Recovery from the twin shocks of Ebola and the collapse of the iron ore sector continues. Non-iron ore sector growth is projected to be 3.7 percent in 2016, led by manufacturing and trade. Iron ore growth is also recovering, with the main company now operating with moderate profitability. Overall growth is projected to be 4.9 percent. Inflation was 10.9 percent at end-September, while the exchange rate has depreciated 19 percent over the last year. The budget is under severe pressure, in part because the rapid depreciation has stripped the government of all excise revenue from retail fuel, and led to explicit subsidies from the budget to keep retail fuel prices fixed. All end-June performance criteria were met while some structural benchmarks were missed. However, the ceiling on net domestic financing was met in part through the accumulation of arrears. There was also a minor non-observance of the continuous ceiling on external debt and a temporary multiple currency practice was introduced in recent months. This is the last review under this ECF arrangement, which expires on December 21, 2016. The authorities have expressed interest in negotiating a successor program in early 2017.
The Executive Board of the International Monetary Fund (IMF) today completed the sixth review of Sierra Leone’s performance under the economic program supported by an Extended Credit Facility (ECF) arrangement1. Completion of the review enables the disbursement of SDR24.44million, about US$33.23million, bringing total disbursements under the arrangement to SDR186.66million (about US$253.81 million). The decision was made on a lapse of time basis2.
In completing the review, the Executive Board also approved a request for waiver for the non-observance of the continuous performance criterion on the net present value of the external debt and the non-introduction of multiple currency practices given corrective measures taken by the authorities.
Sierra Leone’s ECF arrangement was approved by the Executive Board for SDR 62.22 million (about US$86.86 million) on October 21, 2013 (see Press Release No. 13/410) and was augmented twice (see Press Release 15/86 and Press Release 14/441). It was subsequently extended until end-December 2016 (see PR No 16/314).
The government’s economic reform program supported by the ECF has achieved its key objectives despite the exogenous shocks of the Ebola epidemic and the collapse of iron ore prices and associated loss of production in 2014-2015. It aims at ensuring stronger and more inclusive growth and plays a catalytic role for bilateral and multilateral assistance.
The economy proved resilient, supported by sound macroeconomic policies, together with generous support from development partners that helped ensure fiscal and external sustainability, while providing resources to begin implementing the post-Ebola Recovery Strategy. However, the authorities need more resources to mitigate the long – lasting impact of Ebola and commodities prices shocks.
Despite this improvement, challenges persist. Looking ahead, policy should focus on continuing to anchor economic stability through sound fiscal, monetary, and debt policies while making faster progress on structural reforms. Diversifying growth, making it more inclusive and distributing its benefits more widely should be the overriding focus of economic policy.
The ECF is a lending arrangement that provides sustained program engagement over the medium to long term in case of protracted balance of payments problems.
The Executive Board takes decisions under its lapse of time procedure when it is agreed by the Board that a proposal can be considered without convening formal discussions.