As per an 11 February article in The Financial Times, capital market analysts are waiting to see if the Paris Club will demand a rescheduling of all external debts owed, including its private debts. While the Dominican Republic has successfully passed an IMF loan review, emerging market analysts are still concerned that debt default could be imminent. Default would close the doors for borrowing on international capital markets, which some local economic analysts say may not be such a bad thing. The present economic woes of the country are being partially attributed to the liberal borrowing policies of the Mejia administration.
The Financial Times reports that the Dominican Republic has some $1.8 billion in private external debt. The reporter, Jenny Wiggins, speculates that if it demands a rescheduling, it could prompt a default on the part of the DR authorities. The reporter explains that the government has been trying to ward off a default by rescheduling its debt obligations with the Paris Club, an informal group of creditors that help resolve payment difficulties of debtor nations. The Dominican Republic has total bilateral obligations (debt owed by it to other countries) of about US$430 million this year, a figure quoted by the Financial Times and attributed to JP Morgan. “An inconsistent policy mix on the part of the Dominican government, with expansionary fiscal and monetary policy, led to a loss of confidence,” said Graham Stock, an emerging markets strategist at JP Morgan. Analysts are optimistic, however, that the Bush administration could back current President Hipolito Mejia in the nation’s negotiations with its creditors.
See http://news.ft.com/.