Economy of Sierra Leone
Encyclopedia
Economy
An economy consists of the economic system of a country or other area; the labor, capital and land resources; and the manufacturing, trade, distribution, and consumption of goods and services of that area...
of Sierra Leone
Sierra Leone
Sierra Leone , officially the Republic of Sierra Leone, is a country in West Africa. It is bordered by Guinea to the north and east, Liberia to the southeast, and the Atlantic Ocean to the west and southwest. Sierra Leone covers a total area of and has an estimated population between 5.4 and 6.4...
is that of a least developed country with a GDP
Gross domestic product
Gross domestic product refers to the market value of all final goods and services produced within a country in a given period. GDP per capita is often considered an indicator of a country's standard of living....
of approximately 1.9 billion USD in 2009. Since the end of the civil war in 2002 the economy is gradually recovering with a GDP growth rate between 4 and 7%. In 2008 it's GDP in PPP
Purchasing power parity
In economics, purchasing power parity is a condition between countries where an amount of money has the same purchasing power in different countries. The prices of the goods between the countries would only reflect the exchange rates...
ranked between 147th (World Bank) and 153rd (CIA) largest in the world. Sierra Leone's 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. Sierra Leone is a member of the WTO.
Sectors
| Rank | Sector | Percentage of GDP |
|---|---|---|
| 1 | Agriculture | 58.5 |
| 2 | Other Services | 10.4 |
| 3 | Trade and tourism | 9.5 |
| 4 | Wholesale and retail trade | 9.0 |
| 5 | Mining and quarying | 4.5 |
| 6 | Government Services | 4.0 |
| 7 | Manufacturing and handicrafts | 2.0 |
| 8 | Construction | 1.7 |
| 9 | Electricity and water | 0.4 |
Agriculture
Although two-thirds of the population engages in subsistence agricultureSubsistence agriculture
Subsistence agriculture is self-sufficiency farming in which the farmers focus on growing enough food to feed their families. The typical subsistence farm has a range of crops and animals needed by the family to eat and clothe themselves during the year. Planting decisions are made with an eye...
, 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.
Mining
Rich in minerals, Sierra LeoneSierra Leone
Sierra Leone , officially the Republic of Sierra Leone, is a country in West Africa. It is bordered by Guinea to the north and east, Liberia to the southeast, and the Atlantic Ocean to the west and southwest. Sierra Leone covers a total area of and has an estimated population between 5.4 and 6.4...
has relied on the mining
Mining
Mining is the extraction of valuable minerals or other geological materials from the earth, from an ore body, vein or seam. The term also includes the removal of soil. Materials recovered by mining include base metals, precious metals, iron, uranium, coal, diamonds, limestone, oil shale, rock...
sector in general, and diamond
Diamond
In mineralogy, diamond is an allotrope of carbon, where the carbon atoms are arranged in a variation of the face-centered cubic crystal structure called a diamond lattice. Diamond is less stable than graphite, but the conversion rate from diamond to graphite is negligible at ambient conditions...
s in particular, for its economic base. In the 1970s and early 1980s, economic growth
Economic growth
In economics, economic growth is defined as the increasing capacity of the economy to satisfy the wants of goods and services of the members of society. Economic growth is enabled by increases in productivity, which lowers the inputs for a given amount of output. Lowered costs increase demand...
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 infrastructure
Infrastructure
Infrastructure is basic physical and organizational structures needed for the operation of a society or enterprise, or the services and facilities necessary for an economy to function...
s. Sierra Leone's short-term prospects depend upon continued adherence to International Monetary Fund
International Monetary Fund
The International Monetary Fund is an organization of 187 countries, working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world...
programs and continued external assistance.
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 | 246 |
| 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.
Mean wages were $0.32 per manhour in 2009.
Trade and investment
Money laundering
Money laundering is the process of disguising illegal sources of money so that it looks like it came from legal sources. The methods by which money may be laundered are varied and can range in sophistication. Many regulatory and governmental authorities quote estimates each year for the amount...
