{
  "title": "Public Information Notice: IMF Executive Board Concludes 2008 Article IV Consultation with the Dominican Republic",
  "publication": "IMF News, February 19, 2008",
  "sourceUrl": "https://www.imf.org/en/news/articles/2015/09/28/04/53/pn0822",
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  "summary": "Each Public Information Notice contains a background section, a table of selected economic indicators, and an Executive Board assessment.",
  "publishDate": "2008-02-19",
  "sections": [
    {
      "heading": "Background",
      "content": "- Prudent macroeconomic policies since the 2002-04 financial/economic crisis, supported by a Fund arrangement, allowed a strong and rapid recovery.\n- Real growth averaged near double digits since the crisis and was among the highest in the region.\n- Inflation contained to single digits.\n- Fiscal consolidation: shift from primary deficits to primary surpluses and declining public debt ratios.\n- Banking system fundamentals strengthened significantly.\n- Gross international reserves of the central bank reached record levels and now exceed three times short-term external debt coming due.\n- Structural steps taken:\n  - New legal framework for fiscal management.\n  - Bolstered bank supervision moving toward risk-based consolidated supervision.\n  - Recapitalization plan for the central bank approved by congress to be implemented over the next ten years.\n  - Electricity theft and fraud criminalized to improve sector financial performance.\n- Remaining challenges:\n  - Output gap has closed; aggregate demand and oil price shocks widened the external current account deficit significantly in 2007.\n  - Despite strong reserve accumulation, the Dominican Republic still has one of the lowest reserve adequacy indicators among emerging market economies.\n  - Public debt ratios remain substantially above pre-crisis levels; significant amount of peso-denominated debt needs short-run rollover.\n  - Financial sector vulnerabilities reduced but persistent until full implementation of risk-based consolidated supervision and further institutional capacity strengthening.\n  - Fiscal balance improvement reflected substantial revenue increases (partly due to higher nickel-related revenue in 2007) while primary spending kept broadly constant (in terms of GDP) since 2004; subsidy programs for electricity and liquefied gas remained large and poorly targeted."
    },
    {
      "heading": "Executive Board Assessment",
      "content": "- Commendations and overall view:\n  - Directors commended authorities for the country's impressive recovery from the 2002-04 financial crisis.\n  - Prudent macroeconomic policies in a favorable external environment restored confidence, delivering rapid growth, single-digit inflation, declining debt ratios, a robust external position, and a strengthened financial system.\n  - Medium-term economic outlook generally positive if remaining vulnerabilities are managed carefully.\n- External position and exchange rate:\n  - Although the external current account deficit widened over the last two years, Directors judged it to remain in line with economic fundamentals.\n  - The managed float exchange rate regime has served the country well; staff assessment that the peso appears broadly in equilibrium was noted.\n  - Support for central bank policy of building up international reserves as insurance against shocks; level of reserves remains low compared with similar economies.\n- Monetary policy:\n  - Commended central bank's skillful monetary management and appropriate use of intermediate base money targets to meet inflation reduction goal.\n  - Directors concurred on the importance of readiness to tighten monetary policy if needed to forestall incipient inflation pressures; welcomed the central bank's commitment.\n- Fiscal policy:\n  - Main medium-term challenge: increase and better target social spending while generating primary surpluses to lower consolidated public debt burden to pre-crisis levels.\n  - Many Directors recommended aiming for primary surpluses averaging 2.5 percent of GDP over the medium term, although some Directors favored a somewhat slower pace of adjustment.\n  - Encouraged reforms to widen the tax base, mainly by rationalizing tax exemptions, and to limit poorly-designed energy subsidies.\n  - Called for firm control of public spending during the upcoming electoral period.\n  - Encouraged continued improvements in debt management given significant short-term peso-denominated debt.\n- Structural and financial sector reforms:\n  - Noted key structural reforms significantly strengthened the policy framework; Directors look forward to making these reforms fully operational.\n  - Welcomed reorganization of fiscal management institutions and improved procedures for better fiscal and public debt management.\n  - Commended criminalization of electricity theft to reduce budgetary support to the electricity sector.\n  - Welcomed legislation to recapitalize the central bank to strengthen accountability and financial independence.\n  - Commended progress in prudential regulation and financial supervision, including establishment of a macro-financial stress-testing framework.\n  - Advised continued vigilance regarding growth of mortgage and consumer lending.\n  - Encouraged completion of fully risk-based consolidated supervision and further strengthening of institutional capacity, requiring approval of amendments to the Monetary and Financial law.\n  - Cautioned that the legal framework for creating an international financial center should not undermine consolidated supervision efforts.\n  - Looked forward to the Financial Sector Assessment Program update in 2008.\n- Data reporting:\n  - Encouraged authorities to continue efforts to ensure accuracy of key information, particularly on the current account."
