report no. economic memorandum on st. kitts-nevis · rise in tourism receipts, the deficit of the...

Report No. 3827-CRG FILE COPYEconomic MemorandumonSt. Kitts-NevisMarch 19, 1982

Latin America and the Caribbean Regional Office

FOR OFFICIAL USE ONLY

Document of the World Bank

This document has a restricted distribution and may be used by recipientsonly in the periormance of their official duties. Its contents may not otherwisebe disclosed without World Bank authorization.

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CURRENCY EQUIVALENTS

Currency Unit East Caribbean Dollar.

Since its creation in 1965, the East Caribbean dollar was tied to sterlingat the rate E 1.00 = EC$4.8. In July 1976 the link with sterling wasbroken and the East Caribbean dollar was aligned with the US dollar at therate US$1.00 = EC$2.70.

Since July 1976:

EC$1.00 = US$0.370 or

FOR OFFICIAL USE ONLY

This report is based on the work of an IBRD/IMF/CDB economicmission to St. Kitts-Nevis in January 1982. The mission consisted of:Carlos Elbirt (IBRD); Theresa Jones (IBRD); Emmanuel Ndungutse (IBRD);Vincent Marie (IMF); Anthony Alleyne (CDB); and Paolo Lucani (FAO).

This document has a-restricted distribution and may be used by recipients only in the performance oftheir official duties. Its contents may not otherwise be disclosed without World Bank authorization.

ST. KITTS-NEVIS

TABLE OF CONTENTS

Page

COUNTRY DATA

SUMMARY AND CONCLUSIONS ..................................... i-iv

I. ECONOMIC BACKGROUND ......................................... 1

A. Recent Growth Performance ............................... 1B. Savings and Investment .................................. 1C. Prices and Wages ........................................ 1D. Employment .............................................. 2E. Public Sector Finances .................................. 2F. Money and Credit ........................................ 3G. Balance of Payments ..................................... 4

II. DEVELOPMENT POLICY ISSUES. 5

A. Agriculture. 5B. Industry ................................................ 11C. Tourism ................................................. 13D. Economic Infrastructure ................................. 15E. Social Infrastructure ................................... 16-F. Nevis ................................................... 17

III. PRIVATE INVESTMENT AND EXPORT PROMOTION ISSUES .... .......... 19

A. Policy .................................................. 19B. Constraints ............................................. 19C. Necessary Measures and Essential Works .................. 20

IV. PUBLIC SECTOR INVESTMENT PROGRAM ........... .. ................ 21

A. Introduction ............................................ 21B. Progress of the Program ................................. 21C. Composition of the Medium-term Program .................. 23D. Financing the Public Sector Investment Program .... ...... 26

V. PROSPECTS ................................................... 27

GOVERNMENT'S PROJECT LIST ................................... 28

STATISTICAL APPENDIX ........................................ 100

MAP

PREFACE AND ABSTRACT

The economy of St. Kitts-Nevis stagnated in 1981 primarilybecause of the continuing decline in the sugar industry, the maindeterminant of the country's economic activity. Public sector finances,which had enjoyed a relatively strong position in recent years, weakeneddramatically in 1981 owing to a large civil service pay increase, lowerproceeds from the sugar levy and the poor financial performance of severalpublic corporations. Export proceeds dropped 13% because of lower volumeand price for sugar exports. In spite of a slowdown in import growth and arise in tourism receipts, the deficit of the current account of the balanceof payments widened. The future development of St. Kitts-Nevis will dependon the success of the Government's strategy to diversify economic activityaway from sugar by promoting the production of other agricultural products,light manufacturing and tourism. Given the vulnerability of the economybecause of its dependence on one agricultural product and the fact thatpublic finances can only be strengthened gradually, the Government willhave to continue to rely on borrowing on concessional terms in the nearfuture.

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COUNTRY DATA - ST. KITTS-NEVIS

AREA 2 P.' TlON DENSITY269 km 48,700 (end 1980) 185 per km2

Rate of Growth: 0.2 (from 1972 to 1980) 333 per km2of arable land

PO_IQ dT-YOi CIIARACTER-RISTY,CS 1979 HEALTH 1977G-'de Birth, Rate (per 1,000) 24.4 Population per physician 3,313Crude Dcath Rate (per 1,000) 10.7 Population per hospital bed 126

Infant Mortali.y (per 1,000 live births - 1978) 41.0

INCG'E P,ISTRIBTIONh DISiRIBUTION OF LAND OWNERSHIP4 ovf ,ational income, hiig'ost quintile 7 owrned by top 10% of owners

1ovsest quintile 7e owned by smallest 107% of owners

ACCESS TO PIED WATER ACCESS TO ELECTRICITY7 cf pcpulaticn - urban 7. of population - urban

- rural - rural

NFURI_TION 1977 EDUCATION

Ca}orie intaka as 7. cf requirements 130.0 Adult literacy rate %Per capita protein intake 71.0 Primary school enrollment %

1/GNP PER CAPITA in 1980 : US$920

CROSS NATIONAL PRODUCT IN 1980 ANIUAL RATE OF GROWTH (l. constant prices)

US$ Mln. Z 1979 1980

GNP at Market Price 48.1 100.0 5.0 3.3

Gross Domestic Investment 15.7 32.6 13.4 -1.5

Gross National Saving 5.3 11.0 -9.2 -52.8Current Accounit Balance (deficit) 10.4 21.6Exports of Goods, NFS 26.0 54.1 -3.0 -13.1

Imports of Goods, NFS 45.0 93.6 -0.8 9.4

OUTPUT IN 1980

Value AddedUS$Mln. %

Agriculture 5.8 16.3Industry 9.1 25.6Other 20.7 58.1

Total 35.6 100.0

GOVERNMENT FINANCEConsolidated Public Sector Central Goverrmentt

( EC$' Mln ~ 7.% of GDP ( EC$ Mln.) %. of CDP

1979 1980 1979 1980 1979 1980 1979 1980

Current Receipts .. .. .. .. 40.1 55.8 37.7 43.3Current Expenditure .. .. .. .. 36.2 48.1 34.0 37.3Current Surplus 9.0 13.0 8.5 10.1 3.9 7.7 3.7 6.0

Capital Expenditures 15.9 23.4 i5.0 18.1 14.0 23.4 13.2 18.1External Assistance (net) 10.4 14.7 9.8 11.4 10.4 14.7 9.8 11.4

1/ The Per Capita GNr estimate is at 1980 market prices, calculated by the same conversiontechnique as the 1980 World Atlas. All other conversions to dollars in this table are

at the average exchange rate prevailing during the period covered.

not availablenot applicable

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COUNTRY DATA - ST. KITTS-NEVIS

MOFEY CREDIT and PRICES 1976 1977 1978 1979 1980(Million EC$ outstandirg end period)

Money and Quasi Money 56.0 66.2 77.2 100.7 113.9Bank Credit to Public Sector 11.6 12.3 14.7 15.1 26.3Bank Credit to Private Sector 25.6 34.6 41.7 57.0 69.7

(Percentages or Index Numbers)

Moriev and Quasi Money a^ % of GDP 73.0 85.0 85.0 95.0 87.0General Price Index (January 1978-100) 78.9 94.2 105.7 117.0 137.9Annual percentage changes in:

General Price Index 12.4 19.4 12.2 10.7 17.8Btink credit to Public Sector -80.4 6.0 19.5 2.7 74.2B^-nE credit to Private Sector .. 35.2 20.5 36.7 22.3

BA. '7CE OF PAYt9?'TS _RCHANDISE FXPORTS (AVERAGE 1978-80)

1978 1979 1980 US S Mln X(USS million)

i:gorta of Coods, IIFS 18.9 21.1 26.0 Sugar 12.6 71.6I:iports of Goods, NFS 24.3 31.9 45.0 Molasses 0.4 2.3Resource GaP (deficit = -) - 5.4 -10.8 -19.0 Beer and Ale 0.2 1.1

Factor Payments (net) 0.0 0.2 0.3 All other co odities 4.4 25.0Net Transfers 4.8 7.4 8.3 Total 17.6 100.0Balance on Current Account - 0.6 - 3.2 -10.4

EXTERNAL DEBT, DECEMBER 31. 1980Private Capital - 1.5 - 0.6 4.9

US $ MlnPublic Capital (net) 2.3 3.9 5.4

Public Debt, incl. guaranteed 9.1Change in Government - 0.2 - 0.1 - 0.1 Non-Guaranteed Private DebtAssets (- increase) Total outstanding & Disbursed

DEBT SEPVICE PRTIC for 1980

Public Debt. incl. guaranteed 8.8Non-Guaranteed Private DebtTotal outstanding & Disbursed

BIATE OF EXCPANGE IBRD/IDA LENDING. (latest month) (Million US $):

Since May 1976 IBRD IDAIJS$ 1.00 = EC$2.70SC$ 1.00 = US$0.37 Outstanding & Disbursed -

Undisbursed --Outstanding incl. Undisbursed

1j Ratio of Debt Service to Exports of Goods and Non-Factor Services.

not available

not applicable

ST. KITTS-NEVIS

SUMMARY AND CONCLUSIONS

i. Sugar traditionally has been the major factor determining theeconomic performance of St. Kitts-Nevis. After several years ofsatisfactory growth, the economy stagnated in 1981. Although there wasexpansion in the manufacturing, tourism and construction sectors, it barelycompensated for the continuing decline in sugar output. Because of amoderation in import prices and the appreciation of the East Caribbeandollar, inflation fell to 9%.

ii. Public sector finances sharply weakened in 1981. The currentdeficit of the Central Government in 1981 was EC$2.1 million, compared to asurplus of EC$7.7 million the year before. The main cause of the deficitwas the large civil service pay award which pushed current expenditures up18% in 1981. The financial situation of the rest of the public sector alsodeteriorated, bringing the current account deficit of the consolidatedpublic sector in 1981 to nearly EC$10 million, 7% of GDP. The creditmarkets reflected the trends in public finances; credit to the publicsector grew by slightly above 50%.

iii. The value of sugar exports (expressed in US$), which in recentyears has accounted for about 70% of total merchandise exports, dropped by13% in 1981 due to several factors--decline in volume, fall in world pricesand the depreciation of pound sterling. In spite of an increase in exportsof other products, total export proceeds dropped from US$20.3 million in1980 to an estimated US$17.6 million in 1981. Import payments increased by12%, compared to an increase of 40% in 1980. Higher increases in receiptsfrom both tourism and personal remittances were not sufficient to offsetthe deterioration in the trade balance. Consequently, the current accountdeficit rose by 20% to US$12.7 million, 25% of GDP.

iv. The strategy of the Government of St. Kitts-Nevis is to reducethe economy's dependence on the sugar industry by promoting agriculturaldiversification, manufacturing and tourism. Nevertheless, sugar is thedominant productive sector. The completion of a replanting programimproves prospects for increasing sugar output, but further measures areneeded to increase productivity: irrigation, limited mechanization ofharvesting, and the replacement of worn-out equipment. The financialposition of the two public corporations which produce sugar deterioratedsignificantly in 1981; an action program to restore the industry to a soundeconomic base is needed urgently.

v. St. Kitts-Nevis has potential to expand several otheragricultural activities including cotton, groundnuts, livestock, and fruitsand vegetables. In order to realize the potential, essential supportservices--provision of equipment, extension, marketing and credit--must bestrengthened. Since the Government owns most land, real progress indiversifying agriculture will be delayed until a land tenure and land usepolicy is formulated.

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vi. Performance of the manufacturing sector in 1981 was mixed.Although three new plants opened, two large enterprises went out ofbusiness. The main constraints to expansion of the sector are the absenceof medium- and long-term financing for domestic investment owing to theweakness of the Development Finance Bank and the lack of a strategy forindustrial development. The Government is now beginning to define itsindustrial policy and should seek to increase the value added of newinvestments.

vii. Recent improvements,in air and ship travel facilities andconnections largely accounted for the continued expansion in the tourismsector in 1981 in spite of the recession in major markets. Severalprojects to expand or build new facilities are planned in 1982,particularly in Frigate Bay, a tourism development managed by a statutorygovernment body.

viii. During the last five years, the Government has implementedseveral large economic infrastructure projects including the deepwaterport, the airport expansion, road construction, and the establishment offerry service to Nevis. Thus, in general, the existing infrastructure isadequate to support economic activity although the authorities are seekingsome additional assistance. The main future requirements are: upgradingand expanding electricity generation; constructing agricultural feederroads and maintaining secondary roads; and extending the telephone system.

ix. A major obstacle to domestic and foreign private investment isthe shortage of skilled labor. A recent UNESCO study of educationhighlighted two key areas for government action: improving technical andvocational education and teacher training. The 1982 budget reflects theallocation of more resources to these two activities.

x. The Government has an ambitious program to alleviate the currenthousing shortage by using about EC$2 million of loans from the SocialSecurity program for low-cost housing. The Government must take care thatthis activity, combined with the building in the tourism sector, does notgive rise to shortages of skilled labor or construction materials.

xi. Economic prospects for Nevis, the smaller of the two islandscomprising the state, have improved, based on cotton, livestock and, to alesser extent, tourism and food processing. However, in order to promotedevelopment on Nevis, several infrastructure requirements must be met inthree major areas: transportation, water and electricity.

xii. The Government of St. Kitts-Nevis believes that private sectorparticipation in the economy is vital. There are generous investmentincentives and the Government has developed two well-equipped industrialestates. In order to promote exports, projects are identified in thepublic sector investment program to improve the quality and increase thevalue added of agricultural products. Nevertheless, several measures whichmust be implemented before the private sector can become dynamic are beingpostponed, for example, the provision of medium- and long-term credit

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and the upgrading of promotion efforts. The Government needs more activelyand positively to encourage domestic and foreign investment and exports.A positive step is the recent publication of a new investment brochure. Inaddition, in this effort the resources offered by the USAID-PIDAP project,as well as the IFC fund for financing preinvestment studies, can be drawnupon.

xiii. The maintenance of a realistic exchange rate should also beconsidered an essential element of any effective program directed towardsstimulating exports of goods and services. The need to monitor closely thecompetitiveness of the country's exports has become increasingly importantrecently owing to the appreciation of the US$. Since the EC$ is pegged tothe US$, it has appreciated considerably against pound sterling during thepast year. This development has been particularly harmful to the sugarindustry of the Eastern Caribbean and to other exports to the EEC, and ithas also rendered tourist services more expensive for visitors from Europeand Canada.

xiv. Public sector capital expenditures dropped to only 11% of GDP in1981 owing to the completion of several large projects and some delays inimplementation and equipment deliveries. The main productive projectsincluded the sugar replanting program, expansion of livestock and foodproduction, and factory shell construction. Work on the latter was slowerthan programmed because of the weakness of the DFC (now called the DFB),the executing agency. Investment in transportation was the biggestcomponent of capital spending with a share of nearly one-half. Both theairport and deepwater port were virtually completed in 1981. Disbursementson other projects included the construction of several reservoirs,improvements in health centers and the expansion/renovation of schools.

xv. An increase in public sector capital expenditures to EC$25.6million, equivalent to nearly 18% of GDP is projected for 1982. Abouttwo-thirds of the program is accounted for by productive projects orsupporting economic infrastructure. The major agricultural projectsscheduled to begin are fisheries development, sugarcane irrigation andbeef/milk production. More disbursements are expected for factory shellsin St. Kitts, and an industrial site for Nevis will be purchased anddeveloped. Spending for transportation is concentrated on equipment andsupporting facilities for the airport and deepwater port and a newCDB-financed project to construct agricultural feeder roads. Electricitygeneration will be increased in Nevis with the commissioning of two newgenerating sets. Expenditures on social infrastructure and other projectsare forecast to reach EC$8 million, 30% of public investment. A study ofthe water utility and tariff restructuring will begin, and several projectsin health and education will continue as scheduled.

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xvi. Public sector capital expenditures for the period 1982-85 areforecast to average EC$24 million a year, 14% of projected GDP. About 30%of the program is allocated to directly productive projects, 42% tosupporting economic infrastructure and the remaining quarter to socialinfrastructure and other. The composition reflects the Government'sstrategy of diversifying agriculture and providing the infrastructurenecessary to support expanded private sector participation in manufacturingand tourism. Priorities include fisheries development, livestock andvegetable production, construction of additional factory shells,agricultural feeder roads, increased electricity generation, extension ofthe telephone system and development of a water master plan.

xvii. The projected program requires the mobilization of about EC$103million in the period 1982-85, EC$96 million for public sector capitalexpenditures and EC$7 million for debt amortization. About EC$60 millionin external funding already has been committed for ongoing and newprojects, leaving about EC$40 million in additional financing to beobtained. Domestic financing of the investment program through publicsector savings will be constrained because sugar prices are likely toremain depressed. If the Government acts on proposals to raise taxrevenues and utility tariffs, restrains expenditures and improves thefinances of the sugar industry, public sector savings could provide nearlyEC$26 million, financing about a quarter of the 1982-85 program. Borrowingfrom banks and other domestic sources will equal -EC$4.2 million becauserepayments on the large overdrafts of the sugar industry will have to bemade. Therefore, requirements for additional external funds would totalabout EC$20 million.

xviii. After a modest real increase in GDP of 1% in 1982, the annualgrowth rate is expected to average 4.5% in 1983-85, fueled by theanticipated expansion in agricultural diversification, tourism andmanufacturing. The current account deficit is projected to drop as a shareof GDP from its present level of a quarter to 17% by the end of the period.

xix. External debt has risen during the past three years to itspresent level of US$10.8 million. However, debt service payments are stilllow, accounting in 1981 for only 3% of exports of goods and nonfactorservices, and are expected to remain manageable through the projectionperiod. Given the vulnerability of the economy because of the dependenceon sugar and the only gradual strengthening of public finances projected,reliance on concessional borrowing will continue throughout the period.

I. ECONOMIC BACKGROUND

A. Recent Growth Performance

1. Sugar traditionally has been the main determinant of thecountry's economic activity. It now accounts for 15% of GDP and about 70%of exports. Although sugar production has declined since 1978 because ofsmut disease, the rest of the economy--manufacturing, construction, tourismand other services--had grown steadily. As a result, the estimated averageannual rate of growth in GDP for the period 1977-80 was about 3.5%. In1981, however, because the continuing decline of the sugar industry wasonly barely compensated for by expansion in the rest of the sectors, theeconomy did not grow.

2. Value added in the agricultural sector is estimated to havedeclined by about 4%. The 9% drop in sugar production in 1981 was offsetpartially by a sharp increase in cotton production and a smaller rise ingroundnut output. Growth in the manufacturing sector slowed to about 5%.While industries selling in the domestic market and electronic companiesexporting their products expanded, garment factories laid off workersduring the year. Three new plants began operation in 1981 in foodprocessing, electronics, and data processing. However, at the end of theyear, two large firms, one manufacturing shoes and the other garments,closed down. Construction was up because of an increase in the building oftourist facilities, primarily in Frigate Bay, and of some residentialhousing.

B. Savings and Investment

3. Gross domestic savings turned negative in 1980 and furtherdeteriorated in 1981. This occurred primarily because the consolidatedpublic sector current account reached a deficit of EC$9.9 million in 1981.The deterioration was largely associated with a decline in world sugarprices. Although domestic private savings were also negative in 1981, thecontinued inflow of remittances from abroad resulted in national savingsequal to an estimated EC$8 million, compared to EC$14 million in 1980.

4. After increasing steadily from a 1978 share of 9% of GDP to 18%of GDP in 1980, public sector capital expenditures dropped to 11% of GDP,owing to the completion of several large projects. Private capitalformation was up; three new factories were set up in 1981 financed byforeign investors, and hotel construction proceeded, although at a slowpace, in Frigate Bay. The share of gross domestic investment in GDP fellslightly from 33% in 1980 to 30% in 1981. Private investment accounted for64% of total investment in 1981 compared to about half the previous year.Because of the poor domestic savings performance, national savings onlyfinanced slightly less than a fifth of investment.

C. Prices and Wages

5. Given the openness of the economy, domestic prices reflectinternational developments to a large extent. Import prices registeredonly a slight increase in 1981 due to a fall in food costs, moderate rises

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in the price of fuel and manufactured goods, as well as the appreciation ofthe East Caribbean dollar relative to European and Japanese currencies.These developments account for the sharp drop in the rate of inflation(measured by the consumer price index) in 1981, from 14% to 8.6%, and helpexplain why the civil service pay hike did not increase inflationarypressures.

