‘High Inflation On Food Rate A Problem’  – BSL Governor

By Isha S. Mansaray

‘According to the statistics inflation figures, the non food inflation rates are much lower than the food inflation rates, and it’s a problem,’ said the Governor of the Bank of Sierra Leone, Professor Kaifala Kallon.

The Governor said this at the press conference held in the Statistics Sierra Leone (SSL) conference room where a press release was made on the Consumer Price Index (CPI), March 2021.

He said due to our average economy, the food inflation rates have more impact on the average Sierra Leonean than the non food inflation rates. ‘I wanted a single digit inflation, but I prefer a low food inflation rate, even if the inflation rate is high above 10% inflation aggregate than a low inflation where the food inflation is very high. This is because, the average Sierra Leonean, due to our low income, spends high proportion of his or her income on food.’

The Bank Governor said a commitment was made with IMF to bring down the inflation rate to a single digit as well as to stabilise the foreign exchange market. ‘Around March, when the COVID 19 outbreak started, we spent Le500 billion to finance the importation, production and distribution of essential commodities in the country.’

This was a supplementary means to stabilise the economic issues the pandemic came along with, for which the loan was created at 7 per cent, limited to certain commodities like rice, ‘and they ensured that the money was sent directly to the supplier after they had proven  that it is destined for Sierra Leone’.

Prof. Kallon further lectured the media on the impact of inflation in an economy or macro economy as a whole: ‘When the price level is standard, relatively stable, regardless of where it is, consumers and businesspeople can plan into the future knowing that this is going to be the price level; and as a result of that, there is economic certainty. Where there is economic certainty, contrast can happen in situations where it is volatile, and then we are going to have a situation where that certainty is gone. If that certainty is gone, people will involve in crazy activities in order to hedge against the inflation. There are lots of evidence that show that by creating environments of risk and economic uncertainty, high and volatile inflation tends to drive down the rate of investment and capital accumulation in an economy.’

Still on the impact of inflation on the economy, Prof. Kallon added: ‘As cost of capital rises to investors, they are likely to invest less. And as they invest less, they are likely to create fewer jobs and when unemployment rises, all other problems come with it. So even though inflation stability is destined, we prefer low level of inflation to high level of inflation due to its impact on investments and job creation. Also, when inflation rates are very high, economic agents hedge against inflation, investing on sterile assets that do not promote the economy.’

Prof. Kallon gave exclusive specifications on the negative impact of inflation on Sierra Leoneans: ‘The average Sierra Leonean has only labour. They do not have capital; people who have fixed income surfer from inflation. The poor and average Sierra Leonean has fixed income; but however, businesspeople like inflation because their profits rise to the inflation.’

Prof. Kallon concluded that inflation is on a downward trend, that even though the average inflation is below 10 per cent, they still have lots of work to do.

For his part, the Assistant Director, Ministry of Finance, Lasana Fofanah said, ‘Single digit inflation does not mean prices are not increasing but simply means the pace at which prices are increasing are moderated.’

However, he disclosed to the media one of the reasons for the volatile inflation in the country: ‘If the government runs huge fiscal deficit, we have the Central Bank that pays into the excesses of the government – and that is a recipe of inflation.’

The Ministry of Finance has been pursuing serious policies to ensure that the agricultural sector is fully supported to ensure increase in food production; and thus, they are collaborating with the Ministry of Agriculture to ensure increased food production.

He said they have heavy tasks ahead maintaining the stability of the current inflation index. ‘The challenge going forward will be to maintain the single digit inflation. Also, our economy had been affected by external shocks like the prices of fuel.’

Mr Fofanah assured that the ministry is working tediously to ensure that the single digit inflation is maintained: ‘We will continue to pursue policies that will ensure that our economy is stable and the inflation decreases.’

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