## 1. The Government of Sierra Leone completed its first full Poverty Reduction Strategy

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---

### Overview and timing
- The full Poverty Reduction Strategy Paper (PRSP) was completed in early February 2005.
- Implementation of the PRSP is set to begin in mid-2005, following the Consultative Group meeting in June.
- The first annual progress report will be carried out in the third quarter of 2006.
- "Thus, it is expected that Sierra Leone could fulfill the condition of a one-year successful PRSP implementation for its Completion Point under the Heavily Indebted Poor Countries (HIPC) Initiative by mid-2006."

### Strategic framework and objectives
- Overall estimated cost for 2005–07: US$1.7 billion.
- PRS comprises three pillars:
  - (i) Good Governance, Security and Peace Building
  - (ii) Pro-poor Sustainable Growth for Food Security and Job Creation
  - (iii) Human Development
- Main overall objectives:
  - substantial reductions in poverty, hunger, and unemployment
  - adherence to each of the Millennium Development Goals
  - lasting security
  - improvements in the quality of governance

### Participatory process
- PRSP built on participatory processes carried out in 2003 and 2004, including:
  - Strategic Planning and Action Process
  - Focus Group Discussions
  - Participatory Poverty Assessments
  - National and District consultations and validation workshops
  - Radio and television discussions
- Civic engagement on the PRSP was led by NGOs.

### Poverty diagnosis and survey data
- Poverty analysis based on a 2003–04 extensive household survey and qualitative surveys (Participatory Poverty Assessment, focus group discussions, participatory learning forums).
- Choice of caloric definition for extreme poverty (adult equivalent of 2,700 calories per day).
- Survey comparability note: choice of caloric definition makes direct comparison with previous household surveys difficult; next survey scheduled for 2008 should maintain the same definitions.
- Key statistics from the 2003/04 household survey:
  - 70 percent of the population lives below the poverty line of Le 2,111 (slightly below US$1) per day.
  - 26 percent of the population lives in extreme poverty (food-poor: less than 2,700 calories per day).
  - Proportion below the poverty line by area:
    - Freetown: 15 percent
    - Rural areas: 79 percent
    - Other urban areas: 70 percent
- Distributional observations:
  - Poverty heavily concentrated in rural and other urban areas outside Freetown.
  - Income inequality relatively higher in rural areas versus Freetown and other urban areas.
  - Highest poverty rates: rural farming families, followed by rural mining families.
  - Lowest incidence of poverty: those employed in formal, urban, private sector jobs.

### Monitoring and evaluation (M&E) and statistical capacity
- Staffs recommend further work to yield a consistent and comprehensive M&E framework by the first Annual Progress Report.
- Identified gaps:
  - Some PRS targets are missing or poorly developed (example: measures and targets for unemployment, notably youth unemployment).
  - Need to define measures of success for food security (e.g., malnutrition or stunting indicators).
- Institutional arrangements:
  - A Poverty Reduction Strategy Technical Secretariat to coordinate PRS monitoring activities.
  - Four working groups to monitor:
    - resource allocations and expenditures
    - survey and census results
    - community based monitoring
    - research and dissemination
- Statistical capacity issues:
  - Little capacity for data gathering or analysis in most line ministries responsible for PRSP implementation.
  - Statistics Sierra Leone requires additional strengthening.
  - Staffs encourage strengthening Statistics Sierra Leone, Planning, Research and Statistics units of implementing sectoral ministries, and equivalents in local Governments through recruitment and/or sustained in-house training.
- Ongoing support and initiatives:
  - Since 2003, Sierra Leone has participated in the General Data Dissemination System (GDDS) and is implementing the GDDS plan for statistical improvement, with Fund technical assistance.
  - The World Bank has approved funding for the preparation of a National Strategy for the Development of Statistics (NSDS).
  - The PRSP includes specific cost estimates to develop and maintain a macroeconomic and socio-demographic statistical system.

