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Sierra Leone: Fifth Review Under the Arrangement Under the Poverty Reduction and Growth Facility, Request for Waiver of Nonobservance of Performance Criterion, Request for Modification of Performance Criteria, and Financing Assurances Review—Informational Annex

Author(s):
International Monetary Fund
Published Date:
January 2010
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Appendix I. Relations with the Fund

(As of September 30, 2009)

I. Membership Status: Joined 9/10/62; Article VIII

II. General Resources Account:

SDR Million% Quota
Quota103.70100.00
Fund holdings of currency103.6999.99
Reserve position0.020.02

III. SDR Department:

SDR Million% Allocation
Net cumulative allocation99.51100.00
Holdings121.04121.65

IV. outstanding Purchases and Loans:

SDR Million% Quota
PRGF Arrangements46.7045.03

V. Latest Financial Arrangements:

TypeApproval DateExpiration DateAmount Approved (SDR Million)Amount Drawn (SDR Million)
PRGF5/10/065/9/1051.8832.70
PRGF9/26/016/25/05130.84130.84
PRGF3/28/945/04/98101.9096.85

VI. Projected Payments to Fund1

(SDR million; based on current use of resources and present holdings of SDRs):

Forthcoming
20092010201120122013
Principal1.403.274.624.62
Charges/interest0.120.240.230.210.19
Total0.121.643.504.834.81

VII. Implementation of HIPC Initiative

Enhanced Framework
Commitment of HIPC Initiative assistance
Decision point dateMarch 2002
Assistance committed (NPV terms)
By all creditors (US$ million)2675.20
Of which: IMF assistance (US$ million)125.21
(SDR equivalent in millions)100.00
Completion point dateDecember 2006
Disbursement of IMF assistance (SDR million)
Amount disbursed100.00
Interim assistance66.03
Completion point balance33.97
Additional disbursement of interest income 36.58
Total disbursements106.58

VIII. Implementation of Multilateral Debt Relief Initiative (MDRI):

I. MDRI-eligible debt (SDR Million) 4117.34
Financed by: MDRI76.75
Remaining HIPC resources40.59

II. Debt Relief by facility (SDR Million)

Eligible Debt
Delivery DateGRAPRGFTotal
December 2006N/A117.34117.34

IX. Safeguards Assessment

Pursuant to IMF policy, the Bank of Sierra Leone was subject to a safeguards assessment with respect to the PRGF arrangement approved on May 10, 2006. The assessment, which was completed on June 12, 2006, proposed recommendations to address new and continuing vulnerabilities in financial reporting, internal audits, and internal controls. An update of the 2006 safeguards assessment report was completed in October 2009.

X. Exchange Rate Arrangement

For customs valuation purposes and for official transactions, the Bank of Sierra Leone (BSL) calculates an official exchange rate every Friday morning as the weighted average of the auction rate, the commercial bank mid-rate, and the bureau mid-rate in the previous week. Commercial banks may buy foreign exchange from and sell it to individual customers and may trade among themselves or with the BSL on a freely negotiable basis. As of October 08, 2009, the BSL mid-rate was Le 3,645.58=US$1.

In March 2008 the exchange rate regime was reclassified as “a conventional peg” to reflect the nominal stability of exchange rate developments under de facto management through the auction by the BSL as the only seller of foreign exchange. Effective February 2, 2009, the de facto exchange rate arrangement was reclassified from a conventional pegged arrangement to “stabilized” retroactively to April 30, 2008, due to a revision of the classification methodology.

With effect December 14, 1995, Sierra Leone has accepted the obligations of Article VIII, Sections 2, 3, and 4. On June 29, 2001, Sierra Leone removed the remaining exchange restriction, in the form of a tax clearance certificate required for payments and transfers of certain types of current international transactions. Sierra Leone continues to maintain an exchange system free of restrictions on the making of payments and transfers for current international transactions.

XI. Article IV Consultation

The Executive Board concluded the 2008 Article IV consultation on December 22, 2008. The next Article IV consultation will be held in accordance with the decision on consultation cycles approved on July 15, 2002.

