Via IMF (Den Internationale Valutafond)

IMF Executive Board Concludes 2019 Article IV Consultation with Haiti







January 28, 2020















On January 24, 2020, the Executive Board of the
International Monetary Fund (IMF) concluded the Article IV 2019
consultation with Haiti.

[1]



Since March 2019, Haiti has been experiencing a protracted political
crisis and prolonged civil unrest that has at times shut down most
economic activity in the country. The crisis has taken a toll on the
economy and the already vulnerable population: inflation exceeded 20
percent year-on-year in September, output is estimated to have
contracted by an estimated 1.2 percent in fiscal year 2019 (ending
September 30), and the exchange rate depreciated by 25 percent over the
same period. As fiscal revenues have plummeted and the cost of energy
subsidies increased, the fiscal deficit widened to 3.8 percent of GDP
in FY2019 and domestic arrears rose sharply. The public debt-to-GDP
ratio jumped from 40 percent to 47 percent over the fiscal year.

The authorities are making considerable efforts to limit the
deterioration. The ministry of finance is implementing measures to
improve revenue collection and better control spending and, in
November, signed a new agreement with the central bank to strengthen
fiscal discipline and limit monetary financing of the government. The
central bank has been adjusting its interest rates to contain inflation
while at the same time trying to support the private sector through the
recession.

Absent sustained implementation of good policies and comprehensive
reforms, the outlook remains grim. Under the baseline assumption of
some political stabilization in 2020 without major political or
economic reforms, growth would improve but remain negative this year
and below 1.5 percent over the medium term. Inflation is expected to
decline slightly before eventually falling to below 10 percent by 2025.
Risks to the outlook are primarily on the downside but political
stability could bring important upsides. A resolution of the current
crisis, appointment of a new government committed and able to implement
reforms, and return of support from the international community could
lead to higher investment and potential growth.

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Executive Board Assessment

[2]

Executive Directors agreed with the thrust of the staff appraisal. They
expressed concern about the socio‑political crisis in Haiti and
stressed the urgency of restoring political and macroeconomic
stability, addressing poverty and inequality, and tackling corruption.
They called on all stakeholders to work toward a broad‑based national
dialogue to address the country’s daunting challenges and realize the
potential scope for much stronger and more inclusive growth. Directors
encouraged continued close cooperation with donors and the Fund,
including through technical assistance, and welcomed the Country
Engagement Strategy as a basis for future Fund engagement.

Directors stressed that severe fiscal constraints necessitate shifting
scarce resources away from non‑priority spending toward social programs
and investment. They underscored the importance of limiting monetary
financing of fiscal deficits and preparing a notional budget for
FY2020. Directors encouraged the authorities to focus on measures to
boost domestic revenues and reduce exemptions in the near term, while
working to strengthen tax administration, prepare a resolution plan for
budget arrears, and bolster public financial management. Directors
commended the authorities for progress on the new national plan for
social protection, and stressed the need to advance its approval and
focus on a limited number of cash transfer programs.

Directors underscored the urgency of updating the anti‑corruption
policy priorities, including setting up the steering committee
envisioned in the 2009 anti‑corruption strategy. They also stressed the
need to enforce the asset declaration system and conduct regular audits
of state‑owned enterprises and other public entities.

Directors encouraged the authorities to allow the exchange rate to
adjust in an orderly fashion. Looking ahead, they recommended setting a
quantitative monetary target, and encouraged the monetary authorities
to advance other institutional reforms. Directors supported the central
bank’s efforts to continue deepening financial intermediation and
inclusion, including via fintech.

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Directors emphasized that well‑sequenced reform of the energy sector
will be crucial for fiscal sustainability and higher growth and must be
accompanied by clear communications and measures to offset the impact
on vulnerable groups. They encouraged the authorities to overhaul the
management and performance of EDH, work with stakeholders to reduce
electricity costs, improve the reliability and efficiency of energy
supply, and lower the related fiscal burden. Broader structural reforms
are needed to improve the economy’s competitiveness, including efforts
to streamline regulations, remove infrastructure bottlenecks,
strengthen property rights, and enhance governance. Building resilience
to natural disasters is also a priority.

Directors urged the authorities to take steps to improve the quality
and timeliness of economic data, with the help of further Fund
technical assistance.


Haiti: Selected Economic and Financial Indicators 1/

Nominal GDP (2018): US$9.7 billion

GDP per capita (2018): $890

Population (2016): 10.847 million

Percent of population below poverty line (2012): 58

Estimated

Projections

2017

2018

2019

2020

2021

Output

Real GDP growth (%)

1.2

1.5

-1.2

-0.4

0.9

Employment

Unemployment (%)

Prices

Inflation, (end of period) (%)

15.4

13.3

20.1

17.5

14.5

Central Government Finances

(In percent of GDP; unless otherwise indicated)

Revenue and grants

17.7

17.3

13.6

13.4

14.2

Domestic Revenue

14.0

13.0

10.8

10.0

11.1

Grants

3.7

4.3

2.8

3.4

3.0

Expenditures

17.5

19.0

16.1

15.6

16.2

Current expenditures

12.2

12.7

12.5

11.5

11.4

Capital expenditures

5.3

6.2

3.6

4.1

4.8

Overall balance of the nonfinancial public sector, incl.
grants2

-0.9

-2.9

-3.8

-3.4

-3.1

Total public sector debt

38.3

39.9

47.0

46.1

44.9

Money and Credit

Broad money (% change)

12.9

13.7

18.9

18.6

17.0

Credit to private sector (% change)

4.5

12.5

9.9

14.6

17.0

3-month BRH bond interest rate (%)

12.0

12.0

22.0

19.4

16.4


Balance of Payments

(In percent of GDP; unless otherwise indicated)

External current account balance (incl. official grants)

-1.0

-3.9

-2.0

-0.9

-1.1

External current account balance (excl. official grants)

-5.6

-7.9

-4.8

-3.2

-4.1

Foreign direct investment (FDI)

4.5

1.1

0.9

0.9

1.3

Reserves (in months of imports of the following year)

4.4

4.7

4.9

4.8

4.8

External public debt

24.2

23.5

27.4

25.4

24. 2

Exchange Rate

Real effective exchange rate (% change) (+ appreciation)

12.7

2.8

-10.8

Nominal GDP (millions of gourdes)

551,911

631,829

732,545

868,582

1,015,809

Nominal GDP (millions of U.S. dollars)

8,409

9,658

8,708

8,533

8,842

Sources: Ministry of Economy and Finance, Bank of the
Republic of Haiti, World Bank, Fund staff estimates and
projections.

1/ Fiscal years ending September 30.

2/ Includes transfers to the state-owned electricity
company (EDH).


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[1]

Under Article IV of the IMF’s Articles of Agreement, the IMF holds
bilateral discussions with members, usually every year. A staff
team visits the country, collects economic and financial
information, and discusses with officials the country’s economic
developments and policies. On return to headquarters, the staff
prepares a report, which forms the basis for discussion by the
Executive Board.


[2]

At the conclusion of the discussion, the Managing Director, as
Chairman of the Board, summarizes the views of Executive Directors,
and this summary is transmitted to the country’s authorities. An
explanation of any qualifiers used in summing ups can be found
here:

http://www.imf.org/external/np/sec/misc/qualifiers.htm
.


IMF Communications Department
MEDIA RELATIONS

PRESS OFFICER: Randa Elnagar

Phone: +1 202 623-7100Email: MEDIA@IMF.org

@IMFSpokesperson