## Dominican Republic: Sectoral Financial Positions and Macroeconomic Vulnerabilities

_IMF Working Papers, October 17, 2016_

## Source details

**Canonical URL:** [Dominican Republic: Sectoral Financial Positions and Macroeconomic Vulnerabilities](https://www.imf.org/en/publications/wp/issues/2016/12/31/dominican-republic-sectoral-financial-positions-and-macroeconomic-vulnerabilities-44342)

## Other formats

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## Bibliographic details
- Authors: Svetlana Cerovic, Jose Saboin
- Published: October 17, 2016
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781475545494.001

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### Summary
- This paper examines the financial position of the key sectors of the Dominican Republic using the balance sheet approach to identify financial interlinkages and vulnerabilities.
- The balance sheet of the economy has been weakening, particularly in foreign currency, due to persistent fiscal deficits.
- Risks from a weaker foreign currency position appear mitigated by long-term maturities on government debt and increasing accumulation of foreign currency assets.
- Network analysis indicates that, despite stronger financial positions in other sectors, they could be adversely affected in an external stress scenario because of strong links with the public sector.
- Exposures to the public sector are particularly pronounced in the domestic financial system (directly) and households (indirectly, through pension funds).

### Key findings and analysis
- Balance sheet deterioration:
  - The overall balance sheet of the Dominican Republic economy has been weakening.
  - Weakening is concentrated in foreign currency positions and is attributed to persistent fiscal deficits.
- Mitigating factors:
  - Long-term maturities on government debt reduce immediate rollover pressures.
  - There is an increasing accumulation of foreign currency assets that buffers FX vulnerabilities.
- Network interlinkages:
  - Strong interconnections exist between the public sector and the rest of the economy.
  - Network analysis suggests contagion risk: adverse external shocks to the public sector could transmit to other sectors.
- Sectoral exposures:
  - Domestic financial system: pronounced direct exposures to the public sector.
  - Households: pronounced indirect exposures to the public sector through pension funds.

### Policy implications and considerations
- Monitor and address fiscal deficits to prevent further weakening of the economy’s balance sheet, particularly its foreign currency position.
- Continue policies that extend debt maturities to preserve resilience against rollover and liquidity risks.
- Sustain or enhance accumulation of foreign currency assets as a buffer against FX shocks.
- Strengthen oversight of financial system exposures to the public sector to limit direct transmission channels.
- Assess pension fund linkages to public sector assets and consider measures to reduce household indirect exposure where appropriate.
- Use network-analysis tools in macroeconomic surveillance to identify and mitigate potential contagion pathways from the public sector to other sectors.

### Key statistics and publication metadata
- Pages: 37
- Publication date: October 17, 2016
- Authors: Svetlana Cerovic, Jose Saboin
- Volume: 2016
- Issue: 208
- Series: Working Paper No. 2016/208
- DOI: https://doi.org/10.5089/9781475545494.001
- Stock No: WPIEA2016208
- ISBN: 9781475545494
- ISSN: 1018-5941

*IMF Working Papers — Dominican Republic: Sectoral Financial Positions and Macroeconomic Vulnerabilities*

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## Content in this bundle

- **1. Net Intersectoral Financial Positions**
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  - [1. Net Intersectoral Financial Positions (PDF)](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2016/_wp16208.pdf){rel="external" type="application/pdf"}

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_Source: https://www.imf.org/en/publications/wp/issues/2016/12/31/dominican-republic-sectoral-financial-positions-and-macroeconomic-vulnerabilities-44342_