## 1. Net Intersectoral Financial Positions

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### Major themes and purpose
- Overview of sectoral balance sheet developments in the Dominican Republic over the last ten years to identify how balance sheet vulnerabilities in one sector could spill over into other sectors.
- Focus on composition and size of assets and liabilities of main sectors and their inter-linkages; stocks of assets and liabilities, distribution across sectors, types of assets and funding sources.
- Section organization in source: literature review, macroeconomic background, balance sheet of economy and subsectors 2005–2014, analysis of vulnerabilities, conclusions.

### Data, methodology, and sectoral definitions
- Main instrument: balance sheet matrix (Table 1 and Annex 1).
- Data sources: Standard Report Forms (SRF) for monetary and financial statistics and International Investment Position (IIP).
- Sectoral disaggregation into six sectors:
  - (i) central bank (BCRD)
  - (ii) non-financial public sector (NFPS): central government, state and local governments, public non-financial firms, social security
  - (iii) other depository corporations (ODC): commercial banks and other deposit-taking institutions (86 percent relates to commercial banks)
  - (iv) other financial corporations (OFC): in DR include only pension funds (data limitation)
  - (v) non-financial private sector: non-financial corporations (NFPC) and other residents (largely households)
  - (vi) rest of the world (nonresidents)
- Net financial position = financial assets minus financial liabilities.
- Within sectors: decomposition by foreign/domestic currency and, where available, by maturity.
- Data limitations explicitly noted:
  - IIP data do not fully distinguish assets of NFPC and households.
  - Full maturity breakdown not available.
  - Financial link between NFPS and NFPC through bond holding not captured.
  - Discrepancies between reported sectoral positions by BCRD, ODC, and OFC.

### Macro-financial context (selected exact figures)
- BCRD support to banks in 2003: "around 15 percent of GDP".
- BCRD assets surged from "10 percent of GDP in 2002 to 23 percent in 2003".
- BCRD issued securities equivalent to "15 percent of GDP."
- BCRD securities stock remained "around 13 percent of GDP as of end-2014."
- Public debt-to-GDP reduced from "about 60 percent in 2003 to 35 percent in 2008."
- Inflation declined from "over 40 percent in 2003 to 4.5 percent in 2008."
- Post-2009 average real GDP growth of "5 percent".
- NFPS liabilities "have more than tripled since 2005, reaching 53 percent of GDP in 2014."
- "Around 55 percent of total government debt is held by non-residents."
- OFC (pension funds) liabilities to nonfinancial private sector increased from "2.2 percent of GDP in 2005 to almost 10 percent of GDP in 2014."

### Balance sheet dynamics and asset-allocation facts
- Gross financial assets of the country increased by "12 percentage points of GDP since 2005," driven by financial sector (ODC and OFC).
- Net financial position of the overall economy significantly worsened, especially since 2008 global financial crisis; deterioration mostly driven by accumulation of public debt and worsening NFPS net financial position, particularly in foreign currency.
- Pension funds asset allocation at end-2014:
  - "66 percent of total assets of pension funds were invested in central bank securities and government bonds"
  - "32 percent in the banking system"
- Regulatory limits and changes for pension funds:
  - 2007 regulation: initial limit "20 percent of total assets to be invested in BCRD instruments and 15 percent in central government bonds."
  - Ceilings changed: BCRD allocation raised to "50 percent in 2011" and central government bond limit to "20 percent in 2013."
- OFC net creditor positions (2007 to 2014):
  - Net creditor position vis-à-vis Central Bank increased from "0.2 percent of GDP in 2007 to 5 percent of GDP in 2014."
  - Net credit position vis-à-vis General Government increased from "0.2 percent to 6.7 percent of GDP."
- Banks’ claims to BCRD increased from "13 percent of their total domestic assets before the crisis to 25 percent in 2014."
- Banks’ foreign assets and liabilities represent "5 and 7 percent of total assets and liabilities, respectively."
- Banks’ net foreign currency position: remained around "±0.5 percent of GDP over the last five years" (as of source).
- Private nonfinancial sector accumulated assets abroad (mainly deposits) of "as much as 7.5 percent of GDP."

### Sectoral balance-sheet snapshots (selected exact indicators)
- Nonfinancial Public Sector (NFPS):
  - Liabilities reached "53 percent of GDP in 2014."
  - Increased reliance on domestic banks and pension funds; increased foreign currency borrowing since 2012.
  - Issuance of sovereign bonds since 2010 increased non-resident holdings to "around 55 percent" of government debt.
- Central Bank (BCRD):
  - BCRD net position: Central bank (aggregate row) Claims 0.2; Liabilities 16.1; Net pos. -15.9.
  - In domestic currency: Claims 0.0; Liabilities 16.1; Net pos. -16.0.
  - In foreign currency: Claims 0.1; Liabilities 0.0; Net pos. 0.1.
- Other Depository Corporations (ODC — banks):
  - Aggregate row: Claims 0.0; Liabilities 10.2; Net pos. -10.1.
  - In domestic currency: Claims 0.0; Liabilities 8.3; Net pos. -8.2.
  - In foreign currency: Claims 0.0; Liabilities 1.9; Net pos. -1.9.
- Other Financial Corporations (OFC — pension funds):
  - Aggregate row: Claims 0.0; Liabilities 5.4; Net pos. -5.4.
  - In domestic currency: Claims 0.0; Liabilities 5.4; Net pos. -5.4.
- Nonfinancial corporations (aggregate row): Claims 0.0; Liabilities 4.3; Net pos. -4.3.
- Other resident sectors (aggregate row): Claims 0.2; Liabilities 0.0; Net pos. 0.2.
- Nonresidents (aggregate row): Claims 8.7; Liabilities 2.4; Net pos. 6.3.
  - Nonresidents — In domestic currency: Claims 0.6; Liabilities 0.0; Net pos. 0.6.
  - Nonresidents — In foreign currency: Claims 8.1; Liabilities 2.4; Net pos. 5.7.

