FREETOWN, October 27, 2023 – Sierra Leone’s economy is projected to grow at 3.7 percent on average during 2023–25, below its long-term trend. This scenario is predicated on sound domestic policies, including a tight monetary stance to combat inflation, and an equally conservative fiscal policy to decrease debt pressures and rebuild fiscal space. Headline inflation could moderate gradually to 14 percent and the fiscal deficit decline to 3.9 percent of GDP by 2025, according to the new World Bank Sierra Leone Economic Update launched today in Freetown. The report notes that risks to debt sustainability will remain elevated until fiscal balances improve further and the reliance on expensive and short-term domestic borrowings is addressed through the lengthening of maturities and greater access to concessional borrowing.
“Sierra Leone is faced with a challenging macroeconomic environment and the rapid rise in the cost of living combined with weak growth and deterioration of macroeconomic fundamentals threaten to increase the level of poverty among the population,” said Abdu Muwonge, World Bank Country Manager for Sierra Leone. “Therefore, the Government’s policy priorities should focus on restoring macro stability while protecting vulnerable households and maintaining focus on long-term reforms that are geared toward fiscal and debt sustainability.”
The economy experienced overlapping setbacks during 2022 as external shocks aggravated domestic macroeconomic vulnerabilities, resulting in a rapid debt build-up, rising inflation, and food insecurity. GDP growth slowed from 4.1 percent in 2021 to 3.5 percent in 2022, while inflation rose from 12 percent in 2021 to 27 percent in 2022, and further to over 40 percent by May 2023, threatening the welfare of households and worsening food insecurity and poverty. The fiscal deficit increased from 7.6 percent of GDP in 2021 to 9.6 percent in 2022, driven by a combination of macroeconomic headwinds and policy slippages. Public debt-to-GDP ratio increased from 84.7 percent at the end of 2021 to 96.3 percent at the end of 2022. The report notes that, though the outlook for the economy will be shaped by external developments, domestic policy remains key and should focus on restoring macroeconomic stability.
“Enforcing fiscal discipline and renewing the commitment to consolidation will be crucial in ensuring fiscal and debt sustainability. Active debt management can also support debt sustainability and reduce vulnerabilities,” said Smriti Seth, World Bank Senior Economist and one of the lead authors of the report.
The 2023 Economic Update devoted a special section on food security, examining recent trends, challenges and opportunities in three major agricultural value chains – rice, cocoa, and horticulture. It identifies the importance of supporting and empowering the private sector to undertake the required investments in the country’s agricultural sector. The report comes at a time the government has launched its ‘FEED SALONE’ flagship program with the aim to increase agricultural productivity and achieve food security and sovereignty.
The report notes that some 4.5 million people (55 percent of the population) have insufficient food consumption, 3.9 million (48 percent of the population) have crisis or above crisis-level food-based coping strategies, and 3.22 million (38 percent of the population) face challenges accessing markets. While the rate of chronic undernourishment is relatively stable (with a slight upward trend), the report notes that rapid population growth means that the size of the problem is steadily increasing in absolute terms. As policy priorities over the short to medium-term, the report identifies structural weaknesses of the food system as well as global shocks as having negatively impacted the livelihoods and incomes of farmers and exacerbated food security risks. To mitigate these challenges, focus should be placed on prioritizing safety net measures to enhance short-term food availability and access for the most food-insecure and vulnerable households, as well as addressing structural challenges to improve agriculture productivity and competitiveness and enhance the livelihoods of smallholder farmers.
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In Sierra Leone: Moses Alex Kargbo, +232 76 345930, mkargbo@worldbank.org
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FEATURE:
TITLE: Sierra Leone: Macroeconomic Stability Key to Attainment of Food Security
STORY HIGHLIGHTS
- The new economic update for Sierra Leone points to worsening food insecurity against the backdrop of magnified economic vulnerabilities due to external shocks and domestic economic policy slippages. These vulnerabilities resulted in slower economic growth and soaring food inflation
- The new analysis examines the rice, cocoa and horticulture sub-sectors and reveals bottlenecks hampering domestic production and exacerbating food insecurity
- The report also provides several reform priorities for government consideration, including a focus on restoring macro stability and long-term reforms geared toward fiscal and debt sustainability while also leveraging public and private investments to enhance agricultural value chains for greater food security
FREETOWN, October 27, 2023 – Macroeconomic stability built on fiscal and monetary discipline is essential to both food security and poverty reduction. Without a stable macroeconomic environment reflected in a stable real exchange rate, low rate of inflation, sustainable levels of debt, vital investments to enhance agricultural productivity and ensure food security will be constrained, notes a new World Bank economic analysis for Sierra Leone.
