LIBERIA: DIFFICULT PASSAGE AHEAD

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP84S00552R000200160003-9
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 22
• Document Creation Date: December 22, 2016
• Document Release Date: January 12, 2011
• Sequence Number: 3
• Publication Date: June 1, 1983
• Content Type: REPORT

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Directorat
Intelligent
Liberia: Difficult
'assage Ahead
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Intelligence
American Analysis. It was coordinated with the
Directorate of Operations and the National
Intelligence Council. Comments and queries are
East Africa Division, ALA
welcome and may be addressed to the Chief, West-
Secret
ALA 83-10090
June 1983
Liberia: Difficult
Passage Ahead
This paper was prepared bye
Office of African and Latin
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Secret
Liberia: Difficult
Passage Ahead F__1 25X1
Key Judgments We believe Liberia's economic and political situation will remain fluid and
Information available unpredictable for the near future, with the potential for instability and the
as of 15 May 1983 threat of Soviet and Libyan meddling. Although Head of State Doe in his
was used in this report.
three years in office has consolidated personal power, he has failed to arrest
Liberia's economic decline, and his vacillating-often impulsive-behavior
has generated a constant undercurrent of uncertainty. In our judgment,
Doe's popularity has peaked and he faces difficult and potentially unpopu-
lar decisions as he attempts to cope with the simultaneous challenges of
growing economic deterioration, honoring his promise to restore civilian
rule by 1985, and controlling the armed forces.
In our view, Doe has no better than an even chance of coping with Liberia's
problems for the next several years even if he receives requisite advice and
assistance from foreign donors, especially the United States. We judge that
the most likely sources of future instability stem from either the possibility
of economic collapse, the possibility that plans for civil rule may be
aborted, or the threat of military intervention. To ward off these dangers,
Doe needs to adopt more stringent austerity measures, to engineer a
transition to civilian rule, and to further discipline the military.
We doubt that Doe has the willingness or ability to take the full range of
painful and politically risky steps necessary to reverse Liberia's economic
decline, nor do we believe he will achieve more than marginal success in
imposing greater discipline on the military. In our view, Doe does not seem
to have a clear plan for achieving civil rule and there is an even chance that
he may either abort the transition or install himself as the head of a civilian
government in order to claim success. US Embassy reporting indicates that
public anticipation of civil rule has been an important factor in sustaining
popular tolerance for poor economic conditions and administrative lassi-
tude under Doe.
Because Washington is widely viewed as responsible for Liberia's fortunes,
we believe serious instability or Doe's backtracking on civil rule could open
the United States to criticism in Liberia and Africa, as well as afford
propaganda advantages to the Soviets and Libyans. In our judgment,
economic collapse would be likely to set the stage for another enlisted
men's coup and the possibility of new and unpredictable changes in
Liberia's domestic policies and foreign orientation. The cancellation of
plans for civilian rule and the perpetuation of military government would
diminish internal and international support for Doe and would require
increased levels of US support if-as seems likely-the regime was forced
to use strong-arm methods to hold onto power.
Secret
ALA 83-10090
June 1983
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We believe Moscow and Tripoli are monitoring developments in Liberia
and hoping for a change in government either through the election of
civilian leftists or a coup by enlisted men who might prove more susceptible
to manipulation. Doe's strong
suspicion of Communism and dependence on Washington for financial
assistance have allowed few openings for the Soviets and Libyans, whose
presence is small and ineffective. In our judgment, however, any lapse in
Washington's response to bailout requests by Doe-while unlikely to lead
to a dramatic reversal in relations-could cause Liberia to threaten to
establish closer ties with Moscow and Tripoli in hopes that the United
States would feel its position vulnerable and provide more funds.
Doe's penchant for impulsiveness and occasional fits of pique with
Washington mean that there will always be the danger of an abrupt policy
reversal harmful to US interests. On balance, however, we believe
Liberian-US relations will remain reasonably good over the next two years
if US aid levels do not decline significantly and if Doe continues the
transition to civilian rule. There will probably be no serious threat to
valuable US communications and navigation facilities or military access
rights. US interests probably would not be significantly affected if Doe
chooses to cling to power by becoming the elected head of a civilian
government, although his personality would make for some difficulties in
working closely with civilians. If Doe perpetuates military government, he
will face more active civilian opposition, have to turn to more repressive
rule, and require even more US support. Doe's overthrow by another ill-
prepared, populist-oriented military regime would usher in a period of
protracted instability and raise foreign policy uncertainties, offering poten-
tial opportunities for the Soviets and Libyans to meddle.
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Key Judgments
The Decline Intensifies in 1981/82
5
Looking Toward 1985: Some Key Factors
9
Meeting the Timetable for Civil Rule
9
Correcting Shortcomings of the Armed Forces
10
Outlook and Implications for the United States
12
Methodological Notes on Economic Forecasts
15
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Liberia: Location of US Facilities and Access Rights
Area Diplomatic'
Telecommunications
Relay Station
Coast Guard OMEGA
Navigational Station
North
Atlantic
C,ccF, _, 7
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Passage Ahead
Introduction
World recession, coupled with Liberia's continued
economic mismanagement and rising corruption, has
accelerated economic decline since Head of State
Samuel Doe seized power in April 1980. US Embassy
reporting indicates that this situation could generate
new political instability or reversals of policy threat-
ening to substantial US interests in the country. The
Embassy points out that Doe's military regime faces
the simultaneous challenges of forestalling social un-
rest while pursuing economic austerity measures,
imposing order on a still unpredictable Army, and
steering Liberia back to the civilian rule that has been
promised for April 1985. Doe has matured, but he is
still prone to unpredictable behavior not in the best
interests of Liberia or the United States.
