ECONOMIC BULLETIN yayah

Transcription

GOVERNMENT OF SIERRA LEONE
MINISTRY OF FINANCE
AND ECONOMIC DEVELOPMENT
ECONOMIC BULLETIN
2014 First Half
800
700
US$ million
600
500
400
Jun-13
300
Jun-14
200
100
0
Multilateral
Official Bilateral
Commercial
Creditors
Domestic debt
Volume 20 – Issue 1
Economic Bulletin 2014 First Half
TABLE OF CONTENTS
ACKNOWLEDGEMENTS
1. WORLD ECONOMIC DEVELOPMENTS AND OUTLOOK IN THE FIRST HALF
OF 2014
4
2. OVERVIEW OF DOMESTIC ECONOMIC DEVELOPMENTS AND OUTLOOK
IN THE FIRST HALF OF 2014
5
3. DOMESTIC OUTPUT
3.1 Agriculture
3.2 Mining
3.3 Manufacturing
3.4 Electricity
3.5 Tourism
3.6 Banking
5
5
6
6
7
7
7
4. INFLATION
8
5. CENTRAL GOVERNMENT FISCAL OPERATIONS
5.2 Government Revenue
5.2.1 Domestic Revenue
5.2.2 Grants
5.3 Government Expenditure
5.3.1 Recurrent Expenditure
5.3.2 Capital Expenditure and Net Lending
5.4 Budget Deficit and Financing
10
10
10
10
11
11
12
12
6. MONETARY DEVELOPMENTS
6.1 Trends in Monetary Aggregates
6.2 Interest rates
14
14
16
7. EXTERNAL SECTOR PERFORMANCE
7.1 Exports
7.2 Imports
7.3 Trade Balance
7.7 Gross Foreign Reserves
7.8 Exchange Rates
17
17
18
18
19
19
8. PUBLIC DEBT
8.1 Domestic Debt
8.2 External Debt
8.3 Debt Service Payment
20
20
22
22
9. MACROECONOMIC OUTLOOK IN THE SECOND HALF OF 2014
23
ANNEX 1 - IMPACT OF THE EBOLA OUTBREAK ON THE SIERRA LEONE ECONOMY - A
PRELIMINARY ASSESSMENT AS AT SEPTEMBER 2014
I
ANNEX 2 - SELECTED GLOSSARY
VIII
1
ACKNOWLEDGEMENTS
Economic Bulletin of 2014 First Half was prepared and published by the Economic Policy and Research
Unit (EPRU) of the Ministry of Finance and Economic Development
The EPRU wishes to thank the following institutions for providing data that
facilitated the production of this report:
Bank of Sierra Leone
Ministry of Agriculture, Forestry and Food Security
Ministry of Energy
Ministry of Information and Communication
Ministry of Mines and Mineral Resources
Ministry of Tourism and Cultural Affairs
Ministry of Trade and Industry
Ministry of Transport and Aviation
National Power Authority
National Revenue Authority
National Telecommunications Commission
National Tourist Board
Statistics Sierra Leone
And all of the Departments/Divisions/Units within the Ministry of Finance and
Economic Development
2
3
WORLD ECONOMIC DEVELOPMENTS AND OUTLOOK IN THE FIRST HALF OF 2014
The global economy is recovering, albeit slowly. It is projected to grow from 3.2 percent in 2013 to 3.4 percent in
2014 and further by 4.0 percent in 2015. While economic activities in the advanced economies (USA, Euro Area
and Japan) are picking up, the outlook for several emerging market economies including China, Russia, South
Africa is less optimistic.
In spite of the sluggish growth of the US economy and continued weaknesses in the financial and fiscal sectors
of some European countries, economic growth in advanced economies is projected to pick up from the 1.3
percent in 2013 to 1.8 percent in 2014 and further to 2.4 percent in 2015. The US economy is projected to grow
by 1.7 percent in 2014 and by 3.0 percent in 2015. Growth of the Japanese economy is projected at 1.6 percent in
2014 and will slow down to 1.1 percent in 2015 as the fiscal stimulus is withdrawn. Economic growth in the Euro
area will strengthen to 1.1 percent in 2014 and 1.5 percent in 2015. Growth in the Euro Zone is expected to
strengthen to 1.1 percent in 2014 and 1.5 percent in 2015, but remain uneven across the region, reflecting
continued financial fragmentation, impaired private and public sector balance sheets, and high unemployment
in some economies.
In emerging market and developing economies, growth is now projected to moderate to 4.6 percent in 2014
but will strengthen to 5.2 percent in 2015. Growth in the Chinese economy is slowing as reflected in the weak
performance of the manufacturing sector and slow increase in investment, retail sales and bank credit to the
private sector. As a result, growth in 2014 is project to be 7.4 percent and to moderate further to 7.1 in 2015. In
South Africa, growth is expected to stay sluggish as a result of problems in the electricity sector and the lingering
rigidities in the labour market.
In sub-Sahara Africa, the strong growth performance of recent years looks set to continue, accelerating from
4.9 percent to 5.5 percent underpinned by high levels of infrastructure and mining investments.
Despite this positive outlook of the global economy, down side risks still persist. Firstly, geo-political
developments in the Middle East and Ukraine have increased the likelihood of the hike in oil prices. Secondly,
there is also growing concern in global financial markets that as advanced countries reverse the expansionary
monetary policies, long term interest rates will rise, which could trigger a reversal of capital flows from
emerging market economies to the advanced economies like the US. Thirdly, some of the favourable factors that
have supported growth in Sub-Saharan Africa have started to weaken; in particular commodity prices are
falling. Tighter global financial conditions also raise the cost of financing for many countries in the region.
Should these trends continue, they would likely act as a drag on economic growth for many countries in the
region.
In the Mano River Basin, where the scourge of Ebola is blighting human lives and dampening economic
activities, projections for growth has been marked down considerably. In the case of Guinea and Liberia, growth
forecast have been cut by half and for Sierra Leone economic growth has been revised downwards from the
original projected of 11.3 percent to 8.0 percent. The likely extent of the full impact of Ebola on the region will
depend on how far its spreads and how long it takes to be eradicated.
4
2. OVERVIEW OF DOMESTIC ECONOMIC DEVELOPMENTS AND OUTLOOK IN THE FIRST
HALF OF 2014
Prior to the Ebola outbreak in May 2014, economic activities were buoyant while macroeconomic stability was
being consolidated. The economy was on track in attaining the projected growth rate of 11.3 percent for 2014 as
agriculture, mining, construction, manufacturing, tourism and service sectors continued to expand during the
first half of the year.
Consumer prices continued to decline during the first half of 2014, from 8.2 percent in December 2013 to 6.4
percent in April 2014 (the lowest in several years) before rising slightly to 6.7 percent in June.
Domestic revenue performance during the first half of 2014 was, however, weaker than expected due to the
falling iron ore prices, which resulted in lower iron ore royalties and lower personal income taxes as the mining
companies experienced cash flow difficulties. Total Expenditure and Net Lending was lower than the budgeted
amount. While recurrent and domestic funded capital spending exceeded the respective budgeted amounts,
foreign funded capital expenditures were lower than budgeted. The budget deficit was largely financed by
borrowing from the domestic securities market during the review period.
On a year-on-year basis, broad money grew by 21.5 percent at the end of June 2014. Similarly, reserve money
grew by 25 percent over the same period. Relative to end December 2013, Broad money grew by 6.1 percent as
at end June 2014, while reserve money increased by 12.2 percent. While Commercial bank lending rates
remained sticky downwards, Treasury bill interest rates continued the downward trend observed in 2013.
Exports grew strongly while imports dropped, resulting in an improved trade balance, which recorded a surplus
of US$97.7 million compared to the deficit US$143.3 million in the first half of 2013.
Gross official foreign reserves of the Bank of Sierra Leone increased from US$434.55 to US$ 499.30 between
June 2013 and June 2014, equivalent to three and half months of import cover. The exchange rate between the
Leone and the US dollar (Le/US$) remained generally stable depreciating by 1.1 percent only during the review
period.
Public and publicly guaranteed external debt stood at about US$1,052 million compared to US$1,014 million in
the first half of 2013, representing a year-on-year growth of 3.7 percent. The marginal increase was mainly
driven by disbursements from Multilateral Creditors, with US$92.0 million coming from the African
Development Fund/Bank and US$237.56 million coming from the other creditors.
The outbreak of the Ebola Virus Disease (EVD) in May 2014 and restrictive measures adopted to contain its
spread is disrupting agriculture, artisanal mining, manufacturing, construction, tourism, and transportation
activities, thereby undermining the growth prospects of the economy in the second half of the year. It also poses
a significant threat to macroeconomic stability and human development. It is likely to reverse the gains made in
poverty reduction in recent years, if the spread of the disease is not contained in the shortest time possible.
3. DOMESTIC OUTPUT
3.1 Agriculture
The January – June period of each year is the climatic season for planting and cultivation of most agricultural
products including rice in Sierra Leone. Efforts were made to prop up agricultural productivity and food
security by ramping up investments in the following areas: a) Inland Valley Swamp (IVS) rehabilitation; b) tree
crop rehabilitation and cultivation; c) distribution of farming inputs; d) provision of extension services to live
stock; e) feeder roads construction and rehabilitation; f) attempts to transform the existing Agriculture Business
Centres (ABCs); and g) sustaining the activities of the Financial Services Association (FSAs).
According to data provided by the Ministry of Agriculture, Forestry and Food Security (MAFFS), 40 FarmerBased Organizations (FBOs) were provided extension services, including planting materials. A total of 500
5
hectares of IVSs were rehabilitated; of which, 400 hectares covering project areas in the districts of Kailahun,
Kenema, Koinadugu and Kono, and 100 hectares in other parts of the country. Water control measures were
introduced in the IVSs to enable year-round availability of water for farming. Seed rice and fertilizers were also
provided for the rehabilitated IVSs. However, the Ebola outbreak in May 2014 poses a major challenge as
affected farmers would be tempted to consume the seed rice as food at a time of declining food supplies. .
