Governance Reform and Growth Grant - 3

closed

The Governance Reform and Growth Credit Program is the third in a series of three development policy operations in support of Sierra Leone's transition from post-conflict recovery to sustainable development in the context of its Poverty Reduction Strategy (PRS). The operation includes reform measures in support of the following development objectives: (i) preserve the fiscal space needed for poverty reduction; (ii) promote efficiency, transparency and accountability in the use of public resources through enhanced public financial management and governance; and (iii) improve the investment climate by ensuring the provision of electricity in a fiscally sustainable manner. The development policy operation, the last in a programmatic series of three, aims to support the authorities' efforts, in the midst of the current global crisis, to maintain a sound and sustainable fiscal stance and to protect the development objectives set forth in Sierra Leone's second PRS. The PRS emphasizes private sector growth to reduce poverty, backed by public investments in infrastructure and the delivery of basic social services, along with continued improvements in the quality of governance. The operation takes place at a very challenging time, as the Sierra Leonean authorities deal with an unfavorable global environment, which sharply contrasts with its generally positive post-conflict prospects. The global economic down-turn has weakened economic prospects for 2009 and is putting pressure on the fiscal position. The mining sector has been particularly hard hit with declines in world market prices, delayed investments, and scaled back production. Remittances are also projected to fall in 2009. Real Gross Domestic Product (GDP) growth is projected to slow to 4 percent compared to an earlier forecast of 5.5 percent, and revenues are expected to fall short of the original budget target mainly because of declining exports and imports and weaker income growth.