Franco Uccelli of Bear Stearns reports on the IMF mission that arrived in Santo Domingo last night to negotiate the terms of a “new” agreement with the Dominican government. Uccelli says that, according to reports, the purpose of the visit is to reach a consensus on the contents of the Dominican Republic’s new letter of intent, as well as on the complementary fiscal measures designed to compensate for the shortcomings of what he calls the somewhat diluted tax reforms recently approved by the DR’s Congress. The original reform package was intended to generate 2.5% of the GDP in additional revenues for the government, while the version ratified will only produce 1.8% of the GDP in extra income.
Uccelli comments that the emphasis of the negotiations between the government and the IMF will be on fiscal matters, since that is where the most severe deviations from the old stand-by program occurred, and because the government’s recent monetary measures have been accepted by the IMF and have produced positive results.
“At the moment, it is unclear whether a brand new agreement with the IMF will be drafted or if the suspended one will be revised,” he writes. “What is clear, however, is that there appears to be good disposition from both sides of the negotiating table to finalize an agreement as soon as possible.”
Uccelli explains that according to the most recent government timetable, an agreement with the IMF could be restored by the end of November or early December, thus paving the way for the multilateral disbursements to be renewed shortly thereafter.
Uccelli reports that, in addition to the IMF mission, also in town for a visit with President Leonel Fernandez are IDB president Enrique Iglesias and a handful of high-ranking World Bank officials. Representatives from the three multilateral entities are scheduled to analyze the challenges confronting the Dominican economy and current and future financial assistance programs with the President and his economic team.
“Our interpretation of this meeting is that it represents a concerted effort from the multilaterals to make sure that they and the government are on the same page and that their future actions will be carefully coordinated,” he writes. “Moreover, we believe that the meeting with Fernandez and his team will be used by the lending agencies to exert pressure on the government to intensify efforts to implement an economic recovery plan.”‘