Balance of Payments

A balance of payments is an economic statement that records the value of inflows to and outflows from a country. This includes the value of goods and services, incomes to be paid, money transfers and debt. Goods, such as lumber or rubber, and services, such as health care and education, are familiar to most. Money transfers include donor funding, remittances and debt are a bit more obscure.

In the United States, the terms balance of trade and trade deficit are often noted in media to track goods. These are a subset of the balance of payments. Economic powerhouses don't have to worry about things like debt in the same way that poorer countries do, so the broader statement is forgotten in common reports. But to a poor country like Liberia, things like money transfers really matter.

These things matter because Liberia and many countries like it don't produce enough goods and services to bring in enough income. So, most of the money that keeps the country going comes from outside of the country as foreign aid.

Foreign aid to Liberia totaled $1,317 Billion USD in 2008. The United Nations Mission in Liberia, UNMIL, contributed $646 M while other UN organizations gave $136 M. Individual foreign governments gave $263M and the European Union gave $77M. This is huge amount is not debt, but humanitarian gifts. The World Bank estimates its GDP to be only $830 M USD, so aid outstrips trade.

This money has been spent to stabilize the country. Much of it has helped to reestablish the government and to provide a military force that no local militias can match. Half of the vehicles on the streets are marked as a gift. Many new schools and hospital are gifts as well. The money has helped the country immensely.

The balance of trade report makes the plaques on buildings and donation decals on trucks make sense. It helps explain that there is enough money flowing in to make Monrovia rents like those in New York. Big organizations have a lot of weight and it seems to be necessary to pull a country out of conflict.

Source: Central Bank of Liberia 2009 Balance of Payments