By Amin Kef (Ranger)
The Bank of Sierra Leone’s Monetary Policy Committee (MPC) convened on December 14, 2023, under the chairmanship of Governor Dr. Ibrahim L. Stevens. The meeting was held to assess the global and domestic macroeconomic and financial market trends and their implications on Sierra Leone’s economy. The MPC resolved to increase the Monetary Policy Rate (MPR) by 1.0 percentage point to 22.25 percent, following a comprehensive review of economic factors.
The Committee’s decision stemmed from several key global and domestic economic factors. The International Monetary Fund’s World Economic Outlook for October 2023 projects a decline in global growth from 3.5 percent in 2022 to 3.0 percent in 2023, further dropping to 2.9 percent in 2024. The Committee expressed concern over China’s escalating real estate crisis, which could potentially severely impact Sierra Leone, a key trading partner.
Despite the worrying global trends, the MPC anticipates that the gradual normalization of supply chains and the decline in global inflation will result in lower imported inflation for Sierra Leone.
On the domestic front, Sierra Leone’s inflation rate has been high, peaking at 54.48 percent in September 2023, primarily due to an increase in domestic fuel prices. However, the Committee noted that the Government’s efforts to enhance the supply of commodities and stabilize the exchange rate, coupled with a decrease in global inflation, could help to further moderate inflationary pressures.
The domestic economy, however, continues to face challenges due to global and local factors, including supply shocks, lower output from key sectors such as agriculture and mining, and global uncertainty. The MPC acknowledged the Government’s efforts to implement sectoral reforms, such as The Feed Salone Programme, to bolster agricultural productivity and drive inclusive economic growth.
Sierra Leone’s external sector experienced a widening trade deficit and a decrease in foreign exchange reserves due to excess outflows over inflows. Despite these challenges, the MPC remains hopeful that incoming official inflows and private transfers, as well as Government initiatives to support the productive sectors, will boost the gross external reserve position in the coming year.
The Committee also touched upon fiscal developments, noting an increase in the overall fiscal deficit owing to a rise in Government expenditure. The MPC welcomed the Government’s commitment to implementing a mix of revenue enhancement and expenditure containment measures to achieve a budget deficit target of 5.8 percent of GDP in 2023.
The MPC concluded the meeting by raising the MPR, Standing Lending Facility Rate, and Standing Deposit Facility Rate by 1.0 percentage point each, effective Monday, December 18, 2023. The new rates are as follows: MPR at 22.25 percent, Standing Lending Facility Rate at 25.25 percent and Standing Deposit Facility Rate at 15.75 percent.
The MPC pledged to continue monitoring global and domestic economic developments and is prepared to take necessary action to maintain price and financial system stability.