The Central Bank of the Dominican Republic (BCRD) announced in a statement that the Monetary Board authorized the creation of a Rapid Liquidity Facility (FLR) worth RD$60 billion to enable financial institutions to channel loans to businesses and households located in different regions of the country.
Of this amount, approximately RD$40 billion will be allocated to loans for all productive sectors at rates no higher than 8.0% annually, with special emphasis on the health sector and its needs for purchasing equipment, supplies, medicines, and laboratory materials, paying for medical treatments, and improving the physical and human capital infrastructure of medical centers.
Likewise, the new regulation from the Monetary and Financial Authority pays special attention to the financing needs of key economic sectors such as tourism, exports, construction, manufacturing, and agricultural activity, which have been directly affected by COVID-19.
Additionally, the Rapid Liquidity Facility (FLR) will provide RD1T4T10 billion to be channeled to Dominican households through personal and consumer loans. Similarly, RD1T4T5 billion will be made available to all financial intermediation entities, to be channeled to micro, small, and medium-sized enterprises for debt refinancing and for the approval of new lines of credit.
Finally, with the aim of supporting the liquidity needs of smaller companies, the FLR will have a similar amount of RD$5 billion that will be channeled through financial institutions specialized in this segment (i.e. ADOPEM, BANFONDESA, ADEMI, Banco Agrícola, among others), as well as specialized financing programs for the MSME sector (i.e. Banco Solidaria).
This amount of RD$10,000 million that the Rapid Liquidity Facility allocates to MSMEs, added to the RD$13,900 million that remain pending from the previous measure that allocated resources for loans to this sector, results in a total available of RD$23,900 million for new loans and refinancing to companies that belong to this market segment.
It is important to note that this new Rapid Liquidity Facility for personal, consumer, and micro-business loans, approved by the Monetary Board, would be available to all financial intermediation entities at an annual interest rate of 3.0%, to channel loans into the market at competitive interest rates for terms of up to three years.
As in the case of the measures previously approved by the BCRD, loans granted through the FLR will have differentiated regulatory treatment for one (1) year of risk classification A, zero percent provisions and a zero risk weighting in the calculation of the solvency index.
It should be noted that the funds placed through this facility will be backed by the assets of financial institutions with an adequate capital base. These institutions will provide public or private debt securities and/or A and B-rated credit portfolios as collateral for the disbursement of the funds.
In addition to the resolution adopted by the Monetary Board, the BCRD increased the availability of short-term repos for financial intermediation entities from RD$50 billion to RD$60 billion, with the aim of providing greater short-term financing to companies, primarily in the form of credit lines. In addition to the existing facilities for up to 90 days, repos will be available for terms of up to 360 days.
It is important to highlight that prior to these measures, in a first stage the BCRD injected liquidity for RD$ 120 billion, of which some RD$ 94 billion have been channeled through loans to companies and households, highlighting financing to the commerce and MSMEs (RD$14,148 million), manufacturing (RD$10,456 million), export (RD$6,679 million), construction (RD$5,555 million), households (RD$5,520 million), agriculture (RD$4,034 million) and tourism (RD$2,051 million) sectors.
The implementation of this expansionary monetary policy has decisively contributed to the increase in credit to the private sector in local currency, which is currently growing by over 14.0% annually.
With the approval of the Rapid Liquidity Facility for financing companies and households for RD$60 billion and the increase in short-term Repos by RD$10 billion, the total liquidity and financing facilities made available to the public by the BCRD since the beginning of the pandemic would be RD$190 billion, equivalent to a monetary stimulus package of approximately 4.0 % of the Gross Domestic Product.
It should be noted that this resource provision plan is the largest implemented by a central bank in the entire Central American and Caribbean region during the pandemic, and one of the most extensive in the entire Latin American region. Therefore, the private sector has sufficient funds to relaunch productive activity and preserve and create new jobs.
The Monetary Board and the Central Bank will remain vigilant about the economy's performance and adopt all necessary measures to ensure an adequate flow of resources to productive sectors under flexible conditions, providing real financial relief in the face of the adverse situation created by the COVID-19 pandemic.
