Dominican Government Faces Significant Budget Deficit in 2024

The Dominican government grapples with a substantial budget shortfall in the first eight months of 2024. Central government revenues reached RD$872,802.6 million ($14.51 billion) by September 20th.

Meanwhile, total expenditures amounted to RD$987,329.1 million ($16.42 billion) during the same period. This disparity resulted in a primary deficit of RD$114,526.5 million ($1.9 billion), equivalent to 13.1% of revenues.

The General Directorate of Budget (Digepres) defines the primary deficit as the negative balance between total income and expenses. This calculation excludes interest payments on existing debt.

President Luis Abinader’s administration has sought various financing methods to cover the shortfall. For every RD$100 spent, the government needed to secure an additional RD$13.1 in funding.

Financial sources provided RD$258,553.6 million ($4.3 billion) to the government by the reference date. Concurrently, financial applications reached RD$66,336.1 million ($1.1 billion).

Debt servicing consumed RD$259,014.1 million ($4.31 billion) by August 31st. Amortization accounted for RD$67,019.2 million ($1.11 billion) of this amount.

The non-financial public sector (NFPS) debt balance stood at US$57,596 million (RD$3.46 billion) last month. This figure represents 46.3% of the country’s gross domestic product (GDP), according to Digepres.

Bond commitments comprise RD$47,764.5 million ($794.32 million), accounting for 82.9% of the total NFPS debt.

Background: Analysis

The Dominican Republic (DR) faces significant fiscal challenges in 2024, with a primary deficit of 13.1% of revenues, which is higher than the regional average.

However, the country’s debt management appears more favorable compared to its peers. The Dominican Republic’s non-financial public sector debt is 46.3% of GDP.

This is lower than the Latin American average of 52.3% and the Caribbean average of 67.9%. This suggests better debt management and potentially greater economic resilience.

Despite the high deficit, the DR’s lower debt-to-GDP ratio indicates some fiscal space. The country heavily relies on bond financing, with 82.9% of its debt in bonds, aligning with regional trends.

The DR’s growth outlook is consistent with regional projections, with Latin America and the Caribbean expected to grow by 2.0% in 2024.

To address its fiscal challenges, the DR needs to focus on fiscal consolidation and structural reforms. These efforts should aim to enhance growth and address budgetary imbalances, in line with recommendations for the broader region.

Overall, while the Dominican Republic faces fiscal challenges, particularly in its high primary deficit, its debt position is relatively favorable compared to regional averages.

The country’s economic outlook remains aligned with regional trends, but careful fiscal management will be crucial moving forward.

Key Figures DR

The Dominican Republic stands out as a regional economic powerhouse:

• It has the largest economy in the Caribbean.
• Its GDP growth has averaged 4.9% annually over the past 50 years, the highest rate in Latin America.
• The country’s tourism sector is breaking records, with over 5 million visitors in the first five months of 2024 alone, a 12% increase from the previous year.
• The Dominican Republic ranks sixth in per capita income in Latin America and the Caribbean when measured in purchasing power parity.
• Its economic convergence with the United States has reached 32%, outpacing the regional average of 25%.
• The International Monetary Fund projects the country’s growth at around 5% for 2024, one of the strongest forecasts in the region.
• Foreign direct investment reached a record $4.4 billion in 2023, reflecting strong investor confidence.