The MAFFS reported that tree crop cultivation was carried out country-wide with emphasis on the provision of
seedlings to plantations. Oil palm seedlings were provided for 1,000 hectares of farmland, 4,750 hectares for
cocoa farmland, 675 hectares for coffee farmland, and 300 hectares for cashew nuts plantations. Wide-ranging
vaccination was administered on livestock husbandry. The vaccinations given out covered 151,610 backyard
poultry chicks; 49,850 for small ruminants; and 49,018 for cattle, goat and sheep. An estimated 407 kilometres
of feeder roads were constructed and rehabilitated nationwide during the first half of 2014.
The MAFFS also embarked on an ambitious project of transforming the ABCs into viable commercial entities
which had hitherto suffered from administrative and technical difficulties. The move was, however, put on hold
in order to rationalize the interventions in tune with both government and donor expectations.
These interventions were expected to increase agricultural output in 2014 but the outbreak of the Ebola Virus
Disease and measures adopted to stem the spread of the disease and the associated abandonment of farms and
plantations will undermine the full implementation of the farming cycle and hence agricultural output.
3.2 Mining
The mineral outputs, except diamond and gold, recorded an increase in the first half of 2014. Relative to the first
half of 2013, rutile production increased by 7.9 percent, bauxite by 97.6 percent, iron ore by 823.9 percent,
ilmenite by 2.1 percent. The expansion in production capacity and improved mining technology in the bauxite
and iron ore mines was largely responsible for this strong performance.
Source: National Mineral Agency and Bank of Sierra Leone
3.3 Manufacturing
Performance in the manufacturing sector was mixed during the first half of 2014 compared to the first half of
2013.While the output of beer and stout, Maltina, cement, confectionery, acetylene and oxygen increased the
output of soft drinks and paint declined. The production of beer and stout increased by 12.3 percent, Maltina by
11.2 percent, cement by 9.4 percent, confectionery by 6.7 percent, acetylene by 39.7 percent, oxygen by 24.5
percent and common soap by 17.2 percent. The increase in cement production was a reflection of the increased
demand from the expanding construction industry. However, the output of soft drinks produced by the Sierra
Leone Bottling Company fell by 29.3 percent, which may be attributed to competition from both locally
produced and imported soft drinks. Similarly, the production of paint by Rainbow Paints Ltd fell by 20.7
percent mainly due to competition from imported brands of paint.
6
Source: Bank of Sierra Leone
3.4 Electricity
Electricity generated by Bumbuna and other thermal generators operated by the National Power Authority
increased by 6.2 percent, from 76.4 GW/H in the first half of 2013 to 81.4 GW/H in the first half of 2014. Due to
station usage and the high technical losses from the dilapidated transmission and distribution lines, only 63.4
GW/H was available for commercial entities, government institutions, and private households. Total value of
the power sold amounted to Le 68.4 billion; of which industry bought Le24.0 billion, Government bought
Le16.4 billion and households consumed Le 28.0billion.
3.5 Tourism
The Ministry of Tourism and Culture, in close collaboration with the National Tourist Board, recently
developed a Tourism Master Plan, which aims to identify, develop, and upgrade all potential tourist
destinations and to improve the necessary ancillary infrastructure.
According to data from the National Tourism Board, the number of tourist arrivals at the Lungi International
Airport fell by 21 percent, from 41,820 in the first half of 2013 to 32,944 in the first half of 2014. The fall was
particular pronounced for business and Conference visitors, which fell by 3,492 and 2,210 respectively.
Europeans still account for the majority of incoming tourists, followed by those from America (7,215),
ECOWAS countries (5,094), Non-ECOWAS African countries (3,588) and Asia (3,051). Revenue generated
by the sector and other tourist related activities fell by 21 percent, from approximately $30.2million in the first
half of 2013 to $23.6 in the first half of 2014. The outbreak of the Ebola Virus Disease in neighbouring Guinea
and Liberia and the likelihood of spilling over into Sierra Leone might have scared visitors away.
3.6 Banking
FBN bank, a Nigerian commercial bank acquired the International commercial bank with Malaysian owners,
bringing the total number of Nigerian owned commercial banks operating in the country to nine (9), accounting
for about 70 percent of the banks in the economy. The number of commercial banks and bank branches
remained at 13 and 96 respectively. Two foreign exchange bureaus and one credit-only microfinance institution
were registered. Restrictions on foreign currency transactions in commercial banks introduced by the central
bank in late 2013 were rescinded by mid-2014.
The domestic assets of the commercial banking system, which comprise reserves, credit to Government and
credit to the private sector, increased during the first half of 2014 relative to the corresponding period in 2013.
7
Reserves, which consist of currency issued and commercial banks deposit with the Central Bank of Sierra
Leone grew by 22.6 percent in the reporting period from Le 335.3 billion in the first half of 2013 to Le 411.2
billion in the first half of 2014.
Credit to the Government in the form of Government securities mainly treasury bills bought by the commercial
banks during the weekly auctions amounted to Le 1,435 billion in the first half of 2014 from Le 925.5 billion in
the same period in 2013. Credit to the private sector by the commercial banks increased by 3.3 percent, from Le
971.7 billion in the first half of 2013 to Le1.004 trillion in the first half of 2014.
Due to the high levels of non-performing loans on commercial bank balance sheets, weak Information and
Communications Technology (ICT) infrastructure, unreliable electricity supply from the national grid causing
high generator running costs, and weak credit assessment capacity on the part of commercial banks, bank
lending rate remained prohibitively high even though the BSL continue to adjust the Monetary Policy Rate
(MPR) downwards. Non-performing loans soar to 35.7 percent of the loan portfolio of the commercial banking
system in the first half of 2014, from 18.93 percent during the same period in 2013
4. INFLATION
Consumer prices continued to decline during the first quarter of 2014, falling from 8.2 percent in December
2013 to 6.4 percent in April, the lowest recorded in a decade. Inflation subsequently took an upward trend in
May rising to 6.7 percent in June 2014. The end June 2014 inflation was, however, lower than the inflation of
10.8 percent recorded in June 2013.
The fall in inflation during January to April was driven largely by slowdown in food prices due to an increase in
the domestic production of food crops. The increase in demand for goods and services in anticipation of the
Ramadan put upward pressure on consumer prices in May and June. The depreciation of the exchange rate and
Ebola-related as price spikes in epicentres also contributed to the general increase in the prices of basic goods
and services during these two months.
Correspondingly, several components of the Consumer Price Index (CPI) manifested similar trends during the
first half of the 2014. Inflation for food and non-alcoholic beverages rose to 7.0 percent in June following a
decline to 5.1 percent in April 2014. Inflation for housing, water, electricity, gas and other fuels increased to 9.1
percent in June after declining to 7.9 percent in April 2014.
Figure 4-1 Inflation for Selected Items in the CPI Basket
11.00
10.00
Inflation (Year-on-Year)
9.00
8.00
All Items
Index
7.00
6.00
5.00
Jun-14
May-14
Apr-14
Mar-14
Feb-14
Jan-14
Dec-13
4.00
Source: Statistics Sierra Leone
The individual prices of several basic commodities increased during the first half of the year. The price of local
rice increased by 4.3 percent; imported rice by 3.2 percent; fish by 16.3 percent; cassava by 15.8 percent; while
sugar price remained unchanged during the period between December 2013 and June 2014.
8
Table 4-1 Domestic Inflation for Selected Items in the CPI
Item
Food and Non-Alcoholic Beverages
Alcoholic Beverages, Tobacco and Narcotics
Housing, Water, Electricity, Gas and Other Fuels
Transport
Clothing and Footwear
Health
Education
Overall Inflation
Dec-12
13.7
14.1
7.6
3.4
22.1
9.66
0.1
11.4
Dec-13
7.6
11.6
9.8
7.5
11.7
8.1
0.9
8.2
Jun-14
7.0
8.6
9.1
4.5
8.8
3.6
1.7
6.7
Source: Statistics Sierra Leone
The prices internationally traded commodities showed mixed trends. The price of rice fell by 21.1 percent in the
first half of 2014 relative to the average 2013 price. The price of sugar increased by 2.8 percent while that of fish
increased by 1.5 percent. Iron ore price decreased by 24.2 percent on the international market while there is a
marginal increase in crude oil price.
Table 4-2 Selected International Commodity Prices, 2012 – 2014 H1
Item
Rice
Palm Oil
Fish
Sugar (Free market)
Coffee (Robusta)
Cocoa Beans
Rubber
Iron Ore
Crude Oil (UK Brent)
Unit
US$/Metric Ton
US$/Metric Ton
US$/Kg
US cents/Lbs
US cents/Lbs
US$/Metric Ton
US$/Lbs
US$/Metric Tons
US$/Barrel
2012
580.2
939.8
4.8
21.4
110.6
2377.1
153.2
128.5
112.0
Source: IMF
9
2013
518.8
764.2
6.8
17.7
100.5
2439.1
126.8
135.4
108.8
2014 H1
409.4
794.7
6.9
18.2
107.9
3085
96.1
102.6
109.8
5. CENTRAL GOVERNMENT FISCAL OPERATIONS
The major objective of fiscal policy in 2014 was to support the implementation of the Agenda for Prosperity
within the context of enhanced domestic revenue collection and prudent expenditure management.
5.2 Government Revenue
Total Government revenue (including domestic revenue collected and grants received from development
partners) amounted to Le1.48 trillion compared to the target of 1.62 trillion. The shortfall of Le140 billion, was
accounted for by lower-than-projected internally generated revenues and external grants.
5.2.1 Domestic Revenue
Domestic revenue performance during the first half of 2014 was weaker than expected. Total domestic revenues
collected during the period amounted to Le 1.17 trillion (5.7 percent of GDP), which was Le75.5 billion below
the programme target.
