Journal Issue

Dominican Republic: Second and Third Reviews Under the Stand-By Arrangement and Request for Waivers of Applicability—Informational Annex

International Monetary Fund
Published Date:
March 2011
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Annex I: Relations With the Fund

(As of September 30, 2010)

I. Membership Status: Joined on December 28, 1945; Article VIII

II. General Resources Account:

SDR MillionPercent of

Fund holdings of currency729.32333.17
Reserve Tranche Position0.000.00

III. SDR Department:

SDR MillionPercent of

Net cumulative allocation208.83100.00

IV. Outstanding Purchases and Loans:

SDR MillionPercent of

Stand-By Arrangements (SBA)510.42233.17

V. Latest Financial Arrangements:

TypeDate of




(SDR Million)
Amount Drawn

(SDR Million)
SBANov 9, 2009Mar 8, 20121,094.50279.27
SBAJan 31, 2005Jan 30, 2008437.80437.80
SBAAug 29, 2003Jan 31, 2005437.80131.34

VI. Projected Payments to Fund: 1/

(SDR million: based on existing use of resources and present holdings of SDRs):


When a member has overdue financial obligations outstanding for more than three months, the amount of such arrears will be shown in this section.

When a member has overdue financial obligations outstanding for more than three months, the amount of such arrears will be shown in this section.

VII. Safeguards Assessment. An update of the previous safeguards assessment of the Banco Central de la República Dominicana (BCRD), which was completed in April 2005, was conducted in the context of the Stand-By Arrangement approved by the Board on November 9, 2009. The assessment was completed on June 1, 2010 and noted that the BCRD had implemented some of the previous safeguards recommendations relating to its external and internal audit mechanisms, and the internal control framework. In addition, periodic reviews have been instituted by the Internal Audit Division of the compilation, reconciliation, and reporting of Net International Reserves and Net Domestic Assets at each test date under the SBA program, against definitions agreed under the Technical Memorandum of Understanding. However, there remain several weaknesses identified previously with regard to shortcomings in the Monetary and Financial Law (MFL), in particular with respect to the autonomy of the central bank. In addition, the BCRD continues to prepare its financial statements in accordance with accounting policies that do not reflect an internationally recognized financial reporting framework, such as the International Financial Reporting Standards (IFRS). A methodology for separately calculating realized from unrealized foreign currency gains/losses is also lacking. The authorities have undertaken to address the remaining weaknesses.

VIII. Article IV Consultation. The last Article IV consultation was concluded by the Executive Board on November 9, 2009.

IX. FSAP Participation. An FSAP update was completed in March, 2009. A Financial System Stability Assessment report for the Dominican Republic was issued on May 20, 2002. The corresponding FSAP report was issued in November 2001.

X. Technical Assistance has been substantial since 2004, and concentrated on financial sector supervision, tax reform and administration, and national accounts statistics.

XI. Resident Representative. The Fund representative office was closed in July 2008, but is scheduled to be reopened in November 2010. Mr. Mario Dehesa has been selected as resident representative.

XII. Other. The Dominican Republic has not yet ratified the Fourth Amendment.

Annex II: Joint Management Action Plan (JMAP)

1. The IMF and World Bank Dominican Republic teams held joint meetings and coordinated extensively in 2009-2010.1 There exist a close cooperation between the staff of the IMF and the World Bank. The regular meetings also included staff of the Inter-American Development Bank (IADB). The main focus of cooperation has been on electricity sector reform, an important part of the World Bank portfolio and of the structural reforms under the IMF Stand-By Arrangement (SBA). Discussions also included broad macroeconomic issues including fiscal and tax administration reforms, as well as poverty alleviation and external financing. In the fall of 2009 teams from all three international financial institutions (IFIs) met with President Fernández to establish a path for electricity sector reform, which eventually lead to the official reform strategy of the government. Subsequently, following the approval of the Stand-By Arrangement in November 2009, the three IFIs provided considerable external financing to help the government implement a counter-cyclical fiscal policy and address important structural reforms. The most recent meetings included participation of the IMF team in the ROC discussion of the second PASS loan due to be presented at the WB board in November 2010.

