Franco Uccelli of Bear Stearns writes in a 15 January update that they have received confirmation from high-ranking Dominican government officials that the IMF is indeed in Paris this week, holding talks with the Paris Club of bilateral creditor nations about the Dominican Republic’s current predicament. According to Bear Stearns, the IMF is requesting bilateral debt relief for the DR for this year and next. Under standard operating procedures, the request for relief has to come from the IMF directly, given that the policies designed to support the Dominican Republic’s appeal for bilateral assistance would be implemented in the framework of an IMF agreement. If granted, Paris Club relief could total as much as US$350 million in 2004 and US$270 million in 2005. The Dominican Republic has around US$850 million in external debt service obligations for this year alone. A key question that remains unanswered, says the report, is whether the Paris Club may seek, in exchange for debt relief, comparable treatment from other external creditors of the Dominican Republic, including the private sector. Under a new approach to deal with non-HIPC (Highly Indebted Poor Countries), countries such as the Dominican Republic selected by Paris Club members in October 2003 (so-called the Evian Approach and used for countries facing a liquidity problem but considered to have sustainable debt going forward), the Paris Club would design debt treatments on the basis of existing terms. However, for countries whose debt is deemed by the IMF and the Paris Club to be unsustainable (that is, for countries facing a solvency problem rather than a liquidity one), Paris Club creditors would propose a comprehensive debt relief program that would seek comparable treatment from all of the distressed country’s external creditors, including the private sector. The update concludes: “Although our sense is that the Dominican Republic is currently facing a liquidity rather than a solvency problem, with international liquidity levels very low yet public debt ratios still at manageable levels by regional standards, the Paris Club’s assessment of the Dominican Republic’s current situation is its own, and therefore may differ from ours. We expect further clarity on this issue in the near future.”