Dominican Republic weighs adjusting fuel prices 1% to 2% a week as subsidies weigh on the budget

The Dominican government is studying a new rule that would allow fuel prices to move between 1% and 2% each week, instead of staying frozen, once uncertainty in international markets eases. The proposal was presented on Wednesday by Finance and Economy Minister Magín Díaz and Industry, Commerce and MSMEs Minister Eduardo Sanz Lovatón, during the panel "New reality: the Dominican Republic facing the global impact on fuels."

The reason is the cost of the subsidy. Díaz explained that holding prices steady without passing on higher external costs will require a new budget amendment: the allocation to contain fuel prices will rise from RD$30 billion to about RD$55 billion by year's end, pushing the fiscal deficit to 4%, against an initial target of 3.2%.

Over the last 15 weeks, the subsidy has averaged RD$1.5 billion per week, despite gradual increases already applied to the four main fuels. Díaz warned that removing the subsidies all at once could raise prices by more than RD$100 per gallon for some fuels.

Sanz Lovatón explained that refined-fuel prices have decoupled from crude oil: between September and October, a barrel of WTI crude fell 3.3%, from US$94.6 to US$91.4, while a barrel of diesel rose 9.4%, from US$191.3 to US$209.2. Since January, diesel is up 130.2%, gasoline 87% and crude 67.6%.

The government would keep protection on regular gasoline and regular diesel, the most used in transport and production, and apply smaller subsidies to premium gasoline and premium diesel, consumed by higher-income sectors. Díaz ruled out, for now, a tax reform.

Photo: El Informante

Source: Diario Libre / El Informante