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MoFED/ PDMU holds Debt Sustainability Analysis Workshop

  • Monday, Aug 03 2015

The Public Debt Management Unit in the Ministry of Finance and Economic Development has on Monday August 3rd 2015, started a six days Debt Sustainability Analysis (DSA) on Sierra Leone at the Leone Lodge Aberdeen. The program was sponsored by the Government of Sierra Leone and donor partners through the Public Financial Management Improvement and Consolidation Project in the Ministry of Finance and Economic Development.

The primary purpose of the 2015 DSA exercise is to assess the country's Capacity to finance its projects/programmes and services its debt obligations, without undue large adjustments that may compromise its macroeconomic stability, overall growth and development.

The specific objectives of the workshop include the following: Update DSA Reports to incorporate financing gap for the Agenda for: Prosperity including:

i) Assess debt sustainability outlook and proffer appropriate recommendations for policy decisions.

ii) Assess Sierra Leone's external and public debt sustainability against new threshold as a medium policy performer under CPIA rating.

iii) Determine potential risks exposure of Sierra Leone's external and public debt under various shocks scenarios.

iv) Assess new financing landscape with a view of advising on borrowing decisions that will ensure financing needs and future repayment obligations are within acceptable boundaries.

v) Simulate within debt sustainability outlook specific projects, including the new airport, to support the implementation of the Agenda for Prosperity (AFP) Vi) Provide recommendations for policy decisions that would ensure long- term debt sustainability.

In his welcome statement Director of Public Debt Management Unit in the Ministry of Finance and Economic Development Sahr L Jusu, started by welcoming participants to the program adding that the previous 2013 and 2014 workshop was purely a technical exercise.

He said they are expected to present the outcome of the exercise to the Minister of Finance and other relevant stakeholders during which they will make the statement required of a policy maker, stating that they as technicians from the critical Department of Economic Management Bank of Sierra Leone, Ministry of Finance, NRA, National Mineral Agencies and Statistic Sierra Leone, would engaged in order to put the document together which will be a corner stone in Assessing the Debt Management Strategy for Sierra Leone.

Mr Jusu added that it is not the first time they are doing it , noting that since 2001 they have been doing DSA and its a requirement by all countries particularly low income countries . He said even development countries do Debt Sustainability Analysis to assess a medium term outlook of the public debt situation, making it clear that it is a requirement for them to do it.

The Director Public Debt Management Unit informed the participants that there partners from the west Africa Institute for Financial Economic Management( WAIFEM) provided the technical assistant to the exercise, noting that the team from WAIFEM has always be a part of the process since 2000 to give technical support and an independent assessment of the work that they would be doing. He maintained that this year's DSA is exceptional as they are trying to assess the impact of the double shock as according to him everybody must have experienced the impact of Ebola . He further stated that in 2014 they conducted DSA that was way before Ebola and said that, in assumption they just mentioned that Ebola will have impact on debt sustainability.

He said that they as Economists are well aware that the Ebola virus has severe impact on the Macro fundamentals on the GDP, Revenue ,export revenue and the livelihood of people income etc which are fundamental denominators for assessing the debt sustainability analysis, which create more importance why they should do the DSA to assess the impact of Ebola on the overall debt outlook.

Mr Jusu said the second aspect of the double shock is the collapse of the iron ore prices adding that in 2014 when they were doing the DSA, the iron ore prices was already on the down ton as it was averaging around seventy dollar per ton. He said the iron ore prices is now way down below forty dollar per ton, stating that there are some projections where it will be in terms of International estimate in 2016 - 2017 and moving forward which had serious implications on the export revenue.

He concluded that for the above two reasons they considered this year DSA to be an exceptional and critical importance for policy makers to move forward in terms of foreign practice.

In his statement Director of Debt Management Department West African Institute for Financial and Economic Management ( WAIFEM) Baba Yusuf Musa first extended gratitude to the Government and People of Sierra Leone for inviting them to participate as always in such an important critical exercise in the country. He reiterated that WAIFEM has been given technical support to the Government of Sierra Leone on the conduct of Debt Sustainability Analysis as back as 2000, stating that they have been consistently working with the government to ensure that they provide an independent view on the DSA exercise.

Baba Yusuf Musa said though the Government of Sierra Leone has the capacity to do it on its own, but providing an independent view gives the exercise additional strengthen in the sense that "two heads are better than one". He explained that Debt Sustainability Analysis( DSA) is an essential part of fiscal sustainability of any nation, noting that any nation that have not conducted DSA is like having a sailor in a deep sea without a direction. He stressed that the exercise is important to every nation in the sense that it gives a directory path where it can lead the country to a destination where it intends to go.

Baba Yusuf Musa said:

" we assume that we are at a certain point A where we want to move the country to destination E and what we want right now is to navigate the country from point A to point E, and in doing that we will assume that, should we have any disturbance on the way between A to E, we would have a contingency where we will move to. For Instance, should any physical stress occur on the way to E we can decide a destination where we will get from A to C and we will eventually get to E".

He said without a clear path design by the Government they will be acting like a ship in a deep sea without no navigation. He highlighted that the essence of the exercise is to analysis the government capacity to meet its obligation given some fiscal assumptions in terms of revenue and expenditure of the Government.

Director, Debt Management Department West African Institute for Financial and Economic Management Baba Yusufu Musa, said DSA is an important thresholds that signal the need to address potential debt problem and adapt appropriately its debt management policies as well as undertaking macro- economic and structural reforms.

He said DSA helps to inform about a country's susceptibility to debt distress adding that it also help to signal to the member country and donors of a need to shift economic policies, especially financing ( i.e., from commercial loans to grants}

Baba yusfu noted that DSA is an essential condition for fiscal sustainability which according to him is important as an insolvent government cannot provide public services. He explained that DSA is also important for the analysis of the Government's capacity to meet its future financial obligations given fiscal policy ( revenues, expenditures) and financing strategy (sources of budget financing).

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