Beruflich Dokumente
Kultur Dokumente
February,
HYPERINFLATION AND
1992
STABILIZATION IN NICARAGUA
Josi! Antonio Ocampo
I.
INTRODUCTION
The Nicaraguan economy faced in the 1980s and early 1990s
massive macroeconomic disequilibria.
Economic activity never
recovered the large losses incurred during the 1979 revolution
which brought the Sandinistas into power. Moreover, GDP per capital
fell steadily from 1983 to 1991. As a result of production losses
and rapid population growth, by the late 1980s GDP per capita had
returned to levels comparable to the 1940s. Throughout this process
of economic collapse, private consumption per-capita and real wages
fell even more?
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2
countries in the 1980s. Through the 198Os, Nicaragua continued to
receive massive financing from abroad. Also, according to ECLAC
estimates, the terms of trade did not fared badly, either '/.
However, these favorable events were overwhelmed by the impacts on
production and resource availability of the revolution and the
contra war, the US trade embargo and veto on multilateral lending,
excessive reliance on relatively inflexible bilateral assistance
from the former socialist countries, and a series of natural
disasters.
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substantial macroeconomic disequilibria. Moreover, as opposed to
the pattern typical during the Sandinista period, it faced strong
trade union resistance. This factor, combined with increasing
dollar indexation, resulted, once more, in hyperinflation. In
March, 1991, a new stabilization program was put in place, with
strong backing from the major bilateral donors (particularly the
U.S.) and multilateral agencies. This program was able to build on
previous stabilization efforts and to stop inflation, though at the
cost of significant overvaluation of the cordoba.
Iah,ifls,,paper :, analyzes
m,acroeconomic
.,
,I policies and performance in
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nine sections, the first of which is this introduction. The second
summarizes some features of the Nicaraguan economy prior to the
revolution. The third considers the effects of revolution and the
period of recovery which followed it. The fourth analyzes the
building up of macroeconomic disequilibria during the transition to
and full fledged war economy. The fifth shows the characteristics
of the 1988 adjustment program and hyperinflation. The sixth takes
a close look at the 1989 stabilization program. The seventh
considers the 1990 hyperinflation and its relation to the political
transition from the Sandinista to the Chamorro administration. The
eighth summarizes the major features of the March 1991 program and
the post-stabilization period. Finally, the ninth presents the
major characteristics of the structural reforms underway.
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4
basis for expansion. Later on, the process was reinforced by new
primary exports (beef, sugar, shellfish, etc.) and a boom of
agroindustrial and other manufacturing exports to members of the
Central American Common Market, CACM (Bulmer-Thomas 1987, CEPAL
1981, Gibson 1987a).
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6
I.
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The economic legacy of the last years of the Somoza regime and
the revolutionary uprising was complex. Economic activity severely
contracted in 1978 and 1979, by an accumulated 32% (Table 1). The
capital stock was also severely affected. Losses associated to the
destruction of buildings, equipment and stocks, looting of
inventories, slaughter of immature beef cattle and smuggling of
herds were estimated by ECLAC at $381 million (CEPAL 1981),
equivalent to 18% of 1980 GDP. National Accounts records indicate
that the loss of inventories in 1978-1979 was equivalent to 14.4%
of GDP (see Table 1). To these, we must add capital flight for $535
.'
6
The revolutionary government brought with it some emergency
measures, a plan for economic recovery but, above all, an agenda
for structural change. The latter was presented as a program for a
"mixed economy", in which the State would assume control of the
properties of the Somoza family and his clique and some lrkeyrr
economic sectors, and considerably expand social expenditure and
its contribution to capital accumulation. The State would also
encourage the organization of the popular classes, through
unionization in urban areas and cooperativization in the
countryside. As a result of the enhanced role of the public sector,
new rules of the game for the private sector would be designed.
,:,
7
The initial nationalization decrees also brought some 20% of
land property under state control. Land redistribution accelerated
as a result of the Agrarian Reform Decree issued at the second
anniversary of the revolution.,As a result of both measures, more
that 50% of rural property was affected in the years following the
revolution. During its first phases, the government emphasized the
development of parastatals and cooperatives, but soon evolved into
encouraging small scale farming. The redirection of agrarian policy
was largely induced by the need to erode peasant support for the
Contras in some regions of the country. Nonetheless, it also
reflected the social programs of the revolution and the policy of
self-sufficiency in food staples (Enriquez and Spalding 1987, Neira
1988, Wheelock 1989).
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in 1975from 9.3
42.5% in
13.0% in
9
The core external sector indicators moved, however, in the
wrong direction. Neither traditional nor non-traditional exports
ever reached pre-revolutionary levels (Table 3). The reduction of
exports was combined in the early years by a deterioration of the
terms of trade. On the other hand, the revolutionary government
inherited a clearly overvalued cordoba, and a rate of inflation
clearly incompatible with a fixed exchange rate. There was no
attempt to correct such imbalances. A steady real appreciation of
the cordoba then ensued. It was accompanied by a strong
depreciation of the black market rate (Figure 2). The political
climate generated by growing confrontations between the Sandinistas
and the private sector accentuated this trend.
Although strong import and exchange controls became a central
feature of external sector management during the first years of the
revolutionary government, the former were not particularly harsh.
Indeed, the import coefficient reached a historical peak in 1980
and 1981 (Table 3). Growing external imbalances generated by large
imports and weakening exports were financed by record' capital
inflows. Thus, as outstanding debts were renegotiated, the country
had ample access to new financing. Resources came from multilateral
agencies, bilateral sources, both in the developed countries
(including the US) and the Third World (Mexico, in particular), and
only secondarily from socialist countries (see Stahler-Sholk 1987,
Arana et al. 1987 and Table 3). The result of this strategy was, of
course, the rapid growth of the external debt. By 1981, the debt
had already reached extremely critical levels (Table 3).
10
IV. WAR ECONOMY AND MACROECONOMIC DISEQUILIBRIA (1982-1987)
A.
General features of macroeconomic manauement '/
The expansionary demand policy adopted during the first years
of the revolutionary government could be defended on the grounds
that the access to external financing should be used to ensure a
fast turnaround of economic activity and an equally rapid
improvement in key social indicators. On the other hand, as we have
seen, the macroeconomic package typical of the first years revealed
some prudence on behalf of the government, as reflected in its wage
and tax policies. Nonetheless, by itself, external disequilibria
would have called for a significant policy shift as early as 1981.
The government did not grasp the urgent need for action.
Indeed, the systematic lag in the adoption of the stabilization
policies and the partial nature of such efforts once they were
adopted became central features of Sandinista macroeconomic
management early in the post-revolutionary period. Expectedly, the
government was unwilling to give up what it thought to be the
essential goals of the revolution, or to adopt policies which it
thought would affect the economic recovery and, even more, risk
military defeat. Nonetheless, the political process worked in
peculiar directions. Understandably, defense and social expenditure'
became the most inflexible components of the budget. Paradoxically,
however, the government was at the end more willing to sacrifice
real wages and capital accumulation than to reduce the massive
subsidies to the productive sector. Its strong political control of
the labor movement and public-sector enterprises and, on the
contrary, its feeble relations with the private sector and the need
to guarantee the support of the peasants in the contra war, go a
long way to explain this paradox.
