Outlook for 2011-12

Support for the president, Ellen Johnson-Sirleaf, and the ruling Unity Party (UP) has dissipated over corruption scandals and a perceived failure to deliver tangible improvements in living standards. A cabinet reshuffle in November was an attempt to put a fresh face on a weary administration. However, unless the opposition parties maintain one of the newly formed cross-party alliances and rally behind a single presidential candidate, the UP and Mrs Johnson-Sirleaf are likely to prevail in elections in October 2011. The Economist Intelligence Unit forecasts real GDP growth of 7.3% in 2011, rising to 8% in 2012 as investment in the mining sector increases. Liberia will continue to run a large structural current-account deficit because of the heavy UN presence, which accounts for the majority of imports.

The political scene

The Congress for Democratic Change, the biggest opposition party, has elected Winston Tubman as its presidential candidate for the October elections, with its former head and runner-up in the 2005 elections, George Weah, as the vice-presidential candidate. A Tubman-Weah alliance looks formidable, although the order in which they appear on the ticket is surprising. More than 1.79m Liberians have been registered to vote, an almost 30% increase on the 1.3m who were registered in 2005. The government has not renewed the contract of the auditor-general, John Morlu, saying that he failed to respect the office of the president. Critics claim that the real reason is that he presented a significant challenge to some government officials who have been targeted by his audits.

Economic policy

The latest visit by a team from the IMF as part of the sixth review of the country's extended credit facility went well, with all monetary and fiscal targets being met at the end of 2010. The government has issued an Executive Order, which extends the suspension of import tariffs on cement and fuel with the intention of limiting inflationary pressures.

The domestic economy

The government has held preliminary talks with a Brazilian company, Vale, over the rehabilitation of the country's major hydroelectric facility, situated at Mount Coffee on the outskirts of the capital, Monrovia.

Foreign trade and payments

The government has issued three new mineral reconnaissance licences to a mining company, Adamus Resources, to explore for gold deposits. The board of the US government's Overseas Private Investment Corporation has approved US$90m for the expansion of a project that harvests unproductive rubber trees and processes them into woodchips for energy production.

Land area

111,370 sq km

Population

4.1m (IMF mid-2010 estimate)

Main town

Monrovia (capital) 1.1m (2010 estimate)

Climate

Tropical

Weather in Monrovia (altitude 23 metres)

Hottest month, March, 24-32°C; coldest month, July, 22-27°C; driest month, January, 30 mm average rainfall; wettest month, July, 996 mm average rainfall

Language

English (official) and 16 other languages, including the lingua franca "Liberian English" (Creole)

Measures

UK imperial and US systems

Currencies

Liberian dollar (L$) = 100 cents, and US dollar (notes); Liberian coins and notes trade at a large discount against the US dollar, fluctuating according to the security situation and cash shortages

Time

GMT

Public holidays

January 1st; February 11th (Armed Forces Day); March 12th (Decoration Day); March 15th (birthday of J J Roberts, the first Liberian president); Good Friday-Easter Sunday; May 14th (National Unification Day); July 26th (Independence Day); August 24th (Flag Day); November 8th (Thanksgiving Day); November 12th (National Memorial Day); November 29th (birthday of the late president, William Tubman); December 25th-26th (Christmas)

Official name

Republic of Liberia

Form of state

Unitary republic

Legal system

Based on 1986 constitution

National legislature

National Legislative Assembly (NLA), consisting of the House of Representatives (lower house, 64 seats) and the Senate (upper house, 30 seats)

National elections

October 11th 2005 (presidential and legislative elections), followed by a second-round run-off on November 8th 2005 to decide the winner of the presidential election; next national elections due in October 2011

Head of state

President; currently Ellen Johnson-Sirleaf

National government

The head of state and cabinet of ministers

Main political parties

Congress for Democratic Change (CDC); Unity Party (UP); Alliance for Peace and Democracy (APD); All Liberia Coalition Party (Alcop); National Democratic Party of Liberia (NDPL); United Democratic Alliance (UDA); National Patriotic Party (NPP); True Whig Party (TWP); Liberia National Union (LINU); National Reformation Party (NRP); National Vision Party (Natvipol); and the Progressive Democratic Party (Prodemp); Liberty Party (LP); New Deal Movement (NDP); the Liberia National Union for Democracy (LNUD)

