Bilal Coleman: Sierra Leone Telegraph: 30 March 2020:
Sierra Leone may not have registered a single case of the coronavirus, but the global shock engendered by the virus has triggered a financial crisis that is reverberating in the country. It appears that the financial shock wave is running ahead of the virus in Sierra Leone.
Recently, President Julius Maada Bio (Photo below) imposed a moratorium on air transportation, a move whose consequences would be dire not only for inward foreign direct investments but also for a tourism industry that has been showing some life in recent times.
Given the precarious condition of Sierra Leone’s public finances, the country evidently does not have the resources to ride out the challenge posed by a global pandemic.
When Ebola struck in 2014, policy makers looked for and found assistance from outside Sierra Leone’s shores.
Will the country look for outside assistance again, given that the United Kingdom, the European Union, the United States and China are all going through an unprecedented shutdown?
The deadly virus may not have arrived in Sierra Leone but since the country exists in the global community, a shock that delivers a blow to stock markets and government bonds in the United States and the United Kingdom is bound to influence all markets in Sierra Leone.
It must be noted that even before coronavirus struck the world, economists have been warning for quite some time that the rising debt in Africa, posed substantial risks to growth on the continent.
Additionally, investment in African has been going into reverse as investors run elsewhere for safety. And to make matters worse, commodity prices have tanked in international markets.
The cumulative effect of these developments is that while the Dollar has appreciated in value, thereby making Dollar debts more expensive, exchange rates and balance of payments in African countries have been negatively affected.
As the coronavirus pandemic overwhelms the United States and the United Kingdom, policy makers in these countries have responded by ignoring traditional free market principles and positioning their respective governments in the center of demand management and resource re-allocation.
The United States, for example, has just passed a huge $2.2 trillion stimulus package that would deliver checks to taxpayers, small business owners, corporations and state governments. The goal of this policy is to stimulate aggregate demand in an economy that is faced with a 30% unemployment rate.
The lesson for Sierra Leone is that the government must revisit its agreement with the International Monetary Fund (IMF).
If the United States can resort to a large scale government intervention in its economy to influence its macroeconomic fundamentals, it would be unconscionable for the IMF to think that its neo-liberal economic policies would deliver success in Sierra Leone in the throes of a global pandemic. (Photo above: IMF country manager in Sierra Leone – Dr Marsha bids farewell to president Bio).
Accordingly, Sierra Leone must plead for debt forgiveness and allow more government intervention into the economy.
The coronavirus crisis has compounded Sierra Leone’s economic woes as it has caused major economic activities to come to a standstill. Consequently, the country may end up facing a new debt crisis like the one it faced in the early 2000s, which culminated in the Heavily Indebted Poor Countries (HIPC) debt-relief package.
With government having no choice but to impose new regulations to fight the pandemic, there is an urgent need to cushion the emerging financial stress facing the country’s citizens.
Perhaps more importantly, Sierra Leone needs a restoration of business as usual in the world economy. But for that to happen, the United States, Europe and China must extricate themselves of the crisis.