DOCUMENT
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OF THE
Government of the
Commonwealth of Dominica
West Indies
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FOREW ARD
The new administration which took office in February of this year has identified the
urgent need for the economic recovery processto be guided by a comprehensivenational
Integrated Development Plan (IDP), work on which has recently been commissioned.
Completion of the first draft is scheduledfor year end and at all stagesof its preparation,
the IDP will be guided by a consultative processinvolving all the social partners.
This Medium Tenn Economic Strategy Paper (MTESP) is therefore to be read as an
interim statement of the approach being taken to reversing the sluggish economic
performance that has characterizedthe last decade. Given the state of the fiscal account
and the debt burden in particular, the focus is necessarilyon stabilization of the economic
fundamentals and the fostering of an environment in which viable ongoing public and
private investmentinitiatives could be continued. In this context, the initiatives outlined
herein cover a 2 year period as opp<)sedto the 3 year horizon employed in similar
exercises in the past. The policy framework to be adoptedbeyond the period covered by
this docwnent will be informed by the conclusionsof the IDP.
ATHERTON MARTIN
MINISTER FOR AGRICULTURE, PLANNING
AND THE ENVIRONMENT
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AMBROSE GEORGE
MINISTER FOR FINANCE
CO~NTS
COUNTRY
PROFILE
1.1
BACKGROUND
1.2
ECONOMIC
1.3
INFRASTRUCTURAL
AND
ECONOMIC
STRUCTURE
1
1
STRUCTURE
1
AND OPERATIONAL
WEAKNESSES
2.1
] .42.1.1
2.1.2
2.1.3
RECENT
THE
VULNERABILITY
REAL
Agriculture
Manufacturing
ECONOMIC
Tourism
SECTOR PERFORMANCE
3
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7
,
2
2.1.4
2.3
2.2
Offshore Services
PUBLIC
FISCAL
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PERFORMANCE
DEBT
,
8
2.4 2.4.1 PRICES
Inflation
AND LABOUR
9
2.5 2.4.2 CONCLUSION
Employment
3
STATUS
OF MEDIUM
3.1
PUBLIC
3.2
CIVIL
3.3
ECONOMIC
12
12
SECTOR
INVESTMENT
TERM
OUTLOOK
14
AND
MEDIUM
TERM
OUTLOOK
MEDIUM
TERM
STRATEGIC
INSTITUTIONAL
NATIONAL
AND
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STRATEGIC
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THE
TIONFINANCIAL
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SUPPORT
DEVELOPMENT
,
OBJECTIVES
OBJECTIVES
REGULATORY
INTEGRATED
6.1 FISCAL
STRENGTHENING
CONSOLIDA
6.1.1
6.1.2
1998-2000
13
4.2
17
PROGRAMME
18
PLAN
18
MANAGEMENT
SYSTEM
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Cash
Budget
Flow
Management
Management
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21
22
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6.1.3
Expenditure Control
23
6.1.4
RevenueEnhancementInitiatives
23
6.2
CAPITAL
EXPENDITURE
7
INDUSTRIAL
8
POVERTY
9
SECTORAL PROGRAMMES
DEVELOPMENT
ALLEVIA
"9.1.2
Agricultural
25
& INVESTMENT
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of the Banana Industry
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Diversification
9.2
TOURISM PRODUCT DEVELOPMENT
9.3
HUMAN RESOURCE DEVELOPME~T
CONCLUSION
PROMOTION
TION
9.19.1.1AGRICUL
Commercialization
TURE
10
INITIATIVES
REFORM
4.1
5.1
STRATEGY
Economic Infrastructure
Social Infrastructure
MEDIUM
5
6
TERM
FINANCES
SERVICE
PUBLIC
3.3.1
3.3.2
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ANNEX I -MEDIUM
n
TABLES
TERM POLICY MATRIX
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ABBREVIATIONS
ACP
AIDB
BERP
CDB
DBMC
DEXIA
DFID
ECCB
EU
GDP
IMF
KRA
NDC
OECS
PSIP
SIGFIS
SMART
STABEX
UK
VAT
African, Caribbean& Pacific
Agricultural, Industrial and DevelopmentBank
Basic Education Refoml Programme
CaribbeanDevelopmentBank
Dominica BananaMarketing Corporation
Dominica Export /Import Agency
Departmentfor International Development
EastCaribbeanCentral Bank
EuropeanUnion
GrossDomestic Product
International Monetary Fund
Key Results Indicators
National DevelopmentCorporation
Organisationof East CaribbeanStates
Public SectorInvestmentProgramme
StandardIntegrated GovernmentFinancial
Information Systems
Specific MeasurableAttainable RelevantTime-bound
Stabilization of Export Earnings
United Kingdom
Value Added Tax
-IV-
Medium Term Economic Strategy Paper 2000-2002
1
Country Profile and Economic Structure
1.1
Background
The Commonwealth of Dominica, the largest and most northerly of the Windward Islands is
situated betweenthe French islands of Guadeloupeand Martinique in the Caribbean archipelago.
The island has a landmassof 751 squarekilometres, with 65% of its land area under forest cover.
Dominica is reputed to have the largest rain forest in the Lesser Antilles and is the most
mountainousof the easternCaribbeanislands. These factors combine to make the island an ideal
eco-tourismdestination. In 1997, the population was estimated at 75,527 with population density
per kilometre squared of 100.7 being recorded. The population of Dominica is dispersed
particularly around coastalvillages and towns, with an estimated 11% residing in the three main
town areas-Roseau,Portsmouthand Marigot.
As a result of the size of the country, the intensity of the topographyand the settlement patterns, a
widely dispersedsystemof public servicesis required to meetthe basic needsof the population like
security, public health, recreationand community services. This results in increased pressureson
the fiscal accountas resourcesneedto be allocated to maintain the provision of services which, in
other cases,would not have beeneconomicallyjustifiable. Seriouspressureson the fiscal account
and the social welfare servicesalso result from the levels of unemployment (which affects some
23% of the labour force) and poverty (which affectsan estimated30% of the population).
1.2
EconomicStructure
Economic perfonI1ancein the last decadereflected a steadydecline in the dependenceon banana
production for export as the main engine of economic growth in Dominica. This restructuring
process is continuing and it reflects the impact of global developmentsas well as the result of
policy initiatives gearedtowards facilitating the development of a more diversified and resilient
economicstructure.
Consequently,as indicated in Table 1 overleaf, the contribution of the agriculture sector to overall
output has beenreduced from approximately 25% at the start of the decadeto 19.8% in 1999 and
the sector's total exports declined from 56% in 1994 to 36% in 1998. In spite of these
developments,the economyhas been able to maintain positive, though modest, real growth rates
which averaged2.7% over the period. To some extent, the effects of this decline in the relative
importance of the banana industry have been offset by notable improvements in the economic
contributions of non-bananaagriculture, manufacturing, services and tourism. Improvements in
these areas have however been insufficient to absorbthe impact of the weak perfomlance of the
bananaindustry on employmentlevels.
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While agricultural output continuesto accountfor the largestsingle contributionto GDp, it now
lags behind both tourism and manufacturingsectorsnow jointly accountin terms of its contribution
to total foreign exchange earnings. The ongoing reconfiguration of the composition of the
country's exportsis illustrated in Figure I below.
Negative trade balances have persisted throughout the decade mainly as a result of the very narrow
productive base of the economy and the associated b~avy reliance on imports. The performance of
the services account (particularly the travel account) has been instrumental in containing the growth
of the current account deficit which fell from 15% of GDP in 1994 to 7% of GDP in 1998. The
narrowing of the current account deficit in 1998 was largely influenced by the strong recovery of
the manufacturing sector from the loss of market share suffered by the soap and detergent
production industry in 1997. As is the case in the other OECS economies, concessionary inflows
playa major role in the financing of public investment activity.
-2-
Central Government's current accountfiscal balancehas historically beenmarginal and insufficient
to make a significant contribution to the public investmenteffort, averaging 0.8% of GDP over the
last five fiscal periods. Approximately 60% of the overall deficit of about 8.8% ofGDP has been
financed by grant contributions over the last five fiscal periods with loans from domestic and
external sources accounting for the remaining 40%. The current composition of the Central
Government's loan portfolio reflects a mix of domesticsources(45%), externalmultilateral sources
(30%) and externalcommercial sources(25%).
Over the last five years the rest of the public sector has maintained positive current account
balances averaging 1.7% of GDP. The overall deficit for the Consolidated Public Sector of
approximately 2.5% of GDP thus mainly reflects the impact of the Central Government's
operations.
1.3
I nfrastructural and Operational Weaknesses
A critical constraint to the pursuit of the country's diversification agendais the weakness of the
infrastructural base. Sustainableexpansion of the tourism sectoris constrainedby the inadequacy
and sub-optimal use of existing airport facilities and, mainly as a result of weak coastal defence
structures,the internal transportand communications network remains particularly vulnerable to the
effects of adverse weather systems. Critical needs have been identified for the development of
feeder roads and irrigation systemsto support ongoing efforts to improve the productivity of the
agricultural sector and to supportmore cohesive approachesto the expansionof output in both the
banana industry and non-banana agriculture. Major investments in electricity generation and
distribution and water and sewerageare also necessaryin order to meet the requirements of the
further diversification of the economy.
In the social sector, ongoing investment programmes are addressing critical infrastructural
weaknessesaffecting the pursuit of developmentgoals in health and education. These investments
include the construction of new facilities to support efforts to achieve universal secondary
education and the rehabilitation and expansion of the building stock to support the delivery of
primary and secondaryhealthcare.
Particularly in the rural areas,there is also evidence that the lack of basic serviceslike pipe borne
water and electricity adversely affects access of the citizenry to income earning opportunities
resulting in increasedpressureson social servicesand urban centres.
Critical weaknessesare also evident in the quality of the institutional infrastructure required to
supportthe developmentof a competitive export sector. Theseinclude:
8'
The weaknessof systemsto support the allocative decision making process, in particular, the
absenceof an integrated approachto national developmentplanning;
The absenceof a standardsmanagementand consumerprotection capabilitiesand
The weakness of systems to support the exploitation of emerging opportunities for the
expansionof non-tourism service exports.
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In the agriculture sector, an increasingly urgent need is emerging for the existing institutional
support arrangements.to reflect the available synergies between the banana and non:banana
activities. Additionally, the educationstrategyneedsto focus on making more strategic use of local
knowledge. Although some of these issues are being addressed by the legislative agenda,
implementationprogressis being hamperedby the lack of enabling structuresand systems.
1.4
Vulnerability
As a small island developing state, Dominica's economy is vulnerable to a range of exogenous
factors over which it haslittle or no control. Theseinclude:
.
International developments particularly those associated with the rapid pace of globalization
and its effects on the trade preferencesand guaranteed markets upon which the country has
traditionally dependedas a sourceof foreign exchangeearnings, employmentand development
assistance;
Natural disasters which have a disruptive impact on productive activity. In the last decade
Dominica was affected by at least four major tropical stormsand the threat of volcanic activity.
As recently as November 1999 storm surgesresulting from Hurricane Lenny did extensive damage
to the road network and private property. In addition to causingthe direct loss of valuable foreign
exchange,the fiscal burdenhas beensignificant necessitatingthe diversion of scarceresourcesfrom
programmed activities.
Moreover, the country's small size and narrow resource basenecessitateheavy reliance on external
sources as reflected in the high trade/GDPratios and persistenttrade imbalances. This level of
opennessmakes the economy vulnerable to external shocks which invariably affect the cost of
living, the competitiveness of the private sector and consequentlythe country's attractivenessto
inward investment.
Despite the negative implications of size, small island states like Dominica have had positive
development in some areas. Dominica has indicated its commitment to preserving the natural
resources of the globe by being party to a number of key conventions and protocols. Further,
Government hasestablishednew, and strengthenedexisting managementinstitutions to managethe
local natural resourcebase. This will continue to be the strategy of Government in the medium
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RecentEconomic Performance
2
2.1
The RealSector
Figure2 below summarizesthe performanceof the real sectoroverthe lastdecade.
Figure 2
RealGDP Growth Rates (%)
1990-99
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Real growth reached 3.45% in 1998 buoyed by the strong performance of the manufacturing sector
which recovered from the loss of market share resulting from extra regional competition faced by
the soap industry in 1997. As a result of the reversion of the manufacturing sector to previous
trends, persistent weak performance of the banana industry and marginal tourism growth, real
growth for 1999 is estimated at 0.4%. Among the non-traded sectors, construction and electricity
and water recorded positive growth rates while the contribution of government services increased
marginal! y'. '
2.1.1 Agriculture
Growth of the agricultural sector averaged 0.9% (less than the growth rate of the ove:rall economy)
over the last 3 years with negative rates being recorded in 1997 and 1998. The main factor
underlying this weak performance has beenthe continuing decline of the banana industry as a result
of the combined effect of adverse market conditions, declining farmer confidence and disruptions
associated with natural disasters. The industry has also been affected by the depreciation in the real
exch~ge rate of the pound sterling, price v~ances, increasing production and shipping costs and
the madequacy of the internal transportation network.
Banana production peaked in 1988 when 7,000 fanners on 15,000 acres of land exported 72,000
tonnes to the European market. Throughout the current decade there have been declines of
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Partially offsetting the effect of the decline of the banana industry has been the gradual
strengtheningof non-bananaproduction which continuesto play an important role in promoting the
diversification of the sourcesforeign exchangeearningsand the overall economy. This sub-sector
is also playing a critical role in stemmingthe decline in rural incomes and employment associated
with the weakening of banana exports. Efforts in this direction are being coordinated by the
Dominica Export and Import Agency (DEXIA) with a very dynamic role being played by the
Hucksters Association. Over the last 3 years DEXIA's efforts have focused on securing new
markets for fanners, supporting productivity enhancementinitiatives and the development of
approachesaimed at alleviating the problems associatedwith transportationbottlenecks.
Mainly in responseto the efforts of DEXIA and the continuing growth of hucksteroperations, the
non-bananasub-sectorrecordedan estimated 100% increasein the value of exports over the 199699 period. The contribution of non-bananaactivity to total agricultural exports grew from 28.1% in
1996to 43.5% in 1998. Notwithstanding the role being played by DEXIA, there is an urgent need
for improved operational interface with banana marketing operations and for accelerating the
implementationrate of initiatives to foster greaterprivate sector involvement in the organization's
activities.
2.1.2 Manufacturing
The manufacturing sector is in an embryonic state with activities heavily concentratedaround the
soap and detergent production industry. Even within this industry there is only one company
operating at this time. The other players in the industry, including a beveragemanufacturing and
water bottling operation plant and a cardboard box production plant are relatively small
contributorsto the sector's total output and exports.
Nevertheless,the sectorhas played an important role in the economic growth registeredin the last 3
years. In particular, the 3.5% real growth rate recorded in 1998 was largely based on the strong
performanceof this sector which grew by an estimated21 % in that year as the soapand detergent
production industry recovered from the loss of market share experienced in 1997. The strong
growth in exports in that period was also associated with the commencement of toothpaste
production in late 1997.
