRA's ASYCUDA operation that could cause revenue loss or hinder trade and will be followed by an ASYCUDA upgrade by December 2026.
- To address risks identified in the Governance and Corruption Diagnostic Report (GCD), customs authorities will exclusively perform the core functions of destination inspection and classification and valuation of goods starting February 1st, 2027 (new November 2026 SB).

### Fuel revenue and pricing
- Since March 2026, the fuel pricing formula accurately incorporates excise duties, IDF rates, and all other levies.
- As of early May, fuel prices were raised by 28 percent for petrol and 46 percent for diesel this year.
- The continuous SB was not met in part because of subsidies introduced in April to avoid disruptive fuel price movements; these subsidies were transparently reflected in the fuel price formula and publicly announced as temporary.
- The fuel subsidies introduced in April will be strictly limited to 2026—with their costs capped at 0.13 percent of GDP—and are expected to be terminated in July.
- Commitment to the SB was maintained and updated to reflect the temporary need for subsidies (Table 2).

### Medium-term expenditure framework and social protection
- Wages and salaries: plan to maintain wages and salaries at around 4.2 percent of non-iron ore GDP; strengthen payroll and recruitment controls to prevent wage bill overruns.
- Goods and services: plan to contain spending in line with the FX spending PC while safeguarding social spending (Social Spending IT); continued commitment to raise outlays for the school feeding program (School Feeding PC).
  - Strengthen the National School Feeding Secretariat’s program monitoring capacity to facilitate timely invoice processing and payment.
  - Review and update the formula for meal costing in the National School Feeding Financing and Investment Plan to reflect current cost of meal provision.
  - Continue implementing the program with reputable partners and integrate with local farmers and producers to support Feed Salone objectives.
- Subsidies and transfers to IPPs: intend to contain IPP transfers by stepping up energy sector reforms.
  - Plan to fully operationalize the concession as a new end-May 2027 SB, ensuring the selected private operator will oversee all of EDSA’s operations by that time.
  - Expect to gradually reduce IPP transfers as reliance on costly diesel energy falls.
  - Commit to fully compensating for any IPP overruns by cutting non-priority domestic capital spending.
  - Intend to publish EDSA’s 2024 audited financial statements, and a report containing updated information of EDSA’s liabilities to IPPs as of December 2025, by June 2026.
- Domestically financed capital expenditure: limited to 0.9 percent of GDP in 2026 to offset higher than previously expected IPP transfers; plan to increase domestic capital spending as IPP transfers fall.

### Contingency planning and potential measures
- Possible measures to achieve the NCG target include:
  - (i) Reprioritizing spending, including rationalizing domestically financed capital expenditure or cutting goods and services spending, and reducing government energy use.
  - (ii) Strengthening tax administration by frontloading the implementation of TADAT recommendations.
  - (iii) If necessary, introducing tax policy measures including increases in tobacco excises and further rationalization of GST exemptions on food items.
- If oil prices remain elevated, may need to increase energy tariffs.

### Public Financial Management (PFM)
- GFSM 2014 transition: progress made with IMF TA support (end-September 2026 SB); additional IMF TA in June 2026 to ensure smooth transition.
- Arrears management:
  - Did not meet end-April SB partly due to capacity constraints; will adopt more gradual sequencing of reforms with CD support.
  - Prior Action: complete and share with IMF staff a comprehensive stock-taking exercise of central government expenditure arrears as of end-December 2025, covering all potential types of arrears specified in recent Fund TA report, including arrears in IFMIS and not in IFMIS.
  - Commit to publish an independent audit of the arrears stock and operationalize a new arrears profiling system (new end-November 2026 SB) and include audited arrears in the domestic arrears IT as soon as audited and monitoring system in place.
  - Commit to clearing all audited arrears; publish an updated arrears clearance strategy (new end-April 2027 SB) and start clearing the audited arrears stock as part of the 2027 budget.
  - Negotiations to settle domestic FX-denominated legacy arrears to Compagnie Sahelienne d’Entreprises (CSE) amounting to US$60 million.
- Cash management and forecasting: All key MDAs now submitting cash data and forecasts used to inform quarterly budget allotments and auction calendar; ECDMC meeting regularly.
- Budget credibility and SOEs:
  - Continue publishing information on debt and guarantees of SOEs in the budget and SOE Financial Analysis report.
  - Summary information on SOE government transfers and contingent liabilities published starting with the 2025 budget.
  - Expect SOE Act adoption by Parliament by September 2026; seek WB and IMF TA on SOE financial reporting and require SOEs to publish audited financial statements annually.

### Debt and debt management
- Overall and external public debts assessed as sustainable, but at high risk of distress.
- Commit to reducing domestic borrowing and adhering to external borrowing limits to maintain sustainable borrowing costs.
- Planned debt management actions:
  - Update the Medium-Term Debt Strategy annually.
  - Issue debt securities only through public auctions.
  - Restrict issuance of FX-linked debt securities to exceptional circumstances with favorable terms and IMF non-objection.
  - Hold a quarterly investor forum at a senior policy level within three weeks after publication of each quarterly fiscal report.
  - Establish a new investor relations desk by August 2026.
  - Conduct market surveys on T-bond appetite by September 2026.
  - Improve debt management institutional arrangements and domestic market practices with WB and MCM TA support.

### Monetary policy, safeguards, and exchange rate stance
- Monetary policy readiness:
  - Stand ready to tighten monetary policy should inflationary pressures persist.
  - With oil price shock expected transitory, plan to maintain programmed path for reserve money growth and paused further MPR reductions; remain vigilant if shock proves larger and more persistent.
- Monetary policy framework reforms:
  - BSL Board approved the monetary policy strategy in December 2025.
  - Developing guidelines for 7-day repo operations, including guidance on haircuts when T-bonds are used as collateral.
  - Commit to (i) start using the 7-day reverse repo as the primary instrument for liquidity injection by June 2026 and (ii) gradually phase out outright purchases of government securities, limiting them to structural liquidity management purposes.
  - Aim to fully implement the strategy by Q4-2026.
- Monetary financing and budget support loans:
  - Will refrain from any form of direct monetary financing; MoF will repay overdue budget support loans to the BSL.
  - Government will repay all overdue budget support loans—totaling some 1.5 percent of GDP—as soon as possible and no later than by end-2026.
- FX reserves and purchases:
  - Committed to purchase at least US$35 million of FX every six months until the end of the program.
  - Need larger purchases in H1-2026 to achieve end-June NIR target; estimate additional US$29 million in FX purchases needed in Q2-2026.
  - To contain FX spending, MoF will not request FX from the BSL for (i) transfers to IPPs and (ii) for entities outside the central government, which must use commercial banks unless they access their own FX deposits at the BSL (FX spending PC).
- BSL recapitalization:
  - Begun recapitalizing the BSL with the first of four instalments through a marketable 10-year bond with an 8 percent coupon in March (end-March 2026 SB).
  - Plan to issue three further instalments this year, totaling the dedicated budget allocation of NLe 971.5 million.
  - Aim to restore equity-to-GDP ratios to levels prevailing before the 2022 currency redenomination; pursue IMF forward-looking stress testing TA to inform potential future recapitalization needs.
- Safeguards reforms:
  - BSL Board approved workplan to review institutional responsibilities and ensure Board approval of policies; approved impairment policy in compliance with IFRS 9 and a policy on monetary operations.
  - Did not meet requirement to complete audited 2025 financial statements within three months of year-end; plan to publish them by end-June 2026.
  - Ongoing development of audit and risk management policies, reconciliation of cash and BSL accounts, and IT security and business continuity policies.

### Financial sector policies and resolution framework
- Bank resolution:
  - Committed to transfer assets from the problem bank to the acquirer and liquidate the remaining bank with minimal cost to government and risk to acquirer; revised asset valuation determines assets and liabilities to be transferred and the funding gap to be covered by the government.
  - Finalizing legal instrument for transfer; aim to finish the resolution by mid-2026.
- Resolution capacity and safety net:
  - Staffing the resolution unit; plan to implement the Deposit Protection Fund (DPF) Act once adopted by parliament.
  - Finalized Framework for crisis management and resolution adopted by the board; committed to operationalize the bank resolution framework (end-December 2026 SB), fill vacancies in the Crisis Management Section, and finalize recovery and resolution manual.
  - Plan to engage industry on resolution planning, draft resolution plans, and coordinate with home authorities of cross-border groups.
- FX regulation and supervision:
  - Strengthen staff training and examine banks’ FX risk management practices, including placements abroad and net open positions in FX.
  - Increase frequency of net open position reporting from banks to a daily frequency.
  - Introduce reserve requirements on foreign currency deposits by end-September 2026.

### Governance and anti-corruption measures
- Governance and Corruption Diagnostic (GCD):
  - Plan to form a task force overseen by the Vice President by end-June 2026 and complete a detailed action plan by October 2026.
- Mining sector governance:
  - Published MMDMC’s audited 2024 financial statements.
  - Adopted a policy for MMDMC regarding appointment of independent directors, adopted by cabinet.
  - Developed a KPI policy adopted by cabinet.
  - Abolished the Mineral Wealth Fund (MWF) and replaced it with the Sierra Leone Exploration and Mining Company (SLEMC); fulfilled spirit of end-March SB though technical timing differed.
  - Progress on end-September SB on online publication and risk-based verification of asset declarations.
  - Proposal to amend the Anti-Corruption Act approved by Cabinet in May; expect amended bill to be presented to parliament by end-July 2026.
- AML/CFT and beneficial ownership:
  - Implementing the 2025 National AML/CFT Strategy.
  - Will amend the 2009 Companies Act to require companies to disclose and verify beneficial ownership by end-2026 and ensure accessibility to relevant authorities.
  - Continue improving risk-based supervisory framework per the National Risk Assessment (NRA) and address challenges in regulating DNFBPs, notably in high-risk real estate and dealers in precious metals and stones.
  - Commit to adopt, by end-2026, regulations allowing the committee responsible for counterterrorism-related designations to operate; address regulatory gaps in targeted financial sanctions related to terrorism, terrorism financing, and proliferation under UNSC Resolutions.