'/ For a more extensive analysis of this period, see Arana &
al. (19871, Fitzgerald (1989), Gibson (1987b), IMF (1988), Medal
(1988), Pizarro (1987), Taylor et al. (1989) and World Bank (1986).
Stahler-Sholk et al. (1989) presents also a very useful chronology,
which would be extensively used below.
11
Although the first signs of government concern for the balance
of payments --the adoption of export-promotion policies--came as
early as 1982, the expansionary of expenditure policies were in
full swing up to 1984. By then, domestic disequilibria had reached
clearly explosive levels. Forced by the circumstances, the
government adopted the first important stabilization measures in
1985, including cuts in non-defense expenditure, adjustment of
government-regulated prices and devaluation. This was followed by
similar steps in the subsequent years. However, the inconsistency
of the stabilization packages implemented from 1985 to 1987
enhanced
macroeconomic
disequilibria.
Particularly,
rising
inflation eroded the tax base, and attempts to repress inflation
and defend exporters against official exchange rate overvaluation
led to massive relative price distortions and booming black
markets. As a consequence of these imbalances, the government was
finally forced to adopt more drastic stabilization measures in 1988
and 1989.
..
12
rely increasingly on inflexible bilateral assistance from socialist
countries (Table 3 and Stahler-Shock 1987).
B. Fiscal and nonetarv disecnailibria and the f&&
. .
.
Stabr&.zation efforts
As a reflection of policy decisions and defense needs, central
government expenditure continued to increase rapidly after 1981,
peaking at 58.7% in 1984 '/ l /. As Table 2 indicates, the most
dynamic element from 1982 to 1984 was the expenditure in
infrastructure and production (largely investment outlays).
However, all components of central government expenditure continued
to increase at rapid rates. Efforts to raise government revenues
were successful, and by 1984 the country had one of the highest tax
rates of Latin America and the Third World. Nonetheless, the growth
of expenditure clearly outpaced the tax effort. In the same year,
the central government deficit reached 23.5% of GDP --26.6% for the
consolidated public sector deficit,
according to a partial
estimate using IMF data lo/.
Growing pressures generated bymacroeconorPic disequilibria and
the contra war led the government to undertake significant
*/ As pointed out in note 2 of Table 2, total expenditure
according to central government accounts does not coincide with
data on destination of expenditure by ministries, which is used to
make up the breakdown shown in the second part of the same Table.
The former figures are used in the text when referring to total
expenditure.
'/ Total expenditure was actually higher, as not all military
expenditure financed bythe socialist countries was budgeted. IMP
(1991) estimates such expenditure at 13.4% of GDP in 1990, but the
figure for earlier years is unknown. Since 1991, al military
expenditure is budgeted.
lo/ We have excluded from this figure both unpaid foreign
interest and deficit estimates for the nrest of the public sector".
The former are unlikely to be ever paid. The latter have been
estimated by the IMF on the basis of domestic lending, which is a
poor approach in a highly inflationary economy. The estimates of
central bank losses may also subject to controversy.
13
expenditures cuts starting in 1985. However, the war forced a
further increase in defense expenditure, which peaked over 18% of
GDP in 1986-1988 'I/. Thus, the government was forced to
concentrate cuts in civil expenditure.
From 1984 to 1987,
expenditure in infrastructure and production fell to very modest
levels and foreign interest payments were all.but suspended, as the
expansion of public administration costs earlier in the decade was
reversed. Expenditure in social services was maintained, however,
at historically peak levels.
14
increase in liquidity, with only a modest acceleration of inflation
(see Tables 1 and 2). Although the lack of an inflationary
tradition goes a long way to explain this result, it was also
supported by a fixed exchange rate and strong price controls. The
importance of the latter factors is supported by the significant
role played by explicit adjustments in the official exchange rate
and other controlled prices in the inflationary dynamics after 1985
(see below).
1.
15
controlled prices (basic consumer goods and gasoline) at the same
time.
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foreign exchange speculation). The fffundamentalsff were thus bound
to prevail at some point. However, in the transition from one
regime to the other, the exulicit pricing decisions adopted by the
government in the first months of 1985 played the crucial role. In
fact, as Figure 4 shows, the first dramatic acceleration of
inflation in the post-revolutionary period came as the direct
effect of these policy decisions.
After this turning point, the price-monetary dynamics became
explosive.
The average
monthly
inflation
rate constantly
accelerated until it reached hyperinflation in 1989 (Table 1).
Under these conditions, price controls became totally ineffective
and only led to widening differentials between the legal and the
free markets for goods subject to regulations "/. The monetary
fuel was provided by the budget deficit, but also by the losses of
the Central Bank in foreign exchange transactions and the need to
finance most of the nominal expansion in domestic credit through
money creation. The latter was made necessary by the decision to
fix nominal interest rates at artificially low levels. Moreover, as'
the basic official exchange rate was only devalued once more during
the period under analysis (on February 1986, when the official rate
was devalued to 70 cordobas per dollar), the costs of dollardenominated domestic debts (foreign trade financing) were also kept
at very modest levels. '
Accelerating inflation was accompanied by a great variability
in monthly rates. Moreover, as Figure 4 indicates, rather than the
step-wise
acceleration
ffinertialff
inflationary
typical of
processes, it adopted a neat cyclical pattern. The length of the
cycle was annual from 1985 to 1987. Hyperinflation was basically
15/ In May 1989, just before the major liberalization of
domestic prices (see part V), the ratio of black to official market
prices was the following for some important consumer goods: rice
5.5, kidney beans 5.2, soap 12.7, detergent 16.6, and toilet paper
2.4 (SPP, 1988b).
.17
associated with the dramatic shortening in the length of the cycle
to some 4 to 5 months in 1989. What is more interesting, some
turning points, but not the intensitv of the cvcles, were
associated with explicit decisions to correct basic pricing
imbalances: February 1985, the same month in 1986 and, as we will
see below, February and June 1988.
As traditional
monetary theory predicts,
accelerating
inflation was accompanied by falling demand for domestic liquid
assets. For reasons which have already been mentioned, the demand
for term deposits declined ahead of that for money. The latter
remained, in fact, surprisingly high even at fairly advanced stages
of
the
hyperinflationary
process
(Table 2).
The
strong
underdevelopment of the domestic financial market goes a long way
to explain this result. Finally, despite the gross and increasing
overvaluation of the official exchange rate (Figure 2.A) and the
dramatic widening in black/official rate differentials (Figure
2-B), falling liquidity was accompanied by an appreciation of the
real black market rate (Figure 2.C). Some policy measures may have
supported the process, particularly the creation of a rgreyff
(parallel) foreign exchange market in 1985 I"/, where foreign
remittances and a fraction of export earnings could be legally
sold. Massive US aid to the Contras may have also supported this
paradoxical outcome.
