IMF Executive Board Completes Fifth Review Under ECF Arrangement for Sierra Leone and Approves US$34.12Million Disbursement

IMF News, July 1, 2016

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Canonical URL: IMF Executive Board Completes Fifth Review Under ECF Arrangement for Sierra Leone and Approves US$34.12Million Disbursement

The Executive Board completed the fifth review of Sierra Leone’s performance under the Extended Credit Facility (ECF) arrangement.
Completion of the review enables the disbursement of SDR 24.44 million, about US$34.12million.
Total disbursements under the arrangement now stand at SDR 162.22 million (about US$226.45 million).
The Executive Board approved the authorities’ request for an extension of the ECF arrangement by about two months until end-December 2016.

Sierra Leone’s ECF arrangement was approved by the Executive Board for SDR 62.22 million (about US$86.86 million) on October 21, 2013.
The arrangement was augmented twice (see Press Release 15/86 and Press Release 14/441).
The ECF “supports the government’s economic reform program for stronger and more inclusive growth, and it also plays a catalytic role for bilateral and multilateral assistance.”
Footnote: “The ECF is a lending arrangement that provides sustained program engagement over the medium to long term in case of protracted balance of payments problems.”

“After many years of strong growth, Sierra Leone’s economy has deteriorated significantly since mid-2014 when the country was hit by twin shocks: the Ebola epidemic and sharply lower iron ore prices.”
Growth declined from 4.6 percent in 2014 to -21.1 percent in 2015.
The budget and exchange rate “came under pressure, while banking vulnerabilities have increased.”
On a positive note, “the World Health Organization declared Sierra Leone Ebola-free for the second time on March 17, 2016.”
Growth is expected to recover moderately in 2016, with average inflation edging up slightly, “driven mainly by further exchange rate depreciation.”
Budget implementation is expected to be even more challenging than in 2015, given the expected decline in budget support and constrained domestic financing, combined with overspending on wages and the failure to eliminate fuel subsidies.

“Despite these serious challenges, program performance has been relatively good.”
“All end-December 2015 quantitative performance criteria were met.”
Performance against end-September 2015 indicative targets was mixed; “with policy corrections all end-December 2015 indicative targets were met.”
“Considerable progress was made in key structural reform areas, although a few structural benchmarks were met with delays, and others missed.”
Key reforms the authorities are committed to implementing include:
- liberalization of the telecommunications gateway,
- imposing Goods and Service Tax on all electricity bills,
- significant reductions in tax exemptions and duty waivers.

“To address these challenges, the authorities are committed to stepping up reforms and improving public financial management.”
“Decisive implementation of structural reforms aimed at economic diversification will be key to achieving strong and sustainable growth and reducing poverty.”
Priority areas identified:
- improving the business climate,
- enhancing infrastructure,
- supporting private sector development.

Source: Press Release No. 16/314, July 1, 2016, International Monetary Fund.