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Dominican Republic Table of Contents

Dominican Republic


Government expenditures, as a percentage of GDP, reached 21 percent by 1987, up from an earlier low of 15 percent; both figures were low by the standards of most developing countries. These data indicated that, with the exception of the enterprises inherited from Trujillo's holdings, the government's role in the economy was relatively limited. The ratio of total spending had also declined, beginning in the 1970s, because of the decline in revenues as a percentage of total output. Falling revenues dictated a corresponding decrease in the percentage of spending on social services, which worsened the position of poorer Dominicans. Ironically, a major drain of fiscal resources in the 1980s was the result of the low prices of goods and services provided by government-subsidized enterprises, such as utility companies, many of which were created to cater to lower-income citizens. These subsidies began in the 1970s, at a time of greater government resources; by the 1980s, however, they had created serious price distortions between government and market prices. Politicians were reluctant to cut price subsidies to the poor in the late 1980s, as the economy weakened and popular expectations for continued government support remained high.

Government spending was divided between current and capital expenditures. Current expenditures averaged nearly 70 percent of total expenditures during most years, and they were divided among the categories of social services, general services, and financial services. Social services received 30 percent of the national budget in 1988, some 13 percent of which was dedicated to education and 8 percent, to public health. As recently as 1984, social expenditures had accounted for 47 percent of the total. General services constituted 21 percent of spending: about 7 percent of this was allocated to defense; 5 percent, to judiciary and police; and 9 percent, to government operations. The 1988 budget also allocated 22 percent of expenditures under the designation of financial services to debt servicing; this percentage was lower than it had been in previous years, as a result of debt rescheduling. During most of the 1980s, capital expenditures (referred to as economic services in the budget) represented at least 30 percent of total government expenditures, a relatively high proportion. As the Balaguer administration initiated major public-works projects in the late 1980s, the budget share dedicated to capital expenditures increased to more than 40 percent.

Data as of December 1989