The parallel market was actually part of a more general
multiple exchange rate regime. Since 1982, this regime became
increasingly complex, reflecting the decision to defend exporters
against the growing overvaluation of the cordoba. It included two
basic mechanisms: exporters were authorized to keep part of the
18
foreign exchange earned, and domestic support prices for export
crops were fixed at levels higher than those compatible with
prevailing international prices and the official exchange rate. The
basic difference between the two systems was the mechanism by which
the implicit "export incentive" was financed. In the first case, it
was paid by importers of goods and services who bought the foreign
exchange in the parallel market. In the second, it was financed by
the Central Bank.
As Table 5 indicates, both mechanisms were quite effective in
raising the average exchange rate for exports significantly above
the official rate (almost 100 times by January 1988). The latter
was increasingly relevant only for a few exports (mainly from state
enterprises) and most imports. Given the high import content of
some exports of Nicaragua, the multiple exchange rate system thus
operated as a mechanism to increase.effective protection to export
activities. Also, given the massive implicit subsidy on imports, .
the government had to rely on direct import controls to ration
import demand. As most imports were sold by parastatals, this
massive subsidy was largely passed on to the final user, subject,
in any case, to significant resource misallocation, rationing and
growing secondary black markets. Late in the process (June 1987),
the government adopted a surcharge for most imports (the tasa de
estabilizacion monetaria, TEM) to finance the foreign exchange
losses of the Central Bank. By January 1988, this mechanism had
raised the average import rate significantly above the official
rate; still, the average export rate was almost 13 times higher
than that applicable to. imports.
Given the features of the multiple rate'system, the collapse
of exports which took place through most of this period (Table 3)
was only associated in part to exchange rate policies. A myriad of
factors, affecting both the domestic supply and the external
demand, thus account for the evolution of exports: the effects of
war in some areas of the country; lack of confidence by the private
19
.
1988
STABILIZATION
AND
HYPWINFLATION
"/
20.
.
-.
-\
.
.
21
-.
-.
.
.
22
insufficient to reach the target deficit, as the Olivera-Tanzi
effect was eroding the tax base at a fairly rapid rate (see
footnote 12). On the other hand, the maximum domestic lending rate
was kept at 45% a Year and the government decided that the
devaluation of the official rate would not be passed on to dollardenominated
liabilities. Under prevailing conditions,
these
decisions were equivalent to a generalized debt forgiveness. They
also implied that the Central Bank had to incur in very large
losses in foreign exchange transactions (Table 2) and that any
nominal increase of domestic credit had to be financed by money
creation.
-.
-.
23
Nonetheless, fiscal policy was not significantly affected by
the June decisions. There was also no attempt to control the growth
of domestic credit. However, two important reforms in monetary
policy took place in June. First, the government did not assume the
exchange rate risks on dollar-denominated domestic debts. Given
devaluation policy, this decision considerably raised the costs of
such liabilities, if contracted after February "/. Secondly,
authorities decided to index domestic interest rates. However, the
"indexing rule" used was imperfect, particularly in the first few
months 'O/. Thus, from mid-June to mid-September, the maximum
effective lending interest rate was set at 14.9% a month. Since
mid-September, the rule was improved. Still, in the last months of
the year, interest rates ran significantly below inflation levels
(see Table 6).
UP
the
'l/ The subsidy took the form of the right to buy a basket of
basic food products (10 lbs, of rice, 10 lbs of beans and 5 lbs of
sugar) paying between 5 and 10% of their nominal wages.
.
.
-.
24
control the major sources of monetary growth were the fundamental
sources of the 1988 hyperinflation. As Figure 4 indicates, the
economy underwent three distinct price cycles between January, 1988
and the first months of 1989. The first two of them were clearly
unleashed by the adjustment programs of February and June. The
third was more closely associated with the effects of Hurricane
Joan, which hit the country in October, generating losses estimated
by ECLAC at $840 million (CEPAL 1988b). The third cycle was the
most intense. In total, the inflation rate ran close to 100% a
month between September, 1988, and January, 1989.
Overall, the monthly inflation rate was 62.4% in 1988.
Following a classical pattern, this process was accompanied by
rapid demonetization. By January, 1989, M, as a share of GDP had
fallen to 6.8% (Table 6). On the other hand, reductions in
aggregate demand (largely associated with the rising balance of
payments deficit of the private sector measured in domestic
currency, as fiscal policy was not contractionary), relative price
changes induced by the adjustment programs (real devaluation and
wage cuts, in particular) and supply shocks (the hurricane and
electric supply failures during the first semester) led to a 13.4%
fall in GDP. This was accompanied by a renewed deterioration of
exports, as the effective protection to export activities was
actually curtailed. The current account deficit improved somewhat,
however, as the result of rising external transfers and a moderate.
cut in imports.
VI.
25
..
-.
.
.
26.
in 1988, the authorities stated the objective of arresting further
deterioration of public sector real wages.
In the speech in which President Ortega made public the new
program, he also announced the willingness to establish new rules
of the game for the private sector: as a first step in that
direction, he informed that expropriations would cease 2J/.
Finally, the government adopted a financial programming system
coordinated by the Planning Secretariat (SPP) and significantly
improved the data base for short term macroeconomic analysis.
--
.
.
27
government actually ran fiscal surpluses during a few months.
Finally, the fall in real wages was also arrested and partially
reversed (Figure 3 and Table 4).
The major initial cost of stabilization was a strong
recession. In the first quarter of the year, industrial production
fell by 17% with respect to the same period in the previous year.
However, it started to recover in the second quarter (Figure 7). In
with few exceptions
(agricultural foodstuffs and
general,
were severely affected,
inward-oriented
electrical energy),
(cotton), exportables
whereas, also with a few exceptions
experienced a boom (see Table 3 and below) 24/.
-.
-.
.
.
28
proportion of self-employment
and workers
enterprises) and longer unemployment spells 27/.
in
very
small
-*
-.
29
30
regulated prices are excluded (Figure 5 and Table 6). This was
initially accompanied by a dramatic fall in liquidity. However, as
the government was unable to control all sources of monetary
expansion, liquidity, inflation and economic activity started to
pick up. Once more, this was reflected in speculation in the
foreign exchange market in November. This time, the government did
not cut the supply of dollars to the parallel market and maintained
the system of gradual devaluation, thus averting major foreign
exchange speculation and a new inflationary shock. However, it also
kept liquidity at high levels.
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crucial sectors (particularly education and health) could not last
for too long. On the other hand, as we have seen, monetary and
interest rate policies remained a source of considerable
difficulties. The sensibility of the foreign exchange market
continued to be a major source of instability. This reflected, in
turn, the inability of the government to raise an adequate supply
of liquid foreign aid. Indexation increased in 1989 to levels which
were incompatible with permanent reductions in the inflation rate.
Finally, although the room for private initiative considerably
widened, no major advance was made in terms of designing stable
rules of the game for the private sector.