Several other West African states are trying to adjust
to serious economic problems and look increasingly to
the United States and the West for help, fearing they
could become more vulnerable to Libyan and Soviet
exploitation. The US Embassy in Monrovia believes
that these pro-Western governments in the region
view Liberia's fortunes as an indicator of Washing-
ton's intentions and reliability because of Monrovia's
longstanding special relationship with the United
States
This paper examines Liberia's continued economic
decline and how the country is coping with it, the
related political problems, and the most likely scenari-
os looking toward 1985. It addresses the potential for
Libyan and Soviet meddling and the implications of
instability in Liberia for the region and the United
States]
Samuel Doe-A Quixotic Leader
We concur with the US Embassy's judgment that
Head of State Doe seems likely to play the dominant
role in guiding Liberia for the near future. Although
the Liberian leader has matured considerably in three
years in office and has consolidated his personal
authority, Doe's basic unpredictability poses added
problems for the US goal of promoting future eco-
nomic recovery and political stability to safeguard
substantial US interests in the country. Unlike the
majority of African military figures who seize power
with clear goals in mind, Doe seems to have no plan or
timetable for dealing with Liberia's problems other
than a vague vision of improving the lot of the average
Liberian. In practice, Doe is procapitalist and pro-
American, although members of the US Embassy
have found that his stubborn nationalist streak can
sometimes aggravate Washington.
US Embassy reporting and recent field assessments
indicate that the 32-year-old Doe remains a highly
ambivalent individual who tends to react to events and
pressures rather than anticipating them and is con-
cerned with day-to-day survival. Although the United
States enjoys special access to Doe, who has accepted 25X1
some good counsel from Washington, his government
has also been characterized by unwise decisions and
rash actions
Doe is neither well educated nor politically sophisti-
cated, and in facing problems he vacillates, according
to US Embassy officials. Doe's decisions, which often
are not well thought through, will be reversed when
the implications become clearer. Doe also appears to
suffer from abrupt mood shifts, acts on the basis of
incomplete information, and has often followed bad 25X1
advice from less mature colleagues or from those who
have their own axes to grind 25X1
The US Embassy has reported numerous examples of
Doe's impulsiveness and backtracking. A recent arti-
cle in the US press alleging excessive influence by
Washington over Liberia prompted Doe to threaten to
expel the US Ambassador. A few days later he urged 25X1
the Ambassador to continue his wise counsel. While
trying to improve Liberia's human rights image, Doe
secretly executed coup plotters. To eliminate one left-
leaning member of the government, Doe almost com-
pelled all civilians in the cabinet-including his most
competent officials-to resign.
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Although Liberia-independent since 1847-is Afri-
ca's oldest republic and was founded by freed Ameri-
can slaves, its pattern of economic and social develop-
ment was typical of most European colonies in
Africa. Two distinct economies emerged: a small,
relatively sophisticated modern economy dominated
by foreign interests, and an indigenous tribal econo-
my consisting of subsistence agriculture. The rural
poor benefited little from the country's export earn-
ings and social service programs, which favored ur-
ban areas and the elite.
After steady but unspectacular growth following
World War II through the 1950s, Liberia-like many
other LDCs-reaped important economic gains in the
1960s and early-to-mid-1970s during the rapid ex-
pansion of world trade. Led by the strong demand for
its two principal commodity exports, iron ore and
rubber, annual economic growth during the period
averaged 4.5 percent, making Liberia one of Africa's
better performers
Booming exports allowed Monrovia to cover a steadi-
ly rising volume of imports. These, in turn, went to
satisfy the needs of increasingly sophisticated urban
consumers and to support a variety of development
projects. Cautious government fiscal policies averted
inflation and allowed room for steady growth of the
private sector. Most of the population, which was
engaged in subsistence farming, received few benefits
from this prosperity.
Accelerating Economic Pressures
As elsewhere in the developing world, the mid-to-late
1970s brought hard times to Monrovia. Skyrocketing
oil prices plunged the West into recession that de-
pressed demand for Liberia's primary exports. The
slump in world iron ore consumption, for example,
forced Liberia's iron ore concessions to slash output
nearly 30 percent from 1974 through 1979. Only the
boom in tropical commodity prices kept total export
revenues from declining
a This background assessment is based on information from the US
Embassy in Monrovia and on statistical data from the IMF and
While export sales were lagging, imports of goods and
services began to rise substantially. By 1980 expendi-
tures on foreign goods had nearly doubled, partly in
response to increased demand for consumer goods.
Goods imports also were spurred as the government
brought in sizable amounts of construction materials
and other manufactured goods in preparation for
hosting the summit of the Organization of African
Unity in 1979.
Toward the end of the 1975-79 period, the balance on
payments for services deteriorated sharply:
? Fees paid by international shippers to use the
Liberian flag of convenience were down because of a
slowdown in world commerce.
? Annual interest payments on external debt quadru-
pled to $80 million as Monrovia borrowed heavily
to pay for ambitious transport and other public
works projects.
The result was a steady deterioration in Liberia's
current account position. To cover the deficit-which
was $118 million in 1979-Liberia successfully solic-
ited new funds from official creditors, particularly
the IMF and the United States. Access to private
capital, on the other hand, declined, reflecting inves-
tor uncertainty over future trends in markets for
commodities that dominated Liberia's exports.
International assistance was not enough, however, to offset
the impact of lower production of iron ore and rubber. By
the end of 1979, the economy was producing less in real
terms than it was in 1974, while real income had dropped
by 15 percent. The burden of this decline fell most heavily
on the urban workers, as the elite were able to maintain
their living standards through increased corruption and
commodity speculation. That the economy had become a
potent political issue was graphically illustrated when
widespread rioting broke out in Monrovia in April 1979
after the government announced plans for a substantial
increase in the price of rice-a Liberian dietary staple. In
the months leading up to the Doe coup of April 1980,
opposition leaders consistently pointed out the disparity in
the living conditions of the elite and masses as they sought
to drum up popular support.
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Liberia: Balance of Payments
Trade balance
130.5
111.9
63.2
57.8
-16.1
5.5
30.0
66.5
54.0
50.0
50.0
Exports (f.o.b.)
