May 2013 - Bank of Sierra Leone

Bank Of Sierra Leone Weekly EventBrief30 Siaka Steven StreetFreetownVOL 1 Issue 531 st —27 th MAY, 2013May 22THE IMF AND GOVERNMENT STRIKE A DEAL ON A NEW ECF PRO-GRAMME22 nd MaySierra Leone Recovery Sends Yields to RecordLowCued From BloombergFollowing weeks of discussions withthe authorities in Sierra Leone, anInternational Monetary Fund (IMF)Mission to the country, in a PressRelease on May 22, confirmed theyhave preliminary understandings withthe authorities on key elements of amedium-term economic and financialprogram that could be supported bythe Fund under the ECF. However,discussions between the mission andthe authorities were to continue in thefollowing weeks.The IMF mission led by Ms. MalanguKabedi-Mbuyi visited Freetown duringMay 8–21 to carry out discussionsfor the 2013 Article IV consultationand for a three-year economicand financial program that could besupported by the IMF under the ExtendedCredit Facility (ECF). Themission held discussions with Ministerof Finance and Economic Development,Kaifala Marah; Central BankGovernor, Sheku Sesay; members ofParliament; representatives of thebusiness community; developmentpartners; and other senior officials.They also agreed with the authoritiesthat medium-term structural reformsshould focus on bolstering revenuemobilization, strengthening publicfinancial management, maintainingprudent borrowing policies, anddeepening financial intermediation.In the statement the IMF alsoconcluded that, Sierra Leone’seconomic growth accelerated to15.2 percent in 2012, reflectingthe emergence of large-scaleiron ore extraction as well assustained expansion in agriculture,services, and construction.Real Gross Domestic Product(GDP) is projected to grow at13 percent in 2013. Consumer priceinflation declined from 16.9 percentin 2011, to 12 percent in 2012, aidedby prudent monetary policy and stableexchange rate. It is forecast todecline further in 2013. SierraLeone’s external position improvedin 2012, strengthening the reservecoverage.In the fiscal area, the mission said,the overall budget deficit reached 5.6percent of non-iron ore GDP, up from4.6 percent in 2011 partly reflectinginfrastructure investment scaling upand higher spending in goods andservices. The deficit was financedlargely with short-term treasury bills.For 2013, the budget deficit would becontained below 4 percent of nonironore GDP, thanks to the expectedincrease in revenue mobilization, andenhanced expenditure management.The policy discussions they held withstakeholders focused on creating fiscalspace to continue supporting investmentin infrastructure and humandevelopment, reducing inflation tosingle-digits, facilitating access tofinancial services, and creating anenvironment conducive to privatesector development and job creation.Sierra Leone, the Africannation rebuilding its economya decade after the endof a civil war, is benefitingfrom slower inflation and astable currency as borrowingcosts tumble and growthaccelerates.Yields on 91-day notes fell128 basis points, or 1.28percentage point, to a record6.42 percent at the last centralbank auction May 9,134 basis points higher thanSouth African yields anddown from 19.1 percent inDecember after the centralbank cut interest rates. TheFinance Ministry forecastsgrowth in the $3 billioneconomy of 15.1 percent in2013 after last year’s 21.3percent, which was bolsteredby the start of ironoreexports and constructionincluding the expansion ofthe airport serving Freetown,the capital.African Minerals Inc. andLondon Mining Plc, bothbased in London, began iron-ore exports in late 2011.Source: London Mining Plcvia BloombergThe improvement coincideswith the government seekingto reduce domestic borrowingby half this yearafter debt rose to 1.14 trillionLeones ($264 million)in 2012, the ministry said ina report published April 22.Lower bill yields shouldprompt banks to cut theirown rates and boost lendingto companies to supporteconomic growth, FinanceMinister Kaifala Marah saidin an e-mail April 23. TheInternational MonetaryFund forecasts inflation willslow to 9 percent this yearfrom 12 percent.“The government should notcrowd out the private sectorby being the biggest singleborrower in the domesticbond market, driving upinterest rates,” Marah saidin the e-mail. “We want theprivate sector to continue toparticipate in the economy,and we would not achievethat if our appetite for borrowingcontinues unabated.”The amount of bills sold bythe Bank of Sierra Leone inthe first quarter dropped 18percent from the previousthree months to 489 billionLeones, according to datacompiled by Bloomberg.Debt rose as governmentspending climbed on borrowingto spend on infrastructureprojects includingroads and power output.Debt to gross domesticproduct will slow to 40percent this year from 44percent in 2012 after climbingas high as 162 percent in2003, according to IMFestimates and data.The government wants tocut debt by at least 50 percentin 2013, Joseph Thullah,an economist in theministry’s public debt managementdepartment, said inan interview May 7. Anyfinancing shortfalls will bemade up by seeking donorfunds, he said.The Bank of Sierra Leonelowered its key lending rateby 300 basis points to 17percent on April 11, sayingconcern about inflationpressure from prices forimported food and fuel“may be cushioned by therelative stability in the exchangerate.”

