Approved by: Prepared by the staff of the International Abebe Adugna and Marcello Estevão Development Association (IDA) and the (IDA); and Montfort Mlachila and Anna International Monetary Fund (IMF). Ilyina (IMF) SIERRA LEONE: JOINT BANK-FUND DEBT SUSTAINABILITY ANALYSIS Risk of external debt distress High Overall risk of debt distress High Granularity in the risk rating Sustainable Application of judgment No Sierra Leone’s risk of external and overall debt distress remains high, but debt is sustainable . Fiscal slippages and external factors have increased the risks around the baseline, as a larger and more frontloaded fiscal adjustment is now required to achieve the program objectives. Although Sierra Leone’s debt carrying capacity has been upgraded to medium compared to the previous DSA report, one external debt burden indicator and the PV of public debt-to-GDP ratio exhibit sustained breaches of their respective sustainability thresholds. A heavy reliance on short-term domestic financing (T-Bills) creates potential rollover risks, as reflected in persistently elevated debt service ratios and gross financing needs over the medium- and long-term. Domestic rollover risks are mitigated by limited alternative investment options for domestic banks and the authorities’ commitment to limit future domestic borrowing. Th at said, a lengthening of the maturity structure of domestic debt (via active liability management operations) is critical to reduce refinancing risks. Sierra Leone’s debt is sustainable as all the debt indicators remain on a declining trend over the medi um- to long- term. This assessment is predicated on the authorities’ ambitious fiscal adjustment and continued reliance on concessional financing and grants, and moderately high growth rates. Maintaining debt sustainability requires sustained fiscal adjustment underpinned by strengthened public financial management, effective expenditure prioritization, redoubling structural and revenue mobilization reforms. 1 >>> 1. The DSA covers known sources of public debt (Text Table 1). As in earlier DSAs, the debt stock includes central government public and publicly -guaranteed debts. The DSA also includes the latest estimate of the consolidated stock of domestic payment arrears. The Government is working, with the support of development partners, to improve its financial and debt management systems, and to enhance the accounting and timely reporting of public debt, including those of state-owned enterprises (SOEs) and self- accounting-bodies. Subsectors of the public sector Sub-sectors covered 1 Central government X 2 State and local government 3 Other elements in the general government 4 o/w: Social security fund X 5 o/w: Extra budgetary funds (EBFs) 6 Guarantees (to other entities in the public and private sector, including to SOEs) X 7 Central bank (borrowed on behalf of the government) X 8 Non-guaranteed SOE debt 2. The contingent liability stress test accounts for vulnerabilities associated with SOEs and financial market risks (Text Table 2). The contingent liability for SOE debt is set at 7 percent of GDP, higher than the default 2 percent of GDP, reflecting the authorities’ estimate of indebtedness of SOEs and self- accounting bodies, which is not captured in the baseline. Contingent liabilities from financial markets are set at the standard minimum value of 5 percent of GDP, which represents the average fiscal cost of a financial crisis in LICs since 1980. The contingent liability of other elements of the general government is set at 0 percent of GDP because the baseline reflects estimated domestic arrears. Overall, total contingent liabilities are estimated at 12 percent of GDP, as in the previous DSA. 1. The country’s coverage of public The central government plus social security, central bank, debt government-guaranteed debt Used for Reasons for deviations from the Default the Analysis default setting 2. Other elements of the general 0 percent of 0.0 government not captured in 1. GDP 3. SOE’s debt (guaranteed and not 2 percent of Reflect the authorities’ estimate of total 7.0 guaranteed by the government) 1/ GDP indebtedness of SOEs. 35 percent of 4. PPP 0.0 PPP stock 5. Financial market (the default value 5 percent of of 5 percent of GDP is the 5.0 GDP minimum value) Total (2+3+4+5) (in percent of GDP) 12.0 . 2 >>> 3. The COVID-19 shock seriously strained Sierra Leone’s public finances, and total public debt increased in 2021. The large shock to growth and revenues and measures to counter the impact of the pandemic, increased the fiscal deficit in 2020 and 2021. Total public debt at end-2021 is estimated to be around 76.8 percent of GDP, slightly increased from the level of end-2020. Public debt would slightly increase further in 2022-2023 and steadily decrease over the medium term. 4. Public and publicly guaranteed (PPG) external debt was around 50 percent of GDP in 2021, almost the same level as at end-2020 (Text Figure 1). It is expected to increase further in 2022. This reflects additional loans incurred in 2022, including planned ECF disbursements (SDR 15.56 million or 7.5 percent of quota in both June 2022 and December 2022), and SDR retrocessions (6). About 79 percent of Sierra Leone’s PPG external debt at end-2021 comprised non-restructurable obligations to multilateral creditors. The IMF and World Bank account for about 27 percent and 23 percent of total PPG external debt (US$541 million and US$464 million respectively), followed by the African Development Fund (around 8 percent or US$165 million), the Islamic Development Bank (around 6 percent or US$128 million), the EEC/EIB (around 4 percent or US$78 million). Each of the other multilateral creditor accounts for less than 5 percent. Official bilateral creditors account for around 13 percent of total PPG external debt, with the Kuwait Fund the largest (around 3 percent or US$62 million).2 Sierra Leone has pre-HIPC arrears to external commercial creditors (about 8 percent of PPG external debt or around US$168 million at end-2021). Domestic Others, including arrears Domestic Loans Domestic Bond External Domestic T-Bills Multilateral (364 days) External Commercial External Official Bilateral 5. Sierra Leone domestic public debt increased from 26.6 percent of GDP at end-2020 to 27.6 percent at end-2021. Around 59 percent of domestic debt is owed to commercial banks mainly in the form of 364-day T-Bills, while the rest are distributed between the BSL, the non-bank, and legacy domestic 3 >>> arrears owed to suppliers (Text Figure 2). The pre-April 2018 legacy arrears have been progressively paid down from about 9.8 percent of GDP in 2019 to about 5.6 percent of GDP in 2021, largely at face value. 