324.0
400.3
394.4
457.0
447.4
486.4
536.6
600.4
531.4
480.0
450.0
Iron ore
196.7
262.2
293.6
328.7
273.5
274.4
290.0
310.2
331.4
300.0
295.0
Rubber
42.9
64.5
46.2
53.3
59.1
69.2
87.8
102.2
89.2
60.0
55.0
Diamonds
49.3
29.9
18.4
16.6
21.4
30.3
39.6
33.5
23.4
32.0
30.0
Timber
16.6
17.1
12.8
34.6
29.3
46.7
50.1
65.3
36.8
NA
NA
Coffee
5.1
4.0
4.5
6.6
43.0
25.3
27.1
33.0
19.4
NA
NA
Other
13.4
22.5
18.9
17.2
21.1
40.5
42.0
56.2
31.2
NA
NA
Imports (c.i.f.)
-193.5
-288.4
-331.2
-399.2
-463.5
-480.9
-506.6
-533.9
-477.4
-430.0
-400.0
Services and transfers -135.0
-141.9
-144.4
-103.6
-95.0
-146.0
-148.0
-164.6
-186.0
-200.0
-215.0
Current account
balance
-4.5
-30.0
-81.2
-45.8
-111.1
-140.5
-118.0
-98.1
-132.0
-150.0
-165.0
Capital account
balance
NA
27.9
76.2
Official capital
NA
NA
NA
21.4
38.9
64.6
102.6
80.1
50.0
32.0
NA
Private capital
NA
NA
NA
58.8
8.1
-24.3
-10.0
-13.0
NA
Balance on current
and capital accounts
NA
-2.1
-5.0
34.4
-64.1
-100.2
-15.4
-18.0
-92.0
-131.0
NA
Net borrowing
NA
-2.4
-5.0
-28.7
15.8
9.5
22.6
4.6
22.5
NA
NA
Change in
central
government
deposits abroad
NA
-4.5
-10.0
-7.2
9.1
-12.5
-29.4
-69.7
-106.0
NA
NA
a Estimated.
b Projected.
Economic Crisis
When he came to power in 1980, Doe pledged to
improve popular living standards and to revive Libe-
ria's economy. However, his government's actions and
policies-exacerbated by continuing global reces-
sion-have had the opposite effect. US Embassy
reporting indicates that national output declined by
10 percent during the two-year period of 1980-81 and
probably slipped at least an additional 5 percent last
year. Various openly available sources indicate that
the country's financial health is at its lowest since at
least the 1960s, the modern economy is slowly grind-
ing to a halt, and only substantial international
assistance is preventing even greater damage.
Doe's First Year. One of the Doe government's first
acts in 1980 was to execute a number of prominent
Americo-Liberians, including President Tolbert, most
of his family, and nearly all of his cabinet. The
executions received widespread support from the na-
tive population, who, in our opinion, saw them as a
sign of the end of Americo-Liberian domination. The
executions also prompted an exodus of Americo-
Liberians from Liberia, which sharply depleted the
country's skilled labor pool. Among the emigres were
people who occupied senior positions in the govern-
ment, military, and private industry and held most of
the country's wealth.
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Figure 1
Liberia: Iron Ore Production, World Prices,
and Western Purchases
f 1 :a1 I1.1
a Estimated.
b Projected.
A large-scale transfer abroad of funds accompanied
the elite's departure. According to the US Embassy,
currency withdrawals jumped over 25 percent within
weeks of the coup, thereby leaving the government
without access to sufficient funds; it has yet to
recover. Liberia cannot turn on the printing presses to
solve its liquidity crises, as the US dollar is its legal
The coup brought to power a group of undereducated,
inexperienced soldiers whose lack of expertise in
dealing with economic issues quickly became appar-
ent. To redistribute the country's wealth, Doe doubled
salaries for civilian government employees and tripled
the military pay scale. He also increased subsidies for
rice, fuel, and other necessities. In addition, US
Embassy officials report that the new regime tacitly
supported wildcat strikes against the iron ore and
rubber companies that resulted in substantial wage
increases and further lowered the attractiveness for
Westerners of investing in these industries. Even more
worrisome developments, in our judgment, were Doe's
willingness to accept the extravagance of his col-
leagues on the ruling military council and the lack of
fiscal accountability of the various government minis-
tries. These moves boosted operating expenses for
1980 more than 25 percent above the previous year's
level.
Doe clearly did not anticipate that the increase in
government spending would be accompanied by a
falloff in revenues:
? Customs receipts-an important revenue source-
declined shortly after the coup as a result of a 45-
percent plunge in the monthly volume of imports.
? The decline in demand associated with the depar-
ture of the salaried Americo-Liberian elite hurt
business profits and reduced related taxes.
? Ship registrations and associated fees and taxes
from the operation of the world's largest flag-of-
convenience fleet fell off as the world waited to see
how the new government would conduct itself.
The regime's initial policies, such as across-the-board
pay raises, were designed to curry favor with the
public, but entailed substantial costs to the economy.
National output in 1980 fell 7 percentage points from
the previous year, the first decline since 1976. The
loss of most of the Americo-Liberian community
crippled domestic manufacturing, construction, and
other private-sector commercial activities. The result-
ing decline in availability of goods, combined with the
hefty salary increases, pushed inflation to over 15
percent, the highest rate since 1974.
The country's international financial performance
during 1980 was mixed. In foreign trade Liberia
averted disaster because of high export prices for iron
ore through part of the year. Actual export volume
declined, however, and prices were starting to drop by
the end of the year as a result of the international
recession. Service payments reached a record level, on
the other hand, because of rising interest charges on
foreign debt and huge transfers abroad to the exiled
Americo-Liberian community.
