A.1. This is a very relevant question, firstly because our economy is donor- driven, so we depend substantially on foreign donations and at the same time we are aware of the fact that this donor generosity will not continue indefinetely, secondly we, as a country and as a Ministry have decided to mobilize our assets and resources in order to reduce donor dependance and eventually to be able to take full responsibility for funding our budget. The Government has decided to streamline the collection of revenue and in September 2002 National Revenue Authority (NRA) was established by the act of Parliament. The department of Income Tax, Customs and Excise Department were unified in the NRA. Among the major tasks of the NRA is to improve upon the procedures and methods of collection, to rationalize tax administration and to review all the legislation concerning customs, excise and income tax, since some of the laws are very old and some of the levys are outdated too. To enhance revenue collection some of these rates have to be reviewed and we also need to expand the tax net upon many activities that will become taxable in the near future. The NRA has been set up and it will be fully functioning towards the end of this year, we are at the stage of finalizing the recruitment and training of new staff, that will enable us to be able to bring in "new blood", young, competent, well trained and educated staff. We will also retain the experienced people that we have and the new people will join them. It will be necessary to reduce the number of staff that we have, since in the previous times it used to be one of the areas where people entered and then remained for a long time, as a result we have a high number of unnecessary staff and that costs us a lot of money. One of the ways in which we are trying to improve the work of the NRA and to motivate its workers is to remove them from the system of remuneration of Civil Servants. The NRA is going to be set up as an independent authority, and its conditions of service will be able to attract the best qualified staff with its remuneration comparable to the one in banks, for example. In exchange for that, the Government can expect the best out of its people. We as a Government are also trying to address other areas of revenue generation, there are also other Ministries that are collecting revenues, the problem used to be that those amounts were not properly accounted for, as a result we are now formulating another procedure, whereby the NRA will have to supervise all Ministries. According to this scheme, all fees will have to be paid into the general account of the Government to avoid previous mistakes.
We are also hoping to get techniacal assistance from the IMF and the World Bank to improve upon our tax laws. As a Ministry we have also tried to improve the question of granting duty free concessions, the past Governments used to experience tremendous losses from that activity. We are rationalizing it and we have set up a committee which is headed by the NRA, it examines every application for a duty waiver and recommends to the Minister what decision he should make, whether to grant or not to grant a duty free concession. This committee has been working for the last two months and we have saved quite a lot and improved the flow of revenues for the country.
We have also decided to rationalize the tax rate system, to prepare the ground for the common external tariff system within the ECOWAS that we will be adopting. We have reduced sales tax, from 20% to 17,5%, we have also reduced the tax on the importation of new vehicles from 30% to 5%. The tariff rate was so high that nobody could afford to bring in new cars, except for the NGOs, embassys, etc. We hope that by this reduction it will enable more people to bring in new cars, because the importation of large fleets of old vehicles imposed a big drain on our foreign exchange for spare parts. At the same time we decided to slightly increase the duty on old cars to discourage people from bringing in more old cars. These are some of the main steps we are undertaking in order to mobilize our resources and eventually it allow us to reduce our dependancy on donors.

Q.2. Could you elaborate on your macroeconomic fundamentals such as your level of inflation, level of debt, and the level of assistance that you are getting from the international community?

A.2. The economy has started picking up as a result of Government efforts at bringing about peace. With the restoration of peace the business confidence has been established and the Government extended its jurisdiction over the entire country, you have development in business activities in all the areas. As a result of the security improvement we have experienced growth in our real GDP figures, from 5.4 % in 2001 to 6.3% in 2002 reflecting a broad recovery across all the sectors of the economy. In 2003, real GDP growth is projected to reach 6.5%.
For the last two years inflation has been negative and during 2003 it has remained in single digits. This has been due to the large supplies of consumer goods, both imported and locally produced; substantial reductions in import taxes during 2001 and 2002; reduction in domestic petroleum product prices in 2002 to establish a flexible system of pricing that depends on the international markets and prices, the exchange rate is based on the free market and the Bank of Sierra Leone is conducting weekly auctions of foreign exchange openly and freely with a competitive bidding system, where banks and interested businessmen can bid for foreign exchange. Owing to the increase of trade, particularly the rise in the trade with diamonds- as a result of the certification system we have received very high revenues from that sector of the economy, it is one of the biggest earner of foreign exchange for the time being.

Q.3. The macroeconomic environment is being stabilised succesfully, what are the measures to keep the inflation low, without affecting the possibilities of growth?

A.3. You can not develop a country or be engaged in spending in lets say, infrastructure development projects, without pushing the inflation figures to rise and if you try to keep it permanently on a low level, then of course your development level is going to be low too. We always try to keep a balance to keep in check the inflationary tendencies but at the same time we will allow some level of expenditure and particularly in the case of Sierra Leone, with all the destruction that took place, we have substantial financial needs to embark on infrastructural development and that is going to affect the present level of the exchange rate. We need to spend a lot of money to rehabilitate and reconstruct the countryside, reduce poverty, improve the health situation, etc. There will be attempts by the Ministry of Finance to keep the inflation low but at the same time we will not discourage expenditures in the very vital areas that I mentioned earlier.