### Priority actions and macroeconomic framework
- Macroeconomic assumptions for 2005–07:
  - Real output growth assumed to average just under 7 percent per annum during 2005–07.
  - Inflation projected to decline to low single digits during this period.
  - Overall fiscal deficit (including grants) projected to decline to 3.2 percent of GDP by 2007.
  - External current account deficit (including grants) projected to improve to 7.8 percent of GDP by 2007 as rutile and bauxite exports come on line while import growth moderates.
- Alignment with previous consultations: medium-term macroeconomic framework broadly in line with the 2004 Article IV consultations with the Fund.
- Financing gap and fiscal pressures:
  - PRS total cost for 2005–07: US$1.7 billion.
  - Identified financing covered: US$785 million.
  - Resulting financing gap: US$922 million.
- Fiscal and external risks:
  - Increasing fiscal pressure from large public service demands, infrastructure needs, recent wage-related agreements, and assumption of greater security responsibilities as UNAMSIL reduces presence.
  - Potential phase-out of post-conflict premiums on lending and grant volumes unless new pledges secured.
- Staff recommendations on fiscal policy and financing:
  - Continue efforts to strengthen domestic revenue collection, including from mineral resources.
  - Seek enhanced external donor support.
  - Strengthen the National Revenue Authority and capture additional mineral sector revenues in the medium-term budget framework.
  - Further prioritization needed to ensure critical programs and projects receive sustained support given financing constraints.
  - Promote PRSP alignment through an early review of existing programs, projects and estimated costs at the Cabinet level and via the budget process.
  - Focus on efficiency gains in public expenditures and endorse ongoing public financial management reform.
  - Protect pre-identified priority programs and projects in the event of unanticipated aid shortfalls; collaborate with donors on a framework for multi-donor budget support with aid predictability as a goal.
  - External financing should take the form of grants or highly concessional borrowing to safeguard debt sustainability.
  - Integrate capacity building elements into new sector programs and projects; seek donor support for recruitment, retention, training, and merit-based promotions.

### Governance (Pillar I) recommendations
- Endorsement of emphasis on anti-corruption and effective management of public resources, including natural resources.
- Noted progress: launch of a proactive, preventive National Anti-Corruption Strategy (NACS).
- Additional reforms recommended:
  - procurement reform
  - establishment of internal audit units
  - publication of clear and transparent procedures for the divestiture of public enterprises
  - introduction of model fiscal agreements for mining operations
  - adoption of Extractive Industries Transparency Initiative principles for mining policy
- Decentralization:
  - Commendation for intent to reduce inequities in public service delivery through decentralization.
  - Recommendation to better highlight and capitalize on local government and community roles (examples cited: local council rapid results initiatives and National Social Action Program community driven projects).

### Pro-poor growth (Pillar II) recommendations
- Agriculture:
  - Agriculture identified as key for food security, income, and employment generation.
  - PRSP aims include crop diversification, increased productivity through intensification, new technologies, market infrastructure development, and private sector interventions.
  - Staff concern: PRSP lacks specificity on how these objectives will be achieved in terms of policies, programs and projects; supporting matrix of goals and actions is thin on details.
  - Specific gaps noted: unclear mechanisms for diversification, agricultural input market support, mechanization strategy vis-à-vis small farms and land tenure, the role of private sector in input distribution, and insufficient attention to agricultural research.
  - Recommendation: use the first year of PRSP implementation to more fully lay out agricultural policies.
- Infrastructure sectors:
  - Recommendation that strategies for electrical power, telecommunications, water supplies and roads be better informed by estimates of demand and backed by national strategies.
  - Concern that without clear demand estimates and strategies it is unclear whether proposed infrastructural investments are cost effective.
  - Strategies should consider planned reforms of key public enterprises linked to infrastructure including private participation.
- Youth and employment:
  - PRS places strong emphasis on reducing unemployed youth, including through labor-intensive elements in Government programs and through training, capacity building and sports.
  - Staff concern: such measures may not be fiscally sustainable and more fundamental issues in private sector development and labor market frictions—particularly on the demand side—need to be addressed.
  - Recommendation: authorities encouraged to explore these issues and seek technical assistance as necessary.

