Macro economically Sierra Leone remains extremely volatile, as diversification of the economy remains low and highly dependent on agriculture and the production of minerals.

The annual growth rates over the past two decades ranged from between approximately -20% and +20%. They peaked due to large iron ore mining projects in 2012/2013, slowing to around 5% at the Ebola outbreak in 2014, and fell to -21% in 2015, according to the IMF. After a recovery, growth increased in 2019 to around 5%, but the suspension of the licenses of major mining companies in mid-2019 and the COVID-19 pandemic overshadow future growth prospects. The IMF expects -3.1% for 2020.

The outlook beyond 2020 remains challenging. First, there is the uncertainty surrounding the development of international prices for Sierra Leonean extractives. Second, there is an on-going conflict between the government and some of the largest foreign mining companies operating in the country.

In 2019, the government temporarily cancelled the licenses of the Chinese company Shandong Iron and Steel Group and of UK-based SL Mining, a subsidiary of U.S. commodity trader Gerald Group. Both companies challenged the suspension in court.

SL Mining filed for arbitration with the International Chamber of Commerce (ICC) and Britain’s High Court dismissed the government’s challenge to an ICC decision in early 2021. Observers are alarmed about government’s attitude toward the rule of law and the effects of this on the country’s investment climate and the development of FDI.

The challenges arising from a mono-structural export economy and dependency on a small number of influential foreign companies are multiplied by fiscal and monetary hardships high inflation, price increases, debt (public debt 2019: 70%); current account balance (2019: -$646.1 million), underperformance in the banking sector, unemployment (officially: 4.4% in 2020) and poverty, among other challenges.

Sierra Leone witnessed an increase in official development assistance (ODA) during the COVID-19 crisis. Sierra Leone seeks augmentation of the current allocation under the Extended Credit Facility Program (ECF) with the IMF, debt relief from multinational and bilateral partners, as well as additional grant resources.

Those funds are directed to bridge existing and widening financial gaps.

Altogether, lower revenue coupled with substantial and growing expenditure needs puts the government budget under immense pressure, with potentially disruptive social consequences.