President: Ellen Johnson-Sirleaf

Vice-president: Joseph Boakai

Key ministers

Agriculture: Florence Chenoweth

Commerce: Miatta Beslow

Defence: Brownie Samukai

Education: Othello Gongar

Finance: Augustine Ngafua

Foreign affairs: Toga McIntosh Gayewea

Health & social welfare: Walter Gwenigale

Internal affairs: Harrison Kahnweah

Justice & attorney-general: Christiana Tah

Labour: Jeremiah Sulunteh

Land, mines & energy: Roosevelt Jayjay

National security: Victor Helb

Planning & economic affairs: Amara Konneh

Public works: Samuel Kofi Woods

Transport: Willard Russell

Central Bank governor

John Mills Jones

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The president, Ellen Johnson-Sirleaf, will remain firmly in control of the government, but her popularity will decline over corruption scandals and stagnating living standards. Mrs Johnson-Sirleaf is a strong leader who has significant international support for the rebuilding of post-civil war Liberia. Her government faces an immense task in consolidating peace and democracy, as well as in the reconstruction and development of the economy. Although the president emphasised the need for a clean slate in a November cabinet reshuffle, many officials retained their existing jobs or were simply reshuffled to other ministries. Patience with the government is wearing thin because of the lack of progress in curbing fraud or prosecuting those accused of graft. Mindful of this, the government will give the appearance of stepping up its efforts, prioritising judicial reform and improving the implementation of existing mechanisms, although high-level prosecutions are unlikely.

The presence of a peacekeeping force, the UN Mission in Liberia (UNMIL), will remain crucial for the maintenance of stability. The mandate of the 8,000 military personnel has been extended to the end of September 2011 and no drawdowns are planned before the elections in October 2011. The UN is concerned about the capacity of local forces to take over from UNMIL, although reports that violent crime has fallen suggest that there has been some progress in the army and police force. However, there are concerns about the threat to regional stability. Although more than 100,000 former combatants have been disarmed, many who lack an alternative livelihood will be tempted to form or join regional militias or take up looting and banditry. A coup attempt by former army personnel remains a risk, although the UN troops would be able to counter such a move. UNMIL forces are highly unlikely to be withdrawn if Liberia is deemed to be facing any immediate major security threat.

The ruling coalition will be in a strong position to contest the next national elections, planned for October 2011, although the opposition will provide a formidable challenge if they can overcome individual ambitions. The popularity of Mrs Johnson-Sirleaf, who will seek a second term with her current vice-president, has been damaged by allegations of corruption in her administration, although she still retains significant support. Her ruling coalition was also boosted by the merger in mid-2009 of her party, the Unity Party, with the Liberia Action Party and the Liberia Unification Party. The consolidation of political parties highlights the gradual maturation of the political process and has also been evident among the opposition.

The opposition alliances are currently fragile and it is unclear if they will hold for the elections. The largest opposition party, the Congress for Democratic Change (CDC), has elected Winston Tubman, formerly head of the Liberian National Union and a former senior UN official, as its presidential candidate, with the popular former footballer and runner-up in the 2005 election, George Weah, as its vice-presidential candidate. Mr Weah is popular with young voters and at the grassroots, while Mr Tubman brings professional experience, a seemingly complementary combination that will provide a stiff challenge to Mrs Johnson-Sirleaf.

Other alliances, including that between the CDC and eight other parties formed in August 2010 called the Coalition for Democratic Change, and the mooted merger between the CDC and the Liberty Party, led by Charles Brumskine, who came third in 2005, seem to be on hold at the moment. Overall, the Economist Intelligence Unit believes that, despite recent pledges, in-fighting within the opposition parties due to personal ambitions may well scupper the chance of a strong compromise coalition presidential candidate. We therefore expect the opposition vote to be split and forecast that Mrs Johnson-Sirleaf will prevail in the elections, returning as president with her party increasing its representation in the legislature.