VII. POLITICAL TRANSITION AND THE 1990 HYPERINFLATION
Stabilization
during the first months of
efforts
ceased
1990 '*/. This process had started before the victory of the United
National Opposition (UNO) in the February 25 elections, but
accelerated after the electoral results. From January to April, the
official exchange rate and government regulated price were
virtually freezed. The real exchange rate and real regulated prices
halved, totally reversing the results of the 1989 stabilization. As
a consequence, the differential between the black and the official
exchange rate rapidly widened, as the supply of dollars to the
parallel foreign exchange market fell. In an attempt to compensate
for the adverse effects of overvaluation on exports, the government
decided in April to pay exporters the parallel market exchange
rate, at the cost of increasing Central Bank losses.
became
rapidly
sector finances
Simultaneously,
public
expansionary. Taxes were cut as expenditure doubled with respect to
32
1989 patterns (Table 8). In particular, a series of wage hikes
increased public sector real wages by 271% with respect to the last
quarter of 1989 (Figure 3 and Table 4). This was accompanied by a
new public service law, which significantly increased the cost of
firing government employees. By April, the central government
deficit peaked again at 35% of GDP. Despite the virtual freeze on
prices under its control, inflation followed with a lag. In April,
inflation, excluding regulated prices, was approaching the critical
levels which are used in the economic literature to define
hyperinflation --50% a month (Figure 5 and Table 8).
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The basic element of the initial stabilization program was the
gradual introduction of a new currency, the cdrdoba oro, fully
convertible at a parity of one to one to the US dollar. Three
stages in the process were envisioned. During the first, the new
currency would only serve as a financial and fiscal unit of
account. During this stage, it was expected that the government
would correct most of the macroeconomic disequilibria inherited
from the previous Administration. During a second stage, the new
currency would be gradually introduced into circulation, at a
variable exchange rate with respect to the old currency. Finally,
once fiscal and financial discipline had been restored, the old
currency would be taken out of circulation.
Following the program, during its first days in power, the
Central Bank decreed that new deposits and loans would be
denominated in cordobas oro. Annual interest rates for a threemonth deposit in the new currency were set at 10.5%; those for
short-term loans fluctuated between 13 and 22%, depending on the
sector involved. The Bank also decreed that the exchange rate for
the old for the new currency would be that prevailing the parallel
market. Interest rates for old deposits and loans were placed at
levels which created strong incentives to transform them into
similar assets and liabilities denominated in cordobas oro.
No credit cealings were initially established. This was meant
to guarantee adequate incentives for plantings, as the new
government took over when the new agricultural season was starting.
In turn, given the dominant share of agriculture in exports, this
was thought to be an essential element for a strong export supply
response in 1991. Credit cealings were reestablished in August and
became more stringent since October. In any case, in open
divergence to the experience of 1989, the non-fiscal sources of
within close bounds since June
expansion
monetary
remained
(Table 8).
34
-
-*
.-
.
.
-m
36
The resulting deficit has been incompatible with a rapid
reduction in the rate of inflation. Corrective measures adopted at
the onset of the new administration led to a major price shock in
May, which eliminated most the initial excess liquidity (Figure 5.A
and Table 8). After the initial shock, inflation rapidly declined,
if regulated prices are excluded from the calculations. The July
strike sharply reversed this trend. From August to October, it
remained at high though declining rates. Moreover, the substantial
reduction which it experienced in October and November (to 30% a
month) was not sustained, as the budget deficit continued to
exercise major expansionary effects.
The introduction of the cdrdoba oro may have accelerated the
generalized use of indexation rules and, particularly, dollar
indexation. This process was clearly discernible since 1988 and,
especially, 1989, when frequent correction of exchange rates,
government-regulated prices and wages became regular practices.
However,
since mid-1990
domestic prices were increasingly
denominated in the new currency (i.e., in dollars). This fact no
doubt arrested the real effects of nominal devaluation after an
initial spur which left, however, the cordoba overvalued; rather,
throughout the second semester the real exchange rate tended to
moderately appreciate, despite significant nominal devaluations
(Figure 6.A). Nonetheless, the exchange rate differential between
the black and the official markets remained at low and decreasing
levels since June (Figure 6.C). Indeed, the black market exchange
rate has appreciated in real terms since April. This behavior is
consistent with the close historical association between the real
black market exchange rate and liquidity levels (Figure 2.C).
Persistent high inflation was accompanied by a strong domestic
recession. In particular, the industrial recovery which had taken
place during the last months of the Sandinista Administration was
sharply interrupted (Figure 7). For the year as a whole, however,
GDP grew by a moderate l.O%, the first such positive rate since
37
1983 (Table 1). Such moderate growth was associated with the
continued export recovery (Table 3), as domestic demand remained
stagnant during the year.
..
..
38
VIII. THE 1991 STABILIZATION PROGRAM
The urgent call for action was finally grasped by the
government on March 3, 1991, when a new major stabilization program
was adopted. The program included seven major provisions: (1) a
400% devaluation of the cordoba oro followed by a fixed exchange
rate system; (2) the conversion of the old currency at a rate of 5
million cordobas per cordoba ore; (3) a firm commitment to
eliminate Central Bank credit to the government; (4) a 160% general
increase in public sector wages, with additional hikes for
education and health workers (35 and 55%, respectively), which
raised the average increase to some 200%; (5) the backward
indexation of term deposits and loans to the dollar: this was
enacted by readjusting the former by 400% and the latter by 240% to
400% depending on the nature of the liability: (6) the adoption of
a new interest rate policy, by which term deposits rates for
maturities longer than a month were liberalized, that for one month
deposits raised from 9.5 to 12% and-indexed to the dollar, and the
traditional differentiation by sectors of the lending rates was
eliminated and a simple system of dollar-indexed lending'rates was
adopted --18% for short term and 14% for long term loans; and (7)
the maintenance of credit cealings for commercial banks 30/.
The fixed exchange rate system has been maintained since March
and, as we will see, fiscal accounts have actually generated a
surplus since then. Interest rate policy has been subject, however,
to important changes. In particular, on April 9, the Central Bank
implemented,
through the Banco Nicarautiense de Industria Y
Comercio, BANIC, a temp,orary savings plan, denominated "Plan 30",
in which deposits were not indexed to the dollar. The rate was set
at 25% for April and rapidly reduced in the following months, to
20% in May and 10% in June. This was a peculiar decision, as it
39
created a new source of Central Bank losses, at a time at which the
elimination of the public sector deficit (which includes the quasifiscal deficit of the Central Bank) had become the priority of
economic policy. It was, however, rapidly abandoned.
In June, BANIC was allowed to issue 15-day deposits. On the
other hand, in September, coinciding with the signing of the standby agreement with the IMF, the interest rate cealings were
transformed into floors. In December, reserve requirements for
dollar-denominated deposits were reduced from 100 to 25%; this
applied, however, as a marainal requirement on deposits above those
outstanding on October 1, 1991. Although this liberalized for the
first time the use of dollar deposits, stringent conditions on
their use were maintained: in particular, banks cannot use them to
finance cordoba-denominated debts. Reserve requirements on domestic
deposits were maintained at 10% (a,level which had been fixed in
late 1990), but such provision remained largely nominal, as
commercial bank discipline in this area has not been established.
