Sierra Leone will not be using its own money to service its debt owed to the International Monetary Fund (IMF) this year (2021) and next (2022) because it has been taken on by the European Union.
That leaves some $39 million in the hands of government to use in competing priority areas.
The head of the European Union Delegation in Sierra Leone, Tom Vens says his organisation has agreed to take on the servicing of the debt because of the impact of Covid19.
“The EU has made a contribution of EUR 388.5 million to the Catastrophe Containment and Relief Trust Fund (CCRF). The purpose of the CCRT is, in the context of the COVID19 crisis, to provide debt relief on the debt service due to the IMF during two years starting from April 2020”, Vens told Politico in a text message.
This means that the EU will pay the debts of African, Caribbean and Pacific (ACP) countries to allow their governments to plough their depleted resources into the Covid19 pandemic.
Vens went on: “Concretely for Sierra Leone, this payment means that the EU will assume the totality of its [Sierra Leone’s] debt service due to the IMF in 2021 (about 18 million EUR) and largely to that due in 2022 (about 20.8 million EUR)”
Sierra Leone’s Financial Secretary, Sahr Jusu said they were aware that “the IMF has provided debt service payments relief covering April 2020 to April 2022”.
He said since the Fund is not an institution that provides grant resources to low income countries, but credit, it “mobilises donor funds to finance debt service relief in period of crisis such as the Covid-19 Pandemic”. He went on to say that such funds were often mobilised from OECD countries and multilateral agencies such as the EU to finance the debt relief support”.
The Fund would also sell some assets like it did its gold reserve for the debt relief under the Heavily Indebted Poor Countries initiative.
The head of the Institute for Governance Reform (IGR) says the relief is welcome news. Andrew Lavalie however warns that this should not be “a blank cheque for irresponsible borrowing”.
He said: “Sierra Leone needs to borrow responsibly and not unsustainably. The EU and the IMF should pay attention to the country’s vulnerability so it does not use this relief to accumulate more debt”.
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