GRGC-3 Supplemental Credit

closed

The Third Governance Reform and Growth Credit (GRGC-3) in the amount of SDR6.4 million (US$10 million equivalent) to the Republic of Sierra Leone was approved by the Board on November 24, 2009, to support implementation of the country's Second Poverty Reduction Strategy Paper (PRSP-2) in the context of a multi-donor budget support framework. This single tranche credit is the third in a programmatic series of three Development Policy Operations (DPOs) undertaken by the World Bank and is consistent with the Joint Country Assistance Strategy. At the time the GRGC-3 was negotiated in late 2009, the international financial and economic crisis had already adversely affected Sierra Leone's economic performance, although the full extent of this was unclear. Government had already responded in 2009 through programs to assist the hardest hit. For 2010, government plans call for an economic stimulus program to be effected through increased public expenditures with a primary focus on infrastructure spending, mainly for roads and a bold new social agenda to improve health outcomes and provide a cushion for the most vulnerable. A more complete picture about the effects of the global economic and financial crisis on economic performance in 2008 and 2009 is now available. Reduced export demand and remittances led to a slowdown in domestic growth which in turn has lowered the revenue base. Unexpected spending needs in 2009 resulted in deferred investments and generated costs for the 2010 budget which appears underfinanced by the equivalent of about 1.2 percent of gross domestic product (GDP), or about US$27.5 million. The authorities are therefore seeking additional financing resources to help close the larger than anticipated gap to protect growth and ensure that priority expenditures under the PRSP-2 are maintained.