NewsWhore
09-22-2010, 03:20 PM
The Dominican government had committed to achieving a zero deficit in the consolidated government sector's primary balance, but this did not happen. The government posted a 0.4% of the Gross Domestic Product, writes former governor of the Central Bank Bernardo Vega in today's Hoy newspaper. He says that for 2011 the government committed to a primary public sector surplus of 1% of the GDP and 2% for 2012. But the budget announced shows there will be a deficit of RD$33.5 billion, or 1.6% of the GDP and a deficit of the consolidated government sector of 3% instead of the surplus.
"This means the government twisted the IMF's arm and convinced it to allow a fourth consecutive year of fiscal deficits," writes Vega. He explains that as 2012 is an electoral year and the agreement with the IMF expires in February, there will probably be five years of deficits.
He says that this means the proportion of the government debt to the GDP will increase even more. "For next year the government has already announced it would place sovereign bonds for US$500 and US$750 combined with taking on loans from international organizations," he writes. This he says means that "instead of austerity, the government convinced the IMF to allow more borrowing and set back the commitment of increasing the power rates, which means the CDEEE deficit and the government electricity subsidy will increase. This will be resolved by taking on more debt.
Vega comments that the proposed budget for 2011 seems to be "politically unsustainable," as was the case of the 2010 budget, because it includes too little for the electricity subsidy. Moreover, the funds for the Presidency's Supervisory Office of Public Works are being reduced from RD$15 billion to RD$5 billion in 2011, because the funds are instead being allocated to the metro that will now receive RD$13 billion, up from RD$3 billion.
"This means that a single public works project will receive twice what the office will spend on hundreds of public works nationwide," he stresses.
Moreover, he says that the pressures for public works nationwide will make it difficult for the government to fulfill its commitment for RD$14 billion to the Central Bank to pay interests on the debt, and that this will increase the deficit and borrowing.
Vega forecasts a drop in growth given that the 2011 budget increases current spending, but reduces capital spending.
"To get the IMF to accept another year of deficit is, in the words of colleague and former student, Carlos Despradel, 'a great achievement for the government, but not necessarily for the country'," he writes.
Vega concludes that so many consecutive years of deficits bring us to the limit of taking loans, as was the case in Argentina and more recently Greece.
More... (http://www.dr1.com/index.html#3)
"This means the government twisted the IMF's arm and convinced it to allow a fourth consecutive year of fiscal deficits," writes Vega. He explains that as 2012 is an electoral year and the agreement with the IMF expires in February, there will probably be five years of deficits.
He says that this means the proportion of the government debt to the GDP will increase even more. "For next year the government has already announced it would place sovereign bonds for US$500 and US$750 combined with taking on loans from international organizations," he writes. This he says means that "instead of austerity, the government convinced the IMF to allow more borrowing and set back the commitment of increasing the power rates, which means the CDEEE deficit and the government electricity subsidy will increase. This will be resolved by taking on more debt.
Vega comments that the proposed budget for 2011 seems to be "politically unsustainable," as was the case of the 2010 budget, because it includes too little for the electricity subsidy. Moreover, the funds for the Presidency's Supervisory Office of Public Works are being reduced from RD$15 billion to RD$5 billion in 2011, because the funds are instead being allocated to the metro that will now receive RD$13 billion, up from RD$3 billion.
"This means that a single public works project will receive twice what the office will spend on hundreds of public works nationwide," he stresses.
Moreover, he says that the pressures for public works nationwide will make it difficult for the government to fulfill its commitment for RD$14 billion to the Central Bank to pay interests on the debt, and that this will increase the deficit and borrowing.
Vega forecasts a drop in growth given that the 2011 budget increases current spending, but reduces capital spending.
"To get the IMF to accept another year of deficit is, in the words of colleague and former student, Carlos Despradel, 'a great achievement for the government, but not necessarily for the country'," he writes.
Vega concludes that so many consecutive years of deficits bring us to the limit of taking loans, as was the case in Argentina and more recently Greece.
More... (http://www.dr1.com/index.html#3)