XII. Technical Assistance

DepartmentPurposeDate
FADEvaluation of progress in PFM reformsMarch 2009
Assist in designing a simplified regime for

small taxpayers
January 2009
Evaluation of progress on tax

administration reform and VAT

preparation
September 2008
Evaluation of progress on PFM reformsJuly 2008
Implementation of public financial

management reforms
March 2008
Tax administration reforms for successful

VAT implementation
February 2008
Evaluation of progress of revenue

administration modernization
November 2007
Assist the authorities in developing a

comprehensive revenue administration

reform strategy
February 2006
Review the system of fiscal incentives,

especially the special tax regimes applied

to the mining and petroleum sectors
March/April 2004
Review the tariff and indirect tax system,

National Revenue Authority, and tax and

customs administration
February 2004
LEGTA on a legal review of the Bank of Sierra

Leone Act of 2000
March/April 2007
MCMFollow-up assessment on TA needsJune 2009
Follow-up assessment of banking

supervision processes at BSL
March 2009
Follow-up assessment on progress in

strengthening central bank internal

auditing
March 2009
BSL: Internal audit and management of

the central bank
October 2008
Monetary policy, banking supervision,

and recapitalization of the BSL
April/May 2008
Recapitalization of the BSLFebruary 2008
Assist the BSL in bringing its accounting

practices up to international best practice
November/December 2007
Foreign exchange, monetary operations,

and central bank recapitalization
November 2007
Assist the BSL in setting up an action plan

for implementing FSAP

recommendations/financial sector reforms
June 2007
Foreign exchange, monetary operations,

and central bank recapitalization
January/February 2007
MFDMultitopic technical assistanceNovember 2005


STA
Multitopic technical assistance

Assist the authorities in implementing the

international standards recommended in

the Monetary and Financial Statistics Manual
November 2004

April 2009
GDDS mission on national accounts

statistics
March 2009
GDDS mission on national accounts

statistics
September/October 2008
GDDS mission to review the

methodological basis for compiling

national accounts aggregates
January 2008
GDDS project on implementation of a

Standardized Report Form (SRF)
June 2007
GDDS project on reconciling monetary

and fiscal accounts
August 2006
GDDS project on national accountsJanuary 2006
GDDS project on national accountsFebruary 2005
GDDS project on reconciling monetary

and fiscal accounts
February 2005
GDDS project on reconciling monetary

and fiscal accounts.
October 2004
GDDS project on balance of payments

issues
September/October 2004
GDDS project on national accountsSeptember 2004
GDDS project study tour for Sierra

Leonean officials to Kenya on strategic

planning
August 2004
GDDS project on national accountsApril 2004
GDDS project on strategic planningMarch 2004

XII. Resident Representative

Mr. Meshack Tjirongo will assume responsibility for the Fund office in November 2009 as a new resident representative. Mr. Tjirongo will cover both The Gambia and Sierra Leone and will be stationed in Freetown.

Appendix II. Sierra Leone Joint World Bank-IMF Work Program, 2009-10
TitleActivitiesProvisional Timing of MissionExpected Delivery Date
A. Mutual Information on Relevant Work Programs
World Bank work programPublic Expenditure ReviewFebruary 2009December 2009
Country Assistance Strategyongoing dialogueDecember 2009
Third Governance Reform and Growth

Credit (GRGC 3)
June 2009November 2009
Mineral Sector TAMay 2009December 2009
Financial Sector TANovember 2009June 2010
First Programmatic Development Policy

Credit
January 2010September 2010
IRCBP SupervisionDecember 2009N/A
IPFMRP (PFM Project) SupervisionMultiple 2010N/A
Decentralized Service Delivery Spn.Multiple 2010N/A
IMF work programSixth PRGF review and negotiation of a

new program
February 2010April 2010
2010 Article IV consultation and first

PRGF review
September 2010December 2010
Technical Assistance
FAD:

•Revenue administration and tax reform (GST implementation)

•Public financial management (streamlining budget execution)

•Framework for retail fuel price setting
February 2010

November 2009

February 2010
March 2010

December 2009

March 2010
MCM

Central bank audit

Bank supervision

Payment systems

Multi-topic (bank supervision, monetary operations, audit)
October 2009

Fourth quarter 2009

December 2009

March 2010
November 2009

December 2009

December 2009

April 2010
STA

Monetary and financial statistics
First quarter 2010First quarter 2010
B. Requests for Work Program Inputs
Fund request to

Bank
Public expenditure reviewFebruary 2009December 2009
Bank request to

Fund
Medium-term macroeconomic frameworkContinuous
C. Agreement on Joint Products and Missions
Joint products in

FY 2010
DSADecember 2009
DSADecember 2010
Assisting the authorities with the

implementation of their financial sector

reform strategy
Continuous
Appendix III. Statistical Issues

1. Data provided to the Fund are affected by serious shortcomings that significantly hamper surveillance. The prolonged civil war resulted in a virtual collapse of statistical systems in the late 1990s. Serious deficiencies still affect balance of payments statistics, national accounts, and social indicators. The authorities are cooperating fully in providing data to the Fund and regularly disseminating economic and financial data to the public. The country participates in the GDDS, but its metadata need to be updated.