6. A retrocession transaction based on the 2021 SDR allocation is envisaged in 2022 and 2023 to provide fiscal space to finance priority expenditures . Of the total SDR assets and liabilities (6.6 percent of GDP), this DSA assumes the equivalent of 1.6 percent of GDP in 2022, and 0.3 percent of GDP in 2023, will be transferred to the government (retrocession transaction) and then the SDR assets will be sold back to the central bank to convert them into the local currency for financing priority expenditures. These operations would leave to the government with SDR liabilities which are counted as additional long- term and highly concessional external debt in the DSA. 3 7. The assumptions are consistent with the macroeconomic framework in the staff report . 1. Current DSA 2. Previous DSA (July 2021) 3. 2022 2032 LT ave. 2021 2031 LT ave. 4. Real GDP growth (in percent) 3.6 4.5 4.4 3.2 4.5 4.5 5. Inflation (GDP deflator, in percent) 15.8 6.6 10.7 11.5 5.1 7.6 6. Primary deficit (percent of GDP) 1.1 0.8 0.4 1.1 -2.0 -1.1 7. Non-interest current account deficit (percent of GDP) 12.8 6.4 7.1 15.2 11.6 12.3 4 >>> • Growth. Real GDP growth is estimated to have rebounded to about 3.2 percent in 2021 following the COVID shock in 2020, and to increase to 3.6 percent in 2022. Growth in 2022 has been downgraded from 5.9 percent in the previous DSA, due to lower forecasts for iron ore production, greater uncertainty around the global trajectory of the COVID-19 pandemic, and the likely shock to terms-of-trade4 and global growth as a result of the ongoing war in Ukraine. Nearly three-fourths of the country is assessed to be food insecure and recent rise in food prices and supply disruptions, precipitated by the war in Ukraine, has intensified this concern and poses risks to economic activity. Growth is projected to converge to its long-run potential and historical average of around 4½ percent over the medium term, supported by the recent resumption of production at both the Tonkolili and Marampa iron ore mines (for the first time since Ebola), good prospects for new developments in the diamond mining sector, and continued policy support for the agricultural sector. Around 17¼ percent of the population have received two vaccination doses as of mid-May. Vaccine hesitancy and logistical challenges persist. • Inflation. Inflation, as measured by the GDP deflator, is estimated to be broadly in line with average consumer price inflation in 2021 at 11.1 percent and increases to 15.8 percent in 2022.5 Inflation projections for 2022 and beyond have been revised up relative to the previous DSA due to recent trends in global food and fuel price inflation, and the outturn through March 2022, which was higher than expected. Inflation is projected to decline gradually after 2022, and to reach single digits by 2027 measured by the GDP deflator, as fiscal financing pressures recede, and the monetary policy framework improves. • Fiscal. Successive shocks and emerging spending pressures have rendered an extremely tight budget situation. Notwithstanding revenues being on target, the overall fiscal deficit widened by about 3.5 percentage points higher than the target of 3.8 percent of non-iron ore GDP in 2021. These overruns reflected expenditure pressures (containing a third wave of COVID-19, wages and salaries, goods and services due to inflationary pressures, accelerated domestic capital projects following COVID delays) and more than anticipated energy subsidies. These pressures have persisted into the FY2022 budget with preliminary 2022Q1 out-turn showing continued increases in energy subsidies, wages, goods and services amidst revenues shortfalls. A supplementary 2022 budget covers emerging spending pressures, while ensuring that the fiscal targets under the program remain on course. Pressures on social transfers, wage bills and pre-election spending will continue to pose risks to planned fiscal consolidation. Under the baseline scenario, the domestic primary balance shifts into surplus in 2023 and to 1.7 percent of non-iron ore GDP by 2024, as domestic revenues improve. • External. Due to the ongoing Russia-Ukraine war and the resulting fuel price increases, the current account deficit is projected to remain high in 2022. The deficit will be partly offset by strong exports . 5 >>> due to the commodity (iron ore) price increase. The current account will gradually improve towards the medium-term, supported by mining production. • IDA financing. IDA financing is assumed to be all grants until 2027, and 100 percent regular IDA credits after 2028, consistent with the 2017 LIC DSF guidance note. Previously, the LIC DSA assumed that 100 percent of the IDA financing after 2028-31 would be disbursed by grants and a 50:50 split between grants and credit (2032-41). However, the assumptions have been revised to be consistent with IDA’s commitment capacity and to reflect change in IDA Financing terms. This revision of IDA financing results in widened fiscal deficits and primary balance (financing needs increase due to a decrease in grants) and increase external debt after 2028 as previous grants are now treated as program loans (PV of external debt to GDP ratio increases by more than 10 percent in the long run). Further, higher credit financing from IDA would put pressure on Sierra Leone to undertake a relatively steep medium-term fiscal adjustment relative to the previous DSA —to reach given fiscal deficit and public debt objectives . • Other assumptions. This DSA reflects two RCF disbursements in June 2020 (SDR 103.7 million or 50 percent of quota) and in March 2021 (SDR 35.3 million or 17 percent of quota), actual and projected future disbursements under the Extended Credit Facility (ECF), SDR allocation in August 2021, debt relief under the CCRT, and debt deferment under the DSSI.6 This DSA also takes into account the projected external financing gap during 2026-27, and assumes that the gap will be covered by concessional financing with an overall grant element of 35.5 percent.7 Further, the assumption of excluding T-Bills issued in the past from calculation of GFN and the debt service to revenue ratio has been changed and they are now included to capture the full GFN and debt service even if rollover risks are manageable (see Text Table 6 and 13). 