Sierra Leone is currently working on a debt strategy framework with the help of the West African Institute for Financial and Economic Management (WAIFEM) and Debt Relief International (DRI).
The WAIFEM Director General, Chris Osi Itsede, stated that with the receipt of debt relief at completion point in 2006, Sierra Leone experienced low debt burden which was expected to improve its creditworthiness significantly, creating borrowing space.
He pointed out that this scenario had raised concerns that the country might borrow excessively even from non-concessional sources.
Mr Itsede said, “this could offset the efforts made to improve debt sustainability, leading to yet another lending-forgiveness cycle.”
He pointed also that it was feared that potential new lenders would emerge to take advantage of the borrowing space as they seek to lure government into contracting new loans without considerations for absorptive capacity, institutional and policy environment.
“In a bid to prevent a relapse into inappropriate debt management practices and maintain long term debt sustainability, a new debt and new financing strategy focus is required to address the structural and institutional issues in a coherent manner within the framework of a medium term debt strategy,” the WAIFEM director prescribed.
He said the framework should provide a comprehensive basis for assessing a country’s debt sustainability by providing early warning to debt distress in low income countries and guiding their borrowing decisions and also take into account domestic debt and overall macroeconomic policy management.
The debt strategy framework has the blessing of the government of Sierra Leone. The minister of Finance, David Carew, agreed that the layout of the framework for new borrowing would avoid the relapse of unsustainable debt situation in the country.