### Reforms to improve resilience to climate change and RSF support
- Request support via a new IMF arrangement under the Resilience and Sustainability Facility (RSF) to support reforms at the intersection of climate and development: (i) climate-sensitive public investment management, (ii) climate resilience, and (iii) financial stability.
- Climate-sensitive public investment management:
  - Cabinet will adopt a framework for a climate-sensitive public asset registry and start operationalizing it by completing assessments for selected critical assets in priority sectors (reform measure 1, for end-June 2027).
  - The registry will include agreed data standards, institutional responsibilities, procedures for regular updating, and assessments of at least 20 critical assets across energy, water, infrastructure, and public buildings.
  - MOPED and NAGPC formally mandated to develop, adopt, and regularly update maintenance plans for public sector assets.
  - MOPED and NAGPC to develop and adopt a framework for climate-sensitive maintenance plans (reform measure 2, for end-December 2027), aligned with the asset registry and incorporating climate-resilience criteria.
- Macro-fiscal risk methodology and vulnerability mapping:
  - Develop a methodology to quantify fiscal risks from natural disasters, publish the methodology and results on the MoF website (reform measure 3, for end-December 2026), and include updated assessment of natural disaster impacts in the fiscal risks statement accompanying the yearly budget process.
  - NDMA to prepare and publish a national vulnerability map covering main climate-related hazards (reform measure 4, for end-June 2027) on MoECC and/or NDMA website; where data allows, include climate change scenario layers.
  - Main hazards to be covered: extreme heat, changes in precipitation patterns, floods (pluvial, fluvial, coastal), landslides, coastal erosion, drought, and wildfire.
  - The vulnerability map should have sufficient granularity and coverage to support RM6 (digital social protection registry) and RM9 (climate risk transmission channels to the financial sector).

*Source: IMF staff summary of Sierra Leone program documents (PDF chapter/section).*

### 37. We will establish a nation-wide digital social protection registry to better target

### 37. We will establish a nation-wide digital social protection registry to better target support for vulnerable groups, including those vulnerable to climate-related disasters.

### Design and integration of the new registry
- National Social Protection Authority will establish a new digital social protection registry based on existing beneficiary registry data and will link the new registry with the national identification system (reform measure 5, for end-June 2027).
- Household records will be uniquely linked to their national identification number.
- The new registry will include households that are in existing beneficiary registries (approximately 10 percent of extreme poor households).
- A targeting system will be established to allow households to be poverty assessed and ranked.
- The registry will feature protocols for:
  - a dynamic updating mechanism, including regular maintenance,
  - data privacy,
  - data validation,
  - integration with administrative systems.
- The registry will be used to deploy social and development partner support in response to shocks.

### Expansion to climate-vulnerable areas and targeting application
- National Social Protection Authority will expand coverage of the new national social protection registry to include at least 100,000 additional extreme poor households in climate-vulnerable areas as identified under RM4 and apply the targeting mechanism to assess poverty and rank households in the registry, in line with TA (reform measure 6, for end-December 2027).
- Additional household records in the expansion phase will also be uniquely linked to national identification numbers.
- The registry’s ranking system will use the most up-to-date poverty data to identify and rank households in accordance with the targeting system and protocols established under RM5.
- Lessons learned from the expansion phase will be leveraged to strengthen system design, coverage, and operational effectiveness.

### Linkages with other reforms and technical assistance
- Expansion will draw on climate-vulnerable area identification under RM4.
- Targeting mechanism and protocols stem from RM5 and the accompanying TA.
- Implementation support will involve collaboration with the World Bank and the Global Center on Adaptation to develop the social protection registry and a pilot focusing on disaster-prone areas (reform measures 5 and 6).
- IMF Technical Assistance (TA) and other partners will support complementary reforms across public financial management, climate fiscal risk assessment, and financial sector climate risk work (reform measures 1–4, 8–9).

### Implementation timelines and milestones (as stated)
- Establish new digital social protection registry and link with national identification system: end-June 2027 (RM5).
- Expand registry to include at least 100,000 additional extreme poor households in climate-vulnerable areas and apply targeting mechanism: end-December 2027 (RM6).

*Source: 1sleea2026002 - 37. We will establish a nation-wide digital social protection registry to better target*

### 23.333 million is made available for the third review. The fourth review is scheduled to be

### 1sleea2026002 - 23.333 million is made available for the third review. The fourth review is scheduled to be

### Review schedule and financing disbursements
- 23.333 million is made available for the third review.
- The fourth review is scheduled to be completed on or after November 15, 2026; this review will be based on the June 30, 2026 test date.
- The fifth ECF program review will be based on the end-December 2026 targets and is expected to be completed on or after May 15, 2027.
- The final sixth ECF program review will be based on end-June 2027 targets and is expected to be completed on or after November 15, 2027.
- The first, second, and third reviews under the RSF arrangement will take place at the time of the fourth, fifth, and sixth reviews under the ECF arrangement, respectively.

### Quantitative performance criteria and indicative targets (summary points from Table 1)
- Main PCs and ITs monitored (cumulative flows from start of calendar year):
  - Net domestic bank credit to the central government (ceiling).
  - Net domestic assets of the Bank of Sierra Leone (BSL) (ceiling).
  - Net international reserves of the BSL, US$ millions (floor).
  - Budgetary FX spending, US$ millions (ceiling).
  - Spending on the National School Feeding program (floor).
  - New concessional external debt with original maturity of one year or more contracted or guaranteed by the public sector, US$ millions (annual ceiling).
  - New non-concessional external debt contracted or guaranteed by the public sector, US$ million (annual ceiling, continuous).
  - Outstanding stock of external debt with maturities of less than one year contracted or guaranteed by the public sector (annual ceiling, continuous).
  - External payment arrears of the public sector (annual ceiling, continuous).
- Selected numerical entries and status excerpts (reported as in the source):
  - Net domestic bank credit to the central government: unadjusted target (ceiling) 4959; adjustments listed include 359.9, -214, 391.
  - Net domestic assets of the BSL (ceiling): entries shown include 183, 231, -437, -470, -886, -934, -264, -891, -1357, 409, 173 with status flags "Met" and "Not met" as indicated in the table.
  - Net international reserves of the BSL, US$ millions (floor): entries include -39.3, -56.7, -44.2, 35.5, 9.9, 11.8, 71.3, 33.7, 62.6, 25.0, 105.0, 119.4, -1.3, 25.1; adjustments include -14.4, -25.6, -37.6, -37.56, 14.45 and an adjustment for payment/issuance of FX and FX-denominated bonds of -3.0.
  - FX spending, US$ millions (ceiling): 162, 153, 28, 35.8, 56, 84, 112, 29, 56.
  - Spending on the National School Feeding program (floor): 150, 340, 281, 115, 561, 839, 1123, 303, 606.
  - New concessional external debt (annual ceiling, US$ millions): 100, 108.5, 91.5, 89.7, with status entries "Not met" and "Met" as shown.
  - Indicative targets on revenues, spending and balances: Total domestic government revenue (floor) entries include 17939, 18033, 5111, 4588, 11205, 10328, 16423, 15621, 22164, 21513, 5958, 13181. Domestic primary balance (floor) entries include 2217, 2206, 709, 332, 1763, 718, 2566, 1998, 4228, 3117, 1221, 3734.
  - Domestic Arrears (ceiling) entries include 1112, 1730, 996, 1068, 880, 842, 804, 1348, 1273.

### Prior actions and structural benchmarks (Table 2) — objectives, due dates, and status highlights
- Prior Actions (to be completed 5 working days before the Board meeting):
  - PA1: Authorities to share written communication to the relevant iron ore company that the iron ore safe harbor pricing formula is now in force and an audit based on the formula is forthcoming (Objective: Protect revenue base).
  - PA2: Authorities to share results of a comprehensive stock-taking of central government expenditure arrears as of end-December 2025 (Objective: Improve governance and transparency in public finances).
  - PA3: Authorities to provide evidence that all mining agreements ratified since December 2025 comply with EIRA in their latest ratified form (Objective: Strengthen governance and mobilize revenues).
- Structural Benchmarks for the Third ECF Review (selected):
  - SB1 (Continuous): Maintain excise duties on fuels at least as high as established by the 2024 Finance Act; maintain rates of IDF and levies per March 2025 fuel pricing formula; refrain from providing any subsidy to retail fuel prices. Status: Not Met.
  - SB2 (Continuous): Ensure EIRA terms are upheld in fiscal provisions of new and renewed mining agreements. Status: SB Not met; to be completed through Prior Action.
  - SB3 (End-March 2026): Fully operationalize safe harbor for iron ore via documentation requirement and either complete the advance pricing agreement or enforce the safe harbor formula. Status: Not met; to be completed through Prior Action.
  - SB4 (End-March 2026): Authorities to recapitalize the BSL with IMF technical support. Status: Met.
  - SB5 (End-March 2026): Publish MMDMC’s audited 2024 financial statements; adopt policy for merit-based appointment of independent directors to MMDMC and MWF boards; MMDMC to implement KPI-based performance framework for Mountain View via performance agreement. Status: Not met; completed in spirit.
  - SB6 (End-April 2026): Publish independent audit of government payment arrears and a plan to clear them; design robust accounting system for arrears. Status: Not met; replaced with Prior Action and two new SBs.
- Structural Benchmarks proposed for Fourth and Fifth Reviews (selected new SBs and due dates):
  - SB7 (Continuous): Refrain from retail fuel subsidies except temporary subsidy agreed with IMF staff; maintain fuel excises at least at level in 2026 Finance Act; maintain other fuel-related levies per March 2025 formula; update legally binding fuel pricing ceiling formula monthly. New SB to replace SB1 for third review.
  - SB8 (Continuous): Uphold EIRA terms in mining agreements (replacement/continuation of SB2).
  - SB9 (End-August 2026): Submit to Parliament a 2026 supplemental budget aligned with third ECF review projections, including updated PIP appendix.
  - SB10 (End-September 2026): Transition to GFSM 2014 standards for fiscal reporting in time for the 2027 budget.
  - SB11 (End-September 2026): Ministry of Justice to submit amended Anti-Corruption Act requiring online publication and risk-based verification of asset declarations for targeted politically exposed persons.
  - SB12 (End-November 2026): Publish independent audit of arrears stock based on comprehensive stocktaking and fully operationalize new arrears reporting system per AFW2 CD report recommendations.
  - SB13 (End-November 2026): Customs authorities to exclusively perform destination inspection and classification/valuation of goods from February 1st, 2027 (written confirmation to IMF staff).
  - SB14 (End-December 2026): Operationalize the Bank Resolution Framework, including filling vacancies in the Crisis Management Section and developing guidelines for resolution planning.
  - SB15 (End-April 2027): MoF to publish an arrears clearance plan based on independently audited arrears stock, with annual payment targets aligned to macro-fiscal framework.
  - SB16 (End-April 2027): Equip CRM unit with resources; integrate compliance risk management across four principal taxpayer obligations; approve/publish annual Compliance Improvement Plan; establish operational risk management committee.
  - SB17 (End-May 2027): Complete transfer of EDSA’s full operational control to the concessionaire.