A more worrisome pattern was developing with regard
to credit requirements. Local observers reported that
unchecked government spending threatened to ex-
haust available financial resources, and Monrovia had
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Figure 2
Liberia: Real GDP Growth and Inflation
a Estimated.
b Projected.
20
to resort to international loans just to cover its
monthly operating expenses. Only six months after
seizing power, the regime was forced to go to the IMF
and to secure an agreement with Paris Club members
to reschedule payments on part of its nearly $600
million in outstanding loans.
The Decline Intensifies in 1981/82. The combination
of appalling economic management by the govern-
ment and continuing international recession had a
telling impact on the economy throughout 1981/82.
Statistics from the US Embassy indicate that output
declined 5 percent in 1981 and another 5 percent in
1982. Unemployment jumped to at least 30 percent as
operators of the iron ore and rubber concessions-
Liberia's two largest employers-reduced their work
force. by one-third to cut costs.' Lowered imports of
'To keep the concessions going, the government agreed temporarily
to exempt the operators from income or export taxes and to assume
some of the companies' welfare functions. As part of doing business
in Liberia, the companies have had to build and maintain expensive
social projects, such as schools, housing, medical facilities, and
machinery, equipment, and spare parts forced other
businesses to curtail operations. The resulting short-
ages of goods frustrated government hopes of reduc-
ing inflationary pressures in Monrovia and other
import-dependent cities. Real income levels fell fur-
ther.
According to data from the IMF, the falloff in
demand for Liberia's exports sliced total foreign
exchange earnings by 20 percent during 1981/82, a
decline nearly equaled on the import side. Meanwhile,
service disbursements reached record levels as a result
of rising debt payments and the continued slump in
international shipping. Financing the rapidly rising
current account deficit proved impossible-Monro-
via's poor credit rating cut capital flows to their
lowest levels in at least a decade-resulting in the
buildup of arrears
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Liberia was colonized between 1822 and 1865 by a
group of 15,000 emancipated American slaves, free-
born Negroes and their families. The first group of
pioneers settled near the site of what is now Monro-
via. Later, as more settlers arrived, other communi-
ties were established along the coast. For many years,
Americo-Liberians lived in small agrarian communi-
ties. Contact with the native population was limited
to those tribal groups inhabiting the coastal region
and to traders from the interior.
Territorial expansion by the Americo-Liberians in
the late 19th and early 20th centuries resulted in
their subjugation of the nearby tribes. During this
period, most of the Americo-Liberians left their
farms and formed small urban centers that allowed
them to form cohesive political units from which they
controlled the entire coastal region. The locus of
political power eventually lay with a small number of
closely related families in the coastal cities-primar-
ily in Monrovia. These families in turn provided the
country's ruling elite for well over a century.F_~
The urban centers also became the center for the
country's iron ore and rubber operations, which were
the basis of the Americo-Liberians' economic for-
The muddled attitudes and policies of the Doe regime
were clearly instrumental in the decline. US Embassy
reporting indicates that Western creditors were par-
ticularly disturbed by Doe's refusal to accept bad
news from his advisers. Their concern was under-
scored by Doe's dismissal of Planning Minister Tarr
and the Bank of Liberia's president, both of whom
were viewed by international bankers as the only
senior officials left with any appreciation of what had
to be done to keep the economy going. Monrovia also
did not inspire the support of foreign and local
business by continuing to interfere in day-to-day
operations and demanding exorbitant fees and taxes
in return for immunity from physical violence and
arrest.
Growing Pressure for Reform. Admitting his igno-
rance of economic issues, Doe decided to call on
Washington to help sort out the country's day-to-day
tunes. By working closely with foreign investors, the
elite controlled the development of the country's
natural resources and appropriated much of the
profits for themselves. Few if any benefits were
passed on to the tribal population, except for some
jobs in the iron mines and on the rubber plantations.
The economic and social exclusiveness of the Amer-
ico-Liberian elite-it barred even Americo-Liberians
reared in rural areas or of mixed parentage-was the
most important determinant of Liberia's political
development and was instrumental in the popular
support given the ouster of the Tolbert regime by Doe,
who belongs to the Krahn tribe.
The Americo-Liberian community has suffered sig-
nificant losses in the three years since the military
coup. Their leadership either was killed during the
rash of executions that followed the coup or went into
exile in neighboring countries or the United States.
Only afew ministerial-level holdovers remain from
the previous regime, and they have been reduced
primarily to advisory roles. Personal property and
other financial assets were destroyed or confiscated
by the Doe government; former owners, have not yet
received compensation
cash flow problems. By early 1982, the US Embassy
became instrumental in orchestrating efforts of the
Liberian Government, the country's major creditors,
and the IMF in heading off successive crises. In
addition to viewing the United States as a financial
coordinator, Monrovia looked to Washington for
timely monetary assistance. Throughout most of
1982, US advice and funds were the only barrier
between Liberia and massive financial default.
This US Government support, although critical, could
not by itself stem a growing sense of concern in
international banking circles for the Doe regime's
mismanagement. According to US Embassy report-
ing, Liberia's creditors, increasingly concerned about
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the country's continuing financial crises and the re-
gime's reluctance to improve the situation, decided in
late 1982 on a much tougher approach in their
dealings with Monrovia:
? Private banks, particularly in the United States,
refused to extend new loans unless they were guar-
anteed by the US Government. In November 1982
the banks decided not to continue a $50 million oil
facility that had financed Liberia's petroleum im-
ports for several years. Government efforts to re-
place the facility with spot market purchases have
been only partially successful because of the lack of
timely money.
? Also in November, the IMF expressed its displea-
sure with Liberia's performance-particularly the
absence of a 15-percent budget cut requested by the
Fund in mid-1982-by suspending a $10 million
disbursement until the budgetary reforms were in
place. The Fund's position was enhanced substan-
tially, in our opinion, when the US Congress linked
continued official aid to Doe's ability to satisfy the
IMF.
