## Sierra Leone — Joint Staff Advisory Note: Poverty Reduction Strategy Paper Progress Report (Section 1)

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---

### Overview
- Report reviews PRS implementation for Sierra Leone from June 2005 through December 2007.
- Key PRS elements analyzed: (i) macroeconomic performance; (ii) good governance, peace, and security; (iii) pro-poor sustainable growth for food security and job creation; (iv) human resource development; and (v) monitoring and evaluation of the PRS.
- Staffs' assessment: progress made in PRS implementation (macroeconomic stability, continued real growth, strengthened public financial management, efforts to improve social indicators), but the progress report lacks a strong forward-looking component linking to the new PRS.
- Priority areas identified by staffs for strengthening PRS implementation:
  - Pursue a stronger revenue mobilization effort to expand priority poverty-reducing programs;
  - Improve transparency and accountability in the use of public resources;
  - Accelerate reform of the civil service;
  - Revitalize key infrastructural services (power, water, sanitation, road maintenance) in a cost-effective manner;
  - Enhance capacity to monitor and evaluate progress, particularly in food security and health outcomes.

### Macroeconomic and Fiscal Management
- Reported macroeconomic outcomes 2005–07:
  - Real growth averaging 7.2 percent.
  - External current and fiscal account balances declined but remained high.
  - Foreign reserves reached 4.5 months of imports coverage at end-2007.
  - Annual average inflation reached 11.7 percent in 2007 (after single digits by end-2006).
  - Sierra Leone reached the completion point under the enhanced HIPC initiative in December 2006 and benefited from HIPC and MDRI thereafter.
- Fiscal and budget execution issues:
  - Poverty-reducing expenditures: 4.4 percent of GDP in 2006; fell to 3 percent in 2007 against a target of 5 percent.
  - Delays in external budget support since late 2006 caused partly by donor concerns about fiscal management (notably delays in publishing audited financial statements).
  - Domestic debt service absorbs 20 percent of domestic revenue, constraining poverty spending.
- Financial sector and monetary policy:
  - Non-performing loans accounted for 31.7 percent of gross loans at end-2007.
  - Monetary policy was not active enough to achieve single digit inflation by 2007.
  - Staffs encourage the Bank of Sierra Leone to strengthen its monetary framework and conduct a more active monetary policy, given inflationary pressures from world oil and food prices and the use of MDRI resources.
- Staffs' recommended macro priorities:
  - Strengthen public financial management while maintaining fiscal discipline to limit debt-creating domestic financing;
  - Accelerate implementation of the structural reform agenda;
  - Step up efforts to diversify the export base and enhance job creation.

### PRS Pillar One: Good Governance, Peace and Security
- Public Financial Management (PFM) reforms:
  - Significant strides in the Common Action Plan for PFM reforms.
  - Publication in 2007 of audited public accounts for years 2002–04; accounts for 2005 and 2006 scheduled for publication in 2008.
  - Continued implementation of the Integrated Financial Management Information System (IFMIS) and expansion of procurement planning.
  - Staffs note need to enhance procurement capacity and transparency of procurement outcomes; recommend coverage in the next PRS.
- Budget execution and cash management:
  - 2007 saw substantial shortfalls in revenue and budget support in the first three quarters.
  - Authorities implemented a cash-budget management system to maintain program targets, revealing weaknesses in cash flow planning and commitment controls, leading to accumulation of domestic payment arrears.
  - Staffs observe greater efforts could have been made to protect poverty-reducing expenditure programs.
- Decentralization:
  - All functions were devolved to councils by law by end-2007, though implementation of some functions awaits official pronouncements by line ministries.
  - 14 out of 19 councils met transparency and financial accountability requirements.
  - Staffs note need to ensure statutory transfers to local councils are made in full and on time.
- Civil service:
  - Roughly 14,000 out of 16,000 members of the civil service are in the lowest grades.
  - Skilled professionals (accountants, agronomists, chemists, doctors, geologists, lawyers) are in very short supply.
  - Key civil service reform decisions and legal texts remain to be taken (remuneration policy, training policy, draft civil service law).
  - Staffs recommend assessing skill gaps and devising recruitment policies; next PRS should address these issues based on earlier management and functional reviews.

