Press Release: Statement by an IMF Mission to the Dominican Republic
May 29, 2007
The following statement was issued in Santo Domingo today by Mr. Erik Offerdal, Resident Representative of the International Monetary Fund (IMF) in the Dominican Republic:
"An IMF staff mission, headed by Mr. Andy Wolfe, visited Santo Domingo May 16-24 for discussions of the seventh review of the government's economic program which the IMF is supporting with a 36-month Stand-By Arrangement (in an amount of US$635 million).
"The mission congratulated the authorities on their prudent monetary and financial policies and the resulting favorable macroeconomic environment. Economic growth remains strong, the central bank is successfully containing inflation within the target band, despite a sharp increase in oil prices, the net international reserves of the central bank have increased well beyond the target for the year as a whole, and central government revenues have exceeded budget projections while spending is in line with the budget. In this context, preliminary data indicate that all quantitative performance criteria for end-March were met.
"The mission noted the advances in structural reforms; the introduction of registered tax invoices has reduced tax evasion, the financial position of the banking system continues to improve, and the central bank has extended the maturity profile on its stock of certificates and lowered their interest rates.
"Looking forward, the mission urged the authorities to adopt a cautious stance in the management of the higher than expected fiscal revenues, given their cyclical nature, thus limiting any spending increase to well-defined areas not included in the 2007 budget and aiming to save a portion of the additional revenues. The mission welcomed the central bank's firm commitment to a monetary policy stance that, in the absence of further shocks to oil prices, would meet the target inflation range for the year. The mission also welcomed the authorities' commitment to secure congressional approval of pending legislation to recapitalize the central bank and to criminalize the theft of electricity. Although the financial results for the electricity sector were better than expected in the first quarter, the mission noted that sustaining this performance through the year will require continued efforts to reduce losses. Finally, the ongoing efforts to implement consolidated and risk-based banking supervision was seen by the mission as a key pillar in the strengthening of the financial system.
"The mission will prepare the necessary documentation to report to the Executive Board of the IMF, with the aim of the Board discussion to take place in mid-July, 2007."