Press Release No. 10/348

Press Release No. 10/348
September 21, 2010

An International Monetary Fund (IMF) mission visited Sierra Leone during September 8-21, 2010 to conduct discussions for the 2010 Article IV consultation and for the first review under the Extended Credit Facility (ECF), approved by the IMF Executive Board in June 2010. The mission met 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; the Governor of the Bank of Sierra Leone, Mr. Sheku Sesay; other senior officials of the government and the central bank, representatives of the business community, civil society organizations, and development partners.

The following statement was issued today in Freetown by Jan Mikkelsen, IMF Mission Chief for Sierra Leone:

“Economic activity appears to have picked up in 2010 led by a rebound in diamond production and solid growth in agriculture. Real gross domestic product growth is projected at 4.5 percent in 2010, compared to 3.2 percent in 2009. Inflation rose in early 2010 reflecting the introduction of the goods and services tax in January and the depreciation of the leone in late 2009. While consumer prices increased by 18 percent in the 12 months through August 2010, a return to single digit inflation is expected next year. Gross international reserves remain at a comfortable level, equivalent to 5½ months of imports.

“The main challenge facing the authorities is the achievement of higher long-term growth by creating fiscal space for investments in infrastructure and improvements in social services. The mission welcomed the authorities’ plan to accelerate public investments in roads, water, and energy, but stressed the need to constrain nonpriority spending and raise domestic tax collections. To this end, the authorities are committed this year to collect the 6.5 percent royalty on alluvial diamond production, as stipulated in the Mines and Minerals Act 2009, and to implement an automatic fuel price adjustment mechanism that would eliminate fuel subsidies. On budgetary expenditures, the mission supported the implementation of the public financial management reform program, aimed at raising the efficiency of public spending, particularly for development projects.

“While the 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.

“The mission concurred with the Bank of Sierra Leone (BSL) on the need to maintain a tight monetary stance to contain inflation. The mission welcomed the efforts of the BSL to establish a monetary policy interest rate, promote the interbank market, and strengthen supervision of the banking system.

“With regard to the ECF-Supported Program, all quantitative performance criteria were met for end-June. 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.

“The mission would like to thank the authorities for their continued excellent cooperation.”