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Luis Reyes: Public budget for 2015 is "very tight"

The increase in the interest on public debt goes up 24% in 2015

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Luis Reyes: Public budget for 2015 is very tight
SANTO DOMINGO. The proposal of the Law of the General Budget of the State for 2015 "is very tight," says Luis Reyes, the head of the Directorate General of Budgets (Digepres).

The official attributes this "fiscal tightening" to two principle reasons: the increase in the payment of the interest on the public debt by RD $17 billion, and the increases in the resources for complying with the 4% of GDP which is assigned to pre-university education, by more than RD $10 billion. "All told RD $27 billion, and this is 0.9% of GDP," he added.

He said that if these two items are combined with the increases in expenditures for the promotions in the Police and the Armed Forces, the incentives for doctors, the civilian and military pensions, "then this takes us to a situation in which we practically have to leave the budget the same or cut back."

Rayes referred to the proposal of the Budget for 2015, introduced to the Senate last Monday, after concluding his participation in the "International Taxation and Development Seminar," organized yesterday by Oxfam and Fiscal Justice, at the Crowne Plaza Hotel in the National District.

The Digepres director said regarding the issue of budgets for results, that in a social context in which the proposal of the Law of the Budget for 2015 is because of complaints by state institutions and social entities, which feel that they have been affected by the reduction of expenditures.

The tax income forecast for the General Budget of the State for 2015 reaches RD $449.9 billion, equal to 14.9% of GDP. For this same year, it is estimated that public expenditures will be RD $529.3 billion equal to 17.5% of GDP which results in a fiscal deficit of RD $73.9 billion, or 2.4% of GDP.

For 2015 it is estimated that the tax pressure will be 14.1% of GDP, which is below the goal set for this year in the National Development Strategy 2030, which is 16% of GDP. The effects of this low tax pressure are aggravated by the elevated amount that the country has to pay for the interest on the public debt, which for 2015 are estimated at RD $88.0 billion, equivalent to 2.9% of GDP. This amount is 23.2% more than this 2014, which was RD $71.5 billion. At the same time, the interest from last year, are 11.2% above what was paid for the same concept during 2013, which was RD $64.2 billion.

This information reflects a rise in the interests on the public debt, which in 2015 promises to sink the objectives and goals contemplated in the National Development Strategy (DND).

The baseline from which the END started is low if it is compared with the regional averages. Economist Fabricio Gomez Mazara, comparing the tendency of social expenditures between Latin America and the Caribbean, on one side and of the Dominican Republic on the other side, concluded: "The simple average social expenditure of the region is 77% superior to that of the Dominican Republic for the 2013 - 2014 period in spite of the increase of 4% in Education spending starting in the year 2013."

For this same period he also observes: "The average public expenditure on education in Latin America and the Caribbean is still 31% greater than that of the Dominican Republic. Until the year 2012, the region spent 2.24 times more resources on education then the DR." Gomez Mazara expressed these estimates as he participated in the "Oxfam and Fiscal Justice International Seminar."

These issues came up in the context regarding the discussion of the 2015 Budget. But they should be dealt with profoundly, with the arrival of the time for consensus regarding the floundering END: The Fiscal Pact.

Guarocuya Felix, the director of Internal Taxes, reports that the government is working on defining its position regarding this pact, and it is foreseen that it will have its position ready in the first half of 2015.

Tax exemptions

Rosa Cañate, the director of Oxfam in the Dominican Republic, referred to a report from the organization for cooperation and economic development which talks about how the tax exemptions in the country are conceded based on political criteria. In the case of the Dominican Republic, "the tax exemption for investment given to Free Zones, Industries, the Frontier Zone and Tourism amount to RD $30 billion. With this amount they could double the health budget, multiply by 30 that of housing and triple that of freshwater and sewers." "There is a need to evaluate if they should really support the sector which generates most benefits for the development of the country then carry out social investments," she declared.