IMF Letter of Intent

[NewsWhore]

The Fernandez administration has published the Letter of Intent for the second and third review under the Stand-By Arrangement with the International Monetary Fund (IMF). The document is an overview of monetary policy to be implemented in 2010 and 2011 and is scheduled to be reviewed by the IMF board on 20 October. The economic and monetary authorities say that the country has met the quantitative performance criteria and structural reference indicators of the program as of March and June 2010. Tax revenues, nevertheless, were below expectations, and the electricity subsidy is greater than expected. For the rest of 2010 the government commits to limit arrears with power generators and the deficit of the electricity sector to US$600 million. It announces that for 2011 the Ministry of Hacienda would decide on who gets tax exemptions, which would no longer be automatically awarded as per law. The government also commits to improvements in taxation levels. The goal is to reach 15% taxation by 2013. The IMF Letter commits the government to increase taxation levels by 0.1% to 13.3% in 2011.
In the Letter, the DR commits to increase tax revenues by 1.5% of the GDP between 2009 and 2012 and reduce the electricity subsidy by 1% of GDP during the same period. GDP is expected to grow 5% this year, with inflation between 6-7%.
During the press conference, Hacienda Minister Vicente Bengoa denied the government was using the government bank BanReservas to camouflage loans to government contractors, as reported in Hoy.
See the text of the Letter of Intent at www.bancentral.gov.do/noticias/avisos/fmi2010-10-14.pdf (http://www.bancentral.gov.do/noticias/avisos/fmi2010-10-14.pdf)

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