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Nicaragua

 
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Nicaragua

Deficits

Nicaragua's budget deficits were low in the decades of economic growth following World War II. This situation changed dramatically in the late 1970s when the Somoza government had to borrow large amounts of capital to finance military expenditures in the civil war. Deficits also increased during the Sandinista years because large sums of money were diverted to social programs even as income from traditional export crops decreased. The deficit in the final years of the Sandinista administration showed an eerie parallel to the final Somoza years because the government had to increase finances for the military in order to prevent the government's overthrow.

In 1990, despite a new administration, all sources of government revenue declined. Even without the drain of war, the Central Bank of Nicaragua projected in early 1990 that the fiscal deficit for 1990 would average US$13 million per month. Shortly after the inauguration of President Chamorro in 1990, the government monthly deficit fell from more than US$30 million to about US$8 million. The improvement in finances was temporary, however, as the government was forced to abandon tight budgetary restraints later in 1990 when it paid large sums in severance pay to reduce the number of military and public-sector employees. Former members of the military, Contras, and public-sector workers were offered "golden parachutes" in return for retirement. Altogether, the Chamorro government spent approximately US$5 million to disarm 17,000 former combatants. The average payoff was US$200 per person and US$1,000 for each weapon that was turned over to the government. A few former military leaders from both sides of the conflict may have received as much as US$150,000 each, according to stories reported in the international press. These former leaders also received promises of land, credit, houses, and vehicles.

Data as of December 1993

Nicaragua - TABLE OF CONTENTS

  • The Economy

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