6-
2.1.3 Tourism
Growth of the tourism sectoraveraged1.7% in real terms over the last 3 years. This is lower than
the rates averagedin the first half of the decadewhen growth was much more robust as a result of
the rapid expansion of the cruise ship segmentand the enhancementof the product appeal. Over
the last 3 years Dominica has been able to maintain its share of about 5.8% of the Eastern
Caribbean stayover tourism market while the growth rate of net travel receipts averaged 5.2%.
Tourism now accountsfor some 60% of the foreign exchangeearnedby the service sector, 35% of
total exports and approximatelythree times the export earnings of the bananaindustry.
Total visitor arrivals, which peaked at 311,572 in 1998, experienceda decline to an estimated
279,370 in 1999. This resulted from a reduction in the level of cruise ship visitor arrivals as a result
of the suspensionof visits by the major cruise line which visits Dominica. Arrivals increasedin
both the excursionist and stayovercategories. In spite of this decline in total visitor arrivals, total
visitor expenditure increasedfrom the 1998 level of $103.2 million to $112.3 million reflecting a
12% increase in stayoverarrivals from 65,501 to 73,506. The stayover growth was largely fueled
by increases in arrivals of visitors staying in private homes as opposedto paid accommodation.
Indeed, in 1999 there was a 4% decline in the amount of visitors staying in paid accommodation
and the share of this category of stayover visitors declined from 47% to 39% over the 1997-99
period. The stayover growth was concentrated in the last quarter of the year and is largely
associatedwith recent initiatives aimed at expansionof the events tourism product. The Caribbean
and US markets jointly representan estimated76% of stayovervisitors to Dominica.
Major constraints affecting the further growth and development of this sector relate to the
inadequacy of air access, the stock of quality hotel accommodation, the inadequacy of the
marketing strategyand the need for a much clearerand sharperdefinition of the product offer.
Over the last 3 years, efforts to enhancethe quality of the product offer continued to focus on the
positioning of the country as an eco-tourismdestination. Accordingly, the emphasis has been on
the needsof the eco-tourism niche market as opposedto product developmentinitiatives aimed at
competing with the other Caribbean destinations. Physical works undertaken included the
upgrading of visitor sites at Trafalgar and Emerald Pool with EU grant and CDB loan funding.
With the declaration of the Morne Trois Pitons national park as a World Heritage Site and the
hosting of several international tourism conferenceshere the country's profile as a premier eco-ecotourism destination was heightened. In January of this year, Government declared the Morne
Oiablotin areaa national park bringing the total acreageof protectedlands to approximately 41,000.
Government also continued the sp<;>nsorship
of training programmes aimed at supporting the
developmentof a critical massof skilled personnelto meet the needsof this expanding industry and
the National Development Corporation continued to work closely with a number of international
investors interested in participating in the hotel expansion initiatives required to complement the
major proposed expansionof airport facilities. In pursuit of its policy of encouragingthe expansion
of the accommodation sectoralso, Governmentamendedthe Fiscal Incentives Act by increasingthe
tax holiday period applicable to hotel development projects. Actual investment activity in the
sectorcontinues to be dominatedby the local private sector.
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2.1.4 Offshore Services
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Dominica's emerging offshore services industry comprises offshore banks, international business
companies, internet gaming, exempt insurance and trust companies and management services
operationsin addition to the re-engineeredeconomic citizenship programme and a medical school.
Of these,the major contributor to revenue has been the economic citizenship programme which
accountsfor 89% of inflows from the industry and an estimated 15% of non-tax revenues. Plans
are currently being finalized for the commencementof operations of a ship registry in fiscal year
2000101.
2.2
Fiscal Performance
Generally, the structure of Central Governmentrevenue and expenditure operations reflected little
difference when comparedwith trends observedduring the decade. Current revenue averagedsome
35% of GDP with trade taxes being the dominant contributor -accounting for more than 50% of
total tax revenue and some 12.6%ofGDP. Expenditurecontinuedto be dominated by recurrent
requirements which accou-'ltedfor some 85% of total outlay with the public sector wage bill
accountingfor in excessof 50% of currentexpenditure.
The current account surplus of Central Governmenthas averaged approximately 1% of GDP over
the last 3 years. This narrow surplus has been generally insufficient to support the counterpart
funding and cash flow requirementsof the programmedcapital works and financing, averaging 3%
of GDP (2% domestic and 1% external), was relied upon to make up the shortfall. Since the startof
the current fiscal year (July 1999) the configuration of financing operations has been significantly
alteredVwiththe negotiation of two commercial bonds on the external market.
The ConsolidatedPublic Sectorhas averagedcurrent accountsavings of approximately 3% of GDP
over the last 3 years. The performanceof the ConsolidatedPublic Sector is very closely related to
the operations of Central Governmentwhose wage bill accounted for more than 50% of the total
recurrentexpenditure outlay.
2.3
Public Debt
Over the period 1995 to 1998 the stock of Central Government debt outstanding decreasedfrom
$356.4million (or 58.9% ofGDP) to $348.6 million (or 50.2%ofGDP). A major factor here is the
decline in the external debt stock from $179.3 million in 1995 to $149.8 million in 1998 partly as a
resultof the 1997 UK debt forgivenessof $29 million.
As a result of the drawdown of $102.8 million from a foreign commercial bond issue,the stock of
debt increasedto $475.9 million as at the end of 1999. Of this amount, $202.1 million is in respect
of domestic debt which grew by 14% from $177.2 million in 1995. Central Governmentexternal
debt totalled $273.8 million of which debenturesand treasury bills held by foreigners was $113.4
million. This has resulted in a significant increasein the debt burden with amortization and interest
8-
paymentsfor 2000 estimatedat $29.6 million or 14% ofcun-ent revenue. The stock of total public
sector debt is now estimated at $573.4 million. Table VIII provides an analysis of the current
situation with the public debt.
Prices and Labour
2.4.1 Inflation
Inflation rates in recent times have been relatively low particularly when compared to the rates
recordedin the first half of the decade. In 1996 the rate of inflation was 1.7%, declining to 1.0% in
1998 and rising slightly to 1.2% in 1999. The generally low inflation rates reflect in part the
opennessof the Dominican economy,the low recentrates registered by the US, the country's main
trading partner and the benefits derived by global commodity markets from the downward
pressureson world market prices associatedwith the Asian economic crisis of 1998. In addition,
the commitmentto a fixed exchangerate and the tenns governing the country's membership in the
EasternCaribbean Central Bank allow very little flexibility for domestic policy actions that are
potentially inconsistentwith the strongdollar policy of the monetary union.
2.4.2 Employment
A major challenge in the medium term will be the absorption of labour displaced by the banana
industry's decline in output and exports and the generally sluggish growth rates experienced
throughoutthe decade. Unemployment.according to the latest available data,is estimated at 23%
or 7,700. This figure however, maskssignificant regional and genderdisparities. Highest rates of
unemploymentare reported in the St. Patrick and St. Joseph parishes where persons without jobs
accountfor 45.9% and 25.9% of the labourforce respectively. The iowest rates are recorded in the
parishesof St. Andrew and St. Lukef!\1arkrespectively.
Among females unemploymentis estimatedat 27.1% while some 19.6% of males are without jobs.
Labour force participation rates are particularly low for females without secondary education.
While among males with nursery schooVpre-schooland primary education, the participation rates
are 82.2% and 75.1% respectively, while female participation rates in these categories are only
15.5%and 53.9% respectively. Male and female participation rates are generally equal for persons
who have attained secondaryeducationlevels or higher. The survey data suggestsa high level of
skill mismatch and a generally weak national skill base with more than half of the employed
personshaving no occupationaltraining and some49.6% of the unemployed having had no training
that will make them suitable for employment. This points to the need for a comprehensivehuman
resource development initiative aimed at making the labour market more attractive to potential
investors.
Tnceprivate sector accountsfor 44.3% of the employed labour force, the self employed account for
31.9% and the public sector21.3%. More than 50% of those with jobs earn less than one thousand
dollars a month and some 26% of the unemployed (2,023 persons)are heads of households. The
size of the labour force is estimatedat 33,418.
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2.5
Conclusion
.,
Recenteconomic perfonnance reflects the same sluggish growth patterns that have characterized
the entire decade mainly as a result of the continuing weakening of the banana industry and the
inability of the growth experienced in the other foreign exchange earning sectors(manufacturing,
tourism, non-bananaagriculture) to compensatefor the resulting loss of momentumand the impact
on employment levels. Constraints to the sustainable groV\/1hin these areas relate mainly to the
critical gaps in the physical and institutional infrastructure and the absenceof a clear cut growth
strategy. In addition, activity in the manufacturing sector which has made increasingcontributions
to exports in recent years, remains heavily concentrated in the soap and detergent production
industry in which only one firm is operating.
One of the consequencesof the decline of the banana industry has been a depressionof socioeconomic conditions in the rural areas. Among the factors responsible for the relatively wide
spreadof the adverse effects in these communities are: the labour intensive nature of agricultural
production,the small scale land ownership patternsthat characterizethe industry and the extent of
the industry's backward linkages with small businessesand service providers in producing areas.
In addition, partly as a result of cash flow difficulties faced by farmers, rural unemploymenthas
grown in spite of labour shortagesfaced by the industry. Adverse effects feed through to small
businessesand service providers leading to a generally depressedeconomic climate in producing
areasand pressureson the social servicesand urban centers.
To a significant extent, the diversification agendainvolves the reallocation of resourcesaway from
labour intensive agriculture in favour of more capital intensive investment opportunities -in the
goodsproducing sector,the service sector and within the agriculture sectoritself.
The policy implication is that higher rates of investment are now necessary to support the
absorptionof the labour displaced by the contractionof the traditional agriculture sector. Given the
infrastructural deficiencies of Dominica, there is a major role for public investmentin this process.
This is a major medium term economic challenge as the performance of the fiscal account has
weakenedconsiderably throughout the decade and the fragility of the current account surpluses
achieved is not s~pportive of the major public sector investment requirementsof a sustainable
economic diversification effort. In these circumstances,new concessionalfinancing arrangements
needto reflect this challenge both in terms of choice of projects and the rate of disbursementof
approvedfunds.
Shorttenn prospectsfor the alleviation of the unemployment problem will be adverselyaffected by
the high level of skill mismatch as reflected in the inability of the labour market to meet the skill
humanresourcerequirements of the emerging industries. The demand for new skills relates equally
to the diversification of the agriculture sector, the expansionof the manufacturing sector and the
growth of the service sectors. Attempts to attract new investment therefore need to be strongly
supportedby education and human resource development programmes that are responsiveto the
needsof the knowledge based economy.
-1(\-
Finally, along with the rest of the CARICOM region, the Dominican economy facesthe major task
of preparing itself to meet the competitive challenges associated with liberalization and the
dismantling of the preferential arrangementson which the traded sector has traditionally relied.
One of the major medium term initiatives to which Governmentis committed is the preparationof
an Integrated Development Plan which will provide the framework within which these challenges
will be addressed.
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3
Status of Medium Term Economic Strategy Initiatives 1998-2000
3.1
Public Finances
The last Medium Tenn Economic Strategy Paper (MTESP) outlined a mix of institutional
strengtheningand operationalinitiatives designedto achievecurrent account surplusesto contribute
to the capital fonnation effort and to meeting debt amortization commitments. A medium tenn
current account savings targetof 3% of GDP was identified. In the intervening two fiscal periods
the cuuent account surplus has not exceeded1% of GDP while a deficit of 2.25% of GDP is
projected for the current fiscal year. In spite of this relatively weak outturn though, good progress
has been made in establishing the institutional infrastructure required to support a sustainable
approachto the fiscal consolidationeffort.
The strategyadopted involved a pivotal role for related institutional strengthening initiatives in the
overall fiscal consolidation effort. This approachwas adopted in recognition of the importance of
strong financial and economic managementsystemsand capabilities in promoting the sustainability
of the savingslevels achieved.
In supportof this strategy,and with technical assistancefrom the Governments of Canadaand the
United Kingdom, the following programmes are being implemented:- Budget Refonn, the
introduction of a StandardIntegrated GovernmentFinancial Information System (SIGFIS) and the
institutional strengthening of the agencies responsible for economic planning and revenue
collection.
The Budget Reform proguamme involves two basic components-the establishmentof systemsto
support a programme based approachto budget preparationand the introduction of systems at the
departmentallevel to facilitate more dynamic monitoring of in-year fiscal perfounance. Work on
the budget preparation aspectwas substantially completed and departmental budgets are now
prepared on the basis of agreedoperationalgoals as set out in respective corporate plans. The
main outstanding element of this programmeis the introduction of the required supporting systems
at the departmentallevel. Specifically, managementcommitteesneedto be institutionalized at this
level for the purpose of facilitating more dynamic in-year monitoring of agreed budgets and the
timely implementation of corrective actionwhere necessary.
Substantialprogresswas made with the SIGFIS programmewhich involves the computerization of
accounting functions and the introduction of on-line systemsat spending Ministries to enable real
time interaction with the Treasury on expenditure processing, requisitioning and purchasing
transactions. Activities completed include staff training, process fe-engineering, preparation of
pr<:?cedure
manuals, hardware and software .acquisitionand the networking of the Treasury, the
Budget Division and the pilot site at the Ministry of Communicationsand Works. The system has
been fully tested and commissionedat the pilot site. The infrastructure put in place now allows for
the initiation of the required improvements in the systems for commitment accounting and cash
-12-
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management.A July 2000 target date has been set for theseimprovementsto be in place. The next
phaseis the extensionof the systemto the remaining Ministries and Departments.
Technical support for institutional strengtheningof the Economic Development Unit was provided
under programmesfunded by the UK Department for International Development (DFID) and the
European Union (EU). The DFID programme focused on-the-job training in economic
perfonnanceand PSIPmonitoring. This programme is scheduledfor completion in June 2000. To
complementthe UK funded programme, EU STABEX resourceswere used to fmance work on the
designand developmentof an economic managementdatabasefor the storage and retrieval of data
on the progress of individual investment projects and the perfonnance of the overall economy.
Testing of this databaseis currently in progress. The UK Government also provided technical
assistancein the fonn of on-the-job training programmes at the Inland Revenue and Audit
Departments.
One area of continuing institutional weakness is the managementand monitoring of Central
Government's debt portfolio. Existing arrangements involve a division of labour within the
Ministry of Finance with the Debt Unit being responsible for the monitoring of external multilateral
debt and the Treasury Dep(Lt1menthaving oversight responsibility for domestic debt as well as
foreign bond and debenture issues. While a fairly reliable database is maintained on the
performanceof both categoriesof debt, critical weaknessesare evident in the areasof management
report preparationand the coordination of debt managementstrategy.
