Hoy newspaper’s economic editor, Mario Mendez writes in the Wednesday, 24 September issue that the Mejia government continues to negotiate more foreign debt, despite having pledged to discontinue the practice. Mendez compares the government’s habit to that of the private sector, saying that businesses have been making significant strides to reduce indebtedness in dollars – especially given the declining value of the peso. Meanwhile, the public sector continues to contract new loans in foreign currency.
Mendez says the cost to service the debt has tripled and the profile of Dominican liabilities under the Mejia government has made a radical departure from being long-term with multilateral and bilateral organizations, to one of predominantly short-term debt to foreign commercial banks. The various sectors question the fact that the government has taken on US$3.9 billion in loans this year, according to a report presented by Senator Jose Tomas Perez (PLD-National District).
Economists consulted say that the payment of the debt will require 40% of the budget and 50% of tax revenues, when proper fiscal policy would dictate that foreign debt not exceed more than 20% of the national budget. At this rate, by 2004 the government will only be able to dedicate 5% of the 2004 national budget to infrastructure works in 2004, with its bulk going to government payroll and debt-servicing obligations.
As part of the achievements of President Mejia’s trip to Europe, it was reported that financing for a 140-million-euro loan for Nagua waterworks was secured. Furthermore, the Dominican government recently committed itself to the terms of a 12-year buyout of the Union Fenosa power distributors, for an average of US$60 million. This is in addition to the proposed US$255 million in sovereign bonds to finance the Coral Highway that would link Juan Dolio to Punta Cana.