Economy

Economy

Historically, the Liberian economy depended heavily on iron ore and rubber exports, foreign direct investment, as well as the export of its other natural resources, such as timber. Foreign trade was primarily conducted for the benefit of the Americo-Liberian elite, with trade between foreigners and indigenous Liberians severely restricted throughout most of its history by the 1864 Ports of Entry Act. Little foreign direct investment benefited the 95% majority population, who were often subjected to forced labor on foreign concessions. Liberian law often did not protect indigenous Liberians from the extraction of rents and arbitrary taxation, with the majority surviving on subsistence farming and low wage work on foreign concessions.

While official export figures for commodities declined during the 1990’s civil war as many investors fled, Liberia’s wartime economy featured the exploitation of the region’s diamond wealth, with the country acting as a major trader in Liberian, Sierra Leonian and Angolan conflict diamonds, exporting over $300 million in diamonds annually. More recently, the UN ban on Liberian diamond exports as well as the enforcement of the Kimberley Process Certification Scheme by international diamond traders has effectively shut down Liberia’s diamond industry, (although there were fears that foreign traders are hoarding the country’s diamonds during the ban). On April 27, 2007 the UN voted unanimously to rescind the ban in recognition of advances in Liberian efforts to ensure that diamonds are mined legally.

Timber, iron ore, rubber, and other commodity exports continued during the war, in part due to illicit agreements struck between Liberia’s warlords and foreign concessionaires. Looting and war profiteering destroyed nearly the entire infrastructure of the country, such that the Monrovian capital was without running water and electricity (except for fuel-powered generators) by the time the first elected post-war government began to institute development and reforms in 2006. Although some official exporting and legitimate business activity resumed once the hostilities ended (for instance, Liberia signed a new deal with steel giant Mittal for the export of iron ore in summer 2005), as of mid-2006 Liberia is dependent on foreign aid, and carries a debt overhang of $3.5 billion.

Liberia currently has an approximate 85% unemployment rate, the second highest in the world.


The Liberia dollar currently trades against the US dollar at a ratio of 57:1. Liberia used the US dollar as its currency from 1943 until it reversed dollarization in 1982. Its external debt ($3.5 billion) is huge in comparison to its GDP (approx $2.5 billion/year); it annually imports approximately $4.839 billion in goods while it exports only about $910 million. Inflation is falling, but still significant (dropping from 15% in 2003 to 4.9% in the 3rd quarter of 2005); interest rates are high, with the average lending rate listed by the Central Bank of Liberia at 17.6% for 3rd quarter 2005 (although the average time deposit rate was only .4%, and CD rate only 4.4%, barely keeping pace with inflation). It continues to suffer with poor economic performance due to a fragile security situation, the devastation wrought by its long war, its lack of infrastructure, and necessary human capital to help the country recover from the scourges of conflict and corruption.

In 2005, a lawsuit was brought by the International Labour Rights Fund against the company Bridgestone/Firestone for its alleged role in using child labour in its rubber plantations in Liberia and abusing the environment. Workers also briefly staged a strike at the company’s million-acre (4,000 km²) plantation at Harbel in early 2006, but the strike could not be sustained by the poorly funded labour union. However, an international campaign called Stop Firestone is actively campaigning to pressure the Firestone Tire and Rubber Company to change its policies.

Liberia has one of the world's largest national registries of ships, due to its status as a "flag of convenience".

According to the managing-director of Liberia's National Port Authority, Togba Ngangana, Chinese investors have signed a memorandum of understanding to build a manufacturing zone outside the southern port of Buchanan which would produce 50,000 jobs. This is in addition to an undisclosed amount of low-interest loans, debt relief and other incentives.
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