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Trends in
Developing
Economies
1994
Extracts
VOLUME 3. Sub-Saharan Africa

The World Bank

Washington, D.C.
Copyright 0 1994by the International Bank
for Reconstruction and Development/THEWORLD BANK
1818 H Street, N.W., Washington, D.C. 20433, U.S.A.

ARlrights reserved
Manufactured in the United States of America
First printing September 1994

This publication hs been compiled by the staff of the Socio-Econonic Data Division of the
World Bank's International Economics Department. The World Bank does not accept
responsibility for the accuracy or completenessof this publication. Anyjudgments expressed
are those of World Bank staff or consultants and do not neesarily reflect the view of the
Board of Executive Directors or the governmentsthey repreusnt.

The material in this publication is copyrighted. Requests for permission to reproduce portions
of it should be sent to the Officeof the Pubbliser at the addres in the copyright notice above.
The World Bank encourages disseminmatonof its work and will normally give permion
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Permission to photocopy portion for classroom use is granted through the Copyright
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U.S.A.

The complete baclcist of publications from the World Bank is shown i the annual Index of
Publi;ctions, which contains an alphobetical tide list and indexes of subjects, authors, and
DIstribution Unit,
countries and regions. The latest edition is available free of charge from Lthe
Office of the Publisher, The World Bank, 1818 H Street, N.W., Washington, D.C. 20433,
U.S.A., or from Publications, Banque mondiale, 66 avenue d'Iena, 75116 Paris, France.

ISBN 0M213-3045-4
 Foreword
T his new regionalissue of extractsfrom Trends
in DevelopingEconomies (TIDE)presents brief
analytical descriptions and data on recent eco-
nomic performance and trends in 40 economies of
Sub-Saharan Africa. The democratization process
adopted in these economies is moving ahead. Despite
economic and political hardships, reform programs
have survied in most economis and have even been
strengthenedin some. Some economiesare responding
to various actions diected to strengthen :gional coop-
eratiion
This extract volume is publishedfor the convenience
of readers who are particularly interested in the 40
economies of Sub-Sabaran Afica. Like other TDE
volumes this is designed as a ready reference for the
.. .
economicanalyst, invesgor,researcher, or business
person who wans a brief and up-to-datedescriptionof
recent socio-economictrends in this region. This first
editioncoversmostoftheeconomiesintheregion;some
economies are not included because socio-economic
conditions were changing too fast to write with confi-
deuce about the current situation.
The text, tables, and graphs are the same as in the
main 7IDEbook, whichincludes 116developingecono-
mies. The tables on each economy provide information
on key ratios, GDP accounts, social conditions, and
nernational transactions. By making this information
widely available,the World Bankhopes to contribute to
increasedunderstandingof the developingeconomiesof
Sub-Saarai Africa.
Masood Ahmed
Director
Interational Economics Deatment
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 Introduction
T he special edition of extracts fom Trents in
DeveopbW Couries (7IDE) providesbief re-
porason 40 Sub-SaharanAfrica econmies as of
May 1994.The txt, tables, and graphs are derivedfrom
the main TlDE book, which includes 116 developing
economies. TIDE complementsthe World Bank's com-
prehensive country studies and annual reviews, such as
the World Development Report and Global EconAuic
Prospects, which look at global and regional economic
tends and their implicationsfor developing economies.
TIDE draws on information from national sources
and adds commentary on recent economic develop-
ments. In many instnces, the data for the most recent
years are prelimiary World RBk staff estimates that
are subject to revision. Althoughthey may not conform
to data published by nationalauthorities, the dfrc
are generaily not considered analytically significant.
However, readers should pay careful attention to the
provisional character of the data and commentary re-
portedhere-
The text is concernedmainly with current eventsand
the recent past of each economy. It places events m
context by bringing out the distiguishing charac-
teristics of an eonomy, its problemsand prospects, and
the principal element of its development strategy.
Whfle the choice of topics mayvary from one economy
to another, several themes recur govement initiatives
in progress orunder consideration,economicand social
factors affectingdevelpment, and extenal finamceand
debt issues.
For each economythe desciptive text is followedby
tables of socio-economic indicators and graphs. The
vii
"development diamond" graph portrays relatioships
amongsocio-economicindicators for an economy com-
pared with the average of the inome group to which it
belongs. The other graphs also help users to visualize
relationships among economicindicators and to facili-
tate comparisonsamongecnomies. Differeces in data
between text and tables may reflect the use of data of
different vtages or variaons m defintions and con-
cepti The taiblescontin the latest available informa-
ton, although it is not always comparable across
counties and time penods. The Socio-EconomicData
Division of the World Bank's Innational Econmics
Departmentwelcomes comments. A nev product con-
taming the fill text and data from T2DEand using the
*STARS* system wil be released shortly on disket
and CD-ROM.
The reports were write in May 1994and edited by
Joost Polak.
Readers ineted m more detailed descrptons of
the economic indicators should refer to other World
Bank publications, notably WorldDevelopmentReport,
Gal EcononmcProspects. World Tables, and Warld
Deb Table. The statistical tables and notes in these
publications are available on diskette, using the
*STARS* rtreval system.A CD-ROMcotaing data
and mater frm many of these publkaons will be
relased shordy. Readersittd in more compree-
sive countrystdies shouldwrie to the D ist Unit,
Officeof the Publisher, 1818H Strcet, N.W., Washing-
toD,D.C. 20433, U.S.A for a copyof the World Bans
Index of Psblcaions.
 Symbols and Abbreviations
Data not availableor nonexistent
0.0 Zero or less than half the unit shown
AIDS Acquired immunedeficiency syndrome
BEAC Central Bank of African States
GATT GeneralAgreement on Tariffsand Trade
c.i.ef Cest, insurance, and freight
f.o.b. Freeon board
GDP Gross domesticproduct
GNP Gross national product
IDA InternationalDevelopmnentAssociation
*fs Nonfactor services
OECD Organizationfor Economic Cooperation and Development
OECS Organizationof East CaribbeanStates
SDR Special drawing right
SPA Special Progrm of Assistance
UDEAC Central African Customs and EconomicUnion
UJNDP UnitedNations DevelopmentProgramme

viii
 Overview
T he year 1993, on the whole, was a difficult one
for the countries of the Africa region, as gross
domestic product (GDP), excluding South Af-
rica, grew by just 1.4 percenL Although this represents
an improvement over 1992, it is nevertheless disap-
pointing, considering the region's high rate of
population growth and the level needed for develop-
ment. As in previousyears, the countries implementing
major reforms, and tberefore benefiting from the Spe-
cial Program of Assistance (SPA), saw their aggregate
output increase by 2.1 percem or more than the average
for the region.The SPA for low-income, debt-distressed
sub-Saharan African countries provides quicc-disburs-
ing balance-of-payments assistance to 29 eligible
counies in support of reform programs developed in
conjunctionwith the Bank and the InternationalMone-
tary Fund (IMF). The 16 core (or steady)reformersdid
sdll betecr. as their GDP rose by 2.8 percent; the
countries comprising the CFA Zone (Bean, Burkina
Faso, Cameroon, Central African Republic, Chad,
Congo, Coted'lvoire, Gabon, Mali, Maurtania, Niger,
Senegal, and Togo), however, saw their economies
contr-actfor a third consecutiveyear. A positivedevel-
opment in 1993 was that, on average, the low-income
counties performed better than the middle-income
ones, althoughneither group recorded an increasein per
capita terms.
Some of the highest growth rates were achievedby
countries such as Lesotho, Malawi, Mozambique,and
Zambia, that were recovermg from the severe drought
of 1991-92.The rather quick recovery of these andother
countries from the effects of the drought is testimonyto
the relative resiLienceof their economies and to the
effectiveness of collaboration among their public ad-
ministrations, donors, and nongovermmentalorganiza-
dons. The improvement in weather condions was not
generlized, however. Drought persistedin someareas,
posing a serious threat in parts of Ethia and Kenya,
and the countries of the westen Sabel experiencedlow
rainfl. In addition, in these and other countries growth
was held back by political tansition, a high debt burden
(despitedebt forgivenessand reschedulings),a deoeri-
ration in the terms of taade, and weak policy implemen-
tation. The poditical transition sweeping the continent
has resulted in increasing multiparty democmres:
Kx
whereas there were just 6 democraciesa few years ago,
the number had reached 29 by the end of June 1994.
The transition,however, has not beeneasy, without cost,
or uniformly smooth.Where transitiongovermmentsare
in place, a balance of power sharinghas proven difficult
to achieve, and opposing groups still vie for power in
many places. On the economicfront, the transition has
sometimesdisruptedproductionandcommerce, affcted
the mobilizationand allocationof resources, and divered
aetion away from needed policy reforms. Yet the
transition continuesnearly everywhere.
There were sharp contrasts on the African scene in
1993-94.The installationof democraticallyelectedgov-
ernments in Malawi and South Africa stand in sharp
contrast to the mass killing in Rwanda. There were a
variety of outcomesin the economicsphere, too, due to
the contradictory forces at play-not just across coun-
tries, but within them, and even within sectors. Some
counties (such' as The Gambia, Sierra Leone, and
Zimbabwe), where the implementationof reform pro-
grans is on track, nonetheless experenced low GDP
growth rates due to the deterioration of their terms of
trade, weather conditions, the lingering effects of the
1991-92 drought, or the disrptions caused by rebel
activity and political transition. In contrast, such cow-
tries as Equatorial Guinea and Sudan, where reform
programs were lacking or off-track, registered growth
of 6 to 7 percent, helped by oil exports or favorable
agricultural conditions. Yet in others results were un-
even, with agricltural growthcoincidingwith a decline
in industrial production and services or a decline in
overall exports accompaniedneverthelessby an expan-
sion of notraditional exports.
Contrasts also marked the implementaton of poli-
cies. While the countries of the CFA Zone as a group
failed to take the necessary measmresto restore their
compedtiveness in 1993, many of them implemented
significant strucral reforms in the fiscal, fiancial,
trade, and other areas. In several of the good perform-
ers, the improvementswere still inadequate, however;
savings rates, for example,remaned too low to support
rapid, sustined growth, and soia conditionscontinued
to be unsatisfactory.
Despite this panoply of variations, the events of
the past 12 months have some common elements that
provideencouragingsignsfor the future. Despitedelays
anidcosts in terms of lives and pbysical assets, the
dsmocratizationprocess is moving ahead. Despiteeco-
nomic and political hardships, reform programs have
survivedin mostcountriesand haveeven beenstrength-
ened in some. Several countries improved their per-
x
formancein the courseof thepastyear, andthe members
of the CFA Zone have taken an historic, bold step to
improvetheir competitiveness.While much remains to
be donc, more countries are embarked on reform
programs and face better prospects than they did a
year ago.
 Angola
A ngola is the fifth largest country in sub-Saharan
Africa, with a population of about 11 million,
growing at 2.8 percent a year, and a low
populationdensityof 8 inhabitantsper squarekilometer.
The country has a rich natural endowment, including
petroleum, diamonds, other minaerl resources, abun-
dant arable land, and a diverseclimate that favorsa wide
variety of agricultural crops, cattle and fishenes re-
sources, and considerable hydroelectric and irrigation
potential. Before independence in 1975 infastnuctre
was well developed by sub-Saharan Africa standards,
but has since deteriorated substantiallybecause of lack
of mainenance and war damage. Angola has suffered
from armed conflict for triee decades, first in the
strggle for independence, and subsequentlyin a mnug
and destuctive civil war. The transition to a demorati-
cally electedgoverment, iniated after a peace accord
in May 1991, was deraled by renewed fighting soon
after elections in the fall of 1992. The outcome of
ongoing peace negotiationsremains uncertain.
Angola's economicgrowth acceleratedconsiderably
after World War H. Growth was stimulatedby invest-
ment m coffee plantations, which made Anola the
world's fourth largest coffee exporter by 1974, and oil
production, which started in the late 1950sand reached
144,000 barrels a day by 1973. From 1960thogh the
end of the colonial period in 1974, GDP growth aver-
aged about 8 percent a year in real terms. Economic
opportuities attacted Portugese setders, whose num-
bers increased from 40,000 in 1940to 340,000in 1974.
The benefits of growth, however, were not equally
distributed. A significant proportion of the rural popu-
lationwas employedm plntaions, mmes, and factories
until 1961under a system of forced labor, and after that
at very low wages. The vast majority of AngoLas lived
in poverty and socialindicatorswere belowsub-Saharan
Africa averages.
The armed struggle for independence,the subsequent
exodus of most Portuguese settlers, civil war, and
misguidedeconomicpoliciesled to a drastic contraction
of output, the collapse of infatucture, deteriorating
social standards, and environmntal degradati Non-
oil per capita GDP has declined steadily in real terms
since 1975. From a net exporter of agrielunl prod-
1
ucts, Angola has become increasingly dependent on
food importsto supplyits urban population,while much
of its fertile land lies fallow. Skilled labor and manage-
rial talent are scarce. Infrastucture has been ravaged
by war and neglect.
Angola's war economyhas been fueled by the growth
of the oil industry, whose annual output increased 6
percentbetween 1973and 1993to over 500,000 barrels
a day, and by exploitationof diamonds. Over 1991-93
oil exports generated about 90 percent of Angola's
export revenue, equivalentto about$300 per capita. Oil
revenue has fnanced the government's war effort and
has met the basic needs of the urban elite, mostly
public-sectoremployees.The goverment has used cen-
tral planning and administative controls to manage
most of the modern economy. The rest of the economy,
includng diamond mninmg,has relied on informal ac-
ttvies. Most farmers have reverted to subsistence ag-
riculure.
Angola had a commandeconomy from 1975through
1991. Several economic refonn programs formulated
between 1987and 1990were not implemented.Admin-
istered prices and interest and exchange rates resulted
in large distortions, uneconomicuse of resources, and
lack of transparency. Non-oil inrvestmentand exports
were discouraged, and traditional agricultural exports
virtly disappeared. Persistent large public sector
deficits,particularly after 1985, were financedthrough
money creation, fueling inflation. In 1991 the budget
deficit was equivalent to 23 percent -of GDP, and
inflation reached 175 percent. Given a fixed exchange
rate pegged to the dollar, the new kwanza quickly
appreciated.By end-1993 the ratio of the parallel to the
official exchange rate was 15:1. The overvaluation of
the kwanza severely distorted relative prices, enur-
aged excessiveunproductive imports and capital-inten-
sive investment, and led to increasing failure to meet
domesticdemand for most goods and services. Excess
demand for foreign exchange was curtailed dtrough
administrativecontrols. Goverment policies encour-
aged consumptionthmugh widespread consumerprice
subsidiesand the remueration in kind of civil servants,
who were granted access to rationed goods, pardy in
lieu of cash payment of wages. A relatively small
 Angola
proportion of the population, thus, appropriated the
bulk of consumer goods, including imports, at prices
substantiallybelow market. Similarly, state-owneden-
terprises sold part of their production below market
prices to their employees. Public sector employees
traded these underpriced goods on the parallel market
for food and consumergoodsunavailablein state stores.
During 1991-93 limited policy measures were at-
tempted to reduce price distortions and improve the
incentive framework. However, they were not pursued
systematicallyor complementedby fiscaland monetary
restraint and were sometimes reversed. The exchange
rate was devalued by a cumulative 99.6 percenl in
foreign currency terms through February 1993-from
NKz3Oto NKz7,000 to the dollar with the final value
determined by a pilot auction of foreign exchange as a
step towardunifying exchangerates. Commercialbanks
were authorizedto trade foreign exchangeat rates close
to the paralle market rate; in-kind compensation of
public sector employees was replaced by monetary
wages; producer and consumer price controls were
eased, with the notable exceptionof utilities, petroleum
products, and essentialcommodities;and profit margin
controls were removed from all buat25 goods and
services,; including common medicines*):agricultural
tools, utiLityrates, and petroleum product; These par-
tial reforms were largely derailed by th inflationary
impact of fiscal deficits, which topped:32' percent of
GDP in 1993. Inflion was about 500 percent in 1992,
and 1,800percent in 1993. Moreover, the government
reintroduced a fixed exchange rate, set atfNKz4,000to
the dollar in April and NKz6,500 in November 1993.
The gap between official and market exchange rates
widened again, with the latter exceedingNKz7O,000to
the dollar at end-1993.
In early 1994 the government formulated an eco-
nomic and social progam that acknowledgedAngola's
economic and social crisis and proposed stabilization
measures within a framework of economic, legal, and
institutionalreform. It is too early to assess its outcome.
If followedthrough, the program could mark an impor-
tant change in public policies and initiate progress
towards addressingAngola's fiscal crisis and structal
development constraints. Program objectives include
cutting the fiscal deficit on a cash basis to 4.4 percent
of GDP in 1994, and reducing monthly inflation from
30 percent in January to 3 percent by December.Fiscal
targets imply major cuts in government spendingaud
were set with the expectation that additional external
capital flows, both official and private, would be forth-
coming. The program proposes a policy reform frame-
work that would result in quick introductionof market
mechanisms to replace administrativecontrols, includ-
ing grdual unificason of the exchangerate, removalof
most price controls and subsidies, and privatizationof
2
some state assets. Initial steps included a 81.4 percent
devaluationof the kwanza in foreign currency terms to
NKz35,ODO to the dollar in March; in April, the central
bank sold foreign exchange to commercial banks at
NKz68,297to the dollar at the first daily fixing session.
Poverty and Social Indicators
Angola's social indicators,already below the sub-Saha-
ran Africa avenge at independence,declined further as
a result of civil war, inappropriate public expenditure
policies,rapid ruralmigration, and emigrationof skldled
manpower. In 1990 life expectancy at birth was esti-
matedat 46 years, the infant mortality rate was 129 per
1,000, less than 30 percent of the populationhad access
to health services and safe water, and the adult literacy
rate was 42 percent. The disparity in social conditions
amongregions is substantial.Rural poverty is acute due
to disruption of production, interruption of trade with
urban areas and between regions, shortage of traded
goods, and lack of access to social services. Women's
access to basic educationalopportunities has been ex-
panded; their literacy rate, although low at 28 percent
in 1989, is higher than before independence. Women
are numerous in the civil service, including in senior
positions.
Recent Political Developments
In 1991and 1992Angola attemptedto achieve national
reconciliation and replace its single-party system with
a democraticallyelected government. In May 1991 the
government and the rebels signed a comprehensive
peace agreement mediated by Portugal, the United
States, and the former Soviet Union. The agreementset
a detailed timetable for demobilization, creation of an
integrated national army, and multi-party electons
monitored by a joint politico-militarycommission.
Despitesomedelays, the peace processwas generally
on track unmtilelections in September1992. The assem-
bly phase of demobilizationwas about completed, but
reintegrationof former soldiersinto the peace economy
was off to a late and slow start. Demobilizationof the
government and rebel armies started in April 1992, but
by the time of the electionswas well behind schedule.
While the new national army, with a purely defensive
mission, was formally established and began to be
organized, genuineintegrationof the formerly opposing
forces into the new national army did not take place.
Electionsfor the national assemblyand the first mund
of presidentialelectionswere calm and orderly and were
monitoredby the UN and other external observers,who
pronounced them fair. The goverment rceived 53.7
percent of the votes cast for te natonal assembly, and
the rebels 34.1 percent; the balance was divided among
 Angola
16 other parties. While the siting president received
49.7 percent of the votes in the presidential elections,
andthe rebelleader40.1 percent,no candidateobtained
the absolute majority, and a second ballot was needed
tu choos between the two front-rnners.
The rebelsrefusedto acceptthe outcomeof elections,
moved their headquartersto Huambo, Angola's second
largest city, withdrewfrom the UnifiedNationalArmed
Forces, and resumed fighting. They nowcontrol access
to a large part of the country, mostly in the south and
central highlands, includingthe main diamond-produc-
ing area and Huambo. There is considerableinterna:
tional pressure on both sides to make peace. In May
1993 the United Statesrecognizedthe Angolangovem-
ment. Talks between the government and rebels have
beeninconclusive,andanewUN-brokeredpeaceinitia-
tive has been underwaysince November 1993.
Medium-Term Outlook
To develop its considerable economic assets, Angola
requires durable peace and firm commitment to ow-
nomic stabilizationandstructuraladjustment The coun-
try has the potential for sustainedgrowth with equity
and economicdiversification,and could aspire to triple
its per capita income in one generation and become a
middle-incomecountry.
Angola's economycould grow at 6-7 percent a year
through further grwth of petroleum and miunralpro-
duction, the recovery of agricultural production, and
selective industrial development. During a transition
period of five to eight years Angola would needconsid-
erable external support, including extensive debt re-
structuring and relief. Reduced public spending
3
resulting from peace and fiscal restraint could help
increase national saving-currently about 4 percent of
GDP-to a projected 18 prcent of GODP by the begin-
ning of the next decade. The peace dividend could be
substantialover time; in the near future, however, the
cost of demobilizationand reintegrationof excensmili-
tary personnel, de-miningand infrastuctre rehabilita-
tion, administrativeand civil service reform, and other
structural measures,would be high. During the transi-
tion period Angola would face a savingsgap projected
at 7-8 percent of GDP, assumingreschedulingof $4.2
billionin external arrears under favorable conditions.
External Debt
Angola's external debt at end-1993 was estimated at
$8.3 billion (induding inte arrears and moratorium
interest), of which 61 percent was owed mostly to the
formcr Soviet Union, China, Cnba, and Eastern Euro-
pean countres; 38 percent to Western bilateral credi-
tors; and one percentto muldlateralagencies. Over half
of the debt is war-related.In June 1989the then Soviet
Union rescheduledits loans, including awrearsand ma-
turitiesfailingduethrough 1990,on favorableterms (10
years grace and 3 percent intest rate). In July 1989 the
Paris Club reschedulednearly $500 million in arrears
and maturities falling due through September 1990;
other Westem creditors rescheduledtheir debt on simi-
lar terms. The remaining maturityprofile, however. is
unfavorable for the mediumterm; unless restructured,
debt serviceobligationsover 1994-96(includingpenalty
interest but before clearing of arrears), would absorb
about 35 percent of projected exports of goods and
services.
 Angola
Poptdaaonmid-1992(milins) 9.7 Income group: L=zr-anlkk
GNP per capita 1992 (IS) - Indebtednesslnt Savem

KEYRATIOS ___________
iSl 1935 1991 1992 INS hmefniawt prasf(s)
GMss domesutchwuuestnUGDP .. 17.8
Exportsof goodsandnhs/GDP .. 32.9
Goss domneicmavings/GDP .. 220
Gmss natonal aingslGDP .. 20.4 .. .. .. 1

Curentaccountbabnce/GDP .. 3.0
Interespayments/GDP .. 0.5
Toal deWexpots .. 102Z4 233.7 241.5 327.1 07 U a -
0 02
U

GDP:PRODUCTION
(WofGOP) 1980 1985 1991 1992 1993 iofolllbymar(%)
^Arcute .. 13.4 .. _. ., 1._ _ _ _
industr _ 42.9 § *

Mevcs. 43.7_ _ _
A910-US1913533 1931 1992 1993
(avengeannualgnmwff
h)1 -
Agiculhjr .. 0.5 .. .. _ --
Indusby .. 64 .. .. _
Mbnubaduring .. -tt.1 .. .. _-
Sevices 41.87. .. 0 . D2 6? U 9D 6 6

G;OP .. 0.5 0.4 2.7 -22.6 _ _ _ _ _ _ _ _ _ _ _ _ _ _

OURp EXPEICFURE
Growufact ingflect
GssdneEin .. 17.8
. ..
(WVfGOP) 41980IS 199 1992 1993 QUinflG0IupjflbP(')
Pritsensupton .. .v47.0
Gene govemnment
consmto .. 31.0 .. -. *o
10

Eqzotsotgoodsandntfi _ 32.9 .. . .. t_
Imp0olsogoodsandns _e .. 2B.7 t .. ' .. -

(ave
Onnilgro ) 19804J6 115593 199 1992 1993
INS \ /1\
Po.ateconsumpion .. -7.0 I
Gbnenl govement conamasu.n 1
2.15
Gross dmestic imestnt .. .8 *- / .. .

Exportsof goodsandnfs .. 142

Import of goodsand nfs .. 1.2 _ _ _
Grss natonal produc .. 2.0 .. .. .. 0m -c4
assnatinalpincome
on.. .. 1.1 ..

PRICES
and GOVERMT FINANCE _20
1980 1985 1991 1992 1993 Change aoG idwtmrn'dCMP(A)
Domesfftpice 20
-96 ~Xd) Is .
Cnsumer peiss .. _ - ,_ l_
wodsae pfices .. .. .. .. ..
ImpridtGDPdelator .. .

Gonmumntfrnwce 6 u 6 w I 6 6
(S of GDFP
Cemurtbudgetb ee .. -1.3 .. . .- coPGWd. -CP1
Oved s lusd . _ .. . .

4
 Angola
POVERTVand SOCIAL
(annualgrowh rates) 1930485 1985-93 D lSdI.Ind
Poptlabion 2.7 2Z0 Lue Sswdi
Laborfoma 1.7 2.0
oust nset useie(mma)
Povertylevel: headotunt indeK0 ofapopuluinj CapP Gom
LU. expebcacy at birth 46.5 Pprlrri
Infant motality wOr osnd m biths) 124.0 Capra
Child manutrition (X of duWnb7under5) 20.0 C ;
Acss to safewAter (56of ppulaon) 50.0
Energyconsurnpion per capita (offaqulva 96.3
llirterav (1 ofpopusion age 15.j 58.3
Gross primary enrolment (% oftehoolepopurafon) 91.0

TRADE
(Coans USS) 930 198S 1991 1992 1993 ExpositndS
hpertlesntsulLUSS)
Total exports(fob) 1.883 2301 3.449 3.833 2/83 4.an
Otherfuel 1.391 1.946 3.161 3.490 2688 3-5

iidx-h9
Diamonds 228 74 190 250 15 3aDW
MaNwaches - . .
TOM impot (Ci) 1.5B9 1.402 1.347 1.908 1.388i |_
Food i -.. .. ..

-p
Impot primeindex (19876-1y .. _ .. .. _
-
n - so .n a
Temtsof rade(1987=100) .. .. .. _
Opennessof encnomy
(P,SCJGDP_) 62 .. - oh
OEWS
BALANCE of PAYLIETS
(miDonfUSS3 1991 19 1993 CwnitacomitbhuMan ODPratioI%)
Experts of goods and nb . 2,408 3,62 3.978 Z858
Importsof goods nd nbfs 2.095 3.236 4,087 3.278
ResoPAr bab -- 313 384 -109 .420
Netador incrnme .. -130 -1,021 -824 -707 4
Net curnt tansfers _ 21 28 102 132 2
Curren acoourn babnc
Befbre offcial bmwjss _ 204 .68 -831 -993 e
A,tr offidal tansfers .. 204 -608 -831 -995 87 U1 02 U3
Long-tem capial infbw 454 -502 -447 -470
Tol olher items(net) -637 1.159 1,427 1.1B9 -4
Changesinne reserves _ -21 -48 -150 276
Mono:
Resrves dudhig gold (dil USS .. _ .. . ..
Resevesincuduggol rmg.USS) ..
Offidal eshge rate5OCSUSS) 29.9 29.9 76.4 ..

EXTERNALDEBT
EXItnW LDEBT1980
s 1915 1991 1992 1993 Susfndmtt%

Long-termdeWlexports - 75.3 202.5 191.1 272.9

IMF credtexports -- 0.0 CD 0.0 0.0
Shwt4tern debUports -. 271 37.2 50A4 54°12
Totaldebtswvic ots - 6.4 6.7 6.3 9.6 OPI

GDP ratios Oat

Long-ermdeb/GDP - 25-7 - . . so _ Io
IMFcrediGDP - 0.0
Short-termdebtIGDP - 9.6 .. 2.

[
Lorw fm debtwmatos_
Prvate guntedlg-trn 0.0 0.0 0.0 0.0 0.0
Publicand pubicy guranted . seo n a a
Prvate 60.7
GTn 84.1 54.2 56.3 569
OCidial etorsllong-Ierm 39.3 15.9 45.8 43.7 43i

'lha develpmnertdlaond shws a bvel of d opent in the co y ompard wHithits geoup average.

5
 Benin
B enin is a country of 5 millionpeople, and had a
totl GDP of about $2 billion in 1993. Its
economyis highly ope and strongly dependent
on primary and terdary activities. The primary sector,
which accounts for 37 percen of GDP, provides the
country's largest export commodity: cotton. A large
tertary sector dominatedby commerceaccountsfor 50
percent of GDP, and its dynamic re-expot activities
provide 64 percent of export revenues. In contrast, the
countryhas asmall secondarysectorwhichaccountsfor
about 13 percent of GDP.
After nearly two decades of state-led develop-
ment, Benin embarked in 1989 on an ambitious
economic reform program, supported by World
Bank structural adjustment lending and an IMF
structual adjustment facility. A new government
elected in 1991 adopted a second-phase reform
program, covering 1991-93.
Structural Adjustment Program
The main objectivesof Bea's adjustmentstrategyare
to accelerate growth, reduce donestic and external
imbaanes to attamin ssinable balanceof paymentsand
budgetary positionsby the end of the program period
and reduce dependencyon foreign assistance,reducing
poverty and protectingvulnerablegroups, and rehabili-
rating social and physical infrastructur and promoting
human resource development.
The results of the adjustment progrm have been
encouragingso far. Real GDP grew at an annualrate of
4 percen over 1991-93.The overall budgetdeficit (on
a mmitment basis, excluding grants) fel to 4.7 per-
cent of GDP, a substatia! improvement from the 10
percent level of 1990. The inflationrate (measuredby
the implicit GDP deflator)was limitedto an averageof
3 percent for 1991-93.And,thank to increasingexport
revenues, ihe balance of payments cunrent account
deficit was contaned at 9.8 percent of GDP in 1993,as
compared to 8.2 percent in 1992, despite a substatial
declie in world cott and oil prices.
Benin and its partners m the CFA franc zone mod-
fled the parity of the CFA fra from CFAFSOto
CFAFIOOto the French franc in January 1994.Because
6
of the importantsteps takenby Beninto stabilizepublic
finauces, contain costs and inflation, and hlberalze
trade, the positive results achievedso far will be rein-
forced by the devaluation of the currncy. Gains in
eternal competitivenesswill help Beni deepen its
strucural adjustment of the economy, and accelerate
growth rates thmugh export expansion and efficient
import substitutionL
The govermmentis implementinga tax reform to
siplify the tax system, broaden the tax base, and
imprve tax administration. The colporae profit tax
rate was reduced from 48 to 38 percent, a single rate
value-addedtx of 18percentovering most goods was
introducedin 1991, and the governmentextendedit in
1994 to include the telecommuications sector and
petroleumproducts.
Deregulation and trade reforms have also pro-
gressed.Pricecontrolswerelifedformosteommodities
in 1991and the state monopolyon domestictrade was
dismantled.The legal famework concerg employ-
ment and investmentcodes was revised and simplified
to give more flexibility and incnives to the private
sector. Key elements of the trade reforms included
removing quantitativerestrictionsand simplifyingim-
port tariffs. In Jamnuy 1994 the tariff structure was
simplifiedfom 12 rates to 4, and the system of refer-
ence values eliminated. Remaining import licensng
controlswere removed in March 1993.
Beam's banking sectoreffectivelycolapsed in 1989,
and the governmnte has undertake fincial sector
reform aimedat portfolio restrctuing includingliqui-
dating state banks and recoveringtheir assets, improv-
ing financial intermediation, opening banking acdvity
to the prrvate sector, and rebabilitatingthe mralcredit
network. Progresshas been uneven. Five private banks
navebeen createdand are operating. Progresshas been
made in recoveringthe assets of liquidatedbanks and
reimbrsing deposfors. Additonal reforms remai nec-
essary to improvefinancial intemediation.
State-terprise reform has led to the liquidationof
33 entepnises; 8 were privaized, and management
contracts were concluded with the private sector for 9
odter enterprises. The nmbr of enterprisesin the sate
portfoliowas brought down from 40 in 1989 to 27 (15
 Benin
commercialand industrial enterpnses and 12 adminis-
trative agencies)by end-1993. The governmentis com-
mitted to implement programs to reform the main
loss-makingcompanies: the sugar factory, the cement
plant, and the palm oil processingenterprse.
Benin's public administrationreformsincludeorgan-
izationalauditsof key ministries,civil servicereduction
programs, streamliningpersonnelfiles, andstrictlimits
on new hiring. The governmentwill undertake addi-
tional audits as a basis for a long-term strategy for
administrative
reform. The civ servicelabor force was
reduced 12 percent between 1988 and end-1993. Cur-
rently thewagebl absorbs58percentof fiscalrwenues.
After the devaluation, the governmenthas decided to
limit salary increases in the public sector to 15 percent.
The government has also introduced measures to
improveeconomicmanagement.The budgetingprocess
was impmved by adopting new budgetproceres and
a unified presentationfor the budget. Despite improve-
ments in investment programmig, project execution
andimplemenionremain problematic.
Poverty and Social Indicators
The policiesimplementedunder the adjustmeatprogam
have improved living standards. GDP per capita in-
creased from $365 in 1988 to $410 in 1993 Higher
conon producer prices and production icreases have
raised inoomeamongthe rural population.The devalu-
aton should raise nr incomes further and lead to a
substatial reduction in rural poverty. Additionaltar-
geted socialmeasureshe alo been takento countera
the negativeeffectsofthe civil service reformprogm,
the hiing freeze, and the resucturing of public enter-
prises. Severmce pay was provided for departingcivil
servants and a traming program undertaken to assist
workers affuctedby the restucturing of public enter-
prises. A labor-intensivepublic works program to re-
habilitate and expand the road network and saitation
system in Cotonou and Porto Novo provided employ-
ment for some 1,500 persons. An cmployment and
enterprisepromotionunithasbeensetup with assistance
fromUNDP to promote creation of small-and medium-
scale enterprises. A rehabilitationprogram address
the needs for basic social infrastructure, such as rural
roads, primary schools, and conmmnityhealth dispe-
sares, and a social fund has been establishedto finance
prioriy health and education xitues.
Medium-Term Prospects
Economicgrwth in Benamis expectedto reach5 percent
in 1995 and 5.8 percnt in 1996,significantlyabovethe
populationgrowth rate of 3 percentwImprovementsare
expectedfrom cotinued mong performance the cotton
7
sector and an anticpatd overll icse m the gmss
ivestmen rate from 13.9percentin 1993to 19.5 percnt
in 1996,ledby anL acelraon of private invesmen
Agricultur wfillremain the main sourceof growth,
with the efficient cotton subsector leading the expan-
sio. Improvedregional competitivenessand efficient
input supply and extension services outside the cotton
sector should enhance the growth prospects of food
crops, fiuits, and vegetables. Coto production in the
short term is, however, constrainedby ginning capacity
and in the medium term by environmental limits to
further extension. Growth in the industrial sector will
dependon Bmin's ability to exploit increasedcompeti-
tiveness in sectors such as texties. Further industial
growth could alsobe obtainedthmughadditioza public
enterpriserestructuringand contiued improvementsin
publicenterpriseefficiency.Further developmentof the
teary sector will mainly depend on the realizationof
Benm's comparativeadvantage in transit and trnsort
activitiesas deregulation and economic liberalzation
are pusued. Transit activities, which grew by 3.4
percent over 19902, remain dependent on develop-
mentsin neighboringTogo and Nigeria.
The public finance situation is, however, lilely to
remain difficult in the years ahead. The overall deficit
is projectedto increse to 10.8 percen of GDP in 1994
but to fall to 8.9 peent in 1995 and 8.1 percent in
1996,as revenuecollectionmis improvedthrogh the tax
andtrade reform, and expendimresrestrained though
the containment of the wage bil and further pablic
expenditurerestructuri. Domesticpayments arrears
are expectedto be eliminatedover 1994-96.
lIprovements in the current account of the balance
of payments would come from a continued strong
performanceof cotton exports and expandig re-xort
actvities as regionalco vens is restored. After
a sharp decline in 1994, exports are expected to grow
by m average6.8 percent per year over 1995-96,while
imports mcreaseby an average5 percent over the same
period, after a decline of 8.7 percen in 1994. The
current account deficitis projectedto decline from 7.5
percmt of GDP in 1992 to 6.4 perent in 1995.
Extemal Debt
With the adoptionof the stuctural adstment progam
Benin's external debt situation has significantly im-
proved. Beninrescheduledits debt with the Paris Club
in 1989,1991,and 1993, and officialbilateral creditors
havemovedincreasinglytoward providinggrantsradter
than loans. As a consequcnce,total debtservice obliga-
tions, which accoumtedfor 34.7 percen of exports in
1992,have fallen to just 17 percent in 1993. Total debt
outstandingand disbursed accounted for 68.9 percent
of GDP in 1993.
 Benin
Population mid-1 992 (mElions) 5.0 Income group: Low
GNP per capita 1992 (US$) 410 Indebtedness level: Belowavewrge

KEm_ RAnos
IS0 IN9S 1991 1992 1993 Inveutmeatto6DPntop
Grss domesticinvestmentlGOP 152 S.9 14.3 13A 15.2 D
Expotsof goodsandnsllGDP 23.0 34.4 23.7 23.3 21.8
GrossdomesticsavgslGOP -5.1 0.8 5.4 3S9 3.2
Grossnational
saWingsfGDP 23 4.7 8.4 5.7 5.4 le
Cufrentaccmunt
balance/GOP -14.0 -4.2 -5.9 -82 -9.9
InteoespaymentsGDP 0.2 1.3 0.7 0.5 0.5
Tl debtyGDP 30.2 7B.1 71.4 63.1 68.4 w
Totldebtlexports 10Z4 191.8 251.3 230.4 314.4 -a so SI C 3

GOP:
PRODUClION
(S of' GDP) 19W 1985 1991 1992 1993 ShamoFG0Physrw7
Agkulture 35.4 31.9 37.2 36.7 36.8
Industry 123 16.7 126 127 126
Manufactming 8.0 7.6 7.6 7.8 7.7
se-ies 52.3 51.3 50.2 50.6 50.6
1960-85 1955-93 1991 19S2 1993 | .
(avalge annal
w gIwIb)
Agricildure 4.7 4-3 7-9 29 3.6
Industry 120 -0.1 G.0 4.8 26
Manufacturing 7.6 4.9 20 - - e _
tardims 1.1
1.t 3.6 5.0 3.3 1 a °n - w is
GOp 3.7 2.1 4Sa 4.2 3.3 1 3oxt N 0

GD-.t? EXPENDITURE
O 1Drw 1991 1992 1993 Grwth raef OlG and GDP
p4
.- OfGDP) 20e
Privat onsumption 9.5 a8 8 6 8482 85.48T
Gernealgovesnntentconsumption 8.6 15.4 12.0 11.9 11.4 15 -
Grss domesticinvestment 15.2 8.9 14.3 13.8 15.2 1/
Eprts of goodsand nfs 23.0 344 23.7 23.3 21.8
mpots ofrgoodsandnfs 43.3 42.5 32.7 33.2 33.8 5

(averageannualgrowth) t19805 1985-93 1991 1992 1993

Prvate cnrisffnpbon 0.5 1.8 8-7 1-7 3.6
Generalgovernmentcnumption 5.1 -21 -27 -21 -0.8 10
Gmss domestickriestment -14.1 4.4 -0J7 151 13.2 -15
Exportsof goodsand nts -3.1 -38 7.4 129 -2|2
Importsofgoodsandnfs -9.6 -3.4 11.9 4.4 3.1
Grss natonal pmduct 3A4 2.0 5.3 2.9 4.3 -mc -W
Grossnational
income 4.5 1.5 6.6 0.6 3.6 1 1

PRICES
and GOVERNMENTRFNANCE
1980 1986 1991 1992 1993 Caang.ofGDPdfeltrand CPt ()
DOmosutiprice4s
( dmnge) a
Consumerp2ics - I t
Wholesal *-
ImprictGDP delator
_- ..
10.5 -4.9 tJT 2g9
t
3
\
|2 e | _ _
A _ _ _i |

Govornmuntfinance | s
w2 1
(S of GOP)
Cumentbudgetbalance -4.7 -1.8 -z2 0.1 -cotPd& -cPm
Overal surplusWicit _ -80 -9-0 -6.3 _ _

8
 Benin
POVWY and SOCIAL
(antulgmwth rates) 198085 1985-93 Dmbpnmntdhnan
Pouton 3.1 3.2 e n
Laborforce 2to 2
moatncenten*iroat 9mr)
Paoty krlet haadcount hidmc(% of poputio) - GNGr
Life iwcacy atblith 50.6 per
lIntt moty (partousdie brth) 110.0 Py pd-y
Chid malnutition dB oin-f tmercapit 3a.0 wiroln
Aecasst sare water (Ic popue
ffa) 50.0
Enry cowumpion per pW (kg oqloqlenw) 19.0
Iltea (% of populatio age 15) 76.6
Gross pdmmayeruumnt (fi of school-epopulon) 60 A b r
TRADE
(miansUSe 1980 1965 1991 1992 1993 ExportandlWm@lIumb(mUSS)
Tat exports(fob) - 298 329 362 332 -
Fuel - 66 93 95 74
Cotton - 42 7 9 9 -
Manu_acturew - -- - -
Tob imports(?- 384 567 552 571
Food .. 126 99 .. 213 -
Fuel and ergy _ 61 63 .. 40 -2_
Capitlgoods .. 72 182 _ 80
so
.t prte index(1987=100) .. 91 95 91 85
lmpoitprneindx(1-987=1) .. 73 98 84 124 a * * t el 2 u
remsofnbade (ciw9i .. 125 97 1Co 68
Oprnss of economy bdwGDP.%) 66 77 56 56 56 D n t
BALANCEof PAYMENTS
(miNimaSp -ss198D 1985 1991 1992 1993 Cuwancomnt bana GPrao(S)
F tsqargoods and nfs 306 360 451 504 470 -_ _ _ -
lmpordtogoodsandnfs 608 444 621 719 730 4' u so 91 U -
Resource babe -32 -85 -170 -215 -260 -2
Nfl
Net
crmc
cimuttansens
Cunw acat babne
-3
107
-21
62
-31
81
-60
99
-40
87 f E
4
--

_
B3bre a4al bansnes -197 44 -113 -177 -213 ._
After offal transfes -134 -15 -11 -45 -53 .*
Long-ter capitabl
frmw 66 -12 82 -17 55 . _
TotalhieMs (ne) 49 13 43 15S -7 49
Changesin nets1rves 19 14 -113 -91 5 . _

Resves eduxg gold (mE.USS 8 4 192 245 244

h
Reserves iduding gold (rmiL.USS) 15 9 196 249 248
ClidE exchane rate (IcaJUST) 211-3 4493 2821 284.7 283.2

EXENAL DEBT
980 18" (991 1992 1993 rm e d(
Erpeflrafts Itfa fna uES
Long4ermndehb epors 80.8 155.4 236L6 222.9 302.3
IMFcredltlo 3.9 2.7 4.2 3.6 9.2
Shortmenn dflJepfrs 17.7 33.7 1D.6 39 2.9 =
Totdaldebt srAcaeAots 4.9 11.5 S.7 4.3 6.9
GDPatls zOfP%
Long4em. debt0GDP 23.8 63.3 67.2 61.0 65.8 Mm
IMFAFa diGDP 1.1 1.1 1.2 1.0 2.0
Shorterm debUGDP 52 13.7 3.0 1.1 D.6 25
Lo- dambtatbs
Prhate nonguaranteeorgkten 0.0 0.0 0.0 0.0 Q0
0
Pubicanrid -y garated 11 1 - 9a *o 0a
Privae dmsorng-term 352 47.8 0.9 0.4 0.3
Olial creditorstlongterm 64.8 522 99.1 99.6 99.7

' The dvelopnent diamond sho a i of dvelopment inthe cmy ered wfth is com grup avrag

9
 Burkina Faso
B urkinaFaso is a resource-poorlandlockedcoun-
try in a transitional zone between the
Sudano-Guinean regions and the Sahel. Al-
though fragle, soils are comparatively fertile The
majority of Burkina'spopulationof roughly 10 million,
nearly 90 percent rural, depends mainly on agricutume
and stock raising. Populationgrowth of more than 3
percent a year creates severe pressure on arable land
Followmgthe devaluationof the CFA fanc in January
1994,per capita GNP is projectedat $300 in 1992and
social indicators, such as primary school enrollment,
accessto healthservices,andlife expectancy,areamong
the lowest in the world.
Burkina Faso's economic performance has been
limited by several serious constraints: high popula-
don growth and related enviromnental and socioeco-
nomic pmblems; dependence on raimfedagriculture
and vulnerability to drought; an inadequate and frag-
mented economic infiastructure; and what was until
three years ago a highly regulated and distortionary
economic nviruonmentdiscouraging private invest-
ment and exports.
Although most of the laN'r force is occupiedin the
primarysector,its share in G)P is only about40percenL
The servicesector has expnded and is now the second
most signficant element in the Burkinalb econouy,
contributingabout 35 percent of GDP. In the secondary
sector, the conuibution of mnningto GDP is relatively
small, but has been increasingthanksto the expansion
of gold mining, after cotton now the country's second
biggest sourceof export earnings. Other minmg activi-
ties, such as zinc, also have potential. Manufacturing
accounts for only about 13 percent of GDP. Informal
activitiespermeateBurkina'seconomyin all sectors.
Cumbersomeregulations, a restictive trade regime,
price controls,and widespreadgovernmntinvolvement
in productive sectos long discouragedprivate invest-
mem and trade and efficient allocation of resomurces.
These factorsimpededthe developmentof the domestic
banking sector and private entprises in all formal
sectors of the economy. Withoutthe dynamismof the
informal sector, the size and importance of which is
inadequately estimated, economic growth would no
doubt have been much slower in Burkina.
10
Due to the relatively small markets of Sahelian
countries, regional market developmentand economic
integrationare of great importancefor Burina's econ-
omy. Roughly one-fourth of Burkina's external trade
(excludinginformaltrade) is intra-regional,the highest
proportionamong Saheliancountries.Recognizingthat
increased trade flows wihin a larger West African
market could be significant for Burkina's economic
growth, the govermnent attaches priority to regional
economicintegation.
In January 1994 Burkina Paso joined a treaty con-
verting the West African MonetaryUnion into the West
African Economic and Monetar-yUnion. The treaty
provides mechanLisms to promote convergence of na-
tional economicpoLiciesand their harmonizationwith
the Union's monetay policy, and the standardizationof
taxation and foreign trade rules among member comn-
tries. These mechanismswill join those already being
used at the monetry level. The economic union will
also make it possible to micreaseregional economic
production through expading markets and economis
of scale, enhace export growth, and give the union
countriesgreater weightin economicrelatios with their
partners Burkina is also a member of the Economic
Communityof West African Staes, and its June 1991
constitution explicitly recognizes the possibility of
yielding some national sovereignty in the interests of
greater regionalcooperation.
Burkinahas undergonea major politicaltransforma-
tion in the recentpast. Since October 1987the authori-
ties have followed a process of "reciflcationi of the
previous regime's revolutionary socialst ideas. This
move toward greater politicalopennessand democrati-
zation of power has continued and is embodied in the
new constitution.Multiparty legislativeelections took
placein May 1992andthe new parliamentstarted work
in October 1992.
In spite of the handicps constrainingits economic
performance,Burkin Fasogrowthrate in the l980s was
suffimentto sligtly raisepercapitaicomes andconsump-
don, as realGDPgrewby 3.5percentayearbetwe 1980
dnd1993.Year-to-yearvaradons in growth were large
and dependedmostly on the weatier and related agri-
cultural and livestockproductiondevelopments.
 Burkina Faso
Burkina's economy enjoyed relatively good growth
until 1988.Much of the growth was, however, derived
from two unsustainablesources-an expansion of pub-
lic consumption and investment spending and high
agriculturalgrowth due in part to bringing of new land,
recently freed from onchocerciasis-river blindness-
under cultivation. In contrast to rapid growth in con-
stuction, fueled in part by high pulibc investment
spending, and an expansion of transport and other
services driven largely by the good performance of
agiculture, manufactring stagnated during the 1980s,
even though highly protectedby import controls. Struc-
trual factors such as poor technical skills, high energy
and transport costs, high wages and worker benefits,
and rigid price and trade controlshurt competitiveness-
The policy framework was complex and sometimes
conadictory, and specialtax exemptionsandprotective
measures deterred efficiencygains.
In 1989 and 1990, real GDP growth slowed to 1.7
percent a year, largely reflecting a fall in agricultural
output due to a recurrence of poor rainfal and a
cuailnent of public invesunent as the public spending
spree could not be sustained.Because 1991was a good
agricuatural year and the private sector started to re-
spond to reforms in the incentive franework, GDP
expansion reached 6.0 percent in real terms, exceeding
the increasemithepopulaton despite a further reduction
in the growth of public spending. By contrast, economic
developments in 1992 and 1993 were on the whole
disappointing, as external political factors and weak
extenal demand combined with uneven rainfall slowed
the growth of domestic output and incomes, worsened
the public fiance situation, and weakenedthe external
position. Real GDP growth slowed to, 0.7 percent in
1992 and 0.4 percent in 1993, owing to a sharp reduc-
ion in cotton production and a slowdownin industrial
and commercialarIvity.
Cumulative overall government budget deficits,
which averagedalmost 9.2 percent of GDP over 1986-
90 (excludinggrants), created a mounting debt service
burden. Due to administrativeinefficiencies and stag-
nation in the formal sector, tax revenue performance
was disappointg and Burkina fell into arrears on its
domestic and external debt service obligations. At end
of 1990externalprincipal and interestarrears amounted
to roughly CFAF49.4 billion, while domestic rears
were estimated at an additional CFAF34.0 billion.
Combined, these were approximatelyeqivaent to one
year's fiscal revenue. With the adoptionof the compre-
hensive adjustment program in 1991. including meas-
ures to oontain the wage bill and improve revenue
performance, the government was able to clear the
programmed amount of its arears in 1991 and 1992.
The accumulation of external and domestic paymets
arrears resumed in 1992 and acelerated in 1993 as a
11
result of slippages in fiscal revenue due mainly to the
inability of weak institutions to implement a major
import tariff and tax reform and also to some extent to
the political situation in Togo, which hampered trade
through the port of Lomn6in the first part of the year.
Throughoutthe period, inflation was moderate, averag-
ing 3.2 percent a year over 1980-93.
The stuctur of current public expenditureshas also
been a subject of concern. Due to rehiring of civil
servantslaid off under the previous administration, the
wage bil had been increasingtoo fast in the late 1980s,
crowdingout investmentand operating expendituresso
that the amounts allocated for maintainingbasic infra-
structure were minimaL.Expendituresfor basic health
services and primary educationwere inadequate, while
health service coverage and primary school enrollment
rates remaind well belowthe average for similarlypoor
counties. Recurrnt expenditmesof economicor social
importance were being financed by external grants or
simply being eliminated.
Measures to reverse these trends were an integral
part of the program launched in 1991, and they were
fully implemented.Defenseoudays, which were higher
thanthe operating expenditurefor education and health
combined in fte mid-1980s, were cut and the savings
shifted to higher allocations for marials and supplies
inthepriori ministrirs a I reuitmetof950primary
school instuctors.
Burina's external accountsdevelopedrelatively fa-
vorably during the 1980s, thanks to rsing cotton and
gold export revenues. The current account deficit (ex-
cludig officialtransfers) improvedcomparedwith per-
formanceover 1977x8. Net cital inflowssufficednot
only to cover current account defcits during 1982-88,
but also to build up gross offiial reserves to the equiva-
lent of aboutSA monthsof importsof goodsand services
at end-1988. In 1989, however, Burkinas balance of
paymentspositionweakeneddramaticaly due to a dete
rioration in the trade balance, a larger deficit in the
service account, lower net private transfers, and the
govermment'sliability for additional arrears following
the liquidationof the COted'IvoiureBrka-owned rail-
way company. While the exernal trade balance im-
proved in 1990 and 1991, it deteriorated in 1992 and
1993,owingto alarge exten to a reductioninthe volume
and internationalprice for cotton exports.
Burkina'sexternal position is still reatively comfort-
able, althoughit weakenedsomewhatin recent years as
the impact of the slow im-provementin competitivenes
was offset by adverse cxtmena shocks, notably the
decline in world market cotton prices, slow recovry of
gold cxports, delays in developing a promising zinc
deposit, and a sharp drop in worker remitances from
Cbte d'Ivoire. As a member of the Franc Zone, the
comtry faces no foreign exchange constaint.
 Burkina Faso
Regent Economic Developments
In 1991 Burkina Faso launched, with the support of
donors, an adjustment program relying on internal
adjustment policies and struucnal reforms aimed at
building the foundation for sustained economic and
social development The corrective measures imple-
mented under the program contributedto a narrowing
of the overall fiscaldeficitand to the containmentof the
current accountdeficit. However, competitivenessre-
mained low. Because of a need to rely on direct cost-
reduction measures, domestic producers can be
expectedto contbute only gradually to a reduction of
the sizeable external trade deficit which had widened
mainly as a result of a substantial 1992-93decline in
world cotton prices.
WhRethe governmentsuccessfuly containedgrowth
ofthe wagebill, by mid-1993a significantdeterioration
in public finance performance was becoming increas-
ingly apparent. Tax revenmesfell far short of targets,
principaly becase of weaknessesin cuvtomsadmini-
stration whichwas confrontedalso vith growingfraud.
The coton sector deficit, resulting from a decline in
world market prices, put a large claim on the govrem-
mem's budgeL The govemment also failed to take
several revenue-enhancingmeasuresexpectedin early
1993, includingvariableimport levieson rice and sugar
and a temmporary tariff surchargeto substte for re-
movedquanutiaiveimport restrictions.Thesemeasures
were put in place in October 1993, after a detailed
review of macroeconomicperformance; but delays in
implementingpolicy measuresled to a shortfll in aid
disbursements.
After the January1994 devaluationof the CFA franc
the govenment adoptedan updatedmedium-ternastruc-
tural adjustment program supported by IlDA and the
IMP. Developmentssince the devaluationare broadly
satsfactory. Inflation appears to have been contained
witfin the projectedrmge, andthe goverment was able
to lift as envisaged the price controls that had been
reimposed after the devaluation.There is also strong
evidence of a rebound in exports, notably exports of
livestockand agriculturalproducts, as well as a pick-up
in actvity in import substitutionsectors, suchas textile,
soap, and bicycles.
Populationand HumanResource Development
Burkina's populationgrowth rate of abouLt3 percent a
year conatrtes to a variety of ecological and social
developmentproblems. Cultivableland, plant cover,
and water resources are being ovrexploited, leadingto
rapid soil degradation,erosion, and further desertfica-
tion Emigration tD ndghboring coastal countries,
12
whichhas in the past reducedannualpopulationgrowth
by about 0.3 percet, is inceasinfglyless attactive due
to persistent economicand fiacial problems in the
traditionalhost countries. Public fiances cannot keep
up with the costs of basic education and the provision
of health care and other basic services for the rapidly
increasingpopulation.
The governmentis committedto increasedprovision
of familyplanningservicesby allocatingmore resources
for these programs and better integrating them into the
health service delivery system. It has also initiated a
public informationprogram to address the spread of
sexualy transmitteddiseases.
Social Indicaton
Social indicators and population growth mirror the
widespreadpoverty facing the country's government.
The crude death rate (18 per 1,000). infant mortality
rate (132per 1,000), and combinedchild/infantmortl-
ity rate (195 per 1,000) are among the highest in the
world. Primary school emollment has only recently
reached 36 percent. Adult lteacy was estimated at
about 18 percentin 1991,while life expectancyat birth
is estimatedat 48 years. High rural-to-urbanmigration,
combined with sfill inadequate social services, and
governmentpolicies which in the past consatainedap-
portunitiesfor pnvate sector actrity, havealso contrib-
uted to poverty in urban areas.
Environment
Increasedawarenessof environmentaldegradationhas
lead to the formulationof a program to disseminate
simple technologiesthat aid soil, water, and biomass
conservation. A sustained implementationof pen-.y
reforms is, however, required to enhance the land
securiy of rural communitiesso as to improve the
incetives for improvednatural resourcemanagement-
Medium-Tern Prospects
The external current accountdeficit (excludingofficial
transfers) is exped to be reduced from 16 percent of
GDP in 1993to 14.8 percent of GDP in 1996thnks to
a recovery in the growth of exports in response to the
recent devaluationand slower import growth -which
will be enhanced by the large shift in income in favor
of mral areas (wherenearly 90 percentof the population
lives) as a result of the devaluationbecausepeople in
rural areas consumefewer import-intensiveitems than
urban dwellers. The cument accountdeficit is expected
to decreaseto about 12 percent of GDP by the end of
the decade.
 BurkinaFaso
Population mid-1992 (mNions,' 9.5 Incomegroup: Low
GNP per capita 1992 (USS) 300 Indebtednessblvel: Blowavea

KEr RATOS
1980 lISS 1991 1992 1993 IhwesuenttoGDPratio
%)
GrossdomnesticinvestmentlGDP 17.0 24.2 2Z7 21.4 22.1 30.
E*polt of goodsandnlbGDP 12.2 13-1 12Z 11-9 11.9
Grvs domestc savingslGDP -92 -2.0 4.2 2.9 2.2 20 -
Givs natondsavAngslGDP -2.0 9.1 6.6 .9 6.1
Cunnt accouwnt
balancalGDP -17.5 -15.1 -14.1 -14.6 -16.0
Interest paymmntslGDP GA as8 o.s 0.5 0.5
Toa debtGDP 22.3 41.2 35.2 35.9 42.4
Tdal debtepouts 68.0 171.3 18S3 2015 245.0 ' s a g n 22 a

GOP:PRODUCTION
(%ofGDP)9 191S 19i1 1992 1993 ShamofGrPby*ectr%)
AgrinLftu 36.9 44.4 _ . .. _ _
Indusby 19.0 17.4 _
Manbcng 12.5 10 - ..
Servics 42.1 38.1 - .. ..

(aveiuge annualgAwlh) 193805 19B5-93 1991 1992 1993

Agnuxre 2.6 Z2 14.3 -3.7 0.0
-Indusby 3.0 4.0 0.0 0.7 1.3
LMAnaaWff 1.4 4J7 32 rxe 1.0 o._ _ . . .
smvmion 84 a5 0.5 2.4 t.5 - - inO 90 el 2 3

GDP 4.0 2.9 5.3 0.6 A.4 OAwb*se USD7 OS-s

GDP:EXPENDITURE
.^ ofGDP 1930 1985 1991 1992 1993 |Growhf ofGWlandGDP(%)
Prvatecon.mption 96.9 86.6 79.0 802 80.7 .I
Gerwralgovwnment conumpton 12.3 15.5 16.8 16.9 17.1 30
Gossdmeubcinweestnt 17.0 24.2 22.7 21A 2.11
Exportsofgwosandrufs 122 13.1 122 11.9 11.9 20
Imprts of goodsand ifs 38A4 39.3 30D7 30.4 31.8 1/
(venrageanuWWa1m) 198!4;5 193593 1991 19 1993_
Ptiatmconsutnplian 0.6 2.9 2.4 3.4 -;.8 4 -
Generalgovementwcnsunption 11.7 3.9 5.1 7.8 1.6
Gweosdoresfc kwonert 13.4 1.7 353 -12.5 3.5 .a
Exporf goods and f -5.0 4.8 -&5 0.3 3.8
Impoft ofgoodsandnfs -1.5 34 82 1.4 -12 130
Givs nalional
poduct 4.1 28 5.9 0.5 0.3 -GB -e-o
Grossnaionalincrxe 5.1 2.9 5.3 0.3 -0.8 1I1

PRICES
ad GOVER LNENr
FRANCE
ils9 116S 1911 092 1993 CharngeofDpdufliorand
CPI(s)
D lompfte S..
x dngew) 4t
Consumerpnces 12.2 6.9 2.5 -2.0 06 2+
Whaedab
prces -o .. - .. ..
ImpktGd r Si 4.8 4. 0.40 2.0 9
Gownmm ntfn. ce*
(%ofiGDP)
Cwrert budgetbalance .. 1.5 1.7 -02 -22 spd -CPI
Overal surplusdeficit .. -6.0 -75 -7.1 -92 1 __ I

13
Burkina Faso
POVERTYandSOCIAL
(eweD gnrxo M6sU) 19B0415 1918543 Devlap_entuluondt
Populaton ±.5 2.8 Ufaexedancy
Laborfarce 1.9 2.1

Povertylevel:headcn indexf% of populaton) .. GNP Gins

Ut. expectancyat birth 40.2 pp.n.
InfantmortalidyQerthousandMehkths) 132.0 Cavite ersw
COid malnubition/( of chw under5) 45.5
Accessto safe water /% of poputbn) 67.0
EneW consumnpbon per capia (kg offequivbt) 16A
Ilibticy (% aFpopuifm age 15+) 81.8
Gross primary enrolment (% of schoo-gepqpulan) 30.7 A _s__ w
to __or

TRADE
(mIXIs USS) 19BO 1911 1991 1992 1993 ExportandImport mIs (miLUS)
Totl exports(fob) .. 136 283 288 273 70
Cotton _ 30 104 94 64 am
Meat .. 14 29 33 32
Manucbur5 .. .. .. ..
Totl imports (df) .. 353 602 642 636
Food .. 59 89 87 86 3_
Fuelandeneg .. 32 51 42 37 2M0
Capitalgoods .. 106 248 241 240 1e
Exportpic index(1987=100) 81 116 119 107
Importpiiceindex(f987=10tO .. 90 111 115 116
Temrsof trade(1987=100) 90 105 103 93 5 n -
Openness of ecconq (UdWP,56) 51 52 43 42 44 OeodS *Ml
BALANCE of PAYMEITS
1980-; 1985 1991 1992 1993 infbuflGfPrue)
fmsb USV uvnacutelnoeO at%
Exportsof goodsandnds 210- 163 335 349 336 * _ _ .-
Impocts
of goodsandnbi 577 488 848 894 as6 2
22 1-
Resowrcebalance -367 -32 -509 -546 -560
Not falorincane -4 - -1 -22 -28 -30
Net curmentransf-s 112 139 143 145 140
Current accountbala.ce i
Bet;e ofricial lansrfs -259 -187 -38 -429 -450 4
Afterofflcialtrabrrs -49 4 0 -89 -97 -117
Long4erm cotabl inlbw 53 46 117 132 129
Totl otherims (ne 6 a -1 20 24 -1*
CanBges in notreserves -11 6 -27 -55 -36..U
mlemo. -is
Reserm enudRing gold fmf- USS) 68 140 346 341 382
Reseres indurng gold (MAil.USS 75 143 350 345 387
Offii exchangerat rsofl/a 211.3 449.3 282.1 254.7 283.2

EXTERNALDEBT
Expwrtrftos 1980 1915 1991 1992 1993 St rua l debt(%)
Long-arm debtxports 74.8 152.9 171.7 191.6 232.4
IMF crediVfexpots 3.9 3.4 1.8 1.7 4.3
Short-termdaUexporls 9.3 15.0 14.8 10.2 8.3 S
Tdal debt s.rviceexprts 5.9 9.9 9.0 6.3 6.5 * , i
GDPosrafts
Long-trm debUGDP 1i9 36.7 32.1 33.8 402 M-
WOL
IMF crediUGDP 1.0 0.8 0.3 0.3 0.7
Sh-term dsbUGDP ±4 3.6 2 1.8 1.4 | i I

Long4en debt I .I .s
Pdvaw I RA%b_U 0.0 0.0 0.0 0.0 0.0
Public and publ cb guaeemd I 7 ar 4 n9o a2
Pr&.AD edit
w m_long-tenn 72 7.8 0.7 0.5 0.5 1 _
OlEdial waditDrsilongterm s928 92.2 99.3 99.5 99.5

The developent damond shaw a level of developmentin th county comparedwith Is incm groupaverage

14
 Burundi
B urundi, a small (27,830 squarekilometer)coun-
ty in East-Central Africa, is one of the poorest
in the world. Its GDP per capita was estimated
at $210 in 1992and $214 in 1990. With a populationof
about 5.8 million in 1993 and an annual population
growth rate of 2.9 percent since 1980, Burundihas the
second highestpopulation densityin coninental sub-Sa-
haran Africa. Social indicators have steadily
deteriorated in the last few years. Rural-urbanmigration
has remained low, with 94 percent of the population
living on small subsistence farms averaging 0.8 hec-
tares. Burundi has limited natural resources, otber than
relatively fertile agricultural land. Mineral resources
include nickel, phosphate, sle petroleum, vanadium,
and some alluvial gold. Recently,explorationrights for
nickel sulfide have been awarded to a foreign investor.
Agricultureis the predominant activity,contibuting
about half of GDP and about 90 percent of employment
and export earings. Burundi has traditionaly been
highly dependent on coffee exports, which accounted
for approximely 74 percent of exports of goods be-
tween 1989 and 1992, and 63 percent in 1993 due to
depressed world market prices and declining volume
related to political events in late 1993. Burundi is
self-sufficient in food. The secondary sector coutnb-
uted 19 percent of GDP, and manufcung accouned
for 12 percent of exports in 1993- Private sector
investment is mainlv concentrated in smallholderfarm-
ing and transport, which represented about 17 percent
of totil fixed investment in 1993. The public sector
dominates manufacturing, energy, and infrastructure,
providing about 50 percent of the country's formal
sectr employment-
Burundi's road infrastructure is well developed and
progress has been made in simplifyingtmsit formali-
ties. Recent steps to lberalize the transprt sector have
reduced tansportation costs to and from the Indian
Ocean ports of Mombasa in Kenya and Dar Es Salaam
in Tanz&.nia,but as a landlocked country, Burndi is
vulnerable to transportation conditions in neighboring
countries, which are not reliable. This has affected its
ability to diversify its export mrkets.
Burundi held its first democratic presidentil and
legislativeelectionsin June/July 1993.For the first time
15
in Burundi's history, a member of the largest ethnic
group, the Hutus, became president. On October 21,
1993,however, duringa coup attempt by factionsin the
Tutsi-dominatedarmy, the president and some of his
close aides were assassinated. The failed coup provoked
a wave of ethnic violence, resulting in the death of an
esimated 100,000 people and the displacement of an
estimated I million, including about 700,000 who
sought refuge abroad. Politicaldeadlock was overcome
when, in February 1994, a new president took office
and a new government, which included elemnts of the
opposition,was formed. On April 6, the new president,
two ministers, and the presdent of Rwanda were killed
in aplane crash in neighboringRwanda. The latest crisis
has been well handled by the interim government, but
the situationremains unstable.
E
'conomic Reform Efforts
In 1985Burundi initaed a program of structural adjust-
ment, supported by IDA and the IMP. Despite deterio-
rating terms of trade, adverse climatic conditions, and
inteal political instabilty, progress has been made
toward a competitiveexchange rate, reducing effective
protection, establishingaunifiedbudgetandelimir¶ing
most price controls, except in the agricultural sewtor.
Progress was also achieved in improving public sector
management,liberalizingimports, and deregulatingthe
labor and financial markets.
The competitiveness cf Burundi's economy im-
proved alter a series of exchange rate devaluabons in
tandem with other adjustment measures. Initially fo-
cused on improving the competitivenessof non-tradi-
tional exports and import-substitution activities, the
scope of devaluationswas later broadened to compen-
sate for terms-of-trade losses from low world coffee
prices. An open general licensing system was mire-
duced in May 1992 to liberalize current-accounttrams-
actions and facilitate imports, stimulate export
diversification, and promote non-traditional exports.
Burundi has given priority to export diversification to
reduce dependme on coffee and has sought to increase
effiencey andproducdvity in the coffee, tea, and cotton
industries. An export processing zone was established
 Bunmdi
in 1993, but operations are at a standstili due to the
political situation. The business environment has also
been improved by a more flexible labor market and a
less restrictive financial regulatory system.
Reforms have also been introduced to strengthen
public resource management. In 1992 a unified budget
was adopted, combining all central government expen-
dires., whether financed by domestic or foreign re-
sources. In June 1993 managementof the entire budget
process, capital and current, was consolidated in the
Ministry of Finance, strengtheningthe managementof
foreign aid and counterpart funding. The restructuring
of the public enterprise portfolio, however, has been
disappointing. To date, only 15 percent of public enter-
prise assets have been moved out of govermmentcon-
trol. The complexity of the institutional apparatus has
been a constraint to faster privatization.
Recent Economic Developments
The events of October 1993 had a serious impacton the
economic and social siuation. It is estimated that real
GDP fell by 5-7 percent in 1993. The inflation rate
reached 9.7 percent, as compared with 4.5 percent in
1992. Government revenues dropped as a result of an
19.8 percent drop in the volume of exports and a delay
in implementingexpected fiscal reform measures, such
16
as the 43 percent valueadded tax on beer and the
uniform applicationof a 15 percent transaction tax. By
contrast, public expenditure was higher, mostly on
accountof higher spendingrelated to elections. Consc-
quently, the global deficit, excluding grants, amounted
to FBu30.9 billion, or 13.4 percent of GDP. If current
trends continue, a further deterioration of the economy
is to be expected.Projectionsfor 1994indicatea further
GDP decline of 12 to 15 percent, and a substantial
budget deficitof 15percent of GDP. Revenuesare likely
to drop significantly if business activity and donor
disbursementsdo not recover rapidly. Restoringconfi-
dence dmougha process of national reconciliation and
political stability is the key to resuming economic
activitiesand external support.
External Debt
At end-1993, Burundi's external long-term debt out-
standing and disbursed was $1,020 million, or 104
percent of GDP. Three-quarterswas owed to multilat-
eral organizations and is non-reschedulable.Burundi's
debt service at end-1993was 42.6 percent of exports of
goods and services. In 1991 Bunmdi benefited from
debt relief, as the Belgian and French governments
canceled the equivalent of about $115 million, or 13
percent of Burundi's total debt at the time.
 Burundi
Populationmid-1992(milions) 5.8 Incomegroup: Low
GNP per capita 1992 (US$) 210 Indebtednesslevel: Sere

KEYRAnos
1980 1385 1991 1992 1993 In tobPmsl)
Gra domesticInvesment/GOP 13.9 13.9 16.8 18.6 2.3
ExportsofgoodsandnfeiGDP B.8 10.8 10.0 8.9 7.5
Groa domesticsavlngsIGDP -0.6 4.7 -1.7 -2.9 -18.1 2
GmmnationalsaInIs/GDP -0.9 3.9 -1.5 -3.0 -115.4
Curantacmuntbalance/GDP -13.9 -1.5 -18.3 -21.6 -20.7 ID
Interestpayments/GDP 0.2 0.8 1.0 1.3 1.3
TotaldebtlGDP 18.0 39.6 82.4 912 111.3 0
Total debUexportB 180.1 354.5 761.1 917.3 1.23B.3 IT U .. U 3 2 1

GDP:PRODUCTION
( of GM 19380 1985 1991 1932 1993 ShnuuofG1Pbyu.tor(%)
AgrtcuPture 62.2 61.5 54.3 54.2 54.1
Inrduby 12.6 13.0 19.6 20.1 16.8
ManufacturIng 7.4 8.1 14.2 14.6 11.0
Servics 25.1 25.5 26.1 25.6 29.1
12B1W5 195-93 1931 1992 1993
(om_e annualgl .I II II
Agriculre 2.1 2.0 2.1 3.0 -4.7
Industry 5.9 3.7 9.3 2.8 4.8 :
Manufacturing 6.1 3.9 4.2 5.6 -3.1 , -. --. , ; -- i
Services 6.6 4.2 2.3 1.6 3.2 UU so -
D' ta Ene fl5un
GOP 4.1 3.5 5.2 2.7 -1.2 _____ ____ ___ ___ ___ ___ __ __

GOP:EXPENDITURE
of GDP) 1980 1985 1991 1992 1993 Gfowhr aoG0ImndGDPl%)
Pivateconsumption 91.5 87A 91.4 93.0 107.7
Generalgovemmentconwmptbr 9.1 7.8 10.3 9.9 10.4 -
Grossdomestic invesmnt 13.9 13.9 16.8 18.6 2.3
Expolrsorgoodsandns 8.8 10.8 10.0 8.9 7.5 -
Importsof goodsandnbf 23.3 20.0 28A 30.4 27.8

(awinmg.eagm" 19804851985-93 1991 1992 1993 20

Pnvateconsumplion 3.1 3.7 4.8 2.1 5.4I
Generalgovemmeitcomsumption 4.1 3A 1.6 7.3 7.3 8 - * ,|
Grossdomesi inwetmnt 6.7 4.3 2.6 8.2 5.3 -2
Exportsofgoodsandnfs 11.0 -0.6 16.3 1.1 -35.1
Importsof goodsandnfs 5.1 3.2 4.8 5.5 17.5 14
Grossnainal product 3.8 3.6 5.6 2.4 -1.3 -a e 6-GDP
Grossnationalincome 4.1 2.8 6.2 IA 26

PRICESandGOVERNMENTFINANCE
1980 198s 1991 1992 1993 ChangeuoGDP
dSIwandCPI(%)
Domesc p-.15c T
(N dung.) ii0
Consamerprices 2.5 s8 9.0 4.5 9.7
Wholssal pies .. .. .. ..
lmplicitGDPdelator 18A 5.2 3.3 4.8 5.4 | o
finance
Govsnuwimnt I *I 91 12
(%of GDP)
Currentbudgetbalnce 2.5 2.6 3.0 2.2 Z2 -.- oDPsI. -ca|
OveralI suwplus/deficit -7.4 -6fi -2.2 -5.5 -Z2 1

17
 Burundi
POVERTYar' SOCIAL
(--nu gowVh -gm) 198045 19W93 Dbvlpmentdlmoandt
Poplton 2.8 2.9 Lkezpfnc
Laborforce 2.0 2.3
matricntesthamnb)
Poverty Iel: headcountindetx of populfn) .. GNP
Ufe expectancyat bith 48.0 e p
Infantmowal,ty(pwthousandhebkiha) 106.0 p ,lb
Chld makutritlo (%of dulda under5 31.0
Accessto safenier (S otpoplufan) 37.0
En.gy csmplon percapita (kg amequunQ 23.9
hlelacy (S dpopufatfn age 15*) 50,0
Gross primay enrommnt(S cfschod-g populafan) 70.0 c -

TRADE
%mfhonsUS) 19110 1985 1991 1992 1993 Eadand kupoit smls (milLUSE)
Total xports(fob) 66 112 91 80 56 zy
Coffe 58 94 73 49 30
Tea 2 6 9 11 9
Mfanufactures 1 5 4 11 10 20
Tdal impods(ci) 168 1t9 254 239 189 I 1
Foed 18 17 15 11 10
Fuedandenea2y 5 32 29 25 25 _W
Capllapgo 33 63 91 96 68 I
E]qor price hdex (1987=100) 127 116 81 67 8 0
lmpot price index(987=100) 85 65 150 178 167 7 * * * 1 a -
Teimsof btade(1987=100) 149 137 54 37 48
Openes ofe(mdad3GDP,%) 32 31 38 39 35 OW U_
BALANCEof PAYMlENTS
.bnms USSt - mim 195 19t: 1992 1993 amounttbto cDP ra00$}
Exportsofgoodsandnt's
lmporb of goodsand its
Resourcebalnce
81
206
-125
127
239
-112
117
333
-216
98
333
-236
73
272
-199 |
I'

|
[1
42 1 D I l
I -
1

Noetfacor inme -7 -18 -11 -14 -12 I

Met cuITUtfanbsf- 4 10 13 13 9 .10 j
Curentaccount
balance IJ
Beoe officialtansfers -128 -121 -214 -237 -203 45s L| '
Af*roAdal trnsfers -96 -42 -28 -72 -52
Long-tarm
enatal dow 77 55 59 91 65
Tdal otheribms (ne 21 -1 4 6 -3
Changesinet reseres -2 -13 -4 -25 -10
MHmo:
Rhsfwesxeidlng gold (mn USSJ 95 29 141 174 163
Reseivesindudtggold(m!USS- 105 35 147 180 170
Offidal excnge rate(ca.S$ 900 120.7 181.5 20.3 242.8

EENAL DEBT
i. 1930
1IS f 1992 1993
Long4ermdeb_e prts 128.3 318.6 711.9 849.6 1.155.3 1420
IMFcredaxpors - 38.8 113 38.6 56.0 58.0
- Short4cmndebtlexports
Totaldebtsekeept
GDPi1355
-
13.0
9.5
24.5
20.5
10.6
31.0
- 11.7
35.3
14.1
48.8 p jP- I

IJpm.
I

Lang4enrdebbtGP 12it 35.6 77.0 116A 104.1 S

IF crditJGDP 3.9 1.3 4.2 5.7 5.9
Shrt-termdebtGDP 1.3 2.7 1.1 1.2 1.3
Leorg4am debtrallos .
Pivat no rarrleedlon rm D.0 .O .0 0.0 0.0
Pubic andpLbicy guaranteed n w2 I
Pdvateatrsllng4n 7.0 6.6 0.7 0.4 0.4 1 1
Offidel cedltorslbng-tenn 93.1 93A 99.3 99.6 99.6

* Thedevelopmenitdmnd iosa lvl dfdewvpent i the couy cmpaed wih is incomegroupaveage.

18
 Cameroon
rCameroon is among the countries in Africa with
I the greatest developmentpotentiaL.It is richly
'~-' endowedwith tropical forests, coastal fisheries,
mineral resources (petroleum, bauxite, natmal gas),
fertile agriculturalland. and alargely favorableclimate.
Its economyis servedby a well-developedinfrastructure
and communicationsnetwork, and unti the mid-1980s
had a well-fimctioningfinancial system. Duringthe first
25 years after independencein 1960 an appropriatemix
of policies allowed dibspotential to be realized and real
economic growth averaged about 7 percent a year.
Agriculture was the main source of growth and foreign
exchange earnings until 1978, when oil production
started and became the cornerstone of economic
growth.
The flow of oil revenues,while notionallyimproving
macroeconomic indicators, exacerbated Cameroon's
mounting structral problems. The external resources
balance went from a small deficit in fiscal 1977 to a
surplus of 11 percent of GDP in fiscal 1985 and gross
domesticsavingsincreasedto more than 35 percent. The
ensuing improvement in goverment revemnesthrough
royalties and income taxes and a relatively high credit
rating in the international financial markets enabled
Cameroon to gai access to external fiancing and
generated a substantialexpansionin the public sector at
large andpublic investmentsinparticular. However,the
pubLicsector-led expansion was driven by high levels
of consumption and capital-intensive and generally un-
sustainable public investments. At the end of the oil
boom, Cameroon was left with an oversizedinfrastruc-
ture, a large civil service and public enterprise sector,
and significantlyhIgher external mdebtedness.
During 1986-89 Cameroon suffered from three ma-
jor shocks that unmasked the fragility of its oil-depend-
ent development strategy. First, the sharp decline in
export prieled by petroleum in 1986, followedby
cocoa and coffee-caused Cameroon's extemal terms
of trade to fail by more than 55 percent from fisc:l 1985
to fiscal 1989. Second, Came ion's oil production
started to decline after peaking in fiscal 1986. Third,
with its exchange rate linked to a rising French franc
and unable to contain domesticinflation below that of
its main trading partners, Cameroon's real effective
19
exchangeratreappreciatedsubstantially,reducing inter-
national competitiveness.
In the absenceof appropriate corrective adjustment
measures,these shocksdragged the Cameroonianecon-
omy into a long and deep crisis. Real GDP fell by an
average of 3.4 percent a year over fiscal 1986-89 and
real per capitaincomelevels dropped almost40 percent
Budgetaryrevenues decreasedby 35 percent during the
same period' In the face of constant current expendi-
thres, this drop caused a sharp rise in the overall budget
deficit to above 13 percent of GDP in fiscal 1987, and
down to 5 percent of GDP by fiscal 1989 as public
investments wereslashedk These deficits were largely
fianced by an accumulationof domestic arrears and
increased foreign borrowing. The extemal current ac-
count switched from a surplus in fiscal 1985 to a large
deficit in fiscal 1989, and was financed mainly by
drawing down foreign assets of the banking system and
a further buildup of external debt. The emergence of
domesdcarrears indthedewlineinforeignassetscreated
a liquidity crisis in the bankingsystem, exposingimprm-
dent past lendingpracties.
The governmentlamnchedan economic reform pro-
gram in 1988supportedby an MF standbyarrangement
and a World Bank structural adjustment loan. The
program aimed at correcting macroeconomicdisequili-
bria, restoring external competitiveness, and estab-
lishing the conditons for resumed growth, and was
based on an assumption that these objectives could be
achievedthrough internalpolicies only. Waile progress
was made in implementing reforms in a number of
areas, the overall objectives were not achieved and the
economy's fimnmental structural problems became
increasingly apparent.
While extenal trade was lieralized significantly
over 1989-93, it was associated with relative price
movements that were perverse in their incentive and
distributionaleffects, as the prices for non-tradeables
were maintained. In addition to a continued deteriora-
tion of the extenal terms of trade, estimated to have
declinedby 60 percentsince fiscal 1985,the rising value
of the French franc againstthcdollar forced the govern-
ment to lower the local prices of its main exports,
resulting in a sharp decline in the relative internal price
 Cameroon
of tradeables. Rural producer incomeswere reducedby
almost 50 percnt, while prices of public utilities and
services, and wage levels in the public and parapublic
sectors, remainedunaffected.It wasonly withthe recent
reagmnmentof the parity of the CFA fanc-and sig-
nificant civil servantwagecutsin November1993-that
relative pnces became more conducive to increased
output in the tradable sectors.
By December 1993 Cameroon's economy and its
extemal accounts had deteriorated significantlyas the
findamna structura problemsremainedunaddressed
and financial imbalancesmounted- Since the onset of
the crisis in 1986, real GDP had declined by about 30
percent and the real per capita income (taking into
account the terms of trade loss) by about 55 pecent
GNP per capita is estimated to be $820 in 1992
Comparedto its fiscal 1989 level, agricultuna produc-
tion, once the engine of growth in the economy, fi:l by
25 percent, while the small, largely import-substimting
iight manufacturing sector, and the services sector
declined by 20 percent. The mming sector, dominated
by petroleum, experiencedits worst drop over 1986-87,
and has been in declineever since. The current accout
deficit reached about 105 percent of GDP inEscal 1993
as the resource balance went into deficit due to the
petroleum-inducedexport decline, which outweighed
iuport compression,andas interestpayments inceased
significantly. The absence of real adjustment during
fiscal 1985-93 was evidencedby the hact that overall
consumption only declned slightly, while domestic
savngs dropped from 35 percent to 10 percent of GDP
by fiscal 1993 and domesic invesmt from 25 per-
cent to less than 11 percent of GDP.
Recent Economic Developments -favorably
In January 1994 the CFA franc was devalued from 50
to 100 to the French franc. To ensure the success of
the devaluation, Cameroonhas adopteda new macroe-
conomicprogram whose main objective is to secue its
intrnatonal comptitieness and return the economy
to a sustinable growth path. The reform program,
supported by an*IMF standby angment, aims to
bring inflation to a level below 5 prent from fiscal
1996onwards, followinginitial adjustmentsin relative
prices, and attain sustainableamnal real GDP growth
of about 5 pecendtfrom fiscal 1996, primarily led by
improved competitiveness and export performance.
The program also seeks to achieve primary and, even-
tually, overall budget surpluses to enable increased
domestic savings, reduce the current account balance
deficit, and finance an inCreaSingshare of domestic
invements.
20
The program has three main components:
and strengning the public and parapublic sectors,
improvg the incentivesframeworkfor productiveand
production-supportingsectors, and poverty-alleviation
measures.
The first phase of the stabilizion program seemsto
have met relative success. nflantionseems to have been
kept under control, at a substmtiallylower level than
anticipated. Based on a consunmerprice index estab-
lished for Yaoumde,the general price level peaked 28
percent above mid-January levels in the last week of
March 1994. By late April many pnces had falle,
bringing the index down to 120-21. Reports from
Cameroonall point to a significantand swift reacuionin
the agricultural subsectors. particularly cocoa, coffee
and otton, along widhsharprises in exportsto Nigeria.
Post-devauationinterviewswith a number of mamnfac-
uring and agro-processingindustriesconfirmeda more
optimistic outlook that coud translate into increased
output and employmentwhen the impact of the next
harvest season works itself through. Fiscal revenues in
general, and customsrevenuesin particular, are below
expectedlevels over the fist three monthsof 1994.This
is explined, in part, by a delayed implementationof
tax and tariff reforms, along with a sharper-than-antici-
pated fall in the volume of impors and a smaller
increase in nomina comes. It is expected that reve-
nue performance will improve significantly as the
reform measures take hold and the economy starts
growing.
Poverty and Social Indicators
Based on its social indicators, Cameroon still ranks
compared to surrounding sub-Saharn coun-
tries. Nevertheless, almost eight years of economic
crises and a worseningfiscal situation,have takentheir
toll on key social indicators. A fourth of the urban
populationis estimated to live below die poverty line,
and the situation in rural areas, although less known, is
not lily to be much better. Unemploymentis high
among the urban population and is particularly acute
among women and youth; a survey carried out in late
1993 estimatesunemploymentin Yaounde at about 25
percent. Il the rural areas, poverty and unemployment
have been on the rise due to the decline in agricultral
output. Malnmuitionis recurent among nrral women
and childrenespecialy in the arid north. This problen,
in addidon to widespread adult female illiteracy and
poor health care delivery, is reflected in the high rates
of matenal (300 per 100,000births) and infamn(96 per
1,000births) mortality. High ferility rates and popula-
ton growth (esdmatedat 3 percent ayear) andcontinued
 Caneroon
cuts in public expenditureswill put futBherpressure on
already scarce resources allocatedto healthand educa-
lion and worsenconditionsfor the poor.
External Debt
Cameroon's cxternal debt bas increased sharply since
1985 and amounted to about 90 percent of GDP by
end-1993;taking into accountthe impaciof the devalu-
ation, this ratio climbed to about 140 percent by end-
April 1994. With the large declines in exports and
government revenues, Cameroon has experienced a
sharp deterioration in its capacity to service extemal
debt. The ratio of debt service due (micludingaurears)
to exports icreased from 33 percent in fiscal 1989 to
51 percent in fiscal 1993; since 1991 however, debt
service actually paid has amounted to less than 30
percent of the amounts due. More dramatically,the
share of external debt service in governmentrevenues
rose from27percenttoabout 65percentduringthesame
period.
The structure of Cameroon's public and publicly
guaranteeddebt outsumdingand disbursedhas changed
over time in lightof the goverment's ability to attract
and obtai financing. About 30 percent is owed to
multlateral institutions, 50 percent to bilateralinstitu-
tions, 7 percent to private creditors, 1 percent to the
DF, and 12 percent in short-termdebL
Medium-Term Prospects
The governmnt's economic reform program is ecx-
pectedto end the recessionand return the country to a
path of positivereal growth,providedit is successfulin
achievingits objecdves.Real ODPgrowth is projected
to average about 5 percent from fiscal 1996 onwards,
21
primarily as a result of improvedperformance in the
tadeables sector-coffee, wooa, agro-processingin-
dustriesandlightmainufcturing-sustainedbyincreased
investmentlevelsas confidenceis re-established.Public
Sector investmentsare pojected to recover gradually
from 2.2 percent of GDP in fiscal 1993 to about 4
percent in fiscal 1997. In response to the envisaged
reforms of the trade regime, the financial system and
public enterprisesector, and as the public fmance situ-
ation is brought under contol, pnvate investment is
expectedto rise from 8.7 percent of GDP in fiscal 1993
to about 12 to 13 percent in fiscal 1997. Owing to a
serious exlemaldebt overhang, most of the increasein
investmentswil have to be fianced by domesticsav-
ings, which wil need to increase from 9-8 percent of
GDP in fiscal 1993 to about 20 percent in fiscal 1997.
Prnvatesavingsshould be stimulatedby the recoveryof
economicgrwth and improvementin the externaltrade
position. Publc sector savings are projected to tu
around from a negativelevel in fiscal 1993 to about 8
to 9 percent of GDP in fiscd 1997.
The principalobjectiveof fiscalpolicy is to generate
primary supluses and public sector savings suffiient
to cover an increasingshare of Cameroon's external
interestobligationsandto raisepublic investments.It is
expectedthat the primaryfiscalbalancewill be revemsed
from a deficitof 1.8percent ofGDPin fiscal1993to a
surplusof almost 6 percent in fiscal1997.
Cameroon's external debt service wil continue to
weigh heavily on the balance of payments. The Paris
Club rescheduled-Cameroon's current maturities of
eligiblebilateraldebton enhancedTorontoterms (while
arrears were acorded Houstonterms) in March 1994.
Cameroonis also seeking agreementwith its commer-
cil banks to rstrucre ustanding clains, the bulk of
whichhas not been serviced since 1989.
 Cameroon
Population mid-1992 (millions) 12.2 Income group: Lower-middle
GNP per capita 1992 (USS) B20 Indebtedness level Severe

KEY RATIOS
1980 1935 1991 199Z 1993 IvMw nMtt GDPratlo%)

GrossdomeslicinvestmeslGDP 18.9 24.9 126 11.1 10.8

Expcrtsorgoods andnfsGDP 24.1 343 197 19.6 19.5 s0
GrosscdlnesicsmargsP 15.7 35.9 121 9.5 9.8
Gross rnaio savixsGDP 5.6 292 4.8 1.9 0.5 2s

Current ammt balance/GDP -6.4 4.0 -7.8 -9.2 -10.3

IntemstpaymnentskGP 1.6 1.7 1.5 12 12
Total debtUGP 33.5 36.1 53.8 6Z7 63.7 *
Totl debtUepons 136.7 1042 262.2 309.5 313.5 - - So 91 12

GDP: PRODUCTION

J OFGDP) 1930 1935 1991 1992 1993 shuuuuouGoPbySaars3

Agricutue 27.9 20.6 22.0 2l.3 22.3 up
Induslry 25.9 34.3 30.0 30.5 3D3
Manulftnring 7.9 11.0 21.5 21.5 23.0
Setcs 46.3 45.1 48.0 472 47.4
198045 1935.93 1991 1992 1993
ravwage annualgmwt1j
AgrimAtm 0.8 -5 -10.3 -38 42
Industry 12.8 -52 -4.3 -36 -5.4
Manufacturing 15.3 1.9 -5.9 -38 -5.4 o . __ __._ _ 4

S5vices 6.1 -3.9 -7.1 46.8 -4.5 EW 'ems

GDP 6.8 -42 -7.D -5.2 -4.9

GDP: EXPENDITURE
193W 1985 1991 1992 1993 Growt re otslll d GDPr(

Priat cnsumption 755 55.1 74.7 77.3 76.6 la

GeneFal gowernent consumption 87 9.0 13.1 13.2 13.6
Goss domestic Investment 18.9 24.9 12.6 11.1 10.8 -

Exporlsofgoodsandnts 241 34.3 19.7 19.6 19.5 40 -

Imports of goods and nft 272 23.3 20.1 21.1 20.6

(awe-age arsnualgrrnfl,) 198045 198653 1991 1992 1993

Private cosumpbon 4.2 -45 -6.8 -69 4i.6 - \0

Genefal governmen COrnsumpatio 7-7 12 -5 6 -4.5 -2.3 \4

Gross domiestic nestmert 7.1 -16.3 -19.4 -17.0 -6.7 -
Exprts of goods and nfs 16.0 4.3 -42 1.0 .i.6
Import of goods and nfrs 4.0 -4.7 -102 -&9 -7.7T 5.

