Front Matter Page
IMF Country Report No. 15/323
SIERRA LEONE
THIRD AND FOURTH REVIEWS UNDER THE EXTENDED CREDIT FACILITY ARRANGEMENT AND FINANCING ASSURANCES REVIEW, REQUESTS FOR WAIVERS FOR NONOBSERVANCE OF PERFORMANCE CRITERIA AND MODIFICATION OF PERFORMANCE CRITERIA, AND REQUESTS FOR REPHASING AND AUGMENTATION OF ACCESS UNDER THE EXTENDED CREDIT FACILITY—PRESS RELEASE; AND STAFF REPORT
November 2015
In the context of the third and fourth reviews under the Extended Credit Facility arrangement and Financing Assurances Review, Requests for Waivers for Nonobservance of Performance Criteria and Modification of Performance Criteria, and Requests for Rephasing and Augmentation of Access under the Extended Credit Facility, the following documents have been released and are included in this package:
A Press Release including a statement by the Chair of the Executive Board.
The Staff Report prepared by a staff team of the IMF for the Executive Board’s consideration on November 16, 2015, following discussions that ended on September 16, 2015, with the officials of Sierra Leone on economic developments and policies underpinning the IMF arrangement under the Extended Credit Facility. Based on information available at the time of these discussions, the staff report was completed on October 30, 2015.
An Informational Annex prepared by the IMF staff.
The documents listed below have been or will be separately released.
Letter of Intent sent to the IMF by the authorities of Sierra Leone*
Memorandum of Economic and Financial Policies by the authorities of Sierra Leone*
Technical Memorandum of Understanding*
*Also included in Staff Report
The IMF’s transparency policy allows for the deletion of market-sensitive information and premature disclosure of the authorities’ policy intentions in published staff reports and other documents.
Copies of this report are available to the public from
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International Monetary Fund
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© 2015 International Monetary Fund
Front Matter Page
SIERRA LEONE
SIERRA LEONE—THIRD AND FOURTH REVIEWS UNDER THE EXTENDED CREDIT FACILITY ARRANGEMENT AND FINANCING ASSURANCES REVIEW, REQUESTS FOR WAIVERS FOR NONOBSERVANCE OF PERFORMANCE CRITERIA AND MODIFICATION OF PERFORMANCE CRITERIA, AND REQUESTS FOR REPHASING AND AUGMENTATION OF ACCESS UNDER THE EXTENDED CREDIT FACILITY
October 30, 2015
Key Issues
The Ebola outbreak and the sharp drop in iron ore prices have dealt a severe blow to Sierra Leone’s economy. The epidemic, which appears to be in its final stages, has exacted a heavy human toll (more than 3,500 lives) and disrupted economic activity. The sharp drop in iron ore prices has compounded these difficulties by shuttering the main iron ore mines.
These twin shocks have prompted a severe slump in activity. Following several years of robust economic growth, economic output is set to contract by some 21.5 percent this year.
Against this backdrop, policy discussions focused on generating fiscal space to tackle the lingering impact of the Ebola epidemic, and contend with the effects of the collapse in iron ore production. The domestic primary deficit, which widened from 0.7 percent of non-iron ore GDP in 2013 to 5.6 percent in 2014, because of Ebola-related spending and weakened revenue performance, is expected to remain at 5.5 percent of non-iron ore GDP in 2015.
Staff supports the authorities’ requests for waivers, as well as for additional financing from the IMF. Program implementation has been good, notwithstanding the shocks that the economy has experienced. Despite missing several end-2014 PCs, due to the Ebola outbreak, authorities have placed policies back on track. All end-June 2015 performance criteria, as well as most structural benchmarks, have been observed. The authorities’ policy commitments are appropriately strong, in line with the challenges they face. Thus, staff supports the authorities’ request for the completion of the third and fourth ECF reviews, plus an augmentation of 45 percent of quota (15 percent of quota for each of the fourth, fifth and sixth reviews), to bring access in line with the new norms. Given the severe fiscal challenges, staff also supports the authorities’ intention to use this additional funding to help finance the 2015 and 2016 budgets.
Approved By
Abebe Aemro Selassie (AFR) and Dhaneshwar Ghura (SPR)
Discussions took place in Freetown during September 2–16, 2015. The staff team comprised Mr. Wakeman-Linn (head); Ms. Parulian, Mr. Cangul (all AFR), Mr. Baltabaev (SPR), and Ms. Masha (Resident Representative). Mr. Tucker (OED) participated in policy discussions. The mission met with President Koroma, Dr. Kaifala Marah, Minister of Finance and Economic Development, Mr. Momodu L. Kargbo, Governor of the Bank of Sierra Leone, and other senior officials; representatives of the private sector, development partners, and civil society organizations.
Contents
RECENT ECONOMIC DEVELOPMENTS
PROGRAM PERFORMANCE
ECONOMIC OUTLOOK AND RISKS
FISCAL POLICY AND REFORMS
MONETARY, EXCHANGE RATE POLICY AND FINANCIAL SECTOR ISSUES
BORROWING POLICY
OTHER PROGRAM ISSUES
STAFF APPRAISAL
BOX
1. Ebola Epidemic in Sierra Leone: Developments and Prospects
2. Sierra Leone: Financial System Challenges and Non Performing Loans (NPLs)
FIGURES
1. Real and External Sectors, 2011–15
2. Fiscal Sector, 2011–15
3. Monetary and Financial Sector Indicators, 2011–15
4. Indicators of Public and Publicly Guaranteed External Debt Under Alternative Scenarios, 2015–35
TABLES
1. Selected Economic Indicators, 2011–18
2a. Fiscal Operations of the Central Government, 2011–18 (Billions of Leone)
2b. Fiscal Operations of the Central Government, 2011–18 (Percent of Non-Iron Ore GDP)
2c. Fiscal Operations of the Central Government in 2015 (Billions of Leone)
2d. Fiscal Operations of the Central Government in 2016 (Billions of Leone)
3. Monetary Accounts, 2011–16
4. Balance of Payments, 2011–18
5. Indicators of Capacity to Repay the Fund, 2012–27
6. Actual and Proposed Disbursements under the ECF Arrangement, 2013–16
7. Millennium Development Goals, 1990–2015
8. Financial Soundness Indicators of the Banking System, 2011–15
APPENDIXES
I. Letter of Intent
Attachment 1. Memorandum of Economic and Financial Policies
Attachment 2. Technical Memorandum of Understanding
II. Debt Sustainability Analysis Update
Front Matter Page
SIERRA LEONE
SIERRA LEONE—THIRD AND FOURTH REVIEWS UNDER THE EXTENDED CREDIT FACILITY ARRANGEMENT AND FINANCING ASSURANCES REVIEW, REQUESTS FOR WAIVERS FOR NONOBSERVANCE OF PERFORMANCE CRITERIA AND MODIFICATION OF PERFORMANCE CRITERIA, AND REQUESTS FOR REPHASING AND AUGMENTATION OF ACCESS UNDER THE EXTENDED CREDIT FACILITY—INFORMATIONAL ANNEX
October 30, 2015
Prepared By
The African Department
(In consultation with other departments)
Contents
RELATIONS WITH THE FUND
JOINT WORLD BANK-IMF WORK PROGRAM, 2015-16
STATISTICAL ISSUES
Front Matter Page
Press Release No. 15/521
FOR IMMEDIATE RELEASE
November 16, 2015
International Monetary Fund
Washington, D.C. 20431 USA
Telephone 202-623-7100
Fax 202-623-6772