Liberia's good relations with the outside world are expected to remain strong, as Mrs Johnson-Sirleaf has earned considerable goodwill among donors, creditors and investors. In return, her government is under pressure to improve accountability and transparency significantly. Donors have deemed progress so far to be good, and external funding will rise in the light of the debt relief granted under the heavily indebted poor countries (HIPC) initiative in 2010. Significant technical, financial and military support underlines the close relationship with the US, but Liberia also receives strong support from many other governments, including China, as well as from multilateral institutions. The security situation in the subregion-which is vital to stability, given that porous borders allow insecurity to be exported quickly-is expected to remain precarious. The risk of instability in Côte d'Ivoire spilling over into Liberia following the disputed November presidential election is subsiding, as a resolution has been reached and refugees are expected to start to return to Côte d'Ivoire. There is ongoing concern over the prolific crossborder movement of arms and mercenaries, particularly given the influence of international drug cartels in the subregion.

There are unlikely to be any major policy changes ahead of the elections in October 2011 and the president will focus on signing large-scale deals in the extractive industries. Many of the mining concessions have been signed and the focus will then shift to agriculture and oil. The budget for fiscal year 2010/11 (July-June) was ratified by the legislature in October and included a cut in the income and corporate tax rates, which took effect in January. Overall economic policy will continue to be guided by the country's extended credit facility (ECF) with the IMF, which expired in March 2011 but which is likely to be extended until the end of 2011 before being replaced by a successor programme with the Fund. Following the attainment of completion point under the HIPC initiative in mid-2010, the IMF estimates that debt will be cut sharply, to around 15% of GDP. The focus of the ECF will switch to improving economic governance and bank supervision, managing public expenditure, fighting corruption and maintaining macroeconomic stability. On the spending side, the priority will be to rebuilding key infrastructure-particularly restoring the electricity and water supply to the capital, Monrovia, and repairing roads and bridges, as well as upgrading the main ports, with infrastructure spending boosted by allocations from three recent supplemental budgets.

The spending power of the Liberian government will improve over the forecast period as higher exports boost customs duties and the government returns to borrowing on financial markets, albeit in low amounts initially. The government has operated a cash-based balanced budget since the end of the civil war, in line with a policy of implementing strict fiscal discipline, thereby preventing any increase in the public debt. The country reached HIPC completion point in mid-2010. This will be fairly revenue-neutral in the medium term; it will enable the country to borrow from international markets, although no more than 2% of GDP per year, according to an agreement with the IMF. Donors will also offer more concessional financing; however, some of this borrowing will be used for the resumption of debt-servicing from the end of 2011 onwards (net repayments on multilateral debt were zero in recent years as debt relief was being negotiated). Revenue will also be helped by new investment in the mining sector that will result in higher revenue from export tariffs, although tax holidays and lag times before profitability will limit revenue in the early years of these projects. There will be a fall in domestic revenue resulting from a cut in the top corporate and income tax rates from 35% to 25% in January 2011.

On the expenditure front, a large proportion of the budget for 2010/11 is earmarked for restoring and improving public services such as health, education, security and the justice system, which will include increasing salaries and a new minimum wage for civil servants. In addition, civil-service employment will increase by 6,000 as the government employs more teachers and health workers to implement its programmes in these priority sectors. Reconstruction and development programmes will still be funded and managed largely by donors, whose multi-million-dollar budgets dwarf those of the government. The government is expected to maintain a deficit of less than 1% of GDP in 2010/11, before a return to global financial markets in 2011/12, to fund its ambitious reform programme, leads to a larger deficit, financed mostly by concessional external borrowing.

Liberia's monetary policy is ineffective, and the management of the Central Bank of Liberia (CBL) has been specifically targeted for reform under the IMF's guidance. Given the high degree of dollarisation in the Liberian economy (the US-dollar component of the total stock of broad money was estimated at 67% in mid-2008) and its open nature, the exchange rate-along with other fiscal policy measures-has been identified as the main mechanism through which monetary imbalances affect price levels. The CBL's monetary policy will therefore aim to minimise exchange-rate depreciation to help to control inflation, for which it will need IMF support to raise the level of foreign-exchange reserves and help exchange-rate stability. Local currency in circulation will increase as the economy grows and civil-service salaries and other government payments are regularised, but this will be a slow process. The recapitalisation of the system will continue and the minimum capital requirement for commercial banks will be increased slowly from US$10m at the end of 2010. The CBL will work on the introduction of a domestic Treasury-bill market in 2011, as the government plans to start borrowing now that it has received HIPC debt relief. Efforts to strengthen the banking system are continuing, with civil-service salary payments in rural areas to be made directly, prompting six of the country's eight commercial banks to open branches up-country.

