The Bank of Sierra Leone Act, 2019 is arguably one of the most critical pieces of legislation for Sierra Leone’s modern economy. It serves as the foundational charter for the nation’s central bank, fundamentally redefining its objectives, powers, and relationship with the government. This Act repeals the 2011 version, ushering in a framework aligned with international best practices for modern central banking.
For anyone involved in finance, law, or economic policy in Sierra Leone, or for international observers, understanding this Act isn’t just academic—it’s essential for comprehending the architecture of the country’s financial system. This post will break down the Act’s most significant provisions.
1. The Primacy of Price Stability: The Core Mandate
The most crucial change codified in the 2019 Act is the explicit hierarchy of the Bank’s objectives. Section 5(1) states the primary objective is “to achieve and maintain price stability.”
This is followed by:
Contributing to a stable financial system.
Supporting the general economic policy of the Government.
This structure is deliberate. The Act mandates that the Bank’s other objectives can only be pursued after the primary goal of price stability is secured. This is a fundamental tenet of modern central banking, recognizing that low and stable inflation is the greatest contribution a central bank can make to long-term economic growth and prosperity.
2. Autonomy and Accountability: A Delicate Balance
A central theme of the Act is establishing the Bank’s autonomy, a critical factor for credibility in monetary policy.
Autonomy (Section 4): The Act explicitly states, “The Bank shall be autonomous and accountable in the performance of its functions.” More importantly, Section 4(2) insulates its leadership from political pressure: “In the exercise of their functions… members of the Board and staff members shall not take instructions from any person or body.”
Accountability (Part IV): This independence is not absolute. It is balanced with robust accountability mechanisms. The Bank is required to submit annual financial statements and operations reports to the Minister of Finance and Parliament (Section 21). Furthermore, the Governor must appear before Parliament at least twice a year to report on monetary policy (Section 22), ensuring democratic oversight.
3. The Bank’s Key Functions and Powers
The Act outlines a wide range of functions, solidifying the Bank’s role as the apex financial institution.
Monetary Policy (Part IX): The Bank has the sole authority to formulate and implement monetary policy (Section 52). It is equipped with a full toolkit, including open market operations (Section 55) and the ability to set minimum reserve requirements for financial institutions (Section 56).
Currency Management (Part V): The Bank retains the “sole right of issuing banknotes and coins in Sierra Leone” (Section 27). The Act details provisions for the Leone as legal tender (Section 30) and outlines severe penalties for counterfeiting (Section 34).
Financial Supervision (Part VII): The Bank is responsible for “the regulation, licensing, registration and supervision” of commercial banks and other financial institutions (Section 44). This “supervisory function” is key to maintaining the stable financial system mentioned in its objectives.
Payment Systems (Part VII): Recognizing the digital age, the Act gives the Bank the power to license and monitor all payment and securities settlement systems (Section 43), ensuring the safety and efficiency of how money moves.
Foreign Reserves (Part VIII): The Bank is tasked with owning, maintaining, and managing Sierra Leone’s official international reserves (Section 51), using them to execute exchange rate policy and settle international transactions.
4. A New Relationship with Government
Part X of the Act meticulously redefines the Bank’s relationship with the Government, moving away from any perception of it as a simple financing arm.
While the Bank still acts as the “banker, fiscal agent and advisor” to the Government (Section 61), its ability to finance the government is strictly curtailed. Section 64, “Limit on lending to Government,” is paramount. It prohibits most direct credit to the government, with exceptions for temporary overdrafts that are strictly limited to “5 percent of the Government’s actual domestic revenue… in the previous year’s budget” (Section 65(5)) and must be repaid within 93 days.
This provision is critical for enforcing the price stability mandate, as it prevents the government from financing its deficits by “printing money” a primary driver of hyperinflation in other economies.
Conclusion: Why the 2019 Act Matters
The Bank of Sierra Leone Act, 2019, is more than a legal document. It is a clear statement of intent. It establishes a modern, autonomous, and accountable central bank with a clear and primary mandate to fight inflation. By setting firm limits on government financing and equipping the Bank with the necessary tools for monetary policy and financial supervision, the Act provides a credible foundation for Sierra Leone’s long-term economic and financial stability.
Explore the Bank of Sierra Leone Act, 2019 – the foundational law defining its autonomy, core objective of price stability, and key functions in monetary policy, financial regulation, and currency management.