By Hassan Osman Kargbo
In a bid to boost economic activity and stimulate private sector credit, the Bank of Sierra Leone (BSL) has reduced its Monetary Policy Rate (MPR) by 2 percentage points to 21.75%. The Standing Lending Facility Rate (SLFR) and Standing Deposit Facility Rate (SDFR) have also been cut by 3 percentage points each, to 23.75% and 14.25%, respectively.
The decision, announced after an emergency meeting of the Monetary Policy Committee (MPC) on July 24, 2025, and approved by the Board of Directors on July 28, 2025, reflects the central bank’s confidence in the improving domestic macroeconomic environment. According to the MPC, the reduction in interest rates aims to align with developments in the money market, ensure policy consistency, and stimulate private sector credit and investment without compromising price stability.
The MPC’s decision is premised on several key factors, including the continued easing of inflationary pressures, with headline inflation declining to 7.10% in June 2025 from 7.55% in May 2025. Additionally, the 364-day Treasury Bill rate has decreased significantly, from 20.40% in June 2025 to 15.17% in July 2025, due to the government’s ongoing fiscal consolidation efforts.
Despite a projected increase in Real GDP growth to 4.5% in 2025, the BSL’s Composite Index of Economic Activity (CIEA) showed a slight slowdown in economic activity in the second quarter of 2025. Furthermore, private sector credit declined from 3.72% of GDP in March 2025 to 3.69% of GDP in May 2025.
The Leone/US Dollar exchange rate has remained relatively stable, thanks to monetary and fiscal policy coordination and improved market sentiment. While uncertainty in the global environment persists, the MPC believes that the balance of risks to the inflation outlook is tilted to the downside.
The new interest rates, effective July 29, 2025, are expected to stimulate economic growth and investment. The BSL remains committed to its mandate of price stability and is willing to recommend adjustments to the monetary policy stance if market conditions change significantly.
The reduction in interest rates is a welcome development for businesses and individuals seeking credit, as it is expected to increase access to affordable borrowing and boost economic activity. The BSL’s commitment to price stability and its willingness to adapt to changing market conditions will be crucial in maintaining economic stability and promoting sustainable growth.
