Franco Uccelli of Bear Stearns writes in his update on the Dominican Republic that a government mission will be travelling to Washington next week to receive technical assistance from the IMF on Paris Club negotiating strategies and restructuring alternatives. Uccelli is optimistic that the Dominican Republic’s sovereign bonds will be subject to some sort of market-friendly restructuring. “This is not to say that an outright default is imminent – indeed, staying current on all of its non-reprogrammable external debt payments is a DomRep commitment imbedded in the IMF program – but we view some kind of market-friendly rescheduling as a real possibility,” he writes in his 11 February report on the country.<\/p>\n
Uccelli makes these comments mindful of the fact that as part of the stand-by agreement with the IMF, the government will seek debt relief from external creditors in order to close a US$300-million balance of payments (BOP) financing gap. The gap would be the result of the insufficiency of IDB, World Bank and bilateral disbursements scheduled for this year to cover an estimated US$1 billion in BOP financing needs. He writes that the first order of business for the Dominican government will be to attempt to reprogram its debt service obligations for 2004 with the Paris Club, an operation that has actually been built into the text of the IMF agreement. <\/p>\n
Uccelli furthermore believes that at this point, a bailing out of bondholders is likely, either during the current administration of President Mejia or any future government. He mentions that recent press reports have quoted leading Presidential candidate Leonel Fernandez as saying that, should he be elected to the presidency, he would negotiate a voluntary restructuring of the country’s sovereign bonds.<\/p>\n
Uccelli continues to say that as part of the process of seeking external debt relief from the Paris Club, there is a high probability that the country will be required to also seek relief from private creditors, as bilateral lenders may demand that burden-sharing be introduced as part of a broader debt relief program. <\/p>\n
He reports that the key issues in the Dominican Republic today are political uncertainty, economic recession, volatile prices (consumer, foreign exchange and interest rates), fiscal fragility, a heavy debt service burden, tight external liquidity conditions and the need for international finance assistance, among other negative factors. <\/p>\n
Uccelli comments that while a robust external sector (tourism, FTZ exports and remittances) is keeping the economy from sinking any deeper, and is allowing it to generate enough foreign exchange to prevent the FX rate from spiralling completely out of control, the domestic economy remains depressed and shows very limited signs of life. Officially, the GDP is expected to contract by only 1% this year after shrinking by 1.3% in 2003. Nevertheless, Uccelli views this as a best case scenario. <\/p>\n","protected":false},"excerpt":{"rendered":"
Franco Uccelli of Bear Stearns writes in his update on the Dominican Republic that a government mission will be travelling to Washington next week to receive technical assistance from the IMF on Paris Club negotiating strategies and restructuring alternatives. Uccelli is optimistic that the Dominican Republic’s sovereign bonds will be subject to some sort of … <\/p>\n