Sierra Leone’s economy will recover

Sammy Massaquoi: Sierra Leone Telegraph: 23 August 2019:

Much has been said about ‘bread and butter’ economics and the contribution of the Minister of Finance, or lack thereof, to the present state of Sierra Leone’s economy. This piece, therefore, aims to highlight some of the overlooked areas in this discourse.

I have refrained from engaging critics of the government on the mundane political issues which are, quite plainly, diversionary. Statements such as, “President Bio and his economic advisers appear to be clueless on how to solve the ‘bread-and-butter’ issues”, or that “President Bio has failed the nation”, or even that “JJ Saffa has been behaving like a bull in a china shop”, are not only considered derogatory, but I find them to be beneath my comments here.

I thus hasten to submit that ever since the frequently cited and quoted statement by Dr. Mahamudu Bawumia hit the social media waves, about the exchange rate exposing the weakness of the fundamentals of an economy, many would-be economists and pen-happy writers have chosen to rely on his statement and make sweeping conclusions about our economy, often unnecessarily.

Critics of the SLPP government even assert that Dr. Bawudia’s statement is “true for JJ Saffa and his ilk at the Ministry of Finance and Bank of Sierra Leone”.

The reality is that, Dr. Bawudia as a politician can understandably stretch the truth to serve the purpose of his statements, but it behoves those who choose to use those specific statements as blueprints for other economies, to do their due diligence. For as we know them, economists always make statements in “ceteris paribus” conditions.

Dr. Bawudia is not implying that each time the exchange rate is unfavourable for a country the entire fundamentals of the economy are weak because, though an indicator, exchange rate itself has multiple determinants, is malleable, subject to speculation and can be devalued as a deliberate policy (if fixed) to promote domestic exports of a country.

For instance, the fundamentals of the Chinese economy are strong, and it may be the country with the highest trade surplus (USD 421 bn), yet it does not have the strongest exchange rate against the USD, due to some of the aforementioned factors. In-fact, China’s habitual devaluation has been termed by the U.S as currency manipulation

Simply put, fundamentals of an economy refer to the variables/activities that have potential to affect the whole or segments of the economy. So when statements are made about the fundamentals of the economy, the key references are to the country’s Gross Domestic Product (GDP), Inflation, Employment, and Trade balance.

From desk research on the Sierra Leone economy, the 2019 (Q3) GDP figures of USD 4.5 billion is a significant improvement on the 2017 GDP of USD 3.74bn. Inflation has stagnated at 16.2% between 2018 and 2019, after a fall from 17.5 % (2017).

According to Moody’s Analytics, unemployment rate (In Sierra Leone, the unemployment rate measures the number of people actively looking for a job as a percentage of the labour force – sic) stood at 4.5% (2017) but is currently 4.3%, representing a modest decrease.

Sierra Leone also recorded a trade deficit of USD 535m (2017) which has widened by 38 % over the period ending 2019 due to a significant fall in exports, mainly from the minerals sector, to which President J.M Bio has requested a diversification outwards into other sectors, especially agriculture.

But herein lies the exchange rate problem, since persistent trade imbalances imply unfavourable terms of trade for the country. Other factors normally included as fundamentals of the economy are the levels of corruption and education of the population, soundness of the fiscal policy, level and management of the national debt.

My question for our politically motivated writers has always been: In which of these other areas of economic fundamentals is the Sierra Leone economy currently underperforming relative to the previous regime?

My suggested answer is ‘none of the above’. The fundamentals are certainly picking up, and with large infrastructural projects in the pipeline it is fair to say that the fundamentals of the economy will continue to get stronger.

Much to the displeasure of the naysayers of Sierra Leone, we will continue to browbeat the real reason for our present predicament, which is, the legacy of a battered economy, untold austerity, and a people that were then categorized as the third hungriest in the world (Global Hunger Index, 2017).

Of course social and related media are replete with figures on, say, our national debt, which currently requires debt servicing payments of around 110 billion Leones annually. THINK about that!

Besides, a host of lopsided agreements with the mining companies, occasioned during the previous administration have left Sierra Leone holding the short-end of the stick, causing low revenues from our minerals.

