IMF Does Quick U-turn on Sierra Leone's Economy

The IMF has performed a quick u-turn on its predictions for the Sierra Leonean economy. Up till not very long ago the IMF was issuing optimistic reports from Sierra Leone, even though there were many indications to show that all was not well. This follows a now-familiar pattern from the world body of failing to adequately analyze economic trends at country, regional and global level.

In April 2014 an IMF delegation visited Sierra Leone and at the conclusion came out with a generally positive assessment of the country's prospects ("Economic activity continues to expand robustly...
Program implementation remained good. At the end of December 2013, all quantitative performance criteria were met; and all quantitative indicative targets, but one, were observed.". Supporters of the IMF will argue that this was before the Ebola outbreak and no one could have predicted the seriousness of it. Maybe, maybe not, but what could easily have been assessed pre-Ebola was the strength of Sierra Leone's health system. There were many, many indications (including the 2014 WHO maternal mortality report, which we covered) to indicate that the health system was in a parlous condition and vulnerable to a sudden attack. Doctor and nurse/patient ratios were/are very poor. The Abuja target (15% of government spending to go to the health sector) was not being met, even as the IMF was endorsing huge, uncontrolled expenditures on infrastructure contracts.

Well into the Ebola crisis, as late as June 26, 2014, the IMF issued a statement saying. "
Program performance has been strong. All PCs were met with comfortable margins, and all indicative targets (ITs) were met, except for the one on poverty-related spending that was missed owing to enhanced monitoring of domestic investment execution and delayed budget support. Economic growth momentum continued in 2013, with output expanding by 20 percent. The IMF staff recommends completion of the first review under the ECF arrangement."

The 2014 IMF Sierra Leone reports, as well as previous positive assessments, also evidently failed to take into account the country's education indicators. These crucial predictors of development over the next few decades place Sierra Leone woefully behind its neighbours and competitors (see Dysfunctional Education). UNESCO statistics on education spending show Sierra Leone to be close to the bottom of the class in Africa . And yet the IMF was still looking at this and essentially saying, "All is going well in this country."

Many other social services (housing, transportation) leave a lot to be desired in Sierra Leone. In particular, the water and sanitation situation is deplorable, even in the capital, let alone in the countryside. This has a direct impact on health; in addition, with proper investment, the country's plentiful rainfall could be used to boost year-round agriculture, rather than the curent reliance on rainy season planting. However, rather than productive rural investments,  the government was being supported with loans by the IMF, enabling it to spend a large, and indeterminate amount on exorbitant and hastily arranged contracts for the construction of a few showcase, urban four-lane highways.

Various world disaster preparednes reports place Sierra Leone as one of the most vulnerable countries to natural disasters. Tens of thousands of Sierra Leoneans now live in hazardous low-lying coastal areas beneath Freetown's looming mountains and torrential rain. A recent storm left thousands displaced. Long-time Freetown residents will readily tell you of the environmental degradation that Freetown has suffered over the years and the flooding and change in drainage patterns. The IMF evidently failed to take this into account when it gave Sierra Leone a clean bill of health in 2014.

The IMF, like the Government of Sierra Leone, placed great faith in revenue from newly-established iron-ore mining companies. In 2013 we heard the oft-repeated phrase, "fastest growing economy in the world" more times than we care to remember. This was based on start-up revenue from these iron ore companies. The hype was folly at its height, and the IMF above all should have known better. Commodity prices are notoriously cyclical, and the historically high iron ore prices then were certain to come down. This pattern has been ongoing for at least the last 100 years. Yet the IMF bought into the hype as the Government of Sierra Leone forecast  high revenues stretching several years into the future on the assumption of high iron ore prices. Now the iron ore prices have collapsed along with all the optimistic predictions about government revenue and economic growth.

The IMF endorsed the Government's Agenda for Prosperity, with its lofty infrastructure plans, justifying new air and seaports with a dreamer's optimism and contorted logic (sample: "Our current airport is seriously underutilized but in a few years time traffic will have increased. So we need to start a new airport now"). The IMF's June 19, 2014 press release on Sierra Leone says, "The scaling up of public investment, as envisaged in the implementation of the country’s poverty reduction strategy, the Agenda for Prosperity (AfP), should also help to catalyze private sector activity and contribute to higher, sustainable growth in the non-resources sector." What was a key component of the "scaling up of public investment as envisaged in the ...Agenda for Prosperity"? The new airport at Mammamah.
In June 2014, the IMF was effectively saying, yes, this is a good thing, go ahead. The Government accordingly went ahead with plans to build a brand new airport at Mammamah and negotiated a loan from the Chinese. We questioned this project in an article way back in 2013). The projected cost was a whopping 350 million dollars, a huge chunk of the government budget. (Yes, we've heard how long grace periods and long repayment periods can make a seemingly huge loan affordable. In Sierra Leone politicians have used this argument to run up massive, unsustainable debt, and the economy has been known to contract, so we prefer to assess loans on current ability to repay).

Now apparently, the IMF is having second thoughts. Its most recent press release (Sept. 15)  talks about the "very difficult fiscal situation" and the "need for expenditure restraint". There are rumours of tensions with the government over the Mammamah project. Construction is at a standstill despite government assurances over many months that the project would soon go ahead and despite the presence on the site of the Chinese construction crew. The IMF appears to be finally coming round to a calculation it should have made years ago.