### 22. The PRSP could be reinforced through a discussion of urbanization and its

### Urbanization and its consequences
- One of the consequences of the war has been growing urbanization and over-crowding in Freetown.
- When coupled with unemployment, this fuels urban poverty and criminal activity.
- Urbanization also creates many opportunities for more efficient provision of public services, such as health care, education, and electricity.
- Staffs propose that the PRSP could be strengthened by identifying specific reforms or programs, building on these linkages and aimed at alleviating urban pressures.

### Pillar III: Human Resource Development — Health and Nutrition Services
- Strategic elements proposed are generally appropriate for Sierra Leone’s immediate needs.
- Strategy focuses on:
  - (i) further decentralization of health care delivery, especially through the expansion of the district-based health care network composed of primary health care centers and first-referral hospitals;
  - (ii) the provision of cost-effective packages designed to deal with priority problems; and
  - (iii) improved availability of essential inputs to health care, including health sector personnel, pharmaceuticals, infrastructure, and equipment.
- Nutritional gains will be achieved through supplementary feeding and maternal and child health programs as well as the promotion of positive behavioral changes within the population with respect to nutrition.
- Most strategy elements can contribute in a cost-effective manner to poverty reduction although fiscal sustainability is a concern.
  - Implementation of some aspects, particularly the provision of free care for some groups, will likely exceed the financial and administrative capacity of Government.
  - Staffs recommend greater efforts to raise additional resources from both public and private sources to meet the high burden of disease and especially its impact on under five and maternal mortality.
  - Government is further encouraged to proceed with free care only in line with its capacity to implement targeting and to acquire necessary information for effective targeting.

### Pillar III: Human Resource Development — Basic Education
- The PRSP rightly emphasizes improving the quality of basic education, with further work needed to develop the strategy into a sector-wide prioritized plan.
- PRSP identifies serious obstacles, in particular the status of physical facilities and the shortage of skilled teachers.
- It correctly targets vocational, technical and tertiary education institutions, currently in a poor state following many years of neglect.
- Staffs believe the strategy also needs to be extended to address:
  - weak institutional capacity,
  - financial sustainability,
  - the impact of mushrooming enrollments at the senior secondary level (a consequence of the explosion at the primary level),
  - the worrisome trend away from scientific and technical fields, and
  - the low internal efficiency as signaled by high drop out rates.
- There may be opportunities to better link the educational curricula to the specific needs of the economy.

### Conclusions and Issues for Discussion
- Bank and Fund staffs believe Sierra Leone’s full PRSP is reasonably well aligned with the needs of a nation newly at peace, still fragile, but aiming at sustained high growth and poverty reduction.
- To strengthen the strategy and reduce implementation risks, the authorities need to address the issues summarized above. Key needs include:
  - build stronger capacity to monitor and evaluate the impact of the PRS through better statistics from the implementing ministries as well as Statistics Sierra Leone and improve the monitorable indicators for key aspects of the PRS, notably for poverty reduction, unemployment and food security;
  - build stronger capacity to implement the PRS in all priority sectors with central Government focusing on policy and regulation and local governments focusing on implementation.
  - build or strengthen specific strategies in key infrastructure sectors and basic education;
  - bring PRS expenditures in line with available resources through further prioritization of programs;
  - ensure priority programs and projects are protected from internal and external shocks;
  - continue to strengthen revenue collections and seek additional donor financing;
  - strengthen the management and utilization of natural resources; and
  - relieve fiscal and capacity constraints on central Government through greater reliance on both local government and the private sector.
- Questions for Executive Directors:
  - Do the respective Executive Directors of the Bank and Fund concur with the broad directions of the PRS of Sierra Leone?
  - Do the Executive Directors concur with the staffs’ identification of priority actions and critical areas for success?

