A total of 58.9% of government income goes to interest, the CDEEE subsidy and the payroll
SANTO DOMINGO. In the legislative proposal for the Law of the General Budget 2015 a subsidy for the electricity sector is contemplated for an amount of RD $40.9 billion, which is equal to 1.4% of GDP. In the meantime for the payment of interest on the public debt, the estimated expense is for RD $88.0 billion which is equal to 2.9% of GDP.
Another important amount of public expenditure for 2015 is that of the payroll of the public employees, which totals RD $138.8 billion, which represents 4.6% of GDP.
These three items add up to RD $267.7 billion equal to 8.9% of GDP, and 58.9% of the tax (fiscal) income estimated for 2015.
Then, the rest of the funds collected by the government, 41.2%, will have to cover, as pointed out by the popular saying, “as far as they can stretch it.” And this includes line items socially very sensitive such as the money dedicated to education, health, housing, investment in infrastructure, and social assistance.
Fiscally, the situation can even be tighter, given the fact that the estimate of the amount of the subsidy to the Dominican Corporation of State – owned Electricity Enterprises (CDEEE) is based on the supposition that the price of oil will go down with respect to 2014. In the Budget Proposal it is estimated that for the year which is ending the average prices of a barrel of the IMF basket of hydrocarbons and of crude oil of the West Texas Intermediate type are between US $104.2 and US $97.9. In the meantime they are estimating that for 2015 oil prices will fall to between US $97.9 and US $92.1 respectively.
If the forecast regarding increases in the prices during 2015 is fulfilled as echoed in the report by the World Bank titled “Need for fiscal space and of improvements in the use of public resources,” the amount spent on the subsidy of electricity will be greater or on the other hand there will be more blackouts.
4% for education
In the Budget Proposal for 2015, the government shows its commitment to comply with the 4% of GDP for education, as it sets aside during this year RD $119.4 billion. This means that for the rest of the budgetary activities there only remains RD $68.3 billion coming from the tax income.
This low amount forces the government to obtain net financing (new public internal and external debts after amortization of capital due) for RD $73.9 billion, which for the most part comes from external contracts. This fiscal deficit is equal to 2.4% of GDP, the lowest since 2012. In spite of this deficit, the budget projects a primary surplus, the first since 2007.
This primary surplus, which is estimated at 0.4% of GDP, consists of the RD $13.3 billion which are the results of the difference between income and expenditures, after some subtracting from expenditures the interest on the debt.
When an economy has a primary surplus it means that, in order to pay the interest, it does not need to go into debt or it goes less into debt, which contributes to reestablish fiscal sustainability. “It is convenient to point out that this will be the first occasion in the last seven years that they have obtained a positive result of this fundamental variable for the reduction of the commitments of the public debt,” expresses President Danilo Medina in the letter which he sent to Cristina Lizardo Mezquita, the Senate President, along with the delivery of the budget.
But the fiscal restraints of the government are forcing it to contract new debts, whose amount in pesos is RD$175.5 billion. Of this amount RD $133.5 billion correspond to external loans and RD $41.0 billion are from internal or domestic sources.
On the one hand, this amount is less than the RD $189.3 billion included as financial sources in the budget of 2014. But on the other hand the net financing (obtained after discounting debt payment) is RD $73.9 billion, which means an increase in the total of the public debt for this amount, which in dollars is equal to US $1.6 billion. In other words, the debt keeps climbing.
Four billion for the Metro
The Minister of Hacienda, Simon Lizardo, revealed yesterday that the General Budget of the State for 2015 has set aside RD $4.0 billion to be invested in projects corresponding to the second line of the Santo Domingo Metro.
Upon being questioned regarding the social demands that exist, he said that for next year’s budget the government considered line items to increase the salary of the prosecutors and the teachers.
“Everything that has been thought of in the Budget is with regards to the sources of the resources which we have at hand,” he said. He admitted that there are limitations, because the government does not have sufficient sources of income and that “this is a possible budget.”
The official, together with a commission, delivered this legislative proposal to the Senate President, Cristina Lizardo, who said that she would place it on the agenda for the ordinary Senate session set for tomorrow and that she would appoint a joint commission to study it. She thanked the Executive Power for having sent this initiative before the constitutional deadline.
Category: DR News |