6. In 1981 the Government raised wages and pensions by 40% forhigher level civil servants and by 50% for lower paid employees. Sugar

workers received both a 10% increase in their base wage and a 15% specialbonus, the latter paid out of government revenue, because of the high pricereceived for sugar in 1980. Because of the current critical financialsituation of the sugar industry, after some negotiation in early 1982, theworkers accepted a small wage increase of 3% and lower incentive payments.The Government also decided not to pay a special bonus this year for thefirst time since taking over the industry in 1975. Wages in the privatesector seem to follow increases in the cost of living.

7. There are selective price controls on many goods. These pricesare set in concurrence with the private sector and there are no indicationsthat they have been held below market levels. These controls need toremain flexible enough not to lead to shortages.

D. Employment

8. While it is impossible to estimate the labor market situationaccurately for lack of data, unemployment and underemployment are certainlyhigh, especially during the out-of-crop season and probably increased in1981. Late in the year 600 workers, 3% of the estimated active laborforce, were laid off when a shoe and garment factory closed down. Becauseof the reduction in international demand, some of the other garmentfactories laid off employees during the year. The recently established newindustries (a food processing plant, one electronic component factory, anda subscription service) are relatively automated, and thus absorbed onlyslightly over 200 workers.

E. Public Sector Finances

9. Public sector finance, which had enjoyed a relatively strongposition in recent years, weakened dramatically in 1981 largely because ofconditions in the sugar industry. While in the past the consolidatedpublic sector generated current savings, in 1981 a deficit of EC$9.9million, 7% of GDP is estimated. With the exception of Social Security andthe Specialized Funds, the deterioration was general, affecting both theCentral Government and the public enterprises.

(i) Central Government

10. Because of the large civil service pay increase in 1981,estimated to have cost the Government EC$10 million, total personalemoluments rose to EC$27.2 million from EC$16 million the year before.This was the main factor behind the rise in total current expenditures toEC$56.7 million, 18% above the 1980 level of current expenditures.Purchases of goods and services, on the other hand, actually decreased by

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EC$5 million to EC$15.4 million. The decrease in income tax receiptsfollowing the elimination of the personal income tax and lower proceedsfrom the sugar levy contributed to the slight drop in current receipts fromEC$55.8 million in 1980 to EC$54.5 million in 1981, in spite of higherrevenue from import duties and the consumption tax and a record EC$3.3million share of currency profits from the East Caribbean CurrencyAuthority. The current deficit of the Central Government in 1981 wasEC$2.1 million, versus a surplus of EC$7.7 million in 1980. A big drain onpublic revenue is the Electricity Department, a unit of the Ministry ofPublic Works, which lost EC$4 million in 1980 and 1981. Remedial measures,including a tariff increase ranging from 100% to 160% and organizing theelectricity, water and telephone departments as independent utilities, arebeing considered.

11. Capital expenditure decreased in 1981 to EC$16.0 million fromEC$23.4 million in 1980, and the overall deficit increased from EC$16million to EC$17 million. Financing originated mostly from abroad in theform of capital grants and loans (EC$11.6 million), and the rest from thebanking system.

(ii) The Rest of the Public Sector

12. The financial situation of the rest of the public sectorcontinued to deteriorate in 1981. The worsening trend was evident for allentities except the Social Security System and the Specialized Funds.Although up-to-date financial statements are not yet available for thecorporations (National Agricultural Corporation, St. Kitts SugarManufacturing Corporation, Central Marketing Corporation and the FrigateBay Development Corporation), the large amount of bank overdrafts incurredby these enterprises is clear evidence of weak finances, particularly sincethe Central Government funds most of their capital expenditures. Nowhereis the situation more pressing than in the sugar sector which is almosttotally government owned; the industry's bank overdrafts are projected tototal EC$50 million by the end of 1982.

F. Money and Credit

13. The most noteworthy development in 1981 was the increase in theoverdraft of the National Agricultural Corporation with the St.Kitts-Nevis-Anguilla National Bank (60% government owned) which grew byabout 50% to nearly EC$40 million. The National Bank is able to sustainsuch an overdraft because it is the depository for the Social Security Fundwhich provides over a third of the bank's deposit liabilities.

14. The privately owned Bank of Commerce has had liquidity problemssince August 1981, primarily, because of real estate investments. The bankwas unable to meet withdrawals in August and had to suspend operationstemporarily. As of January 1982, it was still paying depositors only aportion of requested withdrawals.

15. During 1981 domestic credit increased by nearly 50%. Credit tothe public sector grew by slightly above 50%, reflecting the sugarindustry's increasing losses, while credit to the rest of the economy roseby 46%. The increase in total credit to the economy was met primarily by

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an increase in domestic private deposits. Demand deposits doubled from the1980 level while savings and time deposits grew 36%. Net foreign assetsalso dropped sharply from EC$17 million in 1980 to EC$6 million in 1981.

16. The share of total credit accounted for by the public sector rosemarginally in 1982 to reach a third. Credit to the manufacturing, tourismand transport sectors rose significantly in nominal terms; their relativeshares in domestic credit also increased. Credit to construction,distributive trades, and personal loans, which as a whole grew moderately,declined as a portion of the total.

G. Balance of Payments

17. In recent years sugar has accounted for about 70% of the totalvalue of merchandise exports. As a result of the decline in the volumeexported and the drop in world prices and the value of the pound sterling,sugar exports fell about 13% in value (expressed in US$) in 1981. Thedecrease would have been more severe, had the Government not sold sugarforward at a favorable price in 1980. In spite of an increase in the valueof other exports--molasses, cotton, and beer--total export proceeds droppedfrom US$20.3 million in 1980 to an estimated US$17.6 million in 1981.

18. Preliminary estimates indicate that in 1981 the value ofmerchandise imports rose about 12% compared to an increase of 40% in 1980.Import categories which grew the most in percentage terms were beverages,raw materials, chemicals and manufactured goods. The trade deficit rose toUS$28 million, 65% higher than the 1980 level.

19. In contrast to most countries in the Caribbean, the recession inmajor markets did not cause tourist arrivals to drop in 1981. Helped bythe completion of the deepwater port, cruise passenger arrivals were up 70%over the 1980 figure. The number of overnight visitors grew 8%. Estimatedrevenues from tourist expenditures totaled US$8.4 million.

20. Increases in receipts from tourism and personal remittances werenot sufficient to offset the deterioration in the trade balance.Consequently, in 1981, it is estimated that the current account deficitincreased by 20% to US$12.7 million, 25% of GDP. The deficit was financedmainly by external grants and loans (US$4.3 million) and foreign directinvestment in manufacturing facilities.

II. DEVELOPMENT POLICY ISSUES

21. The strategy of the Government of St. Kitts-Nevis is to lower theeconomy's dependence on the sugar industry by diversifying agriculturalproduction and promoting manufacturing and tourism. With externalassistance, the Government has implemented several large investmentprojects, including construction of a deepwater port, larger airport, andindustrial estates, in order to support their policies. Real gains havebeen made in increasing the role of tourism and manufacturing in theeconomy. Nevertheless, agriculture, particularly sugar, is still thedominant productive sector. For that reason, this year's report givesparticular attention to these latter topics.

A. Agriculture

22. Further development of the agricultural sector will be based onraising sugar output and improving productivity in its field and factoryoperations and crop diversification. St. Kitts-Nevis is fortunate becausethere is potential to expand several activities including cotton,groundnuts, livestock, and vegetable production, if the necessarysupporting services are provided and if several constraints to agriculturaldevelopment are tackled.

(i) Sugar

Production

23. Sugar is the mainstay of the economy of St. Kitts-Nevis,accounting in 1981 for about 70% of the total value of exports, 15% of GDP(including processing) and employing about 4,500 workers. Sugarcane isgrown on approximately 11,800 acres, about 90% of cultivated land of theisland of St. Kitts. The industry is government owned and is run jointlyby the National Agricultural Corporation (NACO), responsible for sugarcanegrowing, and by the Sugar Manufacturing Corporation (SSMC), in charge offactory operations.

24. The recent decline in sugar production from a peak of 41,000 tonsin 1977 to 32,000 tons in 1981 was caused mainly by a serious outbreak ofsmut disease. A replanting program completed at the end of 1981, replacingolder smut-susceptible sugarcane with smut-resistant plants, should improveprospects for increasing output. However, gains in sugar production willstill be somewhat constrained because the crop cycle was disrupted duringthe replanting program and because the smut-resistant plants have a lowersucrose content than the old varieties. Introduction of irrigation in themost suitable lands would increase production. A pilot irrigation projectis being assessed and the UNDP is helping prepare a draft project proposal.

25. Hiring and maintaining a sufficient number of laborers,particularly for the peak harvest period is a problem which has beenexacerbated by poor attendance by workers. Therefore, in order to increaseproductivity and release labor for other crops, limited mechanized caneharvesting should be introduced in selected areas. Trials withmechanization have been carried out with some success, but the costs and

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benefits and the degree and impact of the changes required in landpreparation and crop cultivation techniques should be evaluated carefully.Labor efficiency could also be increased by the replacement of worn-out,antiquated field equipment and by an upgrading of management ability,particularly for the field staff.

Financial Position of Sugar Industry

26. The financial position of the sugar industry deterioratedsignificantly in 1981 and is likely to worsen further this year. The 1981operating budget for the factory showed a net loss of about EC$5.1 millionand the deficit for 1982 is expected to be EC$2.7 million. The financialproblems of NACO, which has borne the costs of the replanting program, alsowere compounded; the accumulated deficit was expected to rise to EC$39million by the end of 1981.

27. There are several reasons for the losses shown by the industry.One, wage costs are excessive. Salaries rose by 34% in 1979 and by 10% in1980. As a result, in both 1980 and 1981, NACO's wage costs were higherthan its total revenue. In addition, bonuses, totaling EC$0.7 million in1980 and EC$2.4 million in 1981, were paid to the sugar workers out ofgovernment revenue. Two, the recent decline in sugar prices on the worldmarket has had an adverse impact on the finances of the industry. About15,000 tons or half of the total sugar production of St. Kitts-Nevis issold to the United Kingdom at a higher-than-world market price under theLome Agreement. But the balance, after deduction for local consumption(approximately 3,000 tons per year), is sold at prevailing international

prices. The average unit price of the sugar exports of St. Kitts-Nevisfell by nearly 9% in 1981, from an average of $457 a ton to $416 a ton.The price decline was moderated by large forward sales of the 1981 crop.The main brunt of the drop in international prices will be felt in 1982.Three, NACO does not produce cost information or monitor its expenses andstock levels well. For example, the corporation provides services tosmallholders for which it receives no fees. Four, the duties, levies andcesses owed to the Government are high, accounting presently for 35% of thecost of producing sugar. Using preliminary 1981 figures, the average pricereceived for sugar is not covering production costs and the duties, leviesand cesses owed to the Government.

28. The deteriorating profitability of the sugar industry hascritical implications both for the Government and for the sector. TheGovernment is still dependent on proceeds from the sugar levy and exportduties for a fifth of current budget receipts. In 1981, tax receipts fromthe sugar industry fell 9% compared to 1980; the drop is likely to besharper this year. NACO has not been able to service the debt on a loanwhich was onlent by the Government from CDB. Neither NACO or the sugarfactory have been able to purchase the equipment needed to replace oldantiquated machinery.

29. The industry and the Government have both begun to respond to thecritical financial situation. No special bonus from the Government will bepaid this year and, recently, the Sugar Workers' Union agreed to only a 3%increase in wages for the coming year. A private consulting firm, whichrecently completed an annual review of NACO's finances, recommended ways to

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improve the budgeting process and increase the management and informationon and control over costs. In addition, they suggested that stocks bemonitored more closely and that some aspects of financial accounting bechanged. UNDP recently completed a draft report on the sugar industrywhich includes an analysis of the cost structure in St. Kitts-Nevis andrecommendations for improving profitability.

(ii) Agricultural Diversification

Constraints

30. It is important for the Government to devote maximum attention tocrop diversification in order to reduce dependence on sugar and to providefull-time employment for labor when it is not being utilized for caneharvesting. Due to the seasonal pattern of labor demand, about half of thesugarcane workers are unemployed or underemployed for four to five monthsof the year, thus ample labor exists to increase production of crops whichcan be grown during that period of the year. There are ongoing projects inthe public sector investment program to produce citrus, peanuts andlivestock, and NACO has expanded its cultivation of alternate crops. Newprojects are identified for afforestation, vegetable cultivation and theupgrading of cotton production. While these projects show that progress isbeing made, the process of diversification could be accelerated by:(a) making available the equipment to clear and prepare the land foralternate crops; (b) constructing feeder roads to reach inaccessible arableland; and (c) exploring additional crop rotation patterns. The Governmentis making some progress on (b) and (c). The CDB is financing a project toconstruct agricultural feeder roads and the UNDP has begun a study onagricultural diversification which will examine crop rotation patterns.Nevertheless, several critical constraints in the sector need to betackled: namely, absence of a land tenure and land use policy; theinadequate delivery of credit; poor extension service; and insufficientwater supply, primarily in Nevis. In addition, the role and structure ofthe Central Marketing Corporation (CMC) should be reconsidered.

Land Tenure and Land Use

31. About 90% of the arable land in St. Kitts is owned by theGovernment and managed directly by NACO. In Nevis, on the other hand, theGovernment owns 15 estates on 5,400 acres, less than 30% of the cultivableland. The Government has leased or rented 1,500 acres of this land tosmall farmers in Nevis; the rest are either exploited for production ofcrops and livestock or left unutilized. Land could be used moreeffectively and productively if farmers were settled on idle orunder-utilized government land in Nevis and if security of tenure weregiven on lands rented or leased to smallholders. Although in the past nofarmer has been deprived of the rented lands they cultivate, the legalinsecurity prevents most investment in farm development because credit isdifficult to obtain without a mortgage quarantee. There are plans to sellsome land to farmers, financed by long-term loans provided by local banks,but implementation would require enormous resources of personnel, extensionservices, etc., to support the farmer in carrying out sound farm plans.Finally, the Government needs to define a land use policy which willidentify marginal lands to be taken out of sugar production and will

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promote the best use of small farmers' agricultural holdings. Early in1982, the Government initiated an agricultural planning project financed inpart by UNDP which also includes a field component for diversification.

Agricultural Credit

32. Inadequate delivery of credit is a critical bottleneck toagricultural expansion. Although there are several funds for agriculturalcredit, disbursements have been low, in part because of the reluctance ofthe institutions to bear the risk of lending to farmers, but moreimportantly, because of the land tenure problem and the lack of anefficient extension service to help farmers develop and implement theirprojects. Since 1977, Barclay's Bank has disbursed EC$20,000 through itsSmall Farmer Development Scheme. The annual funds of the Ministry ofAgriculture to provide inputs and equipment, in kind, to farmers totalabout EC$50,000. The Development Corporation has also lent small amountsto farmers.

Extension Service and Water Supply

33. Presently the extension service is critically understaffed; thereare five technicians to serve the needs of more than 6,000 farm holdings.The service also lacks the necessary vehicles and equipment. In order tostrengthen the capacity of the extension service, assistance is beingprovided under the Caribbean Agricultural Extension Program, aUSAID-assisted project.Insufficient water supply on Nevis is a seriousconstraint to expansion of agriculture there. Two projects have beenidentified by the Government to increase the supply of water, minorirrigation and a component of the integrated Nevis Project.

Central Marketing Corporation (CMC)

34. The primary purpose of the CMC when it was established by theGovernment in 1974 was to export the agricultural products which wereexpected to be produced in several development projects. None of theseprojects ever materialized so CMC began selling traditional products underthe usual marketing arrangements, competing with an efficient, low-costnetwork of private traders. CMC handled 90,000 lbs. of vegetables andfruit from private farmers during the period 1980-81 and the export ofNACO's peanut crop (250,000 lbs. in 1981). In late 1981, CMC was alsogiven responsibility for coconut exports.

35. The CMC, as presently organized, is not effective in promotingagricultural exports. The institution has little knowledge of domestic andexport market opportunities or capacity to influence the production patternof individual farmers. The CMC does not have an adequate system of qualityand grading standards with corresponding price differentials. The servicesprovided for collection, packaging, storage and shipping are minimal. Ifthe Government seriously wishes to expand agricultural exports, thestructure and functions of the CMC must be reviewed and its activitiescoordinated better with other government institutions dealing withagriculture.

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Diversification Crops

36. Cotton production in Nevis rose from 8,000 lbs. of seed cotton in1980 to 79,000 lbs. in 1981 primarily because of an increase in acreagefrom 38 to 202. Cotton production has good potential because it is ahigh-quality crop which fetches a good price on the export market. Thepublic sector investment program includes projects to upgrade cottoncultivation and to improve the ginnery, and the Government is trying toincrease the area planted with cotton. Aside from the general problemshindering diversification mentioned above, labor scarcity makes expansionof cotton production difficult unless sugarcane cutting is mechanizedbecause the time for cotton harvesting coincides with sugar harvesting.

37. Groundnuts are becoming a more important crop, with most outputexported to Barbados. Although production is now being carried out largelyby NACO (300-400 acres a year in rotation with sugarcane), the cultivationof groundnuts offers particularly good prospects for smallholders on Nevisif rotation with cotton is introduced on a large scale. Presently smallfarmers grow groundnuts on about 75 acres in Nevis. Further development ofNACO lands will be hindered by poor crop management which at leastpartially explains the low average yield (about 1,100 lbs./acre). Moreimportant, since groundnuts are only planted on sugarcane fields betweenthe time of harvest and new planting, significant expansion of the cropwill not occur until land is taken out of sugarcane. The selection of landto be used for groundnut cultivation, however, must take into accounttwo important constraints. Land steeper than 6% is unsuitable forgroundnuts unless special measures are adopted owing to the risk of severesoil erosion. Also, stony land may make it difficult to lift the cropmechanically.

38. Food crops in St. Kitts and Nevis are grown mainly by smallfarmers although recently, NACO has increased its share of production. Themost important food crops are sweet potatoes and yams, primarily grown forfamily consumption. Small farmers also grow a variety of tree fruits(bananas, avocados, citrus, etc.) in backyard orchards, but NACO is theonly large-scale producer managing 115 acres of coconut, 37 acres ofbanana, 25 acres of pineapple and, in addition, 17 acres of coffee. TheCorporation has a pilot project to grow mixed citrus and mangoes on 35acres, but the trees are not yet of bearing age. There are irrigatedvegetable plots managed by NACO, but most vegetables are produced by smallfarmers for family consumption or local marketing. St. Kitts-Nevis exportssmall quantities of bananas and mangoes, but in general, fruit andvegetable production has not kept up with internal demand or the growingrequirements of the tourism sector.

39. The expansion of root crops, fruit and vegetables for localconsumption and eventually for export should be investigated. As a firststep, the Government has identified a project in which NACO would cultivate65 acres of vegetable plots near Basseterre. The main obstacles to higherproduction of fruits and vegetables by smallholders are the farmers'ignorance of market opportunities and low technical and managerial skills,which are reflected in poor quality and inadequate diversification andscheduling of production. Labor scarcity and predial larceny are also

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constraints on production because they cause farmers to reduce theircultivated area.

40. Livestock generally is kept by farmers as a sideline activity,with the exception of some government stock farms. Animals graze onmarginal lands, communal lands or roam in the cultivated fields,constituting a perennial problem to cropping. With the exception of pigswhich have declined, livestock numbers have stagnated during recent years.Livestock is consumed locally and also exported on the hoof, mainly from

Nevis, to nearby French islands. There is a market for increasedproduction, but expansion would require upgrading the quality of localherds by improving nutrition levels and management practices. Feedavailability is a major constraint as livestock usually is relegated tomarginal lands. The use of concentrates should be discontinued because ofthe high cost, but better use could be made of sugarcane, other cropresidues and molasses to supplement natural grazing. Meat production alsohas been hurt by diseases and parasites; a government-proposed project toestablish spraying facilities for tick control would be a partial solutionalong with preventive veterinary care and better use of equipment andfacilities. Since animals are exported on the hoof, the prices receivedare relatively low and there is no opportunity for using the by-products.

