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alarming (see Chapter 10), this may create further financial
problems for the country unless a re-scheduling of the public
debt can be agreed upon. The temporary relief which such a rescheduling
would give, however, will not alter the structural
causes of the problem.
As a result of the Open Door Policy, the Liberian economy is an
open economy in which the U.S. dollar circulates freely as legal
tender, supplemented by Liberian coins which, since 1974, have
been issued by the National Bank of Liberia, the year in which
the central bank was created. Although the Liberian authorities
have been publishing Balance-Of-Payments statements.since 1947,
an accurate account of the flow of money into and out of the
country is virtually impossible in the complete absence of any
exchange restrictions. Therefore, the data available are merely
estimates whose reliability depends on the political nature of
the item involved and on the professional competence of the statistician
responsable for their compilation. In general, however,
information on capital transactions is insufficient for a meaningful
presentation of a Balance-Of-Payments compilation.
In spite of this limitation it is still possible to make some
general remarks on Liberia's capital transactions with the rest
of the world. As stated above, the trade performance, in combination
with the level of indebtedness and the substantial outflow
of money from the enclave (or concession) sector of the national
economy may lead to the assumption of a negative Balance-of-Payments.
The cost of the use of foreign manpower and capital, the
Foreign Factor Payments, are extremely high in Liberia, amounting
to between! 100 and $ 150 million per year (10).
In the past the use of the U.S. dollar has prevented (and will
continue to do so in the future) any pressure on Liberia's currency
regardless of any bad Balance-Of-Payments performance. If
Liberia had had an independent currency of its own, the continuous
and increasing outflow of money and the subsequent (gradual)
depletion of monetary reserves would, undoubtedly, have already
resulted in a series of devaluations. The continued use of the
U.S. dollar, however, has saved Liberia from taking these measures.
As the causes of the problem have remained unchanged the
situation is in fact deteriorating. The country's banking sector
is extremely weak. The National Bank of Liberia's reserves are
very limited whereas the country's five privately owned commercial
banks (all but one foreign owned) are of little importance:
the dominating foreign companies in the country do not need them
as they are virtually self financing, either through a system of
retained earnings or, in some cases, through a labyrinth of intercompany
loans.