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���������ֳ�-New York/London-August 11, 2003: ���������ֳ�, the international rating agency, today has assigned a 'B+' rating to foreign and local currency obligations of the Dominican Republic. The Rating Outlook is Stable.

In spite of a long period of strong economic growth, which has resulted in comparatively strong external and public sector debt indicators, the rating reflects ���������ֳ�'s concerns about a deterioration of the financial system's operating environment, evidenced by the collapse of the second largest private commercial bank, Banco Intercontinental (BanInter) as a result of fraudulent transactions. The situation remains fragile, as two other commercial banks have required liquidity assistance. Although other banks in the system have benefited from a flight to quality up until now, ���������ֳ� is concerned that in the event of the discovery of additional problems, the potential for a further loss of confidence in the banking system remains, requiring additional government support. Thus far, the BanInter failure has had serious ramifications to the economy, contributing to currency weakness, higher inflation and a recession.

The government estimates that the central bank has provided assistance to BanInter equivalent to 13.5% of GDP. The authorities have since dissolved BanInter and are in the process of recovering some of its cost. They have successfully sold a portion of BanInter's assets to an international bank. Of the other two banks that have experienced problems, one has been sold and the other bank is being restructured and recapitalized.

While the magnitude of this shock will affect the economy for some time, ���������ֳ� views positively the recent announcement by the IMF that it will consider the approval of the Dominican Republic's request for support of its economic and financial program through a 24-month, Stand-By Arrangement amounting to SDR 437.8 million (US$618 million) at the end of August. The letter of intent submitted to the IMF includes a reinforced strategy for dealing with the banking crisis and measures to offset some of the costs. The program also includes measures to improve public finances and ensure debt sustainability, as well as establish the framework to support a flexible exchange rate regime. After the agreement is approved with the IMF, the World Bank and the Inter-American Development Bank are expected to provide an additional US$600 million in assistance combined.

Although public sector and external debt (including private sector) are expected to increase to 47% of GDP and 40% of GDP, respectively, by the end of 2003, this is still low relative to other sovereigns in the 'B' rating category. In addition, debt service is low relative to peers as more than 70% of the debt is due to multilateral and bilateral creditors and benefits from concessional terms. ���������ֳ� estimates that the public sector's financing requirement will reach 7.5% of GDP in 2003.

Nevertheless, the recent problems with BanInter underscore the importance of pressing ahead with a comprehensive reform agenda, including enhancing economic policy transparency and improving governance. The proposed IMF agreement addresses these issues, among others, and it appears reasonable that the government should be able to successfully implement its program as it has a majority in Congress. However, this could change following the May 2003 presidential elections as the opposition has a significant lead in the polls.

���������ֳ� will closely monitor developments in the financial system and the possible impact on the sovereign's creditworthiness in the months ahead. Approval and successful implementation of an IMF program would be positive for the sovereign's creditworthiness. Conversely, continued financial system weakness, combined with a lack of progress on the reform front and pressure on the Dominican Republic's modest foreign exchange reserves, could have a negative impact on the country's sovereign ratings going forward.

Contact: Theresa Paiz Fredel +1-212-908-0534 or Shelly Shetty +1-212-908-0324, New York.

Media Relations: Matt Burkhard +1-212-908-0540, New York.