The feasibility of establishing livestock slaughterhouse facilities inorder to export dressed carcasses or meat cuts should be examined.

(iii) Recommendations

41. The Government's public sector investment program broadly

reflects the goals of raising output and productivity in the sugar sectorand promoting agricultural diversification. The preceding discussionhighlights the need for several measures to ensure the success of thestrategy, some of which would require external technical and financialassistance.

(a) In the sugar sector, progress should be made in thelimited mechanization of cane harvesting. NACO shouldcontinue to experiment with irrigation and should beginimplementing some feasible projects.

(b) The Government must examine closely the financial positionof the sugar industry. Making use of the recommendationsalready given by a private consulting firm and a study bythe UNDP, the Government must formulate an action programto restore the industry to a sound economic base.Specific issues to be considered include wage costs, landuse and the appropriate level of government taxes on thesector.

(c) The extension service needs to be strengthened by addingmore staff and providing vehicles and equipment. Theservice should aim to increase the use of better qualityseed, to improve the scheduling of vegetable production,and to upgrade quality control.

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(d) The Government should resolve the legal bottleneckspreventing land distribution and sale to small farmers. Areview should be made of the utilization of governmentlands and alternative strategies should be designed toexploit optimally available land and infrastructure. TheGovernment must decide how to meet the additionalrequirements for financial and technical assistanceresources which would result from a land settlementprogram.

(e) A more active role for agricultural lending agenciesmust be promoted in order to increase the flow ofresources to the sector. The extension services andfinancing agencies need to coordinate their activitiesbetter. The extension service should give specialattention to Nevis where good possibilities exist forsmall farm development, especially cotton and groundnutcultivation.

(f) The livestock services of the Ministry of Agriculture needto be strengthened, particularly veterinary activities,through the provision of equipment and facilities.Experiments on the use of cane by-products for animal feedshould continue with a goal of introducing the practice ona large scale. The feasibility of establishingslaughterhouse facilities should be examined seriously.

(g) In order to promote production of cotton and groundnuts,equipment and supporting services should be provided tosmall farms, mainly on Nevis. Limited roadinfrastructure, some of which will be financed by theCDB's project for agricultural feeder roads, is alsoneeded to open up inaccessible areas.

B. Industry

42. According to preliminary data of the Ministry of Trade andIndustry, there are about 28 manufacturing enterprises in St. Kitts-Nevis,including three factories on Nevis. Nearly a third of the factories makegarments, shoes or textiles. Other industrial activities includemetalworking; assembling electronic components, equipment and televisionsets; data processing; and food processing and bottling, particularlybeverages. Ownership is mixed with 11 foreign firms, 10 local firms and 6joint ventures. Manufacturing primarily is oriented toward exports; nearlyhalf of the firms sell all their production overseas and a quarter sell inboth the domestic and external markets. Total employment in the sectorpresently is about 1,200, somewhat lower than the level reached in the late1970s. Most of the factories are located on one of the two industrialestates located on St. Kitts.

43. Performance of the manufacturing sector was mixed in 1981.Although three new enterprises, together employing slightly over 200people, began operations, two companies, one manufacturing shoes and theother, garments, with a combined workforce of about 600 people, closed

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towards the end of the year. In general, electronic assembly plants andfactories oriented towards the domestic market did well, while there werelayoffs in the garment industry because of the recession and some problemsearly in the year with illegal labeling of garments imported into CARICOM.The Government is negotiating with several firms to take over the twofactories which were closed down.

44. Financed by two previous CDB loans, the Government has built over60,000 square feet of factory space on two industrial estates, PondsPasture and Bird Rock. Water, electricity, telephone lines and seweragedisposal are provided on both estates and asphalt roads provide good accessby vehicle. A third loan to finance an additional 40,000 square feet isbeing processed by the DFC (now called the St. Kitts-Nevis DevelopmentFinance Bank), the Government's executing agency for these projects. Therehave been some problems in executing the project because of the managerialand financial weaknesses of the DFC (described in greater detail below)which resulted in delays, difficulties with contractors and cost overruns.However, all the space has now been either completed or committed: 5,000sq. ft. for a data processing plant; 10,000 sq. ft. for a food processingplant; 5,000 sq. ft. for a metalworking operation; 5,000 sq. ft. for abakery; 10,000 sq. ft. for the expansion of a garment factory; and 5,000sq. ft. for an, as of yet, unidentified factory on Nevis. The DFC alreadyhas received an additional request from a local firm for factory space toireconstitute milk products.

Constraints

45. The critical obstacles to expansion of the manufacturing sectorare the absence of medium- and long-term financing for domestic investmentowing to the weakness of the Development Finance Corporation (DFC), anduntil recently the lack of development of a strategy for industrialdevelopment.

46. The Government established the DFC in 1968. Its financialperformance progressively deteriorated for several reasons includinginexperienced management, weak organization, poor appraisal practices,inefficient collections and inadequate control over lending operations. Asa result, since 1978 the DFC has had very limited operations. A task forceset up by the Government in 1979 recommended that the work of the DFC behandled through a window of the National Bank in order to utilize existingexpertise and management capability and to minimize lending costs. Theproposal has the additional advantages that DFC-type lending could start upagain quickly and that some of the excess liquidity in the commercialbanking system could be tapped. The Government did not adopt therecommendations of the task force but instead developed an ambitious planto strengthen the DFC and transformed it into a development bank.Nevertheless, the difficulties in obtaining staff and funds make itunlikely that the institution will be operational in the near future.Although collections improved in 1981, as evidenced by a decline inarrearages, few lending funds are available except for mortgages (providedby the Government) and factory shells (provided by CDB) and there is almostno capability for appraising and supervising projects. The Governmentplans to remedy these weaknesses by having the Planning Unit assist the DFBin project appraisal, negotiating for additional funds and training staff.

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47. Until recently, the Government had not begun to define a strategyfor the development of the industrial parks, particularly concerning whatforeign investors the state wants to attract. The Government is nowbeginning to define its industrial policy and should seek to increase thevalue added of new investments. Promotion efforts also need to be upgradedand focused. An initial step in this regard is a new industrial promotionbrochure, partially funded by CDB, which recently has been published.Opportunities for new or expanded private investment in St. Kitts includehotel construction; the garment industry, for example, smallfabric-printing operations using local materials; electronics' assembly;and food processing activities linked to local agriculture and livestockproduction. The approval process for investment applications seems tooperate efficiently but may not provide enough information for theGovernment to determine whether a company has the necessary financialresources.

Recommendations

(i) The Government should seek additional financing, probablyfrom CDB, to construct more factory shells so as to stayahead of demand. The rent charged for factory spaceshould be raised because at present it is not sufficientto cover debt-servicing and other costs such asmaintenance and insurance.

(ii) In view of the critical need for medium- and long-termfinancing in the manufacturing sector and the advantagesof operating through a window of the commercial bank, theGovernment should reconsider the recommendation of thetask force.

(iii) The Government should use an information pamphlet to helppromote foreign investment, similar to what is done inseveral of the Caribbean islands.

(iv) The approval process for investment applications shouldinclude a credit check on the firm, done relativelyinexpensively by an international service.

C. Tourism

48. Significant progress has been made in promoting tourism in St.Kitts-Nevis, particularly in the area of improved air travel facilities andconnections. The airport terminal financed by CIDA was completed in 1981and the Government is purchasing equipment to service wide-body jets. TheGovernment is also considering the possibility of extending the runway.Although financial difficulties (unrelated to the St. Kitts service) forcedAntillean Airlines (ALM) to discontinue flights to Basseterre, in general,direct air connections to the island have increased. British West IndiesAirways (BWIA) expanded its service to two direct flights a week from NewYork and added a once-a-week flight from Miami. There are also chartersone day a week each from Chicago and New York. The improvement inconnections to the island partially explains the increase in visitorarrivals in St. Kitts-Nevis in 1981, in contrast to the decline in tourism

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activity in most areas of the Caribbean because of the recession in themajor markets of the US and Europe. In January 1982 Sunjet Internationalinaugurated direct service from Miami four times a week which shouldfacilitate a further rise in visitors this year.

49. Cruise passenger traffic also increased from five vessel visitsin 1980 to twenty-four in 1981. With the added facilities offered by thedeepwater port, the Tourist Board is now negotiating with a firm toschedule one cruise ship visit a week. There is a project identified in

the public sector investment program to build a tourist shopping arcadenear the harbor.

50. Marketing promotion in the US is done through a US advertisingagency and the East Caribbean Tourist Office, which has offices in NewYork, Toronto and London. According to the Tourist Board, the responsefrom these promotion efforts has been encouraging, both in terms of visitorarrivals and in increased investor interest in the Frigate Bay development.

51. Other tourism-related activities include improving Brimstone Hilland promoting the purchase of handicrafts and duty-free items. In 1981,the Government refurbished some areas of Brimstone Hill fortress, a populartourist attraction, and set up a traffic control system in order to easeaccess. However, a significant upgrading of the road there is not plannedbecause of the expense. Two policy measures which aim to strengthen thetourist industry are now before Parliament. The first would promote thehandicraft industry by establishing a council, including a marketingofficer, by providing working capital and ordering raw materials for smallbusinessmen. The second would expand the licensing system for the importof duty-free merchandise and would permit the sale of those items to thelocal population.

52. In line with the higher occupancy rates recorded by most of thehotels in 1981, several projects to either expand or build new facilitiesare planned in 1982. One hotel outside of Basseterre is planning to expandits facilities in 1982 and construction is anticipated to begin shortly ontwo 36-room hotel projects in Nevis. Aside from these activities, thefocus of hotel expansion in St. Kitts-Nevis is in Frigate Bay, a tourismproject managed by a statutory government body, the Frigate Bay DevelopmentCorporation. Construction is proceeding on five privately financedcondominium projects there, although the pace is somewhat slower thananticipated. Completion of the first phases of these projects, likely bythe end of 1982, would increase hotel rooms by about 130. By the end ofthe final phase now estimated for 1984, 900 rooms would be built. Threeadditional projects are slated to begin in 1982. According to theCorporation, land sales for the 850-acre complex picked up in 1981.Nevertheless, the Corporation's financial performance has been weak. Careshould be taken that it does not become a drain on the Government'sresources or is unable to raise commercial financing. So far, over EC$20million in initial infrastructure costs have been funded by theGovernment. However, additional roads (including paved access to the bestbeaches), sewerage and telecommunications facilities are needed.Presently, the Corporation is covering the cost of utility and sewerageservices for the projects on the development; perhaps some of these chargescould be passed on to the developers and residents.

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53. Pending a decision on the Southeast Peninsula Road and FerryProject, the Government should consider expanding boat taxi service to thatarea of the island, which contains some of the most attractive beaches onSt. Ki.tts-Nevis.

D. Economic Infrastructure

54. The economic infrastructure now in place in St. Kitts is on thewhole adequate, but the authorities are seeking some additionalassistance. In particular, several projects implemented during the lastfive years should facilitate economic development, namely: the deepwaterport, the airport expansion, road construction, the establishment of ferryservice to Nevis, the rise in electricity generation and the installationof more telecommunications facilities. Future infrastructure needs, mostof which are included in the public sector investment program, generallyare confined to upgrading, maintaining, and in the case of electricity, toexpanding gradually present facilities in order to support economicexpansion and diversification. In addition, the airport and mostutilities, including electricity, telephone, and water, need to study theirtariff structure and adjust rates to levels sufficient to cover theircosts. It would also be helpful to establish a basis for automaticincreases in these tariffs in line with increased costs.

Electricity

55. Electricity capacity increased from 670 kw in 1980 to 1390 kw in1981. The installation of a new generator much improved service inNevis; two additional generators supplied by the United Kingdom, areexpected to be commissioned on that island in 1982. However, the system onboth islands will need to be expanded to meet increased demand from thegrowing tourism and light industry sectors. In addition, old cables in thesystem should be replaced; the Government is planning to install some newcables in Nevis in 1982 using funds provided by the UK. There are alsoplans to install two power stations, one in St. Kitts and one in Nevis. Afeasibility study examining a proposal to generate 600 kw of electricityfrom excess bagasse has been completed and the Government is seekingexternal financing.

Transportation

56. The ring road on St. Kitts generally is in good condition, butsecondary roads need maintenance work. As already mentioned, theinaccessibility of some arable lands on both islands is an obstacle to theGovernment's goal of agricultural diversification. CDB is financing theconstruction of feeder roads in areas where smallholders cultivate avariety of crops including sugarcane, groundnut, vegetables, root crops,bananas and cotton. The construction of all-weather feeder roads wouldfacilitate the marketing of food crops grown in excess of subsistenceneeds. Crops are now sold through hucksters or the Central MarketingCorporation, both of whom attempt to collect at the farmgate if roadsexist. Improved road access would also permit the more efficient supply ofneeded inputs and equipment, reduce crop spoilage and open up idle landsfor cultivation.

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57. Although the Public Works Department (PWD) has some financialproblems, it is generally well managed. The Department is capable ofcarrying out the maintenance program, but contracts out new projects tolocal and foreign companies, following any conditions laid down by externaldonors or lenders. It may be worthwhile for the donors to examine thepossibility of implementing road construction projects on a regional basisin order to reduce costs.

58. The airport terminal, financed by CIDA, was completed in 1981.The Government plans to purchase a landing system and the equipmentnecessary to service wide-body aircraft. A project to extend the runwayalso is being considered.

Communications

59. New telephone cables were installed in both St. Kitts and Nevisin 1981 and the number of telephones increased, but there is still ashortfall of about 3,000 lines. The Government believes that it isnecessary to replace the present overloaded, old system. Spare .parts forthe existing system are difficult to obtain and manufacturers are beginningto complain about deficiencies in the phone service. The Government has apreliminary idea of the investment it wants to make and is talking tovarious companies. In order for the telephone company to contribute to thecapital investment required for the expansion/replacement, tariff levelsneed to be raised.

E. Social Infrastructure

Water and Sewerage

60. Potable water is available to an estimated 90-95% of thepopulation. The water system is adequate, but some maintenance works needto be carried out. In addition, more water storage facilities are neededto insure an uninterrupted supply because of the highly variable rainfall.A project to design a water development master plan, financed by the CDBand CIDA is planned for 1982. Tariffs are too low and the structure needsto be revised in line with the following considerations: (a) theGovernment's social objective of subsidizing some rural areas; (b) economicand financial soundness; and (c) generation of an adequate return,particularly from industrial and tourist activities. A CDB-funded study ofthe water utility and tariff restructuring has already begun and shouldprovide the Government with the information and analysis necessary to makea decision.

Education

61. A major obstacle to domestic and foreign private investment isthe shortage of skilled labor, particularly people trained in electricaland mechanical engineering, and mid-level managers. A recent UNESCO studyof the sector highlighted two key areas for government action: improvingtechnical and vocational education and teacher training. The studyrecommended the following measures to upgrade technical education: expandworkshops, broaden the range of skills offered, make courses less academicand increase the opportunities for vocational training in the secondary

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schools. The Government is planning to upgrade the technical school inline with the UNESCO suggestions. The UNESCO report also stressed the needfor the technical/vocational education system to improve links with theGovernment, industry and commercial enterprises. The Caribbean Associationof Industry and Commerce (CAIC) recently discussed proposals for trainingwork supervisors and middle management, to be funded partially by USAID.

62. According to the findings of the UNESCO team, the number ofuntrained teachers in the school system in St. Kitts is high, particularlyin the critical primary classes. The training program needs to berestructured and expanded. As a start, expenditures on teacher trainingare projected to increase by 50% in the 1982 budget. The report alsostates that poor buildings and a lack of textbooks make proper teachingdifficult. Both USAID and CIDA are funding projects to upgrade andrefurbish secondary and primary school facilities which should graduallyimprove conditions. USAID is financing a project to upgrade and expanddaycare centers, a critical area because a significant share of the workersin light industry are women.

Health

63. The Government plans to implement several projects to improve thequality of care provided at health centers, including the upgrading offacilities and the rehabilitation of buildings. Partial funding for theseactivities will be provided by USAID and CIDA.

Housing

64. Surveys indicate that the demand for housing in St. Kitts isrising. Annual demand is estimated at 100 new units and replacement ofabout twice that amount; 65% of the requirements are for low- tomiddle-income housing. The Government has an ambitious program toalleviate the current housing shortage. About EC$2 million has been takenfrom the Social Security program to be used for loans for low-costhousing. The funds are being channeled through the Central HousingAuthority (CHA) and the Development Finance Bank (DFB). The Government hasalso started a scheme in which money paid in rent is applied to thepurchase of a home. Given the construction going on in the tourism sector,if the Government attempts to implement the housing program quickly, ashortage of skilled labor--masons, carpenters, contractors, etc.--coulddevelop. In addition, the planned investment in houses increases thepressure to formulate a land use policy. Since the Government owns such alarge share of the land, there does not seem to be enough privately ownedland available for housing. Care must be taken that land allocated tohousing is not better suited for agricultural diversification.

F. Nevis

65. The main economic activity on Nevis, the smaller of the twoislands comprising the state, was sugar production up until the 1950s, whenthe emphasis switched to cotton, livestock, and to a lesser extent,coconuts. The economic decline of the island during the last decaderesulted in heavy emigration; currently there are about 9,000 people livingon Nevis, compared to 11,000 in 1970.

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66. Recently prospects for economic recovery on Nevis are brighter,centering on cotton and livestock and, to a lesser degree, tourism andfood processing. Cotton production increased from 8,000 lbs. in 1980 to79,000 lbs. in 1981, chiefly because of a rise in the area cultivated from38 to 202 acres. However, the 1981 level is still only about half theoutput recorded in 1976. The production is shipped to Japan where itreceives a good price because of its long fiber. Cultivation of groundnutin crop rotation with cotton would offer good returns to the smallholder inNevis. Livestock production is done chiefly on a small scale on individualfarms. The obstacles to increasing output from both of these agriculturalactivities and the corresponding policy measures needed have been describedin the section on agriculture.

67. In order to promote economic activity on Nevis, someinfrastructure requirements must be met. Several projects already have anidentified source of financing, while support for the others should beconsidered seriously by donors. The identified infrastructure needs areconcentrated in three major areas: transportation, water and electricity.Issues concerning electricity, which is critical on Nevis because theisland has suffered from a significant shortage of electrical generation,already have been discussed in the general section on economicinfrastructure.

68. Under transportation, implementation of the following roadprojects would facilitate growth in the tourism and agricultural sectors:(a) partial resurfacing and placement of a "ceiling layer" for the ringroad, the latter necessary to prevent erosion and more expensive civilworks later (estimated total cost is EC$850,000); (b) construction of a4-mile surfaced road in the south (estimated cost is EC$1.2 million); (c)construction of feeder roads centered in Hamilton in the middle of theisland, financing to be provided by CDB as part of the agricultural feederroads project. CIDA is providing funds to extend the pier at Charlestown.A project to enlarge the airport landing facilities in order to accommodatelarger planes (estimated cost is EC$6.0 million) is necessary if thetourism sector in Nevis is to expand.

69. Many of the water pipes in Nevis are old and corroded and shouldbe replaced. Also the installation of water service in the southern partof the island near Desville (estimated cost is EC$350,000) would promoteagricultural activity in that area.

70. In order to encourage light industry (presently a bottling plantand two small garment factories operate on the island), one of the factoryshells financed under the industrial estates loan of the CDB will be builtin Nevis.

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III. PRIVATE INVESTMENT AND EXPORT PROMOTION ISSUES

A. Policy

71. The Government of St. Kitts-Nevis believes that the role of theprivate sector in the economy is vital. In the latest budget speech to theParliament, the Minister of Finance and Nevis Affairs stated that thedevelopment of the public and private sectors must proceed together; eachbenefits from the development of the other. The Government dominates theeconomy because of its ownership of the sugar industry, but with theexception of utilities, other sectors are open to private participation,both foreign and domestic. As in the other islands of the East Caribbean,there are generous tax holidays and duty-free import concessions forqualifying industrial enterprises and hotels. The Government also loweredslightly at the end of 1980 what had been viewed as a very high marginalcorporate income tax rate. To facilitate private industrial investment,the Government has constructed factory shells and provided them with thenecessary services of water, sewerage and electricity. Evidence of thefavorable investment climate is the opening of three new factories in 1981,two foreign and one domestic, and private hotel construction. TheGovernment also has identified several projects in the public sectorinvestment program which would improve the quality and increase the valueadded for some of their agricultural exports.

