By Ishmail Saidu Kanu
“Mr Speaker, Honourable Members, following the impressive performance in 2021 on the back of the recovery in economic activities and improved tax administration, domestic revenue collection weakened during Quarter 1, 2022. Domestic revenue collected in Quarter 1, 2022, recorded a shortfall of Le 330 billion and was also lower than the amount collected during the same period in 2021. Several revenue streams were below their respective quarterly targets, including Petroleum Excise duties, Goods and Services Tax, Fisheries Royalties, and Timber Export Levy”, says Minister of Finance, Dennis Vandi.
He was presenting the Supplementary Government Budget and Statement of Economic and Financial Policies for the Financial Year, 2022 in the Well of Parliament on Friday.
The Minister said in general, the weak revenue performance can be attributed to the delay in adjusting fuel prices, reduced tax compliance, public resistance to tax reforms, especially the use of the Electronic Cash Register (ECR), and supply chain challenges in the export of bauxite and timber logs.
“Mr. Speaker, Honourable Members, we are submitting to this Noble House a Supplementary Budget for the Financial Year 2022 for the following reasons: Firstly, the macroeconomic and fiscal assumptions that underlined the 2022 Budget no longer hold. As Russia and Ukraine are major suppliers of agricultural and energy products, including oil, gas, metals, wheat, corn and fertiliser, countries, including Sierra Leone, are already experiencing uncertain supplies and higher prices. The sharp rise in global food and energy prices coupled with the general uncertainty has slowed down domestic economic activities, undermined domestic revenue collection and created pressures on the budget.
“Secondly, given the urgent need to protect the poor and vulnerable from the soaring food and energy prices, we will adopt mitigating measures, which I will present later in this statement.
“Thirdly, given the need to ensure fiscal and debt sustainability and to facilitate the implementation of the emerging expenditure priorities, Government engaged development partners, including the World Bank, International Monetary Fund and the African Development Bank, for the provision of additional financial resources. Thankfully, reflecting Government’s commitment to implementing policy reforms, the World Bank will provide additional budget support and project grants to support energy and education programmes. We also plan to use a larger share of additional Special Drawing Rights (SDRs) allocated by the IMF to support the budget. The African Development Bank is also providing support under the African Emergency Food Production Programme.
“Fourthly, to expand the fiscal space to finance the emerging expenditure priorities, we are introducing additional tax policy and tax administration measures. These measures are aimed at increasing domestic revenues over and above the original projection
“Mr. Speaker, Honourable Members, the key objectives of the Supplementary Budget are: (i) to safeguard macroeconomic stability through prudent fiscal and proactive monetary policies; (ii) to protect the vulnerable segments of our society from the higher food and fuel prices by expanding existing social safety programmes and enhancing support to the energy sector; and (iii) to complete the implementation of ongoing projects as outlined in the original 2022 budget.
Minister Vandi added that the April edition of the World Economic Outlook Report published by the International Monetary Fund (IMF) has revised the projected growth of the World economy for 2022 downwards to 3.6 percent compared to the 4.4 percent projected in January 2022. Global growth is forecast to average 3.3 percent in the medium-term.
He pointed out that in Sub-Saharan Africa, the pace of the recovery that started in the second half of 2021 has slowed down significantly, reflecting the uncertainties from the spillover of the war in Ukraine combined with the high and rising food, energy and fertiliser prices, adding that Growth in the region is projected to slow down to 3.8 percent in 2022 from 4.5 percent in 2021.
“Mr. Speaker, Honourable Members, global food and fuel prices have surged during the first half of this year, reaching levels not seen since 2007 and 2008 and are projected to remain high in the near and medium term. The price of Brent crude oil is projected to average $100 per barrel in 2022, a 42 percent increase from 2021 and its highest level since 2013. Agricultural commodity prices are forecast to rise by 18 percent this year, reflecting higher costs of inputs, including fuel, chemicals, and fertiliser. Inflation is therefore projected to remain elevated in all regions of the World in 2022”, he added.
The Minister of Finance continued by saying that the spillover effects of the war are negatively affecting all facets of our economy: slow GDP growth, high inflation, weak revenue performance, increase in Government expenditures, fall in foreign reserves and adverse terms of trade. The negative impact on key sectors, including agriculture, cannot be overemphasized.
He explained that the growth prospects of the economy in 2022 are weaker than initially anticipated. “The disruption in fertiliser supply has led to a sharp increase in the global price of fertiliser. In Sierra Leone, the price of fertiliser, including urea, which commonly used by our farmers, has increased by more than 70 percent between January and June 2022. Against the background of the general uncertainty in the global economy, combined with higher food, fuel and fertiliser prices, the initial growth projection of 5.9 percent for 2022 has been revised downwards to 3.6 percent”.
He reiterated that this Budget is a continuation of a series of interventions including improving food security, deepening investments in human capital development and protecting all vulnerable groups to enhance our economy’s resilience to shocks.
Mr. Vandi ended by commending the Supplementary Budget and Statement of Economic and Financial Policies for the 2022 Fiscal Year to the House.
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