### Reform measures under the RSF, 2026–27 (Table 3) — pillars, measures, objectives, due dates, and expected benefits
- Pillar I: Climate-Sensitive Public Investment Management
  - RM1: Climate-Sensitive Public Asset Registry — Cabinet to adopt framework and start operationalizing by completing assessments for selected critical assets in priority sectors. CD partner: IMF. Due Date: Jun-27. Diagnostic: C-PIMA; CPD; CCDR. Prospective BoP risk reduction: Improved fiscal and external sustainability; rationalize maintenance/rebuilding costs; reduce import demands for reconstruction.
  - RM2: Maintenance Plans for Climate-Vulnerable Infrastructure — MOPED and NAGPC to develop/adopt a framework for climate-sensitive maintenance plans aligned with the asset registry. CD partner: IMF. Due Date: Dec-27. Diagnostic: C-PIMA; CPD; CCDR. Prospective BoP risk reduction: Improved fiscal and external sustainability.
- Pillar II: Climate Resilience
  - RM3: Fiscal Risk Assessment from Climate Change — MoF to develop and publish a methodology that quantifies fiscal risks from natural disasters. CD partner: IMF. Due Date: Dec-26. Diagnostic: C-PIMA; CPD; CCDR. Prospective BoP risk reduction: Reduced fiscal costs after disasters; faster recovery.
  - RM4: Vulnerability Mapping — NDMA to prepare and publish national vulnerability map covering main climate hazards. CD partner: GCA. Due Date: Jun-27. Diagnostic: CPD; CCDR. Prospective BoP risk reduction: Reduced economic losses when climate risks materialize.
  - RM5: Digital Social Protection Registry — National Social Protection Authority to establish a new digital registry linked with national ID system. CD partner: WB. Due Date: Jun-27. Diagnostic: CPD; CCDR. Prospective BoP risk reduction: Improved fiscal and external sustainability; better targeted social support.
  - RM6: Expansion in Climate-vulnerable Areas — Expand coverage of the digital registry to include at least 100,000 additional extreme poor households in climate-vulnerable areas and apply targeting mechanism. CD partner: WB. Due Date: Dec-27. Diagnostic: CPD; CCDR. Prospective BoP risk reduction: Improved resilience and lower fiscal/external financing needs.
  - RM7: Water Tariff Methodology — SLEWRC to develop multi-year water tariff methodology and implement a water tariff increase aligned with the methodology. CD partner: WB. Due Date: Dec-27. Diagnostic: CPD; CCDR. Prospective BoP risk reduction: Improved fiscal and external sustainability; support for water-dependent sectors.
- Pillar III: Financial Sector Risk Management
  - RM8: Banks' Loan Exposure Reporting by Location and Sector — Bank of Sierra Leone to require commercial banks to report loan and collateral data by 16 districts and sectors. CD partner: IMF. Due Date: Dec-26. Diagnostic: FSSR, CCDR. Prospective BoP risk reduction: Safeguard financial stability; improve asset allocation; identify risk transmission channels.
  - RM9: Climate Risk Transmission Channels to the Financial Sector — BSL to prepare and publish report identifying physical risk transmission channels to the financial sector and develop forward-looking physical risk indicators by linking loan/collateral data with climate hazard/vulnerability data. CD partner: IMF. Due Date: Dec-27. Diagnostic: FSSR, CCDR. Prospective BoP risk reduction: Safeguard financial stability and enhance risk analysis (Basel III implications noted).

### Technical Memorandum of Understanding (TMU) — scope and specified program exchange rate policy
- TMU defines the quantitative PCs and ITs to evaluate performance under the ECF-supported program and the related reporting requirements.
- All quantitative PCs and ITs are evaluated in terms of cumulative flows from the beginning of the relevant calendar year unless specified otherwise.
- The TMU covers PCs for June 2026, December 2026, and June 2027, and ITs for September 2026 and March 2027.
- Program exchange rates: For program monitoring, most foreign currency related assets, liabilities, and flows will be evaluated at “program exchange rates” as specified at the time of approval of the current ECF program.
- The TMU will apply to test dates beginning with end-June 2026.

*SIERRA LEONE — INTERNATIONAL MONETARY FUND*

### 4. ITs are set on:

### 4. ITs are set on:

### Continuous Quantitative and Non-Quantitative Performance Criteria
- Continuous QPCs include the non-introduction of exchange restrictions and multiple currency practices, specifically:
  - non-imposition or intensification of restrictions on the making of payments and transfers for current international transactions;
  - non-introduction or modification of multiple currency practices;
  - non-conclusion of bilateral payments agreements that are inconsistent with Article VIII;
  - non-imposition or intensification of import restrictions for balance of payments reasons.
- These continuous PCs are non-quantitative and are not listed in the QPC table annexed to the MEFP.

### Quantitative Performance Criteria — Net Domestic Bank Credit to the Central Government (NCG)
- Definition: NCG = net banking system’s claims on the central government, excluding financing for recapitalizing or resolving financial institutions, as calculated by the BSL. It equals:
  - a. Net position of the government with commercial banks (ODC-2SR, line 656 – budget financing): (a) treasury bills; (b) treasury bonds; (c) loan and advances of commercial banks to the government; less government deposits in commercial banks (ODC-2SR, line 667).
  - b. Net position of the government with the BSL:
    - CB-1SR, line 758, budget financing: including (a) BSL holdings of treasury bills and bonds, including bonds issued in conversion/securitization of ways and means into debt (government’s overdraft at the central bank); (b) ways and means advances; (c) 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 (a) central government deposits with the BSL (CB-1SR, line 783); and (b) any debt relief received, notably HIPC, MDRI and relief deposits, as well as debt relief under the CCR Trust.
- Adjustment clauses for the NCG ceiling:
  - (a) Adjust downward (upward) 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.
    - The downward adjustment does not apply to excess external budgetary assistance explicitly for building buffers to retire domestic debt or pay EDSA’s arrears to IPPs.
  - (b) Adjust downward (upward) 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 2025 value).
  - (c) Adjust downward (upward) by the excess (shortfall) in Leone value of net issues of government securities to the non-bank private sector.
  - (d) Adjust downward (upward) 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.
- Data source: Series “Claims on Government (net)”, submitted to IMF staff and reconciled with the monthly monetary survey prepared by the BSL.
- Central Government definition: central government plus special accounts classified as central government in BSL statement of accounts; excludes National Social Security and Insurance Trust and state-owned enterprises.

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

### Net International Reserves of the BSL (NIR)
- Definition: NIR = reserve assets minus short-term and other foreign currency liabilities at program exchange rates.
- Reserve assets include:
  - (i) BSL’s holdings of monetary gold (excluding amounts pledged as collateral);
  - (ii) holdings of existing SDRs and any future allocation of SDRs by the IMF;
  - (iii) BSL’s holdings of foreign currencies in cash or in nonresident financial institutions.
- Reserve assets exclude:
  - frozen, pledged, or encumbered assets (including those used as collateral or guarantees for third-party external liabilities), assets received as part of foreign exchange derivatives (swap, forward, options), 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:
  - (i) BSL’s foreign currency-denominated liabilities to residents and nonresidents with remaining maturity ≤ one year, excluding liabilities with excluded asset counterparts and excluding the foreign liability to China of US$8.4 million relating to a legacy clearing account for a previous bilateral trade agreement;
  - (ii) all credit outstanding from the IMF, excluding liabilities arising from SDR allocations and CCR Trust debt relief granted in 2015;
  - (iii) government’s foreign currency deposits with the BSL with remaining maturity < 360 days.
- Adjustment clauses:
  - For external budgetary assistance: floor on change in NIR adjusted downward (upward) by US dollars equivalent cumulative shortfall (excess) in programmed external budgetary assistance at the program exchange rate.
  - For FX bonds (including FX-denominated zero-coupon bonds): floor adjusted downward by amount paid on maturity of FX bonds or FX zero-coupon bonds, and upward by:
    - (i) face value of any new or re-issued FX bonds or FX-denominated zero-coupon bonds with maturity < 3 years and issued in agreement with Fund staff;
    - (ii) face value of any new or re-issued FX bonds or FX-denominated zero-coupon bonds issued absent agreement with Fund staff.

### Budgetary FX Spending
- Definition: All FX spending by the budgetary central government and the BSL as measured in the BSL’s FX cashflow table, excluding debt service. Includes budget line items listed in Text Table 1 and all BSL FX spending on goods and services, including printing of currency. Other government FX spending not captured in categories should be included under “Other spending”.
- 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.
- Key budgetary FX spending figures (Text Table 1, Millions of US$):
  - Total: Act. 2025 152.6; Proj. 2026 109.4; Proj. 2027 108.4
  - 1. Goods and services: Act. 2025 131.3; Proj. 2026 91.9; Proj. 2027 84.4
    - Government travel: 19.6; 9.7; 8.7
      - Ordinary travel: 12.8; 7.0; 6.0
      - Other travel, including charters: 6.8; 2.7; 2.7
    - Embassies/High Commissions: 48.6; 47.8; 47.5
      - Embassy_other expenses: 7.7; 9.8; 9.8
      - Repatriation expenses: 0.7; 0.7; 0.7
      - Wages_embassies: 40.2; 37.3; 37.0
    - Subscriptions: 4.8; 5.5; 5.5
    - Other Government FX Spending on goods and services: 58.4; 28.9; 22.7
      - Vehicles: 4.8; 2.4; 0.0
      - Medical supplies: 12.6; 8.6; 7.0
      - Medical bills: 0.5; 0.2; 0.2
      - N_Soft: 3.7; 0.2; 0.0
      - ECOWAS Levy: 5.5; 2.8; 2.8
      - Consultancies: 0.7; 0.7; 0.7
      - Security: 2.9; 3.1; 3.1
    - Other spending: 27.7; 11.0; 9.0
  - 2. Subsidies and Transfer: 19.3; 2.0; 2.0
    - Electricity support: 19.3; 2.0; 2.0
      - IPPs: 17.0; 2.0; 2.0
      - Wartsila West Africa S.A: 2.3
  - 3. BSL 1/: 2.0; 15.5; 22.0
  - Note: BSL goods and services spending realization in 2025 only includes FX spending on BSL travel. Total BSL Spending in 2025 was $11.6 million. Projections for 2026 and 2027 include all BSL FX spending from the FX cashflow table, apart from debt service.