Gros nabtonl prduct 7.5 -4.6 -8.2 -64 6.4

Grossnraional inmue 8.7 -7.5 -6.6 -95 -72

PRICES and GOVERNNT FINANCE

193 1985 1991 1992 1993 dhrsnd
Chaug.oafCP CI[%)
Domest P 2 -
(% change)is
Consumer p 9.6 1.3 _ .. ..
WlYla pdces *. *. - - -. 5
ImptGDPdsflor 78 9.0 1.6 -1.5 -4.4o
-5t _F O t1 ~~~91#2
Govenment finance - 1±
(% of GDP)
cxrwetbudget lane . -3.6 -3.5 -5.1 -0PC -CP1
Overallsurplus lt .. -9.4 -72 4.4

22
 Cameroon
andSOCIAL
POVERTY
-niww
- growth-ra" 198045 1985M93 dmmr
POpuLISn Z8 3.0 U bfeepemmcy
Laborfarce 1.8 2.1

indexc
levetheadcount
Poverty J ofpqopubton) . 6
GNP Gs
ULbe _epetcy at birth 56.1 p
(per
Infantmm-talkty thousand gmWeIths)
lmatalitySJx-budfiveb 61.0
~~~~~~~61.0 cop rwa\> t
Childmtnuil (K of dhon under) 1i.S h f
Accmi to sa3fewater(of p yudabn) 34.0
Eniuy co implionpercqita fkgoNeqiae 77.0
IlDltacy(15ofpquwton age15*) 459
Gass pimary enrollment(X ofschoofapopadibn) 101.0 AcSt sUms
TRADE
(mEanh USt) i9mO 195 1991 1992 1993 Expwatandimpotiim(miLl.115)
Totale i (fob) I.418 2.337 1.921 1.6B5 1.iO7 2
Fuel 398 1.53 1.136 868 779 ten
Coca 326 234 127 141 135 in
MLanufactie 119 126 278 157 144 " **
TOt imports(CM 1.452 1.08 1.726 1.624 1.525 '-
Food 80 92 165 150 142
Fuelandener * 1y 14 13
Capi goods 382 382 259 238 221 a
Exportpri index(1987=10 - .- 94 81 81 z
Importpnice
irnd ('1967=100) 85 70 130 134 136 o
Teomsobtade(1957-=l0). _ 73 61 59 o - - - -
Opennessof ecanomy(badaDP.%9 51 58 40 41 40 o_ U

of PAYMENTS
BALANCE
1980 198S 1991 1992 1993 Curvt.cc amtfltoGPratifo
EVoftwW gods
ofnfs1.807 2.798 2Z295 2.043 1.960ra 0,M of122
lInpt ofgoodsandnis Z042 1.898 Z352 220;4 2.OE6 e
Resourcebalance -235 690 -57 -61 -17
Netfactorincome -164 -539 -789 -728 44
Netcurrentafems 3 -33 -67 -75 -8
CGran accut balace. _
Beforeoffidi transfers -478 328 -913 -964 -1.033
Afte officidal
tansrs -395 328 -913 -964 -1.033 .
Long-erm capitlnblow 61S -158 289 179 23
Total t Items(net) -75 -132 594 7 792 '-
Chalgesinnet reseres -144 -38 30 57 219 4

Reses exducinggold(mit USS3 189 132 43 20 2

Reser.vs goldfmM.US$
indcudhg 206 142 54 120 120
Officialexhangerate(AfASS) 209.2 471.1 268.6 280.4 265.4
EXCTERNAL
DEBT _____________
1980 1965 1991 1992 1993 | Struta xrrdebt%)
Long-tm debtleport 11&7 U.5 219.4 2719 2865-
IMFaeWitexpots 3.2 1.0 5.0 3D 018
Short-temdebtepot 14.7 18.7 37.7 34.6 262 1 I
Totaldebtservicel s 152 22.7 19.4 16.5 18. I2Pt1G

GDP silos |ti|

Lang-tenrdebWGDP 29.1 29.3 45.0 55.1 58.2 ma_*tI
IIU credltGDP 's8 0.3 1.0 0.6 0.2
Shaot4tm debtGDP 3.6 65 7.T 7.0 5.3 a

Logtn debt affosI_

Lng41 dtobtguafasn -
Privatenongurmnteedffcng-tenn 82
8. t 6.0
t 4.3
2 5.1
. 5.1 e
Publicand guarante
publicly a - e a
Prvatecreltoilong4trm 37.8 ILl 20.3 15.1 14.6
OfficialcrectosFlong.erm 54.1 65.9 75.4 79.8 80.3

- diaord shos a levl ofdevlpmed inthe courtrycomparad

Thedeseopment groupaage
withitsincOme

23
 Cape Verde
C gape
Verde is a smal archipelago of ten islands
650 kilometers off the coast of Senegal, with a
land area of 4,036 square kilometers and an
exclusive economic zone of 630,000 square Idlometers.
Only nine islands are populated, and half of the popu-
lation of less than 400,000 lives on the island of
Santiago, mainly in Praia, the capital city. About one-
tenth of the countrys surface is arable, and prolonged
cycles of drought aggravate an already senous shortage
offresh water, a rare conmodity. The shortage of water
is, in turn, the main cause of serious urban and rual
environmental problems. Faced with austere livmg con-
ditions and limited employment opportunities, Cape
Verdeans have traditionally emigrated. As a result,
twice as many Cape Verdeans live abroad as on the
islands; very close ties widt the homeland are evidlenced
by significant remittances. The average aumial popula-
tion growth rate was 2.7 percent a year, or 1.5 percent
adjusted for emigration, during the 1980s. In 1992 GNP
per capita was estimated at current $850 compared with
$372 in 1980.
Cape Verde's development is hindred by poor nata-
ral resources, drought, and small domestic markets.
Moreover. the scattered nature of the islands gives rise
to costly communicaions. After independence in 1975
the development of a virtuall nonexistent economyimto
a modem one was a formidable challenge for the
govemment, which chose to perform the role of entre-
preneur in agriculture, industry, and services. Reiance
on the private sector was not pursued. The govenmuent
sought official development assistance and allocated it
to public enterprises in key sectors, which adversely
affected efficency and competitiveness.
Cape Verde's conomy has been traditionally based
on services The service sector accounted for about 60
percent of GDP and employed 37 percent of the active
population in the 1980s. Commerce, transport, and
public services acomuntedfor47 percent ofvalue added.
Construction and industrial production consisting
largely of light manufactuing, fish processing, and
artisanal production accountd for 11.5 and 6.5 percent
of value added, respectively, in the 1980s. The primary
sector contnbuted only about 13 percent of GDP be-
caue of low agricultural potential and inefficient ex-
24
ploitationof reasonably well-endowed fishery resources
(3 percent of value added) by a public-sector-dominaed
industry. Agriclture employs about 24 percent of the
active population.
Foreign trade is characterized by modest merchan-
dise export earnigs, a high share of services in total
exports, and high merchandise imports. The merchan-
disc export base is vcry small in value and diversity;
arnings come predommanty from exports of fish and
bananas. Non-traditional exprrts have marginal impor-
tance. Traditionally, Cape Verde's most substanti
export eamningscome from non-factor services rendered
to international mantime transport, and more recently
from international air trafic serves. The economy is
highly dependent on imports of food and capital and
imary goods.
Notwithstanding formidable development con-
straits, theeconomy performed well over 1980-88: real
GDP growth averaged 6 percent a year. This growth
stemmed predominantly from a high level of imvest-
ment, in particular activities related to public invest-
ment, and services rendered to domestic markets.
Drawing on Cape Verde's strategic location as a refa-
cling and servicig point for ships and aircraft, services
in this area were also promoted thmugh public enter-
pnses. Macroeconomie management was prudent until
1988: the overall balance of payments was in surplus
and a high level of external reserves was maintined:
in 1988 it peaked at 9.4 months of imports. Prudent
public finance management resulted in a low reliance
on borrowing from the domestic banking system.
Monetary policy was cautious and resuted in moderate
inflation.
Sosa Indicator
Compared with oter countries in Sub-Sahara Africa,
social indicators in Cape Verde are impressive. Social
indicators for 1990 shDw univesal priary school
enrollment with a pupil-teacher ratio of 32 to 1, Iife
expectancy of 65 years, infant mortality of 66 per 1,000,
and an adult illiteracy rate of 52 percent. These remark-
able achievements result from concerted efforts and
substantial resources allocated to social services by
 Cape Verde

goverment, various national associationsof women, reduction m developmentassistanceinflows, and tIhe

youth, and farmers, nongovernmentalorganizations, stagnationof eamings from exports of goodsand serv-
and donors. Some problems require fiurtherattention, ices. The balance of payments is charactrized by
however: high nantral populationgrowth has not yet struc l imbalanceon the trade account, substantial
been mitigated by broadly accepted family planning surpluson the factor serviceaccount,sizablenet private
pmgrams andthere is a shortageof trainedteachersand transfers, and consideble net officialtransfers. These
health workers and essentialsupplies. Primary school deficitswere fianced pardy by a reductionin external
curriculaare less than adequate,and thereis inadequate reserves,whichdroppedto 5.1 monthsof imports at the
infrastructre. The provisionof better qualityandmore end of 1993.
efficientbasic social serviceswouldimprovethe quality The governmentadoptedin 1988,after two years of
of life, labor producdvity, and poverty alleviationin study, a strategyof diversifyingand openingthe econ-
Cape Verde. The govenment is committedto continue omy that stressed reliance on the private sector. The
allocating significant budget resources to the social governmentprivatizedthe shoe manufacturingparasta-
sectors, nearly 30 percent in 1992and 1993. tal and liquidatedtwo publicenterprisesin 1988,started
primary education reform in 1989, and enaactedfive
Recent Economic Developments legislativedocumentsdesignedto attract private invest-
ment and promoteexport-onentedactivities.
Econemicperformancedeterioratedover 1989-91.Eco- A new govemmenttook office in April 1991 after
nomicgrowthdroppedto 3.7 percentayear in real terms democraticelfctions and adoptedthe outward-looking
from an average of 6 percent over 1980-88. This strategydesigaed by its predecessorand began to im-
deteriorationwas pardallyattributedto declninginvest- plementit in earnest. The program of policy reforms,
ment, in particularpublic investmen, as a result of the which is geminely homegrown, aims at opening the
completion of some major projects and the postpone- economy.In the mediumand bng tms, the aim is to
ment or cancellationof new ones, decreasingdemand reduce diec governmentinvolvementin the economy
for servicesto inteational maritimeandair traffic, and by restrucrng, privatization, and liquidatingpublic
prolongeddroughts that affectedadverselyagricultural enterprises and building up the private sector. Tle
output In 1992 a resumptionin real economicgrowth government is implementinga program designed to
of 3.5 perct comparedwith only 2.5 percentin 1991, reformthe civil service, improvepublic resource man-
was as a result of an increase in actvities related to agement, including public accounting, auditing and
public investmentand to the resumptionof SouthA*i- procuremmet,strengthenits policy makingand analyti-
can Ainrwaysiternation flights to the United States calcapacity,andimprove its capacityfor more effective
and Western,Europe via the Sal airportr In 1993 real aid coordination.Social services will be improvedand
economicgrowth was sustainedby contnbutionsfrom public investmentconcentated on these servicesandon
the ongoingprivatizationprogram andnew investment infratrcture. Externalassistancehas been muchbetter
in light manufacuring and constructionactivities. coordinatedto maximizeits impact.
Poor economicand financialperformancein the late The ovcrall reform program is sound, adequately
1980s and early 1990sby public enterprisesin manu- sequenced,and on track. The programincludesstabili-
facturing,fishenes, andnon-socialservices(ommmerce, zation and adjustmentpolicy measums,including lim-
marim, and air traffic) reduced tax and non-tax iting credit to public enterprises,keepinginterest rates
revenueand preventedthe governmentfrom fullyserv- positive, increasng tax revenues by enlaging the tax
icingexternal debt. This led to an increasein domestic base and reducingthe overalllevel of tax rates, control-
financingfrom the Bankof Cape Verde while internal ling budgetaryexpendintres,liberalizingthe trade re-
andexternal debtarrearsgrew andnet externalborrow- gime, improvmg and simplifying the tax system,
ing declined.Thesedevelopmentstriggeredinflationary removingstate monopoliesin commerce, services and
pressuresand crowdedoutcredit to the emerging,albeit manufactuing, removingprice controls, and legal and
small, private sector. Inflation gradually accelerated regulatoryreforms. Sectoralpolicyreforms are under-
from 4.5 percent in 1987to 10.6 percent in 1990.As a way in infrastuc , transport, and education. Some
result of renewed monetary discipline, inflation was progress has been made in financial sector reform,
brought down to about 7 percent in 1992 and about 5 althoughthe programis still in its early stages. Foreign
percent in 1993. investorsand Cape Verdeanemigresare being encour-
The overall balance of payments, positive through aged to invest directly or to set up joint ventures with
1988, tuned negativein 1989through 1991.This was the domestic private sector. The legislativepackage
a result of higher imports and debt service obligations, regulating private investmentand the labor code are
a lower availabilityof extrnal resourcesbecauseof a being further improved.

25
 Cape Verde
Medium-Term Prospects
Cape Verde's economicgrowth is projectedto average
5.5 percent a year in real terms trough 1995. This
growth wili come from higher public investmen: in
infrastructureto modernize telecommunications,hous-
ing, water supply and seweragesystemsin urban areas,
combinedwith private investmentin fisheries, tourism,
services (includmg bankng), and export proefssmg
Agriculturaloutput is expectedto impruve, given aver-
age rainfall, while private housing consLtruction, com-
merce, and services to international air and maritime
transport are expectedto grow. Economicgrowth will
continue to depend on services but increasinglythese
are expected to be export-oriented. In the long rin,
economic growth should come from the private sector
in general and exports in partcular. The private sector
is most likelyto invest in fisheries,tourism, servicesto
international air and maritme traffic, export process-
ing, offshore banling, and maritimefleet registration
facilities.
Cape Verde's external position in the medium term
will continueto reflect a significantinvestment-savmgs
gap given the currcnt negative level of goss domestic
savings. Although it is expected that domesticsavings
26
will increase,relianceon foreignsavingswill coatinue.
Achievingexernal balance will depend on containig
import demand, increasing service export earings,
maintaining the high level of private transfers, and
mobilizingofficialassistancewhile amacting dir for-
eign investmentsin productivcactivitiesand sevices.
E
Developmentprojectsin Cape Verde have mosdy been
financedby officialdevelopmentassistance.This assis-
tance will continue in support of neededpublic invest-
ment in infrastructure, modernization of
telecommuniatons, and housingand water supply and
sewage systemsin urban areas. The crrent high share
of grants i total official assistance is projcted to be
sustined The stock of extemrnal debt is projected to
increase becauseof an expected increasein borrowing,
though this has been, and wfll mosdy continue, on
concessionalterms. The expectedincrease in aid flows
and variety of developmentprojectscall for an improve-
ment of aid coordinationand improvedimplenation
of public investment.lhe debt service ratio (includg
the paymentof arrears) is estimated to stay below 10
prcent throngh 1995.
 Cape Verde
Popuation mid-1992 (mEulons) CA Income gmupc Lwer-mlddle
GNP per capib 1992 (LISS) 8S indeblednesske Belowavrag

KEYRATIOS
1910 1985 1991 1992 1993 lmnlUf U0(S) -GP
GrossdomesicinvstmentlGDP 51.6 542 30.3 35.4 --

Exportsr
of goodsandnfs/GDP 18O 29.0 17.2 16.0 _ 0
GrossdomesticsavinsfGDP -24.0 -5.8 -2.8 -9 -

Grossnaoal sawings/GDP 164 112 16.7 18.3 20.

Cunlntac
aunt balanceGDP -2315 -43.3 -13.0 -20.9 10
InterestpaynetsGDP 0.1 14 0.9 0.8_
Tdal debUGDP 19.5 91.3 50.3 45.5 o _ _ .-
Toelddebfexports 332 185.0 142.1 128.6 - " -o " - X

GOP:PROoUCllON
of GOP 1980 1985 1991 1992 1993 Sh aGOPbyslor(%)
Agriaukm 13.6 11.6 13.2 12.7 -
Industry 17.3 17.3 17.6 17.4
Manufacing .. .. .. -
S5vim 69.1 71.1 E9.2 69.8D
so
i980S5 193 1991 1992 1993
fae nnualm
oat )
Agfcb 3.2 5.7 1.3 -1.2
Inhu*y 7.0 3.0 -19.0 25.6_
Manuring - - .. .. -. o
Senices 7.7 4.7 9.7 -1.1 - fr
So - Q -
DAwM *Iaiy nl
GDP 7.0 4.6 3.3 27 -

GDP:EXPENDITURE
G980 1985 1991 1992 1993 GmwU mes oGfSand roDP4%)
P I aconsumption 115.8 96.9 82.7 82.5
govenmentconsumpton
General 82 9.0 20.1 20A4 2.
Grossdornestcineshmnt 51.6 54.2 30.3 35A .. 1s
Exportsofgoodsandnfs 1&0 29.0 17.2 16.0 1/
Importsogoodsandrt 93.689.0 50.3 54.3 5
1980-85 1985-93 1991 1992 1993 a
powwd amnm az et m2 es
Priate conumption 1-7 3.6 -1.6 7.6
GsnemlgDnnent consumption 24.0 3.1 lB 5.1 .. -uo
Grossdomestcinvesbment 5.9 -2.2 0.0 21.1 ..
E*aFtsof goodsand-ts 18.1 -1.9 -1.7 -20.5 .
Importsofgoodsandnfs 6.9 -3.2 -0 130 ..
Grossnabonalprodud 5.5 5.1 2.4 3.5
Gross natonalne 5. 4.8 -1.5 7.6 ..

PRICESsad GOVERNMENT
FINANCE
1980 198S 1991 1992 1993 GPdeflaIermdCPIN
Chhsuoef
Devnesficpdswes

CorsunwpiXns - 5.4 9. 3.1 10.3 *

Whoesie Pes - .. .. _ I
ImplicitGOPdeflator 9.8 42 9.3 7.4 272
o I, ,a _ I
Govemmentfinnce u a o 1 82 *
(%ofGDP)
Currn budget
balance -0.5 -1.6 1.0 _ onPdL -CP1
Overawpltufp eficit .. .. -.

27
Cape Verde
POVERTYand SOCIAL
(annualgr.owth
'ates) 19115-93 OD_Iqpnmm
dIminda
Population 13 Z6 ULfe
eiXdui
LaborfoSe 3.0 .o

Povely levet headcountindex (%of popuaGon) .. GNP G

Lifeexpectancyat bith 67.5 P v ^O
Inant mortality (per xouand he births) 40.0 Pq' .
Child malnuWitonf% of childmn wuer5) 14.7 u
Access to safe water (N of pqpulafo) 74.0
EneW aenmption per capita (kgod equwaen) 290.5
ilitay (I of populatbonage 15) 16 A
Gross primry enrolment (N of schoola popuhlte) 115.0 . a

TRADE
(mUbns US39 19S0 iNS 1991 1992 1993 Ezpatd' hpUS$
Totalexpert (fob) 9 3 .. - 1
n.a.
Matums . .. _
Totalionports(ci) 81 91 _ -

Food 22 18
is _
Fuel and energy 4 ..
Capital goods .. .. _ _ _
Exportpfice inex (1987=100) .. .. _ _ o _ . ,
Importpriceindex(1987=100) .. _ .. _ _ . . so n w
Tems o ade (1987=100) .. .. - _ .. E
Openness of economy adeIGDPN) 112 118 67 T0 - _ _ *
BALANCEof PAYMENTS
w , 1110 1985 1S99 1992 1993 Cir.taccount bnetfe to GDPsdo (%)
Exportsofgoodsandnfs 19 36 52 58 - . a- g In z -
Importsofgoodsandnfs 87 95 150 204 I
Resour balbnce -68 -59 -98 -147 _ -
Net factrmincome 3 2 1 1
Neotcunentbawfers 40 22 57T 72 _ .oi
Current aanunt balance -15
Bare official tansfers -25 46 -40 -73 45
Afterofficial tansfers 4 -9 4 -4 H_
Loa-term capitalinlow 2 14 1 6 ..
Ttal oher nes(net) -7 9 10 12
Changes innetreservs 0 -14 -3 -13 0
Memo:-
Reservesexcludinggold (mi. USS 42 55 65 76 -
Resers icluding gold (mg. US1) 42 55 65 76
Official exchangerate(JocelUSS) 40.2 91.6 71.4 6.0 -

EXTERNAL
DEBT 18 m 19 93a coddf A
EporofiS 1 199S 1991 1S92 19S3 n

Long-enn debtlexports 33.2 183.1 135.0 121.5 -

IMF crdxWexports 0. 0 0.0 Q0.0 _
Short4erm debtexports 0.0 1.9 6.1 6.5 -
Total debt servicelexports 0.5 9.7 6.9 5.7 - ; O
GDPnifos so EC
Longterm debtWGDP 19.5 90.3 482 43.1 .. S
IMF cnxliGDP 0.0 0.0 0.0 0.0
Shoretum debttGDP 0.0 0.9 .1 214 .. 2S
Loqgt.rm debtaf os
Privatenongu_afteedJlng-tenm 0.0 0.0 0.0 0.0 0.0
Publicand pubidy guaranteed 87 - ce
GO w
C
Private creditoralong-trm 0.0 2.5 1.6 1.3 0.0
Offidal creditorslon-term 100.0 97.5 9585 98.7 1W.O

' The deveopmnt diamondshows a level of ddelopment in the Campu wO its incomegrOupaVeg
comy

28
 Central African Republic
T bheCentral African Republic is a landlocked
cuntry of 623,000 square kilometers with an
estimatedpopulationof 3.1 million. Itsper capita
GNP was estimated at $410 in 1992. The primay
sector, induding agriculture, forestry, and fisheries is
the maistay of the economy. It accounts for about 43
percent of GDP and is estimatedto provide employment
for four-fifthsof the active popuion. Mining, manu-
factuing, and utilities account for 13 percent of GDP,
and services 44 percent. Labor productivityis generally
.5W, partcularly in agriculture where it has not im-
proved over the past 30 years. Another constri ng
factor is the Central Afiican Republic's weak human
capital base. Except for life expectancyat birth which,
at49 years, is about the averagefor sub-SabaranAfica,
the adult literacy rate (40 percent), the primary and
seconday school enrollment ratios (60 percent and 11
percent) and health indicators are all below regional
averages,
The Central African Republic's economysuffered a
severe deterioration in the late 1970sand early 1980s,
mainly as a reslt of inappropriategovernmentpolicies
and, to some extent, of exogenous shocks. Heavy
goverment interfrence in agicultural marketing and
an rll-advised agricultural reform in 1970 led to a
complete halk in research and a rapid deterioration of
extension services. Unsoundand overly ambitiouspub-
lic investmentprograms and rapidly increasingbudget
deficits, caused by an oversized and infficient civil
service, nationalizedenterpnses, and expensive short-
term borrowing, reinforced the economic decline.
These domestic problems were further exacerbatedby
faling commodityprices, a drought in 1983, andgrow-
ig disenchantmentamong donors that led to the coun-
try's isolation.
The govermnenthas, since 1982,pursued a series of
stabilizato and strucural adjustmentprograms aimed
at restoring the basis for medium-term growth and
developmentsupported by IMF standby and strucral
adjustmentfacilities and World Bank adjustmentlend-
ing, tcmhical assistance, and sectoral crediatsThe Af-
rican DevelopmentBank, the EuropeanUnion, Prance,
and other bilateral donorshave alsoprovidedsignificant
financial support, and the Central African Republic
29
benefited from substantial debt relief from the Paris
Club creditors in 1988 and 1990. France wrote off its
officialconcessionaldebt of $40 million in 1990.
In 1991increaseddemnandsforpoliticalliberalizafion
and a move toward a mui-party system intensifiedand
combinedwith the increased social stress caused by the
lackluster economic performance, particularly the
growing inabilityof the governmentto meet its payroll,
to exacerbatepoliticaltensions. In 1992the government
organizeda GrandDdbat NaIional to respondto politi-
cal demands. The elections of October 1992 were
canceleddue to fraud in some areas, and the impossi-
bihty of organizingnew electionsbefore the end of the
constitutionalmandateof the incumbentpresidentled to
a tnmsitional government for day-to-day management
under the joint supervision of the five leadig parties
until new elections.Although this arrangementinitially
offered prospects of a quick resolution to the political
crisis, its slow implementation,the gradual withdrawal
of major political figures, and the postpmement of
electionsexacerbatedpoliticaltensions. In addition, the
accumulationof up to eight months of salary arrears to
civil service employeesled to prolonged strikes, dem-
onstrations, and mutinies by elements of the armed
forces. The political and social environment was a
signifiant factor in the deteriorationof an already weak
economicperformance.
In October 1993the Central AfriccaRepublicelected
a new president through a deocratic pricess, ending
the prolonged period of political stalemate and social
turmoil. The new governmenthas stated its commitment
to implementingthe measures necessaryfor a resump-
din of growth. The administration inherits a country
plagued by economic and social problems; the already
wcak health and educations sectors have deteriorated
further, and substantial interal and external arrears
have accmulated.
In the wake of the Janmzary 1994 devaluationof dLe
CPA franc, the governmentis preparing a far-reaching
program of structural andfinancial adjustmentfor 1994-
97. It includes the contnuation and consolidationof a
number of key setucturalmeasures intrduced under
earLierstrucural adjustmentprograms. The government
has also laid the foundation for a reform of the health
 CentralAfrican Republic
and educationsectors that was endorsedby donors at a
May 1994 meeting in Bangui.
Structural Adjustment Performance
The major objective of the Central African Republic's
1986-91 adjustment program was to re-establish sus-
tained per-capita income growth by restoringcompeti-
tiveness through shifts in relativeprices in favor of the
export and import-substitutingsectors through a defla-
tionary strategy aimed at lowering factor costs in rela-
tion to external competitors. This shift would have
provided incentives for increasing output and invest-
ment in these sectors. Economic liberalization,public
enterprise and banking sector reforms, and simplifica-
don of the regulatory enviroment were accompanying
measures to lower barriers to private-sector activity.
While contractionary policies have kept inflation low,
they have not led to a reduction in domestic costs
sufficiently large to compensate for terms of trade
shocks and the appreciation of the French franc against
the dollar, and performance under the adjustmentpro-
gram has been mixed.
A weak capacity for economic management com-
bined with political gridlock had a serious impact on
recent macroeconomic performance that had earlier
been affected by external shocks and loss of competi-
tiveness. Real GDP growdtwas negligibleover 1986-91
due mainly to a fall in agricultural exports ov:r the
whole period. Coffee, the leading source of export
earnings in 1985 (31 percent), was the hardest hit,
falling to only 6 percent of export revenues in 1992.
Despite expenditurecuts, particularlyin public invest-
ment, the ratio of the fiscal deficit to GDPin 1992(11.6
percent of GDP) was barely changed from the level of
1986.The current accountposition improvedas a result
of lower investment-relatedimports. Weak customsand
tax administations and the government's consequent
inabilityto raise revenues were significantfactors in the
disappointingperformance of the adjustmentprogram
on fiscaland external balances. A fiscalcrisis developed
in 1991when the governmentwasunable to pay its civil
servants. In 1992the governmentpaid only 2.8 months
of civil service salaries out of its own funds, while
budgetary assistn from bilateral donors contributed
5.2 months. Since November 1993, however, the gov-
emnent has paid salaries regularly, although it has a
backlog of 12 months' arrears.
A number of major reforms were introduced, al-
though the supply response has been less than antici-
pated. Trade and price regimes have been completely
liberalizedwith the exceptionof sugar. The government
enacted legislationremoving restrictionson real estate
transactionsby foreigners. In line with the BEAC-wide
reform, it liberlized interest rates, liquidateda defunct
30
development bank, and rcstored tde solvency of the
remaining two commercialbanks. Tbe govemmenthas
also committeditselfto implementa proposed UDEAC-
wide reform program of trade and indirect tax policy.
The regulatoryframeworkfor productivesectors (nota-
bly food and livestock) has been streamlined. The
government is still pursuing its program of divesting
public enterprises, albeitslowly. After some delays,the
restructuring of the marketing boards for coffee and
cotton, and the civil servicereforn. are showing impor-
tant progress. The introductionof a three-year rolling
investmentprogram terminateda number of investment
projects of dubious economicbenefit, emphasizedthe
rehabilitationof dilapidatedinfrastructure, and helped
orient the investment program toward priority areas.
But there are as yet inadequate links between the
macroeconomic framework and the investment pro-
gram. and between both and the budget process.
The government's weak implementation capacity,
particularly the absence of transparency and account-
ability in financialmanagement,have played a signifi-
cant role in delayingpolicy changesand prolonging the
adjustmentperiod. Programand project implementation
suffered from the bureaucracy's resistance to change
and its inadequateanalyficalcapacity.
Povert and Social Indicators
The Central African Republic's human resource base
has been neglected. FLscalrestraint led to misguided
sector strategies, and as a result of poor coordinationof
activities,there has beenonly mixed successin address-
ing the serious weaknesses in the health, education,
training, and labor market systems. The government's
education strategy aims at increasing the primary en-
rollment ratio, improvingthe quality and efficiencyof
the primary educationsystem, and strengtheningman-
agementof the sector with a focus on adequatefunding
for non-personnelexpenditures.Health policy bas been
skewedin favor of curative services in urban centers to
the detrimentof preventivehealth care and rural health
services. The maternalmortalityrate of B per 1,000live
births, while falling, remainshigh and the infant mor-
tality rate (142 per 1,0ODlive births) is higher than the
average for sub-SaharanAfrica. The new government
is committed to developing a sound hulmarnresource
base and integratingthis objective into its medium-and
long-term program of economic and social develop-
ment.
Although poverty is pervasive, data on the poor are
patchy, and insufficientgovernment attention has been
focused on poverty alleviation. Despite self-sufficiency
in food production, a significant deterioration in the
overall welfare of the population is suggested by five
consecutiveyears of economicstagnaitionthe shriage
 CentralAfricanRepublic
of the modernsector, anda generalworseningin the
quality of socialservices.The burdenof povertyis
unevenlyspread;women are particularlydisadvan-
tagedas theyshouldermoreof the workload,are less
educated,andhavclessaccessto remunerativeactivi-
ties.
Environment
TheCentralAfricanRepublicis endowedwithforestry
reservescoveringsome3.5 millionhectares,5.5 per-
cent of its area, and some of the continent'smost
abundantand diversifiedwildlife.The :ropicalrain
forestof thesouthwestis consideredone of therichest
in Africa, with a high densityof valuableredwood
species.Despitea lowextractionrate,thecountryfaces
a long-termriskof deforcstation,andpoaching,in part
originatingfrom southernSudan,hasbeenparticularly
destructivein the savannazone.The govermnenthas
undertakena programto reinforceitscapacitytoprotect
and manage its forest and wildliferesourceson a
sustainablebasis throughimprovingthe legal frame-
work and fiscal/incentivesystemfor the forestryand
wildlifesectors, strengtheningcapacityto implement
field controlsand promoteenvironmental protection,
developing improvedagro-forestry systemsin theforest
zone,andsupportingtheprotectionandmanagement of
a denseforestreserve.
Medium-TermProspects
Endowedwith abundantland, a smallpopulation,a
favorableclimate,adequatesoil,richforestryandwild-
31
life,andminingresources,theCentralAfricanRepublic
hasgoodgrowdtpotendalbasedon-farmprivateinvest-
mentin foodcrops,agro-forestry,exportcrops, live-
stock, and privateinvestmentin light transformation
activities(woodandagro-proccssing) andtourism.Yet,
despitethis potential,the significantlevel of external
assistanceandthe progressmadeto date in creatinga
favorableenablingenvironment,the CentralAfrican
Republicstill faces severaldevelopmentconstraints.
These includea legacyof unsoundmacroeconomic
policiesresultingin unsustainablefiscaland external
positions,lossof competitiveness and relatedlack of
private-sectorsupplyresponse,and a costlytax struc-
tureand a thinfinancialsystem.Thecountrystilllacks
adequatesupportservicesand infrastructure and has a
weakhumancapitalbaseandweakinstitutionalcapac-
ity, in part, a consequence of technicalassistancethat
has not sufficientlyengagedin localcapacitybuilding.
Theadjustmentprocems istakingplacein aneconomy
whosevulnerabilityis accentuatedby its inabilityto
diversifyits exports.TheCentralAfricanRepublicstill
relies heavily on few primarycommodities-coffee,
conton,timberanddiamonds-subjectto price fluctua-
tionsthatstronglyaffectits economy,exacerbating the
alreadytightsavingsconstraint.Solutionsto theCentral
AfricanRepublic'sstmcturalproblemscanbe achieved
onlygradually.Realgrowthoverthemediumtermwill
dependon restoringcompedtiveness and overcoming
major structuralbottlenecks.TL2major part of the
country'snaturalresourcepotentialhas remainedun-
tappeddueto hightransportcosts,weakinfrastructure,
previouslycumbersome regulations,and the lowpro-
ductivityof-arelativelyunsldlledlaborforce.
 Centrl AfricanRepublic
Population
mid-1992(milonss) 3.2 Incomegroup:Low
GNP per capita 1992 (US$) 410 Indebtednesslvel: Sews

KEYRATIOS
1980 1385 1991 1932 1993 hiw* lDoGOPrwqo
(9
Gmssdornestic InstmenUGDP 7.0 14.5 11.B 11.8 8.6
Exportsof goodsandnftGDP 26.1 25.2 14.4 12.5 15.3
Grss domestic savingslGDP -9.6 -0.3 0.5 3.3 1.5
GrossnatonalsavfigsGDP -11.4 -3.5 -3.B 43 -Z.7 1u
CununtaccounttbalancGDP -17.6 -16.6 -15.6 -16.0 -11.3
Interst paymrentslGDP 0.1 0.9 0.4 0.5 0.4
ToaWdebUGDP 24A 49.2 682 67.6 72.5
Total debtlexports 94.7 187.9 471.5 524.2 463.9 s - - - 31 03

GOP:PRODUCTION
(%of GOP) 11so las 1991 1992 1933 Sh.mscfGDPbysfro
Agriculture $0.0 39.9 45.B 47.9 49.9 1 __
Industry 20.1 13.7 14.7 14.3 14.1
Manufacring 7.2 7.3 .
Services 39.9 46.4 39.6 37.8 36.0
1980415 1915-93 1991 1992 1993
(avrge annwl gmwOm)
Agriculture 1.6 1.0 -3.1 (L8 2.9
Industy Z1 2.3 -1.1 -1L.3 0.0
Manufact. ing o _ _
Services 6 -1.5
-. -3.0 (L -5.7 a, mas so aI

GP 2.2 0.0 -1.6 -:Z3 -25 USy_oM usa

GDP: EXPENDITURE
(%of GE) 1s980 1985 1991 i932 1993 GmwtaoarFlandGDP ()
Privateconsumpion 94.5 86.5 89.6 86.8 B8. tT
General
govenmentconsumpion 15.1 13.8 9.9 9-B 9.8 5t
Goms domesticinvestment 7.0 14.5 11.B 11.8 8.6 a
Exprts of goodsand nit 25.1 25.2 14A 12.5 ¶5.3 - -o
Importsof goods and nfs 418 39.9 25.5 21.0 22.5

(averega mal growfh) 1980-85 1985-93 1991 1992 1993

Pivate consumption 0.6 1.2 -3.5 -0.1
Generalgovenmnentconsumption -5.6 -0.7 -1.8 -3.0 .. -a
Gross domestc invstment 28.8 -7.8 -346 -7.1 -30.5
Exportsof goodsand nfs -32 -39 -13.8 -10.4 26.1
Impors of goodsand nfs -68 -5.6 -15.1 -1.5 -22.8 |
Gross natona product 2.0 -OA -1.9 -23 -3.9 -G01 -ev
Gross nationalincme 22 -0.6 -0.2 0O -9.3

PRICESand GOVERNNENTFINANCE
1980 1985 1991 1992 1993 Clun 1fGDPdusrandCP1(%)

Consumerprces
VWholeate wholaubpdZwS
prices
ImplicitGDPdefiatr
..
161
i.;
17.0
10.4
67
.-
9.2
-28
-t1
--.
3.2
-1.0
..
0.2
-291

1.5
. I
1
"X 7

Goernmmontfiance
( of GDP)
Currant
budgetbabnce .. .. -3.6 -3.6 -4.6 -1cGOPac -CFI
Ove5lsurplusfdaficit .. .. -14.1 -1m1 -11.8 1 I

32
 Central African Republic
POVERTYand SOCIAL
~ nos)
(MMW tS8S-93
1~~~~98W5 duw
PopulaUon 2.6 2.7 Ubequ
Labor force 1.3 1.6
.iSrmerewtbtaa(a")
Poverty leel: headcouidthbid (ofpFopult) -. GNP GM
Li expedancy at bkti 47.0
Iffantmoaly &wMth nd Eve bdIks) 105.0 perlsa
Child malb ACoapftadrd under! 3 lmbu
Accessto sa water (_6 ofplpuAtam) 12.0
Energycosumnptn per capita (kg oi eq ant)
l 2&8.7
IllIracy (7 efpopuiion age 15*) 62.3
Gross primaryenrolment ( of s0chot-agepopula6) 68.0 AC Se

TRADE
(mTs UMS$ 1980 1D 1991 1992 1993 Exp al (mL US$
omidpt
Tatalexiputs(fob) 147 131 125 114 135 __

Dimoids 48 34 66 69 71
Coffee 38 41 7 5 8 250
Manufactus .. -
Total impots (cif) 188 168 205 152 153 I
Food 11 22 28 .. -
Fuelandenergy 23 23 16 17 16 '
Capiawodt 1B
a 80 130 - - seo l1
Exp:,pncuhdex (1987=100) .. 111 117 114 a
importipmceIx(1987=104. 101 100 108 ,W * - - *i 2 a
Termsoflmde(1987-100) 111 117 106
Openness of econoy ft;idfDP,.6) 69 65 40 33 38 Di E_

BALANCEof PAYMENTS
(nSns USS) 1980 19i5 1991 1992 1993 Cw,utaccutbalancesto GDPraII
Expodsofgoodsandnfs 201 178 184 169 190 e & a l a l l l l
Importsof goodsandnIs 327 276 329 280 278
Resoumbalance -125 -95 -145 -111 -88 -.
Ne factorincme 3 -7 -23 -22 -23
Net cuwrt transfers -17 -12 -32 -79 -28 -40
Cue* amnt balance
Beforeotl allransfem -141 -117 -199 -213 -139 45.
After olfidWbanbsf 43 -a -60 -a -21
Long-tem capti Wow 47 43 81 46 -
Totdlotweitms(net) - 7 -14 -1 46
Changesin net ees -18 20 -20 -3 -2
Melmo:
Reservesexcuding gold (mi US$I 55 S0 103 100 112
Reseres icluding gold (miL US$3 62 53 107 104 116
Official ehne rate(IoclDS) 211.3 449.3 25Z1 254.7 253.2

EXTERNALDEBT
JERPafl,US ImO i9s isis 1S92 1993 Su-- t -
Long-termdebtlexports 71.3 156.9 427.7 470.0 435.5 100
IMFtcredltports 11.4 21i 18.0 17.7 14.9
Short-termdetexports 12.0 9.9 25.8 36.5 13.5
Total debt sieexpos 4.9 14.3 8.1 10.2 7.6 OPU|
GOFuaffas DPIbI
Lor-term debtGDP 184 41.1 61.8 60.6 68.1 |e t
IMF emd'ltGDP 2.9 5S5 6 2.3 2.3
Shot-temi debVGDP 31 26 3.7 4J7 2.1

Privmlen n w n 0.0 0.4 0.1 0.1 0.1

Pubtc ard puibricyguaranteed 7 * * s 91 2
Privatecrdltrsftngm 32S9 &6 2.7 2.6 2.5 11
Offical crdltorulrong-lerm 67.0 91.0 97.2 97.3 97.4

' The devewbpme diamond shows a evel of d In fte couy

_elopment ompaed withItsbInome group average.

33
 Chad
C had presents a major developmentchallenge. It
uxtaosesadifficultpoliticalsituation resulting
from severl years of civil disturbance, a pros-
pect of renewed breakdown of order, extreme poverty,
with quite good long-nem growth prospects. Chad is a
vast country, the fifth largest in Africa, and contains a
large number of ethnic groups. With6.2 millioninhabi-
tants and a per capita GNP estimated at $220 in 1992,
Chad is one of the poorest, least-developedcountries in
the world. Ecoomic development efforts have been
Ihrctized by suces promismg starts stymiedby
senous internal and external blows. Recuring political
instabilty and domestic strife, which erupted into civil
war from 1979to 1983, have been and remain the most
intractable constraints to development Chad has also
been severely affected by drought
Social Indicators
Despite a major post-war reconstructioneffort, Chad's
physical infastucture, human resources, and instim-
tional and administrativecapacity to support develop-
ment are today still at the level where most other low
income sub-Saharan African countries were in the
1960s. Chad ranks 150th out of 160 contries on
UNDP's 1993 Human Development Index. Health
status is poor: the crude death rate of 18.5 per 1,000 is
about twice the average of low-income counties; life
expectncy at birth (47 years) is well below the regional
average; maternal mortality is high at about 210 per
1,000; and the under-5 mortality rate is well above the
regional average of 180 per 1,000. Malnutrition is a
serious problem. In education, important gams have
been made since the war. The primary school enroll-
ment ratio increased from 51 percent in 1984 to about
60 percent in 1990, the fastest primary growth rate in
the Sahel, but it still remainswell below the sub-Saharan
Africa average of 78 percnt. The adult literacy raze is
also low, 30 percent compared to about 50 percent for
the region, and only 18 percent for women. Chad's
population is expected to double in the next 20 years,
given its an estimated anmualgrowth rate of 2.5 percent,
which wil put serious strams on land resources and
social services.
34
Despite all its handicaps, Chad has a number of
positive elements to build on. Compared to other Sa-
heian counties, Chad is relatively well endowed with
natural resources for agricultal production, especially
in the south where rmch of the population is concen-
rted. Food production is genemt.ly sufficient to meet
domestic demand, and agrculture, particularly live-
stock and cotton production, are key sources of future
growth. The private sector could play a dynamic role,
beyond the informal and rural production circit. as a
drivg force in the formal economy. Exploitation of
proven oil reserves for domesticconsumptioncould add
impetus to economic growth m the medium term by
improvingthe reliabilityof supply and reducing the cost
of electricityand diesel fuel-key productioninputs. Oil
exploration in the south holds out the promise of sub-
stntial reserves that could be exported; with a break-
even price of about $10 per barrel, this could attract
significant private investment and dramally trans-
form Chad's long-term economic prospects.
Chad's mrbulent history has also left positive cle-
mens: the civil service is modest in size; the economy
is relativelyunregulated;the populationhas showngreat
self-reliance; and alternatives to public pmvision of
services have developed. Chad does not have the bag-
gage of poor policies and entenched interest groups
supportmg particular policies that hamper many other
African countries, so most development efforts are
focused on building rather than dismanling. The gov-
emmnenthas exhibited a positive, open dialogue with
donorsand awifliugnessto try new approaches. Finally,
the international communityhas expresseda willingness
to respond positivelyto suitable developmentinitiatives
in recognition of the country's poverty and urget
developmentneeds.
Chad's economy is based on agriculture, which
generated almost 50 percent of GDP in 1993 and
provides a livelihood for more than 75 prent of the
population. Subsistence production of food crops by
snaflholders is the pnncipal economic activity, but
output fluctates widely, dependingupon rainfall. Live-
stock and cotton are the most importantsources of cash
income for the rural population and of export earigs
(80 percent). The smallindustrial sector, which contrib-
 Chad
utes about 20 percent to value added, is dominated by
the parastatal that processesand exports cotton. The rest
of the sector consists of several medium-scaleenter-
prises and a large number of micro-enterpriseswhich
produce consumer goods for the domestic market. The
service sector makes up the remaining 30-35 percent of
GDP and includes a large trading sector.
Over 1984-90 Chad made substnntial progress in
rehabilitating and reforming its economy, despite inter-
nal and extemal shocks. The economyduring much of
this period benefited from the more stable political
situation despite a conflict with Libya and sporadic
internal armed conflicts. In 1987, the government
launched an adjustment program which was supported
by IDA and the IMF. The progran focused on improv-
ing public resource management and efficiency in the
cotton sector and includedpolicy reforms in traspor-
tation and livestock. Progress on reforms to improve
public resource management was mixed. Tax revenue
collection improved due to more favorable economic
conditions, tax reforms, and improved tax administra-
dion. The gains on the revenue side were, however, in
large measure, offset by higber spending (mostly wage
bilt and military outlays), and the current deficit in-
creased from 2.2 percent of GDP in 1988 to 5 percent
of GDP in 1990. Imporant progress was made in
reviving key sectors of the economy. Under the pro-
gram, the financial viability of the cotton companywas
improved. Policy reforms in the transportation sector
reduced road transport rates by an average of 30 per-
cent. Reforms to liberalze livestock exports and to
improve the availability of veterinary drugs have had a
more modesteffect. By 1987Chad's economywas more
or less restored to its pre-war level, and economic
conditions continued to improve during the 1987-90
adjustment period. Together the adjustment program
and an investmentprogram that emphasizedagrlture
and tansportation had a positive impact on growth
performance.-as real GDP growth averaged4.5 percent
per year. The inflation rate averaged less than 3 per-
cent per year during the adjustment period. Public
investment, which is totally extemally financed, -ou-
bled from less than 5 percent of GDP in the early '980s
to nearly 10 percent of GDP in 1990; officialdcvelop-
ment assistance flows tripled. With the recovery in
cotton export revenues, the current account deficit was
reduced from 33 percent of GDP in 1987 to 27 percent
in 1990. The gross domestic savings rate, perennialy
negative, improved from -22 percent of GDP in 1986
to -12 percent in 1990.
Recent Economic Developments
Developments since the beginning of 1991 have been
domiated by political events. An armed incursion
35
resulted in an abrupt change in regime in December
1990. The new regime faced enormous challenges: a
vacuum of administration; a fragile internal security
situation; drought; a cholera outbreak in N'Djamdna;
and a gnawingfiscal crisis. The new president adopted
an ambitious political, social, and economic agenda.
However, economic issues took a back-seat to the
pressing needfor political and military reform. In April
1993 an I1-weeknational conferenceof representatives
of 40 politicalparties, civilian, and governmentauthori-
ties put in place transitional institutions in charge of
carrying out the political and economic agenda estab-
lished by the conference. Progress was slow on the
economicfront. The fragiity of the political situation
continuesto be exposed through a pervasive difficulty
in tackling the economic agenda and mountig social
pressure. Due to delays in draftng the country's first
constiution and preparing for general elections, the
tansitional period was prolonged unil April 1995.
Under the auspicesof the French, the demobilizationof
the Chadian army continues to progress steadily; as of
February 1, 1994, 13,032 personnelhad left the army.
A second wave of demobilizationis expected to result
in an additional5,400 departures in the coming months
so that the army will he downsized to 25,000 soldiers
by the end of 1994.
Since 1991the Chadian governmenthas been unable
to stabilize the fiscal situation and 1990-92 targets for
revenues, current expenditures, and the current budget
deficit were missed by significant margins. The 43
percent surge in the budget deficit in 1991 (to about
$90.2million, roughly 7 percentof GDP againstatarget
of 1.7 percent) was mitigated somewhat by a high level
of budget support from exmrnaldonors ($58.7 millon).
In 1992thisbudget support droppedby half. The current
deficit fell to 6.1 percent of GDP due primarily to
courageous and decisive actions on the wage bill and a
lack of liquidity. In 1993 the vicious circle in which
Chad had entered, reached a pealk Arrears in civil
service salaries increased to reach 6-8 months pay on
average. Combinedwith a decline in spending on ma-
terial and supplies, these arrears further hampered
public administration productivity and tax collection.
The accumulationof arrears to suppliers, together with
an increasingly prudent credit po!cy by commercial
banks, eroded activity in the formal sector and the
industrial tax base. As a result, the current deficit rose
to 7.8 percent of GDP while external and internal
arrears together financed 38 percent of the oveall
deficit.
Despite the economic and fmancial crisis, real eco-
nomic growth was high in 1991 (8.4 percent) as favor-
able weather conditons led to strong gowth in output
of food crops and cotton. However, 1992 agricultural
growth was more modest, while a 10 percent decline in
 Chad
formal sector industrial activity led w a modest GDP
growth (0.6 percent). Inflation remained low in 1991
and was a negative 5.5 percent in 1992. In 1993 a
contraction in monetized and economic activity in the
formal sector resulted from the deepeningof the budget
crisis, the decline of the cotton sector, and a substantial
drop in investment. Several enterprises experienced
tense liquidity situations due to the uncertain business
climate, a deterioration in external competitiveness,
withdrawal of import protection because of weak cus-
toms adminisation, and a buildup of public sector
payment arrcars to 10 percent of GDP. GDP growth
was a negative 3.7 percent, and inflation stood at 2.0
percent. The couon sector expcrienced an unprece-
dented 1993 deficit on the order of $23 millionbecause
of a sharp decline in world market prices and weakened
management in the cotton parastatal. In September
1993, as the crisis was nearing its peak, a new perform-
ance contract for the parastamlwas signedthat included
emergency French financng and sigificant managerial
support. The parastaral's difficultieswere reflected in a
26 percent decline in export volume in 1993, and an
increase of the current account deficit to 9.1 percent of
GDP from 8.7 percent in 1992.
Iu January 1994 the 13 countries of the CFA franc
zone, including Chad, devalued their currency from
CFAFSOto CFAF100 to the French franc. In the wake
of the CFA franc devaluation, Chad embarked on a
12-manth stabilization program supported by the 1MF
and IDA tc improve the managementof public finances,
restore financial equilibria, and secure macroeconomic
conditions for the recovery of the economy after the
parity change.The program's major measures include
prudent demandmanagementpolicies to reduce absorp-
tion by the public sector and limit wage increases,
budget reform and strengthening of tax collection, in-
creasing the producer price of the 1994-95 cotton crop
by 5C percent, and a program of social measures to
offset the effects of the devaluation on vulnerable
36
groups. Recordincreasesin livestockexportshave been
reported in the first months after the devaluation. In the
coettonsector, the producer price has been raised itro-
activelyfrom CFAF8Oto CFAF9Oper ldlogramandthe
price for the 1994-95 crop has been set at CFAF12Oper
kdlogram.This measure has given a new impetus to
cotton production, and demand for fertiizers for the
1994-95 crop has soared. The favorable supply re-
sponsebenefits the larger part of the populationin rural
areas and favors substitution of imports by domestic
production, notably in rice and tobacco industry. To
protect the gains in competitiveness induced by the
devaluation, the program stresses the importance of
keeping the lid on domestic costs, notably the civil
service wage bill and industrial and transport inputs
such as petroleum.
Key program measures in public expenditures in-
cluderegular paymentof the civilianwage bill, payment
of external arrears and a detailed agendafor phasing out
domestic arrears to suppliers. full integration of the
autonomousextemr debt-serviceagency into the treas-
umy,and strict control of military spending and extra-
budgetary expenditures. Bold measures to improve
fiscal collection were designed to increase fiscal reve-
nues by 40 percent to 7.2 percent of GDP in 1994. In
light of these actions, the overall fiscal deficit is pro-
jected to rise from 17.1 percent of GDP in 1993 to 19
percent in 1994. External support is expected to reach
the equivaIentof $240 million in 1994.
Implementationof the recovery program is suffering
from delays due to pervasive administrativeweakness
and inefficienciesand lack of coherence in public man-
agemenL Poor communication inside and outside the
government has resulted in the lack of awarenessat the
highest level of the govermment's hierarchy of the
program's content, together with widespread uncer-
tainty and discontent in the business and social sectors.
These difficulties are reflected by disappointing fisc2l
performancesand disorderly expenditures.
 Chad
Population mid-1992 (milios) GA Incomegroup: Low
GNP per capita1992 (US) 220 Indebtedness levot Belowawrage

KEY RATIOS
iwo 1985 1991 1992 1993 Ms1nnttoGDPSW(%3
Grossdornestic hGvestentGDP - 8.2 8.1 8.5 9.4 2-
Expons of goos and nfsFGDP 24.1 16.9 18.5 17.2 13.4
GrossdomesticsavksGDP _ -19. -17.0 -13.6 -8.9
GrossnationalsainrgslGDP - -35.1 -21.3 -14.9 -13.0 la

Crent accunt babncelGfP -22 -3.4 -28.0 -24.8 -222

Interestpayments/GDP 0.0 0.3 0.4 0.5 0.4
Totl debfGDP 31.4 26.4 47.7 55.6 64.1
Totl debtexpots 320.0 192.7 250.0 300.8 457.7 a o n 92 03

GOP:PRODUCTION
ofGDF Ism1980 1985 1991 1992 1993 ShamefGDPbyeadr(%I
Agricut 53.5 452 42.7 43.8 43.6 l5
Industy 1Z0 17.6 18.0 21A 21.S
Manubching - 15.9 16.0 15.9 16.1
Services 34.5 37.3 393 34.8 34.8
1930-85 1985-3 1991 1992 1993
(sings mNlualgrow_i)
A^icitre 3.5 4.9 20.0 6.0 -3
Industry 152 1.6 -it8 -10 j d3.5
Manubdwan - 1.9 -18O0 3 ._ 0
Servies 9.5 1.9 132 -0.9 -11.0 110 SI U -9
GDP 9.0 3.4 6.8 0.3 -2.9 I 13AWb*- _____y__s_____s

GDP ExPENDoURE
(% Gw 1980 1985 1991 1992 1993 GrwtramIofGlandGDP(¶)
Privateconwulipbo - 102;7 97.3 99.1 93.4 20
Gennlgoemmeutcorn pbon - 167 19J 14.5 16.6 is
GrossCamesticinv ent - 8.2 8.1 8.5. 9AJ
Exportsof goodsand nms 24.1 165 18.5 17.2 13.4 i
Inports of goodsandnft 41.0 4.5 43.6 39.3 32.8

(averageannugrowrh) 193085 1985-93 1991 1992 1993 o -10,

Pdiamtecasm_ptbo 27 19.0 2.5 4.3 - 'U - Ut
Generalgoemrnment consumption _ 1.f -1.6 -25.9 102
Grossdomestc inwstmet i25 -9.1 -17 2.2 .tO
Exportsof goodsand nifs 7.0 0.5 -16.6 -6.7 -25.8
Importsof goodsand ni 1i26 -0.1 11.5 -9A4 -7.8 -15
Gross nationalproduct 9.4 3.1 5.8 2.0 -i -0 -- GP
Gross naboral income 9.5 3.1 9.9 2t0 42 1

PRICESand GOVENEr FINANCE

1980 198K 1991 1992 1993 Chaonof
GDPdslarorandCCPI(
Dowoecpdc s

El/
20Cr
(%chng) .t
Consuffrpdcs - 52 4.1 -4.1 _-

Implicit GDP dsiator 8.8 -42 3.7 -1.5 0.6

(X of GDF7
Cwnt budget babne -1.1 -7A1 -6.1 -7.8 |a-'-WPdt -CP|
C0ea suplushrcit .. -8.9 -25.7 -3.1 -16.5 11

37
Chad
POVERTY
andSOCIAL
(annual gmwth roes) 19f0W5 1985413 Oukpmdidbmendn
Popuihlon 2.3 2.5 Ufeexpacy
Laborforce 1.8 20

Paerty level: headcounthndex(5 of populat.on) GNP Grms

life expectancyat birth 47.5 per .phray
Infarit morfit (perhUIsU d ie hihas) 122.0
Chid malnutrition 5 Gfachen under5) 35.0 c pta
Accessto safe water (96oFpopulafon).
Energy conumption per capita (kg ol equiah n 16.4
ItWeracy(%ofppuation age 15*) 702 A m
Gross primary enrolment (l of slo e populatn) 65.0

TRADE
(miMbnsUS 1980 1985 1991 1992 1993 EprtDaPonrtIlY iUss)
Total exports (fob) .. 88 194 199 191 4a
Cotton . 44 92 103 95 i"
Meat . 26 57 59 55 35a
Manufmlures .- 5 - - -. -
Total imports (dl) - 185 408 410 412 2s
Food - - -' -
Fuelandenegy _ 19 0 - - Ism
Capitalgoods 54 -. i
Export pice index (1987=1 . .. 136 141 183 So
Importprioeindex (lW )100) _ . 96 113 123
Temsoftrade(1987=100) _ .- 141 125 148 M
-11 10 - '
Openess of emnomy (fadeIGDP.5) 65 61 62 56 46 an r
BALANCEoFPAYMENTS
fmib5 US5>81990 1985 1991 1992 1993 C4rntmnt t oto GDP {u )
Exports fgoodsandnfs 71 94 238 234 159 - . a _ a I - I 2
Import of goods and nfs so 32D 579 535 388 -|
Resourcebalance -8 -226 -341 -301 -229
Netfctorincome -4 -2 -4 -19 -16 4.
Netcunrnttimnsfem -4 7 -17 -5 -21 -s
CuTent accunta tbalance
BeforeOffial tsfers -16 -221 -33 -324 -266 .|
After offkicil ansfers 12 -87 -96 91 48
Long-tara capia blnlow -4 68 97 66 55 - LL
Totadotheritems (net) -13 -2 6 -3 9
Changesin net reserves 5 22 -7 28 24
MeSnu:_
Resevexcluding gold (mt USM 5 33 120 80 39
Reservesicluding gold (mi USS) 12 37 124 84 43
Official exange rate (lcabJ) 211.3 449.3 28Z1 2647 283.2

EXTERAL DEBT
pExnRALDlEST 1980 1985 1991 1992 1993 , ofnmatampbt
Long-erm debtoxports 285.9 160.4 222.5 Z75.2 436.5
IMFaediUexports 19.3 12.1 12.4 12.2 16.5
Short-ean debtfexpodts 14.8 20.2 15.1 13.5 4.6
Toti deb servioaexprts 83 17.6 4.4 5.4 7.1 _ _PNG
GDPfrffos t I
Long-termdebtlGDP 28.1 21.9 42.5 50.9 61.1 s*o 05
IMFcredlWGDP 1.9 1.7 2.4 23 2.3
Short-tenmdebUGDP 1.5 2.8 2.9 2.5 0.6 25
Long-fl debtmfes
Privat nonguaranteebiong-tm 0.0 0.0 1.7 1.2 1.2 |
Publi andpublcy g9SUtf 07 n U U 01 rat S
Privaecrdtorslongntrm 26.3 18.5 1.5 1.1 0.9 1I_
Officialcredifto lg-rm 73.7 81.5 96.9 97.7 97.8

Thedevelopmentdimond shows a Ivel of dowelopmenthVt ceuntrycompwud wifthits incomegroupavege

38
 Comoros
T he Islamic Federal Republic of the Comoros
became independentin 1975. With a poplation
of 510,000 and a GNTPper capita of S520 in
1992, the Comoros is highly dependent on external
trade and assistanc-r.Food demand cannot be met b
domestic production because of rudimenarv agricul-
tural practces and inadequate marketing, and the
Comoros has become increasingly dependent on im-
ported rice and mear. Small-scalefishing is an efficiem
activity for domestic consumption and has growth
potential. The mnufactung sector is small, and con-
sists mainly of export-crop processimgand a few small
factories supplying the domestic market. Tourism is at
an early stage.
The development prospects of the Comorian econ-
omy are consrained bv stuctl problems that consist
of limited naur al resources and remoteness, a small
domestic market and weak export base dependent on
three commodities-vanilla, cloves, and perfume es-
sence-4acing volatile demand. and population growth
of over 3 percent a year, which puts inmreasmgpressure
on social expendiures and the already fragile ecosys-
tem. The Comoros also faces high unemployment,
with a large surplus of skilled labor. Economic devel-
opment has been hampered by weak public-sector
management capacity, severe macroeconomic imbal-
ances, and a heavy debt overhang, largely incurred
for past low-return public investments. The recent
devaluation of the exchange rate should improve the
Comoros' competitiveness and contnbute to a better
economic outlook.
Social indicatorshave improvedover the past decade
and comparefavorably with the averagefor sub-Sahan
Africa countries. The Comoros' abiliy o maintainand
improve social standards is, however, questionable.
Life expectancy at birth is 56 years and infant mortality
rate is 89 per 1,000. Between 1975 and 1992 primary
school enrollment increased from 46 percent of the
school-age group to 75 percent, and the enrollmentratio
for girls jumped from 29 to 67 percen
The Comoros initiatedpolitical reform in 1990after
15 years of de facto one-party rule. Following open
presidentil elections inMarch 1990, anew constitution
39
was approved by referendumin June 1992, and legisla-
tive electionswere held at end-1993. A new govermment
entered office in January 1994.
Recent Economic Developments
After grwng in the early 1980san average 6 percent
a year, fueled bv ambitionsbut low-returnpublic invest-
Tnenr,real GDP growth slowed gradually to 1.2 percent
in 1993. which translates into a declineon a per-capita
basis. Domestic savings, whichwere consistentlynega-
tive until 1991. turned slighly posiive in 1992and 1993
owmigmostly tO camsin government consumption. In-
vestmentdeclined from the high level of 33 percent of
GDP in the early 1980sto around 18 percent i 1993.
In 1993 the ov t made good progress in
recing severe financl imbalances. During 1988-92
the fiscal deficit (before grans) reached 19 percent of
GDP, and the cunrre account deficit of Ehebalance of
payments averaged about 20 percent of GDP_ In 1993
the fiscal deficit was reduced to 12 percent of GDP
through tax reforms and a 20 percent cut m the wage
bill. This has allowed the govemment to pay civil
servans on time; tbere were frequent delays in the past
The current accoumtdeficit of the balance of paymen
was reduced to 13 percent of GDP due to a 7 percent
declinein imports, a recovery in exports, and a marked
increase m tourism re-eipts and pivate transfers. The
link between the Comorian and French fra helped
maintammonetary disciplme and low inflation.
External Debt
The Comoros' external medium- and long-term debt
outstandingand disbursed quadrupled fromS43 miion
in 1980 to S168 million in 1993 (68 percent of GDP),
as a result of the surge in public investment in the early
1980s. Althougbhmost of the debt was on concessional
terms, one large investmentfor the port in Axjouanwas
financedby a non-concessionalloan and figures promi-
nentIyinthe debtservice profile. Scheduleddebt service
rose stadily from 3 percent of exports in 1980 to 21
percent in 1993, leading to the accumulation of $25
 Comoros
millionin arrears at end 1993.During a donors meeting
in Jeddah last November, Arab creditors agreed to
reschedule most of chese arrears on more concessional
terms. Moreover, following the devaluation of the
Comorian franc in early 1994, France has converted all
official development loans to the Comoros into grants.
Although progress was made in debt reduction, a more
permanent solution to the debt overhang is needed.
Adjustment Program
In 1991 the govermmentlaunched an adjustment pro-
gram widhthe support from IDA. the IMF, and several
other donors, with the objectiveof improvingeconomic
management and laying the foundation for accelerated
economic growth, reducing the role of the state by
downsizing the civil service and divesting productive
and commercial activities, encouraging private sector
investment and exports through trade liberizatdon and
regulatory reforms, and restructuring education and
health to improve delivery of basic social services and
the quality of primary educationand vocationaltaining.
After a slow start, the implementationof the adjustment
program accelerated with the appointment of a new
economic managementteam in July 1992.
The government adopted tax reform in 1993, com-
puterized the customs, and introducedspecifictaxes for
petroleum products and rice. On the expenditureside,
it cut the wage bill by 20 percent anddrasdcally reduced
civil servantallowancesfor housing,transportation, and
utilities. The government reduced the size of the mili-
tary by a third, and adopteda plan to reduce the size of
the civil service by 31 percen. To date, the civil service
has been downsized by 22 percent. Moreover, the
govenment improved the quality of public investment
through the annual preparation of the rolling three-year
public investment programs and elimination of low
priority projects.
In the parapublic sector, the government's policy is
to privatize commercialand productiveactivities. It has
privatized three hotels and liquidated the meat-import-
ing company. The government is committedto restruc-
ture the remaining enterprises to reduce their recurrent
costs and improve delivery of services.
To enhancethe coumtry'scompetitiveness,the govem-
mmt has devahuedthe Comorianfranc by 33 percent in
foreign currency terms, hberalized trade, and reduced
price coauls to a dozen sensitivecommodities.Vanilla
exports have been opened by lowering the eligibility
reqir for expor; imports of cement, tobacco,
higher grade rice, and meat have been fully liberalized.
40
The government also took steps to improve the business
environment and reviewed the legal and regulatory
frameworkfor private investment.It createda center to
provide technical support to small businesses and sim-
plified administrativeprocedures for business creation.
To promote diversification and production in agri-
culture, the govermnentadoptedan agricultural strategy
including policy reforms to diversify export crops.
increase food crop production and productivity, im-
prove agricultural marketing, and protect the environ-
ment. Environmental actions were initiated to control
soil erosion-in particular on the densely populated
island of Anjouan, where environmental degradation is
the most serious-and discourage consumption of the
dwindling fuelwood supply through various measures,
including cross-subsidizing the price of kerosene. A
national environmentaction plan including a long-term
environmentalstrategyhas recently beencompletedand
the government is committed to adopting integrated
conservationmeasures to protect the fragile ecosystem
and develop local capacity to manage environment
issues.
The govemment has taken steps to improve access
to health services and upgrade educationand vocational
training, with the support of the international conmu-
nity. The government is eucouraging family planing
and child care with assistancefrom IDA and the United
Nations Fund for Population Activities. A poverty
assessmentis being carried out to help the government
prepare a strategy for improving the living conditions
of low-income groups.
Medium-Term Oudlook
The Comoros' medium-termmacroeconomicobjectives
are to arrest the decline in per-capita income, start
buildingup a current budgetary surplus, increase public
investmcntwith a focus on infrastructme rehabilitation,
improve human capital development, and reverse the
trend of increasing recourse to external budgetary and
balance of payments support. The 1994-96 program
aims at GDP growth accelerating from a modest 0.7
percent in 1994 to an average of 4 percent in 1995-96
as a result of devaluation-inducedimport substitution
and export diversification. In the longer term, a higher
growth of up to 6 percent a year is possible if the
Comoroscan increaseproductivitythrough humancapi-
maldevelopmentwhile significantlyreducing population
growth and strengthening economic management, in-
cluding a competitive exchange rate and an improved
enabling business environment.
 Comoros
Populalionmid-1992 (mions) 0.5 Inome grwop:Low
GNPper capira 1992 (US$) 20 Indebledness
lvet Modwrt

KEY RATIos _ _ _ _ _ _ _ _ _ _ _ _

19110 19m 199 1992 1993 Iw .e.ttwGDPwoA

Grass
dG iws
fiUc lGDP 33.2 328 14S 20.2 MA.
Expors of goods and rdnGDP 8.7 17.0 17.8 I6A 17.8
Gross,donesicsavvingsIGP -10.1 -013 -3.7 0.6 0.4 2.
Grass nalmi saiMngslGDP 9.6 -M -2 Z8 55
10- _ _ _
Currentacunt baSIWICGDP -16.3 -40.4 -17.2 -20.9 -11.9
ltarest paymentsGDP 0.2 * 1.3 0.7 0.8 0.6
ToaldebUGDP 35.9 117.1 723 66.3 64D0 o
Todald.Wtports 283.2 542.8 282.4 320.0 346.8 " S - - 3

GOP. PRODUCTION
19m i S8S 1991 iS9 1993 ShwssofGDPby_d*r(%)
Agdcultr 3450 36.1 41.2 39.i 39A
Industy 132 14.1 10.0 11.9 12.3
LiuhctWng 3.9 3.7 42 4.4 4.3
Seices 5Z8 49.8 49.8 418.6 48.3
~~~~~~~~~~~~~SB4 -9W-U3 19S 1992 1#1
993 *1
(average
annuerWowth)
Agrcule 4.3 Z3 1.6 -0.8 -0.7
hdusby 4.1 -0.9 162 215 10.3
Mamnuft 4.4 4.1 1.8 5.6 3.6 a -:-_ _t +_-_
Svices 4.9 0.5 02 -4.1 0.6 a - i rm I u a

GOP 4.6 1.2 2.1 1.6 1.2 -

GOP., EXPENDITUJRE _ _ _ _ _
Mol'C'M~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ -
(% COUP) ~~~~~~Insm
isa lm 1992 ins Gnt a,GM- OOPj%
Privatecunsurnpion 792 -72.7 79.4 77.4 78.4
Gaeegal uvsmnmtcrmnptn 30.1 27.5 24.3 no 212 .
Grassdomescinvestmer 332 32.1 14.5 20.2 I5.4 a
Exports of goods and rifs - 7 17.0 17.8 16.4 17.8 20
Impart of goods and nis 51.9 50.1 36.0 36.0 3Q8 10
-SI408 t9BS3 ISMl t99 1993 o
(avwene
annal groawt)
Prwe cansmnpln 3.8 2to 0.4 0.4 0.7 o2
Generalguernentconmption 3.4 -1.9 -4.3 -7.3 -0.2 -a
Gns domesticinvesit 3.9 -7.7 -0.3 40.7 -22.6
Expot of goodsad nis 15.6 4.1 59.7 -4.0 21.8
Impfl of goods.id nrs 4.3 SZ5 4f 4.3 -27-
Grss naloarl produc 42 1.4 2.0 3.3 -0-3 -GM -a-0P -
Gosr inome 4.2 1.0 1A 3.4 -1.6

PRCES and GOVERNIENrFINANCE

1191 1915 199 1992 1993 Cms sOP utt mid CPI )

Daom tprkes ,
(% dW 4 .
Ca5~~~~~~~ . . - . . __.3

*k I. p-ce . . - 2t
mlidt GOPdeflator 7.1
7 0.8 -04 O*4
avwP shce .t ua a4 s Ti
(1ofGDP2
curt budget
belan -*_3 43 -2t6 -3.1 -*-cdara -o'i
C01 srpk rdt .. .. _ -18.9 -12.0

41
Comoros
POVERTYand SOCIAL
iuo- dadmond'
a1980-85aISBS-93

PopuLation 3.5 3.7 Lif sqiect

Labor a 2.4 26s

Povwty Iaes headcount ide fXoFpopu ) .. GNP Grow

Lifi expectancyat bith 56.0 per
Innt modarly (perfoumnd bin hs) 89.0 prrnol.nml
Child makwtion (f Xofhdn underQi)M
Acss tDsal'e w of po,uluib)
X(%
Eneg conumpton per capita (kgo@1quhW I) 35.3
llteracy (S of populefbo age t5) 52.1
(%of school
Grss prmmyennollment popuni) 75.0 AS war

TRADE
(Mitna US$) 1990 1985 1991 1992 1193 Epetand huprtlvnb(mnLUS$1
Totaleaos (fob) 15
s 24 21 21
Otherfood .. 11 15 16 17 a
Owrfood , 3 3 0 1 so
Manufactures .. .. .. .. . so
Tdtal impo.s (cif) .. 40 63 74 59
Food .. 6 12 13 10
Fueandenergy -* 4 6 7 6

Exportprice index(1987=00) _ . .. .. _- w
Importpriceindex(1987-100) - -- -1 7.a.. - -
Terms fftaide (1987t100) _ - -. .. _
Openness of ecownoy(raGDP,S) 61 67 54 52 51 *_
BALANCE of PAYItENTS
usg1980
('mEonsS 1985 1991 1992 il93 CuvrsntaecoumtbalancetoGOPrato
%)
ExporlSft goodsandnb 13 20 49 48 49 e- a a I I
Impcrtsefgoodsandnfs 34 64 94 l11 94 -
Resourcebalan -21 44 -45 -63 -45
Notfactorincome 1 -1 -1 4 0 40
NS cuNrenItansifrs 0 0 4 5 13
Cutent atmunt balanc 45
Bem official5tsfer -20 -46 -42 -55 -33
Alterolicial transfers -9 -14 -1 -15 4 L
Long-termcapital nllow 16 20 0 2 -1
Totaloaer lems(net) -11 0 -11- 6 0
Changesin netreserves 4 -6 12 6 43
Memo:.
Re se lesXdudlnggold (mE. USS 6 12 29 27 -
Resaves inldudinggold (niX USS) 6 12 29 27 _
Offci atrangerale XCaMJS) 211.3 449.3 282.1 264.7 254.6

EXTERNALDEBT
E w - ~~~~~~1980
1965 1991 1992 1993 | uDtnafzuhldebO)
Long-trm debtfeWpt 2742 525L0 260.3 305.2 329.7
IMF aetdloxports 0.0 0.0 2.1 2.2 2.4
Short-erm debWexpots a9 17.8 20.0 1Z6 147 h
Totaldebtservicefexports 2.6 a9 3.1 5.3 & i ! * OSc
GDPraIos -a I - CIP
Lgerm debWGDP 34.8 113.3 66.7 632 608
IMFaedUGDP Q.0 0.0 0.5 0.5 0Q4 j
ShorlOenndeWGDP 1.1 3.8 5.1 Z6 2.7 |
Long-e dibt ra:os I .
Pr nogua _ 0.0 0.0 0.0 0.0 0.0 |
Pubiand pubriclyguarnised 7a * a 10 In n2 93
Pivate redior g-tenn O. 0.2 0.0 0.0 0.0
Ofcial cedltorsmirng-ern 99.1 99.8 110.0 100.1 100.0

The deveopmentdiamondshom a WeMof dmebpeoentin thecntry comparedwith it incone grop avwagt

42
 Congo
S ince the early 1970s,oil has been Congo's bless-
ingand curse, dominatingthe economy,finances,
and behavior of policy makers. Oil wealth accel-
erated Congo's annual rate of economic growth from
2.8 percent during 1970-72to 7.8 percent during 1977-
79, and to 8.4 percent during 1982-85.Oil wealth also
pushed Congo's per capita incometo one of the highest
levels in sub-Saharan Africa. In 1992 GNP per capita
is estimated at 1,090. Since the mid-1980s, however,
softeningoil prices and a weakeningdollar, combined
wit the accumulated errors of past economicpolicies,
have trapped Congo in a protacted economic and
financial crisis The economy declined at an annual rate
of 0.9 percent during 1986-89, eWanding only at a
modest annual rat of 1.7 percent during 1990-92 due
to improvedoil prices.
During the mid-1980s Congo failed to reduce its
expendituresin responseto collapsingoil revenues.The
government assumed that the fall in oil prices was
transitory and continued to live beyond its means,
borowing from abroad until financing dried up, as
Congo failed to service its loans, including those to
multilateralinstitutions. In desperation, the Congo re-
sorted to mortgagingits fiture oil production in order
to mobilizefunds. By 1992its externaldebthad reached
about $4 billion-equivalent to 185 percent of GDP,
one of the highest ratios in the world.
Petroleum's role in financing government expendi-
tire led the authorities to neglect sectors in which the
Congo had historically had a comparative advantage.
By the late 1980s the volumeof tmber exports dedined
to 50 percent of 1970 levels, as a result of transport
aottlenecksand excessive handling costs. Sea, air, and
road links declned for the same reasons, and the Congo
lost its position as transit center for neighboringcoun-
ties. Developmentof agriculture, vital for the diversi-
fication of the economy, was handicappedby reliance
on poorly managedstate enterprises, the rundownrural
road network, and an absence of private transport.
Urban migration-Congo is Africa's most urbanized
ociety-placed unbearable pressure on highly subsi-
dized social services and public utilities.
43
As a sponsor of cradle-to-grave welfare and domi-
nating the productive sectors, government became the
main employer in the Congo. After the last round of
indiscriminate and politically motivated reruiment
over 1989-91, the public workforce numbered about
80,000. Oneoutofevery25Congoleseisacivilservant,
one of the highest ratios in Africa. The civil service
wage bill has consequentlybecome the chief burden on
the budget, 80 percent of annual revenues in 1993.
Governmentfell behind in payingsalaries(eight monihs
in March 1994). This continuing salry fnancing gap
puts pressure on the authorities to borrow indisrini-
nately, and feeds broad social unret
The state dominatedproducdiveand commercial ac-
tivities through a nectrk of public enterprises whose
managementis primarily concerned with rent-seekin,
patronage, and social objectes laid down by govenm-
ment. At the heart of the public enterprisenetwork are
six strategic companies-petroleum refining, distribu-
tion of petroleum pmducts, trasport, electicity, tele-
communicationo, and water-whose inefficiency
penalizesthe budget and severely constrains economic
growth, particlarly in the private sector. These enter-
prises are close to bankruptcydue to poor management,
excessivestaffing, and past low tariffs.
Since 1986weak oil prices and the substantialappre-
ciation of the CFA franc against the dollar kept the
countryin perpul crisis. GDP fell by 7 percet in 1986
and has simcerarely exceeded2 percent yearly growh.
In the same year, governmentrevenues dropped by 33
percent, a futher 39 percent in 1987, and by another 8
perceut in 1988. Rather than reduce exnditures, gov-
emment borrowed to maintain a paUern of wasteful
public consumption and investments. Exernal debt rose
from $3 billionto $4.1 billion in just three years.
To deal with the crisis, the govermmentlaundhed a
stabilizationprogram supported by the IMF in August
1986.A stucnul adustment program supportedby the
World Bank and the African DevelopmentBank fol-
lowed in July 1987. For a time, these programs control-
led public expenditureand halted wasteful ivestment.
The civil service was reducedin size. A start was made
 Congo
on public enterprise reform. However, commitment to
reform was limited to a small number of senior officials
and pressures to use the civil service and the public
enterprises for rent-seeking and patronage soon reas-
serted themselves. Increasingoil revenues (108 percent
in 1989; a further 42 percent in 1990) encouraged the
regime to try to ward off political change through
increased government expenditure, expandingthe civil
service by 14 percent and its wages by 60 percent.
By mid-1993governnenthad nowhereto turn. Reve-
nues, already constrained by public enterprise deficits
and weak revenue collection, continued to fall as pay-
ments of oil-linked debt were deducted from royalty
income. The budget deficit and external debt had risen.
respectively, to 20 and 185 percent of GDP. At the same
time, the impactof years of under-investmentin human
capital and physical infrastructure became evident. Stu-
dents in the overcrowded, run-down primary schools
were taking 11years to complete a six-year course, and
neighborhood clinics had little other than donor-fi-
nanced vaccines to dispense. Years of neglect had
seriously eroded the transport network: the vital road
and rail links between the capital and the port city of
Pointe Noire were barely operational.
In Jamnary1994 Congo joined the other CFA franc
zone countnes in changing the parity wit the French
fanc. GNP per capita, at $905 in 1993, plunged to
below $700 where it is expected to stay until 2000.
Ironically, the impact of devaluation on prices was
camouflagedby the rupture of the rail link with Pointe
Noire, cut by fighting for more than a month. Food
products were immediately in short supply-Congo's
major cities import 6D percent of their food. Supplies
were gradually resumed, mainly via informalcross-bor-
der routes through Zaire, albeit with a significant loss
of customsrevenues. Since then governmenthas moved
to stabilize prices of the most importantgoods. -
Congo was in political turmoil by 1991. After a
national conference Congo's first democratically
elected government was established in August 1992.
However, by November disputes about election results
boiled over into confrontationsbetweengovernmentand
opposition groups. After internationalarbitration, calm
was established, permitting a new round of electionsto
fill the remaining seats in the nationalassembly. Again,
the government's slim majority led the opposition to
question the election's fairness. Soon, the militiasof the
various political factions were fightingin the streets of
the capital, Brazzaville, leading to an estimated 2,000
deaths. Many tens of thousands of citizens had to flee
their neighborhoods, which sustained serious physical
damage. International arbitrators finally declared the
election fair in January 1994. A bipartisan group of
parliamentarianshelped establish a truce that all parties
now accept. The national assemblybegan its first real
44
working session in February, permining government to
present its reform program for consideration.
Medium-Tern Outlook
The Congo has a brief window of opportunity to take
action by translating its liber2l policies into action by
taking critical decisions about the nature and scope of
its involvement in the economy and, most important
about promoting growth.
The sources of growth lie in using private enterprise
to improve management of the still-developing petro-
leum sector, which will be the motor of the economy
for the next decade, infrastructure developmentto im-
prove electricity, telecommunications, and transport,
and in agriculture and agri-business.A major constraint
is the continuingpredominanceof the state enterprises.
Government recognizes this and has singled out six
strategic enterprises for reform: petroleum refining and
distribution, electricity, telecommunications, water,
and transport. While a significant short-term injection
of cosdy managementassistance will be required over
the next two years to restructure and privatize these
enterprises, the petroleum refining and distribution
companiesoffer an immediateprospect forprivatization
because of their attractivenessto investors. Govermment
has powerful incentives to proceed with liberalization,
aspetroleumtaxescouldbringinCFAFl8billionayear
while subsidies were reduced by about CFAF8 billiom
Elsewhere in the economy, government plans to elimi-
nate the state's role in production. In agriculture and
forestry, plantations, ranches, and processing will be
privatized and the state will withdraw from marketing.
Addressing the priority of food production will be the
task of smallholders.
To developthe private sector, government seeks to
remove the constraints to enterprise creation, introduce
flexibility into the labor market, revive the failing
financialsector, and developbetter relationswith entre-
preneurs. New facilities are being offered to small
business. A draft labor law has been developed that
would reduce the strangle hold the unions have on
enterprises. A bank restructuring committee has been
set up. Finally, employers confirm that they are being
consultedby governmenton major legislationrelated to
employmentand customsreforms.
The poor management of Congo's external debt
obligations during the last few years, adding to an
already negativerecord over two decades, has seriously
affected its access to public and private financial
sources. However, with the return to peace and the
prospect of far-reaching economic reforms supported
by a democraticgovernment, there are some signs of a
change in donor attitudes and their willingness to help
meet Congo's external financial requirements.
 Congo
Population mid-1992(milons s 2.4 Incomegroup: Lows-middle
GNP per capib 1992 (US$) 1,090 Indebtedness
level: Swre

KEYRAMOS
1960 1985 1991 1992 1993 *nvustnw*toGoPmtb%)
GrossdomestcInvestment/GDP 35.8 30.3 19.5 16.8 14.2 20
Exportsof goodsandnEslGDP 60.0 56.8 40.5 41.2 43.9
GnmssdomescsavingsLGDP 35.7 31.1 14.2 11.6 7.5
GrossnatonalsavingsuGDP 22.3 18.7 0,6 0.4 -9.3 10
Curnt accouLtbalance/GDP -13.5 -9.3 -21,9 -14.2 -19.6
Intrest payments/GDP 2.2 6.1 1.7 0.9 0.9
TotWdebtIGDP 89.4 140.1 182.8 173.4 .
173.4
ToteldebexportS 148.1 246.4 398A 375.1 347A I u "a - el 2

GDP:PRODUCTION
(%ofGDP) 1980 1935 1991 1992 1913 | abacbor%A
fofGOPb
Agriculture 11.7 7.4 12.1 12.1 11.4
Indusuty 46.6 53.9 33.0 31.9 35.2
Manufacturing 7.5 5.6 8.4 8.3 8.5
SeIces 41.7 38.6 55.0 S6.0 53A
13813.85 1985-93 1991 1992 19!3
AgrICItruS 2.5 2.1 -4.4 1.0 -10.7
Industry 13.4 .0 -0.4 6.4 7.1
Manubcturing 1417 1.8 0.4 -0.9 -2.8 o.
Serices 11.5 -1t0 4.6 1.4 -7.5 87a oI
a so 12
f s
GDP 11.0 0.9 1.6 3.2 -2.1 f3AwIala *flSry DSe.

GDP:EXPENDIFTLRE
(%ofGDFP 1980 1985 l991 1992 1993 GIOwlhUSeOGOI anGdDPSI%)
Prte cnsumption 46.8 52.5 62.7 64.1 70.1 3OT
General governmentconsumption 17.6 16.5 23.2 24.0 22.3 2|.
Gross domesic ivesbnent 35.8 30.3 19.5 18.8 14.2
Exportsof goods and nf 60.0 56.8 40.5 41.2 43.9 '\
imports of goods and ns 60.1 56.0 45.9 46.2 50.5

(averae apnnualgrowth) i980-45 1985-93 199t 1992 1993

Privatemnsumption 10.0 -0.6 to 1.8 -16.4
Gnenw govemmen consumpfion 14.3 -2.1 5.5 -04 -14.8
Gross uomestlclnvesinent 8.2 -12.8 14.1 -20.9 431.1 .4o
Exportsof goods and ns 8.9 4.7 -6.1 8.9 11.5
Import of goods and nfi 7.5 -5.3 0.5 -4.4 -21.7 |4 -
Grss nationalproduct 10.3 1.3 3.9 6.0 -5.7 -GDi -*-coP
Grossnationalincome 13.2 -4.1 -10.5 0.0 -24.9

PRICESand GOVERMENTFINANCE
1980 1985 131 9992 1993 f GDPdmftorard
Chaoroe CPI
DaUImstc prIcS| 15
( cage)
d% )
Censuwrprces 7.3 5.6 9.1 2.2 .. |
W esale prics 14.0 6.6 -3.5 1.7 .-

Implicit
GOPdeldatr 19.0 2.5 -5.3 -5.8 4.9 |54!
Govirnent ffnace -l a -
(S of GDP)
Cutrent budget balance 2.2 12.2 -11.3 -14.5 -19.4 |_OPd -t-CP
Overallswplus/dsfl -11.3 -4.8 -14.6 -20.4 -22.5 1 _ -

45
Congo
POVERTYand SOCIAL
(annualgwth rates) 1O85 1986-93 D id
Populton 3.0 3.3 Ut.eeqctay
Laborfoce 1.8 2.1
most Msr .nt
.atm
Povety leve: headount Index(p of popu Mon) .. \ Gram
LIfe expectancyat birth 51.5 P. pemer
Infant modty (parthousandlive bAhUs) 114.0 com aen
Childmalnutilon (16of duc underl5) 23.5
Acus to safe waWr ( ofpopufiomn) 20.0
Energy consumpton per capita (kg odtequivalnt) 1314
Illiteacy (1 of populafionage 15+) 43.4
Gmss primary enralmmnt (16of school-ae popu.affcnj _CC_ #tDW

TRADE
( 1m8sUSS) 1980 19N5 1991 1[92 1993 ExpoStmd Import
bwEs (EU. US$)
Toalexports(fb) 911 1.145 1.108 1.189 1,116 a40
Fuel 727 952 _ .. ...
Timber 106 60 - m _
Manukacums 9 47 - ._

Totl impor1(dt) 669 746 - .. .. -

Food 69 30 .. .. ..
Fuel an onoy 58 18 _ .. .. *s *
Capitalgoods 107 202 .. .. .. 2m- 1
Expot prnceindex (1987=100 182 135 _- _ __ _._ _ _ _ _
Importprm bdemc(1997-fO0) 201 94 _ .. .. s in 12 Q
Terms of tradef(987=10i) go 143 _
Opennessof enomy (bvdsA3DP,%) 120 113 86 87 94 .
BALANCE of PAYMENTS
(mEans ~ 1980 18S 1991 1992 I993 Currentaccount
banle GDPratI%)
Expofgtofgoodsandnfs 1.021 1.219 1.213 1.267 1,191 07 l- - - -

Importsofgoodsandnfs 1.025 1.1t6 1.093 1.153 905 1 1- 11 1 1

Resourcebuiance -4 64 120 114 285 -5
Net fator income -162 -228 -638 -440 -693
Netcnnttransfers -64 -38 -60 -63 -59 -40
Owuaet accotbatWanx
-otian mslW -230 -202 -579 -89 -467 45
AfterofficLedtransfam -167 -161 -523 -us 439
Long-termcapital inflow 242 207 -155 4!54 -8 -20
Toal oihir its (net) -17 48 644 598 '48
Changesinet rse5s -9 2 34 1 -1
Mousem: 2s
Reseves emlig gold (miff.U1) 86 4 5 7 1
Reservesinduding gogd(mit (US1) 93 8 9 Ii 6
Olffcial exchane rate (ocJaVSSj 211.3 449.3 282.1 264.7 213.2

EXTERNALDEBTf
1980 1385 1931 1992 1993
Longrmn doebexports 122.0 190.3 3352 306.2 314.0
IMF credilexports Z2 0.8 0.5 0.4 0.4
Short-termdebVexports 23.9 55.3 62.7 68.5 33.0 7-
Toteldebtseeexys 10.5 34.3 24.1 1t3 10.9
GDPralic°
Long4m debUGDP 73.7 1082 153.8 141.5 156.7 - Di|c"
IMF adiUGDP 1.3 0.5 0.2 0.2 0.2
ShortOtrm
debtoGDP 144 31.4 28.8 3117 16.5 |2
Long-ftm debt ralr-s
Prvte nonguamnedflong-tm 0.0 0.0 0.0 0.0 0.0 j
Publicwrdpubliclygwartad . 1 . C .2 I
Priat cArlorslonte 51.9 59.9 20.6 19.0 17.4 1
Offal dt orm 481 40.1 79.4 51.0 826

The dealopment diamond shws a ebvel

of deelopment in the countrycompaed wih its inam grwopaverage.