Doe apparently understood the message and in De-
cember announced budgetary reforms that went far in
meeting IMF requirements. These included across-
the-board civil service and military salary cuts of
between 16 and 25 percent, immediate retirement for
government workers aged 65 or above, restrictions on
government travel, and reduced subsidies on gasoline
for government employees. The implementation and
results of these measures has been poor, however.F_
Patterns in 1983. The earliest indicators for stabiliza-
tion make it plain that the Liberian economy is still in
deep trouble in 1983. The US Embassy points out that
Monrovia narrowly missed meeting IMF guidelines
on the budget deficit in April 1983. Revenues were
substantially lower than anticipated, reflecting, in our
judgment, the continued slump in export receipts and
local business activity, as well as government reluc-
tance to pursue a more vigorous collection effort.
We see no signs that the Liberian economy will turn
around any time soon, and certainly not during 1983.
We believe Monrovia will experience the fourth con-
secutive year of declining output, perhaps again
Figure 3
Liberia: Trade, Current Account, and
Balance-of-Payments Position
Balance of
payments
Current
account
I I I I I I I. balance
-200197374 75 76 77 78 79 80 81 82a 83b
a Estimated.
b Projected.
around 5 percent. Slow real growth this year for the
Western economies indicate, in our opinion, no mean-
ingful improvement in international demand for Libe-
rian exports, particularly iron ore.' Without a sharp
increase in export earnings, Monrovia will not be able
to increase imports needed to expand production of
local industries. Neither can the Doe regime count on
sizable increases in capital flows as long as it is unable 25X1
to control government finances. Fiscal discipline, how-
ever, is questionable in view of the lack of experienced
technocrats in the government and the prevalence of
corruption at high levels. Doe has indicated to US
Embassy officials that he would be reluctant to move
beyond last December's limited austerity program. In
our opinion, the foregoing factors point to continua-
tion of the periodic domestic financial crises that have
plagued the Doe regime almost from the moment it
seized power.
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Attendant Political Problems
Although Doe has not been threatened by serious
economically motivated public protests so far, US
Embassy reporting indicates that the regime's inabil-
ity to arrest the economy's decline and to reduce
corruption have eroded its legitimacy and generated
discontent.
a hard economic line-additional severe gov-
ernment payroll cuts, layoff of civil servants, and
inflation-could generate potentially explosive anti-
government sentiment.
The US Embassy reports the military's ban on strikes
has not completely suppressed discontent. Teachers
and medical workers in the public sector have mount-
ed sporadic, short-lived work stoppages to protest
deteriorating living standards as have foreign conces-
sion workers. Many concession workers have been laid
off, and those who remain have had to contend with
the elimination or reduction of social services provided
by their employers, including medical care, housing,
schooling, and transportation.
Students, although currently quiescent, provoked two
major protests last year over deteriorating campus
living conditions and government restraints on politi-
cal activity. The US Embassy reports that continued
misappropriation of funds in the Education Ministry
and the increase of some tuition fees by nearly 300
percent since last year will perpetuate student griev-
ances. The Embassy also notes that job prospects for
graduates in the 57,000-person civil service, tradition-
ally the country's largest single source of employment,
remain bleak because of a continued government
hiring freeze.
Public resentment of high-level corruption and con-
spicuous consumption by ranking officials is growing,
according to the US Embassy. Reporting indicates
that evidence of official corruption is widespread and
often highly visible. Members of the military council
and cabinet officials often abuse privileges and per-
quisites, and even Doe has built a lavish mansion in
his hometown. The US Embassy reports endemic
cronyism-extending even to Doe who is widely per-
ceived as favoring his own Krahn tribe-has undercut
the regime's highly publicized anticorruption drives
and lessened public willingness to pay taxes and
customs duties.
Reports from the US Defense Attache indicate that,
although the military of just under 7,000 men is well
paid by civilian standards, morale and discipline
remain less than satisfactory. Doe has faced repeated
coup plotting over bread and butter grievances, in-
cluding complaints over payroll delays, and the US
Embassy reports disgruntlement and jealousy among
the enlisted ranks over the wealth and perquisites
enjoyed by senior officers.
Muted Reaction. Despite the evidence of economical-
ly based grievances, the Embassy reports that most of
the public is resigned to the limited austerity meas-
ures. Although unhappy about their reduced income,
public-sector employees have grudgingly accepted pay
cuts because of the government's promise to regular-
ize salary payments and to avoid large-scale dismiss-
als. In addition, the Embassy reports that the tradi-
tional extended family welfare system and the ability
so far of rural areas to reabsorb many of the now
unemployed foreign concession workers in subsistence
agriculture have helped cushion some of the worst
effects of the economic downturn.
We believe Doe's harsh repression of any signs of
opposition has had an intimidating effect and limited
public protest. The US Embassy reports that labor
unions have been repeatedly quieted by wholesale
firings or threats of layoffs in response to strike
actions. One major student demonstration ended in
early 1982 after Doe arrested and threatened to
execute student leaders. In addition, the Embassy
reports opposition political activity has virtually disap-
peared as a result of a strict military ban on politick-
ing.
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Continuing Threat to Stability. We believe public
passivity and the image of the regime as an agency of
"national redemption"-initially fostered by post-
coup promises of economic recovery and elimination
of dishonesty in government-will be offset by contin-
ued economic decline, corruption, and government
ineptitude. According to the US Embassy, acceptance
of future economic hardships depends in no little part
on the government's continued ability to regularly pay
the military and civil servants and to keep the prom-
ised return to civilian rule on track. The Embassy
reports current levels of muffled discontent, if cata-
lyzed by growing perceptions that the government is
drifting aimlessly and breaking its promises, could
spur more open confrontations with the government.
In addition, US diplomats believe more severe auster-
ity measures, without stronger efforts by Doe to
stabilize the economy and check corruption, would
increase the potential for public disorder.
