The central bank claims that the restarting of the IMF programme, and the use of Fund money to meet an interest payment on a foreign bond (albeit late) in mid-February, should help to restore confidence in the economy. The Fund produced US$66m in fresh money on 11 February after the government pushed a financial reform law through congress.
The January inflation figure, which showed a jump of 9.23%, indicates that there is little confidence about. The main reason for the jump was the collapse of the peso. Given that presidential elections are scheduled for May, and that President Hipólito Mejía is trailing badly in the opinion polls but remains determined to cling to power, the economic situation is likely to deteriorate. Bulls point out, however, that the US is lining up behind the government and that the government is still servicing its debts. It paid out US$74m on 12 February to service debts. They also note that the peso has recovered from 55 against the dollar to 44 following the IMF disbursement.
One key test for the currency will be what happens in the 48-hour general strike, promised by the opposition Coordinadora Nacional de Organizaciones Populares (CNOP) for March. The CNOP wants an improvement in the supply of electricity (power cuts of up to 15 hours a day are now the rule, even for prosperous parts of Santo Domingo), lower fuel prices and a general wage increase. A two-day strike called by the CNOP at the end of January left six dead.
The main reason for the power cuts is the refusal of the distribution companies, now owned by the state, to pay the generating companies. The distributors are reckoned to owe the generators US$400m. The government said that it will not take on these debts: the generators say that they will not supply power until they are paid.
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