There is an apparent agreement within the corridors of power that the “economy is facing significant challenges”, a mild way of saying that the country is bedeviled by a looming bankruptcy.
While the government is understandably coy to publicly state the obvious – that there is an economic meltdown – it has put measures in place aimed at turning the embarrassing situation around, less than two years ahead of crucial presidential and general elections.
According to an approved Cabinet Paper signed by a certain Ms. Sonia U. Karim, on behalf of Secretary to the Cabinet and Head of the Civil Service, on 14th March, 2016, the present economic situation in the country was hindering effective implementation of the approved budget for this year.
The government has blamed the economic meltdown on “high interest rates on domestic borrowing, increasing trend of extra-budgetary expenditure, Post-Ebola shocks affecting domestic revenue mobilization, and off –budget revenues held by Subvented Agencies.”
In response, the Cabinet Paper says that a high-level policy committee has been set up by the President to proffer short to medium-term measures “on expenditure rationalisation and domestic revenue mobilisation”, aimed at cushioning the effect on the citizenry.
The committee comprises the Attorney-General and Minister of Justice, Chief of Staff at State House, Minister of States in the Ministry of Finance and Economic Development, Secretary to the President, and the Central Bank Governor and his deputy.
The Cabinet Paper further states that the president has given his approval to what it referred to as “prudent yet realistic measures”, adding that “Government needed to manage the implementation of the measures so as not to cause undue alarm and panic domestically as well as internationally.” The measures, the paper says, would be temporary, albeit conceding that there is need for improved synergy and efficiency in resource mobilisation among ministries, departments and agencies.
As part of measures aimed at curbing the economic malady, under the rubric ‘proposed expenditure rationalisation’, there is a proposed “30% cut in recurrent expenditure across the board” which is estimated to save Le309 billion for the year. Also, until further notice, there is a total freeze on new domestically financed capital projects and suppliers contract, procurement of government vehicles, 50% cut in fuel allocation to all ministries, departments and agencies, 50% cut in monthly office imprests, no new purchase of office furniture and fittings, 50% cut in DSA for local travel, and no purchase of office equipment.
In addition, there is a suspension on all overseas travel for public officials, save for “essential and statutory travels”, with the size of the delegation reduced, while officials should no longer benefit from “DSA Top-up for sponsored international travels.”
Furthermore, government officials have been barred from flying business class.
As part of efforts to enhance domestic revenue mobilisation, Cabinet has agreed that there should be effective implementation of the Treasury Single Account, transfer of 60% of existing resources, including projected revenues of all financial autonomous agencies in the Consolidated Revenue Fund, while all business outfits should within 30 days pay their outstanding tax arrears, or risk incurring punitive measures.
The government though has been bullish about turning the dire economic situation around, with Deputy Minister of Information and Communication, Cornelius Deveaux giving assurances last week that they were working round the clock to turn the embarrassing situation around.
He was quick to blame the Ebola outbreak, although many macro-economists and analysts have attributed it to profligate spending by a government which failed to save for a rainy day during the iron ore boom.
With a bloated workforce, following the establishment of myriad commissions and agencies, and recruitment of more than required personnel in ministries, departments and agencies, the government is currently facing huge budgetary constrains to pay workers each month. Also, delegations to international conferences have been astonishingly large, drawing irk from the public.
However, despite the seeming bad economic times, the government seems defiant to carry on infrastructural projects, including the Mamamah Airport project, which the Bretton Woods institutions have cautioned against.
What is evident though is that the country is borrowing hugely to finance present projects, thus incurring mindboggling loans which future generations would have to pay for.
In a seminal article last week, titled “Looming Bankruptcy of Sierra Leone: The Perspective of an Economic Doomsayer”, private legal practitioner, Francis Ben Kaifala opined that: “In a panic mode, the government has introduced subtle austerity measures (a good move if applied properly) like the unilateral cut on workers’ benefits to their disadvantage (a clearly illegal move considering that there was no legal basis for it), increased taxes on income (as high as 35%), and various other planned actions to salvage the embarrassing state of the economy.”
He described a recent text message to citizens, purportedly a quotation by the President, urging “Sierra Leoneans to buy, sell, lease, rent, hire, transact all businesses in Leones” as “embarrassing” and “a subtle admission…that the currency needs saving and is spiraling out of control, it perhaps also worryingly shows that our policy makers are not as in charge of planning Sierra Leone’s economy and its fiscal policies as we would expect them to be doing.”
He added: “It confirms the belief that those we have elected to look after our affairs are not as in charge of doing so as we would expect them to be, or perhaps they do not fully understand what it would take to save the economy.”
Meanwhile, Kaifala proffered the following solution to self-inflicted economic woe. “We need to export more to other countries as we import goods from them so as to reverse the trade deficit that is weakening our currency. In other words, what we need is more export by Sierra Leoneans to receive US Dollars in return, which will cushion the supply of FOREX and not have its price continue to rise to catch up with the demand for it. Clearly, that is not going to happen soon. The other alternative we have is to reduce export and consume more of what we produce. That too is almost impossible as we currently lack policies that encourage or likely lead to self-sufficiency. What the government should be doing is trying to address these two policy considerations and move the country towards a favourable balance of trade or self-sufficiency.”