Press Release No. Press Release No.04/93

The following statement was issued today in Santo Domingo by José Fajgenbaum, Deputy Director of the Western Hemisphere Department of the International Monetary Fund, at the end of a planned first round of discussions with the authorities of the Dominican Republic, as part of the second review of the country's Stand-By Arrangement with the IMF:

"During this visit to Santo Domingo, we assessed recent developments in the economy of the Dominican Republic, and we discussed with the Dominican authorities their recent and planned policy efforts to support their economic program for 2004.

"Although the program was adversely affected earlier this year by higher-than-expected inflation, a major increase in oil import prices, and renewed weakness of the peso, the authorities took steps that tightened monetary conditions and brought down base money. This in turn helped stabilize the exchange rate and led to a sharp drop in inflation in March and April. The authorities intend to continue to hold a firm monetary stance in order to consolidate confidence in the peso and the reduction of inflation. Fiscal policy also has been affected by the developments mentioned above, but the authorities remain committed to achieving the program's fiscal objectives.

"After recently negotiating almost US$200 million in debt service relief from the Paris Club, the authorities are about to approach other bilateral creditors and are examining alternatives for private financing, with a view to completing the external financing of the program for 2004. At the same time, the authorities continue to move forward in the important area of banking sector reforms, broadly consistent with the agenda established under their program.

"The discussions of the second program review will continue in the coming weeks, after the authorities have had an opportunity to further develop and evaluate policy options consistent with recent developments and the program's objectives for 2004. We look forward to continuing these discussions," Mr. Fajgenbaum stated.