Commonwealth of Dominica - Introduction
The country outline for Commonwealth of Dominica is aimed to offer a general overview of Dominica's social and economic situation. It was prepared using inputs from the Caribbean Development Bank Annual Economic Report for the year 2003-2004, the CIA fact-book and World Bank Discussion Papers available online. The complete list of references is available in the sections named Bibliography and Sources on-line.
I. Social Indicators
Rates of poverty in Dominica reflect the continuing decline in banana production as well as stagnation in the country's other sectors. In Dominica, 29% of households and 40% of the general population live in poverty. 11% of households and 15% of the general population live in indigent poverty.[1] An average of 50% of Dominica's children live in poverty. Fewer than half the households with children have two resident parents. In rural areas, 1 in every 2 households is poor. More than 37 percent of households in Dominica do not have access to piped water and 25% of households have no access to toilet facilities.[2] With total government debt currently almost equal to GDP, Dominica also faces increasing unemployment and under-employment. The most significant differences that exist between the poor and non-poor population is educational attainment and unemployment. The rate of unemployment for poor households is 40% while non-poor households' rate of unemployment is 16%.[3] This data demonstrates the correlation between income/employment and poverty in Dominica.
According to the Government of the Commonwealth of Dominica, Dominica has generally good health indicators with an infant mortality rate of 18 per 100 and a life expectancy of 77 years. Major health problems include hypertension and diabetes. An increasingly aging population has also put a strain on the country's productivity.
In 2002, Dominica reported a rise in the number of cases of persons affected with tuberculosis.[4] Typically, an increased incidence of tuberculosis gives an indication of increased number of HIV/AIDS infections. Teenage pregnancy and reproductive health patterns of unprotected sex and gender-related issues have also been cited as problematic for Dominica. Dominica's current health situation sends a clear signal that HIV/AIDS prevention and education is becoming increasingly vital.
II. Economic Situation analysis
a. Overview of the recent economic performance
Dominica's political and economic situation has remained stable despite of the death of Prime Minister Charles and the assumption of Prime Minister Skerrit into office during 2004. In 2003, Dominica's economy experienced a 0.3% growth rate after two consecutive years of economic contractions.[5] This marginal increase was largely due to an estimated 5% expansion of the tourism industry, a 4.6% expansion of the manufacturing sector and a 4.6% contraction of real output from the agricultural sector in 2003.[6] The island's agricultural sector first became vulnerable after tropical storms devastated a quarter of the 1994 crop. Since then, the Dominican economy has been stimulated by growth in tourism, construction, wholesale and retail and manufacturing industries. The island of Dominica currently depends on agriculture (17.6% GDP), government services (22.3%), financial services (15.7%), and transport & communication (14.3%) as the main drivers behind its economy.
Nevertheless, Dominica's economy remains in crisis. Available data suggests an increased incidence of household poverty (from 27.6 percent in 1995 to 29 percent in 2002) along with the unemployment rate (from 15.7 percent in 1999 to 25 percent in 2002).
The Dominican economy has relied heavily on debt financing in order to rectify its economic position. During the past five years, Dominica has boosted its external debt from 35% of GDP in FY 1997/98 to 70% of GDP in FY 2002/03.[7] The country's debt servicing is now 11% of exports while interest payments account for 20% of current revenues.[8] In response, the Government of the Commonwealth of Dominica adopted a broad structural reform strategy in order to strengthen its fiscal position. As part of this strategy, the government reduced civil service wages, improved public sector operations, increased revenues through a sales tax on travel tickets and an increase in custom service charges through an emergency budget. The government also extended the IMF Stand-By Arrangement (SBA) and negotiated a Poverty Reduction and Growth Facility for SDR 7.7 million in December 2003. Public debt recovered to 6.9% at the end of FY 2002/03 from 10.6% of GDP at the end of FY 2001/02.[9] Notwithstanding these improvements, the debt problem remains a fundamental challenge to the Government of Dominica.
Dominica's medium-term economic future rests on fiscal stability, tourism, and growth within the agricultural sector (specifically banana output). As a result of the significant decrease in banana output, Dominica's foreign currency deposits contracted by 54% (to $3.8 million) in 2003.[10] Because Dominica's social outcomes rely on banana output to boost aggregate demand, the government will need to re-assert a clear position on the trade of bananas in order to create a sustainable and sizeable industry. Decreasing preferential access to the EU market for bananas and hurricane-related crop damage has made it difficult for Dominica to assert its position on the future of an uncertain banana industry. Dominica's banana exports fell by 38.5% to a record low of 10,563 tons in 2003.[11] Dominica's attempt to diversify the agricultural market by a scarcity of agricultural labor, investment capital, and transportation costs. In order to combat poverty, unemployment and fiscal instability, Dominica will need to invest in a two-fold strategy that addresses social development needs through a job generating pro-growth strategy while strengthening the country's macroeconomic policy and private sector related activity.
