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Caribbean Islands Role of Government
The government played both direct and indirect roles in the
national economy. Although it allowed the private sector to control
most of the country's economic assets, it found itself having to
assume management of the sugar industry in the 1970s, a situation
that remained unchanged as of 1987. The government, however,
considered its primary role as one of facilitating economic
development by exercising fiscal and monetary options, managing
public sector investment, and creating an attractive environment
for both public and private foreign capital.
Following independence in 1983, St. Kitts and Nevis attempted
to maintain a balance of revenues and expenses. By the mid-1980s,
however, current expenditures and capital investment exceeded
revenues. Large increases in public salaries, 45 percent in 1981
and 25 percent in 1986, were partially responsible for the growing
deficit; tax receipts, however, did not realistically reflect
fiscal requirements. To offset the resulting budget deficit, which
reached 5 percent of GDP in 1984, the government cut capital
expenditures, borrowed from domestic and foreign banks, and
developed new revenue sources. Although the personal income tax was
abolished in 1980, increased revenue was realized from two new
taxes created in 1986, the Social Services Levy and the Employment
Protection Levy. These new financial measures, in addition to
import duties and utilities fees that had previously formed the
basis of government revenue, allowed St. Kitts and Nevis to reverse
its operational deficit and actually realize a small surplus by
1987. This was a critical development for maintaining the country's
international credit rating and access to foreign loans.
Because it was a member of a regional monetary authority, St.
Kitts and Nevis had a limited ability to exercise control over the
economy by manipulating money supply and interest rates. The
nation's primary goals of growth and stability, however, were in
accordance with those of other regional economies, and balanced
growth of the money supply, which was managed by the ECCB, assisted
the government in financing deficits and providing funds for public
sector investment. The Social Security Scheme provided local public
funds for budget and public investment loans.
The government coordinated growth through a program of public
sector investment, which managed foreign and domestic capital
expenditures used for national development. The primary goal was to
expand the country's economic base by moving away from sugar and
toward tourism, manufacturing, and nonsugar agriculture. Public
investment managers allocated funds to three major areas: directly
productive sectors such as agriculture, industry, and tourism;
economic infrastructure projects, including transportation,
communications, and utilities; and social infrastructure, such as
health, education, and housing. In the early 1980s, construction of
economic infrastructure was emphasized to accommodate future growth
in both manufacturing and tourism. Thirty percent of total
expenditures were allocated to transportation. This resulted in the
completion of a 250-kilometer road system, the Golden Rock
International Airport, and a deep-water port in Basseterre.
Communications were also upgraded in the 1980s and were
considered good on both islands. A modern telephone system
consisting of more than 2,400 telephones provided excellent
international service by means of radio-relay links to both Antigua
and St. Martin. St. Kitts had two AM stations: the government-owned
Radio ZIZ on 555 kilohertz and the religious Radio Paradise with a
powerful transmitter on 825 kilohertz. Channel 5, near Basseterre,
was the principal television transmitter, and programs were
rebroadcast through repeaters from the northern tip of St. Kitts on
Channel 9 and Nevis on Channel 13.
Other major projects in the early 1980s included construction
of new schools, diversification of agriculture, and development of
a manufacturing industry. Total allocation for these areas was
about 39 percent of the budget; the remaining 61 percent was split
among small projects in all three major areas.
After 1984, with the completion of large portions of the
supporting infrastructure, public sector investment was focused
more intently on the productive sectors of the economy. Tourism
received approximately 32 percent of total funds allocated through
1987; agriculture and industry followed with 12 percent and 14
percent, respectively. Economic and social infrastructure each
received about 21 percent of total funding, with emphasis placed on
developing new energy sources and upgrading educational facilities.
Data as of November 1987
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