3.2
Civil ServiceReform
Three main objectives guided the initiatives undertaken as part of the public sector development
programmesince 1998. These are:
.
To createa legislative enviromnent that is more supportive of modem managementpractices;
To improve organiZAtionalperformance through the restructuring of the appraisal system to
reflect clearerrelationships betweenoutput and recognition and reward systems;
To use value for money studies to determine the most efficient and effective organization
structure, systems,procedures, staff composition and levels to achieve policy objectives and
optimum service levels.
During 1999drafts were completed and consultationswith senior managementheld on amendments
to the Public Service Bill, the Public Service R~gulations and Public Service Commission
Regulations. Preparatory consultations were also held on amendmentsto the Police Service
Legislation. With the completion of drafting, consultation and refinement work on these pieces of
legislation, the basic elements of the legal infrastructure will be in place to support the public
service modernization initiatives. DFID funding for this work is already in place and it is
scheduledto be undertakenby year-end.
Over the last two years detailed planning work was completed in support of the proposed
restructuringof the appraisalsystem. Proposals for a new reward systemand employee assessment
-11-
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and development review processeswere discussed with senior and middle managementand an
initial roWld of supporting training programmeswas deliveredto supervisory personnel.
An implementation plan has been prepared for sensitization of the public service and for
developmentof Key Result Areas (KRAs) and SMART objectives has beendeveloped.
Following the completion of work on Value for Money Studies at the Establishment,Personneland
Training Departmentand the Ministry of Health and Social Security, short, medium and long term
recommendationswere prepared. While some of thesehave been adopted, further investigations
are required prior to action being taken on the others particularly those with resource allocation
implications.
3.3
Public SectorInvestment
A total of $152.9 miUion was spent on public sector investment over the last three (3) years with
funding coming from a mix of loan, grant and internally generatedresources. This expenditurewas
largely concentratedon economic and social infrastructureprogrammes.
3.3.1 EconomicInfrastructure
Seadefenceworks were completed in Mero and Coulibistrie at a total cost of $2.2 million. Loan
financing from the Republic of China supported the completion of new roads linking Petite
Savanneand Delices on the south easterncoast and the west coastvillages of Jimmit and Warner.
With grant resourcesprovided by the Caribbean DevelopmentBank (CDB) under the Basic Needs
Programme,the minor road network in several villages was upgraded. In addition, with EU grant
funds a major agricultural accessroadsprogramme is currently ongoing.
The airport development feasibility study which was completed in 1998 is being revisited with
particular emphasison the fiscal impact, the choice of location and the viability of a programmeof
interim improvements at the existing facilities.
Preparatoryworks on the Roseau Water and
Seweragedevelopment scheme was significantly advanced and the first round of contracts for
physical works was recently awarded. In late 1999 the road developmentprogramme on the west
coastsuffered a major setbackas a result of wave action associatedwith the passageof Hurricane
Lenny. Replacementcostsare estimated at $109.6 million.
3.3.2 SocialInfrastructure
The continuing need to tighten fiscal operations heightens the imperative of efficiency
enhancementsin the delivery of social services. This is particularly applicable to the rural
communities which are directly impacted by the decline of the banana industry and the relatively
long gestationperiod of diversification programmes.
Social sectorcommitments account for approximately 34.2%of recurrent outlay and investmentsin
the sectorhaveabsorbedsome$22.1 million in the lastfiscal period.
14 -
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Current initiatives in educationare being undertakenwithin the framework of the Basic Education
Refonn Programme for which financial supportWasprovided by the World Bank and the CDB.
The overall objective of this programme is to support the preparation of the country's future
workforce to meet the manpower requirements of economic transition. Activities undertaken as
part of this programme sought to support the first stage of the reform of basic education by:
strengthening the planning and institutional capacity of the Ministry of Education to guide the
further development of the sector, catalyzing a major adjustmentprocess aimed at establishing a
more financially sustainable foundation for the sector's further development. The three major
componentsof the Basic Education Refonn Programmewere:
.The strengtheningof managementand planning capabilitiesin the Ministry of Education;
.Support
for the qualitative improvement of systems for basic teacher training, curriculum
development, procurementand distribution of educationmaterials and the delivery of library
servicesas well as monitoring studentperformance;
.The
expansionand conservationof schoolplaces at the primary and secondarylevels through a
programme of new school construction, plant rehabilitation and the development of new
approachesto systematicpreventive maintenanceand replacementof existing plant. A major
objective of this project component was to support Government's policy goal of providing
universal accessto secondaryeducation by 2003.
Within the framework of the reform programme, financial support for Government's education
developmentefforts also came from the CDB underits Basic NeedsProgrammeand the DFID.
In 1999 construction work was completed on secondaryschools at Grand Bay and Castle Bruce adding an additional 1200 placesand bringing Governmentcloserto its goal of providing universal
accessto secondary education by the year 2003. It is now estimated that access to secondary
educationis available to 60% of the target group. With resourcesavailable under the CDB funded
Basic Needs Programmework was completed on the constructionof the Concorde Primary School
while DFID funding supported extensive rehabilitation works at the Grand Bay Primary School.
Out of its own resourcesGovernment continued its programmeof refurbishment of both primary
and secondaryschools.
An amount of $2.0 million has been committed under the EuropeanUnion STABEX programme
for improvementsto health centres and clinics. A total of 8 health centres are to be rehabilitated
while 2 new ones will be constructed under the programme. Construction of a new operating
theatre at the only secondarycare hospital is continuing. This project is being funded by the French
Governmentand is estimatedto cost $1.7 million.
Physical works are ongoing-on the developmentof new housing schemess in both rural and suburban areas. On the west coast (Layou) 50 housesare being built while 7 additional lots are being
developed. In the north east (Marigot) work is proceedingon the construction of30 housesand the
developmentof 47 building lots for low and middle incomepersons. On the outskirts of the capital,
47 new houses are being constructed for the relocation of low-income families to facilitate the
implementation of the RoseauWater and SewerageProject.
15-
.~.
4
Medium Term Outlook and Strategic Objectives
4.1
Medium TermOutlook
The restructuring of the global trade regime and the threat of further fiscal instability are the two
most critical issuesto which the policy fr-mneworkmust respond in the medium tenD. Both have
far reaching implications for the ability tl:) reduce poverty, to expand exports and to increase
employmentlevels.
Medium tenn projections indicate that, with the existing range of policies, unsustainablecurrent
accountdeficits will be incurred for the next 2 periods averaging 1.5% of GDP. On the expenditure
side, additional pressures on the current account will result from the sharp increase in external
indebtednessand the effects of the public service wage settlementscheduled for conclusion later
this year. Further increases in debt service commitments are also likely as overdraft financing on
commercial tenns will have to be heavily relied upon to meet statutory commitments on a timely
basis. The current revenue base is incapable of supporting this build up of expenditure and the
resulting persistenceof cash flow problems implies further accumulation of arrears to the local
private sectorand the rest of the public sector.
Particularly at risk in such an environment will be:
Social programmesinvolving the provision of transfersto indigent households;
Locally funded public sector investments in support of the infrastructure requirementsof the
diversification thrust and;
The country's capacity to provide short-term responsesin the event of natural disasterslike
hurricanes,windstonns, storm surgesand seismic activity.
Even with substantial inflows of concessionaryfinancing to support the investment programme,
there will be need to pay urgent attention to the restructuring of the current accountas donors will
most likely insist on an agreed fiscal stabilization agenda as a condition to disbursement.
Operationallyalso, a do~or funded programmeis not necessarilyimmune from cashflow pressures
as, particularly in retroactively funded arrangements,the timing of grant inflows will not always
coincide with project expenditurepatterns.
In responseto the slowdown of public investmentand the likely impact of weak public finances on
disposableincome levels, the performance of the revenue account is likely to weaken further as
imports decline in such a scenario.
Given the sharp rise in debt repayment requirementsresulting from the recent commercial bond
isstle, options for new borrowing to support.the PSIP will be severely limited. Consequently, in
addition to meeting the large increasein debt service commitments,the current accountwill have to
be relied upon to finance an increased share of the capital expenditure programme which will
continue to playa pivotal role in the overall restructuringeffort.
16-
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4.2
Medium Term Strategic Objectives
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The major strategic medium term objective is to facilitate the accelerated emergence of
modernized, more diversified and resilient economic structures which will be supportive of
genuinely, profitable oriented private sectorinvestment,less reliant on accessto guaranteed export
markets and more compatible with the imperativeof ecological sustainability and the realities of the
rapidly emerging liberalized global trading environment. The main components of the medium
tenn agendato be takenimplemented in pursuit of this objective will be structuredaround:
An institutional and regulatory support programme including the preparation of an Integrated
National DevelopmentPlan which will assembleall sectoraland investment initiatives within a
coherentframework;
A programme of fiscal consolidation designedto supportthe generationof current savings of at
least 35%-40% of the funding requirementsof a restructured,well focused PSIP;
An Industrial Developmentand InvestmentPromotionProgramme;
A Multisectoral Approach to Poverty Alleviation and
Continuation of diversification and promotion programmes in agriculture and tourism
respectively.
-17-
5
Institutional and Regulatory Support Programme
To a large extent, the economic restructuring experiencedthus far has been more in responseto
external pressuresthan to the programmedimplementationof a consistent set of policy initiatives
gearedtowards facilitating the emergenceof a more resilient and diversified structure of production
and exports. Across sectors, progress with the establishment of the required institutional
framework has been uneven with some sectors enjoying more satisfactory rates than others.
Implementation of the policy agendain supportof the diversification thrust has been affected by
severalfactors, principal of which have been:
The absenceof an integratedplanning framework and systems that are supportive of strategic
approachesto the implementationof agreedpriorities;
The absenceof systemsto supportconstructivepolicy dialogue between the public and private
sectors;
The weaknessof operational interface alTangementswithin the public sector and the generally
slow paceof public sectorreform;
Continuouspressureson the public sectorto respondto the exigencies of the generally unstable
fiscal environmentthat haspersistedthroughoutthe decade;
The structure of Government operations which reflects insufficient attention to the rapidly
increasingimportance of information technologiesand the role that knowledge basedindustries
could play in the diversification and modernizationprocess;
The continued dependenceof investment promotion efforts on an essentially protectionist
investmentincentive frameworkbasedon discretionaryapplication of tax concessions.
5.1
National Integrated DevelopmentPlan
A major medium term priority will be the e~1ablislunent
of the necessaryinstitutional mechanisms
to addressthe above issues. Central to this processis the restructuring of the allocative decision
making process to allow for greater integration between economic and physical planning
operations,improved interface arrangementsbetweenthe budgeting and planning functions and the
institutionalization of policy dialogue betweenthe public sectorand the rest of civil society within a
coherentframework supportedby appropriatearrangements.
Governmentis fully committed to introducing a new integrated approachto developmentplanning
which will involve a focus on optimization, efficiency and sustainability based on economic, social,
physical and environmental considerations. Using this approach, work on the preparation of a
National Integrated DevelopmentPlan has recently begun and is scheduled for completion by the
end of December 2000 -in time to influeI!ce budgetary considerations beginning in the fiscal
period 2001/02. Based on the outcomeof this exercisealso, a medium and long term policy agenda
will be articulated. This approachto planning will necessitate:
-1.8-
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Reform and reorganization of a number of public sector processesincluding changes in the
organizational structure of the Economic and Physical Planning Units and the m~n line
Ministries as well as protocols and procedures.for public sector coordination and
Measures to strengthenthe operations of local government bodies and to facilitate greater
operational integrationof the rest of civil society into national decision making processes.
-19
6
Fiscal Consolidation
The overall objective of the fiscal consolidation progranune is the achievementof current account
surpluseswhich will support the funding of an investmentprogranune of approximately 6%-8% of
GDP over the next 2 years without any si-gnificantincrease in the level of domestic and external
indebtedness. The initiatives to be taken in pursuit of this target will be complemented by a
coordinatedeffort to acceleratethe implementation of ongoing institutional progranunesaimed at
restructuringthe planning and budgetaryprocesses.
Table XIII summarizes Government's proposed approach to fiscal consolidation which will
involve adjustmentson both the revenue and expenditure sides. The key assumptionsunderlying
this approacharethat:
The consumptiontax regime will be restored in the short ternl and be replaced from fiscal year
2002/03 by a broad based, revenue neutral value added tax for which the necessarynational
consultationsand technical planning are currently in process;
Revenuecollection operationswill be bolstered in the short ternl with the primary objective of
reducingthe level of tax and non-tax revenue arrears currently estimated at in excessof 5% of
GDP;
A site value based property tax system will replace the existing area based regime which, in
addition to being obsolete, is inequitable and not supportive of efficient use of scarce land
resources.
On the expenditureside, this scenarioassumesthat:
Wageand salary commitments will not exceed 50% of current revenue;
Expenditure on goods and serviceswill be held at currentrates in real terms;
No new debt obligations on commercial terms will be assumedin the short term;
Central Government will maintain cun-ent commitments to the social security scheme and
negotiatethe conversionof existing arrearsto a suitable long term instrument.
Under this alternative scenario, current account surpluses of 2.7% of GDP could be realized in
fiscal years2000101and 2001/02 and the overall deficit could be contained at an average of 3% of
GDP over the next 3 years. This more sustainablefiscal outcome should be able to support capital
expenditure of up to 8% of GDP which ,Nill contribute positively to growth performance'and
increasedrevenuebuoyancy.
Commitmentsto improved transparencyand results based managementwill provide the framework
for" the proposed fiscal consolidation' initiatives. A major initiative in this respect will be the
establishmentof mechanismsto open up the planning processand facilitate fuller dialogue with the
national community. Suchdialogue will addressissueslike:
-20
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Explicit/implicit policy commitments;
The rationale for decisions on the level, composition and orientation of public expenditurr:and
The configuration and structure of the tax system.
A major expected output of this approach is the fostering of greater national support for the
expenditure measures,revenue generationprocessesand investmentprogramming priorities which
will form part of the adjustmenteffort.
6.1
Strengthening the Financial ManagementSystem
With the implementation of recent institutional strengtheninginitiatives, the infrastructure is now
substantially in place to support this approachand more dynamic monitoring of fiscal operations in
relation to agreedstrategic objectives. Outstandingagendaitems in this respectinclude the absence
of mechanismsto make more strategic use of the infomIation generatedby improved information
systemsand to support allocative decisionsbasedon consistencywith agreedobjectives. Specific
initiatives to be undertakenin this respectwill be:
Implementation of the remaining organizationalchangesrequired to support the budget refornl
programme. In this respect, particular attention will be paid to the establishmentof a budget
managementcoordinating committee, ministerial managementteams and the appointment of
finance officers at the level of spendingministries and departments.
Restructuring of the debt managementfunction to facilitate a strongerfocus on strategic policy
issues and to allow the factoring of repaymentimplications of proposed borrowing operations
prior to entering into new commitments.
