Your Excellency The President

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					Your Excellency The President
Honourable Vice President
Mr. Speaker
My Lord The Chief Justice
Cabinet Ministers
Honourable Members of Parliament
Your Worship The Mayor of The Municipality of Freetown
Your Excellency The Special Representative of The Secretary-General of The UN
UN System Representatives
Your Excellencies Members of The Diplomatic and Consular Corp
Chief Executives and Board Directors of Commercial Banks and
Other Financial Institutions
Representatives of The Private Sector, NGO’s
Civil Society Organisations and The Fourth Estate
Distinguished Ladies and Gentlemen


On behalf of the Board of Directors, Management and staff of the Bank of Sierra
Leone it is my singular honour and pleasure to extend a special welcome to His
Excellency the President, the Honourable Vice President, Honourable Minister of
Finance,   Ministers       and      Honourable   Members   of   Parliament,   the   Special
Representative of the Secretary General of the United Nations and all our
distinguished guests to this special dinner being hosted as part of the celebrations of
                th
the Bank’s 40        Anniversary.


I am particularly delighted that my hosting the dinner for the first time coincides with
the Bank’s 40th Anniversary celebrations. All of us associated with this Institution
must be proud that this tradition has been sustained over the years, even though
there were gaps during the difficult periods in our country’s history.


Your Excellencies, Distinguished Guests,
The Bank of Sierra Leone Dinner is of monumental significance for many reasons:
Firstly, it provides the opportunity for a review of developments in the national and
international economic environment in which it operates; secondly, it gives us the
opportunity to share with you the thrust and focus of our policies, operations and
vision for the future and finally, it brings all of us concerned with the country’s well-
being together, to reflect on the past, the present and the future of our country while
we wine and dine.
Before going further, I would like to congratulate the two new Deputy Ministers
Messrs Sanah B Marah and Joseph Kallon, who have joined the team at the Ministry
of Finance with which we work very closely and which shares our common goal of
promoting economic growth and stability.


Our congratulations also go to the new Mayor of Freetown who has just been
installed in that very important but challenging office after a lull of over three
decades. We wish him a very successful tenure of office.


Since the last dinner, Messrs J Sanpha Koroma and Melvin Tucker left the Bank after
serving for five years each, in the capacity of Governor and Deputy Governor
respectively.   We would like to acknowledge their invaluable contributions to the
Bank and their efforts in the strengthening of the foundation on which the Deputy
Governor Mr. Mohamed S Fofanah and myself are building.


Your Excellencies, Distinguished Guests
I would now like to take you through an explanatory journey of developments in the
international/global arena, the African Regional scene, sub-regional developments
and the Sierra Leone situation, which is influenced and shaped, sometimes in very
large measure by these exogenous factors.


*     International Developments
World economic recovery showed signs of strengthening in 2004, and in spite of the
differences in magnitude and pace, the improvement in growth prospect is good
almost everywhere.
The economy of the United States continues to expand rapidly, with the latest
indication of a long-awaited revival in employment, following a period of rapid rising
unemployment. Employment revival is likely to provide the missing link for a more
secure continuation of economic expansion in the future. The Federal Reserve Bank
has increased interest rates to stem inflationary pressures.
In Japan economic recovery has been stronger and more tenacious than expected by
most analysts, raising the probability of a turning point and the extrication of the
Japanese economy from its decade-long stagnation and deflation.


Economic activity in most western European economies has been largely weak, but
there are signs of gradual improvement.


Meanwhile, most economies in transition, which fared relatively well in the past
global downturn, seem likely to increase growth further in the global upturn.


A noticeable increase both in the demand for and in the price of world market
commodities has contributed to growth in the economies of many countries in Latin
America and Asia.    However, further improvements in economic policy, as well as
additional structural reforms, remain crucial if these regions are to attain the higher,
sustainable rate of growth necessary to achieve meaningful development.



*     Regional Developments
Africa is rich in human, natural, mineral and biodiversity resources. In spite of this,
the region has not achieved the quantum leap in growth and development
commensurate with its huge potential. It is however noteworthy that over the past
few years, growth in African countries has remained surprisingly resilient in the face
of fluctuating growth in the advanced economies and the ensuing uneven recovery. It
is however important to note that this growth is unevenly distributed across Africa
and that a number of important challenges remain if strong growth is to be sustained
and its benefits distributed equitably. Improved global growth and the strong supply
response of the on-going reforms taking place in many African economies set the
stage for further growth for the continent.


