Sierra Leone: The International Monetary Fund has revised the country’s end-year inflation rate from 10.4% to 13.5%.
Food price inflation might remain high given the heavy reliance on food imports, putting continued pressure on an already largely food insecure population.
“Inflation is projected to rise to 13.5 percent in 2021 from 10.4 percent in 2020, and to stabilize at single digits in 2024 as food inflation normalizes and exchange rate depreciation ends” according to a statement by Ita Mary Mannathoko, Executive Director for Sierra Leone and Mr. James Garang, Advisor to the Executive Director.
According to the Fund, year-on-year inflation will however slow down to 12.1 percent in 2022.
Inflation rose as a result of higher food prices, particularly in the second quarter, but moderated in the second half of the year to levels well below the forecast at the time of Rapid Credit Facility (RCF1) (10.4 percent y-o-y in December against the 17.5 percent forecast), despite significant growth in monetary aggregates.
Year-on-year inflation rate hit 10.87percent in February 2021, 0.63 percentage points lower than 11.50 percent recorded in January. Price developments in recent months according to the Central Bank (Bank of Sierra Leone -BSL) have been largely driven by food inflation, while non-food inflation continues to be subdued.
The inflation rate moderated to 10.45 percent at end-December 2020 – from 13.71 percent in September 2020. This according to BSL was below both the end-December 2020 target of 15 percent and the pre-COVID-19 Pandemic level. However, the MPC noted mixed price developments in the first two months of 2021, with inflation rate increasing to 11.50 percent in January 2021 from 10.45 percent in December 2020, before decelerating to 10.87 percent in February 2021.
Sierra Leone’s inflation is still high in the West Africa sub region, as with other countries like Ghana, Liberia and Nigeria, these four countries have been recording inflation rates of more than 10 percent, a situation that has fuelled the cost of credit relatively high.
The BSL Monetary Policy Committee (MPC) said in their 2021 first quarter statement that as they look ahead, risks to the inflation outlook are ‘muted’ with the exception of the possibility of higher food prices as we approach the lean season.
However, this food supply shock they say is expected to be temporary and to wane in the fourth quarter of 2021, with the hope that the BSL’s Agriculture Credit Facility will expectedly help to mitigate any emerging food supply shock in the near-term.
ZIJ/19/04/2021