Theme: ‘Restoring livelihoods for Post Ebola Economic and Social Recovery’
GOVERNMENT BUDGET AND STATEMENT OF ECONOMIC AND FINANCIAL POLICIES FOR THE FINANCIAL YEAR, 201
DELIVERED BY DR. KAIFALA MARAH MINISTER OF FINANCE AND ECONOMIC DEVELOPMENT IN THE CHAMBER OF PARLIAMENT
TOWER HILL, FREETOWN ON FRIDAY, 14TH NOVEMBER 2014 AT 10:00AM
1. Mr. Speaker, Honourable Members, I rise to move that the Bill entitled “An Act to provide for the services for Sierra Leone for the Financial Year 2015” be read for the first time.
2. Mr Speaker, Honourable Members, the unprecedented outbreak of the Ebola Virus Disease (EVD) has created a devastating social and humanitarian crisis with severe negative economic impact, thus, reversing the impressive economic growth we have achieved in recent years.
3. Since the outbreak of Ebola, thousands of Sierra Leoneans have been infected and hundreds have died and many more are still dying. Over two-thirds of those infected are between the ages of 15 – 55 years- the most economically active. Non-Ebola illnesses are adding to the toll of death and suffering as clinics and hospital staff are hesitant to attend to other patients for fear of contagion of this dreadful disease.
4. Our doctors and nurses are the main victims with loss of lives in several cases. Farmers and traders are among the fatalities, most of whom are women. Children are orphaned, while society rejects them. Schools and higher institutions of learning remain closed.
Short Term Economic Impact of the Ebola Disease
5. Mr. Speaker, Honourable Members, the combined effect of the disruptions to agriculture, mining, manufacturing, construction, transportation, domestic and international trade and tourism activities has significantly lowered the growth prospects of the economy. Preliminary analysis show that economic growth will slow down to 4.0 percent in 2014 compared to the original projection of 11.3 percent. The Ebola Virus Disease poses a great threat to macroeconomic stability, human development and poverty reduction.
6. Mr. Speaker, the measures adopted to stem the spread of the Ebola outbreak, including the closure of periodic markets, internal travel restrictions and the closure of borders, while appropriate, have also severely disrupted the supply of domestic food and non-food items. This has resulted in a rise in consumer prices, especially for essential commodities. Our national currency, the Leone, depreciated by 9.2 percent in the official market and by 13.2 percent in the parallel market between end May and end October this year due to excess demand pressures for foreign exchanges as capital flight resumes.
7. Mr Speaker, Honourable Members, the financial sector has also been adversely affected. Normal banking hours have been reduced by 1-2 hours daily while some banks closed operations in epicenters with consequences on internal trade. Community Banks and Financial Services Associations (FSAs), which provide services in the epicenters, have either closed down or have scaled down operations.
8. As a consequence of the impact on economic activities, revenue collection dropped and is estimated to decrease by about Le 390 billion, equivalent to US$90 million in 2014 (1.6 percent of non-iron ore GDP).
9. While recent assessment shows that Sierra Leone’s public debt is sustainable in the medium to long-term, the drop in domestic revenue and increase in expenditure induced by the Ebola outbreak pose serious challenges to debt management.
10. Mr. Speaker, Honourable Members, the Ebola epidemic has also negatively impacted our social fabric. It has disrupted health and education programmes; and halted the implementation of water and sanitation projects, especially in the rural areas. The disease also worsened the already fragile situation of women and children, including the physically challenged and has also eroded the gains achieved in the country’s healthcare services, especially the flagship, Free Healthcare Initiative (FHI).
11. Moreover, NGO operations in the water sector have either been suspended or scaled down, including diversion of resources for expanding the Water and Sanitation and Hygiene infrastructure to Ebola-related activities. This is likely to lead to an outbreak of water-borne diseases further putting pressure on an already overstretched health care system.
12. Mr. Speaker, more women than men have contracted the disease. This is attributable to (i) women’s role as caregivers in their families, which places them at higher risk of exposure to the EVD; (ii) majority of health care workers are female nurses; and (iii) women are mainly engaged in informal trade in crowded open markets and at border towns. The loss of livelihood and stigma has a disproportionate effect on women.
13. Statistics indicate that 107 children have died from the Ebola disease; those children who have survived are stigmatized and many are roaming the streets of our communities.
14. The elderly also face poverty and social exclusion since many of them are not eligible to pension and rely on labour and family members for income.
15. The physically challenged are far more affected and exposed. For instance, the blind depend on the sense of touch, which exposes them to the disease. Additionally, many of them depend on begging on the streets that not only expose them to the disease but has also now limited their movement and sources of livelihood. Even as I speak, the challenge is still with us. Yet, as a people, we are faced with a choice.
16. Mr. Speaker, Honourable Members, on the basis of these devastating effects, the 2015 budget will announce policies and programmes to mitigate the social and economic effects of the Ebola outbreak. Hence, the theme of this budget is “restoring livelihoods for economic and social recovery post Ebola”. This is a budget that brings hope in a crisis; that lays the foundation for a full recovery.
