Attorney and geopolitics analyst, José Eliseo Almanzar, exposed today the urgency of reviewing the regime of subsidies to fuels in the Dominican Republic, citing a 77% increase in the price of diesel in the United States and the lack of effective reductions in public spending. The comment was made during the broadcast of the radio program Politikal.
Price gap and budget burden
Almanzar explained that diesel in the United States is sold at an average price of $6.40 per gallon, while in the Dominican Republic the local price is $4.64, which is equivalent to a difference of $1.75 per gallon, or around RD$103.60. That margin is entirely covered by the State. In addition, diesel fuel represents 75% of the total resources allocated to subsidies in the country.
The specialist indicated that the original budget for this item was 5,000 million pesos. With inflation and the rise in prices, the expenditure increased to 12,000 million and, as of August 31, it reached 31,000 million. In the first two weeks of September, the figure already exceeded 34,000-35,000 million. The weekly cost of the subsidy passed from RD$1,700 million to around RD$2,000 million.
Dependence on the external market and geopolitical risk
The expert highlighted that the Dominican Republic imports 75% of the diesel it consumes from the United States, while the Dominican Refinery of Oil (Refidomsa) only produces 25% of the gasoil. Emergency measures adopted in the US were cited, such as the extension of tanker drivers’ working hours to 16 hours a day, and the possibility of restricting 25% of their exports to balance internal demand in the face of a daily deficit of 500,000 barrels.
According to Almanzar, if the US limits its exports, countries that import 75% of their diesel would have to resort to other markets, which would increase shipping costs and expose the Dominican Republic to a greater crisis than the COVID-19 or the Ukraine war.
Diversion of income and need for austerity
The analyst added that the ad-valorem tax on fuels achieves a collection of 102% of the target thanks to the high price of oil, but that those revenues were destined for current expenses and capital works. Diverting those funds to subsidies distorts fiscal discipline and the sustainability of public spending.
Almanzar concluded that the combination of the increase in the international price of diesel and the lack of effective reductions in public spending puts the country in a position of fiscal and macroeconomic vulnerability that requires an urgent review of the subsidy scheme.
Credits: deultimominuto.com