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After rebounding to an estimated 6.3% in 2010, economic growth will quicken over the forecast period, driven by higher agricultural output, which accounts for more than 60% of GDP. Earnings from the country's largest export, rubber, will remain high, helped by strong international prices as the recovery in the global automobile industry holds up. Activity in the extractive industries will increase, helped by substantial investments following the signing in 2010 of many large concessions that had been delayed because of the global slowdown, including the launch of the US$2.6bn Bong Mines operation. In particular, we expect an improvement in output in 2012, with the first shipments of iron ore from the operations of an international steel company, ArcelorMittal. Growth in manufacturing will be limited by competition from cheaper imports and unreliable electricity and water supply. Investments in palm oil and timber will start production, albeit at modest initial levels, and activity in the forestry sector will gather momentum. Overall, real GDP growth is forecast to pick up to 7.3% in 2011, before accelerating to 8% in 2012 as a result of increased investment activity.

After it remained steady in 2010, we expect inflation to increase in 2011, before moderating in 2012. World oil prices-a large factor in previous Liberian inflationary surges-will increase in 2011, and global food prices, the other main determinant, are expected to rise at an even faster rate. IMF support will help to contain further downward pressure on the currency and, aided by the high level of dollarisation in the country, this will help to restrain inflationary pressures. However, supply bottlenecks owing to poor transport infrastructure will remain structural sources of inflationary pressure. We expect inflation to average 10% in 2011 before falling oil and food prices lower this to 7% in 2012.

Liberia will continue to maintain an exchange-rate system that is free of restrictions on payments for current and capital transfers. However, although the official currency is the Liberian dollar, the US dollar will also continue to be legal tender. The IMF classes the L$:US$ exchange rate as "other managed", meaning that the authorities intervene to influence the direction of the exchange rate. However, it is not really used as a policy tool to improve competitiveness because of the high dollarisation of the economy. High levels of import demand against low export earnings and limited foreign-exchange reserves will maintain downward pressure on the currency. We therefore forecast that the Liberian dollar will average L$74.2:US$1 in 2011, slipping to L$77:US$1 in 2012.

Liberia runs a structural current-account imbalance as a result of the large UNMIL presence, which, according to the IMF, accounted for more than 50% of imports in 2009, and this will remain the case over the forecast period. Trade will continue to expand after recovering in 2010. Rubber constitutes well over one-half of exports, and commodities will continue to dominate export earnings, which will rise as large mining projects begin production. Import costs will increase in 2011-12 owing to capital imports for large investment projects. External debt repayments will be negligible until Liberia resumes debt-servicing at the end of 2011. Inflows of transfers will remain high owing to strong donor funding for the reconstruction of infrastructure and humanitarian assistance. Other than the UNMIL activity, fluctuations in the trade deficit will be the main determinant of the current-account balance, and we forecast a narrowing in the current-account deficit as the rise in export growth outpaces demand for inputs for reconstruction.

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The Congress for Democratic Change (CDC) has elected Winston Tubman as its presidential candidate for the October elections, with its former head and runner-up in the 2005 elections, George Weah, as the vice-presidential candidate. Mr Tubman, the former UN representative to Somalia and previously head of the Liberian National Union (LINU), won 118 votes to Mr Weah's 111 in a US-primary style election at the party's third national convention. Despite the public election, many observers both inside and outside the party believe that the outcome was fixed in advance; the party leadership allowed Mr Tubman to circumvent the rules, which stipulate that an individual has to be a party member for two years before he is eligible to stand for high office, and it was reported in some local newspapers that Mr Weah agreed to relinquish his position.

A Tubman-Weah alliance looks formidable, although the order in which they appear on the ticket is surprising. Any alliance is an achievement for the opposition, which has been trying to mount a more united challenge to the president, Ellen Johnson-Sirleaf, and her Unity Party. A recent attempt broke down because of the unwillingness of Mr Weah to stand aside and allow Charles Brumskine of the Liberty Party to be the presidential candidate (December 2010, The political scene). Mr Weah had good reason to believe that he should be at the top of any presidential ticket, having won the first round of the presidential election in 2005, while Mr Brumskine was third and Mr Tubman a distant fourth. However, it appears that Mr Weah is now prepared to rein in his own personal ambitions for the sake of the party's chances of electoral success, an unusual event in Liberian politics, which is often marked by personal ambition.

