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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
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