{
  "title": "Press Release: IMF Approves Two-Year US$600 Million Stand-By Arrangement for the Dominican Republic",
  "publication": "IMF News, August 29, 2003",
  "sourceUrl": "https://www.imf.org/en/news/articles/2015/09/14/01/49/pr03147",
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  "summary": "Executive Board approved a two-year SDR 437.8 million (about US$600 million) Stand-By Arrangement to support the country's economic program through August 2005.",
  "publishDate": "2003-08-29",
  "sections": [
    {
      "heading": "Approval and program financing",
      "content": "- Executive Board approved a two-year SDR 437.8 million (about US$600 million) Stand-By Arrangement to support the country's economic program through August 2005.\n- Approval opens the way for the release of SDR 87.6 million (about US$120 million) under the arrangement.\n- Dominican Republic joined the IMF on December 28, 1945; its quota is SDR 218.9 million (about US$300 million).\n- Outstanding use of IMF credits totals SDR 4.96 million (about US$6.8 million)."
    },
    {
      "heading": "Macro context and recent economic developments",
      "content": "- After a decade of strong growth and broad stability, the economy faced major challenges due to:\n  - Failure of a large bank because of fraud, hurting confidence in the banking system.\n  - Adverse effects of a succession of external shocks (including the rise in oil prices and the events of September 11, 2001).\n- Economic outcomes and developments cited:\n  - Real GDP growth averaged 6 percent in the 1990s.\n  - Exports and tourism receipts began falling in the second half of 2001.\n  - Public sector deficit widened by a half-percentage point to 2.6 percent in 2002.\n  - Credit expanded by 20 percent in 2002.\n  - Real GDP growth rose to 4 percent in 2002.\n  - Peso depreciated by 20 percent in 2002; inflation doubled to 10 percent.\n  - Central bank lost about half of its foreign reserves.\n  - Baninter failure in spring 2003: deposits fell some 80 percent; central bank financed payout and kept Baninter open to prevent systemic run.\n  - Problems extended to Bancrédito and Banco Mercantil.\n  - Central bank assistance contributed to a near doubling in public debt.\n  - Real GDP in the first half of 2003 fell by about 1 percent, year-on-year.\n  - Peso fell by 42 percent in the first seven months of 2003.\n  - 12-month inflation rose to nearly 30 percent by July 2003."
    },
    {
      "heading": "Program objectives and policy pillars (as stated by Agustin Carstens)",
      "content": "- Primary program aims:\n  - Restore confidence in the banking system.\n  - Reverse recent deterioration in public finances.\n  - Implement tight monetary policy to reduce inflation and immediate pressures on the currency.\n- Banking sector strategy (four planks):\n  - First plank: already implemented—resolving problems of identified weak banks.\n  - Second plank: internationally-assisted audits of all banks to assess the banking system as a whole and identify further necessary measures.\n  - Third plank: put in place a legal and regulatory framework to deal with systemic banking problems.\n  - Fourth plank: enhancement of prudential regulations and supervision.\n- Fiscal strategy:\n  - Objective to raise the fiscal primary surplus over the next three years to allow a gradual reduction in the public debt ratio over the medium term.\n  - Near-term fiscal effort relies on expenditure compression and temporary revenue measures.\n  - Broader reform to follow: reform of the tax system and of spending, as well as asset sales to reduce public debt.\n  - Improved debt management: greater emphasis on the domestic market and less reliance on foreign currency debt.\n- Monetary and exchange rate policy:\n  - Monetary restraint to contain pressures on the currency and inflation.\n  - Strengthen flexible exchange rate regime with full unification of the dual exchange rate markets expected by end-2003 (full unification by end-December would eliminate multiple currency practices arising from a divergence of more than 2 percent at any given time between the official and market exchange rates).\n  - Reducing inflation will be a key objective of monetary policy.\n- Structural and social policies:\n  - Medium-term priorities include trade liberalization and elimination of infrastructural bottlenecks (especially in the power sector) to boost growth.\n  - Efforts to reduce poverty via improvements in efficiency and targeting of social programs.\n  - Authorities sought to avoid cuts in social programs; low-income households effectively exempted from planned increases in electricity prices."
    },
    {
      "heading": "Program summary: projections and targets",
      "content": "- Real GDP is expected to:\n  - Contract by 3 percent in 2003.\n  - Recover by 0.5 percent in 2004.\n- Inflation is projected to:\n  - Reach 35 percent in 2003.\n  - Recede to single digit levels in 2004.\n- External sector:\n  - With domestic demand weak, the external current account balance is projected to shift into surplus in 2003-04.\n- Fiscal targets and debt service:\n  - Cost of servicing the debt will more than triple to 4½ percent of GDP in 2003 and rise further to nearly 6 percent of GDP in 2004.\n  - Program envisages measures to contain the combined public sector deficit to 3.5 percent of GDP in 2003 and 2.5 percent of GDP in 2004.\n  - Authorities determined to keep expenditure under control."
