Dominican Republic peso slides, threatening oil supply

Saturday, January 17, 2004

SANTO DOMINGO, Dominican Republic: The Dominican Republic's currency plumbed new depths against the dollar on Friday, threatening the supply of crude oil to the economically troubled Caribbean nation, government officials and business people said.

According to Reuters, demand for U.S. currency drove the peso to an unprecedented rate of 50 per dollar, and drained the supply of greenbacks to such an extent that the Dominican Petroleum Refinery acknowledged having trouble finding enough hard currency to pay for oil imports.

The National Gasoline Retailers Association said the refinery, which imports about $2.2 billion in crude a year, was rationing deliveries and warned that pumps across the country of nearly nine million people could run dry.

The depreciation of the Dominican currency has accelerated since the government earlier this month abandoned efforts to force the exchange rate down to 30 pesos per dollar through a military-dominated council and other measures.

President Hipolito Mejia, under pressure over a deep economic slump that followed the collapse last year of a major bank and over his own plans to seek re-election this May, said the currency controls ended at the insistence of the International Monetary Fund.

The Dominican Republic has agreed a $600 million standby loan with the IMF, to help it overcome the fallout from the meltdown of Baninter bank, and expects the first payments to be made toward the end of the month.

A weak peso feeds through to more expensive imports, such as fuel, and higher inflation, and the currency's fall in the past year has contributed to growing public discontent in what was once one of the fastest growing countries in the region.

Officials at the Ministry of Industry and Trade told Reuters that gasoline and diesel prices would rise 5.6 percent and 7 percent respectively over the weekend. 

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