The government overspending in December is one of the main reasons for the informal devaluation of the Dominican peso. The National Budget execution figures for December reveal that the government spent RD$813.59 million on Christmas bonuses alone. The government gave full Christmas bonuses to everyone on its payroll. The Fernández administration had given government employees and retirees hefty salary increases, thus the impact of the double salaries at Christmas time was greater. The extra money in circulation resulted in an increase in the demand for U.S. dollars. In order to maintain macroeconomic stability, the Central Bank injected dollars from its reserves into the economy and at the same time implemented constrictive measures that have led to an increase in the interest rate on commercial bank loans. The higher cost of money has had an negative effect on Dominican businesses that had plans for expansion in 1998, taking advantage of the relatively low interest rates that prevailed in 1997. The government received record tax collections in December, at RD$4,404.7 millon, but it also established a new record for disbursements in a month, with RD$4,340.5 million. According to Hector Linares, economic editor of the Ultima Hora newspaper, the government spent money at a higher velocity than it collected it in December, having to draw on reserves. The National Treasury contributed the most to the December collections, with RD$1,607.7 million or 36% of government tax receipts. Throughout the year, the National Treasury contributed RD$8,058.2 million. Customs Bureau collected RD$1,228.05 million in December. Customs collected a total of RD$11,953.29 millon in 1997. The Direccion General del Impuesto sobre la Renta, the income tax bureau, collected RD$1,078.30 million. The total for 1997 was RD$9,363.7 million. The Dirección General de Rentas Internas, or the internal revenue bureau, reported income for RD$490.5 million in December, and an overall year’s total of RD$5,168.2 million. Today both departments make up the Dirección General de Impuestos Internos (DGII), the general bureau for domestic taxes.
