NewsWhore
03-30-2011, 05:00 PM
In an op-ed contribution to Hoy, former Central Bank Governor Bernardo Vega reads between the lines of the IMF statement released this week on the fifth review of the Stand-by Arrangement.
"The IMF mission came and left without negotiating a new letter of intent, announcing that discussions would continue in coming weeks," he observes. He mentions the DR has been operating outside the agreement for three months. The agreement is necessary to issue the sovereign bonds that have been scheduled for this semester and to receive loans from international bodies consigned in the 2012 budget.
He said the agreement began in October 2009 under the premise that international loans with almost no conditions were desirable, following directives of the G-20 that established and encouraged fiscal deficits in emerging countries to stimulate global demand.
Vega writes that the DR was not able to meet the limits to public deficit with the non-financial public sector, and this situation worsened by the unexpected increases in global oil prices.
Now, he says, the international community is fostering surplus-stimulating policies. Last week, the managing director of the IMF Dominique Strauss-Kahn declared: "Growth in most Latin American economies is now back at potential, or above -- and in many of them there are worrisome signs of overheating." He says that the directors of the IMF do not believe our country should cover its budget deficits with domestic or international loans.
"The Central Bank, by increasing interest rates, has moved to a neutral phase, but the government insists on keeping the deficits that are financed with loans. The government does not want to increase electricity rates again, despite the increase in fuel prices and despite having committed to move towards a flexible rate that reflects the changes in the cost of generation in the December letter of intent.
He writes that the IMF wants to reduce the deficits by increasing the price of electricity and securing greater fiscal revenues.
Vega observes that 2012 is an electoral year in which, as happened in 2008, politicians tend to loosen the economy. "The agreement with the IMF expires in February. If the deficit is not reduced in 2011 it is almost sure that this will not happen in 2012 either.
"At least one analyst from the firms that evaluate our sovereign bonds has made a proposal that the agreement with the IMF should be extended to all of 2012 so that the adjustment, politically costly, can be diluted over the next 21 months, instead of the next 11, but others argue that the unpleasant measures should be taken now so that our voters can have forgotten them by May. The government wants to be allowed to continue to take on debt," he writes.
More... (http://www.dr1.com/index.html#12)
"The IMF mission came and left without negotiating a new letter of intent, announcing that discussions would continue in coming weeks," he observes. He mentions the DR has been operating outside the agreement for three months. The agreement is necessary to issue the sovereign bonds that have been scheduled for this semester and to receive loans from international bodies consigned in the 2012 budget.
He said the agreement began in October 2009 under the premise that international loans with almost no conditions were desirable, following directives of the G-20 that established and encouraged fiscal deficits in emerging countries to stimulate global demand.
Vega writes that the DR was not able to meet the limits to public deficit with the non-financial public sector, and this situation worsened by the unexpected increases in global oil prices.
Now, he says, the international community is fostering surplus-stimulating policies. Last week, the managing director of the IMF Dominique Strauss-Kahn declared: "Growth in most Latin American economies is now back at potential, or above -- and in many of them there are worrisome signs of overheating." He says that the directors of the IMF do not believe our country should cover its budget deficits with domestic or international loans.
"The Central Bank, by increasing interest rates, has moved to a neutral phase, but the government insists on keeping the deficits that are financed with loans. The government does not want to increase electricity rates again, despite the increase in fuel prices and despite having committed to move towards a flexible rate that reflects the changes in the cost of generation in the December letter of intent.
He writes that the IMF wants to reduce the deficits by increasing the price of electricity and securing greater fiscal revenues.
Vega observes that 2012 is an electoral year in which, as happened in 2008, politicians tend to loosen the economy. "The agreement with the IMF expires in February. If the deficit is not reduced in 2011 it is almost sure that this will not happen in 2012 either.
"At least one analyst from the firms that evaluate our sovereign bonds has made a proposal that the agreement with the IMF should be extended to all of 2012 so that the adjustment, politically costly, can be diluted over the next 21 months, instead of the next 11, but others argue that the unpleasant measures should be taken now so that our voters can have forgotten them by May. The government wants to be allowed to continue to take on debt," he writes.
More... (http://www.dr1.com/index.html#12)