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The move could make the CDC bid more formidable, with the combination of Mr Tubman's professional experience providing a useful balance to the charismatic appeal of Mr Weah, a former footballer who is very popular with young Liberians. The CDC is currently the largest opposition party, having come second in the elections in 2005, when it won 18 legislative seats. Unlike most of the other opposition parties, of which 24 have so far registered to compete in the election, it has a nationwide administrative apparatus and associated voter recognition. However, Mrs Johnson Sirleaf, and her Unity Party remain favourites to win re-election. Mr Brumskine will run on a separate ticket, and the opposition presidential vote will be divided between the two campaigns. Moreover, the Unity Party has successfully exploited the advantages of incumbency, with the appointment of partisans to official positions, including former critics who have been co-opted, the strengthening of the party network across the country, including through the deployment of vehicles and the construction of new offices, and the broadcasting of its many achievements while in power.

More than 1.79m Liberians have been registered to vote in the upcoming constitutional referendum and the general and presidential elections. The referendum aims to amend four fairly uncontroversial election-related aspects of the constitution (March 2011, The political scene). The number of registered voters represents 89% of those eligible to vote and an almost 30% increase on the 1.3m who were registered in 2005. Women make up 49% of the total, making them a key constituency, as in the 2005 elections when this factor benefited Mrs Johnson-Sirleaf, who appealed to them directly on the basis of their experience as wives and mothers. A further verification exercise has also been undertaken, as those who registered earlier were able to check their details on the provisional electoral roll published in early April.

The National Electoral Commission (NEC) has declared all existing electoral districts void in preparation for the delimitation of new ones. Before the publication of the new districts, potential legislators will only be able to register their intent to stand in a county rather than in a specific district. The NEC also announced that campaigning for the elections would start on July 5th, bowing to requests from opposition parties for more time than was granted in 2005. Campaigning for the August constitutional referendum to be held on August 23rd will start on May 5th, following the start in April of a 150-day civic education exercise to be conducted by the NEC in order to sensitise the public on the details of the referendum.

The government has announced that it will not renew the contract of the auditor-general, John Morlu, ostensibly on the basis that he failed to respect the office of the president and that the controversies that he has generated during his tenure present a needless distraction from the task of fighting corruption. This follows the publication of an email from Mr Morlu to the president accusing her of orchestrating a campaign against him in the media, after articles that were published by known close associates of Mrs Johnson-Sirleaf made various claims against him. His use of inflammatory language in the email was then seized upon as evidence of his supposed lack of respect for the office of the president, and this then formed the basis of the decision not to reappoint him.

Critics claim that the underlying reason for his sacking was that his thorough and independent way of carrying out the job presented a significant challenge to the government and to some of its officials who have been targeted by his audits, and who have lobbied for his replacement as a result. There appears to be little foundation for his sacking on the basis of any failure to do the job effectively, and his strong performance was acknowledged by many international observers, as well as nationally. The early publication of audit reports has also been criticised by those within the government who claim that those affected should have a chance to respond to any accusations against them before reports are placed in the public domain. This aspect has been welcomed, however, by many in civil society who view it as further evidence of the independence of the auditor-general's office under Mr Morlu. Activists have criticised the reduction in the tenure of the auditor-general from an original 15-year term to only four years, which is far less than the life tenure allocated to the position in many countries; this, they suggest, has contributed to the politicisation of the office.

The deputy auditor-general, Winsley Nanka, will act in the capacity of auditor-general until a new appointment is made. He and his staff have pledged to uphold the high standards that Mr Morlu brought to the office, including integrity and independence. Despite international reservations about the failure to reappoint Mr Morlu, the EU is expected to continue its support by funding the salary of the auditor-general, as well as some costs associated with the office.

The annual report on human rights for 2010 released recently by the US Department of State was critical of continued failures in tackling corruption in Liberia and the systemic nature of this problem, citing weaknesses in the judicial system, including the susceptibility to bribery of judges and juries. A culture of impunity in society, low wages and limited training of civil servants, and the lack of capacity at the Liberian Anti-Corruption Commission were mentioned as further key factors, with the insufficient budget and minimal staff of the commission hampering its ability to carry out its mandate effectively.

