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Annual Report 1999 - Sierra Leone - The Economy
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5. External Debt Management
As at end December 1999, Sierra Leone's total disbursed and outstanding official medium and long-term debt, including principal arrears stood at US$ 1,201.9 million. The total stock of debt is still dominated by debts to Multilateral and Bilateral creditors, accounting for 59.6 percent and 29.3 percent respectively. Other creditors like Kuwait Fund for Economic Development, Saudi Fund for Economic Development and Foreign Military Contractors accounted for 3.8 percent whilst the residual 7.3 percent is owed to Commercial Creditors. The principal multilateral creditors are the World Bank, the International Monetary Fund (IMF) and the African Development Bank/Fund (ADB/F).
A total of US$ 173.59 million of the stock of disbursed outstanding debt represented principal arrears accumulated since the May 25, 1997 coup d'etat. This and subsequent events reduced the authorities activity to service their debts. Interest arrears amounted to US$ 26.05 million. As at end September 1999, total principal arrears were US$ 178.2mn but dropped to US$ 173.5mn by end December 1999. The drop was due to payment of principal arrears to the IMF in December 1999.
(a) Major Developments
- During the period under review, the Government of Sierra Leone made extreme efforts to normalise relations with creditors especially the key ones - the World Bank, IMF and African Development Bank. As at end December 1999, payments were up to date with these creditors whilst maintaining arrears with other multilateral creditors.
- In July 1999, the Government of Sierra Leone entered into an arrangement with the International Fund for African Development (IFAD), to consolidate the total arrears of US$ 1.3 million as at July 1999 and current maturities in September 1999 of US$ 0.3mn into a new loan with a new repayment schedule. This resulted in the reduction of debt service payments to IFAD.
- In December 1999, the International Monetary Fund disbursed to the Government of Sierra Leone an additional amount of SDR 15.55 million (US$ 21.3 million) under the Post Conflict Facility and Emergency Assistance programme.
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(b) External Debt by Creditor Category
Sierra Leone's stock of disbursed outstanding debt including principal arrears to all external creditors stood at US$ 1,201.9 million as at end December 1999 as compared to US$ 1,158.2 million as at end December 1998. See Table 10. This increase was as a result of disbursements made by the key multilateral creditors, namely the IMF, IDA and ADF. The Islamic Development Bank under the Emergency Assistance project also made disbursements of US$ 0.24mn.
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(c) Foreign Currency Composition
Table 11 shows the currency composition of Sierra Leone's Disbursed Outstanding debt including principal arrears. The Special Drawing Rights and the United States Dollars continue to be the currencies that dominate Sierra Leone's debt. They account for 33.63 percent and 25.62 percent respectively as at end December 1999.
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(d) Debt Indicators, Debt Ratios and Debt Service
Table 12 shows the debt indicators and debt ratios for the period 1998 and 1999. Debt service payments increased by 69.5 percent from US$ 13.2million in 1998 to US$ 22.4 million in 1999. The increase in the debt service payments made was due mainly to principal repayments made to IMF estimated at US$ 12.4 million. Debt service to export ratio at 355.6 percent was over and above the IMF/World Bank debt sustainability criteria of 200-250 percent respectively.
Sierra Leone's strategy is still predicated on the best effort approach, which calls for servicing debts to creditors who disburse and whose disbursements have a positive impact on the foreign exchange cash flow. Efforts are also underway to negotiate some settlement agreements with respect to arrears creditors.
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