IMF Executive Board Completes the Eighth and Final Review Under the Extended Credit Facility Arrangement for Sierra Leone

IMF News, November 20, 2023

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Canonical URL: IMF Executive Board Completes the Eighth and Final Review Under the Extended Credit Facility Arrangement for Sierra Leone

The Executive Board completed the Eighth and final review of Sierra Leone’s arrangement under the Extended Credit Facility (ECF).
The completion of the review enables the immediate disbursement of SDR 15.555 million (or about US$20.7 million).
Total disbursements under the arrangement to date: SDR 124.44 million (or about US$165.6 million).
The Executive Board approved the authorities’ request for a waiver of nonobservance of the end-June 2023 performance criterion on the ceiling on the net domestic assets of the Bank of Sierra Leone, based on corrective actions taken by the authorities.

The ECF Arrangement for Sierra Leone was approved by the Executive Board on November 30, 2018, for SDR 124.44 million (about US$172.1 million at that time, or around 60 percent of the Sierra Leone’s quota) for 43 months.
The arrangement was extended by 12 months on July 27, 2021, and by another five months on June 5, 2023.
Program aims: reducing inflation, mobilizing revenue to allow for necessary spending consistent with debt sustainability, safeguarding financial stability, and maintaining resilience to external shocks.

Successive shocks and policy slippages contributed to a build-up in macroeconomic imbalances in recent years; a cost-of-living crisis has taken a severe toll on the most vulnerable.
A decisive macroeconomic policy tightening is needed to restore stability and contain risks to debt sustainability.
The authorities have taken bold steps to tighten policies, but reform implementation is challenging amid the large adjustment need and the ongoing cost-of-living crisis.
As the ECF arrangement ends, continued reform momentum is critical.

Fiscal policy
- Implement recent tax revenue measures and maintain steadfast spending restraint to help achieve fiscal targets while creating space for priority social spending to support the most vulnerable.
- The updated debt management strategy should help bring down the high debt service burden and mobilize additional grant support.
- Strengthen public financial management, avoid arrears accumulation, and gain better control of multi-year commitments, especially on domestically financed capital spending.
Monetary and exchange rate policy
- Tighten monetary conditions further to bring down inflation, including through strict limits on central bank purchases of government securities.
- Maintain exchange rate flexibility as a key element of the policy mix, with a focus on ensuring continued reserve adequacy.
- Establish transparency around the currency redenomination and recapitalize the Bank of Sierra Leone to boost confidence in the currency and support the central bank’s mandate.
Financial sector and crisis management
- Address solvency challenges in commercial banks and strengthen crisis management frameworks and the safety net to maintain financial stability.
Structural reforms and governance
- Enhance governance, bolster anti-corruption efforts, further improve the AML/CFT framework, and strengthen the external audit function.
- Improve the business climate and build climate resilience.

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

Output (annual percentage change)
- Real GDP growth: 2022: 3.5; 2023 Prel.: 2.7; 2024 Proj.: 4.7
- Real GDP growth, excl. iron ore: 2022: 2.6; 2023 Prel.: 4.6; 2024 Proj.: (blank in source)
Prices (annual percentage change)
- Inflation, end of period (%): 2022: 37.1; 2023 Prel.: 44.3; 2024 Proj.: 22.9
Central Government Finances (percent of non-iron ore GDP)
- Revenue, excl. grants: 2022: 12.4; 2023 Prel.: 13.1; 2024 Proj.: 14.8
- Grants: 2022: 6.2; 2023 Prel.: 5.8; 2024 Proj.: (blank in source)
- Expenditure and net lending: 2022: 29.5; 2023 Prel.: 23.6; 2024 Proj.: 23.5
- Overall balance: 2022: -10.5; 2023 Prel.: -5.8; 2024 Proj.: -2.8
- Public debt: 2022: 94.6; 2023 Prel.: 90.5; 2024 Proj.: 83.7
Money and credit (annual percentage change)
- Broad money: 2022: 41.1; 2023 Prel.: 27.2; 2024 Proj.: 13.6
- Credit to the private sector: 2022: 11.9; 2023 Prel.: 18.4; 2024 Proj.: 19.0
Balance of payments (percent of non-iron ore GDP)
- Current account: 2022: -9.0; 2023 Prel.: -6.1; 2024 Proj.: -4.2
- Gross reserves (months of imports): 2022: 3.8; 2023 Prel.: 3.4; 2024 Proj.: 3.2
- External debt: 2022: 64.8; 2023 Prel.: 66.0; 2024 Proj.: 60.1

IMF Press Release No. 23/403, November 20, 2023 — IMF Communications Department