The Bank of Sierra Leone cut its benchmark interest rate to bolster growth in sub-Saharan Africa’s second-fastest growing economy as policy makers in Ghana and Nigeria battle to keep inflation pressures in check.
The bank lowered the rate 200 basis points, or 2 percentage points, to 10 percent as the outlook for inflation remains favorable, the Freetown-based bank said in a statement dated Dec. 9 and handed to reporters today. Inflation slowed to 9.4 percent in October from 9.9 percent a month earlier, Statistics Sierra Leone said on Nov. 27. The benchmark rate was 20 percent in February.
The Bank of Ghana has raised the policy rate 100 basis points this year to keep inflation under control and sustain a weakening currency. The Central Bank of Nigeria has maintained the benchmark rate at a record high of 12 percent since October 2011 to stabilize the currency of Africa’s largest oil producer.
“The committee envisages food inflation to continue to decline, bearing in mind the anticipated good agricultural output and stable prices of non-food items in the coming months,” the Sierra Leone bank said in the statement. “Growth prospects for 2013 remain bright, supported by buoyant activities in the mining, agricultural and service sectors.”
The government says the economy will expand 13.3 percent this year, second only to South Sudan in sub-Saharan Africa, as iron-ore mining boosts growth. Sierra Leone is planning bond sales with terms of two years or more for the first time since it emerged from a 1991-2002 civil war, Finance Minister Kaifala Marah said in an interview Dec. 9. The government is also considering introducing Islamic banking as it seeks to increase availability of credit, he said.