Economy of Sierra Leone

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Economic development has always been hampered by an overdependence on mineral exploitation. Successive governments and the population as a whole have always believed that "diamonds and gold" are sufficient generators of foreign currency earnings and lure for investment. As result large scale agriculture of commodity products, industrial development and sustainable investments have been neglected by governments. The economy could thus be described as one which is "exploitative" and based on the extraction of unsustainable resources or non-reusable assets

[edit] Macro-economic trend

This is a chart of trend of gross domestic product of Sierra Leone at market prices estimated by the International Monetary Fund and EconStats with figures in millions of Sierra Leone Leones.

Year Gross Domestic Product
1965 247
1970 355
1975 572
1980 1,155
1985 4,365
1990 98,386
1995 657,604
2000 1,330,429

Current GDP per capita of Sierra Leone grew 32% in the Sixties reaching a peak growth of 107% in the Seventies. But this proved unsustainable and it consequently shrank by 52% in the Eighties and a further 10% in the Nineties.

Rich in minerals, Sierra Leone has relied on the mining sector in general, and diamonds in particular, for its economic base. In the 1970s and early 1980s, economic growth rate slowed because of a decline in the mining sector. Financially disadvantageous exchange rates and government budget deficits led to sizable balance-of-payments deficits and inflation. Certain policy responses to external factors as well as implementations of aid projects and maintenance have led to a general decline in economic activity and a serious degradation of economic infrastructures. Sierra Leone's short-term prospects depend upon continued adherence to International Monetary Fund programs and continued external assistance.

Although two-thirds of the population engages in subsistence agriculture, and despite the fact that most Sierra Leoneans derive their livelihood from it, agriculture accounts for only 42% of national income. As of 2003, the government was trying to increase food and cash crop production and upgrade small farmer skills. Also, the government works with several foreign donors to operate integrated rural development and agricultural projects.

Mineral exports remain Sierra Leone's principal foreign exchange earner. Sierra Leone is a major producer of gem-quality diamonds. Though rich in this resource, the country has historically struggled to manage its exploitation and export. Annual production estimates range between $70-$250 million; however, only a fraction of that passes through formal export channels (1999: $1.2 million; 2000: $16 million; 2001: projections $25 million). The balance is smuggled out and has been used to finance rebel activities in the region, money laundering, arms purchases, and financing of other illicit activities, leading some to characterize Sierra Leone's diamonds as a "conflict resource." Recent efforts on the part of the country to improve the management of the export trade have met with some success. In October 2000, a new UN-approved export certification system for exporting diamonds from Sierra Leone was put into place that led to a dramatic increase in legal exports. In 2001, the Government of Sierra Leone created a mining community development fund, which returns a portion of diamond export taxes to diamond mining communities. The fund was created to raise local communities' stake in the legal diamond trade.

Sierra Leone has one of the world's largest deposits of rutile, a titanium ore used as paint pigment and welding rod coatings. Sierra Rutile Limited, wholly owned by Nord Resources of the United States, began commercial mining operations near Bonthe in early 1979. Sierra Rutile was then the largest non-petroleum U.S. investment in West Africa. The export of 88,000 tons realized $75 million for the country in 1990. The company and the Government of Sierra Leone concluded a new agreement on the terms of the company's concession in Sierra Leone in 1990. Rutile and bauxite mining operations were suspended when rebels invaded the mining sites in 1995. Negotiations for reactivation of rutile and bauxite mining are in progress. The U.S. interest in the company has been reduced to 25%.

Since independence, the Government of Sierra Leone has encouraged foreign investment, although the business climate suffers from uncertainty and a shortage of foreign exchange because of civil conflicts. Investors are protected by an agreement that allows for arbitration under the 1965 World Bank Convention. Legislation provides for transfer of interest, dividends, and capital.

Sierra Leone is a member of the Economic Community of West African States (ECOWAS). With Liberia and Guinea, it formed the Mano River Union (MRU) customs union, primarily designed to implement development projects and promote regional economic integration. However, the MRU has so far been inactive because of domestic problems and internal and cross-border conflicts in all three countries. The future of the MRU depends on the ability of its members to deal with the fallout from these internal and regional problems.

Sierra Leone continues to rely on significant amounts of foreign assistance, principally from multilateral donors. The bilateral donors include the United States, Italy, and Germany, the largest being the United Kingdom and the European Union.

GDP: purchasing power parity - $5.012 billion (2005 est.), $2.5 billion (1999 est.)

GDP - real growth rate: 5.5% (2005 est.), -10% (1999 est.)

GDP - per capita: purchasing power parity - $800 (2005 est.), $500 (1999 est.)

GDP - composition by sector:
agriculture: 49%
industry: 31%
services: 21% (2001 est.)

agriculture: 52%
industry: 31%
services: 21% (2001)

Population below poverty line: 68% (1989 est.)

Household income or consumption by percentage share:
lowest 10%: 0.5%
highest 10%: 43.6% (1989)

Distribution of family income - Gini index: 62.9 (1989)

Inflation rate (consumer prices): 1% (2002 est.), 30% (1999 est.)

Labor force: 1.369 million (1981 est.)
note: only about 65,000 wage earners (1985)

Labor force - by occupation: agriculture NA%, industry NA%, services NA%

Unemployment rate: NA%

revenues: $96 million
expenditures: $351 million, including capital expenditures of $NA (2000 est.)

revenues: $96 million
expenditures: $150 million, including capital expenditures of $NA (1996 est.)

Industries: mining (diamonds); small-scale manufacturing (beverages, textiles, cigarettes, footwear); petroleum refining

Industrial production growth rate: NA%

Electricity - production: 250.1 GWh (2001), 235 GWh (1998)

Electricity - production by source:
fossil fuel: 100%
hydro: 0%
other: 0% (2001)
nuclear: 0%

fossil fuel: 100%
hydro: 0%
nuclear: 0%
other: 0% (1998)

Electricity - consumption: 232.6 GWh (2001), 219 GWh (1998)

Electricity - exports: 0 kWh (2001, 1998)

Electricity - imports: 0 kWh (2001, 1998)

Oil - consumption: 6,500 barrel/day (1,000 m³/d) 2001

Agriculture - products: rice, coffee, cocoa, palm kernels, palm oil, peanuts; poultry, cattle, sheep, pigs; fish, ginger

Exports: $35 million f.o.b. (2000 est.), $41 million (f.o.b., 1998)

Exports - commodities: diamonds, rutile, cocoa, coffee, fish (1999)

Exports - partners: Greece 32.1%, Belgium 28.2%, US 6.3%, UK 5.9% (2001 est.)
Benelux 49%, Spain 10%, United States 8%, United Kingdom 3% (1997)

Imports: $190 million f.o.b. (2002 est.), $166 million (f.o.b., 1998)

Imports - commodities: foodstuffs, machinery and equipment, fuels and lubricants, chemicals (1995)

Imports - partners: UK 25.3%, Netherlands 10.3%, US 7.9%, Germany 6.3% (2001)
United Kingdom 24%, Côte d'Ivoire 14%, Benelux 10%, United States 8% (1997)

Debt - external: $1.5 billion (2002 est.), $1.15 billion (1998)

Economic aid - recipient: $103 million (2001 est.), $203.7 million (1995)

Currency: 1 leone (Le) = 100 cents

Exchange rates: leones (Le) per US$1 - 2,099.03 (2002), 1,986.15 (2001), 2,092.12 (2000), 1,804.20 (1999), 1,563.62 (1998), 981.48 (1997), 920.73 (1996), 755.22 (1995)

Fiscal year: 1 July - 30 June

[edit] See also

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