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COMMENTS & OPINIONS  

How APCís Transformation Agenda handled the Global Crisis Impact on Sierra Leone
By Ernest Bai Koroma
Nov 6, 2012, 17:04
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Astute Leadership in Meeting Challenges of the Global Food and Financial Markets Crisis!

 

Barely a year into the APC administration, the world was hit by the food and fuel crisis. Given that Sierra Leone is a small open economy and a net importer of food and fuel, the crisis would have had dire consequences on the economy and the population. Notably, the price hikes posed a serious challenge to my Governmentís attempts to preserve macroeconomic stability and reduce the widespread poverty at the time.

 

But the APC administration took bold measure to ameliorate the impact of the crisis on our people. 

 

These included the elimination of import duties on imported rice and the reduction in import and excise duties on petroleum products in order to keep pump prices of these products at affordable levels.

 

Government has been subsidizing the price of petroleum products. Total subsidies in petroleum products amounted to Le84 billion in 2011.  In addition, government also purchased 40 buses to ease the transportation problem in the city of Freetown. The buses are being run at subsidized prices to cushion commuters from the high cost of transportation. Subsidy to local bus transportation amounts to Le328 million per month.

 

Government also removed import duty on rice, our staple food to keep the price at an affordable level.

 

Government also implemented a cash-for-work programme to provide a source of income especially for the urban unemployed.

 

The global economic and financial crisis that followed shortly after the 2008 food and fuel prices hikes further complicated the already difficult external environment. In particular, our country experienced a sharp decline in international demand for its major exports mainly minerals such as diamonds, rutile and bauxite which form the bulk of total exports. The prices of some of these minerals also declined on the international market.

 

Combined with the decline in inward remittances, the availability of foreign exchange in the economy decreased, putting pressure on the exchange rate of the Leone vis-ŗ-vis international currencies.

 

As a result, the exchange rate of the Leone to the US Dollar depreciated by 28 percent in 2009. In response, we increased the supply of foreign exchange at Bank of Sierra Leone weekly auction to restrain the rapid depreciation of the exchange rate.

 

The APC administrationís countercyclical fiscal policies to minimize the impact of the crisis and spur growth, and its overall response to the crisis, were widely acclaimed by international financial institutions and experts including Professor Emeritus John Weeks, Senior Research Follow at the School of Oriental and African Studies, University of London, who noted that:

 

Perhaps one of the least likely candidates for implementing an effective fiscal intervention was Sierra Leone, ÖÖ.., recently emerged from civil war, heavily aid dependent, and constrained by limited administrative capacity. But implement a fiscal stimulus the government did, and with notable success.

 

The policy mix we implemented included increasing and re-orienting expenditures towards capital projects mainly investment in infrastructure (roads), energy, agriculture and water supply. At the same time, the Government increased transfers to Local Councils for the implementation of development projects in the rural areas.

 

As a result of the astute policies and actions of the APC Government, Sierra Leoneís economy registered a positive growth rate in 2009 at a time when the economies of most countries in Sub-Saharan Africa and other parts of the world either contracted or stagnated.

 

The Sierra Leone economy grew by 3.2 percent in 2009, which though lower than the growth rate of 5.4 percent in the previous year, was higher than the average growth rate for Sub-Saharan Africa of 2.8 percent. The economy recovered strongly from the impact of the economic and financial crises and rebounded in 2010 with a growth rate of 5.3 percent, supported largely by expansion in mining, agriculture, manufacturing supported by improvements in basic infrastructure and increased foreign direct investment.

 

The economy continued to recover in 2011 growing by 6 percent. The economy is projected to grow by 32.5 percent in 2012, following the commencement of iron ore mining in the Tonkolili and Port Loko Districts.

 

Other macroeconomic fundamentals remained strong. Despite the food and price hikes, inflation is falling; exports are growing; foreign currency reserves are enough to withstand temporary external shocks; the exchange rate has remained relatively stable whilst domestic revenue mobilisation has also improved significantly.

 

Inflationary pressures were, however, high during 2008-2011 due to a number of factors including the hike in the international prices of food and fuel especially, and the depreciation of the exchange rate in 2009 due to the global financial and economic crisis.

 

However, reflecting the proactive fiscal and monetary policies, inflation is trending down wards in 2012; falling to 12.2 percent in May 2012 from 17 percent in December 2011.

 

Gross international reserves increased to US$382 million as at end of June 2012. The nominal exchange rate of the Leone to the US dollar remained relatively stable in 2010 and 2011 after the sharp depreciation in 2009.

 

Export of goods also recovered strongly in 2010 growing by 33.8 percent, mainly reflecting the 45 percent recovery in mineral exports from the 18.5 percent decline in 2009. Exports continued to grow in 2011 and are expected to increase substantially in 2012 following the implementation of two major iron ore mining projects.


CULLED FROM A MANUAL ON 5 YEARS OF CHANGE & TRANSFORMATION


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