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[url
www.dr1.com[/url]]Saying one thing, doing another
Economist Frederic Emam-Zade says that given the mix of policies implemented by the government and the trends that several monetary and fiscal variables are following, the government could potentially end its term with an exchange rate of RD$70-RD$80 to the US dollar and inflation of 100%. The economic implications of this new collapse on the beleaguered electricity system and the fragile banking climate would be disastrous, says Emam Zade, and would have an apocalyptic effect on the governmental PRD party.
“Nobody should be surprised if the outgoing government, consistent with the policies that led to its ejection by the Dominican people, does not honor its commitments to the country or the IMF,” says the economist. Shortly after losing the election, and having promised to cooperate with the incoming government, the PRD authorities are already planting seeds of discord by saying they will not fulfill their commitment to carry out a fiscal reform prior to July of this year.
He says that this outcome was foreseeable from the moment when they decided not to conduct the fiscal reform before signing the second IMF agreement. The reform would have certainly called for tax increases – which would not have been convenient before an election. The logic of certain government officials was as such: if we win, we’ll use the honeymoon period to increase taxes to punish the rich who backed our political opponent, and if we lose, we’ll postpone the tax rises so that the political cost of the reform is passed off to the new government and in this way we’ll accumulate political capital from the opposition for the 2006 legislative election.
Emam Zade furthermore speculates that someone in government may have reasoned that by obstructing the fiscal reform they would also hold a card with which to negotiate impunity for certain government officers, as well as additional laws or changes to the constitution that would benefit the outgoing PRD authorities.
Fortunately, these tricks of the present government could become a blessing in disguise, says Emam-Zade. When the new administration is unable to up its income, it will have to improve the quality of its public spending and substantially reduce its current spending, above all bringing about cuts in the enormous number of public employees. This would benefit the Dominican people in general, but would hurt the political patrons who had government jobs that will now return to the opposition.
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