Press Release No. 08/166

Press Release: IMF Executive Board Completes Second Review Under PRGF Arrangement for Sierra Leone, Approves Extension of Arrangement and US$7.2 Million Disbursement

July 7, 2008

The Executive Board of the International Monetary Fund (IMF) has completed the second review of Sierra Leone's performance under a Poverty Reduction and Growth Facility (PRGF) arrangement. The Executive Board also approved a one-year extension of the PRGF arrangement to 2010.The completion of this review allows for the disbursement of SDR 4.4 million (about US$7.2 million), which would bring total disbursements under the arrangement to SDR 13.5 million (about US$22.1 million).

The Executive Board also granted waivers for the non-observance of three quantitative performance criteria on the basis of corrective measures taken and the temporary nature of the deviations from the quantitative targets.

The PRGF arrangement for Sierra Leone was approved on May 10, 2006 in an amount equivalent to SDR 31.1 million (about US$50.9 million), to support the government's 2006-08 economic program. The extension of the program from three years to four years should provide sufficient time to achieve the program objectives (see Press Release No. 06/94).

Following the Executive Board's discussion, Mr. Murilo Portugal, Deputy Managing Director and Acting Chair, said:

"Economic growth in Sierra Leone remained robust in 2007 and early 2008, led by solid agriculture and mining production and buoyant activity in the construction and service sectors. Inflation, though rising, was relatively contained in the face of surging global food and energy prices. Performance under the PRGF-supported program was mixed in the second half of 2006 through much of 2007. Significant revenue shortfalls, exacerbated by delayed external budgetary assistance, had complicated budget execution. These developments contributed to a severe compression of priority spending and the accumulation of domestic arrears. The strong commitment of the authorities to address the sources of these setbacks and move forward with key structural reforms in the period ahead is welcome, and the recent improvement in program implementation is encouraging."

"The proposed fiscal stance for 2008 seeks to recapture the momentum lost in mobilizing domestic revenue, and strikes a good balance between expanding poverty-reducing and infrastructure spending and preventing the accumulation of public debt. The authorities are committed to staying the course, with wide-ranging measures to make the National Revenue Authority more efficient and broaden the tax base. Firm control over expenditure commitments by ministries, departments, and agencies will provide critical support to the objective of domestic arrears clearance while creating fiscal space to address essential social needs."

"The Bank of Sierra Leone will focus on strengthening its management of liquidity and monitoring closely developments in the monetary aggregates, given the need to contain the second-round effects of rising import prices for food and fuel."

"First steps have been taken to advance structural reforms, in particular in public financial management and the financial sector. The authorities will work to ensure transparency in all public procurement contracts, strengthen the Anti-Corruption Commission, and improve the financial viability of public utilities in order to promote good governance, accountability, and sustained high growth," Mr. Portugal said.

The PRGF is the IMF's concessional facility for low-income countries. PRGF loans carry an annual interest rate of 0.5 percent and are repayable over 10 years with a 5½-year grace period on principal payments.