Valuation of natural assets for inclusion in national accounts and monitoring the same as
measuresof wealth, and collateral for application in debtand aid negatiations.
6.1.1 Budget Management
The main outstanding item on the budget refoIm agenda relates to the establishment of systems and
structures at the level of the spending ministries and departments to facilitate closer in-house
monitoring of agreed work programmes.
Proposals for the establishment of ministerial
management teams and the appointment of Finance Officers have already been developed. These
now need to be refined and piloted through the system. A target date of June 30, 2000 is being set
for the finalization of these issues. This should permit the launching of the in-house monitoring
programme at the start of the next fiscal year.
Detailed proposals have also been prepared for the establishment of a Budget Management
Committee to provide on-going strategic support to the attempt to improve the budget preparation
and management processes. Among other benefits, the functioning of this Committee will facilitate
an interactive approach to the design and development of new fiscal measures and provide a
strategic framework for in-year allocative decision making. It is expected that this Committee will
be actively involved in the preparation of the budget for the fiscal year 2000/2001. This Committee
-21 -
will be Cabinet appointed
and will report to the Minister
with the Budget Division
serving as its technical secretariat.
The lack of legal
support
The Inland
has been seriously
Revenue Division
eroding
of Finance through the Financial
the effectiveness
has been particularly
affected
of revenue
e
operations.
h
absence of the necessary legal support, the Division has been unable to fully maximize
of recent donor funded investments
in the enhancement of its physical
and
Secretary
collection
in this regard as, in the
the benefits
institutional
infrastructure.
Defaulting accounts cannot be systematically followed up, legal interpretations
of
the relevant laws are not available on a timely basis and the Division is without the required support
in cases where there are legal challenges to its decisions.
Past efforts to address this problem
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through traditional public service recruitment modalities have not been successful. Relief
temporary and inconsistent as transfers, resignations and staff shortages at the Ministry
Affairs
have adversely impacted on the continuity
of collection
has been
of Legal
efforts.
To addressthis problem, the recruitment, on contract,ofa legal adviserto the Ministry of Finance
is being pursued. The legal adviser could provide valuable legal support to all revenue collecting
agencies as well as assistanceto the Ministry of Finance in handling the range of legal and
contractualissues with which the Ministry has to deal in the dischargeof its core responsibilities.
The availability of direct legal suppon to the Ministry of Financecould also contribute to relieving
the workload of the Ministry of Legal Affairs. A target date of July 1st 2000 has been set for the
assumptionof duty by the Legal Adviser on a part time basisin the first instance.
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6.1.2 Cash Flow Management
A critical factor affecting attempts to address the persistence of cash flow problems. is the
inadequacyof fmancial planning and cashmanagementsystemsat the Treasury. In the absenceof
a functioning cash managementsystem,strategic decision making is not possible as departmental
cash flow projections cannot be properly analyzed and it is difficult to make optimal use of debt
financing. One symptom of this problem is the continuousrecourse to short tenn fmancing on
commercial tenns to meet statutory obligations. Alongside this, arrears averagesome 3%-4% of
GDP affecting both the private sectorand the rest of the public sector. The problem itself is also
reflective of the weakness of existing coordinating mechanisms between the Budget Division
(which is responsible for the dereservationof funds for capital projects) and the Treasury which
handlesactual cashdisbursements.
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19
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With the commissioning of the new financial managementsystem,the information requirementsof
an effective cash managementsystemcould now be met. On a real time basis, updated forecastsof
all financial flows could be made available to supportthe operationsof the Budget Management
Committee. To make strategic use of this information in the pursuit of its fiscal stabilization
objectives, Government proposes to establish in the medium tenn a Cash Management and
FiI13ncialPlanning Unit within the Treasury. This Unit will have responsibility for the dynamic
monitoring of receipts and expenditure, grants and foreign and domestic loan drawdowns. The
operations of this Unit could playa critical role in managing the pace of debt build up. The
proposalis to have this Unit functional by the start of the next fiscal period.
-22.
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6.1.3 Expenditure Control
0
Alongside the above institutional changes,the following expenditure control measures will be
implemented in pursuit of the fiscal objective of achieving a current accountsurplus of 3% of GDP:
a
To ensure that the level of ex enditure on wa es and salaries does not
exceed50% of total current revenue
The two main measuresthat will be relied on in the short term to achieve this objective are:
continued wage moderation and control over recruitment particularly at the level of daily paid
labour -the area that made the single largest contribution to the escalation of the wage bill over
budgeted amounts in the last fiscal period. Using a mix of internal resources and external
consultants, Governmentintends to complete value for t:Il°ney studies in all Ministries over the
medium term. These studies will inform decisions on staffing levels in the context of a policy
stancewhich incorporatesthe principles of expenditure control and efficiency of service delivery.
The main challengehere relatesto the need for the continuous pursuit of efficiency in the delivery
of public services. There is considerable scope for improvements in procurement systems, in
maintenancesystems,in the coordinationof resourceuse and in maximizing the advantagesoffered
by technological
advances.
A sustainableapproachto the achievementof this target will require actions at the level of both the
individual spendingMinistries/Departmentsand at the level of the central agency, in particular the
EstablishmentDivision and the Ministry of Finance. In the short tenn, the Ministry of Finance will
insist on the observanceof hard budget constraints by the spending agencieswho will be required,
through their respectivemanagementteams,to playa much more active role in the monitoring their
expenditurepatterns.
Additional measuresto be undertakenin support of the expenditure control initiative will involve
the following:
Rationalizationof the systemof specialaccounts;
Rationalizationof debt managementand monitoring operation;
Strengtheningof procurementsystems
Implementation programme for the incremental reduction of domestic arrears to the Social
SecuritySchemein particular.
6.1.4 Revenue Enhancement Initiatives
Net of disputed sums and interestcommitments, income tax arrears are currently estimated at $33
million or 5% of GDP. In addition to the adverse effects on Government's fiscal position, the
persistenceof this level of arrearsresults in an inequitable distribution of the tax burden and needs
-23 -
to be addressed as a matter of urgency. The incidence of non-compliance with statutory
requirementsis high in both the tax and non-tax categoriesof current revenue. In the caseof the
offshore sector for example, the collection rate for renewal of international business company
licencesis estimatedat less than 20% while weak recording systemsfor motor vehicle licensing to
contribute to continuing revenue leakages in that area. In addition, the cost structure for services
provided by Central Governmentis obsolete as reflected in the findings of a report commissioned
in the early 1990s. The recommendatiorisof this report have not beenimplemented and are now in
needof revisiting.
Improvement of the revenue collection systemsis a major medium term policy commitment of
Government. By the end of fiscal year 2000/2001, it is proposedto reduce this level of arrears by
at least $15 million and to have systems establishedto ensure that future arrears levels do not
exceed2% to 3% of GDP. A sustainablesolution to this problem requires continuing attention to
staffing levels, the introduction of strongersanctions,training and the institutional strengtheningof
revenue collecting agencies. A major responsibility of the proposed Budget Management
Committee will be to devise and monitor the implementation of systemwide strategiesto address
this problem which, in addition to being a source of revenue leakage, compounds the inequities
inherentin the existing tax system.
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The key elementsof the preparatoryprocessare the updating of property rolls, arrears collection,
the revision and enactment of supporting legislation, taxpayer education and the redesign of
computer software. The reduction of property transfer fees is also proposed as part of the
transition process.The introduction of a systemof value addedtaxes has been under discussion for
some time now. The principle of a V AT which will replace the consumption tax and a range of
other miscellaneoustaxes is generally acc:eptableto Government since it offers the following
advantagesover the presentsystem:
Properly designed and administered, it could significantly reduce the economic distortions
inherent in the current tax system particularly those associatedwith the uneven distribution of
the tax burdenand private sector allocation decisionsbeing taken on the basis of discretionary
application of duty free concessions;
It is a more buoyant tax which is less compromising in its effects on the revenuebase;
It is more supportive of the macroeconomicobjective of enhancingthe competitivenessof the
co
export sector;
It could compensatefor revenuelossesresulting from tariff reductions associatedwith the trade
reform agenda.
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In the next fiscal year it is proposed to complete preparatorywork for the revision of the existing
system of property taxes to one based on site values as opposed to the existing area based
assessmentrate structure. A tax based on site value is consideredmore relevant to Dominica's
needsat this point in time as, in addition to promoting a fairer burdendistribution, it could be more
supportive of the national goals of increasing investmentand strengtheningthe operations of local
governmentauthorities. It encouragesmore intensive use of land and penalizesidle land.
-24-
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A system of value added taxes is therefore considered an important element of the infrastructure
required to support new export oriented investment, the transition to a more opentrade regime and
the acceleratedlevel of public sector investment to meet the needs of the diversification process.
Government is in possessionof proposaJson the level and coverage of the tax which were
developed and presented by a team from the Fiscal Affairs Division of the IMF following a
technical assistancemission mounted in 1999.
The implementation processwill take full recognition of the need for national consensuson its
rationale and role at this stage of the country's economic development. Towards this end, an
important component of the preparatory process will be a public education and consultation
programme which will seekto assist all sectionsof the population in understandingthe nature of
the new tax and their respectiveroles in its implementation. Another important principle informing
the design of the new system will be the need for specific measuresto alleviate the potentially
negative impactsof the tax on lower income groups in the early stagesof its implementation.
After a full national dialogue on the matter, policy decisions will be taken by Cabinet on the
configuration of the tax. Following this, consultancy services will be engaged to undertake an
assessmentof the administrative, institutional and regulatory support requirements and prepare a
detailed implementation plan. A two-year implementation period is contemplatedand a technical
assistanceproposal has already beenpreparedfor which donor assistanceis being negotiated.
Government will work closely with the ECCB on this initiative and is preparedto coordinate its
efforts with the fiscal reform programmesof the other OECS member countries in the context of
the role of a harmonized tax regime in the creationof a single economic spacein the subregion.
6.2
CapitalExpenditure
As part of the preparationof the National Integrated Development Plan, a detailed review of the
current capital expenditureprogramme is being undertakenwith a view to publishing a new PSIP
and financing plan for discussonswith the donor community by year end. A major focus of this
review will be on the proposed airport developmentprogramme with a view to ensuring that the
chosen solution reflects both the prevailing fiscal reality and the need to addressthe critical night
landing constraintwithin the shortestpossibletime frame.
Ongoing programmes in education, health, telecommunications refonn, water and sewerage,
disaster preparedness,poverty alleviation and the development of the sea defence network will
continue with modifications to some progran1meswhere necessary. Another major area of concern
will be the debt burden of the PSIP and the need for the maximum utilization of available grant
funding. In this context, the review will also focus on the allocation of STABEX budgetary support
funds and the needto ensurethat this reflects the strategic priorities identified.
-25-
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a
Industrial Development & Investment Promotion
The existing investment promotion framework is structured around a system of corporation tax
holidays and duty free concessionsadministeredby the Ministry of Finance and facilitated by the
National Development Corporation (NDC), This policy framework has achieved limited success
with foreign direct investmentgrowing marginally and non-bananaexports being largely dependent
on the performanceof one company operating in a single industry. Indeed, the restructuring that
has taken place over the last decadehas beenmore in the nature of reflex actions by individual
industries and sectors undertaken without the support of a coherent and consistent policy
framework designedto position the economyto deal with the formidable challengespresented by
the dismantling of the preferential trading system.
Moreover, in recent times, as a result of the convergenceof trade liberalization and information
technology advances,the availability of fiscal incentives has become increasingly less relevant to
the location decisionsof foreign investors who now tend to attach greaterimportance to factors like
work force productivity and the regulatory environment.
U
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lt
Additionally, as the country seeks to expand its exports and pursues greater integration with
internationalmarkets,the existing systemof indirect taxes will become increasingly irrelevant. It is
now necessarytherefore,to initiate the processof establishingan investmentpromotion framework
that is more consistentwith the requirementsof the liberalized global trading environment and less
compromising in its effects on the integrity of the country's revenue base. In pursuit of this
objective, Government intends to revisit the existing policy and legislative framework for
investmentpromotion and facilitation. Efforts will be made to attract technical assistancefor the
completion of an industrial developmentmasterplan, an important componentof which will be a
knowledge based industry strategyand action plan covering the role of information technology in
the diversification programme and the full range of related regulatory, human resource and
institutional developmentissues.
Without prejudice to the outcome of this exercise, Governmentis committed to pressing ahead in
the medium term with the implementation of the following initiatives to support enterprise
developmentand export sectorexpansion:
~
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rt
The implementationof the remaining phasesof the CARlCOM External Tariff (CET) subject to
the recommendationsof the OECS an CARICOM;
The simplification and restructuring of the tax regime around a systemof value added taxes as
outlined in paragraph6.1.4 above;
The preparation of a human resource developmentplan which will have as one of its main
components mechanisms to facilitate. the closer alignment of education and training
programmeswith the needs of the labour market;
Measuresto supportthe expansionof the trade in non-tourism serviceswith particular emphasis
on financial servicesoffshore businessand inforl'Ilation technology;
-26
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The continued promotion of pro-competition reforms in the telecommunicationssector;
The developmentof a standardsmanagementcapability for which the enabling legislation has
recently beenpassedand for which a CDB tecfmical assistancecommitment is already in place;
The developmentof a consumerprotectioncapability;
The promotion of tighter operational interface between the state agencies responsible for
facilitating the expansionof agricultural exports viz. DEXIA and DBMC.
Government's investment promotion policy will continue to focus on supporting developments in
the following areas: agri-business,tourism plant expansion, infonnation technology. light industry
and small business. The intention is for the NDC to continue to expand its focus and playa more
global role focusing on facilitating equity mobilization through networking local sponsors with
potentialfinancial partnersand technical supportservices.
-27-
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s
8
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Poverty Alleviation
There is no comprehensivedatabaseon the extent and nature of poverty in Dominica. The 30%
estimateof people living in poverty which was presentedby the 1996 Bonnerjea and Weir study
was basedlargely on anecdotalevidence and no further analysis has been undertakento date. To
some extent, the data gathered in the recently concluded household budgetary survey could
contribute to alleviating this constraint. Nevertheless, there is an urgent need to develop a
capability to monitor the effects and spread of this problem and its demographic and regional
dimensions. This will facilitate the developmentof clearer strategiesand more efficient targeting
and coordination of effort in the context of fiscal constraints and competing demands for
investmentfunds. Even in the absenceof detailed statistical data. what is evident is that there are
high levels of correlation between poverty and unemployment, educational attainment and the
availability of and accessto basicsocial amenities.
The approachto poverty alleviation will continue to be multisectoral with a mix of social safety net
operationsfunded by the Government's recurrent budget and investmentprogrammes financed by
the CDB, the International Fund for Agricultural Development (IF AD) and the Emopean Union.