### PRS Pillar Two: Growth, Food Security, and Job Creation
- Poverty and growth:
  - Poverty headcount estimated to have fallen by as much as 6 percentage points between 2004 and 2007 due to sustained high growth rate.
  - Recent food and fuel price hikes may have erased some gains; staffs view timely initiation of the integrated household survey as a key priority.
- Business climate and trade policy:
  - Regulatory reforms: General Law Act (2007) and Business Registration Act (2007) expected to reduce time and cost to start businesses.
  - Suspension in 2007 of the low internal tariff rate accorded to ECOWAS countries (due to problems determining source of origin), increasing cost of doing business.
  - Limited progress translating Diagnostic Trade Integration Study recommendations into concrete policies; Ministry of Trade and Industry capacity needs strengthening.
- Infrastructure and utilities:
  - Targets for water supply and sanitation were not met in 2007; Freetown water supply briefly interrupted.
  - Electricity generation by the National Power Authority collapsed in Freetown; two expensive contracts with independent power providers were entered into (only one competitively procured and backed by a budgetary allocation).
  - Staffs note need to strengthen management of public utilities and ensure infrastructure investment policies are backed by adequate fiduciary controls and full transparency.
- Agriculture and food security:
  - Recorded agricultural production in 2007 showed an upward trend but output fell short of PRSP targets and 2006 levels; progress report did not explain the shortfall.
  - Staffs recommend MAFFS develop capacity to closely monitor sector developments, formulate an overall agricultural strategy, coordinate to establish an enabling environment, enhance use of extension services, and improve internal road network and port facilities to reduce marketing costs.
- Job creation and youth employment:
  - Progress report cited many job creation programs, but even these reached only a few thousand beneficiaries.
  - Staffs recommend evaluating these programs to assess effectiveness and reviewing the impact of labor laws on job creation.

### PRS Pillar Three: Human Resource Development
- Education:
  - Total primary school enrollment recorded at 101 percent in 2007 (exceeding the 67 percent target).
  - Primary pupil-teacher ratio target of 50:1 was not achieved; little progress in reducing boys-to-girls ratio.
  - Access to textbooks generally very limited.
  - Service Delivery Perception Survey (2006) found bias in quality of service favoring Freetown and the Western Peninsula; many families obliged to pay fees despite policy of free primary school tuition and books.
- Health:
  - Health sector outcomes remain among the lowest globally for infant and maternal mortality.
  - Progress report cited unavailability of 2007 outcome data for many indicators; exception is good progress documented in fight against HIV/AIDS.
  - Staffs recommend PRS progress reports assess improvements in policies, efficiency of expenditure programs, and new investments in the sector, even when survey outcome data are only available every five years.

### Monitoring and Evaluation and Implementation Risks
- Results framework and reporting structure:
  - Good progress in design of a results framework and a reporting structure covering key sectors and all government levels.
  - Development of standardized reporting formats recorded.
  - Line ministries, local governments, and implementing units need strengthening to provide required M&E data.
  - Staffs note improvement in quality of the June 2008 progress report compared to the previous report.
- Common implementation obstacles identified:
  - Increase domestic revenues;
  - Improve procurement capacity;
  - Build technical capacity of the civil service;
  - Enhance growth prospects in productive sectors through better infrastructure services;
  - Strengthen monitoring of projects and programs.
- External risk:
  - Recent fuel and food price increases pose significant risk to macroeconomic stability and could reverse gains in poverty reduction.

### Conclusions and Staff Recommendations
- Staffs' view: the progress report provides an adequate assessment of PRS implementation, summarizing progress and highlighting areas for improvement. Noteworthy achievements: publication of audited public accounts, more supportive business regulations, and primary school enrollment.
- Critical areas to be addressed in the next PRS:
  - Pursue a stronger revenue mobilization effort to expand priority poverty-reducing programs;
  - Improve transparency and accountability in the use of public resources and in public procurement contracts and extend the IFMIS to all major ministries, departments and agencies;
  - Address the persisting PFM weaknesses drawing on TA recommendations made by the multi donor budget support group and the Fund, notably by putting in place a more strategic and participative medium-term expenditure framework process;
  - Accelerate the reform of the civil service to improve its composition and enhance its ability to design and implement the government’s policies and programs;
  - Revitalize key infrastructural services such as power, water, sanitation, and road maintenance in a cost-effective manner;
  - Enhance the capacity to monitor and evaluate progress, particularly in the areas of food security and health outcomes.

### Prioritization and sequencing of the PRS
- Given the limited administrative capacity, the next PRS needs to be well prioritized with a clear sequencing of the different measures and programs to enhance its effectiveness in progressing towards achieving the MDGs.
- The new PRSP should present a concerted vision resulting from a broad consultation with all the different stakeholders.

### Consultation and timeline
- The authorities plan to conduct nationwide consultations on the new PRSP in July this year and finalize the PRSP in August.

