By Sallieu S. Kanu
The stock of public debt increased slightly by 5.5 percent to NLe53.9 billion as at end June 2023 from NLe51.1 billion as at end December 2022, the Minister of Finance said on Friday while reading the 2024 Government Budget and Statement of Economic and Financial Policies in Parleament.
Sheku Ahmed Fantamadi Bangura said, “Domestic debt increased by 13.4 percent to NLe18.2 billion, while foreign debt increased marginally by 0.2 percent to NLe35.7 billion as at end June 2023.”
He said that the increase in domestic debt was driven mainly by increased domestic borrowing.
The finance minister said that after recovering strongly from the COVID-19 pandemic with a growth rate of 4.1 percent in 2021, the Sierra Leone economy slowed down to 3.5 percent in 2022. He said that the economy is projected to grow moderately by 2.7 percent in 2023, but the uncertain global economic environment, coupled with high food and energy prices continued to weigh on economic growth in 2023.
“Inflationary pressures persisted throughout 2023, reflecting imported inflation, domestic food supply shocks, adjustment in fuel prices, and continuous depreciation of the exchange rate. Inflation surged to 54.5 percent in September 2023, from 37.1 percent in December 2022,” he said.
Fantamadi Bangura said that total value of exports increased by 16.1 percent to US$ 659.2 million during the first half of 2023 relative to the same period in 2022. “Of this, mineral exports amounted to US$ 584.7 million, with iron ore exports increasing by 54.7 percent to US$ 391.0 million.”
He said that the total import bill decreased marginally by 0.4 percent to US$ 968.6 million in the first half of 2023 relative to the same period in 2022. “The value of rice and petroleum imports amounted to US$92.1 million and US$305.7 million, respectively. The combined value of rice and petroleum imports, accounted for 41 percent of the total import bill for the review period.”
The finance minister said that trade deficit narrowed significantly to US$ 309.4 million in the first half of 2023 from US$404.9 million in the corresponding period in 2022, reflecting mainly the strong growth in mineral exports.
“Gross international reserves of the Bank of Sierra Leone amounted to US$432.9 million (equivalent to 3.0 months of imports) as at end October 2023, according to the finance minister.
He said that the depreciation of the Leone moderated to 17.2 percent between January and October 2023 compared to 39.1 percent in 2022.
He said that the policy actions taken by the Bank of Sierra Leone to stabilise the exchange rate include: the removal of administrative barriers in the foreign exchange market; the amendment of the BSL Act, 2019 to permit the use of currencies other than the Leone in selected transactions in Sierra Leone; and the announcement effect of the decision to permit lending in foreign currency by commercial banks on a case-by-case basis.
Medium-Term Economic Outlook
The finance minister said that the Sierra Leone economy is expected to remain resilient over the medium-term. “Growth is projected to increase to 4.7 percent in 2024 and 5.2 percent in 2025, driven by increased investment in agriculture, mining, and continued recovery in the services sector,” he said.
“Inflation is expected to ease to 23 percent by end 2024 and further decline over the medium-term as the tight monetary policy stance is sustained and supported by prudent fiscal policy. The anticipated decline in global food and energy prices and increases in domestic food supply will also contribute to lowering inflationary pressures.”
The finance minister said the current account deficit is projected to shrink to 4.2 percent of GDP in 2024 and further to 2.9 percent of GDP in 2025, as the trade deficit narrows.
He said that #official foreign reserves are programmed to stay above 3.0 months of imports cover in the medium-term, supported by official inflows and private transfers.
“The exchange rate is expected to depreciate by the difference between inflation in Sierra Leone and that of our major trading partners. Given the projected decline in inflation, the depreciation of the Leone is expected to moderate in 2024 and the medium-term,” he said.
“However, the outlook of the economy is susceptible to several significant downside risks. These include spillovers from ongoing geo-political tensions, economic fragmentation, escalation of the Russia-Ukraine crisis, prolonged weakening of the Chinese economy, potential collapse of the prices of our key export commodities, continuous depreciation of the exchange rate, and declining international donor support. Moreover, an escalation of the Israeli-Palestine conflict poses a major threat to global economic cooperation, which could also significantly weigh on global growth prospects.”