Finally, the January, 1992, Letter of Intent expressed the
willingness to liberalize interest rate intervention altogether,
except of the regulation of lending rates for rediscount
facilities, including those financed with external funds.
Contrary to what the World Bank (1991, p. 7) has argued, no
"cash budgeting" rule has been followed by the central government.
Moreover, expenditure has remained rather high: it fluctuated since
April around 24.5% of GDP, a level only somewhat lower than that
typical during the second semester of 1990 and above that of 1989
(26.1 and 21.9%, respectively --see Tables 6, 8 and 9).
Nonetheless, the elimination of the extra-budgetary military
expenses financed by foreign aid implied a significant reduction of
military expenditure (some 13% of GDP according to IMF, 1991, Table
3). This had been made possible by the massive cut in the army
throughout 1990 (see Section VII above).
40
Moreover, through 1991 the government implemented a major
voluntary retirement program,
which reduced public sector
employment, including the military and parastatals, by 20% --from
156.600 to 124.700 =/. Estimates using INSSBI (Social Security
Institute) data are only slightly different. They indicate that
public sector employment (central government, public sector
enterprises and autonomous institutes) decreased from 165.275 in
February to 131.284 in December, i.e, by 20.6%. Together with the
estimated cut in the army in 1990 (70.000), this implies that over
100.000 persons --equivalent to 8% of the economically active
population of the country-- have enlarged the private labor supply,
at the time when creation of formal jobs in the private sector has
remained rather limited (some 4.400 new jobs between February and
December, 1991, including mixed enterprises, according to INSSBI
statistics). The major reduction in formal sector employment
generated by the structural adjustment in the size of the public
sector has, thus, shifted macroeconomic disequilibria to the labor
market. Unfortunately, the lack of recent household surveys do not
allow us to analyze the implications of this process J2/.
Part of the resulting cut in government expenditure has been
passed on through higher real wages, which after bottoming in
April, recovered during the rest of the year. By December, real
central government wages were more than twice the level reached
during the 1989 stabilization (Table 4). After March, only a
moderate wage increase was decreed in June (some 20%); more
selective wage hikes have taken place in other months. The AFA food
subsidy created in 1988 was eliminated in September, 1991. Finally,
in the Letter of Intent presented to the IMF in January, 1992, the
government announced than no general wage increases would be
"/ See Letter of Intent of January 31, 1992. See, also, Nathan
Associates (1991), Ch. 2.
32/ See some considerations (no doubt imprecise) on this topic
in FIDEG, Observador Economico, No. 1, January, 1992.
41
negotiated in 1992, but selective hikes might be granted on the
basis of savings generated by a more moderate retirement program
which would be implemented in the year.
The decisive factor in the turnaround in central government
finances and the elimination of Central Bank budget financing, was,
nonetheless, the increase in revenues. Domestic tax revenues
experienced, indeed, a strong recovery in the post-stabilization
period, particularly during the second semester of 1991 (See Table
9; Ministerio de Finanzas, 1991; and Nathan Associates, 1991). Much
more important, however, massive foreign aid allowed the government
to run budget surpluses from March to October (Table 9)
..
42
3). Gross international reserves improved by $97.8 million. This
figure is only slightly lower than the total monetary base (highpowered money) of the country in December, 1991 --CO$547 million or
$109 million. It thus indicates that reserve accumulation played a
crucial role in the rapid remonetization which took place in the
post-stabilization period (Table 9). Nonetheless, as in the 1989
stabilization, net domestic credit to the private sector continued
to be a major source of monetary expansion. Indeed, the 1992
monetary program implies that the public sector would generate a
massive surplus to finance a persistent and even growing deficit in
the domestic financial system (Table 10).
Given strong dollar indexation, exchange rate stability was
also the clue to the sudden interruption of hyperinflation. After
a very large initial spur during the week after devaluation,
inflation was very moderate in the.following weeks and was followed
by some deflation since May (Figure 5.A and Tables 7 and 9).
However, this exclusively the result of a reduction in real
regulated prices (Figure 5.B). Indeed, as Table 7 indicates, the
inflationary effects of the exchange rate adjustment were faster
than those of the June 12, 1989, devaluation, confirming that
dollar indexation had significantly increased since then. One week
after devaluation, it was almost fully reflected in non-regulated
prices, except foodstuffs. In the latter, it took about 15 weeks to
do so, no doubt as a result of state intervention through ENABAS.
The same factors which made the fixed exchange rate extremely
effective as a price stabilization devise thus made the March 3,
1991, devaluation almost totally'ineffective as a way to correct
the overvaluation the cordoba. Figures 2.A. and 6.A indicate,
indeed, that the real exchange rate has stabilized at a level some
25% below that achieved during 1989 and only slightly above the
1980 (overvalued) level. Moreover, in terms of relative prices, no
major advance took place over the second semester of 1990. This
implies, in turn, that the real exchange rate is likely to hinder
43
rather than contribute to export dynamism, which will then have to
depend on other factors ("crowding-in" effects of public sector
investment, positive effects of the structural reforms under way
and special supply-side programs).
44
.
..-
45
.
.-
The magnitude of the cut in the size of the army and the state
bureaucracy and the nature of the tax reform adopted by the new
government have already been summarized in parts VII and VIII. The
restructuring of the state apparatus also involved a major
reorganization of public-sector enterprises. During its first weeks
in power, the Chamorro Administration centralized the management of,
the some 350 state enterprises, excluding public utilities, in a
holding company, Corooraciones Nacionales de1 Sector Publico,
CORNAP, under the Ministry of the Presidency. The privatization
process was initially slow, due to the frontal opposition of the
labor unions, the need to organize the new entity and the legal
complications associated with the process by which the different
companies had become state enterprises. The concertacion paced the
way to a more rapid implementation of such reforms in 1991,
including the elimination of the government monopoly on financial
services and some foreign trade activities, set out in the 1985
Constitution.
On the basis of this political agreement, privatization
speeded up in 1991. By August of that year, 86 enterprises had been
either returned to previous owners, liquidated or privatized, and
the government declared the intention to do so with at least 90% of
CORNAP enterprises by the end of 1993 3s/. At the same time, the
government has been transferring the regulatory functions which
some enterprises had to the Ministries and reorganizing and the
redefining the role of those firms which will remain under public
property for the foreseeable future (utilities, the agricultural
board, etc.).
As a part of the initial reforms, the Chamorro Administration
also decentralized, under the Corooracion Financiera de Nicarauua,
"
46
CORFIN, the management of public sector banks, which had operated
in previous years as mere dependencies of the Central Bank. A
Superintendency of Banks was also created and began operations in
mid-1991. In the Letter of Development Policy, in July, 1991, the
government also established the guidelines for the restructuring of
state banks. Such reform implies that CORFIN would be dissolved and
that three public commercial banks would remain: Banco National de
_"
47
transition period, the government would maintain a dominant
position in some sectors (e.g., sugar and meat), which would only
be lifted as a result of the privatization process.
.I
b
48
.
f
_.
.
