--- Page 1 --- June 2005 02 2005 International Monetary Fund IMF Country Report No. 05/206 and Review of the Program Supported by Haiti: 2005 Article IV Consultation Public Information Notice on the Post-Conflict Assistance Staff Report; Director for Haiti Emergency and Statement by the Executive Executive Board Discussion; the IMF holds bilateral discussions with Under Article IV of the IMF's Articles of Agreement, discussion of the 2005 Article IV usually every year. In the context of a combined assistance, members, Haiti and review of the program supported by emergency post-conflict consultation with have been released and are included in this package: the following documents Article IV Consultation and Review of the Program the staff report for the combined 2005 Assistance, prepared by a staff team of the IMF, Supported by Emergency Post-Conflict March 16, 2005, with the officials of Haiti on economic following discussions that ended on available at the time of these discussions, developments and policies. Based on information 2005. The views expressed in the staff report are the staff report was completed on April 29, reflect the views of the Executive Board of the those of the staff team and do not necessarily IMF. the views of the Executive Board as Public Information Notice (PIN), summarizing on issues related to the a 2005, discussion of the staff report expressed during its May 16, Article IV consultation. by the Executive Director for Haiti. a statement document listed below has been or will be separately released. The Selected Issues Paper documents allows for the deletion of market-sensitive The policy of publication of staff reports and other information. are invited and may be sent the publication policy, reader comments To assist the IMF in evaluating by e-mail to mohicationesioatnfeny of this report are available to the public from Copies International Monetary Fund o Publication Services 700 19h Street, N.W. o Washington, D.C. 20431 (202) 623-7430 o Telefax: (202) 623-7201 Telephone: Internet: hitp./www.imf.org E-mail: publications@imt.org Price: $15.00 a copy International Monetary Fund Washington, D.C. the publication policy, reader comments To assist the IMF in evaluating by e-mail to mohicationesioatnfeny of this report are available to the public from Copies International Monetary Fund o Publication Services 700 19h Street, N.W. o Washington, D.C. 20431 (202) 623-7430 o Telefax: (202) 623-7201 Telephone: Internet: hitp./www.imf.org E-mail: publications@imt.org Price: $15.00 a copy International Monetary Fund Washington, D.C. --- Page 2 --- --- Page 3 --- INTERNATIONAL MONETARY FUND HAITI Staff Report for the 2005 Article IV Consultation Assistance Supported by Emergency Post-Conflict and Review of the Program for the 2005 Consultation with Haiti Prepared by the Staff Representatives (In consultation with other departments) by Christopher Towe and Mark Plant Approved April 29, 2005 consultation and review of the program supported by Discussions covering the 2005 Article IV in Port-au-Prince during March 6-16, Post-Conflict Assistance (EPCA) took place L. Jaramillo, C. Sancak (all WHD), Emergency The staff team comprised P. Gajdeczka (Head), G. Everaert, and was assisted by 2005. Administrative Assistant, MCD), (PDR), M. Vimond (Senior (World Bank) attended key J.J Mathisen K. Florestal (OED) and A. Kouame Bank Governor M. Rached (Resident Representative). and Finance Minister Bazin, Central meetings. The mission met with Economy and ofthe private sector and Minister Pierre, other senior officials, representatives Magloire, Planning donor community. 24, 2003. Executive Directors expressed The last Article IV consultation was completed and on social January conditions. They called for a firm deep concern about Haiti' S worsening economic backed by a track record of policy economic program, commitment to a sound medium-term program. which could lead to a PRGF-supported implementation, 10, 2005, the Executive Board program is broadly on track. On January and the authorities are The EPCA-supported of quota under the Fund' S EPCA policy approved a purchase of 12.5 percent in July/August. All end-December 2004 quantitative expected to request a second EPCA purchase data indicate that end-March 2005 quantitative by wide margins and preliminary measures. targets were observed there have been delays in implementing some key structural targets were also met. However, budget for April-September 2005, discussions focused on the supplementary also to the Article IV consultation and the fiscal reform agenda. Consideration was given the 2005/06 budget framework, and to strengthen the central bank' S financial position. policies needed to bring inflation to single digits meant that specific medium-term policies Although the transitional nature of the present goverment increased fiscal effort and continued donor support could not be discussed, the authorities agreed, that services and promote growth. to improve the provision of basic are necessary their intention to publish this staff report and accompanying Publication. The authorities expressed papers on the IMF website. ussions focused on the supplementary also to the Article IV consultation and the fiscal reform agenda. Consideration was given the 2005/06 budget framework, and to strengthen the central bank' S financial position. policies needed to bring inflation to single digits meant that specific medium-term policies Although the transitional nature of the present goverment increased fiscal effort and continued donor support could not be discussed, the authorities agreed, that services and promote growth. to improve the provision of basic are necessary their intention to publish this staff report and accompanying Publication. The authorities expressed papers on the IMF website. --- Page 4 --- -2CONTENTS PAGE Executive Summary I. Introduction. A. The Setting B. Policy Advice and Performance. C. Recent Economic Developments II. Near-Term Outlook and Risks III. Policy Discussions A. Fiscal Policy and Reforms B. Monetary and Financial Sector Policies C. Structural Reforms and Governance. D. Medium-Term Outlook and Debt Sustainability E. Other Issues. IV. Staff Appraisal Boxes 1. Political Developments 2. Fund Engagement in Haiti 3. GDP Growth, Medium-Term Projections, and Millennium Development Goals 4. Recommendations on the Central Bank' S Operations. Tables 1. Indicative Targets, September 2004 March 2005 2. Selected Economic and Financial Indicators 3.a Central Government Operations (In millions of gourdes) 3.b Central Government Operations (In percent of GDP) 4. Summary Accounts oft the Banking System.. 5. Balance ofl Payments 28 6. Medium-Term Scenario 7. Indicators of fFund Credit, 2004-09 8. Indicators of External Vulnerability 9. Stock of Arrears and Projected Debt Service, 2000-05. 10. External Financing Requirements and Sources, 2000-05 11. External Assistance to the Government and Debt Service 12. Millennium Development Goals 13. Status of Main Policy Actions Under the EPCA --- Page 5 --- 3Figures 1. Inflation and Monetary Devlopments 2. Fiscal Developments 3. External Developments Annexes I. Fund Relations II. Relations with the World Bank Group. III. Relations with the IDB. IV. Statistical Issues V. Debt Sustainability Analysis --- Page 6 --- Executive Summary under the EPCA Recent developments and performance in Haiti have been difficult. The political situation Economic and political conditions of President Aristide. A transition deteriorated in late 2003 and led to the resignation with restoring security and that was formed in early 2004 has been charged which are now scheduled for government and preparing for national elections, economic stability, October-November 2005. Weak exports and fiscal revenue, stagnant The recovery has been weaker than expected. suggest that economic activity has private sector credit, and delays in donor disbursements rate has stabilized, and net However, inflation has declined, the exchange not rebounded. international reserves have increased. has been satisfactory. All endPerformance under the EPCA-supported program data indicate that end-March targets December targets were observed, and preliminary as envisaged, key also met. While many structural measures were implemented arrears have been were sector and domestic measures such as the census of public employment delayed. Policy discussions have required revisions to the Revenue shortfalls and delays in donor funded projects to allow the revenue targets while administrative steps are expected to budget. In particular, to provide maximum support economic will be re-prioritized additional to be met, expenditures additional external financing to cover The authorities are also seeking recovery. demobilization, and elections. outlays on electricity, and 2005/06 envisages real GDP growth of3 percent The macroeconomic framework for thereafter, will be to sustain growth of 4 percent inflation of 10 percent. The challenge, to fund a substantial improvement in social and generate the government revenue needed Critical prerequisites will be services and the public sector' S institutional capacity. continued donor support. successful elections, national reconciliation, and achieve the program' S inflation and external Monetary policy needs to be tightened to need to be absorbed at marketThe large excess reserves in the banking system BRH needs to be introduced in targets. interest rates. Also, a plan to recapitalize the determined its financial position. the 2005/06 budget to strengthen unsustainable and new external assistance should be Haiti' S external debt appears provided on highly concessional terms. government revenue needed Critical prerequisites will be services and the public sector' S institutional capacity. continued donor support. successful elections, national reconciliation, and achieve the program' S inflation and external Monetary policy needs to be tightened to need to be absorbed at marketThe large excess reserves in the banking system BRH needs to be introduced in targets. interest rates. Also, a plan to recapitalize the determined its financial position. the 2005/06 budget to strengthen unsustainable and new external assistance should be Haiti' S external debt appears provided on highly concessional terms. --- Page 7 --- I. INTRODUCTION A. The Setting in Haiti have been very difficult in recent 1. Economic and political conditions elections deadlock following the disputed parliamentary cutback in years. The political investment, and led to a sharp undermined private sector confidence and dampened in Haiti deteriorated significantly, with donor assistance. As a result, economic conditions fiscal and external deficits. The political negative GDP growth, high inflation, and large and increasing violence that polarization intensified, leading to street demonstrations President Aristide' S resignation in conflict in early 2004, and culminated in an armed February 2004 (Box 1). formed in early 2004 to lead Haiti to national 2. A transition government was 2005. A United Nations scheduled for October-Novenber elections, which are now to help restore security and help mission (MINUSTAH) has been deployed in violence. 1 Over the stabilization there have been recurrent episodes of escalation and prepare elections, but but economic conditions remain difficult financial stability has been restored past year, business confidence is low. turmoil in early 2004 and the The economic consequences of the political damage and the 3. have been severe. The property devastating floods in May and September the armed conflict are estimated to have interruption to economic activity resulting from the loss of thousands oflives, extensive of GDP. The floods also caused areas. totaled 5' percent crops in Haiti' S most productive agricultural damage to housing, and destroyed the most difficult in the Western Hemisphere. An 4. Social conditions in Haiti are the line (on less than US$2 a day) of the population lives below poverty is estimated 76 percent less than US$I a day). Haiti' S income distribution and 55 percent in extreme poverty (on accounting for 1.5 percent of skewed, with the poorest 20 percent ofthe population United Nations ranks Haiti 153rd highly wealthiest 20 percent for 68 percent. The to incomes and the and the country is unlikely Index (out of 177 countries), on its Human Development Goals by 2015." achieve the Millennium Development includes about 6,000 troops and 1,400 international police. MINUSTAH National Report on Millennium Development 2 See A Common Vision of Sustainable Development: Goals, UNDP and Government of Haiti, 2004. for 1.5 percent of skewed, with the poorest 20 percent ofthe population United Nations ranks Haiti 153rd highly wealthiest 20 percent for 68 percent. The to incomes and the and the country is unlikely Index (out of 177 countries), on its Human Development Goals by 2015." achieve the Millennium Development includes about 6,000 troops and 1,400 international police. MINUSTAH National Report on Millennium Development 2 See A Common Vision of Sustainable Development: Goals, UNDP and Government of Haiti, 2004. --- Page 8 --- 6Box 1. Haiti: Political Developments a popular priest, is elected president. 