Press Release No. 11/103

Press Release No. 11/103
March 28, 2011

An International Monetary Fund (IMF) mission led by Mr. Alejandro Santos visited Santo Domingo during March 21–24 to continue discussions under the fifth review of the Stand-By Arrangement (SBA) approved in November 2009 (see Press Release No. 09/393). The mission met with President Leonel Fernandez, as well as members of the Economic Cabinet, and other senior government officials. At the conclusion of the visit, Mr. Santos issued the following statement:

“The mission met with new Minister of Finance, Mr. Daniel Toribio to continue policy discussions on fiscal issues and gathered information about the measures announced by President Fernandez last week in response to the food and fuel price shocks. The mission also met with new Minister of Industry and Commerce, Mr. Manuel García to analyze developments in fuel prices.

“The mission noted that program implementation has been successful, mitigating the effects of the international crisis on the Dominican economy. There was broad agreement with the economic team on the main macroeconomic objectives for 2011. Economic growth is expected to be between 5.5 and 6 percent, the Central Bank will target inflation in the
5–6 percent range, and the consolidated public sector deficit will reach about 3 percent of Gross Domestic Product (GDP) as envisaged in the 2011 budget.

“The mission supports the recent increase of 100 basis points in the policy rates by the Central Bank to shift monetary policy to a more neutral stance, and the recent decision of the authorities to cut public spending in areas other than education, health and social protection by 12 percent to safeguard their fiscal position.

“The mission analyzed the authorities’ proposal to introduce flexibility in some of the program targets and objectives in reaction to the food and fuel price shocks, and the need to strengthen social spending while allowing a limited relaxation of the current deficit of the public electricity corporation. The mission stressed the need to reverse the worrisome decline in the tax-to-GDP ratio, and to adopt a more flexible pricing mechanism for electricity tariffs to limit the fiscal cost of higher international oil prices.

“Discussions were very fruitful and will continue in the coming weeks to refine the estimates of the impact of some policy proposals.

“The mission would like to thank the authorities and the citizens of the Dominican Republic for their warmth and hospitality.”