.
49
income tax for profits earned in export activities, equivalent to
80% in 1991-1992, which will gradually decrease to 60% in 1996 and
will be eliminated in 1997; and (b) a tax subsidy equivalent to 15%
of the f.o.b. value of exports in 1991-1993, 10% in 1994-1995 and'
5% in 1996, which will also be eliminated in 1997. These benefits
will only apply, however, to companies which export at least
$250,000 or 25% of their production outside Central America.
This system of incentives is deficiently designed. The
determination of which machinery and intermediates are used for
export rather than domestic production, and what share of profits
are made in export activities, will prove difficult and will
certainly become a mechanism for tax evasion. On the other hand,
the special incentives for non-traditional exports discriminate
against small producers and domestic value added (Ocampo, 1992).
,I'
w*
50
.
Central American Institutions were written off by two-thirds, and
those with Latin America, former socialist countries and commercial
banks by 95%, the debt would still have been some $2 billion at the
end of 1991, or 1.5 times GDP. A more likely but equally ambitious
renegotiation would have left the country with a debt of some $3.2
billion or 2.3 times GDP.
,'
-*
e
e-
.
e
<
51
.
REFERENCES
B-B
. .*
52
Enriquez, L. J. and R. J. Spalding, 1987, "Banking Systems and
Revolutionary Change: The Politics of Agricultural Credit in
Nicaragua", in R. J. Spalding, ed., The Political Economv of
Revolutionarv Nicarauua, Ch. 5, Boston: George Allen C Unwin.
Fishlow, A., E. Bacha, G. Helleiner and L. Velasco, 1990, "Final
Report of the Monitoring Group", Mimeo, April.
Fitzgerald, E. V. P., 1987, wAn Evaluation of the Economic Costs to
Nicaragua of U.S. Aggression: 1980-1984", in R. J. Spalding, ed.,
The Political Economy of Revolutionarv Nicaragua, Ch. 9, Boston:
George Allen & Unwin.
1989, "Problems in Financing a Revolution: Accumulation,
DefLnse and Income Distribution in Nicaragua 1979-86" , in E. V. P.
Fitzgerald and R. Vos, Financinu Economic Develooment: A Structural
Aporoach to Monetarv Policv, Ch. 8, Aldershot: Gower.
S-B
-c
c
I.
DeVelODRIentS,
Washington,
m-- ,
I.
53
Neira, O., 1988, "La reforma agraria nicaragiiense: Balance de echo
anoslI, in Nicaraaua: cambios estructurales Y uoliticas economicas.
1979-1987, Ch. IV, Managua: INIES.
Ocampo, J. A., 1990, "El estado actual de1 plan de estabilizacidnl',
Mimeo, WIDER/SIDA Mission to Nicaragua, Noviembre.
w-w
estabilizacao
1991b,
"Hiperinflacao
recorrente e
Ni&gual#, Pesauisa e Planeiamento economico, 21:1, April.
na
ante
la
1996.
199oc, Stabilization and Structural Adiustment Plan for
Nickacrua, 1990-1994, Document presented at the Meeting of the
Consultative Group in Paris, Managua, December.
M-w
54 '
Stahler-Sholk, R., 1987, "Foreign Debt and Economic Stabilization
Policies in Revolutionary Nicaragua", in R. J. Spalding, ed., The
Political Economv of Revolutionarv Nicaragua, Ch. 7, Boston: George
Allen & Unwin.
we-
agraria
TABLE 1
GDPGrowth
Rate
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
-7.9 z
-26.5
4.6
5.4
-0.8
4.6
-1.6
-4.1
-1.0
-0.7
-13.4
-5.1
1.0
-0.7
GDP
GDP
Investment as %
Fixed
(1977=100) per capita
of GDP
Investment
(1977=100) (Constant prices)
92.1
61.1
70.9
74.1
74.0
17.5
76.3
89.4
65.0
64.9
66.2
63.6
64.3
61.2
73.1
12.4
56.7
54.3
71.9
52.1
62.3
59.1
59.7
59.3
l/ January+Mober
SOURCE: BCN, SPP, IHSSBI and INK.
43.6
40.0
39.1
37.6
10.7t
-6.4
16.8
24.4
20.2
21.0
21.6
22.3
22.3
22.1
18.0
14.7
14.6
12.7
12.78
6.0
14.6
22.2
18.0
18.0
18.7
19.8
18.7
19.1
19.4
15.9
14.6
12.9
Change of
Inventories
-2.0%
-12.4
2.2
2.2
2.2
3.0
2.8
2.6
3.5
3.0
-1.3
-1.3
0.0
-0.3
51.4
46.9
43.0
38.3
33.9
31.1
38.9
33.2
29.6
34.2
139.9
126.7
119.4
120.8
116.9
114.6
112.0
100.0
101.4
73.9
50.5
33.6
71.6
48.9
4.0%
4.5
186.0
165.5
142.9
135.9
100.0
59.5
24.6
1.9 1.8
1.7
2.4
3.4
13.0
19.5
24.9
14.9
11.6
24.0
62.4
27.2
50.6
17.4
19.8
. .
.
,
TaBLK2
FISCALANDmNEYARYINDICAlm
(% of GDP at current prices)
1974- 1979
1978
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
25.3%
18.0
23.0
2.3
34.5
26.7
10.2
10.4
1.9
n.a.
20.0 21.8 27.2 36.4 36.8 35.0 28.2 17.0 8.1 6.7
12.1 12.5 11.9 12.7 15.4 10.4 5.9 3.6 1.2 1.1 1.2
6.2
1991
4.5
6.6
5.2
Honetary
Neans
20.9
l/ Patios of annual figures in 1974-87; average monthly ratios in 1988-91. Includes foreign grants received in 1989-91.
2/ Total expenditure according to these figures is based oh budgets and does not coincide with expenditure according to
the central government accouuts. The 1990 figure refers to actual expenditure according to Ninisterio de Finanzas
(1990). The GDP used to calculate shares in 1990 and 1991 are in dollars, and are amsistent with figures used to
estimate monthly expenditures as a share of GDP.
3/ Includes special programs for demobilized personnel in 1990-91.
4/ Includes transfers, subsidies and incidental expendes in 1990-91.
5/ Excludes unpaid foreign interest. Includes only public sector enterprises producing utilities (see text).
61 Average monthiy ratios.
SOURCES: BCN and IHF.
1.3
1 .
. .
