INTEC economists recommend that the Government decentralize Public Expenditure for a better distribution

SANTO DOMINGO. - Economistas of the Instituto Tecnológico de Santo Domingo (INTEC) recommended redesign la state spending policy for improve your efficiency and attend to your sustainability, and advocated for their decentralization to a better distribution, especially at the provincial level, especially in the less developed areas of the national territory.

By participating in the seminar "Efficiency and Sustainability of Fiscal Expenditure", economists and teachers, Magdalena Lizard, Isidoro Santana, Richard Medina y Rafael espinal They considered that up to now the issue of spending is very centralized and low in the Dominican Republic.

At the event, which was moderated by the dean of the Area of ​​Economy and Business, Armando Barrios, and which was broadcast on the university's YouTube channel, the former Minister of Economy, Planning and Development, Isidoro Santana, pointed out that the greatest of the country's public spending problems is how low it is.  "Taking a relationship between spending and Gross Domestic Product (GDP) among a group of countries, the Dominican Republic has the lowest level of public spending," he said.

For her part, Magdalena Lizardo, coordinator of the Dominican Observatory of International Trade (ODCI), specified that when the National Development Strategy (END) was formulated, the idea was to improve the efficiency of fiscal spending and attend to its sustainability.

"From 2012 to date, we have chosen to finance and solve development problems, such as allocating 4% for Education, but it has been on the basis of greater public debt," Lizardo said, while noting that in 2012 the The debt of the non-financial public sector was 32% of GDP, in 2019, before the start of the pandemic, it was already 40% of GDP, that is, it has increased 1.2 percentage points of GDP each year, and if the situation of the pandemic, that debt has risen to 52% of GDP.

 Lizardo pointed out that the indebtedness also generates the commitment of interest payments, "having dedicated 13.8% of public spending to pay interest in 2012, in 2020 we are paying almost 23%".

The economist recommended addressing the issue in a comprehensive way and observing the rates of public services, the way in which those services are provided (business model), the efficiency of spending and, one last aspect, the country needs a control scheme that allows it to cope with the recurrent systematic shocks that are experienced by external situations (climatic, or of a nature of the global economy).

Likewise, Rafael espinal argued that the public spending es with and there are a number of factors that make it even lower and that lie in the business model, for example, the deficits of the electric sector and the water sector. "There is a deficit in the electricity sector, which is in spending, but you have to transfer a subsidy to compensate those who steal electricity, in the private sector, then the government subsidizes them so that they are richer and even reward it ", He said.

Espinal specified that the same happens in the water sector, in which the government builds aqueducts and then the water served is subsidized or not paid for. "A model in which the Government invests, not only for humble people, but also for big businesses."

During your speech, Richard Medina, coordinator of the degree in Economics at INTEC, indicated that the central government deficit could close around -0.5% and -1.0% of GDP, something not seen for a long time.

“At the end of the year, we are seeing a fiscal pressure of 15.6% of GDP, 1.6% of GDP above what is normally observed. In terms of income, we are 1.6% above normal, and capital spending is 1.0% -1.3% of GDP below normal, which suggests that an adjustment has been made that is around 2.6% - 2.9% of the GDP ”, he specified.

Medina argued that even though President Luis Abinader indicated that he will not make tax adjustments, there are issues that must be addressed, such as the recapitalization of the Central Bank. “Another important issue is the deficit of the Electricity Distribution Companies (EDES), currently there is a deficit of 700 million dollars in the EDEs until September 2021; This figure is higher if they include other components such as the debt accumulated with generators by the CDEEE; it could all add up to $ 1,200 billion by the end of 2021 ”.

The economist said that a spending reform should include the Central Bank recapitalization scheme, and how to reduce losses in the electricity sector.

The experts considered that for the future the Government should think about a pact not only fiscal, but also social. Growth in the Dominican Republic has to do with a flow issue, other Latin American economies have fallen; we can't let that happen here. The economic sectors must understand the need for reform, before we fall into a crisis, they considered.

They also emphasized that Dominican society has been changing and is more mature to understand the things that are needed in terms of reforms. "The Dominican Republic is one of the nations with the highest growth and poverty reduction in the region, but to continue that path, the economic sectors must understand that a change must come in the conception of how the State operates."