### Risk assessment — capital structure, liquidity, currency, solvency (exact figures preserved)
- Capital structure risks:
  - Including FDI liabilities, net external debtor position increased from "36 percent of GDP in 2005 to 61 percent of GDP at end-2014."
  - Excluding FDI liabilities, net external debtor position falls to "16 percent of GDP as of 2014" (deterioration of only "9 percentage points of GDP over the last 10 years").
  - FDI liabilities increased from "48 percent to 54 percent of total external liabilities."
- Liquidity risks:
  - Short-term net creditor position of nonfinancial private sector of "4 percent of GDP."
  - Bulk of short-term net creditor position is a net FX position of "3.8 percent of GDP."
  - Short-term net creditor position against nonresidents is "1.6 percent of GDP."
  - NFPS short-term liabilities in domestic currency decreased by "1 percent of GDP" over the period (Figure 10 reference).
  - Public sector external debt average maturity: "9 years on average."
- Currency risks (exact figures):
  - Net FX position excluding FDI liabilities worsened from "7 percent of GDP in 2005 to 15 percent of GDP in 2014."
  - Including FDI liabilities, net FX position worsened from "-32.7 percent of GDP in 2005 to -59.4 percent of GDP in 2014."
  - Consolidated Public Sector (CPS) net debtor position in FX: "18.3 percent of GDP" (increases to "20.2 percent of GDP" when certain bank claims on central bank reserves are included).
  - CPS position increased from "12 percent of GDP in 2005 to 18.3 percent of GDP in 2014."
  - Banks’ period-average overall net FX position: "0.6 percent of GDP"; estimated 2014 position: "-0.2 percent of GDP."
  - Banks have a negative financial position in FX against households of "around 5 percent of GDP."
  - Household deposits in FX averaged "around 5.4 percent of GDP" during the period.
- Solvency assessment (current-account stabilization exercise — preserved values):
  - Economy growth rate (potential): "4.5 percent."
  - Inflation: "4 percent."
  - Current Account in 2013: "-4.1" (percent of GDP).
  - Current Account in 2014: "-3.2" (percent of GDP).
  - 10-year CA (2013): "-5.5" (percent of GDP).
  - 10-year CA (2014): "-5.3" (percent of GDP).
  - Conclusion in source: the 2014 current account deficit of "-3.2 percent of GDP" is broadly in line with the level needed to stabilize external debt at the 2014 level of "38 percent of GDP."

### Stress test: exchange rate depreciation (selected table entries preserved)
- Sectoral Loss/Gain entries (Loss/Gain End-2014; From 2015 depreciation; From large exchange rate shock (30 percent)):
  - Central bank: 3.7; 0.1; 1.1
  - Nonfinancial public sector: -27.5; -1.1; -8.3
  - Financial sector: -0.3; 0.0; -0.1
  - Private sector: 9.3; 0.4; 2.8
    - Vis-à-vis financial sector 1/: 2.6; 0.1; 0.8
    - Vis-à-vis all sectors 2/: 6.8; 0.3; 2.0
- Interpretation in source:
  - NFPS would be largely negatively affected (e.g., "-8.3 percent of GDP from a 30 percent depreciation").
  - Private sector would experience a positive impact (e.g., "2.8 percent of GDP from a 30 percent depreciation").
  - For the 2015 depreciation of "3.2 percent", NFPS net FX position would deteriorate by "1.1 percent of GDP."
  - Historical reference: 2003 depreciation of "79 percent" increased NFPS net debtor position by "30 percentage points of GDP."
  - Long-term impact transmitted via fiscal channel by increasing public debt and possibly affecting its trajectory.

### Transmission channels and identified vulnerabilities (exactly as presented)
- NFPS is the most vulnerable sector due to large and rapidly growing liabilities (tripling since 2005 to "53 percent of GDP in 2014").
- Concentration risks:
  - Pension funds concentrated in BCRD securities and central government bonds ("66 percent" of pension assets), raising exposure to public-sector balance sheet deterioration.
  - Banks’ large claims on BCRD securities (up to "25 percent" of domestic assets in 2014) create interdependence between banking sector and BCRD balance sheet dynamics.
- Currency and creditor-composition risks:
  - Increased foreign-currency borrowing by NFPS since 2012 and "around 55 percent" of government debt held by non-residents amplify foreign-currency exposure and rollover risks.
- Potential shock transmission pathways described in source:
  - External funding shock to government (higher interest rates, sharp peso depreciation, sudden stop) could impair government debt servicing capability.
  - Deterioration in asset quality for banks exposed to government lending, especially concentrated in the largest state-owned bank.
  - Weakened banks could constrain lending, slowing the economy and worsening private sector positions; feedback loops to banks and NFPS could increase quasi-fiscal deficits and complicate BCRD policy.
  - Pension funds’ heavy investment in government bonds increases households’ indirect exposure to sovereign.

