Governor of the Bank of Sierra Leone Dr. Kaifala Marah met with representatives of airlines operating in Sierra Leone yesterday in the Sam Bangura Building in Freetown and informed them that they should be asking for payment in Leones and not Dollars because the Leone is the legal tender in Sierra Leone.
The Deputy Bank Governor Dr. Ibrahim Stevens in describing the issue of foreign exchange, said “the Leone has been put under pressure by the back door” with the dollarization of the economy.
The economy is experiencing transfer pricing with businesses including the airlines asking for Dollars instead of Leones from travellers. Though the airline representatives in the meeting said they ask for payment in either Leones or Dollars, the BSL team present including the Governor noted that the exchange rate they use for those paying in Leones is higher than the rate of the Bank of Sierra Leone (BSL) or the commercial banks.
The airline operators claimed they each have a bilateral agreement with the Government of Sierra Leone to do business in either Dollars or Leones. One of the challenges they have is to get Dollars to remit to their head offices that are outside of Sierra Leone.
Governor Marah will meet with them at 12pm today to decide on the exchange rate the airlines will use to determine payment in Leones, and also how BSL will help the airlines remit Dollars to their headquarters abroad and to appoint a liaison that will be communicating their concerns to the central bank.
The dialogue forum with the airline operators is one of several meetings that the Governor has held since he took up office in April with exporters, importers, hotels, restaurant owners, civil society and the media among others on limiting the use of the dollar in the economy.
The Leone has depreciated between 10 to 13 percent to the Dollar as receipt from the mining sector is low and donor inflows have dropped with the end of Ebola. Dr. Kaifala Marah and his deputy noted that the country faced the double shock of ebola and decline in iron ore prices which had affected the economy with regard the availability of the Dollar.
The weekly foreign exchange auction stopped in February before Dr. Marah’s appointment as Governor of the central bank in March. The bank has started the forex auction offering $1 million weekly according to Mr. Ibrahim Lamin Director of the Money Market Department.
The dollarization of the economy with even home owners demanding rent in Dollars, hotels, restaurants and other businesses asking for payment in Dollars instead of the local currency with the drop in receipts from iron ore are major challenges to get the foreign exchange needed for importation.
Sierra Leone imports everything from basic food items to machinery, a reason why the country needs to limit the use of the dollar and get a huge foreign exchange reserve to address importation needs.