Sierra Leone Plans First Sale of 2-Year Debt Since War Ended

Sierra Leone is planning bond sales with terms of two years or more for the first time since sub-Saharan Africa’s second-fastest growing economy emerged from war 11 years ago and after yields on Treasury bills plummeted.

“This is all part of the new economic model to reduce domestic debt, diversify the economy and increase access to credit,” Finance Minister Kaifala Marah said in an interview in Freetown, the capital, on Dec. 9. “We have decided as a government not to borrow at the short end and come January 2014 we will try to keep it at that level so that the banks will be forced to intermediate with the private sector.”

Rising iron-ore output, which started two years ago, is set to boost growth in the country devastated by a 1991-2002 civil war to 13.3 percent this year and 14 percent in 2014, Marah said in a budget speech last month. Only South Sudan is set to grow faster at 24.7 percent in 2013, according to the International Monetary Fund. Yields on 91-day bills, used by banks to set lending rates, dropped 15.6 percentage points this year to 3.49 percent on Dec. 5.

The inflation rate, which slowed for a seventh straight month to 9.4 percent in October, may decline to 7.5 percent in 2014 as food costs ease, Marah said. In September, the Bank of Sierra Leone reduced its benchmark lending rate by 3 percentage points to 12 percent. That compares with 20 percent at the start of the year. The leone was unchanged at 4,328.50 per dollar by 7:24 a.m. in Freetown.

Yields on Sierra Leone’s one-year notes, the longest tenure offered, were 9.19 percent at an auction on Nov. 14, according to data compiled by Bloomberg. Rates on Nigerian debt with a similar maturity were 11.7 percent as of Dec. 4, while Kenyan one-year notes yielded 10.8 percent the same day.

Islamic Banking

The West African nation may introduce Islamic banking as it seeks to increase availability of credit, Marah said.

Allowing finance that complies with Islamic law, which prohibits interest payments, will boost access to credit in the country of 6 million, Marah said. About 77 percent of Sierra Leoneans are Muslim, according to the U.S. State Department website, which cites the Inter-Religious Council.

“Our economy will grow to be sustainable,” Marah said. “Every individual, no matter what level they are, will be able to participate in the economy.”

Tianjin Materials & Equipment Group Corp. of China said Sept. 27 it will buy a 17 percent stake in Tonkolili, Sierra Leone’s largest iron-ore mine, from African Minerals Ltd. (AMI) for $990 million. London Mining Inc. (LMI) operates Marampa, the second-biggest mine.

Sierra Leone will set up the Transformation and Development Fund for revenue earned from natural resources including mining and petroleum, Marah said. It will revive the state-owned National Development Bank for investments mainly in agriculture and create a single Treasury account that will bring all government accounts under the control of the accountant general, he said.

To contact the reporter on this story: Silas Gbandia in Freetown via Johannesburg at ebowers1@bloomberg.net

To contact the editor responsible for this story: Antony Sguazzin at asguazzin@bloomberg.net

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