8. Arrears’ clearance. The authorities have paid large amount of the pre-April 2018 legacy arrears (or Le. 457 billion over 2020-21) without large discounts (i.e., overall NPV reduction on total stock of 35- 40 percent) envisaged under the approved arrears clearance strategy. The lack of resources for upfront payment (“sweetener”) of discounted amount was mentioned as one of the reasons for rejection of haircuts by vendors but also because some of the creditors are strategically important e.g., in the supply of medicine to the security sector, which necessitate selected payments. Authorities are planning to update the current arrears clearance strategy with TA from IMF FAD to make it implementable. In the meantime, a temporary halt in clearance of legacy arrears was agreed for 2022 until a new strategy is in place. This has implications on the assumptions on the term (years) within which the arrears will be fully paid after the NPV reductions-extending this by a year to 2028, assuming a new plan comes into effect from 2023. As in the previous DSA, the overall NPV reduction on total stock is set at about 35-40 percent. 9. The realism tools suggest optimism relative to the historical trend, as a bigger and more frontloaded fiscal adjustment is now needed to achieve program objectives. Regarding the primary 6 >>> balance, fiscal adjustment over the coming years includes recovery from a sharp deterioration due to the shocks amid the authorities’ strong commitment to the reform program (Figure 4). The three-year average of fiscal adjustment over 2022-25 reflects a structural break recovery from a sharp deterioration in the primary balance in 2020 and 2021 due to the COVID-19 shock and its impact on revenues, higher energy subsidies, and wage pressures from key sectors (education, security and health). To maintain the fiscal path under the program, Sierra Leone authorities will have to frontload a steeper fiscal adjustment than anticipated in the previous DSA. Regarding domestic revenue, it is projected to increase from about 13.8 percent of GDP in 2020 to about 16.0 percent in 2025, lower relative to previous DSA due to lower than anticipated efficiency yields from the automation program. However, continued reforms on revenue mobilization, including the adoption of a new duty waiver policy will support revenue collection in the medium-term. Regarding the expenditure side, improved expenditure control and greater efficiencies in spending on will be essential to support a fiscally sustainable adjustment in the medium term. Finally, under the IMF ECF-supported program and the World Bank Sustainable Development Finance Policy (SDFP), the authorities have also committed to a concessional debt ceiling and a zero non-concessional borrowing policy and continue to seek additional budget support grants for priority and social spending, which will contain debt vulnerabilities. 10. Sierra Leone’s debt-carrying capacity has been upgraded to medium compared to the previous DSA report assessment based on improved reserves coverage and stronger remittances. With the Composite Indicator (CI) score of 2.76 based on the latest data including April 2022 WEO and the World Bank’s latest CPIA, Sierra Leone’s debt carrying capacity is evaluated as medium, upgraded from weak in the previous DSA report (Text Table 4). Comparing to the previous DSA, reserves coverages improved due to the SDR allocation in August 2021, and remittances increased. 8 Due to the upgrade, thresholds for the external debt burden indicators and the benchmark for the PV of total public debt have been elevated. Text Table 5 shows applicable thresholds for debt indicators. 7 >>> Classification based Classification based on Classification based on on the previous the two previous Final current vintage vintage vintages Medium Medium Medium Medium 2.75 2.76 2.69 Components Coefficients (A) 10-year average CI Score components Contribution of values (B) (A*B) = (C) components CPIA 0.385 3.161 1.22 44% Real growth rate (in percent) 2.719 3.583 0.10 4% Import coverage of reserves (in percent) 4.052 36.560 1.48 54% Import coverage of reserves^2 (in percent) -3.990 13.366 -0.53 -19% Remittances (in percent) 2.022 3.555 0.07 3% World economic growth (in percent) 13.520 3.050 0.41 15% CI Score 2.75 100% CI rating Medium PV of PPG external debt in percent of GDP 40% PV of PPG external debt in percent of exports 180% PPG external debt service in percent of exports 15% PPG external debt service in percent of revenue 18% PV of total public debt in percent of GDP 55% 11. Sierra Leone is assessed to be at high risk of external debt distress, and PPG external debt is assessed to be sustainable. This is predicated on the strong fiscal adjustment and continued reliance on concessional financing and grants, and moderately high growth rates . • Under the baseline scenario, the PV of PPG external debt-to-GDP ratio and the PV of PPG external debt-to-export ratio are projected to stay below the threshold and decline over the medium term (Figure 1, Table 1).9 The projected decline in the debt ratios reflects several factors such as repayment of past ECF disbursements including those from Ebola period and the projected 8 >>> improvement in GDP and exports. While the historical scenario indicates increasing debt ratios, this reflects the COVID-19 crisis and Ebola crisis and commodity price shocks earlier. • PPG external debt service-to-revenue ratio rises over the medium term,10 indicating a tight liquidity situation, before steadily declining in the medium- to long-term, although it remains significantly above its threshold of 18 percent for the next ten years. PPG external debt service-to-exports ratio stays slightly below the threshold of 15 percent over the medium term. • Stress tests indicate that the external debt indicators are most sensitive to exports. In the stress scenarios, all the external debt indicators remain above the thresholds over the medium term. • Since one of the external debt indicators breaches its threshold under the baseline, Sierra Leone is assessed to be at high risk of external debt distress. However, all the external debt indicators are on a declining trend over the medium- to long-term under the policy settings in the ECF- supported program, PPG external debt is assessed to be sustainable. 