Writing in Hoy newspaper today, Friday 16 November, Economist Miguel Ceara-Hatton challenges former President Leonel Fernandez’s claims to justify the government’s record RD$187 billion deficit.
He points out that income budgeted for 2012 was estimated incorrectly and that the government forecast that revenues would grow 25% from 2011 to 2012, 2.2 times the average of the previous two years. “They knew that would not happen. The current revenues for 2012 would grow by 14%, which was 1.21 the average of the previous two years,” he writes. “If they wanted to deceive themselves with undisclosed reasons, then that is another thing, but the statements by Mr. Fernandez are not sustainable,” he writes.
Referring to the electricity subsidy, he states that in order to determine the impact of the increase in the electricity subsidy in the total spending what has to be done is to establish the percentage that the increase of the subsidy represents in the public spending increase. In 2011 the increase in the subsidy explains that 93% of the increase of public spending without including the payment of the public debt, but in 2012 it was barely 10%. Another argument that falls down,” he writes.
“The price of fuel. The 2012 budget was calculated on an average price of US$101 per barrel and the average price for WTI was US$96 until August. Another argument that falls down,” he writes.
He asks: “What caused the deficit?” and gives his opinion:
“The public spending madness in 2012 as a consequence of the elections. President Fernandez said he would spend RD$40 billion on the campaign, almost 2% of the GDP that was needed to complete the spending for education. Public spending in 2012 increased by 40% in nominal terms. It was a deliberate act of fiscal madness knowing that there was a restriction of revenue.”
Furthermore, he asks if fiscal deficit is equal to fraud? And comments:
“Not necessarily. Nevertheless there are sufficient indications, which would require the judicial authorities to investigate. To spend more than RD$100 billion above what was budgeted in 2012 violates the Constitution and the laws on the Budget, Controller Office, Treasury, Procurement and others.
“Also, there have been public works that were clearly overvalued (parking, jails), there was a systematic practice of executing works at construction values that were many times over what was budgeted and spending that cannot be explained, such as the RD$49 billion that they say they paid to the Central Bank.”
Ceara Hatton continues:
“They say that the money went to public works, but then how does that explain the construction sector declining by -0.4% during the first semester of 2012? In addition, with a real growth of public spending as was registered in 2012, the economy should have grown by 14% and the estimate is that it will grow by less than 4%. Where did the money go?”
Ceara Hatton concludes that public spending in 2012 “was madness and chaos that should never be repeated and those responsible should pay for the pain and misery they have caused the Dominican people.”
www.hoy.com.do/opiniones/2012/11/15/454932/Los-argumentos-del-Sr-Fernandez-no-se-sostienen