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Depreciation of the Leones

Opposition Lawmaker demands Bank Governor’s resignation

October 28, 2019

By Jariatu S. Bangura

Bank governor not fit for purpose?

The main opposition All People’s Congress (APC) Member of Parliament, Hon. Sallieu O. Sesay of Constituency 038, Bombali District, has on Thursday (October 24) called on the Governor of the Bank of Sierra Leone, Professor  Kelfala Kallon, to quit his position as the country’s’ currency continues to surrender to the United States Dollars.

The legal tender has continued to depreciate as against foreign currencies, especially the US Dollar in recent times, despite series of measures instituted by the current governor to stablilise it.

The exchange rate of $100 USD to the Leones is above one million Leones and the situation has created serious economic crisis in the country, with prices of consumer goods skyrocketing on a daily basis.

Last week, the opposition lawmaker argued that although the increase in exchange rate has been a perennial issue, but it has become more prominent when the Sierra Leone Peoples Party (SLPP) administration took over, thus urging the Bank governor to resign.

“As long as we don’t have productive investors, we can’t control the exchange rate. Don’t be surprised, if I were him I would have resigned, trust me. It is always easy when you are outside to critique or to proffer solutions, but when you take over office the practicality and the implementation is difficult. This is what the current bank governor is facing. He cannot change the situation, and he cannot change the dynamics. The auction is just a waste of time. You are just providing funds for the boys to take advantage of the situation. I critique it in this parliament and I know there is no way we can use the auction as a method to reduce the exchange rate,” he said.

He observed that there has been difficulty in attracting productive investors to aid the country in this current economic crisis, noting that the auctioning of the US Dollars by the Bank will neither help nor control the current exchange rate.

He urged authorities of the Central Bank to think of new ideas that would rejuvenate the economy.

He alleged that the Central Bank is making a policy for commercial banks that would not allow them to give loans to politically attracted people, which according to him, was not a prudent economic measure for the country.

Chairman of the Finance Committee in Parliament, Hon. Francis Kaisamba, said they have been yearning for such meeting as there has been too much public outcry over the ballooned rate of the foreign exchange, which he said has become a burden on them as the people’s representative.

He said there was need for them to collaborate with the Ministry of Finance, to address the numerous challenges in the exchange rate, stating that there were lots of actions that would have been taken to customise the effect of the issues at hand.

In his respond, Deputy Bank Governor, Dr. Ibrahim Stevens, said the exchange rate is unpredictable, but that there was need to export more to address the issue.

He added that the bank has been effective in carrying out its mandate.

“We don’t have a magic bullet, but we have to do everything we can. If we can maximize production, it will help. If we export iron ore, we will realize more benefit. We have had a reasonable managing environment.  The auctions were done to address volatility, but we don’t have the facility to do it in a large extent because of the legal statutory requirement that has to be followed,” he said.

He noted that the market determines the exchange rate and not the Bank of Sierra Leone, as they only intervened to prevent the persistent movement of the rate as it creates uncertainty.

He said they have spent an amount of $28m to pay off the debt the central government had with the reserved they had kept within the past years.

He said they cannot assure the committee that they would bring the dollar rate down, but that they will try to minimise it as they operate under the law that regulates them.

Dr. Stevens said the role of the bank is to act as banker, adviser and fiscal agent, to support the general economic policy of the government, and to provide for the maintenance of price stability and stable financial system, with the view of providing for the formulation and implementation of monetary policy, financial regulations and prudent standards.

He stated that the impact on the monitoring of the exchange rate has been accurate as they were able to meet the needs of most commodities from going to the black market.

He further revealed that they had to enter into a swap-foreign exchange business with some commercial banks.

 “We invest the dollars in a less risk investment with the Leones they brought to the Bank of Sierra Leone with the interest given to the government. That investment has helped us to pay contractors to do their work,” he said.

Dr. Stevens maintained that as part of their mandate to stabilise the financial system, they were engaging the financial institutions to introduce technology in the banking system as it will bring up new ideas on the growth of the economy.

He said they face constraint with the instrument used in the banking sector as they only use open market operation for purchasing, thus claiming that the inter-banking market is weak which is affecting the economy.

Meanwhile, the committee concluded that the needful should be done among the concerned stakeholders in order to address the burning issues affecting the exchange rate.

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