By zainab.joaque@awokonewspaper.sl
Freetown, SIERRA LEONE – In its latest Africa Pulse report, the World Bank has advised countries grappling with persistently high inflation rates to maintain a restrictive monetary policy stance. The report underscores the importance of curbing inflationary pressures to safeguard economic stability and foster sustainable growth.
Highlighting specific countries in need of stringent monetary measures, the World Bank identified Ethiopia, Malawi, Nigeria, Sierra Leone, Zimbabwe, and others. These nations face unique challenges that necessitate a concerted effort to rein in inflation and stabilize their economies.
The report’s analysis reveals a concerning trend of accelerating inflation rates across the region, with over 80 percent of African countries experiencing a surge in inflation in 2022. Sub-Saharan Africa saw its median inflation rate rise to 9.3 percent, marking a significant increase from previous years.
In response to escalating inflation, central banks across Africa adopted synchronized monetary policy actions aimed at tightening monetary conditions. Interest rate hikes were implemented swiftly and decisively, albeit with variations in pace and magnitude among different countries.
Sierra Leone’s Central Bank, for instance, has raised interest rates consistently over the past nine quarters, totaling a 9 percentage point increase from March 2022 to March 2024.
The report underscores the critical role of independent and credible central banks in combating inflation. It emphasizes the need for central banks to uphold their autonomy and credibility through sound monetary, exchange rate, and financial policy frameworks.
To anchor inflation expectations and mitigate future shocks, the report stresses the importance of coordinated policy frameworks between monetary and fiscal authorities. It cautions against expansionary fiscal policies or foreign exchange distortions, which could undermine the effectiveness of monetary adjustments.
Furthermore, the report recommends accompanying measures to cushion the impact of policy reforms on vulnerable populations, such as fuel subsidy reforms. These measures aim to alleviate social unrest and conflict while maintaining macroeconomic stability.
In conclusion, the World Bank’s Africa Pulse report calls for continued vigilance and coordination in implementing restrictive monetary policies to address inflationary pressures effectively. By prioritizing credibility, coordination, and social protection measures, African economies can navigate current challenges and pave the way for sustained growth and development. ZIJ/16/4/2024