Q.4. What will be Sierra Leone's competitive advantage as far as its future Foreign Investment Act is concerned?

A.4. The Government has elaborated on a wide range of incentives to be included in the Foreign Investment Act and we have come to a point when the Ministry of Finance had to disagree with many of them. As a Ministry, we believe that private investment, both foreign and local is the engine for the economic development of a country- this is undeniable and we all agree with that. However, what has to be understood, is that incentives will not undermine the mobilization of local resources to fund the budget. For example, where the Ministry of Finance has disagreed with the points of the proposed Foreign Investment Act is the incentives given on tax holidays. We think that they are going to undermine our efforts to bring in more funding, therefore we are trying to work out a compromise between giving tax incentives and at the same time not denying the Government from its resources to be able to carry on with our development activities. I believe that the areas that can be attractive to investors should really be emphasized in the investment code for example, investors want to operate in peace and we have achieved that as a Governemnt, then they also want to see a democratic and stable political environment, that we have also achieved, we have had fair and free political elections and the political processes that are going on are in line with our democratic achievements. Other important things that investors will be looking at are certain guarantees in terms of laws, prohibiting nationalization, expropriation, provisions for compensation, etc. They also want to see an environment where the judicial processes really are consistent with the rule of law. They want to see speedy judicial processes, therefore we need to reform that too, it might bee even necessary to have a special court assigned to commercial cases. Businessmen also need guarantees that their profits can be repatriated, capital brought in can be moved in and out of the country freely, they also value infrastructure developments and good accessibility throughout the country. These are some of the areas I would like to highlight in our code. A good number of big investors that have come to me have laid special emphasis on these areas and secondarily they were asking for tax holidays. The emphasis in the draft code is put on exemptions from varios taxes. Even if we include all these exemptions in our code, but there will be none of the points that I have outlined, I am not sure that people would be attracted to come into Sierra Leone. The tax incentives should be complementary to all what I have mentioned before. The donors would ask us, if you are throwing away all your tax revenues, why are you expecting us to continue financing your budget, we can not continue to tax our own people and then come here and support you. That is a slight conflict that I have now and we are trying to find a compromise. Apart from that, Sierra Leone really offers opportunities for investors, it is a very hospitable country and it has very friendly inhabitants. We have a natural harbour, that has a very advantageous location, it is not far from the US and also not far from Europe. We have low labour costs that allows investors to use the country as a centre for production to access the market of the subregion. We also have beautiful beaches that are very attractive for tourism. Before the war we used to wellcome a large number of tourists and we hope to restart that soon.

Q.5. Another important step forward is the privatization of state owned entities, several of them are in the financial sector, what interest do you expect from foreign investors?

A.5. The National Commission for Privatization has been set up already by the Act of Parliament, all parastatals, under various ministries are now being managed by this commission and one of the main functions of that commission is to prepare these companies for the privatization. According to the Act, Privatization can take several forms, it may include joint ventures with foreign companies, it may include contracting of management to foreign companies and it can also include outright sale of these companies. The intention of the Government is to reduce the tax burden created by these parastatals. Some of them have already been contracted out to foreign management and they are operating very succesfully. The Sierra Leone Commercial Bank, for example is a highly profitable venture, Rokel Commercial Bank is partly owned by the Government and partly by the private sector, the State Lottery is another highly profitable organization but still under Government control. There are 24 companies in total intended for privatization. One important issue that we are currently looking at is that Sierra Leoneans don't have the necessary funds to participate in the process, so if we would go for an immediate outright sale of these entities, they will end up in foreign hands completely. The Government would be later blamed for that, since we have not even given the opportunity for local businessmen to participate. Therefore, we are encouraging the establishment of financial institutions in the country, we are also encouraging the banks to create opportunities for nationals to raise funds and to acquire a share in these parastatals. We have been in consultations with the World Bank and a comprehensive plan of the privatization process is being drawn up now by the Commission to present it later to them. After it will be adopted we will set it up for implementation for the various stages of the privatization process. We would like to implement it in a way so that Sierra Leoneans could get a stake in these institutions, otherwise tomorrow we would be blamed for having sold off the assets of the nation. Like I said before, in a joint venture form, we are already having foreign investors and local businessmen joining their powers to buy some of these parastatals.

Q.6. I would like to ask you to tell us about your professional background and your major achievemnets as Minister of Finance.