All the revenue streams recorded shortfalls in collection during the review period. Income taxes amounted to Le
464.8 billion, registering a shortfall of Le 19.5 billion as the over-performance of Le 7.3 billion in corporate
profit taxes was insufficient to offset the Le 24.9 billion shortfall in personal income taxes. Cash flow
difficulties experienced by mining companies due to the sharp fall in iron prices resulted in delays in the
payment of personal income taxes. Goods and Services Tax (GST) amounted to Le 236.4 billion; slightly below
the target as the under-performance in Domestic GST was largely offset by the good performance in Import
GST. Customs and excise duties amounted to Le240.9 billion and were below the target by Le 24.4 billion due to
shortfalls in import duties, excise duties on petroleum products and excise duty on domestic manufactured
goods. Mining royalties and licences amounted to Le117.8 billion and fell short of the target by Le34.1 billion
reflecting the shortfall in royalties on iron ore, diamond, and gold as well as mining licenses. The shortfall in
iron ore royalties was due to the drop in international iron ore prices whilst for diamonds, it was due to lower
than anticipated export levels. Royalties on rutile and bauxite exceeded their respective targets. Mining
Licenses were Le8.7 billion below target. Revenues from other Government Ministries, Departments and
Agencies amounted to Le66.0 billion, exceeding the target by Le5.5 billion good performance of fisheries
licenses and royalties more than compensate for the weak performance in the non-tax revenues collected by
other MDAs. Road User Charges and Vehicles Licences were broadly on target at Le44.7 billion.
5.2.2 Grants
Total grants received during the first half of 2014 amounted to Le309.4 billion and was Le64.5 billion below the
amount expected mainly because the delays in the disbursement of budget support and project grants by our
development partners during the review period. Programme grants amounted to Le158.3 billion, of which,
budget support disbursed by the United Kingdom Department for International Development (UK-DfID) and
the World Bank was Le153.3 billion. HIPC Debt Relief Assistance amounted to Le5.0 billion. The African
Development Bank did not disburse budget support in the first half of 2014. Project grants disbursed during the
review period amounted to Le 50.0 billion, which was Le43 billion below the amount expected.
10
Table 5-1 Government Revenues and Grants, 2014 First Half (Le, million)
FY2014-H1
(Revised
Budget)
Total Revenue and Grants
1,620,709
Domestic Revenue
1,246,840
Income Tax Department
484,323
Corporate Tax
135,256
Personal Income Tax - incl. Govt PAYE
343,846
Other Taxes
5,221
Goods and Services Tax
239,733
Import GST
152,001
Domestic GST
87,732
Customs and Excise Department
265,285
Import Duties
141,586
Excise Duties on Petroleum Products
109,669
Other Excise Duties
13,033
Other Revenue - incl. Freight Levy
997
Mines Department
151,963
Royalty on Rutile
1,487
Royalty on Bauxite
2,058
Royalties on Diamond and Gold
28,315
Royalty on Iron Ore
91,669
Licences
28,434
Other Departments
61,163
Royalties etc. on Fisheries
7,574
Parastatals
2,402
Other Revenues
51,187
Road User Charges & Vehicle Licences
44,373
Grants
373,869
Programme
179,565
o/w Debt Relief Assistance
o/w External Donors Budgetary Support
179,565
Project - Other Projects
194,304
PARTICULARS
FY2014-H1
(Actual)
FY2014-H1
(Variance)
1,480,739
1,171,323
464,775
142,600
318,952
3,223
236,412
137,010
99,402
240,887
126,908
104,533
8,446
1,000
117,842
1,744
4,228
18,835
72,977
20,057
66,689
18,521
48,167
44,718
309,415
158,322
5,033
153,289
151,094
(139,970)
(75,517)
(19,548)
7,344
(24,894)
(1,999)
(3,321)
(14,991)
11,670
(24,398)
(14,678)
(5,136)
(4,587)
3
(34,121)
257
2,170
(9,480)
(18,692)
(8,377)
5,526
10,947
(2,402)
(3,020)
345
(64,453)
(21,243)
5,033
(26,276)
(43,210)
Source: Budget Bureau, Ministry of Finance
5.3 Government Expenditure
Total expenditures and Lending minus Repayments amounted to Le2.055 trillion in the first half of the year
slightly above the budgeted amount of Le2.048 trillion
5.3.1 Recurrent Expenditure
Recurrent expenditure exceeded the budgeted amount by Le42.4 billion due to overruns in wages and salaries
(Le20.3 billion) and non-salary, non-interest recurrent expenditure (Le26.4 billion). The overrun in the
Government wage bill was due to new recruitments to fill technical skills in the civil service. Unprogrammed
Ebola-related expenditure, higher-than-budgeted transfers to local councils, grants to tertiary educational
institutions and defence expenditures contributed to the higher than budgeted non-salary, non-interest recurrent
spending. Ebola-related expenditure amounted to Le9.9 billion during the review period. Interest payments were
lower than budgeted mainly due to lower interest payments on domestic debt as domestic interest rates continued
to plunge.
11
Table 5-2 Government Expenditures, 2014 First Half (Le, million)
PARTICULARS
Total Expenditure and Lending minus Repayments
Recurrent Expenditure
Wages & Salaries
o/w: Pensions, Gratuities and Other Allowances
o/w: Contributions to Social Security
Non-Salary, Non-Interest Recurrent Expenditure
Goods and Services
o/w Social and Economic
o/w WB Emergency Energy Programme
General and Others
o/w National Revenue Authority
o/w Statistics - Sierra Leone
Defence Expenditure
Police
Prisons
Transfers to Local Councils
Grants for Admin. Expenses
Grants for Devolved Functions
Grants to Educational Institutions
Transfer to Road Maintenance Fund
Elections and Democratisation
Domestic contribution
National Electoral Commission
Total interest payments
Domestic Interest
Foreign Interest
Capital Expenditure and Net Lending
Capital Expenditure
Foreign Loans and Grants
Loans
Grants
Domestic
Lending minus Repayment
FY2014-H1
(Revised
Budget)
2,048,876
1,241,863
687,148
34,568
72,146
434,898
283,521
103,352
(3,881)
95,705
30,663
3,616
39,501
33,138
11,825
32,861
1,601
31,260
66,159
44,373
7,984
7,984
7,984
119,817
101,884
17,933
807,013
807,013
485,806
291,502
194,304
321,207
-
FY2014-H1
(Actual)
FY2014-H1
(Variance)
2,055,201
1,284,256
707,458
36,004
51,062
461,337
304,815
82,121
(3,881)
121,716
32,583
3,616
56,179
33,609
11,190
37,507
5,779
31,729
67,313
44,718
6,984
6,984
6,984
115,460
96,915
18,545
770,945
701,889
372,840
221,746
151,094
329,049
69,056
(6,325)
(42,392)
(20,310)
(1,437)
21,083
(26,439)
(21,294)
21,231
(26,011)
(1,920)
(0)
(16,678)
(471)
635
(4,646)
(4,177)
(469)
(1,154)
(345)
1,000
1,000
1,000
4,357
4,969
(612)
36,068
105,124
112,966
69,756
43,210
(7,842)
(69,056)
5.3.2 Capital Expenditure and Net Lending
Capital expenditures and net lending amounted to Le770.9 billion falling short of the budgeted amount
by Le36.1 billion. Foreign funded capital expenditure was Le112.9 billion below the expected amount due to
lower disbursements of loans and grants by development partners in line with the slow pace of project
implementation. Domestic funded capital expenditures amounted to Le329.0 billion, exceeding the budgeted
amount by Le7.8 billion. Net lending amounted to Le69.1 billion, reflecting the reimbursement of funds to the
Petroleum Directorate and the Environmental Protection Agency-Sierra Leone (EPA-SL).
5.4 Budget Deficit and Financing
The overall fiscal deficit, excluding grants, for the first half of 2014 amounted to Le883.9 billion. Including
grants, the deficit amounted to Le574.5 billion. The actual financing requirement for the period amounted to
Le610.5 billion. Net Foreign financing amounted to Le175.7 billion comprising disbursed project and
programme loans of Le221.7 billion less principal repayments of Le46.0 billion. Domestic financing amounted
to Le233.6 billion. This comprised amount borrowed from the domestic banking system amounting to Le299.4
billion, of which, Le82.6 billion was borrowed from the Bank of Sierra Leone through Ways and Means and
Le216.7 billion from the commercial banks through the sale of Government securities. Rather than borrowing,
Government, repaid the domestic debt held by the non-bank financial institutions amounting to Le65.5 billion
as these institutions unexpectedly disinvest from Government securities. Receipts from the privatization of the
12
Ports amounting to Le13.4 billion were also used to finance the deficit.
Table 5.3: Deficit Financing, 2014 First Half (Le, million)
PARTICULARS
Total Financing
Foreign
Borrowing (Loans)
Project
Programme
o/w World Bank - $' m
o/w IMF - $' m
External Debt Amortisation
Debt Relief
Domestic Financing
Bank
Central Bank
IMF SDR on-lending
Ways and Means Advances
MDRI Related Deposits
Commercial Banks
Non-Bank
Privatisation and Other Receipts
Float
o/w: Cheques payable
Change in Outstanding Arrears
Cheques from 2011/12/13 paid in 2012/13/14
Cheques on Hold at BSL and AGD at end of period
Cheques Payable from 2012 cleared in 2013
Unaccounted
Financing Gap
13
FY2014-H1
(Revised
Budget)
452,582
248,890
291,502
291,502
(42,612)
205,806
183,856
104,130
104,130
79,726
21,950
9,101
(11,215)
(11,214)
(1)
-
FY2014H1
(Commit)
610,539
175,729
221,746
221,746
(46,017)
233,611
299,383
82,646
82,646
216,737
(65,772)
13,402
187,796
37,652
(11,214)
161,648
(290)
-
FY2014H1
(Variance)
157,957
(73,161)
(69,756)
(69,756)
(3,405)
27,805
115,527
(21,484)
(21,484)
137,011
(87,722)
4,301
199,011
37,652
161,648
(289)
-
6. MONETARY DEVELOPMENTS
6.1 Trends in Monetary Aggregates
The key objective of monetary policy during the first half of the year remained the maintenance of price
stability. To this end, the Bank of Sierra Leone continued to use Open Market Operations (OMO) as the main
instrument of monetary policy, implemented through Repurchase Agreements (Repo/Reverse Repo). The BSL
also implemented weekly foreign exchange auctions to complement open market operations in mopping up
excess liquidity in the system, thereby taming inflationary pressures.
