In Hoy newspaper today, the dean of the School of Economics of INTEC University, Apolinar Veloz, criticized the government’s decision to acquire new debt to compensate for its fiscal crisis. Veloz criticized the government’s plans to take on RD$3 billion in debt from local banks and issue US$500 million in sovereign bonds this year. He said the present fiscal crisis is the consequence of the government increasing its spending to 79% of revenues, which is 13% more than 1999 levels. The government has reduced capital investments and gave budgetary priority to paying off political favors with government jobs, increases in wages and benefits for government officers, as well as creation of new government jobs in new departments. Veloz criticized the untimely tax increases that hit in January when the Dominican economy was already cringing from the effects of gas price increases and a slowdown in the US economy. Veloz said borrowing abroad to cover the deficit would only place the burden on the next generation which will suffer from higher taxes and less public investment as future governments will have to pay back the Mejia government’s debt. He forecast the ITBIS will have to be increased from 12% to 18%, and the selective tax on non-essential imports to 60%. He concurred with estimates by other economists that the nation’s indebtedness for the sovereign bonds alone will increase to US$75 million a year.
