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Dominican Republic Table of Contents

Dominican Republic

Balance of Payments

Poor trade performance and a heavy debt burden caused the country's balance of payments to register severe deficits during the 1980s. In 1987 the overall deficit reached US$593 million, or roughly 11 percent of GDP. This deficit was financed by a draw down in reserves and a rollover of the oil debt owed to Venezuela and Mexico. The nation's current account was chronically negative; it had not registered an annual surplus for decades. Large merchandise trade deficits were the prime cause of current account deficits. After 1981, however, increased revenues from "invisibles" (tourism and remittances from abroad) reduced the current account deficit, which by 1987 stood at 6 percent of GDP. Remittances--cash transfers sent from the nearly 1 million Dominicans residing in the United States--were an increasingly important source of foreign exchange. In 1987, they were estimated to range from US$300 to US$800 million a year. Reduced interest payments on the country's foreign debt because of debt rescheduling also lowered the service debit on the current account. The country's capital account, like that of most Latin American countries in the 1980s, suffered from capital outflows precipitated by the debt crisis. This crisis essentially precluded new commercial bank lending to the Dominican Republic during the decade. Most new capital flows were registered in the form of official multilateral and bilateral aid and as foreign investment. The United States Department of Commerce estimated cumulative foreign investment at US$400 million in 1987, approximately half of which came from the United States. The nation was increasingly dependent on foreign assistance to stabilize its balance of payments, and its continued drawing on negative reserves placed it in a tenuous financial position as the decade came to a close.

Data as of December 1989