Based on developments in the economy, the monetary policy rate, which signals the monetary policy stance of
the Bank of Sierra Leone, remained unchanged during the first half of the year.
On a year-on-year basis, monetary aggregates expanded strongly. Reserve money grew by 25 percent over the
12-month period mainly due to the 51 percent increase credit to Government by the Bank of Sierra Leone
combined with the 19.4 percent increase in Net Foreign Assets of the Bank of Sierra Leone. Similarly, broad
money grew by 21.5 percent at end June 2014 over the same period. The strong growth in broad money was
driven by increase in both net foreign assets of the banking system (17 percent) and domestic credit to
Government (54 percent). Government borrowing from the Bank of Sierra Leone increased by 50 percent and
from the commercial banks by 57.3 percent. Commercial bank credit to the private sector increased by 3.3
percent over the 12 month period. Relative to December 2013, the rate of expansion in monetary aggregates was
moderate. Reserve money grew by 12.2 percent, driven mainly by the 33.2 percent increase in credit to
Government by the Bank of Sierra Leone. Net foreign assets of the BSL increased slightly by 4.3 percent. Broad
money grew by 6.1 percent as at end June 2014. The growth of broad money was driven largely by the increase
in domestic credit to Government by both the Bank of Sierra Leone and the commercial banking system.
Government borrowing from the Bank of Sierra Leone increased by 33 percent and from the commercial banks t
by 17.8 percent during the first six months of 2014.
Growth in Net Foreign Assets was marginal during the period. Net Foreign Assets of the banking system grew
by 1.6 percent as the 8.3 percent increase in Net Foreign Assets of the BSL percent was partly offset by the 6.4
percent decrease in Net Foreign Assets of commercial banking system.
Credit to the private sector grew by 1.5 percent to Le 1.3 trillion over the same period. Of the total credit to the
private sector, 6.6 percent went to agriculture, forestry and fishing; 2.5 percent to mining and quarrying; 6.7
percent to manufacturing; 16.8 percent to construction; 22 percent to import and export trade; and 10.4 percent
to transport, storage and communications.
Components of money supply: Relative to December 2013, currency outside banks increased marginally by
1.3 percent. Total deposits of the banking system, including foreign currency increased by 7.1 percent to Le3.7
trillion during the first half of 2014. Demand deposits, which accounted for 27.2 percent of total deposits grew
by 30.5 percent, time deposit accounted for 8.6 percent and grew by 7.4 percent while savings deposit l, with a
share of 27.5 percent increased by only 1.0 percent. Foreign currency deposits, accounted for 27.5 percent of the
total, fell by 6.3 percent, owing perhaps to the controls on foreign currency deposits introduced by the Bank of
Sierra Leone in early 2014. The money multiplier remained relatively stable at 3.3 by June 2014.
14
Table 6-1 Monetary Aggregates
June 2013
December
2013
June 2014
Change (%)
between Dec
13 and Jun 14
1,072,341
1,197,935
1,343,812
12.18
3,688,330
4,224,009
4,482,457
6.12
2,773,169
3,139,532
3,466,138
10.40
1,402,437
1,552,616
1,792,142
15.43
Currency in Circulation
688,334
776,405
786,268
1.27
Demand Deposits
714,103
776,212
1,005,874
29.59
2,285,893
2,671,393
2,690,315
0.71
Foreign Currency Deposits
915,161
1,084,478
1,016,319
(6.28)
Time Deposits
308,400
296,001
317,868
7.39
Savings Deposits
693,147
784,171
776,317
(1.00)
Other Deposits
367,207
504,769
577,858
14.48
Net Foreign Assets
2,482,145
2,863,114
2,908,710
1.59
1,360,420
1,557,377
1,624,400
4.30
Assets
1,859,294
2,084,751
2,229,454
6.94
Liabilities
-498,874
-527,375
-542,359
2.84
1,121,725
1,305,737
1,221,615
(6.44)
1,139,499
1,320,984
1,234,303
(6.56)
-17,775
-15,247
-12,688
(16.78)
Domestic Credit
2,585,266
2,927,847
3,318,039
13.33
Claims on Central Govt. Net
1,333,600
1,681,503
2,055,175
22.22
BSL
408,711
463,104
616,906
33.21
Commercial Banks
924,890
1,218,399
1,435,136
17.79
Claims on Non Financial Public
Sector
214,923
200,060
361,114
80.50
Claims on Private Sector
987,877
1,001,358
1,020,849
1.95
971,653
988,548
Claims on Non-Banking Inst.
43,862
39,963
45,624
14.17
Claims on Other Banking
Institutions
5,004
4,962
4,962
-
-119,283
-30,674
73,222
Reserve Money
Broad Money (incl Foreign
Currency)
Broad Money (excl Foreign
currency)
Narrow Money
Quasi Money
Bank of Sierra Leone
Commercial Banks
Assets
Liabilities
of which:
of which
Commercial Banks
Other Items (Net)**
15
Figure 6-1 Trends in Monetary Aggregates
35.00
30.00
25.00
20.00
15.00
10.00
jun-14
May-14
Apr-14
Mar-14
Feb-14
Jan-14
Dec-13
Nov-13
Oct-13
Sep-13
Aug-13
Jul-13
Jun-13
May-13
Apr-13
Mar-13
Feb-13
Jan-13
Dec-12
5.00
Reserve Money
Broad Money
6.2 Interest rates
In general, domestic interest rates continued the downward trend observed in 2013 into the first half of the 2014.
The commercial bank savings rate continued to decline, reaching 3.98 percent in June 2014, from 4.73 percent
in December 2013. The 91 day Treasury bill rate plummeted to 1.66 percent in June 2014 from 3.39 percent in
December 2013. Despite these developments, the commercial bank lending rate remained unchanged at 19.525.3 percent; hence the spread between the lending and savings rates remained wide, which continues to
constrain the growth of bank credit to the private sector. The monetary policy rate remained unchanged at 10
percent since end December 2013.
Figure 6-2 Trends in Selected Domestic Interest Rates
Interest Rates(%)
7
Commercial Banks Savings
(Effective)
6
5
4
Treasury Bills 3 Months
(Effective Yield) Average
3
2
1
16
Jun-14
May-14
Apr-14
Mar-14
Feb-14
Jan-14
Dec-13
Nov-13
Oct-13
Sep-13
Aug-13
Jul-13
0
Treasury Bearer Bonds
(Effective Yield)
7. EXTERNAL SECTOR PERFORMANCE
7.1 Exports
Domestic exports (f.o.b) increased by 13.6 percent to $967.7 million in the first half of 2014 from $851.5 million
in the same period in 2013. 4. Mineral exports constituted 90.4 percent of total exports in the review period. The
value of iron ore exports amounted to US$505.4 million, 16.6 percent higher than the value of exports in the
corresponding period in 2013. This was mainly due to the increase in the volume of production which more than
offset the fall in iron ore prices during the period under review. Diamond exports were slightly higher at
US$105.9 million in the first half of 2014 compared to US$102.2 million in the same period in 2013. Bauxite
exports more than doubled to about US$17 million in the first half of 2014 from US$7.4 million in the first half
of 2013 owing to an increase in the volume of production. The value of Ilmenite exports, a by-product of Rutile,
increased by 49.9 percent to US$4.4 million from US$2.9 million over the same period.
However, the export values of other minerals dropped during the review period mainly due to decrease in
production. Compared to the first half of 2013, Gold and Rutile exports dropped by 46 percent and 25 percent,
respectively. The export value of Zircon, another by-product of Rutile dropped from US$0.7 million in the first
half of 2013 to US$0.2 million in the first half of 2014.
Figure 7-1 Growth of Selected Merchandise Exports, January 2013 and 2014
100.00
90.00
80.00
70.00
%
60.00
50.00
40.00
30.00
20.00
10.00
0.00
Agric
Diamonds
Iron Ore
Other
Minerals
Re-exports
Others
Agricultural exports, mainly cocoa, nearly doubled to US$7 million in the first half of 2014 compared to US$3.7
million in the corresponding period in 2013. The value of re-exports increased to $30.8 million from $21.7
million over the same period. Export values for fish and shrimps dropped by 83.4 percent to US$47.9 thousand
in the first half of 2014 from US$289.5 in the same period in 2013. The value of other export items increased
significantly by 72 percent, from $31.7 million to $54.7 million over the same period.
17
Figure 7-2 Composition of Merchandise Exports
1%
3%
12%
11%
Agric
Diamonds
Iron Ore
20%
Other Minerals
Re-exports
Others
53%
The composition of exports still demonstrates the dependency on mining activities, with mining exports
contributing to over 84 percent of the entire exports.
There have been new private investments in cash crop production including palm oil, rubber and sugar cane.
There are therefore prospects for growth in the agricultural exports in the medium term.
7.2 Imports
The value of total imports (f.o.b.) dropped by 12.5 percent from US$994.8 million in the first half of 2013 to
US$870 million in the first half of 2014, reflecting the drop in the importation of machinery and transport
equipment; food and manufactured goods during the period. The importation of machinery and transport
equipment continued to drop following the completion of the investment phase of iron ore mining companies.
Machinery and transport equipment imports were 23 percent lower compared to the US$216.5 million observed
in the first half of 2013. Food imports were also slightly lower at US$196.8 million in the first half of 2014
compared to US$213.4 million in the same period in 2013. Similarly, imports of manufactured goods were also
slightly lower at US$67.7 million compared to $71.6 million in first half of 2013. The value of other imports fell
by 67 percent to US$65 million during the review period relative to US$201 recorded in the first half of 2013.
The value of crude materials and petroleum products increased by 45 percent to US$270.7 million in the first
half of 2014 relative to the corresponding period in 2013. This reflects the expansion in mining and construction
activities during the period
7.3 Trade Balance
The increase in the value of exports combined with the decrease in the value of imports improved the trade
balance position. A trade surplus of US$97.7 million is recorded in the first half of 2014 compared to the deficit
of US$143.3 million in the first half of 2013.
