Minister reveals objectives of the fiscal responsibility law

With the Fiscal Responsibility Lawsubmitted to the National Congress by the Government, seeks to meet a longer-term goal and it is achieve triple B minus (BBB-), investment grade, by country risk evaluators, which in addition to attract new businesses to the economy it will also generate significant savings with lower interest rates on sovereign bonds.

The law is bound to achieve that investment grade Dominican Republicrevealed the Minister of Finance Jochi Vicente, in an exclusive interview for Listín Diario.

He explained that It is not about achieving that goal in a year or in a governmentbut the importance lies in starting to reach that goal.

That goal transcends the execution of a government, he specified. Currently the country’s ratings are BB- and BB, given by the investment risk rating agencies Fitch, Moody’s and Standard & Poor’s.

With the law running, the country may place its sovereign bond issues at a lower rate and that will generate savings that can be invested by the Government in hospitals, citizen security, transportation, and other social projects.

The minister gave the example of the case of Mexico, which does have a Fiscal Responsibility law, and whose country is placing its sovereign bonds at an interest rate of 5.42%, while the sovereign placement of the Dominican Republic has a rate of 7%.

He explained that the difference in interest rates in the bond issues of Mexico and the Dominican Republic is 1.6% and that would represent a saving of US$864 million per year, which in pesos would be RD$47 billion if the country had that rate.

He also said that the country’s objective, with this law, is to lower public debt to 40% of GDP by 2035, which will be possible because the piece establishes spending rules.

He recalled that the Fiscal Responsibility Law has been highly demanded by the productive sectors and is also a suggestion from international organizations such as the IMF and risk rating agencies.

Vincent defined the law as a mechanism that provides certainty and peace of mind that public finances they will be managed in an orderly manner, because it minimizes a macroeconomic imbalance on the side of fiscal accounts.

“What the Fiscal Responsibility Law seeks is the sustainability of the Dominican public debt,” he emphasized. He indicated that governments have traditionally been responsible for managing public debt and, with some exceptions, the country has behaved prudently, but the pandemic led the government to borrow so that the population would not suffer the ravages.

He assured that the Government has been reducing the debt as a proportion of GDP, but even when it is sustainable, it is not out of control and the IMF has recognized it; interest is high as a percentage of tax revenue.

He added that that law provides a degressive rule of debt interest. In addition to achieving the goal of the investment grade of triple B minus, the country will be able to double or triple the budget of the National Police.

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He cited that the countries in the Latin American region with fiscal rules are Argentina, Bahamas, Brazil, Chile, Colombia, Costa Rica, Ecuador, Mexico, Paraguay, Panama, Peru and Uruguay.

He gave an example that in 2022 countries with a fiscal rule their debt as a proportion of GDP was lower and also interest as a proportion of income.

In the case of the country, the Treasury has been working on this project for more than two years, with the technical assistance of the IMF, in order to have a simple rule and easy compliance (inflation, primary spending, plus 300 basis points).

As he explained, the scheme consists of establishing a spending rule in the government budget in generaland limits primary spending to three percentage points of expected inflation.

The rule puts a debt ceiling of up to 40% of GDP by 2035and also escape clauses in the event of a natural or catastrophic disaster or a contraction in growth or that the forecasts are for real growth of less than 1%.

debt strategy

The minister explained that avoid exchange risk, the Government has been lowering the proportion of debt in foreign currency (dollars), as part of its debt strategy, to place it in local currency, which in turn has shown the great confidence of investors in the Dominican economy.

Currently the 10-year sovereign debt pays 7% interest and the yield of the local bond of 9.6% to 9.7%. For this reason, the proportion of local auctions has increased and the international market has not gone out to place sovereign bonds this year.

revealed that a large proportion of bonds placed in local currency have been bought by foreign investors“and that says that the foreign investor believes in the macroeconomic stability of the country.”


The Minister of Finance assured that one of the great successes of the Government has been the policy of support for the productive sectors.


Jochi Vicente cited the contributions in subsidies to sectors with a high incidence in the cost of living such as fertilizers, a measure that was key last year, to prevent crops such as rice from rising in price. The support was 70% to the fertilizers of this crop, therefore, it was very focused.


Sectors such as flour, allows a stable price in bread and fuels, it was also focused last year and is applied to diesel and propane gas, LPG.

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