If future public disorders are sparked by civil serv-
ants, labor, or large numbers of urban unemployed,
we believe politicians and intellectuals could be em-
boldened to take the lead in articulating popular
grievances and that this could lead to a coup. Such a
situation developed before the 1979 rice riots, when
opposition leaders exploited public dissatisfaction by
railing against the government, thus contributing to
its overthrow.
Looking Toward 1985: Some Key Factors
US Embassy reporting suggests that the economic
and political situation in Liberia is likely to remain
fluid and unpredictable for the next several years. We
judge that the most likely sources of future instability
would be either:
? The possibility of economic collapse.
? The abortion of plans for civil rule.
? The danger of military intervention
The Need for New Economic Policies. In view of
Liberia's bleak economic prospects, we and the US
Embassy believe that the likelihood of further eco-
nomic decline will be a major source of potential
political instability. Restoring Liberia to economic
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health requires, at a minimum, a substantial increase
in world demand for its iron ore and rubber exports-
a development we do not anticipate until at least after
the 1980s. In the meantime, much will depend on
Doe's willingness and ability to implement sterner
adjustment measures so as to maintain Monrovia's
access to IMF and Western aid flows. 25X1
In the area of reforms, the greatest need is to reduce
the role of government in the economy. Doe is mulling
the need to cut the bloated civil service by up to 25
percent and eliminate or turn over to private enter-
prise most of the country's unproductive state-run
corporations. In addition, the US Embassy reports
Monrovia is weighing the postponement of nonessen- 25X1
tial development projects such as road and other
building projects, implementing stricter financial ac-
counting procedures, and adopting a tough energy
conservation program to cut costly oil import bills.)
We believe, on the basis of Doe's erratic economic
record, that he will resist taking comprehensive eco- 25X1
nomic steps as long as possible, and look to emergency
US aid to bail him out of any immediate financial
crisis. If, as we anticipate, Liberia's creditors prevail
on Doe to adopt tougher austerity measures, we
believe he will reverse his decision if serious popular
opposition is encountered. Moreover, enforcement by
the cumbersome and inefficient Liberian bureaucracy
will be less than perfect. In our view, Doe believes his
freedom of action on economic matters is constrained
by a need to preserve his position as Liberia's "re- 25X1
deemer," while minimizing the risk of assassination or
a coup. 25X1
Meeting the Timetable for Civil Rule. Despite a
public commitment to restore civilian government by
April 1985, US Embassy reporting indicates that
Doe's intentions wax and wane depending on his
mood. In conversations with US officials, Doe at
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times voices weariness with the burdens of governing
and professes a desire to achieve civil rule and retire.
On other occasions, especially in recent months, Doe
has voiced serious doubts about the wisdom or feasi-
bility of proceeding toward civil rule and professes
growing enjoyment of the power and trappings of
office. The Embassy attributes Doe's indecisiveness to
his inexperience, distrust of politicians, worries over
Liberia's economic troubles as well as attitudes within
the military and his own future. Doe has publicly
conditioned the return to civilian rule on progress
toward solving the country's economic mess and pro-
viding adequate benefits-such as housing-to the
military. Failure to make such progress could give
Doe an excuse to backtrack.
Doe has revealed no public timetable for restoring
civilian government, and much remains to be done.
The US Embassy reported that a new constitution
was submitted by a civilian drafting commission to
Doe last March. The constitution will be reviewed this
August by a constitutional advisory assembly, whose
59 civilian delegates are being chosen by county
conventions, and then submitted with recommenda-
tions to the ruling military council for approval. Doe
publicly promised in March to complete a census by
next February to help establish electoral constituen-
cies. If and when the constitution is ratified and the
census has been conducted, Doe would then face the
decision of whether or not to lift the ban on politics to
permit the formation of political parties and the
organization of elections
Doe could seize on a variety of circumstances to
prevent further progress toward civil rule. The US
Embassy has reported that Doe fears a repetition in
Liberia of the conditions that set the stage for Raw-
lings's second coup in Ghana-a chaotic transition to
a shaky civilian government that faced severe eco-
nomic problems and lacked public and military sup-
port, The Embassy also indicates some senior Liberi-
an executive mansion officials and key army officers
worry that the country's worsening economic situation
could lead to civil disturbances before elections can be
scheduled. In addition, in his conversations with the
US Ambassador, Doe has expressed concern that
politicking in the preelection period could prove dis-
ruptive or produce so many competing political fac-
tions as to make the country ungovernable. Doe also is
concerned about his ability to work with the political
leaders and groups that emerge once the ban on
politics is lifted. Even if the 1985 deadline can be met,
Doe worries that an abrupt plunge into freewheeling
democracy under untested voliticans could result in
chaos and disruption.
On balance, we believe there is an even chance that
Doe will renege on his promise of civilian government.
US Embassy reporting indicates public anticipation of
civilian rule has so far helped temper frustrations with
poor economic conditions and government maladmin-
istration. The Embassy suggests that many Liberians
assume civilian leaders will have better financial and
managerial expertise and deal more effectively with
Liberia's economic crisis. The abandonment of the
goal of civil rule, the Embassy believes, would risk
alienating key civilian groups and heighten the poten-
tial for serious instability. One way .out for Doe,
however-which would allow him to retain power and
yet return to civil rule-would be to run for the
presidency himself.
Correcting Shortcomings of the Armed Forces. Re-
porting from the US Defense Attache and US Embas-
sy indicates that the survival of the Doe regime and
whatever government that may follow depends ulti-
mately on the Liberian military. Despite some prog-
ress, the armed forces still suffer from a lack of
professionalism, a sense of purpose, and discipline
among enlisted men. Attache reporting also reveals
some concern among officers and soldiers that a
return to civil government would entail a loss of
privileges and material gains or possibly lead to
retribution for their malfeasances.
