Freetown, SIERRA LEONE – The International Monetary Fund (IMF) mission to Sierra Leone, led by Christian Saborowski, has stressed the need for strict expenditure restraint to achieve the commitments made by the country’s authorities in reducing the fiscal deficit. Saborowski made this assertion as the IMF staff concluded their eighth and final review of the 60-month Extended Credit Facility (ECF) financed program on Monday, November 6, 2023.
“The authorities are committed to reducing the fiscal deficit to 5.8 per cent of GDP in 2023, which will require strict expenditure restraint—to offset spending overruns in the third quarter—and swift progress in fully implementing all recent tax policy measures,” he stated.
Saborowski highlighted that multiple external shocks and loose macroeconomic policies in recent years had contributed to macroeconomic imbalances, including high inflation, a mounting debt burden, and dwindling reserves. Additionally, rising living costs exacerbated the already high levels of food insecurity and made the poor more vulnerable.
“Fiscal policy has tightened as programmed during the first half of 2023, although revenues underperformed amid difficulties in sensitizing taxpayers to new tax policy measures, and technical challenges in configuring them,” he added.
Saborowski pointed out that monetary conditions had remained too accommodating over the first half of 2023, and year-on-year inflation continued to increase, reaching 54 per cent in September, partly driven by a recent fuel price hike. However, he acknowledged that the Central Bank had taken corrective action to tighten, including raising the policy rate by 250 basis points since June, providing forward guidance on the need for a continued tight policy stance, and committing to strict limits for Bank of Sierra Leone (BSL) purchases of government securities. The exchange rate had also remained relatively stable in recent months, likely reflecting the tighter macroeconomic policy stance.
“Macroeconomic conditions are expected to stabilize over the medium term, predicated on continued efforts to tighten macroeconomic policies and achieve debt sustainability. The authorities envision steadfast fiscal consolidation in the coming years, aiming for a budget deficit of 2.8 per cent of GDP in 2024,” he elaborated. “The central bank is committed to continuing to tighten monetary conditions to help bring inflation to single digits over the medium term. Growth is expected to weaken in 2023 amid the tight macroeconomic policy stance, before recovering in 2024, supported by an expansion in mining and agriculture.”
The IMF Resident Representative, Wayne Mitchell, joined the six-member team in Sierra Leone to follow up on the IMF Article IV Consultations. The other team members included Garth Peron Nichols, Naoya Kato, Jiren Zhang, Peter Chacha Wankuru, and Isabela Duarte Ferreira.
Under Article IV of the IMF’s Articles of Agreement, the IMF holds bilateral discussions with its members, typically annually. During these discussions, a staff team visits the country, collects economic and financial information, and engages with officials to discuss the country’s economic developments and policies. ZIJ/7/11/2023