As an economist and former Central Bank governor, Bernardo Vega spoke to the Young Entrepreneurs’ Association (ANJE) and suggested there were five alternatives to the current IMF Stand By Arrangement. At the start of his talk Vega proposed that the accord be replaced by an “Extended Fund Facility” with the idea of obtaining a greater quantity of fresh money for the country. Both the Listin Diario and the Diario Libre carried the story, and both reported that Vega warned that such a solution would mean tighter controls on the country and a longer period of time for the financing. Nevertheless, Vega said that this was one way to get out of the quasi-fiscal deficit created by all the certificates of deposit emitted by the Central Bank.
Another possibility would be to find a long-term loan in dollars that would solve the problem of the quasi-fiscal deficit and also help to lower interest rates in the banking and financial system. This type of loan would be very difficult to obtain under the present circumstances, according to Vega.
The highlight of the Vega’s speech was the revelation that neither of the two versions of the IMF agreement, one signed in August of 2003 and the other signed in February of 2004, establish any clear solution for the problem of the quasi-fiscal deficit. Therefore, Vega said, the solution will probably come from a combination of these five proposals: a long-term loan in dollars; wider, easier conditions from the IMF; the sale of government-owned properties; the securing of a strong fiscal surplus under the tax reforms now being discussed; and, lastly, obtaining a substantial reduction in the interest rates and a restructuring of the due dates. Vega pointed out that while other countries in the hemisphere have undergone banking crises that have caused them quasi-fiscal deficits, the Dominican case was extraordinary in that the quasi-fiscal deficit was an especially large proportion of the total economy because of the decision to repay all of the deposits, no matter their size, plus the fact that the collapsed Baninter held a large sum of the total bank deposits. In view of this situation, Vega said that the DR needs to obtain a “waiver” from the IMF since it has twice broken the accords.