With US security assistance, some of the more glaring
deficiencies of the Liberian military are being ad-
dressed. US-funded barracks should be completed by
1985, to afford decent housing for the military if
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civilian rule follows. The Minister of Defense has
moved to disarm enlisted men and punish those who
harass civilians. One army battalion has been as-
signed to growing food crops for the armed forces, and
the military academy is being upgraded to improve
officer training.
We believe the regime at best will make only slow
progress toward overcoming the longstanding prob-
lems of the armed forces. In our judgment, Doe will
continue to face the threat of coup plotting and
random violence from the lower ranks that will in-
crease if, as we expect, the economy continues to
deteriorate. In addition, in the event of serious public
disturbances, we believe enlisted men are likely to be
as unreliable as they were when called upon to subdue
the 1979 rice riots. In our view, overt signs of serious
opposition in the Army toward proceeding with civil
rule plans would tip the balance in Doe's mind and
cause him to abort the process.
Potential for Meddling
As long as the economic and political situation in
Liberia remains unsettled, the danger of meddling by
outside powers will remain. We concur with the US
Embassy, however, that Doe's strong suspicion of
Communism, Liberia's traditional pro-Western orien-
tation, and its heavy dependence on Washington for
financial assistance have limited opportunities for the
Soviets and their allies to gain influence either with
the regime or among the people. Soon after Doe came
to power, Liberia briefly promoted closer ties with
Moscow and Tripoli in hopes of attracting desperately
needed assistance and because of the influence of the
new leftist foreign minister.
as Doe gained experience he
realized that better relations with Moscow and its
allies would result in no significant increase in aid,
and he became far more wary of Soviet and Libyan
intentions. In mid-1981 Doe expelled two Soviet
diplomats for espionage and with strong US encour-
agement reduced the Soviet Embassy to seven offi-
cials. He also closed the Libyan missionF_
relations
advisers occasionally publicly advocate better rela-
tions with Moscow and radical African countries like
Libya and Ethiopia as leverage to extract additional
financial assistance from Washington and in hopes of
expanding Liberia's base of foreign economic donors.
We believe Soviet and Libyan reluctance to respond
positively to Monrovia's initial requests for money was
due to a recognition that they could not successfully
compete with high US aid levels and that any aid
would only help bolster a pro-Western regime. In our
judgment, Moscow and Tripoli will continue to main-
tain a distant relationship with Doe, hoping a change
in government-either by the election of civilian
leftists or a coup by populist enlisted men susceptible
to manipulation-would improve their chances of
gaining influence in Monrovia at Washington's ex-
pense.
The Soviets. US Embassy reporting I 25X1
ndicate that Liberia's leftist foreign 25X1
minister has continued to urge closer bilateral rela- 25X1
tions with the Soviets. Since 1981 Moscow and Mon-
rovia have signed commercial air service and cultural 25X1
,exchange agreements, but the Liberians have stopped
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all educational exchanges with Moscow
US Embassy 2
indicate that Moscow's 2
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ability to conduct subversive activities and increase its
influence is limited by Soviet unwillingness to provide25X1
economic assistance, the small size of its mission, and25X1
the lack of appeal of Communism to Liberia's tradi-
tionally conservative and agrarian society. 1)cv-1
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Libya. Tripoli has attempted, despite the closure of its
mission in Monrovia, to maintain limited commercial25X1
and political contacts with Liberia. The US Embassy25X1
has reported that in 1982 Libya purchased $7 million
of coffee from Monrovia, enabling Liberia to dispose 25X1
with the Soviets and Libyans remain distant. Never-
theless, the US Embassy notes that Doe and his
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of its surplus and providing some desperately needed
foreign exchange. A Libyan-Liberian holding compa-
ny also still functions in Monrovia, allowing Tripoli to
maintain a presence and probably providing a cover
for intelligence activity. According to the US Embas-
sy, the company recently constructed an $11 million
commercial building that includes offices, shops, and
apartments. It is considering plans for low-cost hous-
ing and agricultural projects
The US Embassy reports deep-rooted suspicions of
Libya and its designs in West Africa among Liberia's
senior military, which is dominated by non-Muslims.
Liberia's Muslims also make up only about 20 percent
of the population, have little political or military
influence, and keep a low profile. The majority are
moderate Sunnis to whom Qadhafi's radical brand of
Islam does not hold great appeal. Although Libya
provides limited funds to at least one of Liberia's
handful of Islamic groups, most funding is provided
by Saudi Arabia and Egypt.
Outlook and Implications for the United States
In our view Liberia's economic and political situation
will remain fragile for the near future. We believe
Doe has an even chance to muddle through the next
several years, but to do so he will remain heavily
dependent on advice and assistance from external
donors, especially the United States. Doe's penchant
for impulsiveness and occasional fits of pique with
US pressure.
Washington, however, means that there always will
be the danger of an abrupt policy reversal or backlash
harmful to US interests. In our view if Liberia's IMF
agreement runs into more serious trouble or collapses,
the United States will face a marked increase in Doe's
concerns about what he can expect from Washington
to offset the loss of IMF and other funds. We believe
Doe would almost certainly blame Washington for
any public unrest associated with continued economic
decline or harsher austerity measures adopted under
modest one-time payment.
ance by tacitly threatening to charge rent for US
communications and navigation facilities that were
acquired over the last 25 years either gratis or for a
Assuming that Doe is able to continue in power for at
least the next two years, we think that any lapse in
Washington responding to bailout requests by his
government would cause Liberia to explore more
actively means of applying pressure on the United
States to increase its aid levels. Monrovia could once
again publicly declare its readiness to establish better
relations with the Soviets, Libyans, or other radical
states in hopes that Washington would feel its position
threatened and provide more funds. As a last resort,
the regime could try to extract more economic assist-
Instability, whatever its cause, or the indefinite con-
tinuation of military rule would probably result in
criticism of Washington by moderate Africans, and in
propaganda advantages for the Soviets and Libyans
because the United States is widely identified in the
region as being responsible for events in Liberia and
for championing democratic principles. Economic col-
lapse would unravel Doe's political authority, spur
widespread popular unrest, and set the stage for a
military coup. Most official US observers believe a
successor government would be no better suited to
address the country's problems than the one now in
power.
