By Tanu Jalloh
A release, probably the latest, on the International Monetary Fund, IMF’s visit to Sierra Leone between March 28 and April 11 this year on the discussion of the fourth review of its programme supported under the Extended Credit Facility, ECF and approved by its executive board in June of 2010, detailed progress and highlighted areas for improvement. Before we even start, let’s establish here that no government can boast of immunity to the way credit facility is being programmed in the world economy.
To tell you how important such meetings have always been, the IMF mission was graced by President Ernest Bai Koroma; Minister of Finance and Economic Development, Dr. Samura Kamara; the Governor of the Bank of Sierra Leone, Mr. Sheku Sesay; other senior officials of the government and the central bank; representatives of the business community and civil society organisations and other development partners. Thus, we have tried, in this piece, to highlight the roles of such extended credit facility and vice versa.
First, let’s look at the content of the statement that was issued in Freetown by Malangu Kabedi-Mbuyi, the Fund’s Mission Chief for Sierra Leone and then make an assessment of how comments elicited and communicated here could be used to make judge the country’s economic prospects. While it has been pronounced that growth was imminent, the economy should not be considered as an inanimate idea; it should be fed, nurtured and mentored if it must grow as expected.
Excerpts of the IMF statement read: “Sierra Leone’s economy continued to expand in 2011 on the back of agriculture, construction, and services, supported by increased energy supply and infrastructure investments. Real gross domestic product (GDP) growth in 2011 is estimated at 6 percent. Price pressures have receded somewhat since mid-2011 and consumer price inflation eased to 16.9 percent (year-on-year) at end-2011, as food price increases subsided and tight monetary policy helped contain non-food inflation. Gross international reserves remain at a comfortable level; and the leone has been relatively stable, depreciating by 4 percent (against the dollar) over the course of the year.
“The authorities agreed with the mission on the need to enhance fiscal consolidation efforts, while also addressing Sierra Leone’s large infrastructure and social service needs. In this respect, the mission stressed that it was important to constrain non-priority expenditure in the remainder of 2012, and to enhance expenditure and treasury cash flow management. It encouraged the authorities to take appropriate measures in anticipation of challenges that would arise from the expected surge in resource revenue in the coming years, notably for fiscal and monetary policies.
“The mission concurs with the Bank of Sierra Leone’s monetary policy stance and encourages it to use its policy instruments proactively to strengthen liquidity management and support price stability.
“Performance under the program at end-December 2011 was mixed. With the exception of the continuous zero-ceiling on contracting of nonconcessional external debt, all quantitative criteria for end-December 2011 were met. However, slippages in budget execution translated into a higher-than-anticipated overall deficit financed through accumulation of unpaid bills. Regarding structural reforms, implementation of some of the measures planned for end-December were delayed. Discussions with the authorities will continue in the coming weeks, with a view to paving the way for consideration of the review by the IMF’s Executive Board in June.
“The mission would like to thank the authorities for their continued excellent cooperation.”
Other factors have come to enjoin the whole process of effective credit facility management and adherence to standards while putting the interest of the citizenry at the centre of the bargain. IMF have had their own way of ensuring their conditions are met while governments, the world over, often play the mind game. Sierra Leone is not an exception. Thus, its authorities have tried to manage opinions and views with the engagement they continue to make at macroeconomic level.
For instance Jan Mikkelsen, who led the IMF mission to Sierra Leone in March last year, was worried that “the main challenge facing the authorities is the need to accelerate investment in basic infrastructure and social services while maintaining macroeconomic stability.”
His fears were apparently justified by the general outlook of the economy which warned that: “For the future the key policy priority is thus to bring the economy quickly back on a high and broad-based growth path, as the current slowdown raises already high unemployment, hampers progress with poverty reduction and heightens risks of resurgence of fragility.”
On March 15, 2011, the Fund commended the country’s progress as part of its intermittent evaluations of the economy. “Real gross domestic product growth picked up from 3.2 percent in 2009 to 5 percent in 2010, reflecting higher activity in manufacturing, mining, and construction.”
Addressing the October 8, 2011 state opening of parliament, President Ernest Bai Koroma suggested his government was hopeful. “With the investments in the mining sector, especially in iron ore mining, Sierra Leone will be among the fastest growing economies in the world in the next few years. With iron ore production, real GDP is projected to grow by 51 percent in 2012,” he said.
“We shall make the mineral resources of this nation benefit the people of this country, and the result of our endeavours visible in hundreds of millions of dollars of investment and the creation of thousands of jobs.
“We have granted a concession to African Minerals Limited for the mining of Iron Ore in Tonkolili district. Reconstruction of the Pepel Port has been completed by African Minerals and also the railway from Ferengbeya to Pepel is nearing completion. The Production of Iron Ore is expected to commence in December 2011.
“To further ensure transparent and effective administration of mineral rights, we have introduced and started implementation of a Mining Cadastre. This system feeds in relevant information to the EITI process. A Data Repository has been established in the Ministry’s website for the purpose of transparency and accountability,” the President said.
In his last annual state of the economy address in January this year, Dr. Sheku Sambadeen Sesay, Governor of the Bank of Sierra Leone, said the country also recently “successfully completed its second and third reviews under the IMF Extended Credit Facility (ECF), as we satisfied all quantitative targets and structural benchmarks,” and noted that “the successful reviews will strengthen the confidence of the donor community in our ability to manage the economy.”
It could be recalled that in December 2011 The Executive Board of the International Monetary Fund (IMF) completed the second and third review of the country’s economic performance under a programme supported by the ECF.
The Board’s decision enabled the immediate disbursement of an amount equivalent to SDR 8.88 million (about US$13.8 million), bringing total disbursements under the arrangement to an amount equal to SDR 17.76million (about US$27.6 million).
In completing the reviews, the Executive Board approved waivers for nonobservance of performance criteria on net domestic bank credit to the central government and net domestic assets of the central bank, both for end-December 2010, and for the continuous performance criterion on the ceiling on new nonconcessional external debt. The Board also approved a modification of three performance criteria for end-December 2011 related to the net domestic bank credit to the central government, net domestic assets of the central bank, and gross foreign exchange reserves of the central bank to reflect envisaged changes in fiscal and monetary policy. The three-year ECF arrangement for Sierra Leone was approved on June 4, 2010 in an amount equivalent to SDR 31.11 million.
Following the Executive Board’s discussion of Sierra Leone, Mr. Naoyuki Shinohara, Deputy Managing Director and Acting Chair, issued the following statement:
“The economy is continuing to recover, reflecting steady growth in mining, manufacturing, and construction. Inflation, however, remains high due to exogenous shocks and loose monetary policy at the end of 2010. Given tighter policies and more favorable external conditions, inflation is expected to decline in the near term. Gross international reserves remain at comfortable levels.
“Notwithstanding progress with respect to macroeconomic and structural policies, recent performance under the authorities’ program, supported by the three-year Extended Credit Facility, has been mixed. Despite improved revenue performance in the second half of 2010, an acceleration of infrastructure investment under the government’s Agenda for Change led to a surge in unbudgeted spending and commensurate liquidity expansion.”
I started off with IMF vis-à-vis the ECF and how Sierra Leone’s economy was faring in the last five months and I am concluding on the note that while conditions stand tough for IMF/country interaction, efforts to enliven the economy would always be a priority.
That is the role of the ECF in the general role of the IMF’s global economic supervision.
