By Dr Samoura Kamara for POLITICO
After growing by 5.4 percent in 2008, the Sierra Leone economy slowed down to 3.2 percent in 2009 due to the adverse consequences of the financial and economic crisis. The economy recovered strongly from the financial and economic crisis; growing by 5.0 percent in 2010 and further by 6.0 percent in 2011. Economic growth was supported by increased activities in agriculture, construction (higher public investment in infrastructure,) and services sectors.
Over the last five years, Government also made notable macroeconomic achievements as follows:,
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Improvement in domestic revenue mobilization - from less than 9 percent of GDP in 2007 to 10 percent of GDP in 2011 and an estimated 13 percent of GDP in 2012;
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Government expenditures have been re-oriented in favour of the main drivers of growth including roads, energy, water supply, agriculture , health and education.
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Proactive monetary policies have seen inflation falling to 11.7 percent as at end September 2012 from 18.4 percent in 2009
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Exports have grown strongly, with total export growth jumping from to US$ 420 million as at end June 2012 from US$285.4 million in 2007.
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Imports have also been high, largely to support increased mining and agricultural activities
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The exchange rate remained relatively stable in 2010 and 2011 after the sharp depreciation in 2009 on account of the global economic and financial crises. The year-on-year exchange rate appreciated by 0.6 percent at end June 2012.
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Gross foreign exchange reserves averaged more than three months of imports during the period – enough to withstand external shocks to the economy
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Government has been pursuing prudent external borrowing policies –hence external debt remain sustainable
In addition, Sierra Leone has made significant progress in strengthening governance including intensifying the fight against corruption and implementing public financial management reforms to ensure transparency and accountability; pursuing reforms to improve the investment climate; and promoting popular participation by providing broader democratic space to allow civil society involvement in governance.
Economic Outlook
The outlook of the Sierra Leone economy is bright and positive. The main priority of my Government in the next five years is to implement policies, programmes and projects that will generate sustained and inclusive economic growth, create job opportunities and reduce poverty. This will be done in the context of a stable macroeconomic environment (low and stable prices, stable exchange rate, sustainable debt levels, etc)
Real Gross Domestic Product (GDP)
The increased activities in the mining sector especially the resumption of iron ore mining in the country will significantly contribute to the growth prospects of the country in the future. Taking into consideration the projected production levels of the two main iron ore mining companies, African Minerals and London Mining, the economy is forecast to grow strongly, mostly in double digits in the coming years.
Assuming international market conditions remain favourable, and the mining companies fully implement their respective production plans, the economy is projected to grow by 21.3 percent in 2012. The economy will continue to grow strongly by 15 percent in 2013; 14.1 percent in 2014 and 12.1 in 2015.
Excluding iron ore output, economic growth will still remain strong, averaging 6 percent every year to 2017. This level of growth will be made possible by Government's continuous drive to invest in infrastructure including roads, electricity and water supply; Government policies to improve productivity in the agriculture, fisheries, tourism and the manufacturing sectors;
In all of these, private sector investment will play a key role. Government will therefore continue with the implementation of
programmes and policies that will further improve the business environment and enhance the competitiveness of the economy so as to promote domestic private investment as well as attract foreign direct investment into the growth enhancing sectors of the economy.
Export of Goods
In tandem with the increase in domestic output, export of goods (minerals and non-minerals) is expected to increase substantially in the years ahead. In dollars terms, exports are projected to more than double in 2012, and grow further by nearly 70 percent in 2013, 30 percent in 2014 and further by 16 percent in 2015. The growth in exports will be underpinned by the export of iron ore as well as the increase in the production cash crops (cocoa, coffee etc,) as Government and development partners support the rehabilitation and expansion of cash crop plantations.
Domestic Revenue
Domestic revenues will also increase substantially in the next five years and beyond partly as result of the projected increase in mining revenues but more so from improvements in tax administration as Government continues to modernize the operations of the National Revenue Authority and strengthen the legal framework for tax collection, both from the mineral and non-mineral sectors. The objective is to increase domestic revenue, which currently hovers around 12 percent of GDP to at least 20 percent of GDP by 2017.
