Press Release: Statement at the Conclusion of an IMF Mission to Sierra Leone
IMF News, September 21, 2010
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- Published: September 21, 2010
Mission visit and meetings
- Mission period: September 8-21, 2010.
- Press release date: September 21, 2010.
- Mission Chief: Jan Mikkelsen.
- Meetings held with:
- His Excellency, President Ernest Bai Koroma;
- Minister of Finance and Economic Development (MOFED), Dr. Samura Kamara;
- Minister of Mines and Mineral Resources, Mr. Alpha Kanu;
- Minister of Trade, Mr. David Carew;
- Governor of the Bank of Sierra Leone, Mr. Sheku Sesay;
- other senior government and central bank officials, representatives of the business community, civil society organizations, and development partners.
Economic activity and outlook
- Real gross domestic product growth projected at 4.5 percent in 2010, compared to 3.2 percent in 2009.
- Drivers of growth: rebound in diamond production and solid growth in agriculture.
- Inflation developments:
- Consumer prices increased by 18 percent in the 12 months through August 2010.
- Inflation rise reflected the introduction of the goods and services tax in January and the depreciation of the leone in late 2009.
- A return to single digit inflation is expected next year.
- External reserves: Gross international reserves remain at a comfortable level, equivalent to 5½ months of imports.
Fiscal policy, public investment, and revenue measures
- Main challenge identified: achieve higher long-term growth by creating fiscal space for investments in infrastructure and improvements in social services.
- Mission welcomed authorities’ plan to accelerate public investments in roads, water, and energy.
- Mission stressed the need to:
- constrain nonpriority spending;
- raise domestic tax collections.
- Specific commitments by authorities:
- collect the 6.5 percent royalty on alluvial diamond production, as stipulated in the Mines and Minerals Act 2009;
- implement an automatic fuel price adjustment mechanism that would eliminate fuel subsidies.
- Public financial management: mission supported implementation of the public financial management reform program aimed at raising the efficiency of public spending, particularly for development projects.
Mining revenues and fiscal caution
- While export and tax revenue potential from mining is significant, the mission underscored the need to resist raising spending allocations before such revenues materialize because of substantial uncertainties about the timing and magnitude of future mining revenues.
Monetary policy and financial sector
- Mission concurred with the Bank of Sierra Leone (BSL) on the need to maintain a tight monetary stance to contain inflation.
- Mission welcomed BSL efforts to:
- establish a monetary policy interest rate;
- promote the interbank market;
- strengthen supervision of the banking system.
ECF-supported program and performance
- Program: Extended Credit Facility (ECF) approved by the IMF Executive Board in June 2010.
- All quantitative performance criteria were met for end-June.
- Next steps: Discussions with the authorities will continue in the coming weeks to allow the IMF Executive Board’s consideration of the staff report for the first review later this year.
Statement issued in Freetown by Jan Mikkelsen, IMF Mission Chief for Sierra Leone.