RESTRICTED FILE COPY Report No. AF-10a Public Disclosure Authorized This report was prepared for use within the Bank and its affiliated organizations. They do not accept responsibility for its accuracy or completeness. The report may not be published nor may it be quoted as representing their views. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION Public Disclosure Authorized THE ECONOMY OF LIBERIA Public Disclosure Authorized September 4, 1963 Public Disclosure Authorized Department of Operations Africa CONTENTS Psage Basic Data Map Summary and Conclusions I. THE BACKGROUND.......................................... 1 The Country and People.................................. 1 The Government........................................ 2 The Political Situation................................. 2 II. THE STRUCTURE OF THE ECONOMY............................ 3 The National Income..................................... 3 The Basis of the Economy................................ 4 The Financial Structure................................. 4 Public Finance........................................ Foreign Trade........................................... 6 III. MAIN ECONOTIC SECTORS................................... 7 Agriculture............................................. 7 Forestry................................................ 9 Fisheries............................................... 10 Kining.................................................. 10 Iron Ore.............................................. 10 Diamonds.............................................. 12 Industry................................................ 12 Transportation.......................................... 13 Railways.............................................. 13 Roads................................................. 13 Ports................................................. 14 Power................................................... 15 Water Supplies.......................................... 16 Telecommunications...................................... 16 Education............................................... 16 IV. ECONOMIC DEVELOP1ENT.................................... 17 Past Experience....................................... 17 V. PERFORMANCE, PROSPECTS AND CREDITWORTHINESS.................. 18 Performance............................................. 18 Foreign Aid............................................. 19 Prospects............................................... 20 Creditworthiness........................................ 20 STATISTICAL APPENDIX BASIC DATA Area: 43,000 square miles Population: 1,000,000 (estimated) Gross Domestic Product: U.S. $170 million (rough estimate) Public Finance: (in million U.S. $) Year Receipts Expenditures Difference 1940 0.750 0.635 + 0.115 1950 3.872 4.984 - 1.112 1960 32.368 33.309 - 0..981 1961 32.371 34.118 - 1.747 1962 35.486 42.219* - 6.733 1963 35.54w0-* 50.468* -14.928 * Budgetary forecasts. 44 Treasury estimates. Public Debt: Sept. 30, 1962 (in million U.S. $) Total (including undisbursed) 133.636 - Credit from private banks 14.438 - Suppliers' credits 63.010 - U.S. Government loans 42.992 - Other government loans 13.196 133.636 Eyternal Trade: (in million U.S. $) Year Exports Imports Balance 1940 3.313 2.236 + 1.077 1950 27.635 10.573 +17.062 1960 82.608 69.190 +13.418 1961 61.906 90.667 -28.761 1962 (a) 19.650 34.022 -14.572 (T) First quarter 1962. Commodities 1961 (in million U.S.) Exports Imports Rubber 25.5 Food 10.0 Other agricultural Beverage, tobacco 4.1 products 1.9 Mineral fuels 3.4 Iron ore 29.4 Chemicals 4.2 Diamonds 2.2 Materials manufactured 66.5 Miscellaneous 2.9 Others 2.h Total 61.9 Total 90.6 APRIL 1963 一 開BRD一113己R SUT;11ARY AND CONCLUSIMNIS 1. Liberia has only recently begun the process of economic de- velopment. Production of rubber in the 1930's and the recent exploita- tion of the abundant mineral resources discovered in different parts of the country have eased Liberia's exit from the stagnation of the mid- nineteenth century. 2. The mineral and, to a lesser extent, agricultural resources justify the hope of' a continuing groi.,Tth in the Liberian economy. How- ever, the country is still baclcTard in most fields. Infrastructure - roads, poiier and water supplies - is inadequate, and there is a shortage of skilled labor and administrators. 3. The Government's "open door" policy has recently encouraged a massive inflOT-T of foreign capital for iron ore mining, and the Govern- ment itself has been trying to promote economic development, particularly roads and public buildings. Since much of this effort has been financed by suppliers' credits, it has landed the country in a very difficult fi- nancial situation. 