News Brief No. 02/97

News Brief: IMF Completes Review Under Sierra Leone's PRGF Arrangement and Approves US$25 million Disbursement

September 19, 2002

The Executive Board of the International Monetary Fund (IMF) has completed the second review of Sierra Leone's performance under the Poverty Reduction and Growth Facility (PRGF) arrangement. The Board also granted a waiver of a performance criterion. As a result, Sierra Leone would be able to draw up to SDR 18.66 million (about US$25 million) from the arrangement immediately.

Sierra Leone's PRGF arrangement was approved on September 26, 2001 (see Press Release No. 01/39), for SDR 130.84 million (about US$172 million). So far, Sierra Leone has drawn SDR 56.17 million (about US$74 million) under the arrangement.

The PRGF is the IMF's most concessional facility for low income countries. It is intended that PRGF-supported programs will in time be based on country-owned poverty reduction strategies adopted in a participatory process involving civil society and development partners, and articulated in a Poverty Reduction Strategy Paper. This is intended to ensure that PRGF-supported programs are consistent with a comprehensive framework for macroeconomic, structural, and social policies to foster growth and reduce poverty. PRGF loans carry an annual interest rate of 0.5 percent and are repayable over 10 years with a 5 ½-year grace period on principal payments.

Following the Executive board's discussion on Sierra Leone, Eduardo Aninat, Deputy Managing Director and Acting Chair, stated:

"Economic reforms under Sierra Leone's PRGF-supported program have been making commendable progress, despite major institutional and financial constraints. This, together with the crucial setting of an improved security situation, has helped sustain the economic recovery and keep inflation low, and has significantly boosted the prospects for higher economic growth. A strong effort will be required to maintain macroeconomic stability in light of large pending demands on budgetary resources for social priorities.

"Sierra Leone has made marked progress in advancing the peace process. The successful completion of the disarmament exercise and the peaceful conduct of the general elections have strengthened confidence and improved the prospects for economic and social reconstruction. Nevertheless, peace remains fragile-buffeted by instability in the region and the daunting social challenges that need to be addressed, including the problem of reintegrating ex-combatants, supporting the resettlement of the previously displaced population and caring for war victims.

"Government policies during 2002-03 are appropriately geared toward addressing the pressing postwar social problems and promoting the reconstruction of the social and economic infrastructure. Given the enormous potential demands on budgetary resources, it will be critically important to boost government revenue, prioritize public expenditures, and maintain fiscal discipline. In collaboration with its development partners, the government will also need to take measures to address capacity constraints on policy implementation. The authorities will need to accelerate the pace of structural reforms to enhance growth prospects and improve service delivery. Measures to strengthen investor confidence and develop the private sector will be particularly important. These include privatization and public enterprise reform, a reformed legal structure, and steps to help foster a reduction in real interest rates.

"Sierra Leone will continue to require substantial financial and technical support from the international community to consolidate peace and to address the daunting challenges in the period ahead, including the resettlement of the displaced population and the reconstruction of the economy," Mr. Aninat stated.