Nelson Suárez recommends “controlling current spending, prioritizing public investment and designing medium and long-term strategies to reduce electricity subsidies, public company deficits and dependence on the Central Bank.”.
SANTO DOMINGO–The Dominican Republic's fiscal outlook for the first half of 2025 presents a complex picture that is causing concern among both the public and the business sector. The document "Reflections on the State of Fiscal Operations January-June 2025," written by economist Nelson Suárez, offers a detailed analysis of public finances and their limitations.
The study stems from the Ministry of Finance's submission to the National Congress on July 15, 2025, of the Progress Report on Macroeconomic and Fiscal Projections for 2026. This report outlined the country's macroeconomic roadmap for the 2025-2029 period and presented the fiscal challenges for the end of this year, in addition to the budget projections for 2026.
Suárez's analysis reveals that, in practice, public finances face serious fiscal space constraints, meaning a limited capacity for the government to promote investment and social policies due to the burden of debt, subsidies, and accumulated deficits of public entities.
Growing Deficit and Dependence on Indebtedness:
The Central Government's fiscal operations between January and June closed with a deficit of RD$82,087.9 million, equivalent to 1.0% of GDP. Revenues and donations totaled RD$619,541.7 million, while expenses amounted to RD$701,629.6 million. To cover the gap, the government relied on RD$217,669.4 million in financing, primarily debt.
Although tax revenues showed an 8.5% increase compared to 2024, with an additional contribution of RD$45,964.2 million, non-tax revenues fell drastically due to the absence of extraordinary resources such as those from the AERODOM contract received the previous year. For the business sector, the growth in corporate income tax revenues—20% higher than in 2024—is a double-edged sword: it demonstrates economic dynamism, but also increases the tax burden on the productive sector. Public spending: current and burdensome, investment lagging. One of the most sensitive aspects of the analysis is spending behavior. 91% of the resources spent were allocated to current expenditures, mainly salaries, administrative operations, and debt interest payments. In contrast, capital investment fell by 17.7% compared to the same period in 2024. This drop in infrastructure and development projects is generating concern both among the population, who see improvements in public services postponed, and among construction companies and contractors who depend on government projects. Factors that are strangling fiscal space : The document identifies four elements that are “suffocating” the budget: Debt service : Interest payments alone totaled RD$150,914.3 million (1.9% of GDP), representing 24.4% of tax revenue. Including amortization and debt reduction, debt service amounted to RD$206,231.8 million, or one-third of all government revenue. Transfers to the Central Bank : In six months, the government transferred RD$38,423.0 million, more than double the amount transferred in 2024, to cover interest on quasi-fiscal debt and for recapitalization. Subsidies to the electricity sector: The distributors Edesur, Edenorte, and Edeeste, along with ETED, received RD$43,503.1 million. Added to other subsidies, the figure reached RD$52,542.8 million. Subsidies to the private sector: Another RD$9,039.7 million was given to companies, increasing spending on generalized subsidies. In total, these disbursements represented RD$296,996.0 million in six months , equivalent to 3.7% of GDP and 48% of all tax revenues. Impact on the population and businesses: Suárez's report warns that these limiting factors consume more resources than the deficit itself. Simply put: even if revenues increase, a large portion is allocated to cover debt, subsidies, and structural deficits, leaving little room for social or productive investment. For citizens, this translates into fewer public works, deteriorating infrastructure, and limitations in health, education, and security policies. The business sector, for its part, observes with concern that most of its taxes finance current expenditures and not projects that promote competitiveness and sustainable growth. Suárez concludes that, although the Dominican fiscal situation is not yet “unsustainable,” fiscal space is becoming increasingly restrictive. He recommends implementing controls on current spending, prioritizing public investment, and, above all, designing medium- and long-term strategies that reduce the structural burdens of the budget : electricity subsidies, public company deficits, and dependence on the Central Bank. Otherwise, he warns, any tax reform would only serve as a temporary palliative .
A political and social crossroads. The submission of the Finance Ministry's report to the Senate and the Chamber of Deputies was not a mere formality: it opens the debate on how to maintain the country's macroeconomic stability without compromising development. The dilemma is clear: continue prioritizing debt and subsidies, or free up resources for investment and services that directly impact the quality of life of Dominicans? Analysts agree that a significant part of political governance and business confidence for 2026 hinges on that response.
Let's put into concrete figures how structural commitments consume almost half of tax revenues and limit social and productive investment.
The major budget drains (Jan-Jun 2025)
- Debt interest: RD$150,914.3 million
↳ 21.5% of total spending | 24.4% of revenue - Debt amortization and liability reduction: RD$55,115.9 million
↳ 7.9% of total expenditure | 8.9% of revenue - Transfers to the Central Bank: RD$38,423.0 million
↳ 5.5% of total spending | 6.2% of revenue - Subsidies to the electricity sector: RD$43,503.1 million
↳ 6.2% of total expenditure | 7.0% of revenue - Subsidies to private companies: RD$9,039.7 million
↳ 1.3% of total spending | 1.5% of revenue
TOTAL “fiscal space constraints”:
RD$296,996.0 million → 42.3% of semester spending | 48.0% of revenue | 3.7% of GDP
“Quick snapshots” so that the reader understands that the tax cost is not just a technical issue, but has a concrete impact on people's lives and the dynamism of companies:
Direct impact on the population
- Less public investment: capital spending fell -17.7% (RD$13,558.1 million less than in 2024).
- Lagging infrastructure: only 9% of spending was allocated to investment (vs. 91% to current expenditures).
- Services under pressure: most taxes fund salaries, administrative operations and debt, not improvements in health, education or transport.
- Costly but insufficient electricity subsidies: RD$43,503.1 million transferred to distributors, without visible improvements in service quality.
Direct impact on businesses
- Higher tax pressure: tax revenues on profits grew 20% (RD$19,754.2 million more than in 2024).
- Weak consumption: taxes on goods and services barely grew 3.5%, reflecting contained domestic demand.
- Less public investment: the drop in infrastructure projects limits opportunities for state contractors and suppliers.
- Macroeconomic uncertainty: more resources allocated to debt and subsidies reduce the government's ability to boost competitiveness and sustained growth.
Reference: Reflections on the state of fiscal operations January-June 2025, by Nelson Suárez, Economic Outlook Articles (ACE) No. 10, Center for Economic and Social Studies Father José Luis Alemán, SJ, PUCMM, Santo Domingo, July 25, 2025.