, 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
United Nations
The United Nations is an international organization whose stated aims are facilitating cooperation in international law, international security, economic development, social progress, human rights, and achievement of world peace...
-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
Rutile
Rutile is a mineral composed primarily of titanium dioxide, TiO2.Rutile is the most common natural form of TiO2. Two rarer polymorphs of TiO2 are known:...
, a titanium
Titanium
Titanium is a chemical element with the symbol Ti and atomic number 22. It has a low density and is a strong, lustrous, corrosion-resistant transition metal with a silver color....
ore used as paint pigment and welding rod coatings. Sierra Rutile Limited, fully owned by Nord Resources of the United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
, began commercial mining operations near Bonthe in early 1979. Sierra Rutile was then the largest non-petroleum
Petroleum
Petroleum or crude oil is a naturally occurring, flammable liquid consisting of a complex mixture of hydrocarbons of various molecular weights and other liquid organic compounds, that are found in geologic formations beneath the Earth's surface. Petroleum is recovered mostly through oil drilling...
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
Bauxite
Bauxite is an aluminium ore and is the main source of aluminium. This form of rock consists mostly of the minerals gibbsite Al3, boehmite γ-AlO, and diaspore α-AlO, in a mixture with the two iron oxides goethite and hematite, the clay mineral kaolinite, and small amounts of anatase TiO2...
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
World Bank
The World Bank is an international financial institution that provides loans to developing countries for capital programmes.The World Bank's official goal is the reduction of poverty...
Convention. Legislation provides for transfer of interest, dividends, and capital.
Sierra Leone is a member of the Economic Community of West African States
Economic Community of West African States
The Economic Community of West African States is a regional group of fifteen West African countries. Founded on 28 May 1975, with the signing of the Treaty of Lagos, its mission is to promote economic integration across the region....
(ECOWAS). With Liberia
Liberia
Liberia , officially the Republic of Liberia, is a country in West Africa. It is bordered by Sierra Leone on the west, Guinea on the north and Côte d'Ivoire on the east. Liberia's coastline is composed of mostly mangrove forests while the more sparsely populated inland consists of forests that open...
and Guinea
Guinea
Guinea , officially the Republic of Guinea , is a country in West Africa. Formerly known as French Guinea , it is today sometimes called Guinea-Conakry to distinguish it from its neighbour Guinea-Bissau. Guinea is divided into eight administrative regions and subdivided into thirty-three prefectures...
, it formed the Mano River Union
Mano River Union
The Mano River Union is an international association established in 1973 between Liberia and Sierra Leone. In 1980, Guinea joined the union. The goal of the Union was to foster economic cooperation among the countries...
(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.
External assistance
Sierra Leone continues to rely on significant amounts of foreign assistance, principally from multilateral donors. 60% of its health care budget comes from foreign aid.The bilateral donors include the United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
, Italy
Italy
Italy , officially the Italian Republic languages]] under the European Charter for Regional or Minority Languages. In each of these, Italy's official name is as follows:;;;;;;;;), is a unitary parliamentary republic in South-Central Europe. To the north it borders France, Switzerland, Austria and...
, and Germany
Germany
Germany , officially the Federal Republic of Germany , is a federal parliamentary republic in Europe. The country consists of 16 states while the capital and largest city is Berlin. Germany covers an area of 357,021 km2 and has a largely temperate seasonal climate...
, the largest being the United Kingdom
United Kingdom
The United Kingdom of Great Britain and Northern IrelandIn the United Kingdom and Dependencies, other languages have been officially recognised as legitimate autochthonous languages under the European Charter for Regional or Minority Languages...
and the European Union
European Union
The European Union is an economic and political union of 27 independent member states which are located primarily in Europe. The EU traces its origins from the European Coal and Steel Community and the European Economic Community , formed by six countries in 1958...
.