By Juliana E. P. Kabba
Freetown, Sierra Leone
The Bank of Sierra Leone (BSL) has taken a decisive step to address inflation by raising the Monetary Policy Rate (MPR) by 0.50 percentage points, bringing it to 24.75%. The decision was made during the 543rd Monetary Policy Committee (MPC) meeting on September 30, 2024, and approved unanimously by the BSL Board of Directors.
Governor Dr. Ibrahim L. Stevens, who chaired the meeting, stated that the rate hike is necessary to curb inflation and prevent potential overheating of the economy. “Our commitment to stabilizing the economy and protecting the interests of the public is paramount,” said Governor Stevens. “While we have made strides in reducing inflation, we must remain proactive in addressing the factors that contribute to price instability.”
Sierra Leone has seen substantial progress in its battle against inflation over the past year. Headline inflation dropped from 54.59% in October 2023 to 25.49% in August 2024. This reduction has been attributed to a mix of effective monetary policies, stable exchange rates, prudent fiscal management, and falling global commodity prices.
However, despite these improvements, the BSL is maintaining a cautious approach. The latest interest rate hike is designed to further stabilize prices, as higher rates are expected to limit borrowing and reduce consumer spending, ultimately helping to control inflation.
While the central bank’s move aims to maintain economic stability, the impact on businesses and consumers is expected to be significant. Small business owners, in particular, have raised concerns that the increased cost of borrowing may hinder their ability to invest and expand, which could slow the country’s economic recovery. Additionally, Sierra Leoneans already grappling with the rising cost of living may face further challenges due to the rate increase.
The new MPR will take effect on October 1, 2024, and the next MPC meeting is scheduled for December 19, 2024, to reassess the country’s economic outlook. Economists, policymakers, and the general public will be closely watching how the interest rate hike influences inflation and overall economic growth in the coming months.
In conclusion, while the BSL’s decision reflects its commitment to controlling inflation, the long-term effects on businesses and consumers remain to be seen. The central bank will need to strike a delicate balance between stabilizing the economy and supporting economic growth as Sierra Leone navigates its current financial challenges.
