Country Risk Rating

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. - Source: Coface

Business Climate Rating

The business environment is very difficult. Corporate financial information is rarely available and when available usually unreliable. The legal system makes debt collection very unpredictable. The institutional framework has very serious weaknesses. Intercompany transactions can thus be very difficult to manage in the highly risky environments rated D.


  • Significant mineral resources (iron, diamonds, rutile, gold)
  • Coffee, rice and cocoa production
  • Tourism potential
  • International financial support
  • Significant port activity that is set to expand


  • Vulnerable to weather events
  • Highly dependent on commodity prices
  • Corruption; inadequate protection of property rights
  • Risk of renewed Ebola outbreak
  • Inadequate infrastructure; failing healthcare system
  • Difficult for small and medium-sized enterprises to access credit
  • Extreme poverty and high unemployment

Current Trends

The Upturn in the Economy is Confirmed

Economic momentum was held back by high inflation in 2017, following the twin shocks of the Ebola outbreak and the collapse of iron ore prices, but growth is now expected to resume its upward trend in 2018. It will notably be buoyed by dynamic development in the extractive industries. In particular, iron ore production, supported by the Tonkolili mine and investment from Chinese businesses, is expected to perform more strongly. The prospects are equally favorable for diamonds, with production at the Tongo and Tonguma mines due to start in mid-2018 under a joint project signed between Octea Mining and Stellar Diamonds in April 2017. The increase of rutile production is also likely to continue into 2018.

Public capital investment spending should benefit other economic sectors, starting with agriculture, energy, transport, and construction. Growth in the construction sector is expected to be sustained by reconstruction work following the August 2017 landslide, which killed 500 people in Freetown and caused material damage estimated at USD 30 million. In 2018, despite an easing of upward pressures, inflation will still be high and will continue to dampen household consumption; specifically consumption by the +70% of Sierra Leonians who live on less than one US dollar a day. Fuelled by the spectacular depreciation of the leone in late 2016 and early 2017, as well as higher fuel prices at the pump, inflation could eventually threaten growth prospects in 2018, especially if the most recent fuel subsidies are removed.

Reduction in Twin Deficits at the Heart of the Three-Year Program with IMF Support

Initiated in 2017, the reduction in the fiscal deficit will continue in 2018. Sierra Leone, which has been involved in a new three-year programme with the IMF since April 2017 under an Extended Credit Facility arrangement for USD 224 million, has embarked on reforms aimed at achieving a primary deficit objective of 2% of GDP in 2021 (4% in 2017). As agreed with the IMF, efforts will be concentrated on boosting revenues as a way of reducing the deficit. Measures include the removal of tax loopholes, the application of a mining tax based on market prices, and the introduction of a customs duty of 20% on luxury vehicles. These steps are included in a new draft tax administration law submitted to parliament in 2017, aimed more generally at improving the efficiency of tax collection. The country is also committed to containing current spending, so as to be in a position to accelerate capital investment spending, which sustains growth. Flows of aid from multilateral and bilateral partners following the landslide and flooding in the country should help cover repair costs. The unpopular liberalization of fuel prices at the pump promised as part of the earlier agreement with the IMF, is unlikely to be implemented before the presidential elections of March 2018, putting pressure on spending. Tax slippage cannot, however, be ruled out in the run-up to this major electoral event.

The current account, mainly hampered by a sizeable trade deficit, is still expected to show a large deficit, despite the expected increase in exports of mining and agricultural products. The value of exports should, nonetheless, increase faster than that of imports, which are accelerating in connection with the rise in capital investment spending. Combined with the surplus balance of transfers, this should help reinforce the country’s external position.                                                   

Fragmented Opposition Opens Up the Presidency to the APC

After two consecutive terms, and contrary to persistent rumors that he intends to circumvent the Constitution and stand for a third term, President Ernest Bai Koroma will not be standing for the presidency in March 2018. He will step aside to allow his successor, Dr. Samura Kamara, the current Minister of Foreign Affairs, to stand as the All People’s Congress (APC) candidate. While the battle for Mr. Koroma’s succession could have opened the way to power for the opposition candidate, divisions within the Sierra Leone People’s Party (SLPP) have reduced the likelihood that Julius Maada Bio will assume the presidency. In addition, the recent emergence of the Alliance Democratic Party, led by Mohamed Mansaray, could scatter the opposition votes, rather than threaten the candidacy of the APC.

The climate in which the elections will be held will be closely observed, at a time when living conditions have become tougher due to high inflation. Poverty, unemployment, and corruption are still widespread and provide grounds for social frustration. Any potential liberalization of fuel prices – which impacts on prices generally – could, for example, be explosive in a country that is among the poorest on the continent.

The poverty rate is explained, in particular, by a very poor business climate, which continues to act as a brake on investment and job creation. In recent years, structural and governance reforms have been slow to materialize. 


Coface (01/2018)
Sierra Leone