72. In spite of these positive steps, the private sector feels thatthe Government's attitude toward them is passive in some respects.Domestic entrepreneurs, in particular, perceive the Government's role asaccommodation instead of active support. For example, several actionswhich must be taken before the private sector can become dynamic are stillbeing postponed. The lack of medium and long-term financing for domesticinvestment is a long-standing critical problem, but is still not close tobeing rectified. The processing of domestic agricultural products would bea promising area for investment and expanded exports, but agriculturaldiversification cannot proceed until the Government defines an appropriateland use and land tenure policy. With the exception of tourism, which hasa well-run promotion campaign, the Government does not have adequateprograms to attract foreign investment or encourage export growth. In thecase of foreign investment, the Government needs to develop its industrialestates more aggressively; officials evaluate now only what investmentrequests they receive.

B. Constraints

73. As in the other Eastern Caribbean islands, a major constraint toprivate investment in St. Kitts-Nevis is the small size of the domesticmarket. This means that export promotion must be an integral part of theindustrialization strategy. In addition, there is a shortage of skilledlabor and managers. Although the state does not have a large quantity ofnatural resources, it does have the potential to produce severalagricultural crops for export including cotton, groundnuts, livestock andfruit and vegetables. The main obstacles to increasing agriculturalexports have already been discussed in the section on agriculture.External transportation has been a problem in the past, but the recent

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completion of the airport and deepwater port has improved greatly air andsea connections to St. Kitts, particularly for tourism. Occassionaldifficulties in labor relations have been confined to the sugar workers;the industrial sector generally enjoys labor tranquility.

C. Necessary Measures and Essential Works

74. If St. Kitts-Nevis is to have a dynamic private sector, theGovernment must more actively and positively encourage domestic and foreigninvestment and exports. The Government should consider providing medium-and long-term financing for industry through the commercial banking system,together with assistance in project preparation and analysis. A window inthe commercial banking system would have the advantage of mobilizingresources from domestic deposits. Export credit insurance could be used topromote more exports from domestic companies; eight enterprises with atleast some local participation already sell small quantities overseas. TheGovernment should also seek technical assistance for marketing studies andrecommendations on meeting quality standards. International donors shouldsupport the projects in the public sector investment program to upgradelivestock output, build a slaughterhouse and improve cotton production andthe ginnery as these are income-generating projects.

75. In order to attract foreign investment the Government mustupgrade and expand its promotion efforts. Recently officials have begun todetermine what companies they wish to attract and then focus theirpromotion on them. The Government will be able to draw on the considerableresources provided by the USAID/PIDAP project which provides both theservices of an officer stationed in St. Kitts for three years plusshort-term consultancy services to be used to promote private investment.The fund for financing preinvestment studies in the Caribbean set up by theInternational Finance Corporation could be used to examine the feasibilityof establishing factories to process some of the agricultural products ofSt. Kitts-Nevis.

76. In general, the infrastructure needed to support additionalinvestment is in place. However, more electricity generation and animproved telephone system will be needed to meet the requirements of theexpanding industrial and tourism sectors. The Government should insurethat this project, which has been identified in the public sectorinvestment program, is carried out. Additional financing, probably throughCDB, also needs to be arranged for factory shells since all the space underthe present loan has been committed. In the Frigate Bay tourism area, theplanned building of a major hotel complex will not be possible until asewerage plant is constructed.

77. The maintenance of a realistic exchange rate should also beconsidered an essential element of any effective program directed towardsstimulating exports of goods and services. The need to monitor closely thecompetitiveness of the country's exports has become increasingly importantrecently owing to the appreciation of the US$. Since the EC$ is pegged tothe US$, it has appreciated considerably against pound sterling during thepast year. This development has been particularly harmful to the sugarindustry of the Eastern Caribbean and to other exports to the EEC, and ithas also rendered tourist services more expensive for visitors from Europeand Canada.

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IV. PUBLIC SECTOR INVESTMENT PROGRAM

A. Introduction

78. Recently the public sector investment program of St. Kitts-Nevishas concentrated on several large infrastructure projects, primarily in thetransport sector. These projects were virtually completed in 1981 and arebeginning to show some payoffs in the tourism sector. Hopefully, thebenefits gradually will extend to other areas of the economy. Thecomposition of the 1982-85 program reflects somewhat changed priorities.The Government will continue projects to diversify agriculture and expandindustrial estates, but spending on supporting economic infrastructure willfocus on expanding the electricity and telephone system once the equipmentfor the airport and deepwater port is obtained. Several proposed projectshave been listed and then delayed, two or three years running. It wouldperhaps be useful for both the donors and the Government either to ensurethat these projects are implemented, if they are still considered feasible,or to drop them from the list of priorities.

B. Progress of the Program

1981 Performance

79. After increasing steadily from a 1978 share of 9% of GDP to 18%of GDP in 1980, public sector capital expenditures dropped to only 11% ofGDP in 1981, owing to the completion of several large projects--the sugarreplanting program, the airport extension and the deepwater port. Totalcapital expenditures reached only EC$16 million, compared to EC$23 millionin 1980. The amount was 73% of what the Government had programmedprimarily because of problems with the industrial estates project financedby CDB and delayed delivery of cargo-handling equipment for the port(funded by CIDA) until late 1982 and early 1983. Local sources financed afifth of the investment program in 1981, about the same as the 1980 share.

80. Productive projects accounted for nearly a fifth of capitalexpenditures. Implementation of agricultural projects proceeded well. Thesugar replanting program, replacing plants with smut-resistant varieties,was completed. Slightly over EC$1 million was disbursed for this purposein 1981, all local funds. Good progress was also made in two UK-financedprojects which support the Government's strategy of agriculturaldiversification--expansion of citrus and NACO food production. The UK isalso funding a project to support crop production, including cotton, onNevis. The Peanut Farm Unit, financed by USAID, was virtually completed in1981 according to schedule, as was the soil conservation project. NearlyEC$200 thousand was spent on various projects to promote livestockdevelopment, primarily in Nevis. Total expenditure on agriculturalinvestments was about EC$2.2 million.

81. As already discussed, the DFC had difficulties executing theindustrial estates projects. As a result, disbursements in 1981 were onlya third of what had been estimated in the budget. Because of the liquidityproblems of the DFC, funding of the project had to be done through directdisbursement from CDB instead of the more conventional reimbursementpractice. As a result, payments to contractors in some cases were delayed

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so long that they stopped work on factory shells. Now that all the factoryspace under this loan has been committed, it is important that the DFC (nowthe DFB) complete disbursement applications accurately and efficiently inorder to improve implementation of this project. There were nodisbursements made on the CIDA-financed small business development program,again due to weakness of the DFC.

82. As was the case in 1980, investment in transportation was thebiggest component of capital spending with a share of nearly one-half. TheCIDA-financed Golden Rock Airport Terminal was nearly completed and a jetstarter was purchased. The bulk of transport expenditures, EC$5.5 million,went for the Deepwater Port. The initial loan for this project was fromCDB, and Trinidad and Tobago covered the substantial cost overruns,amounting to about EC$4 million. The port was completed in August butcannot be utilized fully until CIDA cargo-handling equipment is delivered,scheduled for late this year and early 1983. The project financed by theEuropean Development Fund (EDF) to resurface the ring road on St. Kitts wascompleted in 1981. The UK continued to finance purchases of equipment forthe Public Works Department workshops in both St. Kitts and Nevis andrepairs to the Charlestown Pier in Nevis.

83. Other projects included under economic infrastructure were theradio link between Nevis and St. Kitts and the commissioning of an electricgenerator in Nevis, the latter financed locally. In all, investments onsupporting economic infrastructure accounted for 60% of total capitalexpenditures or EC$9.6 million.

84. Spending on other sectors, including social infrastructurerepresented about a fifth of the public sector investment program. In thearea of water provision, construction of several reservoirs financed by theUS Basic Human Needs Program continued on schedule. The CIDA-financedexploratory drilling program, whose results will be the basis for themaster water development plan, continued. In the area of health, the mainexpenditure was for the project to improve health centers funded by a grantfrom United Nations Fund for Population Activities (UNFPA).

85. Project implementation in the field of education wasdisappointing. There were no disbursements from the CIDA-financed ThirdCountry Training Program or the CDB-financed Student Loans administeredthrough the DFC. The factors discouraging the utilization of the latterfacility are restrictions on the share of the program which can be spent atextra-regional institutions and the fact that the loans usually do notcover more than 60% of the total cost. Expenditures for the expansion ofsecondary schools and the renovation of primary schools, financed by CIDAand USAID, were lower than programmed because of a shortfall in localfinancing. Completion of this program is not expected before 1983.

Projected 1982 Program

86. Public sector investment is projected to rise to EC$25.6 millionin 1982, equivalent to 18% of GDP. Productive projects account for EC$3million, a 12% share of the annual program. Major agricultural projectswhich are scheduled to begin are fisheries development, financed by severaldonors, and the related mussel culture program funded by IRDC. A project

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to irrigate sugarcane, which should help raise productivity in this sector,is being financed by the UK. Spending on livestock production will rise toover EC$450,000, including the startup of the Beef/Milk Project, financedby the European Development Fund. The projects to expand citrus and NACOfood production are scheduled to be completed in 1982. In total, spendingon agriculture is projected to reach EC$2.1 million.

87. Under industry, disbursements are expected to continue from theindustrial estates project. Expenditures are planned also for the purchaseand development of an industrial site for Nevis.

88. Again, supporting economic infrastructure accounts for thelargest share of capital spending, nearly EC$15 million, equivalent to 57%of the program. The major expenditure is equipment and supportingfacilities for the deepwater port financed by the remaining balance fromthe CDB loan and by CIDA. The Government is also planning to improveservices at Golden Rock Airport by purchasing landing equipment with localfunds. CIDA is being approached to finance ground equipment for wide-bodyjets. Disbursements on the CDB-financed project to construct agriculturalfeeder roads in St. Kitts and Nevis will also begin in 1982. In total,expenditures on transportation projects are forecast to reach EC$9.8million.

89. The major project in the area of power is the purchase of twoadditional generating sets for Nevis, to be financed by the UK. It isexpected that about EC$564,000 will be spent as part of the Government'scontinuing efforts to upgrade and expand the telephone system.

90. Expenditures on social infrastructure and others are projected toreach EC$8 million, 30% of public investment.- Under water, theCDB-financed study of the utility and tariff restructuring will begin. Theprogram of exploratory drilling of water will continue and the constructionof several reservoirs financed by USAID are scheduled to be completed. Inthe area of housing, the Government plans to continue its project to buildlow-income housing. In health, the program to improve health centers alsowill be completed. The expansion of secondary and renovation of primaryschools will continue in 1982 and disbursements from the Third CountryTraining Project are projected to resume.

C. Composition of the Medium-term Program

91. Disbursements under the public sector investment program for theperiod 1982-85 are forecast to total nearly EC$96 million, an average ofEC$24 million a year, 14% of projected GDP. Nearly 30% of the program isaccounted for by ongoing projects. About 30% of the public sectorinvestment program is allocated to directly productive projects; 42% tosupporting economic infrastructure and the remaining quarter to socialinfrastructure and others. The table below summarizes the allocation ofexpenditures in the public sector investment program.

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SUMMARY OF PUBLIC SECTOR CAPITAL EXPENDITURE BY SECTOR, 1982-85

Amount(EC$'000) (US$'000) %

Directly Productive Projects 30,348 11,240 31.7Agriculture, Forestry and Fisheries 16,376 6,065 17.1Industry 13,094 4,850 13.7Tourism 878 325 0.9

Economic Infrastructure 40,503 15,002 42.3Transportation 23,567 8,729 24.6Power Supply 12,835 4,754 13.4Communications 4,101 1,519 4.3

Social Infrastructure & Other 24,925 9,231 26.0Water Supply and Sewerage 9,966 3,691 TO.Health 483 179 0.5Education 6,587 2,440 6.9Housing 1,500 555 1.6Other 6,389 2,366 6.7

TOTAL 95,776 35,473 100.0

Directly Productive Projects

92. The agricultural projects identified support the Government'sdevelopment strategy of improving productivity of the sugar sector anddiversifying production. The UK is funding sugar irrigation and CIDA mayfinance continued investigation of irrigation. The critial need to replaceold, obsolete equipment in the sugar factory has been underscored.However, the project is not appropriate for external assistance; revenue toreplace the equipment should have been generated through a depreciationallowance using replacement cost accounting before calculation of theprofits of the factory. In the area of diversification, several projectsto expand food production will be completed early in the program. In 1983one project to establish a 65-acre vegetable plant and one to dehydratevegetables are slated to begin. UNDP is financing the former and CDB, thelatter project; coordination of the two activities will be critical. TheGovernment is also concentrating on livestock; CDB will be financing alivestock production project and CIDA is interested in funding anabattoir. Fisheries development is a, priority throughout the period withexpenditures on two projects totaling EC$7.4 million.

93. The Government is including only a few projects in the industrialand tourism sectors because the private sector is carrying out most of theinvestment in these two areas. There are plans to request a CDB loan tofinance an additional 40,000 sq. ft. of factory space as the shells to beconstructed under the present loan have been committed. Disbursements from

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CDB's consolidated credit line are also expected, but will depend on theresolution of the problem with the DFC. Under tourism, the Government isplanning a project to renovate old buildings, financed by the UK. Twoadditional projects in this sector, construction of a shopping arcade andhotel expansion and development, have no identified source of externalassistance. Given the present private investment going on in the hotelindustry, an additional project to build facilities may be unnecessary.

Economic Infrastructure

94. The Government has invested heavily in transportationinfrastructure in recent years. Thus, it is appropriate that this sectoraccounts for a smaller share of the 1982-85 investment program, althoughexpenditures for all the proposed projects would total nearly EC$24million during the period, 25% of the total. By 1983 the equipment andimproved transit shed facilities for the deepwater port should be inplace. The UK-financed project to upgrade the workshop of the Public WorksDepartment, thereby strengthening their maintenance and constructioncapability, is scheduled to be completed in 1983, along with theagricultural feeder road project funded by CDB. The major new projects theGovernment proposes are construction of the Old Road Bay Bypass to replacethe existing hazardous route from the northwestern end of St. Kitts and theSoutheast Peninsula Road and Ferry. Although a feasibility study has beencompleted for the latter, the possible returns flowing from one of theidentified benefits, the opening of a prime beach area to tourism should bereevaluated. No external financing has been finalized for either project.CIDA has indicated its possible interest in expanding New Castle Airport,which would promote an expansion of tourism on Nevis.

95. The need to increase electricity generation in order to supportthe expansion of industry and tourism already has been discussed. Thepublic sector investment program includes new generators for Nevis fundedby the UK. In addition, the CDB is interested in funding a project toupgrade the electrical system on St. Kitts, including installation of agenerator, beginning in 1984. Total expenditures for these importantactivities would reach nearly EC$19 million. It is important that theGovernment secure firm commitments for external assistance for theseprojects and implement them on schedule so that a shortage of electricalpower does not become a constraint on economic growth.

96. Under communications, the UK is financing a telephone worksproject. The Government also is proposing a short-term replacement andextension of the phone system to be followed by a longer term program.

Social Infrastructure and Others

97. The main expenditure under the category of social infrastructureand other is for water supply, totaling about EC$10 million during theperiod, 10% of the total. After completion of the preliminary projects fordrilling and technical assistance, a major water development projectjointly financed by CDB and CIDA is scheduled to begin in 1983. Along-term master plan including treatment plants, reservoirs, pipelines,and wells will be implemented. In education, the ongoing project to expandand renovate schools is expected to be completed in 1983. CDB plans to

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finance a second student loan project. A program to upgrade tertiaryeducation in St. Kitts has also been proposed,but the Government shouldtake into account the recommendations of the recent UNESCO sector surveybefore designing a project. The most important proposal classified as"other" is integrated development of Nevis, including water, feeder roadsand credit. CDB has indicated an interest in financing this project.

D. Financing the Public Sector Investment Program

98. The projected program requires the mobilization of about EC$103million in the period 1982-85, including EC$96 million for public sectorcapital expenditures and EC$7 million for debt service. About EC$60million of the program is accounted for by external financing for ongoingprojects or new commitments, leaving only about EC$40 million of additionalfunding, to be obtained. Although this latter figure is relatively small,it does include several priority projects for which no donor has beenidentified, for example, the expansion of the electricity and telephonesystems. It will be difficult for the Government to increase domesticfinancing of the public sector investment program through public sectorsavings in the short run because sugar prices are likely to remaindepressed.

99. Public sector savings are presently negative. Although a gradualstrengthening of public sector finances are projected from 0 in 1982 toEC$11 million in 1985, even at the end of the period they will not matchtheir 1980 contribution to funding the investment program. Moreover, thisimprovement is predicated on the Government following through on plans toraise tariffs on electricity and water service, increase port and harborfees and institute property taxes. In addition, the Government mustrestrain expenditures and improve the financial position of the sugarindustry. With the exception of 1982, net domestic borrowing is projectedto be negative during the period. This reflects the repayments necesary tolower the current large overdraft which the sugar industry has with theNational Bank. In total, over the period 1982-85, public sector savingswill contribute nearly EC$26 million to financing the program, whileborrowing from banks and other domestic sources will equal -EC$4.2 million.

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V. PROSPECTS

100. In 1982 a modest real increase in GDP of 1% is expected.Thereafter, however, the annual growth rate could average 4.5%, fueled bythe anticipated expansion in agricultural diversification, tourism andmanufacturing. This rise would be supported by investment averagingslightly above 27% of GDP. The public sector would account for somewhatless than one-half of the total investment. National savings are projectedto finance a rising share of investment, primarily because of the indicatedimprovement in public sector finances. After two years of exceptionalincreases, private consumption is projected to decline in real terms in1982 and then resume a gradual rise. As a result, the growth ofexpenditures on imports should slowdown and the deficit on the currentaccount of the balance of payments gradually should drop as a share ofGDP. In addition, private savings are projected to increase gradually inreal terms during the 1982-85 period in response to more investmentopportunities.

101. Public and publicly guaranteed external debt at the end of 1981is estimated at US$10.8 million, compared to US$9.1 million in 1980. Debtservice payments, however, dropped to US$800,000 in 1982, representing only3% of exports of goods and nonfactor services. Although debt serviceprobably will rise somewhat during the period, payments are expected toremain manageable. The low debt service ratio reflects the high proportionof concessional external assistance. Given the vulnerability of theeconomy because of the dependence on sugar and only gradual strengtheningof public finances projected, the Government will have to continue to relyon borrowing on concessional terms during the period.

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ST. KITTS-NEVIS

Government's Project List

:L. This annex contains a list of major ongoing projects, a list ofnew projects for which external finance will be sought during the period1982-85, and individual project descriptions. Each list contains the nameof the project, the executing agency, the lender/donor if any, the totalcost, the external financing obtained or required, the counterpartcontribution needed, and the estimated recurrent costs during the 1982-85period. The individual profiles contain additional information whichshould be of interest to potential donors or lenders, including technicalassistance requirements and the present status of the project.

2. Data for these projects, which will be presented to the meetingof the Caribbean Group for Cooperation in Economic Development scheduledfor June 15-18, 1982, were provided by the Government of St. Kitts-Nevis orfurnished by the World Bank-led mission of January 1982.

