The IMF gives the DR US$600 million.
The DR cuts spending by DR$22billion.
Apply a little math: DR$22billion divided by the exchange rate = US$628million!!!!
What does this mean? It means that the net result for the DR is ZERO!!! The IMF deal is doing nothing. It is not changing the situation.
Look at it this way. Mejia was spending more than he had...meaning that he had to borrow money from both local and international sources in order to meet his payroll.
If he were to "just" cut spending by RD$22billion, then that would be RD$22billion he would not have to borrow. This would be good, and it would bring iterest rates down.
So he turns around and borrows the same amount of money that he "saved" by cutting spending: US$600million from the IMF.
Therefore, under the guise of "Stringent Measures Imposed by the IMF"...he is forced to "cut" spending.....but DOES NOT cut borrowing.
Net result of the IMF money transaction: money that Mejia was going to give somebody else....he is now keeping as a fat US$600million from the IMF.
This makes it clear that he does NOT have to increase taxes because the net inflow to the Mejia is tha same. But with the new taxes, he is getting a double windfall....and the IMF has is required new source of revenue to get its money back.
What evil genius Mejia and IMF are....this is a great scheme.
The DR cuts spending by DR$22billion.
Apply a little math: DR$22billion divided by the exchange rate = US$628million!!!!
What does this mean? It means that the net result for the DR is ZERO!!! The IMF deal is doing nothing. It is not changing the situation.
Look at it this way. Mejia was spending more than he had...meaning that he had to borrow money from both local and international sources in order to meet his payroll.
If he were to "just" cut spending by RD$22billion, then that would be RD$22billion he would not have to borrow. This would be good, and it would bring iterest rates down.
So he turns around and borrows the same amount of money that he "saved" by cutting spending: US$600million from the IMF.
Therefore, under the guise of "Stringent Measures Imposed by the IMF"...he is forced to "cut" spending.....but DOES NOT cut borrowing.
Net result of the IMF money transaction: money that Mejia was going to give somebody else....he is now keeping as a fat US$600million from the IMF.
This makes it clear that he does NOT have to increase taxes because the net inflow to the Mejia is tha same. But with the new taxes, he is getting a double windfall....and the IMF has is required new source of revenue to get its money back.
What evil genius Mejia and IMF are....this is a great scheme.