II. NATIONAL AND EXTERNAL SUPPORT FOR EBOLA FIGHT
17. Mr Speaker, Honourable Members of Parliament, at the onset of the outbreak, Government, in collaboration with its partners on the ground, responded swiftly. An Emergency Operations Centre was established and a National Ebola Response Plan developed. Thus far, Government has contributed Le80 billion; of which Le9.9 billion directly to the Ministry of Health and Sanitation; Le40 billion to the Ebola response and Le 30 billion for hazard pay incentives into the dedicated Ebola account at the Sierra Leone Commercial Bank.
18. The international community’s response, despite being slow initially, has in recent months increased in the form of financial and technical assistance. The estimated commitment, both indicative and firm by donors are as follows: African Development Bank, US$61.2 million; World Bank, US$132 million; United Kingdom, US$535 million; European Commission Humanitarian Aid, US$16.9 million; United States of America, US$10.2 million; Australia, US$9.6 million; Italy, US$6.5 million; Japan, US$5.5 million; China, US$4.8 million; Republic of Ireland, US$2.5 million; Germany, US$2.2 million; Finland, US$2.2 million; Sweden, US$1.9 million. Other contributing countries and organisations include Austria, Cuba, Denmark, Netherlands, Nigeria, The Gambia, Canada, Spain, Islamic Development Bank, Organisation of Petroleum Exporting Countries Fund. Contributions from Humanitarian organizations include the Children’s Investment Fund Foundation, US$14.9 million; and Central Emergency Response Fund, US$7 million.
19. In addition, several countries/agencies have committed funds to support regional efforts to fight Ebola in Guinea, Liberia and Sierra Leone. These include the Bill and Melinda Gates Foundation, US$51 million; Canada, US$30 million; Clinton Global Health Investment, US$5.9 million; Comic Relief, US$1.6 million; Federal Republic of Germany, US$87.8 million; GlaxoSmithKline, US$1.5 million; Switzerland, US$5.2 million; and Timor Leste, US$2 million. In total, with the exception of contribution by Timor Leste, US$183 million has been disbursed as support for Guinea, Liberia and Sierra Leone. The United Nations is yet to disaggregate this amount for the three countries.
20. Private donations, both local and foreign, amounted to Le 9.8 billion and US$4.6 million as per bank statement from the Sierra Leone Commercial Bank as at 31st October 2014.
21. Mr. Speaker, we recognize the additional budget support provided by the African Development Bank, US$24 million; World Bank, US$20; European Union, Euro 12.6 million to mitigate the impact of higher spending and revenue loss due to Ebola. The budget support provided by the IMF through an augmentation of resources of US$40 was timely in mitigating the fiscal impact of Ebola and supported the increase in the amount offered in the weekly Foreign Exchange Auction by the Bank of Sierra Leone.
22. Given the risks faced by our medical personnel, there is need to provide incentives to encourage them to continue to provide medical care and support to Ebola victims. To this end, Government has provided Le 30 billion while the African Development Bank and the World Bank have also provided US$ 5.2 million and US$17 million respectively as hazard pay to Health workers engaged in the fight against Ebola.
23. Mr. Speaker, Honourable Members, as the International Community and friends of Sierra Leone continue to support Government effort in the fight against Ebola, we are mindful of the fact that despite the need for expediency we need to put mechanism in place to ensure that due processes are followed. To this end we are engaging the services of Price Waterhouse and Cooper to provide fiduciary oversight in the utilization of funds. In addition, to promote accountability and ensure that the various resources provided by organizations are properly coordinated, we have agreed on a joint reporting format with our development partners. Post Ebola, Government and development partners will issue a single report on the utilization of resources received to fight Ebola. This is meant to meet public accountability and the New Deal criteria of Aid Effectiveness
24. Mr. Speaker, Honourable Members, let me on behalf of the Government and people of Sierra Leone extend our sincere gratitude to all our development partners, multilateral as well as bilateral, that have contributed to the fight against Ebola. I wish to say special thanks to the United Nations Family for leading the fight against the Ebola Outbreak in Sierra Leone and globally. It is therefore no coincidence that the bulk of the resources dedicated for the fight against Ebola is channeled through UN Agencies in particular WHO, UNICEF, WFP, UNFPA, FAO and the UN Multi-Partner Trust Fund (MPTF).
25. We are also grateful for the setting up of the United Nations Mission for Ebola Emergency Response (UNMEER) to support the efforts of the National Ebola Response Centre (NERC). The United Nations for the first time in its history adopted a Global Public Health Intervention Strategy for the sub-region.
26. We are confident that the efforts of the international community will not only be limited to assist in containing the disease but to also support Government’s post Ebola Recovery Plan. Meanwhile, the World Bank has committed US$98 million to Sierra Leone post Ebola recovery efforts and the International Finance Corporation (IFC), US$ 450 million towards trade investment and employment for post Ebola recovery efforts in Guinea, Liberia and Sierra Leone. Our budget support partners have provided strong indications of scaling-up support in the post Ebola period especially during 2015. We are also urging our non-traditional partners who have stood with us in our fight against Ebola to continue to support post Ebola economic recovery.
III PRE EBOLA ECONOMIC PERFORMANCE
27. Mr Speaker, Honourable Members, you will recall the substantial progress achieved in stabilizing the economy and improvements in infrastructure prior to the outbreak of the Ebola Virus Disease. In particular, our country recorded double digit economic growth in recent years, thanks to iron ore production and export combined with Government investment in infrastructure as well as buoyant activities in the agriculture, construction and services sectors.