These positive growth rates notwithstanding, there are a number of world
developments, which should continue to be a cause for concern to us. These include
the strong increase in the international prices of many commodities in the past year.
Some, such as the prices of petroleum, fats and oils, metals, etc have surged very
significantly during the year to reach their highest levels in several years. Oil price for
example, hit an all time high of US$42 per barrel in May, it was US$27 only a year
ago.    Rising global demand in the face of restricted production and supply, are
common factors behind the rapid hike in these prices, particularly the strong growth
in China’s demand for raw materials and energy. The substantial depreciation of the
United States dollar vis-à-vis other major currencies has also contributed to the
higher prices of commodities.


These developments have had negative implications for emerging economies such as
ours. The major impact includes the following:


·      Import bills rising faster than export receipts have widened the trade deficit
       resulting in disequilibrium in the balance of payments.
·      Increased pressure on the foreign exchange market due to increased demand for
       foreign currency leading to the depreciation of the currency


       The realisation in Africa that greater effort is needed on our part if we must
       catch up with the rest of the world provides some comfort.


·      Market distortion arising from adoption and/or use of non-quantitative and
       administrative barriers to trade, continue to militate against Africa.          The
       performance indicators testify to this.   Africa’s share of international trade fell
       from 4 per cent in 1980 to less than 2 per cent in 1999.


·      The debt burden is also of considerable concern. Africa’s debt stock has been
       mounting in spite of the HIPC and other initiatives including debt rescheduling.
       The debt burden directly affects growth and development.        Africa’s total debt
       stock is put at US$265 billion or 12% of all developing countries foreign debts.
       Debt Service Charge is estimated at US$33.6 billion per annum. Debt/Export
       revenue ratio stood at 175.2 per cent at end 2003 falling from 203 per cent in
       2002, as a result of debt rescheduling.
·   Capital flows into the region is also inadequate. Private foreign investment is
    low, while official flows are predominant.


All of these contribute to shaping Africa’s weak economic performance.


The driving force is stable macro-economic environment, sound policy, structural
reforms and political stability.



*     Sub-Regional Developments

Distinguished Ladies and Gentlemen,


I do not intend to spoil your night with depressing statistics about the economic
performance of the sub-region as this would be tantamount to showing you only one
side of the coin. The more pleasant face of this coin shows the sub-region displaying
some of the world’s leading exporters of crude oil, diamonds and gold, as well as
abundant maritime resources. Many countries in the sub-region continue to perform
well in the global market for other commodities, including cocoa, cotton and
groundnuts. However, when the abundant resource endowment of the sub-region is
set against its pandemic poverty, we see a development paradox that challenges
theorists and policy markers alike.


Several reasons have been advanced for this state of affairs.               They include
inappropriate macroeconomic policies, weak capacity and severe exogenous and
endogenous factors. Time will not permit me to dwell on the relative contribution of
each of these factors to the overall economic difficulties of the sub-region, but
certainly restrictive trade practices, orientation of powerful countries away from
Africa to other regions of the world, governance and corruption issues, may be
plausible explanatory reasons. Suffice it to say that efforts to address the resultant
problems, underpin the current far-reaching reforms undertaken by governments in
the sub-region.    These include financial sector reforms, public sector reform The
establishment/support      of   good   governance   and   anti-corruption    institutions,
increased investment in education and training, and divestiture of government
interest in private enterprises, to name a few.
Following several years of persistent reforms, some modest improvement has been
registered in recent times.   Real GDP growth rates of most countries in the sub-
region averaged 4.3 per cent in 2003, compared with 3.7 and 1.9 per cent in 2001
and 2002 respectively. The average fiscal deficit to GDP ratio improved significantly,
from 4.2 per cent in 2002 to 0.7 per cent in 2003, although most of the economies
remained fiscally fragile. Inflation rate accelerated marginally to 6.0 per cent from
5.5 per cent in 2002.      Overall, the external sector of the sub-region improved
somewhat as the current account position recovered from a deficit to GDP ratio of 4.3
per cent in 2002 to 1.7 per cent in 2003, driven by the significant turnaround in the
export growth of 4.5 per cent in contrast to the decline of 3.0 per cent in the
proceeding year.



