The economic editor of Hoy newspaper, Mario Mendez writes of the general concern regarding how the government will pay for the debt it is picking up with Union Fenosa in order to buyback the Spanish company’s power distribution subsidiaries. He writes that the government had already negotiated a loan [US$200 million] with the World Bank to cover older debts and has accumulated more debt with the power generators for US$115 million. Furthermore, Mendez reports the distribution of power was losing US$12 million deficit per month. All this in addition to the about US$50 million a year the government agreed to pay Union Fenosa over a 12 year period. Mendez says the question in everyone’s mind now is that of how the government will make the payments, given the present fiscal restraints the government is suffering and the commitments taken on with the International Monetary Fund.
Mendez says that in the letter of intent signed with the IMF, the government agreed to gradually increase power rates to consumers to make up for the additional costs attributed to the depreciation of the peso and the difficulties in adjusting rates to consumers at the same pace as inflation and exchange rate depreciation. The government had planned on compensating the increase in cost with the 5% tax on exports. But the 5% tax on exports was effectively protested by business sectors and only produced RD$60 million in its first month, of an estimated RD$500 million the government was hoping for. Free zone and hotel sectors refused to pay the tax, the Agribusiness Board (JAD) also instructed its exporter members not to pay, and the Supreme Court is expected to render shortly its verdict on the legality of the tax that was established by governmental decree.