20.5 C
Sierra Leone
Wednesday, May 25, 2022

IMF predicts economic shocks for salone, approves US$46.14 Million

November 18, 2015 By Alusine Sesay

The International Monetary Fund (IMF) has predicted tough economic times for Sierra Leone in the post-Ebola recovery era, as the Executive Board meeting during the third and fourth reviews  of  Sierra Leone’s  performance under the three-year arrangement under the Extended Credit Facility( ECF) .

 “The updated debt sustainability analysis shows that, while Sierra Leone’s risk of debt distress is moderate, the economy is increasingly vulnerable to further shocks. Thus, borrowing policies should remain prudent in view of the narrow export base and fragile fiscal position. Financing needs, particularly for investment projects, should continue to be covered mostly with grants and concessional loans,” says Min Zhu, Deputy Managing Director and Acting Chair of IMF Executive Board.

“With the World Health Organization declaring Sierra Leone Ebola free on November 7, the country now faces the difficult challenge of economic recovery. Complicating that task, the decline in iron ore prices has led to the shutdown of the main iron ore mines, with consequent sharp declines in GDP and exports, and reduced fiscal revenues.

“As a result, the fiscal challenges in 2016 will be substantial. It will be critical for the authorities to ensure sufficient revenues and financing to cover priority spending, especially for the post-Ebola Economic Recovery Strategy (ERS). This will require strong moves on tax policies and continued efforts on tax administration. Containing the wage bill will also be critical to increase the resources available for the ERS, which will be strengthened by enhancing the transparency and efficiency of expenditures,” the IMF Executive Board noted.

The board urged the central bank to embark on prudent fiscal policies as well as maintain a robust supervisory role over the financial sector. “The Bank of Sierra Leone (BSL) should continue targeting price stability in support of economic recovery. With depreciation pressures stemming from the lost iron ore exports, the BSL should enhance monetary policy instruments and liquidity forecasting to increase its ability to respond to any second round inflationary pressures. BSL should also enhance supervision of the financial sector, and seek to understand and resolve any underlying stress through a timely diagnostic of key troubled banks.”

The board completed both reviews on Monday, 16 November and approved an augmentation of access of 45 percent of quota, equivalent to SDR 46.665 million, about US$64.59 million, to be distributed in three tranches.

The completion of the third and fourth reviews enables the immediate disbursement of SDR 33.335 million, about US$46.14 million and the amount includes the first tranche of the augmentation in an amount of SDR 15.555 million, about US$21.53 million.

The Executive Board also approved the authorities’ request for rephasing of the fifth and sixth disbursements under the arrangement.

They additionally approved the authorities’ request for waivers of non-observance of the end-December 2014 performance criteria on the ceiling on Net Domestic Bank Credit to Government Ceiling, the ceiling on Net Domestic Assets of the Central Bank Ceiling, and the floor on Gross Foreign Exchange Reserves of the Central Bank on the basis of corrective action taken.

The ECF arrangement for SDR 62.22 million (about US$95.9 million) was approved on October 21, 2013 and was augmented twice.

Related Articles

Latest Articles