ST. KITTS-NEVIS: MAJOR ONGOING PROJECTS AND SOURCES OF FINANCING

(US$ '000)

External Interest Amortization GraceTotal Financing Rate Period Period Counterpart Financing Recurrent CostsCost Secured Sources (Z) (years) (years) Amount 1 1982 1983 1984 1985

Directly Productive

Pilot citrus expansion 105 105 UK Grant - - - - - - - -

Crop production - Nevis 81 81 UK Grant - - - - - - - -General Improvement-Prospect Propagation

Station 225 225 UK Grant - - - - - - - -

Low Ground Cattle - Nevis 78 78 USAID Grant - - - - - - - -Beef-Milk Production Program (EDF) 1321 - EDF - - - - - - - - -

Livestock Development - Nadens 128 128 UK Grant - - - - - - - -

Industrial Estates 688 660 .CDB 4 15 5 - - - - - -

Economic Infrastructure

Nevis Feeder Roads 489 829 UK Grant - - 160 33 - - - -

Deepwater Port and Equipment 9600 8700 CDB/TT 4 15 5 900 9 - - - -Improvement of Port and CustomFacilities 199 199 UK Grant - - - - - - - -

Public Works Department Plant 390 390 UK Grant - - - - - - - -

Cargo Handling Equipment/Transit 1897 1897 CIDAShed

'0

Social Infrastructure and Other

Exploratory Drilling of Water 470 470 CIDA Grant - - - -

Jessups Reservoir - Nevis 141 141 USAID Grant - - - -

Study of Water Utility and TariffRestructuring 99 84 CDB 4 15 4 37 15

Improvement to Health Centres 93 74 UK/UNFPA Grant - - 19 20

Improvements to Health Centres andDistrict Nurses Homes 132 128 USAID/CIDA 'Grant - - 4 3

Third Country Training 586 586 CIDA Grant - - - -

Expansion Secondary/RenovationPrimary Schools 3537 448 UK/USAID Grant - - 3089 87

Mission Administered Funds 511 511 CIDA Grant - - - -Community Development 83 83 UK Grant - -

ST. KITTS-NEVIS - MAJOR NEW PROJECTS AND SOURCES OF FINANCING

(US$ '000)

External Counterpart RecurrentTotal Financing Financing CostsCost Required Source Amount % 1981/82

Directly Productive Projects -Livestock Development 1,334 1,200 CDB 134 10 -Irrigation Investigation 348 348 Possibly CIDA - - -Abattoir 174 156 CIDA 18 10 -Fisheries Development 2,660 1,630 UK,CIDA,CDB,UNDP 1,030 40 -Corn/Cassava Mill 21 21 UNDP - - -Mussel Culture (Fishery) 68 62 IDRC - - -Tick Control 22 9 EDF 13 60 -Minor Irrigation 34 23 NGO/EEC 11 32 -Ginnery Improvement 30 22 UK 8 27 -Afforestation 57 57 Possibly USAID - - -Sugar Irrigation 283 283 UK - - -Sugar Factory Equipment 93 93 Unknown - - -65-Acre Vegetable Project 313 192 UNDP 121 39 -Factory Shells 1,000 800 CDB 200 20 -Consolidated Line of Credit - St. Kitts/Nevis 1,200 1,200 CDB - - -Vegetable Dehydration Project 1,000 1,000 CDB - - -Hotel Expansion and Development 625 500 Unknown 125 - -

Economic Infrastructure °Old Road Bay Bypass 297 268 Unknown 29 10 -Southeast Peninsular Road & Ferry 4,000 4,000 EDF or Possibly USAID - - -New Castle Airport - Nevis 500 452 Possibly CIDA 48 10 -Feeder Roads - St. Kitts/Nevis 1,254 1,254 CDB - - -Landing System (VOR/DME Equipment) 370 370 Possibly CIDA - - -New Electricity Generating Set and Auxiliaries (Nevis) 1,740 1,740 UK -Replacement of Underground Power Cables 300 180 UK i Upgrading Electrical System - St. Kitts 2,778 2,472 CDB 306 11Telephone Works 324 236 UK 88 27 -Telephone - Replacement/Extension 1,095 611 Unknown - -

Social Infrastructure and OtherWater Development 4,000 .3,182 CIDA/CDB 818 20Study of Water Utility and Tariff Restructuring 99 85 CDB 14 14Development of Tertiary Education 630 504 Unknown 126 20Student Loans - Higher Education II 150 150 CDB - _Integrated Nevis Project 1,250 1,000 Possibly CDB 250 20

ONGOING TECHNICAL ASSISTANCE PROJECTS - ST. KITTS-NEVIS

Department Technical Assistance Fundin Period Estimated Project Description and ObjectiveTitle Agency cost (us$)

1. Agriculture Fisheries Adviser CFTC Aug., 1976- n.a. Advise on fisheries development in the State, trainAug., 1982 fishermen and personnel in the fisheries division

and to assist with development of fisheriesco-operatives.

2. Agriculture Horticultural Adviser CFTC Aug., 1979- n.a. Advise Ministry of Agriculture and National1983 Agricultural Corporation (NACO) on cultivation of a

selected range of food crops; assist with develop-ment and preparation of agricultural projects; giveon-the-job training to personnel involved inNACO's fruit trees programme.

3. Agriculture Co-op Development CFTC Dec., 1981- n.a. Advise on matters relating to Co-operatives: toAdviser Dec., 1983 assist with training of Co-operatives personnel.

4. Agriculture General Manager, BDD Jan., 1981- n.a. Development of marketing strategy; training ofCentral Marketing Jan., 1983 staff at the Central Marketing Corporation.Corporation

5. Education Child, Family and USAID/High Nov., 1:981- $60,000 To further develop and strengthen the Government'sCommunity Development Scope Oct., 1984 existing child care system. This will entailProject Co-ordinator Educational expanding the network of physical facilities,

Research equipping and staffing the centres and training ofFoundation staff. Developing an overall day care policy for

the islands.

/6 . .....

Department TechnsTitle Agency Period Estimated Project Description and Objective

6. Planning Unit Senior Economic CFTC March,1982- n.a. Assist with Economic Development planning, annualPlanning Officer March,1984 budgeting, sectoral programming and research for

local, regional and international development.

7. Planning Unit Project Assistance USAID Jan., 1982- US$1.8m Short-term and long-term advisory technicalDevelopment Programme 1985 for OECS assistance on investment promotion. The projectOfficer members & aims at promoting economic diversification and at

Belize generating employment.

8. Agriculture Agronomist June, 1978- n.a. Assist in farm planning and organisation of credit1982 for agricultural supplies for small farmers:

provision of extension workers and assisting withmarketing of crops.

9. Agriculture Agronomist USAID/ Feb., 1980- $81,000 Research and development in small farming,CARDI Nov., 1982 including cotton production, peanut spacing and

fertilising in order to make small farmers awareof more modern farming techniques and proper landutilisation.

10. Legal Legal Draftsman CFTC May., 1981- n.a. Drafting of all legislation including subordinate1983 legislation, training of local personnel in the

field of legislative drafting and assisting ingeneral legal work.

REQUESTS FOR TECHNICAL ASSISTANCE

ST. KITTS-NEVIS

Ministry Technical Assistance Funding Period Description and Objective

1. Finance Bank Consultant Unknown 4 man-months Technical assistance is required to assist the St. Kitts-NevisNational Bank Ltd. in a training and restructuring programme inorder to upgrade the institution &nd to improve its capabilityand efficiency.

2. Nevis Affairs Oil Extracting Plant Unknown 12 man-months Technical assistance is required to set up oil extracting plantOperator and manage turn key operation and to train local counterparts to

carry out the operation. The objective of the project is tostimulate agricultural growth. The project will utilise Copra,corn, cotton seed and peanuts to produce cooking oil for localconsumption. The residue will be used for animal feed.

3. Education Technical and UNESCO/ 24 man-months Technical assistance is required to assist in upgrading andVocational Education UNDP improving technical and vocation education in order to meet theAdviser employment needs of Government, industry and commercial.

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ST. KITTS-NEVIS

1982/85 Project List - Individual Project Description

Agriculture(US$'000)

I. NAME OF PROJECT: Livestock Development in St. Kitts-Nevis

II. EXECUTING GOVERNMENT AGENCY: Ministry of Agriculture

III. TOTAL ESTIMATED COST: US$1,334

IV. EXTERNAL FINANCING REQUIRED: US$1,200

V. LENDING AGENCY: CDB

VI. DESCRIPTION AND JUSTIFICATION:

A. Description: The project contemplates the establishment of ageneral program to improve livestock rearingpractices, and to upgrade and expand the livestockpopulation. In addition, it is proposed to re-establish sugarcane in Nevis and to use the by-product for cattle feed. A revolving fund will beset up to provide credit to sugarcane farmers.

B. Justification: Strong potential exists for increased livestockproduction in the islands both for local con-sumption and for export.

VII. COST COMPONENTS AND FINANCING:

Financed by TotalLocal ExternalSources Sources Amount %

Local Costs 134 214 348 26Foreign Costs - 986 986 74

Total Costs - Amount 134 1,200 1,334- % 10 90 100

VIII. DISBURSEMENT PERIOD:

Post1982 1983 1984 1985 Total 1985

Local Sources - 40 40 54 134 -

External Sources - 200 430 570 1,200Total - 240 470 624 1,334

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IX. STATUS OF PREPARATION: The project was redefined to include Nevis.

X. PROJECT IMPLICATIONS:

Operating and Maintenance Costs: None.Debt Obligations: None.

XI. TECHNICAL ASSISTANCE REQUIRED: CDB and EDF are expected to providethe necessary technical assistance.

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ST. KITTS-NEVIS

1982/85 ProJect List - Individual Project Description

Agriculture(US$ '000)

I. NAME OF PROJECT: Irrigation Investigation

II. EXECUTING GOVERNMENT AGENCY: National Agricultural Corporation

III. TOTAL ESTIMATED COST: US$348

IV. EXTERNAL FINANCING REQUIRED: US$348

V. LENDING AGENCY: Possibly CIDA

VI. DESCRIPTION AND JUSTIFICATION: The study aims to investigate thepossibilities for irrigation, especially of sugarcane, on St. Kitts.



Local Costs - 35 35 10Foreign Costs - 313 313 90Total Costs - Amount - 348 348

-% 100 100

VIII. DISBURSEMENT PERIOD:Post

1982 1983 1984 1985 Total 1985

Local Sources - - - - - -

External Sources - 37 161 150 348 _Total - 37 161 150 348 -

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IX. STATUS OF PREPARATION: The project is related to the Water DevelopmentProject, financing of which is under consideration by CIDA, dependingon the results of the exploratory drilling of water project which areexpected in mid 1982.



XI. TECHNICAL ASSISTANCE REQUIRED: CIDA is expected to provide thenecessary technical assistance.

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ST. KITTS-NEVIS

1982/85 Prolect List - Individual Project Description


I. NAME OF PROJECT: Abattoir




V. LENDING AGENCY: CIDA


A. Description: The project consists of the construction oftwo small abattoirs, one on St. Kitts and theother on Nevis.

B. Justification: Good prospects exist for increased meatproduction on the islands both for localconsumption and for export.



Local Costs 18 25 43 25Foreign Costs - 131 131 75Total Costs - Amount 18 156 174

- % 10 90 100


1982 1983 1984 1985 Total 1985

Local Sources - 8 8 2 18 -External Sources - 63 43 50 156Total - 71 51 52 174

- 39 -

IX. STATUS OF PREPARATION: CIDA intends to develop its previouslyplanned leeward and windward island abattoir project. Preparationis likely to be delayed in view of the need to ascertain the statusof similar projects in other islands.



XI. TECHNICAL ASSISTANCE REQUIRED: CIDA is expected to provide necessarytechnical assistance.

_ 40 -

ST. KITTS-NEVIS



I. NAME OF PROJECT: Fisheries Development




V. LENDING AGENCY: UK/CIDA/CDB


A. Description: The project involves a study to examine require-ments of the fishing industry in St. Kitts-Nevisin order to produce a regional strategy. Theentire project is to be modeled on the ongoingCanadian fisheries project in St. Lucia whichincluded improved techniques and local handlingand storage. Specific components of the projectinclude training, organizational improvements,provision of lending facilities and a starterfleet of 25 forty-ft. fishing vessels.

B. Justification: The project would diversify economic activity onthe islands, improve nutrition, and promote foodself-sufficiency and possibly exports.



Local Costs 266 - 266 10Foreign Costs 764 1,630 2,394 90Total Costs - Amount 1,030 1,630 2,660

-% 40 60 100


1982 1983 1984 1985 Total 1985

Local Sources 37 37 585 370 1,030 -External Sources 74 941 245 370 1,630 -

Total 111 978 830 740 2,660 -

- 41 -

IX. STATUS OF PREPARATION: UK and CIDA will assist in the procurementof fishing gear, boat and other equipment. CDB will probably financeUS$800 thousand.


Operating and Maintenance Costs: None during 1983-85.Debt Obligations: Interest payments on CDB loan.

XI. TECHNICAL ASSISTANCE REQUIRED: Technical assistance will be requiredfor further preparation and implementation.

- 42 -

ST. KITTS-NEVIS



I. NAME OF PROJECT: Corn/Cassava Mill




V. LENDING AGENCY: UNDP


A. Description: The project involves establishment of a millto process 100 tons of corn/cassava annually.

B. Justification: To promote import substitution of corn mealand flour. The present mill is obsoleteand frequently inoperative.



Local Costs 6 6 25Foreign Costs - 15 15 75Total Costs - Amount - 21 21

-% 100 100


1982 1983 1984 1985 Total 1985

Local Sources - - - - - -External Sources - 21 - - 21Total - 21 - - 21

- 43 -

IX. STATUS OF PREPARATION: UNDP had agreed in principle to fundthe mill.


Operating and Maintenance Costs: None (replaces existing mill).Debt Obligations: Not determined.

XI. TECHNICAL ASSISTANCE REQUIRED: None.

- 44 -

ST. KITTS-NEVIS



I. NAME OF PROJECT: Mussel Culture




V. LENDING AGENCY: IDRC


A. Description: The project consists of procurement of surveyequipment and aid for starting fish culture, ona pilot basis, for a period of three years in theConaree Pond and Frigate Bay Pond.

B. Justification: To utilize existing pools of inland water tosupplement the presently inadequate fishsupply.




-% 9 91 100


1982 1983 1984 1985 Total 1985

Local Sources 2 3 - - 5 -External Sources 38 24 - - 62 _Total 40 27 - - 67

- 45 -

IX. STATUS OF PREPARATION: Originally Brackish Water Fish Culture.Grant is expected from the International Development Research Center.



XI. TECHNICAL ASSISTANCE REQUIRED: Necessary technical assistance isto be provided by Regional Fisheries Association.

- 46 -

ST. KITTS-NEVIS



I. NAME OF PROJECT: Tick Control




V. LENDING AGENCY: EDF, USAID


A. Description: The project involves the establishment of sprayingfacilities at centralized locations where groupsof farmers can have their cattle sprayed peri-odically, at a fee which would cover operatingcosts.

B. Justification: To promote increased output of milk and beefas a result of improved pest control.



Local Costs 9 - 9 40Foreign Costs 4 9 13 60Total Costs - Amount 13 9 22

-% 60 40 100


1982 1983 1984 1985 Total 1985

Local Sources - 13 - - 13External Sources - - 9 - 9Total - 13 9 - 22

- 47 -

IX. STATUS OF PREPARATION: Project has been identified. Purchase ofspraying material and of communal dip tank in Nevis was requestedfrom USAID.




- 48 -

ST. KITTS-NEVIS



I. NAME OF PROJECT: Minor Irrigation - Nevis




V. LENDING AGENCY: NGO/EEC/possibly CIDA


A. Description: The project involves construction of 30 smalldams and ponds on small farm holdings on Nevisin order to provide water for animals andfor land watering of crops.

B. Justification: To promote increased production of livestockand vegetables.


Financed by TotalLocal ExternalSources Sources Amount _

Local Costs 11 23 34 100Foreign Costs - - - -Total Costs - Amount 11 23 34

-% 32 68 100


1982 1983 1984 1985 Total 1985

Local Sources - 11 - - 11External Sources - - 11 12 23Total - 11 11 12 34

- 49 -

IX. STATUS OF PREPARATION: The project has been identified. Thisproject depends on the exploratory drilling of water project.CIDA may fund the digging of wells.




- 50 -

ST. KITTS-NEVIS



I. NAME OF PROJECT: Ginnery Improvement




V. LENDING AGENCY: UK


A. Description: The project comprises repairs, maintenanceand technical assistance.

B. Justification: The project would promote increased productionof cotton for export by reducing incidenceof pink ballworm and improving efficiency ofthe ginnery.



Local Costs 8 - 8 27Foreign Costs - 22 22 73Total Costs - Amount 8 22 30

-% 27 73 100


1982 1983 1984 1985 Total 1985

Local Sources 8 - - - 8 -External Sources 10 12 - - 22 _Total 18 12 - - 30

- 51 -

IX. STATUS OF PREPARATION: The project has been identified. The UKhas been approached for funding part of the project.


Operating and Maintenance Costs: No incremental costs are expectedduring the project.

Debt Obligations: None.

XI. TECHNICAL ASSISTANCE REQUIRED: A cotton specialist will be requiredfor project implementation.

- 52 -

ST. KITTS-NEVIS



I. NAME OF PROJECT: Afforestation




V. LENDING AGENCY: Possibly CDB (USAID Funds)


A. Description: The project involves the establishment of50 acres of timber on marginal lands.

B. Justification: To assist in diversifying the agriculturalsector and promoting import substitution offorestry products.



Local Costs 49 49 86Foreign Costs 8 8 14Total Costs - Amount - 57 57

- % 100 100


1982 1983 1984 1985 Total 1985


External Sources 22 22 13 - 57Total 22 22 13 - 57

- 53 -

IX. STATUS OF PREPARATION: The project has been identified.


Operating and Maintenance Costs: None during 1982-85.Debt Obligations: Not determined.

XI. TECHNICAL ASSISTANCE REQUIRED: Technical assistance will be requiredto prepare the project and to train local staff.

- 54 -

ST. KITTS-NEVIS



I. NAME OF PROJECT: Sugar Irrigation

II. EXECUTING GOVERNMENT AGENCY: NACO





A. Description: The project aims to provide irrigation systemsfor sugarcane producers.

B. Justification: The project is expected to increase output ofsugarcane.



Local Costs 71 71 25Foreign Costs 212 212 75Total Costs - Amount 283 283

- % 100 100


1982 1983 1984 1985 Total 1985

Local Sources - - - - - -External Sources 233 - - - 233Total 233 - - - 233

- 55 -

IX. STATUS OF PREPARATION: Pilot irrigation system has been completed.



XI. TECHNICAL ASSISTANCE REQUIRED: The UK is expected to provide thenecessary technical assistance.

- 56 -

ST. KITTS-NEVIS



I. NAME OF PROJECT: Sugar Factory Equipment

II. EXECUTING GOVERNMENT AGENCY: St. Kitts Sugar Manufacturing



V. LENDING AGENCY:


A. Description: The project involves procurement of a syrupfilter and Edwards Hydraulic for the sugarmill.

B. Justification: The equipment would improve efficiency ofthe sugar factory.



Local CostsForeign Costs 93 93 100Total Costs - Amount - 93 93

- % 100 100.


1982 1983 1984 1985 Total 1985

Local Sources - - - -External Sources - 93 - - 93Total - 93 - - 93

- 57 -

IX. STATUS OF PREPARATION: The project has been identified, andfinancing of some of the equipment has been requested from the UK.




- 58 -

ST. KITTS-NEVIS



I. NAME OF PROJECT: 65-Acre Vegetable Project

II. EXECUTING GOVERNMENT AGENCY: NACO



V. LENDING AGENCY: UNDP


A. Description: The project would produce commercially a widevariety of vegetables at Pond's Estate.

B. Justification: The project would promote self-sufficiency infood production and improve nutrition.




-% 39 61 100


1982 1983 1984 1985 Total 1985

Local Sources - 67 54 - 121 -External Sources - 137 55 - 192 -Total - 204 109 - 313

- 59 -

IX. STATUS OF PREPARATION: Feasibility study has been undertaken.



XI. TECHNICAL ASSISTANCE REQUIRED: Vegetable agronomist is neededto assist in implementation.

- 60 -

ST. KITTS-NEVIS


Industry(US$ '000)

I. NAME OF PROJECT: Factory Shells

II. EXECUTING GOVERNMENT AGENCY: Development Finance Corporation





A. Description: The project consists of the construction of35,000 square feet of factory space.

B. Justification: To promote the establishment of private sectorindustrial enterprises.


Financed by TotalLocal ExternalSources Sources Amount X

Local Costs 200 284 484 48Foreign Costs - 516 516 52Total Costs - Amount 200 800 1,000

-% 20 80 -100


1982 1983 1984 1985 Total 1984

Local Sources - - 100 100 200 -External Sources - - 400 400 800 -Total - - 500 500 1,000 -

- 61-

IX. STATUS OF PREPARATION: CDB is planning to finance the project.

X. TERMS OF FINANCING:

Interest Rate: 4%.Amortization Period: 15 years.