1990 - Jean-Bertrand Aristide, seven months after taking office. The Aristide is overthrown in a military coup 1991 - President United Nations approves sanctions. reinstalled in office with the help of a U.S.-led military intervention. 1994 - Aristide is win parliamentary elections. Since the the Aristide supporters a 1995 - Aristide disbands army. two consecutive terms, Aristide is succeeded by constitution precludes the president from serving close ally, René Préval. decree. Préval dissolves parliament and rules by 1997-99 Following a period of political deadlock, community criticizes irregularities in Aristide is reelected president, but the international 2000-01 parliamentary elections. conditions and grows amid deteriorating economic 2002-03 Dissatisfaction with the government opposition becomes increasingly vocal. demonstrations intensify and as a result of an armed rebellion, Jamuary-February 2004 - Street 29 and leaves the country. President Aristide resigns on February the chief of the Supreme Court, Boniface Alexandre, the constitution, the March 2004 - As envisaged by led by Gérard Latortue, is formed to lead country succeeds as president. A transition government, arrives. A multinational interim force to elections. multinational interim force, arrives to replace the June 2004 - U.N. stabilization force (MINUSTAH) and reaches full strength in December 2004. ofthe coup that first overthrew Aristide in October 2004 - Violence escalates on the anniversary 1991. the schedule for national elections. January 2005 - The Electoral Council announces elections scheduled. October 2005 Municipal Parliamentary and presidential elections scheduled. November 2005 and government to start their terms. February 2006 - A newly-elected president . A multinational interim force to elections. multinational interim force, arrives to replace the June 2004 - U.N. stabilization force (MINUSTAH) and reaches full strength in December 2004. ofthe coup that first overthrew Aristide in October 2004 - Violence escalates on the anniversary 1991. the schedule for national elections. January 2005 - The Electoral Council announces elections scheduled. October 2005 Municipal Parliamentary and presidential elections scheduled. November 2005 and government to start their terms. February 2006 - A newly-elected president --- Page 9 --- 7US$1.1 billion of new financing for 5. At the July 2004 conference, donors 3 pledged is intended to help strengthen July 2004-September 2006. This assistance creation, improve the period promote economic recovery and job political and economic governance, and promote national dialogue ahead of access to basic services, reestablish security, ofb budgetary assistance to Haiti are elections. Through end-March 2005, disbursements however, have been slow reflecting estimated at US$163.5 million. Project disbursements, projects, security concerns, as well as to prepare and implement weak government capacity procedural delays on the part of donors. B. Policy Advice and Performance with Haiti in recent years and a track record 6. The Fund has been actively engaged The Fund' S policy advice has focused on implementation is being established. and and the of policy in fiscal transparency accountability, macroeconomic stabilization, improvement strategy that could be supported by clear external arrears and develop a medium-term conclusion of need to by the Executive Board at the a PRGF arrangement. This approach-endorsedt Programs (SMP) during two Staff-Monitored the 2002 Article IV consultation-guided approved on January 10, 2005 (Box 2). 2003-04 and an EPCA-supported program C. Recent Economic Developments but the economic recovery has been The EPCA is broadly on track, the authorities, all 7. program Table 1). According to the data provided by weaker than expected (Text observed (Table 1). Many structural measures end-December and end-March targets were such as the census of public sector as envisaged, although key measures Financial stability has been were implemented domestic arrears have been delayed (Table 13). employment and and fiscal revenue, stagnant credit to the private maintained, but the weakness in exports disbursements by donors suggest that the project sector, as well as slower-than-anticipated recovery has fallen short." 4 of a broad reform and development program (the Interim 3 External assistance was pledged in support the authorities and donors. The pledges also Cooperation Framework - ICF) prepared jointly by institutional reforms necessary to support extensive technical assistance to address key included economic growth. and Haiti does not produce quarterly GDP data. 4 There are no monthly statistics on production ). employment and and fiscal revenue, stagnant credit to the private maintained, but the weakness in exports disbursements by donors suggest that the project sector, as well as slower-than-anticipated recovery has fallen short." 4 of a broad reform and development program (the Interim 3 External assistance was pledged in support the authorities and donors. The pledges also Cooperation Framework - ICF) prepared jointly by institutional reforms necessary to support extensive technical assistance to address key included economic growth. and Haiti does not produce quarterly GDP data. 4 There are no monthly statistics on production --- Page 10 --- 8Text Table 1. Haiti: Performance under the EPCA 2004/05 Oct.- -March Oct.-Sept. Prog. Prel. Prog. Proj. (Annual percentage change) GDP at constant prices Consumer prices (12-month, end-of-period) 2.5 2.5 12.0 12.0 (In percent of GDP, unless otherwise indicated) External current account balance (excluding grants) -7.5 -8.6 Net international reserves (millions ofU.S. dollars) 1/ 57.6 63.7 83.6 83.6 Central government overall balance (including grants) -0.4 0.3 -1.2 -1.5 Central government overall balance (excluding grants) -2.2 -2.2 -6.0 Central bank financing of the government 0.2 -0.1 0.0 -6.6 0.0 Fiscal financing gap 0.0 0.0 0.0 0.4 1/1 Excludes commercial banks' foreign currency deposits with the BRH. Projected end-September 2005 stock reflects the authorities' downward revision of the end-September 2004 stock. 8. However, progress has been made in containing inflation, and the exchange rate has stabilized. A significant tightening of financial policies in 2003 helped reduce inflation and stabilized the exchange rate (Figure 1). Inflation picked up again in early 2004, renewed following central bank financing of the budget and widespread supply constraints, and the gourde depreciated by 7 percent against the U.S. dollar during September 2003February 2004. After budget discipline was restored in April 2004 and monetary financing of budget deficits was eliminated, inflation began to decline again and the gourde rebounded to the mid-2003 level Text Figure 1. Haiti: Exchange Rate 1/ (Text Figure 1). However, (1990=100) prices have been highly volatile 0.07 on a month-to-month basis, as a result of supply 0.06 disruptions caused by the September 2004 floods, and Real Effective Exchange Rate (left scale) 0.05 the pass-through of world prices of petroleum. Recent 0.04 price developments are Nominal Effective Exchange Rate (left scale) Exchange Rate consistent with the (USS/gourdes, right scale) 0.03 program' S objective of bringing inflation down to 0.02 12 percent (12-month rate) by September 2005. 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 0.01 Source: Central Bank ofHaiti; and Fund staff estimates. 1/ An increase indicates an appreciation. prices of petroleum. Recent 0.04 price developments are Nominal Effective Exchange Rate (left scale) Exchange Rate consistent with the (USS/gourdes, right scale) 0.03 program' S objective of bringing inflation down to 0.02 12 percent (12-month rate) by September 2005. 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 0.01 Source: Central Bank ofHaiti; and Fund staff estimates. 1/ An increase indicates an appreciation. --- Page 11 --- 9Box 2. Haiti: Fund Engagement in Haiti Executive Directors urged the authorities to re-establish 2002 Article IV consultation discussions, of embarking on a mediumAt the living standards and stressed the importance of a basis for growth and improved context of a SMP that could establish a track-record policy term economic program, possibly in the This approach guided two SMPs that preceded implementation and lead to a PRGF-supported program. 2005. program approved in January an EPCA-supported stabilization gains achieved 2003-March 2004). A one-year SMP aimed at consolidating framework of the SMP was SMP (April of external arrears. The macroeconomic since early 2003 and clearance when the program went off-track, due to large expenditure broadly maintained until December 2003, ofthe IDB, and in June 2003 Haiti The SMP provided a framework for the reengagement and development assistance. overruns. thereby enabling the resumption of disbursements cleared its arrears, financial stability, SMP, in June 2004, sought to restore 2004). The new agreed a track record of policy SMP (April-September framework for donor assistance, and establish ofl Fund resources. provide a macroeconomic build a basis for a possible future request for the use wide and implementation that could all quantitative targets were observed by margins Performance under the SMP was satisfactory; good progress was made on structural measures. authorities requested a purchase under the Fund's EPCA 2004-September 2005). The macroeconomic EPCA (October of the conflict in early 2004. The EPCA-supported of policy to help address the impact 10, 2005, the Executive Board approved the purchase was agreed in late 2004, and on January targets were observed (Table 1) and most of program SDR10.23 million (12.5 percent of quota). The quantitative as envisaged (Table 13). The measures agreed for end-December were implemented under the EPCA. The the structural indicated their intention to request an additional purchase of the World Bank with authorities underpinning the ECPA facilitated the reengagement Bank' 's Executive Board macroeconomic program Haiti cleared its arrears to the World Bank; the Haiti. In early January, 2005, and an emergency recovery and disaster management approved a fast-disbursing adjustment operation project. the BRH has relaxed With the decline in inflation and exchange rate stability, interest rates were 9. in several steps. During August -October 2004, monetary conditions and the stock of excess reserves of the banking reduced to 7.6 percent from 13.6 percent, reserves by March 2005. As a increased sharply reaching 25 percent of required while average gourde system rates declined somewhat, result, commercial bank prime lending Nevertheless, private sector credit growth deposit rates are now below dollar deposits rates. confidence and weak domestic demand has remained stagnant, reflecting low business (Figure 1). of gourde and dollar deposits at the commercial are 31 percent 5 Since June 2001, reserve requirements banks. and the stock of excess reserves of the banking reduced to 7.6 percent from 13.6 percent, reserves by March 2005. As a increased sharply reaching 25 percent of required while average gourde system rates declined somewhat, result, commercial bank prime lending Nevertheless, private sector credit growth deposit rates are now below dollar deposits rates. confidence and weak domestic demand has remained stagnant, reflecting low business (Figure 1). of gourde and dollar deposits at the commercial are 31 percent 5 Since June 2001, reserve requirements banks. --- Page 12 --- 1010. Current March 2005. Tax expenditure was cut to protect the fiscal targets receipts were below target by around during October 2004security situation and strikes by customs 0.2 percent ofGDP, as a result oft the below the programmed levels officials. Also, donor-financed planned by 0.2 percent of GDP. The authorities capital outlays fell wage increases (by the equivalent of0.3 responded by delaying expenditures financed by domestic percent of GDP), while increasing grants) was in line with the resources. As a result, the overall fiscal deficit capital program. (excluding 11. The authorities are In the face of growing finalizing a supplementary budget for pressures to implement April-September 2005. disbursement of donor budgetary outlays and stimulate assistance, the authorities are to elower-than-expected economic activity. Also, the overall level planning re-orient expenditure to 0.4 percent ofGDP to cover the needed of spending will be increased by about help support to the electricity sector. The additional outlays on elections, GDP overall fiscal demobilization, and (or 1.5 percent of GDP including deficit is expected to reach 6.6 percent of program-and there remains a financing grants)-above the target assumed in the EPCA support is identified, the gap would need gap of0.4 percent of GDP. Unless additional donor to be covered by central bank financing. 