46
 Cote d'Ivoire
T he Republicof Coe d'Ivoire is a lower-middle-
income country with a 1993 GDP of about $9.3
billion. Cote d'Ivoire's economy is predomi-
nanty agricultural, with about two-thirds of its active
population engaged in faming, forestry, and fishing.
The agriculturalsector, including forestry and agro-in-
dustries, accounts for about 40 percent of GDP, while
generafing 70 percent of export revenues in 1993.
Exports continueto be dominatedby cocoa, coffee, and
timber.
Since the mid-1970s COted'Ivoire's populationhas
been growing 3.8 percent a year, reaching about 13
milion at emd-1993.High populationgrowth, coupled
with economicdecline, bas resulted in a steady fall in
living stndards. GNPper capitawas estimatedat about
$670in1992,comparedtowellover$1,000intheearly
1980s. Social indicators have also been deteriorating,
reflecting the effects of the economiccrisis and neglect
of basic social services.
COte d'Ivoire has gone through important political
changesduring the last four years. The demoratzation
process was strengthened by the first multi-party and
legislativeelections in 1990. The sitting president was
re-elected but died in office in December 1993, after
having served as head of state for 33 years; he was
succeeded by the president of the national assembly,
who wil fmiishthe five-yearpresidential term.
Economic Developments in the 1980s
COted'lvoire is emergingfrom 13 years of unsuccessful
internal adjustment that failed to reverse economic
declineor reduce growingsocial and poverty problems-
The economic and social crisis started at the beginning
of the 198Gswhen the country faced a number of serious
economic problems. Macroeconomic imbalanes had
grown to unsustainablelevels, with a budget deficit of
about 10 percent of GDP and a curret account deficit
of about 17 percent of GDP. CMned'Ivoire started to
encounter serious debt-servicingproblemsas a result of
a rapd buildup of external debt durmg the second half
of the 1970s. Domestic markets had become increas-
ingly distorted, contributingto inefficient resource al-
location. There was a serious deterioration in public
47
sector management, especially in state enterprises.
These problemswere in essencean outgrowth of a surge
in spendingwhich followed the cocoa and coffee price
booms of 1975-77.
Before 1987 adjustmentpolicies were partially suc-
cessful in reducing the main iternal and extenal im-
balances.The govemmentpursuedconactionary fiscal
and monetary policies that sharply reduced the budget
deficit and inflation. Moreover, the adjustment effort
benefitedfrom the depreciationof the French franc and,
hence, the CPA franc, against the dollar, and from a
short-lived recovery of cocoa and coffee prices in the
mid-1980s.However,with the reneweddeclineoftthose
prices on inte-ational commoditymarkets, the govern-
meut delayed commensurateadjustments in producer
prices. As a result, the fiscal deficit again increased
to unsustainable levels, reaching 17 percent of ODP
in 1989. This also reflected more fundamental prob-
lems, including the downward rigidity of expendi-
ture, especially of salaries and wages, high debt
service obligations, and the real appreciation of the
CFA franc.
CoMed'Ivoire's renewed fiscal and balance of pay-
ment crisis an ihe end of the 1980s revealed not only
inadequate macroeconomicpolicies but also persisting
distortions in the economy. These included a trade
regime that was still characterized by relatively high
tariffs and dispersionlevels and a plethora of non-tariff
barriers, and inadequate levels of resource mobiliza-
tion, reflecting declining domestic savings and sol-
vency and liquidity problems in the domestic banldng
system. There was continued public intervention in
agriculture, especiallyin price and marketing policies,
and the economycontinuedto dependon a few primary
commodities. The public sector was inefficient and
bloated, with limited capacity to provide services as
evidencedby the poor health indicatorsand low literacy
levels.
Recet Economic Deveopment
Faced with an unsustainable economic situation, the
governmentadopteda new stabilizationand ati"itm
program in mid-1989.As one of its principal measures,
 Cote d'Ivoire
it cut guaranteed producer prices for-cocoa and coffee
in half, which helped eliminate the deficit in the agri-
cultural stabilizationfund and reducedthe fiscal deficit.
In addition to the fiscal adjustment, the program aimed
at eliminatingdomestic and external arrears and imple-
menting structural reforms in the agriculture, water
supply and sanitation, and energy sectors.
While progress was achieved under this program
during 1989-90, additional structural reforms were
deemed necessaryto remedy some of the distortionsstill
hampering the recovery of the economy. A medium-
term economic framework for 1991-95, spelled out an
internal adjustment strategy for restoring international
competitiveness and growth. The program failed to
materialize as planned. Although the governrmentin-
itially made progress in cutting the primary deficit in
the early 1990s, high outlays for public salaries, aver-
aging 12.5 percent of GDP (or 60 percent of primary
expenditure) during 1990-93, remained a problerm
With the deepeningof the recessionin 1993,the primary
deficit again increased, rearhing 3 percent of GDP.
As the government did hat succeed in generating a
primary surpluses, its efforts to settle domestic and
ectermalarrears also faltered. A settlement on domestic
arrears was reached in 1991, but its effect was partly
eroded in 1992-93 when the difficult financialsituation
of the central government again triggered a resort to
arrears financing as a means of covering the deficit
xternal arears accumulated rapidly and reached the
equivalent of 60 percent of GDP by end-1993.
The contimuing fiscal and balance of payments
problems revealed, in part, the limitations posed by
the internal adjustment strategy. When this strategy
did not yield the anticipated economic tumaround,
policy slippage intensified. Delays in implementing
economic reforms were also caused by insttutional
wealnesses.
The economic decline that began in 1986 was not
halted, and investment levels remained at arand 10
percent during the early 1990s. Real GDP contracted
by a cumulatve 4 percent and, on a per capita basis, by
a cumulative 18 percent over 1990-93. In January 1994
the goverment agreed, together with its partner coun-
tries in the CFA zone, to devalue the CFA franc. The
government expects that with this parity change and
the- implementation of the accompanying fiscal,
monetary, and structural adjustment policies, the
Ivorian economy wfll be able to restore international
competitiveness and return to a sustaiable growth
path-
- Preliminary results for the first quarter of 1994were
encourapng in terms of stabiliation. Consumer prices
adjusted as anticipated.After an initial surgein January,
mnthly inflation rates through April fell into the 1 to
3 percent range. The fiscal situation also appearedto be
48
improving as the government spent less than pro-
grammed and revenue targets were met. The gover-
ment's restrictivewage policy had a beneficialeffect on
the budget and was followedby the private sector in its
wage negotiations. This augurs well for controlling
inflation and enhancing Cote d'Ivoire's competitive-
ness. Prelimiary trade data indicate that export vol-
umes in the first quarter of 1994 grew by about 7
percent, while import volumes shrank 22 percent, com-
pared to the same period in 1993. As a result, the trade
balance surplus was about CFAF60 billion or $100
million. There are some indications of an early supply
response in the coffee and wood sectors, but data in
other sectors are still too sketchy to make an accurate
assessment.
Poverty and Sodat Indicators
The economicdecline observed since 1986 has caused
a steady decline in real per capita GDP on the order of
27 percent, and a deterioration of social indicators to
levels that pose a serious challenge to C6te d'Ivoire's
medium-and long-term development. Recent estimates
indicatethat more than 60 percent of the population fail
below the poverty line compared to about 30 percent in
the mid-1980s.
Although basic services have been protected more m
urban areas, the incidence of poverty increased much
more rapidly in urban areas than in rural areas- The
share of the urban poor in the total number of poor
increased from about 20 percent in 1985 to about 30
percent in 1992. This is due in part to the high urbani-
zation rate, rising levels ofunemployment, and a reduc-
tion in real wages Rural areas nonethelessstill accoumt
for about 70 percent of the poor in Cote d'lvoire. The
extent and trends in rural poverty differ markedly
according to regions. The situationdeteriorated most in
the West Forest due to falling cocoa and coffee reve-
nues, especially after 1989 when producer prices of
these crops were cut in half. The Savannah, however,
is stil the poorest region, contaiing about one third of
all poor.
Thebudgetary problemsofthe Lastseveral years have
seriously constrainedthe government'sefforts to imple-
ment its human resources developmentprogram. While
the share of the government'sbudget going to education
and health was maintained, it was less successful in
implementingits policy of reorienting intrasectoral al-
locationstowardpimary educationand health care, and
of reducing the urban bias in social imnfrtme.
Moreover, the rising share of salaries within the overall
budget left insufficientresources for other inputs such
as textbooks and pharmaceuticals,aggravatng intemal
inefficiencies.As a result of the strained fiscal simation
and the difficulties encountered by the government in
 Cote d'Ivoire
implementingits social program, the health and educa-
tion systems have deteriorated in recent years.
Health care coverage reaches about 30 percent of the
population and is clearly unsatisfactory in the face of
high population pressures and new epidemiological
challenges such as the rapid spread of AIDS. Infant
mortality has slowly fallen over time, affecting 95 out
of 1,000 live births in the early 1990s. hnmunization
levels also compare unfavorablywith other countries in
the region or with similar per capita incomes.
Cote d'Ivoire's educationsystem continuesto suffer
from low enrollment, low completion rates, high repe-
tition, and inefficient resource allocation. Although the
government has made efforts to provide primary educa-
tion for its youth, it currently covers only an estimated
50 percent of school-age children. The precarious situ-
ation of the education system is also reflected in high
drop-out rates and repetition- The large majority of
children who go to primary school either drop out in the
course of the primary cycle or end all formal schooling
after primazy education, and risk joining the grwing
number of functionally illiterates. Moreover, due to
restricted access to secondary education, the absenceof
any educational alternative for those who cannot con-
tinue beyond primary education, and growing unem-
ployment, children tend to repeat their final years in
primary school. The lack of programs to maintain
school facilities and provide affordable textbooks has
also adversely affected the education system. As a
result, 46 percent of the populaton above the age of 15
remas illiterate, while female illiteracyhovers around
60 percent.
The Structural Adjustment Program for 1994-96
Following the CFA franc devaluation, the govern-
ment has reformulated its economic program and
spelled out its new stabilization and structural adjust-
ment program for 1994-96. Maintaining macroe-
conomic stability will be key to attaining these
objectives; the government is exerting strict budget-
ary discipline to generate the sustained primary sur-
pluses needed to cover an increasing portion of public
debt. It introduced a series of tax measures in January
:994 and complemented them with other fiscal meas-
ures incorporated in the revised 1994 budget law
approved in April. They included a VAT reform,
revision of petroleum taxation, and reduction of im-
port tariffs. Moreover, the government has limited
the civil service base wage increase in 1994 to a
nominal 10 percent, which translates into a substantial
decline in the real wage bill. After the initial pass-
through of the devaluation, monetary policy will aim at
reducing inflation to traditionallylow levels and restor-
ing positive real interest rates. The financial sector
49
liquidity situation will be strengthened not only by the
flexible interest rate policy but also by government
efforts to clear its internal arrears to the banking and
non-bankingsectors.
Deepening public sector reform is a central element
of the fiscal reform agenda, involving the reduction of
the civil service, public enterprise restructuring, and
institutionalcapacity building. The govemment is seek-
ing to increase its public sector efficiencyand promote
private sector development through its privatization
program. It has identified42 enterprises for privatz-
tion during 1994-97, of which 17 are scheduled for
privatization in 1994alone. Moreover, the government
is implementingprograms designed to strengthen the
institutionalcapacities of the finance, health, and edu-
cation ministries.
Trade liberalization will build on the progress
achieved during the last four years. The average
weighted tariff on taxable imports declined from 32
percent in 1989to about 24 percent in 1993- Concomi-
tandy with the devaluation, the govemment announced
a new tariff reform that cut import tariffs, according to
prelimiary estimates, by an average of 20 percent and
created a structure in the range of 0 to 35 percent. Most
non-tariff barriers will be phased out by end-1995, with
the exceptionof those identified in a restrictive list. In
addition, dLenmmberof products subject to price regu-
lation will be reduced.
The government is taking steps to implement the
regulatory and legal framework needed for a dynamic
private sector. Ongoing labor market reforms are ad-
vancing with the adoption of a new labor code in
mid-1994.
Reducing poverty wilLremain a severe challenge to
the government. In the short-term, the devaluationwill
have a more favorableeffect on the rural thm the urban
poor. While farmers suffered greatly fom declining
incomes before to January 1994. the devaluation is
expected to provide them with a much needed boost in
their incomes through increased producer prices. As
real wage declines become more pronounced, and un-
employmenthas been rapidly increasing in urban areas,
the goverment is increasing resource transfers to mu-
nicipalities to start labor-intensive public works and
rehabilitation programs that will stimulate employment
generation.
TheEnvironment
Cote d'Ivoire is confronted with serious environmental
problems, including deforestation, loss of biodiversity,
soil degradation, water pollution, and managementof
industrialand domesticwaste. The govemment is draft-
ing a national envirom mental action plan, which is
expected to be adopted by December 1994 and would
 Cote d'Ivoire
be the first inAfrica to addressthe ful range of global
as well as national enviromental issues.
Medium-Tern Prospects
With the decision to complementits internaladjustment
measures with a devaluation of the CFA franc, the
government is effectivelyaddressingsomreof the main
obstacles for renewed growth, including the lack of
international competitivenessad unsustanable fiscal
and balance of payments deficits. This historic change
in policy directionappears indeed to have imaproved
chances for successfullyimplementingthe reform pro-
gram in whichtrade andprice policiesaswefl as private
sector developmentrank prominently.
The implementationof sound -amecm poli-
cies and suctural reforms shouldlead to better utliza-
50
tion of the Cote d'lvoire's rsources and productivity
gains. The impactof thesereforms shouldbe manifesd
m increases of value-addedand income in agriculturc
and manufactauing.The expectd recovery of the econ-
omy should stimulate demand for labor and reduce
poverty, especiay in ruralareas. Agricultureand manu-
facmming,especiallyagro-industries,will represent ma-
jor sourcesof growth. While traditionalexports should
grow at rates consistent with interatroonal demand,
rapidlyexpandingnon-traditionalexportscould provide
a source of dynamismover the mediumto long n.L A
successul stabiizatiomeffortcoupledwith the envisaged
structural measuresshouldtrauslate ito improvedeffi-
ciency and performance in the tradables sector arnda
markedmicreusein public and private investmentlevels
that could result in sustied grwth rates of as much as
5 to 6 percent a year begnning in 1995-96.
 C6te d'Ivoire
Populationmid-1992 (millwons) 12.9 Income group: Lower-middle
GNP percapita 1992 (Us) 670 Indebtednessevel:sevem

KEYRAMOS
198D 1915 1991 1992 1993 InnwuitmrG raPio(i
Gros domesticinvastentlGDP 265 126 10.0 10.9 9.3
ExporTsof goodsand nfsGDP 35.0 45.6 33.0 33.5 34.3
Gross domesficsavingstGDP 20.4 25.8 13.5 16A 15.3
GrmssnaLti savingslGDP &5 129 -5J -22 -2.7 to

Cunut accountbElanlclGDP -18i0 0.6 -15.7 -13.1 -12.1

Interest payrntslGDP 5.8 9.3 52 42 4.3 .
ToalldebUGOP 73.2 1381 184.8 177.7 188.3 e
Totaldebtexports 204.5 301.3 524.7 526.5 545.4 gr a - l
91 2 n

GDT' PRODUCTION
m190 19315 1991 1992 1993 byaflr(%)

Agiulbe 30.9 29.8 38.4 36.7 37.4

Industry 23.9 23.4 23.5 27.9 24.1
Manufactuing 14.8 15.2 _
- .
SeNices 45.3 46.8 38.1 35.6 38.5
1980-85 1985.93 1991 11992 1993
(vaeagoeaIuaagVDw!h)
Agricue -4.3 21 -3.8 -3.9 2.3
Industry 2.4 -1.3 -9.4 0.6 2.4
Manubdffbing . - - -f2 D
Sawicas 2.6 -24 7.4 4.9 -3.0 WSUSU' -C 1

GDP -03 -1.0 -0.8 0.0 -1.1

GDP:EXPENDITURE
1980 1985 1991 1992 1993 S t._arG GlandGSOP()
(%ofGM Iso
Privateconswnpion 62.8 60.3 68.7 65.9 63.3 |-
Genral govenmenconsumpbon 15.9 13.9 17.8 17.8 20.4 t/
Gross domesticiwasmnert 26.5 12.6 10.0 10.9 9.3 |' /
Exportsof goodsandntfs 35.0 45.6 33.0 33.5 34.3 20-
Importsof goodsandnts 41.2 32.5 29.5 28.0 27.4 to /

(avege anmalgowth) 199WS5 1935.93 199 1992 1993 | a |

Privateconsumption
Generalgovernment csumption
1.1
-2.0
-15
-24
-4.3
-. 11
-05
4.3
4.07
-01
- r0
Grossdomestic iTvesment -20.6 -9.7 47.3 4.0 -30.5 40
Exportsofgoodsand rfs 1.8 02 -4.8 32 -1.7
Importsof goodsandnfs -5.5 -4.3 -7.5 2.7 -9.5
Grossnabonalproduct -1.5 -4.A -12 0.1 -1.7 G-M -b-eDP
Grossnabonalincome -02 -4.1 -3.5 1.6 -32 -

PRICES
and GOVERWNENT
FINANCE
1930 1985 1991 1992 1993 Chanip
ofaGP dISaorardCPI%
Dowases&pdicas
(%Ch.an") -
Consumer prics 14.7 13 1.7 3.5 25
W-I-ale prices - - -2 a
Impict GOPdlator 25.7 4.1 0.3 0.0 -0.7 -a
Svovwnment flnnaree 1
oMGOP)
@f
Cuent budgetbalance 5.8 8.9 -10.2 9.5 -13.4 -_ PL -CPi
Overallsurpludefict 4.5 32 -12.9 -12.9 -16.2 _

51
C6te d'Ivoire
POVERTYand SOCIAL
nts)
(OnnttdWnwbb t1935 1S393 Devmwit
Populto 3.9 3.8 Ut. miPeday
Laborforce 2.7 Z5s

Povertylw: headwuntIne ofpopulation) GNP Gros

Ut. expctncy at bith 55.3 .t Aey
-OhM (55of dign undr5)
manuatriutriton 12.40
83.0
flwaterg (of
Access to X populi
percapita(kgoffequkubn
Enegy consumpbon 125.5
IlErimay (X fpopulaio age 15) 462U;
Grew prmq ay mnt (5 otschd-agw puxut v) 69.0 -ts . wae

TRADE
OratssuSj 19110 13s 1991 I9f2 1S93 Expotmd
bh-ithbvd (nil im)
Totalenports(fob) 3.013 Z761 2,811 2.841 Zam -
Cocoa -793 887 986 968 807 3A
Fumm 644 518 316 373 372
Mawnuctues 652 728 564 683 752 x Ll1 l
(idf)
Toa hmpods Z991 1.721 2103 Z271 1,948 3m ISlE
Food 435 273 490 377 431 t= lU
FudandeneW 557 379 530 511 430 I.m * * * * * *
Capital goods 1.041 446 394 531 332 gm* *

