Economist Miguel Ceara Hatton sums up the outcome of the DR taking on US$1.1 billion in sovereign bonds as ?financial folly? in an article from Sunday?s Hoy newspaper. He reminds that the economic circumstances at the time the bonds were taken out were adverse to such a decision and says the misuse of these funds has led to the impoverishment of Dominicans. The unfortunate consequence of this financial folly is that it costs the country US$103.9 million a year in interest payments, representing half the Education Ministry?s budget (RD$9.1 billion in 2003), with the sad fact that a new emission of bonds to redeem the past two placements would have to be made at a higher rate given the present macroeconomic situation of the country.
He asks, ?In these circumstances, how many children will be left without schools, how many sick without medical attention and how much malnutrition will this financial folly of the sovereign bonds have cost? And worse yet, how many will have to die because the budget money must go to pay interest on those unnecessary bonds, for which the use of their funds has not been duly explained and now appears to have had a dubious use, be it not that of political patronage??
Ceara Hatton maintains that the first US$500 million of the sovereign funds were misspent, which contributed to feed the government?s ?spendthrift? image during 2002, in the so-called confidence crisis that led to fuel the capital flight of 2002 and 2003. Regarding the second issuance of sovereign bonds worth US$600 million, he said these funds were used to pay current spending of the government, and not to restructure foreign debt as was the original commitment.
Ceara Hatton points out that the Dominican foreign debt as of 2003 stood at US$5.85 billion, or 35% of the GDP. While the foreign debt declined from 1997-2000 by US$121 million, the Mejia administration chose to increase it US$2.17 billion from 2001-2003.