### Key conclusions and policy recommendations (verbatim emphasis)
- Key findings:
  - Overall balance sheet of the economy deteriorated over the last ten years, driven almost completely by NFPS in response to fiscal deficits.
  - NFPS increased reliance on domestic financial sector and external sector funding; deterioration pronounced in foreign currency.
  - Other sectors’ financial positions slightly improved and remain broadly solid, with some pockets of vulnerabilities.
  - Capital structure improved (greater reliance on equity; FDI liabilities rose from "48 percent to 54 percent of total external liabilities").
  - Liquidity risks declined due to increase in international reserves, longer maturities on government borrowing, and increase in banks and private sector liquid FX assets.
  - Financial balance sheet of combined corporate sector and households appears sound with strong positive net financial position in domestic and foreign currency.
  - Corporate sector has debtor position in foreign currency against banks, hedged by creditor position of overall nonfinancial private sector against nonresidents; caution due to inability to distinguish NFPC vs households abroad.
  - Financial system overall does not present major vulnerabilities; banks financed mostly through private sector deposits and pension funds; lending to private sector rising.
  - Exposure to public sector in FX increased and is concentrated in the largest, state-owned bank.
  - Pension funds grew strongly but invest mostly in public sector debt and bank deposits due to underdeveloped capital market and tight regulation.
  - Country’s negative foreign currency position is mainly due to public sector external liabilities; devaluation of peso would adversely impact public sector balance sheet.
  - Favorable maturity composition of external debt could buffer FX shocks.
- Policy recommendations:
  - Sound debt management and continued fiscal consolidation to minimize risks from public sector balance sheet mismatches.
  - Further build foreign international reserves to mitigate currency mismatches.
  - Promote development of domestic bond market to allow private sector and financial institutions to diversify portfolios and reduce exposure to a single sector.

### Annex I: BSA matrix notes and selected matrix entries (preserved)
- Table header sectors: Central bank; Central government; State and Local Government; Public Nonfinancial Corporations; Other depository corporations (ODC); Other financial corporations (OFC); Nonfinancial corporations; Other resident sectors; Nonresidents.
- Selected matrix numeric entries (exactly as in source):
  - Central bank (aggregate row): Claims 0.2; Liabilities 16.1; Net pos. -15.9.
  - Central bank — In domestic currency: Claims 0.0; Liabilities 16.1; Net pos. -16.0.
  - Central bank — In foreign currency: Claims 0.1; Liabilities 0.0; Net pos. 0.1.
  - Central government (partial display): Claims 16.1; Liabilities 0.2; Net pos. 15.9.
  - Central government — In domestic currency: Claims 16.1; Liabilities 0.0; Net pos. 16.0.
  - Other depository corporations (aggregate row): Claims 0.0; Liabilities 10.2; Net pos. -10.1.
  - Other depository corporations — In domestic currency: Claims 0.0; Liabilities 8.3; Net pos. -8.2.
  - Other depository corporations — In foreign currency: Claims 0.0; Liabilities 1.9; Net pos. -1.9.
  - Other financial corporations (aggregate row): Claims 0.0; Liabilities 5.4; Net pos. -5.4.
  - Other financial corporations — In domestic currency: Claims 0.0; Liabilities 5.4; Net pos. -5.4.
  - Nonfinancial corporations (aggregate row): Claims 0.0; Liabilities 4.3; Net pos. -4.3.
  - Other resident sectors (aggregate row): Claims 0.2; Liabilities 0.0; Net pos. 0.2.
  - Nonresidents (aggregate row): Claims 8.7; Liabilities 2.4; Net pos. 6.3.
  - Nonresidents — In domestic currency: Claims 0.6; Liabilities 0.0; Net pos. 0.6.
  - Nonresidents — In foreign currency: Claims 8.1; Liabilities 2.4; Net pos. 5.7.
- Annex figures show time series 2005–2014 of net positions by currency for all sectors; figures and table explicitly note exclusions of FDI-related Assets and Liabilities where applicable.

*Source: _wp16208 - 1. Net Intersectoral Financial Positions; 14. Network Map of Intersectoral Linkages; Annex I (excerpts from provided PDF content).*

### 1. Net Intersectoral Financial Positions ...............................................................................

### 1. Net Intersectoral Financial Positions

### Major themes
- Net intersectoral financial positions (section heading appears on page 10).
- Net FX positions and exchange rate shocks (section heading appears on page 20).
- Net FX positions and the 2003 exchange rate shock (section heading appears on page 21).

