Mismanagement of public spending – a serious problem for Sierra Leone

The Sierra Leone Telegraph: 8 April 2013

Freetown Streets becoming rubbsih dumpWhen president Obama congratulated president Koroma of Sierra Leone at the White House last week – for a job well done, it was difficult not to cringe with embarrassment, after five years of poor governance and corruption that continues to widen the gulf of abject poverty in the country.

There was little doubt of the unbridled patronising flattery, with which the US president addressed Koroma, from a president who himself has promised so much to the American people, yet has delivered so little.

Praising African heads of state for their mediocrity and complicity in the impoverishment of their people is not only disingenuous, but does no justice to the promotion of good governance and development in Africa.

Today, pro-government media in Sierra Leone are taking queue from Obama’s misleading statement about the state of Sierra Leone’s economy, deifying Koroma as the new messiah of Africa.

But the fact remains that two years ago, Sierra Leone’s single-track economy was boosted when mining companies and land cultivation foreign companies paid massive, one-off sums of money in return for dodgy contracts.

This one-off, large revenue inflows caused a 25% blip in the country’s GDP growth figures. Since then the economy has struggled to show any signs of employment and personal incomes growth, as poverty worsens.

ADDAXAnd instead of investing the money paid to the government on improving the productive capacity of the country, over 50% of that sum left the country as capital flight through corruption, whilst the rest was used to pay for the government’s profligate spending.

Sierra Leone’s external debt has grown in the last five years from almost zero in 2001, when the international community wiped out the country’s debt after the war.

Today, Sierra Leoneans are staring at a whopping $1 billion debt liability, which can only serve to stunt the development of the country for generations to come, as had been the case in 1980 – 2000.

Reports published by the IMF and the 2013 Index of Economic Freedom (IEF), show that Sierra Leone is struggling to compete economically with neighbouring countries and others in the continent that have gone through similar destruction – caused by war.

So how does Obama square up his praises for Koroma – as a good custodian of the economy, against those published data?

When comparison is made of the economic and political development performance of Liberia, Sierra Leone, Guinea and Rwanda, it is obvious that president Koroma is falling far short of expected standards of leadership.

The 2013 Index of Economic Freedom gives a much clearer insight as to what is happening within these respective countries:

Rwanda

“Population:  10.2 million

GDP (PPP):  $13.7 billion; 8.8% growth; 7.4% – 5 year compound annual growth; $1,341 per capita

Inflation (CPI):  5.7%

Foreign Direct Investment Inflow:  $106.0 million

The Report concludes that:

Rwanda’s economic freedom score is 64.1, making its economy the 63rd freest in the 2013 Index.

Its score is 0.8 point worse than last year, with substantial gains in freedom from corruption and investment freedom outweighed by declines in labour freedom, business freedom, and property rights. Rwanda is ranked 3rd out of 46 countries in the Sub-Saharan Africa region.

Despite the difficult global economic environment, Rwanda’s economy has expanded at an average rate of over 10 percent during the past five years. Foreign direct investment has picked up over the same period.

Much-needed regulatory reforms have been undertaken in various sectors of the economy, enhancing the efficiency of the business environment.”

Sierra Leone

“Population:  6.0 million

GDP (PPP):  $5.1 billion; 5.3% growth; 5.1% 5-year compound annual growth; $849 per capita;

Inflation (CPI):  18.5%

Foreign Direct Investment Inflow:  $48.7 million

The Report concludes that:

Sierra Leone’s economic freedom score is 48.3, making its economy the 151st freest in the 2013 Index.

Its score is 0.8 point lower than last year, with improvements in investment freedom and freedom from corruption overshadowed by declines in half of the 10 economic freedoms including labour freedom and the control of government spending.

Sierra Leone is ranked 36th out of 46 countries in the Sub-Saharan Africa region, and its overall score is below the world average.

Continuing a downward trend in economic freedom, Sierra Leone recorded another significant score decline in the 2013 Index.

The country has been plagued by civil war for many years, and the institutions necessary for economic freedom have not developed to generate long-term economic growth.

Recent reforms have been targeted at opening the economy to international trade and strengthening the enforcement of contracts.

Mismanagement of public spending remains a serious problem and ultimately hurts implementation of necessary reforms. The protection of property rights is weak, and the judicial system lacks both independence and transparency.

Legal proceedings are vulnerable to political interference and commonly subject to pervasive corruption.”

Liberia

“Population: 3.9 million

GDP (PPP): $1.8 billion; 6.4% growth; 5.7% – 5 year compound annual growth; $456 per capita

Inflation (CPI):  8.5%

Foreign Direct Investment Inflow: $508.0 million

The Report concludes that:

Liberia’s economic freedom score is 49.3, making its economy the 147th freest in the 2013 Index. Its score has increased 0.7 point from last year, with substantial improvements in trade freedom and the control of government spending.

Liberia is ranked 33rd out of 46 countries in the Sub-Saharan Africa region, and its overall rating remains significantly below the world and regional averages.

Liberia’s reform-minded government has managed to place the country on a path of strong growth despite the challenging global economic environment.

Reforms have dismantled some barriers to trade, simplified business licensing, and eased credit restrictions.

These ongoing measures, coupled with a determination to improve economic livelihood through committed reforms, have contributed to an average growth rate of over 8 percent over the past five years.

Nonetheless, the economy still suffers from the scars of war and violence has adversely affected institutional structures, causing problems like corruption and poor protection of property rights to persist.

Further reforms, particularly to allow for more vibrant flows of trade and investment, are needed to secure better prospects for long-term economic development.”

Guinea

“Population:  10.6 million

GDP (PPP):  $11.5 billion; 3.6% growth; 2.4% – 5 year compound annual growth; $1,083 per capita

Inflation (CPI):  21.5%

Foreign Direct Investment Inflow: $1.2 billion

The Report concludes that:

Guinea’s economic freedom score is 51.2, making its economy the 137th freest in the 2013 Index.

Its overall score is 0.4 point higher than last year, reflecting improvements in business freedom and freedom from corruption that offset declines in monetary and labour freedoms.

Guinea is ranked 29th out of 46 countries in the Sub-Saharan Africa region, and its overall score is below the world and regional averages.

The Guinean government’s limited attempts at structural reform have had uneven success, and economic growth remains constrained by institutionalized weaknesses that erode the foundations for long-term economic development.

In particular, the judicial system remains inefficient and vulnerable to political interference. Corruption, perceived as widespread, is a serious problem.

The overall regulatory framework is not conducive to the emergence of a dynamic private sector and discourages broad-based employment growth.

Potentially dynamic economic gains from trade continue to be undercut by the absence of progress in reforming the financial and investment areas that are critical to sustaining efficient open markets.”

President Koroma has contributed immensely militarily – perhaps more so than many countries in the continent to the massive build-up of African troops sent to Sudan, Somalia, and Mali.

Thousands of Sierra Leonean soldiers are now serving in these countries, to the pleasure of the international community.

But this generosity should not be mistaken for good economic and political stewardship at home, as Sierra Leoneans continue to wallow in abject poverty, caused largely by corruption and poor governance.

 

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