*Prepared by the Staffs of the International Monetary Fund (IMF) and the International Development Association (IDA); June 26, 2008.*

### Section 1

### Sierra Leone — Joint Staff Advisory Note: Poverty Reduction Strategy Paper Progress Report (Section 1)

### Overview
- Report reviews PRS implementation for Sierra Leone from June 2005 through December 2007.
- Key PRS elements analyzed: (i) macroeconomic performance; (ii) good governance, peace, and security; (iii) pro-poor sustainable growth for food security and job creation; (iv) human resource development; and (v) monitoring and evaluation of the PRS.
- Staffs' assessment: progress made in PRS implementation (macroeconomic stability, continued real growth, strengthened public financial management, efforts to improve social indicators), but the progress report lacks a strong forward-looking component linking to the new PRS.
- Priority areas identified by staffs for strengthening PRS implementation:
  - Pursue a stronger revenue mobilization effort to expand priority poverty-reducing programs;
  - Improve transparency and accountability in the use of public resources;
  - Accelerate reform of the civil service;
  - Revitalize key infrastructural services (power, water, sanitation, road maintenance) in a cost-effective manner;
  - Enhance capacity to monitor and evaluate progress, particularly in food security and health outcomes.

### Macroeconomic and Fiscal Management
- Reported macroeconomic outcomes 2005–07:
  - Real growth averaging 7.2 percent.
  - External current and fiscal account balances declined but remained high.
  - Foreign reserves reached 4.5 months of imports coverage at end-2007.
  - Annual average inflation reached 11.7 percent in 2007 (after single digits by end-2006).
  - Sierra Leone reached the completion point under the enhanced HIPC initiative in December 2006 and benefited from HIPC and MDRI thereafter.
- Fiscal and budget execution issues:
  - Poverty-reducing expenditures: 4.4 percent of GDP in 2006; fell to 3 percent in 2007 against a target of 5 percent.
  - Delays in external budget support since late 2006 caused partly by donor concerns about fiscal management (notably delays in publishing audited financial statements).
  - Domestic debt service absorbs 20 percent of domestic revenue, constraining poverty spending.
- Financial sector and monetary policy:
  - Non-performing loans accounted for 31.7 percent of gross loans at end-2007.
  - Monetary policy was not active enough to achieve single digit inflation by 2007.
  - Staffs encourage the Bank of Sierra Leone to strengthen its monetary framework and conduct a more active monetary policy, given inflationary pressures from world oil and food prices and the use of MDRI resources.
- Staffs' recommended macro priorities:
  - Strengthen public financial management while maintaining fiscal discipline to limit debt-creating domestic financing;
  - Accelerate implementation of the structural reform agenda;
  - Step up efforts to diversify the export base and enhance job creation.

### PRS Pillar One: Good Governance, Peace and Security
- Public Financial Management (PFM) reforms:
  - Significant strides in the Common Action Plan for PFM reforms.
  - Publication in 2007 of audited public accounts for years 2002–04; accounts for 2005 and 2006 scheduled for publication in 2008.
  - Continued implementation of the Integrated Financial Management Information System (IFMIS) and expansion of procurement planning.
  - Staffs note need to enhance procurement capacity and transparency of procurement outcomes; recommend coverage in the next PRS.
- Budget execution and cash management:
  - 2007 saw substantial shortfalls in revenue and budget support in the first three quarters.
  - Authorities implemented a cash-budget management system to maintain program targets, revealing weaknesses in cash flow planning and commitment controls, leading to accumulation of domestic payment arrears.
  - Staffs observe greater efforts could have been made to protect poverty-reducing expenditure programs.
- Decentralization:
  - All functions were devolved to councils by law by end-2007, though implementation of some functions awaits official pronouncements by line ministries.
  - 14 out of 19 councils met transparency and financial accountability requirements.
  - Staffs note need to ensure statutory transfers to local councils are made in full and on time.
- Civil service:
  - Roughly 14,000 out of 16,000 members of the civil service are in the lowest grades.
  - Skilled professionals (accountants, agronomists, chemists, doctors, geologists, lawyers) are in very short supply.
  - Key civil service reform decisions and legal texts remain to be taken (remuneration policy, training policy, draft civil service law).
  - Staffs recommend assessing skill gaps and devising recruitment policies; next PRS should address these issues based on earlier management and functional reviews.