### Figures referenced in this content unit
- Figure 1. BCRD: Assets and Liabilities
- Figure 2. Other Depositary Corporations (banks): Assets by Sector
- Figure 3. Total Financial Assets and Net Financial Positions
- Figure 4. NFPS: Liabilities Against Nonresidents
- Figure 5. NFPS: Net Financial Position vis-à-vis the Financial System
- Figure 6. Net-Financial Position of ODC
- Figure 7. Net-Financial Position of OFC
- Figure 8. OFC: Net-Financial Position vis-à-vis the rest of the Economy
- Figure 9. Capital Structure Risks
- Figure 10. Nonfinancial Public Sector: Liquidity Risks
- Figure 11. Private Sector: Liquidity Risks
- Figure 12. Currency Risks
- Figure 13. Consolidated Public Sector: Currency Risks

*Source: _wp16208 - 1. Net Intersectoral Financial Positions ...............................................................................*

### 14. Network Map of Intersectoral Linkages ............................................................................23

### 14. Network Map of Intersectoral Linkages

### I. Introduction
- Purpose: Provide an overview of sectoral balance sheet developments in the Dominican Republic over the last ten years to identify how balance sheet vulnerabilities in one sector could spill over into other sectors.
- Focus: composition and size of assets and liabilities of main sectors and their inter-linkages; stocks of assets and liabilities, distribution across sectors, types of assets and funding sources.
- Paper organization: Section II (literature), Section III (macroeconomic background), Section IV (balance sheet of economy and subsectors 2005–2014), Section V (analysis of vulnerabilities), Section VI (conclusions).

### II. The Balance Sheet Approach (BSA) — key literature points
- BSA analyzes stocks at a point in time (assets and liabilities) across sectors to detect vulnerabilities not evident from flow indicators.
- Historical context: developed after late-1990s crises; used in “third generation” models.
- Literature findings summarized:
  - Balance sheet mismatches (maturity, currency, solvency) can become explosive after shocks.
  - Small events can undermine funding if balance sheets are sufficiently weak.
  - Currency mismatches magnify impacts of shocks and constrain policy responses.
- Representative references noted in source: Allen et al. (2002); Dornbusch (2001); Krugman (1999); Cespedes et al. (2001); Gertler et al. (2003); Cavallo et al. (2005); Jeanne and Zettelmeyer (2002); Calvo et al. (2000); Reinhart et al. (2003).

### III. Brief overview of macro-financial developments (context for balance sheets)
- 2003 crisis: triggered by overheating, fiscal slippages, large capital inflows, rapid private credit growth, and revelations of fraud in three banks.
  - Central Bank (BCRD) supported banks with financial support "around 15 percent of GDP" and issued BCRD certificates to absorb liquidity.
  - Resulting effects: capital outflows, loss of foreign reserves, significant currency depreciation, acceleration of inflation, surge of public debt.
- 2004–2008: IMF program, prudent fiscal/monetary policies, structural reforms; outcomes:
  - NFPS surplus.
  - Public debt-to-GDP reduced from "about 60 percent in 2003 to 35 percent in 2008."
  - Inflation declined from "over 40 percent in 2003 to 4.5 percent in 2008."
- 2008–2009 global crisis: depressed demand, tighter capital markets; IMF program in 2009 supported countercyclical recovery.
- Post-2009: robust average real GDP growth of "5 percent"; fiscal consolidation delayed until 2013 causing sharp public debt increase.

### IV. Balance Sheet Analysis (2005–2014)

H3: Data and Methodology
- Main instrument: balance sheet matrix (Table 1 and Annex 1).
- Data sources: Standard Report Forms (SRF) for monetary and financial statistics and International Investment Position (IIP).
- Sectoral disaggregation into six sectors:
  - (i) central bank (BCRD)
  - (ii) non-financial public sector (NFPS): central government, state and local governments, public non-financial firms, social security
  - (iii) other depository corporations (ODC): commercial banks and other deposit-taking institutions (86 percent relates to commercial banks)
  - (iv) other financial corporations (OFC): in DR include only pension funds (data limitation)
  - (v) non-financial private sector: non-financial corporations (NFPC) and other residents (largely households)
  - (vi) rest of the world (nonresidents)
- Within sectors: decomposition by foreign/domestic currency and, where available, by maturity.
- Net financial position = financial assets minus financial liabilities.
- Data limitations highlighted:
  - IIP data do not fully distinguish assets of NFPC and households.
  - Full maturity breakdown not available.
  - Financial link between NFPS and NFPC through bond holding not captured.

H3: Role of the 2003 crisis in shaping sectoral balance sheets — key developments
- BCRD:
  - BCRD assets surged from "10 percent of GDP in 2002 to 23 percent in 2003" due to large support to banks.
  - BCRD issued securities equivalent to "15 percent of GDP."
  - Accumulation of quasi-fiscal deficits and recognition of cumulative losses in 2006 capitalized as claims to the NFPS.
  - Stock of BCRD securities remained high, "around 13 percent of GDP as of end-2014."
  - Holders of these securities include banks, pension funds, and private corporations.
- ODC (banks):
  - Crisis led to contraction and decline in assets; gradual recovery but size (assets-to-GDP) at end-2014 still below pre-crisis levels.
  - Claims to BCRD increased from "13 percent of their total domestic assets before the crisis to 25 percent in 2014."
  - Share of credit to private sector in banks’ assets declined relative to pre-crisis period.

