By: Mohamed Sahr Mohamedsahrpro@Gmail.Com
Upholding macroeconomic stability in Sierra Leone with focus on enhancing value chains to boost food security is crucial for her citizens. In recent years, the country has made tremendous progress in terms of stabilizing the economy, but inflation, poverty and food insecurity remain major challenges. Ensuring that the country’s economic growth is inclusive and benefits all citizens, particularly the most vulnerable, is essential to achieving lasting food security. That said, by creating an enabling environment for businesses and investing in agriculture couple with rural development, Sierra Leone can make significant strides towards ensuring her people to have access to adequate and nutritious food despite the cusp of change. However, the 2023 macroeconomic update pictures six thematic areas such as enforcing fiscal discipline, debt management, mitigating structural weaknesses, policy shifts for greater productivity, boosting domestic production to facilitate imports and curbing food insecurity and hunger.
Significantly, Sierra Leone can promote economic growth by creating a friendly environment for investment and growth. When the macro economy is stable, it is likely to provide a range of certainty for businesses and investors who can make long-term investment decisions without fear of sudden changes in the economic environment. That is to say, stable inflation also promotes investment and growth by allowing businesses to better plan for the future. Whereas, stable exchange rates reduce the risk of currency devaluation, which has the potential to cause negative effects on economic growth. Studies have shown that several countries have achieved high economic growth rates while maintaining macroeconomic stability. For example, China has made 9.5% average annual growth from 1980-2010. Singapore for instance has accumulated 5.3% average annual growth from 1990-2015. Also, South Korea has raised 7% average annual growth from 1960-2010. Based on this analogy, Sierra Leone is on the right footing for progress.
Notwithstanding, macroeconomic stability can reduce inflation. The fact that stable economic conditions reduce uncertainty and volatility in the economy, which makes it easier for businesses and households to plan for the future, reduction of inflation with regards to macroeconomic stability, is a requisite for a better nation like Sierra Leone. When there is less uncertainty about the future, businesses are more likely to invest in new projects, and consumers are likely to spend money on goods and services. This increased spending leads to increased demand, and increased demand can put upward pressure on prices. As long as inflation is kept under control, however, businesses can make long-term plans with more confidence, higher productivity and economic growth. Even though inflation is caused by a number of factors, including monetary policy, fiscal policy and economic growth, macroeconomic stability can help to reduce inflation by addressing some of these underlying factors. Bernanke, B.S 2004 in his work title “The Great Moderation.” the Federal Reserve Bank of Kansas City Economic Symposium gives clear view on the relationship between macroeconomic stability and inflation.
In addition, this jury can reduce volatility in exchange rates. It is obvious that macroeconomic stability can help to reduce volatility in exchange rates, but the effects on food prices is more complex. Though stable exchange rates can lead to increased trade and investment, but it can also increase economic growth and strengthening of the local currency. Put simple, this can make imports more expensive, including food imports. Typical example is Sierra Leone’s dependent on imported food particularly to rice as a staple food. International Food Policy Research Institute (IFPRI) in 2011 found that exchange rate volatility has an adverse impact on the domestic prices of staple foods in developing countries.
Finally, macroeconomic stability can promote the creation of an enabling environment for business and investment. There are a number of benefits for macroeconomic stability when it comes to investment and the creation of the enabling business ecosystem. One of the most important benefits is the creation of a stable and predictable business environment. When businesses know what to expect from the economy, they can make long plans and investment with confidence. By so doing, it can lead to increased productivity and innovation, which can further boost economic growth. Foreign Direct Investment (FDI) and World Bank in 2007 observed that stable macroeconomic environment appears to have significant and positive impact on the flows of FDI.
With these key analyses on the macroeconomic stability with focus on food security, solutions remain paramount for Sierra Leone 2023 Macroeconomic update. Reducing the country’s reliance on foreign aids and natural resources is a step to right direction. Government needs to diversify the economy and create new sources of revenue. This could involve investing in other sectors such as agriculture, manufacturing and tourism. The government could also encourage investment in the mining sector, which has the potential to generate significant revenues. Furthermore, the government could implement policies to promote the development of small and medium-sized businesses, which could create jobs and help to reduce poverty.
Also, reduction of inflation through monetary policy is by increasing interest rates. Central Bank can reduce money supply by selling government bonds. Another solution is for the government to strengthen fiscal position. This could be achieved by implementing a more effective and efficient tax collection system and cracking down on tax evasion. More so, the government should reduce its spending in certain areas and focus on areas that are more likely to lead to economic growth, such as infrastructural development and education. By embarking on this step, the government should improve its fiscal position and create a more stable economy.
In brief, macroeconomic stability is vital for ensuring that Sierra Leone can achieve food security. Though the country has made some progress in stabilizing her economy, but more needs are to be done to ensure that growth is sustainable and reaches all sectors of the society. Inclusive economic growth, investments in agriculture and rural development, and greater access to education and healthcare are key to reducing poverty and ensuring food security for the people of Sierra Leone. On this note, with the right policies and strategies in place, the country can create a brighter future for her people.
