NewsWhore
07-02-2010, 04:40 PM
Economist Bernardo Vega focuses on the real situation of the foreign debt in a commentary in Hoy. He recalls that 10 years ago our domestic and external debt was barely 17% of GDP. Now it is 41%, only slightly down from the days of the 2003 banking crisis when it reached 43%.
He says that the Fernandez administration continues to insist that the foreign debt keeps a proportion to the Gross Domestic Product similar to that of other countries in the region. But he says that measurement is not valid because of the profile of the Dominican debt. He makes the point that on average Dominican foreign debt is due in 7.7 years, with an average interest rate of 3.9%, plus a high domestic debt, that combined makes up 41% of DGP. He says the 41% of GDP would not be bad if the debt would expire in 20 years, at 2% interest rate or had been invested in projects that generate foreign exchange for the country, which is not the case in the DR.
He says that the bulk of our loans taken since 2000 have been with commercial banks, at commercial interest rates, plus the sovereign bonds. He says it would have been different if the government had borrowed from multilateral organizations. He said the borrowing spree with commercial banks began during the government of President Hipolito Mejia but was continued during the Fernandez administration.
Among the loans is the financing for the metro that also requires large subsidies for its operation, he explains. Furthermore, he speculates it is just a matter of time for the government to announce new borrowing for the second line of the metro, and perhaps for the Santiago train. He also forecast taking on more sovereign bond debt.
Furthermore, he explains that domestic borrowing, that makes up 40% of the total debt, is also up. These are bonds issued by the Ministry of Hacienda and purchased by commercial banks and local companies that expire on average in 2.4 years, with interest rates of 13.2%. He explained that from March 2007 to March 2010 our domestic and foreign debt of the non-financial sector grew a surprising 76%. And 37% of this expires in 3 years. He says that every year, 40 cents of every peso will be used to repay the debt. And the government will be obliged to continue to take on more debt.
Vega is very critical of the policy of taking on loans from commercial banks and from the Brazilian Development Bank without holding tenders and without adequate feasibility studies.
http://www.hoy.com.do/opiniones/2010/6/29/331970/La-situacion... (http://www.hoy.com.do/opiniones/2010/6/29/331970/La-situacion-de-nuestra-deuda-externa-e-interna)
More... (http://www.dr1.com/index.html#9)
He says that the Fernandez administration continues to insist that the foreign debt keeps a proportion to the Gross Domestic Product similar to that of other countries in the region. But he says that measurement is not valid because of the profile of the Dominican debt. He makes the point that on average Dominican foreign debt is due in 7.7 years, with an average interest rate of 3.9%, plus a high domestic debt, that combined makes up 41% of DGP. He says the 41% of GDP would not be bad if the debt would expire in 20 years, at 2% interest rate or had been invested in projects that generate foreign exchange for the country, which is not the case in the DR.
He says that the bulk of our loans taken since 2000 have been with commercial banks, at commercial interest rates, plus the sovereign bonds. He says it would have been different if the government had borrowed from multilateral organizations. He said the borrowing spree with commercial banks began during the government of President Hipolito Mejia but was continued during the Fernandez administration.
Among the loans is the financing for the metro that also requires large subsidies for its operation, he explains. Furthermore, he speculates it is just a matter of time for the government to announce new borrowing for the second line of the metro, and perhaps for the Santiago train. He also forecast taking on more sovereign bond debt.
Furthermore, he explains that domestic borrowing, that makes up 40% of the total debt, is also up. These are bonds issued by the Ministry of Hacienda and purchased by commercial banks and local companies that expire on average in 2.4 years, with interest rates of 13.2%. He explained that from March 2007 to March 2010 our domestic and foreign debt of the non-financial sector grew a surprising 76%. And 37% of this expires in 3 years. He says that every year, 40 cents of every peso will be used to repay the debt. And the government will be obliged to continue to take on more debt.
Vega is very critical of the policy of taking on loans from commercial banks and from the Brazilian Development Bank without holding tenders and without adequate feasibility studies.
http://www.hoy.com.do/opiniones/2010/6/29/331970/La-situacion... (http://www.hoy.com.do/opiniones/2010/6/29/331970/La-situacion-de-nuestra-deuda-externa-e-interna)
More... (http://www.dr1.com/index.html#9)