A.6. I started as a teacher and then went to England to study law. After receiving my qualification I came home and opened a private legal practice that I carried on for 14 years. In 1986 I joined politics and up to 1992 I was working in different positions in the Government, Deputy Attorney General, Minister of Trade and Industry, Second Vice President, to name but a few. The Government was overthrown in 1992 and after that I resumed my private practice until 1999 when I was again recruited for public administration as Minister of Local Government and Rural Development. I was in that Ministry until June 2002, when I was appointed to my current position of Minister of Finance.
My main achievements, since I became Minister of Finance were, maintaining and sustaining a stable macro-economic environment, the one I inherited. These include a growing real GDP figure, from 5.4% in 2001 to 6.3% in 2002. Low inflation and a relatively stable exchange rate. We have succesfully implemented two annual programmes under the 3 year programme supported under the PRGF (Powerty Reduction and Growth Facility) of the IMF.
I have established of the National Revenue Authority to strengthen tax administration in order to enhance domestic revenue collection and reduce our reliance on donor funding.
I have also established the National Commission for Privatization in order to improve the efficiency of public enterprises, reduce the fiscal burden on Government of loss making public enterprises and, more importantly, to give the private sector a greater role in the economy.
By carrying out our economic programme we have been successful and we have been awarded by debt relief under the HIPC Initiative, from a number of countries, from the IMF, the ADB, the IMF, and the Paris Club. That has substantially relieved the debt service burden on our country and to provide more resources to fight poverty, improve education, health and agriculture.
When I took over the Ministry we had accumulated a huge domestic debt, now we have managed to reduce it by 50%, while at the same time mobilising external financial and technical assistance for the country. In fact I will be travelling after the IMF meeting, to sign two agreements, one a feasibility study for the Freetown-Lungi road and another one for agriculture, in terms of support for rice production.
In terms of budgetary formulation and execution we have greatly improved upon the transaprency and accountability of these processes. The budget preparation and execution used to be highly closed from the public, but under this new programme we invite the public, civil society groups, community leaders, students to come and take part in the budget formulation process. We have sent out projections all over the country to sensitize people about the available resources, how they could be allocated and to get feedback from them about the areas of use and at the same time they should also provide information to us about the sources of their revenue. The response has been very good. Budget sessions have been held all over the country. Once we collected all this information, we invite the representatives to Freetown to sit down with us and the various ministries, departments are also invited to defend their position. When the budget is finally announced in Parliament, people already know what is included in the budget, there are no surprises, like new taxes, for example, because all that have been discussed with the people earlier. There is a democratic, open exercise now. We found that very useful because apart from the preparation, the execution of the budget is also done in cooperation with the people. We also have a Public Expenditure Tracking Survey (PETS), where we collaborate with a large number of students that go around the country to inspect if the budget allocations have been used properly. The provisions in the budget are also much more expressive now, for example if you allocate money for schooling, you also specify, what kind of school, its location, so that the people in that area are aware of that. This will dissolve most of the rumours surrounding budget implementation. That is one important area where we have introduced significant changes.

Q.7. There are very high expectations from this Government regarding the future of this country, what are your projections to the future development of Sierra Leone?

A.7. IfI would put it very bluntly, I would say that I am very hopeful that the economy will improve. We are now preparing our Poverty Reduction Strategy Paper (PRSP). Our Ministry is involved together with many of the Civil Societys, we are also expecting technical assistance to enable us to move forward with the work. Once that is completed, in the document we specify the different areas of intervention for our donors and development partners. This document is so crucial that without it it is very difficult even to receive support. With the prospect of peace and stability that we have achieved, that our neighbor, Liberia has achieved and also Cote D'Ivoire, one would expect a very stable environment in the subregion. Therefore, our plans for development are very high. We have very high natural attributes, over 6 month of continuing rain, which is very conducive for agriculture, very fertile lands, rich mineral resources to explore, and the physical area of the country and its population are not too large. What is our main problem, is management. If our economy could be properly managed, in a very short time we would embark upon a stable development. That brings me to one of the major issues perhaps, which is corruption. That single problem we have, we are addressing it with the Anti Corruption Commission, that is working successfully for the second year, and it has achieved many things. It is working in two directions, one is prosecution, the second is the preventive side of it by educating people about the evils of corruption. This has even been extended to schools in an effort to try to lay the foundation of a new corruption free society. I can say that the educational side of it has been very effective. What the Anti Corruption Commission has been able to achieve is that it has focused every attention on the activity itself. I can not say that we have eradicated it completely, but those who want to be engaged in it are aware that the rest of the people are watching and that they will be prosecuted for it. And we are going to succeed.

Another importanty issue that I want to mention and that gives me good hopes with regard to the future development is that we have a 10 year poverty reduction agreement with the Britain. According to it they have offered us their assistance for a period of ten years, of course provided that we develop according to certain benchmarks, like in the case of corruption, that we have been talking about just now. We have to make sure that we make certain progress, that will be evaluated according to the benchmarks, we also have to undertake certain reformatory measures in the judiciary and in the security and the social sector. What is significant about this arrangement is that, once you perform, for a number of years you can benefit from it. There are only two countries in the world that are getting these facilities, it is Rwanda and Sierra Leone. One would expect and wish that this arrangement will be replicated by the other donors too, because it is crucial for our planning. When we depend on external aid, when you are planning your budget, you have to make sure as much as possible as to when and how much you will be getting. If we could get the same kind of agreement with a number of other donors, I am confident that it would help us a lot. I must also say that our other partners have been helping us a lot in our development needs, particularly, the World Bank, the IMF, The DFID of UK, The Islamic Development Bank and many others have been very generous.