Salone foreign reserve estimated at $ 507M
Bank Governor Exonerates APC Government
In the face of declining donor funds, the central bank suspended the foreign exchange auction system in May 2017 to ensure that reserves are adequate, which led us to pulling out of the weekly auction, the Central Bank Governor said.
As a result of that stance, the Bank of Sierra Leone (BSL) was able to build up on its reserves from $ 503.80 million USD as December to $507.79 million USD in March 2018.
Governor Patrick Saidu Conteh, previously, on May 2nd 2018,said,the Central Bank had net foreign exchange reserve enough to cover 3.5 months of imports, which is the shock absorber for the economy should there be a rundown in terms of the reserves. ”We already have import at 3.5 imports per month, which is not too bad. We also desire to pick up four, five, and six per months”.
According to the Governor, this suspension led largely to the stabilization of the exchange rate in 2017, which he said only depreciated at an average of 4.2% throughout 2017moving from Le 7,239 to Le7, 541.6.”So we witnessed a depreciation of the Leone at a rate below 5%”, he said.
He discussed the major challenges on the monetary policy implementation, which was merely tight by the tight liquidity conditions in the inter-bank market to as fiscal dominance.
On Government revenue, he said, is not making up for expenditures. This, he said, gives rise to accumulation of arrears, and this leads government to borrowing and the effect is escalation of debt interest payment. This impact often ends on the desk of the Central Bank if not properly managed.
Commenting on the status of things as they stand in terms of monetary operations at the Central Bank, the economic recovery process which started in 2016, slowed down in 2017, and there were policies then to see how to recover the economy.
In other words, the estimated economic growth in 2016,which was actually estimated at 3.5%.This development was mainly on the account of challenges experienced in a major sector of the economy mainly iron ore in the extractives sector principally operational challenges faced by the key exporter Shandong Mines.
Governor Conteh added that the then government scaled down significantly on infrastructural and capital expenditure. “If last year was 3.5%, what are the prospects for 2018? They are good .As a minimum, we are expected to achieved 2017 level and higher; minimum 6.1% for 2018.That is what we looking forward to and we think that is doable.”
On the aspect of monetary policy and inflation, he reported that inflation pressures remains elevated though moderating. Reflecting in food and non-food inflation parameters, inflation declined consistently from a peak of 20.22% in March 2017 to a level of 14.69% as at January 2018.
“With this sort of inflated elevated levels, the BSL maintained a tight monetary policy stance in 2017, such that we have to increase the monetary policy rate to 14.5%, as at December 2017, from 11% in December 2016.”
This policy, the Governor noted, Saw the persistent decline in domestic prices and supported the stability of the exchange rate .The Central Bank anticipates that Single digit inflation will be achieved in the medium term.
This, they are confident, will in turn complement their effort to preserve the value of the Leone and create the enabling macro-economic environment to boost investment, promote growth and improve job creation.
Mr .Conteh continues that the recent stance by the President’s Executive orders will help ease the pressure that the Financial Secretary applies on the Central Bank.
“They have to sustain this momentum; the issue of fiscal dominance has to be managed. So far the takeoff point by government is very impressive which will substantially address the issue, when fiscal dominance is managed properly we can really function well as a Central Bank.”
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