12. Net international reserves continued strong inflows of (NIR) have stabilized at about US$65 million. above the program floor, while private remittances, the BRH has been able to maintain NIR With Nevertheless, reserve meeting foreign exchange needs ofthe international adequacy indicators suggest that gross reserves government (Figure 3). standards (Text Figure 2). are still low by Text Figure 2. Haiti: Gross Reserves EPCA support is identified, the gap would need gap of0.4 percent of GDP. Unless additional donor to be covered by central bank financing. 12. Net international reserves continued strong inflows of (NIR) have stabilized at about US$65 million. above the program floor, while private remittances, the BRH has been able to maintain NIR With Nevertheless, reserve meeting foreign exchange needs ofthe international adequacy indicators suggest that gross reserves government (Figure 3). standards (Text Figure 2). are still low by Text Figure 2. Haiti: Gross Reserves Three months of imports Gross reserves as share ofi imports (left axis) 20 Gross reserves as share of broad money (M3; left axis) 350 - E à 250 3 Gross reserves (right axis) Sep-98 Sep-99 Sep-00 Sep-01 Sep-02 Sep-03 Sep-04 --- Page 13 --- 11the World Bank (US$52 million) and obtained 13. Haiti has cleared arrears to three bilateral creditors. On January 4, 2005, deferral of debt-service obligations from million grant from Canada to used US$46 million ofits own reserves and a US$6.4 Board on Haiti arrears to the World Bank. Following the approval of Haiti' S clear its external payments US$46 million, enabling the replenishment January 6, the World Bank disbursed and Spain granted Haiti forbearance on the international reserves. In parallel, France, Italy, treatment ofi fits debt-service stock of arrears and informed that a formal comprehensive program is in place. obligations would take place after a PRGF-supported II. NEAR-TERM OUTLOOK AND RISKS near-term outlook derive from the political Significant downside risks to the and Clothing (ATC). 14. of under the Agreement on Textiles situation, and the lifting quotas and lack of government' S control over provinces may On the political front, security concerns scheduled for late 2005. In addition, weak jeopardize prospects for fair and safe elections delays in disbursement of donor coordination of donor financing with the budget and likely and derail economic recovery. could further undermine private sector confidence in U.S. markets assistance textile assembly export sector faces increasing competition 6 Finally, Haiti' S and its survival is in question. now that ATC quotas have been abolished, economic outlook, the staff agreed the increased risks to the near-term The staff 15. Despite framework unchanged. with the authorities to keep the 2004/05 macroeconomic of 2% percent would be difficult to cautioned, in particular, that the GDP growth objective economic recovery had been delayed. achieve, given signs in the first two quarters that the second half ofthe year would pick up argued, however, that growth in the allocation of The authorities external disbursements and improved strongly in response to accelerated development sectors, and that this year' S in the budget to key and expenditures supplementary achieved. 7 Also, taking into account projected disbursements be growth objectives could be NIR target ofthe BRH is expected to the inflow of private remittances, the end-September met. III. POLICY DISCUSSIONS the macroeconomic objectives are to consolidate unable 16. The authorities' key Although the transition government is stabilization and to jump-start the economy. that near-term economic beyond 2005, it places a priority on ensuring will be to commit to policies growth, and on a reform agenda that policies provide a firm basis for medium-term the staff stressed that national elections in 2005. During the discussions, formed after 2005, Haiti's textile exports were not affected 6 According to preliminary data for January- February by the elimination of ATC quotas. that would Guyana) donors agreed on a list of projects 7 Ata a March 2005 meeting in Cayenne (French be disbursed on an accelerated basis. -term economic beyond 2005, it places a priority on ensuring will be to commit to policies growth, and on a reform agenda that policies provide a firm basis for medium-term the staff stressed that national elections in 2005. During the discussions, formed after 2005, Haiti's textile exports were not affected 6 According to preliminary data for January- February by the elimination of ATC quotas. that would Guyana) donors agreed on a list of projects 7 Ata a March 2005 meeting in Cayenne (French be disbursed on an accelerated basis. --- Page 14 --- 12of social and stability, a substantial strengthening sustained growth would require political capacity, supported by continued donor economic infrastructure, as well as institutional (Box 3). Continued expansion of engagement and commitment to combating corruption and help lessen dependency on income will be essential to reduce poverty Haiti' S national foreign aid. from the authorities noted Haiti's need for additional financing support from the 17. The They stated that continued assistance Fund, including a second EPCA purchase. framework that could extend beyond national Fund would also provide a macroeconomic government on a program that could begin with a newly-elected elections when negotiations The staff noted that a positive track record of policy could be supported by the PRGF. could provide a basis for a future request for Fund implementation under the EPCA program resources. A. Fiscal Policy and Reforms the need for budget corrections to protect the 18. The authorities and staff agreed on The authorities were confident that fiscal objectives of the EPCA-supported program. half of fthe fiscal year could be met by for budgetary revenues in the second and targets administration, including by intensifying customs inspections that the strengthening tax from the Dominican Republic. The staff observed reestablishing controls over imports deterioration in security conditions, which would main risk to revenue projections was a administration. On the expenditure side, the staff affect both domestic incomes and tax especially in light oftheir stressed the importance of safeguarding key social expenditures, authorities stated that in consultation with for political cohesion and stability. The and the provision importance focusing on infrastructure donors, a package of projects was being prepared in the supplementary budget and ofl basic social services, which will be incorporated Additional donor financing is being sought to implemented before the end ofthis fiscal year. cover the remaining financing gap. the large budgetary transfers in support 19. The mission raised questions regarding central government transfers to the The authorities estimate that additional will be needed through of electricity. totaling G400 million (0.3 percent ofGDP) noted that Electricité d' Haîti (EDH) of electricity in Port-au-Prince. The staff end-September 2005 to ensure the supply and lack of adequate internal expenditure control the EDH' S very difficult financial condition of fiscal vulnerability and urged the authorities mechanisms represented a significant source The authorities agreed with the staff S to establish an effective monitoring mechanism. and transparency in public sector reiterating their commitment to full accountability and that all new proposal, that such a mechanism will be set up by end-April, operations. They noted would be subject to open and competitive bidding contracts for electricity production procedures. EDH) of electricity in Port-au-Prince. The staff end-September 2005 to ensure the supply and lack of adequate internal expenditure control the EDH' S very difficult financial condition of fiscal vulnerability and urged the authorities mechanisms represented a significant source The authorities agreed with the staff S to establish an effective monitoring mechanism. and transparency in public sector reiterating their commitment to full accountability and that all new proposal, that such a mechanism will be set up by end-April, operations. They noted would be subject to open and competitive bidding contracts for electricity production procedures. --- Page 15 --- 13and Millennium Development Goals Box 3. Haiti: GDP Growth, Medium-Term Projections, to political the past 20 years, but has fluctuated widely in response in Haiti has been on a declining trend during GDP growth and external aid flows. developments the garment assembly 4.6 percent, fueled by expansion in light manufacturing, During the 1970s, real GDP growth investment averaged financed by foreign aid. Trend GDP industry, tourism, as well as public Figure 1. Haiti: Actual and affected by a hurricane and drought, growth 1970-2003 In the 1980s, growth turned negative, instability after the fall of the Duvalier 10 and a U.S. recession. The political decline. (percent) regime in 1986 led to further economic Aristide's election in 1991, growth recovered as Following President conditions and relations with donors improved. macroeconomic 25 percent, reflecting During 1992-94, real GDP declined by a cumulative economic and political -5 GDP growth the effects of the military coup, the international suffered from shortages Trend embargo, and the cutoff of foreign aid.. Agriculture ceased. -10 growth the assembly sector contracted, and tourism ofi inputs, Haiti in 1994, substantial economic -15 1975 1980 1985 1990 1995 2000 After President Aristide's return to in helped re-invigorate growth, and activity expanded Sources: IFS and Fund staff estimates assistance However, growth weakened subsequently construction and manufacturing. declining foreign aid, and poor due to growing political instability, agricultural performance. undermined business confidence and non- -1.2 percent, as the political impasse of in February During 2001-04, real GDP growth averaged culminated in an armed conflict and change government humanitarian aid was suspended. Political tensions 2004, with damage estimated at 5V percent of GDP. Figure 2. Haiti: GDP growth and external is expected to exceed its recent real GDP growth aid, 1970-2003 Over the medium-term, foreign aid flows and political stability. trend on the assumption of increased reflecting the dampening effect of 15 Recent trend growth is estimated at 0.7 percent, and the resumption in activity. I With restored business confidence the recent drop GDP growth could revive more strongly to nearly percent, of foreign assistance, the 1970s. In the short term, large 5 a rate that is similar to that achieved during mainly through construction. In the capital inflows are expected to boost growth investment largely financed by 0 medium term, growth will be supported by public gains from structural axid, thypercent) -200 sector investment and productivity -5 GDP growth (left 11 foreign aid, private (right -400 reforms. -10 External loans and grahts double the average GDP growth rate currently projected axis, USS million) -600 Haiti would need to head-count poverty by 2015." Haiti is ranked -15 1 1990 at 4 percent per year to halve Index- 76 percent of the population, and 1970 1975 1980 1985 153 on the Human Development lives below the poverty line (US$2 per day Sources: IFS and Fund staff estimates 88 percent of the rural population, income per person). Trend output growth was calculated using a Hodrick-Prescott filter. of GDP per capita of 2.9 percent. See Human 2003 and 2015 would require annual growth ?? Cutting headcount poverty in halfbetween Goals: A compact among nations to end human poverty." Development Report 2003, -Millennium Development Weaknesses in the need to bolster the budget execution process. 20. The staff stressed conservative budget management had contributed monitoring coupled with very expenditure IFS and Fund staff estimates 88 percent of the rural population, income per person). Trend output growth was calculated using a Hodrick-Prescott filter. of GDP per capita of 2.9 percent. See Human 2003 and 2015 would require annual growth ?? Cutting headcount poverty in halfbetween Goals: A compact among nations to end human poverty." Development Report 2003, -Millennium Development Weaknesses in the need to bolster the budget execution process. 20. The staff stressed conservative budget management had contributed monitoring coupled with very expenditure --- Page 16 --- 14set under the last SMP and the EPCA program. well below the targets of agreed to keeping spending that aid coordination and implementation projects to The staff and authorities agreed Framework needed to be accelerated as soon as possible under the Interim Coopeartion and expand provision ofkey social services. boost economic recovery, create employment, authorities agreed on the broad parameters that would 21. The mission and the assumptions for 2005/06 include real the 2005/06 budget. The key macroeconomic increase in NIR to US$114 million govern of 3 percent, inflation of 10 percent, and an investment, GDP growth 2006. In order to increase key public services and, public would need to by end-September domestic revenues and external financing while eliminating BRH financing, The overall deficit (excluding grants) of fully cover recurrent and capital expenditures. external concessional loans and grants. 