By; Amara Thoronka
The World Bank has projected the economy of Sierra Leone to grow on average by 3.7 percent, covering a span of 2023-2025.
In its 2023 Economic Update on Sierra Leone, the World Bank noted that the growth prediction is based on sound domestic policies, addressing inflation and decreasing debt pressure.
“Sierra Leone’s economy is projected to grow at 3.7 percent on average during 2023–25, below its long-term trend. This scenario is predicated on sound domestic policies, including a tight monetary stance to combat inflation, and an equally conservative fiscal policy to decrease debt pressures and rebuild fiscal space. Headline inflation could moderate gradually to 14 percent and the fiscal deficit decline to 3.9 percent of GDP by 2025,” according to the new World Bank Sierra Leone Economic Update launched in Freetown on 27th October, 2023.
On the challenges which the country’s economy faces, the global financial institution advised that risks to debt sustainability will remain elevated until fiscal balances improve further and the reliance on expensive and short-term domestic borrowings is addressed through the lengthening of maturities and greater access to concessional borrowing.
According to Abdu Muwonge, World Bank Country Manager for Sierra Leone, “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. 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.”
Speaking further on economic challenges, the World Bank’s 2023 report on Sierra Leone recognized that the nation’s economy experienced overlapping setbacks during 2022 as external shocks aggravated domestic macroeconomic vulnerabilities, resulting in a rapid debt build-up, rising inflation, and food insecurity.GDP growth slowed from 4.1 percent in 2021 to 3.5 percent in 2022, while inflation rose from 12 percent in 2021 to 27 percent in 2022, and further to over 40 percent by May 2023, threatening the welfare of households and worsening food insecurity and poverty.
The report went further to note that, because of such economic setbacks, the fiscal deficit of the country increased from 7.6 percent of GDP in 2021 to 9.6 percent in 2022, driven by a combination of macroeconomic headwinds and policy slippages. Public debt-to-GDP ratio increased from 84.7 percent at the end of 2021 to 96.3 percent at the end of 2022.
On a positive and advisory note, the report notes that, though the outlook for the economy will be shaped by external developments, domestic policy remains key and should focus on restoring macroeconomic stability.
In the words of Smriti Seth, World Bank Senior Economist and one of the lead authors of the report, “Enforcing fiscal discipline and renewing the commitment to consolidation will be crucial in ensuring fiscal and debt sustainability. Active debt management can also support debt sustainability and reduce vulnerabilities.”
The World Bank’s 2023 Economic Update on Sierra Leone proffered fiscal advice for better growth and management of the nation’s economy.
On enforcing fiscal discipline, the report advised for implementation of a medium-term wage bill management strategy to bring down wages to the government’s target of 6 percent of GDP.
On debt management, the World Bank advised for short-term high interest domestic debt to address emerging liquidity constraints and reduce the crowding out of private sector financing
As a way to mitigate what the report called “structural weaknesses”, the Bank’s recommendation is prioritizing safety net measures to enhance short-term food availability and access for the most food-insecure.
Touching on policy shifts for greater productivity, the report advised for investment in export-oriented cash crops to generate foreign exchange and in the production and marketing of rice to boost food security
Another advisory recommendation is to boost domestic production to facilitate imports by focusing on geographic and thematic investments that boost productivity and purchasing power through competitive local production and export promotion and diversification
Curbing food insecurity and hunger is also a major element of the report. The Bank recommended for support in food production broadly in the coming cropping seasons to improve food availability, while also promoting export crops to enhance food access.
The report comes at a time the Government of Sierra Leone just launched its FEED SALONE project [national agricultural productivity and food security project].
Copy right –Printed in the Expo Times News on Wednesday 1st November, 2023 (ExpoTimes News – Expo Media Group (expomediasl.com)
