BY JENSEN BRIAN ABASS CUMMINGS

Unlocking the Potential of Sierra Leone’s Economy: Concerns, Opportunities, and Strategic Solutions

Sierra Leone, a country rich in natural resources, has made remarkable strides in its economic development. In 2023, the economy outperformed expectations, growing by 5.7 percent. However, while this positive growth trajectory is encouraging, there are significant concerns that must be addressed for the country to achieve sustainable, long-term economic stability. Among the most pressing challenges are fiscal sustainability, inflation, and the performance of the energy sector. This article examines the critical issues raised by Sierra Leoneans, the opportunities for growth, and the proposed solutions to overcome the nation’s economic hurdles.

The Key Concerns Raised by Sierra Leoneans

Despite the positive growth in 2023, there are growing concerns regarding Sierra Leone’s fiscal health and energy sector. The country’s fiscal sustainability remains uncertain due to repeated spending overruns, which have raised doubts about the government’s ability to manage public finances effectively. The report notes, “repeated spending overruns have cast doubt on fiscal sustainability” (World Bank, Sierra Leone Economic Update, 2024). These fiscal challenges are compounded by the substantial risks posed by the energy sector.

Sierra Leone’s energy sector relies heavily on costly liquid fuel-based power generation, placing a significant strain on public finances. The report highlights the urgency of addressing this issue, stating that there is “an urgent need to improve Electricity Distribution and Supply Authority (EDSA) operational and commercial performance and transition away from expensive liquid fuel-based power generation to reduce the negative fiscal impact” (World Bank, Sierra Leone Economic Update, 2024). The inefficiencies in the energy sector have resulted in unreliable electricity supply, which in turn has stunted industrial growth and discouraged foreign investment.

Another key concern raised by Sierra Leoneans is the country’s deteriorating reserve position. While there have been improvements in the current account, the report observes that “the reserves position has deteriorated despite improvements in the current account” (World Bank, Sierra Leone Economic Update, 2024), leaving Sierra Leone vulnerable to external shocks. This decline in reserves underscores the need for a more robust economic strategy to protect the country from potential global economic volatility.

Opportunities for Growth and Economic Resilience

Despite these challenges, Sierra Leone has significant growth potential, particularly in key sectors such as mining, agriculture, and services. The mining sector, which continues to be a major contributor to the country’s export revenues, remains one of the most important pillars of the economy. According to the report, “growth in Sierra Leone is projected to average 4.7 percent in the medium term, supported by mining, agriculture and a recovery in services” (World Bank, Sierra Leone Economic Update, 2024). With increasing demand for minerals globally, Sierra Leone is well-positioned to benefit from this sector’s growth.

Agriculture is another sector with considerable promise. The country’s favorable climate and improved market access have contributed to higher agricultural production in recent years. By investing in infrastructure, such as roads and irrigation systems, Sierra Leone can enhance agricultural output, improve food security, and reduce poverty.

The services sector, particularly retail, telecommunications, and transportation, is also projected to recover. As the economy diversifies and grows, the services sector will play an increasingly important role in job creation and overall economic development.

The Role of Energy in Economic Sustainability

The energy sector remains one of the most critical challenges to Sierra Leone’s economic development. The country’s reliance on expensive liquid fuels for power generation creates a significant fiscal burden and reduces the competitiveness of Sierra Leone’s industries. Without reliable and affordable electricity, sectors like manufacturing and agriculture are limited in their ability to expand and create jobs.

A transition to more sustainable and affordable energy sources, such as renewables, could have a transformative impact on the country’s economy. The report stresses that there is a need for “transition away from expensive liquid fuel-based power generation to reduce the negative fiscal impact” (World Bank, Sierra Leone Economic Update, 2024). Not only would this reduce the cost of energy, but it would also promote industrialization, create jobs, and improve the overall business environment. A more efficient energy sector would also help attract foreign investment, providing the capital needed for growth in other sectors of the economy.

Action Plan 2030: A Vision for the Power Sector

To address these pressing challenges, the Sierra Leone Economic Update proposes an ambitious “Action Plan 2030” for the energy sector. This plan aims to make the energy sector financially sustainable by focusing on improving the operational performance of EDSA, reducing dependence on costly liquid fuels, and transitioning to more sustainable energy sources.

Key elements of the plan include:

• Improving EDSA’s Efficiency: Enhancing the operational and commercial performance of EDSA is crucial to ensuring that electricity is distributed more efficiently and reliably. This will help reduce the high cost of electricity and provide better service to consumers.
• Transitioning to Sustainable Energy Sources: Moving away from liquid fuels and embracing renewable energy, such as solar, wind, and hydroelectric power, will not only reduce costs but also enhance energy security. Renewable energy offers a more sustainable long-term solution to Sierra Leone’s energy needs.
• Attracting Investment in the Energy Sector: To finance the transition to renewable energy and modernize the power infrastructure, Sierra Leone needs to attract both domestic and foreign investments. This will require creating a more favorable business climate, improving governance in the energy sector, and providing incentives for private sector involvement.

If implemented successfully, the Action Plan 2030 could significantly improve the country’s energy sector, reduce costs, and foster economic growth. This would help drive industrialization, create jobs, and make Sierra Leone’s economy more resilient to external shocks.

Conclusion

Sierra Leone’s economic growth in 2023 was a positive surprise, but the country faces several challenges that must be addressed to ensure sustainable growth. The energy sector, in particular, poses significant risks to fiscal sustainability and industrial development. The proposed Action Plan 2030 offers a roadmap to address these challenges by improving the efficiency of the energy sector, reducing dependence on expensive liquid fuels, and transitioning to renewable energy sources.

To achieve long-term economic stability and growth, Sierra Leone must also focus on improving fiscal management, stabilizing inflation, and enhancing the financial sector’s resilience. By tackling these issues and capitalizing on opportunities in mining, agriculture, and services, Sierra Leone can build a more diversified and resilient economy. With strategic investments and effective governance, the country has the potential to unlock its full economic potential and achieve sustainable development.

Sources:

• World Bank. Sierra Leone Economic Update: Unlocking the Potential of the Power Sector in Sierra Leone: Breaking the Crisis Cycle, 2024.