A blog post on the World Bank website by Aleksandra Iwulska, Javier Eduardo Baez and Alan Fuchs joins voices that have expressed concern about the Dominican government’s rising debt. The experts mention that debt levels in the DR are already close to 47% of GDP, with the maximum debt level estimated to be 56.7%. The non-financial sector public (NFPS) debt doubled from 18.3% of GDP in 2007 to 36.6% in the first quarter of 2014. Interest payments reached a peak of 2.4% of GDP in 2012-13 and the external debt is at 25% of GDP in 2013, levels only seen in the peak of the economic crisis of 2003.
But the authors recognize the DR of today is different. GDP grew by 4.1% last year and is forecast to grow 4.5% this year, and central government fiscal deficit has declined from 6.6% of GDP in 2012 to 29.9% in 2013.
The World Bank commentators observe that while the DR is a country with one of the highest economic growth rates in the region over the last decade, it faces one important challenge: to balance a higher level of indebtedness with its high poverty rates (40%) and its weak equity conditions.
The report states:
In addition to limited poverty reduction, people have had little opportunity to escalate socially and economically to reach the middle class, with just under 2% of the population in the DR experiencing upward socioeconomic mobility, in contrast to 41% in the LAC Region. Whereas the country has succeeded in recent years in providing greater access to a spectrum of basic services, there is still high persistence of people who are not only poor in monetary sense but also deprived of the basic goods and services to enjoy fully productive lives.
The authors press the point that what the government is doing by taking on all the debt is transferring the financial burden to future generations.
http://blogs.worldbank.org/latinamerica/will-more-debt-hinder-development-dominican-republic