This record is a partial extract of the original cable. The full text of the original cable is not available.
UNCLAS SANTO DOMINGO 007344
DEPT FOR WHA/CAR, WHA/EPSC, EB/OMA, EB/IFD; TREASURY FOR
NLEE, RTOLOUI, LLAMONICA
E.O. 12958: N/A
TAGS: DR ECON EFIN
SUBJECT: DOMINICAN AUTHORITIES REQUEST USG LOAN OF 950M FOR
CENTRAL BANK DEBT RESTRUCTURING
1. Following is an unofficial Embassy translation of one of
two letters from Dominican authorities to Treasury Under
Secretary Taylor requesting USG assistance, received the
first week of December. Copies were faxed directly to
Treasury and originals have been pouched.
Technical Secretariat of the Presidency
No. 1831 December 5, 2003
Dear Mr. Taylor:
We thank you for the interest that the Government of the
United States has shown to help us to confront the difficult
situation the Dominican economy is going through, after the
fraudulent failure of the largest bank in the system and the
irregularities at two other banking institutions. As you
know, the rescue of the savers (depositors) by the Central
Bank has had a cost of approximately 20 percent of GDP.
To compensate for credit granted, the Central Bank had to
emit during this year certificates that reached by the month
of September the sum of RD$61 billion, that is to say, around
US$1.97 billion (at the prevailing rate in that month) which
represents for the year 2004 a quasi-fiscal deficit above 4.0
percent of GDP.
As we have opportunity to indicate to you on your recent trip
to our country, we are close to reaching an accord with the
International Monetary Fund over the measures that we must
apply to confront this difficult situation, within which is
found a strong fiscal adjustment to bring the 2004 National
Budget into surplus, that compensates part of the
qausi-fiscal deficit of the Central Bank.
Nevertheless, in the Program to which we are agreeing with
the IMF, the other part of the quasi- fiscal deficit of the
Central Bank will be financed through the issuance of new
certificates, since for the moment we cannot commit to
totally finance this deficit through the National Budget.
That is to say, the (quasi-fiscal deficit) is larger than
anticipated in the Program.
As such, even though the Program for 2004 agreed in principle
with the IMF is financed, it worries us that as of now the
said financing will be covered through an increase in the
Central Bank certificates. By doing this, we are creating a
snowball. The problem will get worse with time, and, in
doing so, the fiscal sacrifice that we will have to make in
future years will be ever greater.
For these reasons, we repeat our request that the United
States Government help us structure a long-term international
economic assistance program in the amount of US$950 million.
This would allow us to refinance 50 percent of the initial
amount of the Central Bank certificates, and thus allow the
fiscal adjustment to be spread out over a longer period of
time. This would permit a quick recovery of the national
In absence of this long term external financial help, the
fiscal adjustment that the Dominican Government would have to
make in the coming years would be of such magnitude that
would provoke serious economic, social and political
Rafael Calderon Carlos Despradel
Secretary of State for Finance Technical Secretary of