*IMF staff report excerpt.*

### 1. The Government of Sierra Leone completed its first full Poverty Reduction Strategy

### 1. The Government of Sierra Leone completed its first full Poverty Reduction Strategy

### Overview and timing
- The full Poverty Reduction Strategy Paper (PRSP) was completed in early February 2005.
- Implementation of the PRSP is set to begin in mid-2005, following the Consultative Group meeting in June.
- The first annual progress report will be carried out in the third quarter of 2006.
- Note: "Thus, it is expected that Sierra Leone could fulfill the condition of a one-year successful PRSP implementation for its Completion Point under the Heavily Indebted Poor Countries (HIPC) Initiative by mid-2006."

### Strategic framework and objectives
- Overall estimated cost for 2005–07: US$1.7 billion.
- PRS comprises three pillars:
  - (i) Good Governance, Security and Peace Building
  - (ii) Pro-poor Sustainable Growth for Food Security and Job Creation
  - (iii) Human Development
- Main overall objectives:
  - substantial reductions in poverty, hunger, and unemployment
  - adherence to each of the Millennium Development Goals
  - lasting security
  - improvements in the quality of governance

### Participatory process
- PRSP built on participatory processes carried out in 2003 and 2004, including:
  - Strategic Planning and Action Process
  - Focus Group Discussions
  - Participatory Poverty Assessments
  - National and District consultations and validation workshops
  - Radio and television discussions
- Civic engagement on the PRSP was led by NGOs.

### Poverty diagnosis and survey data
- Poverty analysis based on a 2003–04 extensive household survey and qualitative surveys (Participatory Poverty Assessment, focus group discussions, participatory learning forums).
- Choice of caloric definition for extreme poverty (adult equivalent of 2,700 calories per day).
- Survey comparability note: choice of caloric definition makes direct comparison with previous household surveys difficult; next survey scheduled for 2008 should maintain the same definitions.
- Key statistics from the 2003/04 household survey:
  - 70 percent of the population lives below the poverty line of Le 2,111 (slightly below US$1) per day.
  - 26 percent of the population lives in extreme poverty (food-poor: less than 2,700 calories per day).
  - Proportion below the poverty line by area:
    - Freetown: 15 percent
    - Rural areas: 79 percent
    - Other urban areas: 70 percent
- Distributional observations:
  - Poverty heavily concentrated in rural and other urban areas outside Freetown.
  - Income inequality relatively higher in rural areas versus Freetown and other urban areas.
  - Highest poverty rates: rural farming families, followed by rural mining families.
  - Lowest incidence of poverty: those employed in formal, urban, private sector jobs.

### Monitoring and evaluation (M&E) and statistical capacity
- Staffs recommend further work to yield a consistent and comprehensive M&E framework by the first Annual Progress Report.
- Identified gaps:
  - Some PRS targets are missing or poorly developed (example: measures and targets for unemployment, notably youth unemployment).
  - Need to define measures of success for food security (e.g., malnutrition or stunting indicators).
- Institutional arrangements:
  - A Poverty Reduction Strategy Technical Secretariat to coordinate PRS monitoring activities.
  - Four working groups to monitor:
    - resource allocations and expenditures
    - survey and census results
    - community based monitoring
    - research and dissemination
- Statistical capacity issues:
  - Little capacity for data gathering or analysis in most line ministries responsible for PRSP implementation.
  - Statistics Sierra Leone requires additional strengthening.
  - Staffs encourage strengthening Statistics Sierra Leone, Planning, Research and Statistics units of implementing sectoral ministries, and equivalents in local Governments through recruitment and/or sustained in-house training.
- Ongoing support and initiatives:
  - Since 2003, Sierra Leone has participated in the General Data Dissemination System (GDDS) and is implementing the GDDS plan for statistical improvement, with Fund technical assistance.
  - The World Bank has approved funding for the preparation of a National Strategy for the Development of Statistics (NSDS).
  - The PRSP includes specific cost estimates to develop and maintain a macroeconomic and socio-demographic statistical system.