The 2023 Sierra Leone Economic Update, Enhancing Value Chains to Boost Food Security, emphasizes that the government’s reform agenda for the agricultural sector needs to consist of policy shifts that bring about greater gains in productivity, including investments in export-oriented cash crops (cocoa, coffee, ginger, and palm seed) to generate foreign exchange, and investments in the production and marketing of rice to boost food security through rice self-sufficiency.
“This report is timely and will provide policy options to support ‘FEED SALONE’, the Government’s flagship program and one of the Big-Five priorities,” noted Abdu Muwonge, World Bank Country Manager for Sierra Leone.
The report notes that fiscal constraints are limiting the scope for public financing, further highlighting the important role of the private sector in providing the financing and innovation required to strengthen agricultural value chains. The issue of food scarcity has become more pronounced in Sierra Leone, with a significant number of families finding it hard to secure essential meals and nutrition. Prior to the pandemic, about one in every four individuals faced chronic undernourishment. With a growing population, the number of undernourished people rose from 1.6 million in 2011 to over 2 million by 2019. The onset of COVID-19 further escalated this crisis, with acute food shortages rising from virtually zero in 2018 to affecting 19 percent of the populace by 2021.
Sierra Leone’s economy experienced overlapping setbacks during 2022 which worsened food insecurity: GDP growth slowed to 3.5 percent in 2022 (from 4.1 percent the year before), while inflation rose from 12 percent in 2021 to 27 percent in 2022. By August 2022, 81 percent of households found themselves unable to cater to their fundamental food and nutrition necessities. Moreover, the average intake of calories and proteins per individual is not only below the average for Africa, but is also diminishing, especially in terms of proteins.
Despite higher overall food production than other regional economies, Sierra Leone has become increasingly dependent on imports, especially for rice, its major food staple. Domestic demand for rice now exceeds supply by over 600,000 metric tons per year, requiring imports averaging $200 million per year (that is 400,000 metric tons) and growing at 5 percent per year. Rice production fell sharply after 2014 due to the Ebola epidemic and has not returned to pre-Ebola levels. This is on account of increasing structural constraints to productivity growth including weak research and extension capacities to develop and disseminate yield enhancing technologies, declining soil fertility and low access and utilization of external inputs.
“As food insecurity remains an urgent challenge, mitigation measures should leverage existing safety net programs to buttress incomes and enhance short-term food availability and access for the most food-insecure and vulnerable households, particularly women and children,” said Anna Twum, World Bank Economist and one of the lead authors of the report. “Also, there is an urgent need to address macroeconomic challenges like inflation which erode household purchasing power and contribute to food insecurity, while also improving agriculture productivity and competitiveness and enhance the livelihoods of smallholder farmers.”
The government’s recently developed ‘Enhancing Private Sector Participation in Agriculture’ scheme captures the urgent need for reform and increased private participation in the sector. This policy does not only present a major scaling back of direct public spending on agriculture (especially subsidies) alongside an expanded role for the private sector, but it also includes new requirements in policy and program coherence and coordination.
While prudent policy measures are being undertaken to address the needs and financing requirements of the agricultural sector, the report also recognizes the major role the government has in developing the sector and the country’s overall economy and provides policy options in several areas. Key reform priorities include:
- Enforcing fiscal discipline: implement a medium-term wage bill management strategy to bring down wages to the government’s target of 6 percent of GDP
- Debt management: contain short-term high interest domestic debt to address emerging liquidity constraints and reduce the crowding out of private sector financing
- Mitigating structural weaknesses: prioritize safety net measures to enhance short-term food availability and access for the most food-insecure
- Policy shifts for greater productivity: invest in export-oriented cash crops to generate foreign exchange and in the production and marketing of rice to boost food security
- Boosting domestic production to facilitate imports: focus must be placed on geographic and thematic investments that boost productivity and purchasing power through competitive local production and export promotion and diversification
- Curbing food insecurity and hunger: support food production broadly in the coming cropping seasons to improve food availability, while also promoting export crops to enhance food access
Moses A. Kargbo
External Affairs Officer – World Bank