The Governor of the Bank of Sierra Leone, Dr Samura Kamara, has said at a one-day consultation with MPs on the preparation of the second generation of the Poverty Reduction Strategy Paper that the Central Bank has a very healthy reserve.
The Bank Governor said despite the healthy reserves, “it is not too helpful as the reserve has been built by donor funds and that is not healthy as dependable factor.
Reserves must be built out of export from your own country but today most of the reserves are based on what we get from the IMF, World Bank as their disbursement is done in foreign currencies into government’s account and we in turn disburse in local currency.”
The Bank Governor continued that, “it is okay ( the reserve) but it is not very okay because it does not give you that power, that ownership for building your reserve base but the most important in all of this is the real sector and what happens there and what happens in agricultural sector, manufacturing, tourism, but if these sectors are not moving and we are not producing in a value added manner, we cannot do anything with our currency as we have seen a number of countries that are not producing at the moment i.e Zimbabwe.”
He mentioned the case of Zimbabwe whose rate of inflation was so high as there were no productivity and stressed that an economy would not be managed just by “pumping money”.
The Bank Governor said, “as you pump money, the exchange rate depreciates as it does you lose value and when that is done you go into what they call currency redenomination.”
He further said by maintaining the value of the Leone should be shared responsibilities, stating further that there was every reason to maintain the stability of the Leone as he said it was our main medium of exchange.
The Bank Governor explained that, “the value of the currency is underpinned by a number of developments as first you need price stability to need low inflation that is why the micro economic environment is very important. Also you need a stable exchange rate which you use to measure the stability of the economy as how and how erratic they are and changes vis-à-vis other currencies particularly as the country is highly dollarised.”
Despite that, the Governor said, “lucky for Sierra Leone the exchange rate has been stable for quite a number of years and similarly we also had no inflation because if the inflation is very high, it reduces the value of the currency as it means reducing the amount of goods and services.”
By Ishmael Bayohs