–By THE AFRICA BAZAAR Staff Writer
Following a review of Sierra Leone’s economic program under the extended credit facility (ECF), the International Monetary Fund (IMF) said on Thursday it has approved a $13.69 million (SDR 8.89 million) loan for the West African country.
The ECF is a facility under the Poverty Reduction and Growth Trust. Financing under the ECF currently carries a zero interest rate with a grace period of five and half years and a final maturity of 10 years. The IMF reviews the level of interest rates for all concessional facilities every two years.
IMF said strong growth in agriculture and the services sector, as well as new iron ore production, have strengthened Sierra Leone’s economic growth in 2013, increasing its output by 20 percent.
The country’s inflation rate has declined to single digits, mainly reflecting increased food supply.
According to the review, real Gross Domestic Product (GDP) growth is projected to remain in double-digits at 11.3 percent in 2014, in line with the expected higher iron ore and other mining production, continued strong output expansion in agriculture, services, and construction and a recovery in manufacturing as energy supply improves in 2014.
In addition, the IMF said the scaling up of public investment, as anticipated in the implementation of the country’s poverty reduction strategy, the Agenda for Prosperity (AfP), should also help to catalyze private sector activity and contribute to higher, sustainable growth in the non-resources sector.
Thanks to the food supply benefits from the government-sponsored programs in agriculture, consumer price inflation is expected to continue trending downward and non-food inflation would remain moderate due to continued prudent monetary policy.
The IMF said by improving trade balance, coupled with expected capital inflows, will help strengthen the country’s external position and gross international reserves buildup.
Sierra Leone’s fiscal policy for 2014 will continue to focus on reducing duty waivers and increasing audit capacity in tax administration to support revenue mobilization, containing non-priority spending to create space for public investment and strengthening budget execution and controls through public financial management reforms.
“Continued prudent borrowing policies will be important to support growth-enhancing investment while maintaining debt sustainability,” according to the IMF’s review.
The reform measures and policies that the government implemented in recent years have helped improve macroeconomic stability, advance social policies and boost prospects for broad and inclusive growth. However, the IMF stressed that the country still faces important challenges as poverty and unemployment remain high, and access to important public and social services is limited.
The IMF’s review also noted that future growth are hindered by several obstacles, including insufficient power supply and road networks, and limited access to financial services, particularly for small- and medium-sized enterprises. Despite improvement in 2013, the fiscal position remains fragile due to the relatively low and volatile revenue base and pressure for higher spending in wages and infrastructure, the review said.
For future growth, the IMF emphasized that authorities need to support the implementation of structural reform measures that are aimed at further strengthening the country’s fiscal position, developing financial intermediation, advancing civil service reforms and creating an environment conducive to private sector development.
The overall program performance for the country has been strong.
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