XI. PROJECT IMPLICATIONS:

Operating and Maintenance Costs: None.Debt Obligations: None during 1982-85.

XII. TECHNICAL ASSISTANCE REQUIRED: None.

- 62 -

ST. KITTS-NEVIS


Industry(US$ '000)

I. NAME OF PROJECT: Consolidated Line of Credit.






Description: The project is a continuation of the CDBagricultural and industrial credit scheme.



Local Costs -Foreign Costs - 1,300 1,300 100Total Costs - Amount - 1,300 1,300

- % 100 100


1982 1983 1984 1985 Total 1985

Local Sources - - - - - -External Sources - 196 392 588 1,176 .124Total - 196 392 588 1,176 124

- 63 -

IX. STATUS OF PREPARATION: CDB is replenishing the ongoing creditprogram. A restructure of DFC with branches on Nevis was acceptedas a precondition of continuing the project.




Operating and Maintenance Costs: None.Debt Obligations: None during 1982/85.


- 64 -

ST. KITTS-NEVIS


Industry(US$ '000)

I. NAME OF PROJECT: Vegetable Dehydration Project

II. EXECUTING GOVERNMENT AGENCY: Ministry of Trade, Industry and Tourism





A. Description: Construction of a vegetable dehydration plant.

B. Justification: Dehydrated vegetables can be shipped to theUnited Kingdom thereby providing increasedexport revenues.



Local Costs 200 200 20Foreign Costs 800 800 80Total Costs - Amount - 1,000 1,000

- % 100 100


1982 1983 1984 1985 Total 1985

Local Sources - - - - - -External Sources - 100 400 400 900 100Total - 100 400 400 900 100

- 65 -

IX. STATUS OF PREPARATION: Study has been undertaken to identifyvegetables that can be dehydrated and sold in the UK.


Operating and Maintenance Costs: None during 1982/85.Debt Obligations: None during 1982/85.

XI. TECHNICAL ASSISTANCE REQUIRED: CDB is giving the required technicalassistance.

- 66 -

ST. KITTS-NEVIS


Tourism(US$ '000)

I. NAME OF PROJECT: Hotel Expansion and Development




V. LENDING AGENCY: Unknown


A. Description: Enlargement of existing hotels and constructionof smaller hotels.

B. Justification: To accommodate the increased number of tourists.



Local Costs 125 - 125 20Foreign Costs - 500 500 80Total Costs - Amount 125 500 625

- % 20 80 100


1982 1983 1984 1985 Total 1985

Local Sources - - 10 20 30 95External Sources - - 40 80 120 380Total - - 50 100 150 475

- 67 -

IX. STATUS OF PREPARATION: The project may start in early 1983.




- 68 -

ST. KITTS-NEVIS


Tourism(US$ '000)

I. NAME OF PROJECT: Tourist Shopping Arcade

II. EXECUTING GOVERNMENT AGENCY: Ministry of Trade, Industry, and Tourism



V. LENDING AGENCY: Possibly EDF


A. Description: The project would build a handicraft emporiumfor tourist shopping where local handicraftsmade in the currently operating handicraftmanufacturing center would be sold. The arcadewould also function as a tourist promotioncenter.

B. Justification: The premises would enable tourists to examineand purchase handicrafts at one central site.An increase in tourism receipts and in localhandicraft employment is expected to result fromthe project.




-% 42 58 100


1982 1983 1984 1985 Total 1985

Local Sources - 14 -21 - 35 -External Sources - 28 21 - 49 -Total - 42 .42 - 84 -

- 69 -

IX. STATUS OF PREPARATION: The project has been identified and a sitehas been selected.


Operating and Maintenance Costs: None during 1982/85.Debt Obligations: Not determined.


- 70 -

ST. KITTS-NEVIS


Transportation(US$ '000)

I. NAME OF PROJECT: Old Road Bay By-Pass

II. EXECUTING GOVERNMENT AGENCY: Ministry of Communications, Works andPublic Utilities



V. LENDING AGENCY: Unknown


A. Description: The project would construct a bypass(1.2 miles), at high eIevation, followingthe original route behind Old Road Bay.

B. Justification: To replace the present route from the north-western end of St. Kitts which is consideredvery hazardous.




- % 10 90 100


1982 1983 1984 1985 Total 1985

Local Sources - 12 17 - 29 -External Sources - 111 157 - 268 -

Total - 123 174 - 297 -

- 71 -

IX. STATUS OF PREPARATION: The project has been identified andrequests for financing have been submitted.


Operating and Maintenance Costs: None during 1982/85.Debt Obligations: None.


- 72 -

ST. KITTS-NEVIS



I. NAME OF PROJECT: Southeast Peninsula Road and Ferry

II. EXECUTING GOVERNMENT AGENCY: Ministry of Communications, andPublic Utilities



V. LENDING AGENCY: EDF or possibly USAID


A. Description: The project would construct a primaryroad covering about five miles toconnect with a ferry service.

B. Justification: The project is expected to contribute totourism development and industrialization.It will improve significantly the efficiencyof the transportation between St. Kitts andNevis.



Local Costs - 1,600 1,600 40Foreign Costs - 2,400 2,400 60Total Costs - Amount - 4,000 4,000

- % 100 100


1982 1983 1984 1985 Total 1985

Local Sources - - - - - -External Sources - 480 976 1,063 2,519 1,481Total - 480 976 1,063 2,519 1,481

- 73 -

IX. STATUS OF PREPARATION: Project has been identified. EDF andUSAID have been approached.




- 74 -

ST. KITTS-NEVIS



I. NAME OF PROJECT: New Castle Airport - Nevis




V. LENDING AGENCY: Possibly CIDA


A. Description: Project would extend the runway by 2,000 ft.for a total length of 4,000 ft. (capable oflanding AVRO 748's of Liat) and constructa new terminal building.

B. Justification: Project would permit direct service to Nevisattracting a greater number of tourists.




- % 10 90 100


1982 1983 1984 1985 Total 1985

Local Sources - - - 48 48 -External Sources - - 254 198 452 -Total - - 254 246 500 -

- 75 -

IX. STATUS OF PREPARATION: CIDA has completed resurfacing theexisting 2,000-ft. runway. Feasibility study of further runwayextension and new terminal building has yet to be undertaken.


Operating and Maintenance Costs: None during 1982/85.Debt Obligations: None.

XI. TECHNICAL ASSISTANCE REQUIRED: Technical assistance is requiredfor feasibility study. The state is also interested in taking partin the CIDA Airport Maintenance and Management Project.

- 76 -

ST. KITTS-NEVIS



I. NAME OF PROJECT: Agricultural Feeder Roads - St. Kitts and Nevis






A. Description: Project would construct 8.8 Km of agriculturalfeeder roads in 4 different locations inSt. Kitts and 4.2 Km in 2 different locationsin Nevis.

B. Justification: Project will assist the Government to pursue itspolicy of agricultural diversification and willpromote the production of more food for domesticconsumption.



Local Costs - 752 752 60Foreign Costs - 502 502 40Total Costs - Amount - 1,254 1,254

-% - 100 100


1982 1983 1984 1985 Total 1985

Local Sources - - - - -External Sources 350 904 - - 1,254Total 350 904 - - 1,254

- 77 -

IX. STATUS OF PREPARATION: Project has been appraised and fundshave been secured.


Operating and Maintenance Costs: None during 1982/85.Debt Obligations: Interest rate 4% p.a.


- 78 -

ST. KITTS-NEVIS



I. NAME OF PROJECT: Landing System (VOR/DME Equipment)




V. LENDING AGENCY: Possibly CDB


A. Description: Acquisition of landing equipment.

B. Justification: To improve airport landing facilities.



Local Costs - - -Foreign Costs 370 370 100Total Costs - Amount - 370 370

-% 100 100


1982 1983 1984 1985 Total 1985


External Sources 370 - - - 370Total 370 - - - 370

- 79 -

IX. STATUS OF PREPARATION: The project has been identified. The studywas done by EDF in 1979. CIDA has been approached for funds.


Operating and Maintenance Costs: To be met by airport revenues.Debt Obligations: Not known.

XI. TECHNICAL ASSISTANCE REQUIRED: In June 1979 EDF finished a studyon navigational facilities at Golden Rock Airport which includedspecifications for new equipment.

- 80 -

ST. KITTS-NEVIS


Power(US$ '000)

I. NAME OF PROJECT: Power Station Extension (Nevis)/Generating Sets forNevis Electricity.

II. EXECUTING GOVERNMENT AGENCY: Ministry of Communications, Works andPublic Utilities.





A. Description: Project involves procurement and installationof two 920 KW power generating sets for Nevis,and construction of a new power station.

B. Justification: Energy is a severe constraint on Nevis andis expected to worsen with increased demandarising from industrial expansion.


Financed by TotalLocal ExternalSources Sources Amount Z

Local Costs - - -

Foreign Costs - 1,676 1,676 100Total Costs - Amount - 1,676 1,676

-% - 100 100


1982 1983 1984 1985 Total 1985


External Sources 1,676 - - - 1,676Total 1,676 - - - 1,676

- 81 -

IX. STATUS OF PREPARATION: UK will provide two generating sets in 1982.


Operating and Maintenance Costs: Not yet determined.

Debt Obligations: Not determined.


- 82 -

ST. KITTS-NEVIS


Power(US$ '000)

I. NAME OF PROJECT: Replacement Underground Power Cables






A. Description: The project would install new underground cablesin Basseterre to replace the existing worn-outcables.

B. Justification: The underground cables are old and overworked,requiring replacement to ensure uninterruptedpower supply.



Local Costs 60 - 60 20

Foreign Costs 60 180 240 80Total Costs - Amount 120 180 300

-% 40 60 100


1982 1983 1984 1985 Total 1985

Local Sources - 120 - - 120 -External Sources - - 180 - 180 -Total - 120 180 - 300 -

- 83 -

IX. STATUS OF PREPARATION: No action has been taken. This projectmight be included in a bigger project.


Operating and Maintenance Costs: No increase in operating costsexpected.

Debt Obligations: None.


- 84 -

ST. KITTS-NEVIS


Power(US$ '000)

I. NAME OF PROJECT: Upgrading Electrical System - St. Kitts

II. EXECUTING GOVERNMENT AGENCY: Ministry of Communications,Works and Public Utilities





A. Description: The project would install a 3.6 MW generatingunit. The type of unit will depend partly onoutcome of detailed project study to be preparedduring 1981-82. The unit is estimated to beadequate to meet demand up to 1986, but actualrequirements depend on development of Frigate Bayscheme and Water Supply Department.

B. Justification: The available supply of electrical power onSt. Kitts is estimated to fall short of demandby 1982.



Local Costs 56 - 56 2Foreign Costs 250 2,472 2,722 98Total Costs - Amount 306 2,472 2,778

-% 11 89 100


1982 1983 1984 1985 Total 1985

Local Sources - - 173 127 300 -External Sources - - 494 1,984 2,478Total 667 2,111 2,778 -

- 85 -

IX. STATUS OF PREPARATION: Project study was undertaken by CDB in 1978.Additional technical assistance is required to reassess demand inlight of developments in tourism and public utilities sectors, andto write detailed specifications suitable for seeking competitivebids.


Operating and Maintenance Costs: None during 1982/85.Debt Obligations: 4% interest rate per year.

XI. TECHNICAL ASSISTANCE REQUIRED: Technical assistance will be requiredat all stages.

- 86

ST. KITTS-NEVIS


Communications(US$ '000)

I. NAME OF PROJECT: Telephone Works






To improve the telephone system.




- % 27 73 100


1982 1983 1984 1985 Total 1985

Local Sources 32 35 21 - 88 -External Sources 86 94 56 - 236 -Total 118 129 77 - 324 -

- 87 -

IX. STATUS OF PREPARATION: The UK has been approached. Tariff rateshave to be adjusted to attract donors.



XI. TECHNICAL ASSISTANCE REQUIRED: The UK is expected to provide thenecessary technical assistance.

- 88 -

ST. KITTS-NEVIS


Communications(US$ '000)

I. NAME OF PROJECT: Telephone--Short Term Replacement/Extension




V. LENDING AGENCY: Unknown.


A. Description: Project involves: (a) replacement of defectivecables, (b) limited expansion of all fourexchanges of the system, and (c) expansion of theline plant network. The project is expected tomeet most of the vital needs in the short term,and is to be followed by the Long Term Replacement/Extension Program.

B. Justification: Present capacity is less than 2,000 lines, and thewaiting list is expected to grow with industrialand hotel expansion.


Financed by TotalLocal ExternalSources Sources Amount _

Local Costs 219 - 219 20Foreign Costs 265 611 876 80Total Costs - Amount 484 611 1,095

- % 44 56 100


1982 1983 1984 1985 Total 1985

Local Sources - 224 98 62 484 -External Sources - 278 125 208 611 -

Total - 502 223 370 1,095 -

- 89 -

IX. STATUS OF PREPARATION: Project has been broadly defined; implemen-tation has begun with local funds which are insufficient to completethe project.


Operating and Maintenance Costs: None during 1982/85.Debt Obligations: Not determined.

XI. TECHNICAL ASSISTANCE REQUIRED: ITU and UNDP have expressed interestin providing technical assistance for preparation and implementation.

- 90 -

ST. KITTS-NEVIS


Water Supply and Sewerage(US$ '000)

I. NAME OF PROJECT: Water Development




V. LENDING AGENCY: CIDA, CDB


A. Description: The project would implement a long term masterplan for water supply which includes a shortterm plan for Nevis. The plan includes atreatment plant, reservoirs, pipelines, andwells.

B. Justification: A water storage system is needed on both islandsto ensure uninterrupted supply since rainfallis highly variable.



Local Costs 818 182 1,000 25Foreign Costs - 3,000 3,000 75Total Costs - Amount 818 3,182 4,000

-% 20 80 100


1982 1983 1984 1985 Total 1985

Local Sources - 191 196 282 669 -External Sources - 1,188 787 661 2,636 695Total - 1,379 983 943 3,305 695

- 91 -

IX. STATUS OF PREPARATION: Execution of this project depends on theresults of the exploratory drilling of water being carried out by CIDA.


Operating and Maintenance Costs: None during 1982/85.Debt Obligations: Interest rate: 4% per year on CDB funds.

XI. TECHNICAL ASSISTANCE REQUIRED: CIDA is expected to provide thetechnical assistance required for implementation.

- 92 -

ST. KITTS-NEVIS


Water Supply(US$ '000)

I. NAME OF PROJECT: Study of Water Utility and Tariff Restructuring.






A. Description: This is a study of the institutional set up andtariff structure of the water utility. Its findingswill lead to institutional strengthening of thewater utility and tariff restructuring.




- % 14 86 100


1982 1983 1984 1985 Total 1985

Local Sources 14 - - - 14 -External Sources 85 - _ _ 85 _Total 99 99

- 93 -

IX. STATUS OF PREPARATION: Study is in progress.


Operating and Maintenance Costs: None during 1982/85.Debt Obligations: Interest payment.

XI. TECHNICAL ASSISTANCE REQUIRED:

- 94 -

ST. KITTS-NEVIS


Education(US$ '000)

I. NAME OF PROJECT: Development of Tertiary Education

II. EXECUTING GOVERNMENT AGENCY: Ministry of Education, Health andSocial Affairs



V. LENDING AGENCY: Unknown.


A. Description: The project consists of upgrading the existingfacilities in order to establish a college.Thus training for nurses, paramedics, technicians,

first and second university levels, civil servantsand continuing education could be organized inone institution.

B. Justification: Present standards of tertiary education are lowdue to poor facilities and inefficient use ofteaching resources. A single institution wouldbetter utilize facilities and staff.


Financed by TotalLocal External

Sources Sources Amount %


-% 20 80 100


1983 1984 1985 Total 1985

Local Sources 19 21 69 109 17External Sources 74 86 276 436 68

Total 93 107 345 545 85

- 95 -

IX. STATUS OF PREPARATION: Project has been identified. A committee wasestablished to advise the government on project implementation.


Operating and Maintenance Costs: No incremental costs during 1982/85.Debt Obligations: Not yet determined.


- 96 -

ST. KITTS-NEVIS


Education(US$ '000)

I. NAME OF PROJECT: Student Loans Higher Education II.






The project is a continuation of the existing CDB student loanscheme.



Local Costs 150 150 100Foreign Costs Total Costs - Amount 150 150

-% 100 100


1982 1983 1984 1985 Total 1985

Local Sources - - - - - -External Sources - 37 37 39 113 37Total - 37 37 39 113 37

- 97 -

IX. STATUS OF PREPARATION: CDB has appraised the project.




Operating and Maintenance Costs: None.Debt Obligations: None during 1982/85.


- 98 -

ST. KITTS-NEVIS

1982/85 ProJect List - Individual Project Description

Miscellaneous(US$ '000)

I. NAME OF PROJECT: Integrated Nevis Project

II. EXECUTING GOVERNMENT AGENCY: Ministry of Nevis Affairs



V. LENDING AGENCY: Possibly CDB


A. Description: The project involves water development,feeder roads and credit.

B. Justification: To assist the Government's effort todevelop Nevis.



Local Costs 250 - 250 20Foreign Costs - 1,000 1,000 80Total Costs - Amount 250 1,000 1,250

-% 20 80 100


1982 1983 1984 1985 Total 1985

Local Sources - 80 80 90 250 -External Sources - 320 320 360 1,000 -

Total - 400 400 450 1,250 -

- 99 -

IX. STATUS OF PREPARATION: The study is being prepared.


Interest Rate: Unknown.

Amortization Period: Unknown.


Operating and Maintenance Costs: None during 1982/85.Debt Obligations: Unknown.


- 100 -

ST. KITTS-NEVIS

STATISTICAL APPENDIX

Table of Contents

Table No. Page

I. POPULATION AND LABOR FORCE

1.1 Population Trends, 1972-80 .......... ...................... 1021.2 Employment Trends, 1970-80 ............. . . ............. 103

II. NATIONAL ACCOUNTS

2.1 Sectoral Origin of Gross Domestic Product, 1977-81 ........ 1042.2 Resources and Uses of Resources at Constant Market

Prices, 1977-81 ..........* ............. ... .................... 105

2.3 Expenditure on Gross Domestic Product, 1977-81 ............ 1062.4 Actual and Projected Sources and Uses of Resources,

1980-85 .................................................. ........... 107

III. BALANCE OF PAYMENTS

3.1 Balance of Payments, 1977-81 .................... 1083.2 Imports by S.I.T.C. Classification, 1976-81 .............. 1093.3 Major Exports, 1976-81 . ......................... . ....... . 110

3.4 Actual and Projected Balance of Payments, 1980-85 ....... ill

IV. EXTERNAL PUBLIC DEBT

4.1 Summary of External Public and Publicly GuaranteedDebt Operations, 1977-81 ...... .......... ................ 112

V. PUBLIC SECTOR FINANCES

5.1 Central Government Current Expenditures, 1976-81 ......... 1135.2 Central Government Current Revenue, 1976-81 ........... ..... 1145.3 Central Government Operations, 1977-81 .................... 115

5.4 Financing of Public Sector Investment, 1977-81 .. *......... 1165.5 Estimated and Projected Central Government Finances,

1981-85 ...................................................... .... 117

5.6 Financing of Public Sector Investment Program, 1980-85 ... 1185.7 Public Sector Investment Program, 1982-85 ..... oo.......... 119-22

VI. MONEY AND BANKING

6.1 Summary Commercial Bank Operations, 1980-81 ... * ........... 1236.2 Distribution of Bank Loans and Advances, 1975-81 ......... 124

- 101 -

Table No. Page

VII. AGRICULTURE, INDUSTRY AND TOURISM

7.1 Production of Selected Agricultural Products, 1976-81 .... 1257.2 Tourism Data, 1978-82 .................................... 126

VIII. PRICES

8.1 Retail Price Index, 1976-81 ............................ 127

Table 1.1: ST. KITTS - NEVIS - POPULATION TPENDS, 1972-1980

1972 1973 1974 1975 1976 1977 1978 1979 1980

Total End of Year Population 48,105 47,414 47,794 48,751 49,461 49,864 49,594 49,630 48,699

*Crude Birtlh Rate (per '000) 25.8 24.8 24.0 22.8 26.9 24.4 21.3 24,4 ...

