Dominican bonds decline following tax reform withdrawal

Santo Domingo.- Bloomberg reported yesterday that the withdrawal of the tax reform bill, which aimed to restructure the tax system and boost revenue collection, led to a decline in Dominican bonds. President Luis Abinader had predicted that this drop would be temporary.

According to Bloomberg, “Dollar notes accelerated emerging market losses on Monday, with those maturing in 2060 losing up to 2.6 cents on the dollar, trading below 90 cents.” The reform aimed to raise revenue by 1.5% of GDP by increasing taxes on income, businesses, and property while reducing incentives for the film and tourism industries.

Credit rating agencies have also reacted. Fitch Ratings and Moody’s have rated the Dominican Republic three points below investment grade, while S&P Global rates it one level higher at BB. Seaport Global highlighted to clients that the withdrawal is a significant setback for the country’s goal of achieving investment-grade status during Abinader’s administration. Uncertainty remains about how fiscal consolidation will be achieved, despite limits on real-term primary spending.