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This paper analyzes the link between public investment, economic growth and debt sustainability in Sierra Leone using an inter-temporal macroeconomic model. In the model, public capital improves the productive capacity of private capital, generating positive medium and long term effects to increases in public investment. The model application indicates that a large increase in public investment would have positive macroeconomic effects in the medium term. However, since there is no free lunch, rigidities in tax adjustment would entail unrealistic and unachievable adjustment in the current spending to cover recurrent costs and ensure debt sustainability. A more ambitious increase in public investment would entail more fiscal adjustment, particularly if external commercial loans are secured to complement the adjustment. The model simulations also emphasize the importance of improvements in the structural economic conditions to reap growth dividends. In addition, even if the macroeconomic implications of public investment scaling-up can be favorable in the long term under changes in certain structural conditions, downside risks such as terms of trade shifts and Ebola-induced productivity shortfall expose the country to increased risk of unsustainable debt dynamics. This underscores the need to remove bottlenecks to growth and maintain prudent borrowing policies.

Economic development -- Sierra Leone -- Econometric models. --- Economic development -- Sierra Leone. --- Public investments -- Sierra Leone -- Econometric models. --- Structural adjustment (Economic policy) -- Sierra Leone -- Econometric models. --- Exports and Imports --- Macroeconomics --- Public Finance --- Institutions and Growth --- Fiscal Policy --- International Lending and Debt Problems --- National Government Expenditures and Related Policies: Infrastructures --- Other Public Investment and Capital Stock --- Debt --- Debt Management --- Sovereign Debt --- Public finance & taxation --- International economics --- Public investment and public-private partnerships (PPP) --- Public investment spending --- Public debt --- Fiscal consolidation --- Debt sustainability --- Expenditure --- Fiscal policy --- External debt --- Public-private sector cooperation --- Public investments --- Debts, Public --- Debts, External --- Sierra Leone