2. A major and sustained improvement in the coverage and timeliness of economic data will require greater interagency coordination and restructuring the institutional framework. Statistics Sierra Leone (SSL) continues to face a shortage of budgetary resources which adversely affects compilation of national accounts and price statistics. Since March 2004, and with support from the GDDS Anglophone Africa Project, fourteen national accounts TA missions visited Freetown, the most recent in March 2009. These missions reviewed source data, methodologies, compilation, and dissemination issues and assisted with data development and improvements in methodology.

National accounts

3. The coverage of private sector activities in the national accounts is hampered by an outdated business directory and low response rates to surveys. In particular, small businesses, which represent a very high proportion of business activity, are not adequately captured in national account statistics. The consumer price index (CPI) is used extensively to derive estimates of GDP at constant prices. AFR missions continue to make their own estimates and projections of key national accounts aggregates, as well as making adjustments to historical data using new information.

4. Efforts to reconstruct the national accounts estimates commenced during 2003/04, with the main effort being to prepare new estimates for the period starting in 2001. Because resource constraints significantly the production of final estimates, only preliminary data for 2001-04 were made available. Efforts are underway to prepare revised national accounts based on a 2005 benchmark and using 2005 prices to compile constant price estimates. However, shortages of resources and staff continue to pose major constraints to the statistical development undertaken by SSL.

Prices

5. The SSL compiles the CPI monthly and publishes it with a lag of about three weeks. It has been rebased to 2003 using the 2003 Sierra Leone integrated household survey and continues to cover the capital city and three towns. While a national CPI is being compiled, the authorities continue to publish the old CPI (1992=100). To avoid confusion, the authorities should be encouraged to cease publication of the old series, although they may wish to publish a separate report on the changes between base periods. The production of producer price indices remains a medium-term goal planned to start in 2009.

Government finance statistics

6. The budget reporting system was established with assistance from the Fund/UNDP technical assistance project. Monthly data on central government revenue, current expenditure, and financing are provided with appropriate detail. The European Commission is providing technical assistance to the Accountant General’s Office to improve the timeliness and quality of fiscal data. Fiscal data are reported to AFR but annual data for publication in the GFS Yearbook are no longer being submitted (the most recent data refer to 2004). Fiscal data only cover the central government, not extra budgetary agencies and local governments.

7. There is an urgent need for more timely and accurate data on foreign-financed development projects. Reports on implementation of the development budget and its financing are currently not produced in a format that is suitable for budget analysis because the necessary data are not available. There is also need for quality control of the final data. The authorities are currently considering introduction of a flash reporting system for government expenditure in general and for foreign aid-financed projects. As part of the GDDS regional project for Anglophone African countries, work has been undertaken to reconcile fiscal and monetary data and to improve the coverage and classification of the two data sets.

Monetary statistics

8. The main components of the central bank balance sheet are available daily and weekly; this system provides an early warning system on key financial targets. The full monetary survey is compiled by the BSL with a lag of about six weeks; it has comprehensive coverage of commercial banks.

9. There has been some progress in the compilation of data in line with the 2000 Monetary and Financial Statistics Manual. The BSL, with assistance from STA, has completed the preparation of a standardized report form (SRF) for the central bank, but it has not yet started regular reporting to the IMF. Work on preparation of the SRF for other depository corporations continues.

10. Reconciliation of fiscal and monetary statistics remains a challenge. In the past, compilation of fiscal data solely on a cash basis and differences in the coverage of the central government explained most of the discrepancies between the datasets. In 2007, a TA mission found limited progress on previous recommendations on the fiscal reporting system for extra budgetary agencies and projects. The coverage of reporting agencies had improved, but there were many obvious errors and omissions in the data and in the BSL database. However, in June 2008 the authorities notified the IMF that the fiscal data have been reconciled with the expanded BSL monetary data.

