|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. Maintaining unrealistic exchange rates and excessive
government budget deficits led to sizable balance-of-payments deficits and
inflation. Inappropriate policy responses to external factors and
inefficient implementation 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 IMF 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. The government is 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 nonpetroleum 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 has been hampered by a shortage of foreign exchange, corruption, and uncertainty resulting from 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 - $2.7 billion (2000 est.)
SOURCES: The World Factbook, U.S. Department of State
Mother Earth Travel > Country Index > Sierra Leone > Map Economy History