Mario Mendez, economic editor of Hoy newspaper, focused on how the level of domestic debt in the form of Central Bank certificates is growing faster than the foreign debt given the higher yields. The Central Bank has resorted to issuing certificates in order to counteract the monetary impact of the increase in accumulated reserves. This has been occurring despite a reduction in the interest rate on certificates from around 60% in mid 2004 to around 25%. Economists consulted by Mendez say that the Central Bank has issued around RD$8 billion in savings certificates in order to keep the peso at its new highs. The level of Central Bank certificates at the start of the Fernandez government in August 2004 was RD$94 billion certificates outstanding. He writes that this now has increased to RD$130 billion, for a 38% increase. If these are converted to dollars, the increase in debt is greater, going from US$2.04 billion to US$4.48 billion, for a 119% increase.
He mentioned that the bonds that deal whereby Spanish investors would have placed in dollars at the Central Bank fell through because these requested fixed interest rates, which is not compatible with the IMF agreement. The government also expects to use revenues from the sale of government property to pay off the debt.
He comments that the option contemplated during the end of the past administration for the government to borrow in US$ to pay off the certificates in one shot is now much more costly given the appreciation of the peso. This had made sense when the peso was RD$50-US$1, and the certificates would have been US$2 billion instead of US$4.48 billion, as at present.