18
Figure 7-3 Aggregate Exports, Imports, and Trade Balance (Billions, US$)
1,200,000.0
1,000,000.0
800,000.0
600,000.0
Imports
400,000.0
Exports
Trade Bal
200,000.0
-
FH2013
FH2014
-200,000.0
-400,000.0
7.7 Gross Foreign Reserves
Gross official foreign reserves of the Bank of Sierra Leone increased from US$434.55 in June 2013 to US$
499.30 in June 2014. This is equivalent to three and half months of imports. Mining royalties and taxes, budget
support, and balance of payments disbursements contributed to the increase in foreign reserves during the
period.
Figure 7-4 Gross Foreign Reserves, Q1 2013 – Q2 2014
520
500
$(Mil)
480
460
440
420
400
380
Q1-13
Q2-13
Q3-13
Q4-13
Q1-14
Q2-14
Source: IMF
7.8 Exchange Rates
The exchange rate between the Leone and the US dollar (Le/US$) remained generally stable during the period,
depreciating by 1.1 percent from Le4330.22 in June 2013 to Le4377.62 in June 2014. The increase in export
earnings, FDI inflows and official development assistance combined with prudent monetary and exchange rate
policies contributed to the stability of the exchange rate.
19
8. PUBLIC DEBT
The stock of total public debt was estimated at US$1.55 billion in June 2014 compared to US$1.4 billion in June
2013, representing a 7.0 percent increase. Of this amount, external and domestic debt amounted for US$1.05
billion and US$0.50 billion, respectively.
Figure 8-1 Share of Total Public Debt, June 2014
32%
external
domestic
68%
Source: PDMD, Ministry of Finance and Economic Development
8.1 Domestic Debt
Total stock of domestic debt amounted to Le2.18 trillion or 32.7 percent of the total stock of public debt as at end
June 2014. Compared to the first half of 2013 (debt stock of Le1.82 trillion), this represents a 19.7 percent
increase in domestic debt outstanding.
The domestic debt portfolio comprises marketable securities, non-marketable debt instruments and arrears
owed to domestic suppliers of goods and services. The marketable securities are short-term, with maturities of
one year or less. Non-marketable debt is mainly held by the Bank of Sierra Leone and includes medium term
bonds with maturities of 2 years, 3 years, 5 years, and 10 years issued by the Government of Sierra Leone to
capitalise the Central Bank and address the impairment of its capital. Ways and Means Advances to Government
also form part of the non-marketable debt held by the BSL. Domestic arrears include debts owed to suppliers
8-2 Structure
andoutstanding
Compositionemoluments
of Domesticowed
Debt to ex-diplomats during the
and parastatals as well asFigure
wage arrears
and other
1990s to date.
Domestic Debt
Marketable Securities
91 -day Tbills
182-day Tbills
364-day Tbills
1yr Tbond
Non-Marketable Domestic
Debt
Ways and Means Advances
3yr Converted Bond
Arrears
Suppliers
5yr Recapitalisation Bond
10 year Recapitalisation Bond
Ex-Diplomat
Parastals
Domestic Debt by Instrument: marketable securities, which include 91-day, 182-day, 364-day and 2 years
bonds (held by NASSIT) accounted for 76 percent of domestic debt as at end June 2014 and slightly higher than
the 71 percent share held in June 2013. Of the non-marketable securities, the 5-yr recapitalisation bond
accounted for 54.5 percent with the rest shared among the medium-long term bond issued to recapitalise the
20
Bank of Sierra Leone. These include 3-yr BSL bond issued in 2014 (16 percent), 3-yr BSL bond issued in 2010
8-3 Government
Securities
(15 percent), and the 10-yr BSLFigure
bond issued
in 2014 (14.5
percent).by Instruments
1800000
1600000
Leones, million
1400000
1200000
1000000
2013
800000
2014
600000
400000
200000
0
Marketable Securities
Non-Marketable
Domestic arrears
Source: Public Debt Management Division, Ministry of Finance and Economic Development
Out of the Le2.1 trillion of treasury securities issued by government in the first half of 2014, 45 percent was in
the form of the 1 year treasury bills, which amounted to Le,986.9 billion. This represents a 42 percent increase
from the Le694.62 billion issued in the same period in 2013. An amount of Le453.7 billion (20 percent) was
issued in the form of 182-days treasury bills, Le40.5 billion in the form of a 2-year bond held by NASSIT and the
5-year recap bond issued to the Bank of Sierra Leone.
Domestic Debt by Holder: In June 2014, commercial banks continued to hold the largest share of Government
securities accounting for 64 percent followed by the Bank of Sierra Leone 24 percent. Compared to the same
period in 2013, holding of government securities by commercial banks decreased by 9 percent, while holdings
Figure 8-4
Domestic
Debt,
June 2014
by the Bank of Sierra Leone increased
byOwnership
23 percent.of
The
non-bank
financial
institutions and the general public
held 11 percent of Government securities, out which of which, 2 percent was accounted for by NASSIT.
NASSIT
2%
Gen
Public
10%
BSL
24%
Comm Banks
64%
Domestic Interest Payments: Interest paid on domestic debt fell from Le 135.7 billion in the first half of 2013
21
to Le97.44 billion in the first half of 2014. The decrease in interest payment could be attributed to declining yield
on treasury securities during the same period. Interest paid on Treasury Bills accounted for 74.6 percent,
representing the biggest share of total interest payments on domestic debt.
8.2 External Debt
Public and publicly guaranteed
external debt stood at about US$1,052 million as at end of June 2014 compared
Figure 8-4 Composition of Public Debt, Jun 13 and Jun 14 (US$ million)
to US$1,014 million in the same period in 2013, representing an increase of 3.7 percent. The marginal increase
was mainly driven by 800
disbursements from Multilateral Creditors. The African Development Fund/Bank
disbursed US$92.0 million and other multilateral creditors, US$237.56 million.
700
US$ million
600
500
400
Jun-13
300
Jun-14
200
100
0
Multilateral
Official Bilateral
Commercial
Creditors
Domestic debt
The share of multilateral debt continued to dominate the external debt portfolio, accounting for 66.3 percent of
the entire external debt stock compared to 60.3 percent in June 2013. Bilateral and commercial creditors
accounted for 13.6 percent and 20.1 percent respectively, compared to 14.6 percent and 21.6 percent in June
2013. The decrease in the commercial debt stock reflects good will payments made to commercial creditors to
minimise and avoid costly litigation.
8.3 Debt Service Payment
Total external debt service payment for the first half of 2014, excluding the repayment of debt owed to the IMF,
which is the obligation of the Bank of Sierra Leone, amounted to US$14.9 million; of which principal and
interest payments amounted to US$10.6 and US$4.2 million, respectively. Compared to US$12.6 million paid
in debt service in the first half of 2013, this represents an 18 percent increase in debt service payments.
22
A total external debt service payment of US$18.04 is projected for the second half of 2014, of which principal
and interest would amount to US$13.5 and US$4.7 respectively
9. MACROECONOMIC OUTLOOK IN THE SECOND HALF OF 2014
The economy was on good trajectory during the first half of the year to achieve the projected double digit
growth rate of 11.3 percent in 2014. The outbreak of the Ebola Virus Disease in May 2014 (EVD) dimmed
economic prospects for the rest of the year. The disruption to agriculture, mining, manufacturing, construction,
tourism and transportation following the outbreak of the Ebola Virus Disease undermined the growth prospects
of the economy. It also poses a significant threat to macroeconomic stability and human development and is
likely to reverse the gains made in poverty reduction in recent years if the spread of the disease is not contained
in the shortest time possible.
The combined effect of the disruptions to agricultural, mining, manufacturing, construction, transportation,
domestic and international trade and tourism activities on domestic output is substantial. Preliminary analysis
indicates that economic growth will slow down to 8.0 percent in 2014 compared to the original projection of
11.3 percent.
The closure of periodic markets, national borders, internal travel restrictions and the suspension of international
flights to stem the spread of the disease disrupted the supply of food and non-food items, which in turn led to rise
in consumer prices. Inflation, which had fallen from 8.2 percent in December 2013 to 6.4 percent in April 2014,
rose to 7.5 percent in September 2014. Inflationary pressures will remain high throughout the year, with
inflation projected to reach 10 percent by end December 2014.
The trade deficit is expected to be larger than earlier projected as export growth decelerates, in line with reduced
domestic production, while imports increase to meet additional needs for medical and emergency food
supplies, fuel, and capital equipment for new health centres. Even though payment for services will be lower,
the current account is in deficit, including official grants is projected to widen from earlier projection of 11.1
percent of GDP to 15.4 percent of GDP.
The Capital and Financial Accounts will be negatively affected as FDI inflows dwindle due to the Ebola scare.
Official Ebola related support is expected to compensate for the gaps in the Capital and Financial Accounts. The
overall balance of payments (BOP) is now projected to shift from a surplus of US$46.6 million in 2013 to a
deficit of US$216.4 million in 2014. The IMF projects a balance of payment financing gap of US$110 million in
2014. However, gross foreign exchange reserves of the Bank of Sierra Leone are not expected to decline in
2014, given the increase in Ebola related foreign support.
Domestic revenue collection is being adversely affected by reduced economic activity, lower mining revenue,
and potentially weaker taxpayer compliance. Ebola-related revenue shortfall is estimated at Le 390 billion
(equivalent to US$90 million) in 2014
The revised estimates by Government and the IMF indicate that total expenditure will increase by US$41
million in 2014. Based on these estimates, the overall budget deficit is now projected to be higher than
originally anticipated. The deficit is projected to widen from the earlier projection of 7.9 percent of GDP to 11.0
percent of GDP. Part of this deficit was covered by scaled up budget support from the African Development
Bank, the World Bank and the European Commission.
A preliminary assessment of the impact of the Ebola disease on the economy is described in the Annex-1.
