Of all the indicators that make it possible to determine a country’s economic dynamics, the balance of payments is one of the most relevant.
It is an accounting summary that shows, in broad terms, the total income of a nation with the rest of the world, as well as the payments made for imports and exports of goods, services and capital.
When a country’s international payments exceed its revenues, it is referred to as a balance of payments deficit, which forces it to seek financing to avoid macroeconomic imbalances. This is different from the fiscal deficit, where the State borrows to cover the difference between its revenues and its expenditures in the budget.
Since its creation on December 28, 1945, the International Monetary Fund (IMF) has been characterized as a multilateral organization that makes economic resources available to its member countries to cushion these imbalances in the balance of payments, under the condition that fiscal policies are implemented to prevent future deficits.
As a founding member of this organization, the Dominican Republic has signed a total of 10 agreements for access to credits through the IMF, which has allowed it to withdraw 2,099.9 million in Special Drawing Rights (SDR), equivalent to US$3,043.7 million.
These withdrawals represent 70.9% of the total amount agreed with the IMF, estimated at SDR 3,004.5 million or US$4,290.6 million.
The country’s most recent agreement with the Fund was finalized on April 29, 2020, with the approval and withdrawal of more than US$650 million under a rapid financing facility (RFI), “to meet urgent balance of payments needs arising from the outbreak of the covid-19 pandemic”.
This loan constitutes the dollar equivalent of the total quota paid by the Dominican Republic to the IMF as a member (SDR 450 million), and is close to the US$665.7 million withdrawn in 2005 as a result of the shortfall left by the 2003 financial crisis.
“The pandemic has significantly weakened the country’s macroeconomic outlook for 2020 and created financing needs that require additional support. The IFR provides timely resources to the authorities who intend to use it for essential covid-19-related health expenditures and to support the vulnerable population,” notes an IMF statement reporting on the arrangement.
This is the country’s first drawdown of IMF funds since the 2009 global financial crisis. The government, headed at that time by Leonel Fernández, made a three-year agreement with the organization that guaranteed resources for the equivalent of US$1,754.1 million to increase the State’s fiscal response to the effects of the global slowdown on the Dominican economy.
This figure is the highest amount in SDRs approved by the IMF for the Dominican Republic, representing 40.8% of the total amounts agreed, and of which 70% of the funds were withdrawn, for some US$1,227.9 million, an amount whose payments were extended until 2016.