Crude Death Rate (per '000) 11.3 11.0 10.7 8.9 9.7 10.1 9.7 10.7 ...

Rate of Natural Increase (per '000) 14.5 13.8 13.3 13.9 17.2 14.3 11.6 13.7 ...

Total Births 1,236 1,186 1,143 1,099 1,320 1,212 1,059 1,211 ...

Total Deaths 541 525 510 427 476 503 466 529 ...

Natural Population Increase 695 661 633 672 844 709 593 682

Net Migration / -239 -1,352 -253 285 -134 -306 -863 -646 ...

Net Population Increase 456 -691 380 957 710 403 -270 36 ...

a/ Net migration = Arrivals minus Departures.

b/ The total population figure is from the 1980 Census. The Statistics Office is in the process of estimating the other

parameters and revising downwards the figures for previous years.

Sources: Statistics Office, Planning Unit and ECCM Secretariat.

- 103 -

Table 1.2 ST. KITTS-NEVIS - EMPLOYMENT TRENDS, 1970-80 a/

1970 1975 1980

Agriculture, Forestry, Fishing 4,195 4,701 4,460

Manufacturing 1,265 2,138 2,979

Construction 170 541 600

Utilities 224 264 350

Trade and Hotels 1,399 1,637 1,696

Other Services 3,650 3,912 3,481

Other not stated 352 - -

TOTAL Employment /b 11,255 13,200 13,566

a/ Distribution by industry group based on Ministry of Labourestimates (Annual Reports for 1975 and 1978) and on 1970 Census.

b/ Total employment derived from estimated mid-year population andapplication of ratios from 1970 Census.

Source: 1970 Census, Statistical Office, Planning Unit and ECCM Secretariat.

- 104 -

Table 2.1: ST. KITTS - NEVIS - SECTORAL ORIGIN OF GROSSDOMESTIC PRODUCT, 1977-81

(EC$ million - 1977 prices)

Provisional1977 1978 1979 1980 1981

Agriculture 22.6 19.5 18.3 17.1 16.3Sugarcane 8.6 6.9 6.3 5.9 5.4Sugar and Molasses 8.6 7.3 6.7 5.7 5.2Other Agriculture 5.4 5.3 5.3 5.5 5.7

Mining and Quarrying 0.2 0.3 0.4 0.4 0.4

Manufacturing 3.5 3.8 4.5 5.0 5.2

Construction 4.6 4.4 5.2 5.9 6.1

Services 34.0 37.9 40.7 41.1 41.7Commerce 6.2 6.2 6.6 6.6 6.7Tourism 1.7 3.0 3.6 3.5 3.8Transportation and

Communications 5.7 5.6 5.8 6.0 6.2Housing 5.3 5.5 5.5 5.5 5.7Financial Services 4.2 4.6 5.0 5.0 4.8Electricity and Water 0.7 0.8 0.9 0.8 0.8Government 9.3 11.3 12.5 12.9 12.9Other Services 0.9 0.9 0.8 0.8 0.8

GDP at Factor Cost 64.9 65.9 69.1 69.5 69.7

Source: Mission estimates

- 105 -

Table 2.2: ST. KITTS - NEVIS - RESOURCES AND USES OFRESOURCES AT CONSTANT MARKET PRICES, 1977- 81

(EC$ million - 1977 prices)

Estimated

1977 1978 1979 1980 1981

Gross Domestic Product 78.2 82.8 87.0 89.9 89.9

Imports (including NFS) 59.1 65.3 64.8 70.9 76.7Exports (including NFS) 45.1 47.3 45.9 39.9 39.7

Consumption 63.9 77.7 79.7 95.1 103.9

Public 24.8 26.4 27.6 26.7 28.9Private 39.1 51.3 52.1 68.4 75.0

Investment 28.3 23.1 26.2 25.8 23.0

Public 9.6 10.2 9.9 12.3 9.0Private 18.7 12.9 16.3 13.5 14.0

Gross National Savings 25.1 21.7 19.7 9.3 4.6

Public Sector 7.3 3.4 7.4 10.3 -5.9Private Sector 17.8 18.3 12.3 -1.0 10.5

Memorandum Items

Investment Financing 28.3 23.1 26.2 25.8 23.0

National Savings 25.1 21.7 19.7 9.3 4.6Current Account Balance of Payments 3.2 1.4 6.5 16.5 18.4


- 106 -

Table 2.3: ST. KITTS - NEVIS - EXPENDITURE ON GROSSDOMESTIC PRODUCT, 1977-81

(EC$ million)

Estimated1977 1978 1979 1980 1981

Total Consumption 63.9 79.1 99.6 138.0 161.1

Public 24.8 29.6 34.5 39.3 46.3Private 39.1 49.5 65.1 98.7 114.8

Gross Domestic Investment 28.3 26.9 35.9 42.3 42.0

Public 9.6 11.9 13.6 20.1 27.0Private 18.7 15.0 22.3 22.2 15.0

Goods and Non Factor Services 14.0 14.6 29.2 51.3 63.5Balance

Exports of Goods and NFS 45.1 51.0 57.0 70.2 75.6Imports of Goods and NFS 59.1 65.6 86.2 121.5 139.1

Gross Domestic Product at CurrentMarket Prices 78.2 91.4 106.3 129.0 139.6

Minus: Indirect Taxes 13.3 18.4 23.2 32.8 34.9

Gross Domestic Product at CurrentFactor Cost 64.9 73.0 83.1 96.2 104.7

Net Factor Income Payments Abroad 0.6 0.0 0.6 0.8 0.5

Gross National Product at CurrentFactor Cost 65.5 73.0 83.7 97.0 105.2


- 107 -

Table 2.4: ST. KITTS-NEVIS - ACTUAL AND PROJECTED SOURCESAND USES OF RESOURCES, 1980-85(EC$ million - 1977 prices)

Actual Estimated Projected

1980 1981 1982 1983 1984 1985

Gross Domestic Product 89.9 89.9 90.8 95.0 99.0 103.6

Imports (including NFS) 70.9 76.7 78.0 78.0 78.0 79.0Exports (including NFS) 39.9 39.7 40.0 42.0 44.0 46.0

Consumption 95.1 103.9 103.8 105.0 106.0 108.6Public 26.7 28.9 31.1 30.0 30.0 31.0Private 68.4 75.0 72.7 75.0 76.0 77.6

Investment 25.8 23.0 25.0 26.0 27.0 28.0

Gross National Savings 9.3 4.6 7.0 10.0 13.0 16.0Public 10.3 -5.9 0.0 2.5 5.0 6.0Private -1.0 10.5 7.0 7.5 8.0 10.0

Memorandum ItemInvestment Financing 25.8 23.0 25.0 26.0 27.0 28.0

National Savings 9.3 4.6 7.0 10.0 13.0 16.0Current Account Balance 16.5 18.4 18.0 16.0 14.0 12.0

(as % of GDP)

Gross Domestic Product 100.0 100.0 100.0 100.0 100.0 100.0Resource Balance 34.4 41.2 41.9 37.9 34.4 31.9Imports (including NFS) 78.8 85.4 85.9 82.1 78.8 76.3Exports (including NFS) 44.4 44.2 44.0 44.2 44.4 44.4

Consumption 105.7 115.6 114.3 110.5 107.0 104.8Public 29.6 32.2 34.3 31.6 30.3 29.9Private 76.1 83.4 80.0 78.9 76.7 74.9

Investment 28.7 25.6 27.5 27.4 27.3 27.0

Gross National Savings 10.3 5.1 7.7 10.5 13.1 15.4Public 11.5 -6.6 0.0 2.6 5.0 5.8Private -1.2 11.7 7.7 7.9 8.1 9.6

Memorandum ItemInvestment Financing 28.7 25.6 27.5 27.4 27.3 27.0

National Savings 10.3 5.1 7.7 10.5 13.1 15.4Current Account Balance 18.4 20.5 19.8 16.9 14.2 11.6


- 108 -

Table 3.1: ST. KITTS-NEVIS - BALANCE OF PAYMENTS, 1977-81(US$ million)

Estimated1977 1978 1979 1980 1981

Exports of Goods and NFS 16.7 18.9 21.1 26.0 28.0Imports of Goods and NFS 21.9 24.3 31.9 45.0 51.5

Resource Balance -5.2 -5.4 -10.8 -19.0 -23.5

Net Factor Service Payments 0.2 0.0 0.2 0.3 0.2Transfers (net) 3.8 4.8 7.4 8.3 10.4

Current Account Balance -1.2 -0.6 -3.2 -10.4 -12.7

Private Capital a/ 1.1 -1.5 -0.6 5.1 8.8

Public Capital 0.8 2.3 3.9 5.4 3.8Grants 1.0 2.4 2.0 3.3 2.1Loans 0.4 0.4 2.5 4.0 2.2Amortization -0.6 -0.5 -0.6 -1.9 -0.5

Change in Government Assets(increase -) -0.7 -0.2 -0.1 -0.1 0.1

a/ Includes the financial system and error and omissions.

Source: Mission estimates.

-109 -

Table 3.2: ST. KITTS - NEVIS - IMPORTS BY S.I.T.C. CLASSIFICATION, 1976-81

(US$ million)

Estimated1976 1977 1978 1979 1980 1981

Total 22.3 21.9 24.3 31.9 44.6 50.0

Food 5.0 5.0 5.9 6.7 8.5 9.0

Beverages and Tobacco 0.5 0.5 0.8 0.7 1.0 1.2

Inedible Crude Materials (except Fuels) 0.6 0.7 0.5 0.7 0.8 1.0

Mineral Fuels, Lubricants, and RelatedMaterials 1.7 1.9 2.0 2.7 4.9 4.6

Animal and Vegetable Oils and Fats 0.2 0.2 0.2 0.2 0.2 0.4

Chemicals 2.2 1.7 2.2 2.5 3.7 4.7

Manufactured Goods (classified chiefly by 4.6 7.7 10.3 12.0material)37 40 46 77 103 20

Machinery and Transport Equipment 6.6 6.2 5.4 7.0 9.5 10.7

Miscellaneous Manufactured Articles 1.8 1.7 2.6 3.6 5.5 6.0

Miscellaneous Transactions -- -- 0.1 0.1 0.2 0.4

Sources: Planning Unit and mission estimates

- 110 -

Table 3.3: ST. KITTS-NEVIS - MAJOR EXPORTS, 1976-81

(Value in US$'000 and Volume in Units indicated '000)

Estimated

1976 1977 1978 1979 1980 1981

SugarValue 10,205.2 9,367.0 11,935.4 11,487.0 14,347.8 12,030.0Volume (tons) 31.0 38.0 36.3 36.8 31.5 28.9Unit Price 329.2 245.6 370.0 312.1 457.1 416.3

MolassesValue 255.5 356.0 384.0 324.0 470.1 501.6Volume (gallons) 998.0 1,480.0 1,600.0 1,412.0 1,821.3 2,367.0Unit Price 0.26 0.24 0.24 0.23 0.26 0.21

CottonValue 79.8 33.4 19.7 6.0 5.5 59.7Volume (pounds) 49.0 21.0 15.0 5.0 2.2 23.9Unit Price 1.63 1.59 1.31 1.31 2.50 2.50

Beer and AleValue 120.0 189.0 124.7 143.9 347.0 385.0Volume (gallons) 48.0 75.0 51.0 50.0 93.9 96.0Unit Price 2.50 2.52 2.44 2.88 3.69 4.00

LobstersValue 65.2 33.3 64.4 28.9 41.1 ... a/Volume (pounds) 49.0 21.0 44.0 18.0 16.8 ...Unit Price 1.33 1.58 1.46 1.61 2.45 ...

Total Exports 17,757.0 15,174.0 15,818.0 16,800.0 20,336.0 17,600.0

a/ Export data not available.

Sources: Planning Unit and mission estimates.

Table 3.4: ST. KITTS-NEVIS - ACTUAL AND PROJECTED BALANCE OF PAYMENTS, 1980-85

(US$ million)

Act. Est. Projected1980 1981 1982 1983 1984 1985

Exports of Goods and NFS 26.0 28.0 27.5 31.1 34.8 38.1Imports of Goods and NFS 45.0 51.5 52.2 56.5 59.8 63.1

Resource Balance -19.0 -23.5 -24.7 -25.4 -25.0 -25.0

Net Factor Service Payments 0.3 0.2 0.2 0.2 0.2 0.2Transfers (net) 8.3 10.4 11.1 11.8 12.2 12.6

Current Account Balance -10.4 -12.7 -13.4 -13.4 -12.6 -12.2

Private Capital - 4.9 8.8 6.1 6.0 4.4 5.5

Public Capital 5.4 3.8 7.3 7.4 8.2 6.7Grants and Loans 7.3 4.3 7.7 8.0 8.8 7.8Amortization -1.9 -0.5 -0.4 -0.6 -0.6 -1.1

Change in Government Assets (increase -) -0.1 0.1 - - -

a/ Includes the financial system.


- 112 -

Table 4.1: ST. KITTS-NEVIS - SUMMARY OF EXTERNAL PUBLIC aND PUBLICLYGUARANTEED DEBT OPERATIONS,- 1977-81

(US$ million)

Est.1977 1976 1979 1980 1981

Outstanding and Disbursed Debtat End of Period 5.2 5.1 7.0 9.1 10.8

Outstanding and Disbursed Debtat Beginning of Period 5.4 5.2 5.1 7.0 9.1

Plus: Net Disbursements -0.2 -0.1 1.9 2.1 1.7Disbursement 0.4 0.4 2.5 4.0 2.2Amortization -0.6 -0.5 -0.6 -1.9 -0.5

Debt Service Payments 0.7 0.7 0.9 2.3 0.8Amortization 0.6 0.5 0.6 1.9 0.5Interest 0.1 0.2 0.3 0.4 0.3

(Percent)

Disbursed Balance/GDP 18.0 15.0 17.8 19.0 20.9Net Disbursement/GDP -0.7 -0.3 4.8 4.4 3.3Debt Service/GDP 2.4 2.1 2.3 4.8 1.5Debt Service /Exports of Goods

and Nonfactor Services 4.2 3.7 4.3 8.8 3.0

Average Interest Rate b/ 1.9 3.8 5.9 5.7 3.3

a/ Includes Central Government and Central Government guaranteed.Excludes debt held by ECCA.

b/ Ratio of interest payments to debt at beginning of period.


- 113 -

Table 5.1: ST. KITTS - NEVIS - CENTRAL GOVERNMENT CURRENT EXPENDITURES, 1976-81

(EC$ million)

RevisedBudget

1976 1977 1978 1979 1980 1981

Current Expenditures 25.9 25.7 30.7 36.2 48.1 56.7Personal Emoluments a/ 9.5 10.5 14.8 17.5 16.5 27.2Other Wages and Salaries 4.3 2.3 3.1 3.2 4.3 6.3Goods and Services 7.9 7.0 8.1 10.1 20.3 15.4Interest 2.1 3.4 1.9 1.9 2.4 2.3Pensions and Gratuities 1.2 1.6 1.7 1.8 1.0 2.0Transfers 0.9 0.9 1.1 1.7 2.7 3.5

Other Public (0.2) (--) (0.1) (0.9) (1.2) (1.3)Rest of the World (0.7) (0.9) (1.0) (1.2) (1.5) (2.2)

a/ Personal emoluments include wage bonuses paid to public servants, pensioners andsugar workers. For 1979 the implicit amount is EC$2.3 million while for 1980 and1981 the amount is EC$0.7 million and EC$2.5 million, respectively. Both thesefigures appear in the budget as non-recurrent expenditures.

Sources: Ministry of Finance and mission estimates.

- 114 -

Table 5.2: ST. KITTS-NEVIS - CENTRAL GOVERNMENT CURRENT REVENUE,1976-81

(EC$ million)

RevisedBudget

1976 1977 1978 1979 1980 1981

Current Receipts 29.4 27.6 34.6 40.1 55.8 54.5

Direct Taxes 5.3 6.4 8.8 7.3 5.9 4.8Income Taxes 5.2 6.0 8.4 7.0 5.6 4.5Property Taxes 0.1 0.4 0.4 0.3 0.3 0.3

Indirect Taxes 15.9 13.3 18.4 23.2 32.8 34.9

Consumption Tax 4.3 5.1 5.9 6.4 8.8 9.5Import Duties 4.1 4.0 4.7 5.5 8.6 10.3Export Duties (sugar) 0.3 0.3 0.3 0.3 0.3 0.2Stamp Duty 0.4 0.4 0.4 0.4 0.5 1.0Sugar Levy 5.9 2.5 5.1 8.6 11.7 10.5Foreign Exchange Tax - - 0.7 0.8 1.4 1.6Turnover Tax - - - - - 0.1

Other Taxes 0.9 1.0 2.0 1.2 1.5 1.7

Nontax Revenue 8.2 7.9 7.4 9.6 17.0 14.7Distribution of ECCA

Profits 1.4 0.9 0.6 1.5 2.0 3.3Revenue of DepartmentalEnterprises 2.3 2.4 2.4 4.2 3.8 3.7

Other 4.5 4.6 4.4 3.9 11.2 7.7

Budgetary Grants - - - - 0.1 0.1

Source: Ministry of Finance and mission estimates.

- 115 -

Table 5.3: ST. KITTS-NEVIS - CENTRAL GOVERNMENT OPERATIONS, 1977-81

(EC$ million)

Prel.1977 1978 1979 1980 1981

Current Revenue 27.6 34.6 40.1 55.7 54.5Budgetary Grants -- -- -- 0;1 0.1Current Expenditure 25.7 30.7 36.2 48.1 56.7

Current Account Surplusor Deficit (-) 1.9 3.9 3.9 7.7 -2.1

Capital Revenues (0.6) (0.5) (0.1) ( - ) (1.6)Capital Expenditure 7.8 8.5 14.0 23.4 16.0

Overall Surplus or Deficit (-) -5.3 -4.1 -10.0 -15.7 -16.5

Net Foreign Financing (Grantsand Loans) 2.1 6.2 10.4 14.7 10.2

Change in Net InternationalReserves (Increase -) -1.9 -0.5 -0.3 -0.3 0.3

ECCA Borrowing -- -- -- -- --

Net Domestic Financing 5.1 -1.6 -0.1 1.3 6.0of which: Commercial Banks (0.2) (1.4) (-4.9) (-2.1) (6.9)

Sources: Ministry of Finance and mission estimates.

- 116 -

Table 5.4: ST. KITTS-NEVIS - FINANCING OF PUBLIC SECTOR INVESTMENT PROGRAM1977-81

(EC$ million)

1977 1978 1979 1980 1981

Public Sector Capital Expenditures 9.9 12.6 15.9 23.4 16.0

Capital Formation 9.6 11.9 13.6 20.1 15.0Other Capital Expenditure 0.3 0.7 2.3 3.3 1.0

Financing 9.9 12.6 15.9 23.4 16.0

Public Sector Savings 7.3 3.7 9.0 13.0 -9.9

Capital Revenues 0.6 0.6 0.7 - 1.6

Net Domestic Borrowing 1.8 2.4 -3.9 -4.4 13.8Banking System 0.7 2.4. 4 4 11.2 / 13.7Other 1.1 -- -4.3 15.6 - 0.1

Net External Financing 0.2 5.9 10.1 14.4 10.5Grants 2.6 6.5 5.3 8.9 5.7Development Loans 1.1 1.1 6.7 10.8 5.9Amortization -1.6 -1.4 -1.6 -5.0 -1.4Change in Foreign Assets -1.9 -0.5 -0.3 -0.3 0.3

a/ Includes deposits abroad of money from sugar exports.

Sources: Ministry of Finance, National Provident Fund, St. Kitts Public Enterprisesand mission estimates.