23
ANNEX 1 – IMPACT OF THE EBOLA OUTBREAK ON THE SIERRA LEONE
ECONOMY –A Preliminary Assessment as at September 2014
Introduction
1. The outbreak of the Ebola Virus Disease (EVD) in the Mano River Union sub-region spilled over into Sierra
Leone in May 2014 from neighboring Republic Guinea, where it was first detected in February 2014. The
disease quickly spread into the three chiefdoms along the eastern border district of Kailahun. According to the
daily update on the Ebola Outbreak issued by the Emergency Operations Centre (EOC) of the Ministry of
Health and Sanitation for the 31st August , 2014, the total number of cumulative confirmed cases was 1107, of
which 388 have died, 248 survived the viral disease. The confirmed cases by district is as follows: Kailahun,
469; Kenema, 356; Portloko, 70; Bo, 50;Bombali, 44; Moyamba, 9; Kono, 1; Bonthe, 1; Western Urban, 51;
and Western Rural, 28. Koinadugu District has not registered any confirmed case of the Ebola Viral Disease.
2. On August 4, 2014, His Excellency the President declared of a state of public health emergency throughout
the country, including the restriction of movements of people and the quarantining of confirmed cases.
Government also adopted a number of extra ordinary measures to contain the spread of the disease including the
closure of bars, night clubs, and cinemas and a ban on unnecessary gatherings and meetings.
3. On 8th August, the World Health Organization (WHO) declared a Global Health Alert Emergency as the
EVD outbreak hit four West African countries, namely, Guinea, Liberia, Nigeria and Sierra Leone.
4. This report presents the first round economic and potential poverty impact of the Ebola Outbreak on the
Sierra Leone economy using available data/information, anecdotal evidence and economic intuition for the
period June – August 2014.
A. Impact on Domestic Output and Employment
5. The Sierra Leone economy grew strongly in recent years, recording double digit growth rates in 2012 and
2013 driven largely by iron mining and supported by buoyant agricultural, increased construction activities and
an expanding services sector, including, transportation and tourism. Macroeconomic stability was also
achieved in 2013 with significant reduction in the external current account and fiscal deficits, which translated
into lower inflation, declining interest rates and stable exchange rates.
6. Prior to the outbreak of the disease, the medium-term macroeconomic projections portrayed a growing
economy and stable macroeconomic environment. The economy was projected to grow by 11. 3 percent in
2014 anchored on increased iron ore and other mining activities, increased agricultural production, continuing
construction activities, expansion in the services sector and recovery of the tourism sector. The non-iron ore
economy was also projected to expand by 6 percent in 2014. Inflation was projected to continue to fall further
while the exchange rate will remain stable in 2014.
7. The disruption to agricultural, mining, manufacturing, construction, tourism and transportation following
the outbreak of the Ebola Viral Disease is undermining the growth prospects of the economy. It also poses a
significant threat to macroeconomic stability and human development and is likely to reverse the gains made in
poverty reduction in recent years if the spread of the disease is not contained in the shortest possible time.
8. Agriculture and Fisheries: With most of the agricultural areas under quarantine, and the associated
restrictions imposed on the movement of people coupled with the fact that economically active and physically
strong men and women have been infected by and affected with the disease as well as the fear of going to work
on the farms may lead to the loss of a whole planting season with adverse consequences on agricultural output
and the food security situation in 2014. In particular, the Kailahun and Kenema districts-where the disease is
more prevalent are the main export crop producing areas and also a major source of food stuff including palm
oil, rice etc. The spread of the disease to the other parts of the country especially Port Loko and Kambia
I
Districts-the main rice producing areas is likely to lead to a decrease in the area under cultivation as the usual
'Group Work' on the rice farms cannot be undertaken. In sum, agricultural output is projected to drop by onethird in 2014. This is will not only drag economic growth but also worsen the already fragile food security
situation in the country.
The fisheries sector is relatively stable at the moment though investors scared by the EVD outbreak are now
leaving the country. The sector is likely to experience challenges in the last quarter of the year.
9. Mining: According to the Nationwide Assessment of Economic Prospects conducted in March 2014 by
MoFED, the mining companies projected significant increase in output in 2014 on account of the installation of
additional production capacity and improved mining technology.
In spite of the outbreak of the Ebola Viral Disease and its spread to different parts of the country, the five (5)
major mining companies (i.e., African Minerals Limited, London Mining, OCTEA, Sierra Rutile, and Sierra
Minerals) are continuing with their normal operations up to the time of preparing this report. Hence, there has
been minimal impact on the production activities of these companies. Production data for the first half (January
to June) of 2014 indicate that African Minerals Ltd exceeded its iron ore production target for the period by
14.7%. The production of Ilmenite and Zircon by Sierra Rutile also exceeded the production target for the first
half of the year. However, London Mining Ltd (iron ore), Sierra Rutile (Rutile only), Sierra Minerals (bauxite)
and OCTEA (diamond) fell short of their production targets for the same period by 10.2%, 14.6%, 14.2% and
17.7%, respectively. The revised production targets for the year as a whole indicate that African Minerals will
meet its annual iron ore production target, while rutile and diamond production will drop by 4.8% and 10.4%,
respectively in 2014. The production of Zircon, Ilmenite and bauxite are projected to exceed their annual
projections by 29.8%, 6.4% and 2.6%, respectively.
10. In spite these largely optimistic expectations, there is the possibility of evacuation of expatriate staff and the
consequent scaling down of operations if the outbreak is not contained in the shortest possible time. Given that
the sector is the lead growth driver in recent years, disruptions to mining activities will have severe dent on
economic growth in 2014.
11. Manufacturing: The closure of bars, night clubs, cinemas and related activities as part of Government's
strategy to contain the spread of the Ebola Virus as well as the lull in construction activities have resulted in
significant drop in the demand for locally produced manufacturing products. The hardest hits are the Sierra
Leone Brewery, the Sierra Bottling Company and Leocem Cement Factory-the three biggest manufacturing
firms in the country.
12. In particular the demand for beer, stout, maltina and soft drinks has dropped drastically since the
introduction of the preventive measures by Government, including the closure of all bars and restaurants and
the current non occupancy of hotels and guest houses. In response, the Sierra Leone Brewery has scaled down
its operations and threatened to temporarily close operations. The closure of bars and night clubs, which are
their major sales outlets, will lead to a loss of approximately 24,000 jobs in addition to loss in business incomes
of distributors, transporters and contractors. The scaling down of operations will also adversely affect the
Sorghum Farmers who are the suppliers of its main raw materials. This involves 600 farm households and 3600
indirect beneficiaries. The company has also suspended its investment plan for 2014 including the ongoing
installation of a Cooling and Carbon Dioxide (Co2 Plant.
13. Furthermore, the lull in construction activities, especially road construction for both donor and government
funded projects has also affected the demand for and hence production of cement with attendant consequences
on domestic output and employment.
14. Overall, the scaling down of activities of the three biggest manufacturing activities will undermine the
growth prospects of the economy in 2014
15. Construction: The expansion in construction activities following the scaling up of public investment in
road infrastructure has been contributing positively to the growth of the economy in recent years. The Ebola
scare has led to a lull in road construction activities as workers fear to gather and interact in an attempt to prevent
II
the spread of the disease. Also, in some cases, senior foreign staffs of the road construction companies have been
evacuated. The construction of the Kenema-Kailahun Road, Matotoka-Kono Road, reconstruction of the
Makeni-Kabala Road, Hill-Side Bye-Pass Road, Lumley-Tokeh Road and the reconstruction of city and town
streets in the provincial districts and the Western Area have been suspended. Cement sales, a good proxy for the
level of construction activities, dropped from 35.7 thousand metric tons in May 2014 to 20.4 thousand metric
tons in August 2014, indicating slow down in construction activities. The lull in construction activities will
further weaken the growth prospects of the economy, create unemployment, especially of youths and loss of
personal incomes.
16. Tourism: According to available data from the National Tourist Board, tourist arrivals by air at the Lungi
International Airport dropped by 30 percent in the first eight months of 2014 (January to August) compared to
the same period in 2013 as visitors and investors are scared away by the Ebola Outbreak. The number of
business visitors (investors) dropped by46.9 percent. As a consequence, occupancy rates in hotels, which had
improved in 2012-13 dropped drastically from an average of 50 percent before the outbreak in May to less than
10 percent in July-August 2014. The Bintumani Hotel, Hill Valley Hotel, Leone Lodge have closed operations
while the staff of the Raddison Blu Mammy Yoko Hotel and the Country Lodge have been asked to work for two
weeks only per month. The combined effect of the drop in tourist arrivals and the fall in demand for touristrelated services including restaurants and cottage industries could adversely affect economic growth, domestic
revenue collection and increase the unemployment levels among the youth, who are mostly employed in this
sector.
17. Transportation: Air transportation has been particularly hit by the Ebola Outbreak. Seven airlines (British
Airways, Asky, Air Ivoire, Arik Air, Gambia Bird, Kenya Airways and Air France) flying to Freetown have
temporary suspended operations due to the high risk of spreading the disease to other countries. This is already
disrupting cross border and regional trade causing reduced supply of essential commodities and its attendant
impact on prices and loss of business incomes. Locally, private commercial vehicles are not operating at full
capacity due to restrictions imposed on the amount of people they should carry.
18. Energy: The sector has not been directly impacted so far as the Bumbuna Hydro-Electric Dam, supported
by the rains, is providing sufficient supply of electricity. The sector is expected to face challenges in the dry
season, during which period electricity will be generated from the thermal plants at the Kingtom and Black Hall
Road power stations.
19. The departure of foreign maintenance experts coupled with the non-availability of consultants for some of
the works is delaying project implementation in the sector for about 6-10 months.
20. The combined effect of the disruptions to agricultural, mining, manufacturing, construction,
transportation, domestic and international trade and tourism activities is estimated to slow GDP growth
to 7-8 percent compared to the original projection of 11.3 percent. The ultimate impact on domestic output
depends on the duration of the epidemic.
