The National Council of Businesses (CONEP), the nation’s leading business organization, has warned Congress about the negative consequences of giving the green light to the US$500 million in sovereign bonds. Congress is about to study the bill to issue the bonds. The business organization says the government’s decision to issue bonds while it is taking out short term loans could stagnate the economy and make it necessary for new taxes to meet the growing foreign debt commitments. Conep says this would bring an increase in inflation, force a decline in the foreign exchange rate that in turn would affect the competitiveness of Dominican produce and increase imports. Conep warns of the alarming increase in current expenditures and said the government should use its funds more rationally, liberating income that is going to non-productive items. “Conep is concerned that while the funds generated by the sovereign bonds go to infrastructure works, as proposed, the resources originally destined to these projects may be displaced to current expenditures. If this occurs, we will be acquiring debt to cover more subsidies or more salaries and non-productive expenditures,” the business organization writes to Congress. Among other suggestions, Conep feels that the bond issue should be “substantially lower” than what is proposed by the government and should be subject to conditions such as: 1) a halt to government short term and medium term indebtedness until a analysis of the nation’s debt capacity is carried out; 2) identify where the money to pay the new debt will come from; 3) restructure the debt service and liberate fiscal funds for infrastructure without increasing foreign debt; 4) arrange for matching funds so that long term lending commitments already secured with the IADB and the World Bank can be accessed.