The investmentcomponentinvolves interventions in youth skill development,social infrastructure
and small enterprise development. The investment and policy initiatives outlined below in the
medium agriculture sectorprogramme will also contribute to the objectives of poverty alleviation
and rural economic revival. Governmentwill continue to coordinate its efforts in this area with
those of the non-government organizations (NGOs). In addition, measures will be taken to
strengthenthe operationsof the local governmentbodies in order to facilitate greater integration of
central governmentand the restof civil society in the decisionmaking process.
The searchfor greater efficiency in the delivery of safety net support will intensify in the medium
term with a major emphasis on finding more cost-effective mechanismsto widen the coverageof
the safetynet and control systemleakages.
-28-
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SectoralProgrammes
9
9.1
Agriculture
In 1999 work was completed on an agriculture sector strategy paper, which outlines the
development initiatives that will be undertaken in pursuit of the goal of enhanced export
competitivenessin the sector. It also addressesthe important issue of the .displacementof banana
farmers and includes measuresto supporttheir fe-tooling and repositioning in other sectorsof the
economy.
The strategies outlined focus on promoting increases in rural income and employment and
supporting the national goals of accelerating GDP growth and increasing foreign exchange and
savings. It includesmeasuresproposedfor:
., Achieving full commercializationof the bananaindustry;
., Establishment of an enabling environment for commercial agriculture including the
development of an appropriate legislative and regulatory framework, improving physical
infrastructureand capitalavailability;
Institutional strengtheningof organizationsservicing the sector;
Assessmentof the social impact of the restructuringof the bananaindustry within the context of
other on-going social recoveryprogrammes;
Supporting the national economic diversification effort through the identification of measures
specifically targeted at facilitating the emergenceof economic opportunities in other areas such
as rural manufacturing,agro-processingand communitytourism.
9.1.1
Commercialization
of the Banana Industry
This component of the strategy aims to support the continuing transforntation of the banana
industry. int<;>.one that is capable of competing in the market place with decreasing levels of
protection-and to increase the industry's overall resilience to price competition. A programme of
productivity and quality enhancement initiatives, a restructured marketing and distribution strategy
and efforts to promote greater competition in the market for the supply of inputs will be
implemented in support of the commercializ.ation goal.
The productivity and quality enhancement initiatives are aimed at increasing marketable yields and
efficiency improvements in the post farm gate chain. These initiatives are being implemented
under the EU funded Production Recovery Plan and the Windward Island Strategy both of which
support certified growers in their attempts to recapitalize their farms, expand their acreage and in
some cases introduce irrigation systems, w!th significant results in improved productivity.
The
strategy being pursued recognizes the difficulties inherent in addressing the considerable
comparative cost advantages that Central American producers enjoy over the local industry.
However, combined with a marketing strategy which stresses product differentiation, ethical
labour/management relations and environmentally acceptable productions systems, the resulting
29 -
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.
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efficiency gains could contribute to the continued viability of the local industry in a liberalized
Europeanmarket environment.
0
There will be a strong commitment in the medium term to implementing improved marketing
arrangements within the context of recent sub-regional agreements and informed by
recommendationsincluding those recently put forward by the Donor/Government and Industry
Task Force. The new arrangementswill involve market lobbying, sales promotion and traceability.
A key featureof the new marketing arrangementswill be product differentiation strategiesaimed at
reducing the need for Dominican bananasto compete with Central American fruit on a commodity
basis. Considerable progress has been made towards this end with the introduction of the
certification programme, special pack production and the establishmentof relationships with key
supermarketbuyers. These build on the establishedpreference for Windward bananasin the U.K.,
the more environmentally friendly production conditions and the less exploitative labour systems.
This strategy removes head to head competition but is not sufficient alone to overcome the
competitive gap.
The banana recovery strategy will also involve the implementation of improved information
managementsystemsto fRcilitate more timely more and efficient responsesto changing market
conditions. Improved production forecasting techniques will contribute to higher, more costeffective production and reducethe incidenceof dead freight and fruit being left back. Information
system improvementswill also allow the tracking of produce by buyers betweenthe faml gate and
the market place. The introduction of Geographical Information Systemsis also planned to enable
the industry to determine the most appropriate use of resources such as land. Producer
organizations will also be assistedthrough the developmentof market intelligence systems.
The abovemeasureswill be complementedby:
Medium tenD initiatives aimed at fostering more competition and the pursuit of the most costeffective, commercial approachto supplying inputs to fanners. Where feasible, chargesshould
be related directly to the servicesreceived by the grower;
A programmeof institutional supportto grower organizationsand
The design and implementationof supporting changesto tlie enabling regulatory framework.
9.1.2 Agricultural Diversification
Principal focusof this componentof the overall strategywill be on the creationof incomeand
employmentopportunitiesin non-banana
agricultural-activity.Initiativesproposedinclude:
The establishment of a diversification trust fund to hold and manage financial resources
mobilized for investment in the sub-sec:tor. In addition to the administration of funds for the
implementation of programmestargeted at supporting increasedinvestment, a revolving fund
will be createdto channel loans for famJerre-capitalisation, certification and investments in onfarm infrastructure.
-30-
Encouragement of greater private sector involvement in agricultUral production through
education, training and market researchprogrammesaimed at assisting investors to make more
informed decisions. Attention will be paid to facilitating greateraccessto credit through the
support of fe-capitalization programmesand measuresto establish a more favourable lending
environment. Private sector involvement in the supply and production of inputs will be
encouragedthrough the promotion of a more commercial and competitive market environment.
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A number of initiatives are planned aimc~dat enhancing the legislative framework to support
satisfaction of the current demand for agricultural land. These will include a review of land use
practices,the improvement of land registrationsystemsand the establishmentof a land bank.
..,
These initiatives will be supported by investments in physical and institutional infrastructure
s.
including:
le
Accessroads, irrigation and drainagesystemsand reception, storageand port facilities;
Improvement of systems for marketing and promotion which will be undertaken in close
collaboration with sub-regional,regional and international agencies;
Establishmentof a regulatory and legislative framework to support compliance with relevant
international health, quality and warranty standards;
Measuresto increaseefficiency of existing diversification units;
A programmeof institutional and capacitybuilding supportto private organizations involved in
the delivery of support to the sub-sectorlike the credit unions, the National Development
Foundationand the Chamberof Commerce;
The establishment of an environmental management unit to monitor progress with the
introduction of sustainable production processesconsistent with new initiatives in organic
farming.
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Government policy will also supportthe expansionof investment in livestock and fishing and the
processingof locally available agricultural products.
9.2
.1d
es
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Ild
fi-
With financial assistancefrom the EU and the CDB, site developmentinvestmentswill continue. A
total of $12 million is programmed for investmentin the 2000-2002 period for the developmentof
new tourism sites and improving accessto others. Some of these programmes are expectedto be
finaces underthe review National Indicative Programmewith the EU.
Complementing this investment in physical infrastructure will be a major institutional
strengthening effort aimed at enhancing the sector's international and regional competitiveness
through the establishment of an integrated system of standards, certification, licensing and
compliance. A total of fourteen categoriesof service providers has been identified -8 in the
private sector and 6 in the public sector. The intention is to develop internationally acceptable
service and facility criteria and standardswhich are enforceable by legislation to be introduced as
part of the overall programme.
-31-
..
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Tourism Product Development
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.
The major activities to be undertakenas part of this programmeare:
The development of a set of standards of customer service, safety, equipment and legal
requirementsfor al14 categoriesof operators;
The establishmentof a regulatory framework for support of the certification and licensing
programme;
A promotion and publicity programme aimed at engendering national, regional and
internationalawareness;
An industry service skills on-the-job trainers' programme to be undertaken in support of the
sustainabilityof the overall effort;
A complianceand monitoring systemwhich will be supportedby the establishmentof a quality
assurancedepartmentwithin the NDC and
A review of lodging and restaurantclassification along with the developmentof a rating system
that is consistentwith international standards.
9.3
Human ResourceDevelopment
The ultimate goal of governmentpolicy is the improvement in the quality of life of people. The
successof the implementation of the development agendarelies heavily on the ability to invest in
the human resource of the country. Government policy will focus on increasing the number of
skilled personsas well as ensuring training consistent with the needs of the country. In pursuit of
this goal, Government will develop a human resource strategy as part of the Integrated
DevelopmentPlan. It is intended that in the long term the majority of the labour force will acquire
training consistentwith the national developmentthrust.
-32-
10
al
The issuesthat are cUITentlymost relevantto the establishmentof a sustainablegrowth path and the
alignment of the Dominican economic environment with the realities of the liberalized global
marketcontinue to revolve around:
-
19
Id
The strengthening of the macroeconomic fundamentals, particularly the structure of the fiscal
and external accountsand
The need to expeditethe establishmentof the infrastructurerequired to support the expansionof
private investment.
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Conclusion
Real sectorprojections indicate that the capital formation effort will remaincritical to medium term
growth prospects. In the context of the economy's narrow resource base though, expanded
investmentactivity will increasethe call on the external account to finance both the initial capital
outlays and the impact on domestic consumptionlevels. In the absenceof commensurateattention
to the policy framework required to support expansionof the traded sector, indications are that
beyondthe medium term, such investmentled growth will not be sustainable.
The articulation of a comprehensive. multi-sectoral policy framework to address this issue and
complement the current round of public investmentswill be a major focus of attention in the
forthcoming National Integrated DevelopmentPlan.
Alongside the preparation of this developmentplan, the major thrust of economic policy will be
directed at stabilizing the fiscal account and completing the establishment of the institutional
framework required to support the sustainability of this effort. The focus on the institutional
framework recognizes that, central to the successful implementation of the required adjustment
measures is the need to comprehensively address the weaknesses that have hindered past
adjustmentefforts. Very high priority is therefore being accorded in the medium term to pulling
togetherthe required institutional strengthening operations and defining a clear agenda for their
completion thus setting the stage for shifting the focus to the next round of supply side measures
requiredto preparethe economy for the challengesof the global trading system.
-.)
..3
~~;
3.
2.1
2.1.1
12.1.3
2.2.
2.2.1
I2.3.1
ANNEX I: MEDIUM TERM POLICY MATRIX
POLICY AREAS AND
ACTIONSl~ROPOSED
STRATEGIC
20001
ISSUES
.Illationalintegrated
Development Plan
Complete
2001
20021
Year end
draft to inform
'budget preparations for
fiscal year 2001/02 and
for discussions
with
donor community
I?
Consolidate
Public
Finances
Strenathenina of Financial
Management Sy:stem
Establishment of ~.1inisterial
Management Teams &
Appointments of Finance
Officers
3rd Quarter
1.2 Establishment of National
3rd Quarter
Budget Management
Committee
Appointment of legal Adviser
2.1.4
Establishment
Management
3rd Quarter
1 st Quarter
of (~ash
Unit
2.1.5 Full Commissioning of SIGFIS
2nd Quarter
Expenditure Manaaement
Complete
4th Quarter
value for Money
Studies
2.2. Improve procurement
3rd Quarter
system
2.2.3 Rationalize specicil accounts
4th Quarter
2.3 Revenue Enhancement
Reduce arrears by $15 million
2nd Quarter
3.2. Property taxes -c:omplete
2nd Quarter!
preparations
Industrial
Development
2.3.3.~AT -Complete ~)reparations
3.1 Commission Industrial
Development Maste!r Plan
).2 Restructure
Incenti've Frame-
work
34
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2nd Quarter!
4th Quarter
3rd Quarter
m~
,4.1
14.
14.2
ii4th
!9.
110.
12nd
i15:
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ANNEX I: MEDIUM TERM POLICY MATRIX
--
POLICY AREAS AND
ISTRA TEGIC ACTIONS
,ISSUES
PROPOSED
Support the
Continue sites de..'elopment
continued expansion
programme;
of the TourismI
Sector
5. Other Services
Develop and implement system
of standards, certification,
licensing and compliance
5.1 Establishment of Ship RegistryI
!5.2 Information
-16.
Agnculture/Agro-
Processing
and expansion
Development
8. Infrasture
Development
Ongoing
Ongoing
Ongoing
Ongoing
Ongoing
Quarter
3rd Quarter
growth
Ongoing
Ongoing
Ongoing
Ongoing
Ongoing
Ongoing
Ongoing
Ongoing
of non-banana
agriculture exports
7.1 Implementation
of new
I
20021
industry;
6.2 Support the continued
7. Public Service
20011
Ongoing
Technology
Strateaic Plan
6.1 Restructuring of the banana
I
20001
legislation
3rd Quarter
& regulations
8.1 Airport development -complete
review of feasibility study and
make investment decisions;1
3rd Quarter
8.2 Roads development
Ongoing
2nd Quarter,
8.3 Start Roseau Water &
Sewerage project
8.4 Rural water supplies
Education and
Human Resource
9.1 Complete
Ongoinq
Basis EducationI
Reform Programme;
Development
4th Quarter
Health
Yearend
110.2 PMH improvements
11. Housing and
Development
\
12. Environmental
Protection
Yearend
11.1 CompletIon of ongoing
schemes
12.1
Qua~er
Establish Environmental
Manaaement
f14.1 Complete
Ongoing
Unit
review and publishI
Yearend
new programme
14.2 Complete database testingI
and
ment
Competitiveness
implement
new
Year end
manage-
system
15.1 Develop standards management capability.
35
2nd Quarter
TABLE I: SUMMARY OF ECONOMIC INDICATORS
Sectoral diSlribulion of current GDP (%)
AgricullUre
Mining and Quarrying
21.7
20.4
20.8
20.9
20.2
0.8
0.9
7.3
0.9
0.9
0.9
7.3
7.5
8.8
4.1
4.3
4.6
5.0
1.8
9.2
8.9
8.4
Transpon & Communicalion
7.1
4.1
8.3
16.6
17.6
17.3
17.3
16.8
Holels & Rcslaurams
2.7
3.0
2.7
2.7
2.6
Wholesale & Retail Tradc
11.3
11.5
14.6
19.6
11.6
14.0
18.4
11.3
Financial & Business Services
18.8
1.5
1.5
1.4
8.5
7.8
1.6
565.1
431.3
598;4
ManufaCtUring
Utilities
ConstrUction
Odlel Services
1.4
Less Impuled Service Cbarge
8.2
11.5
15.2
18.4
1.5
9.1
GDP at Current Faclor COSI(Sinn)
494.1
510.2
543.4
GDP at Conslant 1990 Prices (SInn)
403.8
410.3
422.9
2.2
1.6
3.1
2.0
3.5
1.6
1.3
2.0
2.4
0.1
Govenunenl Services
Annual rare of growth in GDP (%)
14.7
18.6
14.0
446.2
PRICES (Smn)
Conswncr Prices (a.. AlUlual % change)
MONEY (Smn)
Money Supply (Ml:
annual % change)
TOtal Domcstic Crroit (net)
Pri.atc Sector (net)
Public SectOr(-)
Estimatro Tourism E~petxlin.rc (UsSmn)
0.3
17.0
-2.1
362.9
312.5
SO.4
31.4
392.5
345.7
344.6
358.5
47.9
42.0
4.5
370.6
386.4
44.0
33.5
36.1
394
14.4
401.9
410.0
37.3
38.2
165.9
155.7
10.3
1.7
42.2
55.0
9.1
-44.1
188.7
183.7
5.0
0.8
57.7
194.8
204.8
188.0
4.5
196.7
49.3
CENTRAL GOVERNMENT FINANCES (Smn)
Current Rc.cnucs (Smn)
150.9
Current Expelxiin.rcs (Srnn)
150.9
Curren! Account Balance (Smn)
Capital Expetxlin.re aIxI Net Let.sing (%GDP)
0.0
0.0
34.7
68.7
11.8
0.=11
-53.2
Current Account BalaIK:C(~ GDP)
Capital Rc.cnue and Grams (Smn)
Capital ExpeIxiin.rc and Net Let.sing (SOUl)
BALANCE
Balancc (Srnn)
8.1
0.7
1.2
17.0
55.3
8.4
1S.S
52.7
-2.5.0
-21.1
SI.2
100.2
52.3
61.1
104.0
98.8
-49.0
44.4
29.7
-51.7
-37.7
63.1
32.2
65.7
30.1
-SO.8
-45.5
-47.6
28.3
28.0
-90.6
.11.8
68.2
10.7
-50.8
7.6
OF PA YMENTS (USSmn)
MerchaJxiisc ImportS(c. i.!)
