Sierra Leone's economic and financial performance indicators

The International Monetary foundation (IMF) in December 1999 assessed Sierra Leone's economic and financial performance to have been object to a "collapse in the fiscal revenue base." Further, there had been "significant increases, in the budget deficit, bank financing, and external payments arrears. Inflation surged, and the exchange rate depreciated sharply." IMF assessments vary with the situation of peace or war in Sierra Leone, as does the economic and financial situation.

The civil war in Sierra Leone caused tremendous damage to the economic and social infrastructure, and inflicted extensive suffering on the population. More than 2 million people, nearly half of the population, were displaced. A modest recovery following the restoration of the democratically elected government in March 1998 was sharply reversed by the rebel invasion of Freetown in January 1999. Economic activity shrank, contributing to a collapse in the fiscal revenue base and to significant increases, in the budget deficit, bank financing, and external payments arrears. Inflation surged, and the exchange rate depreciated sharply.

A peace agreement, signed in July 1999 in Lomé, Togo, has generally been followed by the cessation of fighting in most areas. The ex-rebel leaders returned to Freetown in October 1999, which facilitated the formation on October 20 of a government of national unity, as well as the launch of the program of disarmament, demobilization, and reintegration.

The strategy of supporting the authorities' program under the emergency post-conflict assistance policy is predicated upon the need to rebuild Sierra Leone's administrative and institutional capacity, which was disrupted by the civil war. The proposed program should provide time for the authorities to rebuild their capacity and to reestablish adequate security and pave the way for a more comprehensive program of reforms that could be supported under the IMF's Poverty Reduction and Growth Facility.

The main macroeconomic objectives are to promote the resumption of economic growth, reduce financial imbalances, and begin regularizing relations with external creditors. Satisfactory implementation of the disarmament, demobilization and reintegration program (DDR) for ex-combatants program would help real GDP to rebound to a growth of 4% in 2000 from a decline of 8% in 1999. 

The central objective of fiscal policy during 2000 is the targeted reduction in the domestic primary budget deficit, which is programmed to fall to about 4.2% of GDP in 2000 from an estimated 7.4% in 1999. This objective can be achieved through concerted efforts to improve tax collection and strict control on government outlays. 

Monetary policy will be geared toward reducing inflation while reconstituting external reserves. The rate of inflation is targeted to fall to 15% by end-December 2000 from the 30% projected for end-December 1999. Owing to the destruction of export capacity and the large programmed increase in humanitarian assistance and reconstruction imports, the external current account deficit, before official transfers, is projected to rise to 19% of GDP in 2000 from 9% in 1999. 

To improve efficiency in the foreign exchange market and reduce market segmentation, the authorities will introduce a foreign exchange auction effective January 2000. Other measures that will be taken include regularizing financial relations between the government and public enterprises, reducing tax and duty exemptions, reviewing the civil service and pensioners to remove "ghost" workers and pensioners, and strengthening the regulatory and supervisory framework for commercial banks.

Social indicators in Sierra Leone remain weak. Outlays in the DDR program, amounting to 4.6% of GDP and costing US$29 million in 2000, are almost entirely externally financed. The DDR program will provide ex-combatants with transitional social safety nets. The consolidated budget aims at the provision of the minimum social and economic services for the population and also includes a capital outlay budget expenditure relating to a program for schools, health care, and other social services.

The IMF in December 1999 approved about US$ 21 million in emergency post-conflict assistance for Sierra Leone to help the government's reconstruction and economic recovery program aimed at starting to rebuild the economy.

Some Economic Indicators, 1996-2000 
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Source: IMF

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