### Fiscal Spending on the National School Feeding Program (NSFP)
- Definition: Domestically financed expenditures recorded under the budget classification for school feeding (previously under 301, Ministry of Basic and Secondary Education) in Government of Sierra Leone’s Chart of Accounts, including:
  - Food procurement for school meals;
  - Transportation and logistics costs for delivery to schools;
  - Distribution and related operational expenses.
- Measurement: Cash basis, as recorded in IFMIS, under functional classification for school feeding within MBSSE.
- Monitoring and reporting: Ministry of Finance shall report monthly execution data to IMF staff within 30 days after the end of each quarter, including:
  - (i) actual spending against the budget line for school feeding;
  - (ii) breakdown of payments made to each school feeding provider in the quarter;
  - (iii) source of financing (domestic vs. external);
  - (iv) any adjustments applied under this TMU.

### Assumptions on External Budgetary Assistance (programmed cumulative calendar year, market exchange rate)
- June 30, 2026 US$ 15.9 million
- September 30, 2026 US$ 15.9 million
- December 31, 2026 US$ 89.1 million
- March 31, 2027 US$ 0 million
- June 30, 2027 US$ 0 million

### New Concessional External Debt with Original Maturity of One Year or More Contracted or Guaranteed by the Public Sector
- Definition: All forms of new external debt with original maturity ≥ one year contracted or guaranteed by the public sector based on residency of the creditor. Applies to commitments contracted or guaranteed for which value has not been received.
- Debt deemed contracted when signed by government and ratified by Parliament. Excludes disbursements from the IMF and debts subject to rescheduling.
- Ceiling applied continuously and evaluated as cumulative changes within each calendar year.
- Concessionality: debt is concessional if grant element ≥ 35 percent. Grant element = (NPV of debt subtracted from nominal value) / nominal value. NPV calculated by discounting future debt service using a discount rate of 5 percent.

### New Non-Concessional External Debt Contracted or Guaranteed by the Public Sector
- Definition: External debt not meeting concessionality in paragraph 23. External debt and concessionality reported by Debt Management Division and measured in US$ at current exchange rates. PC applies on a continuous basis.
- Variable-rate loans: PV calculated using program reference rate plus fixed spread specified in contract.
  - Program reference rate for six-month USD SOFR is 3.23 percent (fixed for remainder of program).
  - Spread of six-month ESTR over six-month USD SOFR is -50 basis points.
  - Spread of six-month JPY TONAR over six-month USD SOFR is -300 basis points.
  - Spread of six-month GBP SONIA over six-month USD SOFR is 50 basis points.
  - For other currencies, spread over six-month USD SOFR is zero basis points.
  - If variable rate linked to other benchmark, add spread reflecting difference to six-month USD SOFR (rounded to nearest 50 basis points).

### Outstanding Stock of Short-term External Debt with Maturities of Less Than One Year Contracted or Guaranteed by the Public Sector
- Definition: External debt stock with maturity < one year contracted or guaranteed by the public sector. Excludes trade credit with maturity ≤ one year for imports. Public sector defined in paragraph 27. PC applies continuously.

### External Payment Arrears of the Public Sector
- Definition: All debt-service obligations (interest and principal) arising from loans contracted or guaranteed by the public sector. Public sector comprises central government, regional government, state owned enterprises (listed in Annex 9 of 2023 budget documents), and the BSL.
- Non-accumulation of external arrears is a continuous PC.
- External arrears are obligations not paid on due dates (taking into account contractual grace periods).
- Exclusions: (i) external arrears accumulated before approval of this ECF arrangement; (ii) debts subject to rescheduling/restructuring or under litigation.

### Quantitative Indicative Targets
- Domestic Revenue of Central Government (floor): total central government revenue as presented in central government financial operations table, excluding external grants.
- Domestic Primary Balance: 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 (definition for ECF): sum of all non-salary, non-interest recurrent expenditure and domestic capital expenditure as defined in Attachment B, including:
  - (i) cash transfers;
  - (ii) free health care initiative;
  - (iii) education support programs, excluding the school feeding program;
  - (iv) other social assistance programs;
  - (v) employment/active labor market programs.
- Domestic Arrears: defined as (i) 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
- Authorities shall maintain a program-monitoring committee 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.
- Committee will provide monthly reports to the IMF on progress implementing quantitative targets and structural benchmarks.

*1sleea2026002 - 4. ITs are set on:*

### Annex I. Implementation of the Public Debt Limits in Fund

### Annex I. Implementation of the Public Debt Limits in Fund Supported Programs with Respect to External Debt

### Definition of “Debt”
- The term “debt” follows point No. 8a of the Guidelines on Public Debt Conditionality in Fund Arrangements adopted on June 30, 2015, and comprises:
  - A current (not contingent) liability created under a contractual arrangement requiring one or more future payments in assets (including currency) or services to discharge principal and/or interest.
  - Primary forms: (i) loans (including deposits, bonds, debentures, commercial loans, buyers’ credits, repurchase agreements, official swap arrangements), (ii) suppliers’ credits (deferred payments for goods or services), and (iii) leases (debt measured as the present value at lease inception of all lease payments excluding operation/repair/maintenance).
  - Under this definition, arrears, penalties, and judicially awarded damages arising from failure to pay contractual obligations that constitute debt are debt. Failure to make payment on an obligation not considered debt under this definition (e.g., payment on delivery) will not give rise to debt.

### Data Reporting to IMF Staff (Selected Items 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
  - Details of all new external borrowing and guarantees provided by government, 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 (separately on principal and interest to each creditor, including and excluding new disbursements in the debt recording system, and including and excluding HIPC relief): Monthly — End of month + 4 weeks
  - Report on the stock of debt outstanding, and loan agreements under discussion: Quarterly — End of quarter + 6 weeks
- Monetary and financial:
  - 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 month + 2 week
  - 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
  - Exports and imports of goods (including the volume of key minerals and fuels): Monthly — End of month +4 weeks

### Definition and Composition of Social Spending (Selected entries)
- Total Social Spending: 0.65 percent of GDP; amounts shown in thousands of Leones:
  - Non-Salary, Non-Interest Recurrent Expenditure: 1,217,064
  - Domestic Capital Expenditure: 970,608
  - Total Social Spending (implied residual): 246,456
- Free Health Initiative: 0.19 percent of GDP; 362,126 (Non-Salary, Non-Interest Recurrent), 246,580 (Domestic Capital), 115,546 (Total Social Spending)
- Education Support Program: 0.34 percent of GDP; 645,074 (Non-Salary, Non-Interest Recurrent), 605,189 (Domestic Capital), 39,886 (Total Social Spending)
- Other Social Assistance: 0.06 percent of GDP; 118,245 (Non-Salary, Non-Interest Recurrent), 65,164 (Domestic Capital), 53,081 (Total Social Spending)
- Employment/Active Labour Market Program: 0.05 percent of GDP; 88,092 (Non-Salary, Non-Interest Recurrent), 50,149 (Domestic Capital), 37,943 (Total Social Spending)

### Debt Sustainability Assessment — Key Findings and Risk Ratings
- 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 December 2025.
  - Assessment depends on the authorities’ commitment to program objectives—including an ambitious fiscal adjustment—and continued access to highly concessional external financing including grants.
- Specific indicators:
  - The external debt service-to-revenue ratio breaches its threshold until 2028.
  - The PV of the public debt-to-GDP ratio breaches its threshold in 2026.
  - The overall debt-service-to-revenue ratio remains above 100 percent until 2027.
- Projection behavior:
  - All debt indicators decline over the medium to long term.
- Policy priorities emphasized:
  - Seek grant financing and lengthen maturity of debt, as debt service ratios and gross financing needs will remain elevated over the medium term.
  - Continue reducing domestic financing needs to mitigate domestic rollover risks.
- Vulnerabilities and risk drivers:
  - Highly susceptible to shocks to exports, the exchange rate, contingent liabilities, and the primary balance.
  - Risk of reform fatigue is high, including due to spending pressures related to recent oil price shock.
- Official risk ratings and metadata:
  - Risk of external debt distress: High
  - Overall risk of debt distress: High
  - Granularity in the risk rating: Sustainable
  - Application of judgment: No
  - Date: May 29, 2026
  - Approved by: Papa N’Diaye and Jarkko Turunen (IMF) and Manuela Francisco and Seynabou Sakho (IDA)

### Public Debt Coverage and Data Basis
- Coverage:
  - Unchanged from the previous DSA: debt stock includes central government public and publicly guaranteed debts on a residency basis.
  - DSA includes latest estimate of domestic payment arrears.
  - Debt stock data used as of end-2025.
- Government efforts:
  - Authorities working to improve financial and debt management systems and enhance accounting for and timely reporting of public debt, including debts of SOEs and self-accounting bodies, with support from development partners including the World Bank.

### Contingent Liabilities — Stress Test Assumptions
- Total contingent liabilities assumed at 10 percent of GDP, comprising:
  - SOE debt contingent liability: 5 percent of GDP (higher than default, reflecting authorities’ latest estimates).
  - Financial markets contingent liability: 5 percent of GDP (standard minimum value based on the average fiscal cost of a financial crisis in LICs since 1980).
  - Contingent liability of other elements of general government: 0 percent of GDP (baseline reflects estimated domestic arrears).
- Rationale for increased SOE contingent liability:
  - SOE contingent liabilities reflect on-lending by central government of proceeds of external loans (usually loans for 20 years, with rates ranging from 1.5 percent to 3 percent); domestic loans/overdrafts from local commercial banks (typically for 30 months at interest rates of 18 percent to 20 percent); letters of credit (typically for 36 months). These are government-guaranteed and recorded as contingent liabilities.
  - Due to poor financial statement reporting by SOEs, MOF lacks reliable SOE debt stock estimates; exclusion of SOE debt from the DSA debt stock led staff to increase the contingent liability shock above its default value to reflect added risk.
  - On energy sector arrears, repayment of EDSA’s IPP arrears is included in the macro framework as transfers to IPPs under current expenditures and factors into the DSA’s gross financing needs and domestic debt projections; data on other SOE arrears is lacking.

### Background on Debt — Recent Developments and Composition
- End-2025 stock data:
  - Total public debt declined from 46.9 to 46.7 percent of GDP at end-2025 amid strong nominal GDP growth and nominal exchange rate stability against the dollar.
- Program ceiling breach:
  - Authorities breached the new external borrowing Fund-supported program ceiling by US $8.5 million in 2025.
  - Historical borrowing under the ceiling: The authorities borrowed US$62.3 million in 2024 and US$35 million in 2023, significantly below the US$100 million ceiling.
- Debt composition:
  - Approximately 55 percent of total public and publicly guaranteed (PPG) debt is external debt.
  - 36 percent of total PPG debt comprises non-restructurable obligations to multilateral creditors:
    - IMF: 19.2 percent of total PPG debt stock
    - WB: 12.9 percent of total PPG debt stock
  - Remaining 45 percent is domestic debt; of domestic debt, 33.1 percent are 364-day T-bills.
    - Holders of T-bills: 31.3 percent held by the BSL, 55.8 percent by commercial banks, 12.9 percent by non-banks.
  - BSL net claims on government increased from 12,073.71 million leones to 14,908.28 million leones from end-December 2024 to end-December 2025.
- Contingent liabilities coverage table (selected entries):
  - Other elements of general government not captured: 0 percent of GDP — Used for analysis: 0.0
  - SOE’s debt (guaranteed and not guaranteed): Default 2 percent of GDP — Used for analysis: 5.0 (to reflect authorities’ estimate of total indebtedness of SOEs and rebased GDP)
  - PPP: 35 percent of PPP stock — Used for analysis: 0.0 (PPP capital stock is under 3 percent of GDP)
  - Financial market (default minimum): 5 percent of GDP — Used for analysis: 5.0
  - Total (2+3+4+5): 10.0 percent of GDP

### Arrears, Comfort Letters, and Fiscal Risks
- External arrears:
  - Authorities verified external arrears of US$23.4 million in February 2024 owed to two companies for road construction and penalty interest on delayed payment of civil war-related services; arrears arose outside the program period and did not trigger a breach of the continuous PC. The arrears are included in the debt stock and their clearance is included in debt service projections.
- Comfort letters:
  - In 2025, authorities issued comfort letters to contractors for NLe 640.4 million, of which NLe 346.9 million are outstanding.
  - Authorities confirmed letters were issued by the Ministry of Finance but do not convey a government guarantee per Sierra Leonean law. Letters nonetheless constitute a considerable fiscal risk.
  - Authorities are determining the full stock of comfort letters from previous years.

*Prepared by the staffs of the International Monetary Fund and the International Development Association.*

### 7.      The macroeconomic assumptions underlying this DSA have been updated (Text Table 4).

### 7.      The macroeconomic assumptions underlying this DSA have been updated (Text Table 4).

### Macroeconomic outlook and growth
- Growth is estimated at 5 percent in 2025 but is projected to fall to 4.0 percent in 2026 due to the war in the Middle East.
- The economy is expected to reach its 4.6 percent potential growth over the medium term—supported by robust performance in agriculture, manufacturing and services—as the Feed Salone program boosts agriculture productivity and fiscal policy becomes less contractionary.
- Credit to the private sector rose from 4.0 to 5.3 percent of GDP between December 2024 and December 2025, contributing to growth in 2025.
- The baseline forecast assumes climate impacts (reduced yields and effects on the informal service sector) partly mitigated by the Feed Salone program and climate mitigation measures.
- The RSF program is expected to support implementation of reforms to build resilience to climate change, including strengthening PFM for climate related spending, enhancing social protection systems and managing fiscal risk associated with climate events.

### Inflation
- CPI inflation fell to 4.4 percent by December 2025.
- Following fuel price increases in February and an oil price shock in March, inflation reached 10.8 percent in April 2026.
- Under the baseline, inflation is expected to rise further in the near term, before falling to 11.6 percent by end-2026, and then falling back down to the BSL’s single digit objective.
- Authorities’ policy commitments to contain inflation include: limiting purchases of government securities in the secondary market, refraining from securitizing ways and means balances, and implementing the monetary policy strategy supported by the IMF program.

### Fiscal developments and assumptions
- The domestic primary balance shifted from a deficit of 2.7 percent of non-iron ore GDP in 2024 to a surplus of 1.3 percent in 2025.
- The fiscal effort reached 6.9 percentage points of GDP since 2022, with tax revenue gains contributing around half of the total.
- Fiscal pressures in 2026 due to the war in the Middle East:
  - Domestic primary balance projected to deteriorate by 0.5 percent of GDP relative to the original budget.
  - This deterioration is driven by a 0.35 ppts of GDP decline in revenues and a 0.15 ppts increase in overall spending (including fuel price subsidies introduced in April).
- The end-2025 stock of domestic arrears (including verified pre-2018 legacy arrears and unpaid cheques at the BSL and AGD) is estimated at 0.7 percent of non-iron ore GDP and is reflected in the DSA.
- The authorities are conducting a comprehensive stocktaking of domestic arrears (including MDAs outside IFMIS) as a prior action for the third ECF review; audited MDA arrears to be incorporated into the DSA after end-November 2026 structural benchmark, and an arrears clearance strategy to be published by end-April 2027.
- Medium-term fiscal assumptions include full implementation of the 2026 tax package, strengthened PFM and tax administration, and reduction in IPP transfers as energy sector reforms proceed.

### External sector and reserves
- Current account deficit projected to have shrunk in 2025 to 5.1 percent of GDP from 6.5 percent of GDP in 2024 amid fiscal consolidation.
- Current account projected to improve modestly over the medium term, supported by stronger mining production, improved domestic agricultural production and slower import growth.
- Reserves increased from 1.5 to 2.0 months of imports from end-September to end-December 2025 and are projected to further improve over the medium term.
- The Leone remained stable over the period noted.

### Financial assumptions and specific financing operations
- IDA financing assumptions in the DSA:
  - 100 percent grant financing through 2027;
  - zero-interest, 40-year credits during 2028–2030, with a 10-year grace period and standard service charges;
  - regular IDA credits from 2031 onwards.
- RSF financing included in the DSA: 155.55 million SDR (75 percent of quota at normal access), interest rate 2.25 percent (Group A), 10.5-year grace period, 20-year maturity. RSF is assumed to substitute for more expensive domestic financing.
- Additional use of SDR retrocession in 2025: NLe1360 million (US$60 million, or 0.8 percent of GDP). No additional SDR retrocession expected going forward.
- Budget support loans not repaid by the MoF to the BSL: overdue budget support loans estimated at about 1.5 percent of GDP; authorities and BSL committed to repay all overdue budget support loans by end-2026. Staff incorporated these arrears into the end-2025 debt stock, assuming repayment will be financed through T-bill issuance.
- Two FX bonds issued to resident banks in 2025:
  - US$20 million issued in September 2025: maturity 2 years, interest rate 9.8 percent per annum, coupon repayment semi-annual commencing 6 months after issuance; face value and final coupon repaid at maturity.
  - US$50 million issued in December 2025: maturity 4 years, interest rate 9.5 percent per annum, repayment of interest and principal commences 18 months after issuance, over a period of 4 years.
- The authorities committed not to issue any new FX bonds in coming years without ex-ante agreement of the Fund and the Bank.
- Other DSA assumptions:
  - DSA reflects actual and projected future disbursements under the ECF, the SDR allocation in August 2021, CCRT debt relief, DSSI deferment, and external budget support by the European Union and African Development Bank.
  - Assumes a modest post-program financing gap (PPFG) for 2028-30 to be covered by new external concessional financing. PPFG amounts and terms in the DSA: $20 million (2028), $30 million (2029), $30 million (2030) with 0.5 percent interest rate, 5-year grace period, 15-year maturity, overall grant element of 35.5 percent.
  - IMF ECF financing: 5.5-year grace period, 10-year maturity, zero interest.
  - Loans from other multilateral creditors (other than World Bank) assumed overall grant element of 35 percent.
  - Domestic financing composition assumptions: from 2026–2030, 30 percent of new domestic debts financed by 1-3 year bonds; after 2030, 20 percent by 1-3 year bonds and 10 percent by 4-7 year bonds.
  - Ongoing recapitalization of the BSL in 2026 reflected as a ten-year bond issued by central government and held by the BSL; first tranche financed by a 10-year bond issued at 8 percent interest; recapitalization envelope Le 971.5 million in 2026.
- Domestic borrowing costs: hovered at around 16-17 percent since September 2025; T-bill rates projected to remain around that level through the end of the program.

### Risks and realism assessment
- Downside risks to the baseline are high due to vulnerability to domestic and external shocks (exposure through mining industry and commodity prices).
- Specific risk channels:
  - Spike in oil and fertilizer prices from the war in the Middle East could raise import costs and increase fiscal, current account, and inflationary pressures.
  - Domestic risks: food insecurity, higher taxes, higher prices, social tensions; adverse shift in domestic cost of borrowing could push debt service to unsustainable levels; possible wavering of fiscal consolidation commitment around pre-election period.
  - External risks: heightened trade restrictions, geopolitical challenges, declining commodity prices could hurt net exports and reserves.
  - Climate shocks threatening output due to reliance on rainfed agriculture.
- Mitigants:
  - Government commitment to maintaining low inflation and continued fiscal consolidation.
  - Feed Salone program expected to increase agriculture productivity, lower inflation, and narrow current account deficit.
  - Implementation of resilience strategies under the RSF arrangement.
- Realism tools:
  - The 3-year average primary balance adjustment is 2.0 ppts of GDP, close to the 73rd percentile of the historical distribution for Sierra Leone’s peers.
  - Given that the most ambitious part of consolidation (domestic primary balance) was already achieved in 2025, staff consider the projected fiscal adjustment feasible.
  - Remaining fiscal effort of 1.5 ppts of GDP required by 2027 is projected to be achieved through full implementation of 1.5 ppts of GDP in tax policy measures in the 2026 Finance Act, improved tax administration and firm expenditure controls.
  - Ongoing technical assistance from IMF and World Bank to support domestic revenue mobilization, expenditure rationalization and governance.

