Thursday, September 19, 2019 12:50 pm
ABUBAKAR HASHIM/Sierra Leone
The current global negative economic interest rate bond of $14 trillion in the industrialized countries was top on the agenda in the recently concluded G7 meeting in France. African economies, Sierra Leone inclusive, are worst hit by this negative development. Since he assumed power about 15 months ago, President Julius Maada Bio is saddled with both external and internal economic crises. So far, he has been weathering the storm, with 25 percent of government expenditure locally generated through taxes and royalties, as the major revenue earners, iron ore and other mining activities have halted production due to bad mining policies inherited from past government.
African economies are painstakingly bearing the brunt of the current global economic crunch in the industrialized countries. Nigeria, South Africa and Egypt, the three leading economies in Africa are severely affected by this urgly development. In all these three leading African economies, inflation rates are double digit, unemployment rates are souring and growth rates are slow.
Post war and fragile economies, like Sierra Leone and Liberia are excruciatingly on the devastating end, resulting into inward looking avenues of revenue mobilization through tax reforms and intensive diversification processes away from monolithic sources of income to other sources like agriculture, fisheries and eco-tourism.
In an interactive session in Freetown, the Minister of Finance, Jacob Jusu Saffa prides the government in meeting the thresholds of the inward – looking economic parameters towards realizing the economic agenda of President Bio.
He revealed that government has exceeded its January to June revenue generation target by 213 billion Leones (about 2.5 million dollars), giving a score card for 2018 of an increase in revenue from 13% to 16% of GDP, almost meeting up the campaign promise of 20% to GDP by President Bio as enshrined in the SLPP manifesto.
This development was partially achievable through on-going revolutionary reforms at the nation’s revenue department, the National Revenue Authority (NRA), with intensive restructuring, massive recruitment of qualified personnel and the introduction of an automated system to bolster revenue generation for national development.
Apart from these inward – looking strategies, the country is now receiving budgetary support from its development partners due to satisfactory performance indices by the Bio-led government. International development institutions, particularly the World Bank, Africa Development Bank, the Arab Bank of Development and others, do not support non- performing governments.
The current economic situation in the country is slowly on the recovery path. The local currency, Leones, is weak and depreciating as major exports are negligible. The Central Bank Governor, Professor Kelfala Kallon, in an interview with TheNEWS, revealed that “ Sierra Leone is currently on current account deficit, rendering the Leones the depreciate unless it receives foreign currency inflows, through portifolio and foreign direct investment’’. The only immediate remedy the Central Bank can offer is to halt the demand for non-trading activities like rents by landlords and all foreign contracts to be denominated in Leones, in order to push down pressure on the dollar”.
These stringent non trading monetary measures are meant to strengthen the Leones and aimed at controlling the dollar. The Bank Governor revealed that failure to institute legal measures in the financial sector in the past led to people manipulating the economy in their favor leading to speculativescarcity of the dollar.
Henceforth, no transaction such as house rent, foreign contracts in Sierra Leone should be in dollars.
This policy takes effect, immediately, with raids on unlicensed street peddlers of dollars in full force.More so, NGO’S and Partners should desist from offshore trading of foreign currencies and deposit such currencies in local commercial banks, failure will lead to cancellation of operational licenses.
The Governor of the Central Bank insist that these steps will ultimately lead to a turning point in the economy and the country benefitting immensely when it starts exporting goods and services.
With these policies in place by the Bio- led government, the Finance Minister is also positive of economic turnaround in the next quarter of the year (September to December.
However, currently, the Bio-led administration needs more resources to manage the affairs of the state, as the NRA could not meet up totally and fully with government increasing demands to cater for the vast majority of the people who barely eke out a daily living. As late President Ahmed Tejan Kabba once told this medium in 2007 …” majority of our people are a mass of starving, illiterates, men, women and children plunged for decades in the most appalling obscurity”
This appalling situation is the top most formidable challenge of President Bio’s current economic recovery program. He remains focused and determined to salvage the situation as a once tested and trusted leader in the mid-90s when he was Military Head of State. Just 15 months into his civilian administration, he has succeeded in dropping down government domestic borrowing to finance the budget by 44% , from 1.02 Trillion Leones in 2017 to 564.7 Billion Leones in 2018.
This is remarkable in a country that was largely donor driven in all economic undertakings in the past couple of years. The current economic situation in the country with the implementation of strategic economic policies, including reduction in arrears, consolidation of fiscal revenue, reduce bank borrowing to the barest minimum, coupled with reduction in expenditures will,most likely, lead to a better and most stabled economic atmosphere in the coming months.
Already, the World Bank and other international financial institutions have given Sierra Leone thumbs up in economic growth and performance indices, though at a slower pace.
According to a recent report by the World Bank economic update on financial inclusion for Economic Growth and Development, “…economic growth in 2018 was estimated at 3.8% marginally higher than the 3.7% recorded in 2017”. The slow growth rate in 2018 was in the context of a global slowdown in major advanced economies, leading to slow down in emerging and developing economies in Africa and Asia.
The World Bank report further revealed “an improved fiscal position due to revenue to GDP
ratio increase by 17.2%, while expenditure to GDP ratio remained the same as in 2017”. This report translates to Sierra Leone meeting the minimum requirement in fiscal transparency and is among other 6 West African countries as listed by the US State Department. Senegal, Ghana, Burkina Faso, Ivory Coast and Cape Verde are the other countries included.
The criteria used in this assessment by the US State Department includes ‘’public availability of key budget documents, along full completion and reliability “. It also includes “transparency of processes for awarding government contracts and licenses for national resource extraction”.
President Bio has attended series of development meetings and engagements abroad, all aimed at putting the country in the right direction. He had just returned from Tokyo, Japan, where he attended and participated in the Tokyo International Conference on African Development TICAD 7, where 4.3-million-dollar grant was given to Sierra Leone for Youth Empowerment. The last TICAD meeting was held in 2016 in Nairobi, Kenya. Africa has become the next frontier for development. while advanced countries are currently engaged in trade wars, conflicts and natural calamities like climate change, Africa now focuses on human capital development, peaceful resolution of crises and youth employment.
TICAD 7 placed premium on Africa as it is the second largest continent in the world, with a shop list of development aspirations, with the Africa Chamber of Commerce in Japan playing a lead role.
TICAD7 theme, “… advancing Africa’s development through people, technology and innovation” is in alignment with President Bio’s new direction philosophy. The private sector in Africa is the veritable platform to bring about technological innovation that is people-centered. Over 20 African Presidents were in attendance for the TICAD7 summit that attached $20 Billion toward African development in 3 years.
Agriculture remains a viable investment platform for Africa’s development opportunities. President Bio’s current economic recovery program is anchored along this inward looking path as the largest pineapple producing and processing company in Sierra Leone is a Japanese outfit, Itochu corporation. The company has increased Sierra Leone’s agricultural competitiveness and export capacity. It is located in the second largest city of Bo and will produce packaged fruits for export to Europe, Canada and United States. The project will support the country’s economic growth in the long term by creating thousands of jobs and long term sustainable industry.
The benefits of TICAD7 to Bio’s economic recovery program is the preparation for right investment for the 4th industrial revolution in African countries, as remarked by President Bio in Japan.
Whatever side of the pendulum one weighs Bio’s economic recovery program, his government is slowly recovering from the deep wounds and scars he inherited. The next few months look promising as major economic parameters have been met, both in terms of domestic and international obligations.