Dominican Republic and Haiti: Country Studies

Dominican Republic: The Economy
The unstable economic situation compelled the administration
of Salvador Jorge Blanco (1982-86) to enter into a series
of negotiations with the IMF and to begin restructuring government
economic policies. In 1983 the government signed a
three-year Extended Fund Facility that called for lower fiscal
deficits, tighter credit policies, and other austerity measures.
This program paved the way for the first in a series of rescheduling
agreements with foreign creditors. Although the reschedulings
slowed the pace of repayments, the higher consumer
prices that resulted from the agreements sparked food riots in
April 1984. The government subsequently suspended the 1983
agreements.
In April 1985, however, the Jorge Blanco administration
signed a new one-year IMF Standby Agreement that included
more austerity measures and the floating of the Dominican
Republic peso in relation to the United States dollar. The oneyear
loan also enabled the government to reschedule commercial
bank and Paris Club (see Glossary) debts. However, repayments
were abruptly suspended in 1986 because they were
considered too high. The ensuing civil disorders and serious
differences over the pace of reforms sealed the end of the
agreement prematurely, and the electorate ousted the Jorge
Blanco administration in favor of former president Balaguer,
who evoked memories of the economic growth of the 1970s
and was determined not to seek help from the IMF.
The Balaguer approach was to refuse to negotiate with the
IMF in order to avoid the austere economic conditions its
agreements usually entailed. Instead, Balaguer tried to revive
the economy by initiating a large public works construction
program during his 1986-90 tenure. The economy expanded
rapidly in 1987, but then contracted sharply in 1988—mainly as
a result of the government's spending patterns. High inflation
and currency devaluation, coupled with serious problems with
such basic services as transportation, electricity, and water, crippled
Balaguer's reform program. His expansionary fiscal policies
also fueled unprecedented inflation, causing prices to rise
60 percent in 1988 alone, which took a severe toll on the
poorer segments of the population. His continued devaluation
of the peso may have benefited the country's burgeoning
export sector and tourist trade—but at the expense of disadvantaged
Dominicans earning fixed salaries. By the late 1980s,
the external debt—US$4 billion—was almost double what it
had been in 1980. Finally, the government's payment problems
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