Page 2Bank Of Sierra Leone Weekly Event BriefSierra Leone Recovery Sends Yields to Record LowContd..25 TH MAYTHE DEPUTY GOVERNOR OF THE CENTRAL BANK OF GUINEA ONA STUDY TOUR AT THE BANK OF SIERRA LEONEThe Leone is the fifth-bestperformer among Africancurrencies tracked byBloomberg this year, rising0.3 percent against the dollar.It traded at 4,322.58 by4:45 p.m. in Freetown yesterday.Sierra Leone is spending oninfrastructure and luringinvestment from miningcompanies after the 2002end of a civil war that left50,000 people dead anddisplaced 2 million. TheRevolutionary United Frontguerrillas gained notorietyfor amputating the limbs oftheir victims and using childrenas soldiers.African Minerals Inc. andLondon Mining Plc, bothbased in London, beganiron-ore exports in late2011, K plans to boost diamondexports and SierraRutile Inc. (SRX) is increasingoutput of the materialused in paint and ceramics.Oil companies includingMoscow-basedOAO Lukoil have stakes inoffshore blocksThe deficit in Sierra27 TH MAYLeone’s current account,the broadest measure oftrade in goods and services,may narrow to 9.7 percentof gross domestic productthis year from 20.8 percentin 2012, according to theIMF.With Sierra Leone’s improvingcurrent account and“inflation having stabilizedin low double digits, theincentive to keep T-billyields at substantially elevatedlevels has dissipated,”Samir Gadio, anemerging-markets strategistat Standard Bank GroupLtd.’s London unit, said inan e-mailed response toquestions on May 15.Yields on 182-day notesfell to 9.74 percent on May10, down almost 16 percentagepoints since the lastsale of 2012. Debt with 364-day maturities have retreated14 percent to 11.4percent last week. SierraLeone sells bills on Thursdaysand offers 1-year debtat irregular intervals.GOVERNOR SAMBADEEN SESAY ATTENDS THE 48THANNUAL MEETINGS OF THE AFRICAN DEVELOPMENTBANK (AFDB) IN MARRAKECH, MOROCCOThe Governor of the Bank ofSierra Leone, Mr. Sheku SambadeenSesay is attending the48th Annual Meetings of theAfrican Development Bank(AfDB) in Marrakech, Morocco,scheduled to commenceon the 27 th May and end on the31 st May, 2013.Mr. Thomas Boima, Managerat the Research Department isalso attending the Conferenceas part of the Governor’s delegation.Some 2,500 participants areattending the five-day meetingsincluding heads of state,finance ministers, central bankgovernors, and other delegates.The year’s meetings whichwill also involve the AfDB .Cont. on Pg. 3The Deputy Governor of the CentralBank of Guinea has concluded a twoday visit to the Bank of Sierra Leone togain first hand experience on theBank’s implementation of the AfricanDevelopment Bank (AfDB) fundedPayments System Modernization Projectand the Credit Reference Act.Since 2011, the Bank of Sierra Leonehas been implementing the PaymentsSystem Modernization Project in collaborationwith the West AfricanMonetary Institute (WAMI) and allcommercial banks in the country.The study tour of Mr. Abdoulaye YeroBalde, who is also accompanied by Mr.Ibrahima Kalil Magassouba, theBank’s Director General and Head,Payments System, comes in the wakeof WAMI and AfDB’s commendationof the implementation of the Project inSierra Leone, following their just concludedassessment mission to the Bank.Speaking at a meeting with the VisitingDeputy Governor, the Deputy Governorof the Bank of Sierra Leone, Ms.Andrina Coker apprised him of progressmade in the implementation ofthe WAMZ Payments System ModernizationProject. She indicated thatdespite the successes so far, it was notwithout challenges. However, she said,with the support of its partners theBank is now close to the ‘go live’stage. She expressed delight that theCentral Bank of Guinea was on astudy tour at the Bank of Sierra Leoneto avoid similar challenges that mayderail their project’s implementationtime table. She assured the missionthat the tour will contribute significantlyto strengthening bilateral relationsbetween the two central banksand tightens thecommitment ofmutual cooperationthat has providedthe foundationfor the strongties between them.Reacting, Mr.Abdoulaye YeroBalde thanked theDeputy Governorfor the open andfrank discussionsthey had, indicatingthat his Bankhas a tight schedule in the implementationof the project. Therefore, theywant to learn, as quickly as possible,how Sierra Leone, is managing theimplementation so effectively. He alsorequested that the Bank shares its experiencesin the implementation of theCredit Reference Law and the settingup of the Credit Reference Bureau.Mr. Yero Balde also praised the progressthe Bank is making in improvingthe regulatory and supervisory environmentfor commercial banking especiallythe creation of the Credit ReferenceBureau. He said the Central Bankof Guinea was anxious to emulate SierraLeone in this direction. The experiencegained in the tour, he said,would go a long way in helping theCentral Bank of Guinea achieve bothobjectives at a shorter period of time.The West African Monetary Zone(WAMZ) Payments System ModernizationProject will upgrade the paymentssystems in the WAMZ membercountries of Sierra Leone, The Gambia,Guinea and Liberia to the standard ofthose of Ghana and Nigeria. Implementationin The Gambia has reached‘go live’ while Sierra Leone will “golive” in June. Liberia and Guinea willdo so later.