The policy reforms since 1983 havereduced the fiscal deficit and inflation, helped improveinfrastructure services, and shifted relative prices andincentives towards the tradable sector, in general, andtowards exports, in particular. The key element of fiscalconsolidation up to 1991 was the growth in governmentrevenues, whose share of Gross Domestic Product (GDP) rosefrom 6 percent in 1983 to 13 percent in 1986 and to 16percent in 1991. Higher revenues made it possible to reducethe fiscal deficit and, at the same time, increase publicinvestment in infrastructure which had virtually collapsedprior to 1983. Prudent monetary management also led toinflation falling from 123 percent in 1983 to 40 percent in1986 and 18 percent in 1991. The resulting improvements inmacroeconomic stability made it possible for farms and firmsto respond to the shift in production incentives induced bythe policy reforms. As a result of these reforms, theeconomy turned around. Although economic activity witnessedits biggest surge during the early years of the EconomicRecovery Program (ERP) (5.3 percent annually during1983-86), aggregate growth has averaged 4.7 percent perannum since 1987. The private sector has made a significantcontribution to growth. However, this growth performance hasnot been uniform across sectors. Agriculture recorded anannual growth rate of only 1.9 percent since 1987 whileservices have grown at an average annual rate of 7.4 percentover the same period. Merchandise exports and imports havegrown faster than GDP and with it, complementary wholesaleand retail trade. The share of external trade in GDPincreased from about 5 percent in 1983 to 32 percent in1986, 35 percent in 1991, and 55 percent in 1994.
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