Ext pnceindex(1967=100) 223 101 94 113 75 * I U

ImportWm ndex (1987--1lW) 6s 81 117 113 III
Termsoftrade1987=100) 325 124 80 99 68 sr u m
X n 2 "
Opemessof ecwyfrMadeGDP.%) 76 78 62 62 62
SALANCEof PAYMENTS -
WED=ra 'dnsUw
US:)
~~~~~~~~1930
1935 1991
el 1902 119
193 Cbmc"s
Cur tas boae
PI
oGP nabe(S
-ots ofgoodsandnfa 3.577 3.160 3.134 3.3s8 3,193 r * , *
I`1
-

Importsofgoodandnfl 4,135 Z173 ZW8D Zam Z548

6 2- 1a 0 2
Resouce b- 45S8 987 334 SW6 6144,
Netfactor
income 53 -66 -1.420 -14.4 -1,447
anent
trwlmwms -716 79 -403 -37M2 -.
urrent accountbalance J-
Before
oflfidatwister-a -1.836 42 -1.490 -1.323 -1.122.
Afe l'officaltsos -1.827 68 -1.341 -1.163 -1.023 -12
Lo-trm capit inow 1.033 242 73 385 _
Total oith (net) 662 -283 1.334 8ar! .t.
ChaingesIn netres s 136 -27 -66 -92 -0 ..

Reves acludinggoltg(Ma US:) 20 5 13 7 2

Rewvsh ¶rmg l (MA US) 46 19 29 22 20
OlUd ed
=ange rat (locaVLJSS) 211.3 449.3 282.1 2U4T 2B3.2
DEB
EXTERNAL
1980 1935 1991 I99 1993 |
lmaSer_n!oSu(S) eo
Lang-nte d.Wxports 173.7 257.5 395.6 389.1 413.5 to
IMF F_dlexrt 1.8 20.8 11.1 7.8 6.8
oAtlaWmdeWbVmport 29.1 230 118.0 129.6 125.1
Tota debtserviempo.ts 367 35.0 372 32.7 32.5 T|
LoUn-xadeWGDP 621 118.0 139.3 131.3 142.85 st
IMFcaediUGOP 0.6 9.5 3.9 2.6 2.4
Shod4ormdabtGOP 104 10.6 41.6 43.7 432 25
Letng4n deaft los
priat nfteed ogr 31.8 29.9 19.7 19.7 19.7 D
-Pobk=Wpnd - guaranted 0. a
--
Privatecreditomeong,term 48.7 37.9 21.6 20.2 19.7 _ _
OlWicial
c 19.5 32.2 58B7 60.1 60.7

* The delopmren d *a
shows leel of devlpnen in th cunuby opae Citie infom group aveage.

52
 Djibouti
D jibouti became independentin 1977. A small
country of only 23,200 square kilometers, it
occuL:es a strategic location in the Horn of
Africa. Its GNP per capita was estimated at $771 in
1993. Two-thirds of its 600,000 inhabitantslive in the
capital city. The rest are mostly nomadicherders. The
majority of populationhave poor nutritional and health
standards. Social indicatorsare below thoseof countries
with comparableincomelevels. Life expectancyat birth
is low at 49 years, and infant mortality high at 115 per
1,000. Only 50 percent of the urban dwellers have
access to safe water, and the rural population suffers
from acute shortage of water. Primary school enroll-
ment is 47 percent of the school-agegroup, well below
the sub-Saharan African average. Recent population
growth has been esdtmatedat 5 percnt a year-of which
2 percent represent an influx of immigrantsand refugees
from neighboring countries. Some 130.000 refugees
and immigrants have arrived since the 1980s from
Somalia and Ethiopia, putting heavy pressure on the
economyand social institutions,
Djiboutihas a liberal economicregime. Its currency
has been pegged to the dollar since 1949 and is freely
convertible. The economy is, however, fragile and
highly dependent on external assistanceto meet struc-
tural fiscal and external accounts deficits. Since inde-
pendence, savings havebeen negative. Servicesaccount
for 76 percent of GDP at factor cost, and are dominated
by activities relating to French military presence and
Djibouti's role as a regional transit and business center.
The taditional economy is based on subsistence no-
madicherding. Agricultureand industryare little devel-
oped, owing to th harsh climate, high productioncosts,
and limited natural resources other than, potentially,
geothermal energy and fishing. Merchandiseexports of
local origin are insignificant. Djiboutidependsheavily
on imported energy, food, and other goods.
Following political and ethnic tensionsin November
1991, the government allowed the creation of political
parties. A new constitutionwas approved in a referen-
dum in September 1992. Legislative elections in De-
cember 1992 and presidential elections in May 1993
were boycotted, however, by most of the opposition.
These uncontestedelectionsled to the rce-lectionof dte
53
presidentand his ruling party representatives.The main
oppositiongroup claiming to represent the Afar minor-
ity-an estimated 40 percent of population-has re-
sumedarmed rebellion.The governmenthas quadrupled
military forces. Military expenditureis 15to 16 percent
of GDP, compared to about 6 percent before 1991.
Ethnic tensions remain high and sporadic fightingcon-
tinues. A negotiated settlement of the conflict has
proved elusive.
Rrent Economic Development
Djibouti's economicperformance has been weak since
independence.GDP barely kept pace with population
growthover 1978-83,and declinedby 1.1 percenta year
in the next decade. Per capita mcome has been halved
since independence. The stagnant economy and the
influx of refugees led to acute unemployment. Over
1991-93real GDP stagnated, despitc a short-livedspurt
in military traffic during the Persian Gulf war and
increased trans-shipmentof relief aid to Ethiopia and
Somalia.
Since 1977the resource gap has averaged26 percent
of GDP. Domesticsavingshavebeen consistentlynega-
tive, over 10 percent of GDP for 1992and 1993. After
exceeding 22 percent of GDP in the early years after
independence, investment has gradually declined and
averagedonly 15 percent of GDP during 1991-93. The
overall balance of payments was generally in equilib-
rium until 1991; the onset of internal conflict led to a
gap averagingalmost 3 percent of GDP in 1991-93.
In the late 1980sthe govemment sought to improve
fiscal managementthrough new tax measures, lower
current expenditures, and lower domestic outlays for
capitalexpenditure.Improvementwas short-lived,how-
ever, because of shortfalls in receipts from taxes on
exteral trade, and the politicalhostilitiesin neighboring
countries. The budget deficit rose from 9.2 percent of
GDP in 1989 to 9.6 percent of GDP in 1991, largely
fianced by grants and drawing on cash reserves. The
public finance situationhas deteriorated markedlysince
1991 because of the increase in military expenditure.
Despite higher taxes-including a 10percent special tax
on wages to finance the war effort-increased tax
 Djibouzti
collection, forced levies on public enterprises, and
measures to contam expenditure-includg a new pay
scale and reduced frnge benefitsfor civil servants-the
budget deficit on a commitmentbasis, excludinggrants,
is estimated at 15.5 percent of GDP in 1992 and 12.2
percent of GDP in 1993. The cash deficit after grants
has been financedby domesticpaymentarrears, forcing
local enterprises to borrow from the banling system to
fmance their operations, and putting pressure on the
currency.
The government's development objectives are to
reduce dependence on external budget support, diver-
sify the economy and foster permanent employment
opportunities, improve social standards and alleviate
poverty, and arrest desertification. The increase in
military forces has led to the additional objective of
demobilizing excess military personnel and reintegrat-
ing them into the economy.
Initial stepsto improve fiscal managementhavebeen
offset by incrased military expenditure, the economic
slowdown, and weak tax administration. In 1994 the
govemment itends to increase fiscal revenue by in-
creasing taxes on salaries, profits and domestic con-
sumption, and reduce expenditureby contaning outlays
on materials and transfers, and through demobiization
of 1,500 out of an esfimated17,000 military and secu-
rity personnel The authorities have become more se-
lective about new investment projects and their
financing, focusing on infrastructure (port facilities,
railroads, telecommunications,and roads) and develop-
ment of hnman resources and social services (education,
health, and urban development). While a public invest-
ment program is under preparation,the implemion
of public investmentprojectshas deteriorated due to the
fiscal sLippageand difficulties faced by public enter-
prises in executingprojects. Aprogramtopratizepublic
enterprisesprodcng tradedgoods and services has been
stalled by the political aud economicdifficulties,
While recognizing the Leadingrole of the service
sector, the government is promotingprivate investment
in export-oriented small- and medium-scalemanufic-
turing activitieswith a view to fostering growth and job
creation. The goverment also promotes fishenes and
agriculture within the limits of scarce arable land and
water. .
Ia the social sectors, human resources are being
developed through improved education and vocational
training. The government is investing in urban sites and
services to improve the living conditions of the urban
poor. A comprehensive health plan has been prepared
to address major sector issues, includig the family
planning services, child immuizaton programs, and a
54
communicable discases control program. Wells have
been drilled m several areas of the hinterland to provide
water to nomads and their herds. Pilot projects seek to
arrest descrtification.
Medium-Term Prospects
Djibouti's short-term prospects are difficult. In 1994
production is expected to contract by about 3 percenL
The fiscal situation will remain fragile, despite the
measuresoutlined above, and the govemment is likely
to further increase its domestic arrears, thus fueling the
vicious circle of delayed tax payments, lower imvest-
ment, .nd deteriorating net credit situation of domestic
enterprises. Credit to governmentis expectedto double.
The externalbalancesare alsoexpectedto face increased
difficulties m 1994, forcing further import compres-
sion, the contraction of official reserves, and putting
pressure on the currency.
Medium-termdevelopmentprospects depend on po-
litical settlementof ethnic strife, and the government's
successin stabilizingthe macroeconomicsituation, im-
plementing economic policies to generate job opportu-
nities, reversing declining trends in production, and
reducing demographicpressure.
Successful adjustennt and enhancing the capacity
and the efficiencyof the port, other transport facilities,
and other business and financial services would allow
Djibouti to expand its regional role as a service center
and benefit from eventual growth in the exenal trade
of its neighbors. In the short term, a modest economic
recovery is feasible, but GDP growth is expected to
remain below demographic growth through 1995-96.
GrowLhwoud be generated mainly by the recovery e-
transport and trade activities. Givenstrong stabilization
measures and exteral financing mobilized only on
concessional terms and used productively, a viable
fiscal situdtion, balance of payments, and adequate
extemal reserves could be restored in the mediumterm.
External Debt
Extemal medium- and long-term debt outstanding and
disbursed rose from $96 million (28 percent of GDP)
in 1985 to $180 million (45.4 percent of GDP) at the
end of 1993. Most of the extemal borrowing has been
on highly concessional terms. Debt-service payments
on mcdium-and long-tnrmdebt representedonly about
5 percent of the exports of locally produced goods and
services in 1993. At end-1993 the govermment'sshort-
term debt stood at $15 million, equivalentto 3.2 percent
of GDP.
 Djibouti
Populabonmid-1992 (miNions) 0.5 Income group: Lower-middle
GNP per capita 1992 (US$) _ Indebtedness evel: elowaveage

KEYRAIOS
13SW 1w 1591 1992 1993 1nv W=toGDPrauopj
Grossdomesbt iremientlGDP .. 23.4 16.8 15.7 12.8
ExportsofgoodsandnfslGDP .. 43.9 74.5 712 71A
GrossdomeuicsavingjsGDP .. -3.9 -6.3 -10.7 -14.1 20
GrossnaonalsavingsGDP .. -4.1 -7.5 -12.6 -14.3
Current account b.ancelGDP . -27.5 -24.3 -282 -27.0
Interest paynientslGDP 0.3 0.6 0.5 0.6 0.5 ZN 0 o
Total debUGDP itS 41.9 45.6 41.0 42.1 a
Toal debWMport 87.3 B04 55.2 54-9 7l u" S 2 U

GDP:PRODUCTION
of GDP) tS1980 1985 1991 1992 193 SaasrGWOP by sUckw(%3
Agtatbure .. 2.7 2.9 2.7 2.5 . _
Ibtzsby .. 18.1 19.3 20A 212'
Manufadcung . 4.0 4.6 4.4 4.5
services .. 79.3 77.7 75.9 76.0)
so
1980-865 IBSS3 1991 1992 1993
(ovawmgeanuagwh) I
Ag&iWm . - - -. -

Manu5ainmg .. .. .. ..

D0a *1wn D6aco

GDP 3.7 -07 1.3 2.4 -2.333ftfta'" of ______

GDP. EXPENDITURE
(%of GU7 19M 1985 1991 1992 1993 GmuwlbuksefGWand GDP(%)
Private consumpion 654A 74.7 71.9 76-4
General governfert conumption .. 38.5 31.6 38.8 37J7 15A
Grossdornlecwesbnr .. 23.4 16.8 15.7 12.8
5 0/
Exportsof gods andnts 43.9 74.5 712 71A4
Impors of goodsandrts .. 71.2 97S5 97.6 98.3 5t

(avera8eannual gmwth) 1S80-85 198593 1991 1992 1993 |

Privateconsumpton .. .. - -
General govamment consumption .. .. 4
Gossdoestic investmn .. -4.5 .. .. 45
Exportsofgoodsandnfs .. 2.6
ImportsGl goodsand nts .. -0.1 .. --
Growssni product .. .. .. .. _ -c -COP
Gross
national
income .. .. .. .. _ _ I

PRICES and GOVERNNENTFOANCE

1180 192S 1991 1992 1953 Cbangs doflmbhand CPII%)
Dorsslcpdces |
(% change) 5
4
Cosumerprices 11 2.1 .. *- _
W lsO p- .. .. .. .. .. 2 I
ImplicitGOPdeblEtor 9.7 3.7 2.1 4.5 3.0 1
Govnmmtffnance r um s In a 0*
(%of GDP)
Cumentbudge balane 1.5 -4.5 -11.5 -. 8 |GDPdWd. -CP
Overallspkfdefeitt.. .. .. _ .. I

55
Djibouti
POVERTYand SOCIAL
(annualgrowthals) 198045 1985-93 Dewlapmn dl
Popuiation 6.8 4.9 U. aKPeCtanCY
Laborforce
mnst recnt ceilmat (Mrm)
Povert level:headcountinde (%ofpopuhion) .. GNP /GCSS
Lfe pmedaWcy at birth 49.0
Infint mortlity eriousnde sbi) 115.0 Patnrt
Chld malnutriton (% of ehldmn under5) 40.0 \ /
Access to safe water9 of popflafknj 43.0
Enweyconsumptionper cWit fkgodequivaLent) 994.5
lIfteracy (p oaf
ppuation ae 15+) ..
Grosspdmary enmrolmnt(%ofsco-a popullan) 39.0 tO voawr

TRADE
(mEans11S$) 190 1985 191 1992 1913 Exportlandlnpoitlveh( ImilLUS$)
Totalexports(fob) -. .. .. . . 1
Olheribod .. 4
*1.5 .. .. ....
Manubctures ..
Todzlinports(i) .. ..
Food. .. .. ..
Fuel and energy ..
Capita goods .. .. .
EKPt pop indc (1987--100 .. _ - a
c , . I
Import pice index (1987=1W) . . .. .. a - *o 91 e2 n
Teomsof trade (?97-100) .,
Opennessof economy (fd&tGDP.) 115 172 169 170 OE__f _ *'
BALANCEof PAYMENTS
1980 1985 1991 1992 1993 bedncetoGP ratot A)
Curumaaccou=t
Exportsofgoodsand nfs . 151 321 329 332 n _ - _. _2 I
Impots orgoodsand nfs . 245 421 451 457 r1
Resourcebance .. -94 -100 -122 -125
Netfacdorincore . 12 -3 6 2 40n
Ntcunretrarsfe .. -12 -3 -3 -2
Currernacount balance
Befor official bansfs
After officialtransfe
..
..
-95
-42
-05
-25
-130
-53
-126
-53
*ts

-a0
J
Long4trm capital infw .. 32 31 38 45 _
Totalcter iarns (ne) .. 16 0 -2 0 2s
Changesin netserves .. -6 -6 17 8
Mentor -30
Reervesexcuding gold (mil US1) .. S1 100 83 75
Resrvsnchiudhiggohi (mildUS:17 .. 51 100 83 75
Official exchangerate (ocaWSS) 177.7 177.7 177.7 177.7 177.7

EXTERNALDEBT
1910 1985 1991 1932 1993 S3nrofidab
Lag-term debUexports .. 58.2 53.8 50.6 50.6 .,r
IIFcreditpuorts ... o. 0.0 0.0 o
0.0
Short-temrdebWJors .. 29.1 6.5 4.6 4.3 .
Totl debtserlexpors 4.3 4.3 3.7 3.1o
GOPyfftgDP,'
Long-termdebUGDP 8.7 27.9 40.6 37.6 38.8 I
IMFcrediGDP 0.0 0.0 0.0 0.0 0.0
Short-trm debtlGDP 2.0 14.0 4.9 3.4 3.3
- n~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~2
Privatenronguarantaedllong-term 0.0 0.0 0.0 0.0 0.0 .
Pubr-tand pubkly guarantemd .r a s s0 mIn us
Prvate creditorsllong4erm 182 6.8 0.1 0.1 1.1
Olkial aedftrsilonrv-tem 82.2 93.2 99.9 99.9 9L.9

TThedevelopmentciamondshows a level of deelopment in the wunby comparedwith its ince grup average.

56
 Equatorial Guinea
E quatorial Guinea's land area is 28,000 square
kilometers andits populationabout400,000. The
national territory comprises Rio Mum on main-
land Africa, and the island of Bioko, with the national
capital Malabo and other small islands in the Gulf of
Guinea. Communicationsand administration are par-
ticularly difficult. The islands and Rio Muim have
differenteconomicbases. Biokohas rainfallallyearand
the dominant economicactivity is cocoa production. In
Rio Muni, food crops are the dominanteconomicactiv-
ity, and cash crops play a secondary role. Bioko is the
more developed and urbanized, but approximately
ODpercent of the populationlive in Rio Muni.
Agriculture, includingfishing and forestry, accounts
for about 53 percent of GDP and 60 percent of exports.
Subsistenceagriculture predominates, but timber, co-
coa, and coffee provide monetary income, foreign ex-
change, and government revenues. There is little
mnufacturing; commerceaccountsfor about 4 percent
of GDP, and constrction, public works, and services,
4 percet. A small offshore hydrocarbon deposit in
Bioko, the Alba field, staed production in January
1992, and the first exports were made in April 1992.
Additionaloil explorationis takingplace offshoreof Rio
Muni.
In 1985 Equatorial Guineabecame a member of the
Bankof the CentralAfrica States,and adoptedtheCFA
fac as its currency, a reform that involveda sharp
devaluationof the exchangerate. In that year, effortsto
rebuild the economy were renewed, but overall eco-
nomic growth was marginal. Although timber produc-
tion increasedappreciably,and activityin the commerce
and trade sectors expanded, production and export of
cocoa stagnated at levels far below those achieved
before independence. Moreover, a deterioration in the
terms of trade contributed to large and uns inable
fiscal and extrnal imbalances.
In November 1988 a medium-termadjustmentpro-
gram was adopted, supported by IDA and the IMF.
Equatorial Guinea's economic performance during
198889 fell short of whathad beenenvisaged,primarily
due to slippages in policy implem on because of
limited adminisative capacity and continuederosion in
world market prices for cocoa and cofflee,its principal
57
export crops. Commitmentto program implementation
was alsoless than expected. Cocoa exports stagnatedat
around 6,800 tons on average over 1986-90; wood
export volumes declined sharply in 1988 because of
excessivetxces and production costs, undercapitalized
concessionaires,difficulties in banking services, and
deterioratinglogging roadsand port facilities, were flat
in 1989, and improvedin 1990.
After the disappointing economic performance of
1988-89, the goverment took a number of important
steps over 1990-91to bring the structural adjustment
program back on track. These consisted mainly of
effortsto diversifyeconomicactivityand strengthenthe
productivesectors. The most significantactions taken
were: the launching, in October 1990, of projects to
diversifyagiculture in favor of food crops and non-tra-
ditionalexports;adoptionofa forestryactionplanaimed
at revitalizingproduction and exports, while strength-
ening managment and conservaion of the country's
nanual resources;signing, in April 1990, anew contract
with a foreign company to start exploitation of oil
resources; and the enateme, in April 1992,of a new
investmentcode.
Considerableprogress has been made in strengthen-
ing the management and performance of key public
utilities and toward liquidatingtwo insolvent bans. A
number of changes were also made in the legal frame-
work, including revising the labor law to free up the
labor market, and lifting price controls for all items
except bread, petroleum products, and agriculturalin-
puts. A civil service census was completedand served
as the basis for a new civil service registry. In 1992 its
GNP per capita is estimatedat $340.
Recent Economic Developments
In January 1993the government embarked on a three-
year adjustmentprogram supported by the IMP. The
program for 1993 aimed at attaining real GDP growth
of 10 percent, containing the rate of inflation to 3
percent, and reducing the extrnal current accouat defi-
cit (excludingofficial transfers) to about 22 percent of
GDP. To achieve these objectives, the government
undertook to stengthenpublic finances, continuetight
 Equatorial Guinea
monetary and credit policies coupledwith an accelera-
tion of financial sector reform, maintain positive real
interest rates, and implementstructural policies aimed
at removingconstraints and distortionsin the economy
to increase the non-oil sector's contributionto growth.
However, the government'spreoccupationwith politi-
cal and electoral process in response to pressuiresfor a
greater degree of democratizationmeant that insuffi-
cient attention was devoted to economic management,
and the program veered quicldy off track.
Real GDP grew 7.1 percent in 1993, reflecting
mainly lower-than-envisagedoil production;the rate of
inflation, measured by the consumerprice index, was
less than 2 percent, and the external current account
position deteriorated sharply. There was a marked
worseningof the fiscal situation: the overall budgetary
deficit (on a commitmentbasis and excluding foreign-
financed investment) increased from 3.2 percent of
GDP in 1992 to 8.2 percent. Total revenueis estimated
at roughly 21 percent of GDP, mainly as a result of a
delay in implementingtax reforms, while total expen-
diture and net lendingexceededprogram targets by 10
percentage points of GDP. The substantialexpenditure
overruns were partly causedby financingdevelopment
projects for which donor funding had been frozen.
Consequently,the government'srecourseto bank credit
was much larger than envisaged and domestic and
external paymentsarrears increasedsubstantially.
Developmentsin the external sectorwere less favor-
able than envisaged.The value of oil and cocoa exports
was significantlyless than projected, reflecting a sig-
nificant decline in oil export prices during the second
half of 1993, and substantiallylower volumes of cocoa
exports. As offi transfers were considerably less
than programmed,the external current account(includ-
ing official transfers) shifted into a deficit, equivalent
to 4.4. percent of GDP, compared with a surplusof 2.1
percent in 1992.The overall balanceof paymentsdeficit
widened to $24 million, from $6 milion in 1992, and
was financedmainly through an accumulationof exter-
nal payments arrears.
In January 1994 the CFA franc was devalued from
CFAF50 to CFAF100 per French franc. The govern-
ment extended its ad,j'stment program to cover the
period 1994-96,supported by an IMF EnhancedStrc-
tural AdjustmentFacility. The program aims at accel-
crating economic growth, from an average of 5.6
percent during 1990-93 to an average of 7 percent,
progressiveinflation reduction, measured by the con-
sumerprice index, from a projected35 percent in 1994
to 3 percent in 1996, and reducing the external current
account deficit (excludingofficial transfers) to a level
that eliminatesthe need for exceptionalextera financ-
ing over the medium term. The governmentintendsto
strengthenits internal adjustmentmeasuresas an essen-
58
tial complement to the January exchange rate adjust-
ment. Major emphasis will be placed on fiscal and
income policies, promoting forestry and fisheries, ac-
celerating the restructuringand privatization of public
enterprises, and further trade and price liberalization.
The government's agriculture strategy is to
strengthenincentivesforcrop diversificationto promote
exports. It plans to simplify export procedures,
strengthen research and extension services, distribute
abandoned land to smallholders, and introduce land
tenure security.The governmentwill also limit its direct
interventionin the financingof agriculture by usingthe
commercialbankingsystem to provide banking services
to farmers; the public institution that provides credit,
input, and marketingserviceswill be closed becauseof
its substantialfinanciallossesand a program undertaken
to recover its large loan arrears. The government will
also shift from direct interventionin cocoa exports to a
regulatoryand supportiverole for the private sector. A
small replanting program is being initiated and it is
estimatedthat it will take five years before the effects
of replanting are felt m terms of yield and production.
Economicgrowthis expectedto comefrom icreased
productivityand higherproduction in the oil sector and
more rapid growth in the non-oilsector. As oil produc-
tion levels off, real GDP growth is projected to slow,
from an exceptionallyhigh 13 percent in 1992to about
6.7 percent in 1996.The rate of growthof non-oilGDP,
buoyed by the exchange rate adjustmentand accompa-
nying measures, is expected to rise steadily, from 4
percent in 1993 to 5.9 percent in 1996. The national
savings rate should increase substantiaUy,reflecting
greater profiability in the private sector. Reflectingthe
tapermg off of investmentin the oil sector, the invest-
ment/GDPratio is expectedto decline from 25 percent
in 1993to 20.6 percent in 1996. Growth in the non-oil
sector shouldbenefitfrom a crop diversificationproject,
distributionof 2,000 hectares of abandoned state land
to support expansion of food crop production, and an
mcrease m cocoaproductivity. Trade and domestictax
reforms are expected to reduce the anti-export bias of
the trade regime. Equatorial Guinea's public finances
will be strengthenedconsiderablyover the mediumterm
as oil revenues increase and expenditure-restraming
measures are fully implemected. The overall fiscal
balance (commitmentbasis) is programmed to shift
from adeficit of 8.2 percentof GDP in 1993to asurplus
of 6.0 percent in 1996.
Revenue is expectedto increase from 21 percent of
GDP in 1993 to 25 percent in 1996, with taxes rising
from 14percent of GDP in 1993to 17percent in 1996.
Within the frameworkof the Central African Customs
and Economic Union, the governmentplans to replace
external tariffs with a commonexternal tariff consisting
of four rates, introducea preferentialtariff for intra-un-
 Equatorial Guinea

ion trade, replace its indirect tax system with a gener-
alized turnover tax, introduce excise duties on a region-
ally determined list of products, and eliminate most
categories of customs duty exemptions. Revenue from
oil production is projected to increase over the pmgram
period, but the full impact will not be felt until the
second half of the 1990swhen the initial investment by
the private company has boen recovered.
The govermmentintends to limit the growth of the
public sector wage bill and outlays on goods and serv-
ices so that total expenditure and net lending decline
from 29 percent of GDP in 1993to 19 percent in l496.

59
 EquatorialGuinea
Popalaion mid-1992 (millions) 04 Incomegroup: Low
GNP per capita 1992 (USS) 340 Indebtednesslevel: Sever

KEYRAllOS
1980 1985 1991 1992 1993 mbemntlleGDP rolS)

Gross domestic inwsitmenUGDP .. 5.2 43.3 24.2 25. 1

Exports of goods and n/GDP .. 30.2 32.5 36.6 3M.8 e.-
Gras domestc savings/GDP .. -3.2 -14.5 Z8 7.5 *0-
Gmss national savings/GDP .. -7.5 -18.1 -6.0 -0.6

Current account balance/GDP .. -13.9 61.5 -34.2 -26.2 *

bnerestpayments/GDP .. 60.6 1.2 0.6 0.6
TotaldebtIGDP .. 166.1 193.9 155.2 14310
Total debtxports .. 550.8 560.5 420.5 359.4 a S IS to 1n M

GDP: PRODUCTION
of GDP)
(% 1980 19115 sI 1992 1933 Sh_sfGDPtbySucor(%)
Agrdut . 66.9 58.4 49.6 472
Indstry .. 8.7 12.4 21.9 25.
Manufabcidng .. L7 12.4 11.4 11.3
Servcs .. 22.5 29.3 28.5 27.0

1930-85 1985-93 1991 1992 1993

favegxe anusguwth)
Agrcture -2.3 -6fi -3.9 0.1
Industry .. 7.5 14.9 -02 11.3
Manufacturing -0.9 10.2 6.2 10.0 c - -

Services .. 5.8 72 12.5 7.2 PS IUs so n M 2

GDP . 3.7 --. 0 13.7 7.3 I

GOP: EXPENDITURE
1980 1985 1991 1992 1993 Groawth otltand1 GOPDP%)
of GOPJ
Privateconsumption .. 75- 752 62.0 51.1 14 -
General governennt consumpbon .. 27.7 39.3 35.2 41.4 12 -
Gross domestic investment .. 5.2 43.3 242 25. 11
Exports of goods and nfs .. 302 32.5 36.6 39.8
Importsor goodsand nis .. 39.e 90.3 58.0 57.4
19804 1985-93 1991 1992 1993
fUewrageannuel ) 41h1 1
Privt consumption ..
Gameralgovernment consumption .. .. .. 2
Grossdomesticimnestment .. .. .. .. ..
Expots of goodsand nfs .. .. .. .. .. u m ma
Imports of goods and nfs ..
Gross nabonal prodwt .. 42 -1.0 12.8 10.3
Grossnabonal iname .J .. .. .. ..

PRICES and GOVERNMENT FINANCE

193l6 1985 1991 1992 1993 Chng of GOP
d atnd CP1%)|

Doestleprices 10 T
{; ) IaXt I
Corsumer prices -*-342 -72 ., a
Whalesatpces
| .. *- .. .. .. ma
ImplicitGDP deflat .. .. 3.A 03 -1.7 1

Govwnmentfinam:l -15
(% afGDP7 . s
Cuent dget balance .. 3.5 0.0) 4t2 -6.6 1 -s-CPdt -CPI
Overall surpqWdefcit .. -2.5 -t9 -3.2 -8.2

60
 Equatorial Guinea
POVERTYand SOCIAL
(annualgdroth des 198045 139543 Dlopdmedluumin
Poptlatlon 1.5 2.3 Ufaepetany
Laborlrce 1.3 1.6
moat oAmnteatIa(mr
m)
Poverty meeheadcount Inx(9 cifpopuklatn) - GNP rG
Lifeexpectancyat bih 477 per .7
Infentmortally(petrousnd Evebs) 117.0 capie
ChildmnutdOiontX orchidrn under ) nenlrnent
Acceseto saof water(X of population)
Enery consupirlon per capita (kg oi equiaAent) 68.6
liUeracy(X of populationage 154) 49.8
Gress premary enrolment x of sschool-agepopualaion) 147.0 sba wae

TRADE
(ons uss 1t9110 lg95 1991 1992 1993 Expertand bupartilaval (mULUS)
ToWlexports (fob) 24 36 52 se
cocoa is 6 5 3
Timber 6 0 0 0 40
Manudacures . . o 70
TotalInports (cif) 32 X 64 .
Food ;; 4 0 0 0 40
Fuel and eriagy .. 4 6 7 5 3
Capial"goods .. 12 19 16 l8a 2
Export price index (1987=1.8) 10 _
Imprtprice ndex (1987=100) .. 81 90 90 .. a * *o
T-eFMsoftde( 1957=100) .. 111 129 89 . m In

Opairess of economy MdaKSDP,X) . 70 123 95 97 DEWI E_it

BALANCEof PAYliENTS
(MonS - 110 1985 119 1992 1993 e
Cuetn.accontIbt to SPoratIo
Expostsofgoodseandnfs 24 42 59 62
[ j
87- 8 l9
Imporlsofgoodsandnrs .. 32 118 98 91 . 1
Resoure balance -8 -76 -40 -28
Netactorincome . -4 -6 -11 a213
No curmrt bansfss
Cumnt accountbaanlce
Berore official artsfers
..

-11
1 1 -4

-0 4 -41
a4

010_
JLjEjELi
Af*er icia Vansfbr .. 4 -45 -41 |4'

Long-term caplal hilw .. -7 33 1 -7 I

Toblolh ierms (not). 7 17 -10 -8 0111
Changes in net rsers4 7 2
. ainL:
Reserves excludinggold (mil. US$) .. 3 9 13 0
Rerves indcludnggold (mO.USS3 - 3 9 13 0
Offidal exchange rate (AWaVS) 110.6 449.3 282.1 264.7 283.2

EXTERNALr
ExpMos
rais1980 1985 1991 1992 1993 Smucaurmofnal dmbt(%)
Longern debtlexpods .. 470A 475.6 350.7 332.6
IMFodWoxporlt .. 53.3 29.3 215 2583
Shodt-termdeWt .. 27.1 55.7 48.3 0.5 5
Toaldebt servic/e t .. 425 8.9 5.3 4.5 _PUS
GDPw r/s [oFM&
Long,erm debtIGDP .. 141.9 164.2 129.5 132.3 se
D uO
IlMFaieGDP .. 16.1 10.1 7.9 10.5
Shot-term debtfGDP .. 8.2 19.2 17.8 02
Lung-fl dabt ftes
Privatenonguaranteedllong tem 0.0 0.0 0.0 0.0
Pubric and publiclyguaranteed a.7 a a o- In - a3
Private credtmslong-telrm 13.7 14.3 a1 7.8 7.6 1_ _
Oflical aeditorsllongtorm 86.3 85.6 91.9 92.2 92.4

- Thedvelopment dermandshlmsa levelof devopmt inthe cowubycompared ilhits incomegroupaverage.

61
 Ethiopia
In May 1991, after a long and devastatingcivil war,
the govermmentwas ousted by a coalition that then
formed a transitionalgovernmentin Ethiopia and a
provisional govermnentin Eritrea. A NationalConfer-
ence on Peace and Democracyin July 1991 led to a
charter that requires national electionsto be held at the
end of a transitional period of approximatelytwo-and-
a-half years. A referendum in Eritrea voted
overwhelminglyin favor of independence,which was
declared in May 1993,with agreementthat Ethiopiawill
have free access to the port of Assab in Eritrea. Mean-
while, the transitional government has initiated an
extensive programof political and economicdevolution
to establish a federalsystemof government,andnational
elections for a constituentassembly were held in June
1994.
Ethiopia's considerable economic potential has re-
mained largely unexploited.With a populationof 54.2
millionin mid-1992(mcludingEritrea), Ethiopiais the
second nmostpopulous country in sub-Saharan Africa.
Its GNF per capita is estimated to be $110 in 1992.
EttiopiaWsknownnaural resources includegold, plad-
nuw, tantalmn, sodaash, potash, andnatural gas;except
for gold, none of these resources bas been exploitedon
a large scale. Instead, the economyhad been basedupon
a near-stagnant agricultral sector, a narrow export
base, the production by public enterprises of all basic
wage goods and some raw materials, and a large volume
of servicesprovidedalmostentirelyby thepublicsector.
Real GDP growth, after averaging4 percent a year over
1965-73, fell to around 2 percent for 1973-90.With a
population growth of around 2.9 percent per year,
average per capita incomes declinedconsiderably.
Although the previous government introducedsome
reforms in early 1990, Ethiopia's economicconditions
deteriorated markedly. By mid-1991, when the transi-
tional govermmentassumed power, much of the eco-
nomicinfrastructurewasdestroyedorindisrepair.War,
famine, and reductionsin socialspendinghad decimated
the humanresource base. With aper capita incomelevel
of $110, its social indicators includinginfant mortality
rate, life expectancy, and primary school enrollment
were among the lowest in the world. Real output per
c2a.ta had declined more than 6 percent over the pre-
62
viousthree years. By 1991the gross investmentrate had
fallen to 10.4 percent of GDP, down from 15.8 percent
just three years earlier. Recordedearnings from exports
had collapsedto $276millionin 1991,comparedto $459
millionin 1980.Debt service,onan accrualbasis, stood
at 70 percent of exports of goodsand non-factorservices
in mid-1991, compared to 7 percent in mid-1981, and
debt servicing arrears had reached $341 million. In
addition, as a result of the effects of earlier fiscal
imbalancesand acute shortages during the last months
ofthe civil war, inflationrose to 35.7 percent,compared
to an averagerate of 5.6 percent over the previous thr
years. The budgetdeficit for fiscal 1991was 13 percent
of GDP (includinggrants), and domesticbank financing
of the deficit reached 9.6 percent of GDP. The current
account balance of payments deficit, before official
transfers, reached 8.9 percent of GDP for fiscal 1991.
Gross official reserves had fallen to about one week's
worth of imports.
Agricultureplays a key role in the Ethiopian econ-
omy, contributing more than 40 percent of GDP, 60
percent of merchandiseexports, and 85 percent of total
employment.Despiteits key role, the agriculturalsector
has stagnated for the last two decades: annual growth
droppedto 0.7 percent in the 1970sfrom 2.2 percent in
the 1960s, and stagnated at 0.5 percent in the 1980s.
Although the previous governmentstarted to libecralize
agriculture in 1990, the sector continued to deteriorate
for the next two years, largely due to the war and the
drought. Recently,the agriculturalsector has responded
positively to reforms aimed at enhancingmarket-based
incentives and private-sector initiative. Fiscal 1993
marked a strong recovery as sectoral growth rose to 5
percent, compared with -4.0 percent in fiscal 1992.
Reforms include the freedom to hire farm labor and
decontrol of agriculturalmarketing. However, agricul-
ture continuesto be vulnerableto exogenousshocks as
evidenced by the impacts of the rain and drought on
output in fiscal 1993 and 1994.
Ethiopia has considerable unexploited fertile land,
but is subject to recurrent droughts. Food security
protection against harvest failure is, therefore, neces-
sary. When this was inadequatein fiscal 1985, a famine
occurred and a major intemational relief effort was
 Ethiopia
mounted. A second, even larger, effort was mounted in
fiscal 1988that brought in nearly I milliontons of food
aid (15 percent of annual grain production). Reliefwas
again mobilized in fiscal 1990 and 1991 to cope with
renewed localizeddrought, mainly in the north andeast,
and food was distributed despite scvere disruption
caused by the civil war. Drought and irregular rains in
fiscal 1994 are resulting in a food shortage that may
affect nearly 7 millionpeople this year. The transitional
government is preparing a food securityprogram.
Ethiopia's industrial sector has been dominated by
public enterprises and has stagnated for the past two
decades. Manufacturingaccounts for only 8 percent of
GDP and manufacturing-basedexports are only about
one-fourth of merchandise exports, despite Ethiopia's
competitiveadvantageof low wage ratesand large labor
force. While the transitionalgovernment's fiscal 1994
budget reflects its policy of reducing public investment
in the industrial sector, many sectors are designatedfor
public sector involvementonly
Ethiopia's road tnmsport system cannot support an
efficient and market-basedproduction and distribution
system. Its road density is one of the lowestin Africa.
Nearly three-quarters of farms are more than half-a-
day's walk from all-weatherroads. About 65 percent of
the road network is in poor condition,largely as a result
of a very old road network, inadequat. maintenance,
the effects of war, and heavy vehicle overloading.
Extensive rehabilitation, complementedby enhancing
institutional and financial capacity far routineand peri-
olic maintenance, is needed to remedy the backlog of
maintenance. Deregulationof the transportationsystem
and liberalization of freight tariff rates has begun and
the public expenditure review will help prioritize gov-
emimentexpendituresin this sector.
Ethiopiais one of the countriesmos: poorly supplied
with modern energy and is highly dependent on wood
for fuel. In 1989 per capita consumptionof petroleum
and electricity was about one-fourth of that in Kenya.
In recent years the demandfor energy, especiallyelec-
trickty, has increased rapidly. An improved supply
response requires a comprehensive energy strategy
aimed at attracting significant capital investments to
develop the country's modem energy resources, im-
proving the commercialoperationsof the energy sector
corporations, sectorrestructuring, andencouragingpri-
vate-sector participation.
Water supply and sanitation in Ethiopia is charac-
terized by severely deficient infrastructureand isuffi-
cient institutional capacity to handle policy and
regulatory issues and to plan, operate, and maintainthe
water supply and sanitation services. Only about 17
percent of the population has access to potable water,
and sanitation service is much lower. Water supply
coveragein the urban areas is better, butwith significant
63
inequalities in the larger towns. Regionalization of
water supply operations, which has been carried out
extensivelysince 1993, has created a critical need for
capacity building and institutional support at the re-
gional level. In addition, sector institutions are now
required to take on additional tasks of providing re-
gional administrationswith policy advice, investment
planning, and technical support.
Agriculture-basedexports accountfor about 60 per-
cent of Ethiopia's merchandise exports. Among mer-
chandise exports, coffec accounts for 50 percent,
followed by leather and gold. Ethiopian Airlines has
also been an important source of foreign exchange,
contributingabout 36 percentof export earnings. Under
the previous government, Ethiopia's export perform-
ance was severely constrainedby an inappropriate ex-
changerate policy, stagnatingagriculturalgrowth, poor
marketing infrastrucure, adverse security conditions,
and state controls over export production, distribution,
and trade. As a result, almost all merchandiseexports
declined steadilyin volume over 1989-93.
The recent devaluation of the exchange rate, more
liberaized incentives, greater participation by the pri-
vate sector, favorable weather conditions, improved
security, a redirection of exports from ilegal to formal
channels,and improvedcapacity utilizationhave led to
an improvementin export performance-all merchan-
dise exports increased in real terms in fiscal 1993.
Moreover, the recent increase in international coffee
prices should result in a further increase this year. In
the medium to long term, higher export earnings will
depend on impmved productvity in the agricultural
sector, inceased supply of capital imports, better infra-
structure, improved incentives to exports, a greater
private-sector role, increased foreign investment, a
strongerfinancialsector, rationalizationofthe tariffand
tax structures, and developmentof an export-oriented
and labor-intensivelight manufacturingindustry.
Recent Economic Developments
The transitionalgovernmentbegan an extensive stabili-
zation and growth program for poverty reduction and
transformationfrom a command to a market economy
in fiscal 1993. The first phase of the reform program
includedprudent macroeconomric policies, a substantial
correction for the overvaluedexchange rate and other
distorted key economic prices, and other structural
reform measues.
The macroeconomic stabilization program mainly
consistedof structural improvementsin the fiscal posi-
tion andthe correctionof key price distortions. Ethiopia
eliminated all export taxes except the coffee tax, and
abolished export subsidies, reducedthe number of tax
brackets and loweredmarginal tax rates, began cetral-
 Ethiopia
izingthe managementof externalgrants andcounterpart
funds, and initiateda review of public expenditures.To
correct key price distortions, the transitional govern-
meantintroduced positive real interest rates, adjusted
public-sectorsalaries upward to reduce wage differen-
tis with the private sector, and devaluedthe exchange
rate by 59 percent in dollar terms, thus reducing the
differential between the official and parallel rates to
about 40 percent. The authorities also introduced a
foreign exchange auction and streamlined procedures
for issuing export and import licenses.Thegap between
the foreign exchange auction rate and the parallel rate
has narrowed to about 10 percent.
The transitional govermnent also introducedstruc-
muralreformmeasuresaimedat liberalizingthe economy.
It issuednew labor and investmentcodesto removesome
of the restrictionson labor and investmemnpromulgated
a public enterpriselaw to improve the public enterprise
management,eliminatedthe monopoly power of some
official marketng and trade corporations, established
committees to facilitate public enterprise divestiture,
further decontrolled agricultural prices, decontrolled
pricesfor most products, and agreed to introducemeas-
ures to end discriminatorycredit and foreign exchange
treatmentof the private sector.
Economic performance under the reform programs
has been on the whole positive. There are favorable
signs suggesting that Ethiopia is beginning 'o assert
control over basic macroeconomicmanagement.The
budget deficit-on a cash basis and includinggrants-
was reducedto 10.8percent of GDPin fiscal 1993from
an annual average of 13.3 percent during the three
previousfiscalyears. Recourseto domesticbank financ-
ing declinedto 4.8 percent of GDP in fiscal 1993from
about 9 percent in the early 1990s. The inflationrate for
fiscal 1993, as indicatedby the Addis Ababaretail price
index, is estimatedat 10 percent. This is well belowthe
airwualaverage inflation rate of 15.7 percent of the past
three fiscal years. Foreign exchange reservesincreased
to 13 weeks of imports in fiscal 1993 from an annual
averageof 3.5 weeks for the previous threefiscalyears.
Improved capacity utilization combined with good
weathercontrbuted to 7.6 percent real GDP growth in
fiscal 1993, compared widLan annual average of -3.1
percent for the previous three fiscal years. However,
the external imbalance remains large with the current
account deficit (excluding official transfers) estimated
at 14percent of GDP in fiscal 1993.
Ethiopia's economyremainsvulnerableto shocks, as
evidencedby drought and irregularrain that broughtthe
growth rate down to 2 percent in fiscal 1994. Although
growth is expectedto reboundto over 6 percent in fiscal
1995, a growth rate of over 5 percent w-.'! not be
sustaiable in the longer mn without rapid expansionof
private invesmaentand acceleratedreforms.
64
The overridingobjectiveof the second reform stage
that began in fiscal 1994is to encouragegrowt through
fostering a market-based economy and emphasizing
private sector development. The program continues
prudent macroeconomicmanagementby fiscaltighten-
ing and restricting monetary growth. In the short to
mediumterm, foreign savings will continue to play an
importantrole in balancingthe budget. To ensurefiscal
discipline, the transitional government has imposed a
hard budget constrainton public enterprisesand intends
to prevent any potential buildup of customs and tax
arrears by these enterpnses as they begin to adjust to a
competitiveenvironment.
On the expenditureside, the govemment will con-
tinueto face budgetarypressuresto addresspast neglect
of entire regions of the country, the plight of war-dis-
placed and impoverished people, and much needed
infrastucture rehabilitationandreconstruction.A forth-
coming public expenditure review will help develop
sectoral strategies and redefine the role of the govem-
ment and its expenditurepolicy. A marked withdrawal
of the governmentfrom direct production, greater focus
on social and economicinfrastructure, and an improve-
mentin the efficiencyof public investmentand services,
all withina muchmore decentralizedeconomicenvimn-
ment, are seen as the main thrusts of future expenditure
policy. The transitional governmentis also preparing a
civil service reform study to improve the effectiveness
of the civil service and key public sector implementing
agencies, and to improve governance, accountability,
and democraticprocesses.
The task of macroeconomicstabilizationand struc-
mral reforms will be complicatedby the government's
efforts towards fiscal decentralization, including the
sharing of expenditureand tax responsibilitiesbetween
the center and the regions. It will be a real challengtto
make fiscal decentralizationconsistentwith the overaU
objectives of rnzional fiscal stabilizationand synchro-
nize the pace of decentalization with the improvement
of the implementationcapacity of the regions.
Social Indicators and Population
When the transitional government assumed power in
1991, war, famine, and reductions in social spending
had decimated Edtiopia's human resource base. Its
social indicatorswere among the lowest in the world,
with an infant mortality rate of 154 per 1,000, life
expectancyof 47 years, and primary schoolenrollment
of 36 percenL Nearly 50 percent of the populationlived
in absolutepoverty,with an estated averagepercapita
daily calorie intake of 1,750-only 80 percent of the
levelthoughtnecessaryforahealthylife.Withamarked
decline in military expenditure,the government's fiscal
1994 budget reflects increasing emphasison education
 Ethiopia
and health by increased allocations to both sectors.
Targeted social programs provide another important
avenue for poverty alleviation. The new budget reflects
the need to allocate resources to targeted programs by
commencinga social safety net program.
Ethiopia's population growth rate of about 3 percent
will absorb most gains in economic growth, seriously
impairingprospects for improvingnutrition, education,
and health care, and for comingto grips with Ethiopia's
ecological degradation. The government has reseutly
completed a National Population Policy, outlining a
strategy and policy measures to reduce the rate of
population growth, and a National Policy for Women,
emphasizing importantlinks between reducing popula-
tion growth rate and improving conditions for women.
including health, education, and accessto ecnomic and
social opportunities.
Environment
Land degradation caused by inappropriate forest clear-
ance, soil surface exposure, and overgrazing stands out
as the most severe environmentalproblem in Ethiopia
today. It is estimatedthat nutrient loss and soil erosion
result in foregone agricultunal production of close to
600,000 tons of gain per year, equivalcntto 90 percent
of Ethiopia's structural food deficit in 1993. Degrada-
tion and lack of adequate water resources have also
severely affected crop and livestockproduction, human
health, and industrial and commercialprocesset Urban
degradation in the form of poor sanitation, inadequate
solid waste management and drainage, and to a lesser
extent industrial pollution, is also becomingan increas-
ing problem. The transitional govermmentis nearing
completion of a NationalConservationStrategythat will
set out a comprehensive framework for addressmg
environmental problems across every sector and lay the
basis for sustainableeconomic growth in the future. A
Forestry Action Plan has already been prepared and
adopted in principle by the government. The newly
established National Environmental Protection Agency
will have primary responsibility for setting standards
and enforcing environmentallegislation, while national
and regional program coordination committeesare ex-
pected to be the main vehicle for ensuring overall
coordination, policy direction, and monitoring of the
implementationof the conservation strategy. The main
65
aim of the government is to ensure that line ministries
and their counterparls at the regional level and below
develop the capacity and mechanisms for integrating
enviental managementstrategies into their sector
developmentplans, and include environmental consid-
erations as integral componentsof sector programs and
projects.
ExtenIal Debt
The current account deficit has widened significantly
since the early 1980s, and has been financed through
official transfers, mostly from relief assistance, and
extemal loans, mostly multilateral and former Eastern
Bloc. As a result, Ethiopia's stock of external debt more
than tripled between end-1982 and end-1992. Ethiopia
began accumulating arrears in 1989. By June 1992
arrears to creditors were $716 million. In December
1992 the government reached debt relief and resched-
uling agreementswith Paris aub creditors on favorable
conditions. The government has recently completed a
comprehensive debt managementstrategy that includes
seeling bilateral agreementswith non-Paris Club credi-
tors for debt rescheduling and relief.
Medium-Term Prospects
Under the scenario of continuig reforms, real GDP is
expected to grow about 5.5 percent over 1994-96.
Improved capacity utilization explains most output
growth during the past two fiscal years. To sustain
growth of about 5 percent per year beyond 1996, real
gross domestic investment needs to roughly double by
1996 from about 9 percent in 1992. Although domestic
savings need to rise sharply for stable and sustainable
long term growth, foreign savings remain critical to
Ethiopia's investment in the immediate future. The
budget deficit before grants is projected to be about 20
percent of GDP aually for 1994-96. This is largely
due to the need to incrcase infrastructure investment,
increase operation and maintenance, decompress civil
service wages, provide safety nets for the poor, and
implemen a public works program to absorb labor from
restructuring public enterprises. Part of inports will
continue to support urgently needed reconstruction of
the war-tom economy. Growth prospects for exports
are cautiouslyoptimisfic.
 Ethiopia
midI992 (imillos)
Population Su4 Incomegmup:Law
GNP per capita 1992 (IJSJ 110 Indebtednesslevel: Seven

KEYRATIOS
19m0 tr ur 19192 113 hMw.lmtMtcGoPratbIS)
Gmss domesacInvesbenlGOP 10.0 14.0 10.4 8.7 15.0 20
ExporsofgoodsandnlIGDP 13.9 11.5 82 6.7 12Z5
Gossdomestic tingslGDP 4.9 2.8 0.0 40.5 1.6
GrossmnatonalsavigslGDP 7.0 11A 6.4 13.3 182 a
Cunentaint balGcelGDP -31 -16 -4.0 0.6 -0.5
IneaestpaymtslGDP 0.4 0.5 0.6 0.6 1.4
TotaldebtIGDP 20.0 421 1Z9 64.8 1102 o
Toal debfwports 134.5 235.4 555.5 581.9 592.5 sno n a

GDP: PRODlUCTIONt
( of GDP) o 1 i12 Smn ofCoPby r()
AgrcAwe 512 43.9 47-1 47.7 47.8 -
Industy 15.6 16.8 132 13.1 14.7
Manufactrin 10.9 115 8,7 8.3 -
Services 332 39.3 39.7 392 37.5
loam6 198S93 IW 1992 1193
AWiulue -3.6 3.4 7.9 4.0 5.0
Idusty 3.8 -2.1 -16.1 4.1 11.6
Menuactuut 3.9 -22 -18.7 -1l.0 21.9 0
Services 3.3 0.4 -2.5 -12.8 8.8 - *CU Mt

GDP 0Q5 1.3 -4.6 -7.5 7.7 1 ___

GDPEXPENCITURE
M ofGDP) i9110 115 1991 1992 1993 emflsf65and GOP(S)
Privalecnuption 79.9 77.7 78.5 B5.7 81.7 o;
GeneralgovenmmentnioFn 152 19.5 25 14.8 16.7
Grossdomdsrchw _stment 10.0 14.0 10.4 8.7 16.0 e
Expotsofgoodsandnls 13.9 11.5 82 6.7 12.5 *
Importofgoodsandnfs 19.0 22.6 18.6 16.0 269 2*

faverage smWgrowAh) IM45 1=1140

tNa~~~~~~~~~~~~~~~~~~~~~~~~o
lm 192 1993 Dsu
ang _
t
Prlvanuwtme - - !2
Geneal govnent coruns tmp .. _ _ .. .
Gross domesticinwenot .. \.. J .
Exports of goods andnf .. . .s
Import of goodsand ns .. .. ..
Gros abonalprduct OA 12 -Oi -7.5 7.9 - -wv
Goss naional
ine .. . _ . .. |

PRICES
and GOVERNIIN FINANCE
1950 1955 1991 192 11913 Cbn.. of GP defkd rand CPIM)
Doiwfc prces 4-
(% dhang) 30
Consumerprces 4.5 19.1 35.7 10.5 _ 2
e ps-
Ulehios. _
Implii GOPdefltor 2.0 6.0 10.5 10.1 1.0-
Gowwnmutffia 4t
(SofGDP)
Curent budgetba .. -38 -7.6 -.8 -4.5 --bwPis -CFn

NMol Data for Eribea.not yet disaggrgti. se induded hi EthIpia

66
 Ethiopia
POVERTYand SOCIAL
(annualg/ wth rates) 199W85 191153 Dowlopmdinamondm
PoPulation 2.8 &30 Ub .xeanqy
Labor frce 1.7 21I
mmtzcentesthnato(m)
Pove level; headcountinde (f of popubatin) --
Life expectancyat birth 48.8 * p)- y
Infant mortally (perthosandIi-ebi's) 122.0 perdh B nl
Chid malnutribon(% of dlhlren under5) 38.1 \ f
Accss to safe water (%of populaton) 180.
Energy consumpfionper capita (kg od equivalent) 20.5
Ilteracy (% of populationage 154-) 37.6
Gross prinary enrolment (%of schootage population) 25.0 er

TRADE
(nmioznsUs$) 1980 1985 1991 1992 1993 Exportandnportlewm(IrnLUS$)
Tota expors (fob) 459 359 276 154 222
Coffee 305 225 130 81 126
Hkies 67 46 45 28 32 *.
Manufactures .. .. .. .D M. -
Total ifnmpot(cii) 692 975 1.29 875 848 o
Food 37 283 152 132 133
Fuelandueergy 155 186 102 120 193 a-
Capitalgood 213 249 466 320 297 2
Expor
priceIndex (198700) 115 36 94 98 ..
lmpft pnceidex (1987=1tOO 113 89 124 134 87 . - - e 32 93
Termsoftrade(1987=100) 102 107 75 73
Openness of economy (fade'GDP, ) 33 34 27 23 39 OEurfl 3bn

BALANCE of PAYLMENTS
(md11nsUS 1980 1985 1991 1992 1993 CasntacCauntbala %)
UtoGW13mo
Exportsof goods and nfs 569 549 543 453 516
Importsofgoodsandnfs 782 1.082 1.226 1,074 1.113 e F*1.
Resmsebalance -213 -533 683 -622 -597 a|
91 in
Net facr incme 7 -33 -74 -85 -73
Net cuent bafets 80 443 491 747 648 .2
Cunrentacunt bala n3c
Before offici tansfers -126 -123 -256 41 -23
Aflteroffidal tansfers -126 -123 -266 41 -23
Long-tern capitd nwow 150 162 203 -13 . s-
Tota othernams (net) -64 8 210 38 .- - -
Changesin net reserves 40 -48 -147 -66 -194. J
Mewuo -7
Reservesexiding gold (mna. USS) 80 148 54 232 456
Reaserves induding gold (MnUUSS) 262 216 106 270 S00
Official exchangerate (locWkS$) 2.1 Z1 21 Z1 4.3

EXTERNAL DEBT
Exportrfos IBD980 1985 1991 1992 1993 Structum
of extel debrt%)
Lng-term debtlepots 112.3 264.4 529.7 538.0 578.4 w
IMFcaeKWexpors 13.0 10.1 0.0 2.5 6.3
Short-tern debtiexpors 9.2 11.0 25.8 21.5 7.8 75SOPUS
Total debt servicelexports 7.3 22.5 18.3 14.2 16.5 |_nc
GOP rafts 1 Mt°
Long-termdebUGDP 16.7 39D1 60.0 62.0 107.6 EsoNos.
IMFcredIGDP 1.9 1.5 0.0 0.3 1 12
Short-termdebVGDP t.4 1.6 Z9 2.5 1A I
25
Long-Mm debtratos|
Privatenonguaranteedllong-term 0.0 0.0 0.0 0.0 0.0
Pubic and pubibdy
guaranteed 07 * - 91 92 03
Privatecreditorsmong-tenn 7.2 15.5 142 12.9 11.9 1 1
Officialcredbtorslong-term 92.8 84.5 85.8 87.1 88.1

- The dveopmnerrtdianond shows a leel ofIdwevpment inthe countrycomparedwit its inuconegroupaverage.

67
 Gabon
W ith an estimated population of just over 1
million, growing at 2.5 percent a year, and
an areaof 268.000square klcometers.Gabon
is sparselypopulated. It is rich in natural resources-oil,
manganese, uranium and forests-and enjoysoneof the
highest per capita GNPs-estimated at $4,150 in 1992.
Sound ifrastructure has been built over the years in
telecommunications,transportation,and ncrgy. In ad-
dition, Gabon is the repository of an ecological
diversity whose importanceextends beyondits borders.
With two-thirds of its forests either untouched or
relatively undisturbed. Gabon offers one of the largest
remaining pristine ecosystemsin the world. It is esti-
mated that its forests harbor over 8,000 plant and 600
bird species, contain Africa's largest population of
forest elephants, and provide sanctuary for at least 20
primate spe.es.
Despite Gabon's relativelyhigh per capita GDP and
the emergenceof a modem sector and an educatedelite,
further progress remains to be adhieved in terms of
literacy (adult illiteracyis estimaed at 39 percentof the
total adult population and at 52 percent for the fcmale
population), infant mortality (95 per 1,000live births),
and life expectancy (53 years). These disappointing
social indicators. in spiteof considerablepublic expen-
dinmeson health and education, underline the need for
a more efficient use of Gabon's resources and better
utilization of budgetary allocations to the human re-
sources sector, particularlywith a view to reducingthe
incidenceof poverty.
Gabon's economy is characterizedby the distortions
found in many resource rich countries in which high
factor costs caused by excessive demandfor non-trad-
able goodsmade diversificationintonon-resourceinten-
sive tradable productsdifficult;the basis for diversified
growth still needs to be built in Gabon. its economyis
dominated by the oil sector, which accounts for one-
third of GDP, close to half of governmentrevenue, 50
to 60 percent of gross investment,and over three-quar-
ters of merchandiseexports. Its past developmentstrat-
egy, which relied on spending oil revenues on public
investmentprojects with very low rates of retun and of
a scale that exceeded the absorptive capacity of the
economy, particularly in the mid-1970s and early
68
1980s, underminedGabon's competitivenessand exac-
erbated its dependence on oil. The modern sector is
dominated by inefficient parapublic enterprises. The
private sector is stifled, and the educated elite is more
involved in administrativeand bureaucratic tasks tban
developinga strong entrepreneurialclass. The develop-
mentof agricultureand small and mediummanufactur-
ingenterprises,whichoughtto provide employmentand
incomeoppormities for the bulk of the labor force, has
beenhinderedby a loss of competitiveness.The depend-
encyon oil is further amplifiedby governmentover-in-
debtednessthat preventsit from stabilizingtheeconomy
through countercyclicalbudgetarypolicies.
Recent Economic Developments
Since 1986, when the price of crude oil fell by 50
percent, Gabon's economy has been in decline. The
contaction of govermmentrevenue led to a reduction in
public imvestmentand a contaction of non-oil GDP
Real non-oil GDP growth turned negative, averaging
-1.1 percenta year from 1985 to 1993. Employmentin
the formal sector has been significantlycurtailed: in
1992, the number of jobs in the modern sector was 26
percent below its 1985 level. From 1986 to 1991, the
last year for which comprehensivedata are available,
the loss-makingparapublic sector, which acounts for
35 percentofvalue addedand44 percentofemployment
in the non-oilcorporate sector, receivedoperating sub-
sidies and made losses amounting to an average
CP.AF43billion a year-ibout 3 percent of pre-devaln-
atiuo GDP-a clearly unsustaiable situation.
By the cnd of 1993 Gabon was in the grips of
stagnation, and the government's financial difficulties
threatened to paralyze the domestic financial system,
increasing the costs of business throughout the econ-
omy. As a result of the disequilibrium in public fi-
nances, the current accountof the balance of payments
was in deficit To finance its budget deficits, the gov-
erinent resorted to arrears accumulation.As of Decem-
ber 1993, external arrears accumulatedto $1.1 billion
(about one third of total external public debt), and
domestic arrears to about $450 million (at the new
exchangerate). Public and publiy guaranteedexternal
 Gabon
debt outstanding at the end of 1993 was equivalent to
96 percent of projected 1994GDP.
Following a moderate contraction in 1992, GDP
grew an estimated 2.5 percent in 1993, mainly because
of an increase in oil expors. Exports of timber, public
investment, and demand for oil-related services also
increased. Nevertheless, non-oil GDP grew at only I
percent. a ratc insufficient to reverse the spread of
unemployment.The current account of the balance of
payments remained in deficit at -2 percent of GDP.
Government expenditures exceeded revenue by
CFAF90 billion in 1993, about twice the amount pro-
jected in the budget, mainly because of current expen-
ditures in excess of the original forecast. The budget
deficit reached 6 percent of GDP.
In January 1994 the parity of the CFA franc was
adjusted from 50:1 to 100:1 to the French franc. This
devaluation created new possibilities for stabilization
and adjustment in Gabon. After the devaluationGabon
negotiated a 12-month standby arrangement with the
IMF and a compensatory and contingency financing
facility covering a shortfall in oil export revenues A
Paris Club reschedulingand refinancingagreementwas
concluded on April 15, and a London Club agreement
on May 26 These agreementswith creditors eliminated
most outstanding arrears on the extemal debt.
The December 1993 presidential election was an
importantstage in a process of transition towardsmul-
tipary democracythat beganwith a nationalconference
in March 1990and the holding of multparty legislative
elections that September. Episodesof violence marred
the early stage of the transition toward democracy-
Completionof the electoral process is expectedto allow
a resumptionof economicadjustmentthat had been put
on hold for several years.
Medium-Tern Prospects
The governmcnt that took office in March 1994 an-
nounced a fundamentalchange in developmentpolicy
and is laying the foundations for a strategy based on
redefining the roles of the state and the private sector
in the economy. The new strategy calls for the state's
disengaging from direct intervention in the productive
sectors while strengthening its responsibilities as the
provider of public goods, including protecting the en-
vironmentand biodiversity of the Gaboneseforests and
strengthening its capacity to provide anainstitutional
framework conducive to the developmentof efficient
markets. Competitionand market mechanismsare to be
given a larger role as the main regulators of activityin
the private sector-
69
This growth strategy rests on the restoration of
international competitiveness, for which the devalu-
ation, complementedby an immediateprogram of ac-
companying measures, was a starting point. Strong
structural reforms to ensurethat the real exchange rate
depreciationis maintainedandeliminatethe excesscosts
of pre-devaluationprotectionisttrade policy are under
preparation as the second phase of the goverment's
new economicstrategy.
Key measuresalready taken to implementthis strat-,
egy followingthe devaluationincludccappingincreases
in public sector wage bill at 10 percent in 1994 and
giving appropriatesignals to guide wage negotiationsin
the private sector. The government has also reduced
indirect taxes on petroleum productssold on the domes-
tic market to maintain the pump price unchanged until
implementationof a new indirect taxationsystem based
on value-added taxes at the end of the year. It has
reduced customs duties and simplified the tariff struc-
ture. Export taxes have been eliminated, except for
wood and mineral products, and indirect taxation re-
formed. Budgetary allocationsto education and health
have been protected.
If fully implemented,the government's program of
economicreforms is expectedto generate non-oil GDP
growth of 3.5 percenta year over the mediumterm after
a contraction of 3.4 percent in 1994. In the longer rim,
growthof non-oilGDP is expectedto accelerateto about
6 percent a year as structral reforms bear fruit and
increase the aggregateproductivity of investmenLThe
incrementalcapital/output ratio is expected to decline
from a historical level in excs of 10 to about 6 within
the next decade. However,because petroleum output is
expected to remain constant over the next ten years,
overall GDP growth rem2ins much lower and is po-
jected to reach only about 4 percent at the tum of the
century. Similarly,althoughnon-trditional exports are
projected to increase at about 10 percent a year as
reforms progress, growthof overall exports, still domi-
nated by petroleum, is projected to remain below 1
percent a year. The long-term growth rate of per capita
consumption under this scenario of successful reform
could reach 4 percent.
Budgetary measures included in the program are
expectedto generatea moderateincreaseof the primary
surplus (excludinginterestpayments)in 1994,followed
by a further significantimprovementin 1995due to the
lagged effect of the devaluationon tax collections and
an anticipatedrecoveryof theprice ofcrude oil on world
markets. The programmed primary surplus increases
fromO.4 percent of GDP in 1993to 2.6percent in 1994
and over 8 percent in 1995and 1996.
 Gabon
Populaftonmid-1992 (mWionJ) 1.2 Incomegroup: Upper-middle
GNP per capita 1992 (US$) 4,150 Indebtednesslevel: modeaft

KEY RATIOS
19W0 1915 1991 1992 1993 ep .ygt _._

Grss domesticinvestmentlG1lP 27.5 35.3 26.6 21t4 21.6 -

Exportso goodsand nt/GDP 64.7 51.9 47.0 46.0 45.3 30
GrossdomesticsavingslGDP 60.6 51.9 41.5 35A 34.9
GrossnationalsavingsrGDP 47.0 4Z3 29.4 20.3 19.7 *s

CurnentaccountbaLncefGDP 11.2 -4.8 Z8 -1.1 -1_ 1 0

InterestpaymentslGDP 2.8 1.6 Z5 4.1 2.4
Toa debt/GDP 35.4 32.9 77.0 67.0 61.7 '
Toal debtlUeports 526 56.9 161.9 143.1 136.6 '7 a o so 2 03

GOP:PRODUCTION
(% of GDO) 19B0 191S 1991 1992 1993 S0fG0PbV8§etMr(X)
Agriclkwre 6.8 6.2 8.2 8.2 82 __

Manustrin6 4f 5.2 141.5 41.5 41.5

Services 32.8 34.3 44.5 46.4 47.0
so
191119s 1985-3 1991 1992 1993
(avera annuagro1wt)
Agricultre 1.9 0.6 3.a -Z2 1.1
Industry 2.2 4.3 10.1 -2.5 4.0
Manufacuring 66 9.6 3.5 -22 11 o_
Serices 2.2 0.4 3.5 -22 1.1 a- s 1 aSR 3

GDP 2.2 2.2 6.6 -Z4 2.5 I

GDP-. EXPENDITURE
(% of GDP) 1930 1935 1991 1992 1993 GinU tsFSGOlandG0P(%)
Private consrplion 25.1 29.5 41.0 45.1 45.7 100
Geneal governrneconsLmption 13.2 15.6 17.6 19.5 19.3 D A
Gross domestic iestnent 27.5 38.3 25.6 21A 21.6
Exportsof goodsand nfs 64.7 56.9 47.0 46.0 45.3
Imports of goodsand ots 31.6 43.2 32.1 31.9 31.9 40

(mera annual
gro) im-as19804
1985-93 1991 1992 1993 I.
Private consumption -0.6 1.2 -112 9.0 -2.8 - - - I
Generalgovenmentconmwiption 10.7 -29 2.4 1.8 -1.3
,
Gross donmebscinvestnt 5.2 -7.3 9.2 -23.4 6.0
Exportsof goodsand nfs 3.4 7.2 2.8 17 6.1
Imports of goodsand nfs 7.3 -4.0 -51 4.2 1.5 |e0
Gross naial product 0.3 1.0 EL1 -. 7 1.4 -- ---
Grossnatonal hicome -0.7 -IA 1.0 -6.5 -2.3 | I

PRICESand GOVERNMENTRFNANCE
1980 1985 1991 1992 1993 Ch| af GOPddlatrand CPI%)

Crwnesffprfies Is
(% change) 10_
Consumerprices 12.3 -12.9 0.3 -96 .. 5/
Wholesal pc 15.7 11.8e .. - .. -
ImplicitGOP deflator 35.8 8.4 -3.4 0.5 0.5 |5 \ a w e
Govwmant finance -10
pC of GDFq
Cwerntbudgstbaance . 22.5 Z9 02 -0.1 | O-fl |CP1
Overall surplustdeficit .. -5.0 -2.5 -5.1 -5.8 I

70
 Gabon
POVERTYand SOCIAL
(annud gmwwth
rates)
Popuiton 4.6 2.7 Lp
Loborforce 0.6 0.8
moat mea maunb
t ()
Povertylevel:headcountIndex (%ofpopuilah2) .. GNP Gro\M
Lire expectncy at birth 54.0 par pei-
pd
Infantmordalty(pmlrhausandre bkths) 940 r -
Childmalnutniion(% of childrenunder5) 25.0
Acess to safewater(% of papuJaton) 72.0
EnergycorsLmnption per capita (Ag Nlequihvn) 783.5
Ie1acy (% of populatOon age 15+) 39.3
Grosspimary enrollment(p of cdxx-e popuAtbQ) .. er c ta

TRADE

(milikns US01) 198l l5 1991 1992 1993 Et ImponbDtlava

OWLus$)
Totl exports (fob) 2,531 1.951 2,228 2,259 2114 2500
Fuel 1.958 1.629 1.817 1.844 1,721
Timber 236 122 179 199 216 x0_0
Manufactures ..
Total imports (ai) 997 977 e88 886 835 _
Food 188 161 157 174 164
Fuelandenegy 44 50 10 12 11
Cavpitalgoods 211 21S 3E0 335 316 *
lxportpriceitxi (1987=10O) .. ..o .. U _ .. _ - a ma
Imporlprice index (t9B7'100
Terms of tade (1987=10t) . . - -

_denygssWofecoomy i;-adP0 96 100 79 78 77l f

BALANCE of PAYMENTS
fmmbw USS) 19es 1985 1991 119 1993 Cunt acccmtbohwcetoGOPro)
Expts of goodsand is 2,856 2,090 2552 Z606 2.443
Importsofgoodsandnfs 1.792 1.913 1.743 1.811 1,724 2
Resourcbalance 1,064 177 809 796 720 W
Net ctorincome -425 -244 -541 -714 -697 2 I
Netwunrenttansfrs -158 -109 -117 -144 -125 .4
Curren accountbalance
BefbreoffiaJbansfers 481 -176 151 -82 -104
Afterofricialhansfer 514 -163 158 -51 -90 .1.
Long-termcapitalinflow -36 213 -306 -21T -148 -12
Totalother iems(ot) -385 -111 205 83 237 14
Changesin net resenres -93 61 -57 186 0 -

Maro: t
Reservesexdudinggold (miff.US 10o 193 327 71 1
Reservesindudinggold (milLUS) 115 197 332 75 6
Offiial earhangs rate(lcaiVSS) 211.3 449.3 282.1 264.7 2832

EXTERNALDEBT
,Exprtonifos 1980 ioo
1911Slo 194 1s
ioxdd*bt on-
1993 |
Long-termdbtfdexports 44.1 44.5 123.3 113.0 1192 I
IMF editlexpots 0.5 0.0 4.7 3.o 1.8
Shorttenmdebtexports 7.9 12.4 34.0 27.1 15.7 I
Total debt serviceexports 15.0 11.6 11.9 162 132 TP_1 nO
GDP ratfos OPI't
ong-term debtlGDP 29.7 25.8 58.6 5Z9 S3.8 a*.
IMFcreditGDP 0.3 0.0 2.2 IA 0.8
Short4ern debtWGDP 5.3 7.2 16.1 t27 7.1
Long-tnn debt ralas
Puvatenonguamnatedllong-en 0.0 0.0 0.0 0.0 0.0 0
Pubic and publidy guaranteed a as so In Qa
Print craditouullongterm 75.1 64.0 21.0 20.5 20.2 1 1
Off0ic credilcr/acgtern 24.9 36.0 79.0 79.5 79.8

The dvelopmnt diamondshows a level of devlopment in he coimby compemdwih No rinem ot avuge.

71
 The Gambia
T he Republicof The Gambiais a narrow strip of
10,700 square kilometers on the west coast of
Africa surrounded on three sides by Senegal.
Limited natural resources and an underdevelopedhu-
man capital base have constrained economic
diversification and growth. A high population density
on agriculturalland (207 inhabitantsper squarekilome-
ter in 1991)and very high rates of expansionin the urban
population are generating mounting concern about en-
vironmental issues. The Gambia's open, undiversified
economyis vulnerableto volatilechangesin the external
environment: adverse weather conditions, fluctuations
in the world price of the main export commodity
(groundnuts), a changing aid climate, economiccondi-
tions in neighboring countries, and shifting demand in
Western Europe for tourist services.
The Gambia is one of the least developed countries
in sub-SaharanAfrica, with a 1992 per capita GNP of
$370. The mainstay of its economy has traditionally
been rainfed cultivation of cereals, groundnuts, and
ocheragriculturalproducts, whichin the pastdecadehas
been adversely affected by irregular and inadequate
rainfall. Potental sources for more diversifiedgrowth
lie in agriculture-mainly horticultural and livestock
products-light manufacturingincluding processingof
agriculturaland livestockproducts, and fisheries, tour-
ism, and other services.
The Gambia's limited natural resource base means
the economyis both import-dependentand export-con-
strained. About a third of food requirements, all fuel,
intermediaryand capital goods requirements,and most
manufactured goods are imported. Groundauts have
traditionally contributed about 70 percent of export
earnings. Although recent efforts to diversify exports
through tourism and re-exports have improved eam-
ings somewhat and broadened the export base, it has
not been sufficient to sustain expanding import re-
quirements.
The Gambiahas had a democraticmulti-partyparlia-
mentary system since independencein 1965. The last
presidential election was held in April 1992. Political
stability and its good record on humanrights have won
The Gambia prestige in the intemationalcommunity,
72
which has generatedgenerous aid and technical assis-
tance.
In 1985 The Gambia adopted a comprehensive
macroeconomicstabilizationand adjustment program
with specific measuresaimed at liberalizing trde pol-
icy, establishinga flexibleexchangerate policy, restric-
tive credit and fiscal policies, and flexible interest rate
policy. The program was supported by a large influx of
externaLaid; implementationof reforms was generally
satisfactorvand most macroeconomictargetswere met.
The governoent launched a successor Program for
SustainedDevelopmentin 1990that aims at reinforcing
policy reforms and at promoting private sector-led
growth by diversitfing the economy.
Recet Economic Developments
Despite steadfasteconomicmanagementin fiscal 1992,
economic performance was somewhat disappointing.
Real GDP grew by only 2.1 percent, compared to the
4.5 percent programmed,inflationarypressure (I 1 per-
cent) did not subside as expected, and the current
account deficit (before official transfers) widened to
14.5 percent of GDP comparedto 13.8 percent in fiscal
1992. Inadequaterainfall resulted in poor crop produc-
tion, which, in turn, led to lower exports and higher
food prices. A larger than expected increase in broad
money (20 percent compared to the 9 percent pm-
grammed) put additionalpressure on inflation. Gross
domestic investmentas a share of GDP declined mar-
ginally to 20.7 percent. Real consumption per capita
also fell by some -1.9 percent. On the otherhand. sound
economicmanagementled to a reduction in the budget
deficit ta 2.5 percent of GDP compared to 4.5 percent
in fiscal 1991 as a result of improvement in domestic
resource mobilization and expenditure controls. Gov-
emment revenues increased by 1.6 percent of GDP,
reflectingmainlysome improvementi customsadmini-
stration. Generous budgetary aid enabled the govern-
ment to reduce its net outstanding debt to the banking
system.
The January 1994devaluationof the CFA franc has
reduced the attractivenessof re-exports and cash-crop
 The Gambia
transactions in CFA firancsin The Gambia. In addition,
Senegal's reinforcementof border surveillanceproce-
dures since August 1993 has resulted in a virtual sus-
pensionof cross-bordertradeenteringSenegalfrom The
Gambia. Prospects now appear favorable for normaliz-
ing cross-border tradingprocedures. This trade report-
cdly accounted for about half of The Gambia's total
re-exort trade with Mali, Mauritania, Guinea-Bissau,
and Guinea.
These developmentsare expected to reduce overall
economic growth to zero in real terms in fiscal 1993,
despite good performance in agriculture and tourism.
Government revenues are expected to decline; re-ex-
port-related taxes accounted for about 20 percent of
government revenues in fiscal 1992, and that trade is
estimated to declineby about a third in fiscal 1993. The
Gambia's external position, employment,and incomes
are all expectedto decline.
In September 1993 the government responded to
these developments by enacting additional revemne
measure to ensure payments by public enterpris of
taxes, dividends, and capital transfers for debt servic-
iug, taking steps to improve collection of sales taxes
from the hotel industryand airporttaxes, and increasing
efforts to collect bad debts owed Uegovernment.It also
imposedexpenditurecontrols on I'wer priorityoudays,
not including health and educationexpenditures.
The overall reform has been broadly on track since
1991. Recent progress has been made in public enter-
prise reform-the governmentprivatized core assets of
The Gambia Produce Marketing Board in July 1993,
leased The Gambia Utility Company to a foreiga firm
in July 1993, signed a perbormare contract with the
Civil AviationAuthodties, and granted autonomyto the
post office inearly 1993.Therehavealso been improve-
ments in tax administrationand customs.
However, the failure of the Asset ManagementRe-
covery Companyto collect a sizable share of outsand-
iag debts to the now-privatidzedGambiaCommercialand
Development Bank threatenstimely domesticresource
mobi'ization and significantextrnal aidflows that were
contngent on better collectionperformance.
the government is in the process of expandingthe
tax base and improvingthe efficiencyof tax collection.
Progress has been also made in reducing budgetary
expenditureswhile allowing for higher mcurrent expen-
ditms on educationand health andhigher development
expenditure for priority sectors. A three year-oiling
public investmentprogram introduced in 1989 focuses
on rehabiitation and maintenancein the infrastructure
and social sectors and is an integral part of the budget
process. Althoughpublic expditure programs for the
Ministries of Agriculture, Health, Education, and
Works and Communicationwere prepared in late 1991,
73
with the aim of ensuring that recurrent expenditures
reflect agreed objectives, they are uot yet operational.
Povery and Social Indicators
Poverty is widespreadthroughout The Gambia. In ad-
ditionto low per capita income, this poverty is perhaps
manifestedmost clearlyin low levels of human resource
developmentand key social indicatorsthat are low even
by sub-SaharanAfricannorms. Illiteracyis esdmated at
73 percent while primary schoolenrollment is officially
estimatedat about 60 percent-although recent house-
hold survey data suggest a level of 45 to 50 percent.
Secondaryschool enrollment is very low. While there
has been some improvementin the quality of curricula,
progress in expanding primary enrollment since 1980
has been modest, especiallyin rural areas, and for girls.
The Gambia has one of the highest rates of population
growth in the world, 4.1 percent a year. Althoughabout
one-third of this growth is attributableto migration of
people seekng refuge from nearby trouble spots, the
crude rate of natural increasecontinuesto be very high
at 2.8 percent. rins level of population expansion has
meant that despiterecent steadyGDP growt averagig
about 3.4 percent a year, per capita income levels have
declined in recent years. Although overal mortality
levels continue to be high in The Gambia, there have
been, over the last decade, significantimprovementsin
the health status of the population.Infant mortality has
declined by 31 percent (from 130 to 89 per 1,000 live
births) and childhoodmortality(the probabilityof ding
between ages one to four years) decinmed54 percenat
(from 156 to 71 per 1,000 live births). This improve-
mentin mortality, coupledwith a consistenly high level
of total fertility, explains the rapid population growth.
Improvement in social indicators is of fiudamental
importance in breaking out of the pattern of low level
equilibnum and attaininghighcr growth.
The govemment recognizesthe developmentimpli-
cationsof rapid populaion growth andthe gap m human
resource development. This awareness is changiag the
policy rhetoric, which now calls for raising the long-
termproductivepotential ofthe economyand improving
the welfare of the populationthrough improved akloca-
tion and efficiency in the use of public resources,
especially in education, health including family plan-
ning, and poverty alleviation. Accessto prmary educa-
lionand health services has beenconsiderablyexpanded
in recent years, with donor assistance.The government
adopted a national population policy in 1992, family
planning services are being extended to healh centers
in The Gambia's interior, and government is tring to
increasethe contraceptiveprevalence rate, curently 15
percent.
 The Gacmbia
The Environment
Environmentaldeterioration is a critical long-term de-
velopment constraint. Natural resources in rural areas
are threatenedby increasingpopulationpressureG,over-
grazing, salinity intrusionalong the GambiaRiver, and
inadequate groundwater management.There is also a
potential threat to clean groundwater supply in the
GreaterBanjularea becauseof its proximityto the ocean
and a shallow water table. The governmenthas initiated
a comprehensiveeffort to arrest the deteriorationof the
environment through more careful use of existing re-
sources based on improved resource managementprac-
tices. It prepared mn environmental action plan and
presented it at the UN EnvironmentConferencein Rio
de Janeiro in June 1992. The plan, endorsed by the
donor community in January 1993,urderlines govern-
ment's commitment to arrest the deterioration of the
environment through action in populationcontrol and
human resources settlement,land management,institu-
tional strengthening, and namral resourcemanagement.
74
Medium-Term Outlook
The govermment'sstrategyfor the mediumterm focuses
on maintaining macroeconomic stability, stimulating
private sector development, including improving the
incentives framework. For the medium term, some
expansion is anticipated in agriculture (given normal
weather), export-oriented small-scale manufacturing,
fisheries, tourism, and other services.
There is still considerablescopeto improve domestic
resource mobilizationand to ensure a correspondence
between public expenditureand government'sdevelop-
ment priorities: the social sectors and infrastructure
maintenance.While some of the recent losses in re-ex-
port trade may be recovered over time because of
Banjul's inherent comparative advantage as a natural
point of entry for some parts of Senegal and other
regional countries, much of the decline is expectedto
be permanent, and The Gambia will remain dependent
on external financial and technicalassistance.
 The Gambia
Populationmid-1992 (mfllions) 1.0 Incomegroup: Low
GNP per capita 1992 (USS) 370 Indebtednessleve: Moderate

KEYRATIOS
t9o t985 1991 1992 1993 Inbol b(%)
GnttoaDP

Grossdomestic invesbtetGDP 262 12.5 19.7 19.6 .

Exponsof goodsandnIsIGDP 46.6 40.8 65.1 622
Grossdomastic savigstGDP 0.7 5.1 3.9 2.5 ..
Grossnationalsaving/GDP -2.5 -4.5 7.7 11.1)
Cure,! accountbatance/GDP .47.8 -16.3 -&I -1-2
InerfestpaymnentalGDP 0.2 0.2 2.0 1.9
Totaldebt/GDP 59.3 113.2 114.8 106.3 -

TotaldebVeUorts 205.1 280.3 163.0 a

163.1 .. T e - ' a'

GOP:PRODUCTION
1980 1985 1991 1992 1 SharefG0P byeCtrflLI
Agricultune 30.5 29.7 27.5 - .. Fl [_
Industry 16.3 11A 141 .. ..
Manufacturng 7.3 6.3 5.9 .. ..
Servces 53.2 58,9 58.4 . ..

fiwage
Agriclture
ual g4wh )
1980-85 1985-93
3.1 0.7
1991
.

11.8
19C:
..
1993
..
N_
m51
_ _
_
Indusby 1.7 4.4
Manubfcturing 9.2 4.4 -0.9 .. .. a
S - ces 4.4 3.6 .. .. .. "91 92 ase
GDP 42 36 4.4 .. I
GOP:EXPENDITURE
(1 of GDP) 1980 18 1991 1992 1993 Grownim Gand GDPI%)
Privateconsumpdon 79.2 81.9 77.8 78.0T 25
Genenrlgovermentconsumption 20.1 13.0 15.3 19.5 20--
GroS domestcinversnent 26.2 12.5 19.7 19.6 .. is
Exportsof goodsandnis 46.6 40.8 65.1 62.2
Importsof goodsandnfs 72.1 48.3 65.9 79.2 -

(evesweanual grna7 1930-85 1985-93 1991 1992 1993 0

Prit a cnsumion *4.7 2.3 .. I a a 9S I
GenaTalgovernmentconsumption -4.0 5.7 .. .. .. D
Grossdomesticinvestment -8.6 9.2 2.4 45
Exporl of goods ndnfs -4.9 10.3 4.2
Imports f goodsand nis -14.8 9.9 4.0 .. .. 20
Grossrationalproduct 2.6 5.1 318 6.9 .. -ca -- cor
Gross natonalincome -1.6 4.3 -0.2 . . i

PRICESand GOVERNMENTFINANCE
19S80 1965 991 1992 1993 ChangeofGOPdflaitorandPlC1%)
Domesticprkca 2
(16cage) S0t
Consumer prces 6.8 18.3 5.6 9.5 6.5 1t
Wholesalepices .. .. * ' 10
ImplcitGDPdelblor 7.9 54.9 7.4 .. . o T -
G;ovwrnintfinanc ff a u ml In 2 a
CofGDP)
Cuewt budget baane .. 1.4 5.4 5.7 .. GW CPn
Owall wplusdelit .. -6.9 -4.4 - 1

75
The Gambia
POVERTYand SOCIAL
(annalw
greit)' rates) 1980415 191139 Dsvlopmentdlmondt
Population 3.8 3.7 u hsesypsr
Laborfbres 1.2 1.5

most mcent_tkstb (nwr4

Powertylevd: heoodoint Index (K otpopulafn) .. GNPs scams
Life expectncy at birth 44.8 pe d- l
Infant moaty (per thousmdf Oni bkths) 13MA0 c*pA an
Cidt malnutritionlX of Wdin under5 20.0
Acoess to safewater (U ofpopulhko) 71.0
Energyconsmption percapita (kg elqurWAien 59.7
IlEibracy
(U otpopuslako
age15+) 72.8 sew_
Gross p*ua enrollmentfU of schooAagepoPulutin) 68.0

TRADE
(mrihnsUSS) 19Wi t915 1191 19!2 1993 ExportandimportinmLUSQ

[I
Toll expaots
fob) 90 66 . .. . t

ds
Grundnuts 13 10 .. .. ..
Fish .. 3 .. ..
Manufactires .. . . .. .. 120
Total hmpmts
(do 150 96 .. .. Ie
Food
Fuelandemeigy
Capitalgoods
42
15
29
34
12
18 40.
i s
Export priceKoe f1987=10G) .. .2. . . , * *
Impot picn i fx 1987=t100) .. . . . .a so 1 n2
St
Trms of trde f1987 W) .. .. .. .. .. -

Openness
ofeconomy SVDP,%) 119 89 146 141 .. Drl U_

BALANCE of PAYMENTS
(mUoni;s
USS) 19J0
Is 991 1992 1993 CwataccoustbalizoGtoGP saitIs)
Exportgofgcds and nfs 66 88 223 228 .. e17 * *3
lmporsof gon andnft 179 104 257 245 .. ii
Res eobalwice -113 -16 -34 -17 .. 5 L_
Netfactor incme -2 -24 B8 -2 .. -u
NetcLrentbswers 0 5 15 13
Current account balance .f
Beforeofkiultransfes -112 -35 -28 -4
Altrodalftbansfes -74 -1 17 40 . I

Long-tenn capital infow 4 20 29 33 . 25

Toalotheritenms(net) - 64 -9 -13 -33 . 4
ChiVnesinnet res 6 -10 -32 40 43 0
Mann: *1.
Reee edung geld 01-1 USS) 6 2 68 94 .
Rese.v induding gold (nil. USQ 6 2 68 94
Offidal exchange rate (locetIS 1.8 5.0 9.1 5.9

EXTERNALDEBT
1960 1966 1991 1192 1993 mncem ssi
Longenn debtlexports 149.4 202.5 143.6 146.1
IMF aeditllports 24.5 37.5 17.7 153 ..
Shoot-trm debtlepUs 35.2 40.3 1.7 1.7 ..
Total debt sewitexorts 6.3 10.4 13.7 12.7 .. oPS
GDP ratos 5 Op.
Long-lefn debtlGDP 42.4 81.8 101.1 9.2 .
IMF audeGDP 6.9 15.2 12.5 10.0
Short-termdebUGOP 10.0 16.3 1;2 1.1 .. 2
Lontl debt rules
Priat nonguamunteedVlong-tern 0.0 0.0 0.0 0.0 0.0
Publc i pubily rated o a . . .
Priwe creditossontrm 24.1 21.4 4.2 2.6 1.2
Official crudtousflongtrm 75.9 7A.7 95.8 97.3 9A8.

- Th developmen dmid owsoavel f delpm.nt n i county camped wilh Its om group gsr.

76
 Ghana
G hana
is well endowed with a broad range of
Tnatural resources, including arable land, for-
'%.Sests. and sizable mineral deposits of gold,
diamonds, bauxite, and manganese, and considerable
potential for hydroelectric power. The economy has
traditionallydepended on primary production and ex-
ports. Most of the Ghanaianlabor force is employedin
agriculture. Agricultural production-primarily small
scale-is concentratedin staple food crops and cocoa;
Ghana ranks among the world's largest producers and
exportersof the kiter. The service sector is the second
largest employer, with over 25 percent of the labor
force, accounting for over 40 percent of real GDP,
largely trade and public sector services. The industrial
sector accounts for about 14 percent of GDP and
employment;it is relatively diverseand well developed
by sub-SaharanAfrican sandards
Although Ghanaonce enjoyeda relativelyhigh living
standard compared with most other West African na-
tions, poor economicpolicies and a deteriorationin the
extnal ters of trade in the 1970s led to subsntial
declines in income in the 1970s and early 1980s-This
is reflected in the key economic trends between 1970
and 1982: import volumes feil by a third, real export
earnings by 52 percent, and domestic savings and
investmentfrom 12 percent of GDP to almost insignifi-
cant levels. The return of over 1 millionGhanaiansfrom
Nigeria in 1982-83, and a prolonged drought severcly
stnined the food and employmentsituation.
Real GDP growth averaged5 percent in the decade
foflowing tie introduction of an economic recovery
program in 1983. This contrasts with minus 2 to 3
percent a year in the precedingdecade. The benefits of
grwth have been widely distnbuted. Farmersand rural
workers have gainedfrom improvedproducerprices for
cocoa and liberalizationin trading of other cash crops.
Real food prices (cereals and roots) have fallen gradu-
ally. Governmentexpenditureson social pmgrams rose
significantlyin the initialyears of the recoveryprogram
and most social indicators and living standards im-
proved,
After a decade of sustained adjustment, concerns
about mai ig macroeconomic stability remain.
Macroeconomic imbalances re-emerged in late 1992
77
when civil servants obtained a large increase in wages
shortlybefore the elections. GNPper capitais estimated
at $450 in 1992. Though strong corrective measures
were adopted in the 1993 budget, some of the revenue
measures that were to be implemented at mid-year
stalled in the face of resistance from the newly elected
parliament. The targeted fiscal surplus could not be
attained, inflation reached almost 25 percent and, the
cedi depreciatedby 20.7 percent in 1993. Though there
was considerableimprovementin the fiscal situation in
1993, the full restoration of macroeconomicbalance-
and investor confidence-is not expecteduntil the end
of 1994tmugh new correctivemeasuresinitiatedin th
1994 budget.
The Economic Recovery Program
The governmentintroducedan economicrecovery pro-
gram in 1983 in an attempt to restore and sustai
macroeconomicstability, maintain an incentive frame-
work to enhance efficiency, encourage savings and
investment, provide an enabling environment for the
private sector, and improve the efficiency of public
sector resource management. The program was sup-
ported by financial and technical assistance from the
World Bank, the IMF, and other multilateraland bilat-
erl donors.
Exchangerate and trade reformswere the centerpiece
of Ghana's recovery program. As a result, import
protection is low and relatively less dispersed and is
currentlybased on two tax instruments:the import duty
and the uniform specia tax. The governmentabolished
the import licensingsystem in January 1989, and since
then importerssubmitonly import declarationforms. In
March 1992the auction market that had been set up to
sell foreign currency in 1984 was replaced by a inter-
bank foreign exchange market. Price and distribution
controls were also dismantled.
The cocoa sector is central to Ghana's economyboth
for its contribution to export performane and tax
revenuesand its generationof ruralincome andemploy-
ment. The economic recovry program aimed to in-
crease competition, reduce transaction costs, and
increasethe share of the world price going to farmers.
 Ghana
Overallprogress has beenslowbut steady. Thcfarmners'
share of the world price increased from 25 percent in
the 1984-85 crop year to an estimated 40 percent in
1992-93. The cocoa board trimmed its operational
expensesby retrenchingabout 22,000 workersbetween
1984 and 1989, and an additional 10,400 workers are
now being laid off. In the 1992-93season, the govern-
ment introduced a key reform in its cocoa policy by
allowing private traders to compete with the Produce
Buying Companyof the cocoa board in domesticcocoa
trading. Five companieswere licensedto trade and they
purchased approximately20 percent of the crop. Vig-
orous private trading of cocoa in the domesticmarket
during the next few years is expectedto reduce market-
ing costs and provide a corresponding increase in the
farmer share of cocoa export revenue.
The recovery program improvedthe fiscal situation
substantiallythroughbetter mobilizationof revenue,tax
reform, improved tax collection, and rationalizationof
consmption taxes and user charges. It also improved
the efficiencyof public resourcemanagement,but more
remains to be done to ensure efficient expenditure
managementand project implementation.Recurrentex-
penditureswere given priority in an effort to restore the
efficiencyof the health and educationservices. Public
investmentgrew from negligiblelevels at the beginning
of the program to 7.7 percent of GDP in 1991,empha-
sizing rehabilitation of Ghana's economic and social
infrastructure. In 1993 about 75 percent of the public
investmentprogram was accounted for by investment
in infrastucture, especiallyroads. To improve invest-
meat allocations, sector ministries strengthened their
planning units, and the Ministry of Finance and Eco-
nomic Planningestablisheda committeeto ensure that
investmentsmeet establishedcriteria and supportsector
strategies,within a three-year time horizon.
While progress in rationalizingGha's publicsector
has been greater than that in other countries of the
region, it has lagged behindin other reform areas. There
has been some net reductionin the size of the core civil
service, and some decompressionof salary scales, but
the productivityof the service has not improvedsignifi-
candy. Ghana's public service continues to be one of
the largest in sub-SaharanAfrica-nearly 9 percent of
GDP is spent on public servicewage and wage-related
expenditures-and lacks the incentive frameworkand
supervisionneeded to ensuresatisfactoryperformance.
Since 1988a state-ownedenterprisereformprogram
has aimed at strengthening managementof core state
entexprises and implementiag a divestiture program-
Progress was slow in the beginning,but since 1992the
pacehas pickedup. Guidelineslimitingbudgetarytra-ns
fers to state enterprises and siging of performance
agreements for the core entepises have been imple-
mented. Despite this, implicit transfers remain. Somnz
78
improvementshave been made in the performance of
state enterprises through performance agreements. As
of December 1993 64 state enterprises had been di-
vested. Of these, 34 were liquidatedand 30 privatized
with full or substantialpayment having been received
from the buyer. Another ten enterprises are at an
advanced stage of privatization. A significant step for-
ward in the divestitureprogram was the sale of govern-
ment shares in Ashanti Goldiclds in April 1994.
The governmenthas also been implementinga pro-
gram of wide-rangingfinancialreforms. Ithas abolished
interest rate controls and sectoral credit ceilings. With
the promulgationof a new banking law in 1989, an
improvedlegal frameworkgovemingbankingactivities
was introducedincludinguniformaccountingand audit-
ing standards for all banks, and better supervisionby
the Bank of Ghana. A program to restructure the
finances and managementof distressedbanks has been
completed.The secondstage of the financialadjustment
programwas to reduce governmentownership in state-
controlled banks to a minority position of 40 percent.
This program is now under way and the two largest
banks-Ghana Commercialand the merged Social Se-
curity andNationalSavingsand Credit Bank-ore under
a progressivedivestitureplan that will continueover the
next few years. Apart from the banking sector, Ghana
has a small stockexchange listing some 15 companies.
Withan ongoingdivestitureprogram in the commercial
manufacturingandfmancialsectors,itisanticipatedthat
the stockexchangewili be a vehiclefor floatingshares,
broadening the ownership of these companies among
the Ghanaianpublic. The government's recent sale of
shares in AsbantiGoldfieldsand seven other companies
has already provided a strong impetus to the stock
exchange.
During the ten years of the economic recovery pro-
gram the economy has maintainedan average growth
rate of around5 percentayear. This impliesreal growth
of more than 2 percent a year on a per capita basis.
Farmers and rural workers have gained from improved
producer prices for cocoa and a liberalization in the
trading system for other cash crops. Real food prices
(especiallyfor cereals and roots) have fallen gradually.
Govermmentexpenditureson social programs rose sig-
nifeicantlyduring the mid-1980s, and most social indi-
cators have improved. Overall, growth in
manufacturng has been slow, explained in part by
laggingprivateinvestments.Valueadded in mining rose
by about 9 percent in 1992, and a further 9 percent in
199,3. reflecting investment in the rehabilitation of
existng mines, in new joint ventures, and in increased
small-scale mining activity. Based on the national ac-
counts statistics, national savings, after rising consis-
tendy to reach 9 percent of GDP in 1991, fell to 4
percent in 1992and 1 percent in 1993.Total investment,
 Ghana
after peakingat 16 percent of GDP in 1991,fell to 12.6
percent in 1992 but recovered to almost 14 percent in
1993.
Growth under the economic recovery program has
been led by the public sector, as anumberof constraints,
including mutual distrustbetween the private andpublic
sectors prevented strong private sector involvement.
During the past year there have been some improve-
mentsintheenablingenvironmentfortheprivatesector.
The governmenthas stamlined businesslaws affecting
the private sector, and a more liberal investmentact is
now before parliament. A Private Sector Round Table
has been set up to improve public-privatepartnership.
To attract foreigndirect investment,the governmenthas
arranged a fewinvestment semnars abroad.The private
sector is beginning to show some signs of response; a
few multinationalcompaniesthat had ceased to operate
in Ghana have resumed business operations. However,
the private sector remams uncertai about goverment
intentions, and some constraints remain. The pace of
privatization remains slow-notwithstanding recent
sales of shares in Ashanti Goldfields Fmancial sector
weaknessescontinue, and infrastructurebottlenecksre-
main, especially in the telecommunicationsarea.
Ghana faces serious capacity and human resource
constraints Although it has much better educated and
trained manpowerthan mos: other sub-SaharanAfrican
countries, there is a serious shortage of experienced
personnelto manageand implementthe elementsof the
economic reform program. To address managerialca-
pacity constraints, the government has established an
interagencyCapacityBuildingSteeningCommitteeunder
the Ministry of Fmance and Economic Planning that
undertok a capacity assessment to be followed by a
national conference for consensus building in April
1994.
Poverty and the Environrnnt
The government's strategy recognizes the importance
of rapid economicgrowth for poverty reduction, hence
its preoccupation with accelerated growth. It also rec-
ognizes that emphasison human resources development
is needed to ensure that the poor are sufficientlyhealthy
and literate to take advantage of the new opportnities
arising from growth. The governmentplans to enhance
79
its capacity to deliver basic social services to the poor,
especiallyin the areas of health. familyplanning, nutri-
tion, basic education, and safe water and sanitation. It
is also decentralizingresponsibilitiesfor implementing
social programs.
The major environmental issues in Ghana are soil
degradation, deforestation, and the impact on health
from miningactivities, water contamination,and inade-
quate sanitation. In the 1980s25,000 hectares of forest
were lost each year, and indicationsare that the rate is
accelerating.In rural areas less than 40 percent of the
population has access to safe drinking water 2nd only
15 percenthave adequatesanitation. Mineralproduction
has polluted the air with corrosiveand poisonousgases;
discharges of heavy metals and cyanide are polluting
wamerwiti a potentiallyserious impacton human health.
External Debt
Ghana's total extemal debt outstanding and disbursed
(includingIMF) amounted to $4.6 billion at end-1993,
close to 76 percent of GDP_The share of non-conces-
sional debt, especiallymedium-termoil financing, has
declinedsignificantly. IncludingIMF debt service, the
debt-serviceratio was 26 percent in 1992compared to
50 percent in 1989,and over 50 percent for most of the
1988period. The ratio rose to about 38 percent in 1993,
due to larger non-concessionalborrowing in 1992; it is
expectedto fall to 27 percent in 1994inpart due to lower
scheduledrepurchasesfrom the IMF and lower amorti-
zation of medium-termdebt.
Medium-Term Outlook
Despite considerable gains since 1983, Ghana's eco-
nomic situationremains difficult. Fmancing its foreign
exchange requirements without creating an untenable
foreign debt problem is central to Ghana's macro-
economic strategy. Given the embryonic state of it
nontraditional export base and dependence on a few
export commodieis which are subject to volatility in
prices, Ghanais not yet in a positionto increasesubstan-
tialy externalborrwing on commercialtenns. The role
of the donor communityin continuingto provide conces-
sional aid to help ensure an adequate flow of foriga
exchangeto Ghanawill, therefore, reman cmcial.
 Ghana
Populationmid-1992 (millions) 1.S Incomegroup: Low
GNP per capita 1992(US$) 450 Indebtednesslevel: Sever

KEYRATIOS
1980 i9S5 1991 1992 1993 INvcsbnInttOGDPtaoI%)

GrossdomesticinvestmenlGDP 5.6 9.6 15.9 125 14.8

Exportsofgoodsandnfs/GDP 8.5 9.7 15.7 16.0 ts6
GrossdomesticsaWingslGDP 4.9 7.6 7.9 1.8 -1.2
Grossnational
savings/GDP 4.5 6.5 9.3 3.9 l.
Cwrert account
babancefGDP -1.2 -. 4 -6.5 4.6 -13.6
In_tst paymetIGDP 0.7 0.7 0.9 1.1 1.5 .
Totl debUGDP 31.7 49.4 60.1 62.1 721 n
Tot debthxcports 116.0 329.1 377.8 380.8 360.8 " - - w 92

GOP: PRODUCTION
nc6Of
dGOP 1930 1915 1991 1992 1993 ShmefGDP by msctor(%l
Agricultu 57.9 44.9 48.6 48.6 47.3
Industry 11.9 16.7 16.0 16.2 16.0
Manulacturig 7.8 11.5 8.7 8.7 8.8
Services 30.2 38.4 35.4 35.3 36.7
193805 19853 1991 1992 1993
('awags annal gowlh)
Agdikiitum -1.3 1.9 47 -0.7 2.8
Industy -5.5 6.0 3.7 5.7 4.3
Manufacturing -5.3 4.3 1.1 2.7 2.3
Sevis 4.1 7.7 6.5 82 7.4 e7 - - s n 92 a
4Ds_'~ *i_ Ds
GDP -0.5 4.6 52 3.6 4.8 _

GDP.EXPENDITURE
(%ofGDP) 1930 18 1991 1992 1993 GrowthrafGODandGDlP%)
Privatecosmwnpbon 83.9 83.0 80.7 84.9 89.5 sr
Generalgovernment consumpton 11.2 9.4 11.4 13.3 11.7 4
Gross domestc investment 5.6 9.6 15.9 12.6 14.8
Exportsofgoodsandnfs 8.5 9.7 15.7 16.0 19.6 30
Impartsof goodsandnfs 9.2 11.6 23.7 26.8 35.6 20

(average anual gmwfi) 198045 1985-93 1991 1992 1993

Privateconsumption -0.6 7.5 3.7 10.8 6.8
Generalgovemnenconsumption -4.6 5.7 5.5 11.8 -6.7 - - sce 2
Grossdonmesc inwstment -1.1 9.6 15.0 -14.8 16.1 .to
Exportsorgoodsand nfs -103 16.8 14.9 6A 21.8
Importsofgoodsandnfs -11.1 22.8 112 14.0 183
Grossnationalprduct -0.7 4.5 52 3.7 5.0 |- -aw
Gross national income -1.4 4.4 SA 2.7 0.9

PRICESand GDVERNMENT FINANCE

1980 1985 1991 1992 1993 CmmgeofGOPd*fatrmidPCM)
Domnssfepdca l0
(16change) 3
Consumerprices 50.1 10.3 18.0 10.1 2|
Wholesale
prics 43.2 53.9 1|
implicitGDP deflator 51.0 20.7 20.5 12. 252
Govrnment finance 7
3| * * * 1 U a
(%OGDP)
Currentbudgetbalance -7.8 0.1 32 -22 0.1 1 4W'd cFn
Oveuil swplusldeflcit I I

so
 Ghana
POVERTY and SOCIAL
(anUn
- grwfth rates) IS 1985-O3
I5 Dw _IOPw
dalIo
Population 3.3 3.2 Lo apedmIcy
Laborfbrce 2.7 2.9
mee"(mw(mm
Povety bvul: headcountindex (5 ofpopulbtbn) 35.9 GNP Gms
U.e expectancy at birth 56.0 p_ F__y
Infant modality erthousandSvue bAhq) 81.0
.0_ ,
Chld malnutrition(5 of chidan under5) 27.1 e I_
Access to safe water (5 of paPulno) 56.0
Eneg consmption per capita ft offequvalent 95.8
IlrteraCY(5 ofpopualon age 15') 39.7
Gross primuy enroNmient (5 of schaogpulaB,) 77,0

TRADE
(mUons USSS) so 19U * 1992 t993 Esporsvdnpou u(mM
Tobalexports (fob) 1.104 633 998 986 1.051 *,
Cocoa 793 412 347 303 280 l,x .-
Timber 34 28 124 123 127 t .I
Manufackles .. .. .. - ._ 1
Total import (cit) 972 729 1297 1.486 1.750. * .e
Food 40 38 36 42 SW
Fuel an energy ° 20 173 19r 191 GM
capital goods 187
1. 584 693 1.012 4l
Export price ndex (1957=1WJ .. 93 89 91 .. a __________________,l_*
In.pat prkcindex f987=100;6 77 106 1tS. a th 92
D 92
Trms oftrade (1987=10) .. 122 84 79 -.
Openmessof ecKnoy (ade*DP,5) 18 21 39 43 55 O *_
BALANCE of PAYMENTS
('ms USS) e1980198 nm 1992 1993 Gunvata aw baa. IDGDPraf I%)
0
* -Sts f goodsand ns 1ilO 670 1.093 1.097 1.196 .2 TT
Inports of goodsandnfs
Rosourcabablnce
Notfatoincomne
Net curent basfers
CtamJntacoount babnx
Before offcial transfes
Afteroffidal transfes
1.175
36
-as
-3

-_4
29
836
-166
-111
33

-244
-134
1.638
-545
-129

-454
-253
220
1.8Z8
-731
-115
255

-592
-78
2172
-977
-112
261

481
-572 10
L..L
l E

J
LI
Long-tr capitl inmEow 64 45 373 393 476
Total otheritarns (net) -189 150 176 -118 136 -t2
Chuanges in net serves 96 60 -297 103 -41 . _
mew 0: -t -- _
Reserves cuding gold (ml. USS) 180 479 550 320
Reservesindcudinggold (smiL.US) 330 552 644 412
Offical exchangerate fAab)SS) 9.6 76.2 367.8 437.1 648.9

EXTERNAL DEBT _______ ______

RoALtEEr
EXTE 1980 19s5 1991 1992 1993 SU outml db(

LoNG-termdebflorts 9615 197.6 265.5 278.9 259.4

IMF mdtexpo 8.7 103.6 74.9 65.9 60.7
Sho-twbnndebtlexports 10.8 27.9 34.4 36.0 30.7
Tobl debt serieepot 13.1 24.3 26.5 26.7 25.4 7OP'S
GDPios OPf
Long-ern debtIGDP 25.3 29.7 427- 45.5 53E8DK
IMFcrsdit/GDP 2.4 15.6 11.9 10.7 12.1
Short-tenndebUGDP 2.9 4.2 5.5 5.9 6.1 as
Logw- dbtatigfos
Private nonguranteedln-tenr 0.9 3.0 1.1 1.1 1.1 a
Pubtal and publcly guanteed * m w2
U N 53
Prlvet reditorllong-tme 11.1 125 7.2 6.5 6.7 _
Oflkil credtorsllongWem 85.0 84.5 91.7 924 922

The develpent dimond slomam lemeof dvdwopni ht te cony cmpae wfft bt inme oup averag

81
 Guinea
G uinea is richly endowedwith agricultural.min-
eral, and energy resources. Yet it is one of the
poorest countries in Africa. Per capita income
is estimated at $510 in 1992.but this number is skewed
upward by the importance of mining in the economy.
About a quarter of its childrendie before the age of 5
and average life expectancy barely reaches 40 years.
Only 37 percent of school-agechildrcn have access to
primary education; and 76 percent of the adult popula-
lion is illiterate. An estimated50 percent of Conakry's
population lives in poverty. Virtually all the United
Nations reports on human development, which meas-
ure social indicators such as daily caloric intake and
access to basic health care, ranked Guinea last of 160
countries.
In September 1958 Guinea became the first inde-
pendentnation in the then French West Africa. Shortly
thereafter economicpolicy shifted toward state-led d
velopment; private-sector activities were increasingly
forced undergroundas an overstaffedpublicadministra-
don absorbed most of the surplus generated by the
minmng companies and inpeded the development of
private initiatives.The once dynamicagriculturalsector
returned to subsistenceproduction, and Guinea trans-
formed itself from a major exporter of agricultural
products into a major bauxite exporter and a net food
importer.
The state-leddevelopmentapproachfailedand mod-
ernization and industialization of the economy were
never achieved. Economicgrowth remainedbelow the
2.8 percent estimatedyearly demographicgrowth rate.
The economybecame increasinglydualistic:the official
sector depended on bauxite exports for its income and
functionedthomughan extensivesystem of admisered
prices linked to a highlyovervaluedcurrency, while the
graduallyexpandinginformalsector obtainedits foreign
exchangethru.gh clandestineexports and pivate trans-
fers from abroad. By the early 1980sthe informalsector
satisfied about 80 percent of urban consumerdemand
and virtually all demandfor marketedconsumergoods
outside Conakry. Urbanization acceleratedas produc-
tive activities and incomes were increasingly shifted
from the rural to the urban sector.
82
Thefinancialpositionof the govermnentdeteriorated
severely, mainly becauseof the decliningperformance
of the state enterprise sector. Tax receipts and transfers
from state-ownedenterprises fell as parallel markets
grew to dominate consuner trade, while budgetary
subsidiesto public companiesexanded. As a result, the
governmentwas increasinglyunable to provide neces-
sary services in health and education, and Guimnea's
infastucture deteriorated.External imbalancesbecame
unsustainableas poorly conceivedinvestmentsfailed to
generate returns adequateto service the associatedex-
ternal debL Mountingdebt service obligationsand pri-
vate capital fight resulted in a continualrise in foreign
liabilitiesof the central bank and a massive accunmula-
don of payments arrears, amounting to over $300
millionat end-1985.
Economic and Financial Reform
The Military Committeefor NationalRecovery, which
took power in April 1984, initiated a dramatic change
in Guinea's politcal and economic policies. In an effort
to reverse the long-standingdeteriorationof the econ-
omy and redress financial imbalances,the new leaders
embarkedin late 1985on a seriesof ambitiouseconomic
and financial reforms supportedby IDA, the IMF, and
bilateral donors.
The government's objective was to put in place a
market-orientedeconomicsystem trough measuresto
correct the serious overvaluation of the currency, de-
controlprices, and liberalizeinternaland externaltrade-
The governmentalsointroducedinstitutionalreformsto
promote private sector savings and investment, and
reorientpublic investmenttoward infrastructureneeded
by the productivesectors. It privatizedcommercialand
industrial activities, replaced the defunct state banks
with privately owned banls and reducedthe civil serv-
ice. These initialreformsmeasuresyieldedencouraging
results. The economy grew 4.5 t -rcent in real terms
between 1986 and 1989, almost 2 percent a year on a
per-capitabasis. It also adjusted quickiy to the effects
of devaluation.and inflation declined from 72 ptcrocnt
in 1986 to 28 percent in 1989. However, the response
 Guinea
from modern-sector investors was disappointing, as
growth was concentrated in small-holder farming,
small-scale enterprises, and in the services sector.
During the secod phase of adjustment, begun in