28. Based on these developments, 2014 was regarded as the period for consolidating these achievements while laying the foundation for improved public service delivery in line with the Agenda for Prosperity. The performance of our economy during the first five months of 2014 was encouraging with leading indicators pointing robust economic growth, falling consumer prices, declining domestic interest rates and a stable exchange rate. The implementation of infrastructure projects was on track while service delivery challenges were being identified and addressed.
29. Mr. Speaker, Honourable Members, with continued implementation of pro-growth policies prior to the Ebola outbreak, real GDP growth was projected at 11.3 percent and inflation at 7.5 percent for 2014. During the first half of the year, the economy was on track in achieving these macroeconomic objectives as activities in key sectors; including agriculture, mining, manufacturing, construction, and services such as banking and telecommunications were expanding.
The Bank of Sierra Leone’s proactive monetary policy management, backed by Government’s prudent fiscal strategy combined with improved domestic food production and a stable exchange rate resulted in a decline in inflation from 8.2 percent in December 2013 to 6.4 percent in April 2014, the lowest in five years.
30. In the fiscal area, despite a strong performance in 2013, outturn for the first of the year from January through June was weaker than expected. Revenue underperformed by Le73.2 billion on account of lower proceeds from the mining sector; and taxes on goods and services, and corporate income tax. Recurrent expenditures were higher than projected by Le 55.8 billion, mostly due to overruns in wages and salaries by Le 14.9 billion due to new recruitments; Ebola-related expenditures of Le9.9 billion; and higher-than expected spending on goods and services by Le36.5 billion.
31. The external position improved with foreign exchange reserves increasing to around US$530 million or 3.6 months of imports cover. The exchange rate remained relatively stable as at end-June 2014.
32. Mr Speaker, Honourable Members, despite the challenging environment, I am pleased to inform this House that Sierra Leone met all the Quantitative Performance Criteria under the Extended Credit Facility Arrangement with the IMF at end June 2014.
IV. GLOBAL AND REGIONAL ECONOMIC OUTLOOK
33. Mr. Speaker, Honourable Members, the global economy is slowly recovering following a slowdown in 2013. It is projected to grow by 3.4 percent in 2014 and further by 4 percent in 2015. While economic activities in the advanced economies (USA, Euro Area and Japan) are picking up, the outlook for several emerging markets including China, Russia, South Africa are less optimistic.
34. In emerging market and developing economies, growth is now projected to moderate to 4.6 percent in 2014 but will strengthen to 5.2 percent in 2015. Growth in the Chinese economy is slowing to 7.4 percent in 2014 and further to 7.1 percent in 2015, reflecting the weak performance of the manufacturing sector, slow increase in investment, and bank credit to the private sector. This has implications for exports from Sierra Leone, especially iron ore.
35. In sub-Sahara Africa, strong growth is expected to continue averaging 5.4 percent in 2014, will strengthen to 5.8 percent in 2015, driven by efforts to invest in infrastructure and by strong agricultural production. Risks to the growth prospects of Sub-Saharan Africa include the slow growth in emerging market economies and the Ebola outbreak.
V. POTENTIAL MEDIUM-TERM ECONOMIC IMPACT OF EBOLA EPIDEMIC AND MACROECONOMIC FRAMEWORK, 2015-2017
36. Mr. Speaker, Honourable Members, the medium-term macro-fiscal framework agreed with the IMF in April 2014 indicate strong growth, declining inflation and improving external and fiscal performance. This was anchored on the assumption of expansion in iron ore mining, agriculture and services, coupled with the expected recovery in the electricity sector and the planned scaling-up of investment under the Agenda for Prosperity.
37. Unfortunately, the spread of the Eobla and its heavy toll on human lives, including its dampening effect on economic activities requires a revision of the medium term outlook to reflect current developments. And it is anchored on two scenarios: (i) an Optimistic Low Ebola Scenario that assumes the containment of the virus by end 2014 and (ii) a Pessimistic High Ebola Scenario that assumes the Ebola Virus is not contained until the third quarter in 2015.
38. If the low Ebola outbreak scenario materializes, an economic recovery will emerge over the course of 2015. Under this scenario, economic activities rebound led by agriculture, manufacturing, tourism and construction. This will result in GDP growth of 2.5 percent in 2015 compared to the 9 percent originally projected. Inflation is projected to increase to 12 percent compared to an earlier projection of 6 percent.
39. Under the high Ebola scenario, agricultural output will fall dramatically due to large scale abandonment of farms by farmers and services will also contract, especially in the hospitality sector. Economic buoyancy will largely depend on Government expenditure, which is highly uncertain. In this case, overall GDP will contract by 2.0 percent in 2015, while non-iron ore GDP will shrink by 3.2 percent. Inflation will remain high reaching 14 percent, due to poor harvest in 2014 and loss of planting seasons in 2015.
40. In both scenarios, it is expected that gross foreign exchange reserves will remain above 3 months of import cover in 2015 on account of the projected increase in Ebola related foreign inflows, and inflation will return to a single digit in 2016.
