The government of the Dominican Republic announced yesterday that a delegation had left for Washington, DC in order to negotiate the remaining details of the new IMF program, as reports Beat Siegenthaler of Commerzbank in a release today. Members of the delegation are Technical Secretary of the Presidency Temistocles Montas, Finance Minister Vicente Bengoa and Governor of the Central Bank Hector Valdez Albizu.
Siegenthaler notes that Technical Secretary of the Presidency Temistocles Montas stated that a letter of intent should be agreed upon within a week and that it would be based on a balanced budget for 2005 (excluding quasi-fiscal balance).
On the other hand, he reports that Finance Minister Bengoa also said last night that the government will clear all external debt arrears, paying a total sum of $296 million before January 2005. He noted that wiping out all arrear balances was part of the forthcoming agreement with the IMF.
According to Siegenthaler, DR bonds have rallied over the last few weeks with the expectation of a market-friendly restructuring to be announced once the IMF agreement has been restored. The Domrep 9 1/2% $2006 is trading on a record high of 95 today ? up from 87.5 on 18 October ? while the 9.04% $2013 stands at 85.0 today, up from 81 a month ago.
Commenting on bond investment strategy, Siegenthaler writes that Commerzbank is retaining its overweight recommendation based on the imminence of a finalized IMF accord and subsequent market-friendly restructuring. He adds that, despite the recent rally, they believe there will be a further upside to bond prices once the debt exchange has been implemented successfully.