Admirable precision or convenient accounting?
The Ministry of Finance just reported the fiscal balance figures for 2015. The results indicate that budget management was right on target: the deficit of the Central Government reached almost exactly the goal for the year, DOP 72.7 bn or 2.38% of GDP.
The striking thing is that until October, the cumulative deficit had reached just 53.4% of the target, and 66.6% until November. This means that a third of the deficit programmed for the year was recorded in just one month, and nearly half of it in two months. This implies either an admirable fiscal precision or the prevalence of accounting practices that register payment commitments in convenient ways at convenient times.
In addition, the official figures reported by the Ministry of Finance show significant differences from the fiscal estimates by the Central Bank as published in its 2015 preliminary report. This report estimated the Central Government deficit at DOP 89 bn or 2.9% of GDP. Although the official figures are considered to be those from the Ministry of Finance, such large differences contribute to an erosion of the credibility of fiscal statistics. The actual fiscal situation may not be significantly different from that shown by official data, but the points discussed above shed doubts on its accuracy and on the willingness to follow strict and transparent rules for accounting expenditures and commitments.
In February, prices registered a noticeable decline. The Consumer Price Index fell by 0.56 pps, driving accumulated inflation for the year to -0.57%. The Central Bank has continued its policy of increasing outstanding securities, although it appears to be less aggressive than in the past. In February, interest rates rose again after a one-month decline in January. The weighted average lending rate climbed 53 points while the deposit rate increased by only 8 points. The intermediation margin swelled from 8.75% to 9.20%. The increasing demand for credit by the private sector and a relatively tight monetary policy explains this performance, as monetary policy rate has remained unchanged for many months now.
Recent DIGEPRES figures show that in January 2016, the fiscal accounts closed in the black. The tax agency also announced that in January and February revenues were 5% higher than in the same period in 2015. Although not negative, this performance shouldn’t be considered a good one, given that nominal GDP growth in 2015 was estimated at 9.34%.
The process towards general elections in May continues to show the worst and most opaque side of Dominican politics. Although the parties were able to conclude the official registration of their nominees, the balance of this entire process has been bloody, while at the same time, democratic rights continued to be denied. Recall that the majority of the nominations to Congress made by the Partido de la Liberación Dominicana (PLD), the largest in the country, were imposed by the party leadership. Similarly, many nominations made by the Partido Revolucionario Moderno (PRM) were also decided by means of surveys, and others appear to have been imposed by the party´s leadership. In all cases, this denial of the democratic right to participation and competition generated great tension as well as strong resentment among aspiring candidates.
A few months ago two people were killed during the PLD primaries. Last week, tragedy reached the PRM when a former rector of the country’s public university who was also a PRM nominee to the Senate was shot dead while mediating in an internal party issue. His murder has caused great commotion in the country and has significantly affected the PRM’s image.
The results of two new surveys conducted in February show that President Medina’s lead in voters’ preferences has expanded in a very short period of time. In our view, these results are extremely difficult to contest and point toward a landslide victory for Medina and the PLD in May. Based on this, we believe that the fiscal risks associated with the May elections are in decline.
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