VI. Structural Reforms. Monetary and Financial Sector Policies for 2015
41. Mr. Speaker, Honourable Members, regardless of the leading challenges Government will continue to embark on reforms. The Bank of Sierra Leone will pursue policies to maintain low and stable prices and implement appropriate supervisory measures to ensure financial stability. The banking sector remains safe, sound and stable. The Bank has completed the installation of a safe and modern payments system infrastructure to support high value real time payments for commercial banks and their customers.
42. In a bid to deepen the financial system and improve rural financial intermediation, the Apex Bank (SL) Limited was licensed to carry out first level supervision of Community Banks and Financial Services Associations (FSAs). In addition, four new Community Banks were granted license in early 2014: Kamakwie Community Bank, Madina Community Bank, Sumbuya Community Bank and Taiama Community Bank, thereby increasing the number of community banks from thirteen to seventeen in 2014. The creation of the new Community Banks was supported by the International Fund for Agricultural Development (IFAD).
43. Mr. Speaker, on structural benchmarks, the Bank of Sierra Leone has prepared a roadmap for developing and implementing risk-based supervision to support Financial Sector Stability. In an effort to develop interbank transactions in Government Securities Market, the Bank also prepared a Primary Dealer (PD) agreement to facilitate the development of the interbank foreign exchange market. The Bank has virtually moved towards wholesale Foreign Exchange Auction, while awaiting Technical Assistance from the IMF to move the process further.
44. In 2015, the Bank of Sierra Leone will prepare an internal Contingent Manual to guide identification and supervisory actions in the event of specific or systemic bank distress. The Bank will also, draw up a detailed risk-based supervisory framework for on-sight supervision of at least the largest banks in the country. Furthermore, the Bank will develop with, and issue to commercial banks internal bank specific risks management guidelines to forestall credit, market, and technology risks.
45. Mr. Speaker, Honourable Members, with the continued pressure on the exchange rate, the fall in export receipts and the decline in capital inflows, the foreign currency component of payments for all Government funded contracts is decreased from 70 percent to 50 percent.
46. Project Preparation Fund (PPF): has been established as a demand-responsive facility to finance large and medium scale project preparatory activities. The Fund will facilitate project preparation activities necessary to undertake infrastructure projects from identification through concept design to financial close, including feasibility testing and financial and legal structuring, as well as capital-raising. These preparatory activities include up-stream sector studies, structural adjustment studies, project cycle activities and institution capacity building programs. The PPF will operate on the basis that ownership and commitment to delivery ultimately rests with the relevant MDAs, and in the case of commercial revenue-generating projects, the private operator of the project. In this regard, Government has allocated the sum of 5 billion Leones to start-off the Fund.
47. Budget Monitoring
To strengthen budget execution and project monitoring, the Ministry of Finance and Economic Development will appoint budget monitors in all the Districts.
Public Financial Management Reforms in 2015
48. Mr. Speaker, Honourable Members, with the support of development partners, Government carried out a number of Public Financial Management (PFM) reforms at both the central and local levels. These contributed to improving public budgeting and expenditure management, public procurement, public sector accounting and reporting, internal auditing and external oversight of public finances in recent years. Despite this, challenges remain in some specific PFM areas.
49. To address remaining challenges, Government developed a medium-term PFM Reform Strategy for the period 2014-2017. To this end, Government remains committed to improving fiscal discipline, strengthen budget credibility and ensure value for money as agreed under the Multi-Donor Budget Support Performance Assessment Framework (MDBS-PAF). The implementation of this strategy is being supported under the new Public Financial Management Improvement and Consolidation Project funded jointly by Government and the Multi-Donor Budget Support Partners, including the African Development Bank, the European Union, United Kingdom Department for International Development and the World Bank.
50. Government will complete the regulations for effective implementation of the new Public Financial Management Bill, which will soon be submitted to this Honourable House. The new PFM Bill presents clear and comprehensive definitions of Government entities; introduce fiscal responsibility principles; improved macro-fiscal planning; improved management of fiscal risks; strengthened budget discipline to enhance budget credibility; improved cash management; and strengthened accounting, reporting and auditing.
51. Following the recommendations of Country Procurement Assessment Review in 2012, the National Public Procurement Act, 2004 has been reviewed. The revised Bill has been approved by Cabinet and will be submitted to this Honorable House, shortly.
52. Progress in the establishment of the Treasury Single Account (TSA) is also far advanced. The TSA was scheduled to be completed in September this year but technical assistance was delayed because of the Ebola outbreak. Meanwhile, a Memorandum of Understanding between the Ministry of Finance and Economic Development and the Bank of Sierra Leone has been signed that defines the roles and responsibilities of stakeholders with regard the implementation of the TSA.
53. Mr. Speaker, Honourable Members, the recent analysis of our debt situation reveals that public debt is sustainable in the medium to long-term with minimum degree of risk associated with external shocks. This is mainly due to prudent domestic borrowing as a result of which, interest savings of Le40.7 billion in 2013 and Le122 billion in 2014. Going forward, therefore, Government will continue implementing prudent external borrowing practices by prioritizing highly concessional terms.