H3: Aggregate balance sheet 2005–2014 — headline findings and statistics
- Gross financial assets of the country increased by "12 percentage points of GDP since 2005," driven by financial sector (ODC and OFC).
- Net financial position of the overall economy significantly worsened, especially since 2008 global financial crisis.
  - Deterioration mostly driven by accumulation of public debt and worsening NFPS net financial position.
  - Worsening particularly pronounced in foreign currency.
- Remaining sectors slightly improved their net financial position (Table 1, Figure 3).

H3: Key numeric indicators from Table 1 and figures (selected)
- Central bank: net position series shown in table (preserve table values as in source); net positions decomposed into domestic and foreign currency components in Table 1.
- NFPS (liabilities): liabilities "have more than tripled since 2005, reaching 53 percent of GDP in 2014."
- NFPS externalization: "Around 55 percent of total government debt is held by non-residents."
- OFC (pension funds): OFC liabilities to nonfinancial private sector increased from "2.2 percent of GDP in 2005 to almost 10 percent of GDP in 2014."
- Pension funds asset allocation at end-2014:
  - "66 percent of total assets of pension funds were invested in central bank securities and government bonds"
  - "32 percent in the banking system"
- Regulatory limits and changes:
  - 2007 regulation: pension funds initial limit "20 percent of total assets to be invested in BCRD instruments and 15 percent in central government bonds."
  - Ceilings changed: BCRD allocation raised to "50 percent in 2011" and central government bond limit to "20 percent in 2013."
- OFC net creditor positions (2007 to 2014):
  - Net creditor position vis-à-vis Central Bank increased from "0.2 percent of GDP in 2007 to 5 percent of GDP in 2014."
  - Net credit position vis-à-vis General Government increased from "0.2 percent to 6.7 percent of GDP."
- Banks’ foreign exposures: foreign assets and liabilities represent "5 and 7 percent of total assets and liabilities, respectively."
- Banks’ net foreign currency position: remained around "±0.5 percent of GDP over the last five years" (as of source).

H3: Sector balance sheets — summary
- Nonfinancial Public Sector (NFPS):
  - Balance sheet worsened; liabilities reached "53 percent of GDP in 2014."
  - Increased reliance on domestic banks and pension funds for financing; increased foreign currency borrowing since 2012.
  - Substantial issuance of sovereign bonds since 2010 increased non-resident holdings to "around 55 percent" of government debt.
- Central Bank (BCRD):
  - Net financial position vis-à-vis nonresidents reflects international reserves and IMF liabilities.
  - Repayment to IMF and favorable external developments improved reserve accumulation in last two years (of sample).
- Other Depository Corporations (ODC — banks):
  - One-off improvement in 2006 due to government recognition of losses; broadly stable thereafter.
  - Funding mainly from private sector deposits; limited external borrowing.
  - Large holdings of BCRD securities (claims increased to "25 percent" of domestic assets in 2014).
- Other Financial Corporations (OFC — pension funds):
  - Rapid growth driven by mandatory contributions after 2003 reform.
  - Concentration in public debt instruments due to regulatory limits and high returns.
  - Not allowed to invest in foreign instruments or markets (per source).
- Nonfinancial Private Sector:
  - Aggregated position: strong positive position vs nonresidents that deteriorated during the global financial crisis and improved thereafter (section ends mid-sentence in source).

### V. Analysis — identified vulnerabilities (high-level)
- NFPS is the most vulnerable sector due to large and rapidly growing liabilities (tripling since 2005 to "53 percent of GDP in 2014").
- Concentration risks:
  - Pension funds concentrated in BCRD securities and central government bonds ("66 percent" of pension assets), raising exposure to public-sector balance sheet deterioration.
  - Banks’ large claims on BCRD securities (up to "25 percent" of domestic assets) create interdependence between banking sector and BCRD balance sheet dynamics.
- Currency and creditor composition risks:
  - Increased foreign-currency borrowing by NFPS since 2012 and "around 55 percent" of government debt held by non-residents amplify foreign-currency exposure and rollover risks.
- Data gaps limiting risk assessment:
  - Incomplete IIP breakdown between NFPC and households.
  - Lack of full maturity breakdown limits liquidity risk assessment.
  - NFPS–NFPC bond holdings not captured in available data.

### VI. Conclusions (as presented in source)
- Balance sheet analysis reveals sectoral vulnerabilities and interlinkages that can amplify shocks across the economy.
- NFPS deterioration, concentration of pension funds in public instruments, and banks’ holdings of BCRD securities are key channels of potential spillovers.
- Data limitations constrain full assessment of maturity and intra-private sector linkages.

*Source: _wp16208 - 14. Network Map of Intersectoral Linkages; Canonical URL: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2016/_wp16208.pdf*

### 2011. The improvement in recent years is related to accumulation of deposits abroad, while

### _wp16208 - 2011. The improvement in recent years is related to accumulation of deposits abroad, while

### Nonfinancial Corporations
- Domestic net financial position of the corporate sector remained positive during the last ten years but has deteriorated.
- Deterioration mainly associated with:
  - Reduction of the creditor position against the Central Bank.
  - Increase of borrowing from the banking system (both in domestic and foreign currency).
- Private corporations decreased holdings of BCRD securities from 9.6 percent of GDP in 2006 to 4.3 percent of GDP in 2014.
- Corporations increased borrowing from the banking system; net financial position of the corporate sector in the banking system is slightly negative and more pronounced in foreign currency.
- Debtor position in foreign currency against banks is around 3 percent of GDP.
- Overall nonfinancial private sector accumulated assets abroad (mainly deposits) of as much as 7.5 percent of GDP, which could provide a buffer in a stress scenario.

