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Sierra Leone debt creeping up

Sierra Leone’s government external debt payments are increasing. The IMF estimates they will account for between 7 and 9 per cent of government revenue between 2012 and 2017; $30 million to $50 million. In 2010, for the same time period, the IMF estimated payments of between 5 and 8 per cent a year. The IMF and World Bank say Sierra Leone is at ‘moderate risk’ of not being able to meet debt payments in the future.

Campaigners in Sierra Leone demand debt cancellation

In 2006, Sierra Leone qualified for $1.7 billion of debt cancellation through the Heavily Indebted Poor Countries initiative. The government’s external debt payments fell from averaging 8 per cent of government revenue from 2000-2006 to 2 per cent from 2007-2010.

Around $230 million of the debt which remained was owed to private creditors, and arose from non-payment on debts during the civil war which ended in 2002. The government is currently making ‘goodwill’ payments on these debts in order to not be sued by vulture funds. The World Bank are discussing helping to fund a debt buy-back scheme where the debt would be bought back from creditors at a ‘market value’, thus saving money on paying the full face value of the debt owed. For private creditors who bought the Sierra Leone debt at a steep discount during the civil war, this could still lead to large profits.

Under previous World Bank supported debt buy backs in countries like Sierra Leone, $10.3 billion of debt has been written-off at the cost of paying $750 million. Of this $750 million, roughly one-third has come from profit made by the World Bank on its lending to middle income countries, one-third from donor governments, and one-third from the government’s which owe the debt.

Between 2006 and 2010, the Sierra Leone government has been lent $350 million, rising from $30 million in 2007 to $110 million in 2010. Of this, $200 million (57%) has come from the IMF and World Bank. Debt payments are now predicted to be over 8 per cent of government revenue between 2014 and 2017, a similar level to 2000-2006. This assumes GDP growth averaging 7 per cent a year.

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