IMF political spin

[NewsWhore]

Trying to calm fears and misinformation surrounding the proposed fiscal reform, the IMF mission in the DR held a meeting yesterday with members of public and private sector groups to explain the details of the fiscal reform. According to the IMF team, the reform, carried out together with a reduction in government spending, could save the government RD$36 billion, or 3% of the GDP. But there is a catch, in that money would not be used for education or health. Instead it will be used to pay off the government's loan to the IMF, which currently makes up 44% of the country's total GDP. The IMF wants to see this figure dropping to 30% of the total GDP by 2016. According to Listin Diario, Andy Wolfe, chief of the IMF mission in the country said that for such a reform to take place, the ITBIS (VAT) base, which is currently at 16%, would have to be raised. He defended this move by saying that the international average for such a tax is 18%, in other words, VAT in the DR is relatively low. Wolfe went on to say that there should be a reform of the tax imposed on alcohol consumption, concluding that along with a few more increases in taxes, which he did not mention, this could give the government an extra RD$18 billion. In his address, Wolfe said that the government should definitely stop subsidizing propane gas (GLP) and the electricity sector, commenting that the latter is the government's Achilles heel. Cardinal Nicolas de Jesus Lopez Rodriguez, in an interview with El Caribe newspaper, said that at present the country has no other choice but to submit to the IMF demands. The Cardinal said that the government got the country into this problem and that there is no other choice now but to go ahead with it.

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