IMF extends loan agreement with Sierra Leone, disburses fresh $44 million

DAKAR: The International Monetary Fund will extend a 43-month, $172 million loan agreement with Sierra Leone by an additional year, the IMF said in a statement on Tuesday, while also announcing a fresh disbursement of $44 million under the programme.

The IMF's board approved an extended credit facility in 2018 in order to help the West African nation combat rising inflation and lacklustre economic growth. Following the latest extension, the credit facility will run through until mid-2023.

Disbursements under the programme now total around $111 million, including the $44 million that was approved on Tuesday, as the West African nation works to bounce back from a prolonged economic downturn exacerbated by the COVID-19 pandemic.

"There are early signs of economic recovery, but Sierra Leone's fiscal situation remains tight," the statement said.

"Fiscal space remains limited, reflecting a still low revenue base, an elevated public debt level, and substantial COVID-19-related and other priority expenditure and development needs."

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Sierra Leone's economy contracted 2.16% in 2020, after growth of 5.6% in 2019, according to World Bank figures.

While Sierra Leone's growth is expected to bounce back to pre-pandemic levels in the medium term, the risks to its long term outlook are significant, the statement said.

Mining is expected to be the main driver of Sierra Leone's economic recovery over the next two years, the IMF said, with output stabilizing after legal disputes with several foreign operators drew production to decade lows.

But uncertainties in the mining sector, faltering support from development partners, slow reform implementation and unexpected shifts in COVID-19's global spread, all pose risks to Sierra Leone's long-term economic outlook, the statement said.