Sierra Leone: The Bank of Sierra Leone (BSL) recently launched the Le100 billion agricultural facility added to the special credit facility (SCF) it rolled out in 2020, but the International Monetary Fund (IMF) staff have stressed that it should be temporary.
The Central bank decided to explore an agricultural value chain financing mechanism to reduce food insecurity by incentivizing private sector participation in agriculture. This financing mechanism would include a low-interest medium-term lending facility (along similar lines as the SCF) for financing the production, procurement and distribution of agricultural implements and inputs.
According to the Fund, the BSL views this as within its mandate, given this initiative is intended to ultimately reduce food imports (mainly rice), therefore helping to achieve the BSL’s price and exchange rate stability objectives.
“Staff emphasized that the BSL’s lending facility should be temporary, and clear rules should be established which enable transparent and effective oversight by the BSL and which set out a well-defined exit strategy” it warned.
The agricultural facility would be an initial step, pending broader reforms (supported by development partners) to increase private sector participation in agriculture gaining momentum.
The Bank also took other monetary measures when COVID-19 pandemic hit the country, it took early steps to ensure adequate liquidity in the financial system, reducing the monetary policy rate (MPR) and increasing the reserve requirement maintenance period in March 2020.
The BSL reduced the MPR again from 15 to 14 percent following the December 2020 Monetary Policy Committee meeting, in response to easing inflationary pressures.
The SCF was introduced as a loan facility for importers to ensure that the supply of food and essential goods was not disrupted. Since the SCF was introduced, the BSL has disbursed about Le 495 billion of the Le 500 billion (US$50 million) available. This helped to prevent shortages of essential goods and keep inflationary pressures in check.
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