November 24, 2021
The Ministry of Finance has on Monday 22nd November 2021 commenced a week annual national Debt Sustainability Analysis (DSA) workshop exercise at Leisure Lodge Aberdeen Beach Road Freetown.
The Chief Economist Alimamy Bangura who also doubles as the keynote speaker, in his statement stated that COVID-19 has increased the cost of debt accumulation across the globe and that public debt is under pressure.
He continued that, when expenditure adjustments outweigh revenue mobilization measures, the last resort for the government is debt accumulation which he said is inevitable during emergency response.
He explained that the total stock of public debt as at end of December 2019 before COVID-19 amounted to 26.87 trillion or 71.24 percent of Gross Domestic Product (GDP) of which external and domestic debt accounted for Le 16.54 trillion and Le 10.24 trillion respectively.
The Chief Economist Furthered that, public debt stock increased to 74.24 percent of GDP at end of December 2020. This increase he said was a result of exceptional assistance and new domestic borrowing to close the financing gap needed to implement the response to the COVID-19 pandemic.
He also noted that before the COVID-19 pandemic struck, Sierra Leone, for a while was exposed to moderate risk of debt distress rating despite commodity price shocks and the twin disasters of the Ebola 2014 -2015 and the mudslide 2017.
However, he stated that there were already signs of debt up evidenced by Sierra Leone being classified as high risk of debt distress by end of 2019.
Alimamy Bangura continued that, in 2018, following the political transition, the government pursued fiscal consolidation and prudent fiscal policies supported by enhanced domestic revenue mobilization, expenditure rationalization, and sound public financial management reforms including the Treasury Single Account which consolidate revenue generation. “Revenue to GDP increased from 13.7 percent in 2018 to 14.6 in 2019 and before dropping to 13.3 percent in 2020 due to the COVID-19 pandemic” he added.
Stating that, due to the pandemic revenue mobilization efforts collapsed as trade and investment activities slowed down while debt service payment increased over 25 percent of domestic revenue.
Mathew Sandy the Director of Public Debt Division at the Ministry of Finance in his presentation said, the total debt service payments for both domestic and external debt increased from Le 1.48 trillion in 2019 to Le 2.55 trillion in 2020.
This increase he said could be attributed to the cost of servicing the growing stock of public debt and the repayment of maturing treasury bonds issued in prior years to settle domestic supplier’s and contractor’s arrears.
He continued that, consistent with the increase in debt service cost, total debt service to domestic budget revenue (DBR) increased from 27.54 percent to 46.31 percent in 2020.
He concludes that the current total debt for Sierra Leone is about Three Million Dollars, and that, the expectations of this 2021 Debt Sustainability Analysis (DSA) Workshop will estimate the debt limit for 2021 and also prepare a report on debt management. As it stands, he said, the country is far better and more comfortable than many other countries in the sub- Sahara Africa.