The International Monetary Fund (IMF) has approved the disbursement of $21.13 million to Sierra Leone amid coronavirus economic crisis.
“This disbursement underscores the Fund’s ongoing commitment to help the country tackle any potential economic fallout from the COVID-19 pandemic,” IMF said in a statement received by TODAY NEWS AFRICA in Washington D.C. on Friday.
The approval came after the IMF Executive Board completed the second review of Sierra Leone’s performance under an Extended Credit Facility (ECF) loan.
An extended credit facility (ECF) allows the borrowing country to take out money over an extended period of time rather than reapplying for a loan each time it needs money.
The latest release of funds brings total disbursements under the ECF loan to Sierra Leone to $63.39 million.
IMF also commended Sierra Leone for its “continued reform efforts”, saying that it “will help build the foundation necessary to support future development and tackle the exceptionally difficult external environment.”
The IMF Board had approved Sierra Leone’s 43-month ECF loan for $172.1 million on November 30, 2018.
“Sierra Leone continued to make good progress under the Fund‑supported program. The authorities have demonstrated firm commitment to their reform agenda. While the program’s medium-term goals remain appropriate to enable future growth and development, the dramatic onset of the global COVID-19 pandemic poses significant near-term risks. Combating the economic fallout of the crisis and protecting the health of Sierra Leoneans should be the immediate priority,” said Mr. Geoffrey Okamoto, Acting IMF Board Chair and First Deputy Managing Director.
He added: “The authorities’ cautious fiscal policy has been important. They have made commendable progress in mobilizing domestic revenue and prudent execution of budgeted expenditures. This has stabilized domestic borrowing needs and allowed inflation pressures to ease.
“The 2020 budget appropriately balances the tight fiscal position and meeting development needs. In line with the Government National Development Plan, the budget prioritizes investing in education and provisions for repaying legacy arrears as part of a broader arrears 2 clearance strategy. The authorities will need to prioritize additional spending to help cushion the impact of COVID-19.
“Managing fiscal risks and securing debt sustainability remain the medium-term priority. Continued revenue mobilization will require both tax administration and policy reforms. Deeper public financial management reforms will further improve budget planning and execution, including preventing new arrears. A strategic plan for the two state-owned banks will be instrumental in addressing underlying fiscal risks.
“Monetary policy remains appropriately focused on reducing inflation to single digits over the medium term. Redoubling efforts to implement the new central bank law and the forensic audit action plan will be critical to strengthening operational effectiveness. Continued actions to reduce strains on the foreign exchange market and preserve exchange rate flexibility are also critical to boost resilience.
“The inadvertent omission of securities issued to the nonbank sector gave rise to a breach of the performance criterion on net credit to the government. The authorities took the necessary corrective actions and measures to avoid re-occurrence of misreporting.’’
In a separate statement on Tuesday, the Executive Board of the International Monetary Fund (IMF) said it had completed the 2019 Article IV consultation1 with Sierra Leone on April 3, 2020.
At the same time, the Board also completed the second review of Sierra Leone’s performance under their program supported by the IMF’s Extended Credit Facility (ECF) arrangement.
IMF said that in recent years, macroeconomic conditions in Sierra Leone stabilized, and the economy had begun to cement its recovery.
“Since coming to office in early 2018, the Government implemented key reforms and launched a new National Development Plan with a strong emphasis on investing in education, infrastructure and improving governance.
“Growth stabilized at 3.5 percent in 2018 before picking up to an estimated 5.1 percent in 2019, on the back of a broad-based recovery of economic activity.
“At the same time, inflation moderated to under 14 percent by end-2019. A focus on fiscal sustainability and prudent budget execution saw the overall budget deficit decline from 11.3 percent of non-iron ore GDP in 2017 to 7.7 percent in 2018 and an estimated 6.3 percent in 2019. This helped to stabilize domestic borrowing needs,” IMF said.
It added that the current account deficit also narrowed substantially, although pressure on the exchange rate persists.
“While the Sierra Leonean economy has great potential, the immediate outlook is overshadowed by the rapidly unfolding global COVID-19 pandemic. Based on programmed policies, growth was projected to average around 4½ percent over the medium term.
“However, prospects for the remainder of 2020 are subject to considerable uncertainty. The magnitude of the impact will depend heavily on the extent of vital prevention and containment measures—nationally, regionally and globally—and the associated economic spillovers.
“With the fragile Sierra Leonean economy still recovering from the Ebola health crisis and past lax macroeconomic policies, the COVID-19 shock will add to the country’s vast development challenges. Avoiding long-lasting scarring and continuing the economy’s promising development trajectory will require significant support from development partners,” IMF added.