The International Monetary Fund (IMF) has approved US$650 million under the Rapid Financing Instrument (RFI) to fulfil the request of the Dominican Republic for emergency financial assistance.
The funds from the RFI represents 100 per cent of the Dominican Republic’s quota and the Spanish-speaking country will use the proceeds to meet urgent balance of payment needs stemming from the outbreak of the COVID-19 pandemic.
According to the IMF, “The pandemic has significantly weakened the country’s macroeconomic outlook for 2020 and created financing needs that require additional support. The RFI provides timely resources to the authorities which they intend to mobilise for essential COVID-19-related health expenditure and support to the vulnerable population. The authorities are also seeking support from other multilateral institutions.”
In the meantime, the Dominican Republic Government has been implementing monetary and fiscal measures to absorb macroeconomic shocks and sustain the country’s economic lifeline.
In addition, the Government has increased its expenditure allocation to health care in a bid control and contain the pandemic while creating social programmes to protect the most vulnerable.
“The pandemic has significantly weakened the [Dominican Republic’s] macroeconomic outlook for 2020 and created financing needs that require additional support.”— Internaional Monetary Fund
In a statement, following the decision of the IMF’s executive board to approve the funds, IMF Deputy Managing Director Tao Zhang noted, “The severity of the global COVID-19 shock has disrupted the Dominican Republic’s economy and created urgent balance of payments and fiscal financing needs. The authorities swiftly implemented measures to contain and mitigate the spread of the pandemic. With uncertainties surrounding the duration and spread of the pandemic, the economic fallout could intensify further if containment measures have to be extended.”
He noted that the IMF welcomes short-term measures taken by Caribbean country’s Government and deems them to be “appropriate”.
Tao advised, however, that the country will eventually need to return to creating medium-term fiscal programmes, after the pandemic has slowed, which will ensure its debt-to-GDP ratio remains sustainable and on a downward trajectory.
“As circumstances evolve, policy responses would need to be continually recalibrated. Greater exchange rate flexibility would be necessary as a shock absorber and to preserve international reserves,” the IMF deputy managing director stated.
Still, he said that the Dominican Republic will also need the assistance of other international financial institutions and development partners “to close the remaining financing gaps, ease the adjustment burden, and preserve the Dominican Republic’s dynamic economic growth”.