IMF Executive Board Completes Seventh Review and Financing Assurances Review under Stand-By Arrangement for the Dominican Republic and Approves US$118.3 Million DisbursementPress Release No. 07/189
September 7, 2007
The Executive Board of the International Monetary Fund (IMF) today completed the seventh review of the performance of the Dominican Republic under its economic program supported by a Stand-By Arrangement and approved the disbursement of SDR 77 million (about US$118.3 million), bringing total disbursements under the arrangement to SDR 360.8 million (about US$553.9 million).
The Executive Board also approved the authorities' requests for modification of a performance criterion and waivers of the nonobservance of performance criteria. The Executive Board also completed a review of the country's financing assurances under the Stand-By Arrangement.
The Stand-By Arrangement with the Dominican Republic was approved January 31, 2005 (see Press Release No. 05/18) for SDR 437.8 million (about US$672.2 million).
Following the Executive Board discussion, Mr. Murilo Portugal, Deputy Managing Director and Acting Chairman, made the following statement:
"Macroeconomic performance under the Dominican Republic's economic program has continued to be commendable. Prudent policies in a generally favorable external environment have restored confidence and resulted in high growth, single-digit inflation, declining public debt ratios, and a robust external position. Continued progress in program implementation should further reduce vulnerabilities and bolster medium-term growth prospects.
"Fiscal policy has helped contain the public-debt-to-GDP ratio, improving the outlook for public-debt sustainability. Since early 2007, revenue growth has been robust, in large part reflecting revenue administration improvements and gains from record-high nickel prices. Higher revenue has, in turn, allowed for a more ambitious fiscal target for 2007. The challenge ahead is to persevere with fiscal consolidation during the upcoming electoral period, which will require firm control of public spending.
"Progress is being made in reducing the electricity sector's need for budgetary support. The criminalization of electricity theft and fraud and the recently-completed renegotiation of some long-term contracts are important in this regard. The new legal framework should be firmly enforced, and electricity prices should be allowed to adjust with cost conditions to keep the sector operating on a sound commercial basis.
"Monetary policy has successfully contained inflation within single digits, despite significant oil price increases. The central bank will need to remain vigilant and tighten monetary policy if signs of overheating appear. The recapitalization of the central bank will strengthen its financial independence, accountability, and credibility.
"The legal framework is now in place for the reorganization of fiscal institutions and management. Strong coordination among the leaders of the new institutions will ensure the successful implementation of this restructuring. Making the single treasury account operational will enhance the institutional framework for public financial management by centralizing budgetary control under a single ministry.
"Financial sector risks have substantially decreased, and the banking system has been significantly strengthened. Prudential regulation has broadened to cover financial groups, and financial supervision is appropriately emphasizing risk management. Plans for an international financial center should be consistent with international standards on both consolidated banking supervision and anti-money laundering and counter-terrorism financing," Mr. Portugal said.