By Sallieu S. Kanu
Sierra Leone’s headline inflation decreased by 29.10 percent, from 54.59 percent in October 2023 to 25.49 percent in August 2024, on account of a decline in the prices of both food and non-food items in the consumer price index basket, the Monetary Policy Committee (MPC) of the Bank of Sierra Leone (BSL) said in a policy statement it put out on Tuesday.
The Committee which met on September 30, 2024, observed that the tight monetary policy stance of the BSL, the relatively stable exchange rate, prudent fiscal policy and moderating global commodity prices, were primary drivers for the ease in domestic inflationary pressures.
“This notwithstanding, the Committee noted possible upside risks to the inflation outlook, including potentially higher production costs arising from disruptions in supply chains due to geopolitical tensions, trade fragmentation, climate-related risks, and an unanticipated depreciation of the local currency.”
Going forward, the Committee noted that the BSL should be relentless in its efforts to further decrease inflation, thereby reducing the cost of living and achieving its overarching goal of price stability.
“A low inflation environment enhances the economy’s competitiveness and attracts international capital flows and investments.”
Growth Outlook
The Monetary Policy Committee (MPC) indicates that real GDP growth is expected to remain strong at 4.0 percent in 2024, though lower than the 5.7 percent recorded in 2023, reflecting uncertainties around mining sector output in 2024. “In 2025, domestic economic growth is projected at 4.5 percent due to anticipated expansion in agricultural activities, a rebound in the mining sector, and continued macroeconomic stability. This promising outlook is supported by the Bank’s assessment of business confidence and the Composite Index of Economic Activities (CIEA), which registered an improvement in 2024Q2 relative to 2024Q1,” the Committee said in the policy statement.
While welcoming the positive prospects for economic growth, the MPC acknowledged vulnerabilities to the growth outlook, adding that the possible disruption to trade flows associated with ongoing tensions in the Middle East and other notable geopolitical uncertainties were considered significant factors that would potentially weaken domestic economic activities.
The Monetary Policy Committee recommended and received the approval of the Board of Directors of the Bank of Sierra Leone to increase its Monetary policy rates effective 1 October 2024 as follows: “The Monetary policy rate (MPR) to 24.75 %. The standing Lending Facility rate (SLFR) to 27.75%. The Standing Deposit Facility Rate (SDFR) to18.25%.”