Dominica's population of 72,000 has exhibited relatively insignificant growth due to the country's high level of emigration. The lack of growth in the tourism and offshore banking sectors has failed to combat the growth of emigration in Dominica. Many other Caribbean countries have been able to decrease emigration through growth in these sectors. In the near to medium term, tourism is expected to be the principal driver in the economy. While Dominica's tourism earnings averaged 18% of GDP compared to an average 29% in other islands, tourism contribute over 30% of Dominica's foreign exchange earnings ' three times the current earnings from bananas.[12] In order to expand its tourism industry, Dominica will need to develop a coherent marketing strategy to promote its niche market - rainforests, waterfalls, volcanic sites and coral reefs to the growing international eco-tourism market.
b. Development Cooperation
The International Monetary Fund (IMF) approved a US$11.4 million credit for Dominica, the Government of Dominica. The World Bank also approved a US$3 million structural adjustment loan for Dominica to assist the Commonwealth with .
The EU, the country's most significant grant aid donor, supports agricultural and economic diversification initiatives including programmes for the development of eco-tourism, youth skills training, and the development of the enabling environment for private sector development. Additionally, the EU supports social and community development, including measures to assist in re-tooling and re-positioning of displaced banana farmers in other sectors of the economy.
The EU has made a total of '18 million available to Dominica, under the National Indicative Programmes of the 6th, 7th and 8th EDF. The Country Strategy Paper and National Indicative Programme for the 9th EDF were signed on 12 August 2002 between Dominica and EU. Infrastructure development and the roads sub-sector would be the focal sector of the interventions under the 9th EDF (' 3.7 million) for the period 2002 through to 2007.
The ten year country strategy for the utilisation of SFA was revised in order to reflect the declining size of the banana industry. The strategy provides a consolidated approach to the agricultural sector looking in particular at agricultural diversification, social recovery of rural areas and economic diversification. The strategy focuses on greater economic diversification, with a 20% increase in the amount allocated to this sector, to encourage more diversified economic growth with job creation by improving conditions for the development of the private sector, developing human resources and institutional capacity and by investing in economic and social infrastructure.[13]
III. Key Challenges
a. Overview
The major policy issues for the Government at this juncture are:
- Restructuring Public Debt
- Poverty Reduction
It is expected that inflation will remain under 5% and that unemployment will remain high over the near to medium term. Because tourism is expected to be the main impetus for economic growth, Upgrading Airport Facilities and widening the main access road to the airport should be fast-tracked. This investment might weaken Dominica's economic situation in the short run.
Dominica finalized its Interim Poverty Reduction Strategy Paper in November 2003. The Government of the Commonwealth of Dominica indicated that the Poverty Reduction Strategy will increase the effectiveness of current social protection programs and reduce the incidence of poverty through programs designed to increase employment.[14]
The approval of the IMF and World Bank loans suggest confidence in the economic programme being pursued by the Government to rescue the country from fiscal crisis brought on by years of previous mismanagement. The Government's main policy drive is to address the nation's financial situation. Through discussions, the Government of the Commonwealth is currently pursuing pre-budget negotiations with trade unions, the private sector, and civil organizations to maintain a transparent budgeting process.
IV. Environmental Situation
The Government of the Commonwealth of Dominica has established a National Action Plan that aims to maintain and conserve the island's eco-system. Dominica environmental issues include:[15]
- Bio-diversity and species preservation
- Deforestation prevention and land use management
- Coastal zone management
- Water quality management
- Solid waste management
- Sustainable Development
--------------------------------------------------------------------------------
[1] Country Poverty Assessment Final Report Volume 1 of 2, Halcrow Group Limited, June 2003 p.45
[2] Country Poverty Assessment Final Report Volume 1 , Halcrow Group Limited, June 2003 Executive Summary
[3] Country Poverty Assessment Final Report Volume 1, Halcrow Group Limited, June 2003 Main Report
[4] The Millenium Development Goals in the Eastern Caribbean: A Progress Report p.24
[5] Caribbean Development Bank Annual Economic Review 2003, p. 46
[6] Caribbean Development Bank Annual Economic Review 2003, p. 46
[7] Caribbean Development Bank Annual Economic Review 2003, p. 48
[8] Caribbean Development Bank Annual Economic Review 2003, p. 48
[9] Caribbean Development Bank Annual Economic Review 2003, p. 48
[10] Caribbean Development Bank Annual Economic Review 2003, p. 48
[11] Caribbean Development Bank Annual Economic Review 2003, p. 48
[12] Caribbean Development Bank Annual Economic Review 2003, p. 46
[13] EU Relations with Dominica http://www.delbrb.cec.eu.int/en/eu_and_country/dominica_sfa.htm
[14] http://poverty.worldbank.org/files/Dominica_IPRSP.pdf
[15] http://biz.yahoo.com/ifc/dm.html
