A recognition of fiscal misalignment

DOMINICAN REPUBLIC - In Brief 12 Dec 2016 by Pavel Isa
On December 9, the Executive presented to the Senate a bill to modify the budget for 2016. The bill includes a request for authorization of issuance of securities for DOP 11.8 bn or USD 253 million. Of these, USD 100 million are intended to finance operations for the construction of Punta Catalina coal plants, and the remaining USD 153 million (around DOP 7.2 bn) to cover new financing needs resulting from lower than expected tax revenues during the first half of the year. The proposal is an implicit recognition of what we were thinking was going to happen: that the government will not meet the proposed fiscal deficit target for 2016. A rapid assessment would lead to the conclusion that the deficit will be DOP 87.7 bn (2.65% of GDP) instead of the budgeted DOP 75.9 bn (2.3% of GDP). However, we believe that more than an under-performance in tax collection, the source of the deficit increase is overspending. We will discuss this in more detail in our upcoming report.

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