Sierra Leone Telegraph: 24 January 2021:
Sierra Leone has run out of its own currency – the Leone. The people are getting impatient and wary of government’s promise to make life better economically, amid rising inflation, falling value of the Leone that has lost over 30% of its value against major foreign currencies, since president Bio came to power almost three years ago.
Speaking to the Parliamentary Oversight Committee on Finance last Tuesday, about the current economic crisis, particularly the scarcity of the Leone which began in December, the Governor of the Bank of Sierra Leone, Professor Kelfala Kallon said that the best solution to address the current liquidity crisis in the country, is through the use of electronic payment system.
According to the Bank Governor the rate of appreciation or depreciation of a country’s currency against that of its trading partners, is typically equal to the difference in the inflation rate in the two countries. Few can make sense of this in an empty stomach, but he went on to say that, if Sierra Leone’s inflation rate exceeds that of the USA by 10 percent, the Leone is expected to depreciate against the dollar by 10 percent – vice visa, a theory that many economists may describe as far too simplistic and gobbledegook. (Photo: Governor of the Bank of Sierra Leone – Professor Kelfala Kallon).
“I inherited an economy in which low economic growth and consequently high unemployment co-exist with high inflation,” he said, explaining that the Leone was depreciating as against other currencies at an alarming rate, which according to him resulted in the dollarization of the economy.
On the currency crisis, he disclosed that on March 29th 2018 the Bank of Sierra Leone placed an order for one hundred million bank notes of various denominations, which were delivered on the 12th March and 16th July 2019. He said that based on data at the time, the stock of new notes at the vault after receiving the first consignment on March 12th, 2020 was sufficient to serve the cash needs of the country until December 2020.
“The second consignment was therefore intended to be a buffer for any demand shortage during the year. However following the global outbreak of COVID-19, government put modalities in place to reduce the adverse effect on the people,” he said, explaining that this created an increase in government expenditure on health care, social protection and measures to control the spread of the virus across the country.
The Bank Governor said that people tend to hold money in times of economic uncertainty, despite the fact that currency notes on the vault on 29th April 2020 would be sufficient enough to fill the cash gap through December 2020. Under normal circumstances the Bank placed an emergency order for eight five million notes of various denominations on the same date to increase the buffer stock, he explained.
He told the parliamentary committee that the order would have been delivered on October 2020, which is six months after the ordering date, but due to the increase in orders by Commercial Banks complemented with the COVID-19 restrictions, caused a very long queue and delay in delivering the notes, but that six million of the eight five million notes ordered by the Central Bank was delivered by chartered flight in three tranches in September 25th November 12th and December 11th 2020.
“The remaining 25 million notes of the order were received yesterday 18th January 2021,” he assured parliamentarians, explaining that at least 60 percent of all notes issued has been deposited by the Commercial Banks into their vault.
According to the Governor, this re-deposit minus the mutilated notes will then be issued to the public through the Commercial Banks.
But large sections of the Sierra Leone community, including businesses and the NGOs, do not believe the Governor of the Bank of Sierra Leone can turn things around.
This is a letter written by the Native Consortium to the Bank Governor last week, demanding his resignation if he fails to meet the mid-January 2021 deadline he set for himself, to solve the liquidity crisis and the poor supply of Leones in the country:
Dear Mr Governor,
Request to resign over the shortage of local currency in circulation which has caused discomfort and uncalculated loss to citizens and the business Community during the festive season till date, (even after your elapsed January 15th 2021 deadline).
Mr. Governor, let me first of all remind you about the meetings we held with you and your team sometime in 2019 that bordered on a variety of monetary issues, one of which was the printing of our local currency at Thomas de la Rue. During those deliberations, our organisation – Native Consortium, an organisation that looks at monetary policies, including – shadow banking, money laundering, exchange depreciation, interest rate, Eco Currency and liquidity issue.
If you will recall we advised at our meetings in 2019 that we shift the printing of our local currency at Thomas de la Rue considering the cost and some other related issues. The current liquidity crisis has resulted in acute shortage of money even in the central bank of the sovereign State of Sierra Leone.
