The Executive Board of the International Monetary Fund (IMF) approved the Dominican Republic’s request for emergency financial assistance under the Rapid Financing Instrument (RFI) equivalent to SDR 477.4 million (about US$650 million, or 100 percent of quota) to meet the urgent balance of payment needs stemming from the outbreak of the COVID-19 pandemic.

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 mobilize for essential COVID-19-related health expenditure and support to the vulnerable population.

The authorities are also seeking support from other multilateral institutions.

To absorb the macroeconomic shock, the Dominican authorities are appropriately implementing a package of fiscal, macroprudential and supervisory measures along with monetary easing to sustain economic activity during the crisis.

The government of the Dominican Republic increased healthcare spending to face the pandemic and created a social assistance program titled Quédate en casa (Stay at Home) to boost transfers to the poor.

Following the Executive Board discussion, Mr. Tao Zhang, Deputy Managing Director and Chair, made the following statement:

“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.

“Macroeconomic and financial policies have been accommodative in response to the pandemic.

“The temporary fiscal measures to accommodate higher public healthcare spending and targeted transfers to the most vulnerable are appropriate.

“Once the pandemic recedes, it will be important to return to a gradual fiscal consolidation, including establishing a medium-term fiscal framework, to ensure that the public debt-to-GDP ratio remains sustainable and on a declining path.

“Monetary and macroprudential policies have been eased appropriately, including a reduction of the statutory reserve requirement and provision of additional liquidity to the banking system.

“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 emergency assistance under the Rapid Financing Instrument will help provide the much-needed resources to address the urgent balance of payments needs and support essential COVID-19-related health expenditure.

“The support of other international financial institutions and development partners would be crucial to close the remaining financing gaps, ease the adjustment burden, and preserve the Dominican Republic’s dynamic economic growth.”