1988with support from IDA and the IMF, progresswas
slower, partly because goverument needed to do more
than simply dismantle the old policies and practices.
New reform policies and institutionscapable of sustain-
ing the market-oriented economy were required, and
their design and implementationwere more difficult.
Resistancewas encounteredin further restructuringthe
public enterprises secto:, and the pace of pnvatization
slowed. The civil service reform proved difficult to
implement,particularly the establishmentof a mecha-
nism to monitor and control personnel rolls and the
wage bill.
The main achievements under this phase of the
program included an increase in non-mining revenue
from 32 to 61 percent of total revenue between 1988
Pd i993 and removalof severalunviable projectsfrom
the public investmentprogram. The petroleumdistrbu-
tion sector was privatzed, as were the water and
electricitycompanies.Better controlover publicexpen-
ditures and improvementin monetary policy implemea-
tation helped susmainthe reduction of inflationdown to
4.9 percent in 1993.
Economicref rms havs been accompaniedby politi-
cal reforms and progrcss has bece made toward greater
democracy. The press has been freed since 1990, and
strikes and demonstrationsare allowed. In early 1991
free municipalelections took place. A new constiution
was adopted in 1991 and multi-partypresidential elec-
tions conducted in December 199 confirmed the in-
cumbentpresident in his position, but demonstratedthe
existenceof an active opposition,albeit very much along
ethnic lines- Legislativeelections are scheduledfor late
1994.
Since 1990the performanceof the Guinea economy
has been affected by political factors. In 1991 violent
public demonstrationsby public employees forced the
government to double public-sectorsalaries. Politically
related civil unrest weakened private investor confi-
dence and led to a reduction in private investmentat the
same time that public investmenthad to be curtailed in
the wake of the wage increase; as a consequence,GDP
growth fell to 2.2 percent in 1991. By end-1992, GDP
growth was estimated at 3.2 percent; gross investment
averaged 16.4 percent of GDPover 1991-9f aftera high
of 17.4 percent in 1990;governmentrevenueslippedto
13.8 percent of GDP from a high of 14.8 percent in
1990. In 1993,although GDP growth reboundedto 4.5
percent, gross domestic investment barely maintained
its share of GDP and govenment revenues slipped
further to 11.9 percent of GDP. In addition, weakening
83
world aluminum prices caused the current account
deficit to worsen from 9.8 to 13.5 percent of GDP
between 1990 and 1992 before falling back to 12.5
percentin 1993,partiallyasaresultofimportreductions
prior to the elections.
One of the major constraints to economic growth in
Guineais aweakhuman resourcebase. This is reflected
in low literacy rates, high morbidity and mortality
levels. and a lack of access to basic social services.
These issues are particularly acute for women and
children. Goverment policies under the reform pro-
gram aim at adjustment with social equity. Policy
changesduring the first phase of the adjustmentprocess
shifted the terms of trade in favor of rral producers,
the poorest segmentof the population.The government
adopted a number of transitional measures during the
first phase of the adjustment program to cushion its
effect on vulnerablegroups in urban areas. The authori-
ties are reorienting budget and staff resources toward
the healthand educationsectors, with particular empha-
sis on primary health care and education. A well-de-
signedsocial actionprogram is identifyingthe poor and
disadvantaged,andmonitoringprogresstoward upgrad-
ing their livingconditions.
The economy remains vulnerable to adverse trends
in international bauxite and alumina markets. These
sectors continue to account for close to 80 percent of
Guinea'smerchandiseexport receipts and 40 percent of
governmentfiscalreceipts (downfrom an averageof 70
percent over 1987-90). The recent fall in aluminum
prices will depress future mining revenues, as it led to
a 22 percent drop in mining sector export receipts in
1992, followed by another drop of 4 percent in 1993.
Despite relatively good performance by non-mning
exports. the 1992trade deficit dippedto $118.6 million
and improvedslightlyto $110.9 millionin 1993.While
bauxite and alumina production is expected to remain
stable over the next several years, considerable growth
can be expected in the volume of other exports if the
economicreform program is sustained.
P
The positive impact expected from the present adjust-
ment effortswill takehold onlywith susined economic
managementreforms over the long run. The economic
outlook continuesto be highly volatile and can only be
improved through a continuous adjustment process.
which would result in better public finances manage-
ment and a proper enviunment for private-sector ce-
velopment.
 Guinea
The expectedincreasein private investmentresulting
from these policies, and more efficient public invest-
ment, could result in overaUreal amnualgrowth aver-
aging about 4 to 5 percent beginning in 1995, leading
to a 2 percent increase per year in per-capita income.
The share of agriculture in GDP is projected to gradu-
ally increase on the basis of growing exports. Output
84
growth in the industrial sector could average 3 to 4
percent annually, with continuing growth in small-en-
terprise activities, the expansion of mining activity
outside the bauxite subsector, rehabilitation of viable
industrialenterprises, and increasedconstruction activ-
ity. Further privatizationof trade and other commercial
activitiesshould stimulatetertiary sector growth.
 Guinea
Populationmid-1992 (miions ) 6.1 Income group: Low
GNP per capita 1992 (113$) sic Indebtednesslevel: Modernt

KEYRATIOS
1980 1915 1991 1992 199 anvaamiuttgo DPradoCA;

GrossdomnesticinvestmentvGDP - .. 15.9 16.9 15.4 2

Export of goodsandnfsIGDP . .. 25.9 23.6 21.4
GrossdoFnesticsavingslGDP . .. 13.6 10.2 9.5
Goss nationalsavlngslGDP . .. 7.5 5.4 6.4 'a
CurrentaccountbaLancelGOP . .. -9.8 -13.9 -12-5
Interst paymantslGflP . .. 1.2 1.1 1.0
TotaldebtIGOP .. - 83.8 VIA 88.1 *
Totaldebtlexpotw 200.5 - 322.6 386.8 409.9 " -s - - SI 2 a

GOP:,PRODUCTION
(56of GDP) 1980 1935 1991 1992 1993 f SharsofGDPbYsecmas%)
Agriculture .. - 32.6 24.4 24.5 '0
Industry 32.2 32.3 31.9
Manutturing .. - 3.4 4.6 4.7
Services . .. 35.2 43.3 43.6
so
1980-85 11913593 1991 1992 199
(-awige annualgroAth)
AgrIculture .. 3.0 2.9 4.7 5.
Indusry. 4.0 2.6 2.6 3.1
Manufackuring .. 5.4 3.2 3.8 5.0 I
Services .. 4.1 2.2 2Z6 5.3 w u so go iHa62

GDr'. 3.7 Z.5 3.2 4.5 I 3.fd"nmfM rri

GDP:EXPENDITURE
(56ofGDP) 1980 1985 1991 1992 1993 Got fGIadGP%
Privateconsumnption .. - 70.9 78.8 80.5 20
G-eneralgovermentconsumption .. - 7.5 11.0 9.9
Grossdomesticinwestment .. - 15.9 16.9 I6SA
Exportsof goodsandrifs . - 25.9 23.6 21.4
Importsofrgoodsandrifs - 28.3 30.2 28.2
( usIgrowth) ~~~~19604
198593 1991 1992 1993
Privateconsumption .. 4.4 5.1 3.9 7.2 0 2 3
Generagovermment consurmption .. -1.6 1.7 18.9 -35.4- - - C
Grossedornesticinvestm.ent .. 5.8 -7A4 8.2 7.5
Exportsof goodsandrfe .. 26 1.1 -7.2 9.2 1
lmpodsof goodseand nfs .. 4.1 1.6 1.2 6.2
Grossnationalproduct .. 4.5 4-6 6.3 6.2 -Gm0 -aGDP
Grossnationalincome .. 3.6 2.7 4-4 4.5 _______________

PRICESand GOVERNMENTFINANCE ______________

ImG 1915 1991 1992 1993 ChaigmofGOPdEfatr andCPI (11)

Domesdcpdces ~~~~~~~~~~~~~~~~~~~40
(56dhM11) 20
Conisumerprices . . . 20-
Wholesaleprices .- . - 0I
ImTplcit
GDPdeflator . -. 10.1 7.4 81.0 6
Gaovenrnntffinane s so
S SI 6112 62
(56or GOP)
Curret budgetbalance - . . 2.2 2.0 *.6m'in'a -cPl
Overaflsuquspuudefcr - -7.8 48.0 -7.7 _______________

85
Guinea
POVERTYandSOCIAL
(smnuel
g wth *mas) 198045 198393 Dunlopmntdbunand
Population 2.3 2.9 t.f -pdCy
Laborcfome 1.6 1.8
Imesiecet
mctedumiM (mt)
Poverty ee: headcourt hndexf% UpopulatWd) .. GNm
Le eopectancy at bIrh 43.0per plmnay
Infant mot (perthoand w biths) 133.2
Chddmalnutribon(%ofchien under5) 23.4
Acoess to safe waler 4%ofpopulfon) 33.0
Fiergy cnumption per capia (kg oSlquIvalnt 67.2
llitemcy G%
ofpopuqn ago 1S+) 76.0 A Aer
GrossprInmryenrolment fC ofdscho-agpqpubbafon) 37.0

TRADE
('nUns USS) 19im 19 1991 1992 1993 Expoitend pota (wilLUSS)
Tol exports(fob) .. .. 755 621 614 o
Other metals .. .. 435 343 332 7 -
Aluminum .. .. 154 107 106 L*
Manufactue .. .1
Totalimpots(c) 742 740 725 4e
Food ..

Fuel madeney .. .*

aplal god .. .. . .. . o * * * * * *
EIportprice indx (1987=100) .. .. _ .. .. - _
__ a _ _ _ _
Tm rto
of dex(1987=100) .. .. . .. ..
opens of ecnomy uGDP,XJ%) . . 54 54 5s U Eb*
BALANCE of PAYMENTS
(MltnUS$) 1930 1965 1991 1992 1993 Cum ntabe toGOP raio 1%)
Expot ofgoodsandrtnfs 553 .. 813 684 662 _n u s+
0 2
Impartsof goodsand nts 481 .. 886 878 874 .2
Resourcebalsm 72 .. -73 -194 -213
Netfactor ncme -95 . -204 -146 -123 -4
Net curentbsrs -3 .. -31 -84 -52 ^
Curent accountbalance
Beforeofficialtranslers -26 .. -3tl8 403 d87 ^ _
AIw ofail tansfrs -9 -- -198 -268 -269
Long-tenrcaptalw *lw 46 .. 115 275 272
Tolal oM r itnes (net) -6 .. 16 25 43 -12
Chanps innet reserv -30 -2 68 -32 -46 4
Reserves xcludinggold fm. USS) .. .. .. _
Reservesincludinggold (antSS) .. .. -U
Offidal excha rate (loctWSS) 19.0 24.3 753. 903.0 955.9

EXTERNALDEBT
Egpoftraddis 1930 1983 1391 1992 1993 Smuctrumaorxsnaldebt(%
Long-tern debtexports 181A .. 294.9 359.7 396.6 L-._
IMF credtleForts 6.3 .. 6.7 9.3 9.1
Shot-tenT debtlexpors 128 .. 20.9 17.1 4.3
Totaldebt sewvlkexpos 19.8 .. 16.4 12.4 17.9 =OHPla
GoP alt -'Pos
Lorg4erm debtlUGDP - .. 76.6 85.0 85.2 so
IMF ceWGDP .. 1.8 2.2 2.0
Shodt4ermdebWGDP - - 5.4 4.2 0.9 as
Long-tuna debtratos
PrivSa raneedAng-tar" 0.0 0.0 t.o 0.0 t0 . m
Pubicandpubfihlyg nnted c -u a o n 12 s3
PRwteieditorscilng-en 15.8 15.8 4.1 4.1 3.6 1 1
O0tialcrudlsaong-tmm 84.2 84-2 95.9 95.9 96.4

'The deveopmentdimond sosa l of dJelpmet hi the county comparedwt its intome group ege.

S6
 Guinea-Bissau
G ninca-Bissan is a small country on the West
African coast with about 1 million inhabitants.
With an estimated 1992 per capita income of
about $220, the country is among the poorest in the
world. Populationgrowth is about 2.0 percent a year,
and the economy is characterizedby a large traditional
rural sector, producing primarilyfor subsistence.Partly
for this reason, measurementsof economicactivityare
subjectto an unusualdegrecofuncertainty. Agriculture,
fisheries, and forestry account for about 90 percent of
employmentand an estimated44 percent of GDP. While
urban informal activity is strong, it has not been cap-
iured in statistics. Marketed output is largely confined
to export crops, primarily cashews, groundnuts, palm
kernels, and wood; in 1993 cashews, groundnuts, and
fish accounted for about 87 percent of goods exports.
Rice is the main food crop. In the 1950s Guinea-Bissau
was a net exporter of rice (around 40,000 tons annu-
ally); since 1962 it has been a net importer. AMthough
local production has increased, imports of rice have
remained high and are traded informallywith neighbor-
ing countries.
After independencein 1974Guinea-Bissaufacedthe
task of rebuilding its economy.A protracted liberation
war dislocatedone-fifh of the population,destroyedan
important part of its economic infrastructure, and re-
duced output of the main crops by over a third. An
ambitious public investment program financed mainly
by external borrowing focused on the manufactring
sector and neglectedagriculture. Inapprapriatepricing
policies, an increasinglyovervaluedexchangerate, and
an inefficient marketing system prevented recovery of
agricultural production, depressedofficial exports, and
suimulatedthe parallelmarket. Severefiscalimbalances,
resulting from a rapid rise in government expenditures
and limited growth in revenues, were increasinglyfi-
nanced by central bank credit, fueling inflation. Over
1980-82 the external situation was further aggravated
by exogenous factors such as drought and depressed
world market prices for Guinea-Bissau'smain exports-
The balance of payments deteriorated rapidly, exacer-
bated by external debt service payments and accumu-
lated external arrears.
87
In 1983 the government broke with the policies of
the post-independencedecade and undertook an ceo-
nomic recovery program supported by IDA and the
IMF. Despite initial success, the program lost momen-
tum in 1985 largely becauseof the government's inabil-
ity to control the fiscaldeficit and credit expansion. In
1987 the goverment embarked on a renewed effort at
revitalizing the economy. The structural adjustment
program began in 1987 and focused on broad macroe-
conomic policies, restructuring the public investmant
program, decontrollingagriculturalprices. !umplifying
tariffs and customs procedures, and liberalizing wade.
Its objectives are to move toward a flexible and mar-
ket-determined exchange rate, maintain fiscal and
monetary discipline, achieve positive real interest
rates, liberalize prices, eliminate preferential tax and
tariff treatments, reduce export taxes on cashews,
improve public resource management, and promote
public sector reform.
Since 1987Guinea-Bissauhas evolvedfrom a rigidly
controlled central commnnd economy into a largely
free-market economy. The price and exchange rate
system has been liberalized. The public sector, which
had been overextended and highly inefficient, has un-
dergone major transformations although progress has
been slower than initially anticipated. Key enterprises
were privatized and others were rehabilitated,some of
which are now under private management.Some 1,800
of 13,200 nonmilitary personnel left the civil service
over 1992-93. The financial sector has emerged from
being dominated by a single state-ownedbank, which
was an extensionof the monetary control authority, to
having two competing banks-one the branch of a
private foreign bank and the other a privately adminis-
tered joint venture between local and foreign private
investors and the government. The liberalization of
prices has been one of the most successful areas of
program implementation. All prices are liberalized,
exceptfor petroleumproducts, which are adjustedregu-
lardyto reflect changes in costs. In the past, both rice
and petroleum had benefited from steep subsidies
through a multipleexchange rate system that provided
foreign exchangeat well below marketprices to private
 Guinea-Bissau
and public entities permitted to import these commodi-
ties. Steps to unify the exchange rate were taken in
November 1992; implicit subsidieshave largely evapo-
rated, and the prices incurred by importersare no longer
significantlydistorted.
By contrast, progress on the stabilizationfront fell
short of expectations. Inadequatedemandmanagement
policiescontributed to rapid inflation, a sharpdeprecia-
tion of the Guinea-Bissaupeso, and a sizable accumu-
lation of domesticand external paymentsarrears.
Recent Economic Developments
Performanceduring 1989-93 was mixed. In 1990 pro-
gress was made in controllingthe fiscaldeficit, but there
were revenueshortfalls and large expenditureoverrums
in 1991,and macroeconomicperformance was weak in
1991and much of 1992. The adverse trends continued
in the first half of 1992, but expenditure cutbadks
introducedin the second half of the year helped reduce
the fiscal imbalance. Monetary and credit policy were
also expansionarythroughoutmuch of 1991and 1992.
The result was that, after declining in 1990, inflation
increased throughout 1991, reaching an annual rate of
88 percent at the end of the period in 1992. Beginming
in November 1992, the govenmment,which had been
usingthe Portugueseescudo to anchor the crawl, began
to use the dollar as the standard, and this remains the
currency agamst which the crawling peg is anchored.
Since late 1992 the authorities have shown a strength-
ened commitment to implementpolicies aimed at re-
dressing the country's difficult economicand financial
siuation.
In February 1993 the authorities agreed to an 1MF
shadow program that establishedambitiouspolicy tar-
gets for December 1993. Its overall aim was to boost
budgetary revenues while cuttng current outlays (ex-
cludinginterest payments)to 8 percentof GDP in 1993,
compared with 12 percent in 1992. Preliminary esti-
mates for 1993 indicate that even though some of the
targets were not fully met, actions takenover the year
have started to show results. Inflationwas reducedby
almost a third to about 30 percent, from end-1992 to
end-1993. It is estimatedthat the primaryfiscal surplus
will be 2.0 percent of GDP, fallingshort ofthe 6 percent
target, and the overall fiscal deficit (excludinggrants)
of 28 percent of GDP as opposed to the agreed target
of 19 percent. The hortibllin reachingthe agreed fiscal
targets was mostly due to the fact that budgetary reve-
nues were lower hn expectedbecuse of a decline in
imports and revenue enhancement measures adopted
late in the year have not had time to show results. Low
exports of cashews in 1992also reducedproceedsfrom
the export tax. Meanwhile, the government has man-
aged the exchne rate flexibly. Since the beginnig of
88
1993, the Guinean peso has been devalued by 45
percent, which has allowed the spread between the
official and the parallel market rate to be reduced to 2
percent in early 1994. The real GDP growth rate for
1993is estimatedat about 3 percent. Implementationof
structural reforms has been satisfactory, although
slower than originallyenvisaged.
The govemnment'sprivatization and rehabilitation
program has shown little progress. At the beginningof
the adjustment program, the public enterprise sector
comprised39 enterprises,generating about9 percent of
GDP. A managementcontract for the electricity and
water utility has been put into effect and one of two
previously government-ownedhotels has been privat-
ized and the other put under private management.Four
enterprises engaged in manufactiig and commerce
have been privatized, and two leased to private entre-
preneurs. Two tourist resorts were put under private
managemncLFollowing the recently implementedhb-
eralizationof importpetroleun products, the authorities
are committed liquidating the state-owned petroleum
importingand distributioncompany.The port authority
and the telecommunicationscompany have also been
privatized.A technicalunit to coordinatethe rform has
been establishedto ensure a tansparent and objective
process.
At the start of the program, Guinea-Bissau'sonly
bank performedthe functions of central, commercial,
and developmentbanking. Administrativecapacitywas
very weak, and credit and monetary informationalmost
nonexistet. During most of the period a combination
of lax credit policies with negativc real interest rates
resulted in a credit explosion to the private sector and
public enterprises. A large portion of credit was for
consumption,to cover public enterprises losses, or for
non-priorityprojects. In March 1990 the central bank
was establishedas the monetary authority. Two com-
mercial banks have since been creaed, which has
resulted in significantimprovementsin credit manage-
ment due to very cautious lending policies. To reverse
the deteriorationof the monetarysituation, the monetary
authorities undertook to limit the growth of broad
money, which slowed to 40 percent in 1993, from 111
percent in 1992.In a move towardspositivereal interest
rates, the authorities raised aU interest rates in October
1992andagan in March1993 Thenew 6-monthinterest
rates for lending was set at 68 percent. In view of the
rapid decelerationin inflationduring 1993,the nominal
interest rate structure was adjusted downward, but was
still kept positivein real terms. To restorethe credibility
of the banking system the central bank has decided not
to grant any more guarantees on behalf of the private
sector.
The adjustmentprogram has had a strong positive
impact GDP grew steadily in real terms between 2 and
 rruinea-Bissau
6 percent a year from 1986to 1992, and a real economic
growth of 3 percent was achieved in 1993.The ratio of
exports to GDP increased from 8 percent in 1986 to
more than 12 percent in 1993. Although there are no
official statistics on private-sector investment, it has
been growing since the reform program was launched.
albeit from a very small base. Domestic savings, how-
ever, continueto be negativeat about 3 percent of GDP.
Furthermore, the country continues to be very vulner-
able to external shocks and exports.
The current account deficit excluding official trans-
fers widened from 26 percent of GDP in 1990 to 48
percent in 1992, thdennarrowed to 28 percent of GDP
in 1993, despite a reversal in the terms of trade, as
imports were compressedsharply. The current account
deficit has been financed by grants, concessionalloans,
and the accumulationof debt-servicearrears.
External Debt
Guinea-Bissau'sdebt ratios are extremelyhigh. Its debt
service ratio (goods and nonfactor services) is in the
neighborhood of 162 percent, while the total debt in
terns of GDP is 258 percent. For the foreseeablefuture,
Guinea-Bissau's exteral debt will continue to be a
heavy burden. Atend-1993 the stock ofdebt outstanding
and disbursed amounted to about $580 million equiva-
lent. A donor meetingin May 1989agreed that all future
public sector borrowing be on MiA-equivalentterms or
better. The governnent obtained debt relief from Pans
Club members in 1987 and 1989, the latter at Toronto
terms on arrears and debt service falling due between
October 1989 and December 2990. However, as post-
rescheduling debt service remained high, new arrears
have been accumulating. Recently,the goverment has
89
set up a data base and it is developing a formal debt
strategy.
Medium-Term Prospects
The government remains committed to a reform pro-
gram that emphasizes restrictive fiscal and monetary
policies, coupled with bold structural measures so that
Guinea-Bissaucan achieve, over the medium and long
terms, sustained, broad-based and private-sector-led
growlh. The first steps to reverse the deterioration in
the macroeconomicsituation and restore stability have
already been taken, trough the enforcement of a tight
fiscal and monetary policy. Over the next five years, it
is expected that a strong commitment to sustained
stabilizationpolicies and structural adjustment ns
will allow the economy to grow by between 3 and 4
percent a year. Agriculture will continue to be the
decisive engine of growth. The outlook for increasing
production, processing and marketing of rice and other
cereal grains, cashews, fruits, vegetables and forestry
resources is favorable. Barrig unexpected exogenous
shocks, this sector is expectedto grow at about 6 percent
per year over the next five years. Fisheries, commerce,
and services represent additional potential sources of
growth. Government development expenditumesare
projected to remain athistorical levels, at approximaely
22 percent of GDP for the next five years, with expen-
ditures reoriented toward hmann capital and infrastmc-
ture development. Private investments are expected to
play an incasingly larger role in the development
process. Nevertheless, given its starting point and price
prospects for its exports, Guinea-Bissauwill continue
to be one of the poorest counties in the world well into
the next century.
 Guinea-Bissau
Population mid-1992(millions) 1.0 Incomegroup Low
GNP percapita1992(US$) 220 Indebtednessevel:Severe

KEYRATIOS
1980 193S 1991 1992 1993 IrwmssmetloGDPr&la(%)
Gross domesic investmenUGOP 29.6 32.0 27.0 26.5 24.0 40
Exportsofgoodsandnfs/GDP 8.4 9.9 14.4 8.2 1Z2 nr
Grossdomestic
savings/GDP 4.0 -11.0 -8.0 -22.0 -Z5
GrossnationalsavingslGDP .. -14.4 -13.5 -28.2 -7.6 D

CunrentaccountbalancerGDP .. 48.1 323 -48.5 -27.0 1D

InterestpaymenftsGDP 10 141 1.1 1.1 1.3
Totaldebt/GDP 127.2 l15.1 2705 2873 2581 a0
Totaldebtexpaots .. 1.700.6 1.124. 2.012.7 1.445.0 '7 as s - n
af:2

GDP:PRODUCTION
(%ofGDP) 18 198S 1991 1992 1993 ShamofGr P by sor(%)
AgdrSicta 44.3 42.5 44.7 44.1 43.7 7.10
Industy 19.7 14.2 8.4 8.4 LI
Manufactuing * ..
Servies 38.1 43.3 4689 47.5 48.1
198045 1985-93 1991 1992 1993 S A
(averawennuelgrowth)
Agriculture 6.1 6.0 12.2 3.8 4.0
Industy 8.0 -5.9 -36.2 -1.4 4.1
MI,anufahig . o . , , , , , l1
Servies 1.1 555 8.0 2.5 1.1 "7 -ag so 91 92 X
GDP 4.6 3.8 2.8 28 2.9

GDP. EXPENDITURE
1980 1985 1991 1992 1993 Growthlateoaol andGDP I%)
Pfiwbeconsmptibn T-77.0 8688 102.0 118.lT 93.9 1
Generalgovemment cornsumpfion 29.0 24.2 4.0 3.3 86 1"tA
Grossdomestic kwesiment 29.6 32.0 27.0 26.5 24.0 | -
Exportsof goods ad nfs 8.4 9.9 14.4 8.2 12.2 1 e
Impors orgoodsand rifs 43.9 SZ9 47A4 56.6 38.7 40-

(averageannuwlgm
gwin) 1980-85 1985-93 1991 1992 1993 a0
Privateconsumnption 10.4 0.7 -19.2 -1.9 2TA
Generalgovernment
consumppbon 5.5 2.6 -132 9.4 7.9 a Bo nI 2
Gross donestic investment 5.0 L8 100A 28.7 -41.0
Expotsof goadsandits -6.5 17.9 23.0 -30.0 63.7
Imports ofgoods andrff 9.7 80 33.7 .9 4. °-
Gross natioral product 4.8 37 21 3.4 727 -C" -uPe
Grass nationalincomne 7.2 2.2 5.1 1-2 1.9 _____________

PRICESand GOVERNMENTFINANCE
1980 1985 1991 1992 1993 Clange afGOPdantDrandCP()
DomestIc
prdw 161-
rAdchaeI s89T--
Consumerprices . _ 57.6 69.6 48.1
Wholesale prkes . .. _ .- .- I TI
Imprldt GDP delator 10.1 44.8 63.1 74.1 52.0 20tI
0
Govemmentffnance a as a n w
m 93
(59of GDP)
Current budget balance . -11.7 -5.6 -5.6 -33 |* =WdM -CaM
Overall surplus/defcit . .. . I I

90
 Guinea-Bissau
POVERTYand SOCIAL
198085 1985-93 D bpntd
(samnregmwi Mies) Dopf
Population 1.8 2.1 Ub _iedancy
Laborforce 1.1 1.5
moatreent"etimal fmrs)
Povety level: headcountIndex (% of populion) _ GNP Grws
Lif expectacy at bIrth 38.7 per prIMmy
Inlant morta (pr Hiousend/ks bifthe) 140.0 e. c*men
Child ma n (% of chldien undbr 5 24.1
Accss to safewater(% atpopululn) 25.0
Energyconsumptonpercapift ONg o euval) 37.2
Illiteracy(% ofpqppuhlanage 1S*) 63.5
Grossprimaryenmment (%ofs3hooae population) 60.0 h_o_ b_

TRADE
moEnsuss 19985 1991 1992 1993 Iponrtlvl
Exparoand milLUS5)
Tol xpots (fob) 12 20 6 19 se
Gmunduts 2 0 0 a so
Otherfood 5 14 3 16 70
Manufactures do--
TOtalimnots (CiI) .. 21 Z
B2 l
FLelandenery 9 5 3 30
Capitalgoods 9 29 39 20U
Exper priceindex (1i87=O&e) _ 128 87 74 53
Importpricaindex1967lO1 .. I1m 105 701 a g of 92 "
Tenw of bade 1967-100) .. 84 71 52 ds-E-M'
Openns of economy (MdwSDP.%) 52 63 62 65 51 OE *h
BA A C of PAY mENTS _ _ _ _ _ _ _ _ _ _ _

1980 1985 1931 1992 1993 Currennt banctrxtoparbC%)

-MM
usw)
ExportsoFgoodsandnf .. 18 33 18 29
Imporbofgoodsandnfs - 85 111 125 92
Resourebalance - -67 -77 -107 -63
Netlactorincome - -5 0 1i 2|
Netcunm transbrrs - 3 -4 -1 -2
Cunrentaccountbalance o30
Beforeofical btansfers .. -76 -7S -107 -64
Atrofficialasers .. 45 -36 -71 -33 o
Lsnong-Wm capilalin110w _ 63 39 41 22 _ |0
Total oeritemns(net) -
4. -13 43 8
a 0
Chager in net reeres ° -17 10 -13 2 -o L__

Resb exk ding gold Ira US .- 15 is 14

Reses iuding gold (mil USS) - .. 15 18 14
OllcialexchangeatefbcaLSI 49.9 160.0 3.658.6 5.933.9 tO.081os

EXTERNALDEBT
1980 198S 1991 1932 1333 IfSuexmodebt
f = 4%)|
Lang-trmdbexpots _ 1458.0 1,025A 1.841.6 1.4149 lI
IMFcreditexports _ 17.1 9.6 16.5 11.1
debtexports
Short-tenm 225.4 89.7 164.6 19.1 X__
Totaldebtsericefxpoos - 49.2 11.6 19.0 17.0 PN |
GODPrafs soat
Log-termdebUGDP 121.0 167.3 246.6 262.9 252.7
IMFurdIGDP 1.3 2.0 2.3 2.4 to I
ShorttermdebWGOP 4.8 25.9 21.6 22.1 3.4 25

Privaten_nguaranteedllorngtem 0.0 0.0 030 030 0.0

Publc andpubliclyguranted ST S 50 I1 92 93
Priate adoillomgttemr 28.4 15.2 5.3 5.0 4.8 1
Officialcedlorsing-term 71.6 84.8 94.7 95.0 95.2

Thedeelopmentdiamond
shos a el ofdevelopnerthi the cntry cmparedw is incomre
grp averag

91
 Kenya
}Q enya is a low-incomecountry with a per capita
income of $3 10 in 1992. Its populationgrowth
_ has fallenfrom 3.6 percent in 1984to about
3 percent in 1993, reflecting a sharp decline in fertility
rates. About three-quarters of its land area is classified
as arid or semi-arid. The economy is heavily dependent
on agriculture, which employs about 80 percent of the
labor force and contributesmore tan a quarter of GDP.
Coffee and tea account for about 37 percent of merchan-
dise exports. The service sector, indluding tourism,
accounts for about 50 percent of GDP and is an impor-
tant source of employment. Tourism is Kenya's leading
foreign excbange eamer. The industial sector is rela-
tively developed and diversified, contributes about 17
percent of GDP, and employs close to 8 percent of the
labor force. Kenya is not an oil-producingcoumtry,but
it has an oil refinery in Mombasa that supplies the
domestic and export markets.
Kenya's first decade after independence 1963 was
one of remarkable grwth and strucura change, with
real GDP growth averagingmore than 8 percent a year
Agrcultural expansion was stimulated by converting
high-potentialland to extensive smaUlholder cultivation,
introducinghigh-valueproduction activities, and adopt-
ing high-yielding maize varieties. Manufacturing
growth was largely due to expandingdomesticdemand
supportedby rising agricultual incomes, the encourage-
ment of imvestment rough high levels of proteaion, a
liberal attitude toward foreign investment,and an active
governmentrole in industrialpromotionand investment.
GDP growth decelerated after the 1973 oil crisis,
averaging 5.4 percent over 1973-80. In addition to the
effects of rising oil prices, this slowdown reflected the
emergence of structural constrants. Agricultural
growth slowed as the margin of untapped potential
narrowed but also becauseof inappropriae government
police, such as extensive and inefficientpublic sector
involvement in marketing. Industrial growth slowed
because the incentive structure favored the domestic
market over exports, which led to an inceasingly
inward-lookingsector with declining apportuities for
efficient import substitution. These factors were exac-
erbated by the collapse of the East African Com(muty.
92
Annual GDP growth slowed to 2.2 percent over
1980-85, aperiod oEstabilizationproblems and political
uncertainty -including an attempted coup in 1982-
and severe drought in 1984. The need for stabilization
arose from the erosion of fiscal discipline after the
coffee boom of the late 1970s and the subsequent
deterioration in the external terms of trade due to the
second oil shock. By the mid-1980sstabilizationefforts
had beguif to bear fuit.
The improvementwas, however, short-lived. During
the second half ofthe 1980seconomicgrowth recovered
but, aflter a small coffee boom in 1986, Kenya faced
renewed macroeconomicimbalances. Increases in pub-
lic sector employment pushed up the budget deficit,
which reached 5.6 percent of GDP (on a commitment
basis, including grants) in 1990-91-Higher deficits and
monetary expansion fuclcd inflation. Largely because
of this expansion, adverse terms of trade, and slow
growth in non-traditional exports, the acrrent account
deficit remainedhigh.
In Dczeniber 1991 opposition parties were legalized
and the electoral process reformed. Kenya held multi-
party electionsin December 1992 and the resuits, in the
opinon of most foreign observers, bradly represented
the will of the electorate. The ruling parry and its
candidate for president were returned to power.
Recent Economic Developments
The 1991-92 period was marked by a sharp decine in
aUmajor macroeconomicperformance indicators. Real
GDP growth in 1991and 1992 was 2.3 percent and 0.4
percent respectively, after averaging 5.6 percent over
1986-90. Agricultural production was adversely af-
fected by unfavorable weather conditions. Investment,
which averaged 23.8 percent of GDP in 1986-90,
dropped to 21.3 percent in 1991 and to 16.8 percent in
1992. Extenal imbalances worsened as a consequence
of the 1990-91 Persian Gulf crisis, deteriorating terms
of trade, and the withholding of balance of payments
support to Kenya by multlatteral and bilateral agencies
duringmost ofthe period smce November 1991; arrears
on external debt were also accumulated.
 Kenya
At the November 1991 consultative group meeting,
bilateral donors postponed aid pledges citing a variety
of concerns, including poor macroeconmic and struc-
tural policy performce and issues of govemance,
multi-party democracy, and corruption. The decisionby
the multilateraldonors to withholdbalance of payments
support,however, was largely drivenby concerns about
economic policy failure.
In April 1992 the government agreed with the IMF
on a program of actions to re-establisha sound macroe-
conomic framework. The program set a fiscal deficit
target of 3.5 percent for fisc3i 1992 and 2 percent for
fiscal 1993. The monetary target was to restrain growth
of the money supply to about 9 percent in 1992. On the
external side, the program required the introductionof
a foreign exchange retention scheme to improve export
incentivesandplacedlimitsonnon-concessional foreign
borrowing.
While most monetary targets were not met, the fiscal
objectives for fiscal 1992were largely achieved. Broad
money growth was 34 percent in 1992because of abuse
of the pre-shipment export financing -hme and large
overdrafts and rediscountsto some commercialbanks.
The excessive growth in monetary aggregates fiuled
inflation, which accelerated sharply from about 20
percent in 1991 to around 100percent on an anmalized
basis in the second quarter of 1993. As a consequence,
extenal reforms anounced by the goverment in Feb-
ruary 1993-measures sch as 50 percent foreign ex-
change retention for traditional exports and
services-proved unsustiable. The shilling depreci-
ated very rapidly, widening the spread between the
official and interbank market rates. On the fiscadside,
election-rlated expenses and larger than anticipated
export compensationpayments threated to swell the
fiscal 1993deficit (includinggrants) above the 2 percent
of GDP target. The acculation of arrears on public
and publicly guaranteed external debt became an in-
creasingly imporant source of financing the balance of
payments.
After a period of stop-and-go policies, including a
policy reversal on 50 percent export retention, the
government agreed on an acton program with IDA and
IM in April 1993. The central bank then begamto mop
up excess liquidity through open market operaions that
drasticallyraised the weighted-averagenominalinterest
rates on T-bills. Statutory cash ratios for bans were
increased in a number of steps, access to the rediscount
window was tightened, and commercialbank overdrafts
with the central bank reduced. Several devaluations of
the Kenyan shilling took place in March, April, and
May, raising the official nominal exchange rate from
KSh36 to KSh64 to the dollar and narvwing the inter-
bank premium to about 10 percenL Al the same dme
93
export retention at a flat rate of 50 peroent was reintro-
duced for all exporters and all impo.t controls (other
than a short negative list) were lifted.
The effectiveness of measures to absorb excess li-
quidity was compromised, however, by continued
weaknessin monetarydiscipline. Irregularities in inter-
bank and foreign exchange ransactions involving a
number of commercialbanks continued to add to liquid-
ity even as open market operations attempted to mop it
up. The budgetary cost of this policy failure was sub-
stantial and was eventually reflected in large interest
payments due to T-billholders that increased the budget
deficit for fiscal 1993 (commitment basis, including
grants) to an estimated9.1 percent of GDP. The failure
to enforce monetary policy was ultimately addressed in
July by a change in the managemrnt ot the ciral bank
and the subsequent closure of four commercial banks
and a number of non-bank finncial institutions.
In uly 1993 monetary policy was tightened signifi-
cantly and the economnybegan to stabilize. The market-
determined intra exchange rate appreciated from
around KSh82 to the dollar at end-June 1993 to about
KSh7Oin late September 1993. This paved the way for
the unification of the officialand market exchange rates
inOctober Arrearsonprvatradecreditwerecleared,
and arrears on public and publicly guaranteed debt
began to decine. Inflationfell to 55 percent in the third
quarter of 1993 from the 100 percent level in the
previous quarter. With this reductionininflation,nomi-
nal short-term interest rates on T-bills began to fal
while remainig positive in real terms.
These improvementsin the policy environment fa-
cilitaed a one-year IMF Extended Structural Adjust-
ment Facility in December 1993. The consultative
group meeting of donorsonKenyahad, amonthearlier,
indicated new commitments for 1994 totalling $850
milion, of which $170 million was in the form of
qcuick-disbursmg balance of payments support rInana-
ary 1994 the government rescheduled payment of its
arears on external debt with the Paris Club. While these
amounts are thought suffEcient to fund the residual
extemal financinggap for 1994,donors emphasizedthat
the translationof thes commitmentsmto disbursements
depended on timely and decisive iplementation of
Kenya's economic reform agenda and resolution of
outstandingissues of political reform and govenance
Government implementaton of structural reforms
has been encouragmg although not uniform A number
of actions-maize market liberlization, an increase in
the export retention rate to 100 percent-were taken
abead of scbedule. Civil service reform and parastatal
privatzaton are generallyon trc In May 1994Kenya
lifted all remaing exchange restictions, except those
relating to purchases by foreigners of Kenyan shares
 Kenya
and government securities and the operation of the
Exchange Risk Assumption Fund; it is expected that
these will be removed in the near future. Iion,
which had fallen to 16 percent in the final quarter of
1993, accelerated in early 1994. The resurgence of
inflation was driven inpartby a drought-relatedincrease
in maize prices and poor drought managementby the
government, which was slowto release grain stocks into
the market. An additionalcontnbuting fctor was mone-
tary expansion, itself the result of incompletesteiliza-
tion of larger dan anticipated foreignexchangeinflows.
Gross international reserves increased sharply to over
4.3 months of imports by end-March.The inflowcaused
the Keya shiling to appreciatcto KShS7to the dollar
by late May. On the fiscal side, larger than expected
interest paymentson domestic debt and some remaining
weakness in expenditure control have caused deficit
targets for fiscal 1994 to be exceeded.
Poverty
The prospect of rsing unemployment and increasmg
poverty is the crucial medium- and long-term develop-
ment issueconfrontig Kenya- GDP gmwth fell sharply
over 1991-93. Even when GDP growth was around S
percent during 19890, only 90,000 of the 40D.000
new entra to the labor force were absorbed into the
modern-4argely public-sector.
Estimates made in 1974 revealed that about 33 per-
cent of rural residents and 1 percent of urban residents
were poor. Prelimary results of an on-going poverty
assessmenc suggest that the incidence of poverty in-
creased in the 1980s and early 1990s to aromund45
percent in rural areas and 30 percent in urban areas. The
1980s also saw an mcrease in the depth of poverty,
mcasuredbythedifferencebetweentheactualconsump-
tion of the poor and the minimum requirementof 2,50
calories per adult equivalent and some essential non-
food expendiures.
Environment and Population
Poverty and population pressures on limited land re-
sources are the mmn contnrbutors to environmental
degradaon in Kenya. Environmenta problems are
particularly severe in arid and semi-arid regions, which
are more susceptiLbleto ecological damage resuldting
frm population pressures. The government has pre-
pared a development policy and enviromental action
plan for these areas as part of a national envimelntal
action plauexpected to be finaized and adoptedin 1994.
In the interim. the govermnent intends to protect watr
catchment areas, incorporate envinmental criteria m
major public investment projects, and reqiire biological
94
divcrsity and environmental assessmentsprior to devel-
opmentof public lands.
Kenyahas ecperienced a dramatic drop in its fertility
rate-from 7.7 percent in 1984 to 6.7 percent in 1989,
and s.4 percent in 1993-suggesting that a demographic
transition is taking place. Underlying the decline in
fertlity is an increase in rates of contraceptive preva-
lence from 7 percent in 1977 to 33 percent in 1993.
Despite this fertility decline Kenya's population will
continueto grow rapidly, as there are still large numbers
of women entering their childbearingyears, and contin-
ned govermmentefforts to strengthen the family plan-
ning program are essential to further decreases in
fertility rates to moderatepopulation growth.
Stabilization Performance
Kenya's stabilizationperformance since fiscal 1992 has
been marked by an extendedperiod of significantpolicy
failure, particularly in monetary policy and financil
secr regulaiom. Recent performance is more encour-
aging, but will have to be sustainedto achieve a longer
term reduction in inflation; it is increasingly apparent
that an early resolution of the domestic debt overhang
will be a necessary but not sufficient condition for
fundamentalimprovement in the fiscal situation.
The sustinability of the current stabilization meas-
ures will also dependon significantimprovementsin the
efficiencyof curent and developmentexpenditures and
parastatal and civil service reform. In January 1993the
govemrmentreduced the number of ministries from 28
to 23- In August 1993 it adopted a comprehensivecivil
service reform program and establisheda secretariat to
manage its implemeatation. The major objecdve is to
enhance the efficiency and improve the client focus of
a steamlined civil service Retrenchment targets m-
clude reducng net civil service positions by 74,000 out
of a total complementof about 270,000 by fiscal 1997
while strengtheningthe policymaking and implementa-
tion capacity of key ministries and the central bank.
Most parastals in Kenya are a burden on the budget
and do not contrbute to productivity growth. In 1991
the govemment announced its intention to carry out a
comprehensive parastatal privatiation and restrutur-
ing program and it has since commied itself to privat-
izing 25 of the remaining 190 non-strategic public
enterprises by end-1994 and accelerating restructuring
of key strategic parastatals.
The sharpdecline in agriculturalproduction in 1992-
93 was partly due to poor rainfall; other factors included
declining input use. general erosion of producer incen-
tives arising from payment delays, weak implemnenta-
tion of structnua reforms, and inadequate support to
services to the setr. Recent developmentsare encour-
 Kenya
aging: markets for all agricultural commoditieshave
been liberalized, and the role of marketing parastatals
is being restricted. Parallel to attempts to increase the
scope for private activity, the Ministry of Agriculture,
Livestock Development, and Marketing is being re-
structured to make it more responsive to a sector
increasinglydominatedby the private sector.
Years of maitenance neglect have exacted a toil on
public ifastructure in Kenya. Current and potential
investors at an international investmentconferenceor-
ganizedby the government in May 1994 underlinedthe
importancethey attach to infrastructureand the need for
attention to imprving its quality. Sectionsof the high-
way system and urban and peri-urbanroads need com-
plete reconstrucion and much of the rural road network
requires major rehabilitation. Water supply schemes
that have deteriorated in the past decade need to be
rehabilitated and expanded, especially in the coastal
region. The capacity of Kenya Railways has declined
significantly and this has contnbuted to a decreasing
level of service providedby MombasaPort. In energy,
the problem is also one of inadequateinvestmentwhich
is likely to become a severe constraint *o national
developmentif not undertakenquickly.
In the past two years renewed interest in regional
ingration among the former members of the East
Afican Communty (Kenya, Uganda and Tannia) has
bee revivedby the overall liberalizationof trade in the
95
three countries and by the essentialconvertibility of all
three currencies. The three countries have constituted
technical working groups to prepare proposals consis-
tentwith acommonprogramofactiondefinedinHarare
in December 1992.
Medium-Tern Prospects
The prospects for Kenya's achievingsignificantgrowth
will depend on effective implementationof structural
adjustmentmeasuresto addresskey developmentissues.
If macroeconomic stability is matained and reforms
are pursued vigorously, GDP growth could reach 5-6
percent by 1995, allowing per capita income growth of
over 2 percent per year.
Over the period 1994-96, Kenya's current account
balance (excluding offcial transfers) is projected to
declHneslightly, moving from a small surplus in 1993
to a deficit of less tan 1 percent of GDP in 1996.
Accumulatedextemrnal debt arrears as of December 31,
1993, have been rescheduled over the period 1995-
2001. Due to the refinancingof arrears, amorfizationof
existing debt is projected to increase in dollar terms by
1996. However,the overall scheduleddebt serviceratio
is expectedto dropfrom about30 percentin 1993to about
27 percentin 1996.Under its stabilizationprogram, the
government is commied to limiting no-cocessionl
borrowingto aprximtely $70 millionannually
 Kenya
Populationmid-1992 (nimions) 25.7 Income group: LoW
GNP per capita 1992(1.3) 310 Indebtednesslevel: Sevr

KEYRATIOS
19W 19115 1991 1992 1993 nvumetmeno
GDPrato %)
30
GrossdomesicinvestmentGDP 29.2 26.0 21.3 16.8
Exporsof goodsandnfs/GDP 27.9 25.3 27.4 25.8 ..
Goss domesicsaigs/GDP 18.1 24.9 19.8 1i53 20
Grossnational
sayingslGDP 15A 22.6 15.9 11.3
CurentaccountbalancelGP -17.0 -7.0 -SA -2.3
lnterestpaymmenGDP 2.2 2.6 3.0 2.2 2.0
TotaldebWGDP 46.7 67.0 87.2 79.5 962 0
Totaldebioxpots 154.4 259.4 310.1 295.2 _ a 12 go SI

GOP:
PRODUCTION
(%ofGDP) 1980 1985 1991 1992 1993 Sham ofS
GOlbyuuctnr(%)
Agriutu 32.6 32.5 27A 26.8 __
Ilndstry 20.8 19.1 20.1 19.2
Z
Manufacturing 12.8 11.7 12.3 11.8 _
Services 46.6 48A 52.5 54.0 -

-aeannual grmfh)
Agrict
1981-85 1985-93
27 2.8
1991
-0.7
1992
-3.7
1993
Industry 2Z4 4.4 2Z5 OA .
Mamnucfactrn 3.8 5.1 3.8 1.2 . -
Servies 4.1 4.A as Z9 .. e ae u o
GDP 2.4 3-8 1.5 0.4 02 _
GDP-EXPENDOTURE
(%ofGDP) 1980 1S8S 1991 1992 1993 tews raftsolfGI andGDP(%)
Privaeconsumpion 5Z1 57.6 63.1 68.5 * D
Generalgovemment cnsumpion 19.8 17.5 17.1 16.3 .. i5
Grossdomesbcinvestbnt 292 26.0 21.3 16.8 - 10
Exprts of goodsandnfs 27.9 25.3 27.4 26.8
importsof goodsandnis 39.1 24 28.9 2&4 5

(averageaenuaignrowu 198045 1985-93 1991 1992 1993

Privateacnsumpion 1.1 6.7 31 6.3
Genemgovemment consumpion 1.1 4.0 5.8 9.1 40
Gms domestcInvestment -5.7 -1A -10.7 -16.2 2.8 |S
Exportsof goodsandnfs 0.6 5.7 -1.0 -3.1 6.6
Importsof goodsandns -9.4 5.0 -4.4 4.5 -12.2 -20

Grss nationalproduct 23 4.1 0.8 12 .. -cm -.-

Grmss naionalin 12 42 3.3 32 . I I

PRICES FINANCE
and GOVERNMENT
1980 i9S 1991 1992 1993 ch| afGDPddlnraedCP |%)
Domesti prices SD
(%chwnge) a0
Consumerpnices 13.9 13.0 19.8 29.5 45.8 |3
Who-sale -
ImpliciGDPdelator
..
9.8 82
.. ..
11.3
.
16.3
,
46.1 ,

(%o' GD-C
Cumentmdgetbalance Z4 -0.7 -0.3 0.5 -3.8 1 -OR
Oall suplusldefidt -6.3 -7.0 -72 -4.5 -87

96
 Kenya
POVERTY mnd
SOCIAL
(annualgrowthraes) 19 198593 DveuopmwetdInCwr=
Populaton 4.0 3.4 aqiec_c
UFOe
Luborforce 3.5 3.7
mlt cant moUnR Om)
PovertYlet heedeountIndex (16of popustoba) .. GNP QrGw
Ufe expectacyat b!rth 58.9 pdny
Infant mortalty (pihousand bOnahs) 66.0 pea mIn
ChId malnutriton (6 of chldoenunder 5) 18.G
Accss to satewater (% ofpopulat on) 28.0
Energyconsumptionpr capita (kg oalequvalent) 920
Illiteracy(%of populbtionage 15*) 31.0
Grss primaryenrdmenti (% of schoof-agepopualion) 95.0 Accesto ma wvw

TRADE
(mMlbnsUSQ) 190 1985 1991 1992 1993 rEpaarn*hupmrnvel(mNLLUSS)
Totalexports (fob) 1,390 940 1.070 1.126 -..

Fuel 439 118 68

Coffee 291 281 163 127 .. 2r
Manulactos a181 117 150 144
Tot imports(ci) Z585 1,486 Z034 2214 ..
Food 199 112 137 - .

Fuelandenergy 876 461 395 385

Capitalgoods 726 340 540 457 .. *
Exportpriceindex(1987=1W) 155 115 98 103 ..
Impor price Index(1987=10I) 96 97 102 116 .. sa u ao
Termsoftrada(1987100) 162 119 96 90 ..
Openness
of economby
(ade/GDP,%) 67 52 56 55 .. IE3fl Ebren

BALANCE of PAYMENTS
(EtYons CM) 1930 1965 1991 1992 1993 ntaCC0banC0tDGVPSb0%)
Exportsorgoods and nrs Z144 1,552 2250 2151 e- .
Impalof rgocisand nfs 3,182 1.1149 2,374 Z176 ._
ResouLcebalance -1.038 -297 -125 -25
Net factor income -222 -213 -454 -231 -
Net carnt translfs 27 81 14 68 _
CWInlt accountbalance
Befbre official tasfers -1233 -429 -431 -188 .
After ofrcil bansf -1,115 419 -m 38 45
Long-tarmcapitl inflow 510 106 164 27
Total other items (net) 474 180 -304 290 - 40
Changesin net reserves 131 33 362 -355 -82 -2 W

Resemrves excludinggold (MAilUSS) 492 391 117 53

Reservesincludinggold (m USS) 539 417 145 80
Offidal exdcangerate (lcaUSS) 7.4 16.4 27.5 32.2 580

EXTERNALDEBT
Expor2raOos 1980 1935 1991 1992 1993 Stmucfftumhaemldmht(%)
Long-termrn
detaports 113.7 196.8 258.0 241.7
IMFaexpomts 11.6 32.9 21.9 18.2
Short-tem debt/exports 29.1 29.7 30.3 35.2 ..

Totaldebt service/expots 19.7 38.9 31.2 27.0 ., ri_le

GDP ra6_I uWLM
Long-termdebWGDP 34.4 50.9 72.5 65.1 82.2 SOIL
IMF aediUGDP 3.5 8.5 6.1 49S 5.6
Short-tenndebtlGDP 8. 7.7 8.5 9.5 8.4
Long-frn debt raios_
Pdvatenonguaranteedftn-enn 17.5 16.6 17.0 111 12.1
Publicand publdyguaranteed | - - Gr
mI 92
Private l 34.4 10.7 16.1 15.9 15.6 _Lr
Official credtlAsng-toerm 48.1 72.7 66.9 73.0 72.3

'The developmentdiamondshows a evel of developmentin the countrycomparedtwithits incme goup awrage.

a Average Nairbi bwer incomeprice indics (1987to 1993). b. Fical year (July to June).

97
 Lesotho
L esotho is at a crucialjuncture in its polidcal and
economic development. With the return to de-
mocracy in 1993 after 23 years of authoritarian
rule, and rapid change in SouthAfrica, Lesothohas the
opportunity to reorient its developmentpath toward
greater economicintegrationwith SouthAfrica and the
region. Lesotho has successfullycorrected the fiscal
imbalancesof the 19BOs.It can look forwardto substan-
tial financial flows from the sale of water resources to
South Africa under the Lesotho Highlands Water Pro-
ject, and has made important progress in delivering
social scrvices to its population. However, these ad-
vances have been marred in the past few years by
declininggovermmentperformance instructnul reform.
On the political front, the new democraticgovernment
has had problems with insubordinationin the ranks of
the defense force over pay and politicaldisaffectionaud
has had to request internationalmediationto deal with
two short-lived mutinies.
Lesotho's emergence as a labor reserve for South
Africa closely followedthe general pattem of the crea-
tion of native reserves in the Southern Africa region.
In the mid-19th century European settler regimes effec-
tively lowered the potential profits in a free African
farming sector to force peasants into farm or industrial
labor. In the case of the Basotho, these measures in-
cluded seizing most of its arable land, confiningmde-
pendent Basothofarming to a remote and mountainous
area that was to become the independentstate of Leso-
tho, and adopting protectionist measures against
agricultural exports from Lesotho.
During the 20th century Lesotho'sdependenceon the
SouthAfrican economycast t in the role of an exporter
of labor and exposed it to the long-term consequences
of South Africa's economicpolicies. The failure of the
inward-looking and capital-intensive South African
economy to use its plentful factor-labor-efficiently
has meant a general decline of employment opportuni-
ties, with negative consequencesfor Lesotho given its
historic dependenceon labor migration. The high de-
gre of protection grantedto white industry-parastatal
and private-against inltenationaland domesticcompe-
titon stifled developmem of a diversified producive
base miLesothoorientdtowardsupplyingSouthAfrica.
98
The inefficienciesassociatedwith the overly capital-in-
tensiveand uncompetitiveproductionof basic consumer
goods and services in South Africa have hurt Basotho
consumersin general, and the poor in particular.
The labor recruitmentpolicies followedby the South
Afican mines have had devastating effects on family
structure in the recruitmentareas, including Lesotho-
one of the most important migrant contrat labor sup-
pliers to the mines.
Lesotho responded to these policies by adopting an
import substitution strategy for basic consumer goods
and services after winning independencefrom Britain
in 1966. A key clement of that strategy was creating
parastatals and public companiesin those areas where
the goverment's perceptionwas that a domesticprivate
sector was virtually non-existent, or that emerging
private entrepreneurs would not be able to compete
against large-scale South AfL±an enterprises. Hence,
public investment in the parastatal sector-strongly
supported by donors-dominated economic activity
throughmuch of the 1970s and 1980s.However, by the
nd-1980s it became clear that parastal and public
company investments had been unable to generate sus-
tainedeconomicgrowthor increasethe labor-absorptive
capacity of the economy. Parastatal losses became a
drain on the government's resources, while crowding
out private investment and unnecessarily raising con-
sumer prices for the goods and services produced. By
fiscal 1988 the deficit reached 20 percent of GDP, or
10 percent of GNP-Lesotho's GNP is about twice the
size of its GDP due to migrant worker remittances,
which are included in the GNP estimate, but excluded
from GDP.An imprudentrise in militaTyexpendits
caused a further deterioration n the fiscal balance. In
1988 Lesotho adopted a structural adjustmentprogram
supported by the MF.
Recent Economic Performance
The adjustment program was triggered by the fiscal
imbalance, but it was also designed to find ways of
reducmgLesotho's macroeconomc vuberability to ex-
ogenousshocksand set up a aceconomic and poicy
framework that would enable private sector develop-
 Lesotho
ment and the productive use of Lesotho's substantial
revenues from the HighlandsWater Project. While the
external balance was threatenedby a structural decline
in migrant worker remittancesand Southern African
Customs Union revenues, the scope for corrective cx-
change rate and monetary policies was limited given
Lesotho's membership in regional customs and mone-
tary unions. The only significantshort-termmeans for
correcting the imbalance involved reducing public ex-
pendituresand increasingrevenues. This was the route
taken by the government in a number of successive
structural adjustmentprograms after fiscal 1989.
The stabilization measures proved extremely suc-
cessfi,l. The fiscal deficit, after grants, of 10.3 percent
of GNP in fiscal 1988 was reversed into a surplus of
2.2 percent of GNP by fiscal 1993 (the deficit, before
grants, was reduced from 14.3 percent to 1.9 percent
of GNP). GNP per capita for 1992 is estimatedto the
$600. Inflation, currently estimated at 9 percent, is
decelerating, mirroring the trend in South Africa. Fi-
nally, the external current account deficitwas reduced
from 7 percent of GNP to 2.2 percent, and foreign
exchangereserves were built up from less than 6 weeks
to over 12 weeks of imports. Overall balance of pay-
ments went from a deficit of SDR3.9 million in fiscal
1988 to a surplus of SDR43.1 million in fiscal 1993.
Other positive developments included impressive
manufacturingexport performance,caused by inflows
of foreignL private investmentfrom East Asia and South
Africa attracted by the improvement in the macroeco-
nomic framework, intensive investmentpromotion ef-
forts in the early 1990s, the country's attracive labor
wage rates and productivity, and preferential accessto
export markets through the Lom6 Conventionand the
General System of Preferences applicable to low-in-
comecountries.En1992exportsincreasedby 67 percent
in nominal terms, led by a sharp rise in textiles,
garments,footwear and light manufactures,whichnow
account for over 80 percent of exports and provide
employmentfor about 11,000people. This strengthened
a trend established in the 1980swhen exports-mainly
driven by textiles and footwear-increased 30 percent
ayear, although fromiaverysmallbase. In 1993exports
slowedbecauseof quotasimposedon Lesotho'sgarment
industry, but assuming quotas are relaxed in the near
future, overall exports are expectedto grow 15 percent
a year in the coming years, mainly through growth in
cturing exports.
During the period of stabilizationeconomicgrowth
was uneven and management of strucual reforms
sipped consierably, following a general trend of de-
cining performance of the civil service. Additionally,
severedrought conditionsin the region contnbutedto a
fall in real GDP growthfrom 12.6 percentin fiscal 1989
to 2.4 percent in fiscal 1993. Real GNP growth fared
99
even worse: from 8.8 percent to 0.3 over the same
period.
The reforms envisaged in the adjustment program
were intendedto promote growth and expand employ-
ment opportunities,while continuing to strengthenthe
fiscal and balance of payments positions. These in-
cludedprivatizationand parastatalreform, and improv-
ing land managementand tenure systems to improve
productivityin agriculture. Other supportingstructural
measuressought to increase outlays and improve effi-
ciencyin the use of funds for social services, encourage
capacity building in the civil service-with special
emphasison fmancialmanagementand personneltrain-
ing-and promote sound environmental management
practices. While overall implementationof these struc-
tural reformswas slowand deterioratedduring the final
two years of the military regime, there was some
progress in structural reform over 1988-93. The envi-
ronment for private mvestment improved dtrough
changesin the tax law and streamliningof licensingand
work permit procedures. Progress, albeit slow, was
madein educationand health programs.
Social Indicators
In the past 10 years Lesotho has achieved substantial
progress in human resource development. Mortality
rates are falling and around 75 percnt of 6 to 12
year-olds are enrolled in primary school. A solid core
of social infrastucture exists, exemplifiedby the wide
networkof schools and clinics. However, the impres-
sive advances made by Lesotho in hlman resource
developmentare threatenedby managementand man-
power deficiencies,popuation pressure, and the future
cost of epidemic diseases. In educaton, quality is
decliningat a time when Lesotho is in greatest need of
an expansionof skdllsand needs to be responsiveto the
demandsof economicdiversificationand new employ-
ment opportunities in the region. In health, notable
advancesin the expansionand quality of primarybealth
careservicesare constrainedby bottenecks inplamning,
finance, and training. With respect to population, Le-
sdiho's already high dependency ratio is in danger of
worseningeven more if fertility does not fal rapidly,
and measures to prevent sexually transmitted diseases
are not expanded.
Despite Lesotho's achievementsin providing social
services, poverty continuesto be serious and is charac-
terized by the bigh proportions of people classified as
poor (49 percent) and very poor (26 percent) in 1993.
GNP per capita was estimated at $580 in 1991. The
incidenceof poverty is most severe in the rural areas:
according to one estimate it is twice as high as in
Maseu, the capial. The coninuedhigh rates of poverty
find their root in stil insignificant progress made in
 Lesotho
developingan indigenousprivatesectorin key sectors
suchashandicrafts,textiles,andagricultural processing
andmarketing.Animportbanon wheatandmaizeflour
to protectdomesticprocessingandproductionof basic
foodgrainsmayalsohurtthepoor.Thefoodprice-rais-
ing effectfunctionsas a regressivetax, whileinhibiting
diversification
of agriculture.
Medium-TermProspects
Progressin structuralreformhas beenhamperedby
entrenchedinterests,who inhibitedthe movetowards
genuineempowerment of localcommunities andindige-
nousentrepreneurs.The paceof agriculturaland land
reforn has beendisappointing,and protectionagainst
SouthAfricancompetition has distorteddomesticcom-
petitionin favor of capital-intensiveparastatalsat the
expenseof moreemployment-intensive, smallandme-
dium-scaleindigenousbusinesses.Thesuccessof Leso-
tho's small but thriving industrialsector based on
foreigndirectinvestment-ofwhicharoundtwo-thirds
is of SouthAfricanandone-thirdof EastAsianorigin-
is double-edged.On the one hand, employmenthas
increasedsubstantially as the sectorhas sustaineda 20
percentyearlyreal growthrate overthe past20 years.
Ontheotherhand.substantial resentment leadingto civil
unrestwasfueledby a perceiveddominanceof foreign
investorsat the expenseof local entrepreneurs.The
sustainabilityof reformsis most fireatened,however,
by the lackof progressin civilservicereform,which
stalledafter a promisingstart; its loss of momentum
coincdedwith a growinglack of politicaldirectionin
government andgradualpoliticizationof thecvil service.
Lesotho'svery smalleconomyis very exposedto
changesin thatofits largeandencirclingneighbor.Over
80 percentof Lesotho'strade takesplace with South
100
Africa.Customsunionrevenues,collectedas dutieson
importsby the SouthAfricangovernment,constitute
around50 percentof Lesotho'sgovernmentrevenues.
About 140,000men-40 percent of Lesotho'smale
labor force-are employedin the Republicof South
Africa.Migrantearningsconstituteabout50 percentof
Lesotho'sGNP and allow importsworth more than
onc-and-a-half timesthe valueof domesticproduction.
Over80percentofadultnen livingin Lesothowillhave
beenmigrantworkersin SouthAfricaat somepointin
theirlife. Around80 percentof Lesotho'shouseholds
live in the rural areas, and even in the rural areas
remittancesmakeup morethan50 percentof avenge
householdincome.
A contnued peacefulpoliticaltransitionin South
Africashouldleadto an economicresurgencein Leso-
tho. A dynamicSouthAfricawill stimulatethe devel-
opmentof Lesotho'sdomesticproductivcbase,sinceit
is likely that the new South Africaneconomywill
liberalizeits marketsand generatema-y opportunities
for small-scaleentrepreneurialactivity.
Lesotho's small, poor, and predominantlyrural
economybaseisalmostcontinuously exposedto natural
disasters.Thelatestdroughthit the economyin fiscal
1993and resultedin high food expendituresand im-
ports. Improvedwaterresourcemanagement is an im-
portantelementof a strategyaimedatdrought-proofing
theeconomy.Additionally, carefullymanagedfinancial
reservesthat can be quicldymobilizedto protectvul-
nerablegroupsfromthe adverseeffectsof suchexoge-
nousshockswillgo a longwayto minimizetherisks of
naturaldisasters.Moreover,continuedlberalizaionof
SouthAfricanagriculturalmarketswill improvefood
securityin the regionthroughlower consumerprices
and increasedrelianceon internationalgraintrade, in
particular,duringperiodsof drought.
 Lesotho
Population
mid-1992(mrltons) 1.9 Incomegroup:Low
GNPper capita1992(USS) 600 level:Balowavssgp
Indebtedness

KEYRATIOS
1980 1983 199t 1992 1993 Inweatmat
toGOPraIorA)
so
GrmBdomestcinvestmentGDP 42.4 49.4 72.8 72.6 77.8 70
Exports
of goodsandnb/GDP 20.3 12.7 11.7 14.7 15.3 *s
GrosBdomestcsamtsg/GDP -59.7 -77.5 -56.4 -46.7 -43.3 o*
Gros.natinal savings/GDP 12.5 40.8 15.6 15.7 .. 4
30
CurrentaccountbalanceIGDP -31.8 2.7 .828 -47.0 -23.9 20
Interestpaymentl/GDP 0.4 1.7 1.6 2.0 1.8 tl
ToalndeWGDP 19.2 70.2 70.3 65.9 72.3 D
TotaldebtWexpts 19.5 47.9 75.1 76.4 92.2
2 U U 3 I 32 3

GDP: PRODUCTION
1980 1955 1991 1992 1993 Shumof GDPby.car(%s
(%ofGDP) 100
AgrIculure 23.6 21.5 1Z6 9.8 10.4
Industy 28.9 29.6 44.7 47.2 48.8
Manufaturng 6.5 11.1 15.1 16.9 16.9
Servics 47.5 48.9 42.7 43.1 40.7
1980-SE198-93 1991 1992 1993
(avage annualgmwth)
Agriculture -2.8 -2.4 -29.5 -24.0 18.5
Industry -1.8 14.1 10.9 10.6 10.0
Manufacturng 13.4 10.9 9.2 15.1 5.0 a
Services 6.3 4.8 5.2 2.9 3.5 7 am u n 2 "'a
DAlloakm Ehatay OSarim
GDP 1.2 6.4 1.7 2.8 7.6
GOP:
EXPENDITURE
1980 1938 1991 1992 1993 GrwtraadfGoIandGMlp(%I
(% ofGDP) s
Pdvateconsumpton 123.9 144.5 127.4 115.6 112.1
1 s
Gnenrl governmentconsumplion 35.8 33.0 29.0 31.1 31.2 M4
Gross domestlcinwestme 42.4 49.4 72.6 72.6 77.8
6 S
Exportsof goodsand nfs 20.3 12.7 11.7 14.7 15.3 -3
Importsofgoodsand nfs 122.3 139.7 140.8 134.1 136A 25

1980-85 1985-93 1991 1992 1993 20

ravemgaannualgwwfhJ is /\
Privateconsumption 3.7 -1.0 6.0 -6.9 ..
Generalgovernmentconsumption 2.6 2.3 6.5 4.8 ..
Gross domestic investment -1.7 15.9 1.2 7.3 7.3
Exports of gods and nfs 4.6 9.8 14.8 3.0 11.6 c
lmpots of gocds and nrs 1.9 3.7 7.5 -13.7 5.2 - - - so S 2 33
Gross nationalpodud 3.3 3.5 4.7 -1.6 4.3 G O
Gross nationalIncom 3.0 3.0 1.6 -0.2 a,8 1 1

PRICESand GOVERNMENTFINANCE
1910 1985 1991 1992 1993 Chn.t dGOPdaibtarandCPI%)
Damnesfc pdcas 20
(%changp) is
Consumr prices 15.7 13.3 17.7 17.2 Ia
VWholeslepricas .. .. .. .. .. 5
ImplicitGDP deflator 20.8 16.9 129 14.7 9.7
Govmwnmentfinance B7 *M i
90 S1 92 S4
r%of GDP) G
Corrnt budgotbalanoe .. .. 11.4 14.5 17.0 -
Overal surplusldeaidt .. .. .. .. .. II

101
Lesotho
POVERTYand SOCIAL
1980465 1985-93 Dovalopuwntdluond'
(annualgrowth ues)
Populalton 2.9 2.6 LIk.eectancy
Labor force 2.0 2.1
most mntestflats (M)..
Poverty level: headcount index (%of population) GNP Gross
Life expectancyat birth 60.4 per pr
Infantmortality porthouwsndfive bkths) 46.0 capdm omlyl
Child malnutrition(% f ch/idrununder5) 13.3 e; vam
Access to safe water (S of population) 46.0
Energyconsumptionper capita (kg oil equivalnt)
Illibtracyrx of popubLibnage 15+) 26A
Grmssprimaryenrronent (%of sdoolge popultfion) 107.0 Ac to ate t

T1ADE
(mlEonsUS$) 1980 1985 1991 1992 1993 Expat and kaport tnls (malL
USS)
Total exports (fob) 58 22 .. .. . 7w
n-a
n.a ..
. -.. .. .. .. ew a
Manuectures 34 2 . 5W U
Total impor (cil) 426 335 .. .. .. 4 U
Food 99 66 .. .. .. .
Fiieland energy 45 32 -. .. ..
C:apibdgoods 75 56 .. . . 10 -
Expon pri3 index `1987=100) 108 69 .. . __e;1= ___L_,___ .
Import pniceindex ft967=100) 92 72 .. .. .. a s *1 * 2
Termsof trade (1967=100) 117 95
Opennessof economy (frade1GDR%) 143 152 152 149 152 us *hmp

BALANCE of PAYMENTS
(milonUs) us 1980 1985 1991 1992 1993 Cwtac ncet tDGratC
Exportsofgoodsandnfs 90 39 106 127 114
Imports of goods and nifs 475 343 1.072 929 919 -10 W. m in r
Resoure balance 484 -304 -966 -802 405 +L
Netfactor income 266 249 451 463 625 30 [
Neturcenttransfers 2 62 3 3 4 U
C'urent acount balance IL
Before olftlal eLqrs -11t7 7 512 -337 -176 4e
Afler offidal transfers 56 7 -61 -70 -135 a+
Long4e-tr capitalinflow 34 16 350 179 -Ia
Total oter itenis (net) -47 -2 55 -17 . so
Changesin net reserves -43 -21 44 -92 0
Memo: a
Reservesexduding gold (mi. USS) 50 44 115 157
Reserve includinggold (mil. US$1 50 44 115 157
Offical exchange rate (localJUSS) 0.8 2.2 28 2.9 3.3

EXtERNAL DEBT
T_____________

EXTEoRNALDEBT1980 1985 1991 1992 1993 Sbuctumofutxtmaldsdt(%)

Lang-termdebtlexports 15.5 45.7 71.3 71.6 85.5 |1_
IMF cred-tlxports 1.7 1.1 3.2 4.0 5.9
Short-tmr debtiexports 2.2 1.1 0.6 0.8 0.8 7S
Total debt sevicelexports 1.5 5.2 4.7 5.8 6.4 |Nor |
GDPratos ~:OH
Long-termdebtVGDP 15.4 67.0 66.7 61.7 67.0 CLso
IMF crectrUGDP 1.7 1.6 3.0 3.5 4.6
Shot-term debt/GDP 2.2 1.6 0.6 0.7 0.6
Long-tens debt ra fts
Privatenonguararteedllong-tem 0.0 0.0 0.0 0.0 0.0
Pubricand publicy guarantend 46 a m - DI *2 I
Privatecedillorsflong-term 20.0 4.7 a 65 3.9
Officialcreditorsllonrg-term 80.0 95.2 91.5 93.5 96.1

The developmentdiamnnd shWwsa level of deelopment in the rmountycomparedwit it incomegmrw average.

102
 Madagascar
M adagascar is a stridng example of a country
with significantbut unfi!flled grwth poten-
tial. It is the world's fourthLlargest
island,with
a rugged topography, a wide range of soil types and
climates, a rich mineral endowment, unique flora and
fauna and many beaches, and enjoys abundantlow-wage
and trainable labor. And yet, with a populationof over
12milliongrowing at 2.8 percent a year and a per-capita
incomeestimatedat $230 in 1992, it is one of the world's
least-developedcountries. Poverty is widespread.
The economy is predommantlybased on agriculture,
which accounts for about one-third of GDP and is the
main source of income for about 80 percent of the
population. The agricultural sector is dominated by
small-scalefarms producingboth export and food crops.
Agricultural products provide about 60 percent of ex-
port earnings. Major exports are vanilla, coffee, and
shellfish. Rice is the country's main staple. The indus-
trial sector (about 13 percent of GDP) is undergoing
transformationaway from capital-intenive and import-
suSbstitutingactvties towardslabor-intensiveexport-on-
ented production. Madagascarhas significantlong-term
economicpotential given its industriouslabor force and
an abundant and wide variety of natmralresourmes.
Social Indicators
Madagascar's social conditions are below sub-Saharan
standards: life expectancy is about 50; child mortality
claims 15 percent of live births before age five; malaria
is a major health problem and tuberculosis and other
communicablediseases are increasing; illiteracy is in-
creasing; and chronic malnutrition of up to 40 percent
exists in certain areas. Food security is a particularly
serious problem, especially in urban areas, and has
worened over recent years largely due to economic
decline. The public health and education systems are
poorly managed, underfunded, and inefficient. Litle
has been done to control the rate of populationgrowth.
Environment
Madagascar is one of the ecologicallyrichest countries
in the world; it is also one whose heritage of biological
103
diversity is most at risk, as the country finds itself in a
cycle of envionmental degradation that inreasigly
threatens sustainable development. Forest cover has
been reduced by 50 percent in the last 30years, and in
some areas erosion is decreasingagricultual productiv-
ity and threatening inaswucture. Low technologyuse,
slash and burn cultivation,and wide-spreadpoverty and
high population growth have contnrbuted to environ-
mental degradation.The authorities recognized the im-
portance of this issue, and Madagascar was the first
African country to prepare a national environmental
actionplan-in 99-whichhas beenwidely supported
the donor comnmuity.
From independencein 1960 until 1970 Madagascar
enjoyed modest gmwth. The trend faltered duinng the
mid-1970s as it underweat a socialist revolution that
resulted in authoritarian rule and dirigiste economic
policies of nationalizationand economic controls that
discouraged private sector development. Industrializa-
tion through import substituon became a cental objec-
tive, with agriculture relegatedto a supportmg role. By
the late 1970s this strategy culminatedin an ambitious
public mvesmnt program composed of large, capital-
mtensive, and economically non-viable projects, fi-
nanced to a large extent by external borrowing on
c il terms. The policy, together with declning
terms of trade and stagnant domestic revenues, led to
widening external and domestic disequilbia, high in-
flation, and a contraction in real GDP of 11 percent
between 1980 and 1982, and Madagascar instituted a
stabilizaion program with support from the IMF.
The financial situationstabilized over 1983-87, dur-
ing which there was once again modestgrowth. A series
of measures to lberalize domestic trade and deregulate
prices, in conjunctionwith a sizable devaluation and a
lberal import system, boosted output. Between 1988
and 1990 Madagascar saw a modest increase in per
capita GDP. This period also saw an increase in private
and foreign investment,particularly in the export indus-
tries. Eiconomicprogress was accompaniedby polical
liberalization, which began in 1989 with the lifting of
press censorship and includedmulti-party activiy and
steps to adapt the country's socialist constitution to the
new market orienttion.
 Madagascar
Widespread opposition to the govermment rule
erupted in the summerof 1991, andtheensuingpolitical
turmoil that swept the country derailed the adjustment
effort. Demonstrations and strikes paralyzed public
administration and severely disrupted economic activ-
ity. Output fell, inflationary pressures increased, and
the exernal position weakened. The situation of the
poor worsened. Despite the unfavorable political and
economic enviromment,however, private-sector invest-
ment continued, particularly in labor-intensive export
activities under the special regime of the export proc-
essing zone, which was introduced in 1990 and was
successful in creating jobs and expanding non-tradi-
tional exports during 1990-93. This private-sector re-
sponse vividly demonstrated Madagascar's underlying
potential and reinforced the position of reform-minded
groups that supported new adjustment measures and
private-sector-led growth.
The political crisis evenmuallyled to a transitonal
power-sharing arrangementand anew coalitiongovern-
ment was put in place in early 1992. A new constitution
was adopted in August 1992, and the opposition candi-
date was elected president in February 1993.Parliamen-
tary elections were held in June 1993 and a new
govermmentwas formed in August 1993. The shift to
pluralistic democracy has been remarkably peaceful,
and the transition has resulted in the emergence of a
number of dedicated and vocal proponentsof economic
liberalization.
The AdjustmtentProgram
In 1985, when fiscal deficits and inflation had been
reduced to manageable levels, the government turned
its attention to structural adjustment, focusing first on
correcting the large currency overvaluation, reducing
price controls, streamlining and reforming the ineffi-
cient parastatal sector and state-ownedbanling system,
and liberalizing domestic and external trade. In 1987
the government embarked on a broader reform agenda
with the support of the IMF and the World Bank. The
policy reforms undertaken since the mid-1980s have
drastically altered Madagascar's economic landscape
and bmught an unpreccdenteddegree of freedom to the
markets and restored economicgrowth after aprolonged
perod of uninterrupted decline. The adjustment expe-
rience also contributed to an important shift in attitudes,
as the exportprocessing zone demonstratedthe potential
for export-led, private-sector-based growth.
Recent Economic Developmeuts
Political transition to multiparty democracyand disrup-
tion of the adjustment process significantly affected
104
Madagascar's economic and financial performance in
1991-93. Over the period, per capita income declined
by 12 percent, the fiscal situation deteriorated, the
competitivenessof the economy declined, and poverty
increased.
The economic price exacted by the political transi-
tion was particularly costly in 1991 when real output
declined by 6.8 percent, private per capita consumption
decreased by 3.6 percent, and inflation rose by 14
percent. The 20 percent decrease in imports (in doUlar
terms) was not sufficient to reverse the worsening
external position, forcing the accumulation of $180
million in new arrears by end-1991 and the suspen-
sion of the open general licensing system of foreign
exchange allocation in October 1991. In the area of
public resources, the overall fiscal deficit climbed to
10.6 percent of GDP (compared to 7.8 percent in
1990).
Over 1992-93 economic grwth did not keep pace
with population (GDP grew on average by only 1.6
percent), underscoring the need for widespread reform.
Domestic investment and savings remained low, at
about 12 percent and under 4 percent of GDP. respec-
tively. In the external sector, some improvement was
noted as the current account deficit (without grants)
relative to GDP fell to about 9 percent on average
(compared to 10 percent in 1991). The overal deficit
of the central goverment continued to remain high,
averaging 11.6 percent of GDP. During the period,
inflation was almost 13 percent. The debt overhang
continued to be a serious
estimates and debt serviceconstaint:
scheduled,based on country
debt outstading
remained high at 125 percent of GDP during 1992-93,
and the debt service ratio represented 74 percent of
exports. Madagascar was in arears to most of its
creditors. Arrears amounted to about $700 million by
the end of 1993.
Madagascar's vulnerability to external factors was
apparent in early 1994 when fbur cyclones struck the
island, wreaking great damage to the main trmsport
corridor linking the port of Toamasina to the central
highlands where the capital is located. Roads, bndges,
and railway lines were disrupted not only because of
aging inmstrcte but because of ranoff made worse
by environmental degradation.
In early April 1994the government committed itself
to resume the economicreform process and took initial
steps. A floaung exchange rate system was put m place
on May 6 (which resulted in a nominal devaluation of
about 40 percent against the French fanc); import
restrictions were lifted; and a revised budget law pre-
sented to parliament includeda new value-added tax to
replace the ill-fated cascading indirect tax imposed in
Deember 1993.
 Madagascar

Medium-Term Prospects The government has declared itself in favor of a

Deste the setbacks to adjustment during the politcal
transition1 private investors have maintainedtheir con-
fidence in Madagascars fut. Pogress depends, how-
ever. on the pace of economic reibrms. The complex
political landscape m the country, cnaracterized by
infighting and jockeying for control at various levels
thoughout government, may delaydecisionnaking and
the process of recovry.
program of economicrevialization designedto unleash
Madagascar's substaal poetial and put it on a sis-
tainable growth path. Its priorides are to stbilize the
economy by restoring m c management,
with the principal objectives of increasing public sav-
mgs. monetary management, and containing inflation
and to fster private sector developmentby miprovmg
the busiess environment and providing needed infra-
structure.

105
 Madagascar
Population mid-1992 (milions) 12A4 Income gmup: Low
GNP per capita 1992 (UlS) 230 Indebtedness level:SeveN

KEY RAMlOS
1980 1985 1991 1992 1993 0(%
-nVWrioGDPo

Gross domestic investnentlGflP 15.0 8.5 8.2 11.3 11.7 2

Exparstofgoodsand.t&JGDP 13.3 11.6 t8 1 16.7 14.4
Gross domestic savigsGDP -1.4 1.3 0.8 3.5 1.9
Gmssrtonal savhigGDP -3.1 -3.2 44. 25 20 tO_

Cwrentacuntbab noe/GDP -15.7 0.0 -112 -&7 -9.7

Interest paybhntstGOP 0.7 2.1 2.5 1.1 0.7
Tota debtGDP 302 953 162.8 14864 12027
Total debUeqrts 235.6 59.537.7 884.6 857.3 335.6 7 - o o 2 U3

GDP: PRODUCTION
(% of GDF9 1980 198S 1991 1992 1993 ShasfPbys v(%)
Ariculbde 30.1 35.1 33.0 33.3 34.0
Inrdustry 16.1 13.3 14.2 12.8 1.5
Manutbotring - -.
Servics 53.9 51.5 52. SZ9 52.3
1985 1985-93 1991 1992 1993
(aveiage annual g_owt_)
Agricuwo 1.8 25 0.5 1.7 3.3
Induty -3.7 1.2 -0-4 -1.0 2.7
Manufacturing .. - - - - a-.-.- -

Services -2 12 -7.0 1.1 272 ST a 9 1 il2 -:

oPen-m U1fl Oswu=
GDP -1.1 12 -6.7 1.1 1.9

GDP: EXPENDITURE

fi afGDP) ~ 980 19ins 1991 1992 1993 G owd r ofGX and GDP%)
Private- a xwmpgon 89.3 89.0 92.8 89.1 91.4 W-.
Genmal govwment consumption 12.1 9.8 6.3 7.5 6.5 40
Gross domastic inAsstnert 15.0 8.5 8.2 11.3 11.7
Expods of goodsand nfs 13.3 11.6 18.1 16.7 14.4
Impcrts of goods and nfs 29.7 18.9 25.4 24.5 24.1

(tavesgeo 17ug*, 1980485 1985-93 1991 199Z 1993

Pu;vat consumpion -2.5 -0.1 -1.6 -3o 2.4 -20..
General government consumpion -1.0 -0.5 -69 0.5 -1.6
Gross domesticinvestmnt 4-3 4.0 -56.6 45A 9.9 40
Expos of goods and fs -8A4 4.S 4.5 2.0 3.4
Impodtsofgoodsandnfs -10. 0.0 44-19 0.. 8.2
Gross national product -1.9 1.3 -7.8 3.0 2.6 -ca -G0P
Goss national inmne -0.3 02 -9.1 2.1 1.1

PRJCES and GOVERNMENT FINANCE

1980 is98 1991 1992 1993 Chun" ofGPSdftlorand OPt 1%)

Domoscprfcws
tX dmw) 2
D
Consumer price 182 10.6 8.6 14.5 10.0 is _
VYWX'Saleprics - .. .. .. .. 10 C
InplGdtGP detltor 15.0 10.4 14.4 tZ6 13-1
Gwvuaen finance aU U M go In a Is
(%ofGDP)
urnt budget balnce -1.6 -0.4 -42 -4.3 -1.6 -Wd-G tdo -CPI
Ovralu su d -12A8 -7.5 -10.6 42.4 -10.1 1 1

106
 Madagascar
POVERTY and SOCIAL
(annualgrowthratae) 1930415 1985493 dlanamd
Popuation 2Z7 3.1 LSeepmoncy
Lahorforwe 1A 2.2
mostrecentanmaOn(mm.)
Poety vel: headcunt hidexflC of popnJ) - GNP GrosG
Lif expe;tncy at birh 51.4 pe
Infant moality (perthousandire2ths) 93.0 cws e'ougnut
Chbd mauutrition (10f lOem under5) 321
Accessto safewater (A of popubatn) 30.0
EneWyconsumption ercapita (kg o quaWA 38.0..
lltacy (16of populaton age 15±) 191i
Gross prmary enrolment (1 of sdxo-gpoputa5o) 92.0 mas

TRADE
(minicitsUSt 1930 iS5 1991 1992 1993 ftportandriport evsfimnAUSS)
Toal export (fob) 291 338 328 297 7.
Cothe .. 103 28 32 40 -
Otherfood _ 35 23 9 6
Manuabc - - - - -
Tota impots (ci) _ 466 518 547 594 4-
Food 50 35 58 51 3-
Fuelandenergy .. 85 71 72 4 - r
Ccpdalgoods 98 1S5 129 139 to
Exportprice index (195Th100) - 96 es 85 81
Imput pri index (19V7100) - 85 117 123 123 n n _a so 62 03
Terms otrade (987=0W0) -. 112 74 69 65
Opemess of econmy (radeGDP.%) 43 31 44 41 39 o_ *
BALANCE of PAYMENTS
(nifions USS) 1980 1985 1991 1992 1993 CumuacconttbalanctGOP (3) ,DPtD
1
Exports of goos and rds 516 0 485 499 481 ar ua_ m a a
03
ImTpotsofgoodsandnfs 1,085 0 681 733 80 I M
Resoue balnce -569 0 -196 -234 -3I8
Netfactorincome
Net cluffen-msr
-45
-21
0
0
-71
67
-137
109
-130
132 x
I4 ll
Currert acunt babnce II
Before offil transfers -635 0 -01 -262 32 LI
A.troffcial-dtsers 46 0 -188 -136 -t67 raLj_ L
Longter capitalinfow 356 10 -18 -72 -82
Tdaldoth items (net) 295 -174 224 225 266 -l2
Changesin net reserves -83 24 -17 -17 -16 _
Y6mmo_ 14
Resves exduclinggold (na US5 9 48 89 -
Reservesindudin gold (miff.USS) 9 48 89 - .
Official xchag rate (ocrMUSS) 211.3 6625 1,83.4 1.867.9 1,922.9

EXTERNALDEBT
aoontrifos 19W0 193S 1991 1992 1993 stuuroffrmulabit%)
Long-ten dablexpots 17t1.8 52576.2 7528 743.9 503.0 i
IMFcmditexports 16.8 4,027.3 25. 20.7 19.0
Short4ermdeblecr 47.0 2,934.1 76.0 926 13.6 1 |3 I
Totdaldebt sein exports 17-1 3,800-0 328 18.6 15.5 OP|
GDPratios OPrA.
Long-tem debtIGDP 22.1 84.1 144.1 127.1 116.0 "' MMt
IMFcrecrdIGDP 2.2 6.4 4.7 3.6 2.7
Shodturm debUlGDP 6.0 4J7 14.0 15. 2.0 2

Log4am raIios
dcfebt
Privae nongLaranteedflang-term 0.0 0.0 0.0 0.0 0.0 o
Pubcand
aipubldyguanteed *a g0 a
w2 w |
Privt credorsilong-term 36.3 1&5 7.0 6.8 7.6 1 1
Official credilarbsong-tern 63.7 81.5 93.0 932 92.4

The developmentdiamondshowsa levelof developnm in th couty compard vit is incmnegup average.

107
 Malawi
O ver the past two years, developments in
Malawi have been dominatedby the country's
smooth and peaceful transition from a one-
party system to a multi-party democracy,
accompanied by tangible and irreversible reform in
Malawi's approach to governance and human rights
issues. It is expected that the effects of transition will
not be limited to political governance but also have
consequences for economic management and growth
prospects.
During the 1960s and 1970s,Malawi's development
strategy emphasized infrasuucue and estate agricul-
tmreas prime vehicles for incresed production and
growdt. For two decades Malawi's economy was open
and world market prices for its major exports (tobacco,
tea, coffee, and cotton) were relatively high, real GDP
more than doubled, and real per capita incomegrw by
3 percent a year The period of strong growth ended in
the early 1980s with the onset of economic problems
and extera shocks, includingdeterioration of terms of
trade, oil crises, disruption of external transport routes
through Mozambique, and weather-related shocks. In
comnbination,these sh, k:1L led to an economic crisis
culminating in fiscal 1987 with a decline in per capita
income and policy setbacks that reversed the openns
of the economy and discouraged private sector invest-
ment and output.
The adoption of a strategy in fiscal 1990 based on
growth through poverty reduction was a turning point
inMalawi's development approach. Efforts have been
made to develop structural policies focused on remov-
ing the constraints to sustainable growth while simul-
taneously addressing the roots of poverty. The new
attempt to re-liberalize the economy included reforms
to redress the policy bias against smallholders, re-
move constraints on private sector participation in all
sectors, and move toward a more liberal external
sector policy. Increased adoption of ferdlizer and
hybrid seed in the smallholder sector combined with
expanded private-sector participation in production
and marketing resulted in per capita GDP growth of
2 percent a year over 1989-91.
108
Recent Economic Developments
Economic managementwas challengedby new internal
and external developments, including a decision by
bilateraldonors andthe EU at the May 1992consultative
group meetingto withhold aUnew nonhumanitarianaid
pending reform in Malawi's approach to governance,
and the unprecedented drought throughout southern
Africa in 1992. Following several years of macroe-
conomic stability and positive per capita growth,
Malawi's economy contacted by nearly 8 percent in
1992. GNP per capita is estimated at $220 in 1992. The
remm of normal weather during the 1992193 crop
season helped facilia recovery of production in the
agricultural sector, allowing overall GDP to grow by
some 11 percent in 1993.
After several years of fiscal and monetay discipline,
macroeconomicbalances started to deteriorate in early
1992. Despite government's tightning of fiscal and
monetary polices, including several increases m the
rediscountrate and discrete devaluation of the kwacha,
stabilizationof the economic and financial situation did
not come about until the first quarter of 1994. By April
1994 the annual rate of inflation had declined to 27
percent (comparedto 33 percent m March 1993). The
fiscal program was brought back on track and the
fiscal deficit (before grants) dropped from 9.1 percent
of GDP in fiscal 1993 to 5.7 percent of GDP in fiscal
1994.
Despite two major devaluationsin 1992, the extern
value of the kwacha xmained under considerable pres-
sure largely as a result of economic diffculties and
inappropriate fiscal and monetary policies in fiscal
1993. In February 1994. in response to continuing
decline in extnal competiveness, the goverment
replacedthe fixed exchange system with a market-based
exchange system under which the exchange rate is
derminedby supply and demandconditions. After 12
weeks of operation under this market-based system.
the exchange rate had effectively depreciated by 25
percent; the rate has stabilized at arund 7 kwacha to
the dollar.
 Malawi
The core elementsof a soundmacroeconomicframe-
work, tight fiscal and monetarypolicies, and a market-
based exchange system, have been put in place. With
stabilzation of the political situation and the fuil re-
sumption of donor support, Malawi would have been
able to condinueits macroeconomicreforms, regain the
adjustment momentum achieved between 1988 and
1991, and inplement additionalpolicy measuresneces-
sary to underpin the adjustment efforts. In the short
tern, however, Malawi's economicprospects are over-
cast by a macsivefailure in the 1993-94maize crop due
to erratic rainfall and many farmers' inability to pur-
chase fertilizer on credit as a result of filinj to repay
loans from the last crop season.Governmenthas put out
an appeal for iternaional assistance equivalent to
445,000 metric tons of maize. The drought will result
in negative GDP growth for 1994(possIblyas much as
-9 percent) and is jeopardizing the recent economic
stabilization.
Medium-Term Prospects
Over the medium term Malawi's economy remains
extremelyfragile and vulnerableto extenal shocksdue
to its landlocked position and potential intermption of
extenal transort links, the narrow resomurcebase,
which increases susceptibilityto movementsin world
commoditymarket prices, and continued vulnerability
to weather-reLaedshocks. AlthoughMlawi has made
progress m deregulatingits economy in recent years,
developmentof the private sector has remained slug-
gish, the supply responmse has not been adeque for
sustained growth and balance-of-paymentsviability,
and there has been timediversification out of the
traditional exports of tobacco, tea, and sugar. The
formal economy remams higbly concenftred, and fi-
nancialmarket' are narrow and frgmented. Investment
response has been obstructed by official caution and
long delays in decision making. The trade t regime
has notbeen sufficientlyorientedtowardexportmarkes
on which Malawi's future production and employment
growth will rely heavily
Most importantly, with regard to susaiability, the
designand implementationof reformprogramshave not
becn underpinned by systematic consultationwith, or
involvementof, a broad cross-sectionof the Malawa
society. In addition, the decliningtrends in invrestment
and savings ratios remain of high concernmSustinable
future growdLwill depend critically on increased do-
mestic savings to financea larger share of total invest-
ment. Prerequisites for increased domestic savings
include continued improvementsin the financial posi-
tion of the publc sector, higher private savings gener-
ated through reforms in the financial sector and
109
improved profitability of the enterprise sector, and
substantialreduction in transport costs as a result of the
reopening of lower-cost transport routs to the sea
through Mozambique.
Although Malawi's adjustmenteffort will help sup-
port a reduction in its external financing requirements
in the long term, and notwithstandingthe prospects for
improvementin some external conditions(such as ex-
ternal transport), Malawi will continueto face balance
of paymentspressuresover the next three to five years.
Consequently,over the immediate future, external as-
sistance to Malawi will need to increase to pre-1992
levels.
Malawi's central problem is poverty and alleviating
it is at the core of its developmentagenda for the 1990s.
Successiveadjustmentprograms since the early 1980s
have not succeededm lifting Malawi out of the ranks of
the poorest developingcountries. Despitegood macroe-
conomic management,economic gains have not been
distributed broadly across the popuation Although
Malawi's social indicators and human resource base
have slightlyimprovedin recent years, they continueto
compareunfavorablywith other sub-Saharancounties.
In recognitionof the need to direy address pov-
erty-related issues and broaden the base of economic
growth, the goverment has integrated poverty reduc-
tion into its overall E ,wth strategy through a three-
tiered approach based on expanding employment
opportuities through a liberal environmentfor private
setor eu and initiative,expandingacess
to financial capital, and policies and programs that
encouragelabor-intensiveactivitiesandpartcipation by
women. It also plans to enhanceagriculturalproductiv-
ity for poor farmers, ensure sustainable use of land
resources, and increase public expendituresfor educa-
tion, health, and other social services.
Enironment
Environmentalprotectionandresource managementare
integral componenttsof Malawi's developmentstrategy.
Rapid population growth and low agriculturalproduc-
tivity have led to an increasinglyunsustainabledemand
on land and forest resources, as shownby growng soil
erosion rates, decliningsoil fertlity, widespreaddefor-
estation, increasingscarcityof potablewater, and over-
fishing in Lake Malawi. It is governmnt's policy to
strengthenmanagementof natural resources, with em-
phasis on indigenousforest management,afforestation,
fisheres, and soil conservation. A relatively strong
institutional and policy framework has been set up m
response to specificenvirnmental problems. The gov-
emient planned to finalize a national environmental
action plan by June 1994 through a participative
 .Aawi
processinvolvingpublicandprivatesectorinstitmtions,
non-governmental organizatons, and rural communi-
ties.
Povertyand
Social Indicators
Poverty and Social Indicators
Adequate aention to human resource development is
an important facor contributmg to poverty alleviation
and a greater supply response. Low educationandhealdt
lvels have limited the ability of smal farmers, particu-
larly women, to respond to incentives and the potential
for broadening sources of income for the economy. An
improved pubic investmentplanningprocess is in place
to facilitate the shifting of resources to social sectors,
and increasing attention is being given to improvingthe
110
efficiency and effectiveness of social expenditues
through better focusing on rural areas, where most of
the poor live, rather than cities; on primary education
and cost-efficientsecondary education, from which the
majority of the poor can benefit, rather than universi-
ties; and on low-cost runl health centers rather thn
expensiveurban hospitals. To address the problem of
high populationgrowth rates and populaton density, the
governmnt is committed to strengthening family plan-
ning activities, includingincreased populationeducation
in schoolcurricula, expansion ofchild-spacing services,
andsupport for a new NationalFamily Welfare Council.
Reahing, organizing, and improving the lot of women
have become integral to Malawi's human resource de-
velopnmentgoals.
 Malawi
Populationmid-1992 (iIzVons) 9.1 Income gmnup:Low
GNP per capi 1992 (UiSS) 220 Indebtednesslevel: Modat

KEYRATIOS
1980 1985 1991 1392 1993 InveatmntrtGOP lat(%)
GrossdomesticnvesteVGfdP 24.7 18.6 20.0 18.8 12.9
Exporsof goodsaWd
nftIGDP 24.8 24.2 23.4 23.0 16.7
GrossdomesticsrvingslGDP 10.8 12.9 7.9 1.8 5.1 a0
Grossnatoa savingsA;DP a 9.2 4.2 -1.9 3.0 to
CuerentacoonmtbalanuceGDP -25.0 -132 -11.6 -1a5 -1z4
InteestpaymensGDP 28 2.6 1.9 1.6 1.4
Tota debtIGDP 56.3 90.0 76.4 91.8 91.1 a
Tdal dubUebpods 260.1 359.5 322.1 393.5 548.6 U U 0 3- -

GDP:PRODUCTION
19E0 1985 1991 1t92 1993 Shareuso
GDPhy.ectmj%
Agricultue
Indusby
Mamacturing
Srices
37.2
19.2
11.6
43.6
36.6
18.7
12.3
44.7
34.8
19.5
13.0
45.7
216.3
21.7
14A
50.0
37.6
192g
13.0
43.2
so
H
198W45198'-93 199 1992 113 5
Agricult 2.7 1.8 12.8 -25.1 47.6
Indus&y IA 4.7 3.9 2.4 -1.8
Mam cnig 3.3 4.7 3.0 31 -1.0 O
0
Services 2.6 3.4 5.9 0.3 -4.1 D A1

GDP 2.6 2.8 6.4 8.0 E.J

GOP:EXPENDITURE
(%ofGDG low tS 199t 1992 1993 Gn_-hdGnonGD
l oP(G )
Priva consumption 69.9 69.4 78.3 79.5 Ao
78.1
Gneral govenmentconswnpton 19.3 17.7 13.9 18.5 16.9 e/
Grossdowmstc investment 24.7 18.6 20.0 18.9 12.9
Exportsof goodsmndrin 24.8 24.2 23.4 23.0 16.7
Importsofgood andnfs 31.8 29.9 35.6 40.1 24.5

(averagoae
mJ19885 1985-93 1991 1992 t9 11
Prvateconsumption 1.8 3. 7.7 -9.0 1.3
Generalgovernmentconsmption 3.2 3.4 1.9 0.7 -22
.2 r x
Grossdomesticinwesnot -4.9 2.5 39.0 -17.9 -17.7 -10
Exportsofgoodsandnfs 28 1.5 5.3 -1.0 -a6s
Importsof goodsandnlis -29 3.7 20.2 -7.0 -29.7 e
Grmssnatonalproduct 3.4 3.7 6.6 1.2 -1.4 -c -o
GrossnabonalIncome 3.3 3.0 8.1 -3.7 -4.3

PRICESandGOVERWENTFINANCE
1910 1NS 1991 1993 1993 ChOaof GDPdSlSorandC A)
Domescpdtceu 6 r
(X dWW)
Csumerwprice - 10.5 12.6 227 ..
Whlesale
prics - - - ..
ImpickGOPdeflaior 15.7 8.9 13.6 18.0 22.9 _ _ _ -- _

Govwnmentfnaune U a so
U U Is
Xcf GDP)
Currentbudgetbalance -3.4 -5 0.8 45 -22 -2 cP
ODversurplusdellcit -11.8 -7.7 -5.6 -13.0 -8.4 .

111
Malawi
POVERTY ond SOCIAL
(annualgrowtvrates) 198045 198543 Develomxnmmtdianmon
Population 3.2 3.3 uLre-pect-cy
Lab,6force Zs 2.6
mnotrmceuntuuttss (m11)
Povrty level: headucuntindex (t o poplatn) .. GNP GoGss
Life expectancyat birlh 44.2 , ws
Inlantmoutalily (per thousnd lwe bh#s) 134.3 _frl mut *r
Child mahlututon (%of cren under65) 60.0
Access to saflewater (% of populaion) 53.0
Energy consunpbon per capita (kg oi equivaled) 40.0
flnitescy(VGof popufbion age 15+) 58,8
Gross puunaryenroilment (% of schoo-go population) 6E0 A toad.wtar
TRADE
(milins US$1 1980 1985 1991 1992 1993 Exportaudbnport lw (smilL
US$)
Total exports (fob) 265 250 476 397 311 7ro
Sugar 43 26 29 27 19
Tea 37 53 37 30 35
Manufactures .. 16 23 28 32 -
Total imports (df) 440 287 615 651 514 4 , I
Food .. - . . . ma
Fuel and energy .. .. _ . .. -m
Capitalgoods . . .. ...
Export pniceindex (1987=100) .. 83 130 110 89
Import price index (1987=10) -. 83 114 114 103
Tenyisoftrade(1987=100) -. 101 115 97 as E 9 90w - 92 95
Opennessof economy(lrade(GDP,%) 64 54 59 63 41 JEq Eu_

BALANCE of PAYMENTS
(mEloDsusX
Expors of goods and nfs
Impor of goods and nfs
Resoure balance
1980
313
487
-174
1985
.278
325
46
1991
513
687
-174
1192
426
702
-276
1993
334
543
-209
2 I
Cunws accountbalanceto GOPratio()

13 9l 2

Netfactorincome -149 -114 -47 -39 -38 t

Not currnt transfeFs 13 11 -33 -26 -4 -t1
Curent aoutr
Befamofal
AUIer
balanice

offMtransrers
(mfers

-260
-149
A10

-124
-24
-194 -223
42 -251
-117 | ^4
1e
K-12l
LOIemrapibtmEv mm81 6 115 89 t# | 1 |4
Total otle items (net) 62 go 89 36 43 14811
Changesin netreserves 17 21 -10 98 E 1 t

Reservesexcling gold(mg. USS) 68 45 153 40 36

Reservesincludng gold (mi. USS) 76 49 158 44 41
Offlcial exchange rate (IocaLS$J 0.8 1.7 2.8 3.6 4.4

EaI inNAL DEBT

1980 1985 1991 1992 1993 Snrsn.worextnalne)

Long4ermdebtexpots 198.6 279.6 294.2 3607 5082.2 10

IMF creditexports 25.3 51.4 22.1 21.3 25.5
Shortterm debexports
Totalde srvi bt ft
36.9
27.7
28.3
38.7
5.8
25.3
11.5
24A
14.9
23.8 i 'I
1O
GDPradlosI
Long-tein debaGOP 50.5 70.0 69.8 84.1 84.4 5 |
IMF creditGDP 6A 12.9 5.3 5.0 4.2 1
Short-tam debtIGDP 9A 7.1 IA 2.7 2.5
Long-tensdebt raios
Privatenonguaranteedliong-tefn 0.0 0.0 02 0.0 0.0
Pubic and pubidy guaranted 57 a 8 90 w2 Ot U
Pivate credliorsllng-term 30.7 11.7 3.3 2.4 1.6 _ _
Ofical craeditomslong4ern 69.3 88.3 96.5 97.6 98.4

' The devkelpmentdiamondshows a level oFdevelopmentin the coaNry comparedwith its incomegroup average.

112
 Mali
M ali is one of the pnorest countries in the
world, with a 1992 per capita income of
around $310. Onlyabout a quarter of its vast
1.2 million square kilometers is.arable, yet agriculture
accounts for around half of GDP, three-quarters of
export revenues, and provides a livelihood for close to
90 percent of its rapidly growing population(8.7 million
with a 2.7 percent annual growth rate).
The mainstays of the traditional economyare millet,
rice and other cereals, and nomadic catde-raismg for
domesticconsumption.Cottonand somelivestockmake
up the bulk of traditional exports, but in recent years
Mall has experienced increasingdifficulties as a result
of the overvaluation of its currency and falling world
prices. The modem sector includesgold and some light
manufactures. Mali's potential for long-term growth is
severely limited by harsh resource constraints. Growth
in the agriculturalsector is conditionedby low rainfall,
fragile soiIs, and low-productivitytraditionaltechnolo-
gies. In addition, the weak human resource base repre-
sents a formidable obstacle to fane growth. The
illiteracy rate is estimated at 75 percent, primary edu-
cation enrollment rates are among the lowest in the
world (around 25 percent), andbasic health servicesare
not widely available,
Mali's first democraticallyelected governmentsince
indpendence assumed office in June 1992 Although
the governmenthas survived severe political and social
tensions, the casualtieshave been significant,with three
prime ministers and several cabinet reshuffles in the
interim. The government has taken mportant steps to
improve economic management and maintain a stable
macroeconomic framework; continued pressure from
social groups such as labor unios and students to
deviate from this reform agenda underscores the diffi-
culties of sustaining the adjustment momentum in a
fragile socio-politicalcontext.
The state-dominated developmentstrategy pursued
until the early 1980s led to serious inefficiencies in
resource mobilization and allocation. High levels of
personnel expendiures and subsidies left inadequate
funds for operating and maintenanceexpenditures.Pub-
lic investment decisions gave insufficient attention to
financial and economicselection criteria, such as debt-
113
service and recurrent-cost implications. The overly
complexfiscal system severely distorted resource allo-
cation signals, and little attention was given to prioriti-
zation of public expenditures. In addition, non-market
credit allocationprocedures led to rapid credit growth,
particularlyto the public sector. The weak performance
of the public enterprise sector was a particularly acute
manifestationof poor public resource management. In
additionto te inefficienciesin public resource manage-
ment, price controls, a restrictive trade regime, and
excessive cconomicregulation distorted incentivesand
allowed scarce economic resources to be drawn into
inefficienteconomicactivity. This constraineddevelop-
ment in the areas of Mali's true comparativeadvantage
and impeded growth throughout the economy.
Recent Economic Developments
After several false starts, Mali began its adjustment
effort in eamest in 1988 with support from IDA, the
IMF, and other donors and has since implemented a
wide range of economic and institutionalreforms. The
program has emphasized policies aimed at restoring
macroeconomicequilibria through greater fiscal and
monetary discipline, improvingpublic resource alloca-
tion and use through continment of the public sector
wage bill, restructring expenditures in favor of social
sectors, and operationsand maintenancespending. The
governmenthas also focusedon improvingefficiencyin
the parapublic sector by privatiznmgor liquidating en-
terprises in productive and non-essentialactivities, re-
structuring the few key enterprises remaining in the
publi portfolio, unprovingincentivesforprivate sector
development through trade, tax, and regulatory re-
forms, and the liberalizingof domestictrade and price..
Sectoral reforms have focused on improving the
viability Jothefinancial sector throughrestructuringthe
Banque de Developpement du Mali and the postal
checkingand savings system. The efficiencyand inter-
national competitivenessof the cotton sector have been
improved by institutional, pricing, and taxation re-
forms, and the cereals market liberalized and producer
and consmer pnce controls abolshed for all coarse
grains. Primary-school enrollment rates have been
 Mali
raised and efficiency measures such as double-shifting
in primary schools and better control of new entrants
into post-primary institutionsinstituted.Access to basic
health services has been improved through greater
community participation in managing and financing
primary health care service delivery. The structural
adjustment program was combined with a strategy of
internal adjustment aim at depreciating the real ex-
change rate.
The underlying objective of these reforms has been
to improve the competitivenessof the economyand lay
the foundation for the sustained longer-term growth
needed to raise standards of living andalleviatepoverty.
Overall, the refonns have allowed greater play of
market forces in the determination of economic out-
comzs and the removal of some bottlenecks to private
sectorparticipationin economicactivity. Domesticmar-
keting and prices have been fully liberalized. The trade
regime has been substantially simplifiedand liberalized
with the removal of export and import monopolies, the
strcamlining and reduction in tariff rates, and the elimi-
nation of non-tariff barriers. The investment,commer-
cial, labor, and procurement codeshave all been revised
to make them simpler, more flexible and to remove
distortions in the incentives framework.
Over 29 public enterprises have been liquidated,
restructured, or privatized, and performance contracts
are in effect for the key enterprises remainin in the
public sector. The privatzation program has ruminto
some difficulties since 1991, due both to a lack of
financing and to the high cost to govenment of com-
pensatng retrenched workers, and the govenmient is
preparing an action plan for the continuation of this
process with a view to its completionby end-1996.
Over 4,000 civil servants have left the civil service
under a voluntary departure program begun in 1991.
This has contributed to limiting increases in the civil
service wage bill. In addition, the government adopted
a new salary grid in earty 1994that ensures a closer link
between salary advancements and merit. Despite these
achievements, the civil service reform program has not
succeeded in fully addressing the underlying issue of
civil service efficiency and there is still evidenceof low
staff motivation and effectiveness and imbalances in
staff distribution.
Sectoral reforms have been the most successful in
agriculture. Major improvementshavebeen madeto the
organization and structure of the key cottn sector
through the ongoing performance contract between
farmers, the cotton parasttal, and the government.
Producer prices have been linked to world price move-
ments, and farmers are now part of the decisionmaking
process for the sector. The parastatalhas also succeeded
in reducing its unit operating costs. Liberalization of
cereals pricing and marketing has been completed. In
114
education little progress has been made on the reform
agenda. The governmentbegan using scholarship selec-
tion criteria and double-shift teaching at the primary
level in the 1993-94 school year. However, control of
scholarshipspendingis still unresolved, largely because
the issue of student orientation has not been addressed,
and double-shiftteaching will have to be expanded to a
larger proportion of schools to have the desired effect
on primary enrollment. There are gross inefficiencies
in staff distribution, with substantialoverstaffing at the
administrative and the secondary and higher education
levels, while primary education suffers from a severe
lack of teachers.
These measures have led to improvement in eco-
nomic performance over the adjustment period. Real
GDP rose from an annual average of less than 2 percent
over the first half of the 1980s to about 3 percent
between 1988 and 1993. However, much of this has
been absorbed by population growth estimated at about
2.6 percent a year, leaving minimal improvements in
GDP per capita. The average GDP growth also masks
large annual variations, which are linked to climatic
conditionsand the country's dependenceon agriculture.
Inflaton has been kept in check, averaging under 3
percent a year.
Since 1992 fiscal performance, although improving
as the overall fiscal deficit declined fram 12.3 percent
of GDP in 1991to 9.5 percent in 1993,has fallen short
of program targets. Slippagesin expenditureshave bee
due to extra-budgetaryoulays (notably relatedto public
works) and increasing demands from interest groups,
including labor unions, student groups, and victims of
the 1991political disturbances.Revenue shortfallshave
been caused by financial scandals at the treasury, fiscal
concessions introduced under the transitional govern-
ment under pressure from private-sector interest
groups, increased resistance from the population at
large towards fulfillingtheir tax obligations, and grow-
ing custom fraud. As a result, the overall fiscal deficit
amounted to 11.2 percent of GDP, as against 10.7
percent envisagedfor 1992, and 9.5 percent compared
to the 7.7 percent programmedfor 1993. To address the
growing fiscal sLippagesthe government began imple-
mentinga fiscal austeritypackage in late 1993including
new tax measures, stricter applicationof existing meas-
ures, and the reduction of certain expenditures. On the
external front, a sharper-thm-anticipateddrop in world
prices for cotton led to lower export receipts than
programmed and thus to higher than expected current
account deficits of 14.8 percent of GDP in 1992 and
13.6 percent in 1993.
Despite this improvementin economicperformance,
