Sierra Leone Economy

Subchapters:

Basic data
Public finances and the state budget
Banking system
Tax System

Basic data

According to cheeroutdoor.com, the fiscal deficit will decrease to 3.2% of GDP in 2022, then increase to 3.6% of GDP in 2023. At the end of 2021, Parliament approved a Le10trn ($864.7m) budget for 2022. The proposed 2022 budget expenditure is 8.2% higher than the 2021 budget and continues to prioritize strengthening fiscal management, infrastructure development, agriculture and public health. High wage costs and costs associated with infrastructure development (especially roads and energy) and the procurement of coronavirus vaccines will drive spending in 2022. Revenues relative to GDP will rise in 2022 as economic recovery boosts tax revenues. Domestic loans and fiscal deficits will be financed with concessional loans and grants from donors.

After an estimated economic recovery of 3% in 2021 due to a broad-based recovery across all sectors and low base effects, real GDP is expected to grow by a further 4.8% in 2022. Economic growth in 2022 will reflect strengthening foreign demand, supported by the continued recovery of the mining sector, including the diamond and rutile sub-sectors. Operations at Tonkolili, one of the country’s largest iron ore mines, which had been suspended since 2019, resumed in March 2021 following a takeover by China’s Kingho Mining Company. The agriculture sector, which accounts for more than 60% of GDP, will expand further as agricultural self-sufficiency strengthens and global demand for timber, cocoa and coffee (major agricultural exports) rises in 2022.

Pointer	2019	2020	2021	2022	2023
GDP growth (%)	5.5	-3.2	3	4.8	4.2
GDP/population (USD/PPP)	1,790.00	1,727.10	1,800.00	1,930.00	2020.0
Inflation (%)	14.8	13.5	11.9	13.2	11.5
Unemployment (%)	4.7	5.2	ON	ON	ON
Export of goods (billion USD)	0.8	0.6	1.1	1.6	1.6
Import of goods (billion USD)	1.3	1.3	1.4	1.6	1.6
Trade Balance (Billion USD)	-0.7	-0.6	-0.6	-0.4	-0.3
Industrial production (% change)	ON	ON	ON	ON	ON
Population (millions)	7,8	8	8.1	8.3	8.5
Competitiveness	ON	ON	ON	ON	ON
OECD export risk	07.VII	07.VII	07.VII	ON	ON

Source: EIU, OECD, IMD

Public finance and state budget

Public finance	2021
State budget balance (% of GDP)	-3.8
Public debt (% of GDP)	73.2
Current account balance (billion USD)	-0.4

Taxes	2022
AFTER	ON
F.O	ON
VAT	ON

Sierra Leone’s GDP growth rate in 2019 was 5.1%. The economy was expected to average 4.5% over the medium term, but this projected growth has been hit hard by the impact of COVID-19. Sierra Leone’s real GDP fell by 2.2% in 2021 due to a pandemic-induced slump in global trade and reduced domestic production of minerals, particularly iron ore. However, as the immediate shock of the pandemic began to wear off, domestic sentiment improved and external demand recovered, Sierra Leone’s economy recovered from the COVID-19 downturn, but growth was slower than before COVID-19. Real GDP is estimated to increase by 3.0 percent in 2021, an upward revision of 0.8 percentage points from the 2020 forecast.

After a sharp deterioration last year, Sierra Leone’s fiscal position is estimated to improve in 2021 thanks to spending rationalization and higher tax collection. The fiscal balance in 2021 was -3.8% of GDP. Sierra Leone’s total public debt at the end of 2021 was 73.2% of GDP of 3trillion Leones. The Government has introduced the 2019-2023 Medium Term National Development Plan (MTNDP) under the theme of ‘Education for Development’, the fourth in a series of poverty reduction strategy documents for Sierra Leone. It aims to improve people’s lives through education, inclusive growth and build a resilient economy centered on human capital development.

Banking system

The Bank of Sierra Leone is responsible for issuing licenses to banks, microfinance institutions, stock exchanges and capital market entities such as stockbrokers/dealers, fund managers, securities registrars and clearing institutions. All commercial banks are based in Freetown. Accounts can be maintained in both foreign and domestic currency. While ATMs are available in Freetown and other parts of the country, credit cards are not widely accepted. Banks cannot lend in foreign currencies. The banking sector is dominated by commercial banks. The banking sector in Sierra Leone includes 14 commercial banks, 17 community banks, 59 Financial Services Associations (FSAs), 37 MFIs (5 deposit-taking and 32 credit-only), and three mobile money operators. The commercial banking sector accounts for 99 percent of all financial sector assets. These are 11 foreign banks, two state-owned banks and one domestic bank. The current minimum paid-up capital is 125 billion Le (or its equivalent in US dollars). The amount must be deposited into a bank account designated by the Bank of Sierra Leone.