When Finance Ministers from West and Central Africa met on February 9, 2024 in Abuja, Nigeria to engage the World Bank on the new funding and policy package for IDA-2, Sierra Leone’s Minister of Finance Sheku Ahmed Bangura focused on his country’s current needs: priority assistance to reforming countries via increased budget support to create the fiscal space required for governments to deliver development programmes.

Sierra Leone, under reform-minded President Julius Maada Bio, is building on its signature New Direction development Agenda, inaugurated five years ago at the inception of the leader’s first tenure. As fiscal policy chief with the mandate to ensure economic growth and overall development as well as overseeing the Big Five Game Changers which delineate government’s priority areas within the economy, Bangura cannot but be looking out for how to source the required funding.

Donor assistance is one source, but the Minister knows that much more importantly, the Bio administration must seek local sources, if the sustainability of the development programmes is to be ensured. Minister Bangura opens up on the ongoing initiatives for pulling in more revenues and attracting investments.

The interview excerpted hereunder also reveals the hard work, processes and reforms the Government of Sierra Leone’s is committed to, not just to live up to development targets enunciated in the  recently-inaugurated Medium-Term National Development Plan, but also the noble aspiration of becoming a middle-income economy in two decades’ time.

What is the thrust of your ministry’s fiscal policy?

Since 2018, Sierra Leone’s fiscal policy has shifted towards fiscal consolidation, focusing on domestic revenue mobilization and expenditure management. This includes the introduction of the Treasury Single Account and a pass-through petroleum pricing formula. Reforms have increased domestic revenue and contained expenditures, narrowing the overall budget deficit. Domestic revenue increased from 12.3 percent of GDP in 2017 to 14.5 percent of GDP in 2019 while expenditures were contained at 21.5 percent of GDP, down from over 25 percent of GDP in 2017.

However, the COVID-19 pandemic and the Ukraine crisis significantly impacted public finances, causing a drop in domestic revenue and increased expenditures. The overall budget deficit rose to 5.6 percent of GDP in 2020, despite the government’s Quick Action Economic Response Programme (QAERP) measures. In 2021, domestic revenues increased to 15.7 percent of GDP, but COVID-19 led to high expenditures of 28.7 percent, resulting in a budget deficit. In 2022, public spending increased to 30.8 percent, affecting tax compliance and economic activities.

Recognizing the impact of a widening fiscal deficit on macroeconomic stability, the Ministry of Finance shifted its focus to consolidating public finances in 2023. The ministry understands that developing credible medium-term fiscal strategies could help to preserve fiscal sustainability and rebuild buffers while addressing the country’s huge development needs. In this context, the government enacted the Finance Act 2023, which included several revenue-enhancing measures while reducing spending, and initiated a Medium-Term Revenue Strategy to reduce the budget deficit from 10.9 percent in 2022 to 8.5 percent in 2023.

Going forward, fiscal consolidation will remain the primary fiscal policy, aiming to reduce the medium-term budget deficit to less than or equal to 3.0 percent of GDP, ensuring fiscal and debt sustainability. In this context, fiscal policy will support the Bank of Sierra Leone’s efforts to manage inflation, stabilize exchange rates, and rebuild international reserves, promoting macroeconomic stability and boosting investor confidence. Fiscal policy will be anchored on increasing domestic revenue mobilization and rationalizing expenditures to support National Development Plan implementation, including Feed Salone Initiative, and the Medium-Term Revenue Mobilization Strategy (MTRS), which was  adopted in April 2023.

The MTRS tax policy includes reviewing corporate income taxation, transitioning to a Global Income Tax system, introducing a Minimum Alternate Tax, broadening GST and increasing fuel excise rates. Others include; converting ad valorem excise taxes into specific taxes, harmonizing excisable goods rates, and introducing vehicle circulation tax.

The Sierra Leone economy is projected to grow at 3.8 percent on average during 2023–25, below its long-term average. What efforts are being made to return the economy to its pre-pandemic growth rate?

