Dominican Republic COVID-19 Crisis Response Support

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This single-tranche US100 million dollars Development Policy Loan (DPL) will support the efforts of the Government of the Dominican Republic (GoDR) to limit the adverse impact of the Coronavirus Disease 2019 (COVID-19) pandemic on its hard-won gains in poverty reduction and shared prosperity. The GoDR is responding to the short-term needs in the wake of the pandemic and the associated economic slowdown with a program focused on public health, social spending, and support to the private sector. The GoDR’s program ramps up health spending and service delivery, financing for coronavirus tests, ensuring that hospitals have the necessary equipment and supplies for in-patient care, and providing tax benefits to the health sector. It also includes a substantial expansion of social support, by scaling up existing programs to deliver emergency cash transfers to vulnerable households and laid-off workers and developing new programs to protect independent workers. In addition, it sets the stage for the recovery by supporting the private sector through tax breaks and liquidity support provided through the banking system. The operation supports the GoDR as it strives to cope with the devastating impact of the COVID-19 pandemic by: (i) strengthening the capacity of the national healthcare system, (ii) providing income support to poor and vulnerable households, and (iii) maintaining liquidity for firms. Given the profound global economic ramifications of COVID-19, as well as the pervasive uncertainty surrounding the resumption of domestic economic activity, overall risks of the DPL are substantial. The length and severity of the economic impact of COVID-19, both globally and within the DR, will directly affect the DR’s short- and medium-term growth prospects. These factors will greatly influence the timing, scope, and pace of the post-crisis recovery. While the government has adequate current and contingent resources to sustain supportive fiscal and monetary policies, if downside risks materialize and persist on both fronts, the impact of the crisis may exceed the government’s fiscal capacity to support households and firms.