By Jesmed F. Suma
If one should ask you today, why is Sierra Leone classified as one of the poorest nations in the world? What would you say? I am sure you would be tempted to always blame it all on the endemic corruption. But we tend to forget that corruption and mismanagement only thrive where accountable governance structures and processes are weak, creating the set of imperatives and incentives that encourages bad policies, poor management of national wealth and corrupt practices. Therefore to address our poverty problem we must start by understanding why we are poor. Maybe I should rather say that we must understand why we the people of Sierra Leone are poor though the nation is endowed with riches? Why is it that countries like Japan are far wealthier with far better standard of living than we are, though we are more endowed with rich and diversified natural resources that are in high demand than Japan is? In my opinion the main reasons for Sierra Leone’s poverty can be attributed to three main areas: Firstly, to Sierra Leone’s tumultuous political and economic past central to which was the dictatorship that followed after the demise of our founding father Sir Milton Margai, then the series of coup d’états in the 60s which created economic volatility, discouraging direct foreign investment – and even domestic investment – hence impeding growth. Those exogenous variables created arbitrary external conditions beyond the control of policy makers which made it almost impossible for them to monitor the effect of their policies and avoid the failed outcomes we experienced. The dictatorship continued with a new leadership that laid the foundation for the 10-year war which destroyed the country’s remaining infrastructure. Many countries went through a similar experience of civil war in the early stages of their development such as England, US and Nigeria. They all emerged from those dark days first by fixing their political system. Luckily, we are gradually beginning to work on this problem but more needs to be done. In a previous article I wrote titled “Sierra Leone is Doomed without a third force” I offered a few suggestions on what I believe we need to do to address this challenge. Here is the link in case you missed it http://politicosl.com/2013/01/sierra-leone-doomed-without-a-third-force/ The second reason Sierra Leone is poor is that of the many years of misguided economic policies influenced by the same dictators that ruled our country at the time, instead of allowing the right policy experts to independently make the right policy decisions. Of course we all know what happened to the first Governor of our central bank, Sam Bangura, who insisted on maintaining the independence of the bank in its monetary policy decisions. These Governments often used the financial system to direct credit to themselves, their cronies or favoured sectors of the economy, in some cases even setting favourable interest rates for certain industries. Private financial institutions usually offer loans to borrowers with the most productive investment opportunities driven by profit motive. Yet politicians base their decisions on tribal, regional and political interest to channel loans sometimes denying other sectors that could produce high growth for the economy. Unfortunately, some of these practices still dictate our economic policies today. One of the major consequences of those past misguided policies is the steady and unending devaluation of the LEONE, our local currency, resulting in adverse effect on the economy, contributing considerably to the poverty we experience in Sierra Leone. The third and final reason I think Sierra Leone is poor is because of our overdependence on imported goods. We lost most of our manufacturing industries over the years; some we lost even before the civil war due to bad governance. We’ve lost our ability to produce even agricultural products, most of which we used to export in the early 60s, including rice our stable food and cash crops such as cocoa, coffee, ginger, etc. Politics became the order of the day, people did not find it worthwhile to invest in productive activities; instead they invested their life, time and money in politics. Possible Solutions: What is it that policy makers can do now, to begin addressing the problem of poverty? First we must start by setting up the right foundation to formulate the right independent policies from the right experts. It is also very important for us to understand that the growth of an economy is not only influenced by the amount of natural resources we are endowed with, but most importantly, it is about the policy choices we make on the best possible use of those natural resources. The President should set up a Presidential Economic Policy Advisory Committee. The main function of this committee should be to provide objective advice on the formulation of effective economic policy to the President based on objective empirical research. The committee should be expected to prepare annual Economic Reports. It should be required to set achievable goals that are measurable, can be monitored and can be controlled with predictable outcome. Members of the Economic Policy Advisory Committee should comprise representatives of three other groups:
- Monetary Policy Advisory Group: This group must be independent with no Govt. control or dictates from politicians. The group should be expected to focus on three main variables: Inflation, Interest rate and unemployment. We would expect them to set floors below which they would not allow inflation to fall and ceilings beyond which inflation should not be allow to rise. In this exercise they would have to use available tools of monetary policy to control the supply of money and influence the interest rate particularly for the Credit market, maintain price stability, control inflation and reduce our unemployment rate. Money and Credit are the lubricant that drives the Macroeconomy of any country. Members of this group must have a working knowledge of the functions of the overall monetary economy, the functions and instruments of the credit market, the operations and tools of monetary policy particularly in the context of Sierra Leone. The operative words here are “Working Knowledge” not just academic knowledge. Understanding how money interacts with economic activities and the role of credit is fundamental to the role of an economic policy adviser. It must be headed by the Governor of the Central Bank and may include other policy advisers from the Private Banking Sector, the Manufacturing Sector, the Chamber of Commerce, Insurance and the Agriculture sector.