B. Impact on Consumer Prices
21. National inflation measured by the National Consumer Price Index has been declining steadily reaching 6.5
percent in May 2014 from 12 percent in December 2012. The major contributor to this trend in recent years is the
fall in food inflation owing to the increase in the domestic supply of basic food items and the stability of the
exchange rate. This declining trend in consumer prices is now being reversed by the Ebola Outbreak.
22. The current restrictions on the movement of persons, the closure weekly Community Markets in the rural
areas commonly known as (LUMAs) resulted in the shortage of basic food items in the markets especially in the
urban areas. The situation is exacerbated by the weakening of the Leone and its pass through effect to domestic
prices of imported goods.
23. Data on the prices of key agricultural products provided by the Ministry of Agriculture, Forestry and Food
Security showed that the price of local parboiled rice increase from Le3,700 in May to Le3,815 per kilogram in
July 2014; imported rice from Le3,229 to Le4,046; palm oil, from Le5,159 to Le5,559; fish (bonga) Le11, 389 to
Le12,141 per kilo over the same period. However, the price of other food crops fell over the period: Cassava
III
from Le1721 to 1150 per kilo; sweet potatoe, 1,952 to 1,560; groundnut, and 6,429 to 5,101. Statistics Sierra
Leone (SSL) reported similar trend in the prices of basic food items. Overall, the Consumer Price Index
produced by SSL indicated that year-on-year national inflation rose from 6.5 percent in May to 7.5 percent in
August 2014.
C. Impact on Government Finances
Domestic Revenue
24. Government, in consultation with the International Monetary Fund, reviewed the 2014 macro-fiscal
framework in September 2014 to reflect the impact of the Ebola outbreak on the economy. The outbreak of the
Ebola disease and its dampening effect on economic activities is adversely affecting domestic revenue
collection. With the lull in economic activities, decline in the sale of certain goods and services and the resultant
loss of jobs and personal incomes, domestic revenue is projected to fall in 2014. For the year as a whole, Ebolarelated revenue loss is estimated at Le 390 billion (equivalent to US$90 million) in 2014, including the Le75
billion (US$17 million) shortfall recorded in the first half of the year.
25. Income Tax, which constitutes the largest component of domestic revenue, is projected to drop relative to its
original target. The scaling down and, in some cases, closure of firms, and industries and the associated lay-offs
of staff have resulted in fall in business and personal incomes with adverse consequences on profit tax and
personal Income (PAYE) tax. For, example, the Sierra Leone Brewery estimated that following the closure of
bars, night clubs and cinemas and the consequent drop in sales of their products, an estimated 24,000 employees
in these sales outlets will be laid off. Similarly, the closure of hotels and the subsequent laying off of staff is
adversely affecting the collection of income taxes, both PAYE and profit tax. Furthermore, the uncertainty
created by the outbreak has led to the evacuation of expatriates, with adverse effect on the collection of payroll
taxes (including PAYE and the annual payroll taxes) and work permit fees.
26. The collection of Goods and Services Tax is projected to fall, reflecting the reduction in sales of taxable
goods and services including domestically produced manufactured goods (beer, stout, maltina, cement and soft
drinks). The Sierra Leone Brewery projected that sales and excise taxes due Government in 2014 will drop by
Le10.8 billion during the second half of the year.
27. According to data provided by the Petroleum Unit of the Ministry of Trade and Industry, the uptake of
petroleum products by both the commercial and retail markets has dropped by 20% during July and August
compared to the two preceding months (May and June 2014) and is expected to fall further during the rest of the
year as economic activities continue to slow down. In particular, the consumption of diesel dropped by 30% and
14% in the retail and commercial markets, respectively, while the consumption of petrol dropped by 20% and
13% in the respective markets. This is adversely affecting the collection of excise duty on petroleum products as
it is a unit tax imposed on the quantity sold. The NRA projected that excise duties on petroleum products will
drop by Le30.7 billion. The drop in fuel uptake is attributed to the scaling down of mining activities, the
suspension of road construction activities; disruptions to commercial farming (oil palm and rubber) as well the
reduced use of private generators by businesses and industry as well as residential homes owing to the improved
supply of electricity from the Bumbuna Hydroelectric Dam.
28. Mining Royalties and licenses fell short of the target for the first half of 2014 by Le38 billion attributable to
declining international prices of iron ore. Mining royalties are projected to decline further in the second half of
the year partly due to the continued fall in iron prices and to some extent due to the difficulties experienced by
the mining companies in exporting iron ore and diamonds.
29. The iron ore mining companies reported difficulties in exporting iron ore due to the increase in marine
insurance costs while the Kimberlite Diamond mining company is experiencing challenges in shipping out
diamonds due to the suspension of operations of major airlines. This situation combined with the already weak
market conditions for iron ore is adversely affecting Government revenues in the form of mineral royalties. The
average monthly royalty payments from African Minerals Ltd, which averaged US$2.5 million per month
dropped to US$1.3 million in July and August 2014. Similarly, royalties paid by London Mining Ltd, which
averaged US$800,000 dropped to US465, 000 in July and decreased further to US$262,000 in August 2014. It is
also important to note the rainy season has an impact on mining activities and consequently on mineral
IV
revenues.
30. In general, the uncertainty created by the Ebola outbreak has further weakened tax compliance. Revenue
collected from Ministries, Departments and Agencies are now projected to drop by Le56 billion for the year as a
whole; Le26 billion in the first half of the year and Le30 billion in the second half of the year.
Government Expenditure
31. The outbreak of the Ebola Viral Disease has caused a reprioritization of spending towards efforts at
containing the disease. Budgetary allocation to the Contingency Fund has been increased by Le112 billion to
finance Ebola related activities. Of this amount, Government has disbursed a total of Le79 billion as at mid
September 2014. These include, Le1.9 billion for sensitization and awareness; Le8.0 billion for logistics and
supplies to the Ministry of Health and Sanitation; Le40 billion as Government's contribution to the Ebola Trust
Fund; and Le29.7 billion as Government contribution towards the payment of incentives to health workers. This
was not provided for in the Supplementary Budget presented to Parliament in early July 2014. The Ministry of
Finance and Economic Development and the IMF estimated that Government expenditure will increase by
Le176 billion in 2014 owing to the Ebola outbreak.
32. The shortfall in domestic revenue combined with the increase in Ebola related expenditures gave rise to a
financing gap of Le554 billion in 2014. To reduce the financing gap, domestically funded capital expenditures
were cut by Le194.3 billion including the supplementary provision of Le60 billion for rural electrification.
33. To further close the financing, Government requested an augmentation of access under the existing
Extended Credit Facility with the IMF in the amount of SDR 25.93 million( equivalent to US$40 million) to
support the Government budget. The revised fiscal framework also makes provision for additional borrowing of
Le80 billion from the domestic securities market. The African Development Bank provided additional budget
support of US$ 12.4 million while the World Bank scaled up its budget support to US$30 million to reduce the
financing gap. Despite these efforts, there remains an uncovered financing gap of Le122 billion (US$28
million). In the absence of additional budget support, the monetization of the budget deficit and or the excessive
borrowing from the domestic securities market with the attendant consequences on inflation, exchange rates and
domestic interest rates could derail efforts to preserve macroeconomic stability. Moreover, the potential adverse
consequences of the cut in domestic capital expenditures on the growth prospects of the economy cannot be
overemphasized.
D. Impact on Government Debt
34. Government Debt Management policies and strategies over the years have been underpinned by strong
macroeconomic stability. However, the current Ebola epidemic, which has impacted negatively on key
macroeconomic indicators, poses further challenge to maintaining debt sustainability. The drop in domestic
revenue and increase in expenditure induced by the Ebola outbreak resulted in huge financing gap in the
Government budget. This in turn led to increased Government borrowing from the domestic securities market as
well as from external sources. Government borrowed Le40 billion in July to fund Ebola-related activities. In
addition, Government borrowed US$40 million (Le173 billion) from the IMF under the existing ECF
arrangement to cover part of the 2014 funding gap. However, the increase in domestic funding gap did not
reverse the declining trend in domestic interest rates. Total savings on domestic interest payments due to the fall
in Treasury Bill rates are estimated at Le122 billion in 2014. It is however, important to note that in spite of the
increase in the Government borrowing, debt sustainability analysis carried out by the IMF in August 2014
showed that Sierra Leone's risk of debt distress remains moderate.
E. Impact on the External Sector
35. Exports and Imports: The trade balance is expected to deteriorate as export growth slows with the
disruptions to economic activities especially agriculture and mining, while imports increase to meet additional
needs for medical and emergency food supplies, fuel, and capital equipment for the Ebola Holding and
Treatment centers. The current account deficit is projected to worsen from 11.1 percent of GDP originally
anticipated to 13 percent of GDP. Foreign Direct Investment inflows will also decrease as the Ebola outbreak
V
scare away investors. The overall balance of payments (BOP) is now projected to shift from a surplus of
US$46.6 million in 2013 to a deficit of US$216.4 million in 2014 with a financing gap of US$110 million in
2014.
36. Sub-Regional Trade: Cross-border trade in the Mano River Union (MRU) sub-region has been growing
rapidly in recent years underpinned by peace and stability, speedy economic recovery and buoyant mining
activities.
37. However, recent measures taken by member countries to stem the spread of the disease including the closure
of borders and the suspension of flights have had devastating effect on trade and regional integration. Trade in
the sub-region is dominated by primary agricultural products (local rice, gari and palm oil) exported to Guinea
from Sierra Leone and imported food stuffs and household wares imported from Guinea. These activities have
reduced significantly following the closure of borders and community markets on concerns of contracting the
disease. The result has been a loss in income of farmers and traders involved in cross-border trade in the MRU.
38. Exchange Rate: The exchange depreciated markedly in the parallel market in recent months (July to
August 2014) reaching Le4,800 to the US Dollar by end August from Le4,400 in May 2014. While the recent
depreciation of the exchange rate may be partly attributed to the lagged effect of restrictions imposed on foreign
exchange currency transactions early in the year, the increase in the demand for foreign currency as the well-off
attempts to leave the country for fear of contracting the disease; higher than projected import bill, especially for
food and medical equipment, to meet the shortfall in domestic supply; coupled with the disruptions to mineral
and agricultural exports alluded to earlier in this report, has further undermine exchange rate stability.
