In his first day on the job as the Central Bank?s new governor, Jose Lois Malkum told Hoy newspaper in an extensive interview published today that he favors opening the doors of banking in the DR to foreign invesmtent. Malkum feels the entrance of foreign players will bring internal competition and strengthen regulation mechanisms.
Otherwise, Malkum said, the government would not make changes in the monetary and fiscal policy it is implementing. He said the Ministry of Finance has instructions to continue removing pesos from circulation and cutting fiscal spending. The Central Bank will also continue to reduce money in circulation to curtail spending by the private sector, and to force a lower rate of exchange. In the interview, Malkum sets a target of RD$21.50 – RD$22.00 for the peso rate against the US dollar. Agents were offering around RD$23 for the US$1 yesterday, and selling at around RD$25-US$1.
Malkum disputes that letting the peso slide to a rate of RD$24-RD$25 to the US dollar would be good for the country. He says that while the high exchange rates can be beneficial for tourism and manufactured exports, the inflation it generates destroys the general economy.
Malkum said that 70% of all exchange-market transactions are controlled by as few as three or four agents, and therefore doubts that market forces rule the trade. ?There are people here who think they can do what they want in the name of the market,? he said. However, Malkum feels that the exchange market does not operate as a true market, saying that it is manipulated, very controlled and does not operate with transparency. ?This is not a free market. That is a myth,? he said. Malkum feels that regulations for the exchange market need to be implemented to impede the operations of the present virtual oligopoly.
He expressed belief that the Central Bank could operate with just 50% of its current workforce, adding however that staff cuts would not be made without careful assessments.
As to his work as finance minister, he said that he was able to implement the rule that bans government departments from assuming debt without the authorization of the ministry.