12. Sierra Leone is assessed to be at high overall risk of public debt distress, but public debt is assessed to be sustainable. Again, this is predicated on the strong fiscal adjustment and continued reliance on concessional financing and grants, and moderately high growth rates. • Under the baseline scenario, the PV of public debt-to-GDP ratio gradually declines to the threshold of 55 percent by 2025 (Figure 2). The public debt service-to-revenue ratio is projected to rise over the medium term, suggesting a tight liquidity situation. This increasing debt service is expected to be financed with external grants and concessional loans and government revenues. In this context, Sierra Leone will need continued access to concessional financing to ensure that financing terms remain contained. In the long term, as the economy fully recovers and revenue mobilization gains materialize, the public debt service-to-revenue ratio is expected to decline. • Stress tests indicate that the public debt indicators are most sensitive to shocks to commodity price. Considering that both external debt indicators and public debt indicators exceed their thresholds under the baseline, the country is assessed to have high overall risk of public debt distress. • Nevertheless, public debt is assessed as sustainable given the downward trend in all debt indicators under the policy settings in the ECF-supported program. In this context, (i) sustained and significant fiscal adjustment, and (ii) continued reliance on highly concessional external financing (ideally grants) including from the IFIs which account for a large share of Sierra Leone’s PPG external debt, while limiting recourse to expensive domestic debt are particularly important. 9 >>> 13. The debt service to revenue ratio and gross financing needs in Sierra Leone are persistently high and their reduction is contingent on very strong fiscal policies and greater grant and/or concessional borrowing. The need to rollover T-Bills issued in the previous year(“T-Bills amortization” in Text Table 6) accounts for around 70 percent of gross financing needs and the debt service-to-revenue ratio (Text Table 6 and Text Figure 3).11 However, considering the characteristics of Sierra Leone’s domestic financial market—where commercial banks’ business model has relied heavily on T -Bills, there is no secondary market, and foreign participation is absent —liquidity risks from this rollover appear manageable. In case significant negative shocks materialize, the burden on banks to absorb short term government debt will rise further, leading to larger rollover risks, especially if banking sector health also deteriorates following the shock. Reducing residual rollover risks is a medium-term endeavor, including containing inflation and extending issuance maturities. Therefore, lengthening of the maturity structure, along with strong fiscal consolidation and efforts to secure more grant financing is imperative.12 Actual Projections 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2042 Debt service-to-revenue and grants ratio 1/ 80.2 89.5 92.6 93.8 97.4 101.5 97.7 111.9 100.0 92.1 81.7 76.9 40.1 of which: T-bills amortization 55.5 60.4 55.7 58.5 62.9 68.2 68.5 80.0 69.4 58.9 53.7 47.0 22.5 of which: others 24.7 29.1 37.0 35.3 34.5 33.3 29.2 31.8 30.6 33.1 28.0 29.8 17.7 Gross financing need 2/ 20.6 19.2 17.5 17.5 17.8 18.3 18.3 20.2 18.3 17.0 15.3 14.5 8.9 of which: T-bills amortization 11.3 12.2 10.5 11.6 12.2 12.8 13.0 13.2 11.5 10.1 9.4 8.4 4.4 of which: others 9.3 7.0 7.1 5.9 5.6 5.5 5.3 6.9 6.8 6.9 5.9 6.1 4.5 Sources: Country authorities; and staff estimates and projections. 1/ Debt service is defined as the sum of interest and amortization of medium and long-term, and short-term debt. 2/ Gross financing need is defined as the primary deficit plus debt service plus the stock of short-term debt at the end of the last period and other debt creating/reducing flows. Debt Service-to-Revenue Ratio 300 Most extreme shock is Commodity Baseline 250 of which: excluding rollover 200 Most extreme shock 1/ 150 Historical scenario 100 1/ The most extreme stress test is the test that yields the highest ratio in or before 2031. The stress test with a one-off breach is also presented (if any), while the one-off breach 50 is deemed away for mechanical signals. When a stress test with a one-off breach happens to be the most exterme shock even after disregarding the one-off breach, only that stress test (with a one-off breach) would be presented. 0 2022 2024 2026 2028 2030 2032 10 >>> 14. While Sierra Leone is assessed to be at high risk of external and overall public debt distress, its debt is assessed to be sustainable. Setbacks in fiscal adjustment have increased the risks around the baseline, as a bigger and more frontloaded fiscal adjustment is now necessary to achieve program objectives. While the COVID-19 shock worsened the public debt situation by weakening growth, revenue, and exports, the medium- to long-term trajectories of debt ratios remain largely unchanged from the pre-pandemic projection. However, the increasing public debt service-to-revenue ratio over the medium term suggests high liquidity-related vulnerabilities. The stress tests also highlight that debt indicators are sensitive to shocks to exports and commodity price. 15. This DSA underscores the importance of continued fiscal discipline efforts and structural reforms, supported by technical assistance and prudent financing choices . Although the number of indices exceeding the thresholds has decreased compared to the previous DSA, it should be noted that these changes are due to the relaxed thresholds resulting from the changes in the debt carrying capacity, which was driven by exogenous factors including some statistical fluctuations, rather than the shift in the path of debt-to-GDP itself; the overall risk has not changed significantly, and the importance of fiscal effort remain unchanged. 