Dominican Republic Overview

LENDING

Dominican Republic: Commitments by Fiscal Year (in millions of dollars)*

*Amounts include IBRD and IDA commitments

Context

For the last two decades, the Dominican Republic (DR) has been one of the fastest growing economies with GDP growth averaging around 5.8 percent per year between 1991 and 2012. Despite exceptional growth performance, poverty is higher today than in 2000. Poverty soared from 32 percent in 2000 to almost 50 percent in 2004 following the 2003 financial and economic crisis, before declining gradually to 40 percent by 2011.

on the other hand the DR has experienced a sharp fall in exports relative to GDP since 2000 and its ranking in the World Economic Forum’s Global Competitiveness Index went down to 105th out of 144 countries in 2013. In addition, the country faces the challenge of sustaining economic growth while making it more inclusive.

Challenges for inclusive growth

  • Improving the investment climate to boost entrepreneurship and jobs creation while strengthening access of the poor to labor markets: Growing sectors such as tourism, manufacturing, telecommunication and financial services have not generated as many jobs as envisaged initially. Instead most of the job created has been low skilled jobs in the informal sector. Real wages declined by 27 percent in the last ten years, even as labor productivity rose. Improving competition policy and the investment climate would generate more and better jobs.
  • Promote equitable, efficient and sustainable fiscal policy: The current tax system is hampered by low revenue collection, and relies heavily on indirect taxes. Making the tax system more progressive would allow more redistribution, as well as more investments in essential public services such as water and sanitation, quality education and health for the most vulnerable.
  • Improve public service delivery to reach the poor:  Despite significant improvements in service delivery, access to basic public services remains unequal and of low quality, particularly for the poor. Better program targeting, monitoring and evaluation, along with incentives such as performance-based budgeting could help improve service delivery.
Strategy

The World Bank Group’s strategy is aligned with the Dominican Republic’s National Development Strategy for 2030, which establishes a clear vision for an inclusive, prosperous and democratic country through institutional, productive, social and sustainable development.

The World Bank’s Country Partnership Strategy for 2010-2013 emphasized protecting the poor while enhancing competitiveness and strengthening public institutions for performance accountability. Its four strategic objectives were to:

  • Strengthen social cohesion and improve access to and quality of social services,
  • Promote competitiveness in a sustainable and resilient economic environment,
  • Enhance quality of public expenditures and institutional development, and
  • Build capacity and constituencies for reform.

A new Country Partnership Strategy is under preparation for 2015-18.  Through the initial rounds of consultations, including a wide range of stakeholders, the World Bank Group expects to support the Authorities in strengthening the foundation for sustained and inclusive growth and employment, as well as in reducing vulnerabilities and promoting social inclusion. 

Results would be pursued in five key areas:

  • Enhancing accountability and the management of public resources;
  • Enhancing the dynamism of the private sector and improving the investment climate;
  • Providing access to efficient and reliable energy, ICT and other infrastructure services;
  • Strengthening education, health and water and sanitation systems for a healthier and better educated population; and,
  • Strengthening social protection and DRM systems to reduce vulnerability to economic shocks and natural disasters. 

IFC will seek to support investments in the DR in line with its overall Caribbean strategy, which focuses on financial inclusion, competitiveness and regional integration, and climate change, with innovation and crisis resilience as cross-cutting priorities.

The World Bank’s current portfolio in the DR includes five projects, totaling US$207.4 million in net commitments. The Trust Fund portfolio comprises 12 grants for a total of $3.1 million. Activities are focused on supporting health reform, social protection improvement, municipal development, emergency recovery and disaster management, and water supply and sanitation in tourist areas.

The International Finance Corporation’s (IFC) committed portfolio as of February 2014 comprises US$298 million across 21 active projects.  It is the second-largest IFC program in the Caribbean, with new commitments in FY13 reaching a record high of US$164 million.  Flagship transactions include the issuance of the “Taino Bond”, a first US$10 million equivalent local currency bond issue, used to channel resources to mortgage loans to low-income households and loans to SMEs.  The overall focus of the portfolio is on energy (renewables), financial inclusion and infrastructure. 

This support to the private sector is complemented by a  US$107.6 million guarantee by the Multilateral Investment Guarantee Agency (MIGA). The guarantee is for a toll road to the Northeast of the DR, covering a US$14 million equity investment and US$162 million bond issue for MIGA’s client, Autopistas del Nordeste.

 

Results

Important results have been achieved during the past several years in Government projects financed by the World Bank.  These include:

1. Social Services

2. Competitiveness

3. Public Expenditure Quality

4. Creation of Alliances for Reform

Citizen Observatory established to monitor the execution of the national budget

 

LENDING

Dominican Republic: Commitments by Fiscal Year (in millions of dollars)*

*Amounts include IBRD and IDA commitments