54. To address the costs and risks of domestic debt burden, Government will conduct medium term debt management strategy in 2015 to assess the impact of Ebola outbreak on the debt sustainability thresholds. We will also adopt a comprehensive framework within which Government can make informed choices on how financing requirements could be met at the lowest possible cost consistent with a prudent degree of risk.
VIII. POST-EBOLA RECOVERY- THE NEAR-TERM RESPONSE PLAN
55. Mr. Speaker, Honourable Members, consistent with the low Ebola scenario, fiscal policy in 2015 will lay the foundation for post Ebola economic recovery. The strategy will focus on the following areas:
(i) Reviving the Economy: Stabilise and stimulate the economy by supporting the recovery of agriculture, commerce and trade as well as services, especially tourism;
(ii) Strengthen Health Systems: Establish Public Health Sierra Leone, including the establishment of a well-staffed and equipped Centre for Disease Control and medical insurance for health workers;
(iii) Revitalise the Education Sector: Address the challenges of re-opening schools by implementing a nation-wide school feeding programme; improve hygiene in schools and provide incentives to encourage children to return to school;
iv) Support Recovery of the Agriculture Sector: For food security, re-establish farm activities and training requirements, gradually provide assistance to farmers in the form of inputs such as farming tools, seeds as well as credit facilities;
(v) Improve Access to Finance: Improve, access to finance for SMEs to foster cross-border and regional trade for job creation and restoration of household incomes;
(vi) Scale up Social Protection support: Provide support to vulnerable groups especially orphans and those affected by the Ebola Disease; and
(vii) Re-start Infrastructure projects: Support on-going works on roads, energy and water and sanitation to provide opportunities for private sector development, create jobs especially for youths and improve household incomes.
IX. PROJECTED RESOURCES FOR 2015
56. Mr. Speaker, Honourable Members, given our low Ebola scenario, total budgetary resources projected in 2015 amount to Le3.3 trillion Leones. This includes, domestic revenue of Le2.4 trillion; programme grants of Le302 billion, including external budget support of Le269.4 billion from ADB, DfID, EU and the World Bank.
57. Borrowing from the domestic bank and non-bank sector through the sale of Government securities will amount to Le451 billion. Proceeds from the repayment of the Loan from Sierra Rutile will amount to Le51.6 billion. Proceeds from the privatization of state enterprises are estimated at Le17 billion.
58. Income taxes will contribute Le921 billion; Goods and Services Tax, Le495 billion; Customs and Excise duties, Le520 billion; Mining royalties and licenses, Le 231 billion; and Fisheries licenses and royalties, Le40.1 billion. Revenue collected by other Ministries, Department and Agencies in the form of fees, charges and levies will amount to Le82 billion. Road User Charges and Vehicle licenses will amount to Le100 billion.
59. Development partners are expected to disburse Le742 billion from existing as well as new loans and Le495 billion of grants to finance capital projects.
X. REVENUE AND TAX POLICIES FOR 2015
60. Mr. Speaker, Honourable Members, in 2015, fiscal policy will aim at supporting fiscal consolidation through increased revenue mobilization as well as expenditure rationalization and prioritization. With the projected reduction in economic activity and a potentially weak tax base, Government will adopt measures to broaden the tax base; strengthen tax administration and improve the efficiency of tax collection. In this regard, Government will streamline and rationalize tax and duty exemptions including payment of taxes for contracts awarded by Ministries, Departments and Agencies (MDAs).
61. Mr. Speaker, Honourable Members, property taxes remains an important source of revenue for local councils. In this regard, the Ministry of Finance and Economic Development in collaboration with the Ministry of Local Government and Rural Development will work with all stakeholders to improve property tax collection. Specifically, cadastre mapping of all real properties (exclusively land and buildings) in urban centres will be carried out to determine the base of property taxes in the country.
62. Additionally, the NRA will implement the following tax administration efficiency measures: (i) extensive stakeholder engagement; (ii) monthly reconciliation between ASYCUDA and the Destination Inspection Companies Database to identify discrepancies in value of assessments; (iii) work with Indian Customs and World Customs Organisation (WCO) to adopt its reference price database; and (iv) develop and implement a revenue accounting, reconciliation, and commercial bank integration system to facilitate swift payment and accounting of taxes paid. Furthermore, with support from the AfDB, Government will strengthen the newly established Extractive Industry Revenue Unit to ensure maximum realization of revenues from the extractive sector.
63. Mr. Speaker, Government will also introduce a Revenue Administration Bill that consolidates the administrative provisions in the various tax legislations into a single document with the objective of reducing the burden of tax compliance on taxpayers including importers. The Bill will remove inconsistencies in tax administrative provisions contained in various tax legislations and update provisions to reflect current approaches to improve tax administration. Accordingly, the Income Tax, Goods Services Tax and Customs Acts will be reviewed in line with the new Revenue Administration Act.
XI. EXPENDITURE ALLOCATIONS, 2015
64. Mr. Speaker, Honourable Members, the indicative allocations of expenditure for 2015 I am about to announce are based on the priorities referred to earlier in this statement under discretionary and non-discretionary expenditures.