16. It should also be mentioned that the baseline outlook is subject to downside risks mainly due to the Russia-Ukraine war and emergence of new COVID-19 variants. Further increases in fuel, food and fertilizer prices or health shocks could exacerbate the severe burden on the population, deteriorate budget and external balances, increase costs for businesses, prolong fuel subsidies, provoke social discontent, and put debt sustainability at risk. Given these vulnerabilities to exogenous shocks and potential fiscal pressure stemming from upcoming elections, reducing debt and maintaining debt sustainability requires, first and foremost, sustained fiscal adjustment, underpinned by strengthened public financial management, effective expenditure prioritization, and redoubling structural and revenue mobilization reform efforts. However, to achieve a pace of fiscal adjustment that does not imperil the post- pandemic recovery and allows the country to protect critical social and health spending and continue addressing its large development needs, it will be vital to rely on highly concessional financing and ideally grants. In line with the limit imposed under the ECF-supported program and WB SDFP and performance actions (PPAs), Sierra Leone has a zero ceiling on non-concessional external debt. 17. Development of a deeper domestic debt market will be critical in mitigating potential rollover risks. While these risks remain manageable so far given the characteristics of Sierra Leone’s market, greater exposure of commercial banks to the sovereign risks that unanticipated future shocks could impact financial stability. This risk is mitigated by the authorities’ commitment to limit future domestic borrowing and continued technical assistance in debt management and development of a domestic market, including drawing on recent IMF technical assistance on debt recording and joint World Bank/IMF technical assistance on a medium-term debt strategy. Plans for issuance of medium to long term papers would also be essential in extending the yield curve and reducing rollover risks on bonds held by domestic banks. 11 >>> 18. The authorities agreed with the conclusions of the DSA . They concurred with the importance of efforts to ensure sustained fiscal adjustment and highlighted the ongoing reforms to strengthen revenue administration, improve public expenditure management, and further enhance debt management. They committed to continuing to prioritize grants, seeking only highly concessional financing, and ratifying only loans within the agreed annual ceiling under the ECF-supported program to safeguard debt sustainability. The authorities recognized the high rollover risks of T-Bills and would make efforts to issue medium-to- long-term bonds to reduce these risks and support the development of the domestic debt market. The authorities reiterated their commitment to clear domestic arrears and are working to address the challenges of obtaining NPV discounts through an updated arrears clearance strategy. 12 >>> PV of debt-to GDP ratio PV of debt-to-exports ratio 70 700 60 600 50 500 40 400 Most extreme shock is Exports 30 300 20 200 Most extreme shock is Exports 10 100 0 0 2022 2024 2026 2028 2030 2032 2022 2024 2026 2028 2030 2032 Debt service-to-exports ratio Debt service-to-revenue ratio 50 40 45 35 40 30 35 25 30 25 Most extreme shock is Exports 20 20 15 15 10 10 Most extreme shock is Commodity price 5 5 0 0 2022 2024 2026 2028 2030 2032 2022 2024 2026 2028 2030 2032 Baseline Historical scenario Most extreme shock 1/ Threshold Sources: Sierra Leonean authorities; and IMF staff estimates and projections. 1/ The most extreme stress test is the test that yields the highest ratio in or before 2031. Stress tests with one-off breaches are also presented (in any), while these are one-breaches are deemed away for mechanical signals. When a stress test with a one-off breach happens to be the most extreme shock even after disregarding the one-off breach, only that stress test (with a one-off breach) would be presented. 2/ The magnitude of shocks used for the commodity price shock stress test are based on the commodity prices outlook prepared by the IMF research department. 13 >>> PV of Debt-to-GDP Ratio 120 100 Most extreme shock is Commodity price 80 60 40 20 0 2022 2024 2026 2028 2030 2032 PV of Debt-to-Revenue Ratio Debt Service-to-Revenue Ratio 700 300 600 250 500 200 400 150 300 100 200 100 50 Most extreme shock is Commodity price Most extreme shock is Commodity price 0 0 2022 2024 2026 2028 2030 2032 2022 2024 2026 2028 2030 2032 Baseline Most extreme shock 1/ Public debt benchmark Historical scenario * Note: The public DSA allows for domestic financing to cover the additional financing needs generated by the shocks under the stress tests in the public DSA. Default terms of marginal debt are based on baseline 10-year projections. Sources: Sierra Leonean authorities; and IMF staff estimates and projections. . 14 >>> External debt Gross Nominal PPG External Debt Debt-creating flows Unexpected Changes in Debt 1/ (in percent of GDP; DSA vintages) (percent of GDP) (past 5 years, percent of GDP) 40 80 Current DSA 20 Residual Previous DSA proj. 70 DSA-2017 Interquartile 20 15 range (25-75) Price and 60 exchange rate 50 10 Real GDP growth 0 Change in PPG 40 debt 3/ 5 30 Nominal interest rate -20 20 0 Median Current 10 account + FDI -5 0 -40 Contri bution of Change in PPG 5-year 5-year Di s tribution across LICs 2/ 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 unexpected debt 3/ historical projected -10 cha nges change change Public debt Gross Nominal Public Debt Debt-creating flows Unexpected Changes in Debt 1/ (in percent of GDP; DSA vintages) (percent of GDP) (past 5 years, percent of GDP) Residual 40 Current DSA proj. 20 Previous DSA Interquartile 90 DSA-2017 Other debt range (25-75) creating flows 20 15 80 70 Real Exchange rate depreciation 10 60 0 Real GDP 50 growth Change in debt 5 40 Real interest 30 rate -20 0 20 Primary deficit 10 -40 -5 Median 0 Change in debt 5-year 5-year 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 Distribution across LICs 2/ historical projected Contribution of -10 unexpected change change 1/ Difference between anticipated and actual contributions on debt ratios. 2/ Distribution across LICs for which LIC DSAs were produced. 3/ Given the relatively low private external debt for average low -income countries, a ppt change in PPG external debt should be largely explained by the drivers of the external debt dynamics equation. 