Decision on IMF due January

Economic, Planning and Development Minister Temistocles Montas says that the government is postponing to January announcing whether it will sign a stand-by or other kind of financial supervision agreement with the International Monetary Fund (IMF).

The current stand by arrangement expires on 31 January 2008. He spoke during a TeleAntillas televised debate on the economy.

Hacienda Minister Vicente Bengoa has publicly favored not signing a new agreement with the IMF. Business sectors strongly favor the IMF surveillance to control government borrowing abroad and spending, especially given that 2008 is an electoral year.

Montas is optimistic that 2008 will be a good year, given what he describes as the prudent monetary policy instrumented by the government over the past three years. Montas stresses the economy grew 8% in 2007, despite the rising price of petroleum. He recognized that the weakening US economy would affect the DR, and forecast that for for every percentage point that the US economy declines, the DR economy will not grow by 1.4%.

During the same debate, former Central Bank governor Carlos Despradel said that the current Dominican economic model is unsustainable. He stressed that the growth of the economy has come from an increase in imports and commerce, rather than growth of the productive sectors, as it should be. Despradel is quoted in Hoy saying that “change needs to happen in the way the DR grows and in the way stability is being maintained.”

Economist Apolinar Veloz, a former Central Bank manager, pointed out that the fiscal reform enforced in January 2007 had budgeted RD$17 billion in additional revenues, but instead reaped RD$35 billion. He criticized that the government chose to spend the surplus instead of building a reserve or applying it to the quasi-fiscal debt. He pointed out that while there has been growth, local industries have lost competitiveness.

On the other hand, economist Jose Luis de Ramon pointed out that the DR is flush in hard currency with more dollars entering the DR than is necessary. De Ramon said that the DR has accumulated US$400 million more in dollar reserves than last year. De Ramon criticized the excessive spending of the government, and called for increased funding of education.