*     Domestic Economic Developments

Nearly eleven years of civil conflict devastated Sierra Leone’s economy and
destroyed/disrupted the productive sectors, agriculture, mining manufacturing etc.
With abundant land and water resources as well as a resilient and hardworking
population, there is great potential for economic turn around, sustainable growth and
development.


The country continue to maintain cordial relationships with multilateral and bilateral
donors, especially the World Bank the International Monetary Fund (IMF) the African
Development Bank, (ADB), Islamic Development Bank (IDB) UN System organizations
(UNDP, UNICEF, UNFPA, WHO, UNHCR, UNAMSIL, the United Kingdom Department
for International Development (DFID) and the European Union.         Over the period
under review the third and fourth reviews of the Poverty Reduction and Growth
Facility (PRGF) programme with the Fund were undertaken.          The outcomes were
generally satisfactory culminating in the immediate disbursements of a total of
SDR28mn for balance of payments support. An IMF Mission was here in June on the
first phase of the fifth review and the Mission’s report shows satisfaction with
developments in the economy and management of the programme. The Executive
Board of the Fund also approved the disbursement of SDR23.64mn as additional
Interim HIPC assistance to the country to meet its debt obligations and development
goals.
Furthermore the European Commission approved a five year (2003-7) Country
Strategy Paper (CSP) for economic assistance to the Government of Sierra Leone,
which is to serve as the framework for the disbursement of 220m Euros from the
European Development Fund over the five-year period.


Distinguished Guests, Ladies and Gentlemen
The commencement of a Disarmament, Demobilization and Reintegration (DDR)
programme and cessation of hostilities in Liberia have contributed to strengthening
peace and security in Sierra Leone and directed focus and resources towards
promoting economic growth and reducing poverty.             Productive activities have
recommenced all over the country.      Large investments are obvious in the mining,
manufacturing, service sector as well as the hotel industry with the local commercial
banks rising to the challenge of providing credit to these often-neglected sectors. The
start of kimberlite mining, better supervision of alluvial diamond mining, the ongoing
preparation by Sierra Rutile Limited towards production and the support given to the
agricultural sector, at the highest level of government culminating in His Excellency
the President’s clarion call for Food for all by the year 2007, have all contributed to a
projected real GDP growth rate of 9.4 per cent in 2004 as against a 7.0 per cent
earlier projection.


In the fiscal sector, though there has been some improvement in revenue collection,
yet the revenue levels are not yet high enough to accommodate Government’s vital
expenditure needs of rehabilitating the basic infrastructure necessary to provide
health, education and transportation on a sustainable basis.           Funds are also
required for the Government’s new responsibilities, which included the strengthening
of both the police and military forces to assume full responsibility for national
security, as the international community reduces its support and intervention in
maintaining peace and security in Sierra Leone.
The process of decentralisation culminating in the installation of local government
structures across the country, have added pressure on the already over-stretched
resources.   The delays and sometimes non-disbursement of expected donor funds
means that the resulting fiscal deficit would have to be financed domestically, with
the Central Bank accounting for a significant proportion.    Add this development to
the high growth in credit to the Private Sector, it is not surprising that monetary
aggregates have grown faster than was projected. This has led to inflationary
pressures and further depreciation of the exchange rate. The year on year rate of
inflation which at end 2002 was –3.08 per cent has risen to 11.29 per cent by end
2003 and is presently about 14.62 per cent for June 2004.


Against the backdrop of these developments, monetary management has become
even more challenging, with the Bank maintaining a tight monetary policy stance
through intensified open market operations. The resultant effects have been
increases in the average annual yield on Treasury Bills and the interest rate on
Treasury Bearer Bonds from 14.94 per cent in June 2003 to 24.85 per cent in June
2004 and 15.00 per cent in June 2003 to 25.00 per cent in June 2004, respectively.


The Bank instituted in July 2004, policy measures aimed at containing monetary
growth and mopping up excess liquidity in the banking system.           The statutory
reserve requirement ratio of the commercial banks has been raised from 10 per cent
to 12 per cent. Active trading in Government securities in the secondary market is
being encouraged.


