Headlines in the weekend newspapers (9-10 March) reported that the IMF is insisting on another tax reform and an electricity rate increase as prerequisites for a new agreement. Economist Arturo Martinez Moya, who heads the opposition PRD party’s Economic Commission, pointed out what he described as contradictions in the International Monetary Fund’s macro-economic recommendations. He told El Nuevo Diario reporters that the IMF is recommending a government reduction in the public sector debt and “in order to do this they have to have a fiscal surplus.” To achieve this, IMF wants the authorities to increase fiscal spending, which would imply an increase in the primary deficit in the budget. This would contradict the government’s macro-economic policies, since it would lead to an increase in public spending. Last Friday, 8 March the IMF recommended a tax reform, especially regarding income taxes, the elimination of even more exemptions in an attempt to reduce the public debt in relation to GDP and to guarantee fiscal sustainability. “Going forward, Directors saw a need for additional fiscal adjustment, especially on the revenue side by further reducing tax exemptions, to lower the public debt relative to GDP and ensure fiscal sustainability.”
See www.imf.org/external/np/sec/pn/2013/pn1326.htm for the full Public Information Note from the IMF.