SIERRA LEONE, Freetown – The stability of the exchange rate remained challenged in the first quarter of 2022, given the liquidity constraints that have subsisted from the second half of 2021 and the hike in crude oil prices as well as the increasing cost of freight.
According to the Central bank, this is coming against the backdrop of the global negative supply shock induced by the Russian –Ukrainian crisis. The pressures on the exchange rate are also coming from increased demand for foreign exchange for the importation of food, petroleum products and other trade-related commodities for the rainy season.
In addition, the Central Bank said that the uncertainties in the foreign exchange market remained elevated with the redenomination of the currency, giving rise to some speculative activities in the FX market.
To dampen the pressures on the exchange rate, the Bank of Sierra Leone April 2022 created two new Special Facilities – a Special Fund for Food to the tune of US$ 50 million and a Special Fund for Oil to the tune of US$36million. This intervention was done to help cushion the liquidity constraints in the foreign exchange market as well as to support the importation of essential goods.
The official BSL exchange rate of the Leone against the US dollar depreciated by 5.20 per cent, averaging Le11,568.33/US$1 in Q1-2022 relative to Le10,996.16/US$1 in Q4-2021. It also depreciated by 13.34 per cent when compared to Le10,207.07/US$1 in the corresponding quarter of 2021.
The commercial bank’s exchange rate depreciated by 4.31 per cent, averaging Le11,692.95/US$1 in Q1-2022 relative to Le11,209.55 in Q3-2021. It also depreciated by 13.43 per cent when compared to Le10,308.88/US$1 in the corresponding quarter of 2021.
The bureaux rate depreciated by 6.17 per cent, averaging to Le11,689.99/US$1 in Q1-2022 from to Le11,010.19/US$1 in Q4-2021. Similarly, it depreciated by 14.26 per cent when compared to Le10,231.34/US$1 in the corresponding quarter of 2021.
The Parallel market rate depreciated by 2.99 per cent, averaging Le12,010.42/US$1 in Q1-2022, relative to Le11,662.08/US$1 in Q4-2021. It also depreciated by 15.83 per cent when compared to Le10,368.58/US$1 in the corresponding quarter of 2021. ZIJ/19/9/2022