    },
    {
      "heading": "The Dominican Republic: Selected Economic Indicators",
      "content": "- National accounts and prices (Annual percentage change, unless otherwise indicated):\n  - Real GDP: 2.0 (2004), 9.3 (2005), 10.7 (2006), 8.0 (2007)\n  - Consumer price index (eop): 28.7 (2004), 7.4 (2005), 5.0 (2006), 6.5 (2007)\n- Social Indicators:\n  - Unemployment rate (in percent): 19.7 (2004), 17.5 (2005), 16.0 (2006), 15.6 (2007)\n- Public finances 1/ (In percent of GDP):\n  - Central government primary balance: -1.5 (2004), 0.9 (2005), 0.2 (2006), 1.7 (2007)\n  - Total revenues (including grants): 16.4 (2004), 17.9 (2005), 18.2 (2006), 19.9 (2007)\n  - Primary spending: 17.0 (2004), 18.0 (2005), 18.1 (2006), 1.7? (note: source shows primary spending as 17.0, 18.0, 18.1,  — original table lists primary spending and central government primary balance; preserve table values as presented)\n  - Interest expenditure: 2.1 (2004), 1.5 (2005), 1.6 (2006), 1.4 (2007)\n  - Nonfinancial public sector overall balance: -2.4 (2004), -0.2 (2005), -1.0 (2006), 0.3 (2007)\n  - Quasi-fiscal balance of the central bank: -4.0 (2004), -2.9 (2005), -2.5 (2006), -2.1 (2007)\n  - Consolidated public sector balance: -6.4 (2004), -3.1 (2005), -3.5 (2006), -1.3 (2007)\n  - Of which: primary balance: -0.1 (2004), 0.4 (2005), 1.9 (2006), (no 2007 entry in table)\n  - Total public debt: 53.1 (2004), 46.9 (2005), 44.0 (2006), 39.0 (2007)\n  - Of which: FX currency share (in percent): 69.8 (2004), 57.9 (2005), 54.8 (2006), 53.3 (2007)\n- Money and credit (12-month percentage changes, unless otherwise indicated):\n  - Liabilities to private sector (M3): 22.8 (2004), 13.5 (2005), 14.2 (2006), (no 2007 entry)\n  - Currency in circulation: 9.8 (2004), 17.8 (2005), 14.7 (2006), 14.0 (2007)\n  - Deposits: 11.2 (2004), 11.4 (2005), 5.7 (2006), 15.7 (2007)\n  - Net domestic assets of the banking system: 11.5 (2004), 6.7 (2005), 11.8 (2006), 10.9 (2007)\n  - Of which: Credit to the private sector: 9.6 (2004), 14.3 (2005), 24.5 (2006), (no 2007 entry)\n  - M3, in percent of GDP: 42.7 (2004), 44.2 (2005), 42.0 (2006), (no 2007 entry)\n- Balance of payments (In millions of U.S. dollar, unless otherwise indicated):\n  - Current account: 1,116 (2004), -400 (2005), -1,122 (2006), -2,040 (2007), -1,761 (Auth Est.)\n  - Merchandise trade balance: -1,954 (2004), -3,725 (2005), -5,500 (2006), -6,567 (2007), -6,275 (Auth Est.)\n  - Exports: 5,936 (2004), 6,145 (2005), 6,581 (2006), 6,873 (2007), 7,016 (Auth Est.)\n  - Imports: -7,890 (2004), -9,869 (2005), -12,081 (2006), -13,440 (2007), -13,291 (Auth Est.)\n  - Of which: oil and gas: -1,668 (2004), -2,451 (2005), -2,788 (2006), -3,297 (2007), -3,178 (Auth Est.)\n  - Services and transfers (net): 3,069 (2004), 3,324 (2005), 4,378 (2006), 4,527 (2007), 4,513 (Auth Est.)\n  - Capital and financial account: 199 (2004), 1,317 (2005), 1,489 (2006), 2,477 (2007), 2,286 (Auth Est.)\n  - Of which: foreign direct investment: 758 (2004), 1,123 (2005), 1,288 (2006), 1,528 (2007), 1,555 (Auth Est.)\n  - Overall balance: 417 (2004), 691 (2005), 201 (2006), 645 (2007), 693 (Auth Est.)