### PRS Pillar Two: Growth, Food Security, and Job Creation
- Poverty and growth:
  - Poverty headcount estimated to have fallen by as much as 6 percentage points between 2004 and 2007 due to sustained high growth rate.
  - Recent food and fuel price hikes may have erased some gains; staffs view timely initiation of the integrated household survey as a key priority.
- Business climate and trade policy:
  - Regulatory reforms: General Law Act (2007) and Business Registration Act (2007) expected to reduce time and cost to start businesses.
  - Suspension in 2007 of the low internal tariff rate accorded to ECOWAS countries (due to problems determining source of origin), increasing cost of doing business.
  - Limited progress translating Diagnostic Trade Integration Study recommendations into concrete policies; Ministry of Trade and Industry capacity needs strengthening.
- Infrastructure and utilities:
  - Targets for water supply and sanitation were not met in 2007; Freetown water supply briefly interrupted.
  - Electricity generation by the National Power Authority collapsed in Freetown; two expensive contracts with independent power providers were entered into (only one competitively procured and backed by a budgetary allocation).
  - Staffs note need to strengthen management of public utilities and ensure infrastructure investment policies are backed by adequate fiduciary controls and full transparency.
- Agriculture and food security:
  - Recorded agricultural production in 2007 showed an upward trend but output fell short of PRSP targets and 2006 levels; progress report did not explain the shortfall.
  - Staffs recommend MAFFS develop capacity to closely monitor sector developments, formulate an overall agricultural strategy, coordinate to establish an enabling environment, enhance use of extension services, and improve internal road network and port facilities to reduce marketing costs.
- Job creation and youth employment:
  - Progress report cited many job creation programs, but even these reached only a few thousand beneficiaries.
  - Staffs recommend evaluating these programs to assess effectiveness and reviewing the impact of labor laws on job creation.

### PRS Pillar Three: Human Resource Development
- Education:
  - Total primary school enrollment recorded at 101 percent in 2007 (exceeding the 67 percent target).
  - Primary pupil-teacher ratio target of 50:1 was not achieved; little progress in reducing boys-to-girls ratio.
  - Access to textbooks generally very limited.
  - Service Delivery Perception Survey (2006) found bias in quality of service favoring Freetown and the Western Peninsula; many families obliged to pay fees despite policy of free primary school tuition and books.
- Health:
  - Health sector outcomes remain among the lowest globally for infant and maternal mortality.
  - Progress report cited unavailability of 2007 outcome data for many indicators; exception is good progress documented in fight against HIV/AIDS.
  - Staffs recommend PRS progress reports assess improvements in policies, efficiency of expenditure programs, and new investments in the sector, even when survey outcome data are only available every five years.

### Monitoring and Evaluation and Implementation Risks
- Results framework and reporting structure:
  - Good progress in design of a results framework and a reporting structure covering key sectors and all government levels.
  - Development of standardized reporting formats recorded.
  - Line ministries, local governments, and implementing units need strengthening to provide required M&E data.
  - Staffs note improvement in quality of the June 2008 progress report compared to the previous report.
- Common implementation obstacles identified:
  - Increase domestic revenues;
  - Improve procurement capacity;
  - Build technical capacity of the civil service;
  - Enhance growth prospects in productive sectors through better infrastructure services;
  - Strengthen monitoring of projects and programs.
- External risk:
  - Recent fuel and food price increases pose significant risk to macroeconomic stability and could reverse gains in poverty reduction.

### Conclusions and Staff Recommendations
- Staffs' view: the progress report provides an adequate assessment of PRS implementation, summarizing progress and highlighting areas for improvement. Noteworthy achievements: publication of audited public accounts, more supportive business regulations, and primary school enrollment.
- The staffs identify the following critical areas to be addressed in the next PRS:
  - Pursue a stronger revenue mobilization effort to expand priority poverty-reducing programs;
  - Improve transparency and accountability in the use of public resources and in public procurement contracts and extend the IFMIS to all major ministries, departments and agencies;
  - Address the persisting PFM weaknesses drawing on TA recommendations made by the multi donor budget support group and the Fund, notably by putting in place a more strategic and participative medium-term expenditure framework process;
  - Accelerate the reform of the civil service to improve its composition and enhance its ability to design and implement the government’s policies and programs;
  - Revitalize key infrastructural services such as power, water, sanitation, and road maintenance in a cost-effective manner;
  - Enhance the capacity to monitor and evaluate progress, particularly in the areas of food security and health outcomes.

*Prepared by the Staffs of the International Monetary Fund (IMF) and the International Development Association (IDA); June 26, 2008.*

### Section 2

### _cr08251 - Section 2

### Prioritization and sequencing of the PRS
- Given the limited administrative capacity, the next PRS needs to be well prioritized with a clear sequencing of the different measures and programs to enhance its effectiveness in progressing towards achieving the MDGs.
- The new PRSP should present a concerted vision resulting from a broad consultation with all the different stakeholders.

### Consultation and timeline
- The authorities plan to conduct nationwide consultations on the new PRSP in July this year and finalize the PRSP in August.

*Source: _cr08251 - Section 2*

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_Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2008/_cr08251.pdf_