47.1
95.8
103.2
Tr2deBalancc
-48.6
-53.9
Net Balance on scnrices account
36.4
26.9
34.6
Mcrchandise E~pons (foo.b)
ofwhich: Tra.cl
Transfcrs (net)
(29.8)
19.1
Current Account Balance
(103.6)
Income (net)
Capilai and Fi~al
Accoum
Net errors aIxI omissions
O.erail Balance
Change in Reserves ( ) ; Increase
28.2
(36.1)
107.8
176.8
27.S
-107.8
77.0
102.0
45.5
-13..5
-31.7
-34.6
-4.4
43.6
22.0
3.9
7.0
11.2
-1.9
-10.2
(9.3)
12.0
21.3
(\23.1)
(18.8)
(2.1)
EXTERNAL PUBLIC DEBT (USSmn)
98.2
Amonl5atlon
7.7
5.4
Inte~
2.3
107.3
8.0
5.8
2.2
2.7
2.7
Disbursed OulStal¥ling Debt
Debt Scnrice
Payments
101.2
88.9
92.9
8.9
13.4
12.3
6.6
10.4
9.4
2.3
3.1
3.0
2.7
2.7
2.7
AVERAGE EXCHANGE RATE
EC dollar(s) per US dollar
36
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TABLE II: GROSS DOMESTIC PRODUCT BY ECONOMIC ACTIVITY
AI ractor .osIln
Cunenl
Prkes (ECSM!Woa)
1994
1995
1996
1997
1998
1999
AgricultUre
107.3
104.a
IIB.a
Li vcstock
88.8
7.3
BS.2
7.4
Forestry
3.3
Fishing
7.9
3.4
8.0
121.2
100.0
8.1
3.6
123.0
Crops
112.9
93.7
7;5
3.5
8.2
9.4
9.S
8.2
3.6
9.9
4.1
4.7
4.9
5.1
S.3
5.4
Manufacturing
35.3
37.2
39.4
42.3
52.5
44.S
Electricity aJxI Water
20.0
21.1
23.6
26.2
29.9
31.3
Construction
40.8
47.0
48.5
47.7
46.7
48.0
Wholesale & Reai! Trade
560
58.6
62.3
65.4
67.7
70.6
HOIeis & Restaurants
134
15.1
14.8
15.2
15.5
IS.7
Transport
Road Transport
49.6
26.6
19.4
3.7
51.5
27.1
19.9
4.5
54.5
S34
28.2
28.6
28.6
21.6
20.0
55.3
28.4
22.4
4.6
4.7
4.6
32.4
38.3
39.5
44.6
45.2
4S.2
55.0
59.9
61.6
S9.8
64.0
67.2
Mining aJxI Quarrying
Sea Transport
Air Transport
Banks & Insurance
97.]
7.9
3.5
101.3
S8.2
24.8
4.8
Real Estate & Housing
17.3
17.8
\8.5
19.1
19.9
20.3
Government Services
96.8
93.7
100.9
103.8
112.2
116.5
8.S
6.8
7.7
8.1
Less Imputed Service Charge
40.8
46.3
46.0
43.9
45.5
TOTAL
494.1
510.2
543.4
565.1
598.4
606.7
6.S
4.0
5.9
1.4
Other Services
GROWTH RATE
8.3
8.6
'
9.2
48.3
Source: Central Statistical Office; Eastern Caribbean Central Bank
At Factor CostIn ConstantPrices(ECSMUJioas)
AgricuilUre
CropS
uvesl~k
F~try
Rsbing
1994
1~
1996
1997
1998
90.6
83.2
87.7
864
854
1999
854
73.3
6.8
3.2
7.3
65.6
6.9
3.2
7.4
69.9
7.0
3.3
7.6
68.0
7.1
3.3
8.0
66.7
7.2
3.4
8.1
66.2
74
3.4
8.4
Mining aM Quarrying
3.3
3.7
36
3.7
3.5
3.6
ManufaclUring
27.2
27.8
29.4
30.2
36.6
31.0
Electricity aM Water
13.6
14.4
15.5
16.7
18.2
19.1
Construclion
32.6
36.8
35.7
35.1
344
35.3
Wbo1esale
& RetailTradc
49.0
SO.7
S2.9
54.3
.1.1.6
S7.3
Hotels& RestauranlS
11.4
11.7
11.0
11.3
11..1
11.7
Transport
RoadTransport
SeaTraDSIX'rt
Air Transpon
39.7
22.8
136
3.3
40.8
23.2
14.0
~.6
43.1
24.2
1.1.2
37
43.0
~.5
14.7
3.8
44.3
24.3
16.4
3.7
46.5
24.5
18.2
3.8
Communications
32.4
38.3
39.4
44.5
45.1
45.1
Banks& Insurance
49.6
53.7
.12.8
.10.6
53.3
.16.0
RealEstale& Housing
14.2
14.5
14.8
14.9
1.1.2
15.5
vovcmmcnt Services
72.1
71.1
72.2
74.2
77.9
78.5
OtherServicos
4.7
.1.3
5.5
5.6
5.6
5.9
ILessImpUledServicea.arge
36.4
41.5
40.7
39.1
40.5
43.0
TOTAL
403.8
410.3
422.9
431.3
446.2
447.9
2.2
16
3.1
2.0
3.1
jGROWTH RATE
Sourcc:CemralStaliSlicalOffice arojwlcrn CaribbeanCentralBani:
37
04
G
~
GROWTH RATI:S OF GDP AT FACTOR
COST IN C:URRENT PRICES
Growth Rates
Current Prices
-Growth
Rates
Constant Prices
199419951996199719981999
TIME PI=RIOD
t
1
...
!
~
GrowthRatesof GrossDomesticProduct At Factor Cost In Current Prices
Growth Rates Current Prices
iGr~wth Ra~~ Constant Prices
1994
8.3
2.2
1996
6.5
3.1
1995
3.3
1.6
38
~i~
1997
1998
5.9
1999
4.0
2.0
3.5
0.4
1.4
"."'~"'~,
':'" """"""""""'~':"""""'~""~"'C~
;~
TABLE III: BALANCE
OF PAYMENTS ANALYTICAL
SUMMARY
1994
1. CURRENTACCOUNT
lA, GOODS AND SERVICESI
I. GO<xisI
1998
(90.6)
(77.8)
" (58.2)
(108.4)
(84.5)
(73.4)
(143)
(145.7)
(128.9)
(136.5)
(123.9)
(132.4)
3.5
(139.6)
(127.0)
3.1
b. Stores and Bunkers
1.9
2. Services
36.4
(32.2)
72.7
b. Travel
1997
(107.8)
.(93.0)
(131.2)
a. Transportation
1996
(123.1)
(129.4)
a. Merchandise
1m
(103.6)
c Insurance Services
(1.9)
2.7
34.6
(29.5)
76.1
(5.0)
3.1
44.4
631
65.7
(36.1)
80.1
(38.6)
(34.4)
81.2
(3.6)
87.0
(4.1)
(5.5)
d Financial Services
e Other Business Services
f. Government Services
:. INCOME
1 Compensation of Employees
2lnvestmentlncome
.CURRENT
9.8
3.8
6.5
22.3
29.8
(12.0)
(10.8)
(7.0)
(3.5)
(5.5)
(29.8)
(0.9)
(28.8)
(36.1)
(0.2)
(SO.8)
0.1
(45.5)
0.1
(47.6)
(35.9)
(50.8)
(45.6)
(47.8)
28.0
2.2
25.7
19.1
21.3
27.5
0.7
(0.7)
18.3
(3.6)
24.9
28.1
28.3
2.9
25.4
107.8
116.8
77.G
102.0
45.5
37.6
37.6
TRANSFERS
1 General Govenunent
2 Other Sectors
CAPITAL AND FlNANC[AJ.. ACCOUNT
0.3
,. CAPITAL ACCOUNT
23.1
66.3
68.3
60.8
1. Capital Tr2I1Sfers
23.2
52.3
57.4
60.8
(0.1)
14.0
{0.9
2 Acquisitions & Disposal of Non-PrOOuced
Non-Financial Assets
'. FINANCIAL
ACCOVNT
84.7
110.5
8.7
41.2
61.1
146.0
48.0
56.3
0.0
1.2
(0.5)
23.6
(14.0)
(45.7)
7.9
23.6
2.1
(40.6)
(14.7)
(17.8)
ERRORS AND OMISSIONS
(13.5)
(31.7)
(34.6)
(4.4)
43.6
OVERALL BALANCE
(9.3)
22.0
3.9
7.0
11.2
(3.9)
(7.0)
~1;2)
I Direct Investment
2. Portfolio Investment
3. Other Investment
F1NANCING
Source: Eastern Caribbean
~',i~.,'
,--",';.C;3""~"-'=~~~
9.3
Central Bank
39
(22.0)
TABLE IV: AGRICULTURE
PrincipalAgricultural Exports
(Value ECS'OOO)
Soun:e: Central Statistical Office Annual Trade Reports
"
"~",*?,~~~~~:
40
~~
~
~~~,
~~,O:;~~':,,~"'i;
I
:c'"""
~~~
:
'-',::' "c;
' "" ',-,
,~ .."
"--~
TABLE V: TOTAL VISITOR ARRIVALS
Total Visitors
TA
1994
1995
1996
1997
1998
1999
190.87.
203,759
262.132
299.337
311.572
279.370
65,446
3.310
56,522
60.471
USA
9.369'
10.923
Canada
2.030
1.828
Caribbean
31,509
33.725
63.259
13.580
1,790
34.934
8.800
8.367
5.389
125.541
134.921
193,484
230,581
s~Y.over
I Cruise
VisitOrs
Ship
CruiseShip Calls
[ Visitor
E~penditure (EC$M)
of which: Cruiscship
ExcursionistsI
Srayover
Hotels (holiday)
Business
Private Homes& other
65.501
73.506
14.410
14.121
1.880
1.~
2.158
35.786
36.617
35.817
15,613
1,468
3.924
244.603
201.940
244
267
290
244
268
262
87.6
8.6
1.5
78.8
43.7
20.1
15.0
92.1
106.6
16.2
0.6
90.0
45.5
25.1
19.3
103.2
17.6
0.3
85.3
37.0
26.2
17.0
98.8
13.4
0.9
84.5
41.1
24.6
18.8
112.3
14.7
0.7
97.0
46.5
25.8
24.6
&),471
63.259
65 .446
19.629
7,067
7.815
32.837
35,8)5
21,365
7,849
36.232
65,501
16,924
7,981
73.~
20,567
~,596
44.601
9.2
1.4
81.5
42.6
21.9
22.2
IStayoyer Visitors by place of stay
Slayovcr Visitors
Hotel (holidays)
Business
I Private Homes and Other
Source:
~~"":~~~~
56.522
20.339
6.465
29.718
Cent131StAtistical Office
41
21.100
7.80S
1
612
TABLE VI: REVENUE GENERATED BY THE OFFSHORE SECTOR
Economic Citizenship
Off-Shore Banking
Registration Fees
1996
1997
1998
,~,487,900
8,477,692
8.093,781
43.200
43.200
140,000
114,728
132.624
81.000
7,200
3.586
59,400
107,528
129.038
750,437
721,737
331,223
743,823
615,762
227,691
Renewal Fees
,InternationalBusiness Corporation
Registration Fees
95,175
Renewal Fees
442,349
1.243.239
Registration Fees
119,518
160.714
Annual Fees
322,831
1,082,525
Internet Gaming
Exempt Trust
Company Registration
1999
8,030,377
95,175
1.416.501
321.787
1.094.714
3,600
21,058
3,600
1,793
Annual RenewalFees
10,760
International Trusts Registration
8,505
Annual RenewalFees
Exempt Insurance
Registration Fees
5.869
21.
5,600
14.'062750
Annual Licence Fees
6.
