The stalled agreement between the Dominican government and the International Monetary Fund (IMF) is officially back on track. After a pause of over five months, a revised agreement has been negotiated and was signed yesterday. The first disbursement under the new terms of the deal will amount to US$66 million, with the power sector earmarked as a top-priority recipient. The original agreement with the IMF, signed in August last year, totalled US$657 million. To date, a sum of US$197 million has been disbursed. The original standby agreement was interrupted when the government reacquired two of the privatized electricity distribution companies, Edesur and Edenorte, without the Fund’s awareness. The agreement with the IMF is designed to restore confidence in the banking sector and the country’s general economic policies. The IMF predicts a negative growth of 1% in GDP over the coming year, as well as an inflation rate of 14%. In its statement, the IMF says: “In completing the review, the Executive Board approved the Dominican Republic’s request to waive the non-observance of structural performance criteria regarding the approval of by-laws of the Monetary and Financial Law, the approval of the law for systemic bank resolution, the approval of the 2004 budget law, and the unification of the foreign exchange market; four quantitative performance criteria for the end of December 2003 on fiscal and monetary targets; and the continuous performance criteria concerning accumulation of external arrears, exchange rate restrictions, and multiple currency practices. The Executive Board also approved a request to waive the applicability of the quantitative performance criteria for the end of December 2003 on the contracting of external debt, as final data on this criterion was not yet available.. The Dominican authorities, for their part, committed themselves to “taking all necessary measures” to ensure the success of the revised accord. In its letter of intent, the government states that since the original signing of the agreement they have introduced “a number of measures and a wide-ranging economic program within the framework of the original standby agreement, with the aim of restoring confidence in an economy that has suffered a series of external and internal blows.” The letter, signed by Central Bank Governor Jose Lois Malkun, Finance Minister Rafael Calderon and Technical Secretary to the Presidency Carlos Despradel, continues by saying that they had continued to confront the banking sector’s problems which caused the crisis in early 2003, by making a significant effort to restrict public spending and taking measures to ensure a free, unified and fully-functioning exchange market.
For the full text of the IMF press release, go to http://www.imf.org/external/np/sec/pr/2004/pr0423.htm.