    },
    {
      "heading": "Selected economic and financial indicators (annual or end-period figures as presented)",
      "content": "- Real GDP (annual percentage changes): 1999: 7.8; 2000: 7.3; 2001: 2.9; 2002: 4.1; 2003 (Proj.): -3.0.\n- Real GDP per capita (annual percentage changes): 1999: 6.1; 2000: 5.4; 2001: 1.4; 2002: 2.3; 2003 (Proj.): -4.7.\n- Consumer price index (end of period): 1999: 5.1; 2000: 9.0; 2001: 4.4; 2002: 10.5; 2003 (Proj.): 35.0.\n- Unemployment rate (in percent): 1999: 13.1; 2000: 13.9; 2001: 15.6; 2002: 16.1; 2003: ...\n- Gross domestic investment (in percent of GDP): 1999: 24.2; 2000: 24.0; 2001: 23.1; 2002: 23.2; 2003 (Proj.): 21.7.\n- Gross national savings (in percent of GDP): 1999: 21.8; 2000: 18.8; 2001: 19.7; 2002: 22.7; 2003 (Proj.): 21.7.\n- Banking system: Liabilities to private sector (annual percentage changes): 1999: 24.3; 2000: 11.7; 2001: 21.3; 2002: 13.2; 2003 (Proj.): 44.6.\n- Lending interest rate (period average): 1999: 25.3; 2000: 26.8; 2001: 24.6; 2002: 26.1; 2003 (Proj.): 39.4.\n- Central government primary balance (in percent of GDP): 1999: -2.5; 2000: -1.3; 2001: -1.1; 2002: 1.9; 2003 (Proj.): ...\n- Central government overall balance (in percent of GDP): 1999: -3.2; 2000: -2.1; 2001: -1.9; 2002: -2.2; 2003 (Proj.): -0.4.\n- Consolidated public sector (in percent of GDP): 1999: -1.7; 2000: -0.8; 2001: -1.0; 2002: 1.1; 2003: -2.0; 2004 (Proj.): -2.6; 2005 (Proj.): -3.5.\n- Balance of payments (in millions of U.S. dollars):\n  - Current account: 1999: -429; 2000: -1,026; 2001: -752; 2002: -875; 2003 (Prel.): 159.\n  - Merchandise trade balance: 1999: -2,904; 2000: -3,742; 2001: -3,503; 2002: -3,699; 2003 (Prel.): -3,076.\n  - Exports: 1999: 5,137; 2000: 5,737; 2001: 5,276; 2002: 5,183; 2003 (Prel.): 5,525.\n  - Imports: 1999: -8,041; 2000: -9,479; 2001: -8,779; 2002: -8,883; 2003 (Prel.): -8,602.\n  - Services and transfers (net): 1999: 2,475; 2000: 2,716; 2001: 2,751; 2002: 2,824; 2003 (Prel.): 3,235.\n  - Of which: interest: 1999: -180; 2000: -201; 2001: -196; 2002: -215; 2003 (Prel.): -272.\n  - Capital and financial account: 1999: 1,068; 2000: 1,580; 2001: 1,724; 2002: 952; 2003 (Prel.): 1,318.\n  - Foreign direct investment: 1999: 1,338; 2000: 953; 2001: 1,079; 2002: 961; 2003 (Prel.): 621.\n  - Change in gross international reserves (-=increase): 1999: -194; 2000: 70; 2001: -519; 2002: 526; 2003 (Prel.): -155.\n- Current account (in percent of GDP): 1999: -5.2; 2000: -3.4; 2001: -4.0; 2002: 1.0; 2003 (Prel.): ...\n- Exports (in US$, annual percentage change): 1999: -8.4; 2000: -1.8; 2001: 6.6; 2002: ...\n- Imports (in US$, annual percentage change): 1999: 6.3; 2000: -7.2; 2001: 1.2; 2002: ...\n- Terms of trade (annual percentage change): 1999: -4.8; 2000: -6.0; 2001: 0.8; 2002: 0.9; 2003 (Prel.): -0.3.\n- Real effective exchange rate (end-period, depreciation -): 1999: 3.3; 2000: 5.9; 2001: 2.4; 2002: -16.7; 2003 (Prel.): ...\n- International reserve position and external debt:\n  - Gross official reserves: 1999: 706; 2000: 637; 2001: 1,155; 2002: 630; 2003 (Prel.): 785.\n  - (in months of imports): 1999: 1.3; 2000: ...\n  - Net official reserves: 1999: 547; 2000: 442; 2001: 962; 2002: 376; 2003 (Prel.): 347.\n  - Outstanding external public debt, in percent of GDP: 1999: 21.0; 2000: 18.6; 2001: 19.6; 2002: 20.9; 2003 (Prel.): 33.8.\n  - Total debt service ratio (in percent of exports of goods & services): 1999: 5.0; 2000: 5.2; 2001: 7.1; 2002: 8.0; 2003 (Prel.): 8.6.\n  - Gross reserves/short-term debt (in percent): 1999: 71.1; 2000: 52.4; 2001: 79.7; 2002: 46.8; 2003 (Prel.): 58.5.\n\nSource: Press Release No. 03/147, IMF, August 29, 2003.\n\n---\n\n\n References\n\n- Dominican Republic and the IMF\n- Press Releases\n- PRESS CENTER\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2015/09/14/01/49/pr03147"