A series of external shocks and associated economic uncertainty have disrupted economic activities in recent years, resulting in a slowdown in economic growth. Prior to the outbreak of COVID-19, Sierra Leone’s economy grew strongly by 5.5 percent in 2019, up from 3.5 percent in 2018. As a result of the outbreak of COVID-19 in 2020, this trend of economic growth was reversed. And because of the restrictions imposed in order to contain the spread of COVID-19, the economy contracted by 2.0 percent in 2020, compared to the projection of 4.2 percent for the year. In 2021, the economy began to recover after the COVID-19 pandemic had waned and restrictions had been lifted, which was in turn supported by the restart of iron ore mining, an increase in agricultural and manufacturing activities, as well as a recovery in tourism and trade. As a result, the economy expanded by 4.1 percent in 2021, surpassing projections. However, Ukraine’s war disrupted recovery, causing a slowdown to 3.5 percent, lower than projected growth and 4.1 percent recovery in 2021. The economy expanded by 3.4 percent in 2023, surpassing the projected 2.7 percent, driven by higher output in mining, agriculture, and services. Despite high inflation, fiscal and trade deficits narrowed. Economic growth is projected to remain resilient in the medium-term. Baseline projections indicate that the economy will grow by 4.7 percent in 2024, 5.2 percent in 2025, and 4.5 percent in 2026.

The government, however, is planning to introduce several programmes, policies, and projects that will boost economic growth above the baseline projections of the government in the near future. Recognizing that macroeconomic stability is a pre-requisite for sustainable economic growth, the government will continuously implement prudent fiscal and monetary policies to stabilize the economy and strengthen investor confidence, while also implementing structural and sectoral reforms.

We will continue to diversify the economy to boost its resilience to shocks. The FEED SALONE Initiative is a comprehensive strategy to diversify the economy, enhance resilience to shocks, and develop agro-ecological zones to derisk private investment in agriculture.  Mining expansion, industrial gold production, and a rebound in services sectors like trade, tourism, telecommunications, and financial services are expected to support medium-term economic growth.

Given the critical role of the private sector in driving economic activities, the government plans to implement business regulatory and financial sector reforms to enhance ease of doing business, improve infrastructure, and foster private sector development. Although the economy is expected to remain resilient in the medium term, it faces downside risks such as a slowdown in China, adverse trade terms, tighter financing conditions, Ukraine’s war, geo-economic fragmentation, Middle East tensions, and a potential donor support drop.

Sheku Ahmed Bangura

How would you assess the Sierra Leone Economic Diversification Project?

The Sierra Leone Economic Diversification Project (SLEDP) is a government initiative aimed at boosting entrepreneurship, increasing tourism investment, and addressing business challenges in the country. The project, initiated in July 2020, has improved access to finance in Sierra Leone by upgrading the Collateral Registry and supporting legislative reforms. Over 1,958 loans, valued at over $22.5 million, have been accessed, with 625 women-owned businesses.

It is also supporting tourism development. Sierra Leone, with SLEDP’s support, launched its first National Marketing and Rebranding Strategy in 2021, introducing the ‘Explore Freedom’ brand identity in key tourism markets. Based on this support, Sierra Leone has been recognized as one of the world’s greatest places to visit in 2023 by key media outlets, with Cole Street Guest House ranking among the top 20 restaurants. The Project is constructing upgrades at three tourist sites, including a Viewing Deck and Surfing Club.

The project also provided funding to three tertiary institutions for the establishment of incubation spaces, a review of the entrepreneurship curriculum, and grants for entrepreneurship activities. Limkokwing University, University of Makeni, and Milton Margai Technical University received technical assistance for entrepreneurship curriculum review, training, and grant financing. The Institute of Public Administration and Eastern Technical University joined the 2024 cohort.

To address firm-level challenges, the project has provided technical assistance and matching grant support to 120 SMEs in sectors like Light Manufacturing, Circular Economy, Digital/Innovation, Creative, and Tourism, with a matching grant of $2.4 million for 102 businesses.

Overall, the SLEDP has invested over $25 million in the private sector, resulting in the creation of over 1,000 jobs through various interventions.

What strategies have been put in place to improve the ease of doing business in Sierra Leone?

Sierra Leone is enhancing its business environment to attract foreign investment and stimulate economic growth. In the process, we are implementing strategies such as regulatory reforms, infrastructure development, investment promotion, and capacity-building initiatives. The government is implementing legal and regulatory reforms to simplify business processes, reduce bureaucratic hurdles, and enhance transparency. These include enacting new laws and amending existing ones, such as the Business Registration Act, 2007; the Companies Act, 2009; and the Companies Amendment Act, 2014.

The government has established a one-stop shop at the Office of the Administrator and Register-General (OARG) for small and medium-sized businesses and the Corporate Affairs Commission for corporate entities. This reform has significantly reduced the time and cost of business registration. Sierra Leone was ranked 58 globally in the 2020 World Bank Doing Business Report, above the Sub-Saharan average score of 80.1. In 2022, the government established the National Investment Board (NIB), integrating various government agencies for private investment activities, including the Corporate Affairs Commission, SLIEPA, PPP Unit, and Business Registration Unit, to facilitate investments in Sierra Leone.

