While President Hipolito Mejia has stated that he ?is still the President? regarding the signing of the revisions to the Sectoral Protected Areas Bill, he is delegating his responsibilities for the tax reform bill to the next government. This is despite the fact the Mejia government pledged to the IMF it would submit the bill to Congress by July, a month before the transition.
Hoy newspaper?s economic editor, Mario Mendez, writes today that this Presidential decision conflicts with the efforts of his technical secretary, Carlos Despradel, and a mission of economists representing the future Fernandez government (Temistocles Montas, Daniel Toribio, Rafael Camilo and Julio Ortega) who traveled to Washington, DC this week to discuss the continuing IMF agreement commitments. The IMF suspended a scheduled US$62-million disbursement when the Mejia administration failed to meet certain requirements contained in the IMF program.
Economist Pedro Silverio says that the announcement by President Mejia complicates things. According to the economist, once the PRD is out of the Presidential Palace, the acceptance of tax reforms in a PRD-majority Congress will be a challenge.
Silverio, who is the dean of the school of economics of the PUCMM and the director of the CenAntillas economics think tank center at the same university, forecast difficult times ahead. He points out in an interview with Hoy newspaper that this period of changing governments comes at a time of volatility in the exchange markets and some RD$50 billion in Central Bank savings certificates, issued to neutralize monetary expansion as a result of government efforts to rescue collapsed banks, are due to expire. Silverio says there have not been many takers for more certificates, as evidenced by the most recent auctions made by the Central Bank. ?And this coincides with an expansion in public spending in the past months of the year,? he said. ?In the next three months of the transition, the public finances could considerably deteriorate, and in consequence monetary problems would worsen, leading to an increase in macroeconomic instability,? said Silverio. He alerted that even the negotiations with the Paris Club could be at risk.
In a written note issued to the press, he highlights that tax reform cannot wait until August and emphasizes the need for the government to act swiftly to present and approve the reforms by July, thereby eliminating those taxes which are distortionary and converting the rest into suitable instruments for the future needs of the economy.
Silverio emphasizes that the IMF standby agreement needs to serve as a framework for the efforts to conciliate interests through the National Dialogue that brings together business, political and social advocates of the nation.