Commentary
By Mohamed Jalloh.
As the new APC government moves to appoint Sierra Leoneans to fill positions in the all-important financial management functions in Sierra Leone’s economy, comments reportedly made by the nominee for Governor of the Bank of Sierra Leone, Dr. Samura Kamara, at his parliamentary confirmation hearings, raise serious questions about whether he has the proper perspective required for the job.
According to the November 14, 2007 edition of the Awoko newspaper of SL: "The nominee to serve as Governor of the Bank of Sierra Leone, Dr Samura Kamara, told the Appointments Committee that his vision would be to ensure domestic price stability and stable economic policy backed by a sound financial policy.
Asked how he would be able to let the Leone be equaled to the dollar and when the country would have value for its money, Dr Kamara said if it were possible for the central bank to reverse that it would be fine. But stated that it was not possible as there were factors that drive the value of a currency. "It is every body’s wish to have a high value of the Leone but it cannot stand on its own without being supported by other factors," he said.
"What is more important than anything else," he went on "is the stability of the exchange rate. You will wake up tomorrow and the exchange rate is not erratic, then you look out for investors but the value also functions on the inflation."
Before analyzing the nominee’s surprising comments quoted above, I would like to commend the member(s) of parliament who raised the issue of the necessity of restoring the value of the Leone at the nominee’s confirmation hearings. It is a necessity that I explained, together with my learned friend, Jonathan M. Rose, in our published article in the Concord Times and at AllAfrica.com on January 30 this year, entitled "The Revaluation of SL’s Currency." Cf. http://groups.yahoo.com/group/SALONEDiscussion/message/2339
In our article, we summarized the case for restoring the value of the Leone against the U.S. dollar as a prerequisite for the development of SL as follows:
"As the example of pre-World War II Germany attests, it is a truism that a country with a worthless currency will become, sooner or later, a country with a worthless economy. With a currency that has depreciated by more than 375,000 % since it was first devalued in 1979, and a people frequently ranked as the poorest in the world, SL’s economy is in dire crisis.
We believe that the single greatest contributor to SL’s economic crisis is the same one as that identified by one of the greatest economists of the 20th century, Lord John Maynard Keynes of Great Britain. In his seminal 1919 treatise, "The Economic Consequences of the Peace," Lord Keynes accurately predicted that the destruction of the value of the German currency would precipitate a second world war, because, as he put it: "There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose." For largely similar reasons, we believe SL’s economic crisis to be rooted in the debauchery of the country’s currency. Accordingly, we propose a never-before-tried measure in SL — the revaluation of Sierra Leone’s currency — as the cornerstone of an economic recovery program for our country. This proposal is aimed at reversing the unprecedented inflation and other distortions in SL’s economy in the wake of the 1979 devaluation and subsequent depreciation of the Leone that have made it virtually impossible to sustain economic growth or alleviate poverty."
It is a promising sign that the new parliament understands that the key to resolving SL’s economic problems lies most fundamentally in rehabilitating our country’s needlessly devastated currency. It is especially heartening to learn that the consciousness of Sierra Leoneans, in general, has now been raised to such a high level that the nominee for governor of the Bank of SL feels obliged to agree with a parliamentarian(s) that the current astronomical exchange rate of the Leone to the dollar is undesirable and, therefore, the value of our unnecessarily weakened currency, the Leone, needs to be restored.
However, it is rather disappointing to note that, even though the nominee reportedly believes that our country’s catastrophically weakened currency’s value should be rehabilitated, he expressed the view that it is impossible to do so — whereas, in our article, Jonathan and I clearly outlined how it is indeed possible to do so.
So, in response to the nominee’s unequivocal answer that he believes that it is impossible to achieve the desirable goal of restoring the value of the Leone, the parliamentarians on the Appointments Committee should have followed up his answer with two simple, but very important, questions, namely:
1. Why do you think it is impossible to achieve the desirable goal of reducing the catastrophically escalated exchange rate between the Leone and the U.S. dollar?
2. Given that you have already agreed that it is desirable to reduce the astronomically high exchange rate between the Leone and the dollar, why should we confirm your appointment to be Governor of the Bank of SL when, by your own admission, you do not believe it is possible to restore the exchange rate of the Leone to parity with the dollar (and thereby you will fail to significantly bring down the cost of living that has impoverished millions of Sierra Leoneans and made it impossibly expensive for Sierra Leoneans to effectively compete with foreigners in SL’s economy)?
In my humble opinion, if the nominee fails to answer the above questions satisfactorily, it would be eminently reasonable for the Appointments Committee to question whether he is the right man to be appointed governor of the Bank of SL at this particular time. This is because, currently, the greatest problem facing SL is not corruption, but the devastation of the value of the Leone that itself makes it all but certain that pervasive corruption among ordinary Sierra Leoneans would become a necessity for their literal survival.
Finally, the nominee needs to be asked to explain his statement that "[w]hat is more important than anything else is the stability of the exchange rate," which seems to suggest that he does not agree with the well-established economic principle that the rate of the exchange rate is more important in determining economic activity in a country than fluctuations in the exchange rate.
Thus, to say that "[w]hat is more important than anything else is the stability of the exchange rate," as the nominee is reported to have told the SL Parliament, is akin to someone telling a poor man: "What is important is not the actual price that you will pay for this food, but the fact that the price is stable." Under that scenario attested to by the nominee, there is no difference between a poor man paying $20 for a good and paying $2,000 for the same good, because, according to the nominee, "[w]hat is more important than anything else is the stability of the [price]." Which means, in the mind of the nominee for governor of the Bank of SL, as long as the price does not fluctuate, it makes no difference to him whether the price the poor are asked to pay for a good or service is $20 or $2,000.
Such a position is exactly opposite to that required to bring down the oppressive cost of living that has made virtual paupers of millions of Sierra Leoneans. Therefore, if the nominee for governor of the Bank of SL is serious about reducing the cost of living in SL — the number one priority of any serious government — he must change his view that it is impossible to restore the value of the devastated Leone to parity with the dollar. In addition, the nominee must change his view that the actual rate of exchange between the Leone and the dollar is not as important as the stability of the exchange rate.
If the nominee for governor of the Bank of SL does not change his positions, there is a high probability that, just as his predecessors did, he would fail to resolve the most pressing and pervasive current economic problem facing SL — massive, escalating inflation imported through the catastrophically high exchange rate of the Leone to the dollar which has impoverished millions of Sierra Leoneans and made it impossibly expensive for the average Sierra Leonean to effectively compete with foreigners in SL’s economy.
Editors Note: Moh’m Jalloh (photo), a native of Sierra Leone resident in Maryland, is the founding Managing Director of a financial services firm in suburban Washington, D.C., USA. The above article is adapted from his recent response to a fellow member of SALONEDiscussion, the pioneering Internet discussion forum dedicated exclusively to the serious discussion of issues related to SL with the aim of advancing the development of the country. SALONEDiscussion recently sent a compendium of recommendations to the President of SL that includes proposals for restoring the value of the Leone against the dollar, and for restoring electricity, water and sanitation services in SL. This newspaper will shortly be publishing excerpts from the compendium.
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