A. Non-Discretionary Expenditures: Wages and Salaries
65. Consistent with the Medium-term Wages and Salaries policy of Government, the Government wage bill is programmed to increase to Le1.58 trillion in 2015 from Le1.37 trillion in 2014. On this basis, I am pleased to announce a 15 percent increase in wages and salaries for all categories of public sector workers effective July 1, 2015. The increase will result in a minimum wage from Le480, 000 to Le 550,000 for civil servants and from Le600, 000 to Le660, 000 for teachers, police, military, prison officers and fire force.
66. Debt service payments are projected at Le347 billion. Of this, Le228 billion is interest payments on domestic and foreign debt and Le118 billion for principal repayments of loans.
67. Total statutory transfers will amount to Le389.5 billion. These include Le100.2 billion to the Road Maintenance Fund; and Le 89 billion to Local Councils.
B. Discretionary Expenditures
68. Total discretionary expenditures are projected at Le 1.14 trillion. Of this, Le646 billion is for recurrent expenditures; Le430 billion for domestic funded capital projects; Le22.1 billion for domestic suppliers arrears; and Le 45 billion as contribution towards the continuing fight against Ebola. Foreign funded capital expenditures will amount to Le1.24 trillion. The indicative allocations for all MDAs are stated under their respective Pillars in the Agenda for Prosperity.
Pillar 1 Economic Diversification to Promote Inclusive Growth:
69. Agriculture: As indicated earlier, disruption to agriculture and food production in particular will worsen the food security situation with adverse effects on nutrition given the already high prevalence of malnutrition in the country. In this regard, an amount of Le45.9 billion is allocated to agriculture. This will support the recovery of the sector by enhancing agricultural productivity through the provision of inputs, including seeds, planting materials, agricultural implements, improve activities along the value-chain for food crops including rice, and tree crop rehabilitation. This will launch the three years fertilizer programme. An amount of Le 14.1 billion will be transferred to Local Councils to support agricultural activities in rural areas.
70. An amount of Le9.6 billion is also allocated to agriculture from the capital budget. Of this, Le3.3 billion is counterpart funds for ongoing donor-funded projects and Le6.3 billion to support post Ebola recovery farming activities. Le2.0 billion to implement a special Presidential initiative “One Dollar a Tree”. This is an incentive for farmers to receive one dollar for each cash crop planted. The remainder will launch the Strategic Grain Reserve Programme.
71. Development partners, including the World Bank, IFAD, GEF and European Union will also disburse Le38.6 billion to support ongoing foreign-funded agricultural projects.
72. Tourism and Culture: An amount of Le5.5 billion is allocated to the Ministry of Tourism and Cultural Affairs. Of this, Le 2.2 billion to the National Tourist Board to undertake image building and rebranding programmes, and the use of international media houses, particularly in the post Ebola national image rebranding efforts. This will include the development and implementation of a tourism marketing strategy. Additional funding is allocated for rehabilitation of museums and development of the Lumely Beach. The remaining resources will be utilized by the Ministry for post Ebola activities.
73. Fisheries and Marine Resources: An amount of Le2.1 billion is allocated to the Fisheries sector to support artisanal fishing and aqua-culture as well as the establishment and operationalisation of a Fish Testing Laboratory to obtain EU certification for fish exports. In addition, an amount of Le3.9 billion is allocated from the domestic capital budget of which Le1.9 billion is counterpart contribution to the donor funded projects in the Fisheries sector and Le2.0 billion to finance the construction of cold rooms in district headquarter towns and the construction of fisheries training school. The EU and World Bank will provide Le7.1 billion to support other projects in the fisheries sub-sector.
74. Diversification of the Sierra Leone economy will be done through an integrated approach with participating Ministries Department and Agencies pooling resources and strategies.
Pillar 2: Managing Natural Resources:
75. Environment: Due to the EVD outbreak, poaching in animal reserves, illegal logging, farming and mining seems to have increased in protected forest areas. This is likely to impact negatively on the gains achieved in protecting water catchment areas, forest and animal reserves. To address these, an amount of Le3.7 billion is allocated to the National Protected Area Authority and the Sierra Leone Environment Protection Agency.
76. Mines and Mineral Resources: is allocated an amount of Le1.9 billion in support of its activities. An amount of Le 4.1 billion is allocated to the National Minerals Agency to monitor and regulate mining activities while enforcing the payment of mining licenses and royalties; and the Ministry of Lands, Housing and the Environment is also allocated an amount of Le2.8 billion.
77. From the domestic capital budget, an amount of Le1.3 billion is allocated as Government counterpart contribution to various donor funded projects in the mining and environment sector. Development partners including the World Bank, European Union and UK-DfID are expected to disburse Le16.2 billion to support the implementation of various projects in this sector.
Pillar 3 Accelerating Human Development:
78. Mr. Speaker, Honourable Members, to address the emerging challenges in the health sector, an amount of Le97 billion is allocated to the Ministry of Health and Sanitation. Of this, Le52 billion will support on-going efforts to improve the quality of and access to basic and tertiary health services, Le 45 billion is allocated under the contingency fund to support Ebola-related activities.
79. The National Pharmaceutical Procurement Unit is allocated an amount of Le35.1 billion for the procurement and distribution of drugs. In addition, an amount of Le20.3 billion will be transferred to the Local councils for primary health care services.
