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20 October 2005
Dominican Republic Economic Prospects Reported Improving

International Monetary Fund praises Dominican Republic's economic policy

By Eric Green
Washington File Staff Writer

Washington -- Economic conditions in the Dominican Republic are improving, says the International Monetary Fund (IMF).

In an October 18 statement, the IMF said that the Dominican leadership's "strong macroeconomic policies" have produced rapid economic growth, low inflation, higher international reserves and an improved fiscal balance.

The IMF said the Dominican Republic's central bank has been successful in quickly bringing down inflation and restoring the credibility of monetary policy. The central bank needs to continue improving monetary policy management and communication, the IMF said.

Dominican authorities have made significant progress in restructuring the country's external debt "with minimum disruption to market relationships." The government's "market-friendly approach in conducting the successful debt exchange and in discussing debt restructuring with private creditors will help promote renewed access to international capital markets," said the IMF.

Challenges for the Dominican Republic in 2006, the IMF said, include the introduction of reforms to address a wide range of "governance and transparency weaknesses" in the fiscal, monetary and banking sectors. The IMF said that plans to strengthen the country's central bank will improve the government's ability to conduct an independent monetary policy aimed at keeping inflation low.

The IMF had reported in February that the Dominican Republic was emerging from an economic crisis caused by the uncovering of a banking-sector fraud in 2003-2004. That fraud, together with the failure to implement key elements of an IMF-supported program, was said to have undermined public confidence and set off a "vicious circle of economic deterioration." The IMF's February statement is available on the organization’s Web site.

U.S. Trade Representative Rob Portman has said that the Dominican Republic's passage on September 6 of a free-trade agreement with the United States offers "new hope for easing poverty, fostering development, and strengthening democracy." The trade pact, which also includes five Central American nations, is about "strengthening the rule of law and improving transparency to counter corruption," said Portman. (See related article.)

The White House said in a July 15 fact sheet that the trade pact -- known as CAFTA-DR -- will help continue the transformation of the Americas into a more peaceful, democratic, and prosperous region.

By bringing economic growth to Central America and the Dominican Republic, CAFTA-DR "will boost demand for U.S. goods, reduce poverty, discourage illegal immigration, raise working standards, and deliver hope and opportunity to people who have made the choice for freedom," said the White House. (See fact sheet.)

For additional information on the free-trade agreement, see CAFTA-DR.

(The Washington File is a product of the Bureau of International Information Programs, U.S. Department of State. Web site: http://usinfo.state.gov)