Understanding where government money comes from
A look at Sierra Leone’s revenue performance Between 2014 and 2016
In 2013, Sierra Leone’s revenue collection improved. According to the former Minister of Finance and Economic Development — Dr Kaifala Marah — this was primarily because of higher than expected performance of Income Taxes, Goods and Services Tax (GST), and non-tax revenues which include mining royalties, licenses, fees and other charges. In 2013 alone, income tax a share of nominal GDP was 5.4%; customs and excise stood at 2.8% as a share of nominal GDP, while the share of revenues collected from the mines department was 1.7%. Compared to 2014, 2015 and 2016, these indicators have performed better in 2013.
In 2014, the Ebola epidemic struck the country and this adversely affected all facets of the economy. In a report prepared by staff of the International Monetary Fund, the Ebola outbreak and sharp decline in the price of iron ore brought about a slow-down in the economy, thereby reducing output. Total domestic revenue dropped by 5.86% from Le2.36 trillion in 2013, to Le2.23 trillion in 2014. This mirrored a reduction in domestic revenue as a percentage of GDP, from 13.7% in 2013, to 10.3% in 2014.
But which revenue component performed the worse in 2014?
When reading the 2015 budget, Minister Marah noted the revenue under-performance for 2014 and particularly mentioned the lower proceeds from mining revenues. Well, official data shows that mining revenues dropped by 36.82% from Le295.47 billion in 2013, to Le186.67 billion in 2014. It is important to note that these mining proceeds are royalties on minerals including rutile, bauxite, diamond, gold, iron ore and licence fees. In addition, revenues from other departments which include that raised through royalties from fisheries and parastatals also declined sharply by 36.03% from Le121.51 billion in 2013, to Le Le89.33 billion in 2014.
In 2015, the amount of all categories of domestic taxes increased except that generated from the mines department. However, apart for Goods and Services Tax alone, their percentages of nominal GDP either decreased or remained constant. Mining proceeds continued to drop in 2015 from Le186.67 billion in 2014 to Le86.53 billion, reflecting a decrease from 0.9% to o.4% as a percentage of GDP.
As observed from official data, total grants which constitute support from UK DFID, EU, the IMF, World Bank, African Development Bank, and from other projects, witnessed a consistent increase from Le547.6 billion in 2013, to Le959.48 billion in 2014, and to Le1.16 trillion in 2015.
Following the efforts made by the Government of Sierra Leone to get the economy back to economic recovery after the Ebola epidemic, revenue indicators showed signs of progress in 2016.
In fact, the IMF Review Mission to Sierra Leone in September 2016 had this to say: “…The economy proved resilient in the face of two major exogenous shocks: the Ebola epidemic and collapse of iron ore prices and associated loss of production in 2014–2015. Sound macroeconomic policies, together with generous support from development partners helped ensure fiscal and external sustainability, while providing sufficient resources to begin implementing the post-Ebola Recovery Strategy…”
From all indication, both Income Tax and the mines department improved significantly in 2016, increasing by of 40.76% and 54.49% respectively from 2015 to 2016, with their shares of GDP moving from 3.9% to 5.3%, and from 0.4% to 0.7%. As things stand, evidence from the Ministry of Finance and Economic Development does point to the fact that continued and sustained domestic resource mobilization will be key to achieving the country’s overall macroeconomic and development objectives.
And with the recently concluded elections, many Sierra Leoneans await the announcement and subsequent implementation of economic policies under the new regime.
About Open Gov Fellowships
The Sierra Leone Open Government Fellowship is based on a continental initiative of the Code for Africa (CfAfrica) federation, first launched in 2015 where fellows helped liberate data or build better digital democracies in Ghana, Nigeria, Rwanda, South Africa and Uganda. The Open Government Fellowships are intended to support African government’s Open Government Partnership pledge to make important ‘civic’ information available online.
The World Bank’s Governance Global Practice (GGP) supports client countries to help them build capable, efficient, open, inclusive, and accountable institutions. This is critical for countries to underpin sustainable growth and is at the heart of the World Bank’s twin goals of ending extreme poverty and boosting shared prosperity.
Code for Africa is the continent’s largest federation of civic technology and open data laboratories, with affiliate members in 10 African countries and funded projects in a further 12 countries. CfAfrica manages the $1m/year innovateAFRICA.fund and $500,000/year impactAFRICA.fund, as well as key digital democracy resources such as openAFRICA.net and GotToVote.cc.