The report also commented on the lack of follow-up in the auditing process, with no recommendations having been made by the legislature to the Ministry of Justice despite the completion of over 40 audits by the outgoing auditor-general. The report did, however, commend the government for progress in relation to transparency, including the publication of the national budget and quarterly financial results, the passing of the Freedom of Information Act, one of few in Africa, and the continued implementation of the Liberian extractive industries transparency initiative.

The Ministry of Justice concurred with the findings of the State Department regarding the widespread nature of corruption in a statement that followed its publication. The solicitor-general, Wilkins Wright, suggested that the jury system had exacerbated the problem, and reported that reform of the current Jury Law was currently being considered by a task-force. He added that out of a total of 14 corruption cases that had been investigated, six had been tried, four were still under investigation and four were awaiting trial. Of the six cases that have been tried, one was dismissed, one resulted in a hung verdict, one has been remanded for retrial, one resulted in a conviction that was subsequently reversed, and two resulted in the acquittal of the defendants. This suggests that the record of the government is not as bad as it may appear, with eight cases remaining outstanding and offering an opportunity for the government to obtain the convictions necessary to repair its record in this area.

The trial for war crimes and crimes against humanity of a former president, Charles Taylor, entered its final stage when both defence and prosecution lawyers presented their closing arguments at the International Criminal Court in The Hague in early March. This follows the resumption of the trial following the resolution of the dispute between the three judges and Mr Taylor's defence lawyer, Courtenay Griffiths, over the timing of the submission of his final arguments (March 2011, The political scene). Mr Griffiths was allowed by the judges to present his closing arguments and summing-up, and apologised to them for his contempt of court in walking out over the issue. As part of his closing statement he commented again on the views of the defendant and his defence team regarding the politicised nature of the trial. Although the outcome of the trial is uncertain, some observers fear that the prosecution has not presented its case conclusively, while the defence has been surprisingly robust, leaving open the possibility that Mr Taylor could be acquitted on at least some of the 11 counts on which he is accused.

The latest visit by a team from the IMF as part of the sixth review of Liberia's extended credit facility (ECF) ended with a largely positive statement from the Fund praising the government's progress under the programme, which ran from March 2008 to March 2011. The statement said that all monetary and fiscal targets had been met at the end of 2010, and commended the prudent and realistic nature of the government's draft budget for 2011/12 (July-June), in which domestic revenue and grants will be supplemented by domestic and foreign borrowing in accordance with the government's debt management strategy. Implementation of the current budget has proceeded fairly smoothly, although capital expenditure has been lower than projected owing to a lack of capacity. There will be a focus on a limited number of strategic projects in 2011/12, supported by efforts to build capacity in key ministries and agencies in order to facilitate better implementation.

The Fund emphasised the importance of further structural reforms in order to consolidate existing progress and promote economic growth and investment. Fiscal policy measures will include the areas of public financial management, revenue administration and governance, while financial sector reforms will focus on capital market development and bank supervision, as well as strengthening the payments system. It has lowered its forecast for economic growth in 2011 (previously 8.8%, the Fund has not yet disclosed its latest forecast) owing to a decline in rubber production and delays in the resumption of timber exports. The Economist Intelligence Unit maintains its real GDP growth forecast of 7.3% in 2011, as economic prospects for the remainder of the year remain generally favourable. However, inflation is rising owing to higher global food and fuel prices as well as the inflationary impact of the unrest in neighbouring Côte d'Ivoire after the disputed November presidential election. The sixth review under the ECF is likely to be approved by the IMF Executive Board, resulting in a disbursement of SDR4.44m (US$7m), bringing the total disbursed under the programme to US$367m. A request to extend the programme until the end of 2011 will be granted, and a successor agreement is expected to be put in place for the start of 2012.

The government recently issued a new Executive Order, which extends the suspension of import tariffs on cement and fuel with the intention of limiting inflationary pressures. The order is in effect an extension of Executive Order 9, originally introduced in 2007, which recently expired, and removes a protective tariff of US$2 on a 50-kg bag of Portland cement and the same amount on imported fuel. It is aimed at mitigating the impact of rising global prices for food and commodities, including cement, an important input for the country's large reconstruction efforts. The suspension of the tariff will also provide a boost to the 26% state-owned Liberia Cement Corporation (Cemenco), which is an importer as well as a producer of cement, and help it to meet local demand. In the absence of hydropower, diesel is used extensively to power generators by individuals and companies, who will benefit from the suspension of the tariff.