2. Successful coordination between the WB and IMF teams has resulted in significant synergies between the policies supported by both institutions. In practice this has meant a close cooperation in the design of policies in the IMF SBA and those supported by the forthcoming WB loan. Given the relevance of the electricity sector for macro balances, competitiveness and growth, it is expected that the cooperation between the IMF and the WB teams will continue in the future. The WB expertise on structural issues is well established and the IMF team is keen on cooperating with the WB to reinforce the momentum for structural reforms which are expected to support macro balance in the near to medium term. The call for cooperation has also arisen from the IMF board during its meeting for the discussion of the SBA on Nov 9, 2009, where several EDs reiterated the need for close cooperation with the WB on electricity and social issues.

3. The WB and IMF teams meet informally in Washington every fortnight, have held joint meetings in the Dominican Republic and frequently share information and data. Bi-weekly meetings are used to update country teams on developments and to discuss joint strategy in moving forward on country programs. In the course of 2010, IMF and WB missions have purposely overlapped in the Dominican Republic and the teams have had the opportunity to meet jointly with government officials, including the President of Dominican Republic, to discuss reforms of the energy sector. As a matter of routine, IMF missions have meetings with World Bank and IDB resident representatives.

4. The key macroeconomic and structural policy areas that have benefited from close coordination include:

  • Macroeconomic management (IMF). The current Stand-By Arrangement seeks to implement a gradual fiscal consolidation through 2012 to safeguard debt sustainability and anchor medium-term growth. The strategy is based on two pillars: improvements in tax administration and the rationalization of exemptions to increase tax pressure; and reform in the electricity sector to make it financially self-sustaining and reduce the transfers from the budget, freeing up resources for public investment.

  • Institutional strengthening (IMF, World Bank and IADB). Structural reforms in a number of key areas to support growth and fiscal consolidation are included in the Stand-By Arrangement.

    • Tax administration (IMF, World Bank and IADB). A mission from the Fund in early 2010 identified priorities in tax administration reform and rationalization of tax exemptions. This effort is also being supported by World Bank and IDB projects which seek to establish a medium-term fiscal analysis and budgeting framework and improve the quality and efficiency of public expenditure.

    • Prudential regulations (IMF and World Bank). Based on the joint IMF-World Bank analysis of needs identified during the FSAP-Update, performed in early 2009, the Fund program seeks to introduce new practices in risk-based prudential regulation in line with Basel core principles.

    • Inflation targeting (IMF). The authorities have presented a plan to introduce a fully-fledged inflation targeting framework for monetary policy by early 2012.

    • Reforming the energy sector (IMF, World Bank and IADB). The institutions agreed on a path of reform that will improve the functioning of the electricity sector while reducing its impact on the government budget. The WB and the IDB have focused on management issues in the electricity distribution companies (EDEs) and other issues of microeconomic efficiency. Fund staff has concentrated on the integration of the electricity sector finances in the budget, reducing untargeted transfers to the sector, and overall macroeconomic implications of the sector.

    • Capital market development (IMF, World Bank). The authorities have made significant efforts to develop the local government debt market and plan to continue work to improve the primary and secondary markets for government debt, including by reforms to the regulatory and tax frameworks and institutional arrangements for market-making and clearing.

  • Social safety net (World Bank and IADB). Multilateral development banks continue to devote a substantial portion of their portfolio to development projects in the health and education sectors, as well as sanitation and other pro-poor spending. The IMF has supported these efforts by including the expansion of the Solidaridad conditional cash transfer program and the widening the coverage of the Bonoluz program (a targeted electricity subsidy program) as structural benchmarks under the SBA.

Annex III: Relations With the World Bank Group

(As of September 30, 2010)

1. The World Bank’s total loan commitments in the Dominican Republic (DR) amounts to US$308.9 million, of which US$223.0 million remains to be disbursed. The loan portfolio consists of nine loans: seven for investment (Water and Sanitation in Tourist Areas, Early Childhood Education, Municipal Development, Health Sector Reform II, Youth and Development, Social Protection—including an additional financing of US$10 million—and Energy Distribution); one for Technical Assistance (Financial Sector) and an Emergency Recovery Loan.

2. The Municipal Development Project (US20 million) has been approved by the Lower Chamber and is expected to become effective in the first week of November. The second programmatic DPL (US$150 million) of the Performance and Accountability in the Social Sectors series will be negotiated in October and should be disbursed in the last two months of the year.

3. Portfolio performance in the Dominican Republic has improved substantially in terms of effectiveness delays and disbarment rates since February 2009. The portfolio review held form March 10-12, 2010, indicated a 35 percent decrease (on average) in effectiveness delays and an increase of almost a factor of four (on average) in the disbursement rate. Effectiveness delays went from 13.7 months to 8.9 months between February 2009 and March 2010. Disbursement rates went from 4.9 percent to 19.3 percent in the same period of time.

