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Caribbean Islands National Income and Public Finance
The greatest contributor to national income in 1985 was
government services, accounting for 18.6 percent of GDP, followed
by manufacturing at 15.7 percent, distributive trade at 15.3
percent, agriculture at 8.8 percent, construction at 5.4 percent,
mining at 5.1 percent, and the balance in various other services
including tourism (see fig.__ Jamaica. Structure of Production--
Distribution of Gross Domestic Product (1985)). The decline of
agriculture and the rise of industry and services marked the
Jamaican economy in the 1980s. A large underground economy also
persisted. Many self-employed peddlers, locally referred to as
higglers, worked in the large redistributive trade that often fell
outside the formal economy; therefore, they were not taxed or
recorded in official data. This included some higglers who received
merchandise through illicit imports, thus circumventing official
import regulations. More important, there was a large underground
economy based on marijuana growing and trafficking. Some analysts
estimated that the underground economy was equivalent to over half
of the official economy.
The fiscal year in Jamaica extends from April 1 through March
31. As required by the Constitution, the minister of finance
submits the annual budget to the House of Representatives, the
final authority on the budget, before the end of the prior fiscal
year. Budgeted expenditures are divided into a capital and a
current account, also called a recurrent account. For decades, the
surpluses on the current account were not adequate to finance the
envisioned capital expenditures, such as physical and social
infrastructure, creating structural budget deficits.
Beginning in the early 1970s, expansionary fiscal policies
created deficits in both current and capital accounts, financed by
internal and external borrowing. Although the fiscal deficit as a
ratio of GDP rose from 5 percent in 1972 to 20 percent by 1979, it
had decreased to under 12 percent by 1985 and to under 2 percent by
1986. Total government expenditures in 1985 amounted to US$823
million, whereas revenues reached only US$583 million, resulting in
an overall deficit of US$240 million, or 11.6 percent of GDP.
Budget deficits in the 1970s and 1980s were increasingly financed
by external borrowing. Fueled by extensive foreign borrowing and
relatively high interest rates, the national internal debt rose
from 9 percent of GDP in 1972 to 45 percent in 1979 and exceeded 58
percent of GDP in 1985. By the early 1980s the economy had spiraled
into serious indebtedness, causing total debt servicing to account
for 43.6 percent of total government expenditures in 1985. The
crisis appeared likely to continue, as over 65 percent of its debt
servicing bill was destined for interest payments alone.
Data as of November 1987
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