Will the high government spending have an adverse effect on the economy of Sierra Leone?
As per the request of the Ministry of Finance in Sierra Leone, Parliament has recently granted the withdrawal of Le548 billion from the Consolidated Fund of the country. There is a high level of debt within the nation and the government has to borrow funds to regain the balance within the economy. The people are running to the debt consolidation services to bring back a grip on their personal finances and also boost the economy of Sierra Leone in the process. The finance minister has expressed his utmost concern with the way the Sierra Leonean economy is running and he says that this withdrawal is needed in order to meet the expenditure and also execute the services of the Sierra Leonean government.
There is nothing unnatural about the request of the finance Ministry and the unanimous approval by the Parliament but what is significant is the timing of the approval. Just one month ago the International Monetary Fund (IMF) had warned the Sierra Leonean government about the spending that is gradually spiraling out of control. According to the financial advice of the IMF, the government needs better managed discipline on budgetary issues, has to boost their revenue collection, contain their unnecessary expenses and also restrain the usage of direct credit from the central bank to the government.
Financial mistakes that are sending alarm bells to the Sierra Leonean Parliament
Though the Sierra Leonean government is rejoicing about their excellent year ending and about the achievement of the NRA or the National Revenue Authority in collecting revenue, they’re practically using it as an incentive to embark on a spending splurge. Besides this only positive news for the government, the surging debt burden and the growing budget deficit is sending alarm bells into the corridors of the Sierra Leonean Parliament.
The enduring debt level within the country is becoming worrisome for both the government and the consumers of the nation. All this disheartening financial blunders are happening during a time when the economic growth is expected to decrease after its above-average growth of 4% in the previous year (2010). The predominant presence of the government in the financial markets of the country does not seem to be fading away as the government is still selling hundreds of billions of Leone’s of Treasury Bonds.
Another financial mistake committed by the government of Sierra Leone government is taking up new debt to cover up old debt. This is a pretty unsound fiscal policy and is also restraining the ability of the private sector to aggravate the economy. During the last quarter of 2010, the government debt in Sierra Leone was estimated at $800 million and this figure is seen to be mounting with time. Most financial experts have commented that there is an insatiable appetite for borrowing that is recently being noted in the Sierra Leone government. This habit is pressurizing the Bank of Sierra Leone and the financial markets of the country.
The small and big business organizations in the country have witnessed a staggering rise in the interest rates on the loans. The government has pushed up the rate it pays on the Treasury Bonds and had increased it from 11% in August, 2010 to 18% in September and this figure saw a sharp rise in December, 2010 to 25%. The commercial banks are paying an average of 1-2% on the fixed deposit accounts that are made by the savers and the investors. This makes it well-nigh impossible for them to compete with the government in boosting capital.
Eminent persons from the IMF has stressed on the striking importance of fiscal prudence in rejuvenating the already fragile economy of Sierra Leone. Frugality is an unthreaded path that must be taken into account if you want to get out of debt and rebuild your nation’s economy.
By Jack Hudson, USA
Author Bio: “Jack Hudson is a financial writer and he enjoys writing articles on global financial situation, stock market, debt consolidation, debt settlement and mortgages along with other finance related topics. He is also associated with some online financial communities like DebtCC. You can follow us on facebook.“
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