Resource-rich Sierra Leone hampered by war

By Thalia Griffiths

FREETOWN (Reuter): Sierra Leone languishes at the bottom of the United Nations development index. A three-year-old rebel war is eating up scarce resources. Even the national brewery struggles to make a profit.

But the International Monetary Fund (IMF) has just resumed financing after six years and economists say the country could boom if the war can be brought under control.

In the two years since the military government of Captain Valentine Strasser took power, the leone currency has stabilized and inflation is down to some 15 percent from over 100 percent.

A 1994-96 program drafted with the IMF aims to bring inflation below seven percent. The Bank of Sierra Leone, the central bank, forecasts 1.5 percent Gross Domestic Product (GDP) growth by the end of this year, and 4.5 percent by 1996.

"A framework has now been set for growth in the economy," bank governor Steve Swaray told Reuters in a recent interview.

"The problem we have at the moment of translating all of these gains...is the security situation and the lack of confidence.

That is why all these gains that we have made in the past two years have not been translated into growth," he said.

"We have had to walk a very tight rope between spending on the war and spending on the social sector, but I think to the satisfaction of both the IMF and the World Bank we have managed to walk that tightrope."

The government is improving education and health care and World Bank projects to repair roads and renovate Freetown, the West African country's dilapidated capital, are due to start this month.

Freetown residents say the streets are in better shape than before Strasser and his group of young army officers took power but the city still suffers frequent power and water cuts.

Liberalization of the economy has put goods in the shops but Swaray concedes that one result of reducing the money supply is that few people can afford them.

"The comment that one hears is that there is everything really, it's just that money is too short to go around, but that is what happens when you are pursuing a stabilization program," he said.

Sierra Leone has received no cash from the IMF since April 1988 when, under the government of former civilian president Joseph Momoh, the country was declared ineligible for more aid after running up loan arrears of $55 million.

Momoh's government started a tough reform program in 1989, and in April 1992 the IMF endorsed a rights accumulation program, less than four weeks before Strasser seized office.

The new government pursued the program and the fund reopened its coffers to Sierra Leone on March 28, approving loans totaling $163 million over the next three years.

Currently, 45 to 50 percent of foreign revenues is spent on servicing Sierra Leone's $1.2 billion foreign debt. Talks with the Paris club of official creditors are due this month, and Swaray hoped the situation could be alleviated by mid-year.

Of the debt total, $450 million is owed to institutions such as the IMF and the African Development Bank, $350 million to foreign governments and $400 million to trade creditors.

The country has deposits of diamonds, bauxite, and rutile, from which titanium dioxide is extracted for paint pigment.

World aluminum prices are low, however, and the Sierra Leone Ore and Metal Company has just announced its bauxite mine will close for two or three months as its stocks are too high.

Swaray said the emphasis in recent years on mining, which brings little investment to boost the economy, had not helped growth and he hoped to develop fisheries and agriculture and draw tourists to the country's white, palm-fringed beaches.

But although the former British colony may look like a tropical paradise, large-scale tourism is not encouraged by such basic problems as frequent power cuts plunging hotel rooms into darkness without warning and waits of several hours for a ferry across the river estuary to Freetown from Lungi aiport.