Application Processing Fees
269
ManagementCompanies
Registration Fees
800
5,869
10.958
5,6(X)
3.938
Annual Licence Fees
6.750
269
Application Fees
4,531,100
TOTAL
Source: International Business Unit
42
,:-::;;;,;-~",-,;""~;~::~;""'~~""~"~::F';
9,810,478
10,188.823
270
9,964,353
I
TABLE VII: FISCAL DATA
TA
Central Government
( In millions of~C$)
ITotal revenueand grants
Current revenue
Tax
Of which Offshore financial sector
Non-tax
Of which &onomic citizenshipprogram
Capital revenue
Total grams
Total
I
expenditure
Current
Wages
expenditure
and salaries
Goodsand services
Interest
Tl2n$fers
I Capital expenditure and net lending!I
1994/95
185.6
150.9
130.4
0.0
2O.S
0.0
3.4
31.3
165.9
145.0
0.0
20.9
1996/97
~
246.4
188.7
152.2
0.0
36.5
1997/98
211.8
194.8
158.7
0.1
36.2
0.0
7.9
1.6
1.4
40.6
56.3
5.9
2.7
14.3
1998199
219.9
206.3
1.8
33.7
5.3
5.2
13.6
210.6
251.9
243.2
253.6
155.7
188.0
200.9
106.4
40.1
87.6
88.5
183.7
100.1
29.2
14
20.1
31.5
34.2
14.8
21.0
30.2
100.1
39.3
18.3
30.2
68.7
55.0
68.2
55.3
52.7
10.3
5.0
4.5
5.4
-25.0
-11.3
-44.1
19.1
-50.8
a
172.6
150.9
-53.2
--
208.1
219.6
Current aceount balance
Overall balance (before ~rants)
1995/96
18.1
36.3
Source: Ministry of Finance; IMF Staff Estimates
Summary
of Conmlidated
Public Sector
-( In milIi0n5 or EC$)
Total Revenueand Grants
Current Revenue
Cemral Government
Res! of nonfinancial public sector
I
-Res!
of general government
Capital Revenue
Nonfinancial
I
Total
public enterprises
grants
Total expenditure
Current
Gcn~ governmentwagesand salaries
Goodsandservices
Interest
Domestic
E~temal
I
Curren! transfers
Of Which: pensions
Capital
I.;urrent accountbalance
Overall balance(before grant"
1994195
1995/96
1996197
1m/98
228.8
185.3
148.3
37
286.4
221.2
186.1
35.1
252.9
271.4
235.4
244.6
192.2
203.8
43.1
40.9
32.1
4.9
11.1
32.4
255.2
196.4
162.2
34.2
36.1
-1.8
15.8
43.0
34.9
40.7
2.5
37.4
3.1
14.4
5.4
254.8
181.5
238.2
168.4
92.8
93.8
35.9
14.8
33.1
14
12.1
2.0
12.1
2.6
0.2
8.8
56.4
285.6
210.4
lOS.8
39.3
19.1
15.5
271.5
208.7
106.1
45.3
18.3
16.0
1998/99
3.5
21.4
285.2
218.S
112.3
46.4
18.0
12.8
3.7
2.3
S.3
28.8
21.7
31.7
40.2
41.0
22.9
25.9
26.7
48.1
31.8
73.3
69.8
74.4
69.9
75.3
3.8
28.0
10.8
26.7
26.2
-58.3
-26.0
-55.6
-33.0
-35.2
Sourc~; Ministry of Financ~; IMF Staff Estimat~s
43
TAE~LE VIII: PUBLIC
DEBT
Calendar Year-~ in ECS Million
Dec-97
Dec-98
Dec-99
Public Sector Domestic Disbursed Outstanding Debt
182.7
198.8
202..1
Public Sector Foreign Disbursed Outstanding Debt
247.0
252.2
371.3
6.9
9.2
113.4
ITotai Public Sector DisbW'sedOutstanding Debt
429.7
451.0
573.4
CentralGovernmentDomesticDisbursedOutstandingDebt
182.7
198.8
202.1
Central GovernmentForeignDisbursedOutstandingDebt
142.1
149.8
273.8
6.9
9.1
113.4
324.9
348.6
475.9
Domestic Arrears
17.7
24.3
22.4
Foreign Arrears
10.1
6.9
2.8
Total Arrears
27.7
31.2
25.2
Public SectorDomesticService
15.6
15.5
12.1
IPublic Sector Foreign ServiceI
7.0
6.6
8.6
ITotai Public Debt Service
22.7
22.0
20.7
Central GovernmentDomesticService
15.6
15.5
12.1
Central GovernmentForeignService
3.6
3.3
5.2
Total Central GovernmentDebt Service
19.2
18.7
17.3
Public SectorDomesticLoan Repayment
6.4
10.4
10.8
Public SectorForeignLoan Repayment
21.8
15.1
32.0
Total Public SectorLoan Repayment
28.2
2S.S
42.9
CentralGovernmentDomesticLoan Repayment
6.4
10.4
10.8
Central GovernmentForeignLoan Repayment
15.3
7.6
24.3
afwhich: sinking fund contributions
0.0
0.0
17.9
Total CeDtraI Government Loan Repayment
21.7
18.0
35.1
Cun-ent Revenue
182.9
204.8
202.4
IGDP
655.3
693.6
719.4
Exports (Market Pri~)
337.4
374.0
395.2
ofwhich Foreign DebentUres & T -Bills
afwhich ForeignDebentUres
& T-Bilis
Total Central GovernmentDisbuned Outstandinl~Debt
[
Source: Ministry of Finance
44
TABLE VIII: PUBLIC DEBT
T
In Percent
Dec-97
Dec-98
Dec-99
65.6
65.0
79.7
49.6
50.3
66
11.9
8.8
17.3
Total Public Debt
GDP
Total Central Government Debt
GDP
,Amortization
Revenue
Amortization without sinking fund
8.5
RevenueICernral
Governrnern Debt Payments (incl. Sinking Fund Contributions)
Revenue
22.4
17.9
25.9
22.4
17.9
17.0
0.9
1.3
Central Government Debt Payments(excl. Sinking Fund Col1ltributions)
Revenue
ICentral Government Foreign Debt Service
Expons
Source: Ministry of Finance
J
45
1
TABLE IX: CONSUMER PRICE INDEX
46
PER(
lAs:e(
TABLE X: 1997 LABOUR FORCE SURVEY OF DOMINICA
Non-Institutional Population 15years and over & !.ab4)urForce by Employment Status, Sex and Age Group
A
Noninstitutional
Total Labour
ge Population 15
Force
0
.Total
Empk'yed
Unemployed
Years & Over
Parn"ipation
Rate
Unemployment
Rate
Not in Labour
Force
ITotal
I Male
15-19
3.749
120-24
2.890
25-29
50-54
3.247
2.538
2.453
1,871
1.338
1.031
55-59
812
30-34
35-39
140-44
!45-49
60-64I
i65 & over
INot StatedI
'TOTAL
958
2.781
508
24.176
1.653
2.643
3.012
2.466
2.363
1.781
1.164
901
552
471
761
351
18~118
87i'
1,859
2,394
2,188
1,890
1.572
1.042
829
776
784
44.1
91.5
618
92.8
97.2
278
488
447
46.9
29.7
2,096
247
20.5
235
11.3
72
90
473
96.3
20
209
122
95.2
11.7
90
87
10.5
174
72
87.4
8
130
64
24
68
11.6
5.1
487
120-24
135-44
260
683
78
49.2
27.4
293
588
69.1
16.5
2,020
157
14,56{}
3,559
74.9
19.6
6.058
10.2
115-19
165+
INot ~
I;
Sour,
47
TABLE X: 1997 LABOUR FORCE SURVEY OF DOMINICA
PERCENT AGE UNEMPLOYED BY AGE GROUP AND SEX
1970
1981
1991
Age Group
Males
Females
Total
6.9
10.1
8.1
Males
15.9
15-19
29.4
32.2
30.6
49.8
120-24
5.9
11.6
8.2
125-34
2.2
4.2
135-44
4
2.1
145-54
1.2
0.7
55-64
0.6
1.5
65+
0.3
0
Total
Not Stated
Females
23.6
Total
18.6
Males
Females
Total
9.6
10.5
9.9
66.7
55.7
29.5
34
30.9
19.9
30.4
23.8
13.5
19.1
15.6
2.9
8.8
15
10.8
7.9
8.1
8
1.7
4.6
7.2
4.3
3.2
2.8
3..1
2.7
7.2
4.3
3.2
2.8
3.1
0.9
2.9
2.7
2.8
3.4
3.2
3.3
1.6
0.7
2.2
2.7
2.3
3
0.9
2.4
0
0
8.5
11.4
9.5
6.6
4.3
6.1
.JQ}
840
2,541
TOTAL NUMBER
UNEMPLOYED
917
Source: Central Statistical Office
802
1,719
1.937
2,690
48
4.627
TABLE XI: FISCAL PROJECTIONS (BASELINE)
Actual
Currentrevenue
Tax revenue
Taxes on income and profits
Budget
T;
Projections
1999/2000 2000/2001
220.2
200.9
1998/1999
206.3
1999/2000
172.6
176.0
169.7
183.9
189.5
48.8
48.1
30.9
223.2
2001/2002
229.2
Personalincome tax
29.9
Corporation tax
20.3
49.3
27.5
21.8
18.9
52.0
31.9
21.6
lessrefunds
1.4
0.0
1.6
1.5
53.6
32.8
22.3
1.5
Property transfer taxes
2.3
2.5
2.4
2.5
2.5
Taxeson goods and services
27.1
5.4
26.5
5.5
28.9
5.8
29.7
5.9
12.0
11.7
0.8
0.7
12.1
0.8
7.8
10.2
10.5
0.3
0.3
0.3
0.1
0.1
0.1
Licences
Stampduty on receipts
0.3
Other
0.1
27.5
5.5
11.0
0.6
9.8
0.2
0.4
Taxes on foreign trade and transactions
94.4
96.7
92.7
100.6
103.6
Taxes on imports
89.8
94
87.8
95.7
98.6
Import duties
23.7
24.8
62.5
65.5
24.9
58.9
25.3
Consumptiontax on imports
Customsservice charge on imports
66.6
3.6
3.8
3.9
3.8
26.0
68.6
4.0
Taxes on exports
o.
0.1
0.1
0.1
0.1
Other taxes
4.5
2.1
0.1
2.5
4.8
4.8
2.5
2.2
0.0
2.3
0.0
2.3
3.5
2.5
0.1
2.5
4.9
2.3
0.1
2.5
33.7
47.2
31.2
36.3
39.7
Consumptiontax
Salestax
Hotel occupancytax
Embarkation tax
Foreign travel tax
Cruise Environmental Charge
Nontaxrevenue
11.0
0.7
9.6
Rentsand Interest
5.9
5.3
5.7
6.3
6.5
Dcpanrncnlal revenue and other fees
18.8
1.9
19.4
18.5
20.0
20.6
2.2
2.1
2.0
5.3
12.0
3.4
Off-shore banks and other mu licences
1.8
8.3
1.9
2.1
5.8
2.0
Health levy
2.4
2.7
3.0
1.8
0.0
2.6
2.6
0.1
0.1
0.1
0.1
0.1
Currency profits
Economiccitizenship programme
WarehouseRent
Source: Ministry of Finance
49
TAI3LE XI: FISCAL PROJECTION (BASELINE:)
j~ctuaJ
19!~/1999
Current Expenditure
Wagesand salaries
Wages
Salaries
Budget
1999/2000
Projections
1999/21MM1 2000/2001 2001/2002
200.9
222.8
217.3
223.7
226.5
106.4
117.2
7.1
111.1
10.3
113.3
10.5
104.0
100.7
102.8
115.6
10.8
104.8
7.5
98.9
Goods and services
40.1
44.7
42.1
43.0
43.8
Interest
Domestic
External
18.1
12.8
23.0
26.9
14.8
30.9
15.8
31.0
17.4
5.3
5.6
12.0
15.2
15.6
CUITent transfers
36.3
37 .9
37 .2
1.3
1.3
1.4
36 .5
3.7
36.1
3.8
Tourist Board
0.0
0..0
O.0
O.0
0.0
National Development Corporation
4.6
4. 9
4.8
13 .2
13.5
Schools and scholarships
6.0
7.1
1.1
14.1
6. 6
8.2
1.1
6. 7
7.0
17..2
Regional and International
20.41
1.6
3.
12.2
12.9
13 .0
17.6
20.9
3.2
13.0
5.6
0.6
Local governments
Other
Retirement benefits
Poverty relief
19
3. 4
2. 4
5. 4
Rewards and Compensation
0.2
o.2
0..5
0..6
5.4
0.4
0.1
726.0
-16.4
-3.5
-2.3
0.8
726.0
755.7
ICurrent account balance
,Current account balance (as a % of GDP)
!Projected GDP
0.8
709.1
A~ctual
Budget
1999/2000
7.0
Projections
1.7
2.4
3.4
4.3
0.4
0.7
1.3
0.1
19!~/l999
CapitalRevenueI
Sale of stale landsI
Housing
receiptsI
Renral & sale of lots
5.2
0.1
52.7
322.0
Grant
9.4
Loan
Local
6.4
lOS.3
96.3
36.7
4O.S
Lapital Expendittlre
Total Revenue
211.5
Tolal expendittlre
253.6
230.2
544.8
Overall balance before grants
42.1
-314.6
GraIUS"
Development Aid
Direct aid flows (EU)
13.6
108.3
108.3
1{).3
3.4
1999/2000
2.1
46.0
4.8
15.5
2.7
0.8
778.3
2000/2001 2001/2002
5.3
5.4
1.7
1.8
3.5
3.5
0.1
0.1
-
50.0
50.0
14.5
42.8
203.1
263.3
-60.2
17.7
12.0
5.8
215.5
234.6
273.7
-48.2
276.5
25.0
10.0
-41.9
25.0
10.0
1
15.0
15.0
Total revenue and GranlS
225.1
338..5
220.8
250.5
259.6
Ovemll balance after gmnlS
-28.4
-206.3
-42.5
-23.2
-16.9
Source:Ministry of Finance
50
TA8~LE XI: FISCAL PROJECTIONS
IN PER CENT OF GDP
Actual
29.1%
Budget
1999/2000
30.7%
24.3%
6.9%
4.2%
--
1998/1999
ILurrern revenue
Tax revenue
Taxes on income and profilS
Projections
1999/2000
27.7%
2000/2001
29.1%
24.2%
23.4%
24.3%
24.3%
6.6%
4.3%
2.6%
0.2%
6.9%
2.9%
0.2%
6.9%
4.2%
2.9%
0.2%
2001/2002
294%
Corporation tax
less refunds
2.9%
0.2%
6.8%
3.8%
3.0%
0.0%
Property transfer taXes
0.3%
0.3%
0.3%
0.3%
0.3%
Taxes on gcKxisand seryices
3.8%
0.8%
3.6%
0.8%
0.0%
1.7%
0.1%
1.1%
0.0%
0.0%
3.8%
0.8%
3.8%
0.8%
1.6%
0.1%
1.4%
0.0%
1.6%
0.1%
1.4%
0.0%
0.0%
0.0%
Personal income tax.
