The Monetary Policy Committee (MPC) of the Bank of Sierra Leone (BSL) met on June 24, 2024, and decided to increase the Monetary Policy Rate (MPR) by one percentage point to 24.25%.

This decision, chaired by Governor Dr. Ibrahim L. Stevens, was influenced by recent global and domestic economic developments, aiming to control inflation and stabilize the economy.

The global economy remains resilient, supported by tight monetary policies across advanced and emerging markets. According to the International Monetary Fund’s April 2024 World Economic Outlook, global growth is projected at 3.2% for 2024 and 2025. Global inflation is easing, especially in advanced economies, due to sustained tight monetary policies and softening labor market conditions. Despite this, downside risks such as geopolitical uncertainties and potential crude oil price increases due to OPEC+ production cuts pose threats to the global economic outlook.

Sierra Leone’s real GDP growth is expected to rebound to 4.0% in 2024, driven by agriculture, mining, and services sectors. The BSL’s Composite Index of Economic Activities indicated a faster increase in economic activity in the first quarter of 2024 compared to the last quarter of 2023. However, vulnerabilities such as geopolitical tensions and high international prices for food and energy remain concerns.

Inflationary pressures in Sierra Leone have been softening, with headline inflation decreasing from 40.69% in March 2024 to 35.84% in May 2024. This decline is attributed to tight monetary policy, exchange rate stability, increased domestic food production, and reduced international food and energy prices. Despite this positive trend, risks to inflation persist, including potential spikes in global commodity prices and crude oil production cuts.

Sierra Leone’s trade deficit widened to $142.4 million in the first quarter of 2024, with gross foreign exchange reserves covering 2.3 months of imports, down from 2.7 months. The exchange rate has stabilized due to BSL policy measures, boosting confidence in the domestic currency.

Fiscal policy remains tight as the government pursues fiscal consolidation. Despite improvements in domestic revenue mobilization, the overall fiscal balance recorded a deficit due to increased debt service payments. The MPC acknowledges the challenges of increasing debt service payments but remains optimistic about reducing fiscal deficits with continued exchange rate stability and declining inflation.

Monetary developments showed a decline in reserve money and broad money growth in the first quarter of 2024. Credit to the private sector expanded but remained skewed to a few sectors. Liquidity conditions in the money market tightened, with rising interbank market rates and increasing Treasury bill yields.

The banking sector remains stable, profitable, and adequately capitalized. However, the MPC expressed concerns about the high spread between lending and deposit rates, which undermines the transmission of monetary policy.

The MPC remains cautiously optimistic about the downward trend in inflation but emphasizes the need for continued vigilance. Effective June 26, 2024, the new rates are:

Monetary Policy Rate (MPR): 24.25%
Standing Lending Facility Rate (SLFR): 27.25%
Standing Deposit Facility Rate (SDFR): 17.75%

The Committee will continue to monitor economic developments to guide policy and ensure inflation expectations are adequately anchored. The next MPC meeting is scheduled for September 26, 2024.