IMF Approves Additional Financial Support for Sierra Leone’s Economic Program

By: Christian Conteh

Sierra Leone is set to receive a boost of SDR 15.5 million (approximately US$20.8 million) from the International Monetary Fund (IMF) following the completion of the sixth and seventh reviews of the country’s financial and economic program. Led by Christian Saborowski, the IMF team expressed concerns over the external shocks and loose macroeconomic policies that have exacerbated economic challenges in Sierra Leone.

Despite an estimated growth of 3.6 percent in 2022, rising inflation, sharp currency depreciation, and increased debt-related risks have posed significant hurdles. The high cost of living has also contributed to growing food insecurity.

Acknowledging the weak program performance in 2022, Saborowski noted that significant improvements have been made since then. To continue building on recent reforms and achieve program objectives, Sierra Leone has requested an extension of the program until November 2023 to accommodate an eighth and final review.

The IMF team stressed the importance of tightening fiscal and monetary policies to restore macroeconomic stability and address mounting risks to debt sustainability.

The fiscal policy will prioritize domestic revenue mobilization and expenditure containment while safeguarding social spending, including the school feeding program. The central bank has committed to tightening monetary conditions to curb inflation, stabilize the currency, and enhance monetary policy communication.

Efforts will also be made to revive the interbank foreign exchange market. Maintaining a flexible exchange rate system and building foreign exchange reserves will bolster resilience against economic shocks.

Saborowski outlined expectations of macroeconomic stabilization over the medium term, although risks to the outlook remain high. Growth is projected to decelerate to 2.7 percent in 2023 before recovering in 2024. Inflation is expected to gradually decline to single digits as contractionary policies take effect, while foreign exchange reserves are anticipated to stabilize.

However, risks stemming from slower global growth, tighter global financial conditions, and geographical fragmentation could adversely impact external demand, real incomes, and fiscal and external accounts. The successful implementation of policies is also challenged by the adjustment requirements, capacity limitations, and the soaring cost of living.

The IMF staff team expressed gratitude to Sierra Leone’s authorities for their constructive engagement in the discussions pertaining to the economic program supported by the IMF.

During their visit, the team met with President Maada Bio, Finance Minister Bangura, Acting Governor Stevens, Deputy Governor Sesay, and other senior government officials. Engagements were also held with representatives from civil society, the private sector, and development partners.