the reform program has been unable to achieve appre-
ciable improvements in Mali's extrnal competitive-
ness. As a result, the economywas not able to generate
 Mali
the growth rates needed to allow improvedstandardsof
living and make significantinroadsinto povertyallevia-
tion. This lack of competitivenesswas aggravatedby
the steady and significantdepreciationof currencies of
competitor countries in the region, encouraginga huge
influx of imports into Mali. Industries such as textiles,
shoes, plasticand apparel, whichflourished in the past,
lost their competitiveedge and there was little incentive
for new investmentin local production. Mali's already
fragile industrial base was thus weakened further, put-
ting the sector into a slump. In agriculture, despitecost
efficiency gains, cotton production was unable to re-
cover its operatingcosts, andrice and livestockproduc-
tion remainedbelow their full potential. In addition,the
internal adjustment strategy had a negative impact on
poverty by worsening the terms of trade bctween rural
and urban areas, limiting the resources allocatedto the
social sectorr anddelayingthe resumptionof economic
growth.
Poverty and Social Indicators
Mali's dismal social indicators and its high population
growth rate are indicative of the widespread poverty
facing the country. Its crude death (18.7 per 1,000),
infant mortality (166 per 1,000), and child mortality
rates (249per 1,000)are amongthehighestintheworld.
Primary school enrollment has declined to 23 percent
and is even lower, 17 percent, for girls. The adult
literacy rate is estimated at amund 25 percent in 1993,
and life expectancy at birth is only 47 years. Agricul-
ture, the economicmainstayof the population,remains
115
minimally diversified with substantial fluctuations in
rural incomes due to weather and was te main victim
of the appreciationof the real exchangerate and internal
adjustment policies. A high rate of rural to urban
migration,coupledwith the inabilityof the government
to provide social services for a growing urban popula-
tion, has contributed to increased unemployment and
poverty in urban areas. The government has not yet
developeda poverty reduction strategy, but vulnerable
groupscan expectto benefit from the economic reform
process which is promoting broad based growth and
freeingup scarce resources for social services.
External Debt
Despite erratic growth, both consumptionand invest-
ment have been sustainedby inflows of official devel-
opment assistance.Roughly half of this assistancehas
been in the form of loans, and at end-1993 total public
debt outstandingand disbursedwas about 90 percent of
GDP. Although most of Mali's external debt is con-
tractedon concessionalterms, debt service obligations
increaseddramaticallyin the mid-1980s.The debt serv-
ice ratio, excluding debt service to China and the
then-SovietUnion, and before debt relief, peaked at 31
percent in 1986 and has subsequentlydeclined slowly
to an estimated 19 percent in 1993. Mali continues to
received generousdebt relief from the Paris Club; the
current arrangement, under enhanced Toronto terms,
runs through 1995.In the afermath of the recent parity
change, France also canceled about CFAFZ billion of
its debt claims on Mali.
 Mali
Populaion mid-1992 (millions) 9.0 Incomegroup: Low
GNP per capita 1992 (US$) 310 Indebtednesslvel: sevr

KEYRATIOS
1930 1985 1991 1992 1993
Gmssdomesicnvestmentw
GDP 17.0 17.4 23.1 21.9 21.9 1
Exports
OfgoodsandnfDGOP 16.1 16.5 17.A 14.9 15.8
Grossdmnestcsavings/GDP -1.9 -11.8 6.4 4.8 5.7 *
GrossnaflorasavingmlGOP -0.4 -6.5 9.1 7.1 8.1
Cunentaccountb.lanoeIGDP -14.4 -229 -14.1 -14.8 -13.6 1-
Iritest paymentslGDP 0.2 1.0 0.3 0.5
Totalcdbt/GDP 44.9 11t.0 108.6 93.2 .
Toal debtWenrts 27.3 5112. 460.0 4U.7 . . a a sD m a n

(MaP:PRODUClION
(%uof
GDOP 1980 1S85 1991 1992 1993 _Shws.a=PhyseawrA)
Agucults 58.4 37.2 43.4 44.6 424A
Industry 9.3 16.5 10.7 10.5 11.0
Manufatturig 4.3 10.4 a6 84 8.9
Sercs 32.3 46.3 45.9 44.9 46.6
pavwwannualgru3Aft) 1980.55 1985S93 1991 1992 1993
Agrculture -5.3 5.5 -3.7 12.3
Industry 10.9 0.9 -5.2 12.3
Manumctffach .. .. .. .. .__
Servie 3.4 1.8 Q . -7.1 .. J U ICID *

GDP 0.2 3.4 -1.8 3.1 7.7 *_

OA___________ 0_ _s

GDP:EXPEND
flURE
(%ofGDP) 1980 198S 1991 1992 1993 rafseaGDlandGDP
Piate cnamnpo 91.5 99.4 78.8 81.5 81.5 1s-
Generalgovernmentconsumpion 10A 12.4 14.8 13.7 12.8 12
Goss domestc investment 17.0 17.4 23.1 21.9 21.9 1D
Expoot
sofgods andnfs 16.1 16.5 17a8 14.9 15.8 /
Importsof goodsandnis 35.0 45.7 34.5 3Z0 32-0 4

(awrneg.
annual )198o5 1985-93 1991 1992 1993 2
Private
consumption 2.3 0.3 -3.1 .
Genu govrnmentcosumnion 5.0 4.0 -9.9 - - I2
Grssdornastcinvestimt 0.5 6.3 -0.2 11.1 2.0 .4
Export ofgoodsandrfs 3.4 6.7 15.1 4.4 4.5 ^
lmporftofgodsandnfs 9.7 0.0 1.8 4.0 0.8 .
Gmssnationalproduct -0.9 -1.6 9.0 4.8 1.3 -am -w
Grossnationalinome -0.4 -2.5 6.5 1.5 1A

PRICES
and GOVER NT FRNANCE
i98m 1985 1991 1192 1993 C ngsofGcP
-- dfhttraCflPI
Domestic pr .s
Edage;
Consmarprces .. 2
W* pe s _ .. .. -,
ImplidtGDPdelbtr 8.9 180 1.5 r3 o.0 -
Gowe7nranmuce
( of GDP)
Cwrt budgetb .. -0.7 -Zo -2.3 -0.6 -wn -cps
Oveallsurplus/deficit .. -13.0 -12.3 -112 -9.5

116
 Mali
POVERTYand SOCIAL
(annunagrwh rtes) 1980415 1985-93 DuubpMnetdlmiur
Popufion 2.3 28 Ufsqechnrcy
Labor torce 2.5 2.7
mostrecenZteuat(mm)
Poverty livet headcountindex (o of populain) .. GNP Gross
Lie expecancyat birth 48.4 pbsuy
Infant mortality(perhou nd lve bis) 130-0 cuI2e en,.mw
Child malnutrition(f of chdren under5) 25.1
Accessto safe water (U of podatbn) 49.0
Energy consunplion per capita fkg ol equivant) 22.4
lliteracy (9Cof populat0n age 154) 68.0
Gross prmaiy enrollment(S of sdho-ge pcpulafon) 25.0 A s 51 r

TRADE
(milins USS 1990 19iS 1991 19O 1993 Extandimportbliu (milLUSS)
Tdal expot (fob) .. 176 354 339 340 7u
Cotton 73 173 153 145
Gold .. 52 50 60 57 -
Manufactures .. ,. .. _ *
Total importS (rAt) 469 Sa9 690 6575 . 400-
Food 139 92 102 SI 3M -r
F;dl and energy . 80 51 70 66 -2r
Capitalgoods .. 103 188 201 201 w
Exportpriceindex(1987I100) _ 83 130 119 a
Import price index (1987=100) .. 67 112 116 _- lo go 92 9
Terrsofirade (1987=10) -- 125 116 103 .-- 87 - 3 0 10 0
of enomy 4kada4DP4%)
Openness 51 62 52 47 4B Ehi_

BALANCE oFPAYMENTS
(MlEWions
USIf1 199 198S 1991 1992 1993 Cnurrnt ntbahacooG0P ratI(%)
Exportsofgoodsandnfs 253 220 423 414 415 ° I…
impotsorgoodsandnfs 520 578 822 890 842 42 | * |1 - 02 03
ResourCebalbac -257 -358 -39 -477 -427
Net factor income
Netcuffenttrarsfirs
Currentaccount balance
-17
41
-14
87
-25
89
-30
94
-26
90 - | | ti-
Beforeofficial
bansfers -234 -284 -335 -413 -363
After offdal transfers -124 -47 41 -106 -101 -12
Lonrg-ermcapitalinflow 91 58 69 5 -18 .14 |
TotalotJeritemns(net) 2Z' -11 108 111 118 -u
Changesin net reserves j 40 -136 -10 1 4-

excudinggold(Mr. US/
Reserves 15 23 319 306 332
Reservesincudmg gold (m. USSil 26 29 326 314 340
Offical exchange rate(/oelSS) 211.3 449.3 28221 264.7 283.2

EXTERNALDEBT
Ezipod raffoF 1980 1935 1991 1992 1993 j ean toer debt %)

Long-termdebtIemports 207.8 445.6 435.6 435.1 .u

IMF crediteVxrts 12.0 33.5 10.7 11.5
Short-termdebt/exports 7.5 23.6 13.7 10.0 .5 -_
Total deb senice/exports 5.1 18.1 5.1 7.6
G.D)P
rats UOLi
Longerm debt/GDP 41.1 104.6 102.8 88.8 a'
so
IMFcrediUGDP 2.4 7.9 2.5 2.3
Short-termdeWGDP 1.5 5.5 3.2 21 25-
Long-om debt ratios
Prvaltennguaranteedlog-terrm 0.0 0.0 0.0 0.0 ..
Pubic and pubEidyguarandeed - a2 at a2 Os
Privateadtoslkog-rm 6.3 3A 0.6 0.2 _
Official arditorsllong-terim 94.7 965 99.4 99.8

The developmentdiamondshows a letal of developmentin the countrycompaed with is incomegoq average.

117
 Mauritania
M aunitania is a vast country, with a population
of 2 millionandaverylimited resouicebase.
irtuallyall of its 1.1 millionsquarekiome-
ters isdesert Majoreconomicacivities includeironore
mining in the north, the fishing industry in and around
Nouadhlbou, and exploitationof the agriculturaland
livestokpotentialimthe SenegalRiverValley Eannmgs
from iron ore, which formerly representedthe largest
sourceof foreignexchangeearnngs, havebeen declin-
ing, reflectingfalling demandand prices on the world
market since the mid-1980s.Fish eports havebecome
te predominantsource of foreign exchangeearnins,
generating59 percent of exort eamings in 1992. This
sector represents a promising source of economic
growth, thougbh1990-91declinesin productionvolume
of 10.6 percent and 3.0 pert respectively were
worrisome, given the risk of premature depletion if
fisheries resourcesare not well managed. Pelagic fish-
g activityis dominatedby foreignintests and offers
potential for greater domestic inputs. With only 0.2
pee of the landarea suitablefor agricltnua produc-
tin, the prmary sector neverthelesscontributesabout
one-third of GDP. Mauitaia faces serious enviro-
mental degradation fom deforestation, overgrazig,
and cultivationof mauginallands, all of whichcontrib-
ute to soil erosion.
Mauritania's economic development through the
mid-1980swas uneven and markedby major financial
imbalances, while govemment policies had a highly
interventionist character. Despite investmentrates as
high as 36 percentof GDP in the early 1980s,long-term
growth averagedonly 2 percUt, slowerthan that of the
population.Moreover,domesticsavmgs,whichin Mau-
rita's early years of independenceexceededinvest-
meat, were financingonly a fifth of ivmestmentby the
early 1980s The consequt expansion of eternal
financingled to a gmwing and eveully unsstainable
level of indebtedness.While drought and unfavorable
terms of trade contbuted to tbis poor peformance,
there was inrasig evidence that economicstrategy
and policies were m need of change. Faced .with a
deepeningcrisis, governmentadopted, in 1985,a com-
prdhesive economic and fiincia recovery program
for 1985-88thatwas followedin 1989by aconsolidation
118
program for 1989-91. The adjustmenteffort was sup-
ported by the IMF and IDA.
After the mtroductionof the adjustment program,
macoeconomic performance improved oDnsiderably
through 1989. Real GDP grwth rose to 3.4 percent a
year during 1985-89.The overall consolidatedgovern-
ment deficit on a commitmentbasis (excludinggrants)
declined from 14.7 percent of GDP in 1985 to 10.6
perce in 1989 and 7.3 percent in 1990. Mauritania's
exteral position also evidencedsteady improvement,
as food imports declied in response to improved
incentives in the agricuural sector and favorable
weather conditions. As a share of GDP, the current
account deficit (excludingofficial tansfers) declined
from 31 percent in 1985to 14.5 percent in 1989. The
number of civil servans was frozen, while public
investmentswere cut from 10.4pecent of GDP in 1985
to 5.5 percent in 1989. Interest rates were positive in
real terms.
Severalkeystructuralreoms were alsoputin place.
Projectselectionand budgetprocedureswere consider-
ably strengthened.Price control systemswere hbel-
ized, all import licensesand quotaswere abolished,and
the processng and marketing of nce were privazed,
with the result that the Maurianian economy has be-
come more markert-oriented.
Social Indicators and Poverty
As a result of recurent droughtsand difficulteconomic
conditionsin the nru areas dming the lasttwo decades,
there has been substantialmigrationto urbm centers,
where about half of Mauntaian populationnow lives.
The majonty of these people suffer from extremly low
stdards of living, as reflectedin key social indicators.
Life expect at birth is estimatd at 48 years; infant
mortalityis 117.2per 1,0D0;55 percent of school-age
childrenatend primary shol, but only 34 pecent of
the population is literate in either Arabic or French.
Progress in addressingsocial issues is constrainedby
the population gowth rae, currently 2.9 percent and
risig. The rapid growth of the urban populationhas
increased unemploymentand poverty in urban areas.
Per capita GNP in 1992was $530..
 Mauritania
Mauritaniahas a high degree of poverty, alleviation
of which has been made difficult by the laggmg long-
term GDP growth relative to population.GDP grew by
less than 2 percent amually over the last 20 years, while
populationgrew by 2.4 perment.The increasinglydiffi-
cult public resource situation through the mid-1980s
also precluded rapid progress in providing social serv-
ices. As a result of the implementationofthe adjustment
program, some reversalof past trendswas possiblefrom
1985-90. Per capita incomes rose slighly. Moreover,
throughout the adjustmentexperience, the government
was conscious of the vulnerability of certain groups to
short-term adverse efftcts of adjustment Government
implemented short-term measures and reoriented see-
toral policies to provide a basis for its medium-term
poverty alleviation objective. Food aid and food-for-
work programs were important elements in helping
these groups to cope with the social cost of adjustment.
Furhermore, despitebudgetaryconstraints, the govern-
ment protected basic social services, namely education
and health. A census was undertaken of workers dis-
placedfollowing specific adjustmentmeasmures, such as
the resnucurig of civil service and public enterprises
to assessthe financial impacton such workers and assist
them m secring trainig and credit facilitiesto enable
them to find employmentin the private sector.
Recent Economic Developments
From early 1989untl 1992, the Mauritanianeconomy
suffered a series of intenal and external shocks, which
had a severe impacton conomicand financialperform-
ance, disrupted economic activity, and slowed the ad-
justment effort. Unfavorable weather conditions,
insional bottenecks, and a difficult socio-political
siuation affected output in the agricultural, mining,and
fisheries sectors. A sharp cutback in external financing
occurred as a consequence of the Senegal-Mauritania
crisis in April 1989and the Persian Gulf cisis in 1991.
These factors distractedgovermment'satention from its
economic decisiormaking process for more than two
years. Signs of reversal of the reform results were
obvious. Real GDP growth fell to 1.7 percent in 1992
and domestic financial imbalances reemerged. The
fisheries sector continued to be an enclave with no
linkages with the rest of the economy. The agricultural
sector underwent a significant setback and poor man-
agementandlackofadequatesupervisionhamperedtthe
attainment of the 1987-90 banking restructuing pro-
gram
The deterioration of the domesticfinancial position
was reflected in the weakening of the balance of pay-
ments. The external current account deficit, excluding
official transfers, widened from 14.5 percent of GDP
in 1989to 16.6 percent in 1992,owing in part to a drop
119
in fish export earnings, an increasein imports linkd to
the public investmentprogram, and the developmen of
a new miningproject. The overall consolidatedgovern-
ment deficit on a cash basis (excluding grants and
restructuringoperations) increasedfrom 1.6 percent of
GDPin1990to3.1percentinl992.Thesedeficitswere
financedby credit from the central bank and caused an
accumulationof arrears on extemal debt, estimated at
SDR189.9million at end-1992. This, combined with a
swift ircrease in credit to ;he agricdtural and fisheries
sectors, led to an expansion in the moner supply and
greater inflationarypressures.
SinceSeptember1992the govemnmenthasintensified
its adjustmenteffort and stuctural reform. The results
have been encouraging.A substantialadjustment in the
exchangerate took place in October 1992:the exchange
system has been liberalized, an auction system ftor
imports authorizationsimplemented,and the limits for
transtions m invisibles eliminated. Progress in stabi-
lizing the economyand implementng reforms has been
encouragig. Real GDP growth rose in 1993 to an
estimated4.9 percent, reflectingimprovedperformance
in agriculture (37 percent) and mning (14 percent).
Despite the 1992 devaluation, consumerprice inflation
was contaied to 10percent in 1993, belowthe targeted
13percenL Foreign exchangereserves increased to 1.4
monthsof imports, from 1.0 monthin 1990.The current
account deficit (excluding offcial tmasfers) declined
from 21.5 percent of GDP in 1990 to an estimated 19.3
percent in 1993. The deficit was still higherthan the 11
percent forecast because of weak world market condi-
dons for iron ore and fisheries products, delays in
workers remittances, and the importationof previously
contracted fishing vessels. The consolidated go7ern-
ment fiscal deficit on a commitment basis (excluding
grants) increased from 5.4 percent of GDP in 1992 to
an estimated 10.9 percent in 1993 because of the bank-
ing sector financialrestucturng and icremental social
expenditmes.Althoughthe debt burden was relieved by
the January 1993Paris Club rescheduling, debt servica
(28 percent of exports, afier debt relief) was still bur-
densome.
Progress in key strctural reforms in trade, foreign
exchange, pricmg, the tax system, public entrprises,
public expenditure,civil service,social sectorspolicies,
and the enhanced role assigned to market forces have
been key elements in containing inflation, preservig
the initial gains in competiveness, and redressing
external imbalances. The govmnent has fully priva:-
ized three commercialbanks, financially restructured
two joint-venture financial insittions, liquidated the
developmentbank, enacted a new nonperbrming loan
recovery law and established a special agency respon-
sible for the recovery effort and creatd a mral credit
system based on coopetve principles. Governmet
 Mazritanza
has also raised public utilitiestaffs to levels reflecting
economicand financialcosts and improvedbill collec-
tion.
In the public enterprisesector,governmenthas either
privatized or liquidated several enterprises and elimi-
natedsubsidiesto all publicenLteprises.All government
monopoliesand price control have beenabolished.The
government has lowered the civil service retirement
age, frozen all recruitmentexceptfor the educationand
health sectors, computerizedthe civil-servicemanage-
ment system, and implementeda competitiveexamina-
tion system for recruitment These achievements,
however, must be viewed as fragile against the back-
ground of a still large foreign debt, a gloomy iron-ore
and fisheries export environment, and the remaining
severe structaral impedimentsto private sector growth
and external viability.
Medium-Term Prospects
The Mauritanianeconomy remainsfrile, and its me-
dium-termprospectsare constrainedby a limitednatural
120
and human capital resource base, a high degree of
vulneability to climatic conditions and commodity
prices, an inelastic revenue base, and an extremely
heavy debt-serviceburdet The experience of the past
years has made it clear that without macroeconomic
stability and access to sufficient external financing,
sustainablegrowth will remain out of reach.
The government'smacroeconomicobiectivesfor the
mediumterm focusoncontinuedstrengtheningof public
resource management,fiurtherenhancementof the cna-
bling environment for private sector investment and
growth, and an accelerationin its program to develop
the country's humanresources.
In the longer term, sustaining the improvementin
real per capita iwome will hinge on the government's
abilityto deal effectivelywith the difficult problem of
rapid population growth, presently 2.9 perct and
likelyto reach 3.1 percent in the absenceof an effective
population policy. Demographicgrowth and environ-
mental issues will remain, at least for the next decade,
two of the major constraints to Mauritania's develop-
ment effortsm
 Mauritania
Populafionmid-1992(mirions) 2.1 Incomegroup: Low
GNPper capda 1992(US$) S30 Indebtednesslevel Sewi

KEY RATIOS
19s8 19S5 1991 1992 1993 Ivfunom6GDPradofiA

Grss domesticinvestmutGDP 362 2z8. 17.9 22.5 24-8

Exposoargoods andnIs/GDP 37.3 60.8 "A 38.8 45.2
Gmss domesc savingslGDP 6.9 8.8 10.0 9.3 13.0 2- *
Goss nional savhgsGDP -2.3 -2.3 32 6.0 5.5

Curentaccntbalanc/GDP -35.4 -312 -14.7 -16.6 -19.3

Interespayments/GOP 1.8 4.0 22 1.6 22
TotaldebtVGDP 1154 217.1 19715 193.3 232.4 o
Totaldebteport 304.9 3532 435.4 442.7 48&2 r u U U " 92 C

GDP: PRODUCTION
IXoIGDP) 1980 1985 1991 1992 1993 ShefGDPby3C%
Agrin 30A 22.5 25.9 29A 27.1
Industry 25.0 32.9 28.5 26.4 29.5
ManufchrgQ - 12.9 10.3 10.8 12.1
Servies 43.6 44.6 426 44.1 43.4

1930-85 9S85.93 1991 1992 1993

-4gh)
arcualgm_11)
n n
A^nculbmr 0.9 t.9 42 1.8 6.7 n
Indutstry 4.8 1A -0.6 -2 8.3
Mailb xzwug 0.4 62 11.1 62 a1
Seres 3 3.5 3.9 3.9 23 a7 a
Uso " 2 3

GDP 0.4 2.2 28 1.8 5.0 I

GOP:EXPENDITURE
(%OU3OP) 19K 1985S 1991 1992 1993 Growt rms ofGUIand GOP[1%)
Pftm rwmnptin 67.8 749 79.1 80.2 76.7
Gand gvnment consumton 25.3 162 10.9 10.5 10.3 a
Grossdomesticinvestment 362 28.9 17.9 2s5 24.8
Exportsof goodsand nts 37.3 60.8 44.4 38.8 452 1i
Importsofgoods md nfs 66.7 80.8 52.3 52.1 56.9
1980W5 1985-93 1991 1992 1993|
(OVseDannW dg1) - In \
Pate cosumption 6.8 3.6 4.9 6.8 -5.6 | -

Genral govemnment consumpton -5.6 -0.5 8.8 Z3 -3.5

Gross donestic inestment -9.4 -25 -7.7 27.7 15.3 |V
Exqors of goodsand nfs 7.8 -2.0 -Z8 -10.2 52
Imporltsofgoodsandns 5.3 -1A -0.9 8.4 4.0 |
Gromsnationalpoduc -02 26 3.2 1.6 3.6 -GDi -wPGP
Gross naional income 1.0 32 9.5 3.5 0.4 _ 1

PRICES and GOVERNMENT RFINANCE

1980 1915 1991 1992 1993 Chwne.ofGOPdsfltorarudCPIlt%)
Dvmosicprcess
(%dwn) 40
Corsumerprces _ 5.6 102 |\ 3.
W apnces _ _ - - 2S t
Implc GDPdeflalr 5.9 10.3 9.6 9.9 72 'I

SOy"mmentfnance 87 u U so SIi 23
4%WSGDF7
Currettbudgetbablnce -54 -Z0 -1,1 -4.6 | -CPI
Oveal surpkus(defdt . -14.7 -. 7 -. 4 -11.0 _ 1

121
Mauritania
POVER1Yand SOCIAL
(a-&growth rajs 19504 ¶985-43 Omvelpm.udlin
Populabon 2.2 2.7 Lu asanqcy
Labarfo 2.7 ao

Povertyleve: headcountindex (% of popuun) .. GNP G

Life expectancyat bir 48.1 pe
Inarntmortality(oarusandehw bkis) 117.2 mpe u.u_
Childmalnubtion (X of d*anzd9r5) 31.0 ci
Acess toste water (% of pqpolan) 66.0
Energy consumptiomper capita (kg aleabnQ 107.7
lelbacy(%of popablon age 15r) 66.0
Gross priray enraiet ofsc F-e9pp on) 55.0 eo sae
TRADE
(mnbns Us 190 1985 1961 1992 1993 Exportand bumh b(N LUSS)
TOtalexpods fob) 378 438 414 401 Ao
Iron 1571 150 213 tS5 1S8 4 __
Fsb 43 224 22 245 214 s L L L * 1
Manufacur e.* -
Total imports(cif) 321 334 385 424 378
Facd 103 93 112 1Z7 1tO 2 * - l l
Fuel and energy 45 41 53 73 72 tni
Capi goods 60 J2 S6 III 108 IN
Expdxtie indexer
f987=100) - 94 120 124 110 so 4
Impoflpricmikdexf1987=100) - 94 102 98 93 or a - . 2
Termsof trade(1987=100) _ 100 116 127 119 O " a o s
Openness of scomny (videGDR,%) 104 142 97 91 102 *
BALANCEof PAYMENTS
('ulbisUSuss.1950 1985 191 1992 1993 re0P"0jb)
to GPmONO
Expcrsofgoodsandnfs 253 415 502 452 436 e _ M _M I 2
Importsof goods and nfs 449 552 591 620 549 1O
-196 -137

UH L HJ
Resmoue balanc -90 -158 -113
Netfactorome -27 -52 .61 -67 -66 -tO .
Neot cuQmt bansfers -25 -24 -15 27 -7
Currert accountbe -ass .
Beobreofficialtansfes -251 -213 -166 -197 -186
Alteroffciltansbs -133 45 -83 -104 85 -. _
Uog-erm capia inflow 143 63 -20 19 37
Totalheritems(net -33 0 131 82 21
C aresin nt resarves 4 22 -27 3 27 3o -
M==
Reserves exdudxggold (mll .US) 140 59 6o 61 45
Reserves indudirg gold (mg. USS 146 63 72 65 49
Offial eiange rate locaUS$) 45.9 77.1 81.9 87.0 120.8

EXTRA DEBT
EXTEoRNALs
DE1T1980 1985 1991 1992 1993
Longearrn debtiexports 259.0 317.0 361.8 35S.6 40C7
IMFdcreltexpoats 22.3 10.9 t10 11.1 138
Short-tens debtlexpots 23.6 25.3 62.6 74.8 707 1 1 -
Total debt serrikeexports 17.3 24.3 19.0 172 19.2 OPtI
GoPratbos 1 I
Long-term dbWGDP 100.6 194.8 164.1 155.8 192.2
IMFcudiUGDP 87 6.7 5.0 4.9 6.6
Short-term debGDP 92 15.6 28.4 32.6 33.7 25
Log-emdabt rffos IE]
Puale nonWarantoedlWonrm 0.0 0.0 0.0 0.0 (0 |
Public and publiclyguaanteed a| as so g 92
PdvC crediltrsiong-tenn 183 9.7 5.0 4.7 4.6 1 1
Offical credioaflong-tnn 81.7 90.3 95.0 95.3 95.4

The dvelopment diamond shows a ve of devlpmen in fte C y conpnd with its inme gro avrage.

122
 Mauritius
A n IndianOcean island, Mauritiushas aland area
of 1,865 square kilometers and a populationof
about 1.1 million (1992) growing at.l percent
a year. Mauritius became indepeadentin 1968and has
since been a parliamentary democracy. Ethnic and po-
litical diversity contributes to its vitality and
entrepreneurial spiriL During the 25 years since inde-
pendence Mauritius has evolved from a low-income,
agriculal-based economy with a GNP per capita of
about $400 to a middle-income diversified economy
with a GNP per capita $2,720 in 1992. Initial growth
was spunred by sugar production, which provided al-
most20percent of GDP andoverhalfofexport earnings
during the 1970s. Diversificationinto manufacturing
and tourism led to a relative reduction in te role of the
sugar sector to 5 peren of GDP and about 29 percent
of export exhange earnings in 1992. Industrial output
comesprimarily from an exportprocessingzone created
in 1976, which accountedin 1992for 10percent of GDP
andalmost67percentofgrossexporteamings. Tourism
exanded from less ihan 1 percent of GDP and less than
3 percent of foreign earings in the 1970s to 5percent
and 13 percent, respectively,in 1992.Economicgrowth
and sound public expenditure policies helped improve
social indicators: in 1992, life expectancywas 70 years,
infant mortlity was 17 per 1,000, and the entire popu-
lation had access to safe water.
With the exception of a relatively short period of
sluggish growth largely due to external shocks and
misguided fiscal policies over 1979-81, Mauritius' re-
cord is one of solid growth and prudent fiscal and
external accoumtsmanagement.The county's perform-
ance can be traed to its liberal economicenvironmen,
includig an open exchangeandtrade regime, incentives
for fbreign private investment, stong resource mobili-
zation, conservative public expenditre policies, pm-
dent credit expansion, and good governance. Between
1968 and 1992 Mamitius' aggregateproductiongrew at
an average rate of 53 percent a year and exports grew
at 6.1 percent a year in real utms. Over the 1988-92
period, the fiscal deficit averaged 2.6 percent of GDP,
and the current account deficit of the bae of pay-
ments averaged4.2 peent of GDP, both an indication
of prudent financial management. Inflation averaged
123
9.4 percent over the same period, declining to 4.6
percent in 1992, compared with about 13 percent in
1989-90.
Performance in 1993 was mixed. GDP growth re-
mained strong at 5.6 percent, albeit slower thn ea-
pected due to inclement weather. Savings and
investmentwere alsostg at24 percentand29percent
of GDP, respecvedy. However, followmg an avernge
20 percent icrease m public sector wages in July and
the elmination of subsidies on flour, rice, and sugar.
inflation rose to 10.5 percent The govenment took
steps to contain the fisal deficit (excludinggrants) at 2
percent of GDP and the curent accoumtdeficitat below
3 percet of GDP.
Poverty and Socia Indicators
Over the last decade Mauritu' population has wit-
nessed a doubling of its per capita income and higher
social standards and has now the standards of living of
a middleincome developingcountry. Standards of rm-
trition, health care, and general educationexceed those
of most neighboring countries and are comparable to
other middle-incomecountries The benefitsof the rapid
increasein per capita income and full employmenthave
reached the vast majority of Mauitians. Prelminary
results of a householdexpenditr survey conducted in
1991documentthe broad distributionof the benefits of
growth. The goverment has alsoput i place extensive
social safety mechanisrs to alleviatepoverty.
In coming years the Mauritians will face the dhal-
lenge of adaptingsmoothlyto the demandsof an emerg-
ing industrialsociety. Two areas of concem have bee
identifiedas deservig priority action the lagging sup-
ply of housing-compared with the increase in farnly
incDmesand the unsatisfied demand for labor-saving
home appliancesand child care servces by the growing
proportion of women in the labor force. The first issue
is being addressedby the introductionof changes in the
regulation of the property market to permit a greater
private-sector rioe in providing housing. The second is
being ucildedthrough thireduction m mmportduties on
home applianes and the prvision of incentives for
private investmentin child care srvices.
 MAwifiu
Mauriis' past export-led growth largely relied on
its ability to deployunder-utilizedlabor resources,and
its exteral competitiveness took advantage of low
relative wages and availabilty of the limited skldls
required by ftirsstage ind ion. Since 1988,
however, the economyhas facedincreasingconstraints
as it neared full-employmentand the labor market
tightened. Explicit linkage of wage setlements deter-
mined by animal tripartite negotiationsbetween the
government, the private sector, and labor unions to
inflationrather than productivitygains is putting pres-
sumeon domesticprices and starting to erode exTenal
competitivenss, particularlycrtical for an ope econ-
omy such as that of Mauritiuswith foreigl trade repre-
sentingover 131 percent of GDP in 1992.
Medium-Tem Prospects
Mauitis is now at a crtical juncture, poised for a
second stage of developmentand ready to enter dX
ranks of newly industrializedeconomies.Past sources
of growth, however, cannot be counted on anymore.
The main challUegefacing Mauritius is its abit to
competewith counties offering higberlabor skills and
productivity at similar or even lower wage levels.
Mauritius could increase productivity by improving
technologyandreallocatinglabor to higherproductivity
sectors. This implies increased emphasison technical
education and manpower traming and more flexible
labor markets, micludingincreased labor mobility be-
tween the public and private sectors.A start was made
in July 1992with the eliminationof credit ceilingsand
consolidationof the previous 12 incentiveregimesinto
three categories.
124
In agriculture, sugar production and exports will
remai cntical in the foreseeable future. However,
export diversificationis possible and necessary. In the
past, the govenment encouragedfood self-sufficiency,
ratherthn alternativeexport crops, despitethe fact that
many of the existng food crops cannot be produced
economicallygiven tie climatic conditions. Notwith-
standingrapid growth over the past decade, the export
processingzone is still fragile and highly conentrated
in apparel. Outside garments, there are as yet few
significantexport industries.The only meaningfiunon-
textile exports are watches and clocks (3 percent of
exports),pearls,preciousand semi-preciousstones (1.6
percent), and canned tuna (1.5 perent). The govern-
ment has encourageddiversificationthrough fiscal in-
centives such as the rapid write off of capital invested
in the new priority areas. There are some indication
that new investmentsare taking place in mechanical,
optial, and electrnic assembly operations, and in
brain-serviceexports!' such as slow-umrna d data
entry, software, translation, digitizing of maps and
drawings, and consulting.
Mauritius' tourism policy has emphasized low-
impact, high-spending tourism by promoting an
up-market profile aimed at increasing expenditure
per tourist and per tourist-night. Expecting high
sustaied growth in the sector in the 1990s, the gov-
emmnentgranted licenses for the constuctio of a
number of new hotels. The increased supply of ac-
commodations came on the market when demand
growth slowed because of the decline in growth of
arrivals from France and South Africa, increases in
air fares and hotel costs, and a shift by tourists to
informal accommodation.
 Mauritius
Populaton mid-I 992 (mllions) 1.1 Income group: Upper-middle
GNP per capita 1992(USS) zno Indebtedness lve: Belowavrag

KEYRATIOS
1980 1935 1991 1992 1993 .wmzaMntowGPr&bop%)
Gross domesticinesentm GDP 20.7 24.1 27.7 21.5 29.4 a
Exportsof goodsand nYsiGOP 51.2 5315 55.3 62.5 62.7 s
Gros domest saviglGDP 10.5 22.2 23.8 25.0 242
Gross nationalsavingdGDP 9.8 1i0 25.8 25.7 11.7 a

Cunet accomunt balancGDP -12.3 -60 -0.8 42 -2.8 U

Interest paymentsGDP 2.0 2.6 1.8 1.8 1.3
Total debDGDP 41.3 564 37.9 34.2 313 e
Total debtWexporls 10.0 108.8 5S.5 SZ3 48.7 r7 m - go o 92 92

GDP: PRODUCTION
ofGDP 1980 193s 1991 1992 1993 ShnsofGDPbymector(%)
Aguifllm
Indusry
12.4
25.9
15.3
292
114
32.6
11.1
332
9.9
33.4i
n n
Manactuing 15.3 20.6 23.1 23.2 23.3
Sevicas 61.8 55.5 S6.0 55.8 56.7
1980-85 1985-93 1991 1992 1993
(rerge annua rw7) 11I I111 ll
Agri:_le 52 0.0 -1.9 6.5 -Z5s
LndusSry 5.6 &4 5.6 7.3 62
Manufring 8.0 &4 4.6 6.4 10i0 a
Services 3.8 6.3 4.6 6.5 5.5 aia 7 mos em2 a
DAuoa_ *kflfr flsts
GDP 4.3 6.4 4.0 6.1 5.6 __

GDP: EXPENDITURE
_%afGDP 1980 191S 1991 1992 1993 Growh ofG md GDP(%)

Private anwuption 75-5 67.6 65.3 63.9 65.0 3T

Geriralagovemmentconsumptlon 14.1 102 109 11.1 10.8 30
Gross domesticinwestment 20.7 24.1 27.7 26.5 29A a5-
Exportsof goodsand ifs 512 515 65.3 625 627 20
Impodtsofgoodsand nrs 61.4 55.4 69.3 65.9 68.0

(averageannualgrowt) 1980.15 191593 1991 1992 1993 |10

rivate consumption 1.2 6.4 2.3 5.7 4.1 5 -
Generalgovernmentcomnsnption 1.8 4.6 3.4 3.8 4.0 o
GroS domnescinewstment 3.5 11.6 -6.0 8.8 9.0 | - 02 93
Exportsof goodsandnft 4.3 69 4.3 3.9 5.5 1
Impoutsofgoodsandnfs -0.5 11.1 -1.6 4.3 5.3 40t
Gross natonl prduct 3.6 7.0 52 6.3 5.7 1 -G4 -GW
Grss natonal income 2.9 7.2 4.3 7.1 3.7

PRICES and GOVERNMENT FINANCE

1980 1915 1991 1992 1993 ChangmofGDP drfldawmnd CPI (%)
Dames0fcpdces Is--
(% tag) I1
Consumerprics 42.0 6.7 7.0 4.6 10.5
Wholesal prices .. I. .. .. ..
Impcit GDP deflatdr 27.0 B.0 77 5.3 9.0

Goveiment 5iilgpO m7 * m go 91 m2 us
(%ofGDP)
Cunun budget balance .. -1.8 28 29 2.9 G-wd -CPI

Overal surpluslelckt -6.0 -1.8 -2.1 . . I

125
Mauritius
POVERTYand SOCIAL
(annualgmv4hrates) 19.5I 3 D.ulapnuntdlusmand
Population 11 1.1 Lllepeatcy
Laborfame 23 2.3
int sUCuItaEI gum)
Povey level: headcmuntMdax(K ofpcpuikn) 5.2 GNP s\es
Life expectancyat bIth 70.0 per ,h_ .
lnt mortall (perihousnd ive bkls 18.0 mn u
ChId mabubit0on(S of chidrn under5) 23.9 ammn
Aess to safe water( of popuh%n) 100.0
Energyconsumpbonper capita(Ioequivaqlen 384.9
llltracy 1%of'populbtbnage 15+) 17.2
Gaussprimay enmilmant(K of sdoal-ag ppatIon)
pu0 Aa os wer

TRADE -
(rrdtns US$) 1980 as 1991 1992 1993 Expo_tand hopoetmole lint US$)
Toalaexports(fob) 430 430 1.213 1.292 1.336 1500
Sugar 240 186 338 364 353 1v0
Texties 71 0 * - . t.4o
Manufacue 98 212 775 841 925 1*00
Totl impost (di) 614 526 1,55 1.626 1.559 i_*
Food 161 87 172 189 268
Fuel ad energy 44 74 131 124 128
Caial goods 96 72- 373 388 4a 4
SprlprindexorW=1 ) ~ 128 72 113 119 e s
Impat puicehKdx(1987-1bO) 191 96 120 122 .. a * 8 g * *
Termsof bade(1987=10q 67 75 94 98 - DEw so- I
Opmess of econor uw tDP.S) 113 109 135 128 131 E *
BALANCEof PAYMENTS
oISO8 t9es 1991 1992 1993 Cunwnta atbhbac to GOPraoi A%)
(mKShn USQ
Expartsofgoodsmndnfs S79 576 1,780 1.913 2,058 *
Impoit of goodsandnl5; 695 597 1.887 2.017 2,Z30 2
Pesourcebakano. -116 -21 -107 -104 -172 1
Notfactkhinconue -23 -43 6 12 -8
Hotcanmit anss fe 0 0 79 87 85L p - a
Cunnt accmunt ba|e
Beforewoftcialtransfers -139 -64 -22 -5 -93
Alberoflidaibans -128 -50 -7 14 -91 -

nhbw
Lonig-termcapital 68 -3 103 20 75 -4
Totl other bms (net 85 72 92 12 76 4
Changes in not meve -25 -19 -188 -46 -6D -.

Resrvs lucing gold AnK^UtS$ 91 30 49 820 757

PAsve clu* gold(mil USQ) 113 42 915 t41 781
OfficialexchangefobaleWSs 7.7 15.4 15.7 t S.6 16.7

EXTERNALDEBT
1980 1935 1991 1992 1993 Sbutumdwnidokt%
Long-erm debUwports 54.5 71.4 525 46.7 43.4
IMFaedmtexports 17.4 2&5 0.0 0.0 0.0
Shortern debtexbI 8.1 8.8 2.9 5.6 5.3 7 n
Totaldettser*exports 9.0 24.3 &a 81 7.9 | !1n .

GOPraVeS
Long-trmdebtGDP 281 38.4 35.9 30.6 282 D,| *
IMFcredPJGP 9.0 15.3 0.0 0.0 0.0 I
Short-tenndebUDP 4.2 4.7 2.0 3.7 3.5 2s.
Long6faa bhf a
Private nonguarantsedlongtmrm 7.5 3.6 17i.6 20.8 21.6
Publkard pubiclyguaranteed | s en gno i u OM
Privt creditorsltong-trm 44.2 21.9 129 12.2 10.3 _ _

Offidalcreditordlong4erm 48.3 74.5 69.5 67.0 68.1

-The delopmt diamondshosa e of d opmenth ecountycomped wh itsincoe grup average

126
 Mozambique
T he signingof a peaceagreementin October1992,
the ongoing demobilizationof opposingarmies
under the supervisionof the UnitedNations,and
the elections scheduledfor October 1994 have created
an opportunity for sustinable economic and social
development in Mozambique. The initial productive
supply response was an impressiveGDP growth of 19
percent in 1993. The demobilizationprocess, after
substantial delays and difficiuties in 1992, is moving
forward, but the peace is extremelyfragile, as the case
of nearby A-ngolamakesall too obvious.The challenge
for all parties in Mozambiqueis to proceedwith demo-
hilizationanddemocratizationandeconomc adjustment
as quicklyaspossible withoutgoingso fastorantempting
so much as to cause the wholeprocess to abort.
Mozambique'sperformancemustbe assessedagainst
a backgroundof immensecalenges when the goven-
mens rehabilitationprogramwaslamched in 1987 By
tha time, the advantges it inherited at independence in
1975-a good basic infrastructureand export base-
were all gone, as a result of long years of rigid central
planning, a one-party state, and a vicious ongoingcivil
war. The consequences were a sharp faU in Mozam-
bique's GDP, exteme aid dependency-the debt stock
was equal to 45 fimes exports-and extensivepoverty
with 60 to 70 percent of the populationbeing absolutely
poor.
In the initialperiod of adjustment,prioritywas given
to reducing price and exchange distortions, reducing
adrinistrative controls, rehabilitatingstate enterprises,
and reducingdomesticandexternal iibalances. Signifi-
cant progress was achievedin improvingfinancial in-
centivs. Admiistered consumerprices arenow limited
to two basic foodstuffi (whcat and whearflour), rents,
utilities, and tansport fares. Fixedprices for manufac-
turedproductswere first replacedby a systemof expost
review and have since been liberalized. Overall, the
share of products subject to price contol fel to below
5 percent of total production in 1993. In parallel with
piice adjustments,the goverment bas openeddomestic
and external trade, allowing increased competition
among traders and permitting direct trading between
enteprses. To improve foreign exchange allocation,
the various foreignexchangewindows(includingdonor
127
importsupport funds)were unified into a market-based
system in April 1992. With the exceptionof a small
-negative list, impor licenses are now being issued
automatically, and all forcign exchange is channeled
throughthe bankingsystem. Under the new system, the
exchange rate is detenmned by market forces. The
paralel marlretpremiumhas declined from 150 percent
in 1990to 10 percent by end-1993.
Followingthe 1991 Privaization Act, the govem-
ment decreedthat aUstate enterprises, with the excep-
tiomof strategicenterprisesthat provide essentialpublic
goodsand services, were to be either pdvatized, trans-
formed into cDmmerciay orented pubLicenterpnses,
or liquidated.By early 1994moststatms had ceased
productionor hadbeen privardzed.Nimelarge industrial
firms, whic alone accounted for about 10 perceut of
Mozambique'sindustial production, and263 smalland
mediumenterpriseshad been privatized.Reform of the
major utility pamastatalsand within the petroleum com-
pany had commenced.The post office and telecommu-
nicams parastLs weretrnoned ino commercially
oriented public enterprises in 1993. Frst steps have
been takenwith respectto the airlinesand the railways.
A major achievement has been the restoration of
economic growth, which avcraged nearly 10 percent
over 1987-89despitethe security sitation. Over 1990-
92 growthslowedto 1.7 percmnta year as a conseque
of the 1992 drought, woriening security, and lower
levels of exteral financing. In 19f, with improved
security, better weather, partially restored infrastc-
ture, and continued structural refim, GDP growdt
reached 19 percent. Agriculturalproductionrose by 21
percent as the setor recoveredfrom the 1992drought
and displacedhouseholdsresetfed in runil areas. How-
ever, industr production in the formal sector stag-
nated owing to a painful process of adusting to an
imcreasgy deregulatedenvinonment
Progress in reducing domestic and external imbal-
ances has been limited. This is a long-term objective
given the nature of the imbalancesand the already low
level of per capita income ($70 in 1992), which effec-
tivelyprecludesdrastic cuts in aggegate consumption.
Neverteless, substanial fiscal adjustment has been
achieved. The revenue base has been strengtened
 Mozmobique
through tax reforms and improvementsin tax admini-
stration with the result that budgetary revenues rose
from 18 percent of GDP in 1987to 20 percent in 1993.
Recurrent expenditures have been contained, including
subsidies to state enterprises, while public investment
has been largely financed by donor grants. As a result,
the overall deficit (after grants) declined from 13.5
percent of GDP in 1987to 5.2 percent in 1993.
The reduction in external imbalanceshas been con-
strained by the key rolc assignedto imports. Increasing
the supply of capital and consumer goods, largely
financed by donor grants and concessionalloans, has
been essential for rehabilitating infrastructureand pro-
viding incentive goods to complement the reform of
financial incentives. Thus, the current account deficit
before grants averaged 54.5 percent of GDP over
1990-93.Bccause of strong donor supportand a signifi-
cant shift from loans to grants, the evolution of the
current deficit after grants was different: it fell from 29
percent of GDP in 1987 to 22 percent of GDP in 1993.
Monetary policy has aimed at reducing inflation by
absorbing excess liquidity and improvingthe efficiency
of credit utilization. Monetary expansion has been re-
srained by reducing domestic bank financing of the
budget deficit from 16.5 percent of GDP in 1986to 1.4
percent of GDP in 1993 and by establishing credit
ceilings on commercialbank credit.
Overall, however, the government has had only
partial successin stabilizingthe economy.A.nimportant
source of macroeconomic instability, which has ac-
counted for continued high, albeit declining, inflation
(44 percent in 1993), stemsfrom leakagesintebankdng
sector. 'Other items" (maily represening transitory
accounts in the banking sector), are large and havebeen
growing rapidly. The effect of not controlling these
items is that there has been rapid expansionofthe assets
of the banking sector-and higher inflation than would
be anticipated from other macroeconomic indicators.
Strengtheningthe central bank and developing insu-
ments of monetarypolicy, forminga properly funcdon-
ing financial sector, and continmingwith privatization
in the enterprise sector, are seen as the next steps in
addressing the causes of macroeconomicinstbility.
Since independence the banking sectr has bean
dominatedby the Bankof Mozambique,whichoperated
both as the central bank and as a commercialbank. In
December1991anewcentralbankinglaw and ageneral
banking law were enactedby government.In early 1992
the national bank was separated into BancoCommercial
de Mozambiqueand a central bank. Emphasis is being
given to strengthening the central bank in monetary
control, supervision, andforeign exchangemanagement
and to increasingthe competitivenessof the commercial
banks. Priority is being given to restructuring state
banks, in particular the Banco Commercial, which
128
remainsthe main commercialbank and accounts for 50
percent of lending.
So.I Indicators
Althoughdata are spotty, recent health indicators show
improvementsin social indicators. The infant mortality
rate in Maputo declined from 84 per 1,000 live births
in 1987 to 73 per 1,000 in 1992, and the maternal
mortality rate from 260 to 300 per 100,000 live births
in 1997 to 180 in 1990. A factor in the improvement
has been the increase in social sector expenditunnes:
budgetaryexpenditureson goods and services for edu-
cation and health rose by 19percent in real terms from
1991to 1993,reversingdeclines in the early 1980s,and
60,000 poor urban households are now covered by a
direct income transfer scheme. This policy was made
possible by the increased mobilization of counterpart
funds by the budget, which increased budgetary re-
sources. Nevertheless,poverty remains deep and wide-
spread. Wages for urban unskilled workers have fallen
below the absolute poverty level, a problem that cannot
be addressedthroughtargeted poverty alleviationmeas-
ures alone. What is required above all is resumption of
growth and support for the on-going large-scale reset-
dement of households in ural areas, which will reduce
excesslabor in urban areas and downward pressure on
wages.
Medium-Term Prospects
Mozambique's long-term objective as set out in its
Economicand SocialRehabilitationProgram is to repair
the damage of the past and establis conditions for
accelerating long term growth and poverty reduction.
During 1994-96 Mozambique will face the challenges
of national reconstrction in the aftermath of a destruc-
tive war, which mcludes a number of key tasks: reset-
tlement of about half its population, demobilizationof
91,000 soldiers, and a democraization program based
on multi-partyelections. The man oppositionparty and
the government have agreed on key aspects of an
electorallaw.
The main elements of Mozambique's macro-
economic program include reducing the fiscal deficit
after grants from 5 percent of GDP in 1993 to 4.5
percent of GDP in 1994 and 2 to 3 percent in 1995-96
and the fiscal deficit before grants from 22 percent in
1993to 10percent by 1996.The program also calls for
strengtheningcredit policies to keep monetary growth
within targets and reducing the current account deficit
before grants from 2.2 to 1.5 times exports between
1993and 1996. However, despite some savings accru-
ing from downsizing the armed forces, additional ex-
penditues relateddemobilizion,mine
to clearing, and
 Mozambique
preparationof electionsshouldresult in the overall
budget deficit(beforegrants, and includinginterest
payments)risingfrom22 percentof GDPin 1993to 25
percentin 1994.
Mozambiquefaces threechallengesrelatingto its
externalsector: maintainingthe level of importsre-
quiredfor growth,decreasingits dependence on exter-
nal aid, and reducingits high externalindebtedness.
Importswill increasesubstantiallyin the short term
becauseof the additionalcostsof the demobilization,
elections,and resettlementand other emergencypro-
grams, includingrepairingthe damagecausedby Cy-
clone Nadia in March 1994.Theseprogramsshould
providethenecessaryingredients foragricultural-based
economicrecoveryto takeplace,and for foodproduc-
tionto increase,leadingto reduceddependency on food
aid. There is still an issue with the compositionof
externalaid. Mostof the availablefinancing(exports
andeernal aid)ispre-emptedbydebtservicepayments
anddonor-financed investmentprojects,leavinga very
smallmarginof fimdsfor financingneededimported
inputs(suchaspetroleum),basicconsumergoods,and
capitalgoodsnot fmancedunderinvestmentprojects
Exportsare projectedto rise by over 14 percenta
yearin cunrentdollarsfrom1993to 2002as a resultof
the developmentof new gas fields,increasedmining
exploration,andthercvitalizationof theindustrialbase.
129
Apositivefactorin theprojectedrise in exportswil be
foreigninvestment:applicationsreached$600million
by mid-1993.Importswouldincreasemoreslowly,by
over6 percenta yearon accountof reduceddependence
on foodaid,theendof thedemobilization, electionsand
resettlementprogramsin 1995,andimportsubstitution
accompanying therestructuring
of theindustrialsector.
As a result,the currentaccountdeficitbeforegrants,
afterincreasingfrom56 percentof GDPin 1993to 71
percentof GDP in 1994,shouldfall to 28 percentin
2002, and Mozambique'sdependenceon externalaid
wouldfall from$67per capitain 1993to theregional
average($34per capitain 1990prices)by 2002.
ExternalDebt
Despiteexportgrowthandimportsubstitution underthis
favorablescenario,Mozambique will need contiued
debtreschedulingthroughoutthe 1990s.Currentdebt
relief is generous.but even after rescheduling,debt
serviceamountsto 25 to 30 percentexports.For debt
rescheduling to be a long-termsolution,a reductionin
totaldebtto thetue of 60to 70 percentwouldhaveto
take place. Debt cancellafionagreementshave been
reachedwithseveralofMozambique's OECDcreditors
and,agreementhasbeenreachedthattheformerSoviet
Uniondebtwillbe reducedthroughdebt-equityswaps.
 Mozambique
Populaion mid-1992(mlflions) 16.5 Incomegmup Low
GNP per capita 1992 ( )SS) 70 Indebtedness evol:sever

KEYRATIOS
1980 19835 1991 1992 1993 InwsmentztoGPrauoI)
GrossdomnestichwestmenUGDP 22.5 9-1 39.0 38A 41.5 s
Export of goodsandnfs/GDP 19.7 5.6 21.8 23.8 21.3 40
GmrsdomesticsavlgsJGDP 0.5 -4.1 -9.2 -13A -11.0 30
GrossnaionalsavingslGDP 1.8 -8.0 -10.4 -18.5 -13.9
Cuftft accountbalanolGDP -20.9 -17.2 -51.5 457.5 -55.9
InterestpaymenkslGDP .. 0.7 0.7 0.9 1.0
TotaldebtIGDP .. 105.9 327.8 383.5 333.5
Totaldetlexpouts .. 1.477.4 1,286.6 1.361.B 1,317D0 C a
U as si a2

GDP:PRODUCTION
(9afGDOF) 1980 1985 1991 1992 1993 Sh oGDPbylmator(S)
Agricurxe 36.9 49.1 38.0 32.3 33.1 t_
Indusby 30.9 10.8 15.6 142 12.0
Manufacturn .. ..
Serices 32.3 40.1 46.4 53.5 54.9
1980E451985-93 1991 1992 1993
(aDverage
anawlgrowth)- r
Agricultum -4.3 0.6 -1A -16.2 20.7
Indusby -23.9 7.4 10.2 -10.6 -0.1
Manuactunng .. .. .. .. oM. _. W _._
Servcss 0.1 9.8 86 14.1 22.9 M O
Os X a
GDP -6.6 5.8 4.9 -0.8 19.1 1 ___
o0a
____ ____
mba
____
Otia
__3 _ ____

GDP.EXPENDITURE
GD911019115 1991 1992 1993 G|owt ofGEN
andGOP
Priva conswption 78A 83.1 90.8 94.2 94.1
Gaenergovernmmtcnsumption 21.0 21.0 184 19.1 16.9 iS
Gros domesticinvestmn 2725 9.1 39.0 38A 41.5
Exportsofgoodsandnis 19.7 5.6 21.6 23.6 21.3 t1
Impotsof goodsandnfs 41.6 18.8 69.8 75.5 73.8
19805 1985-93 1991 1992 1993 5
(sarage annualgrow)
Privat cnnption -25 5.4 4.5 -1.0 22.4 0
Generalgovenmmentconsumplion -2.0 2.2 *4.2 -0.7 8.4 | Be go In \ U/
Grossdomesticinvestmt -15.9 9.5 2.5 -9.6 10.0 |
Exports
of goodsandnfs -20.4 9.7 31.2 1.B 3.4
Importsofgoodsandnfs -8.0 6.4 6.2 -5.1 11.0
Grmssnabonalproduct -7.6 5.1 5.7 -4.3 22.3 -GDon -OGDPI
Grossnabonal income -6.8 4.8 6.1 -5.4 22.4 |. _ . I

PRICES and GOVERNIMEN FINANCE

.1980 1985 1991 1992 1993 [Chang.of GDPdaorandOSCPI)
Domestc,prces 2i0
(6 dchange) 150|
Consmer prices .. .. 33.3 4S.2 76.2 | 1
Wholesale prices .. .. .. .I so
ImplicitGDP der .. 35.3 46.2 53.2 46.7 I-

(6 of 00F9
Cwent budgetbanwe .. -12.5 -0.5 4.1 -IA -CP
Overa surplsdeicit .. -18.5 -24.9 -25.6 - 1

130
 Mozambique
POVERTYand SOCLAL
(annualgmwth rates) 1980485 lhubmw
1985493 ndt
Popuaion 2.6 2.6 UhXt
Laborforc 2.1 to
niostirat eallmlat(en)
Povertylevel: headocuntindex (% of ppuAon) - GNP Gam
Life expectancyat birth 44.0 PA pdmry
Infantmortality(rwthousandlw bkffis) 162.1aRMWn
Child malnutrition(%of chddrenunderS)
Acss to sale water eU of popublio) 24.0
Ergy consumptionpercapita (kgoIequmb 32.0
l1teaCY(U of poPulatbnage 15F) 67.1
Gros pmnuryenrolment (U ofsdmo-age populaVlmn) 60.0 11mbse r

TRADE
(nwiOtnsUS$) 1980 1985 1991 1992 1993 ExportandImportbmis n(miL
US)
Toatexpoats (b) 281 77 162 139 132 S
Graundnus 65 12 16 18 19
Fish 32 33 60 55 59 a
Manubctuus .* R - -

Total inports (cii) 800 424 899 855 955 w

Food 108 121 152 145 163 5
Fuel and energy 220 75 S0 78 81 300
Capital goofd 153 49 276 270 300 2s -
Export pric index (1987=100) Si as 102 9D Bs G |
lmportprkceindex(1987-100) 85 92 111 113 114 a a U M 9H 2 3
Tems of tra (987=IOOJ 96 94 92 W 75 o M'
Opermessof econmy (badelGDP.9) 61 24 91 99 95
BALANCEof PAYlENTS
1980 1985 1991 1992 1993 Cntntta6DPlSlo(%l
(nilvn USSw
Exportsof goodsand nfs 399 143 310 304 312 o *I
Imports of goodsand nfs 844 481 1001 970 1.083 -im *0 l * U 0 33
Rasourcebalarce 1445 -S9 -692 666 -771
Not factor inome -6 -117 -180 -214 -212 -.
Netcurrenttransfts 28 16 134 141 163
Currentaccamftbablnc -30
Before officialtranses -423 -440 -739 -739 -820
Aftr ofidal transfer -367 -01 -23T -239 -317 40
Lane-termcapiabflow 364 -50 -188 -155 -112
Totl oter items (ne) -30 330 437 434 383 0,
Changesin net reserves 32 21 -13 -40 46 40
Memo: S
Reserves excudinggold (miLUS$) .. 41 218 .. _
Reserves indudhiggold (miD.US$ .. 41 218 .. -
OffWiialechange rate (olUSS) 32.4 43.2 1.434.5 2,437-7 3.7227

EXTERNALDEB r_1_______92 193____f_t___tA

Export raos19 1 1991 1992 1993

Long-termdebtlexprts .. 139Z1 1,109.9 1.147.5 1,148.5
IMF cradtexports 0.0 32.3 48.2 51.0
Shorn-trmdebtexports .. 5.4 144.4 166.1 117.5 75
Total debt servicelxports .. 29.8 12.2 9.4 12.1
GDPraffos EPCK.
Longterra debUGDP .. 99.7 28Z8 3232 2908 mart
IM caeditIGOP .. 0.0 8.2 13.6 12.9
Short-termdebVGDP .. 6.1 36.8 46.8 29.8 25
Long-ten dm abtaos 0
Privale nwgutmdong-term .. 0.4 OA 0.4
Pubic and publicy guaranted a * M -D an 91
a2
Privabtcretrsong-trm .. 27.3 10.B 92 8.9
Official cediorsg-trn .. 72.3 U.8 904 99.7

The developmentdiamondshows a evelof develpmnt in the counry crmpapd with inommegrop averag

131
 Niger
N iger is a large landlockedcountry covering an
area of 1.27 million square kilometers, 600
kilometers from the closestseashore. Its popu-
lation was estimated at 8.44 million-about half of
whom were less han 15 years old-in 1993 and is
growing at about 3.3 percent a year. Nearly 90 percent
of the population is concentrated along the southern
borderinthe 12percentofitslandareathatisconsidered
arable. Rainfallis limitedand often irregular, while soil
fertility is low and declining, &ueto intensiveuse. As a
result, Niger's fast growing populationis becomingone
of thepoorest in the world Percapita GNPdeclinedby
a yearly average of 4.5 percent since 1980to reach$280
in 1992.
Social Indicators
Niger's social indicators are among the lowest in the
Saheliancountres. Life expectancyat birth of 45 years
is one of the lowest on the continent. Infantand child
mortality rates arc high. The adult literacy rate is only
14 percent (9 percent among womenu)and the primary
schoolenroUmentratio is less than 30 percet.
Significantand sustined imprvement is cmcial for
both long-termgrowth wthin Niger and, m the absence
of employment opportnities at home, to improve the
chances for migrantsto find gainfulemploymentin the
ccastl counries. The governmenthas been unable to
provide sufficient agricutural service to allow subsis-
tence farmers to reduce dependenceon weathercondi-
tions. A fast-growingurbanpopulationcoupledwith the
lack of municipal resources has translated into urban
decay and reduced social care. Malnutrition prevails
among pregnant and nursing women and children. An
estimated 25 percent of children aged 12 to 13 months
and 22 percent of children aged 22 to 24 months are
chronicallv malnourished. In spite of a dismally low
primary school enrollmentrate classooms count up to
120 to 130 children.
Subsistence agriculture has traditionally dominated
the economy, with millet and sorghum taking up 80
percent of cultivated area. Livestock also provides an
importantsourceof income and export receipts. Except
during the Sahelian drought periods, the country has
132
been self-sufficientin staple food production. The dis-
covery of large uranium deposits in the late 1960s
triggered developmentof an important mining sector
that expandedrapidly under highlyfavorable conditions
in the world market during the late 1970s. Uranium
became Niger's principal foreign exchange eamer,
amountingto 70 percent of exports and a major source
of government revenues (around 12 percent). As a
result, Niger went through a period of rapid growth and
modernizationwith the public sector taking a dominant
role in the modern economy.The uranium boom ended
in 1981, when prices plummeted and Niger's market
share decreased.
The formal sector accounts for about around 28
percent of GDP (of which 5 percent for mining) and
comprises a relatively ineffiient public sector and a
small modern prvate sector in rapid decline until re-
cently, owing to the lack of competitiveness of the
Nigerien economyand imports from Nigeria Niger has
an open economy, with imports and exports of goods
and nonfactor servicesexceeding 30 percent of its GDP.
Stroagtrade links existin particularwith Nigeria, which
exerts considerable economic influence through long-
standing rading and culmual bonds. This influence
heightened durimgthe 1980s as Nigeria's competitive
position was bolstered by an important and steady
depreciationof the naira
Past economic results have been lackluster. Niger
exhibited all the features of a typical resource-poor
Sahelian country until tle uranium boom when the
mining sector's share of GDP rose from 6 percent in
1975 to 13 percent in 1980. The end of the uranium
boom revealeda number of serious structural deficien-
cies engendered by the public sector's excessive in-
volvement in production and as the prime allocator of
resources. The collapseof demand in uranium markets
andthegradual declineofcompetitveness in agriculture
and manufing despite low inflation levels were
leading causesof this poor performance.The deflation-
ary strategyadoptedby Nigerto addressthese problems
ran into serious difficulty during a protracted political
transition. Revenuiesdeclined, due in part to dte in-
creased informaiation of the economy and weak tax
administration, and expenditures,mostly public sector
 Niger
wages, proved hard to curtail. Public investment fo-
cusedon infrarc and constructionprojects, while
agricultural investment encounteredserious problems.
Recurrent expenditure favored personnel and transfer
payments over operations and maintenance,to the det-
riment of existing nfrasructu and basic public serv-
ices.
Adjustmentefforts in Niger spannedthe period1983-
90, halted after major slippage in 1990, and recom-
mencedin 1991,whenthe governmentbegan an internal
adjustment strategy with very limited results. In Sep-
tember 1993the governmenttook other internal adjust-
ment efforts, includinga 20 percent cut in public sector
base salaries. Overall, although some stabilizationre-
sults were obtained, the economycotinued to decline
The adjustment program was ambitious, requiring
strong commitment from the governmentin the fiaceof
resisTance,particularlyfrom smdentsand labor unions.
It has focused on policy improvementsin three areas
where stnuctral problems have been most acute and
wher policy changeswould havethe greatestbeneficial
impacton the budgetaryand balance of paymentsposi-
tions: public resource management,parastatal reform,
and agricultura policy,
More efficient use of public resources has been
pursued to improve the use of existinginvestments. A
thee-year investmentprogram, which is Ieviewed and
rouledover annually,emphasizesthe directlyproductive
sectors, the developmentof human resources, and the
rehabilitationof existing infrastucture. Sectoraldistri-
bution of investments has generally reflected govern-
meant'spriorities, althoughtargetshave not been met in
agriculture. Despite the government's aim to increase
public investmentfrom its 9.2 percent of GDP in 1991,
political unrest, weak institutional coordination, and
scarce counterpartresourceshaveresultedin low capital
expenditureimplementationrates, with the ratioto GDP
falling to 5.4 percent in 1992 and 5.7 percent in 1993.
The parastal reform program, which included
measuresto encourageprivate investmentand restruc-
ture the banling system, aimed to revise incentive
policies, improve in the legal and institutional frame-
workfor the parastatalsector, rehabilitate,privatizeand
liquidate individual enterprises, and settle cutstading
debt arrears inthe pubicsector Progress madehasbcen
mixedunder all componentsand has fluctuatedfrom one
year to the next.
The government reformulatedits rur.1 development
strategy and supported policies to improve the effi-
ciency of its intervntions and limit their budgetary
impact The sectoral investment program has been
largely reoriented, emphasizingquick-yieldig, small-
scale projects, farmer participation, and rehabilitation
of existing infrastructure. The operationsof the cereals
marketing and storage agency have been limited to
133
managinga reducedsecurity stock, and its price stabi-
lizationrole has been eliminated. Subsidieson agricul-
tural inputs are being curtailed to expand their
availabilityand lmit the drain on the budget.
From late 1990until the end of March 1993political
and social agendas tansfixed Nigeriens and crowded
out concerns about adjustment and other economic
issues. Followinga 17-monthtransition period, a new
government came to power in April 1993 through
democraticelections. The coalition of political forces
now in government represents a generational shift;
aware of the need for change, albeit dependent upon
forces, such as students and organized labor, they have
opposedeconomicreforms challengingtheir privilffeges.
The Nigerieneconomyremains in the doldrums, mainly
as a result of the failure to undertake or sustain mean-
ingfinladjustmentmeasuresin the face of the competi-
tive decline that amplified the economic and financil
crises. After a poor performance of -1.3 percent in
1990,real GDP growthreached2.5 percent in 1991 due
to a boomlet in agriculture, followed by another poor
performanceof -6.5 percent in 1992. Real GDP grew
1.4 percent in 1993. Exports of goods and nonfactor
services decreasedby 10.5 percent in 1993,coninuing
their decliningtrend. Imports similarlydropped by 4.1
percent in 1992 and by 9.3 percent in 1993, due to
economic decline. The modern indusuial sector de-
cined sharply. This poor performanc combined with
the high population growth permitted little progress
towardsincreasingaccess to basic health and education
or decreasingmalnutrition.
Niger is also sufferingan unprecedentedfiscalcrisis.
Tax revenues declined 8.3 percent in 1992 and 6.7
percent in 1992, while the wage bill, the lion's share of
current expenditures, expanded. The resulting current
fiscal imbalance,amounting to 4.6 percent of GDP in
1993, and an overall fiscal imbalance (commitment
basis) of 8.6 percent of GDP, reduced the import of
capital goods, and continued to threatn investments
compressedto below the replacement rate of existng
assets. External payments deficits also persisted. The
current accountdeficit amountedto 1.9 percent of GDP
in 1992 (7.4 percent excluding grants), and improved
slightlyto 1.3percent of GDP in 1993becauseof higher
inflows of official grants representing 6.2 percent oI
GDP.
After the January 1994devaluationof the CFA franc,
the government moved swnftlyto conclude programs
with the IMF and the World Bank that should enableit
to address the serious economic crisis. The programs
aim at improvingpublic financemanagement,restoring
financialequihbria, and resuming structural reforms to
 Niger
spur the post-devaluationsupply response. Under the
program, some important measureshave been taken to
shift domestic relative prices in order to close the
intenal and extemal deficits. The devaluation-induced
price increases were passed through to the tradeable
sector in an effort to boost incentivesfor export expan-
sion, notably for livestock and cowpeas, and increase
the potential for import substitution.At the same time,
input costs in general and prices of nontradeablesin
particular, were contained to ease the transition, and
other domesticcosts, such as the civil servicewage bill,
industrial iWputs, and energy costs, were also capped.
The program also included key macroeconomicand
social policy measuresto restart gmwth underrestrained
fiscal and monetary policies, jump-start the business
cycle through liquidationof arrears, stepup investments
and tax collection, and minimizenegative social fallout
through temporary subsidizationof sensitivegoods and
other targeted interventions.
A major step towards regionalintegration was taken
by the seven counties of the West African Monetary
Union with the signing of a treaty transformingit into
an economic and monetary union to assist conver-
gence of fiscal policies and harmonization of trade
134
policiesin membercountries,which shouldimprove the
pmspects for agricultmraland manufatrng develop-
ment in Niger.
Medium-Tern Prospects
Preliminaryevidence points to early devaluation bene-
firs for Niger, mainlybecause of the shift in production
incentives promptedby the change in relative prices in
favor of local agriculturalgoods- On the export side,
this has yielded increasedexports of livestock, cowpeas,
and hides and skins. On the import side, they induced
substtutions of local rice, cement, and constuction
items for imports. On the monetary front, significant
repatriationof CFA francs was recorded foilowing the
measurmes of limited inconvertibilityof the CFA, accen-
tuated by the tendency of Nigerian food traders to
repatriate their export proceeds in the form of Nigerien
goods. Inflationfigures for the fis four months of the
program point to a rare of 30 percent, allaying initial
fears of spiralling inflation. Moreover, low 1.6percent
rate for Apri indimtes a stabilizingtendency and it is
likely inflation will reman well within the program
projection of 37 percent in 1994.
 Niger
Populationmid-1992(nV/lions) 82 Incomegroup:Low
GNP per capia 1992 (USS) 2W0 Indebtednesslevel: Severe

KEYRATIOS
1985 19B5 1991 1992 1993 IveamuttoCr MDP

Grss domestc inveslmendGDP 36.6 15.3 9.2 5.4 5.7

Export orgoods and nsIlGDP 24A 21.0 17.0 14.2 1L8
GrossdomesticsavingsiGDP 22.6 6.1 7.5 1.8 1.3
GrossnationalsawingsIGDP 18.8 -1.0 42 4.3 4.7 -,

CurrentaccountbaIanceFGDP -16.9 -19.2 -7.4 -2.0 -1.3

InterestpaymenblGDP 26 2.9 0.9 0.5 0.9
Tobl debUGDP 34.0 53.9 69.7 73.0 77.5 a
Toaldeblexprl - 1328 379.3 457.5 518.0 596.0 7 U U c 31 u U

GDP PRODUCTION

insfGDP 1985
1980 1991 1992 1993 Shwrsa G1D bysadcrj%)
Agdculture 42.6 36.7 37.5 38.8 36.5
lrdusty 22.7 20.9 16.6 17.9 17.9
Manufacturing 3.7 7.1 6.7 6.5 6.5
services 34.8 423 460 43.4 436
198085 1985-93 1991 1992 1993
(ave-go annuargmwh
Agrcultue 1.6 - .. - 0.7
Industry -4.8 .. - 1.6
Manudacturing -.. _ _ - _ -I
Serwices -7.7 . .. .. 2.0 o as a s In 92 n3
GOP -4.1 0.8 2.5 -6.5 IA _ A____
___ ___ ___ ___ ___ __

GOP:EXPENDITURE
(%oFGDP) 1980 1985 1991 1992 1993 Grov|roosof0G10and
GDP
Privatconsunption 67.1 78.8 77.9 81.2 82.1
Genral government consumption 10.3 15.0 14.6 17.1 16.6 30
Grss domestic ieutnent 366 15.3 9.2 5.4 5.7 20a
Exportsofgoodsandnfs 24.4 21.0 17.0 14.2 12Z. |\
Importsof goods arnd
nfs 3E.5 30.1 18.7 17.8 17.3

(-ae annuwl gmwhJ) 198045 198S-93 1991 1992 1993 | ' - - -

Privateconsunption 0.3 .. - - -
General government consumption 1. .. .. -a.
_.
Gross donesticinveslnent -27.1 -10.1 -25.8 -47.7 35.4 40
Expofts of goodsanidrit 80 -1.3 -Z6 -14.3 18.6
Imports of goods and nfs -2.0 -7.0 -8.9 -1.6 9.0 |
Gross onnalprodLKt -6.3 1.0 2.0 -6.5 1A4 -GO -aO-rAc
Growsnatiornl income -4.4 0-2 3.2 -6.1 -3.9

PRICES and GOVERNMENTFINANCE

1980 1985 1991 1992 1993 Chigeo fGI'defltearnd CPI)
Domestcprices 1
(%dung.) I
Corsunerprcks 10.3 -0.9 -7.8 -4.5 ..
Wholesal prices .. .. - .. .3

ImplkitGDP deflator 14. -1.9 -5.1 1.1 -0.1 I

Govenment
finance
of GOP)
Current budgetbalance .. .. -Z6 -4.4 -4.6 -- eCad -CiP
Overal swpkdelidt .. .. -8.4 -8.5 4.6 _

135
Niger
POVERTYand SOCIAL
(annualgrowthmt.:) 198045 1985-93 Devlapjmntdlmiondi
Population 3.6 3.2 Lf qmpflncy
Laborforce 2.3 25
mostrucunt mthatu
(mm)
Povertylevel: heedount indexc
(1 of populbon) . GNP Gross
Lifeexpectancyat birth 46.1 per
Inftnt mortaitry artousend gmbfe hs) 123.1 eapin
Child mahutfiin (% ofXchldunder 5) 49.4
Accen to safe water (%of pqpustion) 59.0
Ener consumptionper capita (Ihgolequival 39.3
lleracy I% oftpulabon age 15*) 71.6
Gross prinary enroment p of scool-age populaion) 29.0

TRADE
(mEosU1) 1980 1935 1991 1992 1993 Export
mad kuportlusts ful. US$3
Tolalexports (fob) - 251 25B 265 236 4Se
Othermetals . 214 199 190 160 sea
rLaz. - . -. .. 5
Mianufctures -- - -- -. .

Total imports(cli) .. 354 366 337 305 256

Food Si9 48 23 23 2-1
Fuelandenergy _ 28 25 28 25 ISO
Capitalgoods - - - 109 8s8 0
Exot prc ide (1987-1) .. 67 67 67 s-
Importprice index(1987-100) -. 107 107 -s2
Tems of ade (1987=100) .-. 62 62 -
Opennessof ecoamy (adWGDP.%) 63 51 36 32 30 OESms *m

BALANCEof PAYMNTS
7Su i9N 19815 1991 1992 1993 Cunei.accountbalmccsonDPndJ(s)
Expo-ts
of goods andnli; 617 298 341 315 282 I0 a VI I
Import of goodsand nfs
Resource balance
etfacdtrincone
956
-340
-33
473
-175
-42
436
-95
-40
418
-03
-4
379
-97
-33 |
K rwlrJT T
Not currerdtransfers -57 -59 -38 90 101
Curent accountbalance -e
Beforeoffiial aers -429 -276 -172 .47 -8a
Afterofficialtransfers -276 -64 -15 90 106 a
Long--ten capital ilow 224 49 -70 -4 -33
Totalotheritens (net) S8 18 89 -3 -82 -
Changesin netresaens -3 -4 -12 9 f12

Resv exuding gold f(mil.US1) 126 136 203 225 192

Reservesinding gold (tnl. US:85 132 140 207 229 196
Offial exchangerate ocaitSS) 211.3 449.3 282.1 2647 286.5

EXTRNALDEBT
1930 1985 1991 1992 1993 Stucomnazt db(%)
Longtrm deobexports 105.8 323.7 420.6 474.4 566.5
IMFdltle,e rls Z25 24.6 20.7 18fi 182
Short-termdebexport 24.5 31.1 16.2 25.0 13.4 75
ToW eO kMVf 21t7 33-8 30-1 15.0 24.8 | s ! |ons
Long-WmdebUGDP 27.1 71.6 64.1 66.8 73.4 s OCR1
IMFcedltGDP 0.6 5.4 3.2 2.6 2.4
Short4enndebt/GDP 6.3 6.9 2.5 3.5 1.7
Long-tanmdebtm
rffos
Privateo a dong m - 44.3 19.3 15.1 131 12.1
Publiciand pubEcdyguaranteed o
87 a so In0 92 2z
Pieate m 18.6 1635 0.1 0.1 01 1 -
Officialcreditorslong-term 37.1 64.3 84.8 86.8 87.3

Thedevelopmentdiamondsbowsa lvel of developmentinthe countrycomparedwilh its incomegroup avwage.

136
 Nigeria
Nig alia is the largest coumtry in sub-Saharan
Africa, containing some 20 percent of the
region's population. Nigeria's wealth of nauL-
ral resources-icluding major oil and gas deposits,
vibrant private srctor, and large labor force endow her
with considerable economic potential When Nigeria
became independent in 1960, it inherited institutions
and processes that have evolved into robust profes-
sional associations, an inquisitive press' a cultural
commitment to freedom, and a competent bench and
bar. Bitt it also inherited ethnic and regional tensions
that reflected the colonial design of its borders and
consitmuencies.In recent years Nigeria has undergone
a series of attempts toward civilian leadership. The
transition was supposed to oe completedby the end of
1992. A presidential election was held in June 1993,
but the result was voided by the then military govern-
ment. An interim government headed by a civiian
assumed power in August but was replaced by a new
military governmentin November. As of June 1994the
political outlook remains clouded. The election time-
table has been suspended indefinitely; all elected
state and local officials have been dismissed; and
political parties have been dissolved. The new cabi-
net draws from a cross-section of ethnic and political
groups. A constitutional conference has been con-
vened.
Petroleum production provides 25 percent of Nige-
ra's GDP, over 90 percent of foreign exchange re-
ceipts, and 70 percent of budgety revenues. Nigeria
also has vast reserves of natural gas, which are only
beginnmg to be exploited. Agriculture offers employ-
ment for two-thirds of the labor force and accountsfor
35 percnt of GDP. Ninetypercentof the sector's output
comes from the crop sector, which is largely based on
small-scalefarming. Yams, cassava, and grains are the
main food crops; cocoa, oil palm, rubber, groundnuts,
and cotton are the principal cash crops. Productivityis
low, but holds considerable scope for improvement
tirough irrigation,improvedteclmology,and expansion
of cultivatedareas. Manufacturingaccountsfor less than
10 percent of GDP. The service sector, dominted. by
wholesale and retail trade, accounts for the remaining
30 percent of GDP.
137
The oil boomof the 1970sfinancedmassiveincreases
in public investment. These were designed to increase
the economy's productive capacity and human capital
and to heal the wounds of the civil war that ravagedthe
country in the late 1960s. But many of the investments
were undertaken without sufficient attention to their
economicviability. In addition,the shift in the terms of
trade and the fiscal expansion raised the prices of
non-tradablesand underminedNigeria's country's non-
oil export base in cocoa, groun:nuts, and cotton. When
oil revenuesdecreased as the oil market weakenedand
internationalinterest rates rose in the early 1980s, the
govermmentincreased its borrowing and expenditures.
Foreign debt accumulated,including sizable arrears on
trade payments. lnlate 1983anew militarygovernment
imposed fiscal austerity, characterized by across-the-
board budget cuts and adminstative restrictions on
imports and on foreign exchange The austerity meas-
ures reduced domestic and extemal imbalances, but
failed to address the economy's structural weaknesses,
which included a legacy of sustaned agricultural de-
cline, an uncompetitive,import-dependentmanufactur-
ing sector, and a cumbersome regulatory famework.
Uneven implementationnotwithstanding,the measures
exacteda heavy economictoll. They alsoproved politi-
cally unsusinable.
Structural Adjustment Program
The govrnment that came to power in mid-1985 de-
clared its intention to move from "austerity alone to
austerity with structural adjustment". With a further
collapse in oil prices adding urgency, in 1986 dte
governmentadopteda far-reachingreformprogram that
combinedexchangerate and trade policy reforms aimed
at revitalizing the non-oil economy, with stabilization
policies designedto restore balance of payments equ-
librium and price stabilit. The adjustment program
emphasizeddownsizingthe public sector and improving
the efficiency of publiz asset management.Import li-
censesandthe agricltural marketingboards were elimi-
nated, price controls were lifted, and the deregulation
of the banilng system initiated. The srucuring of
domesticproduction and the liberalizationof the ince-
 ANigeria
tive regime led to a resurgence of agriculture and
manuficturing.
Although some reforms were sustained during the
1986-92period, others were implementedunevenly.All
suffered from the vagaries of an increasinglyerratic
macroeconomiccnvironment.Successivecyclesof con-
tractionaryand expansionarypolicies-with their atten-
dant effect on prices and activity levels-rocked the
economy.From late 1986to end-1987.macroeconomic
policy was reasonablytight. Butrespondingto criticism
that the adjustment program was too harsh, it trned
expansionaryin 1988-only to reverseitself a yearlater
when the inflationary consequences of more liberal
policies became painfully evidenL In 1990 increased
international oil pnces associated with the Gulf crisis
fueled higher spending, whichcontinuedafter world oil
prices had subsequently collapsed. Mirroring earlier
periods, Nigeriabuiltup large fiscal deficitsover 1990-
92, which, by 1992, amounted to 10 percent of GDP.
Its 1992GNP per capita is estimatedat $320. This trend
continued in 1993, with the fiscal deficit increasing to
an estimated11 4percent Driven by the needto finance
the fiscal deficit, monetary policy also vacillated, and
became increasinglyexpansionary-and inflationary-
as the deficit went out of control The money supply
increasedby 57 percent during 1992 and 68 percent in
1993.
Exchange-ratereform was at the core of the struc-
turaladjustmentprogram. Althoughthespecificmodali-
ties and the effectivenessof implementationvaried over
the adjustment period, the foreign exchange reform
facilitateda cumulativedepreciationin the real effective
exchange rate of about 80 percent between September
1986and the end of 1992.The large monetaryfinancing
of the fiscal deficit in the last three years led to rapid
depreciation of the naira. With foreign exchange re-
serves nearly depletedin early 1993, Nigeria's authori-
ties switched back to a nonprice system of foreign
exchange allocations, and the premium on free-market
sales rose to 100 percent above the official exchange
rate. The 1994 budget formalized this approach to
foreignexchangeallocationsandprohibitedfree-market
transactions. Although initial trade reforms reduced
the cascading protection that had encouraged assem-
bly operations based on imported inputs, some of the
program's first-round tariff reductions-and the
pruning of the import prohibition list-were later
rolled back.
The government encouragedprivate sector develop-
ment by simplifying the regulatory environment, re-
ducing limitations on foreign mvestment, reducing
corporate tax rates, and introducinga debt-equitycon-
version program. Yet private-sector developmentstill
faces cumbersomeregulations and approval processes
that raise the cost of doing business in Nigeria. Ongo-
138
ing difficultieswith the managementof public utilities
have made the provision of critical infrastructureserv-
ices such as power and telecommunicationserratic.
hindering private-sector activity. Most critical, Nige-
ria's unstable macroeconomicand exchange rate poli-
cies and political uncertainty increasinglydiscouraged
investors.
-Much-neededfinancial sector and monetary policy
reform began under the adjustmentprogram, but inter-
eastrates and spreads that were officially deregulated
were periodically subjected to moral suasion by the
authorities in the face of upward pressure on interest
rates. They have been re-regulated under the 1994
budget. Fmancidalsector reforms includednew legisla-
tion, whichembracedinternationalstandards for evalu-
ating the health of the banking system, and there has
beenprogress in meetingthe 1991bankingact's stricter
supervisionand provisioningreqnirements Within the
bankingsystem, new enats aiming to secure foreign
exchange allocations mushroomed, and serious finan-
cial distress has emergedin establishedfinancial insti-
tutions; classified loans now account for one third of
total bank credit. While the central bank and the Na-
tional Deposit Insurance Corporation have begun to
address the difficult task of restructuring banks with
non-performingloans, the eventualdispositionof some
of these banks and sourcesof financing for the restruc-
turings reman unclear. Meanwhile,the federal govern-
menthas begunto divest its equity participationin most
commercialand merchantbanks through public offers.
There has been a prolihferationof sectoral banks and
other nonbank financial nstitutionsthat fall outside the
purview of Central Bank of Nigeria supervision and
regulation.
The adjustmentprogram includedpublic enterprise
reform. Some 58 small enterprises have been privat-
ized-mostly through public offers, or deferred public
offers-on the Nigerian Stock Exchange.Although this
is an achievement,the planned privatization of several
large enterprises has bcen delayed. Even less success
has beenachievedwith the commercializationprogram.
Eleven parastatals were slated for full commercializa-
tion, and in some cases, performancecontracts Cmclud-
ing a ten-year corporate plan) have been signed. Only
limited progress has been made with the partial com-
m ion of the Nigerian Electric Power Author-
ity, and the commercializationof the Nigeria National
PetroleumCorporationand the Nigeria Telecommuni-
caions Limited. Institutim-building effort and the
creation of appropriate regulatory fameworks have
staUledwhile service delivery remains intermittent,
raising operating costs for public- and private-sector
users.
To improve publc procedures for expenditure and
budgetaryplaning, the adjustmentprogm instued
 Nigeria
a rolling plan process that could not compensate for
deep-rooted weanesses in public expendituremanage-
ment. For example the temporary revenue windfall
accruing from the jump in intrnational oil prices in
1990led to the re-emergenceof large-scalegovernment
spending through "dedication accounts" and other de-
vices outsidethe purviewof the statutory budgetaryand
accounting framework. Increased off-budget spending
and continued financing of nonviable investmentpro-
jects have been major contnbutors to the erosion of
fiscal and monetary discipline. Nor were these expen-
ditures directed toward the provision of basic social
services or infiastructure projects designed to build
human and physical capabilityand to meet the needsof
a majority of die people. During the pre-adjustment
period spending, in real terms, on the social sectors had
contracted sharply; the lower spending levels were
manaied throughout the adjustmentprogram.
Despite difficultics in implementation and over-
spending, the policies incorporated in the structural
adjustment program-particularly the large deprecia-
tion of the real effective exchange rate-produced re-
sults. In contrast to an average declineof 2 to 3 percent
ayear between 1980and 1986,Nigeria's real GDPgrew
about 5 percent a year between 1986and 1992,primar-
ily reflecting a recovery in agriculture and maifactur-
mg. However, in response to the general worseningin
economic and financial policies since 1991, economic
growth slowed for the third consecutive year, falling
below 3 percent in 1993. Consistent with Nigeria's
comparative advantage, the agricultural sector experi-
enced a long-awaited comeback. Some of Nigeria's
earlier anti-export bias in manufactung dsappeared
under the adjustmentprogram, and producers switched
from imported to local inputs. Particularly in agro-
processing and textile manufacturing, there is now
greater use of localy produced matLials. The assem-
bly-based manufacting sector, which depends on
imported inputs and had been shielded from competi-
don and market signals, contractedduring the program
period. Following a shift in relative prices in favor of
the nural sector, the production oftraditinal food crops
and cash-crops increased, and agricultura output grew
at a yearly average rate of 4 percent. Today Nigeria
spends one fifth of what it spent in 1986 on food
imports.
Since 1986 the rate of infladon has fluctuated
widely, reflecting variations in the stance of macro-
economicpolicy. In 1986, despite a 70 percent depre-
ciation of the exchange rate, satisfactory monetary
performance kept inflation to 16 percent. And while
inflation decelerated in 1987, the expansionary 1988
budget boosted prices by 55 percent. Inflation rates
moderated once again, as tight fiscal and monetay
policies were implemented in 1989, actaly falling
139
below7 percent in 1990..Recentexpansionaryfisl and
monetary policies caused inflationto rebound. By end-
1992 it was approaching50 percent and exceededthat
level in 1993 and 1994.
Although the adjustmentprogram revived Nigeria's
economicgrowth, that growthcould not compensatefor
the huge drop in purchasmg power assocated with the
collapse of internationaloil prices. With GDP growing
at 5 percent per year and population at 3 percent, per
capita income grew at 2 percent At that rate, it would
havetaken about 30 years for Nigeria to recoverits pe
living standard-achieved in 1981-from its low point
at the start of the adjustmentprogram. In real per capita
terms, consumptionand income are now Littlehigher
than they were in the early 1970s,before the oil boom.
The urban middle class-primarily civil servants and
workers in import-substitutingindustries-bore the cost
of adjusting to the downurn in oil markers and the
collapse of foreign exchange earnings. Small farmers
were the primary beneficiariesof the adjustment.
Medium-Tern Prospects
Assuming a continuationof current policics, including
the administrativeallocationof foreignexchange, inter-
est rate controls, high fiscal deficits, and accumulion
of external paymentarears, Nigeria's compeiiveness
will be further eroded and foreigne ge availability
will decline. The combined impact of the CFA franc
devaluation and the regulation of foreign exchange
trading could be to reduce officially recorded nonoil
exports substanially. Output growth of key sectors,
especially agriculture and export-oriented sectors, is
likely to drop, and real nonoil GDP growth to stgnate.
The adoption of an alternatepolicy mix aimed at fiuan-
cial stabilizationand sustinable economicgrowth could
have a large positiveimpacton economicefficiencyand
could retun real nonoil growth to the 5 percent range.
Experience suggests that the oil sector, which wil
continue to represent 90 percent of Nigera's exports,
is likely to remain insulatedfrom these developments.
In the absence of lasting depressed oil prices or civil
strife, medium-termgrowthin oil production (mcluding
condensates)is projectedto avenage3.3 percent a yea
through 1997, reflecting increases in oil sector invest-
ment asociated with new joint venture agreements
signed in early 1991. Long-run oil sector growth wil
likely be somewhat slower, averaging 2 percent over
1994-2000.
The quality of economicmanagement has progres-
sively deterioratedsince 1990, resulting in a slowdown
in growth. Fiscal and balance of paymentsdeficits have
increased and inflationhas accelerated.Trade andpce
distortions that had been partally rectfied in the late
1980s have re-emerged. Exchange rates and interest
 Nigeria
rates are nowset administratively;they are currentlyfar
from market-clearinglevels.
Poverty and Social Indicators
The impact of economicmismanagementand negative
external shocksreducedper capitaincome from $1,000
in 1980 to $320 in 1992, significantly increasing the
incidenceof poverty. In real per capita terms, consump-
tion and income are now no higher than they were in
the early 1970s,prior to the onset of the oil boom. Basic
social indicators place Nigeria among the 20 poorest
countries worldwide. Infant mortality rates are around
85 per 1,000 live births; half of all children aged2 to 5
show signs of peristent malnutrition; and only about
two-thirds of the relevant age group are enrolled in
primary schools-down from 90 percent in the early
1980s. Populationis growing at 2.9 percent per year;
GDP needs to grow by almost 4 percent every year
simply to keep consumptionin real per capita terms
from declining.
Comprehensiveand far-sighted policies for educa-
tion, health, and populationhave been adopted. These
policies accord preference foi the promotionof health
and educaion services at the primary over the tertiary
level; provide access to umivrsal primary education
free of charge; encourage adoption of cost recovery
measures in health care; and aim to improve the health
of women and childrenthrough birth spacing Without
a commensurate maea in budgetary provisions, no-
tably for recurrent over capital expenditures, and,
within recurrentbudgets,for suppliesand maintenance,
funding will remain a critical constraint for reversing
the decline in enrollments, quality of services, and
utilization rates.
While some womenplay a dynamicrole in political
and economic life in parts of the country, women
generally tend to be seriously disadvantaged,partica-
larly in rural areas Legal, cultural, and socialbarriers
limit their accessto land, credit, farminginputs, tech-
nology, and supportservices andconstraintheir earning
capacity. They spend long hours on low output, physi-
cally demandingactivitiessuch as water and fuel wood
transport, manual crop processing, and headloadingof
farm produce, in addition to their responsibilitiesfor
householdand familymaintenancetasks. They are more
likely than men to be illiterate and poorly nourished,
and women face extreme health risks because of fre-
quent pregnanciesstarting at a young age.
Environment
Like most of sub-SaharanAfrica, Nigeria's key envi-
ronmental problems are soil degradation, water con-
tamnation, and deforestaution.Unaddressed,these and
140
other environmentalproblemscould cost the economy
an estimated$5 billiona year over the long term. Many
of the problems arc directly related to rapid population
growth, which has been reducing the viability of the
natural resource base of the country. Traditionalbush-
fallow farming systems are land intensivebut sustain-
able and compatiblewith the environment-as long as
populationremainsincheckLButwidhrisingpopulation,
farmers cultivate exhausted soils, and their incomes
decline. The worseningof poverty engenders demand
for more childrento help the familysurvive on the land,
whichin turn puts more pressure on the environment-
and so on, in a vicious circle. Nigeria is the world's
largest flarer of natnral gas.
The govenment of Nigeria has taken several steps
toward redressing the country's many environmcntal
problems. A national environmental policy has been
formulatedand state-levelenvironmentalagencieshave
been set up to coordinate enviromnental activities.
Legislationhas been enacted regulatingeffluent limita-
tion and industrial wastes and requiring environmental
impactassessments.Govermmentis also taldng steps to
implementa broad sectoralprogram for envirnmenal
management,includingforestry, water and sanitation,
gas flaring reduction, populationand health, industrial
and hazardous waste management, and coastal zone
management.
The External Environment
The pressure on the external balance has been exacer-
bated by the recent downtum in world oil prices.
Meanwhile,Nigeria's regionalcompetitivenessfor non-
oil exports is declining, reflecting domestic price in-
creasesin excessof that of trading partners, the impact
of the CFA devaluationin neighboringcountries, and
the re-regulationof the informalforeignexchangemar-
keL Another key parameterwith domesticand external
implicationsfor Nigeria's economicdevelopmentover
the mediumterm is its external debt overhang.
The Nigerian economy is highly exposed to price
fluctuationsin world oil markets. Each $1 per barrel
change in oil prices is worth $650 million at current
export volumes. The market outlook is for oil prices to
decline slightly in real terms in 1994 and to remain
unchangedover the mediumterm, with any increase in
global demand being more than offset by increases in
supplies from OPEC and non-OPEC sources. Should
the UN embargo on Iraqi oil exports be lifted, the
increase in world production would generate consider-
iable
downwardpressure on prices. Nigeria's efforts to
increase its productivecapacityto 2.5 million barrels a
day by the middle of the decade appear unccrtain;
favorable new terms have been negotiated with jomt
venure companiesbut governmentbudgetarycats could
 Nigeria

restrict the level of new investments. Direct foreign
investment, most of which is oil sector related, is
expected to remain stable over the medium term. Gov-
ernment efforts to diversify Nigeria's energy exports,
notably trough a liquified nantral gas project, remain
under active discussionwith potential foreigninvestors.
Balance of Payments and External Debt
Throughout the adjustment period Nigeria ran a large
trade surplus, but-with the exceptionof 1990-a cur-
rem account deficit, reflecting its large payments for
interest and other services. Nigeria's net transfer posi-
tion was persistently negative throughout this period,
averaging 5percentofCGDPbetween1986-92.Nigeria's
stock of public and publicly guaranteed long-term ex-
temnaldebt increased from $19.2 billion at end-1985 to
around $29.8 billion by end-1993. This 50 percent
increase occurred mostly between 1985 and 1987 and
was principally due to cross-currency revaluations.
which boosted the value of non-dollar denominated
debt, and the reconciliation and recognition as public
debt of a large stock of trade arrears from the 198243
period. Nigeria has signed and honored tree resched-
uling agreements with the Paris Club since 1986. But
substantial new arrears have accumulated with the ex-
piration of the third agreement at end-March 1992.
Nigeria's total arrears at the end of 1993 may have
exceeded $6 billion, largely to Paris Club creditors.
Notwithstandingthe 1992 debt and debt service reduc-
tion agreement with the commercial banks, Nigerias
total debt service burden, two-tbirds of which is due to
official creditors, will remain largely unchanged over
1994-97.

141
 Nigeria
Population
mid-1992(mibions) 101.. Incomegroup:Low
GNPper capita1992(US$ 3o Indebtedness
lvel: Swar.

* KEYRATlOS
*IwO. 19115 1# 1992 t993 ImnlGOP to tb O;)
Glmssdomestciiwesr ISVGDP 2Z.2 9.0 16.3 182
Exprts ofgoodsandfsI/GDP - 29.0 15.1 35.9 39.1
Gms domesticsavingsGDP 3Z3 12.5 22 22.7
Gross NiDnd savknuGDP -27.0 8.7 15.6 14.3 . 10
to

Ctxret account balancfIGDP 4.8 -0.2 -2.9 -5.0

Intearest
paymentaGoP 0.6 1.8 8.5 5.4
TObddetIGDP 9.6 24.1 100.9 101.1 .e
Totaldebtlaxports 33.0 148.5- 271.6 241A .7 - - 9O 92 t3

GDP: PRODUCTION
(%oTGCP)l int90s196S 101 1992 1993 Shm sGDnP bySatarSI
Agiculur 27.4. 37.3 35.8 38.5
hIdustry 40.3 29-2 37B8 38.2
Manfachting -L0 8.7 _. -
Services - 32.3 33.5 25.5 25.3
so
IS99435 19U53 1eX 1992 19931 C _
(averge annua _gA1A)
Agricuht -1.0 4.5 4.0 4.0
Idusty -5.6 42 4.3 2.0
ManuachrIg -42 - .. .. a
a.
S-nices -0.1 6.3 .3 4.1 _7 - - so in 2 9
0fam *-rn austi
SUP -3.0 5.1 5.1 4.1

GOP. EXPENDrTURE
-91 t9B 199 - 199Z. - 1993 OWU OGEndGDP(%)
.<6ef GDP)
Private 55A 73.8 64.8 70.9
Genral governme conumpon
nt 11.9 13.5 126 6.4 _
Grossdomestic vestnelt 222 90 16.3 1a82
ExportsoFpgodsandnfs 29.0 16.1 35.9 39.1 .. S
Importsof goods andnf . 19.0 12.4 29.6 34.6* -

-fimge .nI-mwth) nw-us5 u911- t491 1992 ins/

Priate consumpion -25 3.0 5.5 16.0 * -.
G!nal govemment conmption 4.1 -1.4 16.5 49.7 -e
uGmssdomesbc iwvesbnt
Expotsof goodsandnbs
-19.3
-7.5
3.6
4.5
7.8
3.7
2.0 _Zs I
1.3
Importsof goodsandnf -12.6 -29 12-2 1.3 ;.
Gmuss natonalproduct -4.0 6.4 8.2 4.1 .. -cm -eGDP
Gross naftonal icme -8.2 4.1 0.8 1.9 .. | I

PRItC:ES
and GOVERNMENT
FINANCE
-1980 1965 191t- 1992 1993 |Ctonk aVGDPd
Sds nrndCPI
(%)
Domestcprces
Consumer
prkes 10.0 7.4 13.0 44.6 572 30
lWabsMeepdres ' - ' - - -- - 2
Implict GOP defltor - 14.1 4& 1 12.9 50.4 .t , I
G0Wl§hHeit gIt W
N e
go t 2 a
X%ofGDF7
Cunsntbudget babo 13.4 4.4 4-1 2.0 _ |_n<. c
Ov0ral supluleflidt -0.3 -2.0 -a5 -8.4 . I I

142
 Nigeria
POVERTYand SOCIAL
(annualgcwth mbasJ 193645 136S-93 Deebpmntanr
Population 3.2 2.9 U pecaicy
Laborlbrca 2.8 28
mo tnmentetinmatemr).
Povertylevel: heedcouniIndex(5 ofpopulation) .. GNP Owes
Libeepeancyat birth 51.6
Infant morblity(perthousamd Km bs) 84.0 aKPISnt
Child mainubton (N ofchku unde 5) 35.7 . Y i
AMsos to eesewaer (N of popultn) 48.0
Energycnsumpton per owita g oDiequhmleno 127.7
Illiteracy(X of populationag I" 49.3
Gross prhnaryenrolment (5 of sdco-oa popublIn) 71.0

TRADE
(slAms 115$) 1980 19116 1S31 1192 19U3 EqMmtandImportinele (mil. ISS)
Total exports (fob) 25,956 12.U8 12,127 12,471 .. usm
Fuel 24,942 12,203 11,655 12.026 . 1
Cocoa W06 310 183 154
Manufactrms .. len
Total Imports(cf)
Food
16,312 9.165 8,727 8.796 r L e
I

F
.. .. .. .. ..

Fuel and energy .. .. .. .. .. 1.

capital goods 5.464 3.199 3.187
Export pri index (1987=100) 203 151 117 118 n*- . L _ ___ __| * _
ImportprlceIndex
fl987100) 81 77 119 109 .. - . - go 112 a3
TermsofbWaft (1tW7=700J 250 196 911 O1.0 _ _
Opennessof economnyf;adeG;DP.%) 48 29 . G65 74E..fl
BALANCE of PAYMEIJS-
(@mionzs $) s1980 loss 1n1 1J92 19uh CtrntwaccnbrnceeoGPrafof%)
Exprt of goodsand nfs 27,006 13.032 1Z324 12,657 - e
Imnportof goodsand nts 17,648 10,070 10,376 11,398 ..
Resourcebalanc 9,358 2,962 1.948 1259 - 2
Net1dctor income -4,472 -2Z916 -2,69 -2.833 -
Netaxent ransfers -409 -244 27 29 - D.
Current accountbalance -2
Beforeofficial tansfers 4,477 -198 -994 -1.545 .. - -
Alter offiCialtransfrs 4,496 -180 -964 -1.545
Long-termcapital inflow -273 -787 -1,960 -5,372.
Total otheriens (net) 322 1,663 2974 3.899 *- - .
Changesin net rserves -4,545 -se -s0 3,018 _

R nases 11$)
exclJing gold (mfltD. 10.235 1.667 4,435 967 1.372
Rn weas Inuding gold (miL USS1) 10.640 1.892 4,678 1.196 1,640
0' dalmwexage rate tozcafSS) 0.5 0.9 9.9 17.3 22.1

EXTERNALDEBT
1900 1985 1991 1992 1993
Long-erm debVext 19.9 110.6 284.5 224.5 ..
IMF Faedlteots 0.0 0.0 0.0 0.0
Shod-termdebt/exports 13.1 -37.9 7.2 la _ . - .&9 .
Total debt serlcelexpots 4.3 34.2 26.6 29.4 _.
GDPffobs . _ pm
Long-termdebt#GDP 5.8 18.0 98.3 94. _
IMF rediUGDP - 0.0 0.0 0.0 0.0 * _
Short-termdebUGOP 3.8 6.2 2.7 7.1 _2-
Long-teradebaffbt e. --
Privatenongua 20A 9.7 1.0 1.2 11I
Pubc and publidy guranteed *y-m o m u3
Prao eoredntorslong4em 60.9 . 75.0 41.5 34.6 33.7
Official credorullaong-term 18.7 15.3 57.1 643 65.1

- The develpment diamnd shows a level of developen in th country oomperedwith Is Incomegrup averag.

143
 Sao Tome and Principe
T he DemocraticRepublicof S&oTon t and Prin-
cipe consistsoftwo islandsof about l,tOOsquare
kilometersinthe Gulfof Guinea,about 20Dmiles
off the coast of Gabon. Most of its 120,000inhabitants
live on the island of Sao Tome, with an estimatedper
capita GNP of $410 in 1992.The Portuguesesettledthe
islands in the 15th century and developed plantations
based on sugar cane and coffee. In more recent times,
cocoa has been grown in medium and large estates
utlizing labor from other African countries.Consump-
tion needs were met largely by imports. At
independencein 1975 Sao Tom6 and Principe adopted
a centralizedeconomicplanning system. Most agricul-
tural land was nationalized, and a marginal role was
given to market mechanisms.
So Tom6 and Principe's low incomelevel disguises
a relatively good performance with regard to other
social indicators: life expectancy at birth is about 65
years, well above the level in most African countries;
infant mortality rate is about 48 per 1,000; and the basic
literacyrate is high relativeto many low-incomedevel-
oping countries.
A variety of micro climates allows cultivationof a
broad range of tropical crops in Sao Tout and Principe,C
but the soils are mostsuited for cocoaproduction.About
half the cultivated area is in cocoa, which accountsfor
over 70 percent of export earnings. A well-organized
cocoa plantationnetwork and supportinginfrastructure
were inherited from the colonial administration.How-
ever, maintenanceof the plantations dropped precipi-
tously in the late 1960s, when the Portuguesereduced
investments in anticipation of independence. From
10,000 tons at independence,cocoa output declined to
3,90Dtons by 1987, as the governmentdid not replace
the departingPortuguesewith experiencedmanagersor
invest adequately in repair and maintenance.Agricul-
moreproduction, including cocoa, was firther discour-
agedby inappropriateprice and tradepoLicies,including
an overvaluedexchange rate and, in the last few years,
low international cocoa prices.
Sgo Tome and Principe is endowedwith abnLdant
energy reserves and great natural beauty. Only 10
percent of its estimatedhydroelectricpotentialhas been
harnessed. Developmentof tourism is still in its infancy
144
due to poor physicalinfrastucture and inadequatelinks
with the rest of the world; a new airport has bern
completedand upgrading of maritime port facilities is
under way.
In its efforts to diversify the economy, the govern-
ment undertook an ambitious public investment pro-
gram between 1976 and 1983, involving substanial
investmentsin construction, beverages, poultry, fish-
ing, and transort. These investmentsdid not make a
significantcontnbution to GDP growth and created an
unsusainabledebt-servic' iurden. In spite of economic
measuresaimedat reformingthe incentivesystem, GDP
per capita declined by an estimated 30 percent in real
terms between 1984 and 1987. Growing losses by the
cocoaplantationsand the majorityof thenicltual
public enterprises,combinedwith iacreasing debt serv-
ice obligations resulted in large fiscal deficits. The
current fiscal deficit averaged20 percent of GDP over
1975-86.Includingextenally financedinvestments.the
overallfiscaldeficitreached57 percent ofGDP in 1989.
with more thm two-thirds financed by external re-
sources.
Recert Economic Developments
Faced with fiscal and external imbalances,the govern-
ment broke with its post-independencepolicies and
embarked on a comprehensive struural adjustmet
program in mid-1987. Since the onset of the program,
the governmentof Sio Torn and Principe has taken
important steps toward creating a propitious environ-
ment for private sector development It has moved to
restore macroeconomicequilibrium,includingsubstan-
tial exchange rate devaluations, extensive price and
trade liberalization,and structural reforms in the finan-
cial and agriculturalsectors, and public administtion.
The adoptn of a crawlingpeg system of exchangerate
managementhas ensured more tmely response to dif-
ferential inflationtrends at home and abroad. Monetary
targets have been adhieved and inflation has substan-
tialy dimiished. Widemng fiscal deficits bave been
containedthrough tax increases, including sbarp rises
inthe taxes onpetroleumproductsand electricitytariffs.
Nominal interest rates have increased substantally to
 Sao Tomd and Principe
positive real levels. Significantprogress has also been
made in restructuringbanking system, whichwas domi-
nated by the national developmentbank. The govern-
ment has favored investments with higher economic
returns; it is rehabilitating economic and social infra-
structure. It has also restored the profitability of the
major cocoa estates through privatization measures,
encouraged diversification of agricultural production
and exports,and undertakenmajor reforms in the public
enterprise sector and public administration.
Since the structural adjustment program started in
mid-1987, the government has adjusted the exchange
rate, resulting in a cumulative depreciation in local
currncy terms of about 835 percent through December
1993, nearly 89 percent in real terms. This devaluation
made the more efficient cocoa estates profitable, not-
withstandingthe fall in world cocoa prices-about 50
percent over the period of adjustment.Pursuit of a more
realistic exchange rate policy has reduced the gap
between the officialand the parallel exchangeratesfrom
65 percent at end-1987 to 1 percent at end-1992.During
1993, however, implementationof the reforms slowed
down, and agap betweenthe officialandparallel market
exchange rates re-emerged. Althoughthe gap narowed
in the latter part of the year, it remains in the order of
20 percent, owing mainly to the government'sdelinling
the officialand parallel marketrates in the fce of delays
in donor disbursementsearlier in the year. The authon-
ties had taken a cautious attitude toward exchangerate
adjustmentbut have movedto take correctivemeasures,
including allowing exchange houses to operate and
introducing financialreforms to allow private banis to
Operateprofitably.
Since the begnning of the adjustmentprogram, th
govermmenthas progressivelydismantledits system of
price controls and eliminated all subsidies on imported
foodstuffs and petroleum products. The private sector
has taken an increasing role in exporting and importing
all but petroleum products since the monopoly of the
state trading company was abolished. Export proce-
dures have been greatly simplified, and the automatic
import licensing system cunrently being implemented,
no longer restricts access to foreign exchange. The
cocoa export tax has been reducedto 8 percent. Efforts
are under way to set up a market-basedmechanismto
move the distibution of food aid to the private sector.
Satisfactoryprogress has been achievedin the fiscal
area. The current fiscal deficit (excludinginterest on
external debt) moved from 6.5 percent of GDP in 1987
to a surplus of 4.8 percent of GDP in 1993. The
narrowing of the fiscal deficit was achieved mostly
through adjusting the prices of utilities and petroleum
products, conversion of sales taxes from a specific to
an ad-valorem basis, inclusion of import duties in the
tax base for calculating the consumptiontax, and the
145
strengthening tax administration in the Ministry of
Finance. On the expenditure side, improvementswere
made mainly by reducingbudgetary transfers to paras-
tatas.
As financingof the fiscaldeficit required increased
recourse to bank credit, growth in broad money accel-
erated trough 1992 from an average annual rate of
about 7 percent in 1987to a peakof 31 percent in 1992,
reflccting a rapid expansion of credit. However, in
1993. :he authorities reduced the growth of broad
money to 18 percent, which contributed to reducing
inflation. Since the start of the program in 1987, infla-
tion has declined considerably, from a high of 45
percent in 1988to 22 percent in 1993. Nominalinterest
rates have beenraised since 1991to real positive levels;
they are now some 10 percent in real terms, in sharp
contrast to the negative real levels of the 1980s. The
authorities have also adopteda policy of sterilizing the
r9unterpart finds arising from balance of payments
support, with the exceptionof-food aid.
A decrease in imports during 1993 allowed the
current accountdeficit to be reducedby some 6 percent-
age points, to $19.5 millionfrom $25.8 millionin 1992.
Exports of goods amounted to $6.2 million in 1993,
compared :rith $5.4 million in 1992. Current account
deficits of the balance of payments have been financed
mainly by loans and grants and the overall deficit by
accunulations of arrears, debt relief, grants, and some
reduction in reserves. At $20 million in 1993, the
current account deficit is expected to remain the same
in 1994.
Extenal Debt
External debt outstanding and disbursed, which was
estimated at about $135 millionin 1987, rose to about
$237 million in 1993 Cincludingcapitalization of ar-
rears), the equivalentof approximately594 percent of
GDP. At the end of 1993 medium-and long-term debt
amountedto $209 million, representing 88 percent of
the total, of which $58 million consisted of payments
arrears. Short-term debt represents the remainmg 12
percent amounting to $28 million, which consisted
almost entirely of payments arrears. As a result, the
ratio of scheduleddebt service(beforereschedulingand
refinancing)to exports of goods and nonfactor services
increasedfrom 64 percent in 1988to about 103percent
in 1993.
Medium-Term Prospects
Over the medium term Sao Tome and Principe will
continue to face a difficult economic and financial
situation. The authoritiesintend to acceleratethe pace
of structual reforms during 1994 to bring inflation
 Sdo Tomi and Principe

under control and narrow the current account deficit to
a level that can be financedby grants and concessional
aid. lhe government intends to continue to promote
food crop diversification and export expansion, based
on smaRholderagriculture and appropriate pricing and
marketing polices. Real output is forecastto increaseby
an average of 3.5 percent ayearbetween 1994and 1996,
and then to rise to about 4 to 5 percent a year between
1996 and 1999. Continued contraction of public con-
sumption, improved public sector resource allocation
and investments, along with improvedincentives for the
private sector imply increased private savings and in-
vestments. Private consumptionis projected to increase
by about 2 percent a year over 1993-95.

146
 Sao Tome and Principe
Populaton mi-1992 (mSilions 0.1 Income group: Low
GNP per capita 1992 (UJS$ 410 Indebtednesslevel:Sewem

KEYRAMOS
1900 1985 1991 1992 1993 lnveslnntto OaPrado 1%)

Grss domnestckwesmfenGDP 34.2 37.0 77.6 57.0 72.2 u

ExpoFts orgoodsandnfs/GDP 45.6 26.4 254 24.1 21.7 so
GmssdomestcstnmgstGDP -14.9 -1E1 -25.0 -24.0 -11.0 50
Grossnational
savings/GDP -7.5 -23.6 -32.6 -352 . a

CurentaccountbalanceYGDP 2.3 -60.3 -79.8 -90.7 20

InterestpaymenftsGDP 0.5 3.7 1.4 25 .. 10
Total debUGDP S4.5 171.9 340.0 439.8 ..
Totalderexports 100.8 650.5 1,754.9 1,825.0 .. a
U U - 31 92 -3

GDP: PRODUCTION
(%aGDP) 1900 19S5 1991 1992 1993 Samof GDP byector I%)
Agriclture ... ..
Industry .. .
Manufacturing
Services,,,

1980-85 19S5-93 1991 1992 1993

(swrageannuafgmwth)
Agriculkur .. .. -
Indusbry-
Manufacurng .. .. - .. .. o , .
Services .. .. .. .t .. a3 9D at 92 9
OAdo* * ru&l D35_
GDP -2.4 7.7 51.2 4.5 12i2 1 __ g__dk____ ____y ____ ____

GDP: EXPENDITURE
(%of GDP) 1980 1985 1991 1992 1993 GQrwAtoGoU id GDP(%)
Privat consumption 91.3 80.7 75.4 77.4 68.8 Am
Generalgovemnmentconsumption 23.6 37.4 49.6 46.6 42.2 am
Grossdanesticinvestment 34.2 37.0 77.5 57.0 72.2