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    "Published: August 29, 2003",
    "Executive Board approved a two-year SDR 437.8 million (about US$600 million) Stand-By Arrangement to support the country's economic program through August 2005.",
    "Approval opens the way for the release of SDR 87.6 million (about US$120 million) under the arrangement.",
    "Dominican Republic joined the IMF on December 28, 1945; its quota is SDR 218.9 million (about US$300 million).",
    "Outstanding use of IMF credits totals SDR 4.96 million (about US$6.8 million).",
    "After a decade of strong growth and broad stability, the economy faced major challenges due to:",
    "Economic outcomes and developments cited:",
    "Primary program aims:",
    "Banking sector strategy (four planks):",
    "Fiscal strategy:",
    "Monetary and exchange rate policy:",
    "Structural and social policies:",
    "Real GDP is expected to:",
    "Inflation is projected to:",
    "External sector:",
    "Fiscal targets and debt service:",
    "Real GDP (annual percentage changes): 1999: 7.8; 2000: 7.3; 2001: 2.9; 2002: 4.1; 2003 (Proj.): -3.0.",
    "Real GDP per capita (annual percentage changes): 1999: 6.1; 2000: 5.4; 2001: 1.4; 2002: 2.3; 2003 (Proj.): -4.7.",
    "Consumer price index (end of period): 1999: 5.1; 2000: 9.0; 2001: 4.4; 2002: 10.5; 2003 (Proj.): 35.0.",
    "Unemployment rate (in percent): 1999: 13.1; 2000: 13.9; 2001: 15.6; 2002: 16.1; 2003: ...",
    "Gross domestic investment (in percent of GDP): 1999: 24.2; 2000: 24.0; 2001: 23.1; 2002: 23.2; 2003 (Proj.): 21.7.",
    "Gross national savings (in percent of GDP): 1999: 21.8; 2000: 18.8; 2001: 19.7; 2002: 22.7; 2003 (Proj.): 21.7.",
    "Banking system: Liabilities to private sector (annual percentage changes): 1999: 24.3; 2000: 11.7; 2001: 21.3; 2002: 13.2; 2003 (Proj.): 44.6.",
    "Lending interest rate (period average): 1999: 25.3; 2000: 26.8; 2001: 24.6; 2002: 26.1; 2003 (Proj.): 39.4.",
    "Central government primary balance (in percent of GDP): 1999: -2.5; 2000: -1.3; 2001: -1.1; 2002: 1.9; 2003 (Proj.): ...",
    "Central government overall balance (in percent of GDP): 1999: -3.2; 2000: -2.1; 2001: -1.9; 2002: -2.2; 2003 (Proj.): -0.4.",
    "Consolidated public sector (in percent of GDP): 1999: -1.7; 2000: -0.8; 2001: -1.0; 2002: 1.1; 2003: -2.0; 2004 (Proj.): -2.6; 2005 (Proj.): -3.5.",
    "Balance of payments (in millions of U.S. dollars):",
    "Current account (in percent of GDP): 1999: -5.2; 2000: -3.4; 2001: -4.0; 2002: 1.0; 2003 (Prel.): ...",
    "Exports (in US$, annual percentage change): 1999: -8.4; 2000: -1.8; 2001: 6.6; 2002: ...",
    "Imports (in US$, annual percentage change): 1999: 6.3; 2000: -7.2; 2001: 1.2; 2002: ...",
    "Terms of trade (annual percentage change): 1999: -4.8; 2000: -6.0; 2001: 0.8; 2002: 0.9; 2003 (Prel.): -0.3.",
    "Real effective exchange rate (end-period, depreciation -): 1999: 3.3; 2000: 5.9; 2001: 2.4; 2002: -16.7; 2003 (Prel.): ...",
    "International reserve position and external debt:",
    "[Dominican Republic and the IMF](http://www.imf.org/external/country/DOM/index.htm)",
    "[Press Releases](https://www.imf.org/en/news/searchnews)",
    "[PRESS CENTER](http://presscenter.imf.org/)",
    "[https://www.imf.org/en/home](https://www.imf.org/en/home)"
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