More importantly, the unease within the mining sector has created more export shocks and subdued production levels, exacerbating the trade imbalance with further impacts on exchange rates. A number of house cleaning measures that the Ministry of mines has adopted to resuscitate this foreign exchange earning sector revives hope for short to medium term recovery.

Let me also argue here that a lot of the improvement strides that finance minister J.J Saffa and team have made, are movements in the negative and therefore not easily noticed by many.

Numerically minded people will agree that a movement from negative 40 to 0, is the same numerical movement as from 0 to positive 40.

What the New Direction government has successfully done is to stabilize an economy that was clearly in a free fall when the APC left.

An objective perspective is that living conditions could have been worse by now, had the APC won the last elections.

It is, therefore, our moral duty as patriotic Sierra Leoneans, to lend support to this government for a take-off of the economy into sustainable growth.

In the interest of full disclosure, the stabilization of the economy has been made possible mainly by the revenue raising efforts of the National Revenue Authority (NRA), supervised by the Ministry of Finance, which has taken our domestic revenue mobilization from single digit to double digits in the short period of this administration.

The implication is that, for once in a long while, government is able to finance its expenditures, including the much trumpeted overseas travels, from domestic revenues without recourse to borrowing.

Admittedly the domestic revenue mobilization, being on track, must now give way to an export promotion phase, to provide us with the much needed foreign exchange for our balance of payments position and consequently economic growth.

This is obviously the longer-term phase and His Excellency is on record asking Sierra Leoneans to exercise patience, since the outcomes will more than justify any economic hardships that will be endured in the waiting period.

No economist, Dr. Bawudia included, will give you a quick-fix for this second phase because it involves production and manufacturing periods, mining lags and crop gestation periods, some of which may even be subject to the vagaries of nature. Therefore at this stage, there is no magic wand.

What I subscribe to, and with restrain I quote former President E. B Koroma here, is that “we are a resilient people”, and having weathered the storms of a decade-long war and a deleterious disease (Ebola), we will persevere and achieve a turnaround of an economy that has clearly bottomed now.

We cannot do so, however, if we are overly critical of, and constantly calling for the removal of the very actors who have, thus far, stabilized the economy.

The ongoing USD auctioning and recent press releases (20/8/19) from the Central Bank on compliance measures in foreign currency dealings by NGOs, businesses and private individuals, are pointers to the relentless efforts of the Finance Team to alleviate the exchange rate problems.

I strongly believe that these officials have already completed their learning curves and should now be given the space and chance to right the wrongs of the past actors, and take this economy to higher levels.

Ultimately, it is those who hate to hear this truth that are writing humbug articles to misinform the public and to evince that the problems of our economy started only last year.

The important and sensitive work of rebuilding a broken economy cannot be achieved in a single feat. Thankfully, there is still more than three years left to deliver.

10 Comments

  1. There is a serious task at hand for this current administration to tackle. And the time is now! The previous government used to face economic challenges, during their first 2yrs in office, though not as compared to what we are seeing now. However, let us give some time to the Bio government to put their promises together and start to deliver. Though I might sound crazy for saying that but, one cannot deny the fact that the Bio administration is still too young to make a speedy recovery to a so called bettered economy.

  2. Outstanding article from the lens of an SLPP insider and a regime advocate. The writer did a terrific salesman job in pointing out the many accomplishments the regime has undertaken in their quest to resuscitate our spiraling economy. By and large, the writer portrayed an impressive economic outlook put in place by the regime and the many goodies that are to follow shortly.

    Contrary to the realities on the ground, characterized by an increase in economic hardship, cost of living, increase unemployment rate, and many other unfavorable conditions; the writer presented, cooked up mathematical figures that cannot be anywhere closer to being factual.

    By all seriousness, who on earth can claim that the unemployment rate in the country has decline from a 4.5% to a 4.3%? Is the 4.5% rate even realistic? Come on folks, you got to be kidding me, are we talking about Sierra Leone here, one of the poorest nations on planet earth having a 4.5% unemployment rate?

    It appears the writer’s long time physical absence from the ground is affecting his analysis, relying solely on uncredited online research. A quick visit to the motherland would have allowed the writer to come into terms with the many desperate youths plying the streets of Freetown looking for employment opportunities.

