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Sierra Leone’s Macroeconomic Situation Remains Challenging Despite Bold Policy Measures

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Unlocking the bottlenecks to robust and sustained real growth through economic diversification and addressing pre-existing macroeconomic weaknesses will be crucial for building a resilient economy that promotes inclusive growth and reduces poverty, according to the new World Bank Sierra Leone Economic Update (SLEU) launched today in Freetown. The country’s macroeconomic situation remains challenging despite the bold and courageous policy measures taken by the new government.

Growth is still low (3.7 percent), inflation and exchange rate depreciation are high (16.8 and 11.8 percent, respectively), the fiscal and current deficits are high (6.6 and 13.8 percent, respectively), and increasing debt has resulted in the country being downgraded from moderate to high risk of debt distress. However, the medium-term outlook is promising, with growth expected to reach 5.2 percent by 2021, driven primarily by supply side factors, including favorable agricultural output, uptick in mining activities and strong performance of the services sector, the report notes. Key risks to the growth outlook include a deterioration in Sierra Leone’s terms of trade; lower than anticipated FDI inflows and the effects on the exchange rate and prices; fiscal slippages including adverse debt dynamics; and financial sector weaknesses.

The SLEU is an annual publication that reports on and analyzes recent economic developments, reviews regional and global contexts and analyzes the implications for the country, and presents the medium-term outlook and prospects for the economy. The 2019 Update focuses on promoting inclusive growth and poverty reduction, namely ‘Financial Inclusion for Economic Growth and Development’. The target audience for the SLEU includes policy makers, business leaders, development partners and analysts interested in Sierra Leone’s economy.

“There is an urgent need for Sierra Leone to develop a comprehensive strategy for deepening the financial sector and this is required to ensure poverty reduction, job creation, investment and growth in the country,” said Gayle Martin, World Bank Country Manager for Sierra Leone. “Whether Sierra Leone can promote sustained inclusive growth and reduce poverty depends on whether it can modify the structure of the economy to generate more and better-paid manufacturing and service jobs. That could be accomplished by facilitating creation by the private sector of formal manufacturing and services activities and increasing the productivity of the informal sector.”

The special topic of the 2019 Update focuses on deepening the financial sector for inclusive economic growth and development. The report notes that usage of the financial system is low in Sierra Leone with only about 5 percent of adults using formal savings products and about 54 percent saving money within the past year. Access to finance for enterprises is a significant barrier to growth of the private sector with 40 percent of firms indicating lack of credit as their biggest constraint. Only 11 percent of Sierra Leoneans have mobile money accounts compared to 20.8 percent in Liberia, 38.9 in Ghana and 72.9 percent in Kenya.

“The government plays a key role in developing the financial sector through promoting resilience and stability. One of the key functions that needs to be established is an effective supervision and regulatory regime for financial institutions to address market failures like anti-competitive behavior, market misconduct, information asymmetries, and systemic instability, which can negatively impact financial sector development, economic growth, and shared prosperity,” said Youssouf Kiendrebeogo, World Bank Senior Economist and one of the authors of the SLEU.

To address existing macroeconomic weaknesses and enhance economic growth, the Sierra Leone government should maintain the fiscal consolidation path, improve debt policy and management and intensify efforts to clear the large stock of arrears.

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Assessing the challenges and opportunities of Africa’s energy future

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The International Energy Agency has significantly deepened its engagement with Africa in recent years, including through greater dialogue with governments and business leaders, increased training programmes for policy makers and expanded analytical work.

Today, several ministers from African countries took part in a special roundtable event about the continent’s energy future that was hosted by the IEA ahead of the Agency’s biennial Ministerial Meeting. It was chaired by Amani Abou-Zeid, the African Union’s Commissioner for Infrastructure and Energy, and Alessandra Todde, Italy’s State Secretary of Economic Development.

The roundtable included the Energy Ministers of Morocco, Senegal and South Africa, as well as other key stakeholders from government, industry and international organisations. The discussions assessed Africa’s energy challenges, took stock of the findings from the IEA’s recent Africa Energy Outlook 2019 and explored the opportunities for further IEA engagement to help African countries’ achieve universal access to affordable, secure and sustainable energy.

“How Africa meets the energy needs of a fast-growing and increasingly urban population is crucial for its economic and energy future – and the world. That is why the IEA is strategically enhancing its engagement with African leaders and convening its partners here today,” said Dr Fatih Birol, the IEA’s Executive Director. “The IEA is fully committed to supporting African countries in achieving sustainable and prosperous energy transitions in the coming decades.”

In June, the African Union Commission and the IEA co-hosted their first joint ministerial forum, which brought together high-level representatives from government and industry in Addis Ababa to discuss the development of Africa’s energy sector. Dr Birol announced today that the second ministerial forum will take place in April 2020 and that South Africa has offered to host the event in line with its 2020 presidency of the African Union.

Following the meeting, the IEA and Senegal signed a Memorandum of Understanding to increase cooperation.

