Emergency Financing to Support the Dominican Republic’s COVID-19 Response

Challenge

On March 19, 2020, the GoDR declared a national emergency due to the COVID-19 pandemic and implemented social distancing measures throughout the country. Pandemic-related lockdowns and international travel restrictions had a profound impact on the Dominican Republic’s economy which is highly dependent on tourism. In 2020, Gross Domestic Product (GDP) contracted by 6.7 percent and per capita income fell to US$7,260. The national poverty rate increased from 21 to 23.4 percent in 2019-20 (i.e., 270,000 persons).

The GoDR responded to short-term needs and the associated economic slowdown with a program focused on public health, social spending, and support to the private sector.

Approach

The emergency response project provided critical funds to the GoDR to enable an immediate response to the COVID-19 pandemic. The response package aimed to support the capacity of the health system, provide income support to poor and vulnerable households, and reduce the tax burden on households and corporations and facilitate their tax compliance. The Development Policy Loanwas prepared within an extremely short timeframe

The program harnessed the World Bank’s convening power to structure a program encompassing a broad set of measures undertaken by ministries of all relevant sectors for both immediate pandemic response and medium-term economic recovery. The World Bank’s position as a leading development institution enabled exchange and learning among different projects that supported countries around the world affected by the pandemic.

Results

This operation had a strong focus on mitigating increases in poverty by protecting poor and vulnerable families during the pandemic and shortening the transition back to pre-crisis livelihoods by containing the potentially large impacts on employment and household income. The project contributed to mitigating the impact of the pandemic on poverty levels by subsidizing the salaries of formally employed workers under suspended work due to shutdowns saves jobs that otherwise would have been lost and provides funds to the workers during this crisis and would protect vulnerable households from slipping back into poverty.The project also supported the capacity of the health care system. Responding to the health crisis caused by COVID-19 required rapidly increasing the capacity of the health system, both in terms of prevention and treatment. The pandemic was overwhelming the health sector, the absorption capacity which was quickly saturated by the high clinical demand generated by patients in need of hospitalization, especially those in need of intensive care.

The operation aimed not only at increasing the availability of Personal Protective Equipment (PPE) and health care equipment but also at addressing the need for coordination and leadership during this unprecedented crisis. To respond to the shortage and the increased cost of PPE, ventilation, and other health care items, the operation foresaw the authorization of emergency processes for the purchase of health care goods and services and released listed medical supplies from import duty and the industrialized goods and services transfer tax (Impuesto de Transferencia de Bienes Industrializados y Servicios, ITBIS. Simultaneously, the operation supported the GoDR in developing and adopting a COVID-19 Contingency plan that defines processes and assigns competencies and responsibilities.

The program substantially and rapidly expanded social protection immediately at the onset of the pandemic, by scaling up existing programs to deliver emergency cash transfers to vulnerable households and laid-off workers and developed new programs to protect self-employed workers. Moreover, the program facilitated rapid, cost-efficient health supply provision and service delivery, financed procurement of personal protective equipment (PPE) and coronavirus tests to ensure that hospitals received the necessary equipment and supplies for in-patient care, and provided tax benefits to the health sector.

• The new, temporary “Stay Home” Program delivered emergency cash transfers to 899,554 vulnerable households (of which 603,081 were female led). The existing “Eating First” households program provided 342,511 particularly vulnerable households (of which 218,896 were female led), with extra cash transfers.
• The ‘’Stay at Home’’ program enrolled 600,646 additional households, enabling them to access support for the first time.
• The number of available isolation beds to accommodate COVID-19 patients increased from zero to 1094.
•  The program facilitated the exemption of medical articles worth more than $140 million from the import duty and the industrialized goods and services transfer tax (ITBIS). This increased the buying power of hospitals and health care providers and hence strengthened the capacity of the health care system to respond to the COVID-19 emergency.
• To improve government accountability on the implementation of the COVID-19 response, the program established a Citizen Oversight Commission to monitor the emergency procurement processes. The committee supervised 64 procurement processes.

Bank Group Contribution

This operation of 100 Million USD was part of a broader coordinated response by the Dominican Republic’s development partners

Partners

The emergency response program worked closely with a range of government stakeholders in the Dominican Republic. The Ministry of the Presidency was the implementing agency, and was responsible for the creation of the Citizen Oversight Commission. The Customs Directorate General of the Ministry of Finance (DGA) was responsible for the exemption, during the emergency period, of listed medical supplies from the import duty and the industrialized goods and services transfer tax. The Ministry of Finance Directorate General for Internal Taxes (DGII) was responsible for deferring 2019 income tax payments from individual taxpayers and firms. The Ministry of Health was responsible for the provision of isolation beds and contracting for health-related personal protective equipment. The Ministry of Labor was responsible for implementation of a temporary solidarity assistance fund for employees (FASE).

Looking Ahead

The strategic investments of the program set the stage for economic recovery after the initial months of the pandemic by supporting the private sector through tax breaks and liquidity support provided through the banking system and several of the measures have been extended beyond the duration of the project.

The COVID-19 pandemic has further highlighted the importance of multisectoral policy reforms to ensure that countries are better prepared for emergencies. In the context of the ongoing pandemic, policy reforms and institutional strengthening in support of comprehensive DRM have become more urgent.

The emergency operation has laid the foundation for several new operations, as the new government is seeking to strengthen the country’s resilience to shocks. One of these is the second Cat DDO that is expected to be submitted for the WBG approval in Q1 of FY23. This operation will support the GoDR’s management of risks resulting from natural and public health adverse events through enhancing territorial planning and spatial data governance for improved DRM and climate resilience, and mainstreaming DRM and climate resilience regulations, policies and standards in key sectors (The Dominican Republic Second DRM Development Policy Loan with a Catastrophe Deferred Drawdown Option, P178122)). The World Bank continues to finance the implementation of an integrated social protection system and the successful existing Integrated Social Protection and Promotion Project (P147213), which supported the cash transfer program on which the emergency operation’s cash transfer component was built has been extended. The financing of its expansion is currently under discussion. Further, the GoDR requested advisory support from the Bank to identify gaps in the preparedness and response capacity of the health care system to pandemics. The WBG’s analytical work Dominican Republic’s Health System through Digital Data and Information Systems (P178396), is currently under implementation.