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Annual Report 1999 - Sierra Leone - The Economy
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(b) Investment Activities
A total of US$1.02mn was earned out of an average deposits of US$29.97mn invested in 1999. In the previous period, average deposit of US$34.44mn invested yielded US$1.45mn. The decrease in earnings was due to the decline in investment funds, and to the high-unbudgeted military outlays particularly during the first two quarters of 1999. Earnings recorded for the review period were marginally lower than those of 1998, and the returns on investment for both 1999 and 1998 were 3 percent and 4 percent respectively.
(c) Foreign Currency Management
The Bank of Sierra Leone's policy in its foreign currency management involves the holding of reserves in currencies to match transaction needs, among which debt service payments, emergency military payments and private sector support are the most significant. The foreign currencies held by the Bank of Sierra Leone as at end December, 1999 (excluding donor import support funds) were 55.8 percent in SDR's, 23.4 percent in United States Dollars, 17.5 percent in Pound Sterling; and the rest in other currencies. Donor support funds were held in the currencies agreed with the donors.
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(d) Foreign Exchange Market
Foreign Exchange Market activities during the period were affected by the prevailing security situation. The rebel incursion of Freetown in January 1999, provoked the suspension of donor assistance, caused the collapse of economic activities, and a temporary shut down of commercial banks and foreign exchange bureaux. These events reduced the number of participants in the formal market. For the first two months of 1999, the market consisted of only two commercial banks and two Foreign Exchange Bureaux.
There was a drop in the levels of activity of both the Commercial Banks and the Foreign Exchange Bureaux in the current period compared to the previous year. The volume of transactions purchases by the banks dropped by 1.4 percent while that of the Bureaux fell by 7.3 percent over the year.
Aggregate purchases and sales for review period totaled US$35.65m and US$40.13m respectively. This represents a decrease of 2.0 percent and 5.6 percent respectively from the levels of the previous periods.
The average exchange rate of the Leone to the US Dollar depreciated by 28.4 percent in 1999 to stand at Le 2,244.64 as against Le 1,606.36 in 1998. This trend was similar in the official buying rate over the quarters as the rate depreciated steadily from Le 1,556.64/US $1.00 in quarter 1 to Le2,122.72/US $1.00 in quarter 4 of 1999.
It is expected that improvement in the security situation will result in a resumption of production activities and bilateral and multilateral foreign exchange inflows into the Banking system.
(d) Foreign Exchange Bureaux
Foreign Exchange Bureaux continued to provide services to the public, complementing the activities of commercial banks and enabling small businesses obtain foreign exchange to facilitate trade in the West African Sub-region. During the period under review, 7(seven) Foreign Exchange Bureaux were established bringing the total to 18(eighteen) Licensed Bureaux compared to a year ago when there were only 14 Bureaux in operation. (Three) 3 Foreign Exchange Bureaux closed down during the period mainly because they could not recover after the destruction to their property during the rebel invasion.
Bureaux purchases and sales during the period reached a peak of US$1.45 million in Q4, representing 10.3 percent of the total purchases effected in that quarter and sales of US$1.14 million in Q4 representing 8.3 percent of the total sales. Overall, Foreign Exchange Bureaux purchases however decreased by 7.3 percent from US$3.98 million in 1998 to US$3.69 million in 1999.
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