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Dominican Republic gets $500 million loan from the IDB

<?xml:namespace prefix = st2 />Dominican Republic will receive a $500 million emergency loan from the Inter-American Development Bank (IDB) to support public spending in core social programs amid the economic slowdown triggered by the world financial crisis.

The loan, approved today by the IDB’s board of directors, will also finance the country’s plan to streamline energy subsidies and improve financial management of power companies, a move that will help reduce the fiscal deficit.

The Bank’s support will allow the Dominican Republic to achieve fiscal sustainability and ensure the fulfillment of the government’s commitment to protect the well-being of disadvantaged groups after the global economic downturn sharply reduced demand for tourism services, exports, foreign investment, and remittances.

The country will use the IDB financing to increase spending on targeted subsidies, education, health care, and the Solidarity Program, a conditional cash transfer plan for the poor.

In addition, the government plans to use the loan to better target payment of liquefied petroleum gas subsidies and streamline electricity subsidies. These last two measures will ensure the government benefits the poorest with the energy subsidies while reducing their cost to the country.

The IDB loan, which matures in five years, will be disbursed in 18 months. The loan has a grace period of three years and its interest rate is based on Libor.