By: Mohamed M Sesay
As Part of indelible trust and international support for President Bio’s New Direction Government, encouraged the Executive Board of the International Monetary Fund (IMF), having completed the fifth review of the Extended Credit Facility (ECF) arrangement with Sierra Leone, to disburse SDR 15.555 million which is about US$ 28.8 million for Sierra Leone.
This glad tidings news was broke in a press statement issued on the web site of the International Monetary Fund on the 27th June 2022 indicating that, the above disbursement brings Sierra Leone’s total disbursements under the arrangement to SDR 93.33 million (about US$124.8 million).
The Press Statement further discloses that the IMF Executive Board decision allows for an immediate disbursement of about US$20.8 million to Sierra Leone to help meet its budgetary financing needs, including supporting social spending.
The press statement adds that successive external shocks have contributed towards mixed performance under the Extended Credit Facility (ECF) arrangement wherein, the authorities have committed to strong corrective actions to bring the fiscal situation under control.
It acknowledges that the economic recovery from the pandemic has been set back by the impact of the war in Ukraine and the medium-term outlook remains challenging.
“In completing the fifth review, the Executive Board also approved the authorities’ request for waivers for nonobservance of performance criteria pertaining to net credit to government at end-December 2021 and for the introduction of a multiple currency practice and exchange restriction, based on corrective actions taken by the authorities”, the release states.
It further notes that Sierra Leone’s 43-month ECF arrangement was approved on November 30, 2018 for SDR 124.44 million (about US$172.1 million at that time or around 60 percent of the country’s quota), and extended by 12 months on July 27, 2021. The program aims to reduce inflation, mobilize revenue to allow for necessary spending consistent with debt sustainability, safeguard financial stability, and maintain external resilience to shocks.
The Press statement continues that Sierra Leone continues to pursue its development path amidst continued vulnerability to shocks and capacity needs. Growth is estimated to have recovered moderately in 2021 (about 3 percent) following the COVID shock and is projected to increase to 3½ percent in 2022, reflecting higher iron ore production. However, this is a downward revision relative to the 3 rd/4th review, reflecting a deterioration of the terms of trade and increased uncertainty about global economic prospects. Inflation has been on a rising trend since mid-2021 due to higher international fuel and food prices, and is expected to average about 22 percent this year, exacerbating already-high levels of food insecurity.
It furthers that the drawdown on reserves to service debt and facilitate food and fuel imports will exert additional pressure on the external position. Fiscal space is extremely tight.
Exogenous shocks, much-needed additional priority spending in response to social pressures and stability concerns, and challenges in commitment controls undermined fiscal performance in 2021, requiring a revised 2022 budget and strengthened public financial management noting that, Sierra Leone remains at high risk of debt distress.