    I assume the writer is less informed about the thousands of young people graduating from colleges/universities across the nation yearly, only to remain jobless years later. Besides, the government which offer most of the employment mainly in the sole bases of party supporters, can the writer enlighten us how many other employment opportunities are there in the midst of a drought investors environment?

    Time and again, regime advocates likes the writer here, kept pointing at inflation and other economic indicators, arguing that things have not really changed for the worst. They argued, the Leone depreciation against the dollar is the only major issue, and to a certain degree they cast the blame on the previous regime for this aspect. While acceptable to party insiders, these arguments are getting old and to a certain degree a slap in the face to many of the suffering citizens.

    Prior to assuming governance, the new regime castigated the EBK regime of being incompetent of running the economy. The regime presented a picture of know it all, and a quick fixer (JJ Saffa) of our economic malaise; the people buy into the regime selling point, they are now in governance for 16 months, yet we are still hearing about the old regime policies being a factor.

    By all indications, things have gotten from bad to worse since the regime took over. Regardless of whatever cooked up figure being tossed around, the realities are, the untold economic suffering is rapidly increasing. As long as things remain the same or continue to get worse, people will continue to complain and ask questions.

    So if the writer thinks it’s unpatriotic or disrespectful to demand answers from top officials like JJ Saffa or the president, was he not demanding the same answers while the EBK regime was in charge? Is it not every patriotic Sierra Leonean’s right or duty to hold our elected officials accountable? My prayer is, we one day get to a point were our loyalty lies first and foremost to mama Salone, instead of political parties.

  3. “…but, what I would say though, still less than three and half years left to HANDOVER.” Sahr Matturi

    Sahr Matturi, we all agree that Sierra Leone is in dire economic straits. But hand over government to whom? To the crooks that destroyed our country? Man, can we have better wishes for our country? Look, a glance at other countries in the West African sub-region will tell you that Sierra Leone is ahead on the path to sustainable growth and development. For example, the rate of inflation in Liberia is 28% compared to Sierra Leone’s 16.2%. Many Liberians on our eastern border now buy their commodities in Sierra Leone.

    Economies everywhere are subject to business cyclical phases. The phase that we are experiencing now started with your APC and of course as you well know, it was also exacerbated by that party’s blatant corruption and greed.

    Do you expect the SLPP to undo all that damage wrecked by the APC in only 16 months? It takes no time to destroy a country. However, it takes time to fix it. APC is not the solution to Sierra Leone’s problems. It is a part of our problem. APC has ruled Sierra Leone for 38 years, longer than any other political party has ruled anywhere in West Africa. What does the APC have to show for that? Zilch! Do we have to continue playing the power game and letting the country rot? Let the APC languish in opposition ad infinitum.

  4. Sierra Leoneans went to the polls and voted in the Bio’s government for better changes, but it seems as if their votes were of no importance to the masses of the country.

    Instead, it is just a promotion to the Bio’s unscrupulous governmental selfish interests. By virtue of all the natural mineral resources we have, we should have been competing with the likes of Kuwait and Qatar in the world index but yet still we remain the poorest.

    • My friend, what really are you trying to communicate here? Because YOU VOTED IN A GOVERNMENT MEANS THAT THAT GOVERNMENT WILL DO ONLY WHAT YOU WANT? OR WILL DO SOMETHING THAT IS IMPOSSIBLE JUST TO PLEASE YOU? Sit down and don’t go to school, learn job or go back to your village and do farming. Say the government is going to feed your household or your warehouse. You might be joking or fooling yourself.

  5. Indeed, there is still more than three years left to deliver on the promises that the ” New Failing Direction ” once bragged loudly from rooftops, to bring quickly to fruition, that will alleviate the sufferings of the struggling masses in our beloved Country.

    All the bogus figures and nonfactual percentages the writer has boldly provided on this platform, for all to see, are inconsequential and quite meaningless to the majority of people in this nation who are already languishing in barefooted poverty.

    Now let us be honest for a minute – Since this unrenumerative government took over Power, until now, nothing sustainable and credible has been seen or achieved, except for their persistent, impulsive borrowing and reckless spending.

    Their Free Quality Education program is presently on crutches ,being overwhelmed by financial constraints, shackles and lack of adequate preparation. Again, what economic policies has this government put in place to ensure financial transparency and the equitable redistribution of wealth from the rich, at the top, towards the poor at the bottom? None whatsoever!

