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Concord Times (Freetown)

Sierra Leone: '2008 Macroeconomic Performance Was Mixed'

14 January 2009

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Freetown — An IMF report ending the year 2008 found out that Sierra Leone's macroeconomic performance was mixed.

Output growth reached 6.4 percent in 2007, led by solid agricultural, mining production and buoyant activity in the construction and services sectors but inflation reverted to double digits in 2007 and went up significantly in 2008, rising to 17 percent.

"Available information points to continued robust economic activity in 2008, despite the impact of the global downturn and a drop in mining production. The primary fiscal deficit (including grants) was reduced to 1.9 percent of GDP in 2007 from 3.1 percent in 2006 as the government implemented a cash-budget management in the face of a significant decline in domestic revenue mobilization."

Reserve money growth exceeded the targets in 2007 (26 percent against 15.6 percent) and 2008 (end-September) due to unexpectedly high bank reserves caused mainly by the establishment of new foreign banks.

Credit to the private sector grew rapidly in 2007 and 2008 as commercial banks continued to increase lending in support of buoyant activity in the construction and service sectors.

The external current account deficit (including official transfers) increased slightly in 2007 (3.8 percent of GDP versus 3.5 percent in 2006) following a slight deterioration in the terms of trade.

"The foreign reserve position of the Bank of Sierra Leone has remained relatively strong. The nominal effective exchange rate depreciated enough over the last two years to offset the rise in inflation, keeping the real effective exchange rate (REER) fairly stable. However, with the acceleration of inflation in 2008 outpacing the depreciation in the nominal effective exchange rate, the REER started to appreciate somewhat."

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