The 2019 IEA Ministerial Meeting is taking place in Paris on 5-6 December. It is chaired by Mr Michał Kurtyka, Poland’s Minister of Climate and the President of COP24. Ministers of IEA Member, Accession and Association countries and CEOs of leading companies are attending the meeting.

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8th Euronest Assembly: The future of relations with Eastern partners

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Energy security, EU-Eastern relations and geopolitical challenges are set to be among the focus points of the 8th session of the joint parliamentary assembly.

Members of the Euronest Parliamentary Assembly will meet in Tbilisi, Georgia, for the 8th Ordinary Session, from 8 to 10 December. The Assembly is comprised of 60 MEPs and 10 members from each of the participating parliaments of the Eastern European partners (Armenia, Azerbaijan, Georgia, Moldova and Ukraine).

Georgian Parliament Speaker Archil Talakvadze will open the session on 9 December. The meetings will be co-chaired by MEP Andrius Kubilius (EPP, LT) and Ivan Krulko, member of the Verkhovna Rada (Ukrainian parliament).

European Parliament President David Sassoli will be represented in Tbilisi by Vice-President Klara Dobrev (S&D, HU).

Political affairs, economic integration, energy security and social matters

The opening session will be preceded by several meetings of the different Euronest committees and working groups, focussing on a wide range of subjects.

Participants will adopt resolutions on political affairs, economic integration, energy security and social matters. As 2019 marks the 10th anniversary of the Eastern Partnership, members will also reflect on the future of this policy, in the run-up to the next Eastern Partnership Summit scheduled to take place in the spring of 2020.

Background

The Euronest PA was established on 3 May 2011 in Brussels, when the Presidents (or their representatives) of the Armenian, Azerbaijani, Georgian, Moldovan, Ukrainian and European Parliaments signed the Assembly’s Constitutive Act.

The mission of the Euronest Parliamentary Assembly is to promote the conditions necessary to accelerate political association and further economic integration between the EU and the Eastern European Partners, as well as to strengthen cooperation within the region and between the region and the EU. The multilateral Assembly contributes to strengthening, developing and making the Eastern Partnership visible.

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Bringing solar-powered water sanitation systems to Ethiopia

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photo: UNIDO

The provision of clean water to its citizens is one of the most urgent and important issues for the Government of Ethiopia. Economic studies conducted in Africa have shown that impacts resulting from poor sanitation and hygiene cost economies between 0.9% and 2.4% of annual Gross Domestic Product. This figure reflects the a) adverse health effects associated with poor sanitation and water supply, b) costs of treating these health problems, c) loss of productivity that results when individuals are sick and others have to care for them, and d) time spent accessing existing water and sanitation services.

About 60% of Ethiopia’s rural population do not have access to basic water services and, as of 2015, 14% – around 11 million people – relied on surface water for drinking purposes. Climate change-induced water shortages are adding to the problem. Droughts have affected several areas of the country, leading to water sources drying up or becoming extremely shallow over the past twenty years. Between 2000 and 2018, six drought episodes have been recorded, with devastating impacts in rural areas.

Innovative water sanitation technologies have emerged as potential solutions to the challenges at hand and for promoting social equality and economic growth, while also having further positive externalities, including enhanced safety and security, less water pollution, greater dignity and equality between men and women, growth in tourism and business, amongst others.

Earlier this month, representatives of the United Nations Industrial Development Organization (UNIDO) and the Water Development Commission of the Federal Democratic Republic of Ethiopia launched a one million dollar project to improve water supply, public health and environmental quality by introducing innovative Japanese water purification technology.

The project, “Improving Public Health by Solar-Powered Water Sanitation Systems in Ethiopia”, which is funded by the Government of Japan, will improve the provision of clean water through solar-powered water sanitation systems under conditions of equality and gender equity; develop the technical capacity of communities to independently operate water sanitation systems and improve awareness of public health; and build the capacity of industry, engineering, procurement and construction contractors in order to strengthen their role in Ethiopia’s water and sanitation sectors.

During the signing ceremony, UNIDO Representative and Director of the regional office, Aurelia Calabro, expressed UNIDO’s gratitude to the Government of Japan for its continued support for enhancing the water and energy sectors in Ethiopia. Calabro further emphasized the critical importance of introducing new energy-efficient, water-purifying technologies that are easily adaptable and can sustain communities in need. She has also commended the commitment of the Government of Ethiopia in jointly implementing the project with UNIDO.

His Excellency Dr. Beshah Mogesse, Commissioner for Water Development, highlighted the impact of the project on the ongoing national ONEWASH programme targeting improved health and well-being of communities by increasing sustainable and climate-resilient water supply and the adoption of good hygiene practices. 

His Excellency Daisuke Matsunaga Ambassador of Japan reaffirmed the strong dedication of the Government of Japan to strengthen the partnership through the introduction of innovative technology, capacity building and skills transfer.

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