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2005-2009-Sierra Leone-Country Strategy Paper

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2005-2009-Sierra Leone-Country Strategy Paper AFRICAN DEVELOPMENT BANK AFRICAN DEVELOPMENT FUND SIERRA LEONE 2005-2009 COUNTRY STRATEGY PAPER COUNTRY DEPARTMENT WEST REGION JULYL 2005 SCCD: G. G. TABLE OF CONTENTS Page CURRENCY EQUIVALENTS, WEIGHTS AND MEASURES, LIST OF TABLES, i-vi LIST OF ANNEXES, LIST OF ABBREVIATIONS AND EXECUTIVE SUMMARY I. INTRODUCTION 1 II. COUNTRY CONTEXT 2 2.1 Political Context 2 2.2 Macroeconomic and Structural Context Issues 3 2.3 Sectoral Context Issues 6 2.4 Priority Cross-cutting Issues 10 2.5 Poverty, Social Context and Issues 14 2.6 Medium Term Economic Outlook and External Environment 17 2.7 Private Sector Business Climate and Issues 18 III. NATIONAL DEVELOPMENT AGENDA AND MEDIUM TERM PROSPECTS 19 3.1 Key Elements of the Government Development Agenda 19 3.2 Assessment of Implementation Progress of the Agenda 23 3.3 The Partnership Framework 24 3.4 Challenges and Risks 26 IV. BANK GROUP COUNTRY ASSISTANCE STRATEGY 28 4.1 Country Context and Strategic Selectivity 28 4.2 Portfolio Management and Lessons From Previous CSP 28 4.3 CSP Result Framework 30 4.4 CSP Pillars or Areas of Intervention 33 4.5 Regional Dimensions of Bank Group Assistance 35 4.6 Bank Group Assistance 35 4.7 Partnership and Harmonization 41 V. RESULTS-BASED MONITORING AND EVALUATION 41 5.1 Monitoring of CSP Outcomes and Bank Group Performance 41 5.2 Managing Risks 42 5.3 Country Dialogue Issues 42 VI. CONCLUSIONS AND RECOMMENDATIONS 43 6.1 Conclusions 43 6.2 Recommendations 43 This Country Strategy Paper (CSP) is based on the findings of the Preparation Mission that visited Sierra Leone in March 2005. The Missions was led by Mr. James Wahome, Principal Country Economist, OCCW and comprised Mr. H. Dosso, Senior Agronomist, OCAR.2, Mr. P. Sturmheit, Senior Engineer, OCIN.3 and Mr. P. Kunene, Senior Education Specialist, OCSD.1. A CSP Dialogue Mission was subsequently undertaken to Sierra Leone in June 2005 that focused on reviewing the CSP with the authorities and the country’s key development partners. Enquires concerning the document may be addressed to Mr. A.Zejly, Acting Director, OCCW (Ext 2127) or Mr. Alieu Jeng, Manager, OCCW.1 (Ext. 2172). i ANNEXES I Bank Group Operations II PRSP Country Strategic Framework III Sierra Leone: Basic Data Sheet IV Table 1: Sierra Leone: Selected Economic and Financial Indicators, 2005-2007 Table 2A: National Accounts at Current Prices, 1999-2003 Table 2B: National Accounts at Constant 1990 Prices, 1999-2003 Table 3: Sierra Leone: Central Government Financial Operations Table 4: Sierra Leone: Sierra Leone: Central Government Financial Operations Table 5 Sierra Leone: Balance of Payments, 2002-2007 Table 6: Sierra Leone: Monetary Survey, December 2001-December 2005 Table 7: Sierra Leone: Gross External Financing Requirement, 2005-2007 Table 8: Sierra Leone: Balance of Payments Projections, 2002-2020 V Map of Sierra Leone VI References BOXES Box 1: Sierra Leone: Country Snapshot 2 Box 2: Sierra Leone: National Poverty Headcount 15 Box 3: Sierra Leone: Poverty Characteristics 17 Box 4: Summary of Key Elements of the Government’s Agenda and Expected Outcomes 24 Box 5: Donors Activities in Sierra Leone 25 Box 6: Participatory Approach in the Preparation of the CSP 35 TABLES Table 1: Thematic Results Matrix 31 Table 2: CSP Results Based-Framework, 2005-2009 34 Table 3: Weak Areas of CPIA and Benchmarks to Monitor Improvement in Rating 39 ii ABBREVIATION AND ACRYNOMS ADB African Development Bank ADF African Development Fund ACC Anti-Corruption Commission ADSR Agriculture Development Sector Report ASR Agriculture Sector Review CPFA Country Profile of Financial Accountability CPIA Country Policy and Institutional Assessment CFAA Country Financial and Accountability Assessment CRRP Community Reintegration and Rehabilitation Project DDR Disarmament, Demobilization and Reintegration DfID Department for International Development EC European Commission ECOMOG ECOWAS Military Observer Group ECOWAS Economic Community of West African States ERRC Economic Rehabilitation and Recovery Credit ERSF Emergency Recovery Support Fund HIPC Highly Indebted Poor Countries HIV/AIDS Human Immunodeficiency Virus/Auto-Immune Deficiency Syndrome NGO Non-Governmental Organization IAAC Integrated Approach to Aid Coordination IDPs Internally Displaced Population IMAT International Military Advisory Team IMC Inter-Ministerial Committee IMF International Monetary Fund IRCB Institutional Reform and Capacity Building MDTF Multi-Donor Trust Fund MODEP Ministry of Development and Economic Planning MOHS Ministry of Health and Sanitation MRU Mano River Union MTEF Medium Term Expenditure Framework NaCSA National Commission for Social Action NECC National Education Coordination Committee NSAP