Freetown, June 27, 2024** – The Bank of Sierra Leone (BSL) has announced an increase in the Monetary Policy Rate (MPR) by one percentage point to 24.25%, following the Monetary Policy Committee (MPC) meeting on June 24, 2024.
The decision, led by Governor Dr. Ibrahim L. Stevens, aims to curb inflation and stabilize the nation’s economy in response to recent economic trends.
Globally, economies continue to show resilience, bolstered by stringent monetary policies in both advanced and emerging markets.
The International Monetary Fund’s April 2024 World Economic Outlook projects a global growth rate of 3.2% for 2024 and 2025. Advanced economies are experiencing easing inflation, driven by sustained tight monetary policies and a cooling labor market. However, challenges such as geopolitical tensions and potential crude oil price hikes due to OPEC+ production cuts pose risks to the global economic landscape.
Domestically, Sierra Leone’s real GDP growth is anticipated to recover to 4.0% in 2024, powered by the agriculture, mining, and services sectors.
The BSL’s Composite Index of Economic Activities showed an uptick in economic activity during the first quarter of 2024 compared to the last quarter of 2023. Nonetheless, the country faces vulnerabilities including geopolitical uncertainties and elevated international food and energy prices.
Inflation in Sierra Leone has been on a decline, with headline inflation dropping from 40.69% in March 2024 to 35.84% in May 2024. This decrease is attributed to tight monetary policy, stable exchange rates, increased domestic food production, and lower international food and energy prices. Despite this positive trend, inflation risks remain, driven by potential global commodity price spikes and crude oil production cuts.
The country’s trade deficit widened to $142.4 million in the first quarter of 2024, while gross foreign exchange reserves now cover 2.3 months of imports, down from 2.7 months.
The exchange rate has stabilized, reflecting BSL’s effective policy measures and boosting confidence in the domestic currency.
Sierra Leone’s fiscal policy continues to be tight as the government works on fiscal consolidation. Despite improvements in domestic revenue collection, the overall fiscal balance showed a deficit due to increased debt service payments.
The MPC acknowledges the challenge posed by rising debt service payments but remains hopeful about reducing fiscal deficits through continued exchange rate stability and declining inflation.
Monetary developments indicated a decrease in reserve money and broad money growth in the first quarter of 2024. Credit to the private sector expanded, though it remained concentrated in a few sectors. Liquidity conditions in the money market tightened, evidenced by rising interbank market rates and increasing Treasury bill yields.
The banking sector remains stable, profitable, and adequately capitalized. However, the MPC raised concerns over the high spread between lending and deposit rates, which hampers the effective transmission of monetary policy.
The MPC remains cautiously optimistic about the downward inflation trend but stresses the importance of continued vigilance.
Effective June 26, 2024, the new rates are:
– Monetary Policy Rate (MPR): 24.25%
– Standing Lending Facility Rate (SLFR): 27.25%
– Standing Deposit Facility Rate (SDFR): 17.75%
The Committee will continue to monitor economic developments closely to guide policy decisions and ensure inflation expectations are well-anchored.
The next MPC meeting is scheduled for September 26, 2024.