F. Poverty and Social Impact
39. The outbreak of the disease has also had severe social impact on women and children, being the most
vulnerable. The disease has killed more females than males; women and girls (54%) compared men and boys
(46%). As a result, the affected women have become widows and single mothers. Children have also been
infected with and affected by the virus; with most of them becoming orphans and separated from their parents.
The number of them (defined as those from 0 to 14 years) who have contracted the disease is 17.5 percent of the
cases as at 26th September 2014. The fear of children contracting the disease compelled the Ministry of
Education, Science and Technology indefinitely postponed re-opening of schools across the country in
September 2014 in accordance with the State of Public Health Emergency. All other education activities
including the BECE and running of summer schools were suspended until the virus is contained. With schools
closed and children not going to school, there is an increased likelihood of increased child labour, school
dropouts, and teenage pregnancy.
40. With an income poverty incidence of 52.9 percent, and weak social indicators (low life expectancy at 46
years (2012), infant mortality of 92 deaths per 1000 births, under-five mortality of 156 deaths per 1000 births
exacerbated by weak health systems, the Ebola Viral Disease and its adverse effects on personal incomes,
business incomes, employment, Government revenues, will worsen the poverty situation. It is important to note
that this is an environment where social protection measures are not well established and not fully supported by
Government given paucity of resources.
G. Donor Support as at end August 2014
41. The international community has been supporting Government's efforts to control the spread of this disease.
Support to the WHO office in Freetown from various donors including the European Commission, Germany.
Canada, United Kingdom-Department for International Development, the African Development Bank (AfDB),
the United Nations Central Emergency Response Fund and the UN Office for the Coordination of Humanitarian
Affairs amounted to US$ 1.14 million. The AfDB also provided a grant of UA1.0 million (approx. US$1.5
million) to Sierra Leone as emergency assistance to finance part of the cost of strengthening of public health
systems in response to the Ebola. The UK-DFID also provided 5 million British Pounds through various NGOs,
UNICEF and WHO to assist the fight against Ebola. The World Bank has committed US$200 million to the three
affected MRU member countries as emergency assistance to help contain the Ebola Outbreak. Most of the
World Bank support, like other donors will go towards containing the spread of the disease in the near term and
strengthening health systems in the medium term. About US100 million dollars will be utilized to strengthen
health systems in the sub-region. US$28 million has been allocated to Sierra Leone out of the balance of
VI
US$100 million to contribute to efforts to stem the spread of the disease and mitigate socio-economic impact.
Three areas of support have been identified: These include (i) Support to EVD Outbreak Response Plans and
Strengthening Essential Health Services, (ii) Human Resources Scale Up for Outbreak Response and Essential
Health Services, and (iii) Provision of food and basic supplies to Quarantined Population in the country.
H. Proposed Actions to address Impact of EVD in the Short to Medium Term
42. The Ministry of Finance and Economic Development in collaboration with other Ministries, Departments
and Agencies is preparing a post Ebola Economic Recovery Plan that will lay out the sector strategies and
economic policies to address the damage done to various sectors of the economy by the Ebola epidemic.
Meanwhile, Government will undertake the following activities:
·
monitor the stock levels of strategic commodities especially rice and petroleum products and in
collaboration with other partners monitor movements in domestic prices of these commodities;
·
Intensify domestic revenue mobilization through improvements in tax administration, reduction in
revenue leakages, strict enforcement of tax compliance and elimination of discretionary tax and duty
waivers;
·
Government to seek additional budget and balance of payments support to cover the fiscal and trade
deficits
·
Initiate actions and seek support to strengthen the national health systems;
·
Support the recovery of the agricultural system to ensure food security; and Provide social protection
support to Ebola survivors and the affected including children orphaned and close families of Ebola victims.
I. Conclusion
43. The devastating impact of the disease on the Sierra Leone economy is clear from the analysis presented
above. The medium-term prospects of the economy are uncertain as the outlook depends on the duration of the
epidemic. In an optimistic scenario, which assumes that Ebola will be eliminated by December 2014, the
economy will recover in 2015 as economic activities resume. In a rather pessimistic scenario, which assumes
that the epidemic will continue into 2015, the economic recovery will only commence in 2016 as economic
activities will contract in 2015. This implies that collective and concerted efforts must be made to combat the
disease in a coordinated manner. But efforts to contain the spread of the disease and supporting those infected
and affected require substantial amount of financial, technical resources as well as and logistics.
44. Whilst Government is mobilizing internal resources to stem the spread of the disease, the disruption to
economic activities is posing a major challenge in domestic revenue mobilization. Therefore, the support of
international community including multilateral financial institutions is critical in addressing not only the
emerging financing gaps in the fiscal and external sector of the Sierra Leone economy but also to support the
Post Ebola Economic Recovery Plan.
VII
ANNEX 2 – SELECTED GLOSSARY
Term
Definition
Balance of payments (BOP)
A statement that summarizes the transactions between the
residents of an economy and nonresidents during a specific
period, usually a year. Transactions recorded in the BOP
include the exchange of goods, provision of services and
factor of production, donations and transfers, exchange of
assets, incurrence and extinction of liabilities. The BOP is
recorded on a accrual basis.
Broad money (M2)
A measure of the money supply that includes both money
(currency and checking deposits) and quasi-money (time,
saving deposits and money market fund accounts). M3 is
acquired after including the foreign exchange deposits.
Capital account
The capital account in the international accounts shows (a)
capital transfers receivable and payable between residents
and nonresidents and (b) the acquisition and disposal of
nonproduced, nonfinancial assets between residents and
nonresidents.
Capital expenditures
Purchases of land, intangible assets, Government stocks, and
nonmilitary equipment that will be used for more than one
year. Capital expenditures are sometimes recorded in a
separate capital account.
Consumer price index (CPI)
A measure of the general level of prices based on the cost of
a typical basket of consumer goods and services.
Current account
The portion of the BOP that records transactions in goods,
services, return accrued or payable for providing or using
factors of productions, and current transfers.
Debt service
Interest and amortization on debt. In the BOP, the i nterest due
is recorded in the current account as a debit entry, under
primary income, while amortization is recorded as a debit
entry in the financial account.
Demand deposits
Also called checking accounts. Funds held in an account with
a bank that are transferable by check.
Discretionary expenditure
Government expenditure that may be changed from year to
year at the discretion of policy-makers.
External debt
Debt is a type of liability that requires the payment of principal
and/or interest at some point(s) in the future.
Financial account
The portion of the BOP that records transactions in assets
and liabilities. The financial account records transactions in
direct investments, portfolio investments, financial derivatives
and employee stock options, other investments, and reserves.
Fiscal balance
An indicator summarizing some aspect of public sector
VIII
performance and financial/or situation.
Gross Domestic Product (GDP)
The market value of all final goods and services produced
within a country in a given period. The GDP is determined
using data for production, expenditures, or income and is
presented in current or constant prices.
Inflation
A sustained increase in the general price level. The rate of
inflation is the percentage change in the price level in a given
period (usually one year).
Liquidity
Liquidity of an asset is the degree to which an asset or
security can be bought or sold in the market without affecting
the asset's price. Liquidity is characterized by a high level of
trading activity. As sets that can be easily bought or sold are
known as liquid assets.
Net domestic assets (NDA)
The sum of net domestic credit and other items, net (OIN).
The latter is a residual category in the monetary survey
combining all the balance sheet items that are not reflected in
net foreign assets, domestic credit, and money and quasimoney. Other items include profit and loss accounts, real
estate holdings, other tangible assets, net intrasector float,
and items to be classified.
Net foreign assets (NFA)
The sum of the foreign assets of the central bank and the
other depository corporations, less any foreign liabilities.
Net lending/borrowing
Equal to revenue minus expenses and net acquisition of
nonfinancial assets. The balance is generally referred to as
the budget surplus or deficit of the given level of Government.
Also equal to the net acquisition of financial assets minus the
net incurrence of liabilities.
Open market operation
The buying and selling of Government securities in the open
market in order to expand or contract the amount of money in
the banking system. Purchases inject money into the banking
system and stimulate growth while sales of securities do the
opposite.
Overall balance (External)
The sum of the current and capital account balances and net
errors and omissions, minus the financial account balance. If
the overall balance is positive, the BOP is in surplus - that is,
receipts in respect of all transactions covered exceed
payments, and foreign reserves increase. If the balance is
negative, the BOP is in deficit, and foreign reserves fall.
Overall balance (Government)
Net lending/borrowing adjusted through the rearrangement of
transactions in assets and liabilities that are deemed to be for
public policy purposes. In particular, all proceeds under
privatization (including fixed asset sales) would be deducted
(treated as financial items) as well as subsidies given in the
form of loans (treated as expense).
Primary balance
It is defined as Government net borrowing or net lending,
IX
excluding interest payments on consolidated Government
liabilities.
Recurrent expenditure
Ongoing expenditure of an organization, such as salaries and
travelling expenses.
Reserves assets
Reserve assets are those external assets that are readily
available to and controlled by monetary authorities for meeting
balance of payments financing needs, for intervention in
exchange markets to affect the currency exchange rate, and
for other related purposes (such as maintaining confidence in
the currency and the economy, and serving as a basis for
foreign borrowing). These include Reserve assets consist of
monetary gold, SDR holdings, reserve position in the IMF,
currency and deposits, securities (including debt and equity
securities), financial derivatives, and other claims (loans and
other financial instruments).
Time deposits
Bank savings deposits with scheduled maturity dates. If funds
are withdrawn prior to maturity dates, some interest is lost as
a penalty.
Treasury bill
A short-term noninterest-bearing obligation issued by the
Treasury, payable to bearer and maturing usually in three
months, within which it is tradable on a discount basis on the
open market. Treasury Bonds are issued for long term
obligation.
X
Excellent Government Printing Department, New England Ville

ECONOMIC BULLETIN yayah

Transcription

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