By George M.O.Williams
Sierra Leone’s Gross international reserves has declined to US$523.80 million as at the end of June 2023, from US$610.42 million as at end December, 2022, due to increase in payments for debt service and goods and services, according the 2023 government statement of economic and financial policies which was read in Parliament by the Ministry of Finance, Sheku Fantamadi Bangura.
This shows a persistent decline in the gross foreign exchange reserves.
Gross foreign exchange reserves dropped to US$ 739.42 million at the end of May 2022 from US$ 931.76 million at the end of December 2021, reflecting mainly increased foreign exchange requirements to import essential commodities in the face of rising global prices.
The Finance Minister said that inflation continued to rise during the first half of 2023 reaching 44.8 percent in June 2023 from 37.1 percent in December 2022 driven largely by the pass-through effect of higher global food and energy prices, and the continuous weakening of the Leone.
He cited that after the Leone depreciated by nearly 20 percent during January to May 2023, the Leone temporarily gained strength in June 2023 as a result of the foreign exchange inflows from the election related activities and the disbursement of balance of payment support of US$21 million by the International Monetary Fund (IMF) in June 2023.
“The depreciation of the Leone reflects the excess demand from foreign exchange relative to the supply. The inadequate supply of foreign exchange could be attributed to low receipts of export, low official development assistance and drop in foreign direct investment (FDI) during the period,” Bangura said.
He lamented that the higher demand for foreign exchange could be attributed to the high cost of imports driven by higher international food and fuel prices as well as strengthening of the US dollar as the United States tightens its monetary policy stance to combat inflation.