Freetown, SIERRA LEONE – Wayne Mitchell, the Resident Representative of the International Monetary Fund (IMF), has emphasized the crucial need for the government to operate an efficient tax administration to boost tax revenue in the country. His remarks came during a hard-hitting panel discussion at the launch of the new World Bank Sierra Leone Economic Update on Friday, October 27, 2023, at the Sierra Palms Hotel.
Wayne Mitchell pointed out that the most pressing challenge the government currently faces is the imperative to enhance efficiency, which extends beyond tax collection. He emphasized the importance of not just raising taxes but doing so fairly, equitably, and progressively. He stressed that creating a clear tax policy framework is essential to inform the private sector about the government’s intentions concerning tax policy.
“This is not solely about revenue mobilization efforts; we must view the tax framework in a much broader context,” he told the panel.
Another critical issue Mitchell highlighted is the removal of wastages within government operations. He stressed the need to shift the focus toward service delivery, rationalize spending, and find ways to provide the necessary resources to actualize the Feed Salone Program, particularly supporting the Ministry of Agriculture.
Addressing the country’s current economic situation, Mitchell pointed out that inflation stands at 54%, making Sierra Leone the third-highest in Africa, trailing behind Zimbabwe and Eritrea. He underscored the paramount importance of addressing price stability, emphasizing that the Central Bank should prioritize price stability in the medium term.
Mitchell proposed the necessity of communicating to the public that a concerted effort to reduce inflation should be made by the Central Bank and the Ministry of Finance, aiming to achieve it within a specific range by 2025. He emphasized that reducing inflation is a shared responsibility of the government, with the onus not solely on the Central Bank.
Regarding Sierra Leone’s debt sustainability challenge, Mitchell acknowledged the discussions on its high debt-to-GDP ratio and causes. He noted that the debt-to-GDP ratio tripled over the past eight years, pointing out that this isn’t solely due to global factors but also policy missteps.
He justified this by highlighting the country’s broad money growth in 2022, which was the highest in the African region, and pointed out that local factors must not be ignored. In addition, he pointed out that the country’s fiscal deficit in 2022, excluding grants from the World Bank, stood at 17% of GDP. The wage bill, debt services, interest payments, and amortization collectively accounted for 100% of domestic revenue generated.
Mitchell emphasized the impact that high debt and servicing have had on the government’s fiscal operations and on the Central Bank’s role in monetizing that debt. He stressed the need for both the Central Bank and the Finance Ministry to collaborate on moving forward.
Addressing the budget deficit, Mitchell mentioned that Sierra Leone’s budget deficit in 2022 was 10.9%, and this year, the Finance Ministry is proposing to reduce it to 5.4% of GDP. He expressed the desire to achieve this target and called for a clear plan for succeeding years.
Finally, Wayne Mitchell emphasized the necessity of inclusive growth, encompassing the private sector, and the need to boost productivity, energy, transportation, water, and other essential infrastructure.
As Sierra Leone grapples with these multifaceted economic challenges, Mitchell’s insights highlight the critical areas that require attention and action. ZIJ/30/10/2023