Sierra Leone gained its independence on 27 April 1961 as a constitutional monarchy within the British Commonwealth. When its first leader, Sir Milton Margai, passed away in 1964, the competitive political struggles between the Sierra Leone People's Party (SLPP) led by Albert Margai, and the All People's Congress (APC) led by Siaka Stevens, heightened the ethnic cleavages (divisions) within the country. Since independence, the recurrent political divide has been expressed regionally in the Krio descendants of the original Freetown settlers and the indigenous people of the hinterland (interior of the country); the Temne-dominated northern province and the Mende-dominated region of the southeast; an economically powerful immigrant Lebanese and Afro-Lebanese group and the indigenes; and a traditional group of native rulers and a modern, mostly urban, Western-educated elite.
The SLPP held power until the general elections of 1967, which were won by the APC. The 1967 coup d'état (take-over of the government), however, prevented the APC from governing until April 1968 when a counter-coup restored civilian rule. In 1971, Sierra Leone was proclaimed a republic and a new republican constitution was adopted in which the head of state, Siaka Stevens, became executive president. In a new constitution adopted in 1978, Sierra Leone became a 1-party state, although it had been in practice a 1-party state as far back as 1973. In 1985, Siaka Stevens handed over power to the commander of the armed forces, Major-General Joseph Momoh.
As president, Joseph Momoh initially announced sweeping reforms. He also implemented IMF donor prescriptions (policies and regulations) aimed at privatization , attracting foreign investments, and urging more efficient domestic revenue collection. He worked with the IMF to resume stabilization (efforts to strengthen the economy) programs that had been interrupted during the Siaka Stevens regime. Other changes targeted the export of gold, diamonds, and fish products, which severely undermined the privileged position of Lebanese and Afro-Lebanese merchants who had long monopolized these economic activities. For example, foreign firms like LIAT Construction and Finance Corporation were given the authority to redirect production and profits through the formal (legal) economy to the benefit of the entire nation. The Lebanese population and politicians engaged in private mining of diamonds were discouraged from doing so through tougher restrictions and laws. Tougher laws such as longer prison sentences and stiff fines were also passed to curb smuggling of minerals, as well as more vigorous searches by customs officers at airports and at border crossings. The aim was to increase revenue collection by the government, and end the dominance of the informal (illegal) economy of smuggling, corruption, and private mining of minerals by influential groups in the country.
During the early years of President Momoh's tenure, he seemed to have ensured government control of the economy, especially in the area of diamonds. For example, in 1986-87, official diamond exports were 280 percent higher than 1985-86 figures. Similarly, foreign reserve holdings of the Bank of Sierra Leone rose to $7.6 million by the end of 1986, from a mere $196,000 in November 1985 when Momoh assumed the presidency.
The sweeping economic reforms angered the influential business community and resulted in an attempted coup in March 1987. Perhaps due to the fear of another coup attempt, the enforcement of drastic economic reforms slowed down after March 1987. A financial crisis in the 1980s, coupled with misrule and government corruption, as well as the difficulties caused by the effects of a civil war in neighboring Liberia, led to a coup d'état in April 1992. The coup was led by a group of young army officers, who selected 27-year old Captain Valentine Strasser to be the head of state. Captain Strasser led the country's Military Supreme Council of State until he was deposed in January 1996 because of his opposition to national elections that would hand over power to a civilian government.
Ahmed Tejan Kabbah of the SLPP won the elections held in February 1996 and set about forming a government of national unity. Another coup in 1997 overthrew the elected government, which went into exile in Guinea. The rebels then controlled the country until 1998, when the elected government was returned to power with the help of armed forces from Nigeria. Although a peace agreement was signed between the warring parties in 1999, fighting continues between the government and the rebels.
Corruption at all levels has destroyed the effectiveness of taxation in Sierra Leone. Individuals with strong ties to politicians often evade taxation—they end up not paying taxes either because they bribe the tax officials or threaten them with loss of their jobs. The strong political, economic, and ethnic ties based on favoritism, bribery, and corruption, among top members of the ruling political party use up state resources and thereby deprive the bureaucracies of funds for national development. According to William Reno in his book Corruption and State Politics in Sierra Leone, President Stevens is said to have used up to 70 percent of state revenues for "preferred (untaxed) concessions in diamond mining areas to political allies who were essential to his effort to resist local demands for greater revenue allocations."