7 percent of GDP would be fully covered by to ensure effective use of the pledged 22. Aid coordination needs to be strengthened donor support in preparation assistance. The authorities noted that they are seeking investment external under the ICF and are to be included in the public of projects that were agreed assistance for the 2005/06 central government budget program. The total amount of external Canada, the European Union, the IDB, the is projected at US$328 million, mostly from However, the team noted that it projected a United States, and the World Bank (Table 11). ofGDP) and that external cash budget financing gap of about US$20 million (0.4 percent Haiti' S debt service obligations, and would not be sufficient to even cover budget support to work with donors to secure additional financing. urged the authorities to allow the 2005/06 budget soon enough 23. The authorities are planning to prepare and consultation with civil society. planning, coordination with donors, ceilings to ministries, as well proper they committed to conveying indicative spending consistent with the Accordingly, proposals for the public investment program, the as to transmitting project for Cabinet discussion in July. This would enable 8 priorities of the ICF and in time prior to its final approval in September." budget' S submission for public consultation to improving budget management and 24. The authorities are committed that a broad strategy for reform of public financial expenditure control. They emphasized weaknesses and increased donor is needed, especially in view of governance the budget formulation management identified the following priority areas: (i) funding. The authorities priorities; (ii) the expenditure approval process, to enable identification of strategic ministries spending to current accounts; (iii) the preparation process, to limit discretionary recourse by which is presently handicapped by and execution of the public investment program, monitoring, which is constrained by the inadequate institutional capacity; and (iv) budget welcomed the envisaged timely monthly fiscal data. The authorities absence of reliable, administration and tax policy, and on Two technical assistance missions from FAD -on revenue enhance the budget preparation process. expenditure management -are envisaged to help public priorities; (ii) the expenditure approval process, to enable identification of strategic ministries spending to current accounts; (iii) the preparation process, to limit discretionary recourse by which is presently handicapped by and execution of the public investment program, monitoring, which is constrained by the inadequate institutional capacity; and (iv) budget welcomed the envisaged timely monthly fiscal data. The authorities absence of reliable, administration and tax policy, and on Two technical assistance missions from FAD -on revenue enhance the budget preparation process. expenditure management -are envisaged to help public --- Page 17 --- 15in a fiscal from the Fund which they saw as instrumental developing technical assistance reform agenda for the medium term. and Financial Sector Policies B. Monetary of reducing inflation to single digit levels. 25. The staff underscored the importance by inflows of private remittances-and the The team noted that exchange rate stability-boosted deficit had played a key role in helping elimination of monetary financing of the budget weak economic activity had also reduce inflation over the past year. At the same time, interest rates on gourde deposits were now reduced pressures on domestic prices. However, negative in real terms, and the staff cautioned below those on dollar deposits and were highly in the banking system, there was a risk that that, especially given the large excess reserves Therefore, a tightening ofthe monetary policy pressures on the exchange rate could emerge. the exchange rate and to support the program' S stance was needed, both to avoid destabilizing inflation objectives. stimulus introduced last year The BRH officials responded that the monetary that BRH losses 26. economic recovery. Moreover, they observed was still needed to support S excess reserves (estimated at 7.1 would have been exacerbated if the banking system' Nevertheless, the officials underscored of gourde broad money) had been sterilized. ofthe liquidity percent inflation and agreed to a gradual absorption their commitment to containing overhang in the coming year. policy framework. The to strengthen their monetary 27. The authorities are seeking target, while also taking into inflation with broad money as the operational BRH targets while maintaining a market-determined account the need to avoid exchange rate instability need to their capacity to forecast regime. The authorities recognized the upgrade and central government floating better coordination between monetary for liquidity, which would require assistance from the Fund. Also, markets financial operations, and have requested technical clear signals about market conditions. instruments need to be modernized to provide a amount of financial will reinstate a conventional auction for predetermined In the near term, the BRH oft the recent IMF technical assistance mission BRH bonds, in line with the recommendations (Box 4). discussed in the accompanying selected issues issues are 9 Haiti's fiscal performance and medium-term paper. recognized the upgrade and central government floating better coordination between monetary for liquidity, which would require assistance from the Fund. Also, markets financial operations, and have requested technical clear signals about market conditions. instruments need to be modernized to provide a amount of financial will reinstate a conventional auction for predetermined In the near term, the BRH oft the recent IMF technical assistance mission BRH bonds, in line with the recommendations (Box 4). discussed in the accompanying selected issues issues are 9 Haiti's fiscal performance and medium-term paper. --- Page 18 --- 16on the Central Bank's Operations Box 4. Haiti: Recommendations for BRH bonds, with bids accepted for the preReinstate a conventional auction announced amount. forecast to link framework, with a macroeconomic Establish a formal targeting policy. the bond auction to the targets on monetary into bonds that would provide BRH credit to the government Convert outstanding income sufficient to conduct monetary operations. the central bank with comparable levels reduce reserve requirements to internationally Gradually (10 percent or less). and relating to foreign currency Review the BRH' S regulations guidelines risks. limits and the management of foreign currency exposure exchange rate regime is and staff agreed that the present floating 28. The authorities 10 The authorities noted that the appreciation ofthe in Haiti's circumstances. before, and expressed the view appropriate reflected its recovery from a year costs remain gourde over the past year S as wage very that it did not have a significant impact on Haiti' competitiveness, been affected. 11 They suggested that performance does not appear to have more important low and export infrastructure, and poor security conditions were political instability, weak 12 Also, since mid-2004 both nominal and real exchange factors weighing on competitiveness. Figure 1). rates have depreciated somewhat (Text the BRH by addressing its losses The authorities agreed on the need to strengthen ofthe 29. and financial autonomy its independence. The legal, operational, defining its role and increasing its legal basis and properly central bank needs to be bolstered by modernizing however, that there was an even more and relations with the government. The staff noted, BRH and to develop a plan to strengthen the operational losses of the urgent need to address in situations with low level of agreed that a flexible exchange rate is appropriate It is generally and vulnerability to real shocks. international reserves, weak fiscal position to monthly wages the sector are estimated at US$4-5 (equivalent 11 Average daily wages in assembly of about US$100). limited consideration by the U.S. congress, is intended to provide 12 The HOPE Act, currently under manufactured with components duty-free access to certain Haitian exports of apparel products trade preferences. Last year, the HERO in the U.S. or countries to which the U.S. grants without Congressional approval. originating favorable alternative for Haiti to the HOPE Act-lapsed Act- a more . international reserves, weak fiscal position to monthly wages the sector are estimated at US$4-5 (equivalent 11 Average daily wages in assembly of about US$100). limited consideration by the U.S. congress, is intended to provide 12 The HOPE Act, currently under manufactured with components duty-free access to certain Haitian exports of apparel products trade preferences. Last year, the HERO in the U.S. or countries to which the U.S. grants without Congressional approval. originating favorable alternative for Haiti to the HOPE Act-lapsed Act- a more --- Page 19 --- 17effectively. 13 The authorities to enable it to conduct monetary operations BRH. This latter step is to its financial position 2005/06 budget a plan to recapitalize the agreed to introduce in the be supported by IMF technical assistance. vulnerabilities were modest. authorities were confident that financial system 30. The remains stable, an assessment also supported Official data indicate that the financial system auditors. In particular, although by banking supervisors and commercial banks' loans from 7 percent in September to loans increased as a share of total adequacy ratio was nonperforming 2004, the average risk-weighted capital banks, and 8.3 percent in December the financial position of commercial The BRH continues to monitor role of 15.1 percent. law that would, inter alia, strengthen the supervisory it is working on a new banking extended its supervision to credit cooperatives. the central bank. Also, the BRH has recently C. Structural Reforms and Governance they attach to enhancing public sector The authorities stressed the importance has been 31. The staff agreed that considerable progress The governance and transparency. reforms in the first half of the fiscal year (Table 13). achieved in implementing structural streamlined and the discretionary use of ministerial expenditure approval process has been Unit became has been sharply reduced. Also, the Anti-Corruption current accounts state-owned telephone and electricity companies operational by end-2004, pre-audits ofthe offers for audits of three other key public sector have been initiated, and requests for sector, the IMF safeguards assessment and have been published. In the financial enterprises ofthe BRH accounts have been largely completed. the external audit commitment to implement the remaining 32. The staff welcomed the authorities' completing the census of under the program. The staff recommended for structural measures workers" and release resources employment in order to reduce the number of"ghost the survey of domestic arrears. in the 2005/06 budget, and also implementing and the priority areas indicated that the census of employment in education The authorities agreed, and in May. Also, they confirmed that the arrears were to begin survey of domestic payment and the list ofbeneficiaries ofa governmentinformation on the execution of the budget for damages suffered from the early program to compensate private businesses The authorities will supported be in line with their earlier commitment. 2004 conflict would published current ministerial accounts to below also continue to limit discretionary spending through credits for nonwage current spending. 10 percent of budgetary losses are subsidized lending to the central government 13 The main sources of the BRH's financial estimated at 1 percent of GDP in 2003/04. See Selected costs, resulting in losses and high sterilization Central Bank." 99 Issues paper "Losses of Haiti's budget for damages suffered from the early program to compensate private businesses The authorities will supported be in line with their earlier commitment. 2004 conflict would published current ministerial accounts to below also continue to limit discretionary spending through credits for nonwage current spending. 