Fiscal reform can help Dominican Republic attract more investment: IMF

Fiscal reform can help Dominican Republic attract more investment: IMF

Raising tax revenues would increase public investment, social spending, which in return would reduce poverty, according to report

By Ovunc Kutlu

ISTANBUL (AA) - Fiscal reform can help the Dominican Republic attract more investment, the International Monetary Fund (IMF) said Monday in a report.

The Dominican Republic leads Latin America in GDP growth with an average annual rate of around 5% per year since the 1970s, said the report, noting that it has taken major steps in reducing poverty and improving living standards.

"Changes to taxation and other policies can help the already fast-growing economy realize its full potential," said the report authored by Emilio Fernandez-Corugedo, Pamela Madrid, and Frank Fuentes.

"Reaching investment grade on its sovereign bonds would further accelerate progress by lowering interest rates, increasing capital flows, and broadening the investor base," it added. "This would also reduce private sector financing costs and boost the economy's growth potential."

The Caribbean nation has higher interest rates on public debt relative to its peers, and this means fewer resources for spending on infrastructure, and social services.

Raising tax revenues permanently by at least 2% of GDP would allow for sustainable increases in key public investment and social spending, which would in return help to increase productivity and private consumption while reducing inequality and poverty, according to the report.

It noted that the Dominican Republic is vulnerable to climate shocks, including hurricanes, storms and floods, which cause annual losses of around 0.5% of GDP on average to its infrastructure alone.

The Caribbean nation is also increasingly vulnerable to rising temperatures and sea levels, said the report.

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