Central Bank of the Dominican Republic Governor Jose Lois Malkun told reporters that the sale of the institution?s assets, as well as those that belonged to the Banco Intercontinental (BanInter), could offset the current deficit at the Central Bank, and bring in as much as US$1 billion. According to Malkun, this amount would be used to stem the ?stop? on financial certificates and even eliminate the quasi-fiscal deficit. According to the governor, up until now the Central Bank has recovered RD$6 billion from one party ? Scotia Bank. Sales currently pending include the building on the Lope de Vega Avenue and the property at Playa Grande which could produce more than US$100 million. Malkun was questioned by reporters as he left the American Chamber of Commerce luncheon that featured President Mejia as the keynote speaker. The Central Bank boss told the reporters that there were ?two things: the ?stop,? the debt and the deficit generated by the debt.? He furthermore said: ?The deficit that is generated by the debt will be taken care of through the tax reform. Now, the ?stop? will be taken care of first by selling off the assets.? Malkun added that Central Bank assets alone could cover as much as half the quasi-fiscal deficit. He ended his commentary by saying that talks with the IMF mission currently in the country seek to find ways to close the US$100 million shortfall that could not be negotiated with the Paris Club. On that point, Goldman-Sachs reported that they had confirmed with Dominican authorities that the government has not yet decided how to fill the remaining $100-million financing gap. This contradicts press reports of yesterday that indicated the government had formally chosen to restructure debt to the private sector and debt to non-Paris Club governments.
The Goldman Sachs Report, prepared by Geoffrey Gottlieb, goes on to say that the Dominican government is looking at a several ways to solve the problems. One of these is to find new loans in the private sector. To this end, there are ongoing negotiations with a pool of banks, from whom the amount being sought is US$70 million ? a sum that might prove to be elusive. These negotiations are expected to come to an end within two weeks. Another option, although less favored, is to restructure the debt with non-Paris Club member nations, such as Mexico, Venezuela and Brazil. Nevertheless, the amount of debt that can be restructured has not been precisely calculated. The third option is to restructure the debt with the private sector. The Mejia administration has reiterated, however, that rearranging the sovereign bonds would be the absolute last resort; the government would prefer to renegotiate debts with suppliers and commercial banks. As part of the agreement with the Paris Club, the Dominican authorities must provide updates to the Club on its strategy to attain comparability of treatment on July 15 and on October 30. As it takes 6 months for the bulk of the Paris Club relief to be provided, the Club could theoretically declare the assistance null and void if comparability is not attained. Such treatment is rare, however, and would require a significant hardening of the US position. Gottlieb points out that there is not much positive news for DR bonds at this time.