10 percent of budgetary losses are subsidized lending to the central government 13 The main sources of the BRH's financial estimated at 1 percent of GDP in 2003/04. See Selected costs, resulting in losses and high sterilization Central Bank." 99 Issues paper "Losses of Haiti's --- Page 20 --- 18Outlook and Debt Sustainability D. Medium-Term projection takes into account the trend 33. The staff's medium-term GDP aid growth inflows (Box 3 and Table 6). The projection output growth and increased foreign assistance of about 10 percent of GDP annually, to assumes a continued inflow of external Accordingly, growth would average 4 percent, support extensive public investment program. external grants) would stabilize at 7 percent of the external current account deficit (excluding would increase to the equivalent of three GDP by 2009, and gross international reserves months of imports. of key social services and to underpin the 34. To support increased provision institutional capacity, government domestic strengthening of the public sector's of GDP over the medium term. This revenues need to increase by 3 percentage points and tax administration, and strengthened would require reforms in the areas oftax policy essential public services would and transparency. Strengthening public sector governance recruit and maintain quality staff in key security, require selective wage increases to share ofGDP is projected to rise by 2009 education, and health sectors, and the wage bill as a The authorities noted that ofGDP, the levels observed in the mid-1990s. would likely to 5 percent administration, and its extension over the entire country, improvements in tax They agreed that the main risks to the mediumbring large increases in government revenues. elections and achieving national outlook derive from potential delays in holding and derail economic term which could undermine continued donor involvement reconciliation, recovery. with renewed donor authorities believe that stronger growth is possible 35. The and a stable business climate. They underscored support, sound macroeconomic policies, noting that unreliable provision of the need to upgrade the country' S infrastructure, difficult security conditions were the main electricity, inadequate road networks, and that higher GDP growth would be and investment. The staff agreed impediments to growth prepared for the 2002 Article IV consultation desirable-along the lines of the projections and enable Haiti to converge toward the (Text Figure 3)-to boost incomes and employment would require a pace of Millennium Development Goals. However, such performance view could not be assumed under reforms and ofinvestment that in the staff S medium term would structural Raising growth to high sustainable levels over the and making present conditions. consensus on the economic and social strategy require achieving broad domestic stability and domestic security. substantial progress toward political The staff agreed impediments to growth prepared for the 2002 Article IV consultation desirable-along the lines of the projections and enable Haiti to converge toward the (Text Figure 3)-to boost incomes and employment would require a pace of Millennium Development Goals. However, such performance view could not be assumed under reforms and ofinvestment that in the staff S medium term would structural Raising growth to high sustainable levels over the and making present conditions. consensus on the economic and social strategy require achieving broad domestic stability and domestic security. substantial progress toward political --- Page 21 --- 19Text Figure 3. Haiti. Real GDP Growth Art. IV 2002 strong Current projections scenario a 2003 200 4 2005 -2 Art. IV 2002, weak scenario Actual -4 of about US$50 million was cautioned that additional donor support 36. The team projected for 2005/06. Total external financing needed to close the external financing gap US$328 million is for the 2005/06 budget and the is projected at USS454 million, of which of elections. The bulk off this external to humanitarian assistance and funding in of the rest corresponds form of but the existing commitments support financing is expected in the grants, The staff encouraged the authorities to seek elections appear to fall short of the projected cost. needs and the external financial support to help meet Haiti' S foreign exchange additional reserves objectives. about Haiti's debt sustainability. The authorities shared the staff's concerns of 37. ratio (in net present value (NPV) terms) Based on end-2004 data, the debt-export The team noted that although on suggests that Haiti' S debt may be unsustainable. assistance), 187 percent or concessionality of pledged favorable assumptions (higher export growth the level of more less worrisome, the fiscal capacity to carry present the debt situation appeared of ensuring that donor assistance was which illustrated the importance The debt was weak, terms and of establishing growth-oriented policies. provided only on highly concessional undertake a formal assessment ofHaiti' s HIPC staffs of the IMF and World Bank will to their respective Boards later this and expect to present its results in a joint paper eligibility, year. accumulation of international stressed the of further 38. The BRH importance In this context, the BRH welcomed for strengthening Haiti's external position. benchmarks for reserves discussion ofthe applicability of alternative the staff S analysis and accumulation targets. The BRH recognized that according establishing medium-term reserve reserves was too low. used benchmarks the present level ofinternational to commonly 14 See Annex V-Debt Sustainability Analysis. Bank will to their respective Boards later this and expect to present its results in a joint paper eligibility, year. accumulation of international stressed the of further 38. The BRH importance In this context, the BRH welcomed for strengthening Haiti's external position. benchmarks for reserves discussion ofthe applicability of alternative the staff S analysis and accumulation targets. The BRH recognized that according establishing medium-term reserve reserves was too low. used benchmarks the present level ofinternational to commonly 14 See Annex V-Debt Sustainability Analysis. --- Page 22 --- -20 - level of reserves in Haiti would Officials stressed, however, that determining the appropriate exchange regime, the high consideration of qualitative factors such as the floating sector, and require remittances and to the assembly export share of imports directly linked to private noted that reserve coverage of about three obligations. Nevertheless, they sufficient low debt-service useful interim operational target that could provide months of imports could be a protection against external vulnerabilities. E. Other Issues assistance from the Fund. In March 2005, a 39. The authorities welcomed technical and Financial Systems Department technical assistance mission from Fund' S Monetary BRH and advised the authorities on the identified the technical assistance priorities of the operations framework. A instruments to upgrade the central bank monetary on-site assessment of appropriate from the Finance Department completed an safeguards are parallel mission missions from the Fiscal Affairs Department the BRH. Two technical assistance administration and tax policy, and public envisaged to recommend measures on revenue technical assistance mission has expenditure management. This expenditure management process and the use of a new budget reviewed steps to strengthen the budget formulation from the Statistics Department will recommend nomenclature. A technical assistance mission timeliness of monetary data reported to the Fund. measures to strengthen the quality and the capacity to The staff underscored the urgency to improving government's and coverage 40. fiscal and monetary data. While the periodicity with produce quality and timely Fund are broadly adequate, problems exist of economic statistics made available to the the standards stipulated in the Technical regard to their timeliness, which does not meet program. The most severe Memorandum of Understanding under the EPCA-supported reserves, which largely reflect the problems exist with regard to data on Haiti' S international at the BRH. The staff decentralization of accounting and financial reporting and reliability, especially excessive authorities' commitment to strengthen data reporting welcomed the of performance under the program. for data required for the monitoring IV. STAFF APPRAISAL initiated last year and the renewed donor support have 41. The political transition and dealing with Haiti's acute social problems. created conditions for restoring growth has restored financial stability, and good Over the past year, the transition government The EPCA is broadly on track, the gourde was made on the structural front. program reserves have increased, and many progress stabilized, inflation is on the decline, net international and security has as envisaged despite a difficult political structural measures were implemented pledged large resources at the July 2004 environment. The international community financial assistance in support of the conference in Washington, and the Fund approved EPCA program. the medium term. As a first step, ahead will be to raise growth over with donors, 42. The challenge the social and economic agenda agreed it would be important to fully implement broadly on track, the gourde was made on the structural front. program reserves have increased, and many progress stabilized, inflation is on the decline, net international and security has as envisaged despite a difficult political structural measures were implemented pledged large resources at the July 2004 environment. The international community financial assistance in support of the conference in Washington, and the Fund approved EPCA program. the medium term. As a first step, ahead will be to raise growth over with donors, 42. The challenge the social and economic agenda agreed it would be important to fully implement --- Page 23 --- -21conditions for fair and safe elections. Prerequisites for raising restore security, and establish broad domestic consensus on the basis would include achieving to growth on a sustainable macroeconomic policies, and continued commitment economic and social strategy, prudent task of a new government to be formed in good governance. In that context, an important development and poverty reduction strategy early 2006 would be to develop a medium-term that could be supported by the international community. economic recovery will 43. In the near term, however, the weaker-than-expected The authorities are finalizing a require policy adjustments and additional 2005 donor that support. seeks to deal with revenue shortfalls supplementary budget for April-September have also been taken to strengthen tax in project disbursements. Welcome steps in and delays shortfalls and protect priority outlays, including administration to prevent further revenue was slower than anticipated. Given the of donor funded projects areas where implementation electricity supply, the supplementary budget political and economic importance of sustaining fuel costs and weaker hydro additional resources needed to cover higher and the also provides outlays will also be needed to strengthen security production. Additional which are essential for ensuring successful elections. government" S control over provinces, community to accelerate appealed to the international The authorities have appropriately for the additional financing needs ofthe disbursement of pledged assistance, including should be minimized. budget, while the recourse to central bank financing recognition of the importance of broad 44. The transition government's parties on the 2005/06 budget is welcome. consultations with civil society and political with government priorities and Early initiation ofthis process will help align donor support in view of the political the needs of all stakeholders, and will be especially half of important next year. The staff welcomes the transition that is envisaged to occur in the first budget total government expenditure authorities' commitment to ensure that in the 2005/06 donor financing, and there will not be will be fully covered by domestic revenues and external any recourse to domestic financing. be to consolidate progress in reducing 45. Monetary conditions need to tightened objectives. The liquidity in the banking inflation and protect the program's external and interest rates raised to positive levels excessive and needs to be absorbed auctions for BRH system appears are committed to re-establishing price-based of in real terms. The authorities 2005/06 budget a plan to strengthen the financial position bonds and to introducing in the of the interim audit ofthe BRH and the central bank. The staff encourages publication assessment mission. welcomes the completion ofthe IMF safeguards in Haiti's circumstances. exchange rate regime has been appropriate 46. The floating exchange market have been implemented The authorities' interventions in the foreign while allowing an increase in international judiciously, without disturbing market conditions the BRH' S objective ofincreasing its comfortable levels. The staff supports reserves to more over the medium term. net international reserves /06 budget a plan to strengthen the financial position bonds and to introducing in the of the interim audit ofthe BRH and the central bank. The staff encourages publication assessment