IMF forecasts budget implementation challenge
July 5, 2016 By Alusine Sesay
The Executive Board of the International Monetary Fund on Friday, 1 July, 2016 approved a disbursement of US$34.12 million to Sierra Leone after completion of the fifth review of the country’s performance under an economic programme supported by an Extended Credit Facility (ECF) arrangement.
However, the Managing Director of the IMF stated that although growth was expected to recover moderately in 2016, budget implementation was expected to be even more challenging than in 2015.
Reading a press release to journalists at the IMF office in Freetown at the Sam Bangura Building, Gloucester Street, IMF Resident Representative to Sierra Leone Mrs. Iyabo Masha echoed the Deputy Managing Director to state that “Growth is expected to recover moderately in 2016, with average inflation edging up slightly, driven by further exchange rate depreciation. However, budget implementation is expected to be even more challenging than in 2015, given the expected decline in budget support and constrained domestic financing, combined with overspending on wages and failure to eliminate fuel subsidies.”
She added: “To address these challenges, the authorities are committed to stepping up reforms and improving public financial management. Key reforms include liberalization of the telecommunications gateway, imposing Goods and Services Tax on all electricity bills, and significant reductions in tax exemptions and duty waivers.”
According to the release, the Executive Board of the IMF also approved the authorities’ request for extension of the ECF arrangement by about two months until end of December, 2016.
The country’s ECF arrangement was approved by the IMF Executive Board for US$86.86 million and had been augmented twice. The ECF support the government’s economic reform programme for stronger and more inclusive growth and it also plays a catalytic role for bilateral and multilateral assistance.
The IMF statement cited economic challenges that befell the country during the Ebola outbreak, coupled with external shocks, especially triggered by fall in the price of iron ore. The release stated though that “Despite these serious challenges, program performance has been relatively good. All end-December, 2015 quantitative criteria were met. While performance against end-September 2015 indicative was mixed, with policy corrections all end-December 2015 indicative targets were met. Meanwhile considerable progress was made in key structural reform areas, although a few structural benchmarks were met with delays, and others missed.”
To achieving strong and sustainable economic growth and reducing poverty, the IMF noted that decisive implementation of structural reforms aimed at economic diversification would be key, and that priority should be given to improving the business climate, enhancing infrastructure and supporting private sector development.