National Social Action Project NCDDR National Committee for Disarmament, Demobilization and Reintegration NCRRR National Commission for Reconstruction, Resettlement and Rehabilitation NPA National Power Authority NRC National Recovery Committee PCPI Post-Conflict Progress Indicators PRGF Poverty Reduction and Growth Facility PSMS Public Sector Management Support PASCO Poverty Alleviation Strategy Coordinating Office PRSC Poverty Reduction Steering Committee SLANGO Sierra Leone Association of Non-Governmental Organizations SPP Strategic Planning and Action Process TRC Truth and Reconciliation Commission TSS Transitional Support Strategy UNAMSIL United Nations Assistance Mission in Sierra Leone UNDP United Nations Development Program UNHCR United Nations High Commission for Refugees iii CURRENCY EQUIVALENTS (31 MAY 2005) Currency Unit: UA1.00 = US$ 1.47495 UA 1.00 = Leones (Le) 4,360.30 WEIGHTS AND MEASURES Metric System GOVERNMENT FINANCIAL YEAR January 1 - December 31 iv EXECUTIVE SUMMARY 1. Country Context: Sierra Leone has suffered from dramatic socio-economic and political instability that culminated into a brutal armed conflict, which lasted for just over ten years, from March 1991 to January 2002. Since the end of the conflict, Sierra Leone has made significant strides in consolidating peace and rehabilitating the extensive socio-economic destruction caused by the conflict. Presidential and parliamentary elections were successfully held nation-wide in May 2002. The next Presidential and parliamentary elections are scheduled for 2007. Local and Chiefdom elections were also successfully held for the first time in 32 years in May 2004. Apart from being an important milestone on the road to peace and political reconciliation, the Local Government elections represent an important step in implementing the on-going decentralization programme, which aims at improving the delivery of essential services at the grass-root level. The Truth and Reconciliation Commission (TRC), established to enhance peace building and political reconciliation, successfully concluded its work in June 2004. A Special Court, sponsored by the United Nations, was also established to prosecute those that bear the greatest responsibility for the war atrocities, and trials are ongoing. Arising from these positive developments, the UN Peace Keeping Mission (UNAMSIL) has commenced its phased withdrawal from the country, expected to end by December 2005. 2. Macroeconomic Context: With the dawn of peace, the Government has embarked on the implementation of macroeconomic and structural reforms that were derailed by the onset of the civil conflict. Consequent to the implementation of these measures, Sierra Leone’s economic performance over the recent past has remained robust, with the real GDP expanding by 7.4 percent in 2004, an improvement from the growth rate of 6.5 percent and 6.3 percent attained in 2003 and 2002, respectively. The sustained recovery in GDP growth is broad based, embracing agriculture, mining, construction, manufacturing and services. Government revenue, as a percentage of GDP, has also continued to rise, reaching 12.2 percent of GDP by December 2004. Inflation remained low in 2001 and 2002, but increased to 8.2 percent and 13.6 percent in 2003 and 2004, respectively. The increase in inflation in 2003 and 2004 is attributed to the higher international fuel prices that prevailed, especially in 2004, and their effect on transport costs, the expansion in broad money, and the continued depreciation of the Leone against the U.S. dollar and other international currencies. 3. However, despite the substantial progress made in economic recovery, Sierra Leone’s economic fundamentals remain weak. Gross national savings are low, amounting to 6.7 percent of GDP in 2003, compared to 5.3 percent in 2002. The low rates of savings reflect the low-income levels as well as institutional weaknesses that poorly support the savings process. The share of GDP devoted to investment continues to be low, reaching 10 percent in 2002 and 15.5 percent in 2003. Investments undertaken over the past were mainly financed from foreign borrowing. Policies to increase savings and enhance greater domestic and foreign investment are therefore necessary to increase productivity and economic growth over the medium term. Being a post-conflict country, Sierra Leone faces several critical challenges, the most crucial being that of addressing the high youth unemployment and the weak institutional and human capacity. The country also faces the prospects of a gradual phasing out of preferential allocations and support by development partners, as the country concludes its post-conflict transition. 4. Sierra Leone’s Poverty Reduction Strategy Paper (PRSP): In an attempt to address the abject poverty, Sierra Leone prepared the Interim Poverty Reduction
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