### Contingency planning and policy options
- If needed, authorities are prepared to:
  - (i) Reprioritize spending, including rationalizing domestically financed capital expenditure or cutting goods and services spending, and take action to reduce government energy use;
  - (ii) Strengthen tax administration by frontloading the implementation of TADAT recommendations;
  - (iii) Introduce tax policy measures including further rationalizing GST exemptions on food items.

### Debt-carrying capacity and stress tests
- Sierra Leone’s debt-carrying capacity was downgraded to “weak” in December 2025 after two consecutive signals of weak capacity in April and October 2025.
- Based on April 2026 WEO data and the 2024 CPIA, Sierra Leone’s composite indicator stood at 2.69 in April 2026, providing a first signal for an upgrade to a “medium” debt-carrying capacity.
- Stress tests:
  - Standardized stress tests applied, plus two tailored stress tests to capture risks related to contingent liabilities and commodity price shocks.
  - Commodity price shock magnitudes based on the IMF Research Department commodity price outlook.
- 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%

*Source: 7. The macroeconomic assumptions underlying this DSA have been updated (Text Table 4).*

### 13.      Sierra Leone is assessed to be at high risk of external debt distress, and PPG external

### 13.      Sierra Leone is assessed to be at high risk of external debt distress, and PPG external debt is assessed to be sustainable.

### External debt assessment
- PPG external debt is assessed to be sustainable, predicated on the ambitious fiscal adjustment, continued reliance on concessional financing and grants, and moderately high growth rates.
- The projected paths of:
  - PV of external debt-to-GDP,
  - PV of external debt-to-exports,
  - external debt service-to-exports, and
  - external debt service-to-revenue
  are somewhat less favorable in the medium term relative to the last DSA, while the external debt service-to-exports and external debt service-to-revenue are slightly more favorable in the long term, helped by continued stability in the nominal exchange rate and tight policy mix.
- Under the baseline scenario:
  - 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.
  - The decline reflects repayment of past ECF disbursements (including from the Ebola pandemic period) and projected growth in GDP and exports.
- Historical scenario shows increasing debt ratios reflecting COVID-19 and Ebola crises and recent large commodity price shocks.
- The PPG external debt service-to-revenue ratio:
  - Exhibits a protracted breach from 2026 and declines below the threshold of 14 percent only in 2029.
- The PPG external debt service-to-exports ratio:
  - Remains below the threshold of 10 percent over the medium and long term.
- Stress tests:
  - Indicate sensitivity to multiple shocks, particularly exports and a one-time depreciation.
  - Show all indicators above thresholds over the medium term in response to the historical scenario shock.
  - Show all simulated shock scenarios cause the external debt service-to-revenue ratio to breach the threshold at least until 2028.
- Assessment conclusion: since the PPG external debt service-to-revenue ratio breaches its threshold over the medium term under the baseline, Sierra Leone is assessed to be at high risk of external debt distress, although all external debt indicators decline over the medium to long term.
- Policy guidance: authorities should continue limiting new external borrowing and restrict external borrowing to highly concessional loans.

### Overall risk of public debt distress and public debt sustainability
- Sierra Leone is assessed to be at high overall risk of public debt distress, and public debt is assessed to be sustainable.
- Domestic debt:
  - Domestic debt-to-GDP ratio is below the median level across LICs for the projection period starting in 2027 and does not signal additional sustainability risk.
  - The ratio is projected to steadily decrease from 20.7 percent of GDP in 2026.
- Domestic debt service to revenues (including grants):
  - Expected to decline from a peak of 116.5 percent in 2026 to 92.4 percent in 2027, reflecting short tenor and rollover needs.
  - Expected to fall steadily thereafter, driven by fiscal consolidation and enhanced debt management, including issuing longer-term debt.
- Large negative net domestic debt issuances from 2026 are predicated on strong front-loaded fiscal adjustment, reliance on concessional financing and grants, and moderately high growth rates.
- Under the baseline scenario:
  - PV of the public debt-to-GDP ratio exhibits a one-time breach of the threshold of 35 percent of GDP only in 2026 and gradually declines over the medium term.
  - The overall debt service-to-revenue ratio is projected to fall below 100 percent by 2028 but remains relatively high in the medium run, suggesting a tight liquidity situation.
  - Paths of the three indicators are more favorable relative to the last DSA in the medium and long term.
- Stress tests:
  - Shocks to combined contingent liabilities and the primary balance are the most extreme.
  - All simulated shocks lead the PV of debt-to-GDP to breach the threshold at least in the short run.
- Assessment conclusion: because the external debt service-to-revenue ratio exhibits a protracted breach under the baseline, the country is assessed to have a high overall risk of debt distress.
- Policy guidance:
  - (i) sustained and significant fiscal adjustment; and
  - (ii) continued reliance on highly concessional external financing (ideally grants), including 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 maturity, and greater grant/concessional borrowing.
- T-bills amortization:
  - Accounts for around 64 percent of gross financing needs in 2025.
  - 56 percent of these T-bills are held by domestic public banks and domestic subsidiaries of foreign banks.
  - The central bank holds around 31 percent of outstanding T-bills associated with its operations in the secondary government securities market.
- Rollover risk:
  - High, but mitigated by authorities’ commitment to sharply reduce the domestic borrowing envelope, lack of alternative financing options for holders of securities, and absence of secondary market trading between commercial banks (banks typically hold T-bills to maturity).
  - Staff assesses banks have capacity to absorb projected volumes of securities under the baseline.
  - Rollover risks should decline with:
    - Reduction in government’s domestic financing need (net borrowing from the banking system expected to turn negative in 2027 and beyond),
    - Expected lengthening of debt maturities,
    - General tightening of macroeconomic policies.
- Selected numeric projections (Text Table 8: Debt service-to-revenue and grants ratio; Gross financing need) — Actual and Projections:
  - Debt service-to-revenue and grants ratio 1/: 132.7 128.9 104.1 93.8 85.6 75.7 64.4 55.0 46.7 37.4 30.5 23.3 5.2
  - of which: T-bills amortization: 85.3 87.1 69.0 40.4 43.4 36.9 31.0 26.0 21.0 17.6 13.0 8.0 0.0
  - of which: others: 47.4 41.9 35.2 53.4 42.1 38.8 33.4 28.9 25.7 19.7 17.5 15.3 5.2
  - Gross financing need 2/: 19.0 18.2 13.5 11.7 10.6 9.1 7.2 5.8 5.1 3.9 2.8 2.0 0.5
  - of which: T-bills amortization: 12.5 12.8 10.4 6.1 6.3 5.4 4.4 3.7 3.0 2.5 1.8 1.1 0.0
  - of which: others: 6.5 5.3 3.1 5.6 4.3 3.7 2.8 2.2 2.1 1.5 1.0 0.9 0.5
  - Notes:
    - 1/ Debt service is defined as the sum of interest and amortization of medium and long-term, and short-term debt.
    - 2/ Gross financing need is defined as the primary deficit plus debt service plus the stock of short-term debt at the end of the last period and other debt creating/reducing flows.

### Risk rating and vulnerabilities
- Overall assessment: debt is sustainable but at high risk of external and overall public debt distress.
- Main downside risk: failure to achieve programmed fiscal adjustment.
- High overall public and external debt service-to-revenue ratios over the medium term indicate high liquidity-related vulnerabilities.
- Stress-tests highlight sensitivity to shocks to exports, depreciation, and combined contingent liabilities.

### Policy recommendations and mitigation measures
- Priorities to maintain debt sustainability:
  - Sustained fiscal consolidation underpinned by domestic revenue mobilization and strengthened public financial management.
  - Continued reliance on highly concessional financing and grants to achieve fiscal adjustment without unduly imperiling growth or critical social and health spending.
  - Maintain zero ceiling on non-concessional external debt in line with the requested ECF-supported program, WB SDFP and PPAs.
- Mitigating rollover and market risks:
  - Implement fiscal consolidation steadfastly and develop a deeper domestic debt market.
  - Limit future domestic borrowing and lengthen tenors through steadfast implementation of the MTDS.
  - Leverage joint World Bank/IMF and AfDB technical assistance on the MTDS and on debt management functions and practices.
  - Utilize FY26 Performance and Policy Actions under Sustainable Development Finance Policy supported by World Bank to help mitigate risks.

*Source: IMF staff assessment as presented in the DSA content unit.*

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

### The authorities agreed with staff’s views on the DSA.

### Authorities’ commitments and near-term policy actions
- Emphasized importance of sustaining a credible fiscal consolidation despite the Middle East war.
- Committed to meeting agreed fiscal targets, including:
  - reducing borrowing from the domestic market;
  - containing borrowing costs.
- Plan to submit to Parliament a 2026 supplementary budget consistent with program projections.
- Committed to:
  - continuing to prioritize grant resources;
  - seeking only highly concessional financing;
  - ratifying loans only to the extent there is space under the agreed annual ceiling to safeguard debt sustainability.
- Recognized high T-bill rollover risks and committed to addressing these by:
  - issuing medium-to-long-term bonds;
  - supporting development of the domestic market through swift implementation of the medium-term debt strategy;
  - conducting regular public outreach to market participants.
- Reiterated commitment to clearing domestic arrears and staying current on external debt obligations.