### Priority actions and macroeconomic framework
- Macroeconomic assumptions for 2005–07:
  - Real output growth assumed to average just under 7 percent per annum during 2005–07.
  - Inflation projected to decline to low single digits during this period.
  - Overall fiscal deficit (including grants) projected to decline to 3.2 percent of GDP by 2007.
  - External current account deficit (including grants) projected to improve to 7.8 percent of GDP by 2007 as rutile and bauxite exports come on line while import growth moderates.
- Alignment with previous consultations: medium-term macroeconomic framework broadly in line with the 2004 Article IV consultations with the Fund.
- Financing gap and fiscal pressures:
  - PRS total cost for 2005–07: US$1.7 billion.
  - Identified financing covered: US$785 million.
  - Resulting financing gap: US$922 million.
- Fiscal and external risks:
  - Increasing fiscal pressure from large public service demands, infrastructure needs, recent wage-related agreements, and assumption of greater security responsibilities as UNAMSIL reduces presence.
  - Potential phase-out of post-conflict premiums on lending and grant volumes unless new pledges secured.
- Staff recommendations on fiscal policy and financing:
  - Continue efforts to strengthen domestic revenue collection, including from mineral resources.
  - Seek enhanced external donor support.
  - Strengthen the National Revenue Authority and capture additional mineral sector revenues in the medium-term budget framework.
  - Further prioritization needed to ensure critical programs and projects receive sustained support given financing constraints.
  - Promote PRSP alignment through an early review of existing programs, projects and estimated costs at the Cabinet level and via the budget process.
  - Focus on efficiency gains in public expenditures and endorse ongoing public financial management reform.
  - Protect pre-identified priority programs and projects in the event of unanticipated aid shortfalls; collaborate with donors on a framework for multi-donor budget support with aid predictability as a goal.
  - External financing should take the form of grants or highly concessional borrowing to safeguard debt sustainability.
  - Integrate capacity building elements into new sector programs and projects; seek donor support for recruitment, retention, training, and merit-based promotions.

### Governance (Pillar I) recommendations
- Endorsement of emphasis on anti-corruption and effective management of public resources, including natural resources.
- Noted progress: launch of a proactive, preventive National Anti-Corruption Strategy (NACS).
- Additional reforms recommended:
  - procurement reform
  - establishment of internal audit units
  - publication of clear and transparent procedures for the divestiture of public enterprises
  - introduction of model fiscal agreements for mining operations
  - adoption of Extractive Industries Transparency Initiative principles for mining policy
- Decentralization:
  - Commendation for intent to reduce inequities in public service delivery through decentralization.
  - Recommendation to better highlight and capitalize on local government and community roles (examples cited: local council rapid results initiatives and National Social Action Program community driven projects).

### Pro-poor growth (Pillar II) recommendations
- Agriculture:
  - Agriculture identified as key for food security, income, and employment generation.
  - PRSP aims include crop diversification, increased productivity through intensification, new technologies, market infrastructure development, and private sector interventions.
  - Staff concern: PRSP lacks specificity on how these objectives will be achieved in terms of policies, programs and projects; supporting matrix of goals and actions is thin on details.
  - Specific gaps noted: unclear mechanisms for diversification, agricultural input market support, mechanization strategy vis-à-vis small farms and land tenure, the role of private sector in input distribution, and insufficient attention to agricultural research.
  - Recommendation: use the first year of PRSP implementation to more fully lay out agricultural policies.
- Infrastructure sectors:
  - Recommendation that strategies for electrical power, telecommunications, water supplies and roads be better informed by estimates of demand and backed by national strategies.
  - Concern that without clear demand estimates and strategies it is unclear whether proposed infrastructural investments are cost effective.
  - Strategies should consider planned reforms of key public enterprises linked to infrastructure including private participation.
- Youth and employment:
  - PRS places strong emphasis on reducing unemployed youth, including through labor-intensive elements in Government programs and through training, capacity building and sports.
  - Staff concern: such measures may not be fiscally sustainable and more fundamental issues in private sector development and labor market frictions—particularly on the demand side—need to be addressed.
  - Recommendation: authorities encouraged to explore these issues and seek technical assistance as necessary.

