re returning. The
government nonetheless faces serious challenges in the economic
arena. It has funded reconstruction by tapping foreign exchange
reserves and by borrowing heavily - mostly from domestic banks. The
newly re-installed HARIRI government's announced policies fail to
address the ever-increasing budgetary deficits and national debt
burden. The gap between rich and poor has widened in the 1990s,
resulting in grassroots dissatisfaction over the skewed distribution
of the reconstruction's benefits.

Lesotho:
Small, landlocked, and mountainous, Lesotho's primary
natural resource is water. Its economy is based on subsistence
agriculture, livestock, and remittances from miners employed in
South Africa. The number of such mineworkers has declined steadily
over the past several years. A small manufacturing base depends
largely on farm products that support the milling, canning, leather,
and jute industries. Agricultural products are exported primarily to
South Africa. Proceeds from membership in a common customs union
with South Africa form the majority of government revenue. Although
drought has decreased agricultural activity over the past few years,
completion of a major hydropower facility in January 1998 now
permits the sale of water to South Africa, generating royalties for
Lesotho. The pace of substantial privatization has increased in
recent years. In December 1999, the government embarked on a
nine-month IMF staff-monitored program aimed at structural
adjustment and stabilization of macroeconomic fundamentals. The
government is in the process of applying for a three-year successor
program with the IMF under its Poverty Reduction and Growth Facility.

Liberia:
A civil war in 1989-96 destroyed much of Liberia's economy,
especially the infrastructure in and around Monrovia. Many
businessmen fled the country, taking capital and expertise with
them. Some returned during 1997. Many will not return. Richly
endowed with water, mineral resources, forests, and a climate
favorable to agriculture, Liberia had been a producer and exporter
of basic products, while local manufacturing, mainly foreign owned,
had been small in scope. The democratically elected government,
installed in August 1997, inherited massive international debts and
currently relies on revenues from its maritime registry to provide
the bulk of its foreign exchange earnings. T