15 >>> 3-Year Adjustment in Primary Balance Fiscal Adjustment and Possible Growth Paths 1/ (In Percent of GDP) (In Percent) 15 7 1 Distribution 1/ 6 0.5 5 12 Projected 3-yr adjustment 3-year PB adjustment greater 0 4 In Percent of GDP than 2.5 percentage points of GDP in approx. top quartile 3 9 -0.5 2 -1 1 6 0 -1.5 -1 3 -2 -2 -3 -2.5 0 2016 2017 2018 2019 2020 2021 2022 2023 More -4.5 -4.0 -3.5 -3.0 -2.5 -2.0 -1.5 -1.0 -0.5 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0 5.5 6.0 6.5 7.0 7.5 8.0 Baseline Multiplier = 0.2 Multiplier = 0.4 Multiplier = 0.6 Multiplier = 0.8 1/ Data cover Fund-supported programs for LICs (excluding emergency 1/ Bars refer to annual projected fiscal adjustment (right-hand side scale) and lines show financing) approved since 1990. The size of 3-year adjustment from program possible real GDP growth paths under different fiscal multipliers (left-hand side scale). inception is found on the horizontal axis; the percent of sample is found on the vertical axis. Public and Private Investment Rates Contribution to Real GDP growth (% of GDP) (percent, 5-year average) 25 6.0 5.0 20 4.0 15 3.0 10 2.0 5 1.0 0 0.0 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 Historical Projected (Prev. DSA) Projected (Curr. DSA) Gov. Invest. - Prev. DSA Gov. Invest. - Current DSA Contribution of other factors Priv. Invest. - Prev. DSA Priv. Invest. - Current DSA Contribution of government capital 16 >>> Actual Projections Average 8/ Historical Projections 2021 2022 2023 2024 2025 2026 2027 2032 2042 External debt (nominal) 1/ 49.2 55.7 55.9 53.9 50.7 48.0 45.6 39.9 38.0 37.0 47.0 Definition of external/domestic debt Residency-based of which: public and publicly guaranteed (PPG) 49.2 55.7 55.9 53.9 50.7 48.0 45.6 39.9 38.0 37.0 47.0 Is there a material difference between the No two criteria? Change in external debt -0.5 6.5 0.2 -2.0 -3.2 -2.7 -2.4 -0.5 0.1 Identified net debt-creating flows ... 8.4 3.1 0.7 0.0 -0.3 0.1 0.4 -6.5 … 1.0 Non-interest current account deficit 14.0 12.8 10.1 8.1 5.7 5.1 5.0 6.4 5.2 15.0 7.1 Deficit in balance of goods and services 23.9 23.0 20.1 18.7 16.3 15.6 15.3 14.2 11.4 21.6 16.5 Exports 21.1 27.6 30.2 31.5 33.9 34.2 33.5 34.5 34.1 Debt Accumulation Imports 45.0 50.6 50.4 50.2 50.2 49.8 48.8 48.7 45.5 8 50 Net current transfers (negative = inflow) -11.2 -11.5 -11.3 -11.9 -11.9 -11.8 -11.6 -9.2 -7.5 -9.8 -10.7 of which: official -3.1 -3.2 -2.7 -3.1 -3.0 -2.9 -2.8 -1.2 -0.9 7 45 Other current account flows (negative = net inflow) 1.3 1.3 1.3 1.3 1.3 1.3 1.3 1.3 1.3 3.2 1.3 6 40 Net FDI (negative = inflow) -8.9 -2.9 -5.4 -4.9 -3.4 -3.6 -3.4 -4.7 -10.5 -7.6 -4.5 Endogenous debt dynamics 2/ ... -1.5 -1.6 -2.4 -2.3 -1.7 -1.5 -1.3 -1.3 35 5 Contribution from nominal interest rate 0.3 0.3 0.4 0.4 0.4 0.5 0.5 0.4 0.3 30 Contribution from real GDP growth -1.5 -1.8 -1.9 -2.8 -2.7 -2.2 -2.0 -1.7 -1.6 4 25 Contribution from price and exchange rate changes ... … … … … … … … … 3 Residual 3/ ... -1.9 -2.9 -2.7 -3.2 -2.4 -2.6 -0.9 6.6 … -1.8 20 of which: exceptional financing ... 0.1 0.1 0.1 0.1 0.1 0.0 0.0 0.0 2 15 1 10 Sustainability indicators PV of PPG external debt-to-GDP ratio 32.8 34.4 35.5 35.3 34.1 32.9 31.7 26.2 24.1 0 5 PV of PPG external debt-to-exports ratio 155.5 124.4 117.3 112.0 100.6 96.2 94.6 76.0 70.7 -1 0 PPG debt service-to-exports ratio 12.0 12.0 11.4 11.4 11.0 10.9 10.3 6.7 5.4 2022 2024 2026 2028 2030 2032 PPG debt service-to-revenue ratio 16.0 22.7 23.9 24.2 24.7 24.3 22.2 13.5 9.9 Gross external financing need (Million of U.S. dollars) 325.7 553.0 333.3 273.7 250.8 224.3 230.9 241.0 -372.8 Rate of Debt Accumulation Grant-equivalent financing (% of GDP) Key macroeconomic assumptions Grant element of new borrowing (% right scale) Real GDP growth (in percent) 3.2 3.6 3.4 5.0 5.1 4.4 4.3 4.5 4.5 4.0 4.4 GDP deflator in US dollar terms (change in percent) 2.2 -5.3 -5.9 -4.9 -2.6 -0.6 0.5 1.5 1.0 0.6 -1.1 Effective interest rate (percent) 4/ 0.6 0.6 0.6 0.7 0.8 0.9 1.0 1.1 0.9 0.7 0.9 External debt (nominal) 1/ Growth of exports of G&S (US dollar terms, in percent) 28.7 28.6 6.4 4.2 10.0 4.8 2.7 6.7 6.5 13.5 8.1 of which: Private Growth of imports of G&S (US dollar terms, in percent) 35.7 10.5 -3.3 -0.4 2.3 3.0 2.9 6.0 0.0 -0.1 4.0 60 Grant element of new public sector borrowing (in percent) ... 42.4 36.2 33.7 33.7 34.2 34.2 44.8 40.1 ... 40.4 Government revenues (excluding grants, in percent of GDP) 15.8 14.6 14.4 14.8 15.1 15.4 15.5 17.1 18.8 12.6 15.6 50 Aid flows (in Million of US dollars) 5/ 191.1 234.6 177.5 200.9 175.7 190.5 196.4 164.8 190.2 Grant-equivalent financing (in percent of GDP) 6/ ... 7.5 5.4 5.7 5.0 4.6 4.6 2.3 2.0 ... 4.1 40 Grant-equivalent financing (in percent of external financing) 6/ ... 74.3 75.0 78.0 76.0 67.8 67.7 53.1 48.7 ... 64.4 Nominal GDP (Million of US dollars) 4,280 4,200 4,084 4,082 4,177 4,334 4,543 6,063 10,936 Nominal dollar GDP growth 5.5 -1.9 -2.7 -0.1 2.3 3.8 4.8 6.1 5.6 4.7 3.3 30 Memorandum items: 20 PV of external debt 7/ 32.8 34.4 35.5 35.3 34.1 32.9 31.7 26.2 24.1 In percent of exports 155.5 124.4 117.3 112.0 100.6 96.2 94.6 76.0 70.7 10 Total external debt service-to-exports ratio 12.0 12.0 11.4 11.4 11.0 10.9 10.3 6.7 5.4 PV of PPG external debt (in Million of US dollars) 1403.4 1443.8 1448.1 1440.3 1422.8 1426.9 1440.6 1588.2 2634.0 0 (PVt-PVt-1)/GDPt-1 (in percent) 0.9 0.1 -0.2 -0.4 0.1 0.3 1.0 1.4 2022 2024 2026 2028 2030 2032 Non-interest current account deficit that stabilizes debt ratio 14.5 6.3 9.9 10.1 8.9 7.7 7.5 6.9 5.1 Sources: Country authorities; and staff estimates and projections. 0 1/ Includes both public and private sector external debt. 2/ Derived as [r - g - ρ(1+g) + Ɛα (1+r)]/(1+g+ρ+gρ) times previous period debt ratio, with r = nominal interest rate; g = real GDP growth rate, ρ = growth rate of GDP deflator in U.S. dollar terms, Ɛ=nominal appreciation of the local currency, and α= share of local currency-denominated external debt in total external debt. 3/ Includes exceptional financing (i.e., changes in arrears and debt relief); changes in gross foreign assets; and valuation adjustments. For projections also includes contribution from price and exchange rate changes. 4/ Current-year interest payments divided by previous period debt stock. 5/ Defined as grants, concessional loans, and debt relief. 6/ Grant-equivalent financing includes grants provided directly to the government and through new borrowing (difference between the face value and the PV of new debt). 7/ Assumes that PV of private sector debt is equivalent to its face value. 8/ Historical averages are generally derived over the past 10 years, subject to data availability, whereas projections averages are over the first year of projection and the next 10 years. 