Dominica

• Total external debt: $251.6 million
• Total external debt payments: Gives $17.1 million each year to the rich world in debt payments.
• Population: 72,000
• Percentage of adults who can read and write: 88%
• Average life expectancy: 75.6 years
• Total health spending: 2.4% of GDP (2003)
• Total spending on debt service payments: 6% of GDP
• Annual GDP: $0.3 billion

DROP THE DEBT FAST
Dominica is the focus of the Drop the Debt Fast on Wednesday 7 May.

Background
Dominica is one of the poorest countries in the Caribbean. It is attempting to reduce its reliance on bananas, traditionally its main export earner. The trade has faced stiffer competition since the European Union was forced by the World Trade Organisation to phase out preferential treatment for producers from former colonies. Dominica is potentially a great tourist attraction but poor infrastructure and the absence of a large airport has impeded the industry's growth. The country is also vulnerable to hurricanes.

Roosevelt Skerrit is Dominica’s youngest Prime Minister. His governing Dominica Labour Party won general elections in May 2005. Dominica’s parliament, the House of Assembly, appoints the president - the ceremonial head of state. The Prime Minister and cabinet exercise legislative power.

Where has the debt come from?
Dominica’s debts have nearly doubled in the past decade. Dominica’s current account deficit, which has widened due to its continuing reliance on imports, has been almost fully financed by large capital grants and foreign direct investment in recent years. A debt restructuring initiated in 2004 did ease the problem slightly, but the impact of a recent hurricane has thrown the country off course.

Dominica was struck by Hurricane Dean in August 2007 and the impact on the Dominican economy was severe: damage to housing and infrastructure, and loss of export earnings is estimated at 20 percent of GDP. The effects of Hurricane Dean underscore the vulnerability of the economy in the context of very high public debt levels, and the rebuilding has put the country further into debt as it has had to rely on aid and emergency funding from regional and international sources. This includes the IMF, which imposes neoliberal economic policy conditions in return for assistance. Dominica has an uneasy past in relation to the IMF: the 2005 election campaign focused on austere IMF conditions, which had caused tax rises and job cuts.

Debt cancellation status
Dominica is officially classed as a lower middle-income country by the World Bank. It is therefore not eligible for the Heavily Indebted Poor Countries initiative or the Multilateral Debt Relief Initiative.

The New Economics Foundation calculates that Dominica requires 63% debt cancellation in order for the government to meet the basic needs of its citizens, such as health, education and infrastructure, without taxing those living below an ethical poverty line of $3 a day.

Sources of information:
IMF, BBC

Last updated: April 2008

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