8
T&3
, I
1990
1991
201.5
61.2
236.8 240.8 370.6 449.5 459.4 449.0 354.1 418.5 339.5 387.8 355.0 268.5
92.2
30.6. 22.7
99.0 102.9 100.0 109.0 124.8 74.1 85.1 78.3 83.8 66.4 58.6 48.3
-257.2.-185.0
456
598
22.9
-39.3 -181.9 -24.9 180.2 -430.1 -590.6 -491.6 -507.4 -596.8 -725.7 -687.8 -679.1 -581.3 -361.6
-357.4
-357.5
655
864
114
130
* 50.9
25.1
961
1136
157.5
-136.1
13.3
8079
8653
8570
201.6
528.1
118
82
85
seeds,
2566. 3139
3788
619
(1.8) (25.6) (23.0) (48.1) (50.6
363
1825
679
123.9
110 92
262.8
22.1 27.5 22.6 24.9 43.3 39.3 28.8 32.2 32.3 33.8 29.2
Official transfers
Terms of trade (KIAC,1980=100)
107
803 598
10.3
51.5
79.3
90
85
82
100
94
99
101
101
92
Table 4
REALWAGES,1985-1991(1985=X@)
Using CPI
-------~~~~~---~~~
National Central
average Government
YEAR
1985
1986
1987
1988
1989
1990
1991
-.
.
Using GDPdeflactor
-----~~--~~~~---National Central
average Government
100.0
59.5
24.6
14.9
11.6
24.0
17.4
100.0
56.3
16.2
9.5
5.8
15.3
11.3
100.0
101.4
73.9
50.5
33.6
71.6
48.9
100.0
95.5
48.5
32.5
16.9
45.7
32.0
QDARTER
1988-1
1988-2
1988-3
1988-4
1989-1
1989-2
1989-3
1989-4
1990-l
1990-2
1990-3
1990-4
1991-1
1991-2
1991-3
1991-4
28.0
16.0
7.8
7.9
10.0
12.7
12.1
14.8
19.1
36.9
23.6
16.5
15.8
15.0
19.2
19.7
16.7
10.7
5.6
5.2
5.2
6.4
5.8
6.6
9.5
24.2
16.0
11.5
10.0
10.5
12.2
12.5
94.8
55.4
26.5
25.4
30.2
36.5
34.0
41.4
53.6
103.4
66.2
46.3
44.4
42.0
53.9
55.2
56.9
37.2
19.0
16.9
15.8
18.5
16.4
18.5
26.7
68.5
45.3
32.5
28.4
29.7
34.6
35.3
1988-Dec.
1989~Dec.
1990-Apr.
199wec.
1991-apr .
1991~Dec.
6.7
15.4
37.7
16.5
12.9
19.8
3.4
6.7
24.3
10.5
10.5
13.0
21.0
43.1
105.8
46.3
36.2
55.6
10.9
18.9
68.8
29.8
29.6
36.6
TABLE 5
1981
1982
1983
1984
1985
Official
Black
10.00
17.33
10.00
28.47
10.00
55.40
10.00
l22.90
10.00
275.80
28.00 70.00
716.70 2183.30
70
12400
Exports:
Coffee
Cotton
Sesane seeds
Bananas
Heat
Shellfish
Other agricultural
Ha&a&ring
.Average export rate l/
7.18
11.79
5.59
10.00
10.00
10.00
10.00
10.00
8.89
8.40
11.19
6.96
10.00
10.00
10.00
10.00
10.00
9.64
9.79
12.28
8.35
10.00
12.00
10.00
12.40
13.20
10.64
16.82
12.50
7.73
10.00
12.00
10.00
12.40
13.20
13.15
25.25
12.50
13.58
10.00
12.00
10.00
12.40
13.30
16.03
179.89
733.32
177.70
70.00
70.00
70.00
70.00
70.00
267.63
1611
2118
2209
2021
70
70
3415
2021
1978
18400
10509
7158
5053
70
70
10035
5053
6840
70
269
21000
536
IBport%
Oil and derivatives
L Subje$ to TEH 2/
- Financed in the parallel market
Average import rate l/
.
Average exchange rate
Ratios:
Average export/inpoti rate
Average export/official rate
Average irportjofficial rate
l/ Goodsandservices
2/ Honetaq stabilization rate
SODRCE:BCH.
110.15
144.30
64.09
28.00
28.00
28.00
28.00
28.00
106.12
1986
1987
Jan. 1988
70
40000
10.00
10.00
10.00
10.00
28.00
70.00
70
306
7856
191
9.70 9.90
10.18
10.89
11.45
42.72 101.78
516
1920
3.82
3.82
1.00
10.36
28.26
2.73
12.76
97.71
7.66
10.00
0.89
0.89
1.00
0.96 1.06
0.96 1.06
1.00 1.00
1.32 1.60
1.32 1.60
1.00 1.00
3.79
3.79
1.00
TABLE6
47.8
Fiscal/Bonetary Connection
(I of GDP)
Central government deficit l/
Monetary Lission - Deficit
Total Nonetary Emission
Honetary aggregates
(0 of GDP)
Heans of payments
Quasi-Honey
1989
22.2
20.1
0.0
0.0
April Nay
August
23.1
2.5
18.3
15.7
4.2
21.3
4.3
21.2
2.0
6.7
8.6
-0.8
-1.3
14.5
7.2
1.5
8.8
10.3
-4.3
8.6
4.3
-2.9
9.4
9.2
1.2
7.2
7.3
1.0
8.9
1.1
0.9
0.9
22.0
26.0
28.0
23.6
14.0
15.0
19.0
16.0
14.0
18.0
20.0
14.9
18.0
86.3
55.1
52.4
54.0
68.9
51.6
28.9
0.1
15.4
40.4
10.9
-0.9
91.8
62.9
45.8
34.4
20.1
8.0
12.6
11.4
15.5
17.0
42.5
0.9
20.8
16.3
0.9
21.5
19.5
1.4
22.9
25.6
6.6
32.2
22.4
3.7
26.0
2.8
3.1
5.8
6.7
0.4
7.1
4.3
5.9
10.2
16.6
1.2
11.6
0.5
6.8
0.5
6.0
0.6
1.1
38.3
35.8
44.4
42.4
50.5
50.8
80.4
63.1
56.0
58.0
-29.3
97.7
JOY
21.4
4.1
14.2
1.3
17.7
June
13.2
24.1
9.9
9.1
21.2
25.3
0.7
23.1
20.2
19.2
1.0
19.5
23.0
20.8
6.4
26.8
6.6
1.8
5.5
1.3
0.6
12.7
13.3
1.0
17.2
18.2
8.3
1.2
8.8
1.6
8.8
1.7
9.0
1.5
9.8
1.4
20.0
33.8
15.0
18.0
20.0
27.2
14.1
14.4
17.3
24.0
10.0
10.0
13.0
19.6
10.0
10.0
13.0
13.0
13.0
17.0
23.4
26.0
-27.8
-5.5
15.1
12.2
5.9
6.3
3.1
62.2
78.4
32.3
41.5
7.7
10.5
11.9
10.5
14.4
12.9
16.2
16.0
19.2
1.0
62.4
60.8
101.4
22.2
.
-c
.