1. I 17 >>> N Actual Projections Average 6/ 2021 2022 2023 2024 2025 2026 2027 2032 2042 Historical Projections Public sector debt 1/ 76.8 77.7 77.2 74.0 70.1 66.4 63.0 56.9 46.2 57.4 66.1 Definition of external/domestic Residency- of which: external debt 49.2 55.7 55.9 53.9 50.7 48.0 45.6 39.9 38.0 37.0 47.0 debt based of which: local-currency denominated Change in public sector debt 0.5 0.9 -0.5 -3.3 -3.9 -3.7 -3.3 -1.5 -0.7 Is there a material difference Identified debt-creating flows 2.2 4.2 0.1 -2.3 -3.1 -3.2 -2.7 -1.5 -0.8 2.1 -1.1 No between the two criteria? Primary deficit 4.3 1.1 0.1 -1.0 -1.0 -0.8 -0.3 0.8 1.1 3.4 0.4 Revenue and grants 20.3 20.2 18.8 19.8 19.3 18.8 19.0 17.8 19.4 16.2 18.3 of which: grants 4.5 5.6 4.3 4.9 4.2 3.5 3.4 0.6 0.6 Public sector debt 1/ Primary (noninterest) expenditure 24.6 21.3 18.9 18.7 18.3 18.0 18.7 18.6 20.5 19.6 18.7 Automatic debt dynamics -2.1 3.0 -0.1 -1.2 -2.0 -2.4 -2.4 -2.3 -1.9 of which: local-currency denominated Contribution from interest rate/growth differential -4.1 -6.3 -3.1 -4.0 -3.5 -2.8 -2.5 -2.5 -2.2 of which: foreign-currency denominated of which: contribution from average real interest rate -1.7 -3.7 -0.5 -0.3 0.1 0.2 0.2 0.0 -0.2 of which: contribution from real GDP growth -2.4 -2.7 -2.6 -3.7 -3.6 -3.0 -2.7 -2.5 -2.0 90 Contribution from real exchange rate depreciation 1.9 ... ... ... ... ... ... ... ... 80 Other identified debt-creating flows 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 70 Privatization receipts (negative) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 60 Recognition of contingent liabilities (e.g., bank recapitalization) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 50 Debt relief (HIPC and other) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 40 Other debt creating or reducing flow (please specify) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 30 Residual -1.7 6.1 2.5 1.7 0.6 -0.1 -0.6 0.2 0.4 1.4 0.9 20 10 Sustainability indicators 0 PV of public debt-to-GDP ratio 2/ 62.1 61.0 60.8 58.5 55.7 52.9 50.3 43.8 33.4 2022 2024 2026 2028 2030 2032 PV of public debt-to-revenue and grants ratio 306.2 302.4 323.7 295.9 288.3 280.7 264.9 246.7 172.0 Debt service-to-revenue and grants ratio 3/ 80.2 89.5 92.6 93.8 97.4 101.5 97.7 76.9 40.1 Gross financing need 4/ 20.6 19.2 17.5 17.5 17.8 18.3 18.3 14.5 8.9 of which: held by residents of which: held by non-residents Key macroeconomic and fiscal assumptions 90 Real GDP growth (in percent) 3.2 3.6 3.4 5.0 5.1 4.4 4.3 4.5 4.5 4.0 4.4 80 Average nominal interest rate on external debt (in percent) 0.7 0.7 0.7 0.8 0.9 1.0 1.1 1.1 1.0 0.7 1.0 70 Average real interest rate on domestic debt (in percent) -0.4 -4.1 1.2 3.0 3.6 3.5 3.7 2.0 2.1 0.6 2.2 60 Real exchange rate depreciation (in percent, + indicates depreciation) 4.2 … ... ... ... ... ... ... ... 2.4 ... 50 Inflation rate (GDP deflator, in percent) 11.1 15.8 17.9 15.9 13.4 11.2 8.9 6.6 6.1 9.9 10.7 40 Growth of real primary spending (deflated by GDP deflator, in percent) 11.9 -10.4 -8.2 4.0 2.7 3.0 8.2 4.9 5.7 6.6 1.9 30 Primary deficit that stabilizes the debt-to-GDP ratio 5/ 3.8 0.2 0.6 2.2 2.9 2.9 3.1 2.3 1.8 -0.1 2.2 20 PV of contingent liabilities (not included in public sector debt) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 10 0 2022 2024 2026 2028 2030 2032 Sources: Country authorities; and staff estimates and projections. 1/ Coverage of debt: The central government plus social security, central bank, government-guaranteed debt. Definition of external debt is Residency-based. 2/ The underlying PV of external debt-to-GDP ratio under the public DSA differs from the external DSA with the size of differences depending on exchange rates projections. 3/ Debt service is defined as the sum of interest and amortization of medium and long-term, and short-term debt. 4/ Gross financing need is defined as the primary deficit plus debt service plus the stock of short-term debt at the end of the last period and other debt creating/reducing flows. 5/ Defined as a primary deficit minus a change in the public debt-to-GDP ratio ((-): a primary surplus), which would stabilizes the debt ratio only in the year in question. 6/ Historical averages are generally derived over the past 10 years, subject to data availability, whereas projections averages are over the first year of projection and the next 10 years. Note: Grants include grants for debt service relief under the Catastrophe Containment and Relief Trust (CCRT). 18 >>> Projections 1/ 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 PV of debt-to GDP ratio Baseline 34.4 35.5 35.3 34.1 32.9 31.7 30.2 28.5 27.3 26.8 26.2 A. Alternative Scenarios A1. Key variables at their historical averages in 2022-2032 2/ 34.4 34.5 35.2 36.2 38.3 40.6 43.5 46.1 48.9 51.8 54.3 B. Bound Tests B1. Real GDP growth 34.4 42.5 50.6 48.9 47.2 45.5 43.3 40.8 39.2 38.4 37.6 B2. Primary balance 34.4 36.1 37.2 36.9 36.5 35.8 34.7 33.3 32.2 31.7 31.1 B3. Exports 34.4 47.9 66.6 65.7 64.5 62.9 60.9 57.9 54.6 52.1 49.7 B4. Other flows 3/ 34.4 42.1 49.3 48.3 47.3 46.0 44.3 42.0 39.7 38.2 36.6 B5. One-time 30 percent nominal depreciation 34.4 45.6 41.8 40.1 38.7 37.1 35.2 33.0 31.9 31.4 30.9 B6. Combination of B1-B5 34.4 47.0 55.5 54.3 53.0 51.5 49.6 46.8 44.4 42.7 41.1 C. Tailored Tests C1. Combined contingent liabilities 34.4 36.9 37.8 37.3 36.8 36.0 34.8 33.4 32.4 32.0 31.5 C2. Natural disaster n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. C3. Commodity price 34.4 40.7 45.7 44.9 43.7 42.1 39.7 36.7 34.0 32.0 30.1 C4. Market Financing n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Threshold 40 40 40 40 40 40 40 40 40 40 40 PV of debt-to-exports ratio Baseline 124.4 117.3 112.0 100.6 96.2 94.6 89.9 81.6 79.4 78.1 76.0 A. Alternative Scenarios A1. Key variables at their historical averages in 2022-2032 2/ 124.4 114.0 111.6 106.9 112.1 121.2 129.7 132.1 142.0 151.0 157.5 0 124.4 105.7 94.5 80.9 74.9 72.2 68.9 61.9 59.8 58.2 55.9 B. Bound Tests B1. Real GDP growth 124.4 117.3 112.0 100.6 96.2 94.6 89.9 81.6 79.4 78.1 76.0 B2. Primary balance 124.4 119.4 118.1 109.0 106.6 106.8 103.4 95.2 93.6 92.4 90.1 B3. Exports 124.4 265.7 624.6 573.0 556.7 554.6 536.2 489.7 468.5 449.0 425.8 B4. Other flows 3/ 124.4 139.4 156.4 142.7 138.1 137.2 132.1 120.2 115.4 111.3 106.3 B5. One-time 30 percent nominal depreciation 124.4 117.3 103.0 92.1 87.8 86.0 81.4 73.5 71.9 71.2 69.6 B6. Combination of B1-B5 124.4 187.5 150.2 231.4 