The Liberian Economy
Author:
Moeen A. Qureshi
Search for other papers by Moeen A. Qureshi in
Current site
Google Scholar Close
,
Yoshio Mizoe
Search for other papers by Yoshio Mizoe in
Current site
Google Scholar Close
, and
Francis d’A. Collings
Search for other papers by Francis d’A. Collings in
Current site
Google Scholar Close
Publication Date:
01 Jan 1964
eISBN:
9781451947182
Language:
English
Keywords:
SP; reserve; enterprise; holding; proceeds; bank credit; income tax; banking system; Export-Import Bank; long-term loan; Commercial banks; Agricultural commodities; Exports; Imports; private sector
Download PDF (2.5 MB)

Moeen A. Qureshi, Yoshio Mizoe, and Francis d’A. Collings*

Abstract

Moeen A. Qureshi, Yoshio Mizoe, and Francis d’A. Collings*

Moeen A. Qureshi, Yoshio Mizoe, and Francis d’A. Collings*

VERY LITTLE PUBLISHED MATERIAL on recent economic developments in Liberia is available at the present time. This article is intended to fill a part of this gap by presenting a brief survey of the economy as it is today, with particular emphasis on recent developments in the areas of production and investment, government finance, banking, and international trade.1

The Republic of Liberia, situated on the west coast of Africa just north of the equator, adjoining Sierra Leone, Guinea, and Ivory Coast, has a land area of about 43,000 square miles. Climatically, it lies in the tropical rain forest belt and receives very heavy rainfall (up to 200 inches) in the rainy season which lasts roughly from June to October each year. Low bush or forest covers most of the countryside. The topography is generally low and rolling, although there are scattered ranges of hills rising up to 4,000 feet. A population census taken in 1962 revealed a population of about one million, of which probably 90 per cent were dependent upon subsistence agriculture. The only national income estimates to have been attempted relate to the year 1960, when gross domestic product was estimated at some $173 million, of which about one half was accounted for by the foreign concessions producing mostly rubber and iron ore.

Liberia was originally founded by the American Colonization Society as a settlement for freed slaves. It was declared an independent country in 1847. For nearly 100 years, the economy changed little. The first major step away from the subsistence economy took place in 1926, when the Government signed an agreement with the Firestone Plantations Company for the establishment of large-scale rubber plantations in Liberia. For the next 25 years, Firestone remained the dominant economic enterprise in the country, providing most of the employment, income, exports, and government revenues, in addition to banking, trading, and other commercial services. However, during and after World War II, a gradual diversification of Liberia’s economy began to take place. Military bases were established there in wartime, in connection with which the Robertsfield airport and other installations were constructed. A deep-water harbor at Monrovia was completed shortly after the war with lend-lease funds. Foreign interest in Liberia was quickened by the discovery of extensive iron ore deposits in the interior. The second major industry had its beginning in 1946 when the Government gave a concession to the Liberia Mining Company, a U.S.-owned concern affiliated with Republic Steel, to explore and develop iron ore deposits in Western Liberia. This company started production at Bomi Hills in 1951.

Liberia experienced rapid economic progress during the 1950’s and the first years of the present decade. The indications are that real domestic product increased by approximately two and a half times during the period 1950-62, while exports increased from $28 million in 1950 to $67 million in 1962 and government revenues from $3.8 million to almost ten times that amount over the same period. In the early 1950’s, the development of iron ore mining facilities at Bomi Hills and the phenomenal rise in rubber prices triggered by the Korean war boom were the major factors contributing to an upward spurt in the domestic product. The rate of economic advance slowed down as rubber prices fell in the post-Korean war period, but it again picked up momentum in the mid-1950’s as the result of a gradual improvement in both production and prices of rubber. Toward the later years of the decade, large amounts of foreign private investment again began to flow into the development of iron ore facilities as new concessions were granted. Foreign capital was also invested in new rubber plantations and other increasingly diverse activities. At the same time, rising public capital expenditures were directed into the creation of infrastructure, such as roads, public buildings, power facilities, etc. As a result of these developments in the late 1950’s, Liberia experienced an investment boom of increasing intensity. Even though from 1961 the terms of trade turned against Liberia, the economy continued to experience a very high rate of investment and economic activity until the beginning of 1963. Liberia’s continued use of the U.S. dollar as circulating currency ensured that stable monetary conditions were maintained during these years of rapid economic growth, and the Government’s strong commitment to liberal trade and foreign investment policies continued to provide an attractive environment for foreign capital and enterprise.

This period of rapid growth nevertheless gave rise to severe strains in certain areas of the economy. In the area of government finance, the heavy public capital expenditures had for some years been financed almost entirely by borrowing, much of which was in the form of relatively short-term contractors’ and suppliers’ credits. While the burden of service on the public debt thus mounted rapidly, the fall in world prices of both rubber and iron ore after 1960 had adverse consequences for government revenues. By the beginning of 1963, the Government’s financial difficulties had reached crisis proportions; this led to the institution during 1963 of a comprehensive program of financial reforms coupled with a debt rearrangement program, in support of which measures the Fund agreed to a stand-by arrangement for $5.7 million. The exceptionally high rate of investment, which had accelerated economic activity during recent years, also declined during 1963. This was principally due to an autonomous decline in foreign investment following the completion of certain major iron ore mining projects. A contributing factor was the curtailment of public works projects; this resulted from the Government’s decision to relinquish short-term and medium-term credits from which a large proportion of public investment had previously been financed. The consequent decline in construction activity created, by the end of 1963, an appreciable slackening in commercial and business activity, and led to the emergence of some unemployment in urban areas. Also, the small Liberian-owned rubber farms, which had increased greatly in number during the 1950’s, were specially hard hit by the decline in rubber prices, and private incomes from this source have likewise declined since 1960.

The Liberian economy might thus be viewed as undergoing a process of adjustment at present, following several years of exceptionally rapid growth. While the Government’s financial situation is likely to continue to be tight for several years to come, the long-run prospects for Liberia’s economic growth are nevertheless favorable. Although the economy is still lacking in infrastructure, the large investments made in recent years for the development of roads, railways, harbors, and other communication facilities have gone a considerable way toward opening up the country and creating a base for further and more diversified development. Certain major infrastructural investments to be started in the near future with long-term foreign assistance obtained during 1963 and early 1964 will further assist this process. The two primary industries upon which the economy still depends heavily—iron ore and rubber—contain the promise of substantial future expansion in production, although the price outlook for these commodities is uncertain.

The Structure of the Economy

Rubber and iron ore production

Total Liberian output of rubber has remained approximately stable in recent years at about 95 million pounds a year (Table 1).2 The bulk of this is still produced by the Firestone Plantations Company, which now has approximately 70,000 acres under cultivation. Firestone’s output reached a peak in 1958 of nearly 84 million pounds, but declined slowly to 77-78 million pounds in 1962 and 1963. The principal reason for this is that Firestone is undertaking a replanting program which involves replacing about 2,000 acres a year with new, higher-yielding trees. The new trees require about six years’ growth before they are ready for the first tapping. Output is expected to remain at about the present level for the next three or four years and to rise again after 1967, when the benefits of the replanting program begin to be realized. The recent downtrend in Firestone’s production has, however, been approximately offset by the rising output by private Liberian farmers, which was estimated at 18.5 million pounds in 1963. There are approximately 2,500 independent rubber farms in Liberia, although only a few of these are operations of any scale. Firestone has aided the independent producers for many years by providing seedlings and technical assistance and buying virtually all their output for processing and export. Much of the independently produced rubber is at present of inferior grade, and yields per acre on independent farms are generally much lower than on the big plantations.3 Since the daily work load of 300 trees a tapper is standard throughout Liberia, the lower yield is reflected in a higher labor cost a pound of rubber produced on the private rubber farms. The recent increases in agricultural wages (see below), coupled with the sharp decline in world rubber prices since 1961, thus threaten the profitability of many of the private farms.

Table 1.

Liberia: Rubber Production, 1958–63

(In millions of pounds, dry rubber content)

article image
Source: Data supplied by the Firestone Plantations Co.

There are five other foreign companies which have planted rubber under concession agreements with the Government. Two of these (B. F. Goodrich and the African Fruit Company) started tapping on a small scale during 1963, but their output has so far been negligible. The other three are expected to start production by 1966 or 1967. By 1968 the potential output of these smaller concessions will reach about 20 million pounds a year, assuming present plans are adhered to.

Production of iron ore in Liberia is of more recent origin but has already exceeded rubber in value exported. Until 1962, the only mine actually in production was that of the Liberia Mining Company (LMC) at Bomi Hills, some 40 miles to the northwest of Monrovia. The ore is mined opencast and shipped by rail to the port of Monrovia, some of the lower grade ore being first put through a beneficiation plant to increase the concentration to shipping grade of about 65 per cent ferrum. This mine started producing in 1951 and its capacity was increased to 3-4 million tons of shipping grade ore a year in 1958 when the beneficiation plant was completed. LMC’s output has subsequently remained fairly stable at about 3 million tons a year (Table 2).

Table 2.

Liberia: Iron Ore Production, 1959-63

(In millions of long tons)

article image
Source: Data supplied by the Liberian authorities.

LMC: Liberia Mining Company. NIOC: National Iron Ore Company. LAMCO: Liberian-American-Swedish Minerals Company.

The second iron ore company to be established in Liberia was the National Iron Ore Company (NIOC), which received its concession from the Government in 1958. The mine is located in the Mano River area near the Sierra Leone border and is served by a branch railway line which joins that of LMC. Production was originally scheduled to have begun in 1961 but the project ran into technical difficulties due to unexpected ground conditions at the ore body and along the railway route, which necessitated delays and added costs.4 Production therefore did not start in any quantity until the latter half of 1962. Production in 1963 is estimated at 2.3 million tons, and the capacity of this operation is expected to rise eventually to 5 million tons a year.

The third, and largest, iron mining operation in Liberia is the Liberian-American-Swedish Minerals Company (LAMCO), which commenced production in May 1963 (the first shipment took place in July). The LAMCO mining area is situated at Mount Nimba, close to the Guinean border. The ore body is very rich (65-69 per cent ferrum) and no beneficiation is needed. Developing the project has involved the construction of a 170-mile railway to the coast and a complete new port for ocean-going ships at Buchanan. Shipments up to the end of 1963 are estimated at about 2.5 million tons, and the full capacity of the present plant (7.5 million tons a year) is expected to be reached in 1965. Plans are under consideration to increase capacity to 10 million tons a year during the period 1965-68.

A fourth mining concession now under development is that of the German-Liberian Mining Company (DELIMCO), which plans to start production in 1965. Its mining area is in the Bong Range, about 50 miles northeast of Monrovia, and a rail connection with the port is now under construction. The eventual capacity of the DELIMCO operation is expected to be 5 million tons a year.

The known reserves of ore at all of these mining sites are sufficient to sustain capacity production for many years to come. On the basis of total capacity at present installed or under construction, maximum Liberian output will rise to 20.5 million tons by 1966; if the further expansion of the LAMCO operation takes place as presently anticipated, this will increase capacity to 23 million tons by 1968. Much of the Liberian ore is sold under long-term contracts or to users having financial participation in the mining operation, which provides some measure of protection from world market fluctuations.

Other production

There are very little data available on Liberian production of commodities other than rubber and iron ore. Diamonds, mostly of industrial grades, are found in several parts of the country. Diamond extraction is confined mostly to small-scale surface digging operations, although there are two small concessions with foreign participation engaged in alluvial mining. The purchase and exportation of diamonds is handled privately, and no statistics on production are available. Export figures are not a reliable indication of production because of the prevalence of smuggling both into and out of the country (see section on Exports, below).

Production of lumber is of growing significance. Several concerns, both domestic and foreign, are engaged in the development of commercial forestry, and in 1962 nearly 16 million board feet, valued at $1.9 million, were produced. Approximately half of this output is produced by the iron ore or rubber concessions for their own use; most of the remainder is sold locally. In spite of some small export shipments in recent years, Liberia remained a net importer of lumber up to 1962.

There are no data on the production of agricultural crops for domestic consumption. The principal food crops, which are raised and consumed mainly in the subsistence sector, are rice and cassava; other crops of importance are palm products and coconuts (both of which are usually harvested from trees growing wild), yams, sweet potatoes, and a variety of other tropical fruits and vegetables. Some of these food crops are marketed in Monrovia and other population centers, but imports of rice in 1962 amounted to more than $4 million, or about one third of all food imports. A pilot project to demonstrate production of swamp rice, in place of the low-yielding upland rice usually cultivated by native farmers, has been successfully established at Gbedin with the assistance of technicians from the Republic of China; 70 native families are now being settled on 500 acres of land on a cooperative basis to commence production on a larger scale. Swamp rice cultivation in the rubber plantation areas is also being encouraged, and in 1962 a total of 1 million pounds was produced in the Harbel (Firestone) area. Poultry farming on a cooperative basis has also been successfully established and the country no longer needs to import eggs. Technical and financial assistance to farmers is provided through the Agricultural Credit Corporation (ACC), established in 1961. During 1963, funds totaling $253,000 were made available to ACC by the United States through the Public Law 480 program,5 most of which has been re-lent to the Gbedin rice cooperative, the poultry producers’ cooperative, or to small farmers on a supervised basis.

Production of agricultural crops for export is limited to palm kernels, coffee, and cocoa. The volume of these items actually exported in recent years has fluctuated considerably, but has generally shown a declining trend. The low level of these exports in the past has probably resulted as much from deficiencies in internal transportation and marketing arrangements as from the world market situation. In April 1963, the Liberian Produce Marketing Corporation (LPMC), an institution established in 1962 by the Government in partnership with the East Asiatic Company of Copenhagen (which provides the management and overseas sales facilities), started business. The purpose of LPMC is to develop and promote production and export of Liberian produce. The Corporation has the right to a monopoly of exports of palm kernels, palm oil, cocoa, coffee, and piassava, and a first option on exclusive handling of other Liberian produce that may become available for export. During most of 1963 it did not exercise its monopoly rights but in December it took over exclusive handling of palm kernels and coffee exports.

The manufacturing sector is in an elementary stage in Liberia and is confined to a few small plants that process local agricultural products or produce import substitutes. Some of the more important manufacturing activities are as follows (with approximate value of production in 1962): beer and soft drinks ($760,000), tire recapping ($253,000), bread and pastries ($165,000), miscellaneous building materials ($100,000), reconstituted milk ($85,000), and soap ($33,000). There is also a palm oil plant, which processes native palm kernels into edible oil for local consumption. Most of these small industries are either foreign-owned or involve a partnership between Liberian and foreign enterprises. The manufacturing sector, although small, has expanded rapidly and several new plants are now in active preparation or construction: a shoe factory, an explosives and chemicals plant, a building block factory, a slaughterhouse, and a canning plant. Almost all these manufacturing activities are located near Monrovia or on the major concession areas. The Liberian Industrial Development Corporation (LIDC), also established in 1961, provides technical and financial assistance to small industry, in addition to finding and promoting investment possibilities in Liberia. A statutory 1 per cent of estimated government revenues each year is set aside in the budget for LIDC, which so far has participated in the shoe factory, a printing press, and studies of various other possible industries. A development bank is in the process of formation and is expected to start operations during 1964.

In October 1963, the Government announced a program called “Operation Production,” which has been given intensive publicity on the domestic scene. A national policy commission, headed by the President, was established, together with a technical commission and supporting subcommissions at the country, territorial, provincial, and district levels. The intention of this organization is to mobilize the resources of the country for a concentrated effort to increase production, with emphasis, at least to begin with, on agricultural production. The first goal is to attain self-sufficiency in rice production. “Operation Production” is intended to enlist support and enthusiasm at the local level for new productive projects on a self-help basis and no additional government expenditure for this program as such is envisioned at the present time.

Role of foreign concessions

It has already been indicated that most of the productive enterprises of any size in Liberia are foreign concessions—that is, foreign companies operating in the country under the terms of individual agreements with the Liberian Government which give them special privileges and benefits. These enterprises, collectively, not only account for the bulk of production in the economy, but also are highly important as investors, taxpayers, employers, and providers of social overhead capital. The largest concessions are those engaged in rubber and iron ore production, but during the 1950’s a wide variety of smaller concessions were granted for timber extraction, agricultural production and processing, diamond mining, and miscellaneous manufacturing activities.

The concessionaires, like all other foreign investors in Liberia, benefit from the Government’s traditional “open-door policy,” which assures them freedom to repatriate profits and capital and to conduct their business with a minimum of regulation and without threat of nationalization. Although the terms of individual concession agreements exhibit considerable variety, certain features are generally common. The plantation, mining, and lumbering concessions usually last for long periods, ranging from 40 to 99 years, and give the concessionaire the right to develop certain areas of the country reserved to it, usually on payment of a small annual rental. The terms of the agreements may be amended only by mutual consent.6 The concessionaire usually receives guarantees of continued exemption from import duties on equipment and supplies needed for the operation of the enterprise and from export duties on the final product.7 Many of the agreements contain a clause whereby the Government must grant benefits to the concession equivalent to the most favorable treatment afforded subsequently to other concessions.

The provisions relating to income taxation or profit sharing are by no means standard. Generally speaking, the rubber and lumber concessions, and also the smaller industrial concessions, are subject to regular Liberian income tax (maximum 35 per cent), but tax holiday periods ranging from 5 to 16½ years from the dates of agreement are still in effect in most cases—Firestone being the only significant exception. In some instances, a special reduced rate of income tax applies for a further period when the initial exemption expires. Taxation of the iron ore concessions is even more variable. The LMC, being wholly foreign owned, agreed to pay the Government a share of its profits rising from 25 per cent at the commencement of operations to 50 per cent after about 18 years. In the three more recent iron ore concessions, the Government acquired 50 per cent of the equity and has, in principle, foregone the right to other taxation in return for dividends on this equity. However, since the Government paid cash for its equity in the NIOC, its effective rate of return from this company is lower than in the other two companies where the equity was received in return for the mineral rights. LAMCO is making payments on a royalty basis during the first two years of operation, in lieu of dividends (for details, see section on Structure of Taxation and Recent Revenue Trends, below, p. 299).

The Government has announced that it proposes shortly to introduce an Investment Code which will regularize and standardize the terms of future concession agreements.

Trends in investment activity

New investment has accounted for a very high proportion of gross domestic product (GDP) in Liberia in recent years. This investment, financed almost entirely through inflows of foreign capital, has produced a “construction boom” which has been a major source of increasing incomes and of the recent brisk rate of growth in economic activity. The construction industry in Liberia consists mainly of a few large foreign-owned contracting firms, which employ mostly Liberian labor and sometimes also utilize Liberian-owned services, such as trucking.

In the private sector, recent investment activity has been heavily concentrated in the construction of iron ore facilities for the concessions in the process of development. The NIOC’s original plans called for a total investment of about $30 million over the period 1959-61; the additional investment necessitated by the difficulties mentioned earlier is not known. The LAMCO venture’s total investment involved an amount of more than $200 million, most of which was spent prior to the early part of 1963. Although a substantial part of these sums was spent for imported capital equipment and materials, both projects, and particularly the latter, have involved the construction of extensive facilities in Liberia, using local labor and, to some extent, local materials and services. Private investment has also taken place recently at a brisk pace in the development of manufacturing and service industries and in residential and office building, mostly in or near Monrovia. Much of this investment (totaling probably in the region of $5-10 million a year) has been foreign in origin, while Liberian investors have tended to concentrate on private rubber farming, real estate, or transportation ventures, these last two activities being reserved by law for Liberian citizens. Various indications suggest that total private foreign investment may thus have averaged $70-80 million a year over the four years prior to 1963.

In the public sector, the Government has recently undertaken a variety of public works projects, including the construction of roads, communications facilities, buildings, schools, power facilities, harbors, etc. Most of this has been financed by short-term and medium-term credits provided by contractors and suppliers. The utilization of contractors’ and suppliers’ credits has probably provided for total new public investment (gross) of about $15-20 million a year during the last few years, while utilization of credits from the Export-Import Bank of Washington (Eximbank) for power and road projects has added a further $3-4 million a year.

Total investment, both public and private, may, therefore, have averaged very roughly about $100 million a year in the last few years. In 1963, however, there was evidence of a marked slackening in the rate of investment. A major factor was the completion of the LAMCO facilities during the early part of the year. Other private investment was affected by the reduced profitability of the housing market and by a gathering climate of financial stringency. In the public sector, construction under prefinancing contracts continued throughout most of 1963, though at a somewhat diminishing pace, but no new prefinanced projects were started after the early part of the year, and work on several major projects then under way (including roads and public buildings) was completed before the end of the year. Construction activity in Liberia usually exhibits considerable season-ability, with a slowdown during the rainy season (roughly June-October) and an acceleration around the year-end. The normal year-end upswing in construction activity was considerably dampened at the end of 1963.

For the future, certain new public investment projects are due to commence during 1964 as the result of new loan agreements signed recently. The largest new project is the Mount Coffee hydroelectric project near Monrovia, which is financed by funds from the U.S. Agency for International Development (AID); it will be constructed over the years 1964-66 at a total cost of about $26.5 million. The Kreditanstalt has offered credits totaling $12.5 million for roads and other projects to be agreed upon. AID has also agreed to assist in the construction of a teaching hospital and two schools in the Monrovia area, the total cost of which will be about $8.7 million. The International Bank for Reconstruction and Development (IBRD) agreed in January 1964 to a loan for the construction of two roads and for provision of highway maintenance equipment for the Department of Public Works, costing in all about $4.2 million. The expectation at present is that total expenditures during 1964 on the AID-assisted projects will be $8.82 million and on the IBRD road project, $0.93 million (including the Government’s contributions). Certain other smaller foreign-financed investments are in prospect, but the total investment during 1964 still seems likely to fall considerably short of the $18-24 million suggested earlier as the probable magnitude of public investment spending in recent years. The only major privately financed construction project presently in prospect is the DELIMCO project, whose total estimated investment of $100 million is to be spread over the three years 1963-65. This contrasts with the estimated $70-80 million a year of private investment in recent years.

Prices and wages

There is virtually no information on price trends in Liberia. The retail price of rice, a basic item of diet of the native population, is controlled at $9.50 a hundredweight and this price has not changed recently. No other prices are controlled. Retail prices of certain food items are known to have dropped recently as local production replaced imports, e.g., eggs and fish. On the other hand, the prices of many imported products have increased in the wake of recent increases in import duties.

No information is domestically collected on the cost of living. However, living costs for foreigners and the more wealthy Liberians appear to be extremely high. A recent United Nations report has indicated that Monrovia is the most expensive city in the world in which it has personnel stationed, with a cost of living index of 115 compared with the base of 100 for New York City.

Some partial information is available on movements in wage rates; this suggests that average wage rates in private employment have increased recently. In May 1963, the Legislature approved an increase in the legal minimum wage from 6 cents an hour (agricultural workers) and 10 cents an hour (industrial workers), to 8 cents and 15 cents, respectively, with effect from July 1, 1963. This increase affected principally the rubber plantations, since industrial and construction workers are generally paid more than the new legal minimum. Wages on the concession plantations and all major private rubber farms were increased accordingly, although on some smaller or more remote rubber farms money wages are believed to be still below the new legal minimum.

A major development in the field of labor relations in 1963 was the strike at Harbel (Firestone’s largest plantation), which occurred from July 2-14, 1963. This was virtually the first organized strike in Liberia’s history, and it occurred without prior warning. The entire work force at Harbel, numbering about 18,000, was idled. The nature of the dispute also suggests the difficulties in assessing movements in real wages. In accordance with the new minimum wage legislation, Firestone proposed an increase in the minimum daily wage to 64 cents (from 50 cents).8 But, at the same time, the company proposed to reduce the subsidies on rice and palm oil sold through company stores, and to revise the “turnout bonus” paid for regular attendance. According to Firestone calculations, these proposals would have raised the average cost a tapper a day (including subsidies and bonuses) from $1.07, prior to July 1, to $1.15. The strike was eventually settled by granting the wage increase without the subsidy and bonus adjustments, which, again according to Firestone calculations, resulted in an increase in the average cost a tapper to $1.21 a day. This figure, it will be noted, is almost twice the new nominal daily wage. Labor costs on the private plantations are probably much closer to the nominal daily wage.

Employment

Data on employment and on those seeking work are also fragmentary. Very rough approximations of the numbers of workers employed by certain major employers at around the end of 1962 are as follows:

article image

Estimates of the work force employed for money wages in Liberia range between 60,000 and 100,000; the above groups, therefore, accounted for at least one half, possibly three quarters, of the total.

During 1963, a major event affecting employment was the completion of the LAMCO facilities during the first half of the year. LAMCO’s operating requirements are for about 2,200 employees; this suggests, therefore, that nearly 10,000 workers, or at least 10 per cent of the country’s paid labor force, were laid off this project during the year. In other construction work there are believed to have been further reductions in the work force during the latter half of the year as prefinanced construction projects were completed. It is believed that only a relatively small proportion of these displaced workers have found work with the DELIMCO project now under construction, or have been absorbed by the rubber plantations. (Paradoxically, there continues to be a shortage of labor on the rubber plantations; this may reflect the fact that wages there are lower and the kind of work less attractive to those who have recently entered the money economy. One of the smaller concessions has been employing women as tappers, with satisfactory results.) There has thus been evidence of the development in this period of some open unemployment in and around Monrovia. The actual numbers of the unemployed are not known, but there are reports of unusually large numbers of applicants for vacant jobs, at a time of year when employment opportunities for unskilled labor normally take a seasonal upswing.

Government Finance

Introduction

The Liberian Government encountered increasing financial difficulties early in the present decade. Total revenues, which had expanded very rapidly in the late 1950’s, increased much more slowly after 1960 as the result mainly of reduced payments by Firestone and LMC, the two largest taxpayers, following the fall in rubber and iron ore prices. Nevertheless, revenues have exceeded ordinary non-debt expenditures of the Government by fairly comfortable, although declining, margins during this period. However, for several years past large extrabudgetary expenditures for public works projects have been undertaken and financed directly by short-term and medium-term credits provided by contractors and suppliers (i.e., so-called prefinancing arrangements). This has been reflected in a rapidly increasing burden of debt service as the credits became payable. The Government has also borrowed from the commercial banks to finance its over-all deficits, giving rise to further relatively short-term debt obligations. Toward the end of 1962, it became apparent that a financial crisis was imminent, since the prospective burden of debt service for 1963 was far beyond any reasonable estimate of the Government’s capacity to pay.

The year 1963 saw some fundamental changes take place in the area of public finance. These included the introduction of a new budgetary system, the adoption of a comprehensive financial program designed to make available additional resources for meeting debt service obligations, the introduction of new expenditure control measures, the decision not to undertake any new projects based on prefinancing arrangements, and the renegotiation of repayment obligations on virtually all Liberia’s existing external debt. The stand-by arrangement with the Fund for $5.7 million, which came into effect on June 1, 1963, was agreed to in support of these measures taken by the Liberian Government.

Structure of taxation and recent revenue trends

The revenues of the Liberian Government have expanded very rapidly over the last 12-13 years. In 1950, current revenues were about $3.9 million: by 1963, they had increased almost tenfold, to $37.2 million. This impressive rise occurred without any major revision of tax rates, which remained broadly unchanged from 1951, when the income tax was introduced, until 1963. Most of the increase until the fiscal year 1960/61 was due to “profit sharing” payments made by LMC and to income tax payments made by Firestone; thereafter, income tax payments by individuals and enterprises other than Firestone and taxation of imports became increasingly important. In the fiscal year 1962/63, taxes on foreign trade accounted for 44 per cent, income taxes for 22 per cent, and “profit sharing” for 13 per cent of total government revenues. These three sources together have consistently provided more than three quarters of total revenues. Income from the registration of shipping under the Liberian flag, which once provided a major portion of the Government’s revenues, has now been reduced to relatively minor significance as the result of increases in other revenues.

Liberian income tax rates are moderately progressive, the maximum rate being 35 per cent on incomes over $100,000 for both individuals and corporations. Taxation of the iron ore enterprises varies with concession agreements with the Government. The LMC, in which the Government has no equity, agreed to pay 25 per cent of its net profits until the end of 1959, 35 per cent until the end of 1969, and 50 per cent thereafter. In the other iron ore concessions, the Government owns 50 per cent of the stock, and receives dividends on this equity in lieu of other forms of taxation. Exceptionally, LAMCO agreed to pay royalties of 50 cents a ton on its output in its first two calendar years of production (1963 and 1964) in lieu of dividends. NIOC, in production since 1962, has not thus far declared any dividend, and therefore has made no payments to the Government. Taxation of imports is applied through a number of different taxes or charges. Import duties range from zero (for essentials) to 40 per cent (for luxuries) of the c.i.f. value (this was changed from f.o.b. in May 1963, see below), a few commodities such as foodstuffs, textiles, beverages, petroleum being subject to specific duties. A surcharge of 15 per cent of the normal duty is added, and a further tax of 5 per cent ad valorem (known as the “public highway levy”) is assessed on all imports. There is also a “luxury tax” on liquor, beverages, cosmetics, cigarettes, cigars, and jewelry, which is collected by customs at the time of entry, in addition to the other customs charges. Export taxation is of relatively minor importance, applying only to precious metals and stones, and unmanufactured ivory (10 or 15 per cent ad valorem for the former, 10 cents a pound for the latter). There is a “stumpage fee” (3 and 5 cents a board foot for lumber and logs, respectively) on all commercial timber sales, including those for export, and a “rubber sales tax” (varying from 1 to 2 cents a pound depending upon price) on privately produced rubber sold to Firestone for export. As noted earlier, most of the concessions claim and receive exemption from taxation affecting imports and exports connected with the operation of their enterprises under the terms of their concession agreements with the Government. Taxation of Liberian-registered shipping is at the rate of $1.20 a ton for initial registration, 10 cents a ton a year thereafter.

The revenues collected by the Government in recent years are shown in Table 3. Because the accounting for government expenditures was until late in 1962 done on a fiscal-year (October 1-September 30) basis, the analysis of revenues is presented here on a comparable basis. Total revenue collections increased in each of the fiscal years shown, rising from $28.9 million in 1959/60 to $36.2 million in 1962/63. Receipts from Firestone and iron ore profit sharing reached their peak in 1960/61 and since then have declined quite markedly under the influence of declining rubber and iron ore prices. Receipts from these two sources in 1962/63, at $9.2 million, were about $3.5 million less than in 1960/61. However, income tax receipts from sources other than Firestone increased steadily, from $0.9 million in 1959/60 to $3.2 million in 1962/63, reflecting improved enforcement and a widening taxable income base. Receipts from taxes on imports also increased year by year, although the increase has been much less than the increase in total imports since the latter has included in recent years large amounts of capital equipment and supplies brought in free of duty for construction projects. Among the “other revenues” shown in Table 3, receipts from shipping declined from 1959/60 to 1961/62 as the result of a reduction in new tonnage registered under the Liberian flag, but in 1962/63 showed a substantial recovery. This sudden improvement was due to several external factors, including a decision of the U.S. Supreme Court in March 1963 to the effect that U.S. labor laws could not be applied to flag-of-convenience ships engaged in commerce regularly with U.S. ports, and the expiration of certain concessions given by the Greek Government some years ago to shipowners registering under the Greek flag.

Table 3.

Liberia: Government Revenues, Fiscal Years, 1959/60-1962/63

(In millions of U.S. dollars)

article image
Source: Bureau of Internal Revenue.

Includes petroleum entry charge in 1962/63 ($0.28 million).

Includes receipts from the Bank of Monrovia of profits from the issue of coinage of $75,000, $25,000, and $400,000, respectively, in the first three fiscal years shown.

Expenditures and financing

On the expenditure side, it is more difficult to present an accurate and comprehensive picture of developments over the past few years because accounting of actual expenditures has been very inadequate. Estimates of the Government’s financial operations in the last four fiscal years, made on the basis of information supplied by the Government, are shown in Table 4.

Table 4.

Liberia: Fiscal Operations of the Government, 1959/60-1962/63

(In millions of U.S. dollars)

article image
Sources: Bureau of Audits/General Accounting, and Fund staff estimates.

From Table 3

Estimated on the basis of utilization of credits.

Arrived at as a balancing item.

Budgeted expenditures other than for debt service declined slightly in 1960/61 to $28.9 million, but increased in each of the two succeeding fiscal years, reaching $33.7 million in 1962/63. During 1962/63 these expenditures in fact took place at a considerably higher rate during the first half of the fiscal year than during the second because of the adoption of austerity measures during the latter period (see below). The total expenditures referred to above include certain capital expenditures financed either from Liberian resources or by utilization of long-term development loans, some of which were shown, until the beginning of 1963, in the separate budget of the Joint Commission.9 They do not include the programs financed by foreign grants, most of which were in the form of technical assistance provided directly (see below).

Debt service expenditures increased sharply from $5.5 million in 1959/60 to $11.7 million in 1961/62, mainly as the result of the rapidly increasing burden of repayment of short-term and medium-term credits. The drop in debt service in 1962/63 (to $8.9 million) is due to the fact that, during a part of this fiscal year, many debt repayments were held up pending the renegotiation of the debt obligations of the Government.

The figures of budgeted nondebt service expenditures mentioned above do not include expenditures financed directly by short-term and medium-term contractors’ and suppliers’ credits. There are no adequate records of these, but estimates based upon the utilization of credits are included in Table 4. In 1962/63 these so-called prefinanced expenditures exceeded $20 million, or more than one half of the Government’s entire fiscal revenues during that period. Most of these expenditures in 1962/63 were in respect of contracts arranged prior to the beginning of the fiscal year, and no new prefinanced contracts have been entered into since early 1963.

The deficits on government accounts during the last four fiscal years have been financed almost entirely by borrowing. Excluding certain capital expenditures which were essentially self-financing at the time they were incurred (i.e., those financed by utilization of Eximbank loans and contractors’ and suppliers’ credits), the deficits have varied between almost nil in 1960/61 and about $6.5 million in 1961/62. These residual deficits were financed during the fiscal years 1959/60 to 1961/62 by credits obtained from the commercial banks, the total amount of which during the three-year period amounted to over $10 million. In 1962/63, in which the residual deficit on this basis was about $2.5 million, the deficit was covered by drawings under the Fund stand-by arrangement, which were used for debt service in accordance with the Government’s agreement with the Fund.

The principal source of foreign official long-term loan assistance to Liberia in recent years has been the Eximbank, which extended a series of five loans, totaling $34.7 million, over the period 1951-61 for road, water and sewage, and electrification projects. Expenditures for these projects, which were until 1963 included in the Joint Commission budget, are included in the estimates of budgeted expenditures given above. Apart from these loans, very little other official loan assistance of significance was received in the decade prior to 1963. During 1963, certain important new long-term loan agreements were signed with Kreditanstalt, AID, and IBRD (for details see section, Trends in Investment Activity, pp. 294-96), but utilization of these loans had barely begun by the end of 1963.

In addition to loans, Liberia has received a variety of grants from foreign governments or UN agencies, most of which have taken the form of technical assistance and are not included in budgetary expenditure figures. Such grants, however, are not usually costless to the Liberian Government which is, in most cases, called upon to provide—from its budget—housing, transportation, and other facilities for the foreign technicians stationed in Liberia, and sometimes must also contribute matching funds.

There is no estimate available of the over-all amount of grants received in recent years. The largest donor has been the United States, whose assistance totaled $8.6 million in 1962/63.10 Since 1950/51, about 36 per cent of U.S. grants have been devoted to education and about 18 per cent to public administration. Additional direct governmental assistance on a smaller scale has been provided by certain other foreign governments and by the United Nations and its agencies.

Financial measures in 1963

The budget for the calendar year 1963 was the first to be formulated in accordance with a new budgetary system devised for Liberia by the Special Commission on Government Operations (SCOGO).11 The intention was that the new national budget should, unlike the budgets of previous years, be as comprehensive as possible of all government receipts and expenditures, including those formerly included in the Joint Commission budget. In the course of preparation for this budget, a detailed review was undertaken of the comprehensiveness of each department’s or agency’s estimates, so that the supplementary appropriations common in the past could be avoided. At the same time, a vigorous effort was made to trim the 1963 budget allocations to a minimum consistent with the orderly functioning of government. The only source of additional departmental appropriations foreseen was a “contingency reserve” of $1.5 million included in the budget (slightly under 5 per cent of total budgeted expenditures other than for debt service), which was intended to provide for expenditures that could not be properly estimated by government agencies at the beginning of the budget year and therefore had not been provided in their appropriations. Budgetary transfers were to be allowed only in exceptional circumstances and then only by authority of the President.

The budget drawn up for 1963 in accordance with this new system was already considered an “austerity” budget. Total revenue was estimated at $38.5 million, total expenditures at $50.5 million, of which $17.2 million was for debt service and $33.3 million for other expenditures.12 The amount set aside for debt service was only about one half of the actual debt obligations falling due during the year (see below) because it was assumed that certain major obligations could be postponed into the following years. The nondebt expenditures had been subject to severe pruning in the budget formulation stage, and specific economy measures incorporated in the budgetary appropriations for 1963 included reduced Liberian representation at international conferences, reductions in travel and entertainment allowances, reductions in gasoline allowances for public officials, discharging surplus personnel, etc. Because of differences in coverage, it is not possible to compare the 1963 budget estimates with earlier budgets, but compared with actual expenditures in earlier fiscal years, as described in the preceding section, the new budget showed only a small increase in ordinary expenditures over the preceding year ($33.3 million in the new budget, compared with $32.6 million actual expenditures in the fiscal year 1961/62). It should be noted that the 1963 budget included a number of expenditures for items such as road maintenance which formerly were financed by contractors’ credits and therefore did not appear in the ordinary expenditure figures. The 1963 budget made no provision for financing the over-all expected deficit of $12 million.

In April 1963, in conjunction with the decision to implement the Debt Rearrangement Plan, the Government decided that further austerity measures had to be implemented. A new, comprehensive, financial program was announced by President Tubman in a special broadcast to the nation on April 15, 1963. This involved specific measures both to raise new revenues and to reduce government expenditures, with the objective of reducing the deficit by about $3.8 million on an annual basis.

On the revenue side, the principal measures were as follows: (1) a change in the basis of valuation of ad valorem import duties to c.i.f. rather than f.o.b. as formerly (this change also affected receipts from the customs surcharge, which is assessed at 15 per cent of the duty paid); (2) selective increases in import duties on certain nonessential items; (3) increased luxury tax on liquors; and (4) imposition of an airport tax of $1 per capita on all passenger departures. These revenue measures were expected to produce an additional $1.5 million a year. The Government also arranged with the major taxpaying concessionaires to alter the dates upon which their tax payments were normally made, so as to spread the flow of revenues from the concessions as evenly as possible throughout the year.

In addition, the Government continued and intensified the campaign against tax evasion that was already under way. The number of income tax returns filed by March 31, 1963 (closing date for 1962 returns) was approximately 6,500, compared with approximately 4,500 for the preceding year and less than 1,000 for the year before that. These increases resulted from the Government’s vigorous educational and enforcement efforts during these years. In 1963 a special tax court was established to facilitate enforcement of the tax laws. A foreign auditing firm was also engaged to review the tax returns of the largest businesses and enterprises. The most dramatic indication of the government enforcement effort was the padlocking of one of Monrovia’s leading retail stores for a period of 22 days in March 1963 for refusal to comply with income tax requirements.

On the expenditure side, cuts amounting to $2.3 million were made in the already approved budget appropriations for 1963, with the objective of holding total expenditures other than for debt service down to $31 million during the calendar year. To achieve these cuts the appropriations for all agencies and departments were reduced by 10 per cent for supplies and equipment and 15 per cent for administrative services. A freeze was instituted on government salaries and on the filling of vacant positions, except in cases of real hardship or emergency. A regime of the utmost economy was instituted for all other expenditures, including drawings upon the contingency allowance.

In order to enforce these expenditure reductions, a “Special Committee on Budget Allotment,” consisting of the Secretary of the Treasury or his representative, the Auditor General, and the Director of the Budget Bureau, was established under the direct authority of the President. The task of this Committee was to determine for each calendar quarter an over-all expenditure ceiling within the limitations imposed by the projected availability of revenues and the budgetary targets described above. The detailed application of this overall allotment, by agencies and purposes, was entrusted to the Bureau of the Budget. A special “debt service account” was also established to facilitate the making of debt service payments.

As part of the financial and debt rearrangement programs, the Government also took the decision not to enter into any further “prefinancing arrangements” for public works projects. This policy was adopted early in 1963, and, while work to complete certain prefinanced projects that were already under way at that time has continued, no new prefinancing arrangements have been entered into since then.

Current financial picture

The measures of financial reform taken in 1963, coupled with the debt rearrangement measures to be described shortly, were broadly successful in bringing the Government’s finances into balance during 1963 without recourse to further short-term borrowing. This result, however, depended upon purchases from the Fund, totaling $3.6 million, which had been made by the end of 1963. The revenue and expenditure figures presented earlier for the fiscal year ended September 30, 1963 reflect only partially the changes introduced during the latter half of that fiscal year. It is difficult at this time to present a detailed picture of the outcome of government financial operations in the period since the financial reforms, because a number of administrative changes in the expenditure accounting and control systems occurred during the year which rendered official expenditure figures unreliable. On the basis of the available information, it is estimated that total budgeted expenditures other than for debt service during 1963 were in the region of $30-31 million; i.e., just within the target of $31 million aimed for when expenditures were cut in May, and $2.3-3.3 million lower than originally provided for in the 1963 budget. Debt service payments during 1963 totaled about $10.5 million, of which about $7.0 million was provided from Liberian resources and the remainder from drawings upon the Fund. Total current revenues during 1963 were $37.25 million, or approximately equal to the total expenditures financed from Liberian resources.

The 1964 budget estimates put revenues during the calendar year at $39.0 million, i.e., an increase of $1.75 million over the amount collected in 1963. Income tax from Firestone is estimated to be $4.0 million, compared with $4.7 million actually received in the calendar year 1963. Other income tax receipts are expected to increase to $3.75 million (compared with actual collections in the calendar year 1963 of $3.3 million). Payments from iron ore mining concessions are estimated at $6.5 million, an increase of $1.5 million over 1963, on the basis of anticipated total production in 1964 of 11.5 million tons (LMC, 3 million; LAMCO, 6 million; NIOC, 2.5 million). No payment from the NIOC is included in this amount. Customs revenues are estimated at $17.25 million (compared with $16.5 million in the calendar year 1963) and receipts from shipping at $1.3 million (compared with $2 million in the calendar year 1963).

Expenditure estimates included in the 1964 budget are as follows:

article image

Current expenditures budgeted for 1964 are thus below the estimated actual outcome in 1963. The capital expenditures shown above consist of the Liberian Government’s contributions during the year to AID and IBRD financed projects, totaling approximately $1 million, its capital contributions to the Liberian Development Bank and the African Development Bank, and the statutory contribution of 1 per cent estimated revenues to the Liberian Development Corporation. “Bills payable” represents arrears due, principally to airlines for mail-carrying contracts, which are to be settled in 1964.

The budget thus envisions a deficit of about $3.5 million during the calendar year 1964. Further drawings under the current Fund stand-by arrangement for meeting debt service payments are anticipated; if the full amount available at the beginning of the year ($2.1 million) is drawn, the remaining uncovered deficit will be $1.4 million.

Public Debt

Debt problem in early 1963

In conjunction with the program of financial reforms described above, the Liberian Government commenced in May 1963 to negotiate with its creditors a major rearrangement of debt repayment obligations falling due during the coming years.

The situation which necessitated this rearrangement was broadly as follows. As the result of heavy government borrowing over recent years, the amount of the public debt had increased very rapidly. The total amount of principal at March 1963 was about $122.6 million, with an additional $31.2 million due in interest payments to maturity. The total principal includes amounts under certain loan agreements which had not been fully utilized—most importantly, the total amount ($12.5 million) of the German Government’s loan for roads and other projects, and $14.0 million of unutilized contractors’ credits relating mostly to projects already under way. Of the total principal due, about $47.5 million was owed to foreign governments or their official agencies (mainly in the United States and Germany) and was mostly long-term in nature; $15.4 million represented credit obtained from commercial banks mostly in Liberia, much of which was due in 1963 and all of which was due within four years; and almost all the remaining $59.7 million (or slightly under half of the total) consisted of short-term and medium-term credits obtained from contractors and their associates, or suppliers. Virtually all the public debt was owed to foreigners or foreign-owned institutions.

Because of the preponderance of relatively short-term and medium-term debt, the burden of repayment was heavily concentrated in the next few years. The over-all schedule of repayments at March 31, 1963, according to the original contracts with these creditors, is shown in part A of Table 5. About $86.7 million of principal, or nearly three quarters of the total, and $25.6 million in interest was due during the six years 1963-68, which implies an average debt service burden during these six years of about $19 million a year. In fact, the prospective burden was much heavier in the immediate future. In 1963 alone, total debt obligations due (principal plus interest) would have amounted to $33.6 million if no postponements were obtained—an amount not much less than the entire estimated government revenue for that year.

Table 5.

Liberia: Schedules of Repayments on Public Debt1

(In millions of U.S. dollars; includes payment on utilized and unutilized portions of loans)

article image
article image
Source: Data obtained from the Liberian authorities.

This table refers to repayments on the public debt as it was at March 31, 1963, except that it does not include repayment of credits received from the United States under Public Law 480.

Includes repayment of $4.0 million overdraft from a commercial bank.

Figures in this section represent new repayment schedules agreed with the creditors down to September 1, 1963. A few creditors had agreed to a new repayment schedule only for a few years and undertook to negotiate again at the end of that period; in these cases, subsequent payments are shown in accordance with the Liberian Government’s original debt rearrangement proposals. Repayments to creditors who had not agreed to rescheduling by September 1, 1963 are also shown in accordance with the Liberian proposals.

Includes repayment of $4.0 million overdraft with a commercial bank.

Total principal due lowered by $4.8 million through agreement with two contractors to reduce unutilized portions of credits.

Debt Rearrangement Plan

A comprehensive Debt Rearrangement Plan was prepared by the Government in March-April 1963 with assistance from members of the staff of the Fund. The objective in formulating the Plan was to provide a scheme for stretching out repayments on the existing debt, which would be viable in terms of Liberia’s estimated future debt service capacity and which would affect all existing creditors on a broadly equal basis. The Plan was designed to be presented to the creditors as the basis for negotiations with each one individually.

The estimates of future debt service capacity, which were at the heart of the Plan, were based upon careful projections of revenues and expenditures during the coming years. For revenues, the projections took into account the prospects for each major source of revenue. Revenues to be derived from rubber and iron ore exports were estimated on the basis of the existing plans of each major enterprise for its productive capacity in the future, assumptions being made when necessary regarding future trends in world market prices and other variables affecting profits. The estimates of revenues from other sources took into account the effects of the new revenue measures introduced in 1963, and also made allowance for some gradual increase in tax receipts in line with the growth of the economy. The expenditures of the Government for all purposes other than debt service were assumed to rise by only 5 per cent a year from the anticipated 1963 level, which included the effects of the financial reforms and economies introduced in 1963. An allowance was made for the service of new long-term loans which Liberia might expect to receive during the next few years, but the assumption was that any new loans that were obtained would have relatively long maturity periods (more than 15 years) and a moratorium on principal payments for at least the next 5 years. Thus, the approach to expenditure projections assumed that firm and continued financial discipline would be exercised in future years. The Plan proposed that the entire surplus of revenues over expenditures plus service on new debt thus arrived at should be considered available for service of the existing debt.

These calculations indicated that a period of close to 15 years would be needed to amortize fully all the existing debt. Revenues were expected to increase only moderately (i.e., at an annual rate of about 7 per cent) until 1969, and the surplus that would be available for service of the existing debt during the 6-year period 1963-68 was estimated at about $60 million, or enough to amortize only 25 per cent of the principal after interest payments had been met. In 1969 a fairly substantial jump in revenues was expected to result from two factors: an increase in the rate of profit-sharing payments by LMC from 35 per cent of net profits to 50 per cent, in accordance with that company’s existing agreement with the Government, and an increase in LAMCO dividends following the completion of the building-up of its reserve.13 These two factors were expected to add about $6 million a year to government revenues from 1969. Nevertheless, the projections indicated that in the following 5-year period 1969-73, the Government would have resources to amortize only a further 35 per cent of the present debt, while the remaining 40 per cent could not be fully paid off for a further 4 years, i.e., until 1977.

The Plan included, on a tentative basis, an allocation of the projected resources available for debt service among all the existing major creditors on an equitable basis. It was assumed that interest would be paid in full on all amounts outstanding; and where loans originally envisioned as short-term or medium-term were being converted to relatively long-term, allowance was made for an increase in the interest rate. The Plan allowed for somewhat different treatment of the banks, on the one hand, and the contractors and suppliers, on the other, in view of their differing capacities to hold longer-term debt. To the banks it was suggested that they should grant a complete moratorium on principal payments for the first 5-6 years and then be repaid at an accelerated rate relative to the other creditors during the next 5-year period. This would allow faster repayments during the earlier years to the contractors and suppliers. On this basis a tentative schedule was drawn up for each major creditor as the basis for negotiation.

Outcome of the debt rearrangement

The Liberian Government presented its Debt Rearrangement Plan to the creditors in a series of letters sent out during April 1963. Protracted negotiations with all the major creditors took place during the summer and fall. Some of these negotiations presented especially complicated problems, because the Liberian Government notes were no longer held by the original creditors but had been discounted with commercial banks and financial institutions in many countries. Many creditors wished to be assured, before assenting to the Plan, that others would not receive more favorable treatment, which caused additional delays and difficulties.

Nevertheless, by September 1, 1963 broad agreement had been reached with virtually all the creditors concerned. The rearranged schedule of repayments on the original debt as agreed by September 1, 1963 is shown in part B of Table 5. In most instances the repayments shown in this table represent new schedules agreed upon for the whole amounts of the loans. In some, the creditors would not formally agree to revise repayment schedules beyond a limited period (e.g., 5 years), taking the position that after this period elapsed they would negotiate again with the Liberian Government: in these instances the subsequent repayments shown are those contained in the original Liberian proposal to the creditors concerned, in accordance with the Liberian position that no individual creditor could be given more favorable treatment than the others, either then or in the future. Only in a few minor instances, representing 2-3 per cent of the original debt, had the negotiations failed to produce agreement at least in principle. The unutilized amounts under the original credit agreements with some of the major contractors were reduced by a total of $4.8 million through agreements to curtail the extent of construction projects originally contracted.

Table 5 shows that the total service burden on the rearranged debt can be expected to remain between $9 million and $10 million a year until 1968,14 after which it increases to a new higher figure of about $16 million in 1969, thereafter declining more or less regularly. This corresponds broadly with the anticipated flow of revenues in these years, with allowance being made after 1969 for an increasing burden of service on anticipated new long-term debt. It will be observed that the cost of the debt rearrangement to Liberia in terms of added interest payments on the rearranged debt is substantial; total interest payments due in the period from 1964 onward have doubled, from $27.0 million prior to the rearrangement, to $54.8 million after. In the first 5-year period (1964-68), interest payments will in fact exceed principal payments by a substantial margin.

The revised debt service schedule given above refers to service only on debt commitments (either utilized or unutilized) at March 31, 1963. Subsequent to that date, the Liberian Government entered into certain new long-term loan agreements with AID and IBRD, as noted earlier, which will increase the principal due by a total of $34.7 million. Repayments on these new loans do not start until after 1968 (although interest payments will commence as and when they are utilized), and the burden of service on them falls within the allowance made in the Debt Rearrangement Plan for such new loans.

In conjunction with the debt rearrangement, the Government entered into an agreement with the First National City Bank of New York (whose subsidiary in Liberia, the Bank of Monrovia, is the official depository of the Government) to handle technical arrangements relating to the rearrangement of much of the externally held debt. The Paris office of this bank was given responsibility for the exchange of government notes of indebtedness and for effecting future payments to the holders of the new notes, in accordance with the revised repayment schedules.

Money and Banking

The currency

The monetary unit of Liberia is the Liberian dollar, established by legislation with a gold content equivalent to that of the U.S. dollar. The official par value of the Liberian dollar (i.e., one Liberian dollar equals one U.S. dollar) was established with the Fund on March 13, 1963. However, the principal currency in circulation is the U.S. dollar, which replaced the pound sterling as legal tender in 1943.15 No currency notes in Liberian dollars have so far been issued, but the Treasury has minted $2.5 million in Liberian coins and the bulk of these are in circulation. Liberian and U.S. currencies are freely interchangeable in Liberia. No information is available as to the amount of U.S. currency in circulation in Liberia nor, consequently, as to the total money supply.

The banking system

Liberia has no central bank; the banking system consists of seven commercial banks: the Bank of Monrovia, the Liberian Trading and Development Company (Tradevco), the Bank of Liberia, the Chase Manhattan Bank, the International Trust Company, the Commercial Bank of Liberia, and the Union National Bank. Of these banks, the four last-named started operations only during the last three years. Only a few commercial banks have any Liberian interest in their ownership; the other commercial banks are entirely foreign-owned.

The Bank of Monrovia, a wholly-owned subsidiary of the First National City Bank of New York, is by far the most important banking institution in the country. Its deposits and credits accounted for more than one half of the total deposits and credits of the entire commercial banking system at the end of September 1963 (latest figure available). In addition to its commercial banking operations, the Bank of Monrovia performs certain functions for the Government analogous to those of a central bank. Under an agreement with the Government of Liberia, it acts as the official depository of the Government and, in this capacity, receives government revenues and makes disbursements on government account. It handles the issuance of Liberian currency on behalf of the Government. It also provides overdraft facilities to the Government up to a specified limit.

At present, the operations of commercial banks in Liberia are governed only by the General Business Law. A draft banking law is under consideration by the authorities.

Recent trends in commercial bank operations

There are no officially compiled statistics of commercial bank operations in Liberia; the series shown in Table 6 have been prepared from balance sheets obtained from individual banks.

In recent years there has been a considerable expansion of commercial bank operations in Liberia. Since 1958 bank credit has increased more than threefold and bank deposits have nearly doubled. Detailed statistics of commercial bank operations prior to 1961 are lacking and the figures presented for those years should be considered as indicative only of the broad magnitudes and trends in bank operations.

Table 6.

Liberia: Operations of Commercial Banks, 1958-63

(In millions of U.S. dollars)

article image
Source: Compiled from data obtained from the commercial banks.

In interpreting the data on operations of commercial banks in Liberia given in Table 6, it is important to note that the banks in Liberia customarily have extensive banking operations with foreign banks and nonresidents, frequently involving large transfers of funds. While in certain respects the distinction between domestic and foreign banking transactions for Liberia is not too meaningful since the U.S. dollar is effectively the currency of Liberia, it is nonetheless useful to separate the figures of total credit operations between their domestic and foreign components, because the foreign transfers are frequently so large and sporadic that they completely obscure the banks’ domestic transactions. Such a separation has been attempted in the credit figures shown only since 1961, but for the earlier years a general indication is given on the basis of partial data.

The most important of these foreign banking transactions in the past related to the so-called offshore deposits; these are deposits maintained with Liberian banks by foreign shipowners, reportedly for tax and other considerations. The importance of these deposits has diminished greatly since 1960; but until that time the swings in the level of offshore deposits, as these funds were periodically shifted in and out of Liberia, were the major explanation of the sharp fluctuations in the figures of bank deposits and credit to the private sector. The bulk of these offshore deposits were loaned or invested abroad by Liberian banks. It is believed that there was a large outflow of offshore deposits in 1958 and this is the main reason for the low level of the figures of deposits and credits for that year compared to 1959, when there occurred a very large inflow of offshore funds. In 1960 there was again an outflow of offshore deposits with Liberian banks and, correspondingly, a reduction in their foreign loans and investments. Since then, the importance of these deposits has been declining, and it is believed that offshore deposits at the end of September 1963 amounted to only about 5-6 per cent of total private deposits.

Since 1961 the salient aspect of the foreign operations of banks is the large increase in borrowing from abroad, which rose from $3.8 million at the end of 1961 to $11.2 million on September 30, 1963. Except during the last quarter of 1962, the increase in foreign borrowing was designed almost entirely to support the increase in the domestic credit operations of commercial banks. The increase in foreign borrowing during the fourth quarter of 1962, some $3.6 million, was the result of special transactions, essentially for the purpose of providing loans to certain foreign companies outside Liberia. At times the head offices of foreign banks with branches or affiliates in Liberia prefer, for reasons of taxation and other considerations, to channel loans to their customers through their Liberian branch offices or affiliates. The increase in foreign borrowing and lending of commercial banks during the last quarter of 1962 reflected transactions of this nature.

The share of total bank credit extended to the Government has increased substantially during the last five years. Until 1960, bank credit to the Government was provided largely in connection with the payment of Government’s equity in the National Iron Ore Company and in the form of periodic “ways and means” advances. But thereafter the continuing recourse of the Government to commercial bank financing is explained by the growing burden of public debt repayments and the widening over-all gap in budgetary accounts. The position changed in mid-1963 when the Government decided, in line with its program of financial reform, to restrict further short-term borrowing from commercial banks. At the end of September 1963, net commercial bank credit to the Government was in fact some $0.7 million lower than at the end of 1962.

Separate figures of domestic credit to the private sector in Liberia are available only since 1961, but the indications are that there has been a steady increase in the level of such advances during the last several years. During the period 1958-62, the stepped-up activity of foreign iron ore concessions plus the high level of public sector investment appears to have stimulated commercial activity and to have created demands for additional credit. During this period there was also considerable building construction, and a large proportion of it was financed through medium-term advances obtained from commercial banks.

As already indicated, movements in the figures of bank deposits until 1960 reflect primarily the effects of incoming and outgoing offshore deposits. The level of total deposits was stable during 1961 and 1962 and increased slightly during 1963, owing almost entirely to an increase in time and savings deposits. The fact that the deposits of Liberian banks have shown relative stability while credit has been rapidly expanding is the major explanation for the heavy reliance by Liberian banks on foreign borrowing in recent years. The Liberian commercial banking system has changed over the last five years or so from the position of being a substantial net capital-exporting system to that of a substantial net capital-importing system.

Capital and reserves of the commercial banks have increased substantially in recent years, reflecting largely the increase in the number of operating banks. The small decline in the level of capital and reserves during 1962 was due to the fact that one of the major banks disbursed $1 million as profits from its accumulated reserves.

Bank credit developments in 1963

The most significant development in the field of commercial bank credit during the period January 1-September 30, 1963 (the latest date for which information is available) was the further increase in domestic credit to the private sector by about one fourth, offset by a sharp reduction in the foreign loans of commercial banks and a slight reduction in credit to the Government. Thus, total credit extended by commercial banks remained broadly unchanged during the first three quarters of 1963 (Table 6). Since bank deposits rose by about 9 per cent during this period, the Liberian banks’ borrowing from abroad showed a small decline.

The large further expansion in domestic credit to the private sector occurred despite some slackening of economic activity, which became noticeable particularly during the second half of the year. Although a detailed analysis of credit to the private sector by destination is not available, it is believed that there was a significant change in the pattern of commercial bank lending during the first three quarters of 1963. The increase in private credit during this period reflected largely additional lending to commercial firms for the financing of imports and inventories, which is believed to have been particularly high in the earlier part of the year. Loans to contractors, previously a major element in the total credit extended by commercial banks, declined.

Foreign lending by Liberian banks, which had increased to $5.1 million during the last quarter of 1962 owing to certain special transactions undertaken by the banks on behalf of their head offices (see above), reverted to a relatively more normal level of $1.9 million by the end of September 1963. Despite this development and the increase in bank deposits mentioned above, the level of commercial banks’ foreign borrowing at the end of September 1963 was close to about one third of the total outstanding amount of domestic credit.

External Trade and Payments

Recent balance of payments trends

Discussion of the balance of payments of Liberia is necessarily conjectural because of the unreliability of existing data and the absence of reporting on invisibles and on capital transactions. The latest official estimates of the balance of payments relate to the year 1959. The estimates for the years 1956-5916 showed a large annual surplus on the balance of trade, ranging from $14 million to $29 million, an inflow of foreign investment rising to about $14 million a year in 1958 and 1959, and a large and continued outflow of investment income in the range of $17-24 million annually. The latter represented mainly net profits of the concessions, which customarily transfer or retain abroad all earnings in excess of their local cash requirements.

In 1960 imports began to rise rapidly, and in 1961 exports fell sharply in value (see below). This brought about a reversal of the traditional trade surplus. In 1961 a deficit of about $29 million emerged on trade account, and in 1962 it increased to $64 million, the value of imports being nearly double that of exports. This was possible only because a large part of the rapid increase in imports consisted of materials and capital goods brought in by private companies for development of the iron ore facilities and financed directly by these companies. There is no indication of the precise magnitude of other transactions entering into the current account of the balance of payments during these two years, but it is safe to assume that the over-all deficit on current account during these years was considerably larger than that on trade account. The current deficit was presumably financed almost entirely through net capital inflow. Indications cited elsewhere suggest that the average annual capital inflow during this period was about $85-100 million a year (public and private). The available banking data also suggest that the banking system as a whole was a net borrower from abroad (and therefore a net importer of capital) during this period.

For 1963, only preliminary export figures for the first half of the year are available, and no import figures. The indications are, however, that during 1963 the trade deficit and the capital inflow were both substantially reduced, as the result of the transition from the investment to the production phase of the two new iron ore projects, and the reduction in foreign-financed public works expenditures. The structure of the balance of payments thus appears to be reverting to a pattern similar to that of the 1950’s, although at substantially higher levels. The large trade surplus that may be expected to result from increased iron ore exports in future will be paralleled by sharply increased capital repayments and profit remittances by the mining companies as they begin to amortize their heavy foreign indebtedness.

Exports

The recorded value of total exports rose to $67.6 million in 1962, an increase of about 10 per cent over the 1961 level, which was the lowest since 1958. Exports in 1962 were, however, still substantially below the record $82.6 million of 1960. As in previous years, the export outcome depended largely on the yield of iron ore and rubber shipments, which together accounted for 86 per cent of the value of total exports in 1962.

Exports of major commodities by volume and value are shown in Table 7. Exports of both rubber and iron ore have experienced substantial drops in unit value since 1960. The annual value of rubber exports appears to have stabilized at about $25 million in the period from 1961 up to mid-1963. Iron ore exports increased sharply in volume, but less sharply in value, in 1962 as the result of shipments from the new NIOC mine; in the second half of 1963 there was a further sharp increase in volume as LAMCO shipments began. It should be noted that the valuation placed on iron ore exports is, however, somewhat arbitrary as the shipments consist of several different grades of ore which command different prices, and a part of the output is sold to users having financial participation in the mining companies at essentially bookkeeping valuations. In the absence of reasonable official estimates of value of these shipments for the first half of 1963, they have been valued in Table 7 at $7.32 a ton,17 giving a total value of $19.8 million for the first half of the year.

Table 7.

Liberia: Exports, 1959—First Half 1963

article image
Source: Liberian Office of National Planning.

Preliminary

See footnote 17 in text.

Diamond export statistics are of doubtful accuracy, because of the prevalence of smuggling. Figures shown above include both industrial and gem diamonds; hence unit values fluctuate erratically and are not shown.

Consisting mostly of re-exports.

Among the minor exports, recorded diamond exports more than doubled in value in 1962 (to $4.5 million) and appear to have continued at a similar rate in the first six months of 1963. However, official figures relating to diamond exports are exceptionally unreliable because of the pervasiveness of smuggling, and export figures thus give an unreliable estimate of Liberia’s earnings from diamond production. Agricultural exports other than rubber account for a very small proportion of total exports, but are of significance in that they represent virtually the only foreign earnings generated by the native population of the hinterland. Exports of palm kernels, the most important of these minor exports, declined steadily over a number of years up to mid-1963, both in value and volume. Palm kernels are a wild crop in Liberia, and the decline in exports may be partly explained by falling prices and/or improved alternative employment opportunities, both of which discourage the tribal people from gathering the kernels. There has also been an increase in local consumption of edible palm oil. Cocoa exports, which earned $0.5 million in 1959, fell to less than half that amount in 1962, in spite of a fairly steady price since 1961. Cocoa is grown almost entirely by tribal farmers. Coffee exports actually increased in volume in 1960-62, but the sharp decline in prices during this period kept the total value at about $0.5 million each year. The preliminary figures for the first half of 1963 show a particularly sharp deterioration in the volume of coffee exported compared with the same period in the previous year. The export figures for the first half of 1963 reflect only marginally the operations of the LPMC which, as mentioned earlier, commenced buying in April.

Regarding the direction of exports, the largest single buyer in 1962 remained the United States, which took about 43 per cent of the total value exported. About 86 per cent of the rubber exported was shipped to the United States. Iron ore shipments went to more varied destinations, the Federal Republic of Germany accounting for 23 per cent of the total, the Netherlands and the United Kingdom about 20 per cent each, and the United States 18 per cent. Among the minor agricultural exports, palm kernels and cocoa went principally to the Netherlands, coffee principally to the United States.

Imports

The latest import figures available are those for 1962. These show total imports in that year of about $132 million (Table 8), a continuation of the massive increase that has occurred since 1959 when imports were valued at only $43 million. All the broad categories of imports registered increases in 1962, but the bulk of the total increase was accounted for in the machinery and vehicles and manufactured goods categories. Imports in these two categories increased by $34 million in 1962 and were more than 50 per cent higher than in 1961. A large part of the imports in these categories has been destined for the new iron ore facilities, particularly those of LAMCO. Of the $53.7 million worth of machinery and transport equipment imported in 1962, $15.7 million consisted of mining, construction, and other industrial equipment, $14.8 million was power generating and other electrical equipment, $9.2 million was road vehicles, and $7.7 million was railway equipment.

Table 8.

Liberia: Imports, 1959-621

(In millions of U.S. dollars)

article image
Source: Liberian Office of National Planning.

Excludes imports for re-exportation.

Liberia’s tariff arrangements involve no preferences for imports from particular countries. In 1961, about 40 per cent of total imports came from the United States and about 35 per cent from Western Europe and the United Kingdom.

Exchange and trade regulations

Liberia has no restrictions on foreign payments or receipts, and transfers in and out of the country may be made freely for any purpose and in any amount. Most transactions with other countries take place in U.S. dollars, although the banks will handle transactions in other convertible currencies on the basis of exchange rates in world markets. Currency notes and coins may be taken freely in and out of the country. In keeping with the “open-door policy” first announced in 1944, capital is free to enter or leave the country at will, and there are no limitations on remittances of profits or repatriation of capital.

Import restrictions are minimal. Permits are required only for imports of firearms and ammunition, explosives, used clothing, and pharmaceuticals. These permits must be obtained from the appropriate government departments and presented to customs officers at the time of clearance of the goods. Imports of rice, formerly subject to permits issued by the Department of Agriculture and Commerce, were freed of this requirement during 1963. Imports of a few goods (e.g., obscene literature, narcotics for other than medicinal purposes) and all imports from South Africa are prohibited. All other imports may be effected freely. Liberia’s tariff schedule does not correspond with international classifications and a revision is under consideration. Liberia is not a member of the General Agreement on Tariffs and Trade.

Export permits are required for most exports other than those made directly by the large concessions. Exports of produce handled by the LPMC may be restricted when exported by other than that corporation, but permits for other exports are issued without restriction, provided that taxes or duties, where applicable, have been paid.

Liberia has trade agreements with a number of neighboring countries, among them Guinea, Mali, and the Ivory Coast, but these do not contain restrictive provisions. They generally include indicative commodity lists and “most-favored-nation” clauses—which for imports into Liberia mean little, as there is a uniform tariff. Some of the agreements (e.g., that with Guinea) specify that payment for Liberian exports must be in acceptable (i.e., convertible) currencies, but there are no bilateral payments accounts.

L’économie libérienne

Résumé

Cet article présente une courte description des principales caractéristiques de l’economie libérienne et fournit des indications sur les tendances économiques récentes et les perspectives d’avenir.

Le Libéria, situé sur la côte occidentale de l’Afrique, est indépendant depuis 1847. Sa population est d’environ 1 million d’habitants, dont la grande majorité se consacre à l’agriculture de subsistance. Les exportations majeures, le minerai de fer et le caoutchouc, sont produites principalement par quelques grosses sociétés étrangères dont les activités sont régies par des accords de concession à long terme conclus avec le gouvernement. Le pays exporte également des diamants et des produits agricoles. Le développement industriel en est encore à ses débuts, et l’infrastructure reste insuffisante dans de nombreux domaines, en dépit des progrès rapides récemment réalisés dans la construction de routes, de ports, de l’équipement hydraulique et électrique, etc.

Le développement économique a été très rapide au cours des dernières années, le taux de croissance ayant atteint en moyenne 10 à 15 pour-cent par an, grâce surtout à l’ampleur des investissements privés étrangers consacrés au développement des exploitations de minerai de fer, et à l’importance des dépenses publiques en capital financées surtout par des emprunts à l’etranger. En 1963, cependant, on nota un déclin du taux d’investissement, dû à l’achèvement de certains travaux importants d’exploitation du minerai de fer et à une réduction des dépenses publiques d’investissement. Au cours des dernières années, les finances de l’Etat ont été de plus en plus lourdement grevées par l’accumulation rapide de dettes à court et à moyen terme. Le gouvernement a maintenant procédé avec succés à de nouvelles négotiations qui ont abouti à la prolongation des délais de remboursement, et met actuellement en œuvre un large programme destiné à renforcer les finances de l’Etat. Le Libéria a bénéficié d’une assistance financière et technique du Fonds pour soutenir ce programme.

L’économie libérienne est complètement ouverte: le dollar E.U. est la principale monnaie en circulation, et il n’existe pas de restrictions sur les paiements internationaux. Le gouvernement suit traditionnellement une “politique de porte ouverte” en ce qui concerne les investissements étrangers, et il a adopté une politique libérate dans le domaine des échanges et du commerce.

La economía de Liberia

Resumen

Este artículo ofrece una breve descripción de los principales aspectos de la economía de Liberia y algunas nociones sobre las tendencias económicas recientes y las perspectivas para el futuro.

Liberia, situada en la costa occidental del Africa, ha sido nación independiente desde el año 1847. El número de sus habitantes se aproxima a un millón, y la gran mayoría de éstos se ocupan en la agricultura de subsistencia. Las exportaciones principales, a saber, mineral de hierro y caucho, son producidas mayormente por unas pocas grandes compañías extranjeras que realizan sus operaciones al amparo de concesiones a largo plazo otorgadas por el Gobierno.

También exporta algunos diamantes y frutos agrícolas. El desarrollo industrial está aún en su infancia; y continúan siendo deficientes los elementos de infraestructura en muchas zonas, a pesar del progreso acelerado logrado últimamente en la construcción de carreteras, puertos, servicios de agua y de energía, etc.

En años recientes el crecimiento económico ha sido muy rápido, habiendo alcanzado un promedio de un 10 a un 15 por ciento anual, debido principalmente a muy fuertes inversiones privadas extranjeras en el fomento de instalaciones para la extracción de mineral de hierro, asý como a sustanciales erogaciones públicas de capital financiadas en su mayor parte mediante préstamos extranjeros. En 1963 se produjo, sin embargo, una disminución del ritmo de las inversiones, en razón de que se completaron determinados proyectos importantes para la extracción de mineral de hierro, y a causa de la reducción de las inversiones públicas. En los últimos años las finanzas estatales han tenido que soportar una carga cada vez mayor con motivo de la rápida acumulación de deudas a corto y a mediano plazo. El Gobierno ya ha renegociado con éxito una ampliatión de los plazos para el pago de sus deudas, y tiene en ejecución un extenso programa cuyo propósito es fortalecer las finanzas estatales. Liberia ha recibido del Fondo asistencia técnica y financiera en apoyo de este programa.

La economía de Liberia es una economía enteramente libre: el dólar de EE.UU. es la principal moneda en circulatión, y no existen restricciones para los pagos internacionales. El Gobierno sigue por tradición una “política de puertas abiertas” en materia de inversiones extranjeras, y sus políticas comercial y mercantil son liberales.

*

Mr. Qureshi, Chief of the West and Middle African Division, was educated at the University of the Punjab, Lahore, and Indiana University. He was formerly Deputy Chief in the Economic Division of the Pakistan Planning Commission.

Mr. Mizoe, economist in the West and Middle African Division, is a graduate of the University of Tokyo (Faculty of Law) and studied at Yale Law School. He was formerly a member of the staff of the Bank of Japan.

Mr. Collings, economist in the West and Middle African Division, is a graduate of Queen’s University (Canada) and of the Johns Hopkins University.

1

This paper is based on information collected up to December 1963; more accurately, therefore, it surveys developments in the economy up to that time.

2

Rubber production figures in this section relate to the period ending October 30 of each year, this being the Firestone Company’s production year.

3

The maximum price paid early in 1963 to independent producers for first-grade rubber was about 16-17 cents a pound, compared with an average export price of about 26 cents a pound. The difference represents processing and handling charges and the rubber sales tax of 1 cent a pound. The average price paid to independents was, however, only 13 cents a pound, reflecting the low quality of most of the privately produced rubber.

4

The Company was forced during 1963 to borrow additionally to finance its operations and to renegotiate the repayment of a part of its external debt.

5

The P.L. 480 program was envisioned as the principal source of working capital for the ACC. However, after P.L. 480 imports, valued at $650,000, had been received under the 1962 program, the program came to a halt in 1963. Negotiations with the U.S. Government are now under way to get the program going again.

6

The Firestone agreement has been revised a number of times since it was originally signed in 1926; the Liberia Mining Company agreement was revised in 1952.

7

This exemption has usually been of indefinite duration, although in two recent lumber concessions it expires after ten years.

8

This wage applies to performance of a daily “standard task,” i.e., tapping and caring for 300 trees.

9

The Joint Liberian-United States Commission for Economic Development was set up in 1950, under a technical cooperation agreement between the two governments, to supervise mainly U.S.-financed development expenditures. In 1963 its budget was merged into the over-all government budget.

10

According to Liberian sources. In earlier years U.S. grants totaled as follows: 1959/60, $5.5 million; 1960/61, $6.3 million; 1961/62, $10.6 million, according to the same sources.

11

SCOGO consists of a group of senior Liberian officials appointed by the President, assisted by members of a U.S. consulting team financed by AID. It is responsible for advising the President on a wide range of public administration problems, including budget management.

12

These amounts include as nondebt expenditures certain payments shown in the Liberian budget as debt service.

13

LAMCO is required to build up a reserve of $25 million under the terms of its arrangements with its major creditors.

14

The 1964 budget includes debt service payments of $10.3 million, i.e., about $0.5 million higher than shown in the table. This is due to a number of small revisions made subsequent to September 1, 1963, and to interest payments on new long-term loans contracted during 1963.

15

However, U.S. notes in denominations above $20 are not legal tender.

16

See International Monetary Fund, Balance of Payments Yearbook, Vol. 12.

17

This assumes that the decline in the average unit price of iron ore between 1962 and 1963 is in the same ratio as the decline in profit-sharing payments made by LMC to the Government between the fiscal years 1961/62 and 1962/63.

Same Series

Other IMF Content

Other Publishers

  • Collapse
  • Expand
Cover IMF Staff Papers
IMF Staff papers: Volume 11 No. 2
Author:
International Monetary Fund. Research Dept.
Volume/Issue:
Volume 1964: Issue 002
Publisher:
International Monetary Fund
ISBN:
9781451947182
ISSN:
1020-7635
Pages:
164
DOI:
https://doi.org/10.5089/9781451947182.024