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COMMENTS & OPINIONS  

Sierra Leone's Main Opposition Analyses THE ECONOMY after two years of ruling party governance
By Sierra Leone People's Party (SLPP)
Sep 18, 2009, 16:36
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1.       Background

 

The Sierra Leone economy grew on average of about 6.5% between 2002-2006 and exchange was stable between Le 2,700-  Le 2,9000 to US$ for the same period. The SLPP government increased foreign reserves from about US$ 51.9 million in 1996 to nearly US$200 in 2006. This served as a buffer against external shocks. Consequently, the exchange rate remained stable. Inflation was under control and fell to single digit (less than 10%) by end 2006.

 

During the SLPP era, a teacher with a family of six (6) who earned Le 300,000 (about US$100) monthly bought a bag of rice at Le 60,000 and left home Le10, 000 for sauce daily. Monthly, that worker only needed additional Le 60,000 to ensure a meal for a family per day.

 

Total exports of diamonds rose from US$41 million in 2002 to about $125 million in 2006. There was marked improvement in revenue collection with the establishment of the National Revenue Authority and successful implementation of revenue reforms. With improved expenditure management and controls, that enabled government to increase domestic financing of the budget from a less than 20% in 1999 to about 50% in 2006.

 

2.       The Economy under APC       

 

After 24 months where are we? Registered economic growth rate dropped to 5.5% in 2008. According to recent from the IMF, real growth in GDP in 2009 is projected to be 4%, a 1.5% percentage point decline from the previous year. Despite the depreciation of the US dollar against other international currencies like the Euro, the value of the Leone with respect to the US$ is now estimated at about Le 4,000 to US$1 representing almost 25% depreciation. Inflation moved from single digit to about 15% in October 2008. With nose-diving of the Leone, end of year inflation may exceed 15% by December 2009.

 

Today, the same teacher with a family of six (6) earning Le 360,000 (assuming he has started to receive 20% salary increase promised last year), buys a bag of rice at Le 140,000. He provides Le 20,000 daily for sauce. This means, he requires Le 740,000 (i.e Le 600,000 for sauce for 30 days +Le 140,000 for a bag of rice). This teacher now needs additional Le 280,000 to afford a meal for the family. His take home of Le 360,000 can only provide him a bag of rice and money for sauce for 11 days.  

 

According to the APC Government Budget (November 2008), total exports amounted to US$120.5 million during the first half of 2008 (APC era) compared to US$136.7 million in the corresponding period in 2007 (SLPP era). The value of exports in 2009 is projected to be $180 million about 27% smaller than in 2008. Total value of imports rose from US$218.4 million for the first half of 2007 to US$276.6 million for the first half of 2008. Consequently, trade deficit widened from US$81.7 million to US$152 million for the same period. 

 

Of these, diamond exports amounted to US$65 million in the first half of 2008 (APC era) compared to US$83.8 million in the same period in 2007 (SLPP era). According to IMF sources, the volume of diamond and rutile exported in the first six months of 2009 has declined in comparison with 2007. This was largely as a result of the stupid policy of suspending the operations of Koidu Holdings, the ambiguous mining policy and the subsequent uncertainty in the sector. 

 

Similarly, agricultural exports fell from US$8.6 million for the period January-June 2007 (SLPP era) to US$ 6.4 million for the period January-June 2008 (APC era).

 

According to the Third Report of the Secretary-General on the United Nations Integrated Peace-building Office in Sierra Leone for the period June 1- September 1, 2009, Foreign Direct Investment is projected to fall by about 25% in 2009.

 

Consequent of this dismal performance of the economy is the ever increasing youth unemployment. The agricultural sector is not robust enough to employ thousands of unemployment rural youths. Most move to the urban areas in search of better opportunities. With limited job opportunities as a result of low investment coupled with the low skill levels of youths, most urban youths go unemployed. Besides, the ongoing donor supported interventions; the APC government has not put in place any feasible initiative to create jobs for the youths. The Youth Employment Scheme initiated in 2006 was abandoned. The APC reduced the initial allocation of US$9 million for youths under the Peace Building Fund to US$ 4 million.

 

Today, armed robbery and petty thieving are on the increase in most large towns.


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