mission. welcomes the completion ofthe IMF safeguards in Haiti's circumstances. exchange rate regime has been appropriate 46. The floating exchange market have been implemented The authorities' interventions in the foreign while allowing an increase in international judiciously, without disturbing market conditions the BRH' S objective ofincreasing its comfortable levels. The staff supports reserves to more over the medium term. net international reserves --- Page 24 --- -22that has been achieved to build on the progress 47. The authorities are encouraged forward the momentum for reforms, and the structural front. It will be important to carry the survey of on the census of employment in the public sector, of in particular to complete and to publish the list of beneficiaries a governmentdomestic arrears ofthe government, businesses for damages suffered from the early supported program to compensate private authorities to strengthen the budget execution 2004 conflict. The staff also encourages the that transfers to commitment to ensure government process, and welcomes the authorities' and that all contracts on electricity production the electricity sector are used as envisaged, and bidding procedures. adhere to open competitive efforts to enhance aid coordination and 48. The staff supports the authorities' to ensure that additional financial additional donor financing. It will be important and external budget mobilize for the budget be provided support that may be required supplementary which will play a key role in reinvigorating financing pledged for this year be fully disbursed, For 2005/06, resources need to be and restoring private sector confidence. needs to be the economy of the budget and elections. New financing could identified to ensure full financing Haiti' S external debt burden, which concessional terms to minimize arrears to the provided on highly The staff welcomes the regularization of and become a source of vulnerability. bilateral donors to defer debt-service payments World Bank and the agreement by some program is in place. the treatment of arrears until a PRGF-supported data reporting to the Fund for program 49. There is an urgent need to improve continue with the delivery of timely fiscal monitoring and surveillance. Serious problems for program monitoring. These data consistent with the standards agreed IMF safeguards and monetary the recommendations ofthe problems can be remedied by implementing from the Fund. assessment mission and technical assistance with Haiti be held on the that the next Article IV Consultation 50. It is recommended standard 12-month cycle. World Bank and the agreement by some program is in place. the treatment of arrears until a PRGF-supported data reporting to the Fund for program 49. There is an urgent need to improve continue with the delivery of timely fiscal monitoring and surveillance. Serious problems for program monitoring. These data consistent with the standards agreed IMF safeguards and monetary the recommendations ofthe problems can be remedied by implementing from the Fund. assessment mission and technical assistance with Haiti be held on the that the next Article IV Consultation 50. It is recommended standard 12-month cycle. --- Page 25 --- E E S I a a D a E - E a E o a J a a € D --- Page 26 --- -24Table 2. Haiti: Selected Economic and Financial Indicators Fiscal Year Ending September 30 2000 2001 2002 2003 2004 Prog. Proj. Proj. (Annual percentage change, unless otherwise indicated) National income and prices GDP at constant prices 1/ 0.9 -1.0 -0.5 0.5 GDP deflator 11.1 -3.8 2.5 2.5 3.0 Consumer prices (period average) 11.6 10.1 26.9 21.9 15.0 15.0 10.6 Consumer 11.5 16.8 8.7 32.5 27.1 16.6 prices (end-of-period) 15.3 12.3 10.1 42.5 22.5 16.6 9.6 12.0 12.0 10.0 External sector Exports (f.o.b.) -2.5 -7.8 -10.5 21.0 12.8 Imports (f.o.b.) 6.8 -2.9 -6.9 13.6 4.8 8.6 4.4 Real effective exchange rate (+ appreciation) -6.0 7.9 -8.9 -8.5 6.0 24.4 31.6 5.4 31.6 Central government Total revenue and grants 2.0 5.2 15.4 37.5 Total revenue 2/ -0.3 31.0 68.7 18.1 Total expenditure 3.8 20.2 37.3 15.9 27.8 25.7 18.0 13.4 8.7 20.6 39.8 17.5 46.5 49.8 19.4 Money and credit Net domestic assets 3/ 18.1 9.4 17.0 26.2 Credit to public sector (net)3/ 7.9 8.5 10.6 6.9 6.2 7.7 Credit to private sector 3/ 16.9 9.4 9.3 4.6 -0.3 0.0 0.0 Broad money (including foreign currency deposits) 36.2 -3.5 5.9 13.0 3.4 7.2 4.9 7.7 Velocity (GDP relative to broad money) 2.6 5.2 2.7 17.2 39.8 9.1 12.8 12.5 13.0 Average interest rate on time deposits 15.0 13.5 2.5 7.6 2.3 2.5 2.7 2.6 2.6 15.0 7.5 (In percent of GDP, unless otherwise indicated) Gross investment 27.3 25.9 24.9 Gross national savings 23.9 22.3 30.7 27.3 27.5 29.1 29.3 Of which: Public sector savings 22.4 29.8 26.5 24.8 25.7 25.1 Savings-investment balance 4/ 0.7 -0.6 1.0 -0.3 1.0 0.2 -0.6 0.2 -3.5 -3.6 -2.5 -0.9 -0.8 -2.7 -3.4 -4.3 Central government overall balance (including grants) -2.2 -2.4 -3.0 -3.5 -2.4 Central government overall balance (excluding grants) -2.5 -2.8 -3.2 -3.6 -1.2 -1.5 -1.7 Central bank net credit to the central government 2.5 2.6 3.1 -3.7 -6.0 -6.6 -7.0 3.1 2.0 0.0 0.0 0.0 External current account balance (including official grants) -1.0 -2.0 -1.0 -0.1 External current account balance (excluding official grants) -6.6 -6.5 -4.9 -4.8 0.4 0.5 0.2 -1.0 External public debt (end-of-period) 29.9 33 -3.7 -6.0 -6.6 -7.0 3.1 2.0 0.0 0.0 0.0 External current account balance (including official grants) -1.0 -2.0 -1.0 -0.1 External current account balance (excluding official grants) -6.6 -6.5 -4.9 -4.8 0.4 0.5 0.2 -1.0 External public debt (end-of-period) 29.9 33 .6 36.1 -2.8 -7.5 -8.6 -9.1 Total public debt (end-of-period) 5/ 31.3 44.4 37.2 30.7 31.2 30.7 External public debt service (in percent of 36.8 39.4 48.2 39.5 32.6 34.1 33.2 exports of goods and nonfactor services) 7.9 8.7 7.9 8.5 9.2 9.2 9.3 7.8 (In millions ofU.S. dollars, unless otherwise indicated) Overall balance of payments -51.9 -7.9 -68.5 -10.9 33.0 Net international reserves 6/ 162.9 108.8 53.0 80.1 64.0 6.1 Liquid gross reserves 7/ 222.3 227.3 38.8 54.5 85.4 83.6 113.6 In months of imports of the following year 2.1 2.2 177.7 157.1 206.9 271.0 277.1 345.8 Exchange rate (gourdes per dollar, end-of-period) 28.3 25.5 1.5 1.2 1.3 1.7 1.6 1.9 29.7 42.0 36.8 Sources: Ministry of Economy and Finance; Bank of the Republic of Haiti; and Fund staff estimates. 1/ Based on the authorities' revised nominal GDP for 2000, 2001, and 2002. 2/ Excluding grants. 3/ In relation to broad money (including foreign currency deposits) at the beginning of the period. 4/ External current account balance excluding official capital grants. 5/ Includes external public sector debt, outstanding Central Bank bonds, and credit from commercial banks to the NFPS. 6/ Excludes commercial banks' foreign currency deposits with the BRH. 7/ Gross reserves excluding capital contributions to international organizations. --- Page 27 --- -25Table 3a: Central Government Operations (In millions of gourdes) 2003/04 2004/05 2005/06 Oct-Sept. Oct-Dec Jan-Mar April-Sept. Oct-Sept. Est. Oct-Sept. Prog. Prel. 4/ Prog. Prel. 5/ Prog. Proj. Prog. Proj. Total Proj. revenue and grants 14,306 5,388 5,647 5,650 6,247 13,022 Total revenue 12,457 4,027 12,235 24,059 24,129 28,497 Current revenue 3,611 3,952 4,104 7,942 7,942 15,921 18,477 12,457 4,027 3,611 3,952 4,104 7,942 7,942 15,921 15,657 Domestic taxes 8,769 3,021 2,596 2,855 2,598 5,474 15,657 18,477 Customs duties 3,481 1,003 917 1,094 5,474 11,351 10,668 Other current revenue 1,112 2,463 2,463 4,560 4,491 ,477 12,457 4,027 3,611 3,952 4,104 7,942 7,942 15,921 15,657 Domestic taxes 8,769 3,021 2,596 2,855 2,598 5,474 15,657 18,477 Customs duties 3,481 1,003 917 1,094 5,474 11,351 10,668 Other current revenue 1,112 2,463 2,463 4,560 4,491 Grants 1,848 1,361 2,036 1,698 Budget 2,143 5,080 4,292 8,138 8,472 support 350 1,129 757 1,400 10,020 Project grants 1,372 1,011 907 1,348 1,174 2,855 4,380 3,535 6,738 5,616 9,490 Total expenditure 15,996 5,893 5,562 5,871 5,867 14,319 15,115 Current expenditure 11,037 4,242 4,067 3,779 26,084 26,544 31,702 Wages ands salaries 3,528 7,590 9,042 15,611 16,637 18,018 Net 4,126 1,883 1,476 1,412 1,393 2,825 3,307 6,121 Operations 4,517 1,072 1,325 1,072 895 2,144 6,176 7,465 Operations 5,160 2,271 4,289 4,491 5,017 1,072 795 1,072 Other current expenditure 1/ -660 2,144 2,271 4,289 4,044 Transfers to the central -83 bank 2/ Interest payments 1,150 1,140 External 1,108 1,054 Domestic Transfers and subsidies 3/ 1,261 1,015 1,050 1,015 Capital expenditure 955 2,031 2,857 4,061 4,861 3,876 4,960 1,651 1,495 2,093 2,339 6,729 6,073 10,473 Domestically financed 3,031 9,906 13,684 Ofv which: counterpart funds 991 1,542 1,184 2,492 2,523 1,061 Forcign-financed 1,929 1,197 1,147 1,596 1,348 5,188 4,889 7,981 7,384 12,623 Current account balance Including current grants 1,897 523 1,546 1,053 Excluding grants 1,421 -215 -456 -343 1,711 1,875 353 -1,100 -980 Overall balance exc. exceptional outlays 1,691 1,866 85 -1,919 381 -6,377 2,880 -10,162 2,415 Exceptional outlays 1,722 Overall balance Including grants -3,413 -505 -222 381 -1,297 Excluding grants -5,261 1,866 -1,951 -2,880 -2,024 -2,415 -3,205 -1,919 -1,763 -6,377 -7,173 -10,162 -10,886 -13,225 Financing 3,413 -85 -381 1,297 2,218 External net financing -190 2,024 1,753 3,205 Loans (net) -990 1,757 2,054 2,187 2,365 -179 438 1,705 984 1,645 1,933 3,788 1,747 Disbursements 415 -3,205 -1,919 -1,763 -6,377 -7,173 -10,162 -10,886 -13,225 Financing 3,413 -85 -381 1,297 2,218 External net financing -190 2,024 1,753 3,205 Loans (net) -990 1,757 2,054 2,187 2,365 -179 438 1,705 984 1,645 1,933 3,788 1,747 Disbursements 791 1,997 1,243 2,318 3,355 2,365 Budgets support 1,748 2,636 5,052 4,669 3,763 Project loans 1,068 1,511 1,283 3,810 2,902 Amortization 808 1,353 1,243 1,768 3,133 -1,136 -300 -352 -291 -673 702 -1,264 -1,314 -1,398 Arrears (Net) 244 -1,896 -1,973 Accumulation -1,601 -1,609 Reduction -49 -49 -1,938 -1,999 0 -1,987 -2,048 Internal net financing 2,807 -115 -767 -460 Banking system 2,789 -115 -767 -163 BRH -460 164 -163 2,821 -74 -773 -378 Commercial banks -32 Arrears -41 -41 -82 (Net) -163 Accumulation Reduction -783 Financing gap Sources: Ministry of Finance and Economy; and Fund staff estimates 1/ Includes statistical diserepancy. 2/To.cover net operational losses of the central bank. 3/ Includes expenditures reclassified from operations to transfers and subsidies in 2004/05. 4/ Total external financing. including grants, was higher than programmed, primarily due to the disbursement ofal US$12.7 million (G483 5/1 Foreign-t -financed capital expenditures include the disbursement ofal US$2.8 million from million) grant from Canada in late December. Grants were higher than programmed. due to the grant Canada for Haiti's membership fee for the Caribbean Development Bank. increase in the grant component of World Bank financing. To.cover net operational losses of the central bank. 3/ Includes expenditures reclassified from operations to transfers and subsidies in 2004/05. 4/ Total external financing. including grants, was higher than programmed, primarily due to the disbursement ofal US$12.7 million (G483 5/1 Foreign-t -financed capital expenditures include the disbursement ofal US$2.8 million from million) grant from Canada in late December. Grants were higher than programmed. due to the grant Canada for Haiti's membership fee for the Caribbean Development Bank. increase in the grant component of World Bank financing. --- Page 28 --- -26Table 3b. Haiti: Central Government Operations (Inp percent ofGDP) 2003/04 2004/05 2005/06 Oct-Sept. Oct-Dec Jan-Mar April-Sept. Oct-Sept. Oct-Sept. Est. Prog. Prel. 4/ Prog. Prel. 5/ Prog. Proj. Prog. 6/ Proj. Proj. Total revenue and grants 10.2 3.3 3.4 3.4 3.8 7.9 Total revenue 8.9 2.4 2.2 2.4 7.4 14.5 14.6 15.1 Current revenue 8.9 2.4 2.2 2.5 4.8 4.8 9.6 9.5 9.8 Domestic taxes 2.4 2.5 4.8 4.8 9.6 9.5 9.8 6.2 1.8 1.6 1.7 1.6 3.3 Customs duties 2.5 0.6 0.6 0.7 3.3 6.9 6.4 0.0 Other current revenue 0.1 0.0 0.7 1.5 1.5 2.8 2.7 0.0 Grants 0.1 0.0 0.2 0.0 0.0 0.0 0.3 1.3 0.8 1.2 1.0 1.3 3.1 2.6 4.9 0.0 Budget support 0.3 0.2 0.7 0.2 0.6 0.4 5.1 5.3 Project grants 1.0 0.6 0.5 0.8 0.7 0.5 0.8 1.7 0.3 2.6 2.1 4.1 3.4 5.0 Total expenditure 11.4 3.6 3.4 3.5 3.5 8.7 Current expenditure 7.9 2.6 2.5 2.3 9.1 15.8 16.0 16.8 Wages and salaries 2.9 1.1 2.1 4.6 5.5 9.4 10.1 9.6 Net Operations 0.9 0.9 0.8 1.7 2.0 3.7 3.7 4.0 3.2 0.6 0.8 0.6 0.5 1.3 1.4 2.6 Operations 3.7 0.6 0.5 0.6 0.6 1.3 1.4 2.7 2.7 Other current expenditure 1/ -0.5 0.0 0.3 0.0 2.6 2.4 0.0 Transfers to the central bank 2/ 0.0 0.0 -0.1 0.0 0.0 0.0 0.3 0.0 Interest 0.0 0.0 0.0 0.0 0.0 payments 0.8 0.2 0.1 0.2 0.2 0.4 0.4 0.0 0.0 0.3 External 0.5 0.1 0.1 0.1 0.1 0.2 0.7 0.7 0.6 Domestic 0.3 0.1 0.1 0.2 0.4 0.4 0.3 Transfers and subsidies 3/ 0.9 0.6 0.1 0.1 0.1 0.2 0.3 0.3 0.3 Capital expenditure 0.6 0.6 0.6 1.2 1.7 2.5 2.9 3.5 1.0 0.9 1.3 1.4 4.1 3.7 6.3 2.1 Domestically financed 2.2 0.3 0.2 0.3 0.6 0.9 6.0 7.3 Ofwhich: counterpart funds 0.0 0.0 0.0 0.1 0.7 1.5 1.5 0.6 Foreign financed 1.4 0.7 0.0 0.2 0.0 0.3 0.0 0. 