Sierra Leone: Fourth Review Under the Three-Year Arrangement Under the Extended Credit Facility, and Financing Assurances Review Informational Annex

The discussions took place in Freetown during March 29–April 11, 2012; and in Washington (April 21–24, 2012). They focused on conditions for completing the fourth ECF review, corrective measures to be implemented to address fiscal slippages that had occurred in late 2011, and policies for the remainder of 2012. Key performance criteria for end-December 2011 were met. However, sizeable spending overruns resulted in a higher-than-programmed fiscal deficit, financed by an increase in unpaid bills. Implementation of structural reforms was mixed, with some measures postponed to 2012. The authorities implemented all prior actions agreed with staff during the fourth ECF review discussions. Staff recommends completion of the fourth ECF review and the review of financing assurances.

Abstract

The discussions took place in Freetown during March 29–April 11, 2012; and in Washington (April 21–24, 2012). They focused on conditions for completing the fourth ECF review, corrective measures to be implemented to address fiscal slippages that had occurred in late 2011, and policies for the remainder of 2012. Key performance criteria for end-December 2011 were met. However, sizeable spending overruns resulted in a higher-than-programmed fiscal deficit, financed by an increase in unpaid bills. Implementation of structural reforms was mixed, with some measures postponed to 2012. The authorities implemented all prior actions agreed with staff during the fourth ECF review discussions. Staff recommends completion of the fourth ECF review and the review of financing assurances.

Annex I. Sierra Leone: Relations with the Fund

(As of July 31, 2012)

I. Membership Status: Joined 9/10/62; Article VIII

II. General Resources Account:

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III. SDR Department:

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IV. Outstanding Purchases and Loans:

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V. Latest Financial Arrangements:

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VI. Projected Payments to Fund2

(SDR million; based on current use of resources and present holdings of SDRs):

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VII. Implementation of HIPC Initiative:

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VIII. Implementation of Multilateral Debt Relief Initiative (MDRI):

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IX. Safeguards Assessment:

The latest safeguards assessment for the Bank of Sierra Leone was completed on November 24, 2010. The assessment concluded that the BSL continues to maintain important elements of the safeguards framework; financial statements are prepared and audited in accordance with international standards and are published in a timely manner on the BSL website. Currently, the BSL is still in the process of strengthening staff capacity in its internal audit function.

X. Exchange Rate Arrangement:

For customs valuation purposes and for official transactions, the Bank of Sierra Leone (BSL) calculates an official exchange rate every Friday morning as the weighted average of the auction rate, the commercial bank mid-rate, and the bureau mid-rate in the previous week. Commercial banks may buy foreign exchange from and sell it to individual customers and may trade among themselves or with the BSL on a freely negotiable basis. As of June 21, 2012, the BSL mid-rate was Le 4,340.08=US$1.

Sierra Leone’s de jure exchange rate regime is classified as floating, with the value of the leone determined by the market. Furthermore, effective November 1, 2008, the de facto exchange rate arrangement has been reclassified to ‘floating’ from a ‘stabilized arrangement’.

Effective February 2, 2009, the de facto exchange rate arrangement was reclassified from a conventional pegged arrangement to a “stabilized arrangement” retroactively to April 30, 2008, due to a revision of the classification methodology. In March 2008, the exchange rate regime was reclassified as “a conventional peg” to reflect the nominal stability of exchange rate developments under de facto management through the auction by the BSL as the only seller of foreign exchange.

With effect December 14, 1995, Sierra Leone has accepted the obligations of Article VIII, Sections 2, 3, and 4, and maintains an exchange system free of restrictions on the making of payments and transfers for current international transactions. Sierra Leone maintains one multiple currency practice subject to Fund jurisdiction arising from the applied multiple-price Dutch auction system, as there is no formal mechanism in place to prevent spreads of effective rates between winning bids from exceeding 2 percent.

XI. Article IV Consultation:

The Executive Board concluded the 2010 Article IV consultation on December 6, 2010. The next Article IV consultation will be held in accordance with the 2010 decision on consultation cycles.

XII. Technical Assistance:

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XIII. Resident Representative:

Mr. Francis Kumah assumed responsibility for the Fund office in Freetown in November 2010 as a new resident representative.

Annex II. Sierra Leone: Joint World Bank-IMF Work Program, 2012–13

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Annex III: Sierra Leone: Statistical Issues

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1

Formerly PRGF.

2

When a member has overdue financial obligations outstanding for more than three months, the amount will be shown in this section.

3

Assistance committed under the original framework is expressed in net present value (NPV) terms at the completion point, and assistance committed under the enhanced framework is expressed in NPV terms at the decision point. Hence these two amounts cannot be added.

4

Under the enhanced framework, an additional disbursement is made at the completion point corresponding to interest income earned on the amount committed at the decision point but not disbursed during the interim.

5

The MDRI provides 100 percent debt relief to eligible member countries that qualified for the assistance. Grant assistance from the MDRI Trust and HIPC resources provide debt relief to cover the full stock of debt owed to the Fund as of 2004 that remains outstanding at the time the member qualifies for debt relief.

Sierra Leone: Fourth Review Under the Three-Year Arrangement Under the Extended Credit Facility, and Financing Assurances Review: Staff Report; Staff Supplement; Press Release on the Executive Board Discussion; and Statement by the Executive Director for Sierra Leone.
Author: International Monetary Fund. African Dept.