Government is also implementing digital platforms for business registration, tax filing, and permit applications to reduce paperwork and corruption. With World Bank support, the government is acquiring an Online Business Registration System (OBRS), an Integrated Tax Administration System (ITAS), and ASUCUDA World. Digitization efforts are also underway for property records and construction permit applications.

The government is investing in infrastructure projects like transportation networks, energy facilities, and telecommunications systems to improve connectivity, logistics, and access to basic services. This enhances business operations and contributes to economic development. Projects include the construction of roads, bridges, electricity, water supply, and airports.

Additionally, the government is implementing tax incentives and duty waivers to raise domestic revenue and prioritize spending, ensuring transparency in granting fiscal incentives. The government provides fiscal incentives to sectors like agriculture, mining, manufacturing, and tourism to lower costs and incentivize investment, including 10-year exemptions from corporate tax and GST, and mining lease agreements.

The government is prioritizing transparency and anti-corruption measures to foster a secure business environment, thereby reducing perceived risks and boosting investor confidence. Sierra Leone has made significant progress in fighting corruption by strengthening its legal framework, enacting the Anti-Corruption Act 2019 to enhance public sector integrity, increasing minimum punishment for major corruption offences, and introducing a robust asset declaration regime for public servants.

The New Direction vision of President Bio aims to make Sierra Leone a haven for foreign investment. How would you assess the activities of the National Investment Board (NIB) in coordinating, facilitating, and promoting business investments in Sierra Leone?

The National Investment Board (NIB) in Sierra Leone aims to improve the quality of life for its citizens by facilitating business transactions through a one-stop centre. Sierra Leone’s one-stop centre showcases growth across sectors, aiming to transform the country into a preferred investment destination with a strong emphasis on value addition. The NIB, established in July 2022, is working on reform packages to improve the investment climate, advocating for investor incentives, and harmonizing business registration legislation.

Additionally, the NIB is implementing a one-stop shop and business solution centre for SMEs, and with World Bank support, it is also deploying an Online Business Registration System. The NIB uses public-private dialogues, business forums, and investment summits to discuss business environment challenges and opportunities, and raise awareness about Sierra Leone as an investment destination.

The NIB plans to self-assess key business indicators, such as the World Bank Doing Business Indicators and the Global Competitiveness Index, to track progress in the business environment. Going forward, the NIB plans to collaborate with other government agencies to establish a National Investment Bank and a Stock Exchange in Sierra Leone to provide medium- and long-tterm capital access. The NIB also seeks to establish market linkages for Sierra Leonean businesses to access overseas markets like the African Continental Free Trade Area (AfCFTA), Africa Growth Opportunities Act (AGOA), EU Everything But Arms (EBA), India, and the ECOWAS Trade Liberalisation Scheme (ETLS).

The NIB recognizes the strategic importance of securing tangible investments for Sierra Leone’s prosperity aspiration. Sierra Leone is eager to welcome investors. We therefore invite investors to explore business prospects in the key sectors of our economy, including mining, agriculture, energy, housing, and tourism. Truly, Sierra Leone is investment-friendly, and the government of His Excellency, President Julius Maada Bio, has put in place sound policies to stimulate investments.

How would you describe the impacts of the government’s programmes on Social Safety Nets, Cash Transfers, the Free Quality School Education Programme, School Feeding and the Free Health Care Initiative in mitigating the multiple shocks on households?

