Hoy newspaper reports that the exchange rate for the peso in April 2002 was RD$17.76 to the US dollar. One year later, the peso has slid to RD$27.80, and available currency in the market is scarce. The newspaper reports that in the past 12 months, the Dominican currency had devaluated by approximately 56%.
The exchange rate crisis is comparable only to the 60% devaluation experienced in 1988, when then-President Joaqu?n Balaguer pushed the country to the limit in order to complete infrastructure works without borrowing from abroad.
The present government, seeking to lower the exchange rate, has implemented restrictions on money in circulation, limited the financing to exchange intermediaries to avoid hoarding, and placed clerks in exchange houses to inspect the sale and purchase of foreign exchange. With these measures in place, it was reported that yesterday there was a shortage of cash to carry out money transfers.
In light of this, the government announced yesterday that it had reached an agreement with the exchange houses to freeze the rate for three days at RD$27.80. The dollars, however, were not flowing into the market.
As reported in Hoy, Central Bank Governor Jos? Lois Malkum attributed the problems of the currency exchange to the small group that controls the market.
Diario Libre newspaper editorial today says that the economy will not again be on the right track until the authorities focus on what they call the root of the problem ? exaggerated government spending. The newspaper also highlights that since President Hipolito Mej?a announced on 14 April he would seek re-election, the peso has continued to depreciate to record lows.