Sierra Leone Economy Facts
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).
- Countryaah.com: Major imports by Sierra Leone, covering a full list of top products imported by the country and trade value for each product category.
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).
- Abbreviationfinder.org: Check this abbreviation website to find three letter ISO codes for all countries in the world, including SLE which represents the country of Sierra Leone. Check findjobdescriptions to learn more about Sierra Leone.
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.
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)
US $ 4,000 million (2018)
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)
15.7 percent (2019)
Government debt’s share of GDP
63.0 percent (2018)
US $ 1 731 million (2017)
US $ 652 million (2017)
US $ 1,190 million (2017)
– 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