Press Release: Statement at the Conclusion of the IMF Co-Sponsored XI Regional Conference on Central America, Panama and the Dominican Republic
July 27, 2012Press Release No. 12/278
July 27, 2012
The following statement was released today in Punta Cana, Dominican Republic, by the Deputy Managing Director of the International Monetary Fund (IMF), Mr. Min Zhu; the President of the Central American Monetary Council, Mr. Rodrigo Bolaños Zamora; the President of the Central American Council of Finance Ministers, Mr. Héctor Guillén; the President of the Central American Council of Financial Sector Superintendents, Mr. Francisco Lay Solano; and the Governor of the Central Bank of the Dominican Republic and host of the conference, Mr. Héctor Valdez Albizu.
“The ministers of finance, central bank governors, and financial sector superintendents of Central America, Panama and the Dominican Republic, and representatives of the IMF met in the Dominican Republic during July 26–27 to discuss the regional economic outlook and strategies for consolidating macroeconomic stability and sustaining higher growth. The conference focused on the possible effects on the region of prospects in the global economy; the relevance of continuing strengthening the macroeconomic and financial defenses against adverse shocks in the future; and the role of structural reforms, particularly intraregional trade, in boosting growth in the region.
“The conference took place in the context of a weakening global recovery. Global growth is expected to continue to be moderate in the coming years, threatened by downside risks, while global financial stability will remain fragile. It is expected that the region will then be confronted with moderate growth in external demand and will continue to face relatively high imported commodity prices in years to come, including oil. Participants agreed that risks to the region mainly result from a failure to sustain moderate growth in the global economy.
“The resilience displayed by the economies of the region in the aftermath of the global crisis is a testament to the strengthening of policy frameworks in the years prior to the crisis. Those years’ efforts to lower fiscal deficits and public debt ratios, modernize monetary and exchange rate frameworks, and upgrade financial systems had paid off not only in mitigating the impact of the severe external shock, but also in supporting the region to operate at near capacity today. Participants agreed that more work needs to be done to rebuild the macroeconomic and financial buffers that have been used during the crisis to enhance the region’s preparedness to deal with future adverse shocks, with due attention to protecting the most vulnerable groups, for which they requested the IMF’s collaboration
“Participants shared the view that the strengthening of macroeconomic defenses required action in several fronts. Stronger foreign reserve cushions, together with more exchange rate flexibility in the non-dollarized economies, would be crucial to manage financing gaps that could arise from adverse external shocks. Moreover, while if liquidity buffers and capitalization remain adequate, it would be appropriate to continuing the efforts to enhance banking solvency and modernize supervision to fence off potential credit risks. On the fiscal front, despite recent steps to strengthen primary fiscal balances and maintain solid public debt structures, more efforts are needed to create appropriate fiscal space and ensure public debt sustainability through strategies that will increase tax revenue, keep government expenditure under control, and improve its composition toward priority spending, protecting the support programs to the poor
“Going beyond rebuilding macroeconomic defenses, participants highlighted the importance of raising sustainable growth to reduce poverty and meet social demands. Since export demand will unlikely serve as a key engine of growth for the region, growth will have to come from “within” through structural reforms to increase productivity and competitiveness. In this context, the discussion centered on the important role that the deepening of regional integration and increasing the global export potential could play in helping the region to enable its growth.
“Participants expressed appreciation for the continued support provided by the IMF to the regional conference, which has become an integral part of the policy exchange between the region and the IMF. They also commended the technical assistance and training provided by the Central America-Panama-Dominican Republic Regional Technical Assistance Center (CAPTAC-DR), which has been made possible with the financial support of the Center’s sponsors. Lastly, participants conveyed their gratitude to the Dominican Republic authorities for their hospitality and support to the success of the conference, and also to Costa Rica for offering to host the next regional conference, scheduled to take place in July 2013.”