Sierra Leone: Risk Assessment

Country Risk Rating

D A high-risk political and economic situation and an often very difficult business environment can have a very significant impact on corporate payment behavior. Corporate default probability is very high.

Business Climate Rating

C The business environment is difficult. Corporate financial information is often unavailable and when available often unreliable. Debt collection is unpredictable. The institutional framework has many troublesome weaknesses. Intercompany transactions run major risks in the difficult environments rated C.


  • Significant mineral resources (iron, diamonds, rutile and gold)
  • Production of coffee, rice and cocoa
  • Potential for tourism
  • International financial support
  • Significant port activity, set to increase


  • Vulnerability to meteorological conditions
  • High level of dependency on commodities prices
  • Corruption, insufficiently protected ownership rights
  • Insufficient infrastructure, failing healthcare system
  • Difficulty accessing credit for small and medium-sized companies
  • Extreme poverty, high levels of unemployment

Current Trends

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An economy that is gradually picking up after the Ebola virus epidemic

Sierra Leone was one of the three countries the most affected by the Ebola virus (3,600 dead and a revenue loss estimated at 29% of GDP in 2015 according to the World Bank). The economic impact of the epidemic was reinforced by the more than 65% fall in iron ore prices (50% of exports) between January 2014 and December 2015, triggering a recession in 2015. Despite the weakness of commodity prices that is likely to persist, the recovery in production in the main sectors of the economy should drive growth in 2016, under the assumption that the virus remains contained. Activity in the mining sector could be stimulated by an imminent resumption of iron ore production, in particular thanks to the purchase of the Tonkolili mine, the second largest mine in Africa, by the Chinese company Shandong Iron and Steel Group (SISG). Production of rutile and diamonds should also contribute to the increase in activity in this sector. Despite the shortages of labor and the still limited distribution channels, the recovery in farm output should gradually lead to a food normalization, subject to good weather conditions. Public investments will be substantial to improve the supply of public services, but foreign investments will remain weak, except the Chinese financing in the mining sector and in transport infrastructures, in particular through the company Kingho Group. Despite a monetary policy easing, the low level of banking intermediation, poverty and high unemployment will prevent a stimulation of domestic demand. Despite the moderation of global prices of commodities and imported energy, inflationary pressures caused by food shortages should keep inflation at a high level in 2016.

Fiscal and current accounts in deficit

The fiscal deficit will continue to increase in 2016. The weakness of the economy will limit revenues (with mining royalties accounting for 40% of government revenues) while spending will remain significant through in particular the Agenda for Prosperity (2013-2018), which will strengthen the ability to collect tax revenues, develop infrastructures (healthcare, transport) and create jobs. The budget will be bolstered by foreign aid (financial, material, medical), the disbursement of USD 64.6 million under the Extended Credit Facility and a USD 29.2 million debt reduction in the form of a subsidy thanks to the IMF’s new Catastrophe Containment and Relief Trust (CCR). Nevertheless, the public debt is increasing rapidly. The current account deficit should remain significant in 2016 as the recovery in exports will be hampered by the low price of iron ore. On the other hand, the country will remain dependent on imports of food products and energy and an increase in imports of materials will be required, given the recovery in mining production, and to carry out infrastructure projects.

Fragile political and social stability

The president, Ernest Bai Konoma, of the All People’s Congress party (APC), enjoys a solid majority in the parliament and a comfortable popularity rating despite the accusations of corruption from the main opposition party, SLPP. After the Ebola epidemic, the government will face growing social unrest because of the increasing poverty, the unemployment and the lack of infrastructures that, according to the population, limited the possibility of a proper government response to stem the spreading of the Ebola virus. The increasing criminality is reinforcing the risk of social instability in the short term and is having a negative impact on business climate which is already difficult (147th out of 189 economies according to the World Bank’s study Doing Business 2016). The inflow of donations, in particular from the United Kingdom, is likely to remain significant in 2016, which will help strengthen public health infrastructures and the financing of investment projects. China will continue to increase its influence thanks to its investments in transport infrastructures and in the natural resources sector.


Coface (09/2016)