- 117 -

Table 5.5: ST. KITTS-NEVIS - ESTIMATED AND PROJECTED CENTRAL GOVERNMENT FINANCES,1981-85

(EC$ million)

Estimated Projected1981 1982 1983 1984 1985

Current Revenue 54.5 59.0 64.0 71.0 75.5

Direct Taxes 4.8 7.0 10.0 12.0 12.0Indirect Taxes 34.9 40.0 44.0 50.0 53.0Nontax Revenue 14.8 12.0 10.0 9.0 10.5

Current Expenditure 56.7 59.0 61.0 65.0 69.0

Wages and Salaries 33.5 34.0 35.0 37.0 38.5Goods and Services 15.4 15.0 17.0 18.0 19.5Interest 2.3 3.0 3.0 3.5 4.0Pensions and Gratuities 2.0 2.0 2.0 2.5 3.0Transfers 3.5 4.0 4.0 4.0 4.0

Current Account Surplus or Deficit (-) -2.2 0.0 3.0 6.0 6.5


Table 5.6 : ST. KITTS-NEVIS - FINANCING OF PUBLIC SECTOR INVESTMENT PROGRAM

1980-85

(EC$ million)

Estimate Projections Total

1980 1981 1982 1983 1984 1985 1982-85 Percent

USES 28.3 17.6 26.6 24.7 22.8 28.6 102.7 100.0Public Sector Capital Expenditure 23.4 16.0 25 23.2 21.3 25.6 95.7 93.2External Amortization a/ 4.9 1.6 1.0 1.5 1.5 3.0 7.0 6.8

SOURCES 28.3 17.6 26.6 24.7 22.8 28.6 102.7 100.0 IPublic Sector Savings 13.0 -9.9 0 5.0 10.0 11.0 26.0 25.3External Financing (Gross) 19.7 11.6 20.8 20.7 17.5 22.0 81.0 78.9 0Borrowing from Banks andother Domestic Sources b/ -4.4 15.9 5.8 -1.0 -4.7 -4.4 -4.3 -4.2

Source: Ministry of Finance, Planning Unit and mission estimates.

a/ Includes change in foreign assetsb/ Includes capital receipts and residual

Table 5.7: ST. KITTS-NEVIS - PUBLIC SECTOR INVESTMENT PROGRAM, 1982-85 Page 1 of 4 pages

(EC$ '000)

1982 1983 1984 1985

Total External Local Total External Local Total External Local Total External Local

ONGOING PROJECTS

AgricultureBayfords Stock Farm Rehabilitation 27 27 - 23 23 - - - - - -

Pilot Citrus Expansion 74 74 - - -

Tree Crop Spraying/Pruning Service 50 50 -Food Crop Production - NACO 36 36 - - -

Crop Production-Nevis(including Cotton Project) 36 3A - 143 45 98Machinery for Livestock Station 10 10 - -Submarketing Depot - Nevis 70 70 - -Livestock Development - Madens (Nevis) 31 31 - 57 57General Improvements - Prospect Progagation Station 57 32 25 -

Con Phipps Peanut Project 3 3 -Low Ground Cattle - Nevis 116 116 -

Beef Milk Production Program (EDF) 274 274 - 274 274 _ 274 274 _ 274 274Fisheries Development 5 - 5 - - - - - - -

Subtotal: Subtotal: 789 759 30 497 399 98 274 274 - 274 274

IndustryIndustrial Estates 600 600 - 429 429 - 278 278 - - -

Consolidated Credit Line - - - 509 509 - 1,019 1,019 - 1,528 1,528 -

Small Business Development 52 52 - 39 39 - - - - - - -

Purchase and Development of Industrial Site (Nevis) 167 167 - 167 167 - - - - - -

Subtotal: 819 819 - 1,144 1,144 - 1,297 1,297 - 1,528 1,528

TransportationFeeder Roads - Nevis 135 135 - 348 348 - - - - - --Repairs to Charlestown Pier 2 2 - - - - - - - - -Golden Rock Airport Terminal 60 60 - - - - - - - - -Golden Rock Airport Drainage 30 30 - - - - - - - - -Deep Water Port and Equipment 2,369 2,369 - - - - - - - - -Improvement of Port Customs Facilities 199 199 - - - - - - - - -

Renovation of Treasury Pier 140 - 140 - - - - - - - -Ground Equipment for Wide Body Jets 468 - 468 - - - - - - - -Resurfacing Roads in St. Kitts 200 - 200 - - - - - - - -Cargo Handling Equipment/Transit Shed 3,348 3,348 - 1,725 1,725 - - - - - -

Nevis Airterminal Building 3 3 - - - - - - - - - -Reseal Airport Tunway 165 - 165 - - - - - - - -Public Works Department Plant 537 537 - 500 500 - - - - - -

Subtotal: 7,656 6,683 973 2,573 2,573 - - - - - -

of 4 pagesTable 5.7: *ST. KITTS-NEVIS - PUBLIC SECTOR PROGRAM, 1982-85 (Cont'd)

(EC$ '000)

1982 1983 1984 1985Total External Local Total External Local Total External Local Total External Local

ONGOING PROJECTS (cont'd)

CommunicationsProvision of Public Telephones 15 - 15 - - - _ _ _

Provision of Line Plant to New Areas 90 - 90

Television Station Equipment 130 - 130

Spareparts for New Radio Transmission 10 - 10 24 - 24 - - _ _ _ _

Subtotal: 245 - 245 24 - 24

WaterExploratory Drilling of Water 160 160 - 160 160 -

Cotton Ground Reservoir-Nevis 12 12 - - - - _ _ _ _ _ _

Jessups Reservoir - Nevis 372 372 - - - -

Clearing Pinneys Mini Dams - Nevis 12 12 - - - -

New Castle Pottery Project 56 56 - - - -

Subtotal: 612 612 - 160 160

Housing

Low Cost Housing Project 1,500 - 1.500

HealthImprovement of Health Centres 95 60 35

Improvement, Health Centres and District Homes - Nevis 343 333 10

Repairs to Cardin Home 45 - 45

Subtotal: 483 393 90 - - _ _ _ -

EducationWest Indies Scholarship and Training 80 80 - 88 88Sixth Form College 246 246 - 26 26

Expansion Secondary/Renovation Primary Schools 2,053 2,028 103 920 920

Third Country Training 325 325 - 331 331 - 337 337 - 405 405

Subtotal: 2,704 2,601 103 1,365 1,365 - 337 337 - 405 405

OthersMission Administered Funds 230 230 - 230 230 - 230 230 - 230 230Community Development 58 58 - - - - - - - -

Printing Laws of St. Kitts 60 60 - - - - - -

Police Telecommunications Equipment 101 101 - - - - - -

Purchase of Vehicles 25 25 - - - - - -

Rewiring Police Headquarters - St. Kitts 80 - 80 10 - 10 - -

Purchase of Alarm System 1,200 - 1,200 - - - - -

Repairing Basseterre Public Market 340 300 40 - - - - -

Subototal .: 2,094 774 1,320 240 230 10 230 230 - 230 230 -

TOTAL O;GOING PROJECTS 16,902 12,641 4,261 6,033 5,.71 132 2,138 2,138 - 2,437 2,437 -

of 4 pages

Table 5.7: ST. KITTS-NEVIS - PUBLIC SECTOR INVESTMENT PROGRAII, 1982-85 (Cont'd)(EC$'000)

1982 1983 1984 1985

Total External Local Total External Local Total External Local Total External Local

NEW PROJECTS

AgricultureLivestock Development - - - 648 540 108 1,268 1,160 108 1,685 1,540 145

Irrigation Investigation 100 100 - 435 435 - 405 405 - - - -

Abbatoir - - - 192 170 22 138 116 22 140 135 5

Fisheries Development 300 200 100 2,640 2,540 100 2,242 661 1,581 2,000 1,000 1,000

Corn/Cassava Mill 57 57 - - - - - - -

Mussel Culture 108 103 5 73 65 8 - - - - - -

Tick Control - - - 35 - 35 24 24 -Minor Irrigation - Nevis - - - 30 - 30 30 30 - 32 32

Ginnery Improvements 49 27 22 32 32 -

Afforestation 59 59 - 59 59 - 35 35

Sugar Irrigation 630 630 - - - -Sugar Factory Equipment - - - 251 251 - - -

65 Acre Vegetable Project - - - 551 370 181 294 148 146 - -

Subtotal: 1,303 1,176 127 4,946 4,462 484 4,436 2,579 1,857 3,857 2,707 1,150

IndustryFactory Shells - - - - - - 1,350 1,080 270 1,350 1,080 270

Consolidated Line of Credit - - - 530 530 - 1,058 1,058 - 1,588 1,588 -

Vegetable Dehydration Project - - - 270 270 - 1,080 1,080 - 1,080 1,080 -

Subtotal: 800 800 - 3,488 3,218 270 4,018 3,748 270

TourismRenovation of Historical Building 120 96 24 126 101 25 - - - - - -

Hotel Expansion and Development - - - - - - 135 108 27 270 216 54

Tourist Shopping Arcade - - - 113 75 38 114 57 57 -

Subtotal: 120 96 24 239 176 63 249 165 84 270 216 54

TransportationOld Road Bay Bypass - - - 332 330 32 470 424 46 - -

Southeast Peninsular Road & Ferry - - - 1,296 1,296 - 2,635 2,635 - 2,870 2,870 -

New Castle Airport - Nevis - - 685 685 - 665 535 130

Landing System (VOR/DMR Equipment) 999 999 - - - - - - - - -

Feeder Roads - St. Kitts - Nevis 945 945 - 2,441 2,441 - - - - - -

Subtotal: 1,944 1,944 - 4,069 4,037 32 3,790 3,744 46 3,535 3,405 130

PowerPurchase and Erection 2 Generating Sets

with Auxiliaries and Building - Nevis 4,524 4,524Replacement of Underground Power Cables - - - 324 _ 324 486 486 - - - -

Upgrading Electrical System - St. Kitts - - - - - - 1,801 1.334 467 5,700 5,357 343

Subtotal: 4,524 4,524 - 3Z4 - 324 2,287 1,820 467 5,700 5,357 343

Table 5.7: ST. KITTS-NEVIS - PUBLIC SECTOR INVESTMENT PROGRAM, 1982-85(EC$ '000) Page 4. of 4 pages

1982 1983 1984 1985Total External Local Total External Local Total External Local Total External Local

NEW PROJECTS (Cont'd)

CommunicationsTelephone Works 319 232 87 348 254 94 208 151 57 - - -

Telephone - Short term Replacement/Extension - - - 1,356 751 605 601 337 264 1,000 562 438

Subtotal: 319 232 87 1,704 1,005 699 809 488 321 1,000 562 438

Water and SewerageWater Development - - - 3,723 3,207 515 2,655 2,124 531 2,547 1,786 761Study of Water Utility and Tariff Restructuring 269 229 40 - - - - - - -

Subtotal: 269 229 40 3,723 3,207 516 2,655 2,124 531 2,547 1,786 761

EducationDevelopment of Tertiary Education - - - 251 200 51 289 232 57 931 745 186Student Loans Higher Education II - - - 100 100 - 100 100 - 105 105 -

Subtotal: - - - 351 300 51 389 332 57 1,036 850 186

OthersIntegrated Nevis Project - - - 1,080 864 216 1,080 864 216 1,215 972 243Improvement of Grove Park 220 - 220 - - - - - - - - -

Subtotal: 220 - 220 1,080 864 216 1,080 864 216 1,215 972 243

TOTAL NEW PROJECTS 8,699 8,201 498 17,236 14,851 2,385 19,183 15,334 3,849 23,178 19,603 3,575

SUMMARY

ONGOING PROJECTS 16,902 12,641 4,261 6,003 5,871 132 2,138 2 ,138 - 2,437 2,437 -NEW PROJECTS 8,699 8,201 498 17,236 14,851 2,385 19,183 15,334 3,849 23,178 19,603 3,575

TOTAL INVESTMENT PROGRAM 25,601 20,842 4,759 23,239 20,722 2,517 21,321 17,472 3,849 25,615 22,040 3,575

- 123 -

Table 6.1: ST. KITTS-NEVIS: SUMMARY COMMERCIAL BANKS OPERATIONS1980-81

(EC$ million)

December1980 1981

Net Foreign Assets 16.7 6.4Assets 48.7 50.2

Foreign Currency Holdings (1.4) (1.5)Claims on ECCA (0.4) (9.4)Claims on ECCA Area Banks (3.5) (5.1)Claims on Banks Abroad (16.2) (12.5)Other (27.2) (21.7)

Liabilities -32.0 -43.8Balance Due to ECCA (-5.4) (-3.6)Balance Due to ECCA Area Banks (-5.3) (-11.8)Balance Due to Banks Abroad (-7.3) (-11.3)Nonresident Deposits (-14.0) (-17.1)

Demand (-2.1) (-1.9)Savings (-7.1) (-9.8)Time (-4.8) (-5.4)

ECCA Currency Holdings 3.4 3.9

Net Domestic Assets 26.9 59.4Net Credit to Central Government -18.2 -11.3

Treasury Bills and Debentures (3.5) (4.2)Loans and Overdrafts (0.7) (2.6)Deposits (-22.4) (-18.1)

Net Credit to Statutory Bodies -1.3 2.2Loans and Advances (21.5) (32.6)Deposits (-22.8) (-30.4)

Net Credit to Other Financial Institutions -4.1 -6.3Loans and Advances (0.4) (0.3)Deposits (-4.5) (-6.6)

Credit to Private Sector 50.4 68.3Interbank Float: 3.4 8.3

Due from Banks in Territory (6.4) (12.1)Due Banks in Territory (-3.0) (-3.8)

Net Unclassified Assets -3.3 -1.8

Liabilities to Private Sector 47.0 69.7Demand Deposits 7.0 15.0Time Deposits 9.1 14.8Savings Deposits 30.9 39.6Other -- 0.3

1/ Excludes Anguilla commercial banks. Balance sheets exclusiveof Anguilla commercial banks not available prior to 1980.

Source: East Caribbean Currency Authority.

- 124 -

Table 6.2: ST. KITTS-NEVIS - DISTRIBUTION OF BANK LOANSAND ADVANCES, 1975-81

December 3 1a/ September 3a/ September 30!1975 1976 1977 1978 1979 1979 1980 1980 1981

(In EC$ million)

Total Loans and Advances 26.2 30.6 41.3 53.6 64.6 63.5 84.7 67.7 91.6

Agriculture 1.5 0.8 2.1 5.0 0.6 0.6 0.6 .3 .3Manufacturing 0.8 1.4 3.2 3.3 2.4 6.4 2.5 2.5 4.9Distributive Trades 5.6 6.3 8.2 7.1 10.5 8.9 11.4 10.5 10.3Tourism 1.7 1.8 2.2 5.1 5.2 4.6 4.6 4.4 6.3Transport 2.5 2.6 4.1 8.7 7.9 8.9 14.2. 1.7 4.9Building and Construction 0.3 0.5 1.1 4.6 8.4 7.7 10.2 9.7 10.0Government and OtherStatutory Bodies 3.8 3.6 4.8 3.0 10.9 8.5 16.4 16.2 26.0

Personal 8.5 12.0 13.6 13.1 13.1 13.0 17.9 15.8 16.9Other Loans and Advances 1.5 1.6 2.0 3.7 5.6 4.9 6.9 6.6 12.0

(As percent of total)

Total 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0

Agriculture 5.7 2.6 5.1 9.3 0.9 0.9 0.7 .4 .3Manufacturing 3.1 4.6 7.7 6.2 3.7 10.1 3.0 3.7 5.3Distributive Trades 21.4 20.6 19.9 13.2 16.3 14.0 13.5 15.5 11.2Tourism 6.5 5.9 5.3 9.5 8.0 7.2 5.4 6.5 6.9Transport 9.5 8.5 9.9 16.2 12.2 14.0 16.8 2.5 5.3Building and Construction 1.1 1.6 2.7 8.6 13.0 12.1 12.0 14.3 10.9Central Government andStatutory Bodies 14.5 11.8 11.6 5.6 16.9 13.4 19.4 24.0 28.5

Personal 32.4 39.2 32.9 24.4 20.3 20.5 21.1 23.4 18.5Other Loans and Advances 5.7 5.2 4.8 - 6.9 8.7 7.7 8.1 9.7 13.1

.a Includes Anguilla.,a/ Excludes Anguilla.

Source: East Caribbean Currency Authority.

- 125 -

Table 7.1: ST. KITTS-NEVIS - PRODUCTION OF SELECTEDAGRICULTURAL PRODUCTS, 1976-81

1976 1977 1978 1979 1980 1981

Commodity 1, Sugar(St.Kitts)

ProductionVolume('000 tons,basis 960) 34,782 40,730 38,992 38,855 34,748 31,600

Acres 9,625 11,140 11,100 9,453 10085 ...Yield per acre(tons) 3.69 3.73 3.59 4.20 3.5 ...Consumption Volume(tons) 3,160 2,700 3,100 3,094Exports (tons) 31,617 37,500 35,386 36,615 31,500 28,900

Commodity 2, Cotton(Nevis)

ProductionVolume('OOO lbs.seed cotton) 157 70 45 9 8 79

Acres 523 315 205 72 38 202Yield per acre(lbs.) 300 224 219 132ExportsVolume('000 lbs.pure cotton) 49.5 21.0 13.0 3.0 2.2 23.9Value (EC$'OOO) 209 90 53 16 15 161

Change in Stocks

Not available

Source: Government of St. Kitts-Nevis

- 126 -

Table 7.2: ST. KITTS-NEVIS: TOURISM DATA, 1978-82

Prov. Proj.1978 1979 1980 1981 1982

Total visitor arrivals 29,747 35,973 38,533 45,531 53,959Cruise passengers 2,092 2,993 5,782 10,203 a/ 15,805Other 27,655 32,980 32,751 35,328 38,154

January-May 12,576 14,980 14,693 15,557 16,778June-December 15,079 18,000 18,058 19,771 21,366

Average length of stay (days) 6 6 6 6 6Average expenditure per day (EC$) b/ 51.0 60.2 69.2 89.2 114.5 C/

Tourist expenditure (millions EC$) 8.5 12.0 15.3 22.6 33.6

a! January-November.b/ Cruise passengers are assumed to stay an average of one day and to spend an average

30% of a stayover visitor.CI This average is estimated by the St. Kitts-Nevis Tourist Board. Expenditures for

previous years may be understated.

Sources: Planning Unit and mission estimates.

- 127 -

Table 8.1: ST. KITTS-NEVIS - RETAIL PRICE INDEX, 1976-81

(January 1978=100)

1976 1977 1978 1979 1980 1981

Average 78.9 94.2 105.7 117.0 137.9 152.3Food 76.2 92.4 105.4 116.6 133.2 147.8Alcoholic beveragesand tobacco 83.6 102.1 106.7 118.9 137.4 153.1

Housing 91.0 93.0 112.0 118.1 121.4 124.7Fuel and light 88.8 98.9 103.2 118.2 152.8 159.5Household and mis-cellaneous items 74.5 95.0 109.4 122.6 146.8 171.2

Clothing and footwear 76.4 95.9 104.5 146.8 130.9 148.1Other 87.5 96.5 101.6 130.9 155.1 167.7

End of period ... ... 110.5 126.5 144.7 157.1Food ... ... 110.7 123.6 141.0 152.4Alcoholic beveragesand tobacco ... ... 109.9 125.6 140.4 158.5

Housing ... ... 116.7 119.5 122.2 126.2Fuel and light ... ... 112.4 126.6 158.3 163.4Household and mis-cellaneous items ... ... 112.9 135.8 156.1 181.9

Clothing and footwear ... ... 103.8 130.1 132.3 161.1Other ... ... 105.1 133.4 165.3 169.5

(Percentage change from preceding year)

Average 12.4 19.4 12.2 10.7 17.8 10.4Food 12.0 21.2 14.0 10.6 14.2 11.0Alcoholic beveragesand tobacco 23.2 22.1 4.5 11.4 15.5 11.4

Housing 6.0 2.3 20.4 5.5 2.7 2.7Fuel and light 14.7 11.4 4.3 14.5 29.3 4.4Household and mis-cellaneous items 7.6 27.4 15.2 12.1 19.7 16.6

Clothing and footwear 13.0 25.5 9.0 6.9 17.2 13.1Other 12.9 2.4 5.3 15.0 32.8 8.1

End of period ... ... ... 14.4 14.3 8.6Food ... ... ... 11.6 14.1 8.1Alcoholic beveragesand tobacco ... ... ... 14.3 11.8 12.9

Housing ... ... ... 2.4 2.2 3.3Fuel and light ... ... ... 12.6 25.0 3.2Household and mis-cellaneous items ... ... ... 20.3 14.9 16.5

Clothing and footwear ... ... ... 25.3 1.7 21.8Other ... ... ... 26.9 23.9 2.4

Source: Statistical Division and Planning Unit.

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