SANTO DOMINGO, Dominican Republic – Dominicans are much poorer today than six months ago. The devastating effects of the financial crisis and the devaluation of the peso in the first half of 2003 have dramatically reduced the purchasing power of all consumers.
This pummeling of purchasing power, felt by all social sectors on the island, has three causes: (1) the exchange rate’s collapse from 18 to about 36 pesos to the dollar, (2) a lack of business and investor confidence, resulting in massive capital flight, and (3) the irresponsible handling of the financial crisis by politicians.
The rich are less rich; the middle class is sinking deeper and deeper into poverty; and the poor and the very poor have only the panorama of hunger, hopelessness and greater suffering before them.
The most dramatic source of impoverishment being felt by all Dominicans is inflation. Officially, according to the Central Bank (which has lost much of its credibility due to the politicization and manipulation of its interventions in this crisis), the consumer price index has increased over 20 percent in the past 12 months. Dominicans have not seen such high inflation since 1990. According to projections of the International Monetary Fund, the inflation level for the year will reach 25 percent, a figure that many say is conservative.
However, what is more dramatic is the collapse of the purchasing power and consumption of all Dominicans as reflected in per capita income. According to the latest information available, the gross domestic product will decline by 27 percent in the course of 2003. The annual income for each islander will decrease to about $1,600.
In one sudden blow, the Dominican Republic will drop to the status of a “low income country,” according to World Bank standards based on per capita income. Before this crisis, that is to say, during the 1990s and the first years of this decade, we were ranked as medium-low income country, with the tendency being to rank us as a country with a medium to medium-high income.
Total public debt has almost been doubled. According to the Wall Street firm of Bear Stearns, total external and internal public debt will grow from 21 percent of the GDP in 2002 to 42 percent in 2003. The fiscal sacrifices required of taxpayers and the state to service that debt will grow every day.
The available resources to shoulder the costs of public education, health, social security and infrastructure will be reduced more and more. The policies of recovery and stability that will have to be put into practice will reduce the ability of the national and local governments to significantly address social demands and, therefore, political stability could become seriously compromised.
This is where we are. There is where a combination of government incompetence, irresponsibility in handling monetary policies, and fraudulent methods in bank management has led us. Now our torment begins.
Excerpted from the original article published by