The Central Bank of Liberia has introduced a US$5m stimulus package for Liberian-operated small and medium-sized businesses under a "credit stimulus initiative", the first of its kind in the country. Under the arrangement, which is intended to promote the expansion of the middle classes by encouraging investment in private enterprises, interest rates payable will be reduced from the market rate of 14.3% to just 8%. The small scale of the scheme will limit its impact, but if it is successful it may be scaled up in future. The government has also recently announced a new National Industrial Policy, aimed at diversifying the economy, maximising the productive use of the country's resources and strengthening the role of the government in the co-ordination of private investment into the country. The policy will be implemented by an Industrial Co-ordination Committee, headed by the Ministry of Commerce and comprising ten other ministries and agencies.

The government has held preliminary talks with a Brazilian company, Vale, over the rehabilitation of the country's major hydroelectric facility, situated at Mount Coffee on the St. Pauls' River on the outskirts of the capital, Monrovia, which was substantially damaged in the early years of the Liberian conflict. The discussions with Vale took place on the sidelines of the first Liberian Mining Energy and Petroleum Conference, held in Monrovia in early April and sponsored by existing investors, including a global steel giant, ArcelorMittal, BHP Billiton (Australia) and Repsol (Spain). The repair of the Mount Coffee facility would greatly boost the country's electricity output, which currently stands at 64 mw. This includes a recently opened 13-mw plant that is intended to supply street lighting in Nimba, Grand Gedah and Maryland counties in the coming months. The Mount Coffee project could take up to two-and-a-half years to complete, providing employment and a boost to the local economy.

The government's efforts to turn the high economic growth and foreign direct investment of recent years into jobs are not having much success. Unemployment stands at more than 95%, according to the recently released 2010 annual report of the Ministry of Labour. The report states that the private sector currently employs less than 70,000 people, despite the billions of dollars that have been invested in mining and agriculture in particular. Public-sector employment is calculated at approximately 32,000, meaning that around 100,000 people out of an estimated workforce of 2.7m are in formal employment. However this unemployment rate does not consider the informal sector, which accounts for the majority of economic activity in the country, and most people earn a living from subsistence agriculture.

A mining company, Adamus Resources, has been granted three new mineral reconnaissance licences to explore for gold deposits. The company, which is listed on the Australian Securities Exchange, the TSX Venture Exchange and the Frankfurt Stock Exchange Open Market, already has a successful gold-mining operation in Ghana. The exploration areas under the new licences are located in western Liberia, near the towns of Bopulu, Fasama and Mambo, and close to the New Liberty operating area of African Aura Mining, where gold deposits have recently been discovered. The company chose these sites because they are close to existing alluvial gold mines and are in the Archean belts, known for having gold. Gold-prospecting is proving an important new area of investment in the country; other exploration companies include Hummingbird Resources (UK), which is active in the south-east of the country (March 2011, The domestic economy). Exploration by Hummingbird Resources in its Dugbe site has shown great potential so far, with every one of 93 exploration holes that it drilled last year showing evidence of gold deposits.

The board of the US government's Overseas Private Investment Corporation (OPIC) has approved US$90m in financing for the expansion of an existing project in Liberia that harvests unproductive rubber trees and processes them into woodchips for energy production. The project is managed by Buchanan Renewables Fuel, which was established in 2009 with the help of a start-up loan from OPIC in order to make productive use of the country's large stock of unproductive rubber trees. It has since benefited from private investment from Pamoja Capital (Switzerland), Vattenfall (Sweden) and Swedfund (Sweden). The loan will enable Buchanan Renewables to increase annual capacity from the current 100,000 tonnes to over 2m tonnes by 2017. Although some of this biomass will be used to generate electricity for Monrovia from the company's plant just outside the capital, some production is likely to be exported. An estimated 300 jobs will be created, as well as a variety of community projects in the city of Buchanan, including an orphanage, a community centre for teenagers, and a community bus service.