Economical overview
Sierra Leone could be a fairly prosperous
country, mainly thanks to large mineral resources, but
from the beginning of the 1980s the economy was steadily
deteriorated by corruption and neglect. The civil war
1991–2002, as well as the 2014–2015 Ebola crisis, have
diluted the problems. According to the World Bank,
Sierra Leone was the eighth poorest country in the world
in 2013.
During the war almost all economic activity was
interrupted. Since the country regained peace, growth
has long been relatively high, although the population
in general did not experience any real improvement.
Almost 60 percent of the inhabitants were still
estimated to live below the poverty line in 2011 (at
less than $ 1.25 / day; more than four fifths lived at
less than $ 2 / day).
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The basis of the economy is agriculture, which until
the mid-1990s accounted for half the gross domestic
product (GDP), but it is the minerals that account for
export income (although attempts are made to sell
agricultural products on the international market - see
Agriculture and Fisheries). At the same time, the
mineral sector is entirely dependent on the fluctuations
in the world economy. For example, iron ore exports
generated revenues of just over $ 15,000 in 2011, $
357,000 in 2012, and close to $ 1.1 billion in 2013.
Decreased demand and lower prices then, together with
the Ebola crisis, led to falling revenues (see below).
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The decay begins
The economic decline began under President Stevens
(1967–1985; see Modern History) and gained momentum
during the Momoh government (1985–1992). Corruption took
place throughout the public administration, the
political leaders committed illegal diamond mining with
the help of private militias, the smuggling robbed the
state of large incomes, the public wages were allowed to
increase more than the economy was able to, and the
state offices were filled with "ghost workers" - non-
existing persons whose wages ended up in the pockets of
others. State money was wasted on poorly planned
projects. From 1985 to 1995, inflation averaged just
over 60 percent per year. GDP fell during the same
period by an average of 3.6 percent per year.
During the war years in the 1990s, all attempts by
the government to decontaminate and stabilize the
economy were unsuccessful, not least because a number of
mines came under the control of the rebel movement Ruf.
Increased growth and inflation
In September 2001, the International Monetary Fund (IMF)
granted a loan of US $ 172 million at low interest
rates, provided that the government could keep the
promised pace in combating the deep poverty that most
Sierra Leonians live under. With reference to the
country's "remarkable progress", the loan began to be
paid off in installments from 2002. Since the country
gained peace, growth has long been stable at 5-7 per
cent a year. At the same time, inflation - often 10-15
per cent per year in the 2000s - largely outweighed the
improvements that growth created. At the beginning of
2010, inflation rose dramatically to 17 percent, which
was, however, explained by the VAT introduced in 2009 of
15 percent. The price increases then became
significantly lower.
According to IMF forecasts, the economy would grow by
more than 30 percent in 2012, thanks to two foreign
companies, London Mining and African Minerals (AML),
that year began to export iron ore on a large scale
(though not as large as expected, partly on due to bad
weather and rail transport problems). AML also decided
to scrap the plans to build a new port. This led to the
economy reaching only half of the IMF's optimistic
forecast.
The Ebola crisis is stopping the economy
The Ebola epidemic hit the economy hard. GDP, which
grew by more than 20 percent in 2013, fell sharply in
2014 and ended at minus 2015. Low world market prices
and reduced demand for iron ore contributed to the
problems; the price was halved in 2014 and most of the
mines in Sierra Leone were closed. The mining company
AML was acquired by the Chinese Shandong Iron and Steel
Group, which resumed mining in 2015. To assist Sierra
Leone and the other two countries affected by Ebola,
Liberia and Guinea, the IMF and the World Bank pledged
financial aid of one billion US dollars. In March 2015,
the IMF also granted more than $ 29 million in debt
write-offs to Sierra Leone.
Debts are written down
Already in 2006, the IMF and the World Bank had
decided to write off about 90 percent of the country's
foreign debt, about USD 1.6 billion, as a reward for
stabilizing the economy and improving the government's
work. In addition, $ 610 million was written off in line
with the G8 countries' promise for debt relief for
Africa in 2005. This strengthened the government's
ability to invest in education, health care and rural
development work. These increased expenses led to a rise
in debt again. A new three-year IMF loan of about $ 46
million was approved in 2010. The loan required improved
tax collection, greater accuracy with how the state's
money is used, increased openness about public
procurement, sharpened efforts against corruption and
better control of public operations being financially
sustainable.
According to the World Bank, the lack of electricity
has reduced growth by up to a few percentage points per
year. Thanks to a large hydropower plant in Bumbuna in
the north (see Natural Resources and Energy, which came
into operation in 2009), the problems have diminished
but are far from being solved.
Diamonds have long been the most important export
commodity, but the illegal export is still believed to
be large. The smuggling of diamonds was estimated in the
1990s to have robbed the state of $ 200 million every
year. A dispute between the government of Sierra Leone
and the company Octéa, which owns the largest diamond
mine in the country in Koidu, risked the diamond mining
to end there. Rutile (titanium oxide), bauxite and gold
also provide export earnings. Like the diamonds, gold
has previously been largely smuggled out of the country.
A four-year poverty reduction program came into force
in 2005, a condition for continued support from the IMF
and other donors. The program entailed a thorough
analysis of the causes of poverty such as war, the lack
of basic community service and poor political
leadership. Continued shortcomings in public
administration, corruption and weak tax collection were
seen as contributing causes. After all, according to
Transparency International, corruption in Sierra Leone
has decreased in recent years and the country has
climbed nearly 30 placements on the organization's
index, ranking 119 out of 175 in 2015.
Prosperity agenda
In the summer of 2013, a five-year national
development program, Agenda for Prosperity (Agenda for
Prosperity, A4P) was launched in order to accelerate
economic development. This hoped to reduce the
proportion of poor people to less than one fifth of the
population. The long-term goal was to make Sierra Leone
a middle-income country by 2035. To cushion the effects
of the Ebola epidemic, around 50,000 households received
income gains in 2015; an additional 150,000 were
expected to receive such in 2016. Everyone who received
Ebola but survived would receive free healthcare.
The most important donors include, in addition to the
IMF and the World Bank, the African Development Bank,
the United Kingdom, China and the United States. The
donors account for about a quarter of Sierra Leone's
budget, in addition to the special aid due to the Ebola
epidemic.
FACTS - FINANCE
GDP per person
US $ 523 (2018)
Total GDP
US $ 4,000 million (2018)
GDP growth
3.7 percent (2018)
Agriculture's share of GDP
60.3 percent (2017)
Manufacturing industry's share of GDP
2.0 percent (2017)
The service sector's share of GDP
32.4 percent (2017)
Inflation
15.7 percent (2019)
Government debt's share of GDP
63.0 percent (2018)
External debt
US $ 1 731 million (2017)
Currency
Leone
Merchandise exports
US $ 652 million (2017)
Imports
US $ 1,190 million (2017)
Current account
- US $ 535 million (2017)
Commodity trade's share of GDP
56 percent (2018)
Main export goods
iron, diamonds, rutile, bauxite
Largest trading partner
China, UK, Benin, Senegal
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