- Fiscal Policy Advisory Group: Controlling government expenditure is very crucial in determining the government’s ability to handle its debts and balance its budget. This group should therefore focus on TAXATION and controlling government EXPENDITUTE with the view of developing a positive impact on our aggregate fiscal discipline, the strategic allocation of resources, and the efficiency of public service delivery. It is important to note that improvements in the quality of public financial management, is key to achieving this objective. Hence we need to monitor Govt. budget and reduce our trade deficit. This group must be headed by the Minister of Finance and must include the Director of the Ports Authority, Commissioner General National Revenue Authority, the Accountant General and other members of the Executive Branch dealing with Government revenue and expenditure.
- General Economic Policy Advisory Group: This group should comprise private individuals from the academia such as the Department of Economics in the University of Sierra Leone and other Sierra Leoneans living abroad actually doing policy related work for development agencies, or foreign governments such as some of the Sierra Leonean Policy Experts associated with “The Sierra Leone Policy Watch Inc” an independent policy think tank.
Two representatives from the Monetary Policy Advisory group, two from the Fiscal Policy advisory group and three from the General Economic Policy Advisory Group should make up the President’s Economic Policy Advisory Committee (EPAC). Every three months EPAC should meet with the President to discuss the set of recommendations and present reports on policy outcomes. Each group could arrange on how often they would meet using available technologies which must include at least a face-to-face meeting every three months. Each group must produce a written report which is presented to the President quarterly. I must add however, that it is very imperative that these groups of policy advisers are given access to all necessary data they would need to help them make informed policy decisions and recommendations. Without having access to the data, they would not be able to offer the best advice. It is obvious that, we need to encourage and develop our engine of growth particularly the manufacturing industry. Relying only on the export of depletable raw mineral resources is not sustainable. A country’s standard of living strongly depends on its ability to increase its productivity. By standard of living I mean the average amount of goods and services that Sierra Leoneans can afford, to enjoy a given level of life style. The basic theory is that if a country produces more, the standard of living of its citizens will increase. Hence, to improve the standard of living of our people we must tackle the problem of UNEMPLOYMENT and INFLATION. The first step to doing so is to setup the right framework as recommended above, for the formulation of an effective set of policies. It is understandable that key policymakers in Govt. are always appointed by politicians. Therefore most of the policies they adopt do not look beyond the next election. But our situation calls for bold leadership and President Ernest Bai Koroma has the best opportunity to provide such leadership at these daring times, which could speak to the legacy he wants to leave behind. The state of our economy calls for swift and bold action to lay the foundation for growth. We cannot afford any more trial and errors. Under normal circumstances, the fundamental concern for any policymaker especially economic policies should be the potential effect of those policies on the standard of living of society as a whole. Unfortunately, with respect to Sierra Leone, most decision makers whose policies are usually already marred by other influences such as tribal, regional or partisan interest tend to focus more on the intent of their policies without regard to the potential short and long term economic consequences, usually resulting in disastrous outcomes on the whole nation as experience has taught us over the years. Therefore, if the President considers the above recommendations he will be the first to introduce a structure that creates an opportunity for other stakeholders outside the corridors of power or politics to weigh in on the best economic policy approach for Sierra Leone as the times demand. Let me hasten to note that the recommendations offered here are not different from what prevails in industrialized and other developing countries. But these are relevant recommendations that suit the realities of our peculiar situation. Please feel free to reach Mr. J.F.Suma via JFSuma@BRIMCOConsulting.com.