Table 7
PRICE DYNANIC FOLUIWING
Weeks after devaluation
10
15
131.4 :
86.8
53.9
108.5
81.6
144.8 1
105.9
57.9
137.5
121.8
162.6 1
139.3
96.3
167.6
139.2
131.3
150.7
191.5
40
131.4 1
63.0
51.1
70.9
62.5
390.9 ;
253.9
230.6
281.5
219.5
390.9 I
296.5
279.7
316.3
290.4
390.9 1
262.1
202.4
332.5
319.5
390.9 \
248.6
165.3
346.8
347.1
390.9 :
281.0
206.8
368.5
345.9
359.7
349.0
348.9
346.4
397.1
78.1
TABLE8
FISCALANDWETABYINDICAT0& 1990
January February Harch
Central Government Budget
Danestic revenue
Foreign grants
Expenditure
24.1
1.5
21.5
3.2
April Hay
19.9
16.3
3.3
34.2
2.2
53.6
June
July
August
24.7
16.1
1.1
22.2
12.8
1.0
23.9
14.5
1.4
15.9
9.0
0.9
9.9
5.0
6.4
4.5
14.2
1.2
30.0
13.5
1.9
30.9
13.8
1.3
29.6
14.7
13.4
28.1
15.5
1.1
16.6
6.6
14.7
1.0
11.3
2.3
25.1
0.4
30.6
10.6
11.4
10.1
-0.9
9.2
18.9
-2.1
16.8
4.0
3.6
3.8
1.2
4.1
1.1
'4.3
1.1
1.2
1.4
1.7
1.2
1.4
1.7
1.2
1.4
1.7
1.2
1.4
1.7
21.4
21.5
1.2
10.6
11.8
-3.2
20.0
11.1
3.4
35.1
-9.7
16.7
14.5
25.4
Honetary aggregates
(0 of GDP)
Heans of payments
Quasi-Honey
9.3
1.4
10.3
1.4
11.6
1.3
11.3
1.0
8.5
1.0
1.0
1.0
1.3
15.0
15.0
19.0
21.1
13.0
13.0
15.0
16.6
13.0
13.0
15.0
15.5
20.0
20.0
20.0
20.0
1.2
1.4
1.7
1.2
1.4
1.7
1.2
1.4
1.7
1.2
1.4
1.7
0.8
0.8
0.8
0.8
0.8
0.8
0.8
0.8
-2.8
-1.8
-4.5
-18.3
-23.5
1.4
-14.3
4.0
-15.6
-0.2
0.5
7.5
25.9
14.7
18.7
15.0
20.9
36.2
116.4
107.1
100.6
86.4
82.5
67.8
58.8
56.1
30.5
33.0
30.3
47.5
40.7
Fiscal/Monetary Connection
(I of GDP)
Central government deficit l/
Honetary Bnission - Deficit
Total Honetary Emission
24.6
46.9
53.7
79.9
31.9
4.4
15.0
1.2
TABLE 9
FISCALANDHOBETABYINDICAlWS,, 1991
January
February
15.0
2.9
17.0
12.8
8.0
3.5
12.9
19.3
-0.9
6.9
19.3
3.1
5.0
Harch
April Hay
-1.6
June
July
20.4
21.3
25.7
14.2
21.1
1.6
27.2
-2.6
6.3
3.1
-1.9
-10.6
-1.6
13.0
11.8
21.1
16.2
10.4
24.0
-3.1
11.5
7.8
11.3
10.3
22.5
0.8
27.7
-9.1
11.4
-5.2
5.2
21.7
0.7
24.4
2.3
-0.1
6.9
1.6
7.3
1.5
7.0
7.6
1.9
1.6
1.3
1.4
1.9
1.4
1.4
1.4
0.9
1.4
1.4
1.4
0.9
1.4
1.4
1.4
0.9
1.4
1.4
1.4
0.9
1.4
1.4
1.4
0.9
1.4
1.4
1.4
0.9
1.4
1.4
1.4
0.9
-2.4
-0.7
-0.5
4.0
-1.2
1.0
-0.6
0.9
-6.4
3.4
-1.1
1.6
0.9
1.5
-1.1
1.2
2.2
5.9
-0.1
0.9
1.6
-0.1
0.0
8.1
4.1
3.8
0.1
4.5
0.7
4.9
5.4
1.0
1.4
6.1
1.5
6.4
1.0
1.2
1.4
1.7
1.2
1.4
1.7
0.8
1.4
1.4
1.4
0.9
1.4
1.4
1.4
0.9
1.4
1.4
1.4
0.9
-7.5
-7.7
29.2
-12.9
52.2
42.0
38.6
261.1
290.5
20.3
15.9
21.1
5.1
22.2
1.1
6.0
49.1
25.4
1.4
23.8
4.4
0.2
4.6
28.2
26.6
0.8
4.4
2.5
15.7
5.2
2.7
-3.0
2.0
-0.2
1.8
Table 10
SOORCES OF GROWTR OF NET DOHESTIC CREDIT
(Hillion Gold Cordobas)
1991
WI
1992
(Honetary
RoqraB 1
Public sector
Net credit to the central governrent
Net credit to the rest of the public sector
Credit to other institution
-82.7
-127.7
27.2
17.8
-764.7
-644.8
-119.9
0.0
Financial system
Net credit to the financial system
Other net assets
Reserve requirements
Net medium and long ten foreign credit
to the Central Bank
Donations received by the Central Bank
417.0
660.1
384.6
-257.0
777.7
937.7
533.2
-235.0
-370.7
11
-208.2
-250.0
.
i,
I
otber
-0.5
333.8
0.0
Table 11
FOREIGR DEBT OF NICARAGUA AS OF JDNE 30, 1991
(Nillion dollars)
Debt, including
unpaid interest
Interest
due, 1992
852.6
19.6
2, Paris Club
a. Typical Paris Club
b. Forner GDR
860.2
502.8
13.6
1.5
B
C
3, Latin Lerica
a. Uultilateral I/
b. Hexico
c. Other bilateral
380.8
1059.0
901.1
4.3
s-s
37.2
D
E
E
2812.9
585.1
102.7
39.2
E
C
117.6
0.2
60.0
3.6
1798.4
7.9
62.3
2.0
9992.8
231.8
Renegotiation
status
4
Y.
6
.
2998.7
1773.3
1368.0
FIGURE 1
loo-
&30:
2 0 ~!-!
1990
1980
1970
1950
1920
b
,
.
!
FIGURE 2
1200 40
1000 50
WO-
20
400 10
mo
0
le.1
lo86 #7 OM lbM
lsso
(99(
FIGURE 3
REAL WAGES, 1985 l 100
(using gdp deflator)
200
150
rotal
100
50
1982
1984
FIGURE 4
MONTHLY INFLATION RATE, 1984 - 1991
250
lllllllllll~lllllllllllllllllllllllllllll~llllllllllllllllllll~llllllllllu
1984
1985
1988
1987
1988
1989
1990
1991
6
Ju
b
FIGURE 5
A. Weekly Inflation Rate (vs. same week
in the previous month)
300
- Total
Wlthout regulated
2ooc
loo-
1989
1990
1991
L
t
c
.
t-
250
225
200
175
150
125
100
75
50
25
1989
1990
1991
1992
FIGURE 7
AProductlonh A
100
90
\ t ,I
Y
80
70llllllllllll
1988
1989
1990
1991
I]
FIGURE 8
lea9
and Black
leQ0
nm
- Pualld/Otl kkl
-- - 8Iack/o(fkkl