80. An amount of Le54.8 billion is allocated from the domestic development budget to facilitate the establishment of Public Health Sierra Leone, including Le4.0 billion for the rolling out of a Medical Insurance Scheme for health workers. The Ministry will work out the finer details of the proposed Public Health Sierra Leone programme to capture various projects as mainstreaming sanitation and hygiene across the country; establish a national ambulance service; a pool of paramedics and trained clinicians. Hence a Public Health master plan will be developed shortly.
81. Development partners, including the Kuwaiti Fund, BADEA, IDB, World Bank, Global Fund and GAVI will disburse an amount of Le100.4 billion to support various projects in the health sector.
82. Education: Mr. Speaker, Honourable Members, Government indefinitely postponed the re-opening of schools, universities and other higher institutions of learning due to the fear of contagion, especially among children. This has many adverse effects, including the loss of time in the learning process, delay in conducting public examinations such as BECE, likelihood of school drop-outs and increase in teenage pregnancy.
83. In this regard, an amount of Le60.1 billion is allocated to the Ministry of Education, Science and Technology to support a nationwide school feeding programme; and accelerated education through radio and television teaching programmes.
84. Government is also allocating Le 10.3 billion to scale up support to the girl child programme. The current situation involves the payment of tuition fees for three terms for girls in JSS I, two terms for girls in JSS II and one term for those in JSS III. With effect from next academic year, Government will pay tuition fees for all the terms for girls in Junior Secondary School. In addition, an amount of Le 37.8 billion will be transferred to Local Councils to scale up procurement of teaching and learning materials, and disinfectant for schools, payment of tuition fees subsidy for primary school children and payment of examination fees for pupils taking NPSE and BECE. An amount of Le7.9 billion is also allocated to continue to pay examination fees for WASCE.
85. Grants to tertiary educational institutions, including tuition fee subsidy for students at University of Sierra Leone and Njala University will amount to Le 142.5 billion.
86. Development partners are expected to contribute Le164.5 billion in support of projects in the education sector.
87. Water Resources: An amount of Le8.9 billion is allocated to the Ministry of Water Resources in support of its activities, including the establishment of a National Water Resource Management Agency to improve the operations of Guma Valley Water Company and SALWACO. An amount of Le13.3 billion is allocated to SALWACO and Guma Valley Water Company for the improvement of water distribution systems in rural areas and the Western Area, respectively. The Local Councils are also allocated an amount of Le 4.5 billion for solid waste disposal services.
88. The AfDB, BADEA, IDB, OFID and GEF will disburse Le92.1 billion to support various water projects including the Rural Water and Sanitation Project, the Three Town Water Supply Project for Bo, Kenema and Makeni and the Kabala Water Supply System.
Pillar 4: International Competitiveness
89. Roads: Mr. Speaker, Honourable Members, the on-going phase of road programmes and other public works will continue as part of our efforts to stimulate the economy and provide jobs, especially for the youth. To this end, an amount of Le131.8 billion is allocated in respect of the rehabilitation and reconstruction of trunk roads, Freetown urban and district headquarter town streets.
90. Road User Charges and Vehicle Licenses will contribute an amount of Le100.2 billion to the Road Maintenance Fund Administration. The Road Fund will support the routine maintenance of trunk and city roads, bridges and ferries, upgrading of existing roads as well as the development of new trunk and feeder roads.
91. Development partners, including the European Union, ADB, IDB, Saudi-Fund, Kuwaiti Fund, BADEA, OPEC and GIZ will disburse an amount of Le434 billion.
92. Presidential Feeder Roads Initiative: this will include the procurement of rural roads equipment to support agriculture, public health and water services in each of the 12 districts. This Presidential initiative will deepen economic inclusion and enhance access to market. In this regard, each District Council will be provided with a dozer, a grader, a roller, two tipper trucks, one utility vehicle and sprinkler.
93. An amount of Le8.6 billion is allocated to the Ministry of Works, Housing and Infrastructure of which Le2.6 billion is for repairs and maintenance of Government buildings. In addition Le 18.8 billion is allocated to the Ministry for the rehabilitation and construction of Government buildings.
94. Energy: Mr. Speaker, Honourable Members, one of the key milestones that would underpin the successful implementation of the Agenda for Prosperity and support the post-Ebola recovery programme is the restoration of sustainable electricity supply in Freetown and urban-rural towns. To achieve this, Government, in collaboration with its development partners, launched several pipeline projects to improve the electricity situation throughout the country. These include the World Bank funded Energy Access and Energy Sector Utility Reform Projects; IDB funded Low and Medium Voltage Network Improvement Project,; the Japanese International Cooperation Agency Transmission and Distribution Lines Project, and the West African Power Pool Project funded by the African Development Bank.
95. As part of regional efforts, ECOWAS provided a grant of US$21.8 million to address emergency needs of the National Power Authority in the Western Area. Additionally, pipeline electricity generation arrangements with Addax Bio-energy for 15MW and Cooperbelt Engineering Cooperation (CEC) for 128MW to be delivered over a period of 18-36 months are underway to improve energy access in the Western Area.
96. The Power Sierra Leone Project that seeks to increase electricity generation capacity to 1000 Mega Watts by 2017 was recently launched in the United Kingdom by the Minister of Energy. The energy sector strategy will focus on the deployment of additional thermal plants, development of hydro projects and solar power; rehabilitation and extension of the transmission and distribution network as well as energy sector reforms.
