Press Release No. 10/137

Press Release: IMF Executive Board Completes First Review Under the Stand-By Arrangement with the Dominican Republic

April 8, 2010

The Executive Board of the International Monetary Fund (IMF) has completed the first review of the Dominican Republic’s economic performance under a program supported by a 28-month Stand-By Arrangement (SBA). The completion of the review enabled the immediate disbursement of an amount equivalent to SDR 79.27 million (about US$119.9 million), bringing total disbursements under the arrangement to an amount equivalent to SDR 279.27 million (about US$422.3 million).

The SBA was approved on November 9, 2009 (see Press Release No. 09/393), for an amount equivalent to SDR 1.09 billion (about US$1.66 billion), or 500 percent of the Dominican Republic’s IMF quota.

The Executive Board also approved waivers of applicability for end-March performance criteria, as data on performance were not available at the time of the Executive Board meeting. The Executive Board also approved modifications to a number of performance criteria for the rest of 2010.

Following the Executive Board’s discussion of the Dominican Republic on April 7, 2010, Mr. John Lipsky, First Deputy Managing Director and Acting Chair, made the following statement:

“Performance of the Dominican Republic economy has been satisfactory under the Fund-supported program, and the authorities’ generous response to the Haitian earthquake is praiseworthy. A substantial fiscal stimulus, supported by an accommodative monetary policy, has served to mitigate the adverse effects of the global crisis and start a recovery. Progress has been made on structural reforms, including on developing a strategy to reform the electricity sector that aims at eliminating indiscriminate subsidies while significantly improving service to all clients.

“The authorities remain committed to the program’s objectives and policies. Strong program implementation will enhance the government’s credibility, and support a successful placement of bonds in international markets, which is an important component of the authorities’ financing strategy.

“Under the program, fiscal policy will shift from an expansionary stance to consolidation in the second half of 2010. Full implementation of the government’s investment program and control of current spending will help support a sustained recovery. Swift elimination of tax exemptions and strengthened tax administration will be important for achieving the planned fiscal tightening in the second half of 2010 and beyond.

“The central bank continues its flexible handling of monetary policy, maintaining stability and supporting growth. While relative stability of the exchange rate is important to maintain confidence, a gradual introduction of greater flexibility will strengthen the authorities’ ability to respond to external shocks, especially if the global environment turns out to be weaker than expected. It is essential to continue with the recapitalization of the central bank in order to enhance the credibility and flexibility of monetary policy.

“Implementation of the structural reform agenda will be of paramount importance to achieve the authorities’ medium-term objectives. Reform of the electricity sector will reduce the drain on public finances and make room for poverty alleviation efforts. While the banking system remains sound, the authorities are preparing a plan to further enhance banking supervision.”