Exportsofgoodsandnb 45.6 26.4 25.4 24.1 21.7 2a -0

Importsof goodsandnfs 94.6 81.4 127.9 105.1 104.9

( wvw arwuargmwth) 198045 198S-93 1991 1992 1993 10l /
Privat consumption -44 . . . .5
General governmentconsumption 4.3 .. / \.
..
Grossdomesticmyos t 3.0 25.9 288.9 19.0 31.8 o .
Exportsof goodsand nrf -1.6 7.3 42.2 -81 4.1 ay u 0 n a 23
Importsorgoodsaandnfs -02 3.0 11.9 20 3.0 e
Gross nationalproduct -3.7 7.2 4S.3 3.5 8.9 -ci - GOP
Grss nationalincome 4.6 4.8 31.0 8.1 8.0

PRICES FINANCE
and GOVERNMENT
1980 19W5 1991 1992 1993 CmageofGOPdP
mUorindCPICA)
D0m1c pd5cs 40
(%clwag) 30
Consumerpricas .. .. - - ..
Vliolesala prices .. .. .. ...
ImplicitGOPdeflator 8.3 0.2 -8.7 30.3 10.0
Govermen fnance - U so 2 93
(%of GMD
Cumrentbidgetbabnce .. .. 5Z3 58.3 -7.1 -e-GoPdnc -CF
Overalsurplusddeficit .. .. .. .. .,

147
SaoTome and Principe
POVERTY andSOCIAL
(annualgrmowfates) 19804as 1985-93 DwltIpmnltdlu.oam
Popubtion 1.8 2.4 LUe
expclncy
Labor tome
Life~~mx
at bite ncenatc 67. G
Povertylevet headcountindex(%ofpopufation) GNP / Gn
Lifo expectancyat birUh 67.6 pr-prl
Infantmorality werhond lve bths) 65.4 paera
Chuldmalmntrifion
(5 of childmnunder5) 17.0 \ a
Accessto safewater(54ofOpUSion) 42.0
EnergymOnsumption percapita(kgoRequivalentj 190.1
lPacy (% ofpopublion age 15*) 33.0
Gross prima'y enrolhnent(p of sdool-age popultion) 138.0

TRADE
(milionsUS$) 1980 1985 1991 1992 1993 Espanampknaitlevd. (mlLUSS)
Total exports (tb) . 7 6 5 5 s
Cocoa 16 6 5 4 3 30
Copra .. 1 0 0
fManufacdres * - -- 5-
Totalimports(ci*) 24 25 25 22 20
Food .. 7 5 5 5 Is
Fuelan energy *- .. 4 3 3 1e
Capitalgoods . 9 8 11 7s
Expot priceindec (1987&100 .. 123 114 a
Importpficeindex(1987=100) . .. 117 a g se 9 2 a
Terms of tade (1987=100) .. 105
Opennessof economy tadWGDP,%) 140 108 15, 129 127 OExp sb
BALANCEof PAYMENTS
(MUonsUSs 1980 1985 1991 1992 1993 CurrntacctbaancatoG0PratbA)
Exportsofgoodsandnfs 20 9 9 10 0_ - .
Imporsof goodsandnfs 22 29 46 45 _ 10 90oon 0
Rezource
baance -2 -19 -37 -35 _
20.
Netfaclorincome 2 -2 -3 -5 ..
Netcirrentbnrs 1 0 0 1 3 -c0
Curentaccountbalance -*
Beforeofficialtransfes 1 -21 -40 -39 -
Alteroflicialtransfas 1 -16 -29 -26 .
Long-terncapital mllw 0 8 . 1t ..
Totalotweritems(net) -13 9 . 16 .
Changesinnetrnserves 12 -1 0 0
Memo: _
Reserveexcdudinggold (mil USSJ . .. .. _
Reserves includig gold(mil. USS .. .
Officialexchangerate(FocaWS$) 34.8 44.6 201.8 320.4
ExTERNALDEBT
Eapalaflos 1980 1985 1991 1992 1933 Sbucftmobsraldobt(%)
Lwg-torm
debtfexpart5 100.8 642.2 1.574.4 1,623.1 . . !
IMFcredicrexpots 0.0 0.0 11.3 10.6 ..
Sho-term debtlexports 0.0 8.3 169.2 191.3 . . -
Totaldebt seeeocpSrt 5.1 29.1 18.5 35.6 I .:. I PM
B
GDPnaffos F 0
gPf
Lang-tendebtlGDP 54.5 175.6 305.1 391.2 .. s mat
IMFceditGDP 0.0 0.0 2.2 2.5 .. :
Shaxt-trmdebUGDP 0.0 2.3 32.8 46.1 ..
Long-ter debt ratlas i
Piate nonguaranteedong-temr 0.0 0.0 0.0 0.0 0.0 0.
Publicandpubidy guamrnbed I * * so i a2
Privatecaedilrsilorm 1.3 9.2 0.8 0.7 0.7 1
Offlial creditorslong-term 98.7 91.0 99.2 99.2 99.3

'The deeopmentdiamond
showsa lvel af deveopme in
lthe countrycmpard withits incomegrup average.

148
 Senegal
S enegal is a small semi-arid Saheliannation with
a populationof 7.9 million, predominantlyrural,
and with linited natural resource endowments.
The modermsector includes fishing, phosphates,chemi-
cal industries, manufacturing, and tourism and is
concentratedin Dakar andthe coastalbelt. The economy
is highly vulnerable to climatic vagaries and adverse
.novementsin internationalcommoditymarketsand has
long been dependent on external funding. The popula-
ion growth rate is high, about 3.0 percent a year, and
is only slightly below thc real GDP growth rte of 3.1
percent for the period 1986-1992.Its GNP per capita is
estimated at $770 in 1992. Senegalhas higher levels of
health indicators (icluding infant mortaity, immuniza-
tion rates, and access to health care) tha other
sub-Saharan African countriesbut ranks below average
for school enrollment and life expectancy.
At independence in 1960 Senegal inherited a rela-
tively well-developedeconomy, with adequateproduc-
tive capacity and significant physical and social
infrasucue. Economic performance was satisfactory
until 1966 when Senegal lost the benefit of guaranteed
prices for its main export crop but deteriorated signifi-
cantdybetween 1967 and 1974. From 1974 to 1978, a
fortuitousseries of good rainfaLlsand harvess and high
world prices for commodityexports led to a short-lived
export boom. From 1978to 1981, Senegalexperienced
two major droughts together with a substantial fall in
groundnutpnces, and average real GDP growth fell to
0.8 percent. By 1981 the fiscal and the current account
deficit reached 12.5 and 27.5 percent of GDP respec-
tively. The inflation rate soared to 12 percent.
Macroeconomic balances improved significantly
during the 1980s but could not be sustained and com-
petitivenessand long-termeconomic growth declined.
These problems were not immediatelyapparent: annual
inflation remained under 3 percent, the guaranteed
convertibility of the currency prevented disruptions in
the supply of imports, and there was no parallel market
for foreign exchange. Furthermore, during 1985-90,
the growth of agricultural output combined with the
recovery of the groundnut oil sector helped offset
stagnation in the mining, fishing, and construction
sectors.
149
Recent Economic Performance
Since 1990 Senegal's economy has experienced a seri-
ous contraction in key sectors. In 1991 fish processing
declined in volume terms by 66.4 percent, phosphates
by 24.1 percent, textiles by 36.8 percent, the food
processing industry by 45.8 percent, and groundnut
exports fell 41 percent in value. This deep recessionwas
partly the result of the prolonged lackof competiveness
of the Senegaleseeconomy.Begminngin 1986, the real
exchange rate appreciatedrapidly as the currencies of
trade partners and competitorsdepreciated. At the same
time, the terms of trade were deteriorating. In fiscal
1991, following the implementation of an austerity
program, the budgetaryposiion turned to a surplus of
0-2 percent of GDPl Despite this improvemet, Senegal
remained dependent on external resources, including
debt reief, to cover part of the trasmy's current
operations. In fiscal 1992higher-than-budgetedexpen-
diture on wages and salariesand capitaloutlays retuned
the budget to a deficit of 1 percent of GDP.
In the first half of 1992 and 1993 the fiscal and
balance of paymentspositionsdeterioratedand substan-
tialdomesticandexternalpaymentarrearsaccumulated.
Total accumulatedinternal and external arrearst the
new parity-reached CFAF133.2 billion at the end of
1993.
To halt the deteriorafionof the economic situation,
the authorities adopted several measures to strengthen
their internal adjustment strategy in August 1993, in-
cluding cutting public sector wages and increasing im-
port duties and the price of petroleum products.
Although these measurescontnbuted to reducing imbal-
ances, the magnitudeofthe real exchange rate overvalu-
ation was such that they came too late to restore
competitiveness.
The stock of debt increased considerably,and the net
foreign assets position remained strongly negative. Ihe
inability of firms to compete implied a shrinking tax
base, which led the government to increase its reliance
on exceptional revenue meares-ncluding heavy
taxation of petroleum import-and ad-hoc measures,
such as payments of non-budgetedexport subsidies in
exchange for payments of tax arrears. These measures
 Senegal
had an adverse impactan costs of productionand forced
more finns to close or join the informaleconomy-the
economy was stuck in a low level equilibriumciarac-
terized by a sustainedrecession and under-utilizedca-
pacity.
Senegal's current account deficit, excluding gross
official transfers, was 7.4 percent of GDP in 1992.
Reductions in the external deficit since the mid-1980s
have come mainly from import compression and a
moderateincrease in private savingsdue to a shift frcm
negative to positive real interest rates. Senegal's exter-
nal position also benefited from significantdebt relief.
In January 1994 the pariEyof the CFA franc was
changed from 50 to 100 per French franc. This historic
decision representeda major step towards launching a
broad developmentagendaaimedat acceleratingexport-
led growth in a region that had experienced a serious
economicdecline. Whileit is still too early to assess the
implications of the devaluation on Senegal, tbere are
encouraging signs: inflation was below 30 percent for
the first half of the year, and Senegal's real exchange
rate target has been reached and competitivenessres-
tablished. Price increases of key consumption goods
have been moderate and the social peace maintained.
There has been a qick supply response in tourism,
cement, txtiles, and livestock. Nevertheless, the situ-
ation is still precarious;tax receipts are markedlybelow
expected levels because imports have collapsed. The
fiancial situationis alsoworrisome,with excessliquid-
ity in the banking system while a 10 point spread
between lending and borrowing rates is maintained,
Structural Adjustment
Senegal launched its first adjustment program in 1980
with support by the World Bank, IMF, and other
multilateraland bilateral donors. While little structural
adjustment took place in the first half of the decade,
more substantialstrcturl changesoccunredafter 1985.
However. the adjustmentprograms suffered major set-
backs due to exogenousshocls andpolicy slippage. The
broad objectivesof the adjustmentprograms have been
to re-establisha viable balance of paymentsand public
finace position, promote private investmentand pro-
duction in agriculture and industry, and achieve greater
efficiencyin public sector resource management.More
recently, as the lack of competitivenessof the economy
became more acute, a central focus of the reform effort
has been to restore competitivenessthrough internal
deflationarypolicy. Sectorallevel reforms coveredthe
banking, fnancial, hulmanresources, and trmasportsec-
tors.
Over 1986 and 1987the economywas substantially
liberalzed. Progresswas also made in investmntplan-
ning and programming and population policy. Tax
150
structure and administrationhave been simplified, as
have the regulatory and administrativeprocedures for
setting up private sector investment operations. Nine
out of the 15 banks in Senegalin financial crisis have
been liquidated, restructured, or merged- The central
bank has also undertaken reforms aimed at removing
controls on lending margins and sectoral allocationsof
credit and improvingbank supervision.
Direct subsidies to the public enterprise sector have
beenconsiderbly reduced, and progressmade in elini-
nating arrears between government and public enter-
prises and amongst public enterprises themselves.
Major remaining obstacles included an unsustainably
high wage bill, tbe nationalassembly's unwillingnessto
ratify a new labor code, and a failue to privatize the
groundmutspar2statal. A revisedpricing mechanismfor
linldng domestic petroleum product prices to world
priceswas adopted, but implementedonly once. Exces-
sive new recruitment of civil servants negated the
impactof the voluntarydeparture program and the civil
service size is now greater than before the start of the
program.
The devaluationseems to constitutea powerful im-
pews to reform. The changein relativeprices is of such
magntude that several of te structral reforms appear
now to be easier to implement, since the incntives to
maintainthe pre-evaluation sinaion have largely dis-
appeared. Senegalhas passed the benefitsof the devalu-
ation to rural producers and limited wage increases. In
the long trm, the successof the devaluationwill depend
on the responseof investment,especiallyforeign direct
investment in export industries. The investment re-
sponsewill not materializeunlmssmajor botdenecks to
production and exports are removed. It is still too early
to assess when the necessary structural reforms wDIbe
implemented.There remains resistance to reform, and
it appears that vestedinterests will fight hard to preserve
rent-seekingsimations inherited from the past.
Medium-Term Prospets
The government's objective is to achieve a 6 percent
real GDP anmal growtb rate to raise real per capita
income, reduce poverty levels, and create 20,000 jobs
createdannuallyin the formal sector. Achievmgthe real
growth target over the long term will dependon favor-
able supply responses m agriculture and industry. For
the major exportcrops, as wel as forrainfed foodcrops,
technical, institional, and envirnmental factors still
represent importantobstacles. The physical constraints
to developmentare not amenable to change in a me-
dium-term perspective: improved soil and water re-
source managementcan affect agricultral production
only gradually; mineral and fish resources are already
being exploitedat near-optmum rates. The expansion
 Senegal
of the industrial sector wil depend to a large extenton
the response by domestic and foreign investors to the
industrial mcentives and the success of measures to
reduce coss of production.
ln the longer term, Senegal's developmentpotendal
will depend on improving the domestic business envi-
ronment to make it conducive to private investment,
sustained human resource development to produce a
skilled and productive labor force, and rapid and sus-
tainable improvement in economic competitiveness
through efforts to lower domestic production costs. If
these conditions can be met, Senegal could develop
exports of light manufactures, high-valuedagro-indus-
trialprodc ts, andservices. Therecenttreatytransform-
ing the West African Monetary Union into an economic
and monetaryunion improvesthe prospects for services
and in in Senegalby increasingthe potendal
for intra-regionaltrade in a market of nearly 60 million
people and permitting economiesof scale.
Population and Social Indicators
Susining improvementsin real per capita income wil
hige onthe abity ofthe governmentto dealeffectively
with the difficult problem of rapid population growth.
While the governmenthas recently formulateda popu-
lation policy, demogWhic growth will remain, at least
for the next decade, one of the major constraints to
Senegal's developmentefforts. Senegal's populationat
the tmn of the cenatry will be about 10 million people.
Approximately 125,000 young adults are expected to
join.thelaborforceeveryyear. Rapidpopulationgrowth
also has an adverse impacton the enviroment.
Despite stagnant and decliningreal per capita public
expenditures on educationand health during the 1980s,
education and health indicators have improved. In edu-
151
cation, overall enrolment increased by one-third be-
tween to first and the second half of the 1980s, with
female enrollment growing faster than male. Most re-
ccnt estimatesfor primary educationare that the enroll-
ment ratio is equal to 58 percent while the average
number of pupils per teacher equals 58. In the health
sector, life expectancyincreased from 45 years in 1980
to 47 in 1990, while infant mortality declined from
116.0 per 1,000 live births to 80.6 between 1975 and
1991. However, on almost all these scores, the trend
has been at best stagnant in recent years, rather than
improving. The government has resolved to improve
access to key social services. This strategy has found
concrete expression in the importancegiven to primary
educationin the public investmentprogram 1fr 1991-94:
66 percent of planned investments in the education
sector, up from 42 percent in the 1981-86plan period.
Primary health care has been expanded and in recent
years allocation of resources for health care has seen a
shift from hospital-based and urban (45 percent in the
1981-85period compared to an allocation of 34 percent
for the 1986-95period) to health center-provided serv-
ices and to rural areas. Governmenthas also promoted
programs of public works rehabilitation and micro-en-
tcrprise developmentin a bid to increase employment.
Environment
Senegal fices key environmental issues such as soil
degradation, salinizationof agriculturalland in low-ly-
ing coastal areas, andloss offorestcover. Itis estimated
that soil fertlity is declining by 3 to 5 percent a year
while forestry resources are decreasing by 1.2 percent
a year. Pcrsistent lack of funding for maintenance has
resulted in serious deficiencies in transport, irrigatior
development, and water.
 Senegal
Populationmid-1992 (mJions) 7.8 Income group: Lower-middle
GNP per capita 1992 (US$1 770 Indebtednesslvel: Msoderae

KEY RATIOS
1950 1985 1991 1992 1993 InvntmnttoGaPrsla%)
Gross domestic invostinenVGDP 15.3 9.8 13.3 I3A 14.1
Exportsof goods and nfs/GDP 28.3 29.7 24.4 22.3 22l0
Gross domesic savings/GDP -4A -1A 7.9 72 7A
Gross nabonal savingJGOP -4A4 -6.8 7.4 4.6 4.8 IC

Current account baanceIGDP -17.4 -16.8 4.3 -8.8 -9.4

Interest paymensGDP 2.2 2.0 1.6 0.7 1.0
TotaldebtlGOP 4.8. 99.4 63.1 57.5 62.2 0
ToW debUexports 162.7 281.5 238.6 249A 274.6 ' a M M U e2 n

GDP: PRODUCTION

(%ofGDP) 1980 1985 1991 1992 1993 SaMuofGDPny%utorp;q

Agriculture 18.8 187 19.0 19.4 18.7 _ _
Industry 24.5 17.7 18.9 18.7 18.6
Manuaturing 15.1 12.8 132 12.9 13.0
Services 566 63.6 62.0 62.0 62.7

198085 I9B5-93 1991 1992 1993

(avengeannual/gmmwth)
Agricutue 2.1 1.3 -2.5 -0.9 -SA
Indusry 2.2 3-9 1t9 2.6 -22
Manufactuing 5.1 3.5 12 -5.7 -1.4 e _ - _ _ -

Services 3.S 2.3 23 t.6 -0.9 .7 - - * In 9 23

GOP 31 2.4 12 1.3 -2.0 _ A_____ _

______ _____A

GDOP:EXPENDITURE

(%ofGDP) 1980 1985 1991 1992 1993 Growtrh ofGInmdIGOP(%)

Private consumpion 78A 84.6 78.9 79.8 80.1 10
Geeil govnmet consumpbon 2Z0 16.8 13.2 13.0 12.5
Grossdomesricinveslnent 15.3 9.8 13.3 13.4 14.1
Exports of goodsand nfs 28.3 29.7 24.4 22.3 2720
Imports of goodsand nfs 44.0 40.9 29.8 28.5 2897 4

(avbage annua/gnfbw) 199045f 1995-93 1991 1992 1993 2

Private consumplion 2.9 2.4 0.5 6A -2.5
General govemnt comsumption 3.1 0.4 0.7 -3.8 1.0 -so e
Grss domeslcinflfsiment -1.9 4.5 2.3 4.1 1.2 |2 If
Exporssofgoodsandnfs 52 1.9 2.4 3.0 -1.3
Importsofgoodsandnfs 1.8 1.9 OA 123 0.0 4
Gross national product Z7 27 IA 1A -272 -GM -rG
Gmss nalional income .8 2.8 0.3 2.5 -2.4 1p_ I

PRICES and GOVERNMENT FINANCE

1990 1985 1991 1992 1993 Change ofGDPdeffdulnrandCP C%1
Domestfcpdcs 4 r

(% dcnge) 2.
Cornumer prs 8.7 13.0 -1.8 -0.1 -0.6 o
Wholsale prices -- . -- 4 -2 M
lImpdtGDPdeflator 11.8 9.1 1.3 3.1 OA |4

nxvwmnt fnance -,
(% of GDP)
Cwret budget balan -0.5 -1.3 4.3 0.7 0.4 -CGPPdt -Ps
0Oemi ruplusM8 .. _ . . .. I

152
 Senegal
POVERTY and SOCIAL
f(anual grww rntes) 198045 198593 Dow apnxnadl&mond
Popuation 2.8 3.0 Le emwpecucy
Labortfr 1.9 2.0
met recentestlm.tm fmre)
Povety level: headcounthIdex (% a!populaton) .. reGm
Ufaexpeclancy at birt 49.3 per
Intit mortality rVthousandheva bflhs) 68.0 8Pr an
Child manutbn (% of ldrdnvnder5) 17.5 eon
Aoress to sab water (S of populatin) 55.0
Energycaiswnpton pxr capita (kg oil equvalnt 1112.
Ilimcy (% f poppulation age 15) 61.7
Grass pimary enrolment (%afschooMagapgopuakon) 59.0 AWlo tseWer
TRADE
(mininsUS) 1i80 1985 1991 1992 1993 Expowtad
lImpertleiela
(. US$)
Totalexports(fob) 480 481 .. .. ..
Fish 100 120 - .. 12
Fuel 90 51 - _
Manttchxms 92 130 - _ . S
Totalimporls(ci) 1.105 900 .. .. .- -
Food 210 2'8
Fuelard energy 276 195 _ _ _ .*
Capitalgoods 158 115 _ _ . z
Export prc index(1987=100) 93 as - _ _ a
Importpiceindex(1887=100) 107 92 - - - a, a u so et 2 m
Toms of tade (1987=1
00) 8B 93 -
Openness of economy
&?doGDP%) 72 71 54 51 51 a I
BALANCE of PAYMENTSl
(mans US) s980 1985 1991 1992 1993 Cu.nieccmntbakrtGDP r()
Expoftafgoodsand nfs 807 845 1,386 1,422 1,284 - . - - + - -

Importsofgoodsand nfs 1,215 1.162 1.693 1.810 1.674 a - a - -

ResourcebalarCE -408 -318 -307 -888 190 -
Netfactor inome 499 -123 -192 -200 -191 .
Netcurrenttansfers -20 8 28 37 40
Curent accountbalance .
BeforedcilWaltrnsehs -SZ6 -434 470 -551 -541
After offici transfers -386 -272 -205 -271 -301
Lang-trm capil flow
Total other iems (re)
301
38
155
103
54
192
103
189
28
161 -10
4
_ U
Changs in net reserves 55 14 -42 -20 112 42
A-nm
Reservesexdudinggdd(mILUSS 8 5 13 12 3
Reseves nduding gold (mill US) 25 15 23 22 15
Official exhiange rate (iocaJSS) 211.3 449.3 2821 264J 2832

EXTERNAL
DEBT
EJuEp@sALDEr 1980 198S 1991 1992 1993 Shuctanofexthnud.dt(%)

Long-termdebtlexprts 123.0 227.5 196.2 206.2 23Z9

IMF creditexports 15.5 29A 22.0 16& 1&7
Short-tarn debtexpots 24.2 246 20.5 24.4 23.1 7 - I
Totl debt sAni ort 28.7 20.8 21.2 13.8 20.0 C_ "
GOP Mbhb 13- It
Long-lwrmdebtGDP 36.9 60.3 51.9 47.5 S28 _ moso
IMPFrediUGDP 4.6 10.4 5.8 4.3 4.2
Shou-tr debtGDP 7.3 8.7 5.4 5.6 5.2 2_
Laong-,fe dWW _raIs
PivaW nonguaranteedrong-term 0.8 0.6 2.0 1.7 1.6
PubS6and -ubcly guaanbmd a s - e e 2 I
Privateaeditrsflong4arm 40.6 13.4 4.9 3.7 2.8 1 1
Officialcredtsoulong-tm 58.6 86.0 93.1 94.6 95.5

'The develpment diamond shon a lel of devebpmen in the countrycomparedwih it icme group aveage.

153
 Seychelles
Seychelles is an archipelago of some 115 islands
in the western Indian Ocean, with a land area of
445 square kilometersand an exclusivceconomic
zone of about 1.3 millionsquare kilometers. An essen-
tial feature of the islands is their uniqueecoogy, pristine
environment, and touristic attraction. Among them is
Aldabra, one of the last refuges of the giant land
tortoise. Seychelles' popution of about 70,000 is con-
centated on the main island of Malt and two others
nearby and is growing at about 0.9 percent a year. The
minuscule size of the economy and its reliance on
external markets-foreign trade averaged 140 percent
of GDP over the last five years-render it particularly
vulnerable to external economiccondions. Seychelles
has expeienced rapid and rsonably equitable eco-
nomic growth. GNP per capita rose fom $870 in 1976
to about $5,650 in 1992.
Seychelles' man econonic activitiesare tourism and
fishing, and some agriculture and small-scalemanufac-
auring. Industry and agriculture have been severely
constained by limited land, water, and skilled labor,
and the small size of the domesticmarket and remote-
ness of the islands. With the developmentof tourism in
the earlv 1970s and of port services for foreign tuna
fishing fleets in the early 1980s, the role of agriculture
declined further. he country's tropical climate and
unique environmentattract mid- and up-scale tourists.
In the peak year of 1990, visitors numbered 104,000,
compared with 37,000 in 1976, an average growth rate
of 7.5 percent, and generatedsome 17percent of GDP,
60 percent of exports of goods and services, and 19
percent of formal employment.Fishing, source of the
second most important export, lagged far behind, ac-
counting for only 1 percent of GDP and about 8 percent
of the exports of goods and services,
Seychelles became independent in 1976 under a
coalition government.In 1977a coup d'6Matestablished
a one-party socialist state, and in 1992 the govement
initiated a transition to multi-party rule. A new consi-
tution was adopted in April 1993, and elections were
held three months later.
Until recently, Seychelles' development relied on
economicpolicies emphasizng public-sector-leddevel-
opment and important amounts of external savings.
154
Mostoftheeconomy-withtheexceptionofthebanking
sector-is publicly owned and managed, including the
mostmodern part of the key tourism sector. The public
sector employs two-thirds of Seychelles' labor force,
the government's budget is about half of GDP. and
governmentconsumptionis about 30 percent of GDP.
Thewage structure is dominatedby public sector wages.
which promote even income distnbution rather than
incentives and efficiency. Dunng the period 1975-90,
yearly net officialdevelopmentassistancetransfers av-
eraged $284 per capita.
Between the mid-1970sand 1990 Seychelles' econ-
omy expandedrapidly, driven by tourism and relatively
abundant extenal financing, albeit with some pauses
reflecting extenal shocts. Real GDP growth averaged
10.5 percent over 1975-79. Growth slowed to 1.4
percent over 1980-85, reflecting the impact of higher
petroleum prices and airfares in the aftrmath of the
second oil price shock, and tourist reaction to an at-
temptedcoup d'etat in 1981-Thegovernment responded
to the downturn by increasing its investment in state-
owned enterprises and external borrowing to stimulate
domestic demand. With its relatively high per capita
income, Seychelles had to rely more on commercial
sources. As a result, its external debt service ratio to
exports of goods and services exceeded 13 percent in
1986-87. Although reasonable compared with other
countries, this ratio was alarming becaue of the econ-
omy's small size and fragility, its high import content,
and volatlity of exports. The country succeeded in
restoring growth by 1985, although the expansionary
policies to stimulate demandresulted in higher budget
deficits (16 percent of GDP in 1986), a surge in mone,
supply, higher inflation, anda more difficultbalance of
paymentssituation.
Rencwedrapidggmwthbetween1986and 1990-7.2
percent per annumon average-reached a high point in
1990, by which time the financial situation had also
stabilized.In 1990real GDP grew by 7.5 percent owing
to a single-year20 percent increase in tourism arrivals.
The fmancial sitation improvedin parallel; the budget
deficit (including official transfers) delined from an
average of 7 perent four years earlier to 1 percent of
GDP; the extenal current account deficit (efore offi-
 Seychelles
cial transfcrs) turned to a surplus of 8 percent of GDP,
despite substantial increase in the cost of oil imports
following the loss of Kuwaiti supplies in August 1990
as a result of the Gulf crisis; and inflation, although
higher than in preceding years, was kept below 4
percent.
Owingprimarily to developmentsin the crucial tourism
sector, the country's performance slipped sharply in
1991, and recovery has been slow. In 1991 tourist
arrivals and expenditures fell by 13 percent and 19
percent, respectively, due largely to the Gulf War; in
1992, although arrivals and expenditures increased by
9A percent and 14 percent over 1991 levels, they
remained below the results of 1990. The slow rebound
of the critical touism sector reflects, in part, past
insufficient effort to rehabilitate and upgrade hotel
infiautre and diversify tourist services, and the
vulnerability of the tourism industry to economiccon-
ditions in industrialized countries, notably Western
Europe.
The decline in toDusm has hurt the economy. Real
GDP contacted by 2.9 percent in 1991-the first such
decline since the early 1980s-but grew modestlyby 2
percent in 1992, and by 4 percent 1993. At the same
time, despite new revenue meass including tempo-
rmy import surcharges and tax increaseson alcohol and
tobacco, the budget deficit averaged 5 percent duing
1991-92and rose to 6 percent in 1993owing to excep-
tional expenditureslinked to the democratizationproc-
ess and infrasttur for the Indian Ocean Games. In
1991balance ofpayments difficultiesled to atemporary
requirementfor the surrender of 30 percent of the gross
foreign exchange earnmgs by exporters to the central
bank. Import controls andsome administrativepayment
delays helped temporarily contain the current account
deficit (before official transfers) at 5.8 percent in 1991,
comparedwith a surplusof 8 percent in 1990.However,
as imports caught up with demand, this deficit rose to
some 6 percent of GDP in 1992and is estimatedto have
risen to 16 percent in 1993owing to an accelerationof
imports.
Social Indicators
Economic growth has been accompaniedby significant
progress in social conditions. Seychelles has low unem-
ployment and actually faces a shortageof rkilled labor.
Socia indicators are comparable to those of higher
income countries. The governmenthas sought to mmi-
mize income disparities and provide equal access to
education, health, and housing: 75 percent of the chil-
dren 6 to 14 are in school; there are 6.2 hospital beds
155
per 1,000 inhabitants and one physician for 1,403
people; 99 percent of the populationhas accessto basic
health care; life expectancyat birth is almost 71 years;
infant mortality is 17 per 1,000; almost all children
under one year of age are immunmzed against the most
commonchildhooddiseases;the entireurbanpopulation
and 95 percent of the rural population have access to
safe water; and subsidized housing has been made
availableto low-incomeand large families.
Seychelleshas legislatedand practicedgenderequal-
ity. Women enjoy equal access to educationand jobs,
including managementpositions and official appoint-
ments. In 1990 women represented 43 percent of the
active labor force.
Medium-Tenn Prospects
The developmentsin 1991-92haveexposed the fragility
of Seychelles' economy and its structural weaknses.
The tourismindustryfaces stiff competitionin the world
market, a shortage of sklled labor, infastructUre bot-
tlenecks, and the danger of upsetting the fragile emi-
ronment upon which it relies. Diversification of
production and exports is hampered by the narrow
resource base, environmentalconcerns, the minuscule
domesticmarket, andrestrictiveexchangerate and trade
policies. The appreciationof the exchange rate, while
adapted to Seychelles'upscale tourism policy, has dis-
couraged investmentand export diversification.
The government's development objectives are to
improvethe qualityof life of all Sqychelloisandachieve
environmentally sustainable development. Its recent
strategicthinking has emphasizeddevelopmentof eco-
tourism to reconcile environmental constraints and
growth objectives, diversification of tourist markets,
higher productivity through skldl enhancement, and
poverty reductionthrough social spendingpolicies tar-
geted at lower-income groups. The govemment also
plans to enhance fiscal moderation through gradual
disengagementof the state from the economyand faster
introduction of incentives for private investment. Its
agenda includes stronger public investment manage-
ment through the introduction of public investment
programming, improved debt managemcntby seeking
mostfavorableterms, convertingfloating-rateliabilities
into fixed-rate debt, and reviewing debt buy-back or
conversionopportunities,and higherpublic savingsand
foreign reserves to provide a cushion against future
external umcertinties.
The govermmentis firmly committed to protecting
the enviroment and prepared in 1990 a ten-year Envi-
ronmental ManagementPlan of Seychelles, which re-
ceived broad donor support. In 1992 it initiated the
preparationof a program for human resource develop-
ment, which will be presented to donors for fmancial
 Seychelles
support in June 1994. Seychellessupports greater re-
gional cooperation in the area of environment-marine
pollution in particular-and education, through the In-
dian Ocean Commission.
Forthe foreseeablefuture, Seychelles'economywill
remain dependent on tourism, despite efforts to diver-
sify into fishing, fish processing, agriculture, light
manufacturing,and regionaltransshipmentandoffshore
services. The tourism marketing strategy is likely to
remain aimed primarily at mid- and upscale tourists
willing and able to pay above-average airfares and
landing fees to enjoy the pristine enviromment,unique
natural beauty, and peaceful atmosphereof the archipel-
ago. So far, Seychelleshas been successfulin attracting
such tourists.
The govermnent is working toward a coherent me-
dium-termmacroeconomicframework in the context of
preparingitsfirstthree-yearpublicinvestmentprogram.
A strategy encouraging greater private-sctor invest-
156
ment and production and more efficient delivery of
public sector services could allow Seychellesto achieve
annual real growth of about 5 to 6 percent over 1994-98,
supportedby investmentequivalentto 18 to 19 percent
of GDP. compared with 24 percent during 1987-92.
Public investment would decline from 13 percent of
GDP in 1989-93to around 10 percent during 1994-98,
while private investmentwould rise from 5 to 6 percent
of GDP to 8 to 9 percent.
The government is expectedto pursue pruden. fiscal
policies, limitingthe overall deficit to a maximumof 4
percent of GDP, and financing it in a non-inflationary
way, thus keeping inflationbelow 5 percent. Together
with prudentcredit policies, this would keep aggregate
demandbroadly in line with resource availabilities,with
an averagecurrent accountdeficit (before officialtrans-
fers) of the order of 5 to 6 percent of GDP, and a debt
service ratio to exports of goods and services below 10
percent.
 Seychelles
Populaton mid-1992(millions) 0.1 Income group: Upper-middle
GNP per capita 1992 (US$) 5.6s0 Indebtednessevel: Belowaveage

KEY RATIOS
1910 198S 1991 1992 1993 InbnvuntoGDP.uio(1%)
3,
GmssdomiesichwestmenllGDP 38.3 22.7 19.8 18.5 23.0
Expots ofgoodsandnfs/GDP 68.0 68.9 57.1 63.0 52.9
GmssdomestcsavingalGDP 27.1 27.9 18.7 14.2 8.7 20
Grm nationalsavingslGDP 23.5 24.4 13.8 12.5 7.0
CufrentaccountbaandceGDP -15.4 1.5 -5.8 6.0 -16.0
Interestp2ynmensfGDP 0.1 IA4 1.6 1.3 1.1
TotaldebtlGDP 57.1 56.0 52.8 42.6 37.5 0v o w G 2 9
Totl debtlexports 81.8 825 91.1 66.7 58.7 r o 09 - Ot 12 03

GDP: PRODUCTION
(34of GDP) 1930 1985 1991 1992 1998. Share.atGDPby emclmorj%
Agricullun 8.8 5.8 4.8 4.4 4.1
IndAstry 15.6 18.4 18.1 17.7 18.9.
Manufadturing 7A4 9.7 9.7 9.7 112
Serices 77.5 75.9 77.1 77.9 76.9
19804851985-93 1991 199Z 1993
(averageoannualgrvdh)1
Agricuia.ce -2.3 0.4 0.3 -6.7 -1.8
lndustry 3.3 5.2 9.3 -0.4 11-1hA | W 0
Manumaduring 1.0 7.0 -2.0 2.4 124 - .
Services 1.1 4.8 -5.6 3.0 2.5 7 US Us so oU t 2
M AW_A AIrdusW 13S A
GDP 1.2 4.6 -2.9 2.0 3.9 1 1

GDP: EXPENDITURE
1930 1985 1991 1992 1993 G.rS.wt-cfGUOandGDP(%)
(%af GDP) 40
Privateconsumption 44.2 37.5 52.1 53.7 43.6
Generalgovefrmientaosunmption 28.7 34.6 29.2 32.2 47.7 30
Grassdomesticinvesment 38.3 22.7 19.8 ¶8.5 23.0
Exportsof goodsandnfs 68.0 68.9 57.1 63.0 62.9 20
Importsof goodsandnIs 79.1 63.8 582 67.3 771 |0

(average annual
gvovAh) 198045 1985-93 1991 1992 1993 o\
Prit consmnptior .. 3.0 -10.7 243.6 3.9 1 .
Generalgovemmurit consumption .. U8 42.7 -28 2.0
Grossdomesticinvestnent .. 4.7 -21.1 5.4 3.8 | .t
Exportsof goodsandnfs .. 12.0 -6.3 -7.2 9.9 130
importsofgoodsandnfs .. 13.8 A8 35.6 7.7 |'
Grossnationl product 1.0 4.9 -3.4 29 7.1 -aOl -cap
Grossnationa income .. 4.0 -10.1 35.6 -5.5

PRICES
and GOVERNMENT
FINANCE
1980 1915 1991 1992 1993 ChnWg.foGDPdmflatnrandCPl%)|
Domesc prkes TA
(%cdwoJe)
Consumerpries 13.6 0.8 2.0 32 1.3 4 4N^/> Q N /\
Wholesaleprices -* 2.
Implrc GDP deflaor 22.0 22 2.4 7.9 1.7
Govemmentfirnwa UTr U a 50 m 2 U3
(t9 of GDPC
Current budget balance 7.8 0.2 5A 5.4 7.1 |GCPd. CM
Ovyeralsurpksldelicit - . . . . . . I _

157
Seychelles
POVERTY and SOCIAL
(annualrgwAh rates) 1980-85 1085-93 Dewlopmonbdlamatd
Population 0.6 0.9 Lifeeean-cy
Labor for c
mastrcfshue(m
Poverty level: headcount ide (X of popuklirn) .. GNM3s
Life expectancyat blith 71.4 Per pu-y
Inf1ntmortaMty(per xwusmndito bbths) 16.2 /
C& zit
ChIld malmrriion (% of chdden under 5) 5.7
Aoss to safe water (I of popuaon) 99.0
Eney consumptionpercaplt (kg oil equwen 4,580.9
Illieracy t% of popuation age 15+) A b afe vr
Gross prinay enrlment(X of sdho- populaoan) .. s

TRADE
(mElosLSS) 19sm 1985 1991 1992 1993 Expotm Impolls (milLUSS)
Totalexpous(obb) 6 5 19 20 22 250
CoPw 3 1 0 0 3
Fish 2 1 3 4 2 200
Manufactues 0 0 12 13 19
Total impots (ci?) 99 100 172 193 241 ISO
Food 19 17 29 36 48
Fuelandenergy 24 26 3.8 33 31
Capitalgoods 20 25 40 40 73 so
Exportprim index (1987=100) 91 97 ... .
Import prica index (1987=100) 120 91 .. .. . - mD ma
'iermsoft ade(1987=100) 75 106 .. .. --

Opemes of economy(bud&rGDP,%) 147 133 115 130 140

BALANCE of PAY1DJ1U
( S80 1985 1991 1992 1993 Currenteccount bWncato GDP Iro
t'mbs US$) 10
Expoftsofgoodsandnfs 97 116 214 268 279 10
Importsofgoodsandnfs 117 108 215 286 343 n

Resourcebalance -20 9 -4 -18 -63

aetfactorincome
Net airrent transfers
-3
a
-6 -15
-2
-4
-3
-5
-3
ae
|
La 9 | |
Curentawmunt balance L
3efore offica transfers -23 3 -22 -26 -71
Aftr ofici transfers -8 17 3 -2 48 -10
Long-tem capital inlbw 18 16 3B 10 40
Total o2herRiams(net) -1 -33 -29 -6 10 t
Changesin ne reserves -8 0 -11 43 -2

Reserves exdudinggold(mrO.USS) 18 9 2B 31 36
Reserwesincluding gold fnmt USL) 1t8 9 2B 31 36
Official exchange rate (bxcaLUSS) 6.4 7.1 5.3 5.1 5.2

EXTERNAL DEBT
Exportrafos 1980 1985 1991 1992 1993 Struclrx mdobt(%
as
Long-turmdBbtlexparts 24.4 623 694 54.2 50.8
IMF cadWexports 0.0 0.0 0.0 0.0 0.0
ShorttenmdeWexports 57.4 20.2 21.7 1Z.5 7.9 75
Totaldebt servixpods 36.2 7.9 10.7 7.0 10.1 DPW.
GDPraos_
Long-tem debtlGDP 17.0 43.8 40.3 34.6 32.4 I i motI
IMF cndltJGDP 0.0 0.0 0.0 0.0 0.0
Shorttrnn debtsGDP 40.0 14.2 126 7.9 5.0 25
Long-temn
debtratls.I
PrvatE nonguaranteedlong-tern 0.0 0.0 0.0 0.0 0.0
Pobloaid publicy guaranted an m go In sz |
Privte aeditcwullang-terrn 0.0 21.1 174 17.0 14.1 .
Official sogt 100.0 78.9 825 83.1 86.9

'The development iamond show a level of deelopment n the cmtmbycDmared with its incomegmup avuge.

in8
 Sierra Leone
S ierra Leone is endowedwith substantialmineal
wealth, ample cultivable agricultural land, and
rich fisheries. Agriculture employs most of dte
populationin low-productivitylabor-intensivefarming.
Rice, the staple food, is grown by more than 80 percent
of farmers but has been imported in large quantities
since the late 1970s. Coffee, cocoa, and fish are the
major agriculura exports. The miningsectorcomprises
a capital-intensiveenclave and substantial small-scale
alluvial operations. It accounts for 10 percent of GDP
ad is the most important source of foreign exchange
ernings. Services accountfor about40 percentof GDP,
comprsing mainly transprt, commuications, trade,
isunrance, finance, and governmentservices.
Classifiedas a least-developedcouitry by the United
Nations, Sierra Leone's population of 4.4 million is
growing at 2.6 percent a year. Per capita income was
$150 in 1992. The distnbution of income is markedly
uneven; over two-thirds of the populationLivesin abso-
lute poverty. Rural life is at a subsistencelevel. Infant
mortality is one of the highest in the world, while other
key indicators, such as life expectancyof 42 years and
primary school enrollment, are among the lowest. The
adult illiteracy rate is estimated at 79 percent. Schools
and hospitals lack the most basic supplies. The quality
of Sierra Leone's civil service has declinedover the past
decade, in part becuse of a lack of incentives for
qualified staff at the senior level.
Sierm Leane's economicinfrastructuredeteriorated
rapidly during the 1980ss Rural feeder roads are in a
state of collapse, and trunk roads are in poor condition,
primarily because of lack of funding and insttutional
weaknesses.Lack of maitenance has also resultedin a
severely deterioratedelectric power generationsystem,
forcing households and firms to operate private power
generators. The water supply situation is critical in
Freetown as well as provincial towns and rmralareas.
Only about 30 percent of the rural populationhas access
to safe drinking water.
During the first decade after independencein 1961
Sierra Leone's economygrew at nearly 4 percent ayear.
The fiscal and foreign exchangeposition was healthy;
iflation was low. The first oil shock notwithstading,
economic growth averaged over 3 percent in the first
159
half of the 1970s.GDP growthslowedto about 1 percent
a year over 1975-80,mainly becauseof fullingincomes
from the miningsector. During the 1980s,the economic
situationdeteriorated.Budgetaryrevenues fell sharply,
from 16percent of GDP in fiscal 1981to only 5 percent
in fiscal 1986, as reductions in imports and official
diamond sales reduced the tax base and increasing
indisciplinein public sector managementeroded collec-
tion efficiency.Major cuts in capital expendituresfol-
lowed. Investments in new social and physical
infrastrucre and mainteane virtally ceased,causing
rapid decay in existing facilities. Mcanwhile, inflation
accelerated, pealing at close to 170 pert in fiscal
1987.
Foreignexchangecontrolsled to a rapidly expanding
parallel mzrket in foreignexchange and trade. Because
of the overvalued official exchange rate, official dia-
mond and gold exports fell sharply, as these commodi-
ties were increasinglytraded in the parallel market
Recordedimports also fell sharply, reflecting shortages
of foreign excage. With official foreign exchange
reserves virtually exhaued and the inflow of foreign
capital falling to very modest leveis, the balance of
paymens deficit was financedmainly by accumulating
arrears. Confrontedwith this deterioration and decline,
the govermmentnegotiatedan IMF stndby arrangement
in November 1986, supplemeted by support from a
Structul Adjustment Facility. However, it was sus-
pended in March 1987because of expenditureoverruns
and excessivecredit creation.
Faced with an increasinglydifficult economic situ-
ation, the governmentbegan in early 1989to implement
reform measuresauned at stabilizingthe economy and
addressing stucturl bottlenecks. Significant reforms
have been implementedsince then, including liberaliz-
ing the exchangerate and trade,decontroulingpnces and
interest rates. stegthening revenue collection and ex-
penditare contols, and revamping mining and fishery
policies. Rehabflitationof infrastructureand revitaliza-
tion of social serviceshas also begun.
Governmnwteffortsto stabilizethe economythough
improved public-sector management have been sus-
tained in the face of large shocksto the economy. Deep
incursions into the Eastern and Southern provinces by
 Sierra Leone
Liberian rebels in March 1991, and subsequent rebel
activities, imposed additional strains on the economy.
An estimated 15 to 20 percent of the population was
displaced; alluvial diamond mining was curtailed; rice
production was reducedby one-third; and the cocoa and
coffee harvests fell sharply. Following improvements
in the security situation in 1993, there was a deteriora-
tion in March and April of 1994.
Structural Adjustment Program
The governmentundertook a structural adjustmentpro-
gram in August 1990that drew 3upportfrom the World
Bank and IMF. Since April 1990 Sierra Leone has
maintaineda market determinedexchangesystem. For-
eigm exchange bureaux have been established. The
operationof the exchangemarket hasimproved substan-
tialy and the commercial banks are now handling a
larger portion of total foreign transactions. The cx-
change rate in the commercial bank market has been
relatively stable since May 1992; the differential be-
tween commercial bank and parallel market exchange
rates is very low, faling to less than 3 percent in late
April 1994. The real effective exchange rate has depre-
ciated by over a one-third since the leone beganfloating
in April 1990.
Trade reform has focused on removing import and
export licensing rcquirements (except for gold and
diamonds) and aUquanfitativerestictions on imports,
and abolishing public enterprise trading monopolies.
Dutieson importedgoodswererationalized inJuly 1992
to improve administrationandcomplianceby importers.
In July 1993 the range of duties was further narrowed
from 0 to 65 to 5 to 40 -2rcent, and the number of tariff
rates reduced from 7 to 3. The 1983 investmentcode
has been repealed andreplaced with a uniform incentive
framework incorporated in the tax and customs laws.
The Sierra Leone Export Developmentand Investment
Corporationwas establishedinJanuary 1994to promote
exports and investmentacross all sectors, and an export
processing zone established starting with the textile
industry.
The maintenance of strict fiscal discipline remains
the key to success in stabilizingthe economy.As a -sult
of the government's efforts to improve fiscal manage-
ment, total revenues rose from 9.2 percent of GDP in
fiscal 1989 to 13.8 percent in fiscal 1993. Recurrent
expenditures, however, increased modestly from 15.5
percent to about 16 percent of GDP in the ane period,
The overall budgetdeficit (excludingggrants) contracted
from 9 percent of GDP in fisal 1989 to about 6.7
pecent of GDP in fiscal 1993. The deficit in the first
half of fiscal 1994was within the agreed target; how-
ever, to offset revenue shortfalls anticipated in the
second half of the year due to a sluggish economic
160
recoveryandarise indefenseexpenditures, the govern-
ment introducednew revenueandexpendituremeasures
in January 1994to contain the fiscal deficit.Preliminary
data for 1993-94 indicatethat the overall budget deficit
was fiurtherreducedto 6A percent of GDP, in line with
the program targeL
Since the beginningof the reformprogram, monetary
policy has been directedtoward reducing moneysupply
growthto levels consistentwith the government's infla-
tion objectives, while ensuring the availability of suffi-
cient bank credit to fuel the recovery of private-sector
activity.The decelerationin the rate of growth of broad
money, mainly as a result of inproved govemment
fiscal operations, contributed to the slowdownin infla-
tion - from 115 percent in 1991to 35 percent in 1992,
and further to about 20 percent in mid-1994. Lending
rates were decontrolled in April 1990. The Bank of
Sierra Leone exercises monetary control tirough open
market operations conducted in the form of weeldy
auctions of trasury bills. In August 1993 the govern-
ment successfullylauncheda one-year treasury bearer
bond, with a fixed coupon rate, which is aucdoned,
allowing the term structure of interest rates to be
market-determined. Nominal interest rates have de-
clined with inflation; interest rates have been generally
positive in real terms since June 1992.
The governmenthas begun a comprehensivereview
of the financial sector. Revised banking legislation is
expected to provide for a more independentand effec-
tive centra bank, strengthened bank supervision, and
clearer legislativeguidelines for the financial sector as
a whole, includingrevised prudential requirements and
increased minimnumcapital requirments.
As part of its stuctural adjustment program, the
governmenthas initiated a comprehensivecivil service
reform program, aimed at restoring civil service effi-
ciency and capacity. Under the first phase of the pro-
gram, civil service employmentwas reduced by about
28,000, or by two-fifths, between July 1991 and May
1994,mainly throughretrenchmentof dailywage work-
ers who were redundant. This has enabled the govern-
ment to make a start toward establishinga salary system
that would enablethe civil serviceto recruit, retain. and
motivatestaff by increasingthe differentialbetween the
highestand the lowest paid civil servants.
All public enterprises are now subject to taxes and
duties and are allowedto adjust their tariffs or prices in
line with costs. The liquidation process has advanced
for the Sierra Leone PetroleumRefining Company and
the National Diamond Mining Company, while the
privatization of the National Petroleum Company and
the NationalInsuranceCompanyhas begun. The second
phase of the reform program, including the privatiza-
tion, Uquidation,or restucturing of 13 additionalpublic
enterprises active in manufacuring and trading is being
 Sierra Leone
implemented by the Public Enterprise Reform and Di-
vestiture Commission.
Exports of rutile and bauxite have increased over the
past five years, but a large proportion of diamond and
gold exports continueto be traded in the parallel market.
Total recorded exports declined by about one-fourdt
between 1985 and 1989, but in response to exchange
and trade liberalization measures exports increased by
an annual average of 11percent between 1988 and 1992.
However, due to rebel incursions, they fell back by 9
percent in real terms in fiscal 1993. Recorded imports,
which had declined by one-fifth in real terms between
1985 and 1988, rebounded over 1988-90, before falling
by 12 percent in real terms in fiscal 1991, again due to
rebel hostilities. Subsequently, imports grew margin-
ally. Imports are expectedto rebound and grow by about
5 percent in real terms in fiscal 1994.
Interest payment obligationshave hovered at around
$47 million annually, with interest on commercialdebt
falling in arrears. The external current account deficit
narrowed slightlyfrom 18percent of GDP in fiscal 1991
to 16 percent of GDP in fiscal 1993. International
reserves are rising steadily and amounted to 2.4 months
of imports at the end of 1993.
External Debt
Sierra Leone's external debt is estimatedat about $1.15
billion, or about 16D percent of (-DP, at end-1993.
Multilateral institutions account for 30 percent of the
total debt. Sierra Leone's debt service obligations in
1993 amounted to $83 million, or 70 percent of mer-
chandise exports of which foreiga interest obligations
amounted to $46 million. The Paris Club offered Sierra
Leone a generous debt relief package under enhanced
Toronto terms in November 1992. The government
requested a further Paris Club rescheduling in July
1994, which is expected to lower Sierra Leone's debt
service burden. Payments arrears to private creditors
are estimated at $350 million. Sierra Leone expects
to clear these arrears with the aid of donors through
a debt buyback operation planned for the second half
of 1994.
The govermment'sbroad developmentobjectives are
to stabilize the economy and create a macroeconomic
and sectoral environmentconduciveto sustainedgrowth
and poverty reduction. It is committed to the policies
needed to achieve these objectives. But while the com-
mitment is there, the capacity to develop and implement
well-defined development strategies remains extremely
limited. The broadening and deepening of the reform
process to encompass sectoral strategies and rebuild
moribund institutionsis just beginningto get under way.
This process has been complicated by the unsettled
security siatation.
161
Poverty and Human Resource Development
The government is taking a two-pronged approach to
combating Sierra Leone's widespread poverty, consist-
ing of policies that promote labor-intensive growth,
especially macroeconomic policies supported by the
adjustment reform program and sectoral policies, and
public expenditurepolicies and rehabilitation of institu-
tions that over time will improve access to basic educa-
tion, health care, and other social services.
The government has committed itself to reforms in
primary education and basic health services and is
preparing sector strategies. Budgetary allocations for
the social services will be increasedby at least 5 percent
annually in real terms over the next few years. The
goverment's human resource development strategy
will focus on inproving the quality of education with
particular emphasis on basic education, substunfially
reducing the illiteracy rate (with special attention paid
to the problem of female illiteracy), incrasing enmoll-
ment ratio in primary education, and making relatively
low-costpreventive and basic curative health care avail-
able throughout the country.
Measures to strengthen staffing through recruitment
of skilled professional and managerialstaff are a prior-
ity, and the governmnenthas begun to recruit qualified
candidatesunder donor-fundedprojects from widtin the
country and among Sierra Leoneans living abroad.
Budgetaryallocations for materials and supplieswill be
brought to adequate levels.
Women in Sierra Leone
Women are predominant among the poor in Sierra
Leone and severely disadvantaged.They are more likely
than men to be illiterate, unskilled, and malnourished;
their productivityis further hampered by limited access
to credit and productive assets. At least 20 percent of
all women, and an even higher percentage of pregnant
women, sufferfromanemia Foodtaboosandtraditional
methods of cooking further lower the nutritional status
of pregnant and lactating women. However, Sierra
Leone'swomendonotconstituteahomogeneousgroup.
Womenin urban areas, especialy in the Western Area,
control a large share of trade and distribution activities,
and some have secure incomes. They are engaged in
wholesale and retail sale and petty trading and account
for 83 percent of total employment in these activities.
Rural women are engaged in subsistence farming and
household miaagement.
Environment
Preliminary findings from an initial environmental as-
sessment point indicate sinif.icant problems across all
 Sierra Leone
sectors, particularly in water, land degradation from
mining (large-scale and artisanal) and agriculturalprac-
rices, deforestation, forest degradationand loss of bio-
diversity, and marine fishing in excess of maximum
sustainable yield. The government is preparing a na-
tional environmental action pian tO strengthen die
framework for environmental conservationand natural
resource management, paying special attention to regu-
latory environment guidelines for the mining sector,
institution building, and direct interventions in the ag-
riculture, forestry. livestock, and fisheriessubsectorsto
manage and protect the natural resource base.
Faced with acute shortages of skilled manpower, the
govermment has taken steps to shift the provision of
some services to the private sector. A semi-autonomous
Road Authority, funded by charges levied on sales of
gasoline and diesel, has been establishedto manage the
perodic and routine road maintenanceprogram through
contractng to the private sectorover the next two years.
Provision of primary health care services and the man-
162
agement of elementary schools have been increasingly
undertaken by non-governmentalorganizations and lo-
cal communities.
The fisheries sector has considerable potential for
growth in the medium term, but care must be taken to
monitor yields to protect against overfishing. After an
unsuccessfiljointventure agreementwith a private firm
in 1990 to monitor the sector, the government is now
developing, with external support, a firmework for
managingthe sector. The government intends to tender
a contract for fisheries surveillance to the private sector
by late 1994.
The mining sectorhas a critical role in Sierra Leone's
long-term development. A revised Mining Act provides
the framework for mining investment, taxation, profit
repatriation, and the environmental regulation that
guards against land degradation, ensures sound mining
practices, and avoids special fiscal and incentive sys-
tems for the sector that might distort general macroe-
conomic policy.
 Sierra Leone
Populabonmid-1992 (milions) 44 Incomegroup: Low
GNP per capita 1992 (USS) 1SO Indebtednesslent Severe

KEY RATIOS
1980 1985 1991 1992 1993 Invu isto GDPrto()
GrmssdomesficinvestnentlGDP 16.2 10.0 11.9 11.7 9.2 20
Exportsof goodsandnIsIGDP 24.3 9.7 25.4 24.7 22Z4
GrossdomestcsavingslGDP -0.8 9.0 ItSf 105 5.1
GrossnatonalsamrvnstGoP -3.0 6.4 -1.9 -3.1 4.2 1-
CurentaccountbalancerGoP -19.0 0.2 -18.4 -14.8 -17.4
Inest paymentslGDP 0.7 02 0Z2 1.6 1A
TotaldebWGDP 39.6 55.0 169.3 181.6 169.9
Toa debUexports 156.6 451.2 801A 734.0 752.3 so- In - es

GDP:PRODUCTION
t
(% ofGDP) 1980 1985 1991 1992 1993 sh aofrGDPby{
80w,)
Agridte 33.0 44-5 37.9 . 1
Industry 21.9 12.5 16.3.
Manufacturing 5.5 3.6 4.9 .
Servis 45.1 42.7 45A.
19104t5 1985-93 1991 1992 1993 so
Agriculture 2.2 2.7 0.8
Indusbty -68 2.8 -3.1 _
Manufactuing 1.1 -6.4 -20.7 . D- .…_ _
services 6.4 2.2 6.5 m - g.oS - 1 2 93

GDP 0.7 2.0 2.6 -4.5 0.7 1 DAudM*__________3 _____

GDP:EXPENDITLRE
(% ofGDP) 1910 19i5 1991 1992 1993 th sa G adGDP S
Prvat cnsumption 92.4 83.0 77.9 80.2 83.7
Genrawgovemrnanerionsuon 8.4 7.2 10.4 92 112 ee-
Gros domesticinvwstment 16.2 10.0 11.9 117 9.2 5
Exportsof goodsanidns 24.3 9.7 25A 24.7 22.4 40- /
Impotsofgoodsandnfs 41.3 9.8 25.7 25.8 26.5 /
(aveag anhnulgroslh) 1981045198SS93 1991 1992 1993 t-
Privateconsumption -44 2.9 1.3 -7.2
Genealgovernmeritconspbon -0.4 -3.3 14.3 -48.1
Gross dombesticnvestmfl -6.0 2.1 -11.0 39.8 -0.8
Exportsof goodsandnfs -13.5 0.9 -5.9 43.5 -9.2 *3.

Import of gods and nfs -24.8 1.8 -18.6 34.5 05 .

Grossnationalproduct 0.6 1.9 2.2 -4.2 0.7 -cot -c-c
Gross nationalincome -0.4 1.8 32 -5.3 0.4
PRICES
and GOVERNMENT
FINANCE
1980 1985 1991 1992 1993 ChangW.otGDPd.fiaWrndCP1(%)
Doarrwrcprices zrJl
(51change) ISO
Consumer
nftiesah
prices
prs.
Im-ici GOPdeflator
12.9
8.8
76.6
85.7
102.7
76.7
65.5
105.8
-
222
-
32.9
E
10

Govwnment inanae 87 M 193 so 91 92 03

(%OfGDP)
Currentbudgetbalance .. -8.6 .6.0 -4.0 -2.3 _Cmoc -CFt
OvueMsurpluslmfi t . . ,. _ ,, _

163
Sierra Leone
POVERTYand SOCIAL
(-Uana gmWlh'atj 19504 5 191593 Dmpawmt diamodt
Population 2.3 2.6 t e
Laborfe 1.1 1.3
most rmntssflimrip
Poverty level: headcotmt index 1X of population) .. GNP A Gus
Life expectancy at birth 43.0 per . - pdm y
Inant mortality rthousand h bkths) 142.9 COPS N/ euvet
Child malnutitin (% oI'idrn under 5) 23.2
Access to safe water (% of popuhffon) 420
Ensigy consumpibor per capita (kg od equivalrnl) 72.6
lIrteracy (% of popubli aon 1o5+) 79.3
Gnrss prmary enrollment (f6 of saoo-age poplablon) 48.0 1A^loMsatwaw
TRADE
(mKans US1) 1980 1985 1991 1992 1993 Exportandalmportleves IlUSQ )
Ttal exports (feb) 214 139 137 146 139 so
Diamonds 1Z 30 21 35 23
cocoa 23 25 S 2 2
Mamifactures7 1gjCI
Tota imports (Cii) 426 169 17I4 5 --
Fuel and energy 59 6 32 19 25
Capitalgoods 22 42 3 29 31 40
Export prie index t1987=100) 153 101 .. . . . o
lnwot priceindex(1987=100) 62 66 _w . - m
so- S ,
Terms of trade(7987=-100) 24B 153
Openness of economy (frad P,XDFJ%) 66 19 51 50 49 GEnius Etamn

BALANCE of PAYMENTS
(mitns1US.) 1980 191t5 1991 1992 1993 CuntaccountbalncutoGDPrdofl&)
Exports of goods and nfs 278 160 159 172 i 64 -
Imnortsofgoodsandnfs 473 173 196 ISO 194 | g' B a s I" 62 0S
RLsoturcebalance -196 -t3 -37 -8 -30 -4 |||||
Net factr income
Netouffe ntc
-22
-196
-29
3
-102
0
-95
0
-98
0 IIII
CJurent account balance
Before officialtransfers
Aferoffical transfers
-209
-165 19
3 -139
-103
-103
-66
-128
-89
*IO

44
tI
U12
Lotenngcwpitalp hlvw 4B -66 -II 28 67 - EJ
Total otr items (net) 102 51 12B 53 41 11 I
Changes in netreserves 1S -4 -14 -15 -18

Resavesexcldinggoldd(mi US) 31 11 10 21 33
Reswves inclng gold (miL USS) 31 11 10 21 33
Ollidal exchan_s re AOCGVSS$) 1.0 3.6 199.0 424.0 539.9

EXTERNAL DEBT
EVort ragos 1980 19S5 1991 1992 1993 Sbuctz fetl d btpl)
Long-term deobtlmcpet 1162 241.8 412.2 304.8 429.3 1
IMF creditlexports 21.3 62.9 63.4 53.5 50.7
Short-term debFexports 19.1 1484 325.8 285.7 M2
722
Tot debtserviorts 23.0 12-5 8.9 20.5 17.5 I i'3
GoPratos
Lang-erm debUGDP 29.4 29.5 87.1 97.7 97.0 so
IMF ceWxIGOP 5.4 7.7 13A 13.2 11.4 i
Shot-erm debtIGDP 4.8 17-8 68.8 7027 61.5 |
Long-tem debtaiosra-Is
Private nonuaraanl erm 0.0 0.0 0.o 0.0 0.
Public and pubily guaranteed w u - In m2 - I
Private cedlmorsng-term 34.4 20.6 142 7.8 4.6 _I
Officialcredltorsilong-term 65.6 79A 85.8 92.2 95i4

The development diamond shows a level ofdevelpment in the cournty comparedwith its hincme gOUp aveage

164
 Swaziland
Swaziland is a smalllandlockedcountry bordered
mainly by SouthAfricawithapopulation of about
0.9 millionand a 1992per capita GNP of $1,090.
Its econonuc links with SouthAfica are strong not only
because of geographic reasons but also because of its
membershipin the SouthernAfrica CustomsUnion and
CommonMonetary Area. CustomsUnion receiptscon-
tribute about a half of Swaziland's fiscal revenues.
South Africa contrbutes about 80 percent and 30 per-
cent of mercalndise imports and exports respectively.
Additionally, SwLziworkers in South African mines
represent about 25 percent of wage employmentand
provide a substnta flow of remittances (over 15
peremt of GNP).
The Swazieconomyrelies primarilyon agro-forestry
activitiesunder a dualistic tenure system. A capital-in-
tensive export-orientedcommercial subsector operates
on ildeDeed Land developedby foreign capital, and
there is a semi-subsistencesmallholdersubsectorutiliz-
ing Swazi Nation Land. Given its structre, openness,
and sizr, the economy is vulnerableto externa shocks,
and thereforesubject to wide fluctuations.In particular,
it has been sensitive to developmentsin South Africa
affecing goods and factor markets, significantchanges
in commodity price for sugar and wood pulp, and
periodic droughts.
Swaziland has been able to achieve relatively high
growth rates over the past decades, based on market-
or.ientedeconomicpoLcies, with very litdlegovermnent
interventionon prices and wages. Favorableconditions
for foreign investment, including political stability, a
number of fiscal incentives, and liberal regulations on
profit remitances have been the basis for developinga
large private sector mostly consisting of South Africa-
based investments. In addition, the goverment has
pursued a cautious fiscal policy, avoiding large deficits
and limiting the size of the public sector. The govem-
ment controls a few strategic sectors, such as public
utilities, but the size of the public sector as a whole is
not large by African standards.
Economic actmty accelerated between 1986 and
1989when real GDP growth averagedover 5 percent a
year. This accelerationwas led by a foreigninvestment
upswing tnggered by the tighteningof sanctionsagainst
165
South Africa, concentratedin export oriented manufac-
turing activities, and a relati-reimprovementin inlema-
tionalcommodityprices andvweatherconditions. During
1990-93, real GDP growth fell about 2 percent a year.
Weaker commodity prices and the onset of another
recession in South Africa have affected manufacturing
and commercial agricuture, and foreign investment
flows.
Wage employment, about 25 percent of the labor
force, grew by an average annualrate of 2.2 percent in
the 1980s, well below the 5.9 percent rate during the
1970s, and slightly below the labor force growth of
about 2.3 percent a year. Increasesin wage employment
are estimated to have slowed further during 1990-92;
there is, consequently,a growing unemploymentprob-
lem that is primarily urban in nature.
Substantialbudgetary smpluses were recorded over
1987-91.As a result of these surplusesthe government
became a net creditor to the banking system and has
been making net repayments on external publc debt.
During 1990-91, a large proportion of the budgetary
surpluseswere steriized throughthe CapitalInvestment
Fund, a provision made by the governmentto finance
fumre investments.However,expendituresare catching
up, particularly capital and personnel expenditures,
creating concerns about future sustainability. The
budget deficit has resurfaced m 1992 and is estimated
to have increased significantly in 1993 to about 6.5
percent of GDP.
Money supply growth averaged 34 percent over
1989-93, based on rapid expansionin net foreign assets
while net domestic credit remained relatively un-
changed. Credit to the private sector expandedby about
27 percent annually, while net credit to the government
was negative, reflecting large budgetary surpluses.
Since 1988interest rateshavebeen keptdeliberatelylow
and below those in South Africa with the objective of
encouraging productive investment and reducing the
commercialbanking system's liquidity. Unfortunately,
this policy did not have the intendedeffect on domestic
investnent, has rather encouragedshorn-term rade f6-
nancing. Negativereal interest rates have discomaged
financial savingsand encouragedcapital flight to South
Africa where the rates are significandyhigher.
 Swaziland
Most prices are free in Swaziland,with the exception
of those for petroleum, cotton, milk, maize, tobacco,
and public sector utilities. These prices are adjusted
periodically to reflect changes in costs and market
conditions;but price adjustmentsfor some utilitieshave
been insufficient to cover costs. Domestic inflation, as
measured by the consumer price index which closely
follows the South African price trend, averaged 13
percent between 1986and 1990, followinga 20 percent
hike in 1985causedby the depreciationof the lilangani,
which is pegged at par to the rand. Estimated 1993
inflation was 17.0 percent.
Swaziland's balance of payments was strong in the
late 1980s, which translated into a buildup of foreign
reserves. The contributingfactors were customs union
.eceipts, rapid export growth, and direct foreign invest-
ment. This is unliey to continueas both customsunion
receipts and exportgrowth are expected to level off.
External Debt
Swaziland's external debt profile has improved mark-
edly in recentyears. The debtoutstandingand disbursed
to GDP ratio has declined from 54 percent in 1986 to
25 percent in 1993. Estimated debt service ratio was
about 3 percent in 1993.
Medium-Term Prospects
Swaziand is at a crtical stage in its development. The
ihangingpolitical circumstances in the subregion are
also likely to have pmfound economicimplicationsfor
Swaziland. Orderly political transiton in South Afica
would renew investor interest there; instability would
discourage foreign capital from the entire subregion. In
either case, Swaziland will be at a disadvantage. For
Swazilandthis could mean a reduction in direct foreign
investmentflows. Changes in customsunion tariff and
non-tariff barriers could also affect Swaziland's com-
petitiveness. There is growing unemploymentin the
formal sector, which is likely to cause pressures on
public expnditures, and macroeconomicmanagement
is likely to become more difficult.
Diminshed customs umon protection would mean
that Swazilandwould no longer be able to count on a
166
protected market and would have to tum increasingly
to export markets outside the union countries - there
has already been a major restructuring of its textile
capacity in anticipation of these changes. Investment
efficiencywill thus be at a premium. Investmentincen-
tives structure may thus need to be revampedto ensure
an outward orientation for this purpose.
While Swaziland's macroeconomicmanagementhas
been good, the recent trend in public expenditures is a
cause for concern. Possiblereduction of customs union
revenues-which now provide about half the govem-
ment's revenues-through a lowering of the tariffs is a
real possibility. Expendituresfor terdary educationhas
been one of the driving forces behind recent increases
in public expenditure.While Swazilandhas an cviable
record of investment in human resources develop-
ment-gross enrollment ratios are high, about 100
percent at the primary level and 50 percent at the
secondarylevel-there are issues of efficiencyof public
expendituresin the sector. Similar efficiencyconcerns
also apply to other areas, including the parasttals.
There may also be a need for changes in monetary
policy. Interest rates are generally negative in real
terms, particularlyon long term deposits which has not
helpedfinancial savings,caused capital flight, and have
hardly promoted capital investment.
Poverty and Environment
Quantitativeinformationon absolute poverty m Swaz-
iland is absent, but visual evidenceof it is rare. There
are also no income distnbution data. Nevertheless,
given the duality of the economy, it is likely that there
is a considerableincidenceof relativepoverty. A major
challenge for the future is thus how to integrate the
traditional sector with the modern sector and ensure a
better distrbution of income-earningopportmities.
Land degradation through overgrazing is becoming
a major issue, as dramadzed by the recent drought.
Farming systems are also not conduciveto soil conser-
vation. The incidence of urban pollution is not high.
The government is aware of the need for proper con-
servation practices and there is work in progress to
identify a strategy for environmentallysustainable de-
velopment.
 Swaziland
Populationmid-1992 (mfmins) 0.9 Income group: Loww-middle
GNP per capita 1992 (UIS$) 1.090 Indebtednesslevel:Below a owabe

KEYrRAnOS
1980 196 1991 1992 1993 l.wubfntt&GDPr.U(%)
GrossdomestlcrivesmentGDP 30.3 26.2 20.1 25.3 20.2
Exportsof goads and nrlGDP 69.5 56.4 79.3 82.6 80.4
GrossdomestircsagslFGDP 6.5 4.7 10.5 10.9 1.6 0- _
Grossr
nationasaingslGP -4.1 16.0 12.5 11.5 1.0
Cwunt accunt ba_ncelGDP -3.2 -24.7 -10.9 -11.8 -19.3
InterestpeymentsDP 1.5 2.3 1.0 0.9 0.9
TotaddebtlGDP 36.0 67.3 30.1 2&6. 26.0
Total dnbUeo 46.5 67.9 31.4 27.9 37.4 -7 a 0 12

GDP. PRODUCTION

1%ofGDPJ 1930 1985 1991 1992 1993 Sh_afOGOPbyadtr(%)

Agricuture 23.7 20.7 16.5 13.1 _ 10.
Industy 32.0 26.0 44.3 48.7 _
Manualcturnng 22.3 16.2 41.7 45.6 _
Servies 44.3 53.3 39.2 38.2 _
50
1930-85 1985-93 1m 1992 1993
Agricuble 0.0 -2.1 1.9 -32 6.8
Indusby 1.6 122 4.0 5.6 4.1
Manu lctuuing 2.7 15.6 2. 5.7 .. a -. _-.-.
Servki 6.7 32 0.2 -37 1i4 a m au a 2P
W.m *1_U OSls
GDP 3.7 -4.0 2.6 1.4 2.0

GOP.EXPENDITURE
o1980 1935 1991 1992 1993 Gmw oarlua"GDP(%)
Pui'le consumplon 74.4 72.5 72.3 668 73.1 2
GtneralgovenmeMtconsumption 13.1 228 17.2 22.3 25.3 *.
Gosnsdonestio wsestent 0.3 26.2 20.1 25.3 202 o
Expolsof goodsandnfs - 95 56.4 79.3 82.6 80.4
A a h in 92 n
mts of goodsandnfs 93.3 78.0 88.9 97.0 99.1 -o /
i9810-5 1985-13 1191 1992 1993
Privat consamption ..
Gonal goenrnerteonsumpbon . ..
Gamssdomastc _ 1nolu 4.0 7.1 4.7 -1.8 .-
Expou.sof goodsandnks -2.0 9.3 0.8 -4-4
Importsofgoodsandnb 1.4 7.8 2.2 4.6 4 0
Grossnabonalproduct 3.0 -3.0 3.9 -0.3 0.8 -a -eoP
Grossnatonalincoe 3.5 3.9 2.4 2.7 _

PRICESand GOVERNMENT FINANCE

1980 19SU 1991 1992 1993 Changeo
f GOPdetaorand
CPI I%)
Dmneatlprk.s50~
(X change) aWN
Con er pdces 18.7 20.5 10.h 8.2 17.0
Wholesaleprices .. .. _ .. .. .
ImplicitGOPdeflator 18.9 6.1 4.1 4.8 1Z3
GovlrhmntSfiancl 57 n *
n Uz In n
(%cGDP)
CQnutbudgebla_ne 14.0 7.9 11.8 4.6 1.7 -
OvandI _un- .. - .. _

167
Swaziland
POVERTYand SOCIAL
(annualgrwth ses) 198045 1985.93 Devulapmuetdiandn'
Popubbon 3.1 3.8 Lee_dncy
Labor borce 2.2 2.4
most mcsnt.stknnml (--I
Poverty level: headcountindex fS of,opultaion) .. GNP Gros
Life expectancyat birth 57.2 per PlbitY
Infant modality(per tousandie bMrths) 108.2 llno\f a
Chid malnutrifion(7Sof chlrn undar-5) 9.7 ap/
Aess to safe water (S afpopulatbn) 30.0 -
Enegy consumptionpercapia (kgoffequlnt) 254.6
liRraqcy(S of populatIonago 15+.) 32.1
Gross pdmary enrolment (S ofssQooge population) 111.0 A lo se er

TRADE
(milansUSS) 1980 19B5 1991 1992 1993 ExportandnpPotkiveI(mILUSS
Totalexirts (fob)
n.a . - *
n.a
ManufaWres .. .. _
Total impcsts(cit) .. _
Food -- -
Fuel and ener..gy -. ..
Capitd goods .. . .. .. ..
Exportpric index(1967=100J .. _ _ .. .. . , - ,. . ,
Inpot priceindex(1987t100) .. .. . .. . 9
Terms of ttade(1987=100) .. _ -- . .
Opennessof economy(adwGDP,X) 163 134 168 180 180 DEsui sav
BALANCE of PAYMENTS
(mEbwsuss 1910 1985 1991 1992 1993 cc bGwto GOPraio IS)
Emerts of goodsand nfs 404 205 676 705 625
Imports of goodsand nts 617 335 785 822 793 1
Reource balanc -213 -130 -109 -117 -168 a
Netfactorincome 4 38 15 11 63 57 " D 1 2
Nat currenttransfers 0 0 -1 1 0 -s
Current acount balnce
Befoe officil bansfers -211 -89 -96 -106 -173 .10
Affer official transfers -132 -39 3 25 -58
Long-termcapital inflow 35 13 40 4 6
Total other items(net) 133 21 -30 6S 7
Changesi net reserves -37 5 -13 -95 45

Reservesexcuding gold (mil. USS) 159 83 172 309 254

Reservesinduding gold (mg. US$) 159 83 172 309 264
Official exchange rate(kcafUSS) 0.8 2.2 2B Z8 3.3

EXTERNAL DEBT
Expot ratfos 1980 15 1991 1992 1993 Sbuctm ainm debt(%)
Long-tm debteports 41.9 77.4 30.5 27.2 36.6 1
IMF rectexports 1.3 5.1 0.0 0.0 0.0 .
Shitn-term debtWexports 3.3 5.4 0.6 0.7 0.8 .I :
Total debt senwcdexprts 40 9.9 3.3 3.0 4.2 OPNC
GDPabs . OPM,
Long-lern debWGDP 32.4 59.3 29.6 25.9 25.5 D ! - i *Olt
IW caeMIGDP 10 3.9 0.0 0.0 0.0;
Shoat-term debtGDP 2.6 42 0.5 0.7 0.5 '
Losng-em debt faffos
Priate nonguarmnteedlbong-term 0.0 0.0 0.0 0.0 0.0
Public and pubricly gurantod aU u H 9S
Privae crudorsflorig-tern 12.8 10.7 20 1.5 0.5
Officialcrditcrslngterm 87.2 89.4 9&0 98.4 99.5

mhdavebpment diamond shows a evel of development in the countiy compand with its income grmupaverage.

168
 Tanzania
W ith an estimated GNP per capita of about
$110 in fiscal 1992, Tanzania is one of the
poorest countries of the world. Covering an
area of 945 thousand square kilometers, it has a popu-
lation of about 26 milliongrowing at 3 percent annually.
Lying just south of the equator, the mainlandstretches
west from lakes Victoria, Tanganyika,and Nyasa to the
Indian Ocean in the east. The center of the country is
covered by high plateaus while the north and south are
mountainous. Zanzibar, Pemba, and the smaller Indian
Ocean islands are home to about 3 percent of the
population. The economy is heavily dependent on the
agriculturalsector (60 percent of GDP) with the diverse
ecology supporting cultivation of coffee, cotton, tea,
cashew nuts, sisal, maize, rice, wheat, cassava, and
tobacco. The small manufacturing sector produces a
range of products including textiles, processed foods,
and chemicals,and the miningsectorhas good potential.
Tourism is one of Tanzania's dynamic sectors with
significant growth in recent years. The large service
sector is increasingly an importantsource of employ-
ment.
Following independence in 1961. the economy, bur-
dened with a legacy of extensive poverty, dependence
on subsistenceagriculture, a small industrialbase, and
a limitednumber of educatedand rained personnel, still
managedto grow at about 6 percent a year through the
late 1960s. In 1967 the government's ArushaDeclara-
tion called for the esablishment of a socialistsociety in
response to growing ncermsaboutwidespreadpoverty
and income inequality. The public sector was given a
leading role and state control was extendedthroughout
the economy. This includednationalizationof all com-
mercia and financial firms occupyingthe commanding
heights of the economy, collectivizationof peasant
farming, and granting exclusivemarketingand process-
ing rigbts to cooperadves and marketing boards.
Overall, the govenment was successfulin forging a
uiifled nation and makingprogress in improvingsocial
conditions. However, while GDP continuedto grow at
about 5 percent into the early 1970s, structural weak-
nesses within the economy began to emerge. Govern-
ment interventionsundermined the developmentof the
private sector through price controls and restrctive
169
marketing policies thatreduced incentives to produce,
large investnents in inefficientindustrialparastatalsthat
inhibitedprivate sector competition and drained public
sector finances, and directed credit and interest rate
controls that impairedthe efficiency of financial inter-
mediation.During the rest of the decade the effects of
the flawedeconomicpolicies,combinedwith successive
droughts, a cosdy war with Uganda, the breakup of the
East African Community,and a fall in the terms of trade
includingthe oil price shocks,led to a protracteddecline
in output-
By the early 1980s economic decline and macroe-
conomicimbalancesweie severe. Real per capita GDP
contracted in each of the years during 1981 to 1984,
exports collapsed, industrial outputdeclined 15 percent
a year, and capacity utilization fell to less than 25
percent. Importswere compressedto the point that they
were no longer sufficientfor the normal functioningof
the economy, and there were widespread shortages of
goods. Budget deficits reached above 10 percent of
GDP, inflation remained unabatedat over 30 percent,
the shilling was significantlyovervalued, and payment
arrears on external debt began to mount. Social progress
achievedin the 1970sbegan to be reversed. There were
several inadequate attempts to address these problems
through a series of annual 'Economic Survival Plans".
Economic Adjustment
In early 1986 Tanzania embarked on an adjustment
program to dismantlethe system of pervasiveeconomic
controls and encourage private-sector participation in
the economy. The program included a compreensie
package of policies that reducedthe budget deficit and
improved monetary control, substantially depreciated
the overvalued exchange rate, liberalized the trade
regime, removedmost price controls, eased restrictions
on the marketingof food crops, freed interest rates, and
initiated a restructuring of the financial sector. The
governmentalso launchedprograms to rehabilitateand
improvemaintenanceof key infrastructure-roads, rail-
ways, and ports-and to strengthenresearch and exten-
sion services. The economy respondedpositively to the
reform program and the acoDmpanyingincreased avail-
 Tanzania
ability of external resources, with increasedproduction
of food, some increase in traditionalexport crops, and
a strong rise in nontraditioni' -norts. During 1986-92,
both GDP and total exports grew at an averageof about
4 percent a year in constant prices. Inflationdeclined
from a high of 36 percent in 1984,but remainsat above
20 percent.
Despite the progress of reforms, the economy faces
considerable difficulties. The gradualist approach to
adjustmenthas meant that substantialreformshave yet
to be implemented:the processingof importantagricul-
tural exports remains controlled de-factoby inefficient
monopolies,excessive regulationsthrottle private sec-
tor operations, financial services still are provided
largely by inefficient public institutions, and ineffi-
cient-and often bankrupt-parastarals continueto play
a major role in the industrial sector. The economydoes
not generate sufficient savingsto sustain development,
and large inflows of external resources are required.
With approximately45 percent of the populationunder
the age of 15, present rates of output growth may not
be sufficient to create the employment necessary to
absorb expectedlarge increasestothe labor force, much
less to significandy raise the well-beingof most Tan-
zanians.
The public sector lacks the capacity to cope with the
challengesposed by extensivepoverty, a rapid increase
in population,a growing menacefrom AIDS, the break-
down in essential infrastructureand the disastrousstate
of most public services. Ret political turmoil in
neighboring Rwanda has imposed a major burden on
Tanzania's Kagera region. The economyand surround-
ing environment in the region have been damagedby a
sudUta influx of nearly half a million refugees.
After three decades of rule by one parry, Tanzania
has embarked on a process of political reform.. Multi-
party elections at the iocal level are scheduledfor late
1994,with electionsfor president andparliamentsched-
uled a year later. The introductionof political parties
into the political arena has been a new experience for
Tanzania and it is difficult to predict what impact the
elections and increasing political tensionswill have on
the implementation of economic reforms. Some con-
cems have been raised over the goverunent's ability to
undertake difficult reform measures duringthis period.
Recent Economic Performance
Macroeconomicmanagementdeterioratedsignificantly
in fiscal 1993 and early fiscal 1994. The fiscal deficit
(including grants) equaled 8 percent of GDP in fiscal
1993, and government borrowing from domestic
sources reached 5 percent of GDP during the second
quarter of fiscal 1994. Monetaryexpansion was above
program targets, increasing at over 40 percent in fiscal
170
1993. There are several reasons for this deterioration.
Tax revenuesfell owing to a declinein rates, continuing
problemsin customsadministration-customs collected
less thanhalfof taxes assessedand payableon imports-
difficulties in implementing the planned reduction in
exemptions, delays in implementingthe new pre-ship-
ment inspection system, and the impact of a severe
drought on economicactivity. Aid disbursementswere
less than expected due to slow implementationof pro-
jects and the reform program. Finally. expenditure
control suffered a breakdown, increasing expenditures
in fiscal 1993 and leading to a huge check float that
carried over into the first half of fiscal 1994.
In response to the deterioration in the macroe-
conomicenvironmentin the first half of fiscal 1994,the
govermmentmade a deternined effort to re-establish
expenditure control and rein in excessive monetary
expansion.The govermmentinstituteda cash system for
controlling expenditures: no checks were to be issued
without sufficient funds, and the public sector banks
were instructednot to honor checks issued on accounts
that didnot containsufficientfunds. As the rate of public
expenditure was far in excess of available cash, the
policy resulted in a sharp reduction in expenditures.To
keep paying salaries, the governmentwas forced to cut
off funds to development projects and close a large
number of primary and secondary schools.The govern-
ment also took steps in January 1994 to reduce unnec-
essary expendituresand raise revenuesthrough controls
on foreign travel, reduction in staff at embassies, re-
duced use of vehicles.the eliminationof tax exemptions
grantedin August 1993,and the introductionof selected
tax increaseand additionaltaxes. This program appears
to be working, as tax revenucshave increased substan-
tially and the government has remained within the
monetary targets in its economic program through the
first four months of [994.
Tanzania's main developmentobjective is to stimu-
late the private sector's capacity to produce and deliver
goods and services, while limiting the role of the public
sector and strengthening its capacity to manage the
economyand provide essentialservices. Major areas va
the program includemacroeconomicmanagemcnt,pub-
lic sector reforms,private sector development,rehabili-
tation of infrastructure, agricultural development,
human resource development, poverty reduction, and
environmentaland land policies.
The medium-termgoals of the government'smacro-
economicmanagementprogram are to strengthenfiscal
policy throughimprovingtax administrationandpolicy,
eliminatingunnecessaryexpenditures, and reallocating
of expendituresto improve efficiency,tighten monetary
control through severe limits on commercialbank ac-
cess to central bank refinancing, eliminate credit to
coop2rativesand parastatalsunable to repay their debts,
 Tanzania
and the managementof reserve requirements, foreign
exchangeauctions,and treasury bill auctionsto conform
to credit targets. It also aimsto increasemacroeconomic
efficiency through structural changes including in-
creased allocation of credit by private-sector banks
rather than public-sector institutions, liquidationof in-
solvent agricultural cooperatives, and the privatization
of industrial parastatals. Substantialprogress has been
made in liberalizing the trade and payments system,
including unification of the exchange rate, easing of
restrictions on the access to foreign exchange, and
eliminationof a number of admrinistrative impediments
to trade.
The goverment's effort to mnnage the transition
from a public sector heavily involved in all aspects of
the economy to one that focuses on maintaining an
appropriate mcentives frameworkand providing infra-
stucture and social services includes retrenching
50,000 civil servantsover a three-yearperiodbeginning
in fIscal 1993, along widLa hiring freeze and implemen-
tation of a longer-term personnel control system. It
plans also to introduce a three-year rolling plan forward
budget to make budget allocations more responsive to
current priorities, reorganize ministries to take into
account the reduced role of the state in economic
management,and establish al adequate incentivessys-
tem for the civil service, iLcluding monetization of
various in-kind benefits and rationalization of the pay
structure to improve motivationand performance.
The govermmenthas establishedthe legal and insti-
ttitional famework for its privatization program, and
developed procedures for liquidation, divestiture, and
performance agreements.Budgetarysubsidiesto paras-
tatals have been reduced. The hard budget constraint
adopted by the government provides for removal of
preferencesand eliminationof subsidiesfor commercial
parastatals, exceptfor limitedtransitionalarrangements
to support privatizafion.
Governmentpolicies eliminatingor simplifyingvan-
ous trade restrictions have improved the efficiency of
the trade system. The governmentwiUtake further steps
tw ensure that all economicsectors are open to private
:nvestment and eliminate unnecessary adminmstrative
clearances. It has also initiated a program to strengthen
the court facilities, legal expertise, and accounting
systems.
The economiccrisis of the 1970sand early 1980sled
to a severe deterioration in infrastracture. The most
serous problem has been a failure to allocate sufficient
resources to maintenance. The dilapidated transportz-
tion network, frequentpower outages, bottlenecksat the
port, and lack of adequatetelecommunicationsservices
have severely constramed growth. Under the reform
program, the governmenthas achieved substantialpro-
gress in improvng management, financing, and reha-
171
bilitationand maintenanceof infrastructure,particularly
in the area of road transport. In agriculture, production
incentives for traditional export crops (coffee, cotton,
tea, cashews, sisal and pyrethrum) havebeen improved
through the unificationof the exchange rate system and
passage of a bill to eliminate legal impediments to
private sector entry, although regulations still need to
be issued ensuringunrestrictedentry into the marketing
and processing of these crops.
SocialIndicators
Despite the government's commitment to providing
basic health and educationservices, the economiccrisis
of the 1980s led to drastic deterioration in Tanzania's
human development indicators and the modest gains
made since independencewere severely eroded. More
than 10 percent of childrcn die before they reach their
first birthday, high mortality and morbidity rates from
infectiousand parasitic diseaseshave persisted for dec-
ades, the malaria epidemic is out of control, and Tan-
zania's HIV rate is among the highest in the world.
Health servicesare severelyconstrainedby the shortage
and poor allocationof resources, weak implementation
capacity of Health Ministry, impediments to greater
privae sector involvement,uncoordinateddonor activi-
ties, and inadequatecost recovery. The major challenge
facing the government in education is to reverse the
rapid declinein its quality and the related drop in school
erollments over the past decade.
The goverment's program to reduce poverty -is
based on three pilars: an accelerationof labor-absorb-
ing growth increasesin the level andefficiencyof social
sector expenditr, and targeted interventionsto assist
the poorest segments of the population. Income from
traditional export crops, a substantialshare of which is
producedb:' smalUholders,should increasein real terms
fromenhancedproductivityand rises in real cropprices.
The food securty program and the operation of the
strategic grain reserve are designed to forestall food
price spikes and aDeviatetemporary shortages affecting
particular areas and vulnerable groups. The reform
program for the civil serviceand parastatalswill include
safety net features for adversely impacted low-income
workers, including a retrenchmentcompensationpack-
age for the civil service and severance payments and
retaining opportunities.The governmenthas develo74
a poverty profile that will enable it to strengthen future
policy formulation and target its program effectively
both by groups of people as well as by region.
Environment
Improvementsin the managementof the environment
are importantto ensure apopriate pricing for non-re-
 Tanzania
newable resource and to arrest degradation of natural
resources. The govermnent is finalizinga national con-
servation strategy and a national environmental action
plan, which will include measures to reduce land deg-
radation, halt destructive deforestation, and mitigate
urban pollution. Priorities include strengdtening of the
National Enviromnment Council and building capacity in
line ministries to integrate environmental concerns in
development efforts.
RegiGnal E:conomic Integration
In the past two years, there bas been renewed interest
in regional integration among the former members of
the East African Community (Kenya. Tanzania, and
Uganda). This interest has been revived mostly becase
trade in the three countries has beu greatly liberalized
m the past few years and exchange rates are essentally
convertible.-Technical working groups have been con-
stituted in a number of countries to prepare proposals
consistent with a common program of action defined in
Harare in December 1992.
Mledium-Term Prospects
Tanznia's balance of payments will continmuto face
large external imbalances over the medium term and
require continued exceptional financing. Taling ac-
count of the government's adjustment pmgram in the-
mediium term, export volume growth is expected to
average 8 percent over Thenext few years. It should be
noted that part of this growth rate merely r-flects a shift
of exports from the parallelmarket to the official market
172
now that the exchangerate has been unifiedand theade
regime is simplified. The adoption of a policy allowing
full retention of foreign exchange for non-traditional
exporters is expected to boost further the production of
non-traditionalexports, which are projected to grow at
an annual average rate of about 15 percent in volume
terms. Importvolume growth, at 4 percent. is expected
to be lower than the rate of GDP growth, projccted at
5 percent per year. This reflects an assumed improve-
ment in the efficiency of import use owing to a more
appropriate exchange rate policy as well as due to the
positive impact of parastatal and financial sector re-
forms. The services account is projected to improve
slightly, reflecting an incrase in receipts from tourism
and a gradual decline in interest payments. Finally.
private transfcrs, which reflect parallel market exports,
are expected to decline as the parallel market is inte-
grated into the official market through the further
liberaization of the exchange and trade regime.
Exbmal Debt
Tanzania faces a severe debt problem. Currently, it is
servicing only multilateral debt and a small portion of
its liabilities to bilateral creditors, with the remaining
bilateral debt covered by Paris Club agreements and
the commercial debt in arrears. The govemment is
putting in place an effective debt management system
and has formulated an overall external debt strategy
that calls for obtaining ssistance from donors to reduce
debt owed to official sources, including more conces-
sional rescheduling terms from the Paris Club and
resources.
 Tanzania
Population
mid-I992(millions) 25.9 Incomegroup:Low
GNPpercapita1992(US$) 110 Indebtedness
level:severe

KEYRATIOS
1980 1985 1991 1912 1993 Invs1nwnttc GOPr'Ii(SI
Grass domesticini,estmentlGDP 23.0 15.7 38.5 413 a
Exportsof goods end nfsIGDP 13.2 6.2 15.1 20.8 4
Gros domesticsavings/GDP 9.5 7.1 4.4 4.6 30
Gross nationalsavings/GDP 10.0 8.7 . . .

Currnt accou.t balancelGflP -10.5 -7.5 -25.7 431.5 la.

InterestpaymentslGDP 0.9 0.4 1.0 2.2
Tota debtIGDP 48.2 54.3 202.7 244.60
Tota debtexports 356.3 789.9 1,05635 1,021.3 1.056A SF - Uso s In 31 2 93

GDP:PRODUCTON
(%OI'GDP) i~~~~~~~1m
1985 1991 1992 1993 ShwmsafrsDPrbyisectorl%AI

Aguicitue 44.4 56.7 51A 61.4 .

Inidustry 15.9 9.3 10.4 12.1
Mamztaaturing 10.9 5.2 3.4 4.5
Services 38.6 34.1 28.2 26.5
so
1980-85 1985-93 1991 1992 1993
(aveamgeannuaflgmowUi)
Agrclture 2.9 4.9 4.0 4.4
Industy -4.8 6.3 4.4 2.7
MUmifcu*UIrCn -4.7 4.3 12.0 1.9 . .........
ServIces -0.2 2.7 335 23 a. aB so Di 2 S

GDP 0.9 5.8 1.6 3.7 _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

GDP: EXPENDITURE
(%cf GDP) 1980 illS 1991 1992 1993 wh oGD&dGPA
Privateconsuimption 77.1 77.5 85.4 85.0 ..

Gener.algovernmentconsumption 13.0 15.4 10.2 10.5 3.

2
Gmossdomestc investrmet 23.0 15.7 38.5 41.9
Exportsofgoodrsandnls 13.2 5.2 16.1 20.8 2a
Importsofgoodsand nfs 26.3 14.8 50.2 58.1 2.
is
(averae arnualgrowth) 1980-85 1985-93 1991 1992 1993 ii
Pinvateconsumption .

Generalgovernmentconsumption .

Grossdanmestiirnvestmet 2.2 4.6 35.5 -11.2 n2

Exportsof goods and ifs 40
Imuportsof goodsand nfs .. 5
G rossnaonaproduct 0.9 4.9 13. 2.9 ..- cG .- o
Gras nationalincome . . . . .

PRICESend GOVERNMENTFINANCE
1980 INlS 1991 1992 199 Changeof GOPduflutorandCMI
f%)
Doaneacpdc.s en
(% dunfg.) 30
Consutier prkces 30.3 33.3 22.3 22.1 .
VYhdaIes.lprices . . . . .
Implicit
GDPdella-for 13.0 34.0 26.0 12.'9'
Govumnmunt
finance s7 a * a m1 a2
(%a?GDP)
Currentbudgetbalance -1.0 -1.9 -0.3 14 .. MWd CP
Overal supkrpldeticit -125 -6.4 -2.7 -2.6 _______________

NotwEconmic dat rfetr to mainlandTanzanVo

only.

173
Tanzania
POVERrT and SOCIAL
(amnuslgowth mates) 198015 1198543 Devlopmnltdlmond
PopulatIon 3.2 3.0 i.e expecacy
Laborfore 28 3.0
mostrcant mtMmIm .m.)
Povry level: headoountindec(% oFpopu/ion) .. GNP aM
G
Ulfeexpeancy at birth 50.8 per phray
Infantmortaly per thousandAv bitha) 91.6
Chid malnutrition(N otfchAiw urmderS) 25.2 C i
AccesstD safe water f% of pqJOUIIon) 52.0
Eney consmption per capia fkg oieqdu/n 30.2
literam (l of popuIan age 1S) ,A to dc wat,
Grmsspunary enrolment (N of scDoolLag poputa) 69.0 l _ .

TRADE
(mI"BUsUS:) 1980 191185 19P1 1992 1993 tEpn undImportlevis (muLUS$)
Total exports (fob) 583 337 361 397 367 1Aw
Coffee 119
1. 77 60 88 1.1
Cotton .. 30 63 98 55 121w
Manutows . 33 70 64 53 . 1
Totalimports(cif) 1.219 946 1.189 1,526 1,151 a
Food .. 78 1 49 57
FuelandeneWr 0 224 1S3 102 99
Captal goods 0 434 559 719 537 4_
Exportpriceindex(1s97-100) .. 113 S6 6 74 .
Inmprt pric indec (1987=100) .. 80 8 1.24 95 D27 u n 10 l 2
Tems of tade (1987100) .. 141 87 72 78 -h
Ct
Opennessof economry ( .dXGDP%) 39 21 E6 79 .. 3EIEIt O s,u
BALANCE of PAYMENTS
(mtmes US:j 1930 1985 1991 1992 1993 Currntaunt to GOPadoC
gnoprc
Exportsof goodsandnft 673 445 529 657 611 o" 7 a 91i 22 93
Imports ofgaodsand nfs
Resom balance
Net*torincome
1t221
-548
-14
1,016
-571
-93
1.569
-1.040
-185
1,701
-1.134
-159
1.851
-1.239
-172 -ti
7 6s U - I
iI
S U 03

Net currenttransfers 22 148 408 455 463 -is

Current aceountbalance
wrtfe cdfiJ transfers -CA540 -516 -418 866 -948 4e t
After oic transfs -432 -347 -289 -297 -35I
Long-term capit nflkow 363 283 -548 -560
Total owherims (net) 3 78 898 960 . _

Changesin net reserves 66 -14 -82 -102 123 -s

memo:
Reservesexcluding gold (mif. US$3 20 16 204 327 203
Reservesindtudinggold (mg. USS 20 16 204 327 203
OffIc exnge ateW7kcaLUSSJ t.2 17.5 219.2 297.7 405.3

EXTERNAL
DEBT
EXprtra1ffAL 1930 1985 1991 1992 1993 S cma xwalel dat()

Log-trm debt/exports 287.6 626.4 954.8 921.6 1.009.5 1I

IMF credltlexports 24.6 122 23.5 33.6 34.8
Sho-tem debeoports 44.1 151.3 782 66.1 12.2 U .
ToW debt senericexpoots 21.7 34.1 21.6 -27.4 26.4 -,M

GDPraffos i OPnW
Longterm debUGDP 35.9 43.1 183.2 220.7 . '5 - ,cIL
IMF crediGP 3.3 Q8 4.5 8.0 I.
Short-tem debt/GDP 6.0 10.4 15.0 15.8 . |
Long-n debt fileos
Privatenonguaranteedlong-erm 42 0.6 0.2 02 02 - i
Public and publicly guwanted r - -o
g 1 c 3
Privateczedltrsllong-tsrm 12.8 11.6 4.3 4.0 2.6 1 _

Offiial crnditorslongterm 83.0 87.7 95.5 95.8 972

The devlopment diamond shws a leve of deelbpment in the county compared wih its income group aveage.
T

174
 Togo
T ogo is a small country, covering an area of
56,800 square kilometers with a population of
about 3.8 million. Located on the Gulf of
Guinea, midway between Nigeria and CMted'Ivoire, it
is relatively well-endowed in terms of agricultural and
mineral resources. The economy is based on agricul-
ture, which traditionally generates about 30 to 35
percent of GDP and provides the livelihood of almost
80 percent of the population. Subsistenceproduction of
food crops is the principal economic activity; cotton,
and, at a lower level, coffee and cocoa, constitute the
most important sources of cash income for the rural
population, and export of those crops providesabout 20
percent of the country's foreign exchange earnings
Togo is largely self-sufficient in food production, al-
though there are significantregional disparitiesbetween
the wetter south and the more savanna-like north. The
secondary sector, dominated by phosphate mining and
a small-scale manufacturing sector, contributes about
20 to 25 percent of GDP. The service sector makes up
the remaining 40 to 50 percent of GDP and includes a
vital commerce sector and a banking system, which,
until recently, was relatively healthy and served the
entire sub-region. A well-developedhighway network
linling its capital and principal port, Lome, with neigh-
boring Benin, Ghana, and BuzkinaFaso supports transit
and trade activities which, due to Togo's geographical
position and to a long period of political stability, were
well developed until recendy. Thus, Togo's economic
growth potential is significant, particularly in agricul-
ture, regional trade and commerce, and in smnll-scale
industrial production. However, the country remains
poor, with an estimated GNP per capita o' only $390
equivalent in 1992.
With phosphate mining and, later, cotton as its
principal source of export revenues, the Togolese econ-
omy enjoyed private-sector-led growth and financial
stability for a decade and a half through the early 1970s.
Buoyed by a quadrupling of phosphate prices in late
1974, the government embarked on a program of pub-
Liclyled growth based upOnincreased public investnment
and the creation of public enterprises, including those
in phosphate mining and cotton. By 1978,public expen-
ditures had climbed to an unsustanable 46 percent of
175
GDP. As internationalprices for phosphate, coffee, and
cocoa dropped below boom levels, Togo began to
finance its increasing public sector and balance of
payments deficits through external borrownng and ar-
rears accumulation.As a result, Togo entered the 1980s
with a high external debt and an economy saddled with
a large and inefficient public sector.
To redress the macroeconomicand structural rigidi-
ties, the goverment obtined IMF and World Bank
suppoIt for an economic reform program. Debt relief
from the Paris and London Clubs followed. The reform
efforts succeeded in reversing the negative growth rate
trend. Whereas real GDP growth had averaged -1.7
percent a year during the period 1980-83, it averaged
2.5 percent a year over 198486.
These efforts were interupted in late 1986 when a
combinadonof drastic changes in Togo's terms of trade
and high government expendituresled to a deterioration
in Togo's fiscaland external financial situation. By 1987
the fiscal deficit had inceased to 9.0 percent of GDP.
External arrears had reached 8.5 percent of GDP and
the rate of real GDP growth had fallen to 0.5 percent.
Reform efforts resumed in 1988. The government's
third structural adjustment program, supported by the
World Bank and IMF, had as its objecive achieving a
sustained real annual rate of growth of 5 percent by the
early 1990s. Under this program, the government
adopted a pricing system for cash crops that lined
producer prices to world market conditions, largely
eliminated quantitative restrictions on imports. revised
the investment code and established an export process-
ing zone, and reduced the number of enterprises in the
public sector portfolio.
The fiscal deficit was brought down to 6.1 percent
of the GDP in 1989 and the current account deficit of
the balance of payments to 10.2 percent. Assisted by
favorable climatic conditions, amnal real GDP growth
averaged about 5 percent in 1988-89.
Recent Economic Developments
Beginning in late 1990, the Togolese government came
under increasing pressure to establish a multi-party
system. Following violent streat riots and mass civil
 Toga
disobedience, a national conference was convened in
July 1991 and led to the formation of a one-year
transition government. Parliamentary and presidential
elections were scheduled for July 1992. However, po-
litical violence, which forced 300,000 Togoleseto seek
refuge in neighboringcountries, disturbedthe electoral
calendar, led to a general strike by the opposition and
trade unions, and brought most economicactivitiesto a
standstill from November 1992 through August 1993.
In condemnationof the lack of progress in the electoral
calendar, bilateral aid was cut off. Following interna-
tional mediation, presidential elections were held in
August 1993and the president was re-elected. Legisla-
tive elections, held in Februa-y 1994, were won by the
political opposition. A new governmentwas formed in
May 1994. Its stated priority is to restore a national
consensus although it does not include members of the
majority opposition party.
The longperiod ofpolitical instabilityand the general
strike had a severe impac: on the economy. Real GDP
has declined by about 23 percent over the last two years
andthe overallfiscal deficit(excludinggrants)increased
from 7A4percent in 1991to 13percent in 1993. The tax
base has drastically shrunk and fiscal revenuesin 1993
are 45 percent of their 1991 level. As civil service
salarieswere notpaid for severalmonthsand investment
expenditure fell short of their projections, a severe
deterioration of public service and of the public main-
tenance of infrastructurehas occurred. SomeCFAF21.1
billion of additional internal payment arrears acmmu-
lated in 1992 and 1993. Despite a 35 percent drop in
import expenditures, the current account deficit (ex-
cluding official transfers) was 9 percent of GDP in
1993. Scheduleddebt service paymentsin 1993reached
40 percent of export revenues.
Medium-Tern Prospects
Togo joined the other CFA countries in realigning the
CFA franc in January 1994. The realigunent offers
opportnities for growth in the Togolese economy,
primarily from agriculture, trade. and services.
Togo's main sources of growth are agriculture, light
industry, and commerce.Increasedagriculturalproduc-
tion will dependuponproductivitygains, increasedcrop
diversification, and development of unused land.
176
Among cash crops, cotton clearly provides the most
promisingperspectives. Significantpotentialalso exists
for increasing and diversifying the production of food
crops-ubers. maize, millet, and sorghum-to meet
growing urban demand. Small-scaleindustry and com-
merce should grow as political stability allows them to
reap the benefits from fiscal and administrative incen-
tives for private sector investmentalready in place.
Social Indicators
Healthand educationindicators haveimprovedover the
last 30 years but they remain lower than in many other
sub-Saharancountries.Lifeexpertancyis only53 years.
Health problems have been aggravated by the recent
crisis. Infant malnutrition is now rampanL Girls are
under-representedin the educationsystem, which has a
very high repetitionrate and is ifl-adaptedto the require-
ments of the economy.Budgetarypressure reduced the
share of educationandhealth expendituresin the budget
in the 1980sbut thcre has been some recovery in recent
years. Togo's high rate of population growth (3A
percent a year) places additionalstrain on basic social
services.
In the context of the adjustmentprogram, the gov-
emnent has embarkeduponamajor reformofthe health
system, emphasizingstructural and budgetary reforms
aimed at enhancing the delivery of basic services,
including family planning. In the area of gencral edu-
cation, the program seeks to ensure adequate spending
levels and acquisitionof basic skills at the primary level
and developmen of science education at the secondary
and university levels. However, current urban-biased
policies need to be revcrsed to better meet the needs of
the majority mral population and to improve girls'
schooling. To this end, the governmenthas initiated a
major assessmentof the sector, to identifyand address
the major constraints. This work is expected to lead to
the developmentof an overallstrategyand a clear action
plan. In vocationaleducation, a major reform has been
initiated to adapt technical traming to actual market
demands and cnhance labor force productivity. The
government is reorienting its policies in support of
poverty aleviaton, employmentcreation and promo-
tion of private initiatives, and fhrther integration of
women into the developmentpro:ess.
 Togo
Populaion mid-1992(nmilos) 3.9 Incomegrup: Low
GNP per capita 1992 (USS) 390 Indebtednesslevel:Modate

KEYRAMOS
19i 1985 1991 1992 1193 lsmtto GDPSIoCA
:0
Gross domesbcinestmentlGDP 30.1 24.1 22.8 21.9 11.7
Export of goods and nfsGDP 51.1 48.4 332 28.9 227_
Grossdomest sayingsIGOP 24.3 15.4 14.8 1.0 4.0 D
Gwssnalonal swingslGfDP 21A 10.0 133 10.7 Z7

Cunent ocunt balarGP -15.9 -127 -9.0 -11.2 -9.1

Intern paymentsiGDP 1.7 5.1 1.1 0.6 1.4
Total d.bIGDP 920 123.3 84.1 87.0 103.5
TOal dobUxpoft 180.1 230.4 232.9 270.7 406.9 - so
U - Q U

GDP: PRODUCTION
1980 19S 1991 1992 1993 roonyusctr

AgriWt 27.5 33.7 37Z6 36.3 49.2

Irndusy 24.8 21.7 23.8 228 177
Manulfatrig 7.8 6.7 10.4 10.3 6.9
Senvicm 4737 44.7 43.6 40.9 33.0
199WS 1SB93 1991 1992 1993
(averg annualgmwth)
AgrQCicU 5.3 3.6 -12 -1.3 16.3
industry -3.7 -0.5 7.3 -13.4 -2&5
Manfcw"ing -3.6 2.1 5.5 -9.8 -40.8 a-- -

Servim -2.5 -4.4 -4.7 -142 -328 o u - - * -

GOP -0.5 -04 -0.9 -9.4 -12.7 _

GDP: EXPENDITURE
19B0 191S 1991 1992 1993 raisnoG01unPd(%3
GwDGfl
(X OfGM 20
Privae msmption 52. 71.5 70.3 73.0 79.6
Gan gaenment anmsumpbon 22.4 13.1 14.9 15.0 16.5 10'
Grmssdonestic knestmnt 30.1 24.1 22.8 21.9 11.7
EWportsof goodsandnis 51.1 48.4 332 28.9 227 1
Importsof goods and nfs 56.4 57.1 412 35.8 30.4 -e

(averageannualgrowth) 199005 18-93 1S9 1992 1993 q3 \

Prfvatconsumption 5.0 -4.5 .0 4-a6 -as
Generalgovemrnent cortsption -7.6 2.3 -5.9 -11.3 -3.0
Grossdonmesc instmnt -7.1 4.1 -10.3 -11.9 -54.3
Expo ts of goods and nis 4.4 -4.1 Z9 -1Z8 -27.6
Importsof goodsandrids -22 -3.9' 86 -12.7 -33.1
Grossnatonalproduct -1.2 0.1 -0.9 -9.3 -12.6 -00I -- GOP
Gross natoml income -0.2 -0.3 -1.9 -11.6 -14.5 _

PRICESand GOVERNWNrFINANCE
13t0 1915 1991 12 1993 Ch_mag. PdeEkwandCPI )
DomosP pd
(%d ,3f
Consumer
picas 12.3 -1.8 0.4 IA -1.0 2i
Whdbp1da1 - - 1
InpidtGDPdefltor 10.4 2.9 3.2 0.0 e
-0.6

CAOrGDP)
CuWI budgebabnce 7.4 62 -&0 -Z4 -11.1 -WdsL -CP1

Overall pludsfdicit .. -6.1 -7.5 -62 -12.7

177
Togo
POVERTYand SOCIAL
(annual gmwvdu
rates) 198045 198543 i tdliamd'
Population 3.0 3.6 Ufa ectnacy
Labor fore 2.2 2.4
mest rcent _atm nWm)
Poverty liovl: headount idex (X ofpopdafn) .G GNP Gross
Ufa expectancyat bi 55.0 pr.
Infant moalbity (per thousandkme bintsJ 85.0
Chid malnutrition(% of cdren under 5) 24.4
Acces t safewater (% of popalin) 71.0
Energy cosump n per capita (,kgcoHequivafeni) 46.2
Ifheracy (%of popub age 15+J 567 mo sa WarW
Gross prnmaryenrolment j% of schoo-ge populakon) 111.0

TRADE
(minsoUSQ) 1980 1915 1991 1992 1993 Expomtard Importb IInl US$)
Totalenporls (fob) 480 282 393 322 221 710
Phosphors 136 95 126 79 53 Sao
Ccoola 39 15 11 10 6
Mamftures 121 47 145 123 74 soo
Total imports cil .. 348 535 475 292 4.
Food .. 87 91 81 46 xI
Fuel and energy .. 20 35 36 27 21
Capia goods .. 52 113 85 50 -*
Export pace index (1987=-100) 107 93 120 116 103 a
lmpcrtpuiceindex(1987=400) .. 86 115 120 114 a a -m n a s
Terms oftade(1987=10j I. 108 104 97 90 '

Opennessof econaoy (badSWPD%) 107 106 74 68 53

BALANCE of PAYMENTS
(mUffons EIM 1980 ISB 1g9 1992 1993 Cufu,ntaccountanceMg GM

Expoft5 of goods and nfs 550 369 537 452 289 a a In . _2 s

Impots of goods and rift 691 436 666 606 388 -2
Resource balance -141 -67 -129 -1 54 -98 4
Net factorincome -40 -38 -30 -29 -27
Netcurrenttransfers 1 8 14 8 10 a.
Currentaccount balance .
Betbre oficiW bansibrs -181 -97 -145 -175 -115
Alteroidal transeris -95 -27 -54 -90 -84
Long-term capital inflow 71 -2 13 -4 67 -1-
Total other items (net) 23 108 56 39 -98 -44
Changes inetreserves 2 -79 -15 85 115 -..

Reseres excluding god (mi USS) 78 297 365 272 156

Reservesinduding gdd (mig USS) 85 301 369 277 161
Official exchangerate (AcabtUSS) 211.3 449.3 282.1 264.7 283.2

EXTERNALDEBT
Export aVes 1980 1985 199 1992 1993 |Su fl debt()
Lorlenrrn debttpods t SS.O 194.1 196.3 227.2 351.8 w 1
IMF creditfexports 5.6 18.2 13.6 15.3 21.3
Short-termdetWports 19.5 18.1 23.0 28.2 33.9 71-1 .
Total debt servicexpods 9.0 27.3 9.1 7.3 16.3 7
GDP rateas
Long-termdebtUGDP 79.1 103.8 70.9 73.0 89.4 Mon
IMF aedrtUGDP 2.9 9.7 4.9 4.9 5.4
