Dominican Republic warns about high oil prices

By Manuel Jimenez

SANTO DOMINGO, March 12 (Reuters) - The Dominican Republic's government is ringing alarm bells over rising oil prices, saying the cost of energy may force it to "tighten its belt" and could send electricity subsidies soaring.

Economy Minister Temistocles Montas said that subsidies to the electricity sector could climb to $1.2 billion, compared with the $650 million in the government's budget.

He said the government of President Leonel Fernandez, who is campaigning to be re-elected in a May general election in the Caribbean country of around 9 million people, did not intend to increase electricity rates to compensate.

"I think we are going to be forced to seriously review the situation because while it is true that the immediate impact is on the government in terms of the management of public finances, in reality we're talking about a problem that is the responsibility of the whole of Dominican society," he said.

Montas said on Wednesday that it was justifiable to maintain electricity subsidies -- which have been criticized by multilateral institutions like the International Monetary Fund -- because any increase in electricity rates would boost theft and end up reducing the revenues of power companies.

The Dominican Republic, which shares the island of Hispaniola with impoverished Haiti, was plunged into a deep economic crisis by the collapse of a major bank in 2003.

With the help of financial support from the IMF, a gaping budget deficit has been brought under control, once rampant inflation reined in and economic growth restored.

The IMF says one task still left to be undertaken is a reform of the ramshackle electricity sector, which is subject to regular blackouts, and a gradual reduction or phasing out of electricity and cooking gas subsidies.