### Households
- Households are net creditors in the economy.
- Households improved their net creditor position against the financial system significantly, mainly due to accumulation of assets in pension funds.
- Households’ net financial position in the banking system hovered around 4.5 percent of GDP over the period.
- Net position in domestic currency was broadly balanced.
- Net foreign currency position remained strong, at around 5 percent of GDP.

### V. BSA: RISK ASSESSMENT — Overview
- Analyzes exposure to capital structure, maturity mismatches (liquidity), currency mismatches, and solvency at aggregate and sectoral levels.
- Uses IIP, SRF and other data; notes data limitations (e.g., cannot fully distinguish NFPC vs households abroad).

### A. Capital Structure Risks
- Including FDI liabilities, net external debtor position increased from 36 percent of GDP in 2005 to 61 percent of GDP at end-2014.
- Excluding FDI liabilities, net external debtor position falls to 16 percent of GDP as of 2014 (deterioration of only 9 percentage points of GDP over the last 10 years).
- FDI liabilities increased from 48 percent to 54 percent of total external liabilities, indicating movement toward equity instruments and improved capital structure.

### B. Liquidity Risks
- Overall economy shows low liquidity risks with strong short-term net financial position against nonresidents.
- Improvements driven by:
  - Increase of international reserves.
  - New government borrowing with longer maturities.
  - Increase of banks' deposits abroad and private sector deposits in FX relative to short-term FX liabilities.
- NFPS (Nonfinancial Public Sector):
  - Short-term net financial position improved.
  - In FX, accumulation of international reserves by BCRD and long maturities of public sector external debt (9 years on average) are main contributors.
  - Liquid part of foreign BCRD reserves treated as available for government debt service (commercial banks reserve requirement excluded).
  - In domestic currency, conservative assumption: all loans borrowed from banks (excluding government bonds) are short-term; NFPS shows positive short-term net financial position.
  - Short-term liabilities in domestic currency have decreased by 1 percent of GDP over the period (Figure 10 reference).
- Banks:
  - Data limitations prevent full assessment of maturity mismatches (breakdown of maturity on bank loans not available).
  - Standard financial soundness indicators suggest banks are very liquid, sufficiently capitalized and profitable.
- Private sector:
  - Nonfinancial private sector has a strong short-term creditor position of 4 percent of GDP.
  - Bulk of short-term net creditor position is a net FX position of 3.8 percent of GDP; domestic currency position is balanced.
  - Short-term net creditor position against nonresidents is 1.6 percent of GDP; this position has deteriorated as short-term foreign assets declined after the global financial crisis.

### C. Currency Risk
- Economy:
  - Net debtor position in foreign currency (external assets minus external liabilities in FX) has deteriorated over last ten years.
  - Net debtor position in FX excluding FDI liabilities worsened from 7 percent of GDP in 2005 to 15 percent of GDP in 2014.
  - Including FDI liabilities, net FX position worsened from -32.7 percent of GDP in 2005 to -59.4 percent of GDP in 2014.
- Consolidated Public Sector (CPS):
  - Net debtor position in FX of 18.3 percent of GDP (position increases to 20.2 percent of GDP once multiple banks claims on central bank reserves related to required reserves on FX deposits are included).
  - Position increased from 12 percent of GDP in 2005 to 18.3 percent of GDP in 2014, reflecting accumulation of debt in FX mostly by Central Government.
- Banks:
  - Banks maintain a close-to-balance overall net FX position; 2005-2014 period average is 0.6 percent of GDP; estimated 2014 position was -0.2 percent of GDP.
  - Banks have a negative financial position in FX against households of around 5 percent of GDP.
  - Household deposits in FX averaged around 5.4 percent of GDP during the period and appear to be main source of FX lending to private corporations and NFPS.
  - Corporates may be exposed to notable FX risk; corporates and households together hold liquid assets abroad of 7.5 percent of GDP.

- Stress test: currency depreciation scenario (Table 2 summarized)
  - Sectoral losses/gains (Loss/Gain End-2014; From 2015 depreciation; From large exchange rate shock (30 percent)):
    - Central bank: 3.7; 0.1; 1.1
    - Nonfinancial public sector: -27.5; -1.1; -8.3
    - Financial sector: -0.3; 0.0; -0.1
    - Private sector: 9.3; 0.4; 2.8
      - Vis-à-vis financial sector 1/: 2.6; 0.1; 0.8
      - Vis-à-vis all sectors 2/: 6.8; 0.3; 2.0
  - Interpretation:
    - NFPS would be largely negatively affected (e.g., -8.3 percent of GDP from a 30 percent depreciation).
    - Private sector would experience a positive impact (e.g., 2.8 percent of GDP from a 30 percent depreciation).
    - For the 2015 depreciation of 3.2 percent, NFPS net FX position would deteriorate by 1.1 percent of GDP.
    - Historical reference: 2003 depreciation of 79 percent increased NFPS net debtor position by 30 percentage points of GDP.
  - Long-term impact of exchange rate shock likely to be transmitted via fiscal channel by increasing public debt and possibly affecting its trajectory.

