SANTO DOMINGO.- The increase in interest rates, applied by the monetary authorities, which jumped from 16.5 percent in May to 24.5 percent to August 13, a little more that a 48 percent rise, affects the country’s commerce, farming, industrial production, construction, credit cards users and even banks that cannot make loans.

But Hacienda minister Vicente Bengoa yesterday justified the increase because, "it’s necessary to restrain the economy so private spending doesn’t overflow," and keep Dominican Republic’s balance of payments from deteriorating even more.

He said this year’s oil bill will top US$5.0 billion, which is creating a imbalance in the external account.

He asked how do you put the brakes on the economy?, and answered: “by restricting the money circulating through an increase of the legal balance sheet and the monetary measures already taken by the Government. When you pick up the money through an increase of the legal balance sheet, the interest rate tends to rise, which is what has happened.”

 Bengoa said that if the retailers are protesting because of high interest rates, “they must be very careful," because there is a relation between that and the dollar’s exchange rate. “When interest rates rise, the dollar tends to stabilize. If the dollar rises it has a generalized effect on all prices.”

Bengoa said monetary authorities have taken measures to confront the crisis, which includes raising interest rate, “but that’s part of the solution that we have to face the situation of the Dominican economy."

Although he recognized that high interest rates affect the construction industry and private consumption, the Hacienda ministers said “but what would happen if it were at 40 or at 45 percent? That would really be serious, because everything would skyrocket and nobody could buy anything, as it happened before.”

Yesterday, a real estate broker who asked not to use her name told DT that there’s “a lull” in new housing starts. “Builders who bought through loans at 13, 14 percent all of a sudden are faced with repaying them at almost twice that rate. It’s not looking too good.”