As at 15th July 2020 only 57.4% or Le287 billion (about US$28.7 million), of the Le500 billion (US$50 million), Special Credit Facility provided by the Bank of Sierra Leone (BSL) to support the production, importation and distribution of essential commodities at concessional interest rates, has been accessed by importers and manufacturers. Finance Minister Jacob Jusu Saffa revealed this, in his recent Supplementary 2020 Budget, where he stated that the credit facility seeks to maintain adequate stock levels of essential commodities at stable prices. During the launch of the Sierra Leone Economic Update (SLEU) Bank Governor Kelfala Kallon was asked about injecting money into the economy at a time when inflation is on the rise, and on how he aims to balance the need to maintain the supply of essential commodities supported by his Le500billion Credit Facility with a need to reduce inflation.
His response was that even before COVID-19 they were met with what they call stagnation in economics. This means high inflation coupled with high levels of unemployment. He claimed this is the most serious problem any economist can face because remedy for inflation worldwide worsens unemployment and remedy for unemployment worsens inflation. Before COVID-19, the Central Bank decided that they have to look at reducing the inflation rate but also keep an eye on the unemployment rate. “So we kept our monetary policy rate (MPR) relatively stable but the transmission mechanism between what we do as a monetary authority and interest rates which affects the economy as a whole is very weak” he explained.
He said that they were successful at reducing inflation by December 2019 as it had come down to 13.9% and they were bragging that this year they will bring it to single digits then COVID came. “We will have to think hard about what to do, … do we continue dealing with inflation or pay a little bit of attention to unemployment and the impact of that on the economy” he quizzed. Governor Kallon explained that there are two things to answer the question. The supply restraints that will occur both globally and locally with the lockdowns had an impact on increasing the price level in the country and their goal was to make sure that there are no shortages in the market, so once there are shortages other prices are going to rise.
What the credit facility has done, he furthered is to assure the market that the Central Bank is ready to inject liquidity into the market system so that businesses can be sure if they want to invest and bring goods into this country they are willing to support them. That he stressed has stayed the inflation rate from rising higher than it already is.
By Zainab Iyamide Joaque