Abdul R Thomas
18 September, 2012
President Koroma has taken much pride and upheld as an experienced and successful entrepreneur by his supporters and admirers, including former British Prime Minister – Tony Blair. But with eight weeks to presidential election, the president’s economic record in office is now looking very shabby.
The Executive Board of the International Monetary Fund (IMF), has yesterday completed its fourth review of Sierra Leone’s economic performance – the last before elections are held on the 17th November, 2012.
This latest IMF Report is not encouraging, nor does it endorse the government’s over-exuberant false claims about Sierra Leone being one of the fastest growing economies in the World.
The government has been massaging its economic growth figures, and today we have learnt that it has also misled the IMF about its foreign debt, which, now running at over a Billion Dollars, is believed by analysts to have far exceeded agreed target.
When the president promised that he will run the country like a business, the expectation was that, not only would the economy be flourishing, but that standards of management will be consistent with international best practices: good governance, probity, transparency, accountability, prudence, and effective leadership.
By all accounts, it is now clear that President Koroma’s performance report card after five years in office is poor, which will make it difficult for the people of Sierra Leone to endorse his stewardship at the polls in November, for another five years.
With unemployment at over 70% and rising; inflation running at 18%; banks’ interest rate at over 23%; and economic growth not expected to exceed a one-off 12% by the end of this year, life for ordinary Sierra Leoneans is grim, as the country’s survival continues to hang desperately on a life support machine, kept going by the international community.
Following the Executive Board’s discussion of the country’s performance with the minister of finance – Samura Kamara, the Central Bank’s governor – Sambadeen Sesay, and other government officials, Deputy Managing Director and Acting Chair – Mr. Min Zhu, issued a statement.
Not surprisingly, the IMF could not confirm the government’s economic growth figures, nor was it able to corroborate claims that the GDP is set to grow by 35% by the end of 2012.
However, Mr. Min Zhu said that; “Economic growth has been robust and broad-based, reflecting the scaling-up of infrastructure investment and the implementation of projects in mineral sectors.”
But the IMF’s optimism is based on the critical assumption that iron ore production forecasts will be met in the next three months, after serious disruption of production by heavy rains. He said that; “Medium-term prospects are favourable, as iron ore production in 2012 is expected to boost growth. However, the outlook is subject to downside risks, mostly stemming from the uncertain global environment.”
Yet, this guarded optimism has been somewhat shattered by the less than favourable financial performance posted by the country’s largest producer of iron ore – African Minerals Ltd., who have recently declared a significant reduction in profits, as its cost continues to rise and production levels cut.
Consistent with the widely held view that the government has been profligate and inept in its management of the country’s finances, the IMF said that; “External price shocks and a loose monetary policy stance through mid-2011 have kept inflation in the double digits.”
Prices in the shops and markets have more than doubled since the government came to power in 2007.
The lopsided economic thinking and propaganda being peddled by pro-government media, that, Sierra Leoneans are better off than their counterparts in London, is a laughable fairy tale that will not win votes for the president in November.
Early this year, the Sierra Leone Telegraph reported that, the government was unable to pay its public sector workers and meet its procurement contract obligations. It had to sell Billions of Leones worth of Treasury Bills in order to cover its running costs, due to slippages in revenue streams. Poor budget management, many would say.
It was also reported that commercial banks had ran out of cash, as the government raided their vaults, looking for cash to meet its spending obligations.
Yesterday, the IMF reported that; “To address fiscal slippages incurred in 2011, the authorities have taken corrective measures, establishing a high-level Cash Management Committee and preparing monthly cash-flow statements. These measures improve fiscal management and enhance coordination between fiscal and monetary policies.”
The country’s main opposition party – The Sierra Leone Peoples Party (SLPP) have always maintained that, the government has not done enough to create a broad based and diverse economy that would generate reasonable revenue for the country.
Sierra Leone is one of the poorest countries in the world, with daily average income of less than a Dollar, and more than a half of its adult population not expecting to live beyond 47 years.
Critics have consistently accused the government of over-reliance on one-off cash payments from foreign investors, especially mining companies, in return for lucrative mining agreements that do not generate sufficient wealth to address rising poverty in the country.
Mr. Min Zhu said that; “Administrative efficiency gains and one-off payments from the extractive industries have supported revenues.”
Although the government has borrowed massively since 2007 to pay for its infrastructural development projects, it has also been ensuring that it pays its monthly debt servicing bill.
The IMF said that; “The authorities maintain a prudent debt management strategy. They continue to make efforts to resolve arrears to commercial creditors accumulated before and during the civil war. The authorities are also taking measures to improve debt management capacity to ensure that new loan commitments are consistent with debt sustainability.”
“After monetary policy conditions were appropriately tightened in late 2011, the statutory limit on direct central bank financing of the budget was observed, and the Bank of Sierra Leone used its money market instruments pro-actively to manage liquidity, thus helping lower inflation expectations. Continued tight monetary policy is needed in 2012 to support disinflation” – says Mr. Zhu.
The IMF is concerned that, although “Structural reform implementation has been backed by technical assistance from Sierra Leone’s development partners; and focused on public financial management, the financial sector; and private sector development; continued progress in these areas is needed to underpin fiscal and monetary policy efforts, and support growth prospects.”
It has also been heavily criticised for its lack of vision in supporting private business development programmes that would lead to job creation.
Analysts believe that fewer legitimate businesses were registered in the last two years, than the number of existing business closures reported, as the economy continues to teeter on the edge.
This latest IMF review has enabled its Executive Board to release US$6.9 million, bringing total disbursements under the current three-year ECF arrangement for Sierra Leone to SDR 22.2 million – estimated at US$34.4 million. The total approved on June 4, 2010, is SDR 31.11 million.
But did the government lie to the IMF early this year, about its alarmingly high and rising debt figures?
The IMF said that; “Inaccurate data on public sector new nonconcessional external debt provided in December 2011 at the time of the second and third reviews of Sierra Leone’s program under the ECF arrangement resulted in a non-complying disbursement.”
“In view of the corrective actions by the authorities, the Board decided to waive the non-observance of the performance criterion that gave rise to the non-complying disbursement,” Mr. Zhu added.
This fourth review report on the performance of the country’s economy by the IMF is a serious indictment of the government’s poor record in office.
With elections taking place in November, the electorate are expected to express their strong dissatisfaction with the government’s performance, and will be looking for a new direction in 2013 that can remove the country from its life support, operated by the international community.