In our view Doe's departure under such circumstances
would probably lead to the installation of yet another
ill-prepared military regime dominated by populist-
oriented enlisted men. We believe such a regime
would be beset with political weaknesses and foreign
policy uncertainties of the sort that characterized the
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The United States has been perceived by Liberians as
their "mother country" since before independence in
1847. Liberia claims a special historic relationship
with the United States dating from its colonization in
the early 19th century by freed American slaves, and
many Liberians view Washington as morally obliged
to assist Liberia in solving its problems. Other Afri-
cans view Liberia as traditionally linked to the
United States and regard Washington's commitment
to Monrovia as a bellwether of US interest in and
ability to influence events elsewhere in Africa. F_
Liberia has the largest concentration of US assets in
black Africa. Washington maintains three important,
rent-free communications and navigation facilities in
Liberia: a Voice of America relay station, an area
telecommunications relay system servicing 40 embas-
sies and consulates, and one of eight Coast Guard
Omega stations worldwide that provide an all-weath-
er navigation system for civilian and military aircraft
and ships. The facilities occupy over 3,000 acres and
would cost over $100 million to relocate elsewhere if
other African countries could be found to accept
them. Potential advances in satellite technology
could diminish their usefulness by the end of the
decade.
first year of the Doe regime. The new government
would probably prove more difficult for the West to
deal with initially, usher in a period of protracted
instability, and offer Moscow and Tripoli at least
short-term opportunities to ingratiate themselves with
what would very likely be naive and directionless
leaders
We believe there would be less civilian criticism if
Doe were to engineer his election as Liberia's future
civilian president than if he canceled plans for demo-
cratic government. The latter development probably
would increase civil-military frictions, make it more
difficult to attract talented civilians to the Doe gov-
ernment, and increase the regime's vulnerability to
outside meddling. If the perpetuation of military rule
The United States has formal military access in
emergencies to Monrovia's port and international
airfield, a right enjoyed nowhere else in West Africa.
These facilities can help for rapid staging for US
forces into Africa and the Persian Gulf and were used
to support peacekeeping operations in Zaire in 1960
and 1978. The United States will spend $5 million
this year to upgrade fueling, servicing, and storage
facilities at the airport
American private business investment totals $300
million, mainly in mining and rubber industries, and
American banks have outstanding US loans of $400
million. The United States imports less than 5 per-
cent of its iron ore, rubber, and timber from Liberia.
Some 75 percent of US-owned shipping is under
Liberian flag-of-convenience registry, the world's
largest. US aid to Liberia this year will total $71.2
million, which is the highest per capita aid level in
Sub-Saharan Africa. Of this amount, $32 million is
for budgetary support, $12 million for development,
$11.4 million for PL-480 food imports, and $15.8
million for military assistance.
spurs more active opposition to Doe among students,
labor, and ex-politicians, he would have to resort to
more strong-arm measures to maintain power. We
believe Doe's regime would gradually become more
ineffectual and corrupt as it became clear to regime
members and the general population that the govern-
ment could not solve the country's intractable prob- 25X1
lems, and as officials attempted to maximize their
own gains through graft. In these circumstances, the
Doe regime would probably prove more resistant to
pressure for economic reform and require even higher
levels of US assistance to sustain
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Appendix
Methodological Notes
on Economic Forecasts
The economic data in this assessment are derived
largely from the IMF, whose quarterly meetings with
the Liberian Government produce the most current
and consistent series of domestic economic indicators.
Various US Government sources also were used,
primarily to confirm information provided by the
Fund. In addition, we had to make various assump-
tions concerning the performance of the world econo-
my and key commodity markets. Available published
Liberian statistics proved unsuitable because they
were frequently untimely, internally inconsistent, and
ignored developments in areas of the country other
than Monrovia.
Trade and International Financial Developments
In preparing our estimates of Liberia's balance-of-
payments position for 1983, we relied on certain key
assumptions about factors affecting demand for Mon-
rovia's exports, particularly iron ore and rubber:
? We assumed only a slight recovery in major indus-
trialized countries, resulting in average developed
country growth of about 2 percent. This forecast
assumed that activity in major Western economies
would not pick up appreciably until some time in the
latter half of 1983. Our projected growth rate of
2 percent also is in line with official projections of
the Organization for Economic Cooperation and
Development (OECD).
? This assumption of a slow and limited economic
recovery in the West this year should result in no
significant increase in demand for-or prices of-
Liberia's mineral or agricultural exports. This con-
clusion is supported by commodity market analysts
both inside and outside the US Government.
In deriving our estimates for import expenditures this
year, we assume that the government's austerity
measures, including wage cuts and reduced consumer
subsidies, will hold down purchases of consumer
goods. Orders for machinery and other equipment will
feel the impact of the business community's uncer-
tainty over Monrovia's fiscal policies and the re-
trenchment program started by the iron ore and
rubber producers to hold the line on production costs.
We also anticipate further weakening this year in
Monrovia's payments position for imported services.
The primary factor is the increase in interest pay-
ments on foreign debt, as reflected by data from the
World Bank on medium- and long-term debt. Re-
ceipts, on the other hand, remain depressed because
of the impact of the slow recovery in the West on
international shipping and Monrovia's ability to offer
the use of its flag of convenience.
These trends suggest a $165 million deficit on current
account for Liberia this year, about the same as the
$150 million that the IMF and other sources estimate
for last year. Financing this deficit requires monetary
resources beyond the country's capability. Capital
flows will continue to lag because of concern in
international circles about the Doe regime's ability to
move ahead on financial and other essential economic
reforms. In the interim, we expect Monrovia will build
up short-term arrears and miss deadlines on payments
on foreign debt
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