Sierra Leone Telegraph: 18 April 2022:
The Monetary Policy Committee (MPC) of the Bank of Sierra Leone (BSL) met on 30th March 2022, to discuss the current economic situation affecting millions of people in the country, as inflation and unemployment continue to rise, and the economy contracts.
But the Monetary Policy Committee is not confident about the future, after concluding it “is of the view that demand pressures will lead to a significant depreciation of the Leone in the near future. Given the high pass-through effects of exchange rate depreciation on domestic prices, this will lead to higher prices, which will potentially negatively impact living standards of especially the poor.”
This is the Report of the Monetary Policy Committee:
Inflation
Inflationary pressures are likely to persist in the near term. Based on the rebased Consumer Price Index (CPI) produced by Statistics Sierra Leone, headline inflation increased from 11.63% in 2021 Q3 to 17.94% in 2021 Q4. Thereafter, it moderated to 16.65% in January 2022. However, it picked up in February 2022 to 17.59%.
Global commodity-price inflation (especially fuel and food), high freight charges, the overall global negative supply shock created by the Russian-Ukranian crisis, and the uncertainties surrounding the COVID-19 pandemic suggest that inflationary pressures are expected to persist in the near period.
The resultant increase in domestic fuel pump prices, which is bound to raise production costs economywide, may most likely impose adverse consequences for domestic prices.
Domestic Economic Growth
Domestic economic activity at a slower pace than previously expected. Real gross domestic product (RGDP) growth in 2021, which was estimated at 3.2%, was downgraded to 2.9%. This subdued economic performance was also reflected in the BSL’s high frequency indicator of economic activity—the Composite Index of Economic Activity (CIEA), which shows that the economy contracted by 2.73% in 2021 Q4.
RGDP growth is expected to be stronger (at 5.0 percent) in 2022, supported by an expected increase in activities in the agriculture, manufacturing, services and mining sectors. In short, actual RGDP growth during 2022 may, more likely than not, fall below its forecasted value of 5.0%.
External Sector
The Leone continued to depreciate against major international currencies in 2021 Q4, due to reduced supply of foreign exchange in the face of increased demand. This pressure is likely to increase during the Ramadan period, which is characterized by increased import demand for food and other essential commodities.
External sector performance was mixed in 2021Q4. The trade deficit widened from $146.65 million USD in 2021 Q3 to $245.66 million in 2021 Q4. This is due to the combined effects of increased imports and decreased exports.
The stock of gross foreign exchange reserves of the Bank of Sierra Leone (excluding swaps) decreased from $932.90 million USD in 2021 Q3 to $931.76 million in 2021 Q4. This was singularly due to a revaluation loss of $4.24 million USD outweighing the net inflows of $3.10 million.
Despite the decrease, the stock of reserves was enough to cover about 5.4 months of imports of goods and services.
The Committee is of the view that the demand pressures will lead to a significant depreciation of the Leone in the near future. Given the high pass-through effects of exchange rate depreciation on domestic prices, this will lead to higher prices, which will potentially negatively impact living standards of especially the poor.
A country which lacks a strong economic base will always be vulnerable to severe shocks determined by outside forces, in some cases the economy may convulse to worsen things. This is where Sierra Leone finds itself. It would take clear thinking and drastic measures to reverse our continuous decline in all sectors; a poor economy just doesn’t have adequate resources to expend on anything. We don’t have a solid manufacturing base, most of our basic needs are met by imports which subjects the Leone to unsustainable pressures, thereby causing debilitating inflammation. In years gone by, when the proceeds from our natural resources did not find their way into the pockets of politicians,but into the Treasury, the Bank of Sierra Leone was in a position to support and defend the Leone on the international market, by buying or selling it as the case may be to uphold its value.
Our agricultural sector is extremely weak, thanks to successive governments’passing attention to it. The importer of rice, for example, has to spend a huge amounts of Leones to buy foreign currency to import rice, hence the higher price of a bag of rice. This goes for everything that is imported. If the undermining leakages from the economy (meaning corruption) which Dr Yomkella keeps talking about are plugged it will go a long way in assuaging the hardship in our society. We shall then be living in an economy where large diamonds do not go missing between State House and Lungi Airport, where grants and loans disappear into thin air, completely missing their target, where auditors’ reports do not see the light of day because they would muddy the face of the President all the way down to goodness knows where.
Our sorry state goes all the way back to the Stevens years. When Siaka Stevens and his gang of thieves got thick into their thieving mode, they delinked the Leone from the British pound Sterling, a huge mistake for a developing economy. Now we see the consequences everywhere. APC and SLPP are the problem in our society, and that’s why I keep advocating for a bloodless revolution that sees both of them benched for a while to give NGC and Dr Yomkella to have a go at managing our economy. The current Central Bank Governor, Kallon, is off track, he is confused. He thinks he can fool us with rhetoric.
Kudos to Governor Kaifala Kallon for trying hard to control the monetary policies during the difficult circumstances with the IMF and World Bank. Even the pandemic and the war between Russia and Ukrainie has made the situation worse. The Fiscal policies of the Executive branch must be synchronized with the fiscal policies in order to enhance exports which will eventually strengthen our currency and improve our GDP.
Hopefully, the new Leone which was recommended by credible financial institutions and should be release shortly will have a psychological effect on our citizens, I will encourage the money hoarders to keep hiding their looting, and after ninety days of the release, their monies will be waste papers.
Lastly, my prediction is, there will soon be a lot of millionaires in Makeni, based on the fact that the lifetime leader of the APC will need some help to convert his loot hidden in his bunker to the central bank. People of Makeni, it’s payback time for you to receive your fair share from the monies that was stolen from you.
Until fairly recently no one talks about inflation and the rising cost of living in Sierra Leone .Because that is what as a nation and people we have been used to for decades .We are led to believe this government is doing everything to shield us from inflationary pressures and stopping us from sliding deeper into poverty .Since Bio took office , the average house hold in Sierra leone have seen their live savings disappear into rabbit hole with no rescue package on sight to help mitigate their suffering .Now we are being told by the bank Governor that our economy will grow by %5percent. I for one is not holding my breath.The trickle down economy we were promised by Bio haven’t materialises.With inflation rearing its ugly head and a cost of living crisis battering households any easing of the pressures or the stranglehold on peoples lives by this one directionless Bio government will take some times.And even time is in short supply given the misguided economic polices that the Bio government have been pursing.
The depreciation of our Leone against US dollar shouldn’t come as any surprise to us.Mesuring the inflation rise by the CPI might just give the accurate picture of how well our economy is performing .Especially when it comes to house hold items like your daily bread and how much households spend on their electricity, and rents .But we can’t use the same yard stick to measure the cost of living crisis affecting families up and down the country .For instance a resident in Freetown has different priorities in life to keep their head above water than say some famer with three wives with an assortment of children and hungry mouths to feed in Kaliahun or Falaba districts .
In other words , the cost of living crisis will at any stage impact on peoples lives depending on which part of the country they happens to reside . Although with the latest technologies, we shouldn’t be in a situation where people are given the option of charging their mobile phones or going with out food for the rest of the day .But with this government we have to learn to adapt .What a crash course Bio have given us all to live within our means .As long as it doesn’t apply to him and some of his corrupt cronies.