223.7 221.9 213.4 193.3 186.0 179.7 171.9 C. Tailored Tests C1. Combined contingent liabilities 124.4 122.0 119.8 110.2 107.5 107.5 103.8 95.6 94.1 93.2 91.3 C2. Natural disaster n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. C3. Commodity price 124.4 176.7 179.1 154.7 143.0 135.2 122.8 109.0 102.4 96.9 90.7 C4. Market Financing n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Threshold 180 180 180 180 180 180 180 180 180 180 180 Debt service-to-exports ratio Baseline 12.0 11.4 11.4 11.0 10.9 10.3 10.4 9.8 8.2 6.6 6.7 A. Alternative Scenarios A1. Key variables at their historical averages in 2022-2032 2/ 12.0 10.6 10.2 9.7 9.7 9.3 9.6 9.7 9.0 8.3 9.1 0 12.0 10.2 9.6 9.0 8.7 8.1 8.1 7.8 6.4 4.9 4.6 B. Bound Tests B1. Real GDP growth 12.0 11.4 11.4 11.0 10.9 10.3 10.4 9.8 8.2 6.6 6.7 B2. Primary balance 12.0 11.4 11.4 11.1 11.1 10.5 10.6 10.1 8.8 7.3 7.5 B3. Exports 12.0 21.0 41.0 41.9 41.4 39.2 39.3 42.4 44.6 38.3 37.6 B4. Other flows 3/ 12.0 11.4 11.8 11.7 11.6 11.0 11.0 11.7 11.2 9.5 9.4 B5. One-time 30 percent nominal depreciation 12.0 11.4 11.4 10.9 10.8 10.2 10.2 9.7 7.6 6.0 6.2 B6. Combination of B1-B5 12.0 14.8 20.1 19.6 19.5 18.4 18.5 20.1 18.2 15.3 15.2 C. Tailored Tests C1. Combined contingent liabilities 12.0 11.4 11.5 11.1 11.1 10.5 10.6 10.0 8.4 6.8 6.9 C2. Natural disaster n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. C3. Commodity price 12.0 15.2 14.9 14.1 13.6 12.5 12.1 12.4 11.3 9.2 9.0 C4. Market Financing n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Threshold 15 15 15 15 15 15 15 15 15 15 15 Debt service-to-revenue ratio Baseline 22.7 23.9 24.2 24.7 24.3 22.2 21.9 21.6 17.1 13.5 13.5 A. Alternative Scenarios A1. Key variables at their historical averages in 2022-2032 2/ 22.7 22.2 21.6 21.8 21.6 20.2 20.3 21.3 18.7 16.8 18.3 0 22.7 21.4 20.4 20.1 19.4 17.5 17.1 17.1 13.4 10.0 9.4 B. Bound Tests B1. Real GDP growth 22.7 28.6 34.7 35.4 34.9 31.9 31.4 31.0 24.6 19.4 19.4 B2. Primary balance 22.7 23.9 24.3 24.9 24.6 22.6 22.3 22.3 18.3 14.9 15.1 B3. Exports 22.7 26.3 29.5 31.8 31.2 28.6 28.1 31.5 31.5 26.4 25.6 B4. Other flows 3/ 22.7 23.9 25.0 26.3 25.8 23.7 23.3 25.6 23.4 19.3 18.9 B5. One-time 30 percent nominal depreciation 22.7 30.7 31.1 31.3 30.9 28.2 27.8 27.5 20.4 15.8 15.9 B6. Combination of B1-B5 22.7 25.6 29.5 30.5 30.0 27.5 27.0 30.6 26.3 21.6 21.2 C. Tailored Tests C1. Combined contingent liabilities 22.7 23.9 24.4 24.9 24.7 22.6 22.3 22.0 17.6 13.9 13.9 C2. Natural disaster n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. C3. Commodity price 22.7 32.8 34.3 36.1 33.1 28.4 26.1 26.2 22.6 18.1 17.5 C4. Market Financing n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Threshold 18 18 18 18 18 18 18 18 18 18 18 Sources: Country authorities; and staff estimates and projections. 1/ A bold value indicates a breach of the threshold. 2/ Variables include real GDP growth, GDP deflator (in U.S. dollar terms), non-interest current account in percent of GDP, and non-debt creating flows. 3/ Includes official and private transfers and FDI. 19 >>> Projections 1/ 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 PV of Debt-to-GDP Ratio Baseline 61.0 60.8 58.5 55.7 52.9 50.3 49.4 48.3 46.8 45.4 43.8 A. Alternative Scenarios A1. Key variables at their historical averages in 2022-2032 2/ 61 67 71 74 74 72 71 69 66 64 62 0 #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A B. Bound Tests B1. Real GDP growth 61 75 90 91 91 92 95 98 100 102 104 B2. Primary balance 61 66 70 66 62 59 58 56 55 53 51 B3. Exports 61 70 82 79 76 73 72 70 67 64 60 B4. Other flows 3/ 61 68 74 71 68 65 64 62 59 57 55 B5. One-time 30 percent nominal depreciation 61 62 59 56 52 49 47 45 43 41 38 B6. Combination of B1-B5 61 67 68 60 58 56 56 55 54 53 52 C. Tailored Tests C1. Combined contingent liabilities 61 72 69 65 62 59 58 56 54 53 51 C2. Natural disaster n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. C3. Commodity price 61 68 74 82 88 93 98 100 103 105 107 C4. Market Financing n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Public debt benchmark 55 55 55 55 55 55 55 55 55 55 55 PV of Debt-to-Revenue Ratio Baseline 302.4 323.7 295.9 288.3 280.7 264.9 298.6 291.4 272.3 259.7 246.7 A. Alternative Scenarios A1. Key variables at their historical averages in 2022-2032 2/ 302 353 350 367 379 369 425 411 383 364 346 0 89.47176 85.82063 112.499 131.0969 141.9985 147.1764 136.1233 114.6495 103.1126 90.95506 85.37678 B. Bound Tests B1. Real GDP growth 302 382 415 433 453 454 567 581 572 575 575 B2. Primary balance 302 353 352 341 332 313 350 341 318 302 287 B3. Exports 302 372 415 410 404 385 434 421 387 364 340 B4. Other flows 3/ 302 363 373 367 360 343 386 375 346 327 307 B5. One-time 30 percent nominal depreciation 302 337 304 293 281 261 285 272 249 233 216 B6. Combination of B1-B5 302 354 340 308 305 292 337 332 314 302 290 C. Tailored Tests C1. Combined contingent liabilities 302 384 349 338 329 310 348 339 316 301 286 C2. Natural disaster n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. C3. Commodity price 302 444 455 517 540 531 623 604 595 598 599 C4. Market Financing n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Debt Service-to-Revenue Ratio Baseline 89.5 92.6 93.8 97.4 101.5 97.7 111.9 100.0 92.1 81.7 76.9 A. Alternative Scenarios A1. Key variables at their historical averages in 2022-2032 2/ 89 97 105 111 119 114 132 116 105 92 86 0 89.47176 85.82063 112.499 131.0969 141.9985 147.1764 136.1233 114.6495 103.1126 90.95506 85.37678 B. Bound Tests B1. Real GDP growth 89 105 129 153 176 183 234 229 224 217 217 B2. Primary balance 89 93 114 138 134 125 137 121 110 97 90 B3. Exports 89 93 95 99 103 100 114 105 101 90 85 B4. Other flows 3/ 89 93 94 99 103 99 113 104 98 87 82 B5. One-time 30 percent nominal depreciation 89 89 91 93 98 94 107 96 88 77 73 B6. Combination of B1-B5 89 94 99 103 111 110 131 121 114 104 100 C. Tailored Tests C1. Combined contingent liabilities 89 93 138 131 130 121 134 118 107 94 87 C2. Natural disaster n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. C3. Commodity price 89 119 121 149 193 206 252 238 234 228 228 C4. Market Financing n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Sources: Country authorities; and staff estimates and projections. 1/ A bold value indicates a breach of the threshold. 2/ Variables include real GDP growth, GDP deflator and primary deficit in percent of GDP. 3/ Includes official and private transfers and FDI. 20 >>>