SOE Debt Falls Sharply as Government Pushes Reform Agenda

By zainab.joaque@awokonewspapersl.com

Washington. D.C, – Amid persistent economic challenges, Sierra Leone’s State-Owned Enterprises (SOEs) are showing signs of fiscal discipline and improved governance, with a sharp drop in debt levels over the past year.

According to newly released figures from the Ministry of Finance, the total outstanding loans and contingent liabilities for SOEs declined from US$36.54 million (NLe837.16 million) in 2023 to US$23.95 million (NLe543.49 million) by the end of 2024. This nearly 35% reduction is being hailed as a major stride toward restoring financial stability and promoting prudent borrowing within the public sector.

Government efforts to streamline borrowing and prioritize concessional financing are paying off. Local loans make up just 12.3% of the current SOE debt, while the lion’s share—87.7%—comes from external sources, largely on-lent by the government. This reflects both limited access to domestic credit and Sierra Leone’s continued reliance on foreign partnerships to fund large-scale infrastructure projects.

At the center of the SOE debt profile is the Sierra Leone Telecommunications Company (SIERRATEL), which alone accounts for a staggering 87.5% of total SOE liabilities. Much of this debt stems from major infrastructure investments, including financing from the EXIM Banks of India and China for telecommunications upgrades such as the CDMA project.

While these investments are considered vital for expanding national connectivity, SIERRATEL’s dominant share of SOE debt raises red flags about overconcentration and the risks of heavy dependence on a single entity.

Trailing SIERRATEL is the Electricity Distribution and Supply Authority (EDSA), which holds 7.89% of total SOE debt. EDSA’s borrowings are mainly linked to a revolving Letter of Credit for fuel procurement from Karpower—critical for keeping Freetown’s lights on—and other short-term financing obligations.

Smaller amounts are owed by institutions like the Sierra Leone Postal Services (SalPost), Sierra Leone Airport Authority (SLAA), Sierra Leone Road Transport Corporation (SLRTC), and Guma Valley Water Company. Notably, several of these debts were soft loans provided by the government to cushion the impact of the COVID-19 pandemic and other economic shocks.

On a more positive note, several SOEs—including the National Insurance Company, Electricity Generation and Transmission Company, and Sierra Leone Housing Corporation—reported no outstanding loans or contingent liabilities. The country’s two state-owned banks, Sierra Leone Commercial Bank and Rokel Commercial Bank, also maintained clean balance sheets, carrying only routine deposit liabilities.

Behind the improving debt numbers is a broader reform effort to reshape the governance landscape of SOEs. A new SOE Bill is in the pipeline, along with proposed legislation to replace the outdated National Commission for Privatisation (NCP) Act. Meanwhile, a new SOE Ownership Policy, already approved by Cabinet, aims to clarify the purpose of state ownership and chart a roadmap for reform.

Reinforced corporate governance frameworks are also being developed for the state-owned banks, focusing on risk management, board oversight, and internal and external audits.

To enhance transparency and accountability, the Ministry of Finance is conducting annual surveys of contingent liabilities and publishing regular reports on SOE performance. The adoption of international fiscal risk management tools—such as the SOE Health Check, PFRAM, FRAT, and DGLAT—is expected to strengthen monitoring and early-warning systems.

While the SOE debt reduction is a step in the right direction, Sierra Leone’s overall public debt profile remains under pressure. According to recent assessments by the International Monetary Fund (IMF), the country’s public debt is considered sustainable but vulnerable, with high risks of distress projected through 2027.

Analysts agree that continued fiscal restraint, a focus on concessional loans, and the successful execution of structural reforms will be key to sustaining these gains and ensuring long-term financial health. ZIJ/5/5/2025