PROGRAM INFORMATION DOCUMENT (PID)
APPRAISAL STAGE
Report No.: AB6077
Sierra Leone: Fourth Governance Reform and Growth Credit
Operation Name
(GRGC-4)
AFRICA
Region
General finance sector (50%); General public administration
Sector
sector (50%)
P117822
Project ID
GOVERNMENT OF SIERRA LEONE
Borrower(s)
MINISTRY OF FINANCE AND ECONOMIC DEVELOPMENT
Implementing Agency
Ministry of Finance and Economic Development, Government of
Sierra Leone
George Street
Freetown
Sierra Leone
Tel: (232-22) 225-612 Fax: (232-22) 228-355
minfin@sierratel.sl
October 28, 2010
Date PID Prepared
November 8, 2010
Date of Appraisal
Authorization
December 21, 2010
Date of Board Approval
1. Country and Sector Background
Sierra Leone has made rapid progress on many fronts since the end of the war in January 2002.
The global economic slowdown and its effects on the economy have constituted a setback for the
country. A significant effort remains to be made in order to raise per-capita incomes above peak
pre-war levels and sharply reduce poverty. Macroeconomic performance through 2009 has been
consistently strong, bringing rapid growth and steadily declining fiscal deficits despite many
ongoing challenges. The quality of public financial management has steadily improved. Public
service delivery resumed quickly in many sectors, most notably in primary education. An
emphasis on decentralization was underscored in 2004 through the first local government
elections in over 30 years and the re-establishment of local governments. The first full Poverty
Reduction Strategy Paper (PRSP) was issued in February 2005. These achievements helped
Sierra Leone gain access to substantial debt relief in December 2006 via the HIPC Completion
Point and Multilateral Debt Relief Initiative. General elections in 2007 resulted in a new
government and adoption of a second PRSP in 2009.
Sierra Leone is at a challenging juncture in its post-conflict history. Having maintained and
consolidated peace, it is now moving to national elections in less than two years. The recent
global economic downturn has tested its fledgling economic management capability as the
mining sector the mainstay of its formal economy was largely idled. It has made gains in social
and economic stability which have attracted new investments principally in the mining sector.
These have in turn raised concerns about governance, corruption and future economic prospects.
The recent confirmation of offshore oil reserves will further exacerbate governance and
economic management challenges. While these pose risks going forward they also represent a
unique opportunity to move the country forward.
2. Operation Objectives
The proposed credit will support government efforts to preserve the fiscal space needed for
poverty reduction by protecting poverty reducing spending priorities during a period when the
economy remains under stress and is still recovering from the effects of the global recession.
The measures supported under the proposed operation would (a) reinforce the link between
resource allocation and the objectives of growth and poverty reduction, through pursuit of
procurement reforms, and improving the institutional set-up for public sector reform;
(b strengthen domestic resource mobilization and management through tax administration
reforms and increased transparency; and (c) improve the prospects for private sector
development by ensuring improved provision of electricity.
3. Rationale for Bank Involvement
Despite the steady progress made by the country in the post-conflict period its access to capital
for development finance remains constrained to a small number of development partners. The
Bank is one of those partners and is one of the only sources of financing available to the country.
The case for Bank financing rests on the maintenance of an appropriate macroeconomic
framework, the consistent progress which has been made to date in strengthening public financial
management and in implementing structural reforms.
4. Financing
Source:
BORROWER/RECIPIENT
International Development Association (IDA)
Total
($m.)
0
10
710
5. Institutional and Implementation Arrangements
The administration of this operation will be the responsibility of the Ministry of Economy and
Finance. To facilitate program implementation and the coordination of activities, the government
has appointed an Inter-ministerial Steering Committee chaired by the Minister of Finance and
Economic Development. This Committee is composed of key Ministers and the Governor of the
BSL. The Steering Committee will be assisted by a Technical Committee comprising high level
staff from various line ministries and the BSL. The Technical Committee will be chaired by the
Financial Secretary and will be responsible for coordinating the activities of all government
agencies involved in program implementation. These arrangements are the same as for the Third
Governance Reform and Growth Credit.
6. Benefits and Risks
By supporting the implementation of the Government’s overall development program and its
poverty reduction strategy this operation will contribute to poverty reduction and the
maintenance of economic growth.
The reform program faces the following risks which if they materialize have the potential to
disrupt and jeopardize its objectives:
(a) Macroeconomic risks from exogenous shocks due to a prolonged global downturn, leading to
deterioration in the terms of trade or the incurring of unavoidable expenditures from a natural
disaster. Government track record provides comfort in this regard on the former as does the
ongoing IMF program and related dialogue. The Bank is also monitoring this area closely.
(b) Fiduciary risk due to weak institutional capacity could undermine the reform program.
Mitigated by government and donor efforts to build capacity and strengthen the fiduciary
environment. (c) Political risks could materialize and destabilize the reform program, as the
2012 elections draw closer. Mitigated by experience of the economic management team and
close monitoring and dialogue by development partners.
7. Poverty and Social Impacts and Environment Aspects
The measures supported by the proposed GRGC-4 are expected to have a significant positive
direct impact on poverty reduction. No adverse social or poverty impacts are expected from the
prior actions supported by the proposed credit. First, the strengthening of public financial
management would enhance efficiency, transparency and accountability in public investments
and service delivery. Such measures would also increase the country’s absorption capacity for
external resources. To the extent that the Government’s 2011 program has the expected impact
of stimulating growth, generating additional employment opportunities, and extending the reach
of critical health services, it would protect the objectives of the PRSP-2 and have a positive
impact on the poor and on vulnerable groups.
The policies and actions supported by the proposed GRGC-4 are not likely to have any
significant effect on the environment, natural resources and forests. The policies and actions
supported under this operation address primarily institutional reforms, none of which entails any
environmental effect. Government’s 2011 budget does, however, include investments in basic
infrastructure and agriculture that may have some environmental effects. Most of these
additional investments, should they materialize, would be financed by development partners,
each with their own environmental requirements. Potential positive environmental effects may
arise from increased access to electricity as poor households switch from fossil fuels to
electricity.
8. Contact point
Contact: Cyrus P. Talati
Title: Senior Economist
Tel: (202) 458-7375
Fax: (202) 614-7375
Email: Ctalati@worldbank.org
9. For more information contact:
The InfoShop
The World Bank
1818 H Street, NW
Washington, D.C. 20433
Telephone: (202) 458-4500
Fax: (202) 522-1500
Email: pic@worldbank.org
Web: http://www.worldbank.org/infoshop