Commentary
By: Saidu Jalloh.
The Budget Discussion for the Fiscal Year of 2024 has come to an end, but what is next for Sierra Leone and the economy? A question many reasonable Sierra Leoneans had been asking for a long time. Sierra Leone’s economy experienced overlapping setbacks during 2022 which worsened food insecurity: GDP growth slowed to 3.5% in 2022 (from 4.1% before), while inflation rose from 12% in 2021 to 27% in 2022. According to World Bank research. Business as usual, economic management is not delivering desired outcomes and, even if a crisis is avoided in the near – term, long standing policy of institutional challenges are persisting and severely constraining the economy.
This has hindered the prospect of vast majority of the country’s people, at least 6 million of whom live in extreme poverty. Whether to continue down this path, or to instead chart a new course and rise to its tremendous potential, is Sierra Leone’s choice among the current crisis ravaging Africa are the specific ways the peoples and government of Africa understand and comprehend its nature, scale, causes and directions in each particular country and across the whole continent. A crisis of this magnitude, whether in nature or in society, cannot be measured, let alone resolved, without a realistic grasp of what actually constitutes its essential characteristics.
Everything is just tough in Sierra Leone, most family are not sure when they will eat each day. Like most Sierra Leoneans, the family savings are trapped in the bank. A changeover to redenominate the currency has plungned Sierra Leone’s economy into crisis. Sierra Leoneans technocrat are scourging for options to stem a loading economic crisis that has forced many households to keep tightening their belts, with close to six million people suffering acute food shortage. A World Bank report published show an economy racing towards a cliff. The National Treasury, which acknowledges the deepening financial hole, is getting dismayed by deteriorating macroeconomics conditions in the country, which are choking private business and foreign investments.
A review of key macroeconomics indicators flashes the red light, signalling an economy suffocating under the weight of rising interest rates, soaring inflation, falling forex reserves, depreciating Leones, falling revenue collection, rising government spending, mounting debt and debt service obligation amid a shortage of US dollars. The economic troubles deepened after a World Bank rating and poor’s downgraded the country’s credit status from stable to negative, denting prospect of foreign direct investment and the government’s efforts to access cheap loans from the international markets.
As state owned enterprises and parastatals proved to be ineffective and inefficient despite the huge amount of money government do fund them, they have contributed immensely to the devastating economic crisis Sierra Leone is facing. According to Andrew Lavalie of Institute for Governance Reforms said, “state owned enterprises are dying as a results of the high debts they acquired overtime. Sierra Leoneans do give trillions of Leones to a good number of state owned enterprises every year for them to make profit and provide improved services, adding that it was good to take a look on how far they have gone and how near they have approached since 20 years after embarking on privatization.” The reason for the collapsing of state owned enterprises are: zero fiscal discipline environment, operate in high corrupt risk environment. The money government had spent on the karpowership is enough for the country to own its Karpowership.
You don’t need glasses to see where the problems are. Now it is about how do we solve? It is not enough to do some minor amendment cosmic things. In medicine you would say that this is an operation of the heart. If this happens and everyone has realized that this has to happen and if people want to work together then it makes sense and I believe it doesn’t take two or three years to change those things. This can happen within one year.
Strong leadership needed, this is something that not just one single person can do. With all due respect Joe Biden and Rishi Sunak, I’m not sure that they didn’t do all the things themselves at (American and England ). There were also other people involved in these two countries, people in certain position, no matter what area it was, in order to rebuild and build this economy, all area have to work together in a very close reliable way. We should not leave everything in the hands of the president, political appointees should deliver and stop their differences.
Sierra Leone’s economic descent has surprised many. The West Africa nation had long been held up as a model for economic growth and political stability. While the government has blamed the country economic woes on the COVID-19 pandemic and the Russia – Ukraine, analyst and experts, as well as Sierra Leoneans people, are well aware that Sierra Leone economic troubles preceded the pandemic and are largely due to the country’s politicians’ penchant for overspending. Politics in Sierra Leone is an extremely costly affair.
“Sierra Leone is faced with a challenging macroeconomic environment and the rapid rise in the cost of living combined with weak growth and deterioration of macroeconomic fundamentals threaten to increase the level of poverty among the population,” said Abdu Muwonge, World Bank Country Manager for Sierra Leone. “Therefore, the Government’s policy priorities should focus on restoring macro stability while protecting vulnerable households and maintaining focus on long-term reforms that are geared toward fiscal and debt sustainability.”
The 2023 Economic Update devoted a special section on food security, examining recent trends, challenges and opportunities in three major agricultural value chains – rice, cocoa, and horticulture. It identifies the importance of supporting and empowering the private sector to undertake the required investments in the country’s agricultural sector. The report comes at a time the government has launched its ‘FEED SALONE’ flagship program with the aim to increase agricultural productivity and achieve food security and sovereignty.
The report notes that some 4.5 million people (55% of the population) have insufficient food consumption, 3.9 million (48% of the population) have crisis or above crisis-level food-based coping strategies, and 3.22 million (38% of the population) face challenges accessing markets. While the rate of chronic undernourishment is relatively stable (with a slight upward trend), the report notes that rapid population growth means that the size of the problem is steadily increasing in absolute terms. As policy priorities over the short to medium-term, the report identifies structural weaknesses of the food system as well as global shocks as having negatively impacted the livelihoods and incomes of farmers and exacerbated food security risks. To mitigate these challenges, focus should be placed on prioritizing safety net measures to enhance short-term food availability and access for the most food-insecure and vulnerable households, as well as addressing structural challenges to improve agriculture productivity and competitiveness and enhance the livelihoods of smallholder farmers.
Sierra Leone’s post-pandemic recovery was disrupted by concurrent domestic and external shocks, exacerbating existing macro-fiscal vulnerabilities. Inflation and exchange rate depreciation reached record levels, depressing economic activity, and triggering a severe cost-of-living crisis. Fiscal accounts have deteriorated due to macroeconomic headwinds and policy slippages, and risks to debt sustainability have intensified.
Conclusively, sustaining the economic recovery will involve structural reforms to accelerate inclusive economic growth, as well as resuming fiscal consolidation through robust revenue reforms and expenditure rationalization and a prudent monetary policy to support the recovery and stabilize the exchange rate.