It is no secret that the liquidity crisis during this last festive season to date has caused innumerable economic embarrassment and incalculable loss to individuals and businesses. Mr. Governor from your interview with the press, you blamed the adverse effect of Corona virus on the printing of our currency. Below are some of the excuses you levied:
a) That some individual(s) made huge withdrawals from the banks without concomitant injection into the bank.
b) That De La Rue have shortage in some materials like thread and paper to print our Leones.
c) That you’ve made an order for more Leones to be printed for the next two years and later doubled the order.
d) That by mid-January 2021 you expect a consignment of Le 25 Million Leones notes.
e) That you’ve also made directives to the Commercial Banks to ask their customers to bring their Leones into the banks in exchange for Dollars.
f) That you’ve also lifted the ban on Dollars.
Mr. Governor, contemporary closer look at the above has revealed you were only making excuses all of which have not helped the situation. These excuses look like mere textbook economic hypothesis; and when Native Consortium critically looked at your excuses from another angle and with another economic binoculars, we arrived at the following:
a) The so-called lifting of ban was impracticable, inadequate and unworkable, almost useless because you were like giving the cow to Business people and holding on to the rope.
b) Between April to August 2020 when the world experienced the height of the Covid, two-thirds of the world’s population was under quarantine and lockdown with no vaccine. No country experienced liquidity shortage except Liberia that experienced one between August to November 2020, but the Liberian currency is like a surrogate currency to the US Dollar. In the Liberian situation, it is the senate that gives approval to re-order currency because of the rampant money theft by State functionaries and corruption.
c) Mr Governor, you told the media that you reordered the printing of notes in January 2020 and later you doubled it. If this was anything to go by then we never experienced the crisis in mid-2020, except for the festive period.
d) Mr Governor for you to even suggest or concoct an hypothesis that some persons did huge withdrawal for speculative motive without any injection, is another laughable joke because such a thing has never happened. Since you have not been here long enough, let me hasten to tell you that you were speculating about a ghost in a theatre that never existed. As a matter of fact, you had instituted a ban on Dollar, and what you should have worried over was the injection of counterfeit notes in circulation, not a titanic withdrawal without concomitant injection into the bank.
e) You also demanded that Commercial Banks ask businesses to bring Leones into the banks. And that too Mr Governor was an organised joke because no businessman would want to keep Leone for any speculative hike. Mr. Governor, please note that what happened this last festive season was never experienced, even throughout our 11 years Civil war. Sierra Leone has never experienced this untold financial shortage and economic embarrassment – even between 1988 to 1990, when our economy sunk to its lowest depression.
f) Mr. Governor, this whole mess you’ve put the country into, is just revealing your incompetence; more so when we see that all the excuses you gave to the local media were totally different to what you said to the international media like the BBC.
g) Mr. Governor, if you want to blame the liquidity crisis on Covid, why did other African Countries never had this unparalleled national financial shortage? And why didn’t it occur no other time but the festive season? This is disgraceful.
Mr Governor, having stated all the inconsistencies and flaws in your excuses, you promised the nation that by mid-January (15th January) you expect a consignment of Le 25 Billion notes. Native Consortium, a consortium of over 30 civil society organisations, is demanding that you tell the nation if the liquidity crisis is over.
If not, we are asking you to resign because we Sierra Leoneans are tired of all this jazz economic theories you are putting out there as an excuse. You have woefully failed this nation.
We are aware that your job is a tenure job and President Bio cannot easily sack you. But we are now informing our President that the liquidity crisis is unbearable. Workers are paid but cannot access their salaries in full. Businesses don’t have enough cash to transact, thereby leading to great loss and financial discomfort.
If you cannot keep to your deadline set, we ask that you gracefully resign. Failure to do so will leave us with no alternative but to mobilise the business community and citizens to stage a peaceful protest to compel you to resign.
We hope you are a listening Governor and will come out quickly to publicly address the nation about the mid-January currency shortage deadline you set yourself
Edmond Abu (Jr) – Executive Director, Native Consortium.