Press Release No. 23/403

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

November 20, 2023

• The IMF Executive Board completed the eighth and final review under the Extended Credit Facility Arrangement for Sierra Leone which allows for an immediate disbursement of about US$20.7 million.
• Successive shocks and policy slippages contributed to a build-up in macroeconomic imbalances in recent years. The Sierra Leonean authorities have taken bold steps to tighten macroeconomic policies, but reform implementation is challenging amid the large adjustment need and the ongoing cost of living crisis.
• As the arrangement under the ECF-supported program for Sierra Leone comes to an end, continued reform momentum will be critical in restoring macroeconomic stability and containing risks to debt sustainability. As macroeconomic policies tighten further, efforts to protect the most vulnerable are a priority.

In completing the eighth review, 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. It was extended by 12 months on July 27, 2021, and by another five months on June 5, 2023. The program aimed at reducing inflation, mobilizing revenue to allow for necessary spending consistent with debt sustainability, safeguarding financial stability, and maintaining resilience to external shocks.

At the conclusion of the Executive Board’s discussion, Mr. Bo Li, Deputy Managing Director and Acting Chair, made the following statement:

“Successive shocks and policy slippages contributed to a build-up in macroeconomic imbalances in recent years, while 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 comes to an end, continued reform momentum is critical. Implementation of recent tax revenue measures and steadfast spending restraint should help achieve fiscal targets, while creating space for priority social spending to support the most vulnerable. The updated debt management strategy will be critical in helping bring down the high debt service burden and mobilize additional grant support.

“Monetary conditions should tighten further to bring down inflation, including through strict limits on central bank purchases of government securities. Exchange rate flexibility should be a key element of the policy mix, with a focus on ensuring continued reserve adequacy. Establishing transparency around the currency redenomination and recapitalizing the Bank of Sierra Leone will help boost confidence in the currency and support the effective execution of the central bank’s mandate. Addressing the solvency challenges in commercial banks and strengthening crisis management frameworks and the safety net will be critical in maintaining financial stability.

“Progress with structural reforms will be essential, including to enhance governance, bolster anti-corruption efforts, further improve the AML/CFT framework, and strengthen the external audit function. Strengthening public financial management will also be key, including by avoiding arrears accumulation and gaining better control of multi-year commitments, especially on domestically financed capital spending. Efforts to improve the business climate and build climate resilience will also be critical. “