Economist Pedro Silverio Alvarez is alerting the government cannot afford to take on more debt unless we start to export more. He explains the DR economy now is kept strong by the government taking on debt, which he equates to injecting steroids into the economy. Read below from DR1 Daily News -- 19 September 2014.
Pedro Silverio Alvarez: Economic model must change
Former manager of the Central Bank, Pedro Silverio Alvarez writes an opinion piece in Diario Libre today, Friday 19 September, warning that time is running out for the Dominican Republic to change its economic model. Changes in the economic model would enable more resources to meet the financial obligations of the increase in indebtedness taken on by the PLD administrations.
Alvarez adds that the increasing debt taken on by Dominican governments is reaching unsustainable levels. He points out that the World Bank recently published an economic report revealing that during the past 15 months the DR has made three international bond placements for US$2.75 billion and the government is seeking additional financing for US$2 billion.
Debt levels have significantly increase in recent years. The non-financial public sector debt has doubled from 18.3% of GDP in 2007 to 36.6% in the first quarter of 2014. When the Central Bank debt is included, the debt level could be closer to 47% of GDP, points out the World Bank report. In 2011 economists Jimenez and Ovalle estimated the maximum debt level for the Dominican Republic in 2013 at 56.7%.
Alvarez writes that it has been a common practice of governments to be addicted to taken on debt as the easy option. This gives a false sensation of wellbeing. ?But like all vices, sooner or later the reality will hit hard,? he writes.
The bottom line is that the Dominican Republic will need to make payments on this debt that puts the welfare of Dominicans at risk. He comments that during his presidential election campaign, Danilo Medina promised a debt reduction policy, but this has not been implemented.
Alvarez?s main point is that the current economic model is obsolete. He calls it ?growth on steroids,? which has not been able to provide an effective response to poverty, by developing a strong middle class or creating quality work opportunities. Instead, it is a model that depends on the government taking on debt and now the government is at risk of reaching its payment limit, which will force traumatic adjustments as has been seen in the past.
Unfortunately, Alvarez says that Medina is now entering the second half of his government, when politics may prevail.
The latest UNDP human development report found that the middle class in the Dominican Republic was in decline. Meanwhile, Central Bank Governor Hector Valdez Albizu recently reported that the DR would post economic growth that was three to four times greater than the average for Latin America by year?s end.
Se agota el tiempo para el cambio de modelo - DiarioLibre.com
La deuda p?blica expone al pa?s a un elevado riesgo de choque externo - DiarioLibre.com
Pedro Silverio Alvarez: Economic model must change
Former manager of the Central Bank, Pedro Silverio Alvarez writes an opinion piece in Diario Libre today, Friday 19 September, warning that time is running out for the Dominican Republic to change its economic model. Changes in the economic model would enable more resources to meet the financial obligations of the increase in indebtedness taken on by the PLD administrations.
Alvarez adds that the increasing debt taken on by Dominican governments is reaching unsustainable levels. He points out that the World Bank recently published an economic report revealing that during the past 15 months the DR has made three international bond placements for US$2.75 billion and the government is seeking additional financing for US$2 billion.
Debt levels have significantly increase in recent years. The non-financial public sector debt has doubled from 18.3% of GDP in 2007 to 36.6% in the first quarter of 2014. When the Central Bank debt is included, the debt level could be closer to 47% of GDP, points out the World Bank report. In 2011 economists Jimenez and Ovalle estimated the maximum debt level for the Dominican Republic in 2013 at 56.7%.
Alvarez writes that it has been a common practice of governments to be addicted to taken on debt as the easy option. This gives a false sensation of wellbeing. ?But like all vices, sooner or later the reality will hit hard,? he writes.
The bottom line is that the Dominican Republic will need to make payments on this debt that puts the welfare of Dominicans at risk. He comments that during his presidential election campaign, Danilo Medina promised a debt reduction policy, but this has not been implemented.
Alvarez?s main point is that the current economic model is obsolete. He calls it ?growth on steroids,? which has not been able to provide an effective response to poverty, by developing a strong middle class or creating quality work opportunities. Instead, it is a model that depends on the government taking on debt and now the government is at risk of reaching its payment limit, which will force traumatic adjustments as has been seen in the past.
Unfortunately, Alvarez says that Medina is now entering the second half of his government, when politics may prevail.
The latest UNDP human development report found that the middle class in the Dominican Republic was in decline. Meanwhile, Central Bank Governor Hector Valdez Albizu recently reported that the DR would post economic growth that was three to four times greater than the average for Latin America by year?s end.
Se agota el tiempo para el cambio de modelo - DiarioLibre.com
La deuda p?blica expone al pa?s a un elevado riesgo de choque externo - DiarioLibre.com