    What this country urgently needs is not empty rhetoric and unfruitful boastful statements coming from an incompetent Finance Minister, but an urgent Economic policy or theory that will yield quick, beneficial results for all.

    It is time to ‘ Put up or Shut up! ‘Here’s a piece of advice to the Finance Minister, Mr Saffa, an arrogant, unapproachable man, whom the writer of this article has come here purposefully to protect, defend and loudly cheer.

    Now, listen up and listen well – Any economic policy that does not prove itself to be viable in six months must be tossed aside and replaced by a new one. You cannot be doing the wrong things and expect to receive good life-changing results. It is madness! Time is not on your side, gentlemen!

    At this point, Trickle Down Economics, in my view, is our only hope, to salvage and save this ailing, sinking nation from drowning and getting lost in the rough Seas of Quagmires and Conundrums, created through the gross negligence, rancorous attitudes and ineptitude of the SLPP.

    “Trickle Down Economics” can instantly bring about badly needed desired change. It proposes that Taxes on the wealthy and business can be drastically reduced in order to stimulate investment that would create jobs and benefit the poor in our societies in the shortest time possible.

    But is this government practicing or implementing such strategic policy? Absolutely not! They are doing exactly the opposite, raising taxes on businesses, imposing high fines and scaring investors away. Seems to me, they are like a circus full of clowns, with no audience to cheer their dry, stale pathetic jokes.

    The Finance Minister should get his act together quickly, because this nation cannot afford to be waiting on him, for positive change forever….Rising Sun Will Rise Again.

  6. Sierra Leoneans elected the SLPP government because they were fed up with the way our country was governed in the past ten years and the direction our economy was heading under former President Ernest Bai Koroma and his thieving Ministers.

    It is understandable that our people expect change but more importantly, they expect our government officials to explain to them what they are doing to alleviate their suffering and to put a stop to the rising commodity prices in the market.

    Just barely two years in office, it might not look like the SLPP government is doing much to effect changes to the layman but most who are following what has been going on in the past year, will agree that had it not been for the stringent fiscal policies enacted by this government, our country would be in dire economic straits today.

    However, if we do not trumpet our achievement and lay in bare for the market woman to understand, the frustration of the common man will continue to rise. This is why JJ Saffa, our Finance Minister is being targeted, because he is charged with the responsibility of turning our economy around for the better. And I think he is in the unique position to inform the citizens about what our government is doing to ameliorate their living standards.

    However, the recent interview he gave on Democracy Radio did not do much to assuage the fears many people have about the cost of living. I was personally taken aback by his impatience and lack of humility. He was very dismissive and behaved as if he was still on a campaign trail. His choice description of his fellow Sierra Leoneans as “LABO LABO PEOPLE” did not win him any admiration.

    Our esteemed Minister should realize that he is now a public servant and therefore has the obligation to be respectful to the citizens because they pay his salary and instead of talking down to them, he should make every effort to persuade them by articulating the plan of the government and not to make it seem as if they do not have any reason to complain. In my opinion, he lost a very good opportunity to change the views of the people who are clamoring for his firing.

    The APC party and their operatives erroneously thought they were above questioning and today they are paying the ultimate price for their hubris and this is something most of us who support the SLPP new direction would not like to see happen to our party.

    So, it will behove all our ministers to behave appropriately and to sympathize with the plight of our people who have gone through hell and back in the past ten years. We cannot talk about a ‘New Direction’ if we continue to commit the same mistakes of those we criticize.

    • Indeed. Difficult mathematical expressions. As the writer rightly said and I quote “still more than three years left to deliver” but, what I would say though, still less than three and half years left to HANDOVER. That makes sense as regards to the current state of affairs in the country. Thanks Mr. Noorudin KaiKai for your brilliant comment and may GOD BLESS you.

    • All I see your party doing is pointing fingers. They have made no effort in solving the issues. They only made things worse and spend most of their time blaming the APC than ruling.

    • Just for his level of arrogance, JJ saffia should have been replaced. Period! Integrity and humility is what the Sierra Leonean people want from all government officials especially from someone that heads such a ministry like finance.

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