World Bank Warns of Rising Debt Risks in Sierra Leone

By Ishmail Saidu Kanu

Sierra Leone faces rising debt pressures, according to the latest World Bank report, despite signs of economic recovery and improved trade performance.

The report notes that the country’s risk of debt distress has increased considerably due to repeated budget overruns, with debt service to revenue reaching 125 percent in 2024.

Domestic borrowing costs soared from 29.3 percent in 2023 to 40.8 percent in 2024, although recent expenditure measures have brought rates down to 15.17 percent in 2025.

While public debt as a share of GDP declined slightly to 44.4 percent in 2024, over one-third of it is costly short-term domestic debt.

External debt, totaling $1.83 billion, remains mostly concessional, with the IMF and World Bank accounting for 30 percent of total public debt.

On the external sector, Sierra Leone’s trade balance improved, with the current account deficit falling from 9.5 percent of GDP in 2023 to 4.7 percent in 2024, thanks to stronger exports and remittances supported by World Bank and EU grants.

Mineral exports, especially iron ore, remain the backbone of the economy, making up 77 percent of total exports. Cocoa exports surged by 140 percent, aided by the government’s Feed Salone initiative.

However, official reserves have dropped to just 1.5 months of import cover as of August 2025, below the IMF benchmark of three months, due to high debt payments, energy arrears, and fiscal spending.

Despite these challenges, the Leone strengthened in real terms, appreciating 5 percent in 2024 and 13.6 percent year-to-date in 2025, showing improved market confidence, reduced dollarization, and stable exchange rate policies.

The World Bank cautions that while economic recovery is underway, careful debt management and fiscal discipline remain critical to sustaining growth and avoiding further financial stress.