Admittedly, the increase in reserve requirements would reduce the banking system’s
ability to give out loans. However, moderating the current rapid growth in private
sector credit would not only result in the attainment of high credit standards, it will
facilitate achievement of sustainable credit growth in the medium term. Furthermore,
the Bank is in the process of installing a new electronic book entry system, which will
facilitate the issuing of dematerialised securities, and introducing repurchase
agreements (repos) by the end of the year. These measures are all geared towards
deepening the financial market and attaining a high degree of flexibility in monetary
policy operations.
*     40 Years of Central Banking

Your Excellency, Ladies and Gentlemen

I did say earlier that the Bank is celebrating its 40th anniversary. When its doors

were opened on Tuesday 4th August 1964 only three years after the country’s
independence, it was not only a manifestation of the widely held belief then, that
political independence without economic independence was hollow, but a resolute
determination of the founding fathers to create institutions that would efficiently
manage the economy of a young emerging state. By its creation, Sierra Leone moved
from being a member of the West African Currency Board to its own central bank,
The Bank of Sierra Leone. The act setting up the Bank was very clear on what the
Central Bank was to do – “issue legal tender and maintain external reserves in order
to safeguard the international value of the currency”. To ensure the strength of the
currency the Leone had a fixed parity with gold and external reserves to be
maintained at 50 per cent of notes and coins in circulation.         Advances of the
Government were always expected to be temporary and to be repaid before the end of
the year, with no new loans given if the outstanding credit was not repaid.


Over the years the role and functions of the Bank have grown and its focus has also
changed significantly.   Developments both in the global and national environment
have led to several amendments to the Bank of Sierra Leone Act with the latest being
the Bank of Sierra Leone Act 2002, taking on board provisions to meet the challenges
         st
of the 21 century. The Bank’s functions now include the formulation and execution
of monetary and exchange policy, supervision and regulation of commercial banks
and all financial institutions, the promotion of an effective payments system and the
development of a sound financial system.


The Bank has developed new regulatory guidelines for other financial institutions and
is in the process of registering them. It has facilitated the establishment of four
community banks in Marampa-Masimera, Yoni, Segbwema and Mattru Jong, with
two more being supported in Kabala and Zimmi.
The rationale for this initiative is to empower rural communities to own and drive
their own development process.


New commercial banks have over the forty years emerged and taken their place side
by side with the only two colonial Banks then - Standard Chartered Bank and
Barclays Bank (now Rokel Commercial Bank) which is indigenously owned and
managed. Presently, there are six commercial banks and a licence has been granted
to a seventh the International Commercial Bank Sierra Leone Limited, which is
expected to start operations soon. Modalities are under way to grant licences to the
Cooperative Development, Sierra Leone Housing Corporation Bank and the Post
Office Savings Bank, to legitimize their operations. The objective is to diversify and
deepen the financial sector and make it more competitive and responsive to the needs
of a growing economy.


Other initiatives that have been embarked on include reform of the payments
systems. A National Payments Committee is now in place and has produced the first
draft of the “Bills of Exchange” and the “Payments System” Acts to support the
reform and modernisation of the payments system. An electronic book entry system
to be in place soon will enable the Bank issue dematerialised securities.


The Bank has also facilitated the drafting of an Anti-Money Laundering Act, now
before Parliament.   Other recent development includes the creation of a Capital
Market, Private Sector and Micro- Finance Units.



*     Looking Ahead

Distinguished Guests,
What then does the future hold for the Bank and the country? The prospects are
extremely bright in the medium to long term, when the real sector of the economy
would have taken off. In the near term, the Bank will strive to fulfil its monetary
policy objectives of “maintaining low inflation rate consistent with achieving high
sustainable economic growth and financial stability.” It will increase the instruments
available for it to do this as well as improve on its monetary operations. For the
Bank to be successful would require the strengthening of the existing working
relationship with the Ministry of Finance so that fiscal and monetary policies will not
be operating in isolation but will complement each other. The establishment of the
Economic Policy Coordinating Committee, which brings together the Bank and the
Ministry of Finance and chaired by the Honourable Minister of Finance, has
tremendous potential to bridge this gap. The Bank will also strive to build a sound
financial system not only by supervising and regulating the existing financial
institutions, especially monitoring the loan portfolios of commercial banks to ensure
that they meet high credit standards, but also by promoting institutions that will
increase financial intermediation in the rural areas. Where there are no commercial
banks the people in the area will be encouraged to establish a community bank for
their locality.


