Volume 4, Issue 2, June 2019, Page: 64-73
The Impact of Extractive Industry on Sierra Leone Economy: (Implication for Poverty Reduction)
Alie Faroh, Department of Economics, Ernest Bai Koroma University of Science and Technology, Makeni, Sierra Leone
Received: May 16, 2019;       Accepted: Jun. 28, 2019;       Published: Jul. 19, 2019
DOI: 10.11648/j.jbed.20190402.14      View  118      Downloads  18
Abstract
Extractive industry which consists of agriculture, mineral and hydrocarbon products such as gold, phosphates, diamonds, oils, gas, etc. The industry is the economic block for many developing countries; in some cases this industry constitutes the sole source of fiscal revenues, foreign exchange earnings and surpluses to finance the needed socio-economic development. This paper used different approach by taking the entire extractive industry and examining its impact on economic growth and also the link between resource revenue and poverty reduction. This study used multivariate regression techniques in econometric to analyze time series data for period of forth nine years (49) from 1964 to 2012, using quantitative and explanatory research approach, both E-view and Stata Software were used to analyzed the data, the necessary diagnostic tests associated with time series data were carried out in order to make the results reliable and valuable. Our results indicate a positive relationship between resource wealth and economic growth. The finding appears robust in the sense that it remains significant in growth model after controlling for a variable like population; we find that the effect remains the same. The exchange rate is significant, meaning that exchange rate volatility is key factor affecting the growth rate of the economy of Sierra Leone. The domestic savings is significant, and shows a positive relationship with economic growth, as many empirical literatures shows that savings and investment are good for economic growth, this finding has been proven in our case here for Sierra Leone. The population variable is significant with positive sign, meaning that population can contribute to economic growth positively, especially when the labor force is provided with adequate training and skills. Finally, we conclude by accepting the null hypothesis; that extractive resources particularly the hydrocarbon and other mines resources have a positive relationship with economic growth. Some policy recommendations are; The Government should promote and enforced mineral resources revenue stabilization and reducing fiscal imbalances, Encouraging mining companies to behave in a more social and corporate responsible manner with a view to improving the social relevance of mining. The government through the central bank and the ministry of finance should direct policy towards inflation and exchange rate volatility. The government should maintain all the principles and guidelines and strictly follow the Extractive Industry Transparency Initiative (EITI) rules.
Keywords
Extractive Industry, Economic Growth, Poverty Reduction, Policy, Sierra Leone
To cite this article
Alie Faroh, The Impact of Extractive Industry on Sierra Leone Economy: (Implication for Poverty Reduction), Journal of Business and Economic Development. Vol. 4, No. 2, 2019, pp. 64-73. doi: 10.11648/j.jbed.20190402.14
Copyright
Copyright © 2019 Authors retain the copyright of this article.
This article is an open access article distributed under the Creative Commons Attribution License (http://creativecommons.org/licenses/by/4.0/) which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
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