Public budget amendment bill will increase the deficit for 2023

DOMINICAN REPUBLIC - In Brief 02 Aug 2023 by Magdalena Lizardo

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Yesterday, the Government sent to the National Congress a public budget amendment bill for 2023. According to the Ministry of Finance, the “modifications in the Budget respond to the slowdown in economic growth, which has accentuated in 2023, attributed to various factors such as the decrease in domestic demand and the adverse international economic environment”. The fiscal impulses are “necessary to boost economic activity”. In the budget amendment bill, the Central Government deficit increases from 3% of GDP to 3.2% of GDP. Total spending would be increasing by 0.9% of GDP, due to both the increase in capital spending (0.56% of GDP) and current spending (0.37% of GDP). In turn, total income would be increasing by 0.72% of GDP. The 2023 income projection incorporates DOP 25 b from Income tax paid in advance by financial institutions with net financial assets greater than DOP 50 b. Based on an agreement reached with the Ministry of Finance, financial institutions may deduct those payments from their future income tax obligations¸ prorated over the next 4 years. It´s worth saying that if this advance payment is excluded, the revenue projection for 2023 would be DOP 1,061.8 b, which would imply a deficit of -3.6% of GDP, instead of -3.2%. The Ministry of Finance has indicated that in the public budget amendment bill 1) the increase in the deficit will be financed entirely by resources available for fiscal year 2022, amounting to DOP 23.6 b, and by the reduction in financial applications amounting to DOP 44,4 b, of which DOP 36.3 b correspond to reductions in the amortizations, achieved as part of the liability management operation carried out in February 2023. 2) the fin...