The size of debt of Sierra Leone has risen from 40 to 63% of GDP, in two years (2015/17) according to the 17th Edition of the World Bank report titled, “Africa’s Pulse, an analysis on issues shaping the continent’s economic future.
The 88-page World Bank report on Africa’s economic future was prepared by the Office of the Chief Economist for the Africa Region and laid emphasis on three key components including, economic growth, emerging fiscal and debt risks and electricity access and economic development.
The World Bank Chief Economist for the African Region, Albert Zeufact, said the report provides analysis of the nature of the macro economic in the region with topics on special areas of concerns. He highlighted, government needs to speed up macro economic reform especially fiscal adjustment and deepen structural reforms if they are to bring growth back together above crisis level.
He revealed that Africa’s projected grown is 3.1% by 2018 and 3.6% around 2019-2020 with more attention on rising public debt which has exposed the continent to more market risks threatening fiscal sustainability.
According to the report, 11 countries experienced growth rates above 5.4% in 2015-18 as opposed to 7 countries in the April 2017 issue of Africa’s Pulse despite the fact that, output growth rebounded from 1.5% in 2016, perceived to be the lowest pace in more than two decades to an estimated 2.6% in 2017.
The Senior Economist at World Bank, Kemoh Mansaray, said debt is not necessarily a bad thing. It’s just that alarming that the debt increased by such a substantial rate; from 40 to 63% in the last five years (2013 to now).
He said it is good that there is a new government that is looking into measures to address revenue generation. Mansaray said the projects, new airport and ports extension, were questionable and could add to the debt risk. “It is very important that some of these issues are discussed especially in the area of quality investments, selections and proper implementation of projects like the Wilkinson Road construction. It was poorly implemented and later went well over budget exceeding $20 million USD, he revealed.
He said it is important that the country have efficiency in public investment, proper planning and implementation of programs thereby boosting revenue generation. Debt is not really a bad thing. It’s how efficient it is been financed from export to growth and mobilization of revenue.
“The growth rate of Sierra Leone slowed down in the last two years as a result of the dependency of our economy on the mining sector and slow down in the iron ore productions that led to the sharp slow down on the economy which saw dropped in growth rate from 6.3% in 2016 to 3.8% as at 2017. So it is important that we boost our revenue generation, quality public investment management and minimized borrowing into priorizing investment like roads constructions and projects that can generate revenue so that borrowing will not be exorbitant,” he advised.
In the area of fiscal deficits he said the fiscal deficits can be one driver for debt stressing that government have been spending more than the revenue been generated by the past government. He said government have been borrowing both domestic and external debt pointing that domestic borrowing can lead to crisis in such that the rollover risk becomes so high. He said domestic borrowing is usually one year or less except when you have good capital market it will be rollover to five years pointing that it will lead to a situation where the government cannot pay its debt and calls for a bailout.
The World Bank Chief Economist for the African Region Economist, Albert Zeufact, said in moving forward, the government needs to be transparent, engage on better management of policies, strengthening debt management and policy, etc.