1.4 4.1 3.7 6.3 2.1 Domestically financed 2.2 0.3 0.2 0.3 0.6 0.9 6.0 7.3 Ofwhich: counterpart funds 0.0 0.0 0.0 0.1 0.7 1.5 1.5 0.6 Foreign financed 1.4 0.7 0.0 0.2 0.0 0.3 0.0 0. 0 0.7 1.0 0.8 3.1 3.0 4.8 4.5 6.7 Current account balance Including current grants 1.4 0.1 0.4 0.3 0.9 0.6 Excluding grants 1.0 -0.1 -0.3 0.1 -0.2 1.0 1.1 0.5 0.3 0.2 -0.7 0.2 -0.6 0.2 Overall balance excl. .0 0.8 3.1 3.0 4.8 4.5 6.7 Current account balance Including current grants 1.4 0.1 0.4 0.3 0.9 0.6 Excluding grants 1.0 -0.1 -0.3 0.1 -0.2 1.0 1.1 0.5 0.3 0.2 -0.7 0.2 -0.6 0.2 Overall balance excl. capital exceptional outlay: -1.2 -1.1 0.1 -1.2 0.2 -3.9 -1.7 -6.1 -1.5 0.0 Exceptional outlays 1.2 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Overall balance Including grants -2.4 -0.3 0.1 -0.1 0.2 -0.8 Excluding grants -3.7 -1.1 -1.2 -1.2 -1.7 -1.2 -1.5 -1.7 -1.1 -3.9 -4.3 -6.1 -6.6 -7.0 Financing 2.4 0.3 -0.1 0.1 -0.2 0.8 External net financing 0.4 0.4 0.4 1.3 1.2 1.1 1.7 Loans (net) -0.1 -0.6 1.1 1.2 1.3 1.1 1.3 -0.1 0.3 0.3 1.0 0.6 1.0 1.2 Disbursements 0.7 0.4 0.5 1.2 0.8 2.3 2.0 1.3 Budget support 0.3 0.3 0.3 1.4 1.6 3.1 2.8 2.0 Project loans 1.1 0.6 0.9 0.8 2.3 1.8 0.4 0.1 0.1 0.2 0.1 0.5 0.8 0.3 Amortization -0.8 -0.2 -0.2 -0.2 -0.2 -0.4 0.8 1.1 1.7 -0.4 -0.8 -0.8 -0.7 Arrears (net) 0.6 0.1 0.1 -1.1 -1.2 0.1 0.1 Accumulation 0.6 0.1 0.2 0.0 0.0 0.1 -1.0 -1.0 0.0 Reduction 0.0 0.0 0.0 0.1 0.2 0.3 0.0 -1.2 -1.2 0.0 0.0 -1.2 -1.2 0.0 Internal net financing 2.0 -0.1 -0.5 0.2 0.4 -0.3 0.1 -0.1 Banking system 2.0 -0.1 -0.5 0.2 0.4 0.0 0.0 BRH -0.3 0.1 -0.1 0.0 0.0 Commercial 2.0 0.0 -0.5 0.3 0.4 -0.2 0.1 0.0 banks 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Arrears (net) 0.0 0.0 0.0 0.0 0.0 -0.1 0.0 0.0 Accumulation 0.6 0.0 0.0 0.0 0.0 0.0 0.0 Reduction 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Financing -0.6 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 gap 0.0 0.0 0.0 0.0 0.0 0.0 0.4 0.0 0.4 .0 0.0 0.0 0.0 Reduction 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Financing -0.6 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 gap 0.0 0.0 0.0 0.0 0.0 0.0 0.4 0.0 0.4 0.0 0.4 Memorandum item: Nominal GDP (millions of gourdes) 140,346 165,432 165,432 165,432 165,432 165,432 165,432 165,432 165,432 188,540 Sources: Ministry ofFinance and Economy; and Fund staff estimates 1/ Includes statistical discrepancy. 2/7 Tocover net operational losses of the central bank. 3/) Includes expenditures reclassified from operations to transfers and subsidies in 2004/05. 4/ Total external financing, including grants, was higher than programmed, primarily due to the disbursement ofal USS12.7 million (G483 5/1 Foreign- -financed capital expenditures include the disbursement ofa US$2.8 million from Haiti's million) grant from Canada in late December. Grants were higher than programmed due to the increase in the World grant Canada for membership fee for the Caribbean Development Bank. grant component of Bank financing. 6/ Program ratios differ slightly from those in Country Report No. 05/6 165 due toa minor revision in nominal GDP. --- Page 29 --- -27Table 4. Haiti: Summary Accounts of the Banking System Fiscal Year Ending September 30 2003/04 2004/05 Dec. March June Sept. 2005/06 Dec. Sept. Prel. Proj. Prog. Proj. Prog. Proj. Proj. Actual Actual Prog. Prog. (In millions of gourdes) I. Central Bank 5,430 6,564 6,823 7,917 6,751 7,475 7,163 7,557 7,920 8,300 10,658 Net foreign assets 1/ (In millions ofU.S. dollars) Neti international reserves (program) Commercial bank deposits 4,413 2,121 2,936 2,301 2,790 2,176 2,221 1,779 1,902 1,469 Net domestic assets 21,581 21,506 20,775 21,959 21,412 21,920 21,486 21,581 21,561 21,561 Credit to the nonfinancial public sector 2/ 20,803 20,887 22,038 21,496 21,998 21,571 21,659 21,645 21,645 Of which: Credit to the central government 20,687 21,659 21,585 -21,027 -21,793 -21,555 -22,265 -21,536 -22,650 -23,644 Liabilities to commercial banks -18,619 -21,253 -20,427 -20,654 Ofwhich: -13,623 -17,708 -16,957 -17,110 -17,103 -18,250 -17,671 -18,026 -17,991 -17,519 -18,700 Cash-in-vault and reserve deposits -3,471 -3,924 -3,543 -3,884 -4,240 3,545 -5,131 4,943 BRH bonds -4,996 -3,545 -3,544 2,558 2,558 1,857 2,558 2,558 Other 2,229 1,793 1,857 2,179 1,857 1,857 9,843 8,685 9,759 10,218 9,541 9,651 9,384 9,336 9,822 9,769 11,134 Currency in circulation II. Consolidated Banking System 14,285 12,683 14,739 15,561 14,758 15,738 15,243 15,519 16,165 16,257 19,645 Net foreign assets Other 2,229 1,793 1,857 2,179 1,857 1,857 9,843 8,685 9,759 10,218 9,541 9,651 9,384 9,336 9,822 9,769 11,134 Currency in circulation II. Consolidated Banking System 14,285 12,683 14,739 15,561 14,758 15,738 15,243 15,519 16,165 16,257 19,645 Net foreign assets (In millions ofU.S. dollars) ofv which: Commercial banks NF A 42,933 44,078 44,359 44,142 45,791 45,843 46,625 46,475 47,927 47,607 52,547 Net domestic assets 20,339 21,023 20,292 21,476 20,919 21,436 20,994 21,097 21,069 21,069 Credit to the nonfinancial public sector 1/ 21,097 21,860 22,436 22,332 23,349 22,889 25,031 23,947 28,887 Credit to the private: sector 21,171 21,142 21,415 11,619 12,039 11,746 13,205 12,250 15,593 In gourdes 10,982 10,893 11,073 11,597 11,644 11,310 11,144 11,827 11,697 13,294 In foreign currency 10,189 10,249 10,341 10,263 10,816 10,688 In millions ofl U.S. dollars 280 1,839 2,592 1,798 2,592 2,592 Other 1,423 1,839 1,921 1,989 1,880 2,592 57,217 56,761 59,098 59,703 60,549 61,581 61,868 61,994 64,092 63,865 72,192 Broad money 9,843 8,685 9,759 10,218 9,541 9,651 9,384 9,336 9,822 9,769 11,134 Currency in circulation 26,584 26,227 27,607 27,275 28,436 28,390 29,440 29,386 33,491 Gourde deposits 23,372 25,824 24,655 24,047 24,268 24,831 24,709 27,567 Foreign currency deposits 24,002 22,252 22,755 23,257 23,401 9,541 9,651 9,384 9,336 9,822 9,769 11,134 Currency in circulation 26,584 26,227 27,607 27,275 28,436 28,390 29,440 29,386 33,491 Gourde deposits 23,372 25,824 24,655 24,047 24,268 24,831 24,709 27,567 Foreign currency deposits 24,002 22,252 22,755 23,257 23,401 In millions ofl U.S. dollars (Percentage change relative to broad money in the preceeding period) 3/ 1.6 -1.5 3.6 5.1 3.7 5.4 4.5 5.0 6.1 6.3 5.3 Nett foreign assets 10.6 0.5 0.1 3.0 3.1 4.5 4.2 6.8 6.2 7.7 Net domestic assets 8.4 0.7 -0.3 0.6 -0.2 0.0 -0.1 0.0 Credit to the nonfinancial public sector 2/ 3.2 4.6 -0.1 -1.4 3.9 3.1 6.9 4.9 7.7 Credit to the private sector 3.5 3.4 0.5 1.3 2.3 2.1 (12- month percentage change) 9.1 3.3 4.3 3.6 5.4 11.9 12.1 12.9 12.5 13.0 Broad money 39.8 2.9 -0.9 3.8 4.0 5.2 10.2 9.6 13.1 12.5 14.0 Currency in circulation 13.3 17.9 13.7 12.2 9.7 8.3 14.0 13.8 14.0 13.8 14.0 Gourde deposits 33.5 -5.2 -3.1 -2.8 2.4 10.1 11.1 11.6 11.0 11.6 Foreign currency deposits 62.9 2.6 8.3 9.5 6.0 7.8 6.6 7.6 11.2 10.7 10.2 Foreign currency deposits (U.S. dollars) 4/ 45.5 17.1 -1.9 6.2 4.0 0.0 -0.1 0.0 Credit to the nonfinancial public sector 2/ 23.9 12.8 3.4 -0.2 0.7 7.0 10.5 18.4 13.3 20.6 Credit to the private sector 22.1 9.2 1.2 3.3 7.5 12.7 12.5 27.3 7.3 0.8 5.6 5.4 5.6 8.9 6.3 21.2 Credit in gourdes 16.9 1.5 0.7 9.9 8.6 17.1 15.4 15.4 14.1 13.6 Credit in foreign currency 28.2 11.2 13.9 14.3 13.2 7.9 14.8 10.1 12.4 Credit in foreign currency (U.S. dollars) 14.6 26.9 15.8 19.7 Memorandum items: End-of- f-period gourdesp per U.S. dollar 16.9 1.5 0.7 9.9 8.6 17.1 15.4 15.4 14.1 13.6 Credit in foreign currency 28.2 11.2 13.9 14.3 13.2 7.9 14.8 10.1 12.4 Credit in foreign currency (U.S. dollars) 14.6 26.9 15.8 19.7 Memorandum items: End-of- f-period gourdesp per U.S. dollar Neti international reserves in 13.3 11.1 11.6 12.2 12.4 13.0 14.8 percent of fbroad money 9.5 11.6 11.5 12.1 Share in foreign currency (in percent) 46.1 47.0 45.9 47.5 45.8 46.1 45.8 45.7 45.1 Bank deposits 50.7 46.3 47.9 48.4 48.7 47.2 48.8 46.0 Credit to the private sector 48.1 48.5 48.3 46.9 48.2 47.0 44.4 47.5 45.8 46.7 Commercial Bank USSI loan/USS deposits 42.4 46. 1 45.4 44.1 46.2 43.3 Sources: Bank of the Republic of Haiti; and Fund staff estimates. 1/1 Includes commercial banks' foreign currency deposits. For program monitoring, they are excluded from net international reserves. 2/1 Excludes special accounts. 3/1 Fora all quarters, percentage change is calculated relative tot the previous September. 4/1 Percentage change calculated on US dollar values. --- Page 30 --- - 28Table 5. Haiti: Balance of Payments (In millions ofU.S. dollars; unless otherwise indicated) Prel. Prog. Proj. Proj. Current account deficit (-) (excluding grants) -168.1 -141.0 -97.5 -333.0 Trade balance (deficit -) -709.4 -375.5 -409.8 Exports, f.o.b. -785.4 -809.9 -1,078.8 -1,151.1 -1,217.6 Of which: Assembly industry 273.2 330.4 372.7 390.7 404.8 422.7 exports 220.8 278.1 319.0 334.1 344.2 Imports, f.o.b. 141.0 -97.5 -333.0 Trade balance (deficit -) -709.4 -375.5 -409.8 Exports, f.o.b. -785.4 -809.9 -1,078.8 -1,151.1 -1,217.6 Of which: Assembly industry 273.2 330.4 372.7 390.7 404.8 422.7 exports 220.8 278.1 319.0 334.1 344.2 Imports, f.o.b. -982.6 -1,115.8 -1,182.6 -1,469.5 358.9 Of which: Petroleum products -157.3 -1,555.9 -1,640.3 Services (net) -146.3 -218.0 -307.6 -273.8 -265.3 -92.6 -152.1 -204.9 -211.9 -216.8 Receipts 163.7 130.9 131.7 159.2 -232.1 Payments 159.8 176.5 Income -256.3 -283.0 -336.6 -371.0 -376.6 (net) -408.6 Of which: -15.2 -14.3 -13.6 -22.2 -22.7 -25.9 Interest payments -13.5 -14.7 -17.7 -17.6 Private transfers (net) 1/ -17.8 -13.6 649.0 810.8 931.0 979.9 1,015.1 1,065.8 External grants 135.1 137.2 113.1 357.5 385.9 364.1 Current account deficit (-) (including grants) -33.0 -3.7 15.6 24.5 10.4 -45.7 Capital and financial acco ounts (deficit -) -35.4 -7.2 17.4 56.9 Public sector capital flows (net) -8.0 25.3 53.6 51.8 Loan disbursements -4.6 99.7 88.3 56.3 13.0 49.6 24.0 133.0 Amortization 122.9 89.6 -21.0 -24.3 -28.6 -33.3 Banks (net) 2/ -34.6 -33.3 Direct investment 3.1 -46.8 29.0 -50.1 -42.1 -24.5 4.7 7.8 5.9 7.4 Other 3/ 7.4 20.0 -35.3 6.5 -12.9 0.0 0.0 0.0 Overall balance (deficit -) -68.5 -10.9 33.0 81.4 64.0 6.1 Financing 68.5 10.9 -33.0 -81.4 -81.4 Change in net international reserves (increase -) 4/ 41.0 9.7 -52.8 -38.0 -39.1 -56.1 Change in arrears (reduction -) 27.4 -56.1 Rescheduling 1.3 19.8 -43.4 -42.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Financing gap 0.0 0.0 0.0 0.0 17.4 50.0 Memorandum items: Current account balance, excluding grants (in percent ofGDP) -4.9 -4.8 -2.8 -7.5 -8.6 Current account balance, including -9.1 grants (in percent of GDP) -1.0 -0.1 0.4 0.5 Exports (f.o.b) growth -10.5 21.0 0.2 -1.0 Import (f.o.b) growth 12.8 4.8 8.6 4.4 External debt -6.9 13.6 6.0 24.3 31.6 as percent of exports 286.1 284.7 261.0 5.4 NPV of external debt as percent of exports 200.9 195.9 248.9 240.4 230.0 Debt service as percent of exports 7.9 186.8 173.3 Net foreign assets of the central bank (USS million) 8.5 9.2 9.2 9.3 7.8 135.1 -6.9 13.6 6.0 24.3 31.6 as percent of exports 286.1 284.7 261.0 5.4 NPV of external debt as percent of exports 200.9 195.9 248.9 240.4 230.0 Debt service as percent of exports 7.9 186.8 173.3 Net foreign assets of the central bank (USS million) 8.5 9.2 9.2 9.3 7.8 135.1 125.5 178.3 215.8 217.4 Gross liquid international reserves (USS million) 4/ 177.7 157.0 206.9 277.1 273.5 Gross international reserves (in months 277.1 345.8 ofi imports of goods and services) 2.2 1.8 2.0 2.0 1.9 Gross international reserves (in months 2.3 ofi imports of goods and services) 5/ 0.9 0.6 0.7 0.9 0.9 Gross liquid international reserves (in months 1.1 of next year's imports of goods and services) 4/ 1.5 1.2 1.3 1.7 1.6 1.9 Sources: Data provided by the central bank; and Fund staff estimates. services) 2.2 1.8 2.0 2.0 1.9 Gross international reserves (in months 2.3 ofi imports of goods and services) 5/ 0.9 0.6 0.7 0.9 0.9 Gross liquid international reserves (in months 1.1 of next year's imports of goods and services) 4/ 1.5 1.2 1.3 1.7 1.6 1.9 Sources: Data provided by the central bank; and Fund staff estimates. 1/ Based on remittances transferred through authorized "transfer houses" and central bank, estimates of such transfers channeled 2/ Excludes commercial banks' foreign currency deposits with the BRH. through other means. 3/1 Includes short-term capital and errors and omissions. 