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Sierra Leone: Imf Crisis Solution Report

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Sierra Leone: Imf Crisis Solution Report ActionAid International Sierra Leone SIERRA LEONE: IMF CRISIS SOLUTION REPORT Samuel Jamiru Braima Senior Lecturer & Head Department of Economics & Commerce Fourah Bay College,University of Sierra Leone 2011 IMF Crisis Solution SL Acknowledgements I would like to thank ActionAid International Sierra Leone (AAISL) for providing the opportunity for undertaking this research to determine the nature of responses provided by International Financial Institutions (IFIs)to the solutions of the Financial crisis, particularly the International Monetary Fund (IMF), and the implications for poverty reduction efforts in Sierra Leone. I would like to extend sincere thanks to AAISL field officers and Ministry of Finance staff whose efforts have been invaluable in the collection of field data and constructive comments that have contributed immensely in the lead up to the preparation of this report. This is also to acknowledge the communities – Local Councils and ordinary residents – for their support in providing the responses required that helped determine the trend in information on poverty related spending on the part of Government and how this translates to poor people’s lives in their various communities. Many thanks also go to the study team whose efforts and dedication in overall documents review, undertaking field work and supporting the information analysis has been invaluable. This work will never be complete, if Mr.Patrick Zombo’s original insistence on how to go about the study and dedication to seeing this study done in the light of AAISL is not put down in black and white. You have just started the long race; I hope you will be able to sustain it. Thanks for all the pains. Disclaimer Full responsibility for the text of this report rests with the authors. The views contained in this report do not necessarily represent those of the people consulted or AAISL. Samuel Jamiru Braima Senior Lecturer, Department of Economics and Commerce Fourah Bay College, University of Sierra Leone 2 IMF Crisis Solution SL Contents Acknowledgements ................................................................................................................ 2 Disclaimer ............................................................................ Error! Bookmark not defined. Abbreviations ......................................................................................................................... 5 List of tables and figures ........................................................................................................ 6 Executive Summary ................................................................................................................... 7 Findings .................................................................................................................................. 7 GoSL Policy response ............................................................................................................ 9 PART 1 .................................................................................................................................... 10 BACKGROUND ................................................................................................................. 10 General objective: ............................................................................................................ 11 Specific objectives: .......................................................................................................... 11 Key research indicators ........................................................................................................ 12 IMF Program: ................................................................................................................... 12 Programme implementation: ............................................................................................ 12 Impacts on the general economy (macro indicators): ...................................................... 12 Impacts on human welfare: .............................................................................................. 12 PART 2 .................................................................................................................................... 13 METHODOLOGY ............................................................................................................... 13 2.1 Desk Research ............................................................................................................ 13 2.2 Expert Informants’ Interviews ................................................................................... 13 2.3 Focus Group Discussion (FGDs) ............................................................................... 13 PART 3 .................................................................................................................................... 15 IMPACT OF FINANCIAL CRISIS ON THE SIERRA LEONE ECONOMY .................. 15 3.0 Introduction ................................................................................................................ 15 3.1 Sierra Leone during the Global Financial Crisis ........................................................ 15 PART 4 .................................................................................................................................... 19 IMF AND SIERRA LEONE ................................................................................................ 19 4.0 Sierra Leone –IMF Relationship ................................................................................ 19 4.1 THE PRGF PROGRAMMES IN SIERRA LEONE 2006-2010 .............................. 20 Key Features of PRGF ..................................................... Error! Bookmark not defined. SINGLE-DIGIT INFLATION A MUST ............................................................................. 24 INTERNATIONAL RESERVES ........................................................................................ 27 4.3 SIERRA LEONE’S DEVELOPMENT PRIORITIES ................................................... 28 PUBLIC FINANCIAL MANAGEMENT FOR EFFICIENCY ...................................... 30 KEY TRANSMISSION CHANNELS IN THE SIERRA LEONEAN ECONOMY ......... 31 Financial Sector ................................................................................................................ 31 Commodity prices and trade ............................................................................................ 32 Remittances ...................................................................................................................... 33 Foreign Direct Investment ............................................................................................... 33 Overseas Development Assistance (ODA) ...................................................................... 33 Domestic Revenues .......................................................................................................... 34 Policy Responses .................................................................................................................. 35 Increase Government Spending ....................................................................................... 35 Protect Poverty Expenditure ............................................................................................ 36 Other effects of the crisis in 2010 ........................................................................................ 37 PART 5 .................................................................................................................................... 41 5.1 REGIMES DURING THE PRGF AND IMPACT ON THE POOR ............................. 41 5.2 Recent Suggestions/Pro-Poor alternatives and Conclusions .......................................... 50 SELECTED REFERENCES .................................................................................................... 52 3 IMF Crisis Solution SL 1. Agenda for change- GoSL PRSP II .................................................................................... 52 14. Statement at the Conclusion of an IMF Mission to Sierra Leone, Press Release No. 10/348 September 21, 2010 .................................................................................................... 52 15. Tax Scoping Study 2010 – Christian Aid Sierra Leone (unpublished) ........................... 52 APPENDIX A1. ..................................................................................................................... 53 APPENDIX 1 B ....................................................................................................................... 54 4 IMF Crisis Solution SL Abbreviations AAI - ActionAid International AAISL - ActionAid International Sierra Leone AfDB - African Development Bank BSL - Bank of Sierra Leone CRF - Consolidated Revenue Fund DfID - Department for International Development DTD - Domestic Tax Department ECF - Extended Credit Facility EIF - Enhanced Integrated Framework ESAF - Enhanced Structural Adjustment Facility FDGs - Focus Group Discussions FDI - Foreign Direct Investment FHCI - Free Health Care Initiative GDP - Gross Domestic Product GoSL - Government of Sierra Leone GST - Goods and Services Tax HIPC - Heavily Indebted Poor Countries IFIs - International Financial Institutions IMF - International Monetary Fund IPRSP - Interim Poverty Reduction Strategy LICs - Low Income Countries LTO - Large Tax Payer money MDAs - Ministries Departments and Agencies MDGs - Millennium Development
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