Sierra Leone Telegraph: 10 January 2021:
As Sierra Leone struggles with its money supply, last month – December 21, 2020, the Executive Board of the International Monetary Fund (IMF) completed the first and second reviews of Liberia’s economic performance, under the Extended Credit Facility (ECF).
“Priority should be given to addressing risks from weak financial institutions and ensuring the supply and quality of Liberian dollar banknotes,” the IMF told the Liberian authorities.
The four-year ECF arrangement, with a total access of SDR155 million (60 percent of quota or about US$214.30 million) was approved by the IMF Executive Board on December 11, 2019.
Completion of the first and second reviews enables the immediate disbursement of SDR34 million (US$48.86 million), bringing total disbursements under the arrangements to SDR51 million (about US$72.20 million).
An IMF statement published on 21 December 2020, says that after mixed program performance initially, the authorities in Liberia have taken corrective actions to address weaknesses in the program and they continue to make progress in structural reforms.
“Reflecting the impact from the COVID-19 pandemic, the growth forecast for 2020 has been revised down from 1.4 percent at the program’s inception to -3.0 percent,” the statement reads.
Commenting on prospects for the economy, the IMF says that: “Assuming global conditions gradually normalize, growth is projected to reach 3.2 percent in 2021, but downside risks to the outlook are high. Liberia remains fragile and vulnerable to shocks as both fiscal and external buffers remain low. Liberia continues to be assessed as having a sustainable debt burden, but borrowing space is limited.”
“The COVID-19 pandemic continues to exert significant strain on Liberia’s fragile economy. The authorities have taken the necessary steps to stabilize the economy amid multiple challenges. A modest fiscal loosening is appropriate to meet humanitarian needs during the COVID19 pandemic.
“The authorities are committed to fiscal discipline and further improvements in cash management, transparency and accountability in spending, and domestic revenue mobilization to finance their development agenda. The monetary policy stance is appropriately aligned with the inflation objective, and significant progress has been made in strengthening central bank independence. In the context of the gradual de-dollarization of fiscal spending, it is important to further refine instruments for open market operations and enhance policy coordination between the central bank and the government.
“Further efforts are needed to contain the central bank’s operational expenses and build up reserves. Rebuilding confidence in the financial sector is critical for financial stability. Priority should be given to addressing risks from weak financial institutions and ensuring the supply and quality of Liberian dollar banknotes. Further improvements in governance are necessary for efficient delivery of public services.
“Steps are being taken to clear the fiscal audits backlog, further enhance procurement transparency, and upgrade the anti-corruption legal framework. Efforts to increase borrowing space would support sustainable growth. The authorities should continue to work with donors and development partners to secure grants and concessional borrowing, and carefully prioritize the use of public resources.”
In neighbouring Sierra Leone, there is serious scarcity of the local currency – the Leone, which the Governor of the Bank of Sierra Leone – Professor Kelfala, said is caused by difficulties in securing the supply of newly printed Leones from abroad because of the Corona pandemic.
Millions of households in Sierra Leone ran short of the Leone during the Christmas holidays, causing a sharp rise in prices in the shops and markets.
The government of Sierra Leone says it is waiting for stocks of newly printed Leones to arrive shortly – valued at $25 million.
But critics say that this is just a fraction of what the economy needs to meet market and consumer demand, and stabilise the currency.
Sierra Leone’s currency has lost over 20% of its value since president Bio came to office in April 2018, due largely to the big fall in exports – especially iron ore.
The economic crisis in Sierra Leone has prompted calls for the President to sack the Bank Governor as well as the Finance Minister – JJ Saffa.
Many are accusing President Bio of placing political party loyalty above the country’s interest.
This is what the Bank of Sierra Leone Governor said in his own defence: