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Select Economic and Financial Indicators2014201520162017e2018f
Real GDP (% change)4.6-20.56.16.06.1
GDP (USD bn)5.04.33.73.94.1
Inflation (average)8.39.011.516.910.6
Fiscal Balance (% GDP)-3.6-4.5-8.6-5.9-5.4
Broad Money (% change, end period)7.310.36.16.36.5
Population (mn)7.17.27.47.67.7
Exports (USD bn)1.50.80.91.11.3
Imports (USD bn)2.91.91.82.02.2
Current Account Balance (% GDP)-18.2-17.4-19.7-21.1-18.5
FX Reserves (USD bn, end period)0.80.60.50.50.5
Exchange Rate (average)4321.84284.74830.27395.37781.6
Sources: IMF, World Bank, UN, Bloomberg, Ecobank Research

Economic outlook

Economic outlook

Real GDP: Economic activity is likely to expand modestly in 2018 thanks to an improved commodity price outlook (which should boost production in the country’s key export sector, iron ore) and efforts by the government and foreign partners to bring an end to the Ebola crisis that crippled the economy in 2014-15. The latter has ushered in a period of peace and stability, while allowing the government to refocus its attention on promoting its economic policy agenda; this is specifically in the areas of infrastructure development (mainly road construction and energy) and tourism. Efforts to boost activity in these areas should help to open up new sources of growth in the foreseeable future. Already, developments in the tourism sector have increased economic activity in hospitality, adding value to overall productivity. Growth in the non-iron ore economy will also be supported by ongoing and planned reforms in agriculture, fishery and port services. Election-related spending will also lend some support to growth, although uncertainty over the country’s next leader could undermine investment prospect in the private sector and overall private sector contribution.

Inflation: is expected to slow down on account of base effects; however, inflation will remain elevated amid continued strong domestic demand, and exchange rate pass-through effect arising from higher oil import costs and continued high government spending. Other stresses stem from the government’s weak project implementation capacity; this will continue to cause delays in the public works programme, sustaining inflationary pressures.

Fiscal balance: The budget deficit is likely to remain large despite a potential rise in mining tax revenue. Progress in fiscal reforms is likely to stall as government focus shifts in light of upcoming elections, weakening prospect for further IMF disbursements, at least before the election; post-election, we expect the new government, with assistance from the IMF, to resume the implementation reform process with the aim to improve tax compliance, broaden the tax base and strengthen public financial management. However, given the culture of weak institutional structures, fiscal slippages are likely limiting prospect for timely donor financing. Similarly, revenue will continue to underperform given limited private sector activity against a background of high government spending (mainly in recurrent spending), Ebola-related recovery and election-related outlays. On balance, the budget deficit is likely to remain above 5.0% of GDP.

Current account: The deficit on the current account is likely to narrow slightly over 2018 as export receipts rise, mainly in metals, minerals and agricultural commodities; however, higher imports associated with the government’s infrastructure programme, and increased iron ore production, which will boost the need for machinery, while rising oil import costs will exert pressure, sustaining large deficits on the current account. Consequently, this will increase FX demand resulting in a weaker currency over the forecast period.

Risks

Key domestic risks arise from a confluence of factors notably: uncertainty over the 2018 elections, a possible resurgence of the Ebola epidemic and increased fragility in the fiscal position. Concern over the latter is driven by the government’s ability to promote IMF-agreed reforms, and domestic revenue challenges; this is especially given limited activity in the private sector, the government’s growing need to finance its critical infrastructure programme and support growth. Failure to mobilise revenue significantly will result in further cuts in public services, which are already under major strain. Externally, another shock to iron ore prices will pose a major risk for growth and the external balance.

FX, FI and Commodity Information

FX, FI and Commodity Information

Exchange Rate Structure

RegimeManaged float
TargetNo target, but interventions by BSL to absorb foreign-financed budget spending, and reduce volatility
Type of interventionVia auctions 
Convertible currency?No
Market participantsn/a
Source: Bloomberg, IMF, and Ecobank Research

FX

FX ProductsSpotForwardsNon-deliverable ForwardsOptionsSwaps
On offerYesNoNoNoNo
Daily trading volume (USD mn)n/an/a
Average trade size (USD mn)n/a
Average spreadn/a
Trading hours08:30-14:30
Settlement cycleT+2
FX Market StructureThe BSL, donors, and the global corporates are all large suppliers of FX. Commercial banks may buy FX from, and sell it to, individual customers but trading amongst themselves or with the BSL is limited. Recently, BSL began conducting official foreign exchange auctions at preferential rates, with the ultimate aim of providing subsidized foreign exchange to fuel and rice importers. 
Non-resident FX RegulationsSpotForwardsNon-deliverable ForwardsOptionsSwaps
Trade and FDI flowFX payments are currently prioritised for oil marketing companies and commodity importers.n/a
Financial flowNo restrictions
Resident FX RegulationsSpotForwardsNon-deliverable ForwardsOptionsSwaps
Trade and FDI flowFX payments are currently prioritised for oil marketing companies and commodity importers.n/a
Financial flowNo restrictions
Source: Bloomberg, IMF, and Ecobank Research

FI

Primary MarketTreasury billsTreasury notesTreasury bondsCentral Bank billsOMOs
IssuerGovernmentn/aGovernmentn/a
End useGovernment financingGovernment & infrastructure financing
Maturity structure91- to 364-days1- & 2-yr
CouponZeroFixed
Coupon paymentsn/aQuarterly
Secondary Market 
Daily trading volumeLimited trading between commercial banks but BSL provides re-discounting window to banks.n/aLimited trading but only available to customers but not banks.n/a
Average trade sizeLimited trading
Settlement cyclen/a

Ecobank local affiliate contact details:
Ecobank Sierra Leone, 7 Lightfoot Boston Street, Freetown
Tel: +232 22 22 17 04 / 22 78 01
Source: Bloomberg, IMF, and Ecobank Research

FI primary market information

FI primary market information

Sierra Leone Debt2014201520162017e2018f
Government debt (% GDP)35.045.355.960.363.3
    Sub-Sahara average44.552.656.155.655.8
External debt (official creditors, % GDP)22.529.436.843.446.8
    Sub-Sahara average25.530.231.932.933.2
External public debt stock (USD bn)1.11.21.41.71.9
    Share of total sub-Sahara debt (%)0.50.50.50.50.5
Source: IMF; Ecobank Research

Commodity and trade information

Commodity and trade information

Hydrocarbon & mineral production

Sierra Leone’s mineral production industry has suffered a severe downturn under the dual impact of slumping commodity prices & the Ebola outbreak. Sierra Leone produced an estimated 19.2mn tonnes of iron ore in 2014. But the slump in iron ore prices and the impact of Ebola led to the collapse of the country’s two leading projects, including the rich Tonkolili deposit, reducing iron ore output to almost zero. The mine has since been purchased by China’s state-owned Shandong Iron and Steel Group, reflecting the Chinese government’s long-term strategy to secure iron ore for its steel industry. However, production is unlikely to resume until there is a recovery in international prices. Exports of tin, which reached US$236mn in 2014, also slumped to just US$1,000 in 2016.

However, the country’s other mineral production has continued. Diamonds remain a valuable export, with 549,000 carats exported in 2016. Planned investment by Stellar Diamonds & Octea Mining aims to boost output by 250,000 carats/year from their combined Tongo and Tonguma kimberlite mines. The country’s other mineral production included 1.4mn tonnes of bauxite ore, 140,400 tonnes of titanium ore, 106kg of gold and 1,289 tonnes of zirconium (all in 2015).

Sierra Leone has no known oil and gas reserves, despite exploratory drilling by Russia’s Lukoil in 2013. The company drilled an offshore well which encountered some hydrocarbons, but it pulled out of the license in 2015 following poor test results. Sierra Leone consumed 382,900 tonnes of refined petroleum products in 2016, 8.81% higher than the previous year. Diesel and Gasoline made up 47.27% and 40.48% of petroleum products consumption, respectively. A significant proportion of the country’s petroleum products imports are re-exported informally to neighbouring countries. Sierra Leone also imports petroleum products from Côte d’Ivoire and Senegal.

Soft commodity production

Sierra Leone lacks a robust agriculture sector, and produces small volumes of cash crops. The country is a micro producer of cocoa, with estimated output of 10,000 tonnes in 2016/17, although there are projects underway to redevelop dormant cocoa plantations and significantly boost output. The country produced an estimated 756,000 tonnes of milled rice in 2016, making the country the fifth largest producer in West Africa, but output is short of domestic demand, requiring imports to close the deficit.

Trade Flows

Imports

Sierra Leone’s imports totalled an estimated US$958mn in 2016. The country is dependent on the imports of consumer goods, notably vehicles and machinery, worth US$183mn in 2016, pharmaceuticals (US$46mn), electronics (US$45mn) and furniture (US$18mn), some of which are re-exported to its landlocked neighbours. Imports of petroleum products were worth US$65mn in 2016 and industrial raw materials were worth US$101mn, reflecting the country’s low level of industrialisation. Given the country’s limited agricultural production, Sierra Leone imported US$110mn worth of rice in 2016, along with US$20mn of flour and US$26mn of beverages.

Exports

Sierra Leone’s exports totalled US$466mn in 2016, four times higher than the previous year which had been severely affected by the Ebola outbreak. Iron ore was once the country’s key export (worth US$237mn in 2014), but this sector has all but collapsed. In 2016, shrimp (worth US$159mn) and honey (US$142mn) have replaced iron ore as the country’s most valuable exports. An emerging soft commodity export is inulin (polysaccharide) which was worth US$88mn in 2016, most of which went to Belgium. The country also exported US$18mn worth of cocoa and cocoa products in 2016. Sierra Leone re-exports small amounts of machinery, vehicles and plastics to its landlocked neighbours.

  • Flag
  • Population
    7,719,729
  • Area
    71,740 km2
  • Capital
    Freetown
  • Largest city
    Freetown
  • Official language
    English
  • Major languages
    Temne, Mende, Krio
  • Currency
    Sierra Leonean Leone (SLL)

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