### D. Solvency Risk
- Solvency assessed via present discounted value approach and current account stabilization equation (equation (1) provided in source).
- Exercise parameters:
  - Economy growth rate (potential) set at 4.5 percent.
  - Inflation set to 4 percent (BCRD target).
- Table 4 summary:
  - Current Account in 2013: -4.1 (percent of GDP).
  - Current Account in 2014: -3.2 (percent of GDP).
  - 10-year CA (2013): -5.5 (percent of GDP).
  - 10-year CA (2014): -5.3 (percent of GDP).
  - Conclusion: The current account deficit achieved in 2014 (-3.2 percent of GDP) was broadly in line with the level needed to stabilize external debt at the 2014 level of 38 percent of GDP.
- Policy implication: Continued accumulation of foreign assets and their returns (reserve accumulation) important to maintain macroeconomic stability; a reversal to the ten-year average current account deficit would put external debt on an upward path.

### E. The Transmission Channels
- Network map of intersectoral linkages highlights:
  - NFPS has a large direct negative exposure against non-residents and a large exposure against BCRD (related to recognition of 2003 banking crisis losses and quasi-fiscal deficits).
  - Financing from pension funds and banks to NFPS is evident.
  - NFPS is most vulnerable sector in the economy due to large debtor position.
- Potential shock transmission:
  - External funding shock to government (higher interest rates, sharp peso depreciation, sudden stop) could impair government debt servicing capability.
  - Banking system: deterioration in asset quality for banks exposed to government lending, especially given concentration in largest (state-owned) bank.
  - Weakened banks could constrain lending, slowing the economy, which would worsen private sector financial position and feed back to banks.
  - Distress in NFPS would further increase quasi-fiscal deficit and complicate BCRD monetary policy framework.
  - Pension funds’ heavy investment in government bonds increases households’ indirect exposure to sovereign.

### VI. CONCLUSIONS — Key findings and policy recommendations
- Key findings:
  - Overall balance sheet of the economy deteriorated over the last ten years, driven almost completely by NFPS in response to fiscal deficits.
  - NFPS increased reliance on domestic financial sector and external sector funding; deterioration pronounced in foreign currency.
  - Other sectors’ financial positions slightly improved and remain broadly solid, with some pockets of vulnerabilities.
  - Capital structure improved (greater reliance on equity; FDI liabilities rose from 48 percent to 54 percent of total external liabilities).
  - Liquidity risks declined due to increase in international reserves, longer maturities on government borrowing, and increase in banks and private sector liquid FX assets.
  - Financial balance sheet of combined corporate sector and households appears sound with strong positive net financial position in domestic and foreign currency.
  - Corporate sector has debtor position in foreign currency against banks, hedged by creditor position of overall nonfinancial private sector against nonresidents; caution due to inability to distinguish NFPC vs households abroad.
  - Financial system overall does not present major vulnerabilities; banks financed mostly through private sector deposits and pension funds; lending to private sector rising.
  - Exposure to public sector in FX increased and is concentrated in the largest, state-owned bank.
  - Pension funds grew strongly but invest mostly in public sector debt and bank deposits due to underdeveloped capital market and tight regulation.
  - Country’s negative foreign currency position is mainly due to public sector external liabilities; devaluation of peso would adversely impact public sector balance sheet.
  - Favorable maturity composition of external debt could buffer FX shocks.
- Policy recommendations:
  - Sound debt management and continued fiscal consolidation to minimize risks from public sector balance sheet mismatches.
  - Further build foreign international reserves to mitigate currency mismatches.
  - Promote development of domestic bond market to allow private sector and financial institutions to diversify portfolios and reduce exposure to a single sector.

*Source: IMF staff analysis and Balance Sheet Approach (BSA) applied to the Dominican Republic (excerpts from the provided PDF content).*

### Annex I. Dominican Republic BSA Matrix

### Annex I. Dominican Republic BSA Matrix

### Sectoral net intersectoral asset and liability positions (table overview)
- Table header identifies sectors: Central bank; Central government; State and Local Government; Public Nonfinancial Corporations; Other depository corporations (ODC); Other financial corporations (OFC); Nonfinancial corporations; Other resident sectors; Nonresidents.
- Table distinguishes Claims, Liabilities, Net pos. for each pairing of holder of liability (creditor) and issuer of liability (debtor).
- Values are presented split by currency where available: "In domestic currency" and "In foreign currency".