Government has been implementing social protection and safety net programmes to reduce poverty, tackle inequality, and assist the poor and vulnerable segments of society. Despite supply chain disruptions, rising global food and fuel prices, and currency depreciation, the government continues to use several instruments to mitigate the resulting cost of living crisis. These include direct cash transfers to vulnerable households, labour-intensive public works, and livelihood support for persons with disabilities (PWD). Between 2020 and 2022, the Emergency Cash Transfer Programme, funded by the World Bank, the European Union, and the Sierra Leonean government, provided cash transfers to 46,000 beneficiaries and supported 10,000 disabled individuals.  Currently, with support from the World Bank, the government, through the National Commission for Social Action (NaCSA), is implementing the Productive Social Safety Net and Youth Employment (PSSNYE) Project, providing emergency cash transfers to 35,000 beneficiaries.  The project will provide an economic inclusion package of $400 per household and create an immediate employment opportunity for 13,000 youths, half of whom are female and 15 percent are PWD. I would also like to point out that, as part of the government-funded Sierra Leone Disability Project (SLDP), NaCSA is providing micro-grants and financial literacy training to 400 groups of people with disabilities, aiming to establish at least 1,000 sustainable livelihoods nationwide. As I mentioned earlier, labour-intensive public works remain an integral component of our social safety net programmes. This year, through NaCSA, we plan to use the Community Driven Development Project (CDDP) and Rapid Community Development Initiative (RACODI) to provide short-term employment to 15,000 youths through the construction and rehabilitation of community schools, health and vocational centres, and grain stores, as well as temporary employment to 2,500 rural youths involved in tree planting and sanitation under the Green Public Works (GPWs) programme.  The government has developed an institutional and policy framework for social protection interventions, implementing a National Social Protection Strategy (2022-2026) to address vulnerabilities and risks. We commend our development partners, especially the World Bank, the Islamic Development Bank (IsDB), the German Development Bank (KfW), AfDB, UNHCR, the UN, and ECOWAS, for generously providing grants and loans for NaCSA’s programmes.

In fulfilment of President Maada Bio’s promise, the government is investing in education to support economic growth, alleviate poverty, and boost the productivity of the future labour force. The government has been paying for tuition and public examination fees, teaching and learning materials, school feeding, the rehabilitation and construction of secondary schools and classrooms, and science laboratory equipment. Government spending on education, which is equivalent to 20 percent of the annual national budget, remains one of the largest funding commitments globally. While government spending on education is still about 3 percent of GDP, we are making a strong push to increase education expenditure to between 4.0 percent and 6.0 percent of GDP to achieve the Sustainable Development Goal (SDG) 4.

Like education and social protection, strengthening the health sector is a crucial agenda item for Sierra Leone to enhance human capital outcomes. The Free Health Care Initiative has significantly improved healthcare access, especially for pregnant women, lactating mothers, and under-five children. The initiative has significantly increased healthcare utilization, reduced maternal and child mortality rates, and improved overall health outcomes by eliminating financial barriers. The government’s recent increase in the health sector budget and expansion of primary health facilities have led to improved health outcomes. For example, Sierra Leone’s life expectancy increased from 53 to 61 years in 2023, with a lower maternal mortality ratio and infant mortality rate.

The government is making progress in improving citizens’ lives, and also working to raise domestic revenues and mobilize resources from Development Partners for effective health sector spending. Currently, we are spending about 5.7 percent of GDP on health, exceeding sub-Saharan Africa’s 4.9 percent, but raising it to close financing deficits depends on favourable macroeconomic and fiscal conditions.

What is the level and kind of engagement you are having with your development partners and foreign donor agencies?

We are enhancing our partnership with Development Partners through macroeconomic policies, public financial management reforms, and development programmes to drive growth, promote sustainable development, and mitigate poverty. Sierra Leone has been implementing economic reform programmes under the IMF’s Extended Credit Facility for years, providing medium-term financial assistance to low-income countries facing prolonged balance of payments challenges.

Recently, our discussions with the Fund focused on reviewing Sierra Leone’s performance for the 2018–2023 ECF programme that expired in November 2023. Following the successful completion of the 8th Review of the already completed ECF programme, we expect the IMF Executive to approve a successor programme with a new set of objectives to achieve a stable and sustainable macroeconomic position necessary to spur growth and reduce poverty.

Similarly, our engagement with the World Bank is blooming, and we will continue to engage in common areas of interest. The World Bank has been providing support across several sectors, including governance, health, agriculture, the private sector, energy, and extractives, with a portfolio of about US$1.1 billion. What we are doing now as a government is to scale up the utilization of these resources and ensure that the broad architecture of government can effectively implement programmes and projects to achieve sustainable, resilient, and inclusive growth in the medium-term. We are engaging the bank on the need to access more grant resources, especially now that we have a new Medium-Term National Development Plan (2024–2030). At the recent Western and Central Africa Ministers of Finance Meeting with the World Bank in Abuja, Nigeria on February 8th, I stressed the need for increased budget support that will create the fiscal space required for governments to deliver their development programmes. We will continue to push on this front as International Development Association (IDA) donor partners, representatives from borrower countries, and World Bank management gear up to meet in December 2024 to determine IDA-21 policies and announce the final replenishment package.

