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Government requests waivers from IMF
posted on: Mar 29 2010 10:25 by Royston. Viewed 533 times.
The Dominican government requested two waivers from the International Monetary Fund (IMF) for not achieving two of the targets proposed under the standby agreement in October 2009 and approved in November. Officials submitted the letter of intent for the first program review that should be done in late February.
Also, according to the letter of intent submitted to the IMF, the Government will apply a more flexible pricing mechanism for electricity rates in order to adopt a "technology fee" (which will cover the cost of generation, transmission and distribution, as well as the loss of efficiency in the system).
According to the letter addressed to Dominique Strauss-Kahn, IMF managing director, the authorities say there are early signs of improvement in the economy, but also recognize that external and internal risks to the recovery remain high.
The official communication, dated March 16, explains that most targets are met, but there was a temporary diversion in a fiscal goal and a "slight delay" in settling domestic arrears:
Regarding the economy, the letter said that the government achieved the goal of the overall balance of the consolidated public sector, but there was a deviation of about 0.4% of GDP in the deficit of central government, which is mainly explained by the increase in transfers to the Dominican Corporation of State Electrical Companies (CDEEE) which had faced higher than expected costs that were partially related to oil prices. Increases, the government says, that were not passed on to customers.
Some of the increased expenses were offset by higher profits from Refidomsa, the Dominican gasoline refinery but these were received too late to be included in last years financial statement..
"On the basis of the corrective actions taken to achieve our goals, we request a waiver for the breach of two performance criteria, one on the fiscal balance of central government, and the other on nonaccrual and settlement of arrears to the electricity generating companies.
The letter explains that the performance criterion on external arrears accumulation was not fulfilled, because the CDEEE ended 2009 with arrears amounting to US$100 million from electricity generators, and the program allows a delay of 45 days to pay bills due. He stressed, however, that these arrears were cleared last week and that the government is now current on their obligations to the generators.
Dominican authorities also asked the IMF for marginal changes to the macroeconomic program for 2010 to adapt to changing regional and international realities.
Regarding improvements in billing, the electricity distribution companies are committed to increasing the number of customers covered by about one third, from 1.4 million in 2009 to 1.9 million at the end of September 2010 .
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