• August 25, 2023

Debt Review Strategy… FINANCIAL LEAKAGES LOOMS LARGE

Debt Review Strategy…  FINANCIAL LEAKAGES LOOMS LARGE
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The Public Debt Management Division, Ministry of Finance in their recent debt strategy workshop appeared to have ignored the issues of addressing fiscal leakages that continue to loom over the ministry. Many national debt experts were yearning to see challenges mentioned by the Audit service Sierra Leone in their Performance Audit Report on the implementation and Public Debt management on behalf of government and Sierra Leoneans, recently discussed at the Finance Ministry’s Public Debt Strategy workshop.

Critical fiscal management issues such as the unavailability of a borrowing plan for 2018-2021, regardless of the fact that it was one of the action points in the 2020 strategic plan, for which the Director of Public Debt was unable to proffered reasons for its continuous looming unavailability. A borrowing plan is a schedule of an anticipated debt contraction over the coming fiscal year which indicates the size, type and repayment terms of an anticipated debt.

The Public Debt Division was also accused of waste of resources as Public Debt Regulation and Procurement Manual that should minimised the operational risks for sound business practices, including well articulated responsibilities for staff, and clear monitoring arrangement absent. Challenges in the segregation of duties, which constrained staff leading to conflicting processes and procedures in public debt operations, especially for domestic arrears remain unresolved.

Review of the report on monitoring of loans and grant funded project nationwide tilted: Country Programme Portfolio Review (CPPR) document done by the World Bank in collaboration with the National Monitoring Evaluation Department revealed delays in the implementation of the projects due to lack of proper system in the procurement processes, lack of effective monitoring of project loans by government, inadequate strategies in place through the project implementation unit, to speed up reviews of proposals, among other things were challenges faced by the division in the five years.

Before the update of the country Medium Term 2023-2028 Debt Strategy, government aimed to maintaining public debt at a sustainable threshold of not more than 70% in nominal terms and 55% in present value terms, while external debt will not exceed 40% Gross Domestic Product in present value terms.

According to the stand alone audited report, the total public debt stock of Sierra Leone at the end of December, 2020 amounted to Old Leones 30.7 trillion, of which external and domestic debts accounted for 20.05 trillion and 10.66 trillion.

The report further exposed the public debt stock increased by 14.69 percent, relative to its end of December 2019 position of 20.1%.

Public debt stock increased by 14.69%, relative to its end of December 2019 position of 20.1%, the supreme audit institution revealed.

The total public debt in 2020 amounted to 30.7 trillion Old Leones, while external and domestic debts accounted for 20.05 trillion old Leones and 10.66 trillion.

Following the commencement of the debt strategy workshop, Public Debt Management Division Ministry of Finance, on Monday 21st August 2023 with the aim of updating the Medium Term 2023-2028 Debt Strategy, to reduce the cost and risks of the existing debt portfolio in consistent with the national debt strategy of the country.

Relevant key Ministries Departments and Agencies – MDAs including the National Revenue Authority – NRA, National Mineral Agency (NMA), Bank of Sierra Leone, Statistic Sierra Leone, the University of Sierra Leone and Civil Society Organisations deliberated and analysed the issues of existing debt, financing needs, intent and exchange rate and potential financing strategies during the workshop hosted at Leisure Lodge, Aberdeen, West of Freetown.

Speaking at the secession, the Director Public Debt Management, Mathew Sandy, informed that Sierra Leone has met the international standards of the Medium Term Debt Strategy training presentation by the World Bank and the International Monetary Fund.

He explained that the exercise involved eight steps including the objectives and scope of the strategy, cost and risk of existing debt, potential sources of finance, Medium Term macro policy and market environment. He said broad structural factors and risks, analysis of alternative debt management strategies review with fiscal infrastructure, monetary and market authorities and propose and approve the design. “Fiscal consolidation with efficiency, spending and innovative ways are significant to reducing debt in the country”, he added.

He stated that the update of the Medium Term Debt Strategy 2023-2028 would inform the financing options for the 2024 budget and fiscal strategy statement 2024-2025 which he said will proffer policies for the entire year of delivery on the Big Five Game Changer, Feed Salone, Human Capital Development, youth empowerment scheme, revamping of the public service and technology.

Senior Deputy Financial Secretary, Samuel E. B. Momoh, in a presentation disclosed that the minister disclosed public debt is among the most topical issues of global economic discussions, nothing debt has been associated with volatile economic growth, high inflation and persistence global shocks attributing it to the ongoing Russia – Ukraine war.

Momoh said the stock of disbursed outstanding public debt including verified domestic arrears reached 51.70 billion, estimated at 2.75 billion USD at the end of December, 2022, of which external and domestic debt accounted for 35.66 billion, 1.9 billion USD and 16.06 billion respectively.

He said recent estimate of public debt stood at 98.9% of the GDP as of December 2022 and is projected to an average of 82.38% of GDP in 2024-2027 under the baseline public debt and macroeconomic assumption.

He also stated that existing Medium Term Debt Strategy of 2021-2025 estimated total public debt was projected to decline gradually with hopes that the economy would expand export and increase domestic revenues and budget deficit narrow in the medium term. “Most of the expectations turned the opposite as the economy contracted, domestic revenue decreased and budget deficit expanded with the government agenda”, Momoh stated, and continued that the foundation upon which the last Medium Term Debt Strategy 2021-2025 was built has changed and that comes the need to update the Medium Term Debt Strategy to reflect the recent development and design alternative strategies to address the rising debt levels to finance government priorities at low cost and reduce risk.

Updating the Medium Term Debt Strategy 2023 -2025 will help improve the country’s policies and institutional assessment rating translating into additional  IDA allocation to the country.

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