NewsWhore
01-29-2009, 07:00 PM
Financial analyst Alejandro Fernandez Whipple makes an important point in a contribution to today's Diario Libre on how pension plan savings by Dominicans have been invested in government securities.
"Money belonging to Dominican workers is being invested to sustain government deficits, contributing very little to the creation of value in the Dominican economy," he points out. He said that the government instead needs to reduce its spending.
According to Fernandez, of the RD$44 billion in the accounts administered by the pension plan companies (AFPs), as of September 2008 more than half (47%) or RD$20 billion is invested in financial instruments issued by the Central Bank, the governmental Banco de Reservas and the Banco Nacional de la Vivienda. Other complementary funds add on another RD$8 billion, for RD$28 billion in the hands of government entities. He expects the figure to have increased 30% by now. "In the last three months of 2008 alone, pension funds invested an additional RD$5 billion in the Central Bank bringing the total to RD$25.3 billion," he writes.
He says this leap in volume in Central Bank instruments happened when the government authorized up to 40% of the funds to be invested in Central Bank instruments. As a result, the government now holds 47% of the funds, up from 22% in December 2006.
Fernandez writes that the explanation for the Central Bank having aggressively increased its pension fund portfolio is due to a decision by the central government to "postpone" the capitalization to which it is obligated by law.
He also makes the point: "If the Banco de Reservas is one of the leading recipients of pension funds, it is not only because it reached RD$150 billion in assets, but because during 2008 it increased its lending to the government itself by almost RD$20 billion, which easily represents the total of its lending growth in that year."
More... (http://www.dr1.com/index.html#9)
"Money belonging to Dominican workers is being invested to sustain government deficits, contributing very little to the creation of value in the Dominican economy," he points out. He said that the government instead needs to reduce its spending.
According to Fernandez, of the RD$44 billion in the accounts administered by the pension plan companies (AFPs), as of September 2008 more than half (47%) or RD$20 billion is invested in financial instruments issued by the Central Bank, the governmental Banco de Reservas and the Banco Nacional de la Vivienda. Other complementary funds add on another RD$8 billion, for RD$28 billion in the hands of government entities. He expects the figure to have increased 30% by now. "In the last three months of 2008 alone, pension funds invested an additional RD$5 billion in the Central Bank bringing the total to RD$25.3 billion," he writes.
He says this leap in volume in Central Bank instruments happened when the government authorized up to 40% of the funds to be invested in Central Bank instruments. As a result, the government now holds 47% of the funds, up from 22% in December 2006.
Fernandez writes that the explanation for the Central Bank having aggressively increased its pension fund portfolio is due to a decision by the central government to "postpone" the capitalization to which it is obligated by law.
He also makes the point: "If the Banco de Reservas is one of the leading recipients of pension funds, it is not only because it reached RD$150 billion in assets, but because during 2008 it increased its lending to the government itself by almost RD$20 billion, which easily represents the total of its lending growth in that year."
More... (http://www.dr1.com/index.html#9)