The appropriate structures and institutions will be put in place to ensure that Sierra Leoneans benefit from the mineral wealth. In particular, a Transformation and Development Fund will be established as part of the Consolidated Revenue Fund, with the relevant governance arrangements to ensure the prudent use of the mineral revenues.
Government Expenditure
Government will continue with its current efforts of re-directing Government expenditures to the sectors that will generate economic growth and create job opportunities. Hence, Government will continue to invest in infrastructure, agriculture, health and education. Efforts will be made to diversify the economy by increasing support to and implement key reforms in the fisheries and tourism sectors. While, substantial amounts of money will be spent on these sectors, appropriate measures will be put in place to ensure efficiency in public spending-in other words, we should be able to receive better quality of goods and services at relatively lower costs.
External Debt
While Government, Government will seek external financial resources to complement domestic revenues to implement various projects and programmes, it is mindful of the need to ensure that the level of external borrowing is consistent with the country’s capacity to service the debt when it is due for payment. Hence, ensuring debt sustainability will remain a top priority of my Government in the next five years.
Inflation (Consumer Prices)
Like other countries in the continent, our economy was adversely affected by the international food and fuel crisis resulting in higher domestic prices of goods and services. Inflation, though declining, was mostly in the double digits in recent years due to these unfortunate developments in the global economy. This situation, as we all know is not good for the population especially the poor people. My Government is very much concerned about this situation. My Government’s key in the next five years is not only to return the economy to single digit inflation but also to maintain this low level of inflation during the next five years and beyond.
To achieve this, my Government will implement a combination of sectoral and macroeconomic policies. In the first place, the Bank of Sierra Leone will ensure that monetary policy remained proactive and appropriate to ensure that prices remain stable. Secondly, Government policies in the agricultural sector are expected to result in an increase in the supply of basic food items such as rice and other food crops; and thirdly the stability in the exchange which we now enjoy will continue and this in turn will contribute to ensuring that the prices of basic goods , especially those imported, remain stable.
Foreign Exchange Reserves
Government will ensure that gross foreign exchange reserves, which serve as the shock absorber to the economy in the event of external shocks; for example when price of our exports fall or when the price of imported goods such as oil, rice etc rise by big margins). Government will ensure that there is sufficient amount of foreign reserves that can cover at least 3 months of imports at all times.
In this context, Government will continue to implement a flexible foreign exchange regime as this will allow the economy to adjust quickly to external shocks. At the same time ,Government will continue to implement appropriate macroeconomic and sectoral policies to ensure that the exchange rate remain stable, which in turn , will contribute to the stability of the prices of basicl goods and services. Government will also continue to make foreign exchange available to the private sector to facilitate the importation of essential goods such as rice, petroleum products as well as raw materials and intermediate goods used by manufacturing industries.
Bank Credit to the Private Sector
Access to affordable bank credit has been a major constraint to the private sector, making it impossible for them to establish new businesses and or expand existing ones. My Government will focus on continuing to implement financial sector reforms to improve the efficiency and stability of the financial sector. The final outcome will be a sector that is capable of supporting the private sector by making available affordable bank credit to the private sector. This in will encourage the private sector to invest , thereby create job opportunities.
Conclusion
The implementation of the programmes, policies and projects to achieve the targets and objectives stated above will be guided by our next Growth and Poverty Reduction Strategy-the Agenda for Prosperity (PRSP III).
Hence in the next five years, my Government will focus on diversifying the economy while maintaining a stable macroeconomic
environment; prudent management of our natural resources in general and mineral revenues in particular; investing in Human Development (education, health and water and sanitation),; improving the external competitiveness of the economy by improving, among others, infrastructure; design and implement programmes to create employment especially for the youth; provide social protection for the vulnerable groups; improve governance and strengthen public sector capacity; and last but not the least ensure Gender Equality and empower women. The overarching goal is to promote sustainable growth and create employment opportunities.
The author is Minister of Finance. We requested him to write this article. So did also did the main opposition SLPP party on their future economic plans for the country. But the contact said they were too busy to oblige. We hope they still find time to do so before our next edition – the last before polling day.
