The International Monetary Fund has just completed a review of the Extended Credit Facility approved for Sierra Leone. The Extended Credit Facility (ECF) provides financial assistance to countries like Sierra Leone that have had long term “balance of payments” problems. A country’s BOP is the total of all international trade, and financial transactions between the country and the rest of the world. If a country imports less than it exports, and doesn’t have enough of a forex reserve to pay for its projected development plans, that country has a balance of payment problem. The International Monetary Fund lends money to country’s with BOP problems whether they are classed as Middle-Income countries like Ghana or Low Income Countries (LIC) like Sierra Leone.
The IMF approved a three and a half year $173 million ECF loan to the new government in November 2018. This facility replaced the June 2017 ECF which according to the IMF went “off track” due to “fiscal slippage” also known as borrowing money to spend it recklessly.
Before President Bio’s government could access a new credit facility from the IMF it had to implement measures and policies that clamped down on waste. These included the rolling out of the Treasury Single Account, a reduction in duty waivers and exemptions, stronger oversight over ministries, departments and agencies, and expenditure restraint.
Last week representatives from the IMF visited Sierra Leone for the first review of the 2018 ECF. Their review is ongoing and the IMF will make a decision to on whether to disburse more funds to Sierra Leone under the existing ECF once that review is complete.
In the meantime here are the 3 most important things the IMF had to say about Sierra Leone’s fiscal management under the current facility:
- Authorities kept the budget in check because they spent below their budget and collected more revenue than anticipated. Due to this inflation went down rom 8.8% in 2017 to 5.8% in 2019.
- Bank of Sierra Leone could not meet “three of five structural benchmarks—the forensic audit of the BSL, developing a strategic plan for the two state-owned banks, and a strategy for clearing domestic arrears—have been delayed, as the underlying issues are proving to be more complex than anticipated.”
- Sierra Leone is “broadly on track” for its ECF program but to continue to meet its target, it should maintain fiscal discipline through out.
The full release from the IMF is available here.