Sierra Leone Debt burden: A Case For Debt Relief During COP 26
By Mohamed Konneh
Sierra Leone’s public debt is 76.47 percent of the country’s GDP in 2020. This gives you in actual terms Three Trillion Dollars which is bigger that the country’s budget for 2020, 2021 and 2022. With this debt burden development for a poor country like Sierra Leone is meaningless.
Servicing it debt every month and paying the wage bill which is 56 percent takes away almost every single cent collected by the National Revenue Authority.
Canceling this debt is one of the best ways to fight climate change and will mean the government will have more resources in mitigating the effect of climate change.
Christian Aid, Budget Advocacy Network (BAN), Action Aid and Oxfam will take debt campaign to the COP26 conference in collaboration with Jubilee Debt Campaign UK this year.
There is no climate justice without debt justice according to Abu Bakarr Kamara, the National Coordinator at Budget Advocacy Network (BAN).
Although COP26 is a global summit, there are climate impacts in every locality, for which Sierra Leone is no exemption. COP 26 will determine the conditions under which every reader, viewer, or listener and their loved ones will spend the rest of their lives. It’s hard to imagine a story that matters more than the 2021 climate change conference of Parties schedule to take place in Glasgow, Scotland this November.
As climate chaos explodes around the Globe, world leaders face what United Nations Secretary–General António Guterres has called a “code red for humanity”; the world must slash greenhouse gas emissions immediately if humanity is to prevent the worst of what climate change has in store and preserve civilization as we know it.
COP26 (26th UN Climate Change Conference of the Parties) is the follow-up to the 2015 Paris Climate Change Conference (COP21), at which the Paris Agreement was signed. Adopted by 196 countries, Paris set a goal of limiting average global temperature rise to “well below” 2 degrees Celsius, and preferably 1.5 C, compared to pre-industrial levels.
In advance of COP26, countries presented the United Nations with the first Nationally Determined Contributions, which are countries’ plans for achieving the 1.5 C target and other goals of the Paris Agreement.
COP26 amounts to a deadline for US president Joe Biden’s budget reconciliation package. Biden has pressed Congress to pass a budget bill that includes a panoply of measures—from tax credits to buy electric vehicles to incentives for utility companies to quit coal and gas in favor of wind and solar—that are fundamental to the president’s goal of cutting overall US emissions in half by 2030, as science requires. Failure to pass that bill would damage the United States’ credibility as a climate leader and Biden’s ability to press other countries for strong action at Glasgow.
Sierra Leone stock public debt increased to 77% of GDP as of 30 November 2020 from 70% in 2019 a year earlier. Sierra Leone's debt is classified as being at high risk of debt distress, largely due to heightened solvency and liquidity risks arising from the COVID–19 pandemic.
The high debt burden coupled with limited fiscal and monetary policy space could constrain Sierra Leone’s effort to increase growth and this means plugging the country into more poverty.
In particular, the 2020 budget was anchored on the NDP. Despite credits and grants from international financial institutions in 2020 to help the country meet urgent balance of payments and fiscal needs from the pandemic, the country needs increased external financial assistance to support a resilient recovery. External assistance could aim to create fiscal space through debt relief, restructuring, suspension of debt service payments, and concessional lending. In the medium to longer-term, the country should also complement ongoing domestic revenue mobilization efforts by deepening ongoing financial sector reforms to support domestic credit market growth.
There is every need for developing countries including Sierra Leone to address issues of adapting to and mitigating climate change. This is urgent as the impact of climate change continue to grow. The country also has immediate competing development issues including reducing poverty and demand for social services. The country is currently faced with rising food prices, fuel and financial crises. To ensure adequate priority and funding to combat climate change, there is need for additional financing and this could only be possible with a debt relief.
in 2017 June Sierra Leone agreed new loans from the IMF of $220 million. At the time the loans were agreed, the IMF expected external government debt payments to be 11% of revenue in 2018, but said they could reach 15% if there is one economic shock. In that review, Sierra Leone’s external debt was said to have more than doubled from 21% of GDP in 2013 to 46% in 2017, five years in which the country’s people were struck by the Ebola disease outbreak.
In the IMF 2017 debt assessment they predicted that GDP growth would be 6% in 2017, though in a worst case scenario it would be 4.3%. The IMF’s World Economic Outlook (WEO) now says it was worse than the worst case scenario, 3.5%, and will be 3.5% again in 2018. The IMF 2017 assessment said total government debt (including domestic debt) would reach 61% in 2018 and 62% in 2020. The WEO now says it will be 64% in 2018 and 74% by 2020. The IMF has once again been wildly over-optimistic in its assessments.
From World Bank and IMF data, 27% of Sierra Leone’s debt is owed to the IMF, with a further 17% owed to the World Bank and 29% other multilateral institutions. In total, 73% of the debt is therefore owed to multilateral institutions. 15% is owed to private creditors and 12% other governments.
Sierra Leone’s President, Julius Maada Bio, appealed for international help to deal with the debt crisis inherited by the Previous Government.
President Maada Bio in 2018 signed a new agreement with the IMF as the government was already in a debt crisis. The climate change conference of parties remains a perfect platform to appeal for debt relief.
