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Sierra Leone News: Debt sustainability assessment begins

The Ministry of Finance (MoF) has commenced a week-long debt sustainability workshop to establish whether Government borrowing levels are running into a destabilising debt path in order to take corrective measures based on internationally acceptable indicators. The workshop will also assess the country’s level of exposure to risks of debt distress anchored on projected macroeconomic path in the medium to long-term.
The assessment is said to be benchmarked against established debt indicators such as Present Value (PV) of Debt to GDP, PV of Debt to export, Debt Service to Domestic Budget Revenue, Debt Service to Export, amongst others.
The Deputy Minister, Patricia Lavalie, said this year’s Debt Sustainability Analysis (DSA) will be conducted using the new Debt Sustainability Framework for Low Income Countries (DSF-LICs).
The new tool ensures that the DSF remains appropriate for the rapidly changing financing landscape facing Low Income Countries and to further improve emerging market financing pressures for countries, especially exposing the impact of commercial and domestic borrowing in order to provide a holistic debt position of the country.
“It is also flexible and makes judgement much easier and realistic than before. Monetary policy dimension to the assessment is so critical to ensure overall macro stability in the medium to long-term,” Minister Lavalie said.
She said the public debt was about Le16 trillion or 60% of GDP when the new government took office. There is also a huge stock of unpaid domestic arrears of about $1.4 billion USD, which is currently being audited and a strategy being developed for its clearance. She added that it is expected that the said arrears will be examined during the workshop.
In his statement, Deputy Governor, Ibrahim Stevens, noted that fundamental analysis is required at any point in time to understand the nature of the stock and to a larger extent the composition of external debt that the country has.
He predicated his remarks on the fact that the country needs to have a comprehensive economic analysis of the fundamentals for it to make good policy decisions. “I want you to make sure that is achieved. You do your macro forecasting and we do the inflation forecast at the Central Bank, I believe compounding all of them together they give us a better basis for taking policy decisions. We want to get the grading of our debt position,” he said.
The lead facilitator, Baba Musa, from the West Africa Institute for Financial and Economic Management (WAIFEM), said that the essence of the exercise is to assess the debt trajectory of the path of debt management or accumulation in Sierra Leone going forward.
The primary question to be answered is whether it is in the rising trend or is it in line with the fiscal commitment of government? Are there areas of concern? And if there are areas what corrective measures are they going to take to ensure that the debt remains sustainable in the medium to long term…” and that is why we conduct the debt sustainability analysis.”
By Zainab Iyamide Joaque
Tuesday August 28, 2018.

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