Concerns Over Dominican Republic’s Economy

Santo Domingo. Christopher Columbus thought this was a good place for a port. Photo by Haniel Espinal on UnSplash.

Economic Challenges

Former President Leonel Fernández is worried about the Dominican Republic’s economy.

He says the falling value of the peso, lower international reserves, and higher interest rates are causing problems. These issues could hurt businesses, families, and the country’s financial health.

In his latest article, he said the government has not done enough to control the peso’s value. The peso has already dropped more than expected this year, reaching RD$63.44 for one US dollar. He pointed out that the Central Bank’s reserves fell from US$16.2 billion in mid-2023 to US$12.6 billion in early 2025. This makes it harder for the bank to protect the economy.

Fernández also said rising interest rates are making it tough for businesses, especially small and medium ones. He warned that the dollar could reach RD$70 by the end of the year. He asked the government to act quickly to stop the economy from getting worse and to rebuild trust in the financial system.

Tourism and the Economy

Even though tourism is doing very well in the Dominican Republic and bringing in U.S. dollars, that alone isn’t always enough to keep the peso strong.

The country may still need more dollars than it’s earning, especially to pay for things like imported goods, fuel, or foreign debt. If the demand for dollars is higher than the supply, the value of the peso can fall, even with healthy tourism numbers.

Central Bank Reserves and Investor Confidence

Another issue is that the Central Bank’s reserves have dropped, which makes it harder to support the peso’s value. If investors or businesses lose confidence in the economy—perhaps due to rising inflation, high debt, or concerns about future stability—they may move their money elsewhere. This weakens the peso further.

Also, if Dominican interest rates aren’t high enough to attract investment compared to other countries, especially the U.S., more money may flow out. So while tourism is a bright spot, it can’t fully offset problems in trade, finance, and investor confidence.

Fernandez says the government should act quickly, but he doesn’t actually make any suggestions, though he apparently opposed one solution which could be increasing interest rates.

Possible Solutions

The Dominican Republic government has a few options it could use to help stabilize the peso and strengthen the economy. Each one has pros and cons, and some may take time to show results.

Raising interest rates would make saving in pesos more attractive and help slow inflation, which could strengthen the currency. However, higher interest rates do make business loans more expensive, which can hurt small businesses, construction, and slow economic growth.

Second, the government could work to rebuild its international reserves. This might involve borrowing dollars from international lenders, encouraging more foreign investment, or limiting imports to reduce the trade deficit. Stronger reserves give the Central Bank more power to defend the peso when needed.

Third, they could introduce temporary capital controls—rules to limit how much money leaves the country. This can stop sudden drops in the peso, but it may also scare off investors if they feel trapped.

Sources: Listin Diario, Dominican Today, news agencies.

Conclusion

The Dominican Republic faces significant economic challenges, including a falling peso, lower international reserves, and rising interest rates. While tourism is a bright spot, it is not enough to offset the country’s economic problems. The government needs to act quickly to stabilize the peso and strengthen the economy, and there are several options available, including raising interest rates, rebuilding international reserves, and introducing temporary capital controls.

Frequently Asked Questions

Q: What are the main economic challenges facing the Dominican Republic?

A: The main economic challenges facing the Dominican Republic are a falling peso, lower international reserves, and rising interest rates.

Q: How can the government stabilize the peso and strengthen the economy?

A: The government can stabilize the peso and strengthen the economy by raising interest rates, rebuilding international reserves, and introducing temporary capital controls.

Q: What is the impact of tourism on the Dominican Republic’s economy?

A: Tourism is a bright spot in the Dominican Republic’s economy, but it is not enough to offset the country’s economic problems. The country still needs to address its underlying economic challenges to achieve long-term stability and growth.