Dominican Bonds Decline Following Tax Reform Withdrawal

• Bloomberg reported 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. However, President Luis Abinader had predicted that this drop would be temporary.
• President Luis Abinader ordered the withdrawal of the Fiscal Modernization bill from the Chamber of Deputies. The formal withdrawal was announced by Alfredo Pacheco, President of the Chamber of Deputies, following a request from the Executive Branch.
• President Abinader had previously addressed the nation, emphasising his commitment to democracy and listening to the people’s concerns. He acknowledged that the Fiscal Modernization bill lacked the necessary consensus and stressed that a democratic government must be willing to amend decisions based on public feedback, stating, “I am a president who listens.”
• 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 not (yet) reacted to the withdrawal. Currently, Fitch Ratings and Moody’s have rated the Dominican Republic three points below investment grade at BB-/Positive and Ba3/Positive, while S&P Global rates it one level higher at BB/Stable.
• Seaport Global highlighted to clients that the withdrawal was 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.

(Source: Dominican Today)