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IMF and Sierra Leone Reach Staff-Level Agreement on Eighth Review of Extended Credit Facility

The IMF staff and the Sierra Leonean authorities have reached a staff-level agreement on economic policies to conclude the eighth and final review of the 60-month ECF financed program, releasing about US$20.4 million in financing once the review is formally completed by the IMF Executive Board; External shocks and policy slippages in recent years contributed to macroeconomic imbalances, including high inflation, a build-up in debt, and low international reserves. A cost-of-living crisis continues to take a severe toll. The authorities have taken steps to tighten the macroeconomic policy stance, but further efforts are needed; The program has laid the foundations for an economic recovery by taking steps to restore macroeconomic stability, address debt vulnerabilities, and protect the most vulnerable. Reforms supported by the ECF have strengthened tax administration, public financial management, and financial sector oversight, among others.

An International Monetary Fund (IMF) team, led by Mr. Christian Saborowski, visited Freetown from September 25 to October 6, 2023, for the eighth review of Sierra Leone’s financial and economic program supported by the Extended Credit Facility (ECF) arrangement, approved on November 30, 2018 (see Press Release No. 18/446 ). Subject to approval by IMF Management and the Executive Board in the coming weeks, the completion of the eighth and final review under the ECF will make available SDR 15.5 million (about US$ 20.4 million), bringing the total IMF financial support under the arrangement to SDR 124.4 million (about US$163.5 million).

At the conclusion of the mission, Mr. Saborowski issued the following statement: “Multiple external shocks and loose macroeconomic policies in recent years contributed to macroeconomic imbalances, including high inflation, a build‑up of debt, and low reserves. Increases in the cost of living worsened already high levels of food insecurity and made the poor more vulnerable. Fiscal policy has tightened as programmed during the first half of 2023, although revenues underperformed amid difficulties in sensitizing taxpayers to new tax policy measures, and technical challenges in configuring them. The authorities are committed to reducing the fiscal deficit to 5.8 percent of GDP in 2023, which will require strict expenditure restraint—to offset spending overruns in the third quarter—and swift progress in fully implementing all recent tax policy measures.

“Monetary conditions remained too accommodative over the first half of 2023, and y-o-y inflation has continued increasing to 54 percent in September, in part driven by the recent fuel price increase. The central bank has since taken corrective action to tighten, including by raising the policy rate by 250 bps to since June, providing forward guidance on the need for a continued tight policy stance, and committing to strict limits for BSL purchases of government securities. Meanwhile, the exchange rate has remained relatively stable in recent months, likely reflecting the tighter macroeconomic policy stance.

“Macroeconomic conditions are expected to stabilize over the medium term, predicated on continued efforts tighten macroeconomic policies and achieve debt sustainability. The authorities envision steadfast fiscal consolidation in the coming years, aiming for a budget deficit of 2.8 percent of GDP in 2024. The central bank is committed to continue tightening monetary conditions to help bring inflation to single digits over the medium term. Growth is expected to weaken in 2023 amid the tight macroeconomic policy stance, before recovering in 2024, supported by an expansion in mining and agriculture.

“The authorities continue to advance on important reforms, albeit with delays. Capacity building efforts have focused on strengthening tax administration and improving revenue mobilization; enhancing public financial management; improving foreign exchange operations; strengthening financial supervision and oversight; and improving statistical reporting on government finances, public debt, and national accounts. These efforts were supported by technical assistance from the IMF, the World Bank and other development partners.

“The staff team is grateful to the authorities for the open and productive discussions to ensure success of their economic program supported by the IMF. The team met with Finance Minister Bangura, Acting Governor Stevens, and other senior government officials. The mission also had fruitful discussions with representatives from civil society, the private sector and development partners.”

Distributed by APO Group on behalf of International Monetary Fund (IMF).

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