At the end of 2019 the external financing added US$13.5 million to central bank foreign exchange reserves, which then reached US$ 506 million, equivalent to 3.5 months of import cover. Economist from the World Bank wrote that capital transfers and inflows to the financial account especially foreign direct and portfolio investments helped finance the Current Account Deficit (CAD). Capital transfers increased by 0.7 pp to 2.7 percent of GDP because of grants for projects, Foreign Direct Investment (FDI) and portfolio inflows rose from 6.1 percent of GDP in 2018 to 8.9 percent, mainly directed to agriculture, mining, and telecommunications.
The country’s external position they said improved in 2019 as the CAD declined from 18.8 percent in 2018 to 14.0 percent with the trade balance and net services payments improving. The merchandise trade deficit narrowed slightly from 14.0 to 13.4 percent of GDP with exports rising and imports moderating as the currency depreciated. The 11.1 percent increase in net service payments as interest payments on external debts rose, but was offset by a 14.7 percent reduction of net service payments as service-related imports fell. Total exports moved up from US$639.2 million (15.6 percent of GDP) in 2018 to US$721.0 million (17.2 percent) in 2019 as mineral exports recovered and agricultural exports rose. Mineral exports went up from US$359 million to US$ 497.9 million from a jump in diamond exports and a brief resumption of iron ore exports.
Though iron ore exports resumed in 2019, production stopped after just three shipments because of conflict between the Government and the Sierra Leone Mining Company Limited (SL Mining). Agricultural exports more than doubled during 2019 as production of palm oil, coffee, and cocoa intensified reflecting new private sector investments and better support for farmers from both Government and the private sector. Imports grew slightly, by 0.6 pp, to US$1,267 million (30.6 percent of GDP). Food and oil imports lessened, but there was an increase in other imports, especially manufactured goods and transportation equipment.
Food imports declined because domestic food production increased, especially rice, cassava, maize, and fruits and vegetables. Liberalization of fuel prices pushed up petroleum pump prices and slowed petroleum imports. Increased demand for manufactured and transportation equipment explain the increase in other imports.
By Zainab Iyamide Joaque