In April 2023, there was a notable 12.69% increase in reserve money owned by the government of Sierra Leone.
This increase was primarily due to a boost in the Bank of Sierra Leone (BSL)’s net domestic assets (NDA), even amidst a decrease in net foreign assets (NFA). Reserve money is crucial for promoting investments, transactions, managing international debt, and influencing domestic exchange rates.
Regarding liabilities, the rise in reserve money was evident in the increased currency issuance, surpassing the growth in bank reserves. Broad money (M2) grew by 2.24% in April 2023, driven by a hike in the banking sector’s NDA, which overshadowed the decline in NFA. The NDA increased by 4.69%, which mirrors an uptick in net claims on the government by both BSL and Other Depository Corporations (ODCs). Conversely, the NFA of the banking system dropped by 9.36%, mainly due to a decline in both BSL’s and ODCs’ NFA. Additionally, April 2023 marked a slight 0.53% rise in credit extended to the private sector, a drop from the previous month’s 5.92%.
In response to the evolving economic environment, the Bank adjusted its monetary policy rate (MPR) and the standing lending facility (SLF) rate by 0.50 percentage points each. The MPR was set at 19.25%, and the SLF rate at 22.25%, with the standing deposit facility rate (SDF) remaining at 12.75%. In May 2023, the interbank rate slightly increased to 20.88% from April’s 20.77%, aligning with the policy corridor. Commercial banks’ average lending rates stayed at 21.23% in May 2023, while savings rates remained at 2.17%, making the gap between the two a consistent 19.06%.
Moreover, 2023 showed varied trends in government securities’ average yields. The 91-day Treasury bills weren’t traded in January, March, and April, but their average yield decreased from 8.44% in February to 4.11% in May 2023. The 182-day Treasury bills, not traded in January, March, and April, had a yield of 10.49% in May 2023. The 364-day bills maintained stability, with yields ranging from 28.24% to 28.28% between January and May, ending at 28.24% in May 2023.