Sierra Leone's central bank slashed its monetary policy rate (MPR) by 300 basis points to 12.0 percent, saying it expects food prices to continue to decline due to a good harvest and non-food prices to remain stable, helping contain inflationary pressures and push inflation further down.
The Bank of Sierra Leone, which has now cut rates three times this year by a total of 800 basis points, also cut its other rates to align its rates with lower government treasury rates and money market rates. The reverse repo rate was cut to 12.5 percent and the standing facility rate to 13.0 percent.
Sierra Leone's inflation rate eased to 10.58 percent in in June from 10.86 percent in May, continuing the declining trend since the start of 2012. Last year the central bank cut rates by 500 basis points.
In a statement released on Aug. 30 following a meeting of the central bank's monetary policy committee on Aug. 29, the bank said economic prospects for this year remain favourable, "underpinned by encouraging trajectory of mining and non-mining sectors," including 10.5 millions metric tonnes of iron ore produced and exported in the first half of the year.
For 2013, the central bank projects real growth of Gross Domestic Product at 13.3 percent, up from 6.2 percent in 2012, a forecast that is consistent with the second quarter outlook. Business confidence surveys show enhanced confidence and optimism resulting from stable macroeconomic conditions.
The risk to the outlook for the private sector stems from the energy sector, the bank added.
Exports of diamonds rose 18.1 percent in the first seven months of the year from the same 2012 period to US$107.17 million. Along with foreign exchange inflows from foreign direct investment and foreign tax revenue, this has contributed to relative stability in the foreign exchange market in the first half of the year, the bank said.
The government's fiscal operations also continue to be within this year's targets and the central bank encouraged the revenue authority to implement new revenue-enhancing measures to help revenue collection efforts.