\n  - Of which: change in NIR (increase -): -479 (2004), -898 (2005), -283 (2006), -645 (2007), -693 (Auth Est.)\n  - Current account (in percent of GDP): 6.1 (2004), -1.4 (2005), -5.6 (2006), -4.9 (2007), (no Auth Est. entry)\n  - Exports of goods (in US$, annual percentage chg): 8.5 (2004), 3.5 (2005), 7.1 (2006), 4.4 (2007), 4.5 (Auth Est.)\n  - Imports of goods (in US$, annual percentage chg): 3.4 (2004), 25.1 (2005), 22.4 (2006), 11.3 (2007), (no Auth Est. entry)\n- International reserve position and external debt:\n  - Gross official reserves: 825 (2004), 1,929 (2005), 2,251 (2006), 2,891 (2007)\n  - (In months of imports of goods) 2/: 1.3 (2004), 2.3 (2005), 2.2 (2006), 2.6 (2007)\n  - (In terms of short-term debt, percent) 3/: 3.2 (2004), 3.7 (2005), (no 2006/2007 entries)\n  - Net international reserves: 602 (2004), 1,520 (2005), 1,788 (2006), 2,278 (2007)\n  - NIR, program definition 4/: 192 (2004), 859 (2005), 1,128 (2006), 1,500 (2007)\n  - Outstanding external public debt, in percent of GDP: 34.7 (2004), 23.7 (2005), 23.9 (2006), 21.5 (2007)\n\nPublic Information Notice (PIN) No. 08/22 — January 14, 2008; Executive Board conclusion announced February 19, 2008. Sources: Central Bank of the Dominican Republic; World Bank; and IMF staff estimates and projections.\n\n---\n\n\n References\n\n- Dominican Republic and the IMF\n- Public Information Notices\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2015/09/28/04/53/pn0822"
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    "Published: February 19, 2008",
    "Prudent macroeconomic policies since the 2002-04 financial/economic crisis, supported by a Fund arrangement, allowed a strong and rapid recovery.",
    "Real growth averaged near double digits since the crisis and was among the highest in the region.",
    "Inflation contained to single digits.",
    "Fiscal consolidation: shift from primary deficits to primary surpluses and declining public debt ratios.",
    "Banking system fundamentals strengthened significantly.",
    "Gross international reserves of the central bank reached record levels and now exceed three times short-term external debt coming due.",
    "Structural steps taken:",
    "Remaining challenges:",
    "Commendations and overall view:",
    "External position and exchange rate:",
    "Monetary policy:",
    "Fiscal policy:",
    "Structural and financial sector reforms:",
    "Data reporting:",
    "National accounts and prices (Annual percentage change, unless otherwise indicated):",
    "Social Indicators:",
    "Public finances 1/ (In percent of GDP):",
    "Money and credit (12-month percentage changes, unless otherwise indicated):",
    "Balance of payments (In millions of U.S. dollar, unless otherwise indicated):",
    "International reserve position and external debt:",
    "[Dominican Republic and the IMF](http://www.imf.org/external/country/DOM/index.htm)",
    "[Public Information Notices](https://www.imf.org/en/news/searchnews)",
    "[https://www.imf.org/en/home](https://www.imf.org/en/home)"
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