The Government of Sierra Leone recorded a revenue shortfall of about 10 percent during the first quarter of 2026 despite introducing new tax measures aimed at strengthening domestic revenue collection, according to the International Monetary Fund (IMF).

The revenue underperformance comes at a time when the government is pursuing an ambitious fiscal consolidation programme under its Extended Credit Facility (ECF) arrangement with the IMF, designed to improve public finances, reduce borrowing and restore macroeconomic stability.

In its latest Country Report on Sierra Leone, the IMF said preliminary data showed that government revenues fell below expectations during the first three months of the year, primarily because of weak tax compliance rather than weaknesses in tax policy.

“Preliminary data suggest that revenues underperformed by 10 percent in the first quarter of 2026, largely due to poor compliance,” the IMF stated.

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The Fund noted that while most of the revenue measures contained in the Finance Act 2026 have already been implemented, some key reforms are still outstanding. These include the removal of Goods and Services Tax (GST) exemptions on water and magazines, as well as the expansion of the circulation levy, all of which are expected to boost domestic revenue once fully implemented.

According to the report, Sierra Leone has made significant progress over the past three years. Since 2022, the authorities have strengthened the domestic primary balance by seven percentage points of GDP, supported in part by tax revenue gains of about 3.5 percentage points of GDP. The IMF said these efforts, combined with tighter monetary policy, have helped stabilise the exchange rate, reduce inflation, lower borrowing costs and restore credit to the private sector.

However, the Fund warned that maintaining these gains will require continued improvements in tax administration and stronger enforcement.

“The authorities pledged to recover the Q1-2026 revenue shortfall by improving collection efforts and swiftly implementing the remaining Finance Act 2026 tax measures,” the report said.

Despite these commitments, the IMF expects revenues to remain below the original target this year because of slower economic growth and lower demand for imported fuel, both of which are affecting tax receipts.

Beyond introducing new taxes, the IMF believes Sierra Leone’s bigger challenge lies in improving tax administration.

The report points to the findings of a recent Tax Administration Diagnostic Assessment Tool (TADAT), which identified significant weaknesses in the country’s tax administration system.

According to the IMF, progress on several planned reforms has been slower than expected, prompting revisions to some of the programme’s structural benchmarks.

Among the reforms the government plans to implement are strengthening the compliance risk management framework, improving customs administration and ensuring that core customs functions are carried out exclusively by customs authorities. The IMF said these measures are intended to improve efficiency, reduce leakages and enhance revenue collection.

The Fund also encouraged the authorities to intensify revenue mobilisation efforts within Sierra Leone’s extractive industries, which remain an important source of government income.

Officials plan to strengthen enforcement of the Extractive Industry Revenue Act (EIRA), operationalise a new “safe harbour” pricing mechanism for iron ore transactions between related companies and ensure that mining agreements comply fully with existing revenue laws.