Maada Bio’s Government Clears Off $100 Million Domestic Debts by Ernest Bai Koroma’s Administration

The Chief Economist in the Ministry of Finance, Alimamy Bangura has disclosed the Government of Sierra Leone (GoSL) has spent over US$100 million to offset domestic arrears.

According to the Chief Economist, “fortunately, government completed the Domestic Arears Clearance Strategy and Principles 2020-2025 that benefit from some funding from development partners to kick-start clearance, The payment of over US$100million domestic arrears in 2020 helped to moderate the spiral of debt dynamics and provided liquidity to the banking system that was associated oversubscription in the Treasure Bill (T-Bills) Market and collapse in the interest rate for 364-days T-Bills by end of 2020 from 25.1 percent to 10.51.”

He said the huge debt service burden averaging over 25% of domestic revenue would crowd out spending on government priority agenda of Free Quality School Education (FQSE) and also in the healthcare sector that should improve the capacity of Sierra Leone’s health infrastructure to better respond to the ongoing COVID-19 pandemic and other health pandemics in the future.

Speaking at the National Debt Sustainable Analysis (DSA) workshop in Freetown, the Chief Economists said in Sierra Leone public debt comprises public and publicly guaranteed disbursed outstanding domestic and external debts owed to resident and non-residents. He said public debt is under pressure because majority of the costs associated with the COVID-19 pandemic have increased the rate of debit accumulation across the global.

According to Mr. Bangura, when expenditure adjustment and revenue measures reach the chock level of government, the last resort is debt accumulation which is inevitable at least during the immediate response and post-pandemic period.

He said the pandemic collapsed revenue mobilization efforts as trade and investment activities slowed down while debt services payment increased over 25 percent of domestic revenue, government spending no health and related sectors increased to combat the pandemic.

Mr. Bangura said the conduct of the DSA was timely because it would help to assess the current debt distress rating of Sierra Leone and would also provide the basis for calculating the new annual borrowing or debt limit.

According to Unity Newspaper, the Chief Economics said the government in response to the pandemic launched a Quick Action Economic Response Programme (QAERP) to cushion the impact of the pandemic on vulnerable persons and businesses.