The International Monetary Fund released yesterday a
\nsummary of the conclusions of its 29 August consultations with the Dominican
\nRepublic. The IMF directors recommend increasing revenue while curtailing
\ngovernment expenditures to limit the budget deficit and emphasize the need for
\nthe government to adopt comprehensive tax and expenditure reforms. "Directors
\nurged the authorities to advance approval of a tax reform to broaden the base of
\nconsumption and income taxes, and to seek prompt approval of budgetary reforms
\nto improve the efficiency of public spending," states the report. The directors
\nwelcomed the decision to unify the exchange market and the authorities’
\ncommitment to a fully flexible exchange rate policy. The IMF feels that to
\nrealize medium-term growth potential the country will require structure reforms
\nbeyond those in the systems of banking and governance. On the positive side, the
\nIMF highlights the fact that exports and tourism have recovered so far in 2003,
\nand that imports have fallen as a result of the downturn in domestic demand and
\na sharp depreciation of the peso. The IMF states that the external current
\naccount showed a 1% surplus of the GDP in the first half of the year, after a
\ndeficit of 4% in 2002. Notwithstanding, the financial account has weakened
\nacutely, even after the placement of US$600 million in sovereign bonds in early
\n2003. This is attributed in part to the decline in direct foreign investment and
\ncapital outflows. The IMF attributes the downturn of the economy, after strong
\neconomic performance during 1992-2000, to a series of external shocks that began
\nin 2001: rising oil prices, 9\/11, and the economic slowdown in the US and
\nEurope. It explains, however, that the biggest blow was the breakdown in the
\nbanking sector, which was met with monetary expansion by the government and a
\nsequence of economic complications. The IMF attributes the banking crisis to
\ngovernance problems that went undetected for many years, including accounting
\nmalpractices, mismanagement and fraud. It applauds the authorities for having
\nlaunched a comprehensive program to strengthen the banking system. To read the
\nreport, see
\nhttp:\/\/dr1.com\/news\/2003\/101503_IMF.pdf<\/p>\n","protected":false},"excerpt":{"rendered":"
The International Monetary Fund released yesterday a summary of the conclusions of its 29 August consultations with the Dominican Republic. The IMF directors recommend increasing revenue while curtailing government expenditures to limit the budget deficit and emphasize the need for the government to adopt comprehensive tax and expenditure reforms. "Directors urged the authorities to advance … <\/p>\n