By Zainab. joaque@awokonewspaper.sl
Freetown, SIERRA LEONE – The overall fiscal deficit continued to widen in the third quarter of 2022, from NLe1.51 billion in the second quarter to NLe1.84 billion in the third quarter, the Central Bank says. The deterioration the Bank says was mainly due to increased government expenditure and net lending which was more than the increase in total government revenues. Similarly, the primary balance also worsened, as the deficit increased from NLe978.90 million in the second quarter to NLe1.46 billion in the third quarter.
According to the Monetary Policy Committee (MPC) it noted that domestic revenue mobilization remained subdued, as the growth in total revenue was mainly in respect of foreign grants which increased from NLe196.74 million in the second quarter to NLe782.89 million in the third quarter.
Domestic revenue, though improved, was below the target for the third quarter of 2022. Going forward, the MPC recommends heightened fiscal consolidation efforts in order to counterbalance the expected election-related expenditure increase for the 2023 general elections.
In its January Monetary Policy Statement, the Central Bank says Sierra Leone’s economic prospects remained challenging during the review period, largely reflecting the effects of negative supply shocks to short-run aggregate supply, which have produced stagflation.
Accordingly, real GDP growth for 2022 has been revised downward to 2.8 percent, from its earlier estimate of 3.6 percent. Recent projections also suggest a 3.1 percent real GDP growth in 2023, which will be below its pre-pandemic level.
The subdued output growth is also reflected in the Bank’s Composite Index of Economic Activity (CIEA), which shows that domestic economic activity slowed down to 0.97 per cent in the third quarter, from a growth of 1.97 per cent in the second quarter. The moderation in the CIEA mainly reflected the contraction in exports and capital expenditures.
The MPC noted the downward revision of real GDP growth on account of reduced economic activities in the productive sectors of the economy and raised concern about its implications for fiscal operations, exchange rate, and domestic price developments, as well as its effects on the welfare of particularly the poor.
This convinced the Committee that there is a need for prudent policy reform measures to boost domestic production and productivity in order to reduce the seemingly expanding output gap. ZIJ/10/1/2023