IMF: Distributor buyback cost govt. US$693mn

An International Monetary Fund (IMF) report has concluded that the Dominican Republic's decision to buy back Spanish power company Union Fenosa's 50% stakes in local distributors Edesur and Edenorte on October 1 has increased public sector debt by US$693mn to a record US$7.69bn, local newspaper Hoy reported. For the sector to remain viable, rates must increase rapidly to an average of no less than US$0.12/kWh by February next year, according to the IMF. After that, rates should continue to rise 3% a month in dollar terms to reach US$0.14/kWh as soon as possible. The report also recommends gradually eliminating subsidies currently estimated to cost the government US$7.5mn a month, starting by cutting those for consumption of over 500kW/h in January 2004, followed by consumption of over 300kW/h from March and then of over 200kW/h from June. The government and the IMF are negotiating this week over a US$600mn two-year stand-by loan which was suspended as a result of the Fenosa buyback, which took the country's debt above the US$7bn agreed with the IMF, Reuters reported.