Overspending empties the kitty

[NewsWhore]

Economist Carlos Despradel says that the government is hard-pressed for revenues now because it is paying the price for overspending on campaigning in the run-up to the Congressional elections that took place in May. The ruling party managed to win a majority in Congress. He warns that it is in the government's best interests to reduce spending rather than forge ahead with a tax increase. As reported in Hoy newspaper on Monday, 6 November, Despradel says that if the government wants to increase taxes, it should at least show signs of austerity, but that that is not happening. He said that the economy today is very different compared with what Fernandez tackled during his first Presidency, in 1996. He rejected the statements claiming that it is the International Monetary Fund that is making the impositions for more taxes. He explained that all the IMF demands is fiscal balance, but it is up to the authorities to choose how to achieve this. "It is the authorities' choice to decide if they are going to achieve this balance, either by increasing income or cutting expenses. Whichever option is chosen, the IMF has to accept," said Despradel, who is a former governor of the Central Bank. Despradel was speaking during an interview with PRD secretary general, Orlando Jorge Mera for the "Lideres" TV program on Color Vision. Despradel said that in 2006 the government was not able to comply with the IMF Stand-by agreement program because of overspending in the first two quarters of the year. Despradel highlighted the fact that government revenues in 2004 were up 40%, while inflation was 29%, for a surplus of 11%. Then in 2005, revenues were up 22% and inflation was 7%, so the government had a 15% surplus. In 2006 revenues were up 16% and inflation is estimated at 8%, for 8% real additional revenue. "That means that the government has increased its revenues beyond inflation for three consecutive years. Each year it has had more money to spend. Any company or family would want that," commented Despradel. He said that Dominicans are questioning the use the government is giving to the additional funds generated by the so-called fiscal reforms. He commented that Income Tax is up 24%, when compared with 7% inflation, which is positive. Property tax is up by 76% this year, and ITBIS has produced 27% more. But current government spending is up by 37%, "an extraordinary increase in a country where inflation has been low." He observed that regardless, the government complains it has not had enough revenues. To make his point about overspending in the run-up to the May election, he analyzed the situation where in January 2006 the government spent RD$104 million on materials and supplies, but in February this increased to RD$2.1 billion, in March to RD$1.2 billion and in April to RD$2.1 billion. Likewise, he mentioned that in January, the spending on wages for those not on the payroll (non-personnel services) was RD$148 million, but in April this had increased to RD$1.2 billion.

More... (http://www.dr1.com/index.html#4)