Balance of payments

11. The BSL is responsible for compiling balance of payments (BOP) statistics. It obtains source data from the SSL, government ministries, the Customs and Excise Department (Customs), and the “Financial Survey of Major Limited Companies,” for data on foreign direct investment. Imports and exports of goods estimates are based on data compiled by Customs and are adjusted for coverage, valuation, and timing to accord with BOP definitions. The BSL does not adjust BOP data using supplementary information to take account of unreported data.

12. External transactions are characterized by a large volume of activity in the informal sector, principally diamond smuggling. A considerable portion of imports is financed by these unrecorded exports. As a result, official BOP statistics tend to substantially understate transactions. Staff has been addressing this problem through the use of third-country (principally EU member) import data. STA has been providing technical assistance on BOP issues through the GDDS project to help the authorities implement the Balance of Payments Manual, Fifth Edition (BPM5).

13. Data problems also exist for trade in services, income statistics, current transfers, and the capital and financial accounts. Regarding the last, there are substantial difficulties in tracking financial transactions of the public and private sectors that are routed through commercial banks. While the authorities are producing data on the international investment position, improvements are required in coverage and in valuation adjustments. These difficulties are manifested in reconciling flow data in the BOP and stocks in the international investment position. Estimates of smuggled imports and exports, in particular diamonds, are also not available.

14. Information on official grant and loan receipts is relatively good and is prepared by AFR on the basis of contact with the authorities and donor agencies, but data on private capital flows are very poor. Some information on private banking flows can be derived from the monetary survey. Other private flows, especially those linked to the informal diamond trade, are implicitly included in “errors and omissions.”

Sierra Leone: Table of Common Indicators Required for Surveillance

October 2009
Date of latest

observation
Date receivedFrequency of

Data4
Frequency of

Reporting4
Frequency of

publication4
Exchange Rates10/08/0910/15/09DWW
International Reserve Assets and Reserve Liabilities of

the Monetary Authorities1
09/0910/15/09MMM
Reserve/Base Money09/0910/15/09MMM
Broad Money08/0910/05/09MMM
Central Bank Balance Sheet09/0910/15/09MMM
Consolidated Balance Sheet of the Banking System08/0910/05/09MMM
Interest Rates209/0910/15/09WMW
Consumer Price Index08/0909/30/09MMM
Revenue, Expenditure, Balance and Composition of

Financing - Central Government
06/0908/31/09MMN/A
Revenue, Expenditure, Balance and Composition of

Financing- Central Government
06/0908/31/09MMN/A
Stocks of Central Government and Central Government-

Guaranteed Debt
06/0908/31/09QQN/A
External Current Account Balance06/0908/31/09AAA
Exports and Imports of Goods and Services06/0908/31/09AAA
GDP/GNP06/0908/31/09AAA
Gross External Debt06/0908/31/09AAA
International Investment Position306/0908/31/09AAA

Includes reserve assets pledged or otherwise encumbered as well as net derivative positions.

Both market-based and officially-determined, including discount rates, money market rates, rates on treasury bills, notes and bonds.

Includes external gross financial asset and liability positions vis-à-vis nonresidents.

Daily (D), Weekly (W), Monthly (M), Quarterly (Q), Annually (A); Irregular (I); Not Available (NA).

Includes reserve assets pledged or otherwise encumbered as well as net derivative positions.

Both market-based and officially-determined, including discount rates, money market rates, rates on treasury bills, notes and bonds.

Includes external gross financial asset and liability positions vis-à-vis nonresidents.

Daily (D), Weekly (W), Monthly (M), Quarterly (Q), Annually (A); Irregular (I); Not Available (NA).

1When a member has overdue financial obligations outstanding for more than threemonths, the amount will be be shown in this section.
2Assistance committed under the original framework is expressed in net present value (NPV) terms at the completion point, and assistance committed under the enhanced framework is expressed in NPV terms at the decision point. Hence these two amounts cannot be added.
3Under the enhanced framework, an additional disbursement is made at the completion point corresponding to interest income earned on the amount committed at the decision point but not disbursed during the interim.
4The MDRI provides 100 percent debt relief to eligible member countries that qualified for the assistance. Grant assistance from the MDRI Trust and HIPC resources provide debt relief to cover the full stock of debt owed to the Fund as of 2004 that remains outstanding at the time the member qualifies for debt relief.

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