4. Relatively important amounts of foreign aid are available., prin- cipally from the U.S.A. and Germany. Eximbank loans and suppliers' credit have financed construction of building and power plants and roads. Never- theless, the need for outside finance remains to continue basic economic development. 5. The eligibility of Liberia for Bank loans i,.-ill depend largely upon the Government's i.,Till to restrain expenditures and new borrol%ing while carrying through a program of debt rearrangement to ease the burden of its present debt. THE ECONOMY OF LIBERIA I. THE BACKGROUND The Country and People 1. Liberia is situated in the rain forest area of West Africa. It is bounded by Sierra Leone, the Republic of Guinea and the Republic of Ivory Coast, and covers 43,000 square miles. There are three main re- gions: the coast, where most of the rubber grows, the high forest areas, and the plateau of the hinterland. Numerous small rivers flow across the country, but rapids prevent navigation beyond a.few miles from the ocean. 2. The first population census took place in April 1962. The com- plete results of this census are not yet known, but the population is thought not to exceed 1 million. On this ba,sis, the average density would be aporoximately 20-25 persons per square mile. There are two main groups: a small group of about 15,000 people, formerly called Americo-Liberians, who are the descendants of the original settlers from the United States, and the indigenous population of about 20 tribes. 3. Liberia wa.s founded in 1822 by freed U.S. Negroes sent to Africa under the auspices of the American Colonization Society whose purpose was "to promote and execute a plan for colonizing in Africa with their own consent the free people of color residing in the U.S." The first gover- nors of the settlement were agents appointed by the Colonization Society, but in 1847 the Republic of Liberia was established under a constitution modeled after that of the U.S. 4. Until the 1920's most of the territory of Liberia remained out- side real government control and untouched by any modern economic influ- ence. The small Liberian exports of sugar, coffee, camwood and palm kernel produced in the coastal regions survived with difficulties in the face of competition from other countries. Due to this political and economic weakness, Liberia was during this period under a constant threat to its independence, and official U.S. support at the time was important. 5. This situation began to change in the years 1925-1926 when the Firestone Company injected new strength by establishing rubber plantations. In World War II the U.S. built the port of 'Monrovia, which came into opera- tion in 1948, and an important airfield. The presence of American forces had a notable impact on the economy. Important iron ore deposits were dis- covered after the war. Their exploitation has provided a great stimulus to Liberia's economic life. 6. Liberian history explains certain major factors in the present situation. First, the predominance of the descendants of the first Americo- Liberian settlers and the difficulties between them and the indigenous population which, until recently, hindered the establishment of an effi- cient administrative organization. Secondly, the absence of governmental assistance to promote economic growth such as has been provided for other - 2 - African countries by U.K., France and Belgium. For that reason, the eco- nomic development of Liberia has come to depend on an "open door" policy designed to attract private investments. The Government 7. Liberia has a republican form of government with a constitution patterned closely on that of the United States with three branches: exec- utive, legislative and judicial. The executive branch is headed by the President, elected by country-wide vote for a term of eight years. He may be re-elected for succeeding h-year terms. He appoints a cabinet to head each department with the advice and consent of the Senate. The present cabinet is composed of 11 members who head the following depart- ments: State, Treasury, Justice, Post, Defense, Interior, Public Instruc- tion, Public Works and Utilities, Agriculture and Commerce, National Public Health, Information. In addition, there are certain bureaus such as the Bureau of General Supplies and the Bureau of Civil Service. A Special Commission on Government Operations (SCOGO) has the responsibility of surveying the activities of every department and governmental agency to improve their efficiency. This Commission is assisted by a team of seven American experts financed by U.S. AID. The Bureau of Natural Re- sources and Surveys carries out mineralogical and geological surveys, supervises the cartographic service and controls mining operations. 8.. The legislative branch consists of two houses: