FILE COPY Report No.

RESTRICTED

FILE COPY Report No. AF-10a

This report was prepared for use within the Bank and its affiliated organizations.They do not accept responsibility for its accuracy or completeness. The report maynot be published nor may it be quoted as representing their views.

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

INTERNATIONAL DEVELOPMENT ASSOCIATION

THE ECONOMY OF LIBERIA

September 4, 1963

Department of Operations

Africa

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CONTENTS

Psage

Basic DataMapSummary and Conclusions

I. THE BACKGROUND.......................................... 1

The Country and People.................................. 1The Government........................................ 2The Political Situation................................. 2

II. THE STRUCTURE OF THE ECONOMY............................ 3

The National Income..................................... 3The Basis of the Economy................................ 4The Financial Structure................................. 4Public Finance........................................Foreign Trade........................................... 6

III. MAIN ECONOTIC SECTORS................................... 7

Agriculture............................................. 7Forestry................................................ 9Fisheries............................................... 10Kining.................................................. 10Iron Ore.............................................. 10Diamonds.............................................. 12

Industry................................................ 12Transportation.......................................... 13Railways.............................................. 13Roads................................................. 13Ports................................................. 14

Power................................................... 15Water Supplies.......................................... 16Telecommunications...................................... 16Education............................................... 16

IV. ECONOMIC DEVELOP1ENT.................................... 17

Past Experience....................................... 17

V. PERFORMANCE, PROSPECTS AND CREDITWORTHINESS.................. 18

Performance............................................. 18Foreign Aid............................................. 19Prospects............................................... 20Creditworthiness........................................ 20

STATISTICAL APPENDIX

BASIC DATA

Area: 43,000 square miles

Population: 1,000,000 (estimated)

Gross Domestic Product: U.S. $170 million (rough estimate)

Public Finance: (in million U.S. $)

Year Receipts Expenditures Difference

1940 0.750 0.635 + 0.1151950 3.872 4.984 - 1.112

1960 32.368 33.309 - 0..9811961 32.371 34.118 - 1.7471962 35.486 42.219* - 6.7331963 35.54w0-* 50.468* -14.928

* Budgetary forecasts.44 Treasury estimates.

Public Debt: Sept. 30, 1962 (in million U.S. $)

Total (including undisbursed) 133.636- Credit from private banks 14.438- Suppliers' credits 63.010- U.S. Government loans 42.992- Other government loans 13.196

133.636

Eyternal Trade: (in million U.S. $)

Year Exports Imports Balance

1940 3.313 2.236 + 1.0771950 27.635 10.573 +17.0621960 82.608 69.190 +13.4181961 61.906 90.667 -28.7611962 (a) 19.650 34.022 -14.572

(T) First quarter 1962.

Commodities 1961

(in million U.S.)

Exports Imports

Rubber 25.5 Food 10.0

Other agricultural Beverage, tobacco 4.1products 1.9 Mineral fuels 3.4

Iron ore 29.4 Chemicals 4.2

Diamonds 2.2 Materials manufactured 66.5Miscellaneous 2.9 Others 2.h

Total 61.9 Total 90.6

一APRIL 1963 開BRD一113己R

SUT;11ARY AND CONCLUSIMNIS

1. Liberia has only recently begun the process of economic de-velopment. Production of rubber in the 1930's and the recent exploita-tion of the abundant mineral resources discovered in different parts ofthe country have eased Liberia's exit from the stagnation of the mid-nineteenth century.

2. The mineral and, to a lesser extent, agricultural resourcesjustify the hope of' a continuing groi.,Tth in the Liberian economy. How-ever, the country is still baclcTard in most fields. Infrastructure -roads, poiier and water supplies - is inadequate, and there is a shortageof skilled labor and administrators.

3. The Government's "open door" policy has recently encouraged amassive inflOT-T of foreign capital for iron ore mining, and the Govern-ment itself has been trying to promote economic development, particularlyroads and public buildings. Since much of this effort has been financedby suppliers' credits, it has landed the country in a very difficult fi-nancial situation.

4. Relatively important amounts of foreign aid are available., prin-cipally from the U.S.A. and Germany. Eximbank loans and suppliers' credithave financed construction of building and power plants and roads. Never-theless, the need for outside finance remains to continue basic economicdevelopment.

5. The eligibility of Liberia for Bank loans i,.-ill depend largelyupon the Government's i.,Till to restrain expenditures and new borrol%ingwhile carrying through a program of debt rearrangement to ease the burdenof its present debt.

THE ECONOMY OF LIBERIA

I. THE BACKGROUND

The Country and People

1. Liberia is situated in the rain forest area of West Africa. Itis bounded by Sierra Leone, the Republic of Guinea and the Republic ofIvory Coast, and covers 43,000 square miles. There are three main re-gions: the coast, where most of the rubber grows, the high forest areas,and the plateau of the hinterland. Numerous small rivers flow across thecountry, but rapids prevent navigation beyond a. few miles from the ocean.

2. The first population census took place in April 1962. The com-plete results of this census are not yet known, but the population isthought not to exceed 1 million. On this ba,sis, the average density wouldbe aporoximately 20-25 persons per square mile. There are two main groups:a small group of about 15,000 people, formerly called Americo-Liberians,who are the descendants of the original settlers from the United States,and the indigenous population of about 20 tribes.

3. Liberia wa.s founded in 1822 by freed U.S. Negroes sent to Africaunder the auspices of the American Colonization Society whose purpose was"to promote and execute a plan for colonizing in Africa with their ownconsent the free people of color residing in the U.S." The first gover-nors of the settlement were agents appointed by the Colonization Society,but in 1847 the Republic of Liberia was established under a constitutionmodeled after that of the U.S.

4. Until the 1920's most of the territory of Liberia remained out-side real government control and untouched by any modern economic influ-ence. The small Liberian exports of sugar, coffee, camwood and palmkernel produced in the coastal regions survived with difficulties in theface of competition from other countries. Due to this political andeconomic weakness, Liberia was during this period under a constant threatto its independence, and official U.S. support at the time was important.

5. This situation began to change in the years 1925-1926 when theFirestone Company injected new strength by establishing rubber plantations.In World War II the U.S. built the port of 'Monrovia, which came into opera-tion in 1948, and an important airfield. The presence of American forceshad a notable impact on the economy. Important iron ore deposits were dis-covered after the war. Their exploitation has provided a great stimulusto Liberia's economic life.

6. Liberian history explains certain major factors in the presentsituation. First, the predominance of the descendants of the first Americo-Liberian settlers and the difficulties between them and the indigenouspopulation which, until recently, hindered the establishment of an effi-cient administrative organization. Secondly, the absence of governmentalassistance to promote economic growth such as has been provided for other

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African countries by U.K., France and Belgium. For that reason, the eco-

nomic development of Liberia has come to depend on an "open door" policy

designed to attract private investments.

The Government

7. Liberia has a republican form of government with a constitutionpatterned closely on that of the United States with three branches: exec-

utive, legislative and judicial. The executive branch is headed by the

President, elected by country-wide vote for a term of eight years. He

may be re-elected for succeeding h-year terms. He appoints a cabinet to

head each department with the advice and consent of the Senate. Thepresent cabinet is composed of 11 members who head the following depart-ments: State, Treasury, Justice, Post, Defense, Interior, Public Instruc-

tion, Public Works and Utilities, Agriculture and Commerce, NationalPublic Health, Information. In addition, there are certain bureaus suchas the Bureau of General Supplies and the Bureau of Civil Service. ASpecial Commission on Government Operations (SCOGO) has the responsibilityof surveying the activities of every department and governmental agencyto improve their efficiency. This Commission is assisted by a team ofseven American experts financed by U.S. AID. The Bureau of Natural Re-sources and Surveys carries out mineralogical and geological surveys,supervises the cartographic service and controls mining operations.

8.. The legislative branch consists of two houses: the Senate with

ten members and the House of Representatives with thirty-nine members,thirteen of whom represent the tribal people. All citizens male and

female may vote in the national election if they are at least 21 yearsof age and own a hut, house or other property on which taxes are paid.Only Africans or people of African descent may acquire citizenship.Politically, the country is divided into five counties, four territories

and three hinterland provinces. The President of Liberia appoints the

county and territory superintendents and provincial and district commis-sioners.

The Political Situation

9. The dominant political party in Liberia today is the "TrueW,hig Party" headed by President Tubman. The "True Uhig Party" hasgoverned the country since 1870 when it displaced the formerly domi-nant Republican Party which is now extinct. President Tubman wasfirst elected in 1943 and in May 1963 vas elected for a fifth h-yearterm. The Tubman policy is characterized by two main preoccupations:the unification of the country and the growth of its economy. The aimof the unification policy is to overcome the serious deficiencies ofthe existing tribal society and to provide its members with the minimumqualification necessary to participate effectively in the economic and

political life. A serious effort has been made by the Tubman admin-istration to approach this aim. The extension of the electoral fran-chise, the nomination of tribal leaders to the House of Representatives,and the creation of roads are steps in this direction. To this end, the

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Liberian Government has encouraged the foreign agricultural companies toinstall their plantations in isolated areas. The policy is shouing goodresults. From the economic point of view, the liberian Government hastried to attract foreign investment by a liberal policy. This "opendoor" policy allows a generous initial period of exemption from certaintaxes in order that the investor night quickly recover a part of hisinvestment. It maintains an unrestricted repatriation of profits andavoids confiscatory taxation. On the other hand, in some cases theGovernment receives shares in the companies. Certain companies areexempted from all taxes, the Government receiving 50 percent of theprofits.

II. THE STRUCTURE OF THE ECONOMY

The National Income

10. There is little information on the national income. The Gov-ernment of Liberia does not prepare such estimates. Some estimates havebeen attempted, especially by a mission from Northwestern University.Although not much weight should be placed on such estimates, it is usefulto mention them. In 1960 the GDP was roughly estimated at U.S. $170million. Over the seven years from 1950 to 1957 the GDP increased ac-cording to these estimates by about 80% and over the three years 1957-1960 by about 5C5. Investment as a proportion of national expenditureis high (around one-third in 1960), principally due to the foreign in-vestments in iron mining, but is expected to diminish after a few yearswhen mining investments will largely be completed. Domestic savingsare low and have not shown an increase as a proportion of GDP. The partof GDP accruing to the African is very low, since a large part goes toforeign investors. For that reason the amount of GDP per capita, aboutU.S. 4170, cannot be regarded as a valid indication of the standard ofliving of Liberians. In addition there are big differences in income-ithin the population. On the other hand, the subsistence sector has

declined in importance since 1950. Wage income is growing accompaniedby the development of distributive services or industries. All theseestimates show that liberia's present material prosperity rests on nar-row foundations and that the future growth in income and governmentrevenues depends mainly on prospective increases in the production ofiron ore and rubber and financial support from foreign sources.

11. There are no indices of rages and prices. The average dailywage for unskilled labor varies between 37 cents in an independentrubber farm and 50 cents in mines. There is little data about pricemovements over the past years. But based on price movements incertain African countries, such as Ghana, it is thought that thegeneral price level increased from 1950 to 1960 by about 30 to 4O%.

12. The country suffers from a labor shortage. Immigration isforbidden. The maximum male labor force may not exceed 180,000-200,000persons. Due to certain sociological facts, the strong tribal organiza-tion, the small reaction to monetary incentive, it will probably 'ce rather

difficult to enlarge the mass of workers over the next few years. This

situation is likely to hinder the growth of certain major sectors of

the Liberian economy, principally rubber production which suffers al-

ready from a labor shortage. In the immediate future, however, theshortage of labor in rubber production will be eased somewhat as

workers move out of iron ore mining, which calls for more labor in the

period of establishing the mines and facilities than in the period of

production.

The Basis of the Economy

13. Until recently the economy of Liberia has been based on sub-

sistence farming and on the production of rubber for export. While

these continue to be the primary economic activities of the country,

mineral production is rapidly becoming of first importance. Agri-

culture, forestry and fishing produce about 40% of the GDP. Farming

provides a living for about 50% of the population and produced 46%of total exports in 1961 with a value of U.S. $27.4 million. The

main export commodities are rubber, piassava fiber, palm oil and ker-

nels, cocoa and coffee. Agricultural imports amounting to U.S. $14.2

million in 1961 represent 15.7% of total imports and are mainly com-

posed of rice (25,000 tons) other grains, sugar, meat, dairy products,

beverages and tobacco.

1. Mining is becoming the major field of production. The three

minerals currently produced are iron ore, diamonds and gold, the prin-

cipal one being iron ore. In 1957 mineral exports amounted to U.S. $9.7

million. In 1961 they amounted to U.S. $31.6 million - of which U.S.

$29.11 million was iron ore - representing 50' of total exports. 1lineral

exports will increase in the next few years. The total Liberian produc-

tion is expected to reach about 17 million tons in 1967. The part

played by other industries in the Liberian economy is almost negligible.

The Financial Structure

15. An act of legislature approved June 7, 1935 established the

Liberian dollar, the monetary unit of the country equal to fifteeen

and five twenty first grams of gold nine-tenths fine. They are the

same specifications as those of U.S. dollars. The Liberian dollar,

however, in practice never became the principal medium of exchange.

An act accepted by the legislature of Liberia in March 1956 declared

the U.S. dollar the legal currency in Liberia.

16. Liberia has no central bank and the Government imposes no

foreign exchange restrictions. The banking system in 1962 was com-

posed of six banks which are either affiliates or branches of foreign

banks. The major bank is the Bank of Monrovia, an affiliate of FirstNational City Bank of New York. The Bank of Honrovia has been the

official depository of the Government since 1935. Other banks at

present operating in Liberia are: Bank of Liberia (partly Liberian-oi-ned with Chemical Bank of New York, a minority shareholder), Tradevco

(Bankers Trust and M,edio Banca - ilan), Chase Manhattan, InternationalTrust Co. (International Bank of Washington with a small liberian share-holding), and Commercial Bank of Liberia (mainly Swiss - Intrabanque -and Lebanese). Most of these began operations only recently. Becausethere is no central bank i!hich would normally centralize banking data,it is difficult to get information on the monetary situation. Table 13gives figures collected in Monrovia of bank deposits and advances.

Public Finance

17. The major fact concerning public finance is the tremendous in-crease of receipts and expenditures of the liberian Government duringthe last ten years. Receipts of 1962 are more than nine times thoseof 1950,and expenditures have increased in the same proportion.

Governmental Current Revenues and Expenditures(million of U.S. $)

Year Receipts Expenditures Difference

l9O 0.7 0.6 + 0.11950 3.8 L.9 - 1.11960 32.3 33.3 - 1.01961 32.4 34.1 - 1.71962 35.5 42.2* - 6.71963 35.5-* 50.4* -11.9

Budgetary forecasts.-3 Treasury estimates.

l8. The remarkable increase in receipts results principally fromthe creation in 1991 of an income tax and from the payments of royaltieson iron ore exports by the Liberia Mining Corporation. The rate ofgrowth of expenditures, which has been very high, especially in 1959and 1960, has sharply declined in 1961 and 1962 because of a declinein revenues due to reduced economic activity and depression in commodityprices particularly rubber. This fact illustrates a weakness of theLiberian financial situation due to the fact that, as in many otherAfrican countries, the major part of government revenues depends onforeign trade: income tax, import duties, iron ore profit sharing arealmost 7_5 of the total revenues. The major part of income tax rev-enues is paid by Firestone, and this revenue varies with world rubberprices. Revenues depend largely on world demand for iron and rubberover the coming years. The estimates given in Table 3 were prepared bythe Liberian Government. Estimated revenues from iron are based onproduction indications given by the companies. The size of ore produc-tion forecast seems realistic. All mines are closely connected withthe steel industry. For example, the Republic Steel Corporation is ashareholder in Liberia Hining Company and the National Iron Ore Company,

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Thyssen in the German Liberian Mining Company (DELIMCO), and BethlehemSteel and Swedish steel companies in the Liberian American SwedishMinerals Company (LAIICO). Furthermore, certain of these mining com-panies have already sold all or part of their production under long-term contracts. On this basis, the Liberian Government has estimatedthat its revenues will rise from U.S. $35 million in 1962 to U.S.$78 million in 1972. The principal factor of this increase is thegrowth of iron ore profits, which will increase1 s a proportion oftotal revenues from 14% in 1962 to 25% in 1972.- On present ex-pectations of rubber and iron ore prices these revenue figures seemoptimistic, especially in the long term. More prudent estimateswould assume revenues to rise from $35 million in 1963 to $63 millionin 1972.

19. The growth of expenditures has followed that of revenues.Between 1951 and 1961 the average annual rate of growth was 19,. Itis difficult to determine the amount of capital expenditure withintotal government expenditure. The greater part of capital expendi-ture has been outside the budget and financed by loans. However,rough estimates indicate that about one-third of expenditures coveredby the budgets in the years 1960-61, 1961-62 and 1962-63 were capitalexpenditures for such things as buildings, power, roads and otherpublic works. The Government's estimates of expenditures are givenin Table 3. The slight decrease in the amounts of forecast expendi-tures after 1965 results from the decrease in the amount of fixedcommitments, i.e. debt service. The expenditure figures in Table 3cannot, however, be taken seriously, since they result in annualbudgetary deficits of from $12.5 million to $3.6 million from 1963to 1966 and deficits of this size cannot be financed.

20. The major problem which the Liberian Government has to faceover the coming years is that of debt service payments on their presentdebt. This question is discussed later in the report in the contextof past performance and creditworthiness.

Foreign Trade

21. Liberia's foreign trade has been increasing, total value ris-ing from 5.5 million dollars in 1940 to 38.2 million dollars in 1950and to 152.5 million dollars in 1961.

Value of Foreign Trade(million of U.S. $)

Year Total Exports Imports Balance

1960 5.5 3.3 2.2 + 1.11950 38.2 27.6 10.6 +17.01960 151.8 82.6 69.2 +13.41961 152.5 61.9 90.6 -28.719162 (a) $3$19.) J..-6.(a) First ouarter 1962.

1/ Iron ore mining companies are not subject to income taxes, the Gov-ernment of Liberia receiving a part - generally 50% - of the netprofits (see paragraph 43).

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About half of this trade is with the U.S.; but in recent years WesternEuropean countries have taken an increasing part in this trade. Liberia'sbalance of trade has been constantly favorable until 1961, when therewas an excess of imports due to a drop in iron ore and rubber prices andthe heavy import of capital equipment.

22. The principal factors in the increase of exports from 1953 to1556 were a rise in the prices of rubber and an increase in exports ofiron ore. A drop in 1957-1958 resulted largely from a drop in prices ofrubber and iron ore. Until 1962 the major export was rubber but over thecoming years the major export will be iron ore. These two products rep-resent 90% of exports.

23. The rapid increase in imports reflects mainly the growth of theLiberian economy stimulated by increased foreign investments. But thisincrease in recent years has been due to imports of equipment for theiron mines of LMCO and DEIMCO. Food represents about 15.7% of totalimports, mainly rice (25,000 tons) due to the small local production.

24. The Government does not prepare balance of payments figures.There are no monetary or exchange controls applicable to the privatesector so that data other than export and import statistics are not ob-tainable. Generally speaking, while the trade balance has been favorablethe balance of current payments has been in deficit, largely because ofrepatriated profits of foreign companies which probably represent morethan fifty percent of the amount of merchandise import. The deficit oncurrent payments is covered by the inflow of capital.

III. 1AIN ECONOMIC SECTORS

Agriculture

25. Agriculture is one of the two most important sectors of theLiberian economy. Three groups of agricultural enterprises are distin-guishable. The biggest group is the native tribesmen who follow thetraditional pattern of African agriculture chiefly in Liberia's hinter-land where the traffic connections are few and poor. A much smallergroup of some 3,000 farmers, descendants from American immigrants, farmon land to which they hold titles; over 2,500 of them cultivate rubber.Estate agriculture is represented by six foreign companies, all of themengaged in rubber production. The Firestone Company alone cultivates86,000 acres of rubber trees, constituting the largest rubber planta-tion unit in the world.

26. Tribal agriculture is almost entirely restricted to subsistencefarming. The lack of roads and technical assistance, and tsetse infesta-tion, as well as problems of land tenure and land fragmentation are thereasons for little or no changes over the past decades. The Governmentof Liberia intends to promote production of staple food for domesticconsumption with emphasis on swamp rice production. Farmers presently

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produce only upland rice yielding 800 lb. or less per acre. To demon-strate the advantages of swamp rice production, the Government inviteda.group of Chinese experts, who succeeded in harvesting up to 5,000 lb.of paddy per acre by introducing improved varieties and application offertilizers and plant control. However, rapid production increase ofrice is unlikely to occur because of lack of extension officers and roads.Increases of staple food production over the coming years may not do morethan keep pace with the population growth, thus forcing Liberia to main-tain present import levels over the next decade.

27. High prices for rubber during World War II and the Korean boom,plus the example of high rates of profit accruing to Firestone, providedsufficient incentive for new producers to enter the rubber market. Sincethen the number of independent Liberian rubber producers has steadilyincreased. M1ore than 2,500 farmers cultivate rubber trees on some 120,000acres. Firestone's provision of trees, budiwood, credit and technical as-sistance has greatly assisted in the expansion of rubber in Liberianfarms. However, Liberian farms are generally much less efficient thanFirestone and realize much lower rates of profit per acre of mature rubber.

28. Reasons for the low output of independent farms are poor manage-ment, which is technically backward and does not exercise adequate super-vision of tapping and other preparations, as well as an acute labor short-age. If world market orices continue to fall during the coming years,which is likely, many farms will have to suspend operations and no furtherexpansion of rubber plantings can be expected.

29. From the mid-1930's, when Firestone's plantation came into pro-duction, until 1961, when iron ore became predominant, rubber was Liberia'sprincipal export. Despite the diminished relative value of rubber exports,the production of rubber remains Liberia's principal economic activity ina number of other respects. In 1960, for example, an estimated 35,000workers were employed on plantations and independent farms. These com-prised over 40% of the estimated total of some 85,000 employed in themoney sector of the economy. Until 1961, Firestone was still the onlyrubber concession in production. Since the mid-1950Ts, however, fivemore foreign concessions have established rubber plantations. Three ofthese (Liberia Company, Goodrich, African Fruit Company) started tappingin 1962. The remaining two concessions (Salala Rubber Corporation,Liberian Agricultural Company) will not produce until 1966 and 1967.

30. The total acreage of the reserve areas of the six concessionsis just over 3 million acres, or approximately 11% of Liberia's totalland areas. Development areas, however, including Firestone, will totalonly 118,500 acres by 1970. Production figures and acreage planted aregiven in Table 7. Production of rubber of the Firestone plantation willbe below the 1961 level until 1969 when the young trees of the presentreplanting program will be mature. However, rubber from the new conces-sions will compensate Firestone's lower production from 1965 on, andtotal output of rubber from Liberia may be in the region of 130 million

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lb. by 1970. World market prices may decline to 22 cents per lb. by 1965from the present 28 cents level and continue to be low, so that the valueof total production by 1970 would be in the region of U.S. $22 million.

31. The plantations expect that despite the price decline, theirhigh yields and efficient management will enable them to operate at aprofit even at a lower world market price. Average yields per acretapped of improved varieties on plantations in Liberia are about 1,200lb. and improved clones now being used for replanting may raise yieldsup to 1,600 lb. per acre. There is, however, a severe problem of laborshortage on the plantations which curtails production. There is an es-tiniated shortfall of 12,000 workers at present for the six concessionsand it is calculated that this resulted in a. production loss of approxi-mately Li or about U.S. $.9 million worth of rubber in 1962. No changein the Government's wage policy can be foreseen and all plantations arelikely to suffer from labor shortage over the coming years.

32. The Government intends to encourage oil palm production as analternative for former rubber planters. Oil palm grows over wide partsof the territory; however, little research has been carried out and im-ports of selected high yielding palm trees will become a necessity be-fore any large scale prcmotion of this crop could be recommended. In-creased oil production would contribute to a gradual decrease of importrequirements of oils and fats amounting to U.S. $.17 million in 1961.

33. Exports of cocoa and coffee are likely to remain at presentlevels. However, a decline in the value might occur due to falling worldmarket prices. With regard to piassava fiber no change in volume or valueover the next years can be anticipated as the plant grous wild in theswamps and no cultivation improvements can be carried out.

34. D.pansion of agriculture will suffer from the lack of qualifiedextension officers in government service. The present number of officersis inadenuate because agricultural graduates are readily absorbed by plan-tations which offer higher salaries than the Government can offer. Highersalaries for extension officers as well as transport facilities are thebasic needs for promoting production expansion. Furthermore, marketingfacilities are presently nonexistent and will require special attention.Agricultural credit will be provided by the Agricultural Credit Corpora-tion which has been established in 1962. The Corporation will draw itsfunds from PL 480 counterpart funds and is expected to bring its capitalto U.S. $5.8 million by 1965.

Forestr

35. One of the most promising prospects for economic developmentis the commercial exploitation of Liberia's vast forest resources. Untilrecently, Liberia's estimated nine million acres of high forest have beenvirtually untapped, because of inaccessibility of the major timber stands.At present, there are only five timber concessions and four domestic timberconcerns in the country. Total output of timber in 1961 is estimated at

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just under 10 million board feet, an amount insufficient even to meet localdemands. IWJith the construction of roads opening up forest areas, produc-tion is likely to increase to about 130 million board feet annually, withn value of over U.S. $15 million by 1968. Stumpage tax and land rental fromconciOsns right be expecte. to yield U.S. '.83 million to the Governmentfrom 1968 onward. However, reckless exploitation of existing timber re-serves could lead to serious land deterioration. The Government is awareof this problem and has introduced a law to assure proper reafforestation,but limited possibilities of supervision may limit enforcement of the law.

Fisheries

36. Maritime fishing is presently undertaken by one Liberian companywith five trawlers. Fish landings fluctuate very much, because boat re-pair facilities are lacking. Demand for fish is reflected in the relativelyhigh prices paid. The Government is aware that before any investment inthe fishing industry can be made, a survey of fish reserves in the coastalwater has to be carried out. A scheme to establish fish pools in Liberia'shinterland is in its infancy and an evaluation of these projects appearsto be premature.

Mining

37. The three minerals currently produced in Liberia are ircn ore,diamonds and gold. The most important is iron ore.

Iron Ore

38. Four firms are at present concerned with mining in Liberia. TheLiberian Mining Company. This company has a concession on a deposit sit-uated near the Sierra Leone border at Bomi Hills. The equity capital wasprovided by Col. Christie who headed a group of private American investorsand. by the Republic Steel Corporation which is the majority stockholder ofthe company. The Liberian Government has no equity investment in IMC buthas the right to be represented on the Board of Directors. The ore re-serves are estimated to be about 200 million tons - 50 million of which isformed by a magnetite running 65-70p iron. A recent geological survey anddrilling program is reported to be encouraging. Large additional tonnagesof good quality ore are said to have been added to LHC's extensive knownreserves of high grade ore. The mine began to operate in 1951. The yearlyproduction is about 3 million tons, of which 1.2 million tons is concen-trates. The ore is carried to the port of Monrovia by a. company-owmed rail-way forty miles long. LIAC employs about 2,700 workers, principally unskilled.

39. The Liberian American Swedish Minerals Company (LA1CO). An im-portant ore deposit has been discovered in the Nimba 7ountains in theCentral Province close to the borders of Guinea and Ivory Coast. The re-serves are estimated to be several hundred million tons of commerciallyexploitable iron ore. According to LAMCO's estimates proven deposits atNimba exceed 250 million tons with iron content of about 66%. The LAMCO

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project ill operate as a joint venture under which Bethlehem Steel Cor-

poration owns 25% and LAMCO 75/. LAMCO is a Liberian corporation. Its

capital stock is owned equally by the Liberian Government and a group ofAmerican and Swedish interests and some Liberian citizens. It is esti-

mated that LAMCO's total labor force will be about 2,250 of which 1,730will be Liberians and 520 foreigners. The mineral -ill be transportedto the ne7w port of Buchanan by a company-omed railroad 200 miles long.The cost of the project is estimated to be around '215 million, prin-

cipally financed by loans from the Export Import Bank and the German

Kreditanstalt. The first shipments are scheduled for summer 1963.Production is expected to be about 7.5 million tons per year initially

and perhaps 10 million tons or more. Almost all of the joint venture's

first 7.5 million tons has been contracted for by Bethlehem Steel and

German, French and Italian buyers. Important ore deposits have been

discovered in Guinea just across the border from LAMICO's deposits. An

international syndicate with American, English, Japanese and Belgianinterests is now being formed. If this group decides to mine these

deposits, it may use LAMCO's railway and the port of Buchanan. Negotia-

tions with LANCO on the use of their railroad are now in progress.

4O. The National Iron Ore Company (NIOC). NIOC's main ore depositsare located along the Mano River near the Sierra Leone border. NIOC is

a Liberian company. Its capital stock is owned 501 by the Liberian Gov-ernment, and 15' by the Liberia Mining Company and a group of investors

headed by Col. Christie. The remaining 35% of the stock is held by pri-vate Liberian interests. Reserves are estimated to be about 65 million

tons with iron content of 56-60% and probably about 100 million tons morewith iron content of about 5-5. By scrubbing and washing, the iron ore

content will be raised to about 57-58%. The ore is carried by rail to

the L1C mine at Bomi Hills and through UIC's railroad to Nonrovia. Cost

of the project is estimated to be about $30 million, financed by loans,

principally from First National City Bank of New York and Eximbank.

Production began in 1961. It is scheduled to be about 3.5 million tons

per year. It is reported that all the company's annual production hasalready been sold for each of the next ten years.

41. The Germlan Liberian Nining Company (DEINITCO). This company hasrights on an ore deposit situated at Bong Range in the Central Province

about fifty miles from Honrovia. The proven reserves are estimated to be

about 300 million tons of ore with an average iron ore content of 375.This ore will be concentrated to get an ore with an iron content of 65%.

The capital stock of DELIMICO is divided eoually between the Liberian Gov-

ernment and Geerkschaft Exploration, a firm of the Thyssen Consortium.The Liberian Government will receive 50 of the net profits. It has the

right to elect five of the eleven members of DELIMCO's Board of Directors.Cost of the project will be about $100 million. The mine installations,railway between Bong Range and Monrovia and port are now under construc-

tion. The company plans to begin production in 1965. DEIMCO plans its

mining and processing capacity at about 8 million tons per year, whichmeans a !-5 million tons annual output of concentrated ore for export.

The value of the ore will be lover than that of other Liberian mines andthe costs of production will be higher.

- 12 -

42. These four companies are called on to play an important role

in the Liberian economy. The potential production and estimated reserves

of the four companies are summarized below:

Extraction capacityin millions of long Estimated ore reserves

tons per year proven and probable in1in. Max. millions of long tons

LMC 3 4 200NIOc 3.5 5 165LANCO 7.5 12 400DELIMCO 8 8 300

Total 22 29 l,065

The proven and indicated reserves represent an amount sufficient to sustain

the production at full capacity by all companies for at least 35 years.

43. Concerning the financial relations between the mining firms and

the Government of Liberia it is to be noted that while the Government owns

50% of the capital stock of the three new iron ore concessions LAMCO, NIOC,

DELIMCO, only in the case of NIOC has the Government itself had to subscribe

for its shares. In the other cases the shareholding is granted to the Gov-

ernment in return for the grants of exploitation rights. The Governmentwill receive 5ON of the "net profits" of these companies. The concession

agreements allow for amortization of borrowed capital at an agreed rate

and "net profits" mean profits after allowing for such amortization. In

addition, the Government will receive 50% of Bethlehem's share of net

profits from the LAMCO joint venture. The Government is not a shareholderof the LIC but it receives 35% of net profits. This percentage will in-crease in 1970 up to 501. In return for this appropriation of net profits,companies are exempted from all taxes (except for certain small taxes) and

import or export duties.

Diamonds

h4. Diamonds are found in the Western Province. The principal diamondfields are around the Lofa River. Foreigners are excluded from prospectingand mining diamonds, except with concession agreements, none of which hasbeen negotiated, though the Liberian Government desires to attract a conces-

sionaire to work the deposits by large-scale modern methods. The amount of

Liberia's production is difficult to estimate. Indeed, many diamonds are

illicitly imported into Liberia from neighboring countries.

Industry

45. Liberia has little manufacturing industry. The most important

are brick and tile manufactures, soap, drinks and wood products. Many of

them have been created by Firestone to provide the firm's needs. In 1961

- 13 -

a brewery -,as set up by a Swiss group. Three major concessions recentlygranted are for construction of a shoe factory (Swedish interests), cement

factory (Italian interests), and an industrial explosive and chemicalsfactory (Baird Chemical Corporation, and Canadian Industries Limited of

Montreal) but none of these projects is yet under way. It seems that in

spite of the open door policy foreign interests are not yet very interested

in establishing industry in Liberia. There are the handicaps of a small

local market, shortage of skilled labor, and the difficulty in meeting

competition from imports. Due to this last fact the brewery has beenthreatened with serious financial difficulties, and the Government is con-

sidering the possibility of increasing the tariff on imported beer. There

are also the restrictive regulations on ownership. Under the present law

no foreigner may hold real property, he may lease land from a Liberiancitizen but such lease may not be for longer than 21 years; two additional

optional periods of 21 years each are authorized. On the other hand,

there is the undoubted prospect of further growth in the economy, which

should allow some expansion of industry. In order to help the develop-ment of industries, the Government of Liberia has approved the creation

of a development bank which IFC is helping to establish.

Transportation

Railways

h6. As mentioned above, there is at present only one railroad in

operation between Mano River and Monrovia. Two other railways are underconstruction, one between Buchanan and Mount Nimba and the other betweenMonrovia and Bong Range. All these railways are exclusively used for oretransportation.

Roads

47. Road development in Liberia started around 1952. At that time

the country had less than 300 miles of roads, mainly gravel roads in poor

condition. Today Liberia has nearly 1,700 miles of roads and tracks of

which about 1,000 miles are all-weather roads and 170 miles paved high-

ways. From 1952 up to today, about $30 million have been invested inroad construction, financed mainly by Eximbank loans ($16 million) and

two short-term credit loans from the Italian Construction Company, Vianini.

48. The number of registered vehicles has increased from only 650in 1949 to over 9,000 in 1962. With the planned increase in mileages of

new roads in the coming years, the steep increase in registered vehicles

is expected to continue.

49. Unfortunately, there is no reliable information on traffic den-

sity based on actual traffic counts. Only in and around Monrovia, the

capital, has traffic been counted showing a traffic density of 800 to

1,IOO vehicles per day passing the entrance streets to the east and the

north of the city. However, rough estimates of traffic on the main high-

ways in the country indicate that between 200 and 400 vehicles pass over

those roads daily.

- 1)4 -

50. All roads in Liberia, including streets in the cities and towns,are administered by the Department of Public !orks and Utilities (DPWU)created in 1945. Not until 1951 did the DPWU obtain a special departmentfor roads and streets which from 1952 to 1962 was under the guidance ofthe U.S. Bureau of Public Roads (BPR). The department's operation col-lapsed nearly completely last year when BPR left. At the beginning ofthis year, the firm J. C. White Engineering Corporation,of New York, wasretained to advise on and assist in a complete reorganization of DPIU'soperation, not only with roads and streets, but also with buildings,electricity, water supply and sewerage, ports, etc. The service is fi-nanced by a grant from US-AID.

51. The great activity in new construction and improvement of roadsover the past few years, has been possible only by extensive foreign loansand credits of about $30 million, mainly from the Eximbank and the Italiancontractor, Vianini. The construction of the roads under the Eximbankloans was undertaken by a few foreign contractors on a basis of limitedcompetitive bidding and at high cost. Vianini undertook the constructionof the roads financed by himself on a negotiated unit-price basis. Allwork under the two credits from Vianini will be completed by March 1964.Just recently there were three new roads given on contract to a Germanconstruction company, Strabag A.G. Part of a German Government loan isfinancing 805 of the cost.

52. In late 1962 the Bank was asked by the Government to considerfinancing road construction, and as the outcome of a Bank mission's visitin January 1963, the Bank is considering proposals prepared by the mis-sion for construction and improvement of two roads (90 miles), and main-tenance equipment. Total cost is estimated at $11.25 million of whichforeign currency cost would be $3 million. The construction and improve-ment proposed would, in the case of one road (Kle-Pujehun), open up newareas with agricultural and timber potentialities, and in the other case(Honrovia-Shiefelin-Robertsfield) would complete a short cut for heavytraffic over the road from the capital to the main Firestone plantationand the international airport of Robertsfield.

Ports

53. The principal port is at Monrovia. It was built originallyunder a lend-lease agreement between the United States and Liberia dur-ing World War II and was opened to commercial vessels in 1948. It is afree port. Since its completion it has been run by the Monrovia PortManagement Company, Ltd., an affiliate of a U.S. firm, as agent for theLiberian Government. Traffic has increased as follows (in tons):

1957 1958 1959 1960

Cargo landed 236,000 204,000 221,000 333,300Cargo loaded 2,060,000 1,993,000 2,596,000 3,020,000(of which ironore) 25000,000 1,914,000 2,500,000 2,924,000

- 15 -

The port is at present well equipped but would need expansion in a few yearsto handle an increase of activity, unless part of the traffic is handled atBuchanan.

54. It has already been mentioned that a port is now under construc-tion by LANCO at Buchanan. The port has provision for handling generalcargo to take the overflow from Monrovia. Another port was built at Sinoce.Originally, it was planned as an outlet for bananas grown by a German com-pany. The bananas failed due to Panama disease and the port will now beused mainly to export rubber being grown by the American Fruit Company andtimber from adjacent countries.

Power

55. Electric power in Liberia is provided by private plants and inthe Monrovia areas by the Monrovia Power Authority. The principal conces-sions, such as LMC, LAMCO, Firestone and Goodrich, have their own powerplants and transmission systems to meet their own needs. The MonroviaPower Authority is a government agency created in 1959. It has authorityto operate in the whole country; but at present operates only in the fol-lowing towns:

Monrovia (capacity) 13,100 KW (an additional 7,500 K is nowunder construction)

Robertsport " " " 271 KWBuchanan " " " " " 373 K!Greenville " " " 271 ITHarper " " " " " 475 1J

Transmission facilities of the agency include about 130 miles of 69 KVlines and 140 miles of 12.5 KV: interconnections have been constructedbetween the lonrovia Power Authority System and the IEC's plants inMonrovia and Bomi Hills on one side and Firestone's system in Harbel onthe other side. These commercial systems can supply power to the Au-thority at its hours of peac demand. There has been considerable modern-ization and expansion since 1959, financed mainly by loans of $7,265,000and $4,750,000 from the Eximbank.

56. Power demand has been growing rapidly. Peak demand in the areaof Monrovia more than doubled in each of the two four-year periods, 1950-1953, and 1954-1958, and again in the last four years. Consumption wasrunning at an annual rate of 66 million KWH in 1962. Peak demand was11,600 K last December. In 1966, estimated peal: demand is expected toreach 25,340 K!T which will exceed the total installed capacity. A study,financed by ICA, made by an American engineering firm, the Stanley En-gineering Company, recommends the installation at Mount Coffee nearMonrovia on the River St. Paul of a hydroelectric plant. The initialinstallation TTould be 30,000 KU with later additions which could bringthe capacity up to 90,000 K. The estimated initial cost is $27 millionincluding transmission lines. US AID have agreed to lend $24.3 million

- 16 -

for this project, for a term of 40 years, including a grace period of 10

years, ith a credit fee of 3/4 of 15 per year.

Water Supplies

57. In this field Liberia, compared with other Hest African coun-

tries, is backward. In Nonrovia, the existing system is insufficient tomeet the increasing needs of the toum. Inland the installations have

generally been constructed by firms having rubber or mining concessions.

Projects are now under study concerning the extension of Monrovia's system,

at an estimated cost of about $7.5 million; the modernization of a sewer-

age system of I-onrovia, at an estimated cost of about $8.6 million and

installation of water supply systems in Harper, Greenville and Buchanan,at an estimated cost of $2 million. AID is considering proposals for fi-

nancing the Honrovia water and sewerage improvements and Germany is in-

terested in helping water supplies in the smaller centers.

Telecommunications

58. ith the exception of very weak telephone services in Monrovia

and within concession sites, the only telephone line in Liberia is one

between Honrovia and Bomi Hills constructed by LM1C. Elsewhere the com-

munications are operated by radio. The Government has signed a con-

tract with a Swedish firm for the expansion of the onrovia telephone

system and the establishment of small exchanges in 20 other places

throughout the country.

Education

59. Although there has been an improvement in the standard of school-

ing in Liberia over the past few years, it is still low. It is thought

that some 20 to 30% of school-age children go to school. Literacy is thought

to be about 55 of total population. Investment in education is a high pri-

ority need, particularly for primary and rural education. At present the

elementary school buildings in Monrovia are used on a two-shift system,

with separate morning and afternoon pupils. Education is provided by Gov-

ernment, by private groups, particularly concessions operating in Liberia,

and by Christian missions. In 1961 Government was maintaining 504 schools,

private companies and others 56, and Christian missions 178. In 1961

about 6,000 studerts were enrolled in elementary schools, 11,200 in

junior and senior high schools. The Liberian Government allocated about

10'7 of its budget - ';.6 million in 1963 for education. There are three

institutions of higher education: the University of Liberia, a public

university in onrovia with 300 students, an Episcopalian University with

120 students and a Roman Catholic College with 4O students. The Liberian

Government is now studying a ten-year education program which will call

for loans of $20 million. The goal is to attain 90-955 literacy in ten

years and to promote a wide elementary education by 1970. Teachers'

training facilities are being expanded and the Government expects to trainenough teachers within 10 years. The U.S. has been providing aid in this

field- AID expects to lend on soft terms '2 million this year for a high

- 17 -

school and, probably next year, $300,000 for an elementary school. TheGovernment expects UNESCO to make a study this year of the country'seducational needs.

IV. ECON01MC DEVELOPIEIT

Past Experience

60. The first foreign investment took place in the 1920's and 1930's

when Firestone began rubber production. During and immediately after thewar the main investments were for the use of the U.S. Army - an airfield,some roads and the port of Monrovia. With the discovery of iron beganthe great inflow of foreign capital, private capital for iron mining andlater for agricultural and forestry concessions, and government borrow-ing for roads and buildings.

61. It is difficult to assess the amount of all these investments.

The amount nou, or soon to be, invested in iron mining or agricultural

concessions is estimated at about U.S. $40 million, of which agriculturalplantations represent about $60 million, all ovwned by foreign companies.

The Liberian Government is a shareholder in all iron ore concessions exceptEC, but of some $380 million invested or to be invested in these projectsall but $10 million has been provided from foreign sources. The total in-

vestment in building construction was estimated in 1961 to be about '24million of which $l8 million was for the Liberian Government. Foreigncapital has been flow!ing into Liberia during the past year or two at anannual rate of approximately $75 million, of which some $60 million wasfor iron ore mines, perhaps $10 million for government bui)ding and roadprojects, and the remaining $5 million for other purposes. A steep de-cline is anticipated in the near future following completion of iron oreinvestment.

62. On its side the Government has tried to increase public invest-ment. Under a technical agreement between the Government of Liberia andthe U.S.A. in 1950 a five-year program was inaugurated in 1951 under thedirection and advice of the "Joint U.S.-Liberian Commission for EconomicDevelopment." This program was subsequently expanded into a nine-yearprogram which expired in 1960. In 1951-1962 Liberia allocated about 20%of its annual budget for development purposes through the Joint Commission.The funds spent through the Joint Commission were spread (rather thinly)over various ministries such as Public Works, Health, Agriculture andEducation and for servicing loans for power, water and roads. Most of theJoint Commission's efforts seem to have been for technical assistance,mainly by way of personnel to help the administration.

61:. Having succeeded in attracting foreign capital, the LiberianGovernment has endeavored to begin laying doim the framework of a moderncountry - roads, buildings and poer. No plan or systematic statement ofpriorities has been prepared, nor, indeed, hasany elaborate plan so far

- 18 -

been necessary, since the needs were obvious enough. Now the Governmenthas established a National Planning Agency. The Agency is to propose

national planning policy and to coordinate plans which involve govern-

ment programs and projects, external assistance programs, and policyinvolving government concessions. The new organization began its work

in July 1962 with the help of experts from the United States and UnitedNations. A program has not yet been completed. Nevertheless, it is al-

ready possible to determine certain investment sectors of high priority,

particularly agriculture, roads, water, electric power and education.

V. PERFORM-AINCE, PROSPECTS AND CREDITWORTHINESS

Performance

64. For some years the Government has been trying to build asquickly as possible the framework for a modern country. Much of thisconstruction of roads, buildings and power was financed by Eximbank loans,other bank loans and suppliers' credits covered by short-term governmentnotes. The expected increase in government revenues no doubt seemed tothe Government to justify, in principle, this policy. But, since therehas been no international competition, the Liberian Government has hadto pay heavily. The high financing costs have been disguised by their

partial inclusion in contract prices. Until recently no systematic checkwas kept on the total of public debt and it has been only during thelast year that complete information has been gathered and studied by

the Government. Total external public debt outstanding at September 30,1962, including undisbursed, was $133.6 million, of which almost half

($63 million) was suppliers' credits, $30 million was Eximbank loans,

and $14 million was credits from private banks. The remainder representsloans from the U.S., German and Israeli Governments. Full debt service

payable on this debt in 1963 would be $26 million - over 70% of the Gov-ernment's estimated current revenues. However, the Government knowsthat it can negotiate a postponement of some of the debt service pay-ments and has budgeted for payments of $18 million in 1963, which rep-resents half the estimated government current revenues for 1963, 30% ofestimated export earnings in 1962 or 19% of estimated exports in 1963.It should be noted that external public debt is total public debt! thereis no separate internal public debt. Even after reducing debt service

payments this year to $18 million, the Government would be faced, on itsown estimates, with heavy budget deficits for at least three years (see

Table 3). There is little prospect of financing these deficits. The

Government has therefore no other choice than to approach its creditorsfor a re-arrangement of debt obligations.

65. The Government is now well aware of its plight. It has said

that it will not contract any more suppliers' credits, and that it wishesto have international competition for its development projects. It is

taking steps to increase revenues and reduce expenditures. It has openeddiscussions with its main creditors. It has also arranged a stand-by

- 19 -

credit from the IMF of $5.7 million. The Government reports that its

creditors seem disposed to enter into arrangements for postponing matu-

rities. It appears that the debt could be made manageable if maturities

were pushed back several years, but even this relief would mean a high

debt service burden and restraint on other expenditures for the nextdecade or more.

66. An analysis by purpose of the debt incurred by the Governmentup to September 1962 shows that about 40% has been for roads, 10% for

power, 10% for the Executive lansion, 7% for Sinoe harbor, 4% for tele-communications, and the remaining 29% for a miscellany of public build-

ings, street paving and other government and municipal works. Some of

this expenditure has been largely for "prestige" purposes; for example,the Executive Mansion. Part of the road expenditure, too, has beeniasted because of inappropriate standards of construction, in some cases

too high and in some cases too low. Yet, to make a very broad judgment,probably at least two-thirds of all this expenditure has been forjustifiable basic economic development. The fact that so much of the

finance took the form of loans or suppliers' credits, however, has

caused Liberia to pay heavily, and the Government is now eager to in-

troduce international competition into the country's development in

the public sector.

Foreign Aid

67. Total U.S. aid to liberia from 19. to 1962 amounted to U.S.$8.3 million. In addition there have been loans principally by Exim-bank amounting to U.S. $104.3 million of which $62.9 million was tothe Government and $41.4 million to private firms, including U.S. $30million to LA11CO. The total of U.S. grants and loans was thus U.S.$152.6 million. For 1963 U.S. AID is considering loans on soft termsfor a high school ($2 million) and a hospital and medical trainingcenter ($4.7 million). Besides the loan made for power (see paragraph56) they are considering other projects which will probably be financedin 1964: a water and sewerage scheme for Monrovia ($15 million) andan elementary school ($300,000). Grants approved for fiscal 1963amounted in January 1963 to $6 million and may reach $8 million forthe year. These cover a wide field with emphasis on education.

68. The United Nations agencies have provided grant assistancetotaling approximately ,2.5 million for the period 1954 through 1961.In addition a U.N. ExpanCied Technical Assistance program has boenauthorized for 1961-62 and a U,N. Special Fund Agriculture Educationproject of U.S. $1.2 million for a six-year period was agreed in Sep-tember 1961.

69. West Germany has been the most important source of aid afterU.S. Development assistance provided from this country totaled about"2 millicn in early 1963, and in addition, & log-term credit of $12.5million for road construction, airport improvement and a develcpmentbank was agreed in June 1961. Smaller amounts of assistance have been

- 20 -

provided or planned by Switzerland, Sweden and China. The total grant

assistance from all sources, l9b4 through 1961, amounted to roughly $50

million. The prospects for foreign aid seem rather favorable for Liberia.

In particular, the U.S. program will probably continue for the next several

years.

Prospects

70. The main impetus to economic development has come from foreign

private investors in rubber and iron ore mining, and the effects of this

investment have permeated throughout the economy, enlarging the money

sector and allowing the Government to invest in public development.

The effects, especially of the mining investment, will be felt for

some years to come. Government revenues can confidently be expected

to rise steadily, but a large part of these revenues will have to be

devoted to servicing debt recently incurred, and there will be only

limited scope for new borrowing. It is therefore important for the

Government to avoid wasteful expenditures and to devote what resources

are available to productive use. Improvement of the road system and

of agriculture will help enlarge the money economy and the domestic

market for manufacturing and service industries. Investment will be

needed also in power and water supplies to keep abreast of demand.

71. It is impossible to say precisely how much new public bor-

rowing would be needed over the next few years to sustain the economy

and permit some growth. A reasonable assumption would be that about

$80 million new borrowing would be required over the next eight years

or so roughly for the following purposes: road $10 million; agriculture,

education and health $25 million; water $15 million; power (Mount Coffee

hydro) $30 million. It is possible that most of this (for power, water,

agriculture, education and health) could be on "soft" terms, if the

U.S. AID continued to follow present policies.

Creditworthiness

72. Liberia has reasonably good economic prospects, but a very bad

immediate financial situation which, however, could be made manageable.

The degree of success that can be expected from the Liberian Government's

efforts to manage its financial situation depends upon the soundness of

certain assumptions. The main asssumptions are: a willingness on the

part of the main creditors to accept an extension of amortization pay-

ments over a period several years longer than their present terms; a

steady increase in government revenues; a restriction of government ex-

penditures, other than debt service, to a small annual increase; and a

limit to new borrowing along the lines suggested in paragraph 71. On

such assumptions, it is possible to envisage repayment of all the

present debt by about the year 1976, an extension of three or four years.

If indications are received that Liberia will pursue reasonably sound

financial policies, it should be considered eligible for Bank loans.

STATISTICAL APPENDIX

Table

Government Revenues and Expenditures...................... 1

Government Revenues, Fiscal Year Ending September 30...... 2

Estimated Revenues and Expenditures, 1963-1970............ 3

Government Expenditures, Fiscal Year Ending September 30.. 4

External Public Debt as ofSeptember 30, 1962...... .. ... ......... .904..*0. 5

Estimates of Iron Ore Production and Government Revenues.. 6

Potential Acreage Planted and Output of Rubber, 1962-1970. 7

Total Rubber Production and Estimated Value, 1962-1970.... 8

Value of Foreign Trade.....9............ .... 9

Value of Imports by Products.. ..................... 10

Value of Exports by Products............ ........... 11

Exnort Forecast .......and ..v........ .................. 12

Bank Deposits and Advances at End of Year.....0.......... 13

Table 1

Government Revenues and Expenditures(millions of U.S. .$

Year Receipts Expenditures Difference

1940 0.750 0.635 + 0.115

1950 3.872 4.984 - 1.112

1951 12.830 10.261 + 2.569

1956 17.923 17.427 + .496

1957 19.415 19.663 - .248

1958 18.110 23.114 - 5.004

1959 24.552 24.626 - .074

1960 32.368 33.349 - .981

1961 32.371 34.118 - 1,747

1962 35.486 42.219 * - 6.733

1963 35.540 ** 50.468 * -14.928

* Budgetary forecasts.Treasury estimates.

Source: LiberianTeonsury-.

Table 2

Government Revenues

Fiscal Year Ending September 30(millions of U.S. $)

1960/1961 1961/1962A. Internal Revenues

Firestone income 7.00 5.40Other income 1.51 2.33Highway levy 1.60 2.08Luxury tax 1.69 2.03Iron ore profits 5.74 5.35Hut tax 0.36 0.34License tax 0.85 0.87Miscellaneous 3-03 4,88

Total 21.78 23.28

B. Customs Revenues

Import duties 6.88 8.29Surtax 1.00 1.19Export duties 0.37 o.64Miscellaneous 0.15 o.16

Total 8.40 10.28

C. Other Revenues

Public utilities o.49 0.7Consular fees 0.95 1.09Vessel registration 1.07 0,85

Total 2.51 2.51

GRAND TOTAL 32.69 36.07

Table 3

Estimated Revenues and Expenditures, 1963-1970

Budgetaryexpenditures

Fixed apart fromYear Commitments(a) debt service Total Revenues Difference

1962 16.0 26.2 42.2 35.5 - 6.7(actual)

1963 18.1 32.4 50.5 38 -12.5

1964 20.5 30.6 51.1 10 -11.1

1965 19.6 32.3 51.9 '3

1966 17.6 3h.o 51.6 )- 3

1967 1h1 36.7 50.8 53 .

1968 10.7 4o.3 51.0 58 + 7.n

1969 7.6 43.4 50.4 _6 +11.6

1970 7.1 46.8 53.9 68 +1.1

1971 6.8 50.5 57.3 73 +15.7

1972 6.1 44.5 50.6 78 +27.4(a) Annual debt service estimated by the Liberian Treasury as payable after

allowing for the rolling over of certain debts to private banks.

Source: Liberian Trepsurv.

Table 4

Government ExpendituresFiscal year ending September 30

(in million of US $)

1960/61 1961/62 1963 1/

The Legislature 0.6 0.6 0.5

The Chief Executive 1.9 2.8 2.1

Foreign Services andInformation 3.7 3.7 3.9

Financial Administration 1.3 1.9 1.6

Justice 1.3 1.3 1.4

Defense 1.6 2.1 2.6

Posts and Telegraphs 0.6 0.9 0.9

Interior 0.2 0.2 0.3

Education 2.9 3.6 5.3

Public Works 1.0 1.1 3.7

Agriculture and Commerce 0.3 0.3 0.9

Health 1.9 2.0 2.8

Local Government o.4 0.4 0.6

General Government 5.5 5.2 5.1

Debt service 0.1 0.2 18.2

Development Program 4.1 8.7 -

Joint Commission 5.2 6.0 0.3

Others 0.1 0.1 0.2

32.6 41.0 50.4

1/ Budgetary Forecasts for calendar year 1963.

Table 5

External Public DebtAs of Septumbar 30, 1962

(Million of U77-

Net of undisbursed Includingundisbursed

Total external debt 1/ 83.5 133.6

Privately-placed debt 77.4- Credits from private banks 13.3 1.4- Suppliers' credits 42.1 63.0

U.S. Government loans 27.4 43.0Eximbank 3.*5Development Loan Fund .1 2.8Military sales 1.0 1.0Agricultural sales credit - 8.7

Loans from other governments .7 13.2Germany - 12.Israel .7 .7

1/ Does not include lend lease creditsof the United States with 818,923,000outstanding.

Estnimated contractual service Payments on external public debt outstandingincludinF undisbursed as of September 30, 1962. (A) Full debt service payable.(B) Estimates made by Liberian Treasury as payable after allowing for therolling over of certain debts to private banks - in million U.S. 4:

(A) (B)

1962 n.a. 16.01963 26.0 18.11964 19.7 20.51965 20.5 19.61966 18.5 17.61967 14.6 14.11968 ) 10.91969 ) 7.01970 ) 50.2 7.01971 ) 7.01972 ) 7.0

Table 6

Estimates of Tron Ore ProductionAnd Govcrnmant Revcnuos from Iron Ore

Production (P) Million TonsRevenues (R) Million $

LMC NIOC LAMCO DELIMCO TOTALP R P R P R P R P R

1963 3.0 5.0 2.5 0.0 2.4 1,2 0.0 0.0 7.9 6.2

1964 3.0 5.0 3.5 0.05 6.0 2.8 0.0 0.0 12,5 7.85

1965 3.0 5.0 3.5 0.3 7.5 3.3 1.0 0.3 15,0 8.9

1966 3.0 5.0 3.5 08 7.5 3.4 2.5 0.6 16.5 9,8

1967 3.0 5.0 3.5 0.9 7.5 3.5 3.0 0.8 17.0 10.2

1968 3.0 5.0 3.5 lo,4 7.5 3.6 3.0 1.0 17.0 11.0

1969 3.0 5,,0 3.5 2.2 7.5 7.0 3.0 1.0 17.0 15.2

1970 3.0 7.01/ 3.5 2.6 7.5 7.6 3.0 1.0 17.0 18.2

1971 3.0 7.0 3.5 3.0 7.5 8.3 3.0 1.0 17.0 19.3

1972 3.0 7.0 3.5 3.0 7.5 8.4 3.0 1.0 17.0 19.4

1/ Government participation increases from 35% to 50%.

Source: Liberian Treasury.

Table 7

Potentiol Acreage PlAnted andOutnut of Rubber, 1962-1970

1962 1963 1964 1965 1966 1967 1968 1969 1970Firestone:

.000 acres: 70.0 70.0 70.0 70.0 70.0 70,0 70.0 70.0 70,0million lbs: 78.5 77.7 77.1 76.9 76.9 77.1 77.5 79.1 82.9

Goodrich:

.000 acres: .3 1.3 3.0 5.5 8.6 10.2 11.2 11.2 11.2million lbs: .1 .6 1.2 2.5 4.4 6.2 7.9 9.4 10.6

African Fruit Company

.000 acres: .7 1.6 2.4 3.2 3.9 4.4 4.7 5.0 5.3million lbs: .2 .6 1.1 1.7 2.5 3.2 3.8 5.5 5.1

Liberia

.000 acres: .1 .3 1.0 1.7 2.4 3.0 3.5 h.o 4.5million lbs: - .1 .4 .8 1.2 1.8 2.4 3.0 3.6

Liberian Agriculture

.000 acres: - - - - 3.0 7.0 11.0 16.0 23.0million lbs: - - - - .9 2.7 5.2 8.5 13.1

Salala

.000 acres: - - 1.0 2.5 3.5 4.5million lbs: - - - - - .3 .9 1.7 2.6

Independent

.000 acres: 120.0 120.0 117.0 114.0 111.0 108.0 105.0 102.0 99.0million lbs: 17.0 17.0 16.5 16.0 15.5 15.0 14.0 13.0 12.0

Total

.000 acres: 191.1 193.2 193.4 194.4 198.9 203.6 207.9 211.7 217.5million lbs: 95.8 96.0 96.3 97.9 l0l.4 106.3 111.7 119.2 129.9

Source: Northwestern University Team and Firestone.

Table 8

Total Rubber Production and Estimated Value 1962-1970

AssumedAverage

Production Price per Lb. ValueYear Millions of Pounds US Cents Millions of US$

(f.ob.)

1963 96.0 23 2?

1964 96.3 22 22,0

1965 97.9 19 18.6

1966 101.4 18 18.2

1967 106.3 17 18.0

1968 111.7 17 18.9

1969 119.2 17 20.2

1970 129.9 17 22.0

Table 9

Value of Foreign Trade(Millions of U.S. $T

Year Total Exports Lmpnrts Balance

1940 565 3.3 2.2 + 1.0

196 1408 11.3 3.5 + 7.8

1950 38.2 27.6 10.6 +17.0

1955 68.8 42.8 26.0 +16.8

1956 71.3 44 5 26,8 +17.7

1957 78.6 0.4 38.2 + 2.2

1958 81,5 53.7 27.8 +25.9

1959 109.9 66.9 43.0 +23.9

1960 151,8 82.6 69.2 +13.4

1961 152.5 61.9 90.6 -28.7

1962(a) 53.4 19.h 34.0 -14.6

(a) First quarter 1962.

Source: Liberian Treasury.

Table 10

Value of Imports by Products(Millions of U.S,$)

1957 1958 1959 1960 1961 1962(a)

Food 5.5 3.8 5.6 8.3 10.0 2.4

Beveragesand Tobacco 1.6 2.0 2.3 2.7 4.1 1.2

Inedible Crude .4 .1 .3 06 .8 23

Mineral Fueland Oil 1.7 2.1 2.8 2.9 3.h .8

Oil and Fats 1l .1 .1 .1 .1 .1

Chemicals 2.3 2.0 2.7 4.7 4.3 1.2

Manufactured 10,6 6.4 11.8 16.2 21.6 12.0

Machinery andTransport Equipment 11.4 7.5 10.4 23.3 35.o 12.4

MiscellaneousManufactured 4.6 3.7 6.9 10.0 9.9 3.3

Others - - .3 1.4 .3

TOTAL 38.2 27.7 42.9 69.1 90.6 34-o

(a) First quarter 1962.

Source: Bureau of Economic Research,

Table 11

Value of Exports by Products

(Millions of U.S. $)

1957 1958 1959 1960 1961 1962(a)

Rubber 27.4 26.1 30.8 39.0 25.5 8.7

Palm Kernel 1.2 1.0 2.2 2.0 1.1 .2

Piassava .2 .4 .2 .4 01 -

Coffee .3 .3 .6 5 .4 .3

Cocoa .2 .4 .5 .5 .3 .1

Total Agriculture 293 28.2 34.3 42.4 27.4 9.3

Iron Ore 8.5 21.5 28.2 34.7 29.4 8.2

Diamonds 1,2 2.3 2.1 2.3 2.2 .9

Total Minerals 9.7 23.8 30.3 37.0 3106 9.1

Others 1.3 1.7 2,2 3.2 2.9 1.0

GRAND TOTAL 4o3 53.7 668 82.6 61.9 19.4

Ta) First quarter 1962.

Source: Bureau of Economic Research.

Table 12

Export Forecast

1962 1963 1964 1965 1966 1967 1968 1969 1970RubberMillion pounds 95.8 96.0 96.3 97.9 101.4 106.3 111.7 119.2 129.9

Price per pound(in cents) fob 28 23 22 19 18 17 17 17 17

Value in million US$ 26.8 22.0 22.0 18.5 18.2 18.0 18.9 20.2 22.0

TimberMillion board feet - 11.0 33.0 52.0 89.5 100.8 111.9 111.9 111.9

Value in million US$@ 120 per board foot fob - 1.3 4 6.2 10.7 12.0 13.4 13.4 13.4

Iron OreMllion tons 3 8 12.5 15.0 16.5 17.0 17.0 17.0 17.0Value in million US$

@ $8 per ton fob 24.0 64.0 100.0 120.0 132.0 136.0 136.0 136.0 136.0Miscellaneous 7.0 7.0 7.0 7.0 7.0 7.0 7.0 7.0 7.0

Total value inmillion US$ 57.8 94.3 133.0 151.8 167.9 173.0 175.3 176.6 178.4

Table 13

Bank Deposits and Advances at End of Year(Millions of U.S. $)

Year Deposits Loans and Advances

1958 13.7 11.9

1959 23.9 21,7

1960 18.8 18.6

1961 22.7 29.7

1962 29 35

Source: Individual banks? statistics.