### Debt sustainability analysis (DSA) indicators and projections (external and public debt)
- External debt (nominal) projections (Percent of GDP): 
  - 2025: 25.5
  - 2026: 24.2
  - 2027: 24.9
  - 2028: 23.5
  - 2029: 22.7
  - 2030: 22.0
  - 2031: 21.0
  - 2032: 16.9
  - 2036: 11.0
- Change in external debt (Percent of GDP): -3.0; -1.3; 0.7; -1.4; -0.8; -0.7; -0.9; -0.7; -0.5 (series as presented).
- Identified net debt-creating flows (Percent of GDP): 1.7; 0.8; 1.0; 1.4; 1.1; 1.0; 0.7; 0.6; 1.1; 4.5; 0.8 (series as presented).
- Non-interest current account deficit (Percent of GDP): 5.0; 3.4; 3.3; 3.5; 3.8; 4.0; 4.0; 4.6; 5.8; 7.3; 4.0 (series as presented).
- PV of PPG external debt-to-GDP ratio (Percent): 17.4; 16.5; 16.6; 15.7; 15.1; 14.5; 13.8; 10.9; 6.7 (series as presented).
- PV of PPG external debt-to-exports ratio (Percent): 81.1; 79.8; 83.1; 78.9; 76.8; 74.8; 71.6; 57.0; 34.5 (series as presented).
- PPG debt service-to-exports ratio (Percent): 9.7; 8.9; 8.8; 8.5; 8.2; 7.3; 6.4; 5.3; 3.6 (series as presented).
- PPG debt service-to-revenue ratio (Percent): 20.4; 16.8; 15.1; 14.4; 13.6; 12.0; 10.5; 8.5; 6.1 (series as presented).
- Gross external financing need (Million of U.S. dollars): 528.6; 294.1; 334.4; 387.6; 365.4; 339.3; 298.1; 315.1; 503.2 (series as presented).

### Public sector debt dynamics and indicators
- Public sector debt (Percent of GDP) projections:
  - 2025: 46.7
  - 2026: 44.9
  - 2027: 41.5
  - 2028: 38.3
  - 2029: 35.5
  - 2030: 32.7
  - 2031: 29.9
  - 2032: 27.5
  - 2033: 25.4
  - 2034: 23.5
  - 2035: 21.5
  - 2037: 17.7
  - 2046: 10.8
- Change in public sector debt (Percent of GDP): -0.2; -1.8; -3.5; -3.2; -2.8; -2.8; -2.7; -2.5; -2.1; -1.9; -2.0; -1.8; -0.6 (series as presented).
- Identified debt-creating flows (Percent of GDP): -1.1; -1.0; -3.0; -3.1; -2.6; -2.7; -2.8; -2.8; -2.4; -2.2; -2.3; -2.0; -0.8 (series as presented).
- Primary deficit (Percent of GDP): -0.4; -0.8; -2.3; -2.4; -1.9; -1.9; -2.0; -1.9; -1.5; -1.3; -1.4; -1.2; -0.2 (series as presented).
- Revenue and grants (Percent of GDP): 14.6; 14.7; 15.1; 15.0; 14.6; 14.5; 14.3; 14.1; 14.1; 14.0; 14.0; 14.0; 13.8 (series as presented).
- Of which: grants (Percent of GDP): 4.5; 3.8; 3.4; 3.2; 2.8; 2.7; 2.4; 2.3; 2.2; 2.1; 2.1; 2.1; 2.1 (series as presented).
- PV of public debt-to-GDP ratio (Percent): 38.7; 37.4; 33.8; 31.1; 28.5; 25.8; 23.3; 21.1; 19.3; 17.6; 15.7; 12.4; 7.1 (series as presented).
- PV of public debt-to-revenue and grants ratio (Percent): 264.1; 254.0; 223.7; 207.2; 195.0; 177.8; 163.3; 149.7; 136.9; 125.7; 112.7; 88.6; 51.9 (series as presented).
- Debt service-to-revenue and grants ratio (Percent): 132.7; 128.9; 104.1; 93.8; 85.6; 75.7; 64.4; 55.0; 46.7; 37.4; 30.5; 17.3; 5.2 (series as presented).
- Gross financing need (Percent of GDP): 19.0; 18.2; 13.5; 11.7; 10.6; 9.1; 7.2; 5.8; 5.1; 3.9; 2.8; 1.2; 0.5 (series as presented).

### Realism tools and sensitivity tests (selected results)
- Sensitivity tables present multiple stress scenarios (external and public DSAs), including:
  - Baseline PV of debt-to-GDP ratio: 16.5; 16.6; 15.7; 15.1; 14.5; 13.3; 12.7; 12.0; 11.4; 10.9 (series as presented for PV of external debt/GDP).
  - Bound tests and tailored tests show varying outcomes for PV of debt-to-GDP, PV of debt-to-exports, and debt service ratios across scenarios (e.g., One-time 30 percent nominal depreciation, Combined contingent liabilities, Commodity price shocks).
- Stress-test methodology notes:
  - "The most extreme stress test is the test that yields the highest ratio in or before 2032."
  - Commodity price shock magnitudes are based on the commodity prices outlook prepared by the IMF research department.
- Thresholds and breaches are indicated in tables (bold values indicate a breach of the threshold).

### Climate change, NDC 3.0, and financing implications
- NDC 3.0 (October 2025) priorities and alignment:
  - Timeframe: 2025–2035.
  - Aligned with MTNDP 2024–2030, Energy Transition and Green Growth Plan, Feed Salone Strategy, SDGs, Agenda 2063, and Sendai Framework.
- Mitigation target:
  - Reduction of 19,987 Gg CO₂e by 2035, equivalent to approximately one-third of projected BAU emissions.
- Estimated financing needs by 2035: US$2.97 billion total, comprising:
  - US$1.02 billion for mitigation;
  - US$1.95 billion for adaptation.
- Government mobilization plan by 2035:
  - 20 percent of mitigation needs (US$205 million);
  - 21 percent of adaptation needs (US$400 million);
  - About half of mobilized domestic contribution from the budget (US$304 million) and half through private sector (US$301 million).
  - Implies additional annual expenditures of 0.4 percent of GDP until 2035 if fully implemented as planned.
- Climate Finance Roadmap instruments and channels highlighted:
  - domestic resource mobilization (environmental taxes and fees);
  - concessional external financing, multilateral climate funds;
  - private capital via blended finance, sovereign guarantees, sustainability-linked loans, green and blue bonds, climate insurance, carbon markets, results-based financing;
  - Sierra Leone Climate Fund (SLCF) as consolidating vehicle.
- Institutional and capacity constraints identified:
  - Limited fiscal space and high risk of debt distress;
  - Data gaps and weak project preparation capacity;
  - Governance weaknesses: weak accountability, low transparency, incomplete decentralization, clientelism, corruption;
  - Absence of climate-informed Public Financial Management limits tracking of climate expenditures.
- Institutional progress noted:
  - Establishment of Climate Finance Unit (CFU) within the Ministry of Finance;
  - Planned MRV system in the EPA;
  - Operationalized National Climate Change Steering Committee (NCCSC) in 2022.
- Priority adaptation actions to operationalize NDC commitments:
  - climate-smart agriculture (Feed Salone alignment);
  - robust land-use and spatial planning for coastal and flood-prone areas;
  - integration of climate-resilient standards into infrastructure development;
  - strengthening climate finance governance, environmental tracking, and MRV systems.

### World Bank engagement and selected activities
- Country Partnership Framework (CPF FY2021–26) focus areas: (1) Sustainable Growth and Accountable Governance; (2) Human Capital Acceleration for Inclusive Growth; (3) Economic Diversification and Competitiveness with Resilience; cross-cutting: Governance, Gender, Technology.
- Selected WB-financed operations and objectives:
  - Sierra Leone Macro Stability and Resilience DPO series (first operation P503960, 2024, US$80M) including Catastrophe Deferred Drawdown Option.
  - Sierra Leone Contingent Emergency Response Project (CERP, P516624, 2026) for rapid response to crises.
  - Sierra Leone Digital Transformation Project (P177077, 2022, US$50M) including early warning systems.
  - Enhancing Sierra Leone Energy Access Project (P171059, 2021, US$61M) and Additional Financing for grid extension and off-grid solar.
  - Resilient Urban Sierra Leone Project (P168608, 2021, US$55M) for resilient municipal infrastructure and integrated flood forecasting.
  - Sierra Leone Water Security and WASH Access Improvement Project (P507588, 2025, US$40M) focusing on Guma Dam catchment protection.
  - Sierra Leone Connectivity and Agricultural Market Infrastructure Project (P178683, 2024, US$74M) with climate-resilient transport and agricultural market infrastructure.
  - Sustainable Agricultural Value-chains Intensification for Growth Project (SAVIG, P513429, FY2026, US$40M) pipeline project for climate-smart productivity.
  - Sierra Leone Quality Essential Health Services and Systems Support Project (P172102, 2021, US$60M) with climate-shock-resilient facility measures.
  - Productive Social Safety Nets and Youth Employment Project (P176789, 2022, US$40M) with Green and Digital Public Works components.
- Advisory Services and Analytics (ASAs) include:
  - Sierra Leone Country Climate and Development Report (CCDR, P180420, launched June 2025);
  - Unlocking Results-based Climate Finance for Upper Guinean Forests (P501060);
  - Sierra Leone Climate and Health Vulnerability Assessment (P501993);
  - Sustainable Cities: Urban Areas and Climate Change in Sierra Leone (P179704);
  - Sierra Leone: Pathways to a Transformation of the Agri-Food Sector (P177046).

### Recent operational developments (staff statement highlights, June 18, 2026)
- Prior Action 1 met: Letter to iron ore company dated June 5, 2026, notifying application of iron ore safe harbor pricing formula and forthcoming audit.
- Prior Action 2 met: Comprehensive stocktaking of central government expenditure arrears as of end-December 2025; all MDAs either submitted outstanding arrears or confirmed none beyond IFMIS records. Next steps:
  - publish independent audit of MDA submissions (end-November 2026 SB);
  - publish clearance strategy for verified arrears (end-April 2027 SB);
  - verified arrears to be reflected in macro framework and the DSA after audit completion.
- Prior Action 3 met: Amended and ratified the only mining agreement since December 2025 to comply with EIRA; Parliament ratified on June 11, 2026.
- Problem bank resolution progress:
  - Independent valuation received;
  - Estimated funding gap: NLe 192 million (0.1 percent of GDP) or less;
  - Funding gap to be covered in part in cash and in part via government recapitalization bond;
  - Assets and liabilities of failed bank (excluding shareholders) transferred to intermediary vehicle; deposits and good assets expected to transfer to acquirer; operation expected to be completed in June 2026.
- Fuel subsidy revisions in May 2026:
  - Petrol subsidy revised from 1.1 NLe per liter to 3.24 NLe per liter;
  - Diesel subsidy revised from 4.3 NLe per liter to 2.64 NLe per liter;
  - Authorities remain compliant with program commitments on the transparent and temporary nature of the subsidy; revisions are not expected to substantially alter monthly subsidy cost based on past consumption patterns.

*Source: IMF staff report excerpt on Sierra Leone (June 18, 2026).*

### 1. Our Sierra Leonean authorities would like to convey their sincere appreciation to

### Our Sierra Leonean authorities would like to convey their sincere appreciation to

### Program Performance
- Authorities express appreciation to Management and Staff for concluding the third review under the Extended Credit Facility (ECF) and guidance on the request for financial assistance under the Resilience and Sustainability Facility (RSF).
- Domestic primary balance strengthened by 7 percentage points of GDP from 2022 to 2025, supported by a tight monetary policy stance.
- Most end-December 2025 Performance Criteria (PC) and Indicative Targets (IT) were met except for concessional external borrowing, Net Domestic Assets (NDA), domestic arrears and the domestic primary balance.
- Corrective actions taken:
  - Brought NDA back on track as of end March 2026 to meet the revised end-June 2026 target.
  - Lowered the 2026 ceiling on concessional external borrowing by the amount of the slippage.
- Continuous end-March 2026 PCs and ITs met on Net Credit to Government (NCG), Net Domestic Assets (NDA), and Net International Reserves.
- Recapitalization of the Bank of Sierra Leone (BSL) structural benchmark was met.
- Missed structural benchmarks on fuel pricing, adherence to EIRA terms for new mining agreements, operationalization of the safe harbor for iron ore, and mining governance reflect implementation challenges:
  - Fuel pricing benchmark missed because authorities subsidized fuel to mitigate impact on vulnerable households.
  - Progress on mining governance constrained by exit of some companies originally covered under the commitment.
- Authorities corrected three missed structural benchmarks, including a comprehensive stock-taking of central government expenditure arrears through prior actions.
- Two new structural benchmarks on strengthening arrears management programmed for the next review.
- Authorities request Directors’ support for:
  - Completion of the third review under the ECF arrangement.
  - Waivers for the missed PCs given corrective measures taken.
  - Modification of performance criteria.
  - An arrangement under the Resilience and Sustainability Facility (RSF).

### Recent Economic Development
- Real GDP growth:
  - Improved from 4.4 percent in 2024 to 5.0 percent in 2025, driven by agricultural productivity under the Feed Salone Initiative, manufacturing and services.
  - Projected to reach 4 percent in 2026 and gradually converge to a medium-term potential of 4.6 percent, contingent on easing of the Middle East crisis, improvements in agricultural productivity, expansion in mining activity, and a less contractionary fiscal stance.
- Inflation developments:
  - Declined from 54.5 percent in October 2025 to 4.4 percent in December 2025.
  - Single-digit inflation sustained at 6.4 percent in January and 8.1 percent in February 2026.
  - Rose to 10.8 percent in April 2026, driven by external shocks from the Middle East conflict and associated fiscal pressures.
- Current account:
  - Deficit narrowed from 7.1 percent in 2024 to 5.4 percent in 2025.
  - Projected to narrow further to 3.7 percent in 2026, reflecting slower import growth, import substitution, and stronger export performance (iron ore, heavy mineral concentrates, bauxite, coffee, cocoa beans, palm oil).
- Gross international reserves:
  - Increased to 1.9 months of imports at end-March 2026, up from 1.5 months in September 2025, supported by sustained FX purchases by the BSL despite higher-than-expected payments for goods and services.
  - Authorities committed to rebuilding reserve buffers over the medium term.

### Fiscal Consolidation and Debt Management
- Fiscal stance and targets:
  - Domestic primary surplus of 1.3 percent of GDP in 2025, up from a deficit of 2.7 percent in 2024.
  - Supplementary budget planned targeting a domestic primary surplus of 1.1 percent of GDP to Parliament by September 2026.
  - Fiscal buffer of 0.2 percent of GDP planned in the forthcoming supplementary budget to be utilised only in the fourth quarter of 2026.
- Revenue and expenditure measures:
  - Strengthening domestic revenue mobilization through tax reforms (revised personal and corporate income tax systems) and operationalization of the safe harbour regime for iron ore.
  - Reinforcing revenue administration with a clear delineation of responsibilities for customs functions in line with Governance and Corruption Diagnostic recommendations.
  - Rationalizing capital budget to support critical spending on the upcoming census, continuation of the Feed Salone program, and counterpart funding for multilateral and bilateral projects.
- Social protection and subsidies:
  - Current fuel subsidy treated as temporary and tightly capped at 0.13 percent of GDP in 2026, with commitment to allow full pass-through of international oil price as warranted.
  - Commitment to safeguard social spending and improve targeting and efficiency of social support; RSF-proposed reforms to extend the digital Social Protection Registry for Integrated National Targeting (SPRINT) to include those vulnerable to climate-related disasters.
- Public financial management and arrears:
  - Enhanced cash and debt management, linking budgets to execution; regular cash forecasts and investment pipelines submitted by key ministries, departments and agencies.
  - Ongoing monitoring of EDSA arrears to independent power producers (IPPs) and continuation of arrears payments to reduce public debt.
  - Structural benchmark set for a forthcoming audit expected to substantially reduce reported arrears through verification.
  - Commitment to clear all validated arrears quickly.
- Debt management practices:
  - Annual update of the Medium-Term Debt Strategy.
  - Issue debt securities through competitive bidding.
  - Limit domestic FX-linked debt issuance to cases agreed with the Fund.
  - Strengthen communication and improve debt coverage through enhanced reporting of SOE debt and arrears.
  - Actively mobilizing grant financing from development partners for priority spending.

### Monetary, Exchange Rate, and Financial Sector Policies
- Monetary policy:
  - Prudent, data dependent monetary stance combined with fiscal discipline to ease inflation pressures and stabilize the exchange rate.
  - Central Bank Board approved in December 2025 its monetary policy strategy and are advancing implementation, including operationalizing the 7-day repo as the main policy instrument.
  - Board approved Impairment Policy in compliance with IFRS9 and a policy on monetary operations.
  - Recapitalization of the central bank begun in a steady and consistent manner to build foreign reserves.
  - Reserve coverage rose from 1.5 months of imports in September 2025 to 1.9 months in March 2026, supported by FX purchases and disciplined FX management alongside tighter control of government FX spending.
  - Authorities stand ready to make appropriate monetary adjustments should inflation surprises persist.
- Financial sector stability:
  - Progress in resolving the problem bank and advancing the legal instrument required to ensure a seamless transfer.
  - Strengthening crisis management frameworks and enhancing FX risk monitoring, including daily reporting of net open positions and new reserve requirements on FX deposits.
  - Tightening supervision amid rapid private sector lending growth; improving risk management standards and preparing safeguards for emerging vulnerabilities including NPLs and sovereign exposures.

### Structural Reforms
- Fiscal, PFM, energy, and governance reforms progressing:
  - Strengthening mining governance and taxation, including application of the safe harbor regime for iron ore.
  - Customs modernization through digital systems and audits to reduce leakages and improve compliance.
  - Transition to GFSM 2014 at an advanced stage.
  - Plan to incorporate Fund technical assistance into the next budget to strengthen transparency and accountability.
- Governance and transparency measures:
  - Published audited 2024 financial statements of the Mines and Minerals Development and Mining Corporation (MMDMC).
  - Plans to publish asset declarations underway as part of a broader amendment to the Anti-Corruption Act.
  - Progress on AML/CFT frameworks and ongoing efforts to amend the Companies Act of 2009 to enhance beneficial ownership transparency; by end-2026 authorities intend to require companies to disclose and verify true owners and ensure access by relevant authorities.
- Energy sector and SOE reforms:
  - Addressing structural fiscal risks in the energy sector through market-based solutions including selection of a private concessionaire for electricity distribution and rationalization of untargeted subsidies, with intent to restore cost-recovery pricing once shocks subside.
  - Advancing legal reforms to strengthen SOE oversight and enhance fiscal risk disclosure.
- Business environment improvements:
  - Establishment of a Business Solution Center to streamline business registration, licenses, and permits, with plans to make the platform accessible online.

### Climate Change and the RSF Arrangement
- Climate vulnerability and risks:
  - Sierra Leone is highly vulnerable to climate-related disasters: floods, mudslides, and extreme weather events causing loss of lives, destruction of infrastructure, and disruptions to agricultural output.
  - Climate risks could erode macroeconomic stability and derail development gains without sustained policy action.
- RSF reform focus:
  - Three reform areas targeted under the RSF: climate-sensitive public investment management, climate resilience, and financial stability.
  - RSF expected to strengthen capacity and resilience to climate change, support adaptation efforts, and catalyze additional financing while reinforcing reforms under the ECF.
  - Authorities view climate resilience reforms as macro-critical to safeguarding macroeconomic stability, preserving fiscal sustainability, strengthening infrastructure resilience, and advancing inclusive growth.
  - Authorities plan to work with the World Bank and other partners to build on the RSF’s catalytic effect.

### Conclusion and Requests
- Authorities reaffirm commitment to prudent macroeconomic policies to achieve ECF and prospective RSF objectives.
- Authorities express gratitude to the Board, Management, and staff for continued support.
- Request Executive Directors’ support for:
  - Completion of the third review under the ECF and associated requests.
  - Waivers for missed PCs given corrective measures.
  - Approval of an arrangement under the RSF to strengthen long-term resilience and advance sustainable and inclusive growth.

*Source: 1sleea2026002 - 1. Our Sierra Leonean authorities would like to convey their sincere appreciation to*

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_Source: https://www.imf.org/-/media/files/publications/cr/2026/english/1sleea2026002.pdf_