Dominica

The purpose of this Country Support Strategy is to provide a framework for EU assistance programmes in Dominica under the 10th EDF. It outlines the current status of EU–Dominica relations, sets out a detailed country diagnosis, summarises the Government’s development agenda, reviews past and present EC cooperation and the activities of other major donors, and concludes with the proposed EU response strategy and its corresponding indicative work programme.

Dominica achieved independence from the UK in November 1978 and adopted a republican form of government in 1989. Elections are constitutionally due every five years. In 1980, Mary Eugenia Charles was elected as the first female prime minister in the Caribbean, remaining in office for 15 years. Dominica is a small lower-mid-income economy with an area of 750 sq km, a population of 72 000 (2005 estimate), a GDP of USD 316 300 000 (EUR 210 870 000), and GDP per capita of USD 4 393 (EUR 2 929) (projected 2007 current market prices). Social indicators are quite good and reflect Dominica’s long-standing tradition of productive investment in human development, including social protection. While the country enjoys a relatively high index of human development (0.798), available data suggest that the economic crisis in 2001/2 led to a rise in poverty and in unemployment. The economy depends on agriculture, primarily bananas, and remains highly vulnerable to climatic conditions and international economic developments. Tourism has been increasing recently as the government seeks to promote 'ecotourism', but requires better air access, which is addressed with the support of the EU and Venezuela. The Government began a comprehensive restructuring of the economy in 2003, which included elimination of price controls, privatisation of the state banana company, and tax increases. To address the economic crisis, the Government engaged in a 3-year IMF Poverty Reduction and Growth Facility, which came to an end in December 2006. The principal development challenges focus around the need to sustain economic growth through economic diversification, combat a still unacceptably high level of poverty, and reduce risks posed by natural disasters. Moreover, to facilitate the transition to a more open, diversified and competitive economy, Dominica needs a more enabling macroeconomic and regulatory environment for private investment. The importance of regaining fiscal sustainability and implementing a successful debt restructuring process is also recognised as a critical precondition for growth. The Government has developed and is implementing a medium-term Growth and Social Protection Strategy (GSPS) for the period 2005-2009. The strategy assumes that poverty will be reduced through balanced economic growth.

The EC aid provided to Dominica since 1975 is estimated at EUR 108 000 000. The biggest share has come through the Stabex and SFA mechanisms, almost three times the amounts of the NIPs, to expedite the ongoing restructuring of the banana sector and support economic diversification. The 8th EDF focused on tourism development, while the 9th EDF originally focused on infrastructure (road maintenance). Following the Mid-Term Review, it was agreed to add macroeconomic support as a second focal sector to enhance Government efforts to address the macroeconomic challenges in conjunction with the IMF/PRGF being implemented at that time.

The EC and the Government propose to allocate 80% of the A Envelope under the 10th EDF to Macroeconomic General Budgetary Support (GBS) to assist the Government with the implementation of policies and strategies aimed at achieving sustained growth and poverty reduction. Approximately 10% of the A Envelope will be allocated to the Technical Cooperation Facility, in particular to support Non-State Actors (NSAs) and possibly to provide Trade-Related Technical Assistance (TRTA). The remaining 10% will be allocated to Technical Assistance to the NAO Office.