Micro-Finance is also considered as one of the effective tools in reducing poverty.
However, unless there is a well-defined policy, strategy and effective structure as well
as supervision, the desired objectives are not likely to be realized. The Bank of Sierra
Leone therefore has an important role in the institutionalisation of micro Finance and
it will be responsible not only to supervise and regulate the institutions, but also has
a responsibility for ensuring that resources are properly utilized and tracked. A draft
Regulatory Framework has now been developed and it is hoped that this will soon be
tabled and discussed at a Development Partnership Committee (DEPAC) Meeting.
The Bank of Sierra Leone is a committed member of the African Rural Agricultural
Credit Association (AFRACA), which is aimed at promoting the provision of financial
services to the rural population in Africa.          The Bank currently holds the
chairmanship for the West African zone for the two-year period spanning 2002 to
2004. We will endeavour to meet our responsibilities to this organization, which has
great    potential   for   supporting    a   wide    range    of   rural    agricultural
projects/programmes.


Distinguished Guests,
It has become apparent to Governments and policy makers in Africa that in order for
the continent not to miss out on the benefits of globalisation, the countries in Africa
need to speak with one voice.        This thinking has resulted in the African Union
evolving out of the OAU with a clearer vision and the New Partnership for African
Development (NEPAD) mapping out a multifaceted strategy for eradicating poverty in
Africa and ensuring that the continent participates in the globalisation process.


As one of the pioneering Banks for the West African Monetary Zone (WAMZ) The
Bank of Sierra Leone is bracing itself for the envisaged West African Monetary Union.
The WAMZ comprises of The Gambia, Ghana, Nigeria, Guinea, and Sierra Leone.
This is considered as the fast track approach to monetary and economic union in
ECOWAS. July 1, 2005 has been slated as the date for the establishment of the West
African Central Bank (WACB).        The implication is that Member Countries Central
Banks     will cease being independent Central Banks but would be branches of the
new independent West African Central Bank, which will be responsible for monetary
policy in the zone and issuing the currency ECO. This monetary union is expected to
eventually merge with the UEMOA countries, which use the CFA, for the ECOWAS
Monetary Union and eventually one of the building blocs that would go towards the
creation of the Central Bank of Africa (CBA).         Given that the progress towards
monetary integration is based on the ability of member countries to achieve macro
economic convergence, it is incumbent on all of us to work hard and contribute to a
turn around of our economy and country through the strengthening of economic
growth and wealth creation.        At the same time we should not lose sight of the
implementation of the poverty reduction programme as would be outlined in the soon
to be completed Poverty Reduction Strategy Paper (PRSP), as it is only within this
context that Sierra Leone will achieve strong economic performance.


The policy challenges for long term sustainable growth include, enhancing real sector
performance;     maximizing      domestic   revenue   mobilization;   guaranty       investors
protection and ensure transparency and accountability; design robust policies and
appropriate mechanisms to avert systemic dislocation; minimization of distortions
and maximization of performance by encouraging fair play and competition; reducing
restrictions on capital mobility and establishing an appropriate institutional
framework   to    ensure   the    growth    and   development   of    the   equity    market.
Consideration should be given to fiscal incentives in the form of differential tax
treatment of equities on the one hand and bank deposits and other debt instruments
on the other.


Distinguished Ladies and Gentlemen
Finally, let me pledge to you that the Bank of Sierra Leone as an independent central
bank, is committed to the overriding objective of developing a strong, vibrant and
prosperous      economy,   and   to   contribute   professionally   and   effectively   to
global/regional, sub-regional and national initiatives and efforts in building a
prosperous environmentally sound and egalitarian society for the present generation
without compromising the needs of future generations.


I thank you all for your attention.




                                      Dr J.D Rogers
                                        Governor
                                 Bank of Sierra Leone

				
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