Shot4erm debUGDP 10.0 9.7 8.3 8.1 8.6
Long-imdebt rabfs 1 .
Peivaw rm 0.0 0.0 0.0 0.0 0.0
Pubic and pubkly guaranteed u - - m
-In 2 am
Private ca ng-Lu. 462 10.9 4.7 4.6 0.1 I-
Officia auditorflong-term 53.8 89.1 95.3 95.4 99.9

- The develpment diamondshows a lvel of develp_mnt in tte cotry comparedwith is incom group avere

178
 Uganda
D espite being landlocked,Ugandahad one of the
most promising economiesin sub-SaharanAf-
rica at the beginning of the 1960s. In addition
to ample firtile land and a favorable climate for agri-
cultural growth, it had a relatively well-developed
mnanufacturingsector and an adequate transportation
system. GDP growth averaged about 6 percent from
1963 to 1970. and relative price stability was main-
taied. Startingin 1970,political turmoil and economic
mismanagementradically changed the situation. As a
consequenceof extensiveeconomic,social, and political
upheaval, real GDP declined by about 20 percent be-
tween 1972 and 1985.In per capita terms the decline
was even steeper.
the National Resistance Movement government.
which took power in January 1986, inherited an ex-
tremely difficult economicsiuation. The transport net-
work was in an acute state of disrepair; the nation's
vehicle fleet was severely depleted; once-productive
agricultural lands lay in riins; and most manufacturing
plants had either closed down or were operating at a
fiaction of installed capacity. Discipline and account-
ability in the public service bad all but collapsed. The
new government also inherited a large external debt
burden. with debt service of more than half of fiscal
1985 export earnings.
The Economic Recovery Program
The government's first response to the daunting prob-
lems that it inherited was to intervene heavily in the
economy. Extensive state intervention was quickly
seen to be a failure. The government then embarked
upon an economic recovery program in May 1987,
with assistance from the IMF, the World Bank, and
other donors.
The economic recovery program has had three prin-
cipal aims: to bring about macroeconomicstability and
lower inflation, reduce imbalances in the external ac-
counts, and promote economicgrowth. After ups and
downs in each of these areas during the first tour years,
major achievementshavebeenwon in the last two years,
and the program has continued to be diligently pursued
by govemment,
179
Inflationary bank financing of deficits was brought
under control about two years ago, and the results are
visible. Inflationwhichwas virtuallyarrested in the first
half of 1993, has remained low. It is currently runmning
at an annual rate of 14 to 15 percent, but much of that
is due to higher food prices resulting from enlarged
regional demand because of drought in Kenya and
purchases by the World Food Program. The exchange
rate, whichwas stable from early 1992to late 1993,has
since appreciated almost 15 pc-cent in real effective
terms. This was due to a combinationof factors-strong
private capital flows, large donor import support, a
sharp rise in coffee prices, and continuedstrong growth
in nontaditional exports, although from a low base.
Although still high, real interest rates have declined
from their extreme levels in 1992as the creditabilityof
the government's anti-inflationary stance gained
ground.
While the governmentworked hard to stabilize the
economy.structuralreforms haveproceededapace.The
trade and exchange system has been nearly fully liber-
alizcd. As a result the exchangerate and the allocation
of foreign exchange are market-determined. In April
1994 Ugandaaccepted obligationsof Article VIII. Sec-
tions 2, 3. and 4 of International Monetary Fund's
Articlesof Agreement,under whichUganda is commit-
ted to place no restrictions on current international
trnmsactionswithout prior IMF approval.
Price controls were fully dismantledwith the lifting
of the controls on the prices of petroleum products in
January 1994. Most interest rateshave been liberalized
smce November 1992, and while initially the nominal
intrest ratcs were over 40 percent, they are now in the
20 to 25 prcent range. State monopolies involved in
the import trade, the export trade, and domestic mar-
keting havebeen abolished.Over2,500 of the properties
expropriated in the early 1970s have been returned to
the owners.
Important steps have been taken toward improving
public sector managemcnt.Cver the past two years the
size of the civil servicepayroll has been reducedby over
40,000 ghostworkers, abouL66,000 temporaryemploy-
ees, and by 14,000 regular civil servants. Measures
have been introducedto strengthenpersonnel mange-
 Uganda
ment and payroll administration. The objective is to
have a mach smaller, more efficient, adequately paid
civil service. In addition, the army has beendownsized
through successfulimplementationof a demobilization
program. Close to 23,000 soldierswere releasedduring
the first phase of demobilization.The next two stages
involve 10,000 soldiers each. Civil service reform and
the veterans demobilizationprogramhave receivedsub-
stantial support from the donor community.
Financial stabilizationand structural adjustmentare
beginning to pay off. The downward slide in coffee
production, which is still the main export, has been
halted and should receive a boost from the recent rise
in coffee prices. There are signs of a revival of local
and foreign investor confidence in the government's
management of the economy, as shown, for example.
by increasing rehabilitation investments in previously
expropriaLedproperties and the greater disposition of
the publicto hold financial assets in the form of savings
and time deposits which have grown nearly four-fold
onverthe past two years. Above all, the economy has
been growing. Real GDP grew at an average annual
rate of 5.7 percent between fiscal 1988 and fiscal
1993. In per capita terms GDP grew by about 3
percent in each of these years. It has a GNP per capita
of $170 in 1992.
'fey Deveopment Issues
Agriculture will remain the engine of growth of the
Ugandan economy for some time to come. The sector
still accounts for more than 50 percent of GDP, gener-
ates 90 percent of expori earings, and employs about
80 percent of the labor force. Its rapid transformation
is critical to both growthand poverty alleviation.Small-
holders, relying on labor intensive methodsof produc-
tion and low levels of technology, account for almost
all of agricultural output. As is common in much of
Africa, women are the backboneof agriculture,provid-
ing about 70 percent of total agricultural labor in the
case of Uganda. Smallholders,andwomen in particular,
face many handicaps including the high risks of im-
proved technology partly because of the low rural
capital base, poor marketing services, and a lack of
access to credit. The agenda for policy and strucural
reform addresses some of these issues and considerable
progress has been made but the productionfrontiers are
linited by 'ow income and technology levels. Add-
tional investments are required in public goods and
services-research, extension,plant and animal disease
control, environmental management, and rural infra-
sucture (e.g. roads and water supply). Lessons from
counties with similar levels of widespread poverty
indicate that supplementarymechanismsfor rural capi-
tal accumulationard transformationare also necessary
180
to overcome the risks and develop the channels of
intersectoral linkages which have been disrupted by
historical events in the country.
Given the urgent need to lift the vast majority of
Ugandansout of poverty, the governmenthas begun to
accord the developmentof human capital priority by
allocating increased b idgetary resourecs for primary
healthcare and primary education. Present literacy and
numeracyrates are exceedinglylow. In 1991 the adult
illiteracy rate was 48 percent for the total population
and 61 percent for women. In the health sector, the
physical infrastructure and the managementand deliv-
ery systems have all but collapsed and are only now
being slowly rehabilitated.The total fertility rate of 7.3
is one of the highest in the world, and needs to be
reduced. The drive to build up Uganda's human capital
willnot suceeedwithout a more concertedeffort to bring
about a slowdown in the spread of AIDS, which is
ravaging the country.
Ugandahad the most dynamicprivate sector in East
African before the political turmoil of the 1970s. The
Ugandaii private sector still accounts for almost 90
percent of GDP, but the rate of private gross capital
formation is now one of the lowest in sub-Saharan
Africa-less than half the continent's average for the
period 1986-90. The government is trying to revive
private investmentthrougha stregy comprisinga more
hliberalregulatory environment, a substantialprivatiza-
tion effort, and a reformed financialsector. The imple-
mentationof this strategypresents manychallenges, and
the pace of financial reform, and privatization in par-
ticular, has been slow.
Ugaaria's infrastructurewas neglectedfor more than
a decade. As a landlockedcountry, Uganda's needs are
particularlygreat in the transport area. Much progress
has been madeduring the pastfive years in rehabilitating
the road, iail, telecommunications,power, and water
systems. However, infrastructurebottlenecksstfillcon-
stitute a serious constraint on investment, production
and exports. The government has begun to increasethe
share of budgetary resources devoted to road mainte-
nanceand the repair and reopeningof rural feederroads.
The government has recently liberalized petroleum
productsprices.
Uganda's financialsector is still small, rudimentary,
and dominatedby the government-ownedUganda Com-
mercial Bank and the Coopertive Bank. There are no
capital marketsor merchantbanks. There is hardly any
term credit. There is only a limited market in govern-
ment treasury bills. The system, payments is ineffi-
cient, with heavy reliance on informal market
transactions.The ratio of broad money supply to GDP
is one of the lowestin the world, which reflects -helow
levels of savings and financial internediationL The
central bank is only now rebuilding its capacity for
 Uganda
prudential supervision of the banking system, a large
part of which is insolvent.The wecasses of the sector
have adverse effectson savings, investmentand growth.
Governmenthas initiated a financial sector restructur-
ing, and new Bank of Uganda and FinancialInstitutions
Acts have been passed to provide a better framework
for monetary manageme:nt.
The capacity of the government to discharge its
traditional functionshas been weakened over the years
as a result of the chaos that engulfed the country. The
lack of capacity is evident at many levels. The govem-
ment lacks the capacity to collect revenue. The ratio of
domestic revenue to GDP is between 7 and 8 percent,
which is less than half the regional average. To address
this problem the government established the Uganda
RevenueAuthority in 1991to take over tax admimstra-
tion. Uganda's capacity for budget formulation and
administration, although greatly improved, remains
weak. The merger of the Finance and Planning Minis-
tries in fiscal 1992 has led to some improvement in
public expendituremanagement.The government's ca-
pacity to carry out project and provide counterpart
funds is also limited, with the result that projects have
been progressing slowly. As part of public e ditRre
review exercises, projects in the developmentbudget
have been classified into core and non-core projects to
ensure that the core projects receive adequate counter-
part funding. The government's capacity continues to
be undermined by low civil service pay. As part of
the overall civil service reform, government is exam-
ining ways of implementing a minimum living wage
over the next several years to improve public-sector
performance.
Environment
Comparedto many of its neighbors, Ugandacan pursue
its growth strategy under relatively favorable environ-
mental and natural resource conditions. Nevertheless,
the country faces environmentalproblems relatedto the
degradation of forest resources, soils, wetlands, ran-
gelands, and fish stocks. These problems will intensify
with rising demand for food and encrgy. Raised con-
sumption levels will also lead to higher levels of waste
and pollution. Many of these environmentalproblems
pose threats to the sustuinabiliy of Lake Victoria as an
ecosystem.
An increased awareness of environmentalproblems
and the lack of institutional capacity to effectively
managethemprompted the governmentin the begmning
of 1991 to launch preparation of a national environ-
mental action plan. Over the last two-and-a-halfyears,
a secretariat in the Ministry of Natural Resources has
managed a highly partcipatory process of assessing
181
problems, defining issues, and proposing remedial ac-
tion. It has resultedin the draftingof a an environmental
policy, an institutionalstructure to implement the pol-
icy, and supportinglegislation. Formal adoption of the
environmentalaction plan is expected by mid-1994.
Environmentalpolicy objectives emphasize sustain-
able development through appropriate environmental
management, integration of environmental concerns
into developmentpolicies, preservation or restoration
of the equilibrium of ecological processes, and raising
public awareness and participation in environmental
affairs. The proposed institutional frameworkprovides
for a semi-autonomousNational Environmental Man-
agemcntAuthority mandatedto monitorthe state of the
environment, advise the goveramenton environmental
policy and legislation, coordinate sectoral interests,
integrate environmentalstandards in developmentplan-
ning, oversee compliancewith regulations,and promote
cnvironmental education and awareness. Implementa-
don of environmentalpolicies, however, would remain
the responshility of the sectoral ministries.
Regional Integration
In the past two years there has been renewed intcrest in
regional integrationamong former members of the East
African Community (Kenya, Tanzania, and Uganda).
This interest has been revived mostly because trade in
the three countrieshas been greatly liberalized and their
currencies are now essentially convertible. Technical
working groups havebeen constituted in all three coun-
tries to prepare proposals consistent with a common
program of action defined in Harare in December of
1992.
Uganda's balance of payments situation was seri-
ouslyaffectedby the collapseof the InternationalCoffee
Agreement in July 1989. Owing to the sharp fall in
inmternational coffee prices and, subsequently,domestic
supply, coffee cxport receipts declined precipitously,
from 5276 millionin fiscal 1989to $104 milion in fiscal
1993. The average robusta coffee price in fiscal 1993
was $0.78 per kilogram comparedto $1.80 prior to the
collapse of the coffee agLeemcntarrangements. Mostly
as a result of decliningworld prices, coffee exports fell
from 2.7 million60 kilogrambags in fiscal 1989to 1.98
million bags in fiscal 1991, but then recovered to 2.2
million bags in fiscal 1993, as the removal of coffee
export taxes and greater comDetitionamong processors
began to have an impact on prices received by coffee
growers. Currently, as stocks and the world production
havedeclined, the price of coffee has been onan upward
trend, so hat export earnmgs from cfee can be
expected to rise. At the same time non-traditional ex-
ports have been rising strongly over the past few years
 Uganda

(although from a low base) and private transfers have some importantresults.The compositionof the debt has
risen precipitously. been pardaily restructuredalong the lines of the strategy
described above.
External Debt Uganda has strictly implementedits policy of con-
tracting new debt at only higbly concessional terms.
Since late 1991 the government of Uganda has been This shift has resulted in lower average interest rates
implementinga debt strategy geared to reduce its high and longer matLuritieson the debt stock. About 72
debt-servce oblgations and arrears. The main elements percentof total debt is owed to multilaterals.10 percent
of this strategyhave been year-by-yearreschedulingof to Paris Club bilaterals, 14 percent to non-OECD
eligible Paris Club debt and maximum annualdeferral bilaterals, and 4 percent to commercial creditors. In
of post-cutoff debt on a bilateal basis. Uganda has December1993the governmentrquested, and the Paris
sought write-offs of long-erm reschedulingof arrears Club agreed to, a seven-monthextensionof the consoli-
and debt owed to non-OECDbilateral creditors, exten- dation period to have it coincidewith the IMP Extended
sion of bilateral balance of payments support to multi- Structural Adjustment Facility program, which bad
lateral debt service, buybacksof uninsured commercial been extended from December 1993 until June 1994.
debt, and cessationof governmentor government-guar- The govermmentintendsto request a further meetingof
anted externalborrowingon al but highlycncessional the Pans Club followingthe expiration of the current
terms. The mplementationof this straegy has yielded arrangementsin June 1994.

1s2
 Uganda
Populationmid-1992 (mions) 17.5 Incomegroup:Low
GNP per capita 1992 (USS) 170 Indebtedness level: Severe

KEY RATIOS
19B0 1985 1991 1992 1993 [InvumunrroGrauocn
Gross domesticinvestmentJGDP 6.1 6.5 16.0 14A 14.5
ExportsofgoodsandnnlGDP 19.1 10.0 7.0 5A 6.0
Gross domesticsavings/GOP -0A4 4.8 0.3 -0.1 1.5
Grass nationalsavings/GOP -0.8 5.3 14 3.5 6.5 ...

Currenstaccountbalance/GDP -tS6 -137 -14.9 -10. -8.

Interestpayments1GDP 0.07 09 06 0.4
Total debt/GDP 55.0 48.9 108.6 91.9 77.5 a
Total debtexports 210.6 310.9 1.455.1 1t491.1 1.2B4.1 -1 s7 12 93

GDP: PRODUCTION
(%of GDP) 1910 1985 1991 1992 1993 ShofGDIPbynctor(%S
Agricuture 72.0 58.8 528 55.2 55.6 Fl Fl V]-
Industby 4.5 7.3 12.3 11.8 11.8 II j
Manufactunng 4.3 4.5 5A 5.0 4.9 fj
Services 23.5 33.9 34.9 33.0 32.6 DU
(aemgeannualgrowth)
1990-85 195-93 1991 1992 1993
Il I I
H
Agriculh 4.1 1.1 2.3 6.6 ||
Industry - 9.7 9.9 4.2 5.8
Maniufatuing .. .0 1Z-7 3.6 3.7 oI_u.
Services .. 5.8 6.2 4.9 5.5 - - a a' 2 u

GOP .. 5. a
3f o
3.0 64 ____________s,

GOP: EXPE ATURE

(X ofGDF19 1985 1991 1992 1993 Growthrat.sofGDIandGDP
Pnvateconsumption .. 83.3 89.0 88.6 88.5 eT
Generalgovemnment constumpton . 119 10.7 11.5 10.0 I
Gross domesticinvestnent 6.1 6.5 16.0 14A 14.5
Expotsofgoodsand nfs 19.1 10.0 7.0 5.4 6.0 a.
Importsofgoodsand nfs 25.6 11.7 22.7 19.9 19.1 30

(evemgeanual gmwUtJ 19909-5 1985-93 1991 1992 1993 2 \

Privateconsumption - 4.6 3.1 3.0 3.9 tl
Generalgovernmentconksumption . 6.5 9.8 8.5 16.6
Grossdomesticinvestment
Expots of goodsand nfs
..
..
8.2
3.2
-1.0
7.5
-4.1
-2.7
22.9
24.0
a
IF - -
_
sS
a
r
import of goodsand nfs .. 3.4 1.8 -1.4 15.0 |-' |
Gross nationalproduct .. 5.1 3.5 3.t 6.7 -Gco -cowP
Grossnationalincome .. 4.3 32 Z.8 6.5 , I

PRICESand GOVERNMENTFINANCE
1980 1985 1991 1992 1993 Chang or GDPdator and Cn C%)
Domesficpices 250
(%change) z
Consumerprices 157.7 28.1 5Z4 6.1 ISO
Wholesalepices .. 1
ImplicitGDP deflaor 160.2
1. 31.8 614 224 Sot
Governentfinance 67 6 s go 91 92 03
C of GOP)
Current budgetbalance .. 0.4 -0.3 -3.6 -2.0 |GCmPaI -CP
Overalsutrpls/deficit .. -2.6 -6.6 -10.6 -10.2 1 1

183
Uganda
POVERTYand SOCIAL
1980415 1985493 1Devulopmetdlan,end
(annual gowdh rates)
Population 2.0 3.2 Ufaexpectuicy
Labor frce 2.7 2.9
most recentestmate(mm)
Povertylevel: headcountindex (5 of populaSon) 55.0 GNP 7k Gross
Lifeexpectancyat birth 43.3 per , prmmy
Infant mortality(perthousandebiths) 122.0 ca \ enrkmlent
Child malnutrition(6 of chldlSn under 5) 233
Access to safe water f5 of population) 21.0
Energy consumptionper capita (kg oftequivaln) 23.9
lI!Aeracy(6 of populalon age 15+) 46.0 Ams to wow
Gross prmary enrolment (6 of sdwol-age popuaticn) 71.0

TRADE
(miions USSJ 19a0 19os 1991 1992 1993 Exptandpofrtllv(mtUS)$)
Total exports
(fob) 346 383 175 172 157 eao
Coffee 339 353 127 117 104
Cotan 4 13 8 10 5 MO
Manufacture . . . s
400
Totalimports (cil) 324 404 545 451 573 r r
Food 29 31
FuLe and energy 124 50 87 57 53 20
Capital goods E5 198 ..
Export priceindex (1987=1W) -. .. .. .. .. a
Import priceindec f1987=1) .. .. .. .. .. 8 X
Tennsoftrade (1987=100W) .. El
Opennessofeconomfy (a&dRDP %) 45 22 30 25 25 Dw le

BALANCE
of PAYMIENTS
(mnffions
C/Si) t1980 1985 1991 1902 1993 Curint accountbalanceto GDPmto
Exports of goodsand nfs 329 399 197 201 249 °a 'l B 9 ' 0 '3
Imports of goodsand nfs 441 455 626 668 791 .
Resourcebalnce
Netfactorincome
Net currenttrasfers
-112
-7
-2
-65
-49
71
-429
-73
108
-467
-67
188
-542
-60
260
|
i
Curent accotxt balance
Beforeofficial transfers -121 44 -394 -346 -342 iD
Afterofledal bsrem -3 4 -160 -113 -107
Long,termcapitalinlow -59 58 81 86 148 -12
Total other items (net) 87 -25 61 53 -55 1s
t
Changes in net reserves 55 -37 18 -26 14 .18
Memo: -16 --

Reservesexclfing gold (mil USS) 3 27 59 94 145

Reservesinduding gold (mNil.USQ) 3 27 59 94 145
Official exchange rate jIocaMUSS) 1.0 11.0 832.5 1,133.8 1.195.0

EXTrERNAL DEBT _ _ _ _ _ _ _ _ _ _ _ _ _
ExTErttaLffos 1980 1985 1991 1992 1993 StruchulWett d(%

Long-tern debtlexpos 164.3 223.1 1,194.0 1,241.5 1,0932

IMFcediVtexports 27.0 76.4 167.7 171.1 134.1
Short-Ienmdebtlesports 19.3 11.3 93.5 78.5 26.9
07 opt
Total debt servicexports 17.4 39.1 70.6 40.2 26.5 75

GDP ratos oPm |

Long-termdebVGDP 42.9 35. 89.1 76.5 67.6 S off.

IMFcrediUGfP 7.1 120 12.5 10.5 8.3
Short-termdebtGODP 5.0 1.8 7.0 4.8 17 25
Long-tern debtratas
Prvate nnguraranteedllong-term 0.0 0.0 0.0 0.0 0.0 |
Pubic and publcly guaranteed | 7 6n -o . . 0
Private credillorsng-term 46.1 20.0 10 5 7.9 7.0 1 _
Offidal creditorsfiong4rm 5S&9 80.0 89.5 92.1 93.0

diam-ondshow a level
The devekopment ofdeelprent 'n the couty compatedwih its ncomegroup averagt

184
 Zaire
Z aire has the third largest population-40 million
197and the second largest area-2.35 million
square kilometers-in sub-Saharan Africa.
About 40 percent of the population is urban. The
aggregate density of population is low at 17 people per
square kilometer.In some regions, such as Kivu, demo-
graphic growth, aggravated by inflhxe; of imnigrants
and refugees from neighboring countries, is putting
pressure on land, with serious consequences for the
ecology. Zaire has an ample underutilized economic
potential, including an industriouswork force. Natural
resources include the second largest rain forest in the
world, fertile soils, amplerainfall, and considerableand
varied mineral resources. Mining and processing of
copper, zinc, cobalt, gold, and diamonds, and petro-
leum extractionaccounteduntil 1990 for about one-fifth
of GDP and the bulk of export earnings.
Zaire's economy is below the country's potential and
declining.Per capita GNPwas estimatedat $20 in 1990
and has since fallen by at least 30 percent. After a
difficult period of civil turmoil and severe economic
decline following independence in 1960, production
expandedat an average rate of 4.9 percent a year in real
terms over 1965-73, fueled by favorable terms of trade
and foreign investment. The current account balance
was in steady surplus, inflationwas relatively low, and
social indicatorsimproved. Over 1974-82,deteriorating
terms of trade and disruptions caused by the 'Zairiani-
zation" and nationalizationof foreign-ownedbusinesses
led to a decline in GDP of I.5 percentayear on average,
and persistent current account deficits. Expansionary
public spending fmancedby money creation and heavy
external borrowing-much of it on nonconcessional
terms and for nonviable projects-failed to stimulate
growth and fueled inflation. During 1983-89 the gov-
ermnent carried out a stabilizationand adjustmentpro-
gram, which produced encouraging results. However,
supply response lagged, and weak fiscal management
emerged as a key constraint to successfil adjustment.
Since early 1990, political instability has been ac-
companied by declining production, investment and
fiscal mobilization; unrestrained public spending fi-
nancedby monetary creation,resulting in hyperinflation
and currency depreciation; rising current account defi-
185
cits, and mountingexternal arrears. This acceleratedthe
loss of Zaire's creditworthiness and investor confi-
dence, rapid degradation of its productive assets and
infrastructure, and a decline in living standards and
social indicators. The true extent of economic decline
is difficult to capture as economic activities have in-
creasinglyshifted to the informalsector. The country's
modem economy,its instiutions, and its human capital,
have suffered seriously and are rapidly eroding. Over
1989-1993,GDP declinedby at least30 percent. Copper
production declined by about 90 percent, cement pro-
duction by 70 perenat, the consumption of petroleum
products by 50 percent, road and river traffic by about
80 percent, and the national railways all but ceased
operation. Agricultural production has been hit espe-
cialy hard by the collapseof the transpr- system. The
only notable exceptionis diamonds, whose production
has continued at about the same pace, and has even
increasedin the informalsector. The short-termoutlook
for recovery is poor.
Zaire's dismal economic performance affected social
indicators,once ahead of many countries in sub-Sahaian
Africa. Even before the current crisis, social indicators
were decliningbecauseof inappropriatepublic spending
policies. In 1989 under-fivemortality was close to 200
per 1,000 live births; maternalmortalitywas 6 per 1,000
live births; 25 percent of children and 13 percent of
pregnant women were undernourished; enrollment in
primary education was 76 percent, down from 92 per-
cent in 1978; 77 percent of infantswere not immunized
before their first birthday, and more than 30 percent of
children were never immunized; half of the children
lacked access to anti-malaria teatment; malnutrition,
particularly of lactating mothers and children, was
widespread; and adult illiteracy was 45 percent. The
crisis that has gripped Zaire since 1990 has accelerated
the decline in these standards. With the exception of
limitedhumanitarianaid, virtually all external fiancing
in the social sectors has been discontinued, and maziy
operationshave been canceled; the already insufficient
budgetary financing of social sectors has been greatly
 Zaire
reduced, and the ability of users and enterprises to pay
for social services has been sharply curtailed. Occa-
sional surveys indicate a worseningof infant mortality,
child malnutrition, and other critical social indicators.
Contagious diseases once contained, such as try-
panosomiasis.have retumed due to shortagesof preven-
tive programs and medication. Zaire is facing serious
risk of widespread endemic diseases and further dete-
rioration of its human capital, which would constrain
sustainable development for many years.
Traditionalexternal assistanceflows haveceased due
to political instability, a deteriorating economic and
financial enviromnent, and a large accumulation of
payment arrears. Official assistance is currentlylimited
to humanitarian aid. The country was $4.9 biWE--in
arrears at end-1993, including to the IMF and other
multilateral creditors. The IMP has suspendcd Zaire's
voting and related rights. The World Bankhas declared
Zaire in nonaccrual status, as has the African Develop-
mcnt Bank. Foreign private investment has essentially
ceased.
Failed Adjustment During 198389
Between 1983 and 1989 Zaire took on-again, off-again
stabilization and adjustment measures that built on the
traditional market orientation of the economy and sup-
ported initiativesto strengthen public resource manage-
ment, liberalizethe exchange rate, prices and trade, and
improve investment and export incentives. Initially, the
program held promise. Over 1984-86 GDP growth
averaged 323 percent, up from 0.7 percent in the pre-
ceding three years, copper mining regained profitabil-
ity, and more coffee, diamond, and gold exports started
to flow through official channels, allowing export earn-
ings to grow by 4.8 percent a year. Increasedproduction
of foodstuffs and manufactured goods helped reduce
imports by 1.1 percent a year, and the government's nct
recourse to domestic credit declined to 1.1 percent of
GDP,fiom3percentintheprecedingthree-yearperiod.
Annual inflation decelerated from 76 percent to 24
percent, and the overall fiscal deficit (on a cash basis,
after debt relief) averaged 0.3 percent of GDP, com-
pared with 2.1 percent during the previous three-year
period,
In late 1986 stabilization and adjustment efforts
weakened. Public spending increased, and previous
progress in exchange rate and price liberalizationwas
partially reversed. Inability to contain public spending
and improve its composition and quality also derailed a
short-livedstabilizationeffort in 1989. During 198749,
despite higher exports and external transfers, GDP
growth declined to 0.6 percent a year. Govemment
nondebt expenditure-mostly nondevelopmental-in-
creased from 6.2 percent of GDP to 10.3 percent;
186
outlays in foreign exchange (excludingdebt service and
externally financedprojects) increased six-fold to $550
millionin 1988;budgetary revenue other than from the
national copper mining company, which traditionally
suppliedup to one-thirdof the budget revenue, declined
to 6.4 percent of GDP, from 8.5 percent in 1984-86;
the external current accountdeficit averaged6.9 percent
of GDP, 64 percent higher than in the preceding three-
year period; and inflation averaged 86 percent, com-
pared with 31 percent in 1984-86.
Recent Developments and Shon-Term Outlook
Zaire's current economicdebacle. rooted in long-stand-
ing inappropriate policies, has accelerated during the
political crisis that has gripped the country since April
1990, and whose end is not yet in sight. Single-party
rule has been challenged by a broad-based, albeit di-
vided, opposition, by increasingly assertive regional
and local interests, and by a vocal press. Militaxy-led
looting in late 1991 and early 1993 left behind a
shattered economy and a tense social and political
climate. The political situation is unstable, and without
a strong governmentZaire's ability to addresseconomic
problems remains severely constrained.
Politicalgridlock has led to unprecedentedeconomic
and social decay. Since renouncing adjustment efforts
in early 1990, Zaire embarked on a downward spiral of
collapsingproduction, investment and exports, inappro-
priate fiscal policies resulting in hyperilation and
accumulationof arrears, widespreadunemploymentand
increased poverty, and rapidly declining living and
social stndards. Zaire's human capital has been eroded
by dwindling persanal incomes, greatly reduced public
spending for educationand health, and civil strife. The
exodus of expatriates following looting in 1991 and
1993, and vanishing employment opportumitiesin the
formal sector furter aggravated the situation. The
dynamism of Zaire's informal economy-not ade-
quately captured by official statistics-mitigated to
some extent the impact of fiscal laxity and modern-sec-
tor decline, as did Zaire's legacy of non-governmental
delivery of social services. This has slowed down
somewhat the economic and social decline, without,
however, compensating fully for the shrinking formal
economy.
Between 1989 and 1993 GDP is estimated to have
contractedby 30 percent, exports (in SDR terms) by 52
percent, and imports by 72 percent. The destuction of
capital assets by riots and looting has been estimated at
up to one-fourth of GDP. Compared with the 1987-89
period, 1993 copper production declined from 460,000
to 48,000 tons; cement production from 490,000 to
149,000tons; and crude oil production from 10 million
to 8.3 millionbarrels. Consumptionofpetroleum prod-
 Zaire
ucts declined from 876,000 to about 400,000 cubic
meters, and beer sales-an acceptable proxy for the
monetary income of urban households-from 3.8 mil-
lion to 1.4 million hectoliters.
Fiscal policy, which has spun out of control, is
largely responsiblefor the extraordinaryfinancialdete-
rioration since 1990. While the tax base shrank gradu-
ally from 10 to 11 percent of GDP in the 1980s to 3
three percent of GDP in 1992-93,governmentspending
surged to the point where receipts cover barely 10
percent of the governnent's obligationsand 20 percent
of its cash outlays. The fiscal deficit has been financed
by accumulatingarrears and monetary expansion.Zaire
has suspendedall external debt service payments. Ex-
ternal arrears reached$4.9 billion at end-1993. In 1992
and 1993issuance of currency was equivalenton aver-
age to more than 25 times the broad moneystock at the
beginning of the period. As a result, inflationaveraged
more than 3,800 percent over 1991-93. Despite rapidly
expandingmonetary financing of its spending, the gov-
emmentaccumulatedsizabledomesticpaymentarrears,
isluding arrears on wages and salaries. By September
1993 arrears on wages and salaries to public sector
employees (except for part of the military personnel)
reached up to 12 months. In 1993 civil service wages
in dollar terms were about 20 percent lower than in
1989, while non-wagecurrent expendimrewas 64 per-
cent higher.
Since 1989the domesticcunrencyhas depreciatedcby
over 230,000 times, from Z455 per dollar at end-1989
to Z105 milLionper dollar (in old zaires) at end-1993.
In an attempt to contain the prohibitive cost of issuing
and handling currency, alleviatethe critical shortageof
banknotes, and allowthe govermmentto meet itspayroll
187
and other domestic financial obligations, the Bank of
Zaire introduced a new zaire in October 1993. The
initial parity of NZ3 per dollar was rapidly eroded by
an acceleration of govemment spending. Two months
after its introduction,the new zaire was trading at NZ35
per dollar in the interbank market and at over NZ100
per dollar on the parallel market. The two main dia-
mond-producingregions have refused to accept it and
have created an independentmonetary zone where the
oldzairehas remainedinciculationandhas maintained
its value against the dollar.
The weakenedgovernment, an adverse social, eco-
nomic and fincial environment, shortage of local
counterpart funds, and deult on debt obligationshave
resultedin a rapid declinein investment.Officialexter-
nal capital disbursementswere $35 million in 1993,less
than 10 percent of the $367 million disbursed in 1989.
Nonproject assistance($126 million in 1989) was not
availablein 1991-93.Private investenct driedu p ia the
wake of the late 1991 looting. The Association of
Zairian Employersestimatedthe damagecausedby this
looting at about $1 billion to enterprises alone. Sub-
sequent civil unrest and degradation of the economic
and social environment have fhir eroded investor
confidence.
Zaire's short-termoutlook is poor, and drastic stabi-
lization measures are urgently needed. Zaire's consid-
erable developmentpotential wil not be realized unless
the country addresses stumcturalconstraints, including
inefficient management of public resources, the debt
overhang, poor infatuctue, insuffcient attetion to
human capital development,an unatactive investment
climate, and, last but not least, major and well-en-
trenched governanceshortcomings.
 Zaire
PopuLationmid-1992(milions) 39.8 Income group: Low
GNP per capita 1992 (USS) .. lndebtednss level:S

KEYRAMOS
19W0 1935 1991 1992 1993 tventiG oP MUDs)

GrossdomesticlnwestmenUGDP 10.0 12.5 .. ..

ExportsofgoodsandnslGDP 1i5. 27.5
Grossdomnesticsavings/GDP iLl1 14.4
GrossnationalsavlngslGDP 6.6 6.5 .. *o.. ..

Currnt acmuntbalaIGDP
InterestpaymentslGflP
-. 9
1.4
-8.8
2.7
. .I 11
Total dWIGDP 34.5 85.8 .. .. .. .
Totaldebteports 201L4 307.6 .. .. .. 31 - _

GOP:PRODUCTION
I% ofGOPD) 1980 11o5 1991 1992 1993 ShmasGDPbysector(%)
Pgricutue 25.3 29.9 .. .
Indusry 33.1 29.2 .. _
Manufacuig 14.3 9.9 .. . .
Services 41.6 40.9
19(0m-5 1985-93 1991 1992 1993
(aeageannualgrwifi)
AAure 2.6 .. .
Industry 3.1 .. .. _
ManufctUring 32 _ .. o.
.. ..
Servis 0.7 .. - _ , U U m m i2 S3
°AWIu *baub fSlo
GDP 1.9 -1.9 -7.2 -10.6 ..

GDP. EXPENDITURE
(%of GDP) 980 1985 1991 1992 1993 shrWPaavmasuw
Privateconsmnption 815 77s -. -. -
Generalgovanment conmppaon 84 7.7 .. .. .. 2
Grossdomaeschwesbnntr 10.0 12.5 .. .. ..
Expotcsof goodsand nfs 16.5 27.5 .. .. .. a 2
Imports of goodsad nfs 16A 25.6 -- -2
(19S0-5 1985-93 1991 1992 1993 \

Privateconsumption 2.6 - .. -
Generalgovernmentcorsumption -3.9 _ _
Grossdomesticnwesbnent -1.0 - _ .. _ -Ia
Exportsof goodsand nfs 17.7 -1.6 .12
Importsof goodsand nfs 14.1 3.3. .. ..
Gross nabonalproduct -0.6 2.6 .. .. _ -cm -G-P
Grass nationalince -0.8 3.1

PRICES and GOVERNMENT FINANCE

1SSO 1965 1991 1992 1993 ChangeofGDPdeflodr end CR I%)
Domstcprices 5-
% change) a=
Conssumerprices 46.6 23.8 2.154.4 4.1292 .. /
Wholesale priC - - ,, -
2_
Implidt GDP deflr 51.1 25.8 . _*.
Gevernmentfinance 37 U U U SI 12 1
(t ofGDP)
Cunrt budget balance -0.5 .. .. .. -CFt
Overall swplusfdec .. .. .

188
 Zaie
POVERTY and SOCIAL
(annualgrowthrates) 1930-US1138-3 Dovulepmieadluon
Poptiatln 3.2 3.3 vrsapaeCtW±q
Labo"
foFCe aS 2.4
estnimte(msur)
mot reent
Povertyleve:headcount ktde f%of popalelion) .. GNP Gross
LUfeiepedancyat bkth 51.6 periay
Inkentmoralfty(perthousanidrivebMrth) 90.9 cpeowMm
Childmalnutriin (U of chiWreundeor5) 28.8
Accessto safewater(%oFpopulatkin) 34.0
Energ consumption percapita(kgoIsquAiuvent 47.5
lfteracy(U of popukibarage1-54) 25.2 ~sf ae
Grassprknarymimes (U of schtoo-gepopulatio) 76.0 Acnl d o

TRADE
(millonsUssj iso m9is 1991 1992 1993 a('NIL USSI
Exportm,uhnpeutmt
Totaexport (fob) Z,269 1,153 ..- zsAS
Copper 1,033 712 .

Coffee 163 154 .

Marejacbres - --

TOtaimports(cii) 1,456 1.484 1.

Food 88as. - -

Fuel and encgy 241 .. .-

Capitagoods 204 .

Expor pniceindex (1987f100) 133 112 a____________

Import priceindex(1907=100 69 81 - . . -0 0 m 22 a3
Tefins of trade(1987=-100) 192 137 .

Openness ofeconomy(&;adatmDP.%) 33 -3ODes'. Mires'

BALANCEofPAYMENTS
tmNfibns US$) liso i9ns un 1992 15I ComtcodawgljanbtGOPraftI.()
E2po.tsofgoodsanrdnfs 2.3711 1.979 - - aS a a
- n a 0
of goodsandnfs
Imports 2Z353 1,844 - - -

Resotxcebalance 18 135 .. . -

Netfactorinconme -498 -569 -4

Netcununt transfers -79 -55 .. . -

Currentacowuntbalance -
Befbre official
bunsfers -559 -48 .. -
After trnseion
off*Ica -292 -289 .

Totaothetems(net) -1.241 550 .. .

Changes Innetreserves -35 36 -13 25
Mena: -
Reserveexdcluinggold(mil (153) 204 190 183 157 .

Reserves gold
including (mnil!U13$) 380 335 193 156
Offkicia
exchange (bca'ZSVT
rate 2.8 49.9 15,587.0 6.5Et05
EXTERNALDEBT ______ ______

ratios
BWM 19-w0 isis urn 1992 199
Long-tern,debtiexponts 177.3 247.1 . .'

IMF acredItexot 15.5 40.2 - -

Short-ton debtiexports 13.6 20.2 . . 7

Tota debtsrvialexpots 2fl 24.8 -. r
GOPruins (PW
Long-term debt/GOP 29.6 61.9 - . *OIL
IMFcreditGDP 2.6 11.2
Short-terrndebt/GOP 2.3 5.5 2
Long-tw debt ratios
nonguaranteed/long-term 0.0
Private 0.0 0.0 0.0 0.0
andpublicy
Public guaranteed -m - 0 sIM-c-1 a
creditorfitong-teurm 37.1
Private 17.9 9.5 9.5 9.6
OffIiacreditors/Iong-tanm 62.9 82.1 90.5 90A4 90.4

showsa levelof development:

diamond
"The development grou average.
vlth It Income
inthe countycompared

189
 Zambia
Z ambia's economy suffers from severe and long-
standing distortions that will require a major
structural adjustment effort over an extended
period if they are to be overcome. Its major charac-
teristics are heavy reliance on a single export product
(copper), a very high debt serviceburden, and excessive
public-sector direcdon of, and direct participation in,
the production of goods and services. Soon after inde-
pendence in 1964,-the United National Independence
Party governmentsoughtto gain controlof the economy
through widespread nationalization.The economy be-
came dominatedby parastatals, and a one-party state
was introduced. Rising copperprices helped the econ-
omy grow steadily at an average rate of 2.5 percent
during the first decade after independence.Since 1975,
however, failing world copper prices and the general
deterioration in Zambia's terms of trade, coupledwith
a failure to develop a dynamic, diversified economy,
caused overall economic decline. Attempts to support
continued consumption through borrowing failed to
contribute to economicgrowth andcreateda severedebt
problem.
Zambia has an exceptionally large extenal debt
burden. Total debt at end-1992 amountedto $7.0 bil-
lion, of which $2.4 billion was multilateral,$2.8 billion
bilateral, $0.4 billion medium/long-termcommercial
(ncluding export credits) and $0.7 billion short term,
and $0.7 billion interest arrears. Excluding the short
term debt, Zambia's external debt represents nearly
$700 per head of population, one of the highest any-
where. Further rescheduling of Zambia's Paris Club
debt was achievedin July 1992,and a commercialdebt
buy-back is under way. Alleviatingthe debt burden is a
prime focus of the consultativegroup and Paris Club
processes and will require substantial and concerted
donor support.
Another major constraint on Zambia's potential for
economic growth is its heavy dependenceon copper.
Copper accounts for nearly 85 percent of exports,
contributes about 15 percent of GDP. and is an impor-
tant source of budgetary revenue. The problem is wors-
ened by the poor prospects for cooper prices and a
projected sharp decline in copper output from existing
operations around the end of this decade.
190
The third major constraint is the dominance of the
parastatalsector, and the consequentstifling of compe-
tition andinitiativeand the impositionof high prices and
low quality in the domesticindustrial sub-sectorswhere
parastatalshave had an effective monopoly. The mannu-
facturng parastatals have not kept up with product
developments elsewhere. The tourism sector has at-
tracted only a fraction of the potential market. The
gemstoneparastatal has exploited only a small portion
of Zambia's tremendous potential, with most exports
avoidinigofficial channels. With few exceptions, the
parastatalshave been inward looking andcontent to rely
on the smallZambianmarket they havegenerallyfailed
to diversify the economy or develop Zambia's natural
advantagesto the ext possible. In the public utility
sector, the position is not much better. The railways are
extremelyslow and unreliable; the power companyhas
beenunable to maintaina sufficientlysteadyvoltage for
the operation of sensitive industrial plants; and the
telecommunicationsservice is substandard in areas im-
portant to business.
b mbia's medium-termstrategy aimsat diversifying
the economy away from copper, reduimngthe high
capitaland importintensityof productionand consump-
tion, improving economic efficiency, and increasing
savings and investment rates to restore economic
growth.
The government's stuctral adjustment program,
begun in fiscal 1990, combined trade policy reforms,
deregulation, and exchange rate adjustent aimed at
enhancingthe competitivenessof the non-coppersectors
with stabilizationpolicies designedto restore fiscal and
balance of payments equilibrium and price stability.
Efforts were made to downsize the public sector and
enhance its efficiency,while stimulating private-sector
development. The government eliminated subsidies on
maize and ferdlizer, decontrolled prices, and revised
investment laws, rules, and regulations. Zambia has
completely decontrolled the exchange rate with the
establishmentof bureaux de change, freed interestrates,
reduced the budget deficit (excluding grants and inter-
est) from about 8 percent of GDP in 1991to 3 percent
in 1992and 1 percent in 1993, embarked on privatiza-
tion of parastatals, and retrenched 12,000 redundant
 Zambia
public employees. These achievementswere made de-
spite the devastating drought that hit the country in
1992.
Recent Economic Developments
Zambia maintainedgood policy performance in 1993
and early 1994, despitesome lapses in implementation.
The major accomplishmenthas been that inflationon an
annualized basis declined from 300 percent in the first
half of 1993 to just over 30 percent in the subsequent
10 months. Interest rates have fallen from over 300
percent to about 100 percent and are still faing. Alter
the devastatingdrought of 1992,agriculturalproduction
nearly doubled in 1993 compared to a negative 40
percent in 1992, although the 1994 crop will be down
agan because of inadequate late rains.
Despite significantimprovementsin Atepolicy cnvi-
ronment- and frequent demonstrationsof politicalwill
to maintain the reform program-Zambia faces two
major difficultiesin the short and mediumterms. First,
any growth, or even the mainteance of economic
activity, given Zambia's debt burden, requires very
large inflows of foreign aid. The balance of payments
position, even under the most optimisticscenarios, is
expected to be so tight that under the most generous
Paris Club terms currently implemented, Zambia will
continue to transfer between 10 and 15 percet of its
domestic production abroad as debt service for the
remainderof this decade and beyoniLSecond, giventhe
tightness of the resource constrants and the political
demands for improvements in living standards, the
political ability of the governmentto stickto the reform
program may be difficult. The new government won
nearly 80 percent of the vote in 1991, largely on the
strength of the oppositionto the failed policies of, and
general lack of confidencein, its predecessor.The next
geneal election is due in 1996. In the meantme, the
government appears to have considerable support, al-
though there is widespreaddiscontentover the contiu-
ing economicstagnation and the linited improvements
in public services.
Domestic policies to reduce inflation and improve
public sector implementationcapacity remain cental to
improvingthe prospects for growth. The most challeng-
ing macroeconomic policy issue will be to achieve
economicgrowth without reignitinginflation.This will
require a concerted and sustainedeffort. If Zambiacan
make this adjustment and hold to its current course, it
should be able to break inflationary expectationsand
initiate a virtuous circle of lower interest rates and
higher investment and exports, leading to lower infla-
tion and increased growth.
Weaknesses in the public sector have persisted,
despite iniial efforts at civil service reform and priva-
191
tization of parastatals. These problems-together with
the 1992 drought, inadequate infrastructure, the high
inflation,and the current monetarycrunch-have inhib-
ited the stimulationof an adequate supply response to
refonns.
On the fiscal front, the government has announced
its intention to expand the scope of the ongoing tax
reform to encompass introductionof a value-addedtax
in mid-1995. Improvedtax administrationand broaden-
ing of the tax base will also enhancerevenuecollection.
A new Zambia Revenue Authority began operation in
April 1994.This, combinedwith expenditurerestraint,
wil help eliminatebudget deficits and prevent inflation
from rising again. Past efforts at stabilizationhavebeen
fustrated by lapsesin spendingrestraintand disappoint-
ing revenues, sometimes due to shortages of political
will but increasingly the result of shortcomings in
implementAtion.
P
Past economic decline contributed to the neglect of
human resources development. Budgetary allocations
were drasticallycut, and the quality of services deterio-
rated considerably.The government is now taking bold
steps to reverse the negative trends in social indicators
and restructure the delivery of social services. The
thrust of the restructuringis decentralizationof service
delivery with recovery in budgetary allocations and
delegationof authority. Initiativesinclude district man-
agement in health and education, devolutionof safety-
net measumes to local groups-includingnon-governmental
organizations-andrestructuringof the water supply and
sanitation sector. This approach complements the re-
forms designed to move Zambia toward a free-market
economy.
In breaking with the previous centralized and plan-
ner-knows-bestpractices, the soial sector reforms rec-
ognize that the provision of welfare takes place at the
household level. This shift in philosophy will help
ensure better decisionmakingin the social sectors and
improve their efficiencyand effectiveness.The goal is
to provide a quality-assuredpackcageof basic services
as close as possible to the household.
In the area of protecting vulnerable groups, Zambia
had an excellentexperience with the response to last
season's drought through the Program to Prevent Mal-
nutrition, which worked through committees of non-
govemmentalorganizations,public servants, and other
civic leaders at local levels. Other positive experiences
in reachingvulnerable groups have been accomplished
by the Program for Urban Self Help and small develop-
ment projects fundedby the MicroprojectsUnit. Based
on the Program to Prevent Malnutrition, 50 nongoverm-
mental organizations and the govemment have come
 Zambia
together to form a coordinating organization that will
finance a ' monitor activities in rural areas across the
country. The Ministry of CommunityDevelopmentand
Social Services is improving its Public Welfare Assis-
tance Schemeto serve the indigentpoor ihat also relies
on local committees for its implementation.Contracts
have been signed with five major nongovernmental
organizationsto assist in implemcntingthese programs.
The implementationof the next medium-termplan for
AIDS alleviationwill include public and private agen-
cies. Current AIDS alleviation activities, while limited
in scope, are being carried out in a decentalized man-
ner.
Zambia's economic reform program has substan-
tilly improved the environment for private-sector de-
velopment. A greater role for the private sector in the
economy is part of the government'sdevelopmentstrat-
egy. The private sector is seen as playing a key role in
increasing the growth of nontraditonal exports.
Especialy given the substantial deteriorationin the
living stndards of the average Zambian over the past
18 years, the government has reognized that it cannot
contimneto undertake the strngent measuresnecessary
to stabilize the economy and restore growth without
ensuring that the bulk of the populationbegin to expe-
rience improvementsin welfare levels. Followingthe
mcreasinglyprecipitouswelfure declineof recent years
and the expectationsassociatedwith politicalhberaliza-
tion, the future of the whole reform program hangs in
the balance. While the measures taken to promote
agriculture, exports, and the private sector generally
should lead to sustainableand indeed rapid growth in
key subsectors of the economy, this impact will be
neither widely spread nor dramaticallyapparent in the
short term. In contrast, a welfare safety net that builds
on the successfulapproach to alleviatingthe impact of
the fiscal 1993 drought, combined with a reorientation
of social services to meet widespreadbasic needs will
192
offer tangible evidence that less goverment can also
meanbetter govermnentin preciselythose areas that are
critical to the welfare and economic prospects of the
poor in Zambia. Budgetrestructuring and a reorienta-
tion of goverment delivery capacity to getting results
in the field through decentralizationand a partnership
with successfulnongovermmentalorganizationsand the
private sector will improve the distribution of social
welfare significantlyand quickly and will lay the basis
for the longer-termeconomicparticipation of the poor
in Zaambia'srecovery and growth.
External Financing
External assistance will need to stay at or near the
currently very high levels. Over the next five years,
fioreignaid will finance much of the needed public
investment. In later years, however, a larger share of
the inestment will have to be financedout of domestic
saving. This should be possible because there is scope
for increasingpublic-sectorsaving by increasing reve-
nue and restrining expenditure on consumption and
becausenontraditionalexport growth shouldeventually
permit a better balance between exports and imports.
Policiesto stimulateprivatesavingwill take time thave
an impacL
When Zambia approacbedthe inteational commu-
nity in 1989, it was clear that exceptional measures
would be needed if Zambiawere to meetits international
obligationsand still have sufficient imports to achieve
sustainablegrowth. Argumentswere made at the time
that unprecedentedconcessionsshould be made on the
stock of both bilatral and multlateral debt, but it was
decided that it would be better to solve the immediate
problem with exceptionallevels of balance-of-payments
assistanceand a rightsarrangementthat would take most
of the IMF arrears off the table until 1995.The Paris
Cub added generous rescheduling.
 Zmbia
Populationmid-1992 (milions) 8.3 Income group: Low
GNP per capita1992 (US$) 360 Indebtadnesslevel:Sever

KEYRATIOS
1980 1935 1991 1992 1993 InveammnttoGDPnrtlof%)
GrossdomnestcinvestnentUGDP 23.3 14.9 14.7 14.1 10.7 20-W
Exportsof goodsandnfsWGDP 414 38.8 34.2 31.7 40.2
Gmssdomestic savkwisGDP 19.3 IS.4 17.9 10.8 9.5
GrossnationssavinrslGDP 7.3 3.5 5.4 -0.2 0.9 10

Curentaccountbalnce/GDP -13.8 -14.4 -15.1 -23.7 -15.5

lnterestpwentsGOP 3.0 1.9 7.0 3.0 2.8
TotlWdebUGOP 84.0 203.2 214.3 221.6 184.9o
TotaldebUexports 200.7 477.0 620-3 5902 5s3.0 C9U uC 212 In

GDP: PRODUCTION
(% GDP) it 1985 1991 1992 1993 ShnIUCfGOPbys.cUr(%)
Agtu'a
Industry
14.2
41.3
13.1
4Z0
15.8
462
21.3
42.8
28.6
37.5
n n
Manufacturing 185 22.9 33.7 32.6 26.2
Services 44.5 44.9 35.0 35.9 33.9
1980-35 1983593 1991 1992 1993 so
aualg uwh
(average
Agriculture 21 -02 52 -3.1 521
Industry -. 6 2.5 -12 3.7 3.2
ManufacItuing 0.3 5.9 0.0 5.6 5.8 a
Services 5 -0.1 -1.5 -12 2.4 C -a to
- I 2
ots. *hfll o sel
GDP -3 1.1 -0.6 -2.7 6.8

GDOP:EXPENDFrURE
MofVGD)t 1930 1996 1991 1992 993 I GromteshorGidGDOP(%)
Private consumption 55.2 60.7 65.8 742 81.5 M T
Generalgvgaement consumnption 25.5 23.9 16.3 15.0 9.1 SD
Grss domeslcinvestnent 23.3 14.9 14.7 14.1 10.7 4D /
Exportsof goodsand nfs 414 38.8 34.2 313 40.2 3c
Importsof goodsandnfs 45.4 38.2 30.9 35.0 41t4 20
ig-30U8S1985-93 1991 1992 1993
Privateconsumption 2.8 -2.1 -21.4 10.6 227 -. D. /U tlU m
Geneal governmentcosmxnpton -4.5 -0.7 0.0 -5.8 0.0
Gross domestlcinwestment -11.5 7.7 53.3 -21.4 15.3 3/
Expogtsdgoods and nfs -3.1 -OA -16.1 14.6 -21
Importsofgoodsandnfs -9.8 -3.1 -18.0 16.4 15.5 40
Grossnationalproduct -2.6 4.9 -0.6 -2.7 6.8 -GDI a-GU
Grossnational
income -&2 4.0 3.9 -10.4 16.9

PRICES
andGOVERNMENT
FINANCE
1980 19BS 1191 1992 1993 ClangeofGOPdoralndCP(%)
Domestic prices 2T
(%dCang) 15Et
Consumarprices 11.6 37.3 93.7 191.3 187.2 ol
Whoesalebpces 13.4 472 92.3 120.6 so
IrnpNcitGDPdeftor 11.8 41.1 94.8 166.4 137.1 |
Govemmmntfinance 7
5| M m ge M M 13
(%oFGDP3
Cuent budget balance .. - -7.6 -4.6 -8.1 | CDP1
Ovall swplusdefcit .. - -13.0 -8.4 -11A _ J

193
Zambia
POVERTYand SOCIAL
1980485 19815-93 D.wlapmunt dm'unr
(annual gowth eWes)
Populaion 34 3.t Liftexpeclancy
Labor force 3.2 3.4
moatrecantatinata (mr)
Poverly level: headcountindex (U of popuhWion) 64.3 GNP GroBs
a oxpeclancyat brth 47.7
Infant mordaity(perhousan live bLifhs) 107.0 cP MUEIT
Chid malnubition(X of chhidrwn under 5) 23.0 w u
Accessto safe water (U of populatin) 5ao
Energy consumpdonper capita (kg oOequNialnt) 157.8
hliteracy(%ofpopulaion 15+) 27.2 AccesstI safe -
Gross primary enrolment (U of schod-agepopulabon) 92.0
TRADE
(mions US$) 1980 198S 1991 1992 1993 Expor andInput rwd.s(mi US115)
Totalexports (fob) 1,457 871 1,085 1,110 949 ,
Copper 1,106 401 895 867 734 1.4W
Zinc 25 17 7 1 0 1=
Manufactures 13 .. .. ,. ..
Totalimports(cif) 1,324 834 952 1.301 960 am
Food 55 23 .MO-

Fuel and energy 248 122 83 53 47 a .

Capitalgoods 283 163
Exportprice index(1987u100) .. .. .. .. _ o
Import priceindex (1987100) .. .. .. .. .. 0, - - - * a
Terms of trade (198Th170) ..
Opennessof economy(trade,fGDP.%) o7 77 65 67 82 IS5W IS
BALANCEof PAYMENS
1930 198S 1991 1992 1993 Curnntaccounstbaanceto GDPmrdS%)
(mfillonsUSSJ)
Exportsofgoods and nfs
Importsofgoodsandaf
Resource balance
Net factorincome
1,609
1.765
-157
-2205
950
96g
-19
-267
1.169
1,257
-89
-384
1.193
1.585
-392
428
1,064
1.284
-220
-255
|

'U 91 St 93

Netcurrenttransfers -176 -38 .40 -33 -19 -tI

Current acount balance
Befre official transfers -538 -324 -513 -753 -494 15
Afer officialtransfers -505 -271 8 -117 -110
Long-termcapitalinflow 468 18 -244 -120 360
Total otheritems (net) -124 -203 141 332 -235
Changesin net reseres 162 456 94 -95 -15

Reserve excludoing gold (roW.USS) 78 200 185

Reserves inching gold (miff US$) 206 201 192
Official exchdge rate (IOaMUS$) 0.8 3.1 64.6 178.9 452.8

EXTERNALDEBT
1980 1985 1991 1992 1993 |Strucur o,fxflm dbt(%)
Long-erm debWexports 137.1 323.1 424.8 404.3 450.6 1-(3
IMFceditlexpots 27.5 83.5 78.3 71.0 73.0 L
Short-term deb/exports 36.1 70A 117.2 115.0 29.4 75|O-G
ToPtaldebt ser'icaxports
GPrailas
Long-term
debtiGDP
25.3

57.3
14.4

137.6
51.1

146.7
30.0

151.5
38.1t

150.7 5
I ~
'

IMFo editUGDP 11.5 35.5 27.0 26.6 24.4

Short-termdebUGDP 15.1 30.0 40.5 43.2 9.8 2a .|

Long4enn debt vaios

Private nornguaranteedilong-tenn 3.9 0.0 0.1 0.3 0.3 o
Publk: and publiclyguaranteed w as D 9.
* s2 3
Pivate crediorslong-tern 28.7 18.5 9.7 8.5 8.0 1 . I
Offidal redltors/Iong-term 67.4 81.5 90.3 91.2 91.8

The developmentdiamondshows a level of developmentin the countrycomparedwih its incomegroup average.

194
 Zimbabwe
Z imbabwe is a landlocked country of about
390,000square kilometers, borderedby Mozam-
bique on the east, Botswana on the southwest,
Zambia on the northwest, and the Republic of South
Africa on the south. In 1992 its estimated GNP per
capita was $570 and its population 10.5 million, with a
growth rate of about 2.8 percent a year.
At independence in 1980 Zimbabwe faced a number
of difficult issues as the population expected rapid
progress in redressing severe inequalities in income,
capital, land-holding, and access to social services. The
economy was diversified and had good potential for
growth, but physical infrastructureand the capital stock
were depleteddue to foreign exchange shortagesduring
the previous 15 years and the effects of the war of
liberation. On the human capital side, there were sig-
nificant shortages of skilled labor, largely due to the
emigration of white Zimbabweansand the educational
policies of the pre-idependence govermentm The gov-
ernment also faced internal and extemal security prob-
lems that affected both business confidence and the
transport of exports and impo os.
The new government effectivelyleft intact the inher-
ited economic structure, with predominantly private
ownership of producdve sectors, and maintained an
extensive system of economic controls. To promote
growth, it sharply increased foreign exchange alloca-
tions in 1980 and 1981, raised agricultural producer
prices, and invested heavily in infastrucmre. To pro-
mote equity, it expanded educationand health services,
increased minimumwages, reoriented agriculturalserv-
ices toward communal smallholder areas, and intr-
duced an agricultural resettlement program. The
combination of these policies and very favorable
weather conditions resulted in bumper crops and an
economic boom in 1980 and 1981, with GDP growth
averaging 10 percent, but then unsustainable external
and internal imbalances developed.
Zimbabwe's development strategy produced mixed
results during the 1980s. While it made great strides in
education, health, and smallholder agriculture, its per
capita income remained stagnant because of disappoint-
ing economic growth averaging about 3-2 percent a
year. Private sector investment as a share of GDP fell
195
tobelow 10 percent inthe mid-1980sbefore recovering.
Labor-force growth outpaced the expansion of employ-
ment opporunities, and by the end of the 1980s only
one in three school leavers was being absorbed into the
formal sector. Most of the growth in formal-sector
employmentduring the 1980swas in the public sector.
After a period of large foreign borrowing in the early
1980s, the current account deficit of the balance of
payments was kept in check through a strict system of
direct foreign exchange allocations, avoiding excessive
foreign borrowing and debt buildup. The debt service
ratio rose to around 35 percent for the period 1985-88,
due to a hump in repayment obligationsto commercial
banks and the IMF, before tiling back to the low 70
percent range for 1989 and 1990. However, the result-
ing shortages of importedgoods constrainedinvestment
and productivity.
Recent Economic Developments
Towardtheendofthe 1980sitbecameincreasinglyclear
ttat sustainedincome growth would require fundamen-
tal changes in economicmanagementto reduce the fiscal
deficit to a sustainablelevel, liberalizetrade policy, and
reduce domesticregulations. Bolsteredbyvt!hsuccessful
elections of 1990, the government prepared a wide-
ranging program of policy reform outlined in a 'Frame-
work for Economic Reform, 1991-1995.' This
document was distibuted widely within the country and
presented to donors in early 1991. The adjustment
program addressed the key policy constraints that han-
pered Zimbabwe's developmentin the 1980s and wilL
increase public-sctor efficiency, private-sector devel-
opment, and employmentcreation. Its main components
are fiscal deficit reduction and monetary poLicyreform,
trade liberalization, deregulaion of private-sector ac-
tivities, sector-specificpolicy initiatives, and measures
to alleviate the impact of reforms on vulnerable groups.
The program constitutes a departure from pervasive
direct controls to market forces and blends of structural
reforms and macreconomic stabilizationmeasures.
There was a good begiming to strucn'nl adjustment
in 1991. A system of open general import licensing,
covering 15 percet of imports, was establishedand the
 Zimbabwe
export retention scheme increased to 15 percent of
export earnings to provide additional incentives to ex-
ports and access to license-free imports. To support
demand managementmeasures in maintaininga reason-
able balance of paymentsposition, the real depreciation
of the exchange rate was accelerated. The government
accelerated fiscal reform by adopting a budget that
reduced the deficit from 10.7 percent of GDP in fiscal
1991 to 7.1 percent of GDP in fiscal 1992. Initial steps
were taken to liberalize marketing and pricing, and the
Labor Relations Act was amendedto formalize a trans-
parent and quick mechanism for retrenching labor.
While good progress was made in initiating the
adjustment process, macroeconomicbalances deterio-
rated during the later part of 1991. The current account
of the balance of payments deteriorated, from 3.8
percent of GDP in 1990to 8.4 percent of GDP in 1991.
Export receipts remainedsluggish, due to disappointing
agricultural export performance, resulting from below-
average rainfall and the world economic slowdown,
aggravated by the Gulf crisis. Imports grew rapidly
because of large pent-up demandand speculation about
fiurer exchange rate movements. The authorities in-
itially hesitated in tightening monetarypolicy, but when
pressure on foreign exchange mounted, decisive steps
were taken during the second half of 1991 to contain
aggregate demand. Money supply growth was slowed,
interest rates were liberalized and became positive in
real terms, and aggressiveexchange rate policy resulted
in a 35 percent real depreciationof the Zimtabwe dollar
between July and September 1991.
Despite the emergence of these stabilizaton prob-
lems, there were indications that stuctural improve-
ments were taking hold in 1991i Investment increased
and nontraditional exports, such as horticultural prod-
ucts, textiles, and garments, showed a significant in-
crease in real te=s, albeit from a relatively low base.
However, the supply response was less than expected.
Continued investment licensing, as well as excessive
regulation of markefing and pricing, were recogniznd
as impediments to reaping the full benefits of foreign
trade liberalization and fiscal reform. It was alSD felt
that further action needed to be taken to shield the poor
and other vulnerablegroups from transitionalhardships,
pardy to improve the longer-term sustainability of the
reform program.
Dealing with Drought in 1992
Southern Africa was hit in 1992 by the worst drought
this century, and this more than offset the economic
benefits arising from the policy adjustments under-
taken in 1991 and 1992. That the program was contin-
ued, despite the adverse economiic circumstances,
196
provides an indicationof the government's commitment
to adjustment.
As a result of the drought, Zimbabwe's GDP fell by
7.9 percent in 1992, with agricultural sector output
fallingby 24.4 percent. Manufacturingalso fell due to
the combined effect of agricultural input shortages, a
drastic decline in domesLicdemand, shortages of power
and water, and the tight credit policies implemented to
contain inflation and help support the balance of pay-
ments. However, inflation continued at about 42 per-
cent, fueled by agricultural commodity shortages and
the government's decision to pass on to consumers
increases in producer and import prices for agricultural
foodstuffs. Real incomes and consumption fell, as
wages did not keep pace with the much higher cost of
living. At the end of 1992, about 4 million people, 40
percent of Zimbabwe's population, were receiving free
food, imposing a major burden on the budget.
Because of the unprecedentedneed for food imports
and the much lower exports of agricultunalproducts,
externalbalances deteriorated sharply during 1992.The
current account deficit rose to 15 percent of GDP and
the accumulationof external debt was much higher than
anticipated, rising from $2.9 billion at the end of 1990
to £3.5 billion at the end of 1992 (62 percent of GDP).
The fiscal deficit did not fall as expected in fiscal 1993,
in part because the government undertook to provide
every small scale farmer with a minimum amount of
seed and fertilizer with which :" grow a crop in the
1992/93 season. Monetary and credit policy remained
tight, and interest rates remained positive in real terms
at around 35 percent. After the major depreciation of
the Zimbabwe dollar in the third quarter of 1991, the
nominal exchange rare was held constant during 1992,
before fallingby another20 percent between December
1992 and February 1993. Large amounts of bilateral
and multilateralfinancial support were disbursedduring
1992 to assist Zimbabwe in its drought relief and
recovery program and to ensure that its economic
reform program remained on track.
Reover in 1993 and Early 1994
The 1992-93 rainy season was a good one and this,
togetherwith supportiveprices and aprogram to ensure
that farmers had the necessary inputs, resulted in sub-
stantialrecovery. The maize crop was about 2.5 million
tons, mor.. than enough to meet c:urret needs, ccton
production returned tc pre-drought levels, ana water
resources were replenished. The 1993-94 rainy season
was also good, though there were patches of drought,
with the result being another maize crop in excess of 2
million tons. The recovery of the livestock, sugar, and
treecrop industries has been spread over the two sca-
 Zimbabwe
sons, but with the exception of cattle, numbers in
communalareas back to pre-1992 levels,
However, while the agricultural sector rebounded
from the drought, overall GDP growthremainedmodest
at an estimated 2 percent in 1993.This was largely due
to continued depression of the manufacturing sector
causcd by slowly recovering domestic demand com-
poundedby the continued tight monetarypolicy and the
resulting high interest rates. Inflationfell from about 46
percent late in 1992 to about 20 percent during the
second half of 1993and has remainedthere. The fiscal
deficit for fiscal 1993 exceeded 11 percent of GDP as
drought-related expenditures continued until the har-
vesting of the 1993 crop in April-May, and revenues
remained depressed on accountof the economicreces-
sion. The plannedcontainmentof expenditureyielded a
projected fiscal deficit of approximately7.7 percent of
GDP fiscal for 1994. This was designed to reduce
domestic borrowing by government, ease pressure on
interest rates, and support the needed recovery of pri-
vate sector investment.
The balance of payments improved dramatically in
1993in spite of a sharp fall in the prices of Zimbabwe's
main exports-chrome, other minerals, and tobacco.
Stagnant export earnings, combined with severely de-
pressed import levels on account of the domesticreces-
sion, resulted in a reduction of the current account
deficit to about 5 percent of GDP.
Despite the serious economic and social difficulties
created by the devastating drought, Zimbabwe contin-
ued with structural adjustment, in 1993 andearly 1994.
Import liberalization proceeded in line with program
trgets, with the export retention scheme rate being
increased to 50 percent in April 1993 and then being
replaced by foreign currency accounts and 60 percent
retention by exporters of their foreign exchange earn-
ings in January 1994.The retention rate was effectively
raised to 100 percent, and the market and official
exchange rates umified in July. Decontrol and adjust-
ment of prices proceeded more quicldy than targeted.
Cabinet approval for price increasesis now confinedto
197
only thrce commodities:maize meal, vegetableoil, and
some fertilizer compounds. Investment licensing was
relaxed in April 1993so investmentsmade with 'own
foreign exchange funds," including exchange retention
entitlements,are no longer subject to investmentsanc-
tioning. To further encourage foreign investment, the
governmentnow allows automatic and unrestricted re-
minance of dividends accruing to any foreign invest-
ment made in Zimbabweafter May 1, 1993, provided
they are remitted through exchange retention system
market. Foreign investments made after September
1979 are eligible for unrestricted repatriation of the
foreign exchangeinjected'qq capital through the foreign
currency account and exchange retention markets.
Whilethere were significantreal cuts in nondrought-re-
lated expenditures during the 1992-93 fmancial year,
the govemment's successful drought relief program
created a major burden on public resources in terms of
budgetaryexpensesand manpower needs. This resulted
in programs dealing with the social dimensions of
adjustment receiving less attention than originally ex-
pected. Nevertheless,an effective program for exempt-
ing the poor from school fees was introduced in 1992,
and an appropriate income threshold established for
exemptionfrom healthfees, although the healthexemp-
tion system has not operatedas effecively as planned.
Average per capita incomeshave beenstagnant since
the early 1980s, but therehave been significantpoverty-
related improvementsin two areas. First, a supportive
policy on agricultural pricing and a reorientation of
agricultural services toward the communal areas have
improved smallholderincomes, apart from in drought
years. Second, there has been a substantial expansion
of basic services in health, family planning, education,
andurban services. Inadequateemploymentgrowth has
become a major concernin Zimbabwe. Although there
are 200,000 new entrants to the work force each year,
formal employment has expanded very slowly. This
problem will be eased somewhat as structural reforms
and deregulation lead to an expansion of small- and
medium-sizedenterprises.
 Zimbabwe
Population
mid-1992(milflons) 10.4 Incomegroup:Low
GNPper capita1992(US3$) 70 Indebtedness
level:Moderat

KEY RATIOS
1980 1918 19D1 1992 1093 InvtnmontloGDPmiloC%)

Grss domesticInrestmenGDP 16.8 19.8 25.0 24.3 22.5 30

Exports of goodsand nfsIGDP 30.3 28.8 31.6 32.0 34.2
GrmssdomesticsavbnsIGDP 15.8 21.0 21.0 13.4 21.3 20
Gross nationalsaingslGDP 12.2 17.2 16.6 9.2 17.6

Current accountbalance/GDP -5.6 -3A -8.4 -15.1 -5.0 e0

InterestpaymentslGOP 0.2 2.8 3.9 2.7 3.0
TOtaldebtrGdP 14.7 53.4 52.7 70.4 77.3 0
Total debi/expors 45.4 186.9 165.0 217.2 221.7 n - No2 H 02

GDP: PRODUClION
(%ofGDPJ 1980 193S 1991 1992 1993 SharsofGDPbyasctor(
Agricuture 14.0 2D.2 1&9 22.1 18.3
Industry 33.7 28.0 33.3 35.0 35.3
Manufacturng 24.9 22.9 28.5 30.2 30.6
Serices 52.3 51.8 47.8 42.9 46A
1980-85 1985-93 1991 1992 1993 so
Agriculture 3.7 -2.6 3.1 -24.4
Industry -1.2 2.7 3.2 -B.4
Manufacturng 0.9 3.1 2.6 -9.3 .. e
Serices 4.9 3.8 6.3 -3.6 .. 8 * * 1 92
GDP 3.3 Z0 4.9 -7.9 2.0 1 AG*____ m__________ ____

GDP:EXPENDITURE
of GD)
rA 1980 1985 1991 1992 1993 Gro|th rats aofGDand GDPOP
PrMvate
cwnsumpttn 64.5 57.5 58.2 66.5 59.9 so
Generalgovemnment consmption 193 21.5 20.3 20.1 18.8 |
Grossdomestc investment 18a 19.8 25.0 24.3 22.5
xportsof goods and nhs 30.3 28.8 31.6 32.0 34.2 |0
Importsof goodsand nfs 33.3 27.6 35.5 42.8 35.4 20
(aweage annualgowth) 193-85 193593 1991 1992 1993 10
Privateconsutmption 1.1 2.9 10.9 8.2 -6.6|
General governent consutmpton 9.1 4.7 3.6 -11.0 -3.8 ga G|
Grossdomesticimesiment -1.7 2.6 17.2 -16.3 -6.1 |10
Expors of goodsand rfs 37 OA -0.2 -15.9 4.6
Imports of goods and nfs -1.0 4.7 16.4 1.8 -19.1 4'
Gross natonal product Z8 1.9 4.2 -8.4 2.1 -oo aocr
Gmss natonal ZiI 2.0 5.1 -8.1 2.2 | I

PRICESand GOVERNMENTFINANCE
1930 1985 1991 1992 1993 Chba.gofGDPdeuzlworandCPI%3
DorneCcpicaes SP
(7 change) I4 --
ConsumerpSces 5A 8.5 23.3 42.1 27.6 30_U
VYholel pces .. .. .. - 30,
ImplctGDPdellator 10.0 7.0 27.7 41.2 23.6 1,
Gowmmantfinance a * No go et 92 n3
(% of GDPI
Current budgetbalawe .. -4.7 -0.2 -2.3 -0.7 d-GWdf. -CP
Oveml stfpust/delicit .. .. .. .. . I _

19S
 Zimbabwe
POVERTYand SOCIAL
(annualgmwfh rates) 1198041 1985-93 Devlelpmuntdamend
Populaton 3.5 3.1 Lireexpectancy
Labor force 2.7 2.9
meatrucl issmlblsrrarol
Poverty loyl: hendcountIndex (X of popubtion) 2rL5 GP
NPGMe
Lile expectanciat birth 5.8 per -- - - -- ^ pma.y
Infant motality (perthousnd Ra bkhs) 4&.5 cn enrollmen
Child malnulitlen (% of hdi
Wen under 5) 10.0 pIta
Amesnto safewatr (5%
ofpopuleion) 36.0
Energy consumptionper capita (kg dequwhaent 449.7
Iliteracy (5 ofpopuatbnae 15+B 33.1 h&1
Gross prlnary enrollment( ofschool-ag popuaion) 117.0 Accemutoute maer

TRADE
(mMUbsUS9 19 19 1991 1992 1993 ExportandImportnlsvabnmIl
USS)
Total exports(fob) 1,445 1.124 1,785 1,514 1,543 urn
Cotton 192 223 433
Gold 180 121 226 ,, .
Manufacaes .. .. 385
TotalImports (cMl) 1.641 1,040 Z229 2,295 1*836 .

Food
Fuel and energy 49
271 35
192 26
240 . .I
Capitl goods 706 402 991 .. 1,836
Expor priceindex(19817=100) 166 102 113 99 90
Impertpricelnrdex(1987=100) 139 86 127 130 107 0 a so to ,j
Termsoftrade(1987c100) 119 118 89 77 85s
Openressofeconomy (ra;ldoGDP,) 64 56 67 75 70 u- m-- ---
BALANCE of PAYMENTS
(miftes USQ 1980 1911 1991 1992 1993 CunentaceountbalhncetoaGPraieg%)
Exportsofgoodsand rfs 1,612 1,229 2056 1,819 1,903 2
Importsofgoodsandnfs 1.721 1,211 2315 2,438 1.973 0 -

esowwce balance
Net fadtorincome
Net curent transfers
-109
-72
0
18
-126
-45
-259
-290
2
-619
-280
40
-70
-254
48
|2" a
U L i In
U 2
14j
Curent accountbalance
Before offictaltansfars -302 -153 -547 -859 -276
After official transers -244 -98 -452 417 -95 -10
Long-tern capItalbillow -54 52 2a5 482 250 -12
Talotheriems (not) 211 103 243 -83 76 .14
Changesin net reserves 87 -86 -86 218 -241 1I
Memo: -16
Reseives exdudInggold (mID.USS) 214 93 150 222 432
ReservesInclucinwgold (miE.USS) 419 345 255 404 6'1
Official exchangerate (loabUSS) 06 1.6 3.4 5.1 r .6

EXTE:RNAL
DEBT
ra
EXTERpoN EB 1980 19B5 1991 1992 1993 Stucture of extmaldebti(%)
Long-termdebtlrncts 40.2 142.6 138.1 167.2 168.6
IMFcredilexports 0.0 20.4 0.0 11.7 14.5
Short4ermn debtlxports 5.2 23.8 25.9 38.3 38.7 1 1 O
Totaldebt serIc/texports 3a 3Z7 27.2 3Z0 32.1
GDPgffs nrvF-L
Long-tarmdeb/GD? 13.0 40.8 44.1 54.2 58.7 | Moir.
IMFcredit/GDP 0.0 5.8 0.0 3.8 5.1
Short-tern debVGDP 1.7 6.8 8.6 12.4 13.5 2,
Long-tew debt ratos
PrNvatenonguaranteedllong-trm O. 3.5 9.2 9.8 10.7 0
Publicand publiclyguaranteed 1 7 * , * 'I * *3
Privatecedirllog-term 85.5 58.7 33.7 29.1 21.8 1 1
Offiial erediostong-tmerm 14.5 37.8 57.1 61.1 67.5

- Thed ciamond shoetsa level of developmenthi the county cmnparedwith its incomegroup aveage
mopnent

199
 Technical Notes
T he tables and graphsthat followeachcountry text
provide a uniform statisticalframeworkfor ana-
lyzing country economic performance. Most
data are consistentwith other World Bank publications
such as World Tables, WorldDebt Tablesandthe World
DevelopmentReport. Somedata are the recentestimates
from national publicationsdata that may not conformto
international concepts and definitions,but are consid-
ered to be usefuilin placing country policy decisionsin
context. lTese differencesare generaRynot considered
analyticallysignificantfor a parficularcountry.
Population
Populadon numbers for mid-1992are World Bank
estimates.These are usuaRyprojectionsfrom the most
recent population censuses or surveys; most are from
1980-92, and, for a few countries, from the 1960s or
1970s.Note that refugeesnot permanentlysetded in the
coumtryof asylum are generaRyconsidered to be part
of the population of their country of origin
Gross National Product (GNF
GNIPmeasures the total domesticand foreign value
added claimed by residents. It comprisesGDP (defined
below) plus net factor incomefrom abroad,which is the
income residentsreceivefrom abroadfor factor services
(labor and capital) less similar payments madeto non-
residents who contributed to the domestic economy.
GANP per capita figures in U.S. dollars are calculated
according to the World BRak Atlas method of conver-
sion- The Atlas conversion factor for any year is the
average of a country's exchange rate for that year and
for the two preceding years, adjusted for differencesin
relative inflation between the country and the United
States. This three-year average smoothsfluctuationsin
prices and exchange rates for each country. To derive
GNP per capita, the resulting GNP in U.S. dollars is
divided by the midyear populationfor the lWestof the
three years.
For incOmegroup and indebtedne leveldefinitions,
see the two classification cbles at the back of the
book.
200
Key Ratios
Key ratios are calculated as percentage shares of
GDPor exportsat currentprices. The numeratorof each
ratio is defined below. The denominators(GDP and
exports) are defined in the sections on production and
balance of payments.
Gross domestic invesme consists of outlays on
additions to the fixed assets of the economy plus net
changes in the level of inventories.
Exports(iorts) of goods and nonfactor sermces
represent the value of all goods and nonfactor services
p-;ovidedto (andfrom)the restofthe world; they include
merchandise,freight, insurance,travel, and other non-
fictor services. The value of factor services, such as
investmentincome, interest, and labor income, is ex-
cluded. Current transfers are also excluded.
Gross domestic savings are calcuated by dedtcting
total consumptionfrom GDP_
Grossnaional savingsequl gross domesficsavings
plus net factor income and net curnT private transfers
from abroad.
Cutrrentaccountbalanceafter officialtransfersis the
difference between (a) exports of goods and services
(factor and nonfactor)as well as inflows of unrequited
transfers(private and official) and (b) imports of goods
and services as well as all unrequited transfers to the
rest of the world. Cwrenr account balance before
offidal transfers is the current account balance that
treats net official unrequited transfers as akin to
official capital movements. The difference between
the two balance of payments measures is essentially
foreign aid in the form of grants, technical assis-
tance, and food aid, which, for most developing
countries, tends to make current account deficits
smaller than the financing requirement. The key
ratio presented here is the current account balance
before official transfers.
Interest paymenr (on long-tenn debt) are the actual
amountsof interestpaid in foreign currency, goods, or
servicesby the borrower during the year.
Totaldebt includes total outstanding external debt
(long- and short-term debt and the use of IMF
credit).
GDP: Production
In the sections on production and expenditure,
ratios of GDP are calculated from data in current
prices, and growth rates are calculated from data in
constant prices.
Agriculturecovers forestry, hunting, and fishing, as
well as agriculture. In developing countries with high
levels of subsistencefarming, much agricultuLralpro-
duction is either not exchangedor not exchangedfor
money. This increases the difficulty of measuring the
contribution of agriculture to GDP and reduces the
reliability and comparabilityof such numbers.
Industry comprises value added rniningand quarry-
ing; manufacturing (also reported as a separate sub-
group); construction;and electricity, gas, and water.
Servces comprise value added in all other branches
of economic activity, including imputed bank service
charges, import duties, and any statisticaldiscrepancies
noted by national compilers.
GDP measuresthe total outputof goods and services
for final use produced by residents and nonresidents,
regardless of the allocation to domestic and foreign
claims. It is calculated without making deductionsfor
depreciation of faibncatedassets or depletionand deg-
radation of natural resources.Theestimate of GDP used
for ratio calculationsin the section GDPproduction is
on the same basis as the components-at purchaser
values or at factor cost
GDP: Expenditure
Private consumption is the market value of all goods
and services, including durable products (such as
cars, washing machines, and home computers) pur-
chased or received as income in kind by households
and nonprofit institutions. It excludes purchases of
dwellings but includes the imputed rent for owner-oc-
cupied dwellings.
General governmentconsunprion includes all cur-
rent expenditr for purchasesof goods and servicesby
all levels of government. Capital expenditure on na-
tional defense and security is regarded as consumption
expenditre.
Gross domesic investment- see Key Ratios.
Esporasfimportsofgoods and nonactorservzces-See
Key ratios.
GNP - see above.
GIVY,or gross national income in constant prices is
derived as the sum of GNP and the terms of trade
adjustment. The latter is equal to capacity to import
(value of exports of goods and nonfactor services de-
flated by the import price index) less actual exports of
goods and services in constant prices.
201
Prices and Government Finance
Consumerprices comprise the price index of goods
and services used for private consumption of house-
holds.
Wholesaeprces (or producer prices for some coun-
tries) monitor changes in prices of items at the first
important commercialtransaction.Preference is given
to producer prices becausethe concept, weightingpat-
tern. and coverageare more consistentwith accounting
and industrial production statistics. The price index
covers a mixnureof pricesof agriculturaland industrial
goods at various stagesof production and distnbution.
Implicit GDPdeflator is an overall mcasure of price
performance in the economy.Derived by dividing cur-
rent price estimatesof GDP atmarket prices by constant
prices.
Current budget balance is the excess of current
revenueover current expendue.
Overall suwplus/deJliristotal revenueand all grants
received, less the sum of total expenditureand govem-
ment lending minus repayment.
Poverty and Socal Indicators
Populaton - see above.
Laborforce comprises so-called 'economically ae-
tive persons, includingarmed forces and unemployed
but excludinghomems and odter unpaid caregivers
and smdents.
Poverty level headcom index is estimated as the
proportion of population under the poverty line. The
poverty lines are country-specific and are not compara-
ble across countries. These estimates are based on
special surveys dtat, in most cases, are now more da
10 years old.
Energy consumpion per capita is the annual con-
sumption of commercialprimary energy (coal, lignite,
petroleum, namral gas, and hydro, nuclear and geodter-
mal eletricity) in kdlogramsofoil equivalentper capita.
Infaunmortality rate is the number of deaths of
infantsunder one year of age per l,000 live births in a
given year. The data are a combination of observed
values and interpolated and projected estimates.
Access to safe water is the percentage of population
with reasonable access to safe water supply (includes
treated surfacewaters or unteated but uncontaminated
water suh as that from springs, sanitary wells, and
protected boreholes). In an urban area this may be a
public fountain or standpost not more than 200 meters
away. In rural areas it implies that members of the
householddo not have to spend a disproporfionatepart
of the day fetching water. The definition of safe has
changed over time.
 Child malnutriuion (wader 5) is the percentage of
children under five years with a deficiency or an excess
of nutrients that interferes with health and genetic
potential for growth. Methods of assessment vary, but
the most commonlyused are: less than 80 percent of the
standard weight for age; less than minus two standard
deviations from the 50th percentileofthe weight-for-age
reference population; or the Gomez scale of malnutri-
tion.
Illiteracy (% of populaion age 15+) is the propor-
tion of the population 15 years of age and older who
cannot, with understanding, both read and wrte a short
simple statement of everyday life. This is only one of
the three widely accepted definitionsand its application
is subject to significant qualifiers in a number of coun-
tries. The data for the most recent estimates are from
the illiteracy estmates and projectionsprepared in 1989
by UNESCO. More recent information and a modified
model have been used; therefore, the data for 1990 are
not strictly consistent with those published in previous
years.
Grosspnniary enrulmemn (% sdwol-agepopulaon)
is the grss enrolmnt of all ages at the prnmarylevel as
a perentage of school-agechildren as defined by each
country. Although many countries consider pnmawy
school-e to be 6-11 years, others use different age
groups. Gross enrolment may be rported in excess of
100 percent if some pupis are youngeror older thamthe
country's stadard range of primary schoolage.
.Irfant morralUiy rare is number of dearls of infants
under one year of age per 1,000 live births in a given
year. The data are a combinationof observedvalues and
interpolated and projected estimtes. A f'ew countries,
such as the economies of the former Soviet Union,
employ an atypical definition of live births, which
reduces the reported infant mortality rates relativeto the
standard (World Health Organization)defiition.
The development diamond portrays relationships
among four socio-economicindicatorsfor a given coun-
try and compares them with the average of the country's
income group. Life expectancy, gross primary enroll-
ment, access to safe water, and GNP per capita are
presented, one on each axis, and then connected (with
a bold line) to form a polygon-the 'diamond." The
shape of the diamond can thus easily be comparedwith
the income group to which it belongs. The averages for
each income group are indexed, and the reference
diamond represented by a fine line. Any point outside
the reference diamond represents a value better than dLe
group average, and any point inside the reference dia-
mond represents a value below the goup average.
Where data are not available, only part of the diamond
appears. Since the reference diamond represents differ-
202
ent values in different income groups, comparisons
should be limited to the same income group.
Life epecancy at birth is the number of years a
newborn infant would live if prevailing patterns of
mortality at the time of its birth were to stay the same
throughout its life. As in infant mortality rate, the data
are a combination of observed values and projected
estimates.
GNP per capita - see above.
Trd
rade
The section includes information on export and im-
port valuesand prices, with additionalvalue data on the
two main export commoditiesand major categories of
imports. The categorization of exports and imports
follows the Stndard Intemational Trade Classification
(SITC). Series M. No. 34, Revision 1. Notethatinsome
aLses,(for example, fuel), the export subcategory may
be listed more than once. These represent different
forms of the commodity and are therefore shown sepa-
rately.
Total exports (f.o.b.)hlmporrs (c&if.) cover, with
some exceptions, international movements of goods
across cstoms wrders. Exports are valued fo.b. (free
on board) and imports c.i.f. (cost, insurance and freight)
unless otherwise specified in the foregoing sources.
Food covers the commoditiesin SITC Sections 0. 1.
and4 and Division22 (foodaudlive animals, beverages
and wbacco, aninal and vegetable oils and fats, oil-
seeds, oil nuts and oil kernels).
Maufacmaes comprise commodities in SIT C Sec-
tions 5 through 9 (chemicals and related products,
basic manufactures, machiinery and transport equip-
ment, other manufactured articles and goods not
elsewhere classified) excluding Division 68 (nonfer-
rous metals).
Fuel and energy comprise commodities in SITC
Section 3 (mineral fuels and lubricants and related
materials).
Capital good comprise commodities in SlTC Sec-
tion 7 (machinery and transport equipment).
Exportrimporrprice indexe are price indexes for
measuring changes in the aggregate price level of a
country's merchandise exports and imports over
time.
Terms of rade is the relative level of export prices
comparedwith import prices, calculated as the ratio of
a country's index of average export price to the average
import price index.
Openness o!f economy is the sum of exports and
imports of goods and nonfactor services as a share of
GDP.
Balance of Payments
Exportsrimports of goods and nonfactor services -
see Key Ratios.
Resource balance is exports of goods and nonfactor
services minus imports of goods and nonfactorservices.
Nerfactor income is the income received from abroad
for factor services (labor and capital) less similar pay-
ments made to nonresidents who contributed to the
domestic economy.
Net current transfers are private net transfer pay-
ments-between private persons and nonoffical organi-
zations of the reporting counniy and the rest of the
world-that carry no provisions for repayment. In-
cluded are workers' remittances; transfersby migrants;
gifts, dowries, and inheritances; and alimony and other
support remittances. Net current transfers are equal to
the unrequited transfers of income from nonreidents to
residents minus the unrequited transfers from residents
to nonresidents.
Current account balance - see Key Ratos.
Long-term capital infow, comprises changes, apart
from valuation adjustments, in residents' long-term
foreign liabilities less their long-term assets, excluding
any long-term items classified as reserves.
Total other items (net) comprise the s-m of short-
term capital, net of errors and omissions, and capital
ransations not included elsewhere.
Chamgesin net reserves comprise die net change in
a coumty's holdings of international reserves resultng
from transactions on the current and capital account.
These include changes in holdings of monetary gold,
SDRs, reserve position in the International Monetary
Fund, foreign exchange assets, and other claims on
nonresidents that are availableto the central authority.
The measure is net of liabilities constituting foreign
authorities' reserves, and counterpart items for valu-
ation of monetary gold and SDRs, which are reported
separately in IMF sources.
Reserves exchuing gold comprise a country's mone-
tary authorites' (central bank, currency boards, ex-
change stabilization fimds, and treasuries) holdings of
SDR, reserve position in the International Monetry
Fund, and foreign exchange.
Reserves includng gold comprise international re-
serves excluding gold and official holdings of gold
valued at ye2r-end London market price.
iciadexchange rate (local currency units/USS) is
the official exchange rate as reported in the Interna-
tional FuinancalSatistics (line rflwf - period avenge),
expressed in units of national currency per U.S. dollar,
although an alternative rate is used when the official
exchange rate is judged to diverge by an exceptionally
large margin from the rate actually applied in interna-
tionI transactions.
203
External Debt
Debt indicators presented in this section are ratios
used to assess the external situation of developing
countries. They are compiled on a consistent basis as
reported to the World Bank's Debtor Reporting System
by memboercountries.The ratios offer various measures
of the cost of, or capacity for, servicing debt il terms
of the foreign exchange or output foregone. Extenal
debt indicators are shown for the end of the year
specified. The exports reported in this section include
goods and all services and workers' remittances.
Long-termdebt is defned as debt that has an original
or extended maturity of more than one year and that is
owed to nonresidentsand repayablein foreigaicurrency,
goods, or services. Long-term external debt has ree
components:
Public debt is an extemal obligation of a public
debtor, including the national government. a political
subdivsion (or an agency of either), and autonomous
public bodies.
Publicly guarameeddebt is an external obligation of
a private debtor that is guaranteed for repayment by a
public entily.
Private creditorsinclude bonds that are either pub-
Liclyissued or privately placed; loans from private
banks and otherprivate conumercialinstitutions; cred-
its from manufactures, exports, for example; and
bank credits covered by a guarantee of an export
credit agency.
Official creditors include loans from international
organizations (multilateral loans), loans from govem-
ments and their agencies, loans from autonomous
bodies, and direct loans from official export credit
agencies.
Private nonguaraneed debt is an external obligation
of a private debtor that is not guaranteedfor repayment
by a public entity.
RiFcredt denotes repurchase obligationsto theIM
witi respect to aU uses of IMF resources, excluding
those resulting from drawings in the reserve tanche. It
comprises purchases outstanding under the credit
tranches, includmgenlargedaccess resoures and all the
specialfacilities(the buffer stock, compensatoryfinanc
ing extendedfund, and oil facilties), Trust Fund loans,
and operations under the Structural Adjustment and
Enhanced Structura Adjustment faciities.
Shon-tenn debrtisdefined as debt that has an original
maturity of one year or less. Available data permit no
distinction between public and privat nonguranteed
short-term debt
Total debt service is the debt service payment (prin-
cipal repayments and interest payments) on total long-
term debt, use of IMF credit, and interest on short-term
debt only.
Table 1 C fication of economies by income and region, 1994
Sub-Sd=nnfriia: AS&________ EMYqMSSCombo!As. Mide EastandNorth Africa
Sated . in
Ircate SGULduni EastAS Esaqeamd at of Middte North
grow Subou Afria West Afrca d Pacic South Ash CezrntAsai Ew East Ajnoz Aswras
Barnmdi Benin Cambodia Afganhstan TaiiSZ% Yemen.Rep. Egypt Arab Guyana
Comnos BurkinaF
Po Chinas Rep. Hait
Enjita Cen- African ladoeia Ubunn Honduras
Ethiopia Republic Lao PDR India Nicnaiu
Knya Chad Myanmia Madive
Lesotho Equatrial VietNam Nepal
Madagascar Guinea dan
Malawi Gambia.The SndLanka
Moabp Ghana
[- Riwanda GR
uinea
honexg Somalia Guineais
Sudan Lbria
Tanaia Mali
Uganda Mauitai
Zaire NgrF
Zamibia Nigeia
Zimbabwe SaoTaron
and Principe
Sierra
TP Leone
_ .~ ____ Togo _____

Angoa C oo Fiji Albania Turkey Irandfam Algeria Bere

Opbouti CapeVerde u Armiena Rep. Morocco Boivia
NqsmAA CNg Ks Degm Azebaia Iraq Tunisia Chile
Swaziand Camtdivoire Rep. Bosniaand ford-n Colombia
S5ea Marshall Her3gvina Lebanon Costa Rica
Isblards Bulgaria SyKianAnb Cuba
?vlironaia Cmratia Rep. Dominic
Fed.Sts. CzEO Dominicn
Monglia Republi Repubbc
N. Marianala Georgia Ecuador
rapasNew Kazaltstan El Salvador
Guinea Kyrlyz Gnada
Philippmes Republic Guatemala
Solomon latia inca
7~ slads Lithuana Panama
Thaidand M ParaY
Tp FYine Peru
Vanua±u Molda SLvnent
Western Polamd and the
S5nta Romnara Grenadins
Rassian
Pedaraon
mova
RepubRe
AIMfr- Tu cknaista
Ukrairie

Yugoavia.

Boawam Gabot Amican Gbtaltar Babm LibYa Anrigunand

Mauritius Smoa Eotonia Gre Oman Barbuda
MayUt Guam Hunay Isle of Man SaudiArabia Argentn
Runion KoraRep. Skrenia Mata Aruba
Seydhell Macao Pertoga Babados
SouthAfrica Malaysia Brazil
New FrenchGuiana
Caledoa Guadeoupe
MTinique

Utpper Nedherlands
PuS Zi5o
S20itsasd
Kern
St Lucia
Suriname
Trinidad
2r,dTobago
Uruguay
Venezuela
iSnubttk 169 27 23 26 8 27 6 9 5 38

204
Table 1 (continud
Asa Emee d Catral Asia MUk hSand NathAfria
Eastand East&"
inct Snuthearn &stAm EurnVad Rt of Middk NWrth
vaW Subgtaap rica Wet AftIo andPcYk SouthAsia CwbalAsia Eue East Mi Ameris
Australia Austia _ a_a_
Japm Bdgiutm Unted State
New Zealand Denmark
Fktand
Fra=
kdand
Iceland
OECD- Hlgh Italy
Neffi~~~~~~~~~~~~~~~ermanye

ntgh- SmpSpedands
Sweden
Ain rl*: bbnds
Switzwland Qat vzgn~tea
United

Bnzxai Andorra Israe Bahiacnas.The

French CuspSl Kuwait Beamdd
NAb Plymsiaa Isands Qatar Vurgtn
OEEW HongKong Cypnms UnkitedArab Meands(US
mantis ~~~~~~Sinapor Faerolslans Esnikaues
OAtP GRatend
SanManna
Toal: 208 27 23 34 8 27 28 13 5 43
a- FomerYugv av RepublicolM4aedonia-
v. OdtAsianecsaomies-Taiwaa.,bin.

Definitions of groups

ThesetablesclassifyallWorldBanklmembereconomies,andalloher upper-middle-income. 12.696-SSE355;

economtes with populadons of morc than30,000-
Income group: Economies are divided according to 1992 GNP per
capita calculated usingthc WarldBankAdsmnethod.The groupsare:
low-income. $675 or less: lower-middle-income, S676-S2,695;
and high-income. S8356 or
more.
The estimates for the republics of the former Soviet Union are
prliminry. and their classification will be kept under review.

205
Table 2 Classification of economies by major export category and indebtedness, 1994

LoW-incr AMG-ncOME Hsgis>nmr

Sezdy Modm Ls S y MaIJldy Less Not b
Growu nfetd bua& id aMd afetDiddb mOEtniss (lCD nmOECD
Caiina Bulgara Hungary Annenia Canada HongKong
Poland Russian Beams Fnland brael
Fileradon Estonia Germany Slngapp
Georga ireland OAF'
Korea.Dent Itly
Rep. Jaa
KoCrea.ip. Sweden
Eapres Kyrmyz Switmlarnd
Lf-- Republic
seatu Ltavia
Lebanon
Lituana
MLaon
Moldova

Ukraine
._______ Urheldatan ___Uzeisa

Afhanistan Guinem Cad Albania ClDe Americn French Guiana kdca-nd FEeac:ilarnds
Buuadi Malawi Argetina Gudemala Samoa Guadeloupe New Zaland Greenland
Equacrial Toga Bolivia Papua New Bolwana Reunion-
Guine Zimbabwe COtedvhoire Gum gst
Mongla
Ethopa Cuba Nandbta
Gha Peru Pargy
Guinea-lian Solmon
Guyana .Ailands
Honduras SLVincent
Liberia and the
Madagmor Gcenadine
Exportrs Mali SuNnanie
unsgad Mauritania Swazilarbd
prmi-y Myanar

?hge
SEaTona
and Pdrirnpe
Somal
Sudan
Tanzania
Uganda
VietNam
7Zaie
Zambia _

Nigria Algeia Gaban Ban Bnmei

Angola Venezuela Iran Taamir Qatar
E t- Cong Rep. lthaed.Arb
Iraq iJbya Emidrats

am Trinidad
and Tobag
Turkwmientan_____
Cambodia GambiaThe Benm Jamaia Dondcan Anfigusand Maiiqu United BahamasTIr
Egypt Arab Maldives Bhutan Jordan Republic Barbuda Kigdom Bermuda
Re- Npal BurkinaFaso Panama Greece Aniba Cypms
YemnurRep. Haib Barbados
Leomtho Belize Polynesia
Cape Verde
4jibcti
ElSalvador
Fi
Grenada
E-ok ICiriati
rrukn ~~~~~~~~~~~~~~~~~~Malta
Netiedanids
Andllc
St iMR
and

Vanuatu
Westen

206
Table 2 (cashd)

teLnet MMIe )Egh.damw

Saucily Moderatehj Less Sarmmfy Mmieutdy Less Netldasfied b
Grow9 ib inb ed buied idebhinas OECD
r -XC
CentralAfrican alah SrLna EuA_l Colombia Azerbaia Yugoalavi Atal Kuwait
Republic Cncats Tajildsn Canmeo CostRic Donira Fed. Rep. Austria
Kenya Idia Ecuador rhippines Kazaldst Bdgium
Lao PDR Idonesia Mexaco Senea Malaysia Denmak
DirrstW Mozambique Paimstla Morocc Tunisia Mauitus France
aprkrsb Siera Leone Syrian Aab Turkey Portugal L mne g
Rep. Uruguay SouthAfric Netheflands
Thailand Nrway

_______ _______ ~~~~~~~~~~~

Stam ~~United____s

Gibraltar BsniaaMd Ander

Cedpur Chanma

ECtia VIrgin
Guam Islands US
Isle ofMan
kbacedfla

d- Marbh
by apat IslanKs
-tW-Y Mayan

Fed.Sts
Na,Caiedonia
N.Maiias
Puerto Ric

Toah2Otbrsianom.
a- OteAsa
aiwa7,0l21 .
snaesTaiwan,Qunn
9 j 21

n Eaonuesmwlunosigle tcategmy amwhOarm mtoa npcn

50 pcn atotlio
c. FomuerYugosav Republic ofbMawdonia.

Definffions of groups

ThesetablesclassifyalWldBankmcmbereconomes.plus alUother to GNP(80 prce) and presentvalue ofdebt serviceto exports(220

economieswith populationsof more than30,000. perent). Moderaly udebredmeans idtherof the two key rtos
Major export caregorjr: Major exprtsarc
exports are those
Muyoqoncaxeory:Mago that accountfor
hosesSataccot Po 550 exceeds 60thatdo
econoniies percent
notofrcporcdtdaled
but does notdebt
rach, the critical
statisdiclo lvels.Ban
theWorld For
percen or more of total exports of goods and services onmone ec Reportdnstepresntaebsadstisnotb possiBat
category,in the period i987-91. The caegorics are: noobtelprimary Dnstea hefollowin metolgialsused atoc ias notpn-blc
(SrrC 0.1,2, 4, plus 68), feels (SlTC 3), nuts (S1TC5 to 9. Insmesad evrwegyinmcbtedmedlsn sceoffourkfy rthios(avered
less 68), and servies (factor and nanactor srvice recepts plus o res.99 vreabdebteds debttourP5y ros(ead
workers' remittances).If no sigle categoryaccountsfor 50 percent oexrts927 prent,vebti seve t tsN(30pect);dand
or more of total exports,theeconomy is classifiedas diversiJed2 it to e(275 p ercent).Mederac
to yeidobts (30 pme t); ano
ntesrst to exportr C20 pectl Mbdrn w en he of
Indebtess: Standard World Bank definitons of severe and four key ratios exced 60 percent of, but do not ract, the critical
moderateindebtedness,averagedover threeyears(1990-92)are used levels. Al other clasified low- and middle-incomeeconomiesar
to clasify economiesin this table.Severelyinebted meanseither of Listedas less-idebeAi
the twokey ratiosis abovecriticallevels:presentvalue of debt service

207
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= THE WORLD BANK / BANQUE MONDIALE / BANCO MUNDIAL

WORLD*DATA 1994
This CD-ROM features more than 700 time-series indicators of World Bank dtamon national accounts, balance of payments, socialdevel-
opmcnt, trade, external deor and finance, covering 1960 to 1992. Many. such as current and constant price U.S. dollar national account
series, are available in a World Bank publication for the first time. The filI text of Trends in DeaelopingEconomiesis also included. The
World Bank's user-FriendlvSocioeconomic Time-scriesAccessand Retrieval System (tISTARS*) allows the user to view and manipulate the
dataand the text contained in this CD-ROM and to export data seections into other computer programs.

DATA ON DISKETTE AND MAGNETIC TAPE 1994

All the data series in the annual publications described below are available in time-series on 3.5-inch diskettes in the NVorldBank's
*STARS* retrieval svstem. Users oF DOS 2.1 or higher operating systems can viewvand sclect a[l the data, which can be exported to other
computer applicttions such as Lotus 1-2-3, Javelin Plus, or any program that reads ASCII characters. The diskettes require at least 512K
RAM. Data from WorldDebt Tabkr and WToarld Tables arc also availableon magneric tape.

TRENDS IN DEVELOPING ECONOMIES 1994

This annual collection of profiles of economic conditions in devdoping economies is one of the World Bank's most eagerlyawaited statisti-
cal publications. The sixth edition describes the recent economic performance of 1 16 economies. Thc reports describe each country's eco-
nomic fiatures, current socioeconomic issuesand prospect and summarize national development strategies. Newly designed tablcsgive List
accessto key data on economic and social indicators and are accompanied bv graphs. Mosr indicarors include data for the 1980s and for
1991-93. The ->STARS*diskettes indcudceine-series data for 1980-93 with links between data tables and texr.

TRENDS IN DEVELOPING ECONOMIES 1994 EXTRACTS: VOL. 1. EASTERN EUROPE AND

CENTRAL ASIA. VOL. 2. EMERGING CAPITAL MARKETS. VOL. 3. SUB-SAHARAN AFRICA
Three regionalexnractsfrom Trendsin DevelopingEconomiespresent brief analytical descriptions and data on recent socioeconomicperfor-
mance and trends. Volume 1 covers 20 economies of EascernEurope and the former Soviet Union. Volume 2 concentrates on 2 develop-
ing countrics where stock markershave grown rapidly since the early 1980sand fbreign investrmenchas increased since 1989. Volume 3,
publishedfor the first time, presents individual profiles of40 Sub-Saharan counmries.

SOCIAL INDICATORS OF DEVELOPMENT 1994

Provides the larestsocidalindicators for more than 190 economies including the most recent availableestimate of fertiliy, mortlity. iflicer-
acy, access to health care, and shares of GDP for selected social expendirures. The indicators describe the characteristics of poverty and che
effeciveness of ef*obrsto red-ucepoverry. Intemational comparisons are made easier by a summary table cha takes a cross-country look at a
selectedarray of indicators. The data are gathered from govcrnnents, specalized internationalagencies,and World Bank files.

WORLD DEBT TABLES 1993-94

Provides complete and up-to-date data on the debt and international capital flows of developing countries. This two-volurneset gives debt
data for 131 countries. Volurne I analyzes and sumucarizcsextcnal finance for developing countries Data presenzedin both volumes arc
compiled from the World Bank's exdusive Debtor Reportng Systm. The cablesgive statistics by country on public and publiclyguaran-
reed long-term debr, private nonguarantced long-term debr, short-term debr, and International Monetary Fund credits Indicators report on
debt outstanding, andisbursed debt, commitments disbursements, principal repaynnents,nct flows, interest payments, and net transfeirs
Also provided are data on currency composition of long-term debr. debt restructuring, and debt service proiections. Aggregacedata are pre-
sented for all countries and for selecredgroups, including principal borrowers and highly indebted countries.

WORLD DEVELOPMENT REPORT 1994

This series, now in its seventeenth year, has been described as "the most influcntial docunmentin seting the agenda for the development
debare." WorldDevelopmentReport 1994 focuseson infitasrumcure-rypeservicesthat are essential for householdc-business, and governments
to function: transport, telecommunications,water and saniration, power and gas, and major water works. The Report includes the World
Development Indicator-statistical tables thar provide instant access to the most comprecensive and current data available on social and
economic development in more than 200 economies, induding the countries of the former Sovier Union and the Easern and Central
European economies.Topics range from agricultural producton to international trade

WORLD TABLES 1994

The most demailedcollection of economic data published by the World Bank. This edition provides economic, demographic, and social data
for 160 economies plus basic indicators for an additional 47 economies. The time series spans 1972 to 1992. Data are orgaized both by
topic and bv country. The topical pages report GNP, GDP, domesticsavings and investment, imports and exports,and other economic
indicators for individual countries, geographic regions, and income groups. The country pages consist of four-page tables for most of the
World Bank's memnbers,presenting data on GNP per capita, popularion, origin and use of resonrces.domestic prices, manuficuring activi-
ty, monetary holdings, central government finances, foreign trade, balance of nayments, and external debt.

COVER DESIGN BY BRIAN NOYES / THE! MAGAZINE GROUP ISBN 0-821 3-3045-4