IMF VIEWS ON SIERRA LEONE'S ECONOMIC PERFORMANCE

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SIPDIS

DEPARTMENT FOR AF/W (JHUNTER)

E.O. 12958: DECL: 09/24/2018
TAGS: ECON PREL SL
SUBJECT: IMF VIEWS ON SIERRA LEONE'S ECONOMIC PERFORMANCE

Classified By: CHARGE GLENN FEDZER FOR REASON 1.4(B)


1. (U) Summary: Ambassador Perry met with two International
Monetary Fund (IMF) representatives on September 18 to review
Sierra Leone's recent economic and governance performance.
The officials are currently undertaking an Article IV review
that will be the basis for IMF policy recommendations. They
are also taking advantage of this mission to review the 2009
budget to ensure it is consistent with commitments made under
the Poverty Reduction and Growth Facility. Though tempered
with realism, the discussion highlighted many reasons for
optimism about Sierra Leone's long-term development
prospects. End Summary.


2. (U) Ambassador Perry met with two International Monetary
Fund (IMF) representatives on September 18 to review Sierra
Leone's recent economic and governance performance. Norbert
Toe, Deputy Division Chief of the African Department,
accompanied by Alvin Hilaire, IMF Resident Representative in
Guinea and Sierra Leone, are currently undertaking an Article
IV review. This statutory mission reviews countries'
financial and economic arrangements through discussions with
Government of Sierra Leone (GoSL) interlocutors, and is the
basis for IMF policy recommendations. This type of review
occurs every two years in Sierra Leone. Taking advantage of
this mission, Mr. Toe and Mr. Hilaire are also reviewing the
2009 budget with the President, Minister of Finance, and
others to ensure it is appropriate with commitments made
under the Poverty Reduction and Growth Facility.


3. (C) Mr. Toe explained that data recorded to the end of
June, 2008, is under review. While he praised the Ministry of
Finance for improvements in terms of the provision of
information and statistics, he noted that the performance has
not been stellar. Of the nine performance criteria, three
were missed in the areas of revenue, the primary balance, and
the Central Bank balance. Mr. Toe stated that revenue was a
near-miss, and that the National Revenue Authority (NRA) is
making strides in improving the taxation system. Recording
and monitoring non-tax revenue, however, is a problem. The
Primary Balance shortfall is largely due to excessive travel
by the Executive and Legislative branches of government.
President Koroma assured the IMF representatives in a meeting
on September 18 that he would curb official travel, and
apparently appeared embarrassed when this was identified as a
concern. Also impacting the Primary Balance was the 2008
budget's omission of a promised $5 million GoSL contribution
to the Bumbuna hydroelectric project. This contribution was
eventually made, but created an unexpected deficit in the
primary balance. This, in turn, created problems with the
Central Bank balance.


4. (C) The Ambassador reported that the GoSL frequently
informs her of their "disappointment" in the donor community,
which they feel has failed to provide them with the funds
they need to effectively reduce poverty and drive growth
(Note: The GoSL budget is between 54-56% donor-funded,
according to the Deputy Minister of Finance. End note.). The
Ambassador herself feels that the GoSL must become
self-sufficient through building its domestic revenue base.
The IMF hears similar complaints, and responds with the same
refrain as the USG: mobilizing domestic resources is the only
way for Sierra Leone to move forward. While it is likely the
GoSL will continue to request donations for budgetary
support, it does appear that they are taking the message of
self-sufficiency to heart. And example of this is the NRA's
revamping of the taxation system and planned implementation
of a penalty system in October, 2008, for those who fail to
pay their taxes. This is considered by many to be a
significant step forward for the NRA and the GoSL.


5. (U) Mr. Toe asked Ambassador for her views on the
Anti-Corruption Commission (ACC) and governance in general.
The ACC, under the leadership of Commissioner Abdul
Tejan-Cole, is making great strides in terms of reorganizing
into an effective unit. The Ambassador stated that the
revised law, which was signed by the President on September 1
but cannot be implemented until it is publicly gazetted, is a
strong piece of legislation that gives the ACC the power to
effectively investigate and prosecute corruption at all
levels. The IMF representatives said they were also impressed
with the law, the commitment and fortitude of Mr. Tejan-Cole,
and the support that President Koroma has shown to the ACC.
Mr. Toe asked if the USG would consider providing financial
support to help ensure the ACC's positive momentum, and the
Ambassador replied that opportunities were already being
explored.


6. (U) On the governance issue, Ambassador Perry outlined the
role the mission played in the local elections, particularly
the support provided to organizations to inspire and train

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female candidates. Ambassador and emboffs also added to the
chorus of voices in the international community promoting
messages of peace and tolerance in the build-up to election
day. She informed the IMF representatives that the USG is
also working closely with the GoSL on maritime issues, which
encompass security, environmental, economic, and social
dynamics. Ambassador Perry's primary message to Mr. Toe and
Mr. Hilaire was that the GoSL has made progress, even
substantial progress considering the hardships and obstacles
facing them. She was hopeful that this positive trend will
continue, particularly in the area of economic development.


7. (C) Comment: Though the GoSL has fallen short on some of
its commitments to international financial institutions,
there is a universal view that these deficiencies are
primarily due to capacity and resource limitations rather
than will. The IMF has been patient with Koroma's
administration thus far, but also acknowledged that there
will ultimately be consequences if actions continue to fall
short of agreed-to expectations. Still, representatives
appear to agree with the Ambassador's view that there are a
number of reasons to be optimistic about Sierra Leone's
ability to make structural changes in the short-term for
long-term economic benefit. Supporting such entities as the
ACC, in principle and practice, would be a clear sign that
the USG believes a turnaround in Sierra Leone is probable,
rather than possible. End Comment.
FEDZER