The value of the U.S. dollar is the strongest it has been in a generation, devaluing other currencies and unsettling the global economic outlook.
www.nytimes.com
From this mornings NY Times.
One question came to mine was--Does the DR pay their debt in dollars or pesos?
This strength of the dollar could be a game changer for the DR...I think?
Both, but the majority of debt (external bonds) is in dollars.
The DR is in very good financial shape..........for the moment. The best financial shape in years.
International reserves are strong due to tourism, remittances, and exports. So strong that the government has been able to subsidize the cost of fuels for months now. Additionally, as was stated elsewhere, the Central Bank had the foresight to see interest rate hikes coming in the US...........and so raised their interest rates multiple times to front run or buffer the peso. It has worked............so far.
The problem with raising rates, if not done carefully, is that it eventually chokes off demand...............leading to a slowing of the economy..................stunting overall growth and increasing unemployment. And with that, should any one of the current three stools of the economy falter...............the economy, and more so the peso, will start to revert back to its trend of 3-4% yearly devaluation. Those are the keys to watch closely.
And like clockwork, as the economy starts to falter, the government will look for more ways to raise revenues to meet its debt obligations............in the form of new borrowings which could lead to a weaker peso...................which leads to the need for newer sources of revenue..............which leads to new/higher taxes.............which then leads to......................
Respectfully,
Playacaribe2
