Tax reform central to Sierra Leone fiscal consolidation, says finance minister

19 Sep 18

Sierra Leone is strengthening its tax system to ensure that it can cover its budget deficit and basic salaries – a task that is “quite challenging” – the new finance minister has told PF International in an exclusive interview.

Jacob Saffa, who was appointed finance minister in May, said that the previous government relied too heavily on borrowing from private banks to finance each deficit and even basic salaries.

He explained that he would focus on ensuring that the government could finance its own expenditure. “Fiscal consolidation is our number one priority. This means we need to mobilise revenue and rationalise our spending,” he told PF International in London today.

He added that tax is a major source of revenue and that the government would work to improve the system for more efficient tax collection and provide staff training to build the capacity needed.

In 2017, the government budget deficit was equal to 5.80% of GDP, and total domestic revenue was 3.0% short of its target for the year, according to the World Bank.

The finance minister said he could not disclose which taxes would change ahead of presenting the budget at the end of October. But he added that the changes will maximise revenue without hurting the poor in the country.

On Monday, the country rolled out its landmark free education programme for primary and high school students, which covers tuition fees and textbooks for more than two million children in government-run schools.

This is part of the new government’s move to eliminate poverty and invest in education, health and social protection.

Saffa told PF International that human capital is a top priority: “We have increased public spending on the education sector to 21% of the national budget.”

The government also plans to improve the health system and child health in the country, including provision of school meals to optimise learning capabilities. The finance minister said he hopes this will be achieved within the next three years.

But he added that even if the maximised revenue that can be raised through taxes went only to health, education and social protection, the country faces a financing gap of around $300m for those three areas alone.

At an event at the Overseas Development Institute yesterday, Saffa also said the government needed the skills to negotiate with the private sector and to better manage contracts.

He told PF International that this would enable the government to borrow money more responsibly and create a “win-win” situation. 

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