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Caribbean Islands Foreign Trade and Balance of Payments
St. Kitts and Nevis' trading patterns were well established by
the 1980s, but this did not guarantee the stability of trade or the
balance of payments. Although relationships with major trading
partners such as the United States, Britain, and Caricom had
existed for a long time, St. Kitts and Nevis' export earnings were
hard to predict because of the volatility of demand for its tourist
services, agricultural (sugar) products, and manufactured goods.
Raw and processed sugar products continued to lead export
earnings in the 1980s, but to a lesser degree than before because
of steady growth in the manufacturing and tourist sectors. Export
earnings from sugar had accounted for 77 percent of the total in
1978, but they fell to 60 percent in the mid-1980s as clothing,
shoes, and electronic components sold abroad in greater quantities.
In spite of improved earnings from nonagricultural trade, the trade
deficit continued into the 1980s. Only the growing tourist sector
kept the current account deficit from being even worse.
St. Kitts and Nevis imported goods at a constant rate through
the 1980s, the most significant of which were manufactured
products, food, and machinery. They accounted for about 21 percent,
20 percent, and 19 percent, respectively, of total imported goods
in the mid-1980s. Fuel and chemicals combined for a total of 20
percent of imports; the remaining 20 percent comprising numerous
miscellaneous items. Over 55 percent of imports originated in
Britain, the United States, and Puerto Rico. Trinidad and Tobago,
Canada, and other countries accounted for approximately 12 percent,
6 percent, and 27 percent of imports, respectively.
Because St. Kitts and Nevis was forced to import basic
necessities such as food and many manufactured products, the danger
of a large current account deficit was ever present. Should sugar,
light manufacturing, and tourism all perform poorly at the same
time, a large deficit in the current account would be unavoidable.
As of 1987, this situation had not occurred only because the
tourist market had been very buoyant. Sugar output fell in the mid1980s , while production of manufactured goods, such as garments and
footwear, fluctuated with the trade restrictions characteristic of
the Caricom market. This fluctuation often compounded the trade
deficit.
Despite these uncertainties and the large deficit in the trade
balance, St. Kitts and Nevis ran a relatively small current account
deficit for 1985 of US$6.8 million. Three items helped minimize the
negative trade balance: a strong positive services account composed
almost entirely of tourist revenues, unrequited private
remittances, and official government transfers.
The overall balance of payments for 1985 was a surplus US$1.7
million. A capital account surplus of US$8.5 million, composed
predominantly of private sector investment in tourism and
communications but also bolstered by public sector loans, more than
offset the current account deficit. Growing public sector loan
commitments caused the World Bank to express concern over the
potential for a long-term external debt obligation. But the World
Bank suggested that continued growth of the tourism sector would do
much to minimize St. Kitts and Nevis' debt service burden; there
would be even less probability of a serious problem should sugar
and manufacturing markets stabilize in the future.
Data as of November 1987
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