The government is also deepening collaboration with the African Development Bank (AfDB), the Islamic Development Bank (IsDB), and several other partners and donors to implement programmes and projects focusing on human capital development, economic diversification, infrastructure, and governance. Recall that with the new development agenda, we are using agriculture—the Feed Salone programme as the main anchor to transform the economy. We will make systematic and deliberate efforts to traverse this journey.

At the time of this interview, discussions were at an advanced stage with the European Union for the provision of a budget for the period 2024–2027 amounting to 65 million euros.  Also, the government, with support from the European Union and the United Nations Capital Development Fund (UNCDF), launched the Salone Access to Finance Project, which will provide US$7 million in credit and US$3 million to allow farmers to have access to crop insurance, and this is happening for the first time in Sierra Leone. The Bank of Sierra Leone will also inject US$10 million through the Agriculture Credit Facility. Commercial banks will provide loans at a 10 percent interest rate, 20 percentage points lower than the prevailing market rate. This project will impact 500,000 farmers. The strategy is to continue to engage Development Partners and donors and seek support for critical mechanisms like this that have the clear potential to deliver transformation.

Going forward, the government will continue to engage development partners on the need to provide enhanced concessional resources and debt relief, as well as fiscal space for the implementation of our new Development Plan, 2024–2030.

Your background at the Bretton Woods institutions and long years of service at the Ministry of Finance give you a double advantage as a systems insider. To what extent do you think it would help you reposition the Sierra Leonean economy?

Indeed, in the early part of my career, I worked as an Economist on public debt issues at the Ministry of Finance before proceeding for further studies in Canada. I interned at the International Monetary Fund with the Policy Development and Review Department working on external debt management and the Highly Indebted Poor Countries Initiative (HIPC) from October 1998 to April 1999. I later joined the West African Monetary Institute (WAMI) from 2001 to 2006, providing regional surveillance and management advisory to the West African regional monetary integration programme, serving both as a Senior Economist and Principal Economist. After leaving WAMI, I returned to Sierra Leone in 2006 and had a short stint as Director of Fiscal Decentralisation at the Ministry of Finance before joining the World Bank in 2007 as Senior Advisor on the Executive Board of the World Bank. I would say that my 12 years of experience at the Bank were stellar, having given me the opportunity to provide fiduciary and corporate-level advice on economic development programmes, particularly in developing countries.

As I already articulated, many developing economies, including Sierra Leone, have faced turbulent macroeconomic challenges in recent years. The uncertain global economic environment, accompanied by high food and energy prices, slowed economic growth, weakened fiscal and external accounts, and heightened food insecurity. As challenging as these problems are, I have been using the experience, knowledge, and networks I have garnered over the years and the pool of technical and professional staff in the Ministry, the National Revenue Authority, the Bank of Sierra Leone, and the government architecture, to initiate and drive economic reform programmes while mobilizing external resources to support our growth and development aspirations.

My focus has been on repositioning the economy to improve the management of public finances by intensifying domestic revenue mobilization and rationalizing expenditures. We are implementing the Medium-Term Revenue Strategy (MTRS) and utilising innovative financing mechanisms to maximise revenues from our mineral resources.

On the expenditure side, we have established and operationalised the Wages and Compensation Commission and are developing a Medium-Term Wage Bill Strategy to improve the sustainability of the government payroll. We are making frantic efforts to improve budget planning and execution; expand the coverage of the Integrated Financial Management Information System (IFMIS), which will help us avoid overspending and the accumulation of areas. On the basis of these and other reform measures, we successfully completed the implementation of the previous IMF Extended Credit Facility (ECF) during very turbulent times. The IMF Executive Board approved the eighth and final review of the ECF in November 2023. We also successfully implemented all the reforms agreed upon under the third series of the World Bank Development Policy Operations and Performance and Policy Actions (PPAs). These efforts have started yielding positive results — the budget deficit is gradually being narrowed, inflation is trending downward, and the exchange rate has been relatively stable. We have commenced negotiations with the IMF for a successor economic and financial programme to be supported under the ECF arrangement. Discussions are ongoing with the European Union Delegation in Sierra Leone for the provision of budget support. We are also discussing with the World Bank, the African Development Bank, the Islamic Development Bank, and the Arab Bank for Economic Development in Africa (BADEA) additional project grants and concessional loans to support the implementation of our Medium-term National Development Plan, especially the FEED SALONE INITIATIVE to achieve food self-sufficiency and improve food security.

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