Sierra Leone’s public debt increased to $3.14

About 75% of domestic debt is owed to commercial banks in the country.

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By Lawrence Williams

Sierra Leone’s public debt increased to $3.14 billion in 2021, according to the World Bank’s Sierra Leone Economic Update 2022 published this June. According to the report, this is the highest level of indebtedness in sub-Saharan Africa since the country received debt relief many years ago. Public debt is increasing primarily as a result of additional borrowing from multilateral sources to fund growing expenditures, which puts the country at high risk of debt distress. 

Moreover, Sierra Leone has been assessed as being at very high risk of debt distress by the World Bank and the International Monetary Fund. The Bretton Wood institutions reached this conclusion after conducting a debt sustainability analysis for Sierra Leone in July 2021. Based on this latest report, the total external debt stock is estimated to be $2.10 billion (67%) in 2021, while the domestic debt stock is estimated to be $1.04 billion (33%). The report says about 75 percent of domestic debt is owed to commercial banks in the country. Although domestic borrowing is increasing, external borrowing still dominates the public debt portfolio.

According to the World Bank, the government has already developed an arrears clearance strategy that relies on increased revenue mobilization, grant resources, and an extended payment plan. Moreover, the Central Bank Governor Prof. Kallon (photo) has expressed high hopes that the re-denomination of the local currency will stabilise the economy. The new Leone is expected to take effect 1 July.

The report further delved into the energy situation in the country. It revealed that the government owes Karpowership $36 million. According to the report, the failure of the government to honor its obligations under the Power Purchase Agreement with Karpowership is the main reason for frequent power outages in the capital. Karpower management has begun rationing electricity supply to the capital. 

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