Central Bank debt has grown 1,768.3% since 2000

Santo Domingo.- The debt of the Central Bank of the Dominican Republic (BCRD) has seen a significant expansion since the beginning of the century, reaching $20.442 billion USD by the end of the third quarter of this year. According to the General Directorate of Public Credit, this figure represents 17% of the gross domestic product (GDP). This is a dramatic increase from the year 2000, when the debt stood at $1.156 billion USD, marking a rise of 1,768.3% over the period.

From 2000 to 2019, the average annual debt of the BCRD was $6.622 billion USD, peaking at $11.488 billion in 2019 USD, which accounted for 12.9% of the GDP. However, by September of this year, the debt surged by an additional $8.955 billion USD, a 43.8% increase in just 45 months. Over these three years and nine months, the average annual debt was around $15.961 billion USD. The most notable increase was between 2021 and 2022, when the debt jumped by $3.371 billion USD, rising from $13.901 billion USD to $17.272 billion USD.

As of September this year, the total debt represents a 15.5% expansion compared to December 2022. In terms of composition, the Central Bank’s debt in 2000 comprised 77.1% external debt and 22.9% internal debt. This changed significantly after the 2003 financial crisis, with internal debt increasing from $393.2 million USD to $1.703 billion USD, a 76.9% rise within a year. Since then, the internal debt has been on an upward trend, averaging $5.792 billion USD annually between 2000 and 2019. As of September 2023, the internal debt stands at $19.362 billion USD, making up 94.7% of the total debt. The external debt, currently at $1.081 billion, accounts for 5.3% of the total, surpassing the peak of $1.016 billion USD in 2012 and greatly exceeding the 2020 figure of $305.3 million.

The recent surge in the Central Bank’s debt is attributed to the issuance of more financial certificates to cover the debt. Antonio Ciriaco Cruz, an economist and dean of the Faculty of Economic and Social Sciences at the Autonomous University of Santo Domingo (UASD), noted that the issuance of certificates to cover the quasi-fiscal deficit reached 870.299 billion pesos in December 2022 and has since increased to 1.049 trillion pesos. This trend results from the government’s difficulty in fulfilling its financial obligations under Law 167-07 for the Recapitalization of the Central Bank. The law’s reformulation, extending the compliance period and increasing contributions to the debt, is suggested. Additionally, Cruz recommends transferring the Central Bank’s debt to the Ministry of Finance, followed by issuing long-term bonds to resolve it.

The International Monetary Fund (IMF) also advises recapitalizing the Central Bank as a key economic policy for the medium term. This step, according to the IMF, will boost the bank’s autonomy and support the inflation targeting framework by deepening the exchange market and increasing the use of hedging mechanisms.