The Diario Libre reports today that Central Bank Governor Jose E. Lois Malkun says the CB will not intervene in the foreign exchange market under any circumstance. He said he met with the exchange houses, bankers and remittance companies, who were not interested in agreements to fix the rate, but rather in allowing the market to float according to the law of supply and demand. Malkun admitted that during the period in which the government held the rate at RD$35 to US$1, a parallel market developed. Malkun attributed the parallel rate to actions of the exchange agents who understood that it was below market value. “For now we have to wait. We have to wait for everything to be decided. We are at a crucial time and we cannot despair. If it is going to go up, then let it go up. Let the market decide the rate. That is the policy of the Central Bank, to not intervene in the market under any circumstance,” he is quoted in the newspaper as saying. On 17 December, the IMF conditioned the resumption of the stand-by arrangement with the Dominican government to the authorities’ willingness to take “steps to ensure the efficient and transparent functioning of the foreign exchange market.”
On 1 December, President Mejia and his economic team, including CB Governor Jose Lois Malkun, had met at the Presidential Palace with the head of the Armed Forces, General Soto Jimenez; the chief of Police, General Marte Martinez; the head of the DNI (National Intelligence Agency), General Cruz Mendez; the head of the Internal Revenue Department, Quico Tabar; the head of Customs, Vicente Sanchez Baret; and other members of the government’s economic team. Exchange house, remittance companies and banks were told that the IMF requires the exchange rate to be less than RD$40 to US$1 in order to ratify the pending standby agreement. At the time, the rate was manipulated to decline several points per day and was pushed down to a rate of RD$34, but at the same time a parallel market boomed when formal market agents had no dollars to sell.
Nevertheless, El Caribe reports that despite the announcement, the black market has prevailed. While the official rate for selling dollars had climbed to RD$40-US$1, the availability of dollars continued to lag in the formal market. Black market operators were said to be buying at above RD$42-US$1, and selling for more than RD$43. The Listin Diario says that the exchange houses have not yet liberalized the rate and that the pact is still being enforced. Euros were going for RD$47 for purchases and RD$52 for sale.