The Minister of Finance, Jacob Jusu Saffa has intimated that it is important that some public education be done on the state of economic affairs in Sierra Leone from time to time.
According to him, such education keeps the public better informed of economic progress and contemporary issues.
Jacob Jusu Saffa stated that the current Government inherited a baseline situation characterised by high level of poverty, huge domestic and external debts, huge arrears to suppliers, double digit inflation, low domestic revenue collection, poor financial management and corruption as well as poor relationship with partners including the IMF and the World Bank.
He went further to state that as at 2018, according to Sierra Leone Integrated Household Survey (SLIHS), poverty remains high in Sierra Leone with official poverty rate at 56.8% in 2018.
This literally means out of every 10 households in Sierra Leone, as he states, 6 are poor which could mean they have no means of livelihood. And in n street economics, this could mean they had no sustained access to ‘bread and butter’.
Total external debts in 2018 was estimated at over US$1.6 billion, domestic debts of about US$650 million and verified arrears to suppliers estimated at about US$340 million. Total revenue (including grant) GDP ratio was estimated at 14.8% in 2017. Before 2018, not more than 60% of the national budget was financed from domestic revenue.
Reported average daily revenue collected was barely Le 10 billion before April 2018 putting average domestic revenue collected for 22 working days at Le 220 billion. This was far insufficient to meet monthly domestic wage bill of about Le 250 billion and debt service of about Le 100 billion. This obviously warranted bank financing of the persistent huge fiscal deficit.
Between 25-30% of Government revenue is spent on debt service monthly. This means that since 2018, on average, for every Le 100 billion collected monthly, Le 30 billion (equivalent to the construction of 30 schools with each having 6 classrooms, office, store, WASH facilities and furniture for 300 pupils) is used to service debt.
Inflation was about 18% and exchange rate about Le 7,500 to US$1. Two large scale mining companies were closed for various reasons. IMF had ceased funding because of economic indiscipline and by extension all partners withdrew or slowed down operations in Sierra Leone. There was no policy programme with the IMF. All budgetary support from World Bank, EU and ADB were withheld.
The thrust of our economic management is fiscal consolidation (increasing revenue and efficiently managing expenditure) for human capital development and job creation.
Economic Growth was estimated at 5.4% in 2019 compared to 3.5% in 2018. Total revenue (including grant) GDP ratio increased from 14.8% in 2017 to 17.7% in 2019. In 2019, about 75% of the national budget was financed by the domestic revenue. Average daily domestic revenue collected increased to about Le 20 billion and by extension monthly revenue collection for 22 working days estimated at Le 440 billion. With wage bill around Le 250 billion plus Le 100 billion for debt service, means that, currently, Government has about Le 90 billion for other recurrent and capital budget financing.
Although this is not enough, it has enabled us to seamlessly manage the economy. Due to the strong leadership of the President and effective fiduciary management, Sierra Leone has attracted huge budgetary support and project financing that has enabled us implemented ambitious development project projects in water, electricity, roads, education and health with minimal recourse to bank financing.
Inflation progressively reduced from 18% in 2018 to about 11% slightly over 10% in November 2020 and is expected to be in single digit by end 2021. We experienced exchange rate depreciation of about 10-15% in the 2018 due largely to weak export capacity but has been fairly stable since October 2019. External reserve that was estimated at 3.5 months of imports in 2018 substantially increased to nearly 5 months of imports by end 2020 and exchange rate has remained stable for over 15 months now.
The country was able to normalise relationship with the IMF in 8 months of our administration and started implementing the current IMF Extended Credit Facility (ECF) programme. During the last review of the ECF, we met all quantitative benchmarks and structural conditions.
As the country was about consolidating gains in economic recovery in 2020, we had the pandemic COVID-19 affecting all aspects of economies in the world. In Sierra Leone, GDP declined by 2.6% slightly less than initial projection of 3.3% as a result of COVID-19 with tourism as the hardest hit sector. Revenue declined by at least US$100 million by end 2020 while public spending on health increasing considerably.
In response to the COVID-19, Government developed (i) the Health Response Plan aimed at prevention, detection and management of the virus and (ii) the Quick Action Economic Response Programme aimed at managing the economic fallout of the pandemic.
Government continues to be the single largest funding entity on COVID-19. As at end December 2021, Government has spent nearly US$40 million on prevention, detection and treatment of corona cases. Partners have also collaborated with Government to roll out these plans and have contributed resources through realignment of existing projects and new funding.
Despite all these, Government has been able to pay salaries to public sector workers on time, service expenses of Ministries, Department and Agencies, provide safety nets to vulnerable groups and undertake development projects including electricity, water supply, roads, agriculture and support to SMEs.
(C) The Calabash Newspaper