The Executive Board of the International Monetary Fund (IMF) on July 1st 2016, completed the fifth review of Sierra Leone’s performance under the economic program supported by an Extended Credit Facility (ECF) arrangement.
Completion of the review enables the disbursement of about US$34.12million, bringing total disbursements under the arrangement to US$226.45 million.
In completing the review, the Executive Board also 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 about US$86.86 million on October 21, 2013 and was augmented twice. It 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.
Following the Executive Board’s discussion on Sierra Leone, Mr. Mitsuhiro Furusawa, Deputy Managing Director and Acting Chair, made the following statement:
“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 the positive side, the World Health Organization declared Sierra Leone Ebola-free for the second time on March 17, 2016.
“Despite these serious challenges, program performance has been relatively good. All end-December 2015 quantitative performance criteria were met. While performance againstend-September 2015 indicative targets was mixed, with policy corrections all end-December 2015 indicative targets were met. Meanwhile considerable progress was made in key structural reform areas, although a few structural benchmarks were met with delays, and others missed.
“Growth is expected to recover moderately in 2016, with average inflation edging up slightly, driven mainly by further exchange rate depreciation. However, 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.
“To address these challenges, the authorities are committed to stepping up reforms and improving public financial management. Key reforms include liberalization of the telecommunications gateway, imposing Goods and Service Tax on all electricity bills, and significant reductions in tax exemptions and duty waivers.
“Decisive implementation of structural reforms aimed at economic diversification will be key to achieving strong and sustainable growth and reducing poverty. Priority should be given to improving the business climate, enhancing infrastructure, and supporting private sector development.”
Meanwhile, it should be noted that 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.