*Source: Staffs of the World Bank and IMF comments and advice on Sierra Leone PRSP (early February 2005).*

### 22. The PRSP could be reinforced through a discussion of urbanization and its

### _cr05193 - 22. The PRSP could be reinforced through a discussion of urbanization and its

### Urbanization and its consequences
- One of the consequences of the war has been growing urbanization and over-crowding in Freetown.
- When coupled with unemployment, this fuels urban poverty and criminal activity.
- Urbanization also creates many opportunities for more efficient provision of public services, such as health care, education, and electricity.
- Staffs propose that the PRSP could be strengthened by identifying specific reforms or programs, building on these linkages and aimed at alleviating urban pressures.

### Pillar III: Human Resource Development — Health and Nutrition Services
- Strategic elements proposed are generally appropriate for Sierra Leone’s immediate needs.
- Strategy focuses on:
  - (i) further decentralization of health care delivery, especially through the expansion of the district-based health care network composed of primary health care centers and first-referral hospitals;
  - (ii) the provision of cost-effective packages designed to deal with priority problems; and
  - (iii) improved availability of essential inputs to health care, including health sector personnel, pharmaceuticals, infrastructure, and equipment.
- Nutritional gains will be achieved through supplementary feeding and maternal and child health programs as well as the promotion of positive behavioral changes within the population with respect to nutrition.
- Most strategy elements can contribute in a cost-effective manner to poverty reduction although fiscal sustainability is a concern.
  - Implementation of some aspects, particularly the provision of free care for some groups, will likely exceed the financial and administrative capacity of Government.
  - Staffs recommend greater efforts to raise additional resources from both public and private sources to meet the high burden of disease and especially its impact on under five and maternal mortality.
  - Government is further encouraged to proceed with free care only in line with its capacity to implement targeting and to acquire necessary information for effective targeting.

### Pillar III: Human Resource Development — Basic Education
- The PRSP rightly emphasizes improving the quality of basic education, with further work needed to develop the strategy into a sector-wide prioritized plan.
- PRSP identifies serious obstacles, in particular the status of physical facilities and the shortage of skilled teachers.
- It correctly targets vocational, technical and tertiary education institutions, currently in a poor state following many years of neglect.
- Staffs believe the strategy also needs to be extended to address:
  - weak institutional capacity,
  - financial sustainability,
  - the impact of mushrooming enrollments at the senior secondary level (a consequence of the explosion at the primary level),
  - the worrisome trend away from scientific and technical fields, and
  - the low internal efficiency as signaled by high drop out rates.
- There may be opportunities to better link the educational curricula to the specific needs of the economy.

### Conclusions and Issues for Discussion
- Bank and Fund staffs believe Sierra Leone’s full PRSP is reasonably well aligned with the needs of a nation newly at peace, still fragile, but aiming at sustained high growth and poverty reduction.
- To strengthen the strategy and reduce implementation risks, the authorities need to address the issues summarized above. Key needs include:
  - build stronger capacity to monitor and evaluate the impact of the PRS through better statistics from the implementing ministries as well as Statistics Sierra Leone and improve the monitorable indicators for key aspects of the PRS, notably for poverty reduction, unemployment and food security;
  - build stronger capacity to implement the PRS in all priority sectors with central Government focusing on policy and regulation and local governments focusing on implementation.
  - build or strengthen specific strategies in key infrastructure sectors and basic education;
  - bring PRS expenditures in line with available resources through further prioritization of programs;
  - ensure priority programs and projects are protected from internal and external shocks;
  - continue to strengthen revenue collections and seek additional donor financing;
  - strengthen the management and utilization of natural resources; and
  - relieve fiscal and capacity constraints on central Government through greater reliance on both local government and the private sector.
- Questions for Executive Directors:
  - Do the respective Executive Directors of the Bank and Fund concur with the broad directions of the PRS of Sierra Leone?
  - Do the Executive Directors concur with the staffs’ identification of priority actions and critical areas for success?

*IMF staff report excerpt.*

---


_Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2005/_cr05193.pdf_