Statement by an IMF Mission to the Dominican RepublicPress Release No. 06/184
August 29, 2006
An International Monetary Fund (IMF) staff mission led by Mr. Andy Wolfe, Division Chief in the Western Hemisphere Department, issued the following statement today in Santo Domingo regarding an August 3-16 mission:
"An IMF mission visited Santo Domingo during August 3-16 to initiate discussions on the fifth review of the authorities' economic program that the IMF is supporting through a 28-month stand-by arrangement (in the total amount of about US$635 million).
"The mission commended the authorities for their continued firm commitment to pursue sound macroeconomic policies, which is fundamental to creating an environment of sustainable high growth and low inflation. The mission highlighted that the strong recovery in economic activity, which is well into its second year, no doubt reflects the positive impact of the improvement in the country's public finances, the market-friendly debt restructurings, and the central bank's successful efforts in combating inflation in a difficult environment of sharply increasing oil prices. The positive economic performance is also the result of the rapid recovery in confidence in the financial system, owing to strengthened oversight by the bank superintendency and the strict and comprehensive application of the legal framework, which is sending a strong signal regarding the monetary and financial authorities' determination to ensure banking system soundness. In this context, the current court proceedings against former owners and managers of those banks involved in the 2003 banking crisis are encouraging.
"The mission held a first round of discussions on the prospects for the macroeconomic outlook for the remainder of 2006 and for 2007, and these discussions will continue as the authorities refine their economic program; a mission is expected to return in the near future with the aim of completing the review. The mission urged the authorities to move swiftly and forcefully to: (i) accelerate and deepen the reform in the electricity sector in order to reduce in a durable way its need for government financial support and to improve service provision; (ii) ensure fiscal sustainability, threatened recently by sluggish revenue performance; and (iii) approve draft laws aimed at providing a durable legal framework for the efficient conduct of fiscal policy. Moreover, the mission recommended that the authorities should implement a sound and viable plan to recapitalize the central bank, which is needed, among other things, to ensure that this institution can carry out monetary policy in an unencumbered manner. Such a plan would help increase the considerable gains made to date in reducing the quasi-fiscal losses of the central bank."