### Selected numeric entries from the matrix (preserved exactly as in source)
- Central bank (aggregate row): Claims 0.2; Liabilities 16.1; Net pos. -15.9.
- Central bank — In domestic currency: Claims 0.0; Liabilities 16.1; Net pos. -16.0.
- Central bank — In foreign currency: Claims 0.1; Liabilities 0.0; Net pos. 0.1.
- Central government (partial display): Claims 16.1; Liabilities 0.2; Net pos. 15.9.
- Central government — In domestic currency: Claims 16.1; Liabilities 0.0; Net pos. 16.0.
- Other depository corporations (aggregate row): Claims 0.0; Liabilities 10.2; Net pos. -10.1.
- Other depository corporations — In domestic currency: Claims 0.0; Liabilities 8.3; Net pos. -8.2.
- Other depository corporations — In foreign currency: Claims 0.0; Liabilities 1.9; Net pos. -1.9.
- Other financial corporations (aggregate row): Claims 0.0; Liabilities 5.4; Net pos. -5.4.
- Other financial corporations — In domestic currency: Claims 0.0; Liabilities 5.4; Net pos. -5.4.
- Nonfinancial corporations (aggregate row): Claims 0.0; Liabilities 4.3; Net pos. -4.3.
- Other resident sectors (aggregate row): Claims 0.2; Liabilities 0.0; Net pos. 0.2.
- Nonresidents (aggregate row): Claims 8.7; Liabilities 2.4; Net pos. 6.3.
- Nonresidents — In domestic currency: Claims 0.6; Liabilities 0.0; Net pos. 0.6.
- Nonresidents — In foreign currency: Claims 8.1; Liabilities 2.4; Net pos. 5.7.
- Table notes: "Sources: Standardized report forms for monetary and financial data and International investment position for nonresident data." and numbered notes: "1\ There are discrepancies between reported sectoral positions by BCRD and ODC", "2\ There are discrepancies between reported sectoral positions by ODC and OFC", "3 \  The re   is  no   d iss a gre ga tio n  o f  e xte rna l  a sse ts   a nd   lia b ilitie s   o f  the   N o nfina nc ia l  P riva te   S e c to r  (N o nfina nc ia l  C o rp o ra te   S e c tor + Other residents). In this table, the position of the whole sector is shown in the Nonfinancial Private Corporate sector."

### Figures and graphical highlights (Annex II references)
- Annex II, Figure 1: Sector’s Net Financial Positions vis-à-vis the rest of the Economy — shows time series 2005–2014 with panels for:
  - Net position in foreign currency, net position in domestic currency, combined position for Central Bank; NFPS; ODC; OFC; Nonfinancial Private Sector; Nonresidents.
  - Y-axis scales shown in percent ranges, e.g., -2% to 4% for some panels; -60% to 0% for Central Bank foreign currency panel.
- Annex II, Figure 2: Sector’s Net Financial Positions vis-à-vis Nonresidents — by currency (In percent of GDP) for 2005–2014; panels include Central Bank, NFPS, ODC, OFC, Nonfinancial Private Sector. Notes:
  - "1/ It does not include FDI-related Assets and Liabilities."
  - "2/ Net position in domestic currency (zero or negligible)"
  - "3/ Nonfinancial Corporations + Households. Net position in domestic currency is negligible."
- Annex II, Figure 3: BCRD Net Financial Position vis-à-vis the rest of the Economy — by currency (In percent of GDP) for 2005–2014; panels include General Government, Other Resident Sectors, ODC, OFC, Nonfinancial Corporations, Nonresidents.
- Annex II, Figure 4: ODC Net Financial Position vis-à-vis the Public Sector — by currency (In percent of GDP) for 2005–2014; panels include Central Government, The Public Sector, State and Local Governments, Public Nonfinancial Corporations, Central Bank.
- Annex II, Figure 5: ODC Net Financial Position vis-à-vis the rest of the Economy — by currency (In percent of GDP) for 2005–2014; panels include Other Nonfinancial Corporations, Nonfinancial Private Sector, Other Resident Sectors, Nonresidents, Other Financial Corporations.
- Annex II, Figure 6: Nonfinancial Corporations Net Financial Position vis-à-vis the Financial System — by currency (In percent of GDP) for 2005–2014; panels include Central Bank, ODC, OFC, The Financial System. Note: "1/ There is no exposure to financial instruments in foreign currency."
- Annex II, Figure 7: Other Residents (Households) Net Financial Position vis-à-vis the Financial System — by currency (In percent of GDP) for 2005–2014; notes:
  - "1/ In 2005, the exposure to financial instruments in foreign currency is negligible, after that is zero."
  - "2/ There is no exposure to financial instruments in foreign currency."
- Annex II, Figure 8: Nonfinancial Private Sector Net Financial Position vis-à-vis the rest of the Economy — by currency (In percent of GDP) for 2005–2014; notes:
  - "1/ In 2005, the exposure to financial instruments in foreign currency is negligible, after that is zero."
  - "2/ There is no exposure to financial instruments in foreign currency."
  - "3/ There is no reported exposure to financial instruments in domestic currency."
- Figures use percent-of-GDP scales and show net positions by currency (foreign/domestic/combined) over 2005–2014.

### Data caveats and metadata shown in the unit
- The matrix and figures explicitly exclude FDI-related Assets and Liabilities where noted.
- Discrepancies are reported among reporting sources: BCRD, ODC, OFC.
- Some sectors report negligible or zero exposure to instruments in certain currencies (explicit footnotes in figures).

*Source: Annex I. Dominican Republic BSA Matrix (table and figures extracted from provided content).*

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_Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2016/_wp16208.pdf_