4. Both indicators also showed relative improvements when compare to LAC and the Caribbean region. In February 2009, effectiveness delays (on average) in DR were as twice as high as those of the LAC Region. Today, they are almost the same (DR: 8.9 months; LAC: 13.7 months). The same was also truth for the disbursement rate when compare to the Caribbean region. In February 2009, DR disbursement rate was as twice as low as the Caribbean (10.7 percent).

5. A comprehensive set of analytical studies has been completed in recent years. In FY 2009, a Growth Study CEM (Country Economic Memorandum), an update of the Financial Sector Assessment Program, a new Country Partnership Strategy (FY09-FY13), an update of the Report of the Observance of Standards and Codes (ROSC) in Accounting and Auditing and a set of Policy Notes that fed the National Development Strategy. The Bank is preparing several NLTS targeting: (i) social sectors, (ii) competitiveness, (iii) quality of public expenditures and (iv) risk management and climate change.

A. IBRD and IDA Operations (as of September 30, 2010)(In millions of U.S. dollars)
Active ProjectsSectorCommitmentsDisbursementsUndisbursed
DO(APLI) Water and sanitation in tourist areasWater27.51.126.4
DO-Early childhood education projectEducation42.035.76.3
DO Financial sector technical assistanceEnergy12.56.75.8
DO Electricity distribution and rehabilitationEnergy42.00.441.6
DO Social sectors investment programSocial Protection29.43.925.5
DO Municipal DevelopmentAgriculture and rural development20.00.020.0
DO Youth development projectSocial Protection25.012.312.7
DO (APL2) Health reform, IIHealth30.51.928.6
DO Emergency recovery and disaster managementEmergency80.023.956.1
Source: World Bank
Source: World Bank
B. IFC Operations (as of September 30, 2010)(In millions of U.S. dollars)
Source: World Bank
Source: World Bank
C. MIGA (as of September 30, 2010)(In millions of U.S. dollars)
Outstanding gross guarantees78.7157.3127.9126.099.6107.6
Source: World Bank
Source: World Bank
D. IBRD and IDA Loan Transactions (fiscal year)(In millions of U.S. dollars)
Net lending2.53.932.2-20.4298.9-10.7
Valuation adjustments
Debt outstanding393.0402.6435.2447.1748.6737.6
Interest and charges19.921.122.623.820.714.4
Source: World Bank
Source: World Bank
Annex IV: Relations With the Inter-American Development Bank

(As of September 30, 2010)

1. In 2010, the IDB estimates making disbursements for US$411 million, of which, US$200.00 million correspond to the Fiscal Strengthening Program. There will also be a $110.0 million disbursement from the Program to Support Competitiveness Policy-Phase II.

Dominican Republic: Relations with the Inter-American Development Bank

(In millions of U.S. dollars)

A. Operations
SectorCommitmentsDisbursedUndisbursed Amounts
Science and Technology---
Urban Dev. And Housing10.07.32.7
Labor Market, Training, and Transfers---
State Modernization541.5306.0235.5
Private Sector Development11.010.20.8
Disaster Prevention5.00.64.4
Social Investment80.074.35.7
B. Loan Transactions
Net Lending96.9133.436.3190.368.742.864.1-31.5351.3316.3
Interests and Charges36.040.948.
Subscriptions and Contributions0.
Net Transfer60.292.0-12.1134.38.9-17.9-128.4-87.6298.2267.0

2. For 2010, the Bank has been working on the preparation of five loans in the areas of education (US$ 50 million), agricultural innovation (US$ 30 million), water and sanitation (US$ 35 million), support competitiveness policy (US$ 120 million) and social protection (US$100 million). On September 27th, the Bank approved the Country Strategy for the period 2010–13.

The World Bank country director is Ms. Yvonne Tsikata and the IMF mission chief is Mr. Alejandro Santos. The list of staff members attending regular meetings include: Ali Alichi (IMF), Pedro Antmann (WB), Juliana Araujo (IMF), Geoffrey Bannister (IMF), Philippe Benoit (WB), Laura Berman (WB), Maurizio Bussolo (WB), Juan Miguel Cayo (WB), Rodrigo Chaves (WB), Carine Clert (WB), Ernesto Crivelli (IMF), Raphael Espinoza (IMF), Kenji Hosono (IMF), David Reinstein (WB), and Roby Senderowitsch (WB).

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