International loans are the fifth source of foreign exchange for the Dominican Republic. Enrique Pensón Brisindi of the Analytica financial research firm reports that taking on foreign loans follows remittances, free zone receipts, tourism receipts and direct foreign investment receipts.
As reported in El Dinero online economic news service, Penson Brisindi said the government regularly resorts to injecting hard currency into the economy via internal loans in order to satisfy its debt obligations.
At the close of the first quarter of 2017, the government injected US$1.3 billion in foreign loans, according to the Public Credit Agency (Dirección General de Crédito Público). At the same time, the Central Bank data reveal that national the value of exports reached US$1.06 billion, free zones revenues generated US$1.32 billion, tourism receipts were US$1.98 billion and remittances were valued at US$1.45 billion.
Pensón warned that the widespread interest in supporting tax reform as a way to consolidate public finances in the medium and long term could lead to a reduction in the deficit that, in turn, could affect the exchange market.
This means, he explained, that to consolidate the public finances has to come accompanied with a reformulation of the Dominican economic model, with added initiatives to increase the country’s capacity to generate hard currency.
He cautioned that solving fiscal problem could, in fact, create another fiscal crisis in the country. Penson said the Medina administration is dragging its feet in addressing important government priorities, given that fact that only the Education Pact has been signed, while there have been delays in the completion of the Electricity and Fiscal Pacts that were key components of the National Development Strategy Law 1-12 (END).
Foreign debt in the Dominican Republic has reached US$9,169.8 million, or 12.3% of the GDP. Of the total, US$2,799.2 million (3.8% of the GDP) is intragovernmental debt, which is defined as debt contracted by one institution of the government with another.
Furthermore, the Ministry of Finance data indicate that as of 31 March 2017, the Non-Financial Public Sector Debt had reached US$27,659.6 million, or 37.2% of the GDP. This is made up of 66.8% of foreign debt, or US$18,489.8 million, with 33.2% being domestic debt.
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El Dinero
26 May 2017
