Sunday, June 4, 2023

IMF: recapitalization of the Central Bank will deepen its autonomy

The mission of International Monetary Fund (IMF), which visited the Dominican Republic in the framework of the review established in Article IV, considers that the recapitalization of the central bank (BCRD) will deepen its autonomy, while a strategy to continue deepening the foreign exchange market and expanding the use of hedging mechanisms will also underpin the framework of inflation.

In the short term, he stresses, policy priorities should continue to seek to ensure that inflation returns to the target level, maintain the downward trajectory of public debt while avoiding growth moderation and safeguarding the financial stability.

The IMF’s concern is regarding the high deficit that the Central Bank has been dragging since the financial crisis of 2003, as a result of which the Law 16707 for recapitalization. At the time of enactment of the legislation, it was recognized that, based on its audited financial statements as of December 31, 2005, the Central Bank presented accumulated losses of RD$202,140.6 million, of which RD$39,535.7 million (19.6%) was generated from its creation until December 31, 2002. The remainder, establishes the legislative piece, was after the banking crisis of 2003, amounting to RD$162,604.9 million, equivalent to 80.4%.

In the short term, according to the IMF, policy priorities must remain focused on continuing to guarantee macroeconomic and financial stability. In the medium term, it highlights the need for further improvements in policy frameworks, the business climate, governance and social safety nets because they can foster more inclusive growth.

The mission, which was chaired by Fernández-Corugedo, held meetings with the governor of the Central Bank, Héctor Valdez Albizu; the Minister of Finance, José Manuel Vicente Dubocq, and other main officials and representatives of the civil society and the private sector. The mission expressed its gratitude to the authorities for their hospitality, their cooperation and for the open and frank dialogue.

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