97. As part of this project, Government will issue a special “Electricity Medium-Term Bond” in tranches beginning 2015 to raise an amount of US$106 million to fund the installation of power plants and transmission and distribution materials in provincial headquarter towns as approved by Parliament in July 2014.
98. In the meantime, an amount of Le68.2 billion is allocated from the domestic capital budget for the procurement and installation of thermal plants for provincial and district headquarter towns. An additional Le 34.5 billion is allocated to support the rebuilding of the National Transmission and Distribution Network; an amount of Le2.0 billion is provided to support the operations of the Barefoot College for improvement of solar energy; Le3.0 billion as Government contribution to the unbundling and restructuring of the electricity sector; and Le9.2 billion as its contribution to the West Africa Power Pool Project.
99. Development partners including the ADB, European Union, World Bank, IDB and JICA are expected to provide an amount of Le106.6 billion to support energy sector projects.
100. Trade, Finance and Investment: An amount of Le16.9 billion is allocated to the Ministry of Trade and Industry to support various activities, including the implementation of the local content policy to encourage local business ideas, strengthen the operations of the Sierra Leone Producing Marketing Company, including a provision of Le5.0 billion as capital for trade in agricultural products; support consumer protection activities; and participate in regional trade integration programmes. Development partners will disburse Le11.6 billion to support the Rural Private Sector Development Project.
101. Small and Medium Scale Enterprises (SMEs) Fund: An amount of Le 5.0 billion is allocated to operationalise the SME Fund in 2015. Additional resources from the proceeds from the Japanese food aid of about Le7.0 billion will be utilized to complement Government’s allocation to the SME fund. The fund will support training for SMEs, development of young entrepreneurs and improve access to affordable finance at preferential interest rates through the Community Banks and Financial Services Associations. Government will establish an independent agency to execute the SME fund. A National Steering Committee for SME Development will be established comprising Ministry of Finance and Economic Development, Bank of Sierra Leone, Ministry of Trade and Industry, Office of the Chief of Staff, Sierra Leone Chamber of Commerce, Industry, and Agriculture. Sierra Leone Investment and Export Promotion agency and the International Finance Corporation to implement a holistic SMEs development programme incorporating the SME Policy and the SME Fund. The committee will be co-chaired by the Ministry of Trade and Industry and Ministry of Finance and Economic Development while the BSL will regulate the programme through the Apex Bank.
102. In addition, an amount of Le3.2 billion is allocated to the Sierra Leone Investment and Export Promotion Agency (SLIEPA) to facilitate investment and export promotion activities.
103. Government is also allocating an additional amount of Le1.3 billion to this sector, of this, Le500 million to support the reconstruction of the Standards Bureau Laboratory; and Le600 million as counterpart funds to donor funded private sector development and trade related projects. Development partners including the World Bank and the ADB will disburse Le12.1 billion to support the implementation of the Financial Sector Development Plan and institutional development and capacity building projects.
Pillar 5: Labour and Employment:
104. Mr. Speaker, Honourable Members, the Ministry of Labour and Social Security is allocated an amount of Le5.3 billion for various activities including enforcing labour regulations and review of the obsolete labour laws to enhance private sector development for job creation. In addition, Government is allocating Le 4 billion for cash transfers to the aged and vulnerable groups.
105. The Ministry of Youth Affairs is allocated an amount of Le4.7 billion in support of youth activities. In addition, Le 2.1 billion is provided from the domestic capital budget for the implementation of the National Youth Development and Empowerment Project. Government counterpart contribution to the World Bank funded Youth Employment Support Project amounts to Le 864 .0 million. The World Bank will disburse Le 4.8 billion in support of this Project.
106. Skills Development Fund: Mr. Speaker, Honourable Members, significant skills gap exists in both the public and private sectors, which is adversely affecting private investments and public service delivery. It may interest you to know that, there are 201,000 motorbike riders (Okadas) and 1,500 Ataya bases with a membership of at least 50 each compared to 621graduates in engineering, medicine and mass communication over 2010-2014. Based on the estimate from the Ministry of Health, Sierra Leone needs 3,300 medical doctors. There are at present 386 doctors including only 9 Dental Surgeons in the country, leaving a gap of 2,914 doctors. The estimated number of nurses and mid-wives is 1,365. Estimates from the Ministry of Health indicate that an additional 8,615 nurses and mid-wives are required. This indicates the prevalence of unskilled work force.
107. In an effort to address this imbalance between skills available and skills required, Government established the Skills Development Fund in 2014. The Fund will be operationalised in 2015 to support young, brilliant, and talented Sierra Leoneans to undertake highly specialized technical and vocational training programmes to fill the existing skills gap.
108. Already Le2.1 billion mobilized this year is ring-fenced for the Skills Development Fund. In addition, Le7.0 billion will be transferred from the proceeds from the Japanese food aid will be transferred to the Skills Development Fund to support among others, the establishment of a Young Engineers’ Corps as well as support for advanced and specialized training for young medical graduates. Government will also pilot a National Youth Service another Presidential initiative, and roll out a Young Professionals Internship Progrmme for uni