4.2%
Stampduly on receipts
Other
0.0%
0.0%
3.8%
0.8%
0.0%
1.5%
0.1%
1.3%
0.0%
0.1%
Taxes on foreign trade and transactions
13.3%
13.3%
12.8%
13.3"
13.3%
12.7%
13.0%
12.1 %
12.7%
12.7%
3.3~
3.4%
9.0%
0.5%
34%
8.8~
O.5~
8.1%
0.5%
3.3%
8.8%
0.5%
3.3%
8.8%
0.5%
0.0%
0.0%
0.0%
0.0%
0.0%
0.6%
0.3%
0.0%
230.0%
0.3%
0.3%
0.0%
0.5%
0.7%
0.6%
0.3%
0.0%
0.3%
0.0%
0.3%
0.6%
0.3%
0.0%
0.3%
NoRtaX revenue
4.8%
6.5%
4.3%
4.8%
5.1%
Rents aM interest
0.8%
2.7%
0.3%
0.7%
0.3%
0.3~
O.O~
0.7%
0.8%
2.6%
0.3%
0.4%
0.2%
0.0%
0.0%
0.8%
2.7%
0.3%
0.8%
2.7%
0.3%
0.7%
0.3%
0.3%
0.0%
Consumption tax
Consumption tax surcharge
Sales tax
Hotel occupancytax
Licences
Taxeson impons
Import duties
Consumption tax on imports
Customs service charge on imports
Taxes on exports
Other taxes
Embarkation tax
Foreign uavel tax
Cruise Environmental Charge
Depanmental revenueand other fees
Cu=ncy profitS
Economic citizenship programme
Off-shore banksand other mu licences
H~lth levy
WarehouseRent
0.0%
1.6%
0.1%
1.4%
2.7%
0.3%
1.7%
1.1%
0.4%
0.0%
Source Ministry of Finance
51
0.3%
0.4%
0.3%
0.3%
0.0%
~
2.3%
TABLE XI: FISCAL PROJECTIONS IN PI:R CENT OF GDP
Actual
1998/1999
28.3%
Budget
1999/2000
15.0%
1.1%
13.9%
16.1%
1.0%
14.3%
15.3%
1.4%
13.9%
15.0%
1.4%
13.6%
14.8%
1.4%
13.5%
(joods and services 1/
5.7%
6.2%
5.8%
5.7%
5.6%
Interest
2.6%
3.2%
1.8%
0.7%
2.4%
3.7%
2.0%
1.7%
4.1%
2.1%
4.0%
2.0%
2.0%
2.0%
5.1%
0.2%
5.1%
0.2%
0.0%
0.7%
0.9%
1.0%
0.2%
1.8%
0.3%
4.8%
0.2%
0.0%
0.6%
0.8%
0.9%
0.1%
4.(0.:
i%
0.6%
0.8%
1.0%
0.2%
2.0%
0.3%
0.0%
5.2%
0.2%
0.0%
0.7%
0.9%
1.1%
0.2%
1.7%
0.5%
0.0%
0.8%
0.1%
CurrentExpenditure
Wages and salaries
Wages
Salaries
Domestic
External
Current transfers
Local governments
Tourist Board
National Development Corporation
Schoolsand scholarships
Regional and International
Other
Retirement benefits
Poverty relief
Rewards and Compensation
ICurrent accountbalance
0.0%
Actual
1998/1999
Capital Revenue
Sale of state lands
Housing receipts
Rental & sale of lo'ts
Total Revenue
Total expenditu~e
Overall balance before grants
Grants
!TOtalrevenueand GrantSIOyerall
balanceafter grantS
Source: Ministry of Finance
0.7%
0.2%
0.5%
0.0%
30.7%
0.8%
Budget
1999/2000
1.0%
0.3%
0.6%
0.1%
Projections
1999/2000 2000/2001 2001/2002
29.9%
29.6%
29.1%
0.1%
1.7%
~%
OJ0.(
1%
i%
OJ1%
0.'
1%
0." %
1: '%
0.3%
0.0%
0.-: ~%
-0.5%
0.3%
O.C1%
Projections
1999/2000 2000/2001 2001/2002
0.3%
0.7%
0.7%
0.1%
0.2%
0.2%
0.2%
0.5%
0.5%
0.0%
0.0%
0.0%
28.0%
36.3%
29.8%
36.2%
30.1%
35.5%
-8.3%
-6.4%
-5.4%
14.9%
2.4%
3.3%
3.2%
31.8%
46.6%
33.3%
-28.4%
30.4%
-5.9%
33.2%
-4.0%
-3.1%
-2.2%
29.8%
35.8%
-5.9%
9%
52
31.7%
75.0%
-43.3%
TABLE XII: FISCAL PROJECTIONS (ALTERNATIVE)
ICu~~t revenue
Tax revenue
Taxes on income and profits
Actual
Budget
Im/l999
1999/2000
206.3
223.2
172.6
176.0
169.7
204.8
208.2
Projections
1999/2000 2000/2001
200.9
246.0
2001/2002
251.0~
48.8
49.3
48.1
Persona! income tAX
29.9
30.9
66.7
41.2
Corporation tAX
20.3
27.5
21.8
18.9
27.0
less refunds
1.4
0.0
1.6
1.5
68.3
42.2
27.6
1.5
2.3
2.5
2.4
6.5
6.5
26.5
31.0
5.5
5.8
29 .7
S.9
12.0
13.3
13 .6
Hotel occupancy tax
27.1
5.4
11.0
0.7
0.8
1.3
1.3
Licences
9.6
7.8
0.3
10.3
10.6
0.3
0.1
0.1
O.3
O.1
o. Propenytransfertaxes
Taxes on goods and services
Stamp duty on receipts
0.3
Other
0.1
27.5
5.5
11.0
0.6
9.8
0.2
0.4
Taxes on foreign trade and transactions
94.4
96.7
92.7
100.6
103"6
Taxes on imports
89.8
94.1
87.8
95.7
98.6
Import duties
23.7
24.8
24.9
62.5
65.5
58.9
25.3
66.6
26.0
Consumption tax on impons
Customs service charge on impons
3.6
3.8
3.9
3.8
4.0
Taxeson exports
0
0.1
0
0
0
Other taxes
4.5
2.1
0.1
2.3
2.5
2.5
0.0
3.5
4.8
2.3
0.0
2.5
4.8
4.9
Nontax revenue
33.7
47.2
31.2
Consumption tax
Sales tax
Embarkation tax
Foreign travel tax
Cruise Environmental Charge
2.2
2.3
0.1
0.1
2.5
2.5
41.3
42.9
6.5
20.6
2.0
7.0
2.0
2.6
0.1
Rentsand interest
5.9
6.3
18.8
5.3
19.4
5.7
Departmental revenueand other fees
18.5
20.0
Lottery Commission
0.0
5.3
1.8
0:0
0.0
1.5
12.0
8.3
3.0
6.9
Economic citizenship programme
Off-shore banks and other IBU licences
Health levy
Warehouse Rent
1.8
1.9
2.4
2.7
0.0
2.6
0.1
0.1
0.1
0.1
53
68.6
TABLE XII: FISCAL PROJECTIONS (ALTERNATIVE)
Actual
CurrentExpenditure
Wagesand salaries
Wages
Salaries
Retroactiveadjustment
1998/1999
Budget
1999/2000
Projections
1999/2000
2000/2001
200.9
222.8
217.3
225.9
230.2
106.4
117.2
7.1
111.1
113.3
115.6
7.5
10.3
10.5
10.8
98.9
104.0
100.7
102.8
104.8
2001/2002
1.0
Goods and services 11
40.1
44.7
42.1
43.0
43.8
Interest
Domestic
External
18.1
23.0
31.0
17.4
26.9
14.8
30.9
12.8
5.3
5.6
12.0
15.8
15.2
15.6
Current transfers
36.3
1.3
37.9
37 .2
1.40
38.7
Tourist Board
0.0
0.0
O.
O.
National Development Corporation
4.6
4.9
4. 8
Schools and scholarships
6.0
6.6
6. 7
Regional and International
7.1
8.2
7. 06
4.9
6.7
7. 6
1.1
1.1
1.
1.2
14.1
12.2
12.9
14.7
Poverty relief
1.9
3.4
0.2
0.2
2.45
O.
2. 0
Rewards and Compensation
O.2
6. 9
7. 8
1.2
15.2
2. 1
o.2
Currentaccountbalance
5.4
0.4
16.4
20.2
20.8
Current account balance (as a % of GDP)
0.8
0.1
-2.3
2.7
2.7
709.1
726.0
726.0
755.7
778.3
Local governmentS
Other
Retirement benefitS
[Projected GDP
Source: Ministry of Finance
54
1.3
I.40
15.5
39 .8
1.4
0.'0
5.10
TABLE XII: FISCAL PROJECTIONS
IN PER CENT OF GDP (ALTERNATIVE)
Budget
1998/1999
Projections
1998/1999
2001/02
30.7%
2.7.7%
1999{00
32.6%
2000/0]
Current revenue
32.3%
30.8%
Tax revenue
24.2%
23.4%
27.1%
27.5%
25.2';:
6.8';:
3.8%
3.0%
6.6%
4.3%
2.6%
8.8%
7.3%
4.5%
3.6%
9.0%
5.6%
3.7%
Property transfer taxes
0.3%
0.3%
0.9%
O.91C
0.8%
Taxes on gO<xisandservices
3.8%
0.8%
1.5%
3.6r.
4.1%
0.8%
1.8%
0.2%
1.4%
0.0%
3.9%
0.8%
1.8%
1.4%
0.8%
1.6%
0.1%
1.4%
0.0%
0.0%
Taxeson income and profits
Personalincome tax
Corporationtax
5.5%
3.0%
3.8%
Consumptiontax
Salesta~
Hotel occupancytax
Licences
0.1~
1.3~
Other
0.1%
0.8%
1.7%
0.1%
1.1%
0.0r.
Taxeson foreign trade and transactions
13.3%
12.8%
13.3%
13.7%
13.3%
13.0%
12.1%
12.7%
13.0%
12.7%
3.4%
9.0%
0.5%
3.4%
3.3%
8.8%
3.4%
8.1%
0.5%
3.3%
8.8%
Taxes on exports
0.0%
Other taxes
Embarkation tax
Taxeson impons
Import duties
Consumptiontax on imports
Customsservice chargeon imports
0.2%
0.5%
9.1%
o.S%
0.0%
0.0%
0.0%
0.0%
0.3%
0.3%
0.710
0.310
0.6%
0.3%
Foreign travel tax
0.0%
0.010
0.0%
0.7%
0.3%
0.0%
0.6%
0.3%
0.0%
Nonraxrevenue
6.5%
4.3%
5.7%
5.9%
6.1%
Rentsarid interest
0.7%
2.7%
0.8%
2.6%
0.3%
0.0%
0.8%
0.9%
0.8%
2.7%
0.3%
2.7%
0.3%
0.2%
0.4%
0.9%
0.3%
0.3%
0.9%
0.3%
2.7%
0.3%
0.3%
Depanmentalrevenueand other fees
Currencyprofits
Lottery Commission
Economic citizenshipprogramme
Off-shore banksand other IBU licences
Source:Ministry of Finance
0.3%
0.0%
1.7%
1.1%
0.2%
55
O.5~
0.9%
0.3%
c
TABLE XII: FISCAL PROJECTIONS IN PER CENT OF GDP (ALTERNATIVE)
Curren!Expenditure
Budget
1998/1999
Projections
1998/1999
1999/00
2000/01
2001/02
30.7%
2~.9%
29.9%
29.6%
29.2%
16.1%
1.0%
15.0%
1.4%
14.8%
1.4%
13.6%
13.5%
14.7%
1.4%
13.3%
Wagesandsalaries
Wages
Salaries
14.3%
15.3%
1.4%
13.9%
Goods and services 1/
6.2%
5.8%
5.7%
5.6%
5.6%
Interest
3.2%
2.4%
0.8%
3.7%
2.0%
0.8%
4.1%
2.1%
2.0%
4.0%
2.0%
2.0%
3.8%
1.8%
1.9%
5.2%
0.2%
5.1%
0.2%
5.1%
0.2%
5.1%
0.2%
5.1%
0.2%
0.7%
0.9%
1.1%
0.2%
1.7%
0.5%
0.0%
0.7%
0.9%
0.9%
Domestic
External
Currenttransfers
Local governments
National Development Corporation
Schools and scholarships
Regional and International
Other
Retirement benefits
Poverty relief
Rewards and Compensation
ICurrent account balance
0.1%
!Capital Revenue
i Sale of state landsI
Housing receipts
Rental & sale of lots
1.2%
0.4%
iTotal Revenue
Total expendirure
Overall balance before grants
0.7%
0.1%
36.7%
74.8%
-38.1 %
1.0%
0.6%
0.1 ;%
o.~'%
IJ 1%
2.0%
2.1.
0.1%
1.0%
0.2%
1.9%
0.3%
0.0%
0.3%
0.0%
O.f 1%
-2.3%
2.7%
2.7%
1.6%
0.8%
0.2%
0.4%
0.2%
0.2%
0.5%
0.2%
1.8%
0.3%
0.: %
0.:
J%
%
1.2%
1.3%
0.3%
0.8%
0.1%
0.2%
0.6%
0.5%
35.9%
36.3%
47.2%
34.3%
44.2%
36.0%
31.5%
35.4%
-8.3%
-8.5%
-1.7%
-3.9%
Grants
17.8%
4.0%
4.9%
Total revenue and Grants
Overall balance after ~rants
Source:Ministry of Finance
54.6%
40.1%
41.2%
-20.2 %
-4.1%
-3.6%
56
0.6%
0.9%
1.0%
0.2%
9%
36.2%
0.2%
0.7%
0.0%
3.1%
34.6%
-0.8%
TABLE XIII: UTILITIES GENERATION, SALES AND CONSUMERS
ITELEPHONESERVICES
Residential Use
{;ommercial Use
Total
Source: Recordsof Cable and Wireless
~--
1994
1995
14.132
2.894
17,026
14.878
3.047
17.925
57
1~
15,484
2,792
18.276
1m
15.668
3.149
18.817
1998
TABLE XIV: SOCIAL INDICATORS
1994/1995
199511996
1996/1997
1997/1998
1998/1999
14.434
647
14.320
644
13.907
EDUCAnON
Primary
i
Enrollment
Number of Teachers
13.724
13,418
631
611
611
63
63
63
Number of Schools
65
Pupii-Teacher Ratio
22.3
22.2
22
22.5
22
SecorKiary
4.511
4702
4.928
5,455
5772
Number of Teachers
269
278
283
293
328
Number of Schools
14
14
14
15
15
Pupil-Teacher Ratio
16.8
16.9
17.4
18.6
17.6
528
598
651
652
670
2
2
2
2
2
Enrollment
Teniary
Enrollment
Numberof Teachers..
Numberof Schools
*per thousandof mean population
**1993-1999 is not recorded as teachersare recruited on a part-time basis
Sources:
World Bank Report no 14944-DOM
Education Development Plan 1999-2005
Statistical Digest 1998
58
TABLE XV: EXPORTS
TOTAL EXPORTS (EC$MN)
Domestic
Of which: Primary
Manufactured
manu as % ofdomestic
Re-exports
Primary Expons
ofwhich: Bananas
1994
1995
1996
1997
1998
127.3
121.8
163.0
146.6
117.6
138.7
159.2
139.8
67.1
57.7
59.9
0.5
0.5
4.2
65.3
73.3
0.5
66.5
57.2
138.5
135.3
63.3
72.0
0.5
3.2
141.3
124.3
3.0
1999
92.7
2.6
0.6
3.7
6.7
67.1
57.7
63.3
65.3
69.4
70.7
0.0
44.8
45.5
42.2
40.5
67.1
12.9
17.8
23.1
28.9
38.9
31.8
rate ofgroWth ofnon-banana
2.3
-0.8
0.4
0.3
Manufactured Expons
57.2
59.9
73.3
65.0
34.5
41.8
72.0
53.7
0.3
92.7
55.9
81.0
65.0
22.7
18.1
18.4
19.7
11.7
Non-banana
ofwhich: Soaps& soapproducts
Other
59
TABLE XVI: BANANA INDUSTRY (SELECTED INDICATORS)