El Caribe newspaper warns that in only nine months, the Mejia administration has sent to Congress projects needing US$505 million in short term government loans with foreign commercial banks. This contrasts with the US$240 million taken out by the previous Fernandez administration with foreign commercial banks in four years. Newspaper executive editor, Bernardo Vega writes that international loans with foreign commercial banks to purchase goods and services are very costly to the country. He estimates the real interest paid on them is 20%. He warns that these loans, unlike money borrowed from lending organizations such as the World Bank and the Inter American Development Bank, do not require that tenders be held. This means that goods can be overvalued to benefit the government officers who seek the loans. The newspaper points out that 50% of the loans are with Spanish commercial banks. Vega, a former governor of the Central Bank, says these loans will affect the government’s credit rating, its future capacity to secure new loans and even the private sector’s ability to secure loans. The Dominican foreign debt is US$3,600 million, of which US$1,200 million are soft loans with multilateral organizations such as the World Bank and the IADB. Another US$1,700 million are with foreign governments, of which US$844 million is owed to the US and US$373 million to Spain. The Dominican government owes private banks US$662 million. El Caribe’s editor says the new debt would amount to a 14% increase in the DR’s foreign debt, while increasing the proportion of short-term loans at high interest rates. Vega criticizes the government for going on a borrowing spree with private banks, without tenders or any transparency, while the disbursement of soft loans by the IADB and the World Bank is going at a very slow pace. So far the government has only sent to Congress four loans for US$53.7 million from these institutions. “Indebtedness that does not generate the wealth with which to pay it back is like a drug. It temporarily allows high current expenditure levels, providing jobs for party members, allows for not increasing taxes and for building works outside of the budget. But after the party comes the hangover, when it has to be paid. That will also affect this government as most of the new loans do not even have grace periods,” writes the newspaper in its editorial today.
