Sierra Leone Seeks IMF Waiver For Significant Breach of Net Bank Credit to Government

The government has observed the quantitative performance criteria (PC) on gross international reserves (GIR) and Central Bank net domestic assets (NDA) and the continuous PCs on external arrears and debt.

Based on strong corrective actions, they have requested from the International Monetary Fund (IMF) waiver for the significant breach in net credit to government (NCG) at end-December that reflected expenditure overruns financed by large issuances of T-Bills and a significant accumulation of unpaid cheques.

This is according to the IMF country report No.22/259, which highlighted a letter of intent to IMF’s Kristalina Georgieva Managing Director dated 10th June 2022, which was signed by the Acting Minister of Finance, Bockarie Kalokoh, and Bank Governor Kelfala M. Kallon. The letter stated that, while the country met the quantitative performance criteria (QPCs) and indicative largest on GIR and NDA of the Bank of Sierra Leone as at end-September and end- December 2021 by a large margin.

Preliminary data indicate that the country missed the March 2022 indicative targets on NDA of the BSL, GIR, and NCG owing largely to the impact of the war in Ukraine on the economy, which is constraining economic activity and leading to revenue shortfalls and triggering a sharp increase in the period of fuel and a general increase in the price level. In that statement to the Fund on behalf of Sierra Leone, dated June 27th, 2022, Ms. Ita M. Mannathoko, IMF Executive Director. Africa Group 1 Constituency and Patterson Ekeocha, Senior Advisor said that the performance criteria for net credit to government measures will strengthen budget planning, cash, and debt management, as well as payroll management.

According to the IMF staff, the NCG breach of the banking system at the end-December was significant (4 percent of non-iron are GDP) and reflected expenditure pressures (including containing the third wave of COVID 19, wages and salaries goods and services due to rising inflation domestically financed capital spending Free Quality School Education. These fund said were financed by large issuance of T-Bill to both bank and non-banking sectors and a large accumulation of unpaid cheques.

In the country’s memorandum of Economic and Finance Policies (MEFP) of the Extended Credit Facility 5th Review, it revealed that program performance weekend in 2021 owing to the expenditure overturn reflecting the increase in the price of goods and services, cost overruns on capital projects, unexpected wage pressured coupled with the need to continue to respond to the lingering impact of COVID 19 on the economy.

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The MEFP went on to add that, the increase in government borrowing and areas accumulated was detected by expenditure overturns caused by unexpected expenditures including wage demand subsidies to EDSA to secure power provision and a general increase in the price of goods and services.
NCG refers to the net banking system’s
Claims on the central government as calculated by the BSL. This includes the net position of the government with commercial banks including treasury bills, treasury bearer bonds, excluding holding of special bonds provided by government to cover the BSL losses, the stock of non-interest bearing non-marketable securities (NIBMNS), the difference between converted NIBMNS into treasury bills and proceeds from their sales, and ways and means less central government deposits and HIPC and MDRI relief deposits.


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