4/1 Includes commercial banks' forcign currency deposits with the BRH. --- Page 31 --- -29Table 6. Haiti: Medium-Term Scenario Prel. Proj. 2001 2002 2003 2004 2005 2006 2007 2008 2009 Real sector (annual percentage rate) Real GDP growth -1.0 -0.5 0.5 -3.8 2.5 3.0 Inflation (CPI end-of-period) 12.3 4.0 4.0 4.0 10.1 42.5 22.5 12.0 10.0 8.0 7.0 6.0 Fiscal sector (in percent of GDP) Central government overall balance (including grants) -2.4 -3.0 -3.5 -2.4 -1.5 -1.7 Total revenue and grants 8.0 8.5 -1.6 -1.7 -1.6 Central 9.1 10.2 14.6 15.1 15.7 16.2 government revenue 1/ 7.6 8.3 9.0 8.9 9.5 9.8 17.3 Central government expenditure 2/ 10.4 11.5 10.5 11.2 12.3 Domestic 12.6 12.6 16.0 16.8 17.3 17.9 18.9 financing 2.6 2.7 2.9 2.0 0.0 0.0 External financing 0.0 0.0 0.0 -0.2 0.3 0.6 0.4 1.5 1.7 1.6 1.7 1.6 Monetary sector Growth in Broad Money 5.2 17.2 39.8 9.1 12.5 13.0 13.6 11.7 10.9 External sector (in percent of GDP) Trade Balance -20.9 -20.5 -26.6 -22.9 -26.4 -27.1 -26.4 -25.8 Services (net) -3.0 -2.7 -5.1 -5.8 -5.0 -5.2 -24.5 Income (net) -5.5 -5.8 -5.7 0.0 -0.4 -0.5 -0.4 -0.5 -0.6 Private transfers (net) 17.3 -0.1 0.0 0.1 18.7 27.4 26.3 23.3 23.8 23.7 23.2 External grants 4.5 3.9 4.6 3.2 8.9 23.0 Current account (incl. net) -5.5 -5.8 -5.7 0.0 -0.4 -0.5 -0.4 -0.5 -0.6 Private transfers (net) 17.3 -0.1 0.0 0.1 18.7 27.4 26.3 23.3 23.8 23.7 23.2 External grants 4.5 3.9 4.6 3.2 8.9 23.0 Current account (incl. official transfers) 8.1 7.7 8.2 7.8 -2.0 -1.0 -0.1 0.4 0.2 -1.0 -0.2 Current account (excl. official transfers) -6.5 -4.9 -4.8 -2.8 -0.7 0.7 External financing -8.6 -9.1 -8.4 -8.4 -7.1 gap 0.0 0.0 0.0 0.0 0.4 1.1 Of which: Central government 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.4 0.4 0.0 Liquid gross reserves (in millions ofU.S. dollars) 227.3 177.7 157.1 206.9 277.1 0.0 0.0 In months of imports of the following year 2.2 1.5 345.8 380.3 476.3 603.7 1.2 1.3 1.6 1.9 2.0 2.5 3.0 Memorandum Items: Nominal GDP (millions ofg gourdes) 85,700 93,840 119,616 140,346 165,432 188,540 214,143 239,265 264,887 Sources: Haitian authorities; and Fund staff estimates. .0 In months of imports of the following year 2.2 1.5 345.8 380.3 476.3 603.7 1.2 1.3 1.6 1.9 2.0 2.5 3.0 Memorandum Items: Nominal GDP (millions ofg gourdes) 85,700 93,840 119,616 140,346 165,432 188,540 214,143 239,265 264,887 Sources: Haitian authorities; and Fund staff estimates. 1/1 Includes current revenue and transfers from the BRH. 2/1 Includes exceptional outlays. --- Page 32 --- - 30Table 7: Haiti Indicators of Fund Credit, 2004-2009 (Fiscal year ending September 30) Outstanding Fund credit 1/ 7.6 14.8 11.8 10.2 6.4 1.3 In millions ofSDRs 446.0 855.5 751.5 700.1 461.4 96.4 In millions of Gourde 18.1 14.4 12.5 7.8 1.6 In percent of quota 9.3 0.3 0.2 0.0 In percent ofGDP 0.3 0.5 0.4 In percent of exports of goods and services 2.2 4.0 3.0 2.5 1.5 0.3 Debt service to the Fund 2/ 3/ In millions of SDRs 5.0 3.5 3.5 2.0 4.2 5.5 294.8 204.7 225.3 136.3 304.9 412.6 In millions ofGourde 4.3 4.3 2.4 5.2 6.7 In percent of quota 6.1 0.1 0.1 0.1 0.2 In percent ofGDP 0.2 0.1 In percent of exports of goods and services 1.5 1.0 0.9 0.5 1.0 1.2 In percent ofdebt service due 16.0 10.3 11.4 5.9 11.4 14.3 (In millions of SDRs) -4.9 7.2 -3.0 -1.5 -3.8 -5.1 Net use ofFund credit 10.2 0.0 0.0 0.0 0.0 Disbursements 0.0 4.9 3.0 3.0 1.5 3.8 5.1 Repayments Sources: IMF, Finance Department, and staff projections. 1/ Includes the 12.5 percent of quota disbursement under the emergency post-conflict assistance. 2/ Including SDR charges. 3/ Before subsidization ofGRA charges. 3.0 -1.5 -3.8 -5.1 Net use ofFund credit 10.2 0.0 0.0 0.0 0.0 Disbursements 0.0 4.9 3.0 3.0 1.5 3.8 5.1 Repayments Sources: IMF, Finance Department, and staff projections. 1/ Includes the 12.5 percent of quota disbursement under the emergency post-conflict assistance. 2/ Including SDR charges. 3/ Before subsidization ofGRA charges. --- Page 33 --- -31Table 8. Haiti: Indicators of External Vulnerability (Units as indicated) Prel. Proj. 2001 2002 2003 2004 2005 2006 2007 2008 2009 Debt indicators 33.6 36.1 44.4 37.2 31.2 30.7 30.6 30.6 30.5 Total external public debt in percent of GDP 261.0 240.4 230.0 235.4 238.1 233.8 Total external public debt in percent of exports 1/ 273.3 286.1 284.7 1.2 1.0 1.1 1.1 1.1 External debt service in percent of GDP 1.1 1.0 1.3 1.3 0.8 0.8 0.6 0.8 0.8 0.8 0.7 0.8 0.8 Amortization 0.3 0.4 0.5 0.5 0.4 0.3 0.3 0.3 0.3 Interest 8.7 7.9 8.5 9.2 9.3 7.8 8.3 8.7 8.3 External debt service in percent of exports 1/ 5.7 6.1 5.6 6.0 6.4 6.4 Amortization 6.2 4.8 5.3 2.2 2.2 2.0 2.5 3.1 3.2 3.5 3.1 2.3 Interest central reve 15.1 13.1 15.3 13.7 12.7 11.1 10.5 10.2 9.1 External debt service in percent of current government 9.5 8.5 8.4 7.9 7.7 7.6 6.9 Amortization 10.8 4.3 8.0 5.1 5.7 5.2 4.3 3.2 2.8 2.6 2.2 Interest Other indicators -7.8 -10.5 21.0 12.8 8.6 4.4 4.3 5.3 5.4 Exports (percent change, 12-month basis in U.S. dollars) 6.0 5.4 3.6 3.8 1.9 Imports (percent change, 12-month basis in U.S. dollars) -2.9 -6.9 13.6 31.6 25.4 25.0 income 18.6 19.1 25.3 23.4 26.2 25.9 25.5 Remittances and grants in percent of gross disposable Real effective exchange rate appreciation (+) (end of period) 7.9 -8.9 -8.5 31.6 23.8 27.1 40.5 39.7 Exchange rate (per U.S. , 12-month basis in U.S. dollars) -2.9 -6.9 13.6 31.6 25.4 25.0 income 18.6 19.1 25.3 23.4 26.2 25.9 25.5 Remittances and grants in percent of gross disposable Real effective exchange rate appreciation (+) (end of period) 7.9 -8.9 -8.5 31.6 23.8 27.1 40.5 39.7 Exchange rate (per U.S. dollar, period average) -45.7 -32.7 -8.9 35.4 Current account balance (US$ million) 2/ -72.5 -33.0 -3.7 15.6 10.4 balance (USS million) 64.5 -35.4 -7.2 17.4 53.6 51.8 67.2 104.9 91.9 Capital and financial account 0.8 -8.0 25.3 -4.6 88.3 56.3 77.0 88.2 85.7 Public sector 63.8 -27.5 -32.5 22.0 -34.7 -4.5 -9.8 16.8 6.2 Private sector 3/ 227.3 177.7 157.1 206.9 277.1 345.8 380.3 476.3 603.7 Liquid gross reserves (USS million) 2.2 1.5 1.2 1.3 1.6 1.9 2.0 2.5 3.0 In months of imports of the following year 1/ 833.0 923.4 909.4 1,074.6 1,361. 1.8 In percent of amortizations due in the following year 1,084.5 730.6 548.6 598.3 63.4 76.0 90.3 49.9 40.0 36.7 34.9 47.1 65.0 In percent of base money Sources: Central Bank of Haiti; and] Fund staff estimates. 1/ Goods and services. 21 Including grants. 3/ Includes short-term capital, errors and omissions. --- Page 34 --- - 32Table 9. Haiti: Stock of Arrears and Projected Debt Service, 2000-05 (Fiscal year ending September 30, in millions ofU.S. dollars) Est. Proj. 6.0 17.8 50.9 52.1 78.1 Total arrears Multilateral Creditors 2.1 11.2 39.0 33.3 49.2 0.2 4.0 19.6 0.0 0.0 IDB IDA-WORLD BANK 0.8 6.1 19.0 32.4 49.2 0.2 0.0 0.0 0.0 0.0 IMF Other (OPEC and FIDA) 0.9 1.1 0.4 0.9 0.0 Bilateral Creditors 3.9 6.6 11.9 18.8 28.9 55.9 Projected debt service 1/ 45.8 Multilateral creditors 21.6 IDB 16.5 IDA-WORLD BANK 4.8 IMF 3.0 Other (OPEC and FIDA) 10.1 Bilateral Creditors Sources: BRH; and staff projections 1/ Excluding arrears reduction. FIDA) 0.9 1.1 0.4 0.9 0.0 Bilateral Creditors 3.9 6.6 11.9 18.8 28.9 55.9 Projected debt service 1/ 45.8 Multilateral creditors 21.6 IDB 16.5 IDA-WORLD BANK 4.8 IMF 3.0 Other (OPEC and FIDA) 10.1 Bilateral Creditors Sources: BRH; and staff projections 1/ Excluding arrears reduction. --- Page 35 --- - 33Table 10. Haiti: External Financing Requirements and Sources, 2000-05 (In millions ofU.S. dollars; unless otherwise indicated) Prel. Proj. 1,405.3 1,269.6 1,237.1 1,467.2 1,582.5 2,066.2 External resources (identified) 503.0 442.6 436.9 461.3 504.4 564.6 Exports of goods and services -1.7 0.4 4.0 -4.9 Income (net) 28.2 12.5 649.0 810.8 931.0 1,015.1 Private transfers (net) 578.0 623.6 385.4 221.3 160.6 135.1 137.2 113.1 Official transfers (net) 7.8 5.9 7.4 Foreign Direct investment 8.0 2.0 4.7 Medium- and long-term official loans 66.9 28.3 13.0 49.6 24.0 98.7 0.0 0.0 0.0 0.0 0.0 15.6 Of which: IMF purchase 1,386.8 1,316.2 1,193.2 1,462.6 1,566.6 2,139.5 Use of resources 1,355.0 1,300.8 1,238.9 1,398.8 1,519.2 1,932.5 Imports of goods and services 32.6 25.6 6.4 37.5 26.4 94.3 Debt Service payments 6.0 11.8 27.4 1.3 19.8 -42.3 Of which: net accumulation of arrears 14.3 15.1 7.4 5.0 IMF repurchases and charges 4.0 1.0 65.6 -59.9 4.9 -63.3 -35.6 42.6 Buildup of gross reserves 55.1 -16.3 -3.1 46.8 -29.0 42.1 Commerical banks buildup of reserves Other capital incl. errors and omissions -18.6 46.6 -43.9 -4.6 -15.8 0.0 0.0 0.0 0.0 0.0 0.0 73.3 Financing gap 0.0 0.0 0.0 0.0 0.0 40.3 Program loans and grants 0.0 0.0 0.0 15.6 IMF purchase 0.0 0.0 0.0 17.4 Residual financing need 0.0 0.0 0.0 0.0 Sources: Data provided by the central bank; and Fund staff estimates. 0.0 0.0 0.0 0.0 0.0 73.3 Financing gap 0.0 0.0 0.0 0.0 0.0 40.3 Program loans and grants 0.0 0.0 0.0 15.6 IMF purchase 0.0 0.0 0.0 17.4 Residual financing need 0.0 0.0 0.0 0.0 Sources: Data provided by the central bank; and Fund staff estimates. --- Page 36 --- -34Table 11. Haiti: External Assistance to the Government and Debt Service (In millions ofU.S. dollars) Cumulative 2003- 04 2004-05 2005-06 2003 06 70.6 345.8 328.0 744.5 External assistance to the government 1/ 48.6 194.3 300.4 543.4 Budgetary financing of projects 94.1 157.2 284.5 Bilateral creditors 33.2 14.8 31.5 78.4 124.7 United States 4.7 35.1 58.6 98.4 Canada 5.9 14.1 0.0 20.0 Taiwan 4.0 7.0 8.9 19.9 France 3.8 6.3 11.2 21.4 Others 15.4 100.2 143.3 258.9 Multilateral creditors 0.0 6.7 21.0 27.7 World Bank 9.5 40.0 56.7 106.2 IDB 5.4 49.1 60.3 114.7 EU 0.5 4.5 5.3 10.3 Other 22.0 151.5 27.6 201.1 Budget support 12.0 50.4 12.6 75.0 Bilateral creditors 12.0 36.4 12.6 61.0 United States 0.0 12.7 0.0 12.7 Canada 0.0 0.0 0.0 0.0 Taiwan 0.0 1.3 0.0 1.3 France 0.0 0.0 0.0 0.0 Others 10.0 101.1 15.0 126.1 Multilateral creditors 0.0 61.8 0.0 61.8 World Bank 10.0 39.3 15.0 64.3 IDB 0.0 0.0 0.0 0.0 EU 0.0 0.0 0.0 0.0 Other 50.7 55.9 46.4 153.1 Debt service 10.2 10.1 9.0 29.2 Bilateral creditors 40.6 45.8 37.5 123.9 Multilateral creditors 19.9 289.9 281.6 591.3 Net transfers 35.1 134.4 160.8 330.3 Bilateral creditors -15.2 155.5 120.8 261.1 Multilateral creditors Sources: Data provided by donors, the central bank, and staff projections. 1/ Includes only identified financing; excludes humanitarian assistance and election financing. .2 10.1 9.0 29.2 Bilateral creditors 40.6 45.8 37.5 123.9 Multilateral creditors 19.9 289.9 281.6 591.3 Net transfers 35.1 134.4 160.8 330.3 Bilateral creditors -15.2 155.5 120.8 261.1 Multilateral creditors Sources: Data provided by donors, the central bank, and staff projections. 1/ Includes only identified financing; excludes humanitarian assistance and election financing. --- Page 37 --- - 35Table 12. Haiti: Millennium Development Goals (Cont.) Target 1990 1995 2001 2002 2003 2015 Goal 1. Eradicate Extreme Poverty and Hunger Target 1: Halve, between 1990 and 2015, the proportion of people whose income is less than one dollar a day. 1. Population below USSI a day (in percent) 2. Poverty gap ratio at US$I a day (in percent) 3. Share of income or consumption held by poorest 20 percent (in percent) Target 2: Halve, between 1990 and 2015, the proportion of people suffering hunger 4. Prevalence of child malnutrition (percent of children under 5) 26.8 27.5 17.3 13.4 5. Population below minimum level ofdietary energy consumption (in percent) 65.0 60.0 49.0 32.5 Goal 2. Achieve Universal Primary Education Target 3. Ensure that, by 2015, children will be able to complete a full course of primary schooling. 22.1 56.1 6. Net primary enrollment ratio (percent of relevant age group) 7. Percentage of cohort reaching grade 5 54.8 59.7 65.3 66.2 66.2 8. Youth literary rate (percent ages 15-24)2/ Goal 3. Promote Gender Equality and Empower Women Target 4. Eliminate gender disparity in primary and secondary education preferably by 2005 and to all levels of education by 2015 9. Ratio of girls to boys in primary and secondary education (percent) 94.6 100 100 96.3 98.6 100.8 101.1 101.1 10. Ratio of young literate females to males (percent ages 15-24) 11. Share of women employed in the nonagricultural sector (percent) 39.5 12. Proportion of seats held by women in the national parliament (percent) 2/ Goal 4. Reduce Child Mortality Target 5. Reduce by two-thirds, between 1990 and 2015, the under five mortality rate 150 137 125 123 118 13. Under-five mortality rate (per 1,000) 14. Infant mortality rate (per 1,000 live births) 15. Immunization against measles (percent of children under 12 months) Goal 5. Improve Maternal Health Target 6. Reduce by three-quarters, between 1990 and 2015, the maternal mortality ratio. 16. Maternal mortality ratio (modeled estimate, per 100,000 live births) 1,000 1,100 680 17. Proportion of births attended by skilled health personnel 23 19.5 23.8 118 13. Under-five mortality rate (per 1,000) 14. Infant mortality rate (per 1,000 live births) 15. Immunization against measles (percent of children under 12 months) Goal 5. Improve Maternal Health Target 6. Reduce by three-quarters, between 1990 and 2015, the maternal mortality ratio. 16. Maternal mortality ratio (modeled estimate, per 100,000 live births) 1,000 1,100 680 17. Proportion of births attended by skilled health personnel 23 19.5 23.8 --- Page 38 --- - 36Table 12. Haiti: Millennium Development Goals (Concl.) Target 1990 1995 2001 2002 2003 2015 Goal 6. Combat HIV/AIDS, Malaria, and Other Diseases Target 7. Halt by 2015, and begin to reverse, the spread of HIV/A AIDS 5.5 5.6 18. HIV prevalence among females (percent ages 15-24) 28.1 19. Contraceptive prevalence rate (percent of women ages 15-49) 11 17.6 20. Number of children orphaned by HIV/AIDS 200,000 Target 8. Halt by 2015, and begin to reverse, the incidence of malaria and other major diseases 21. Prevalence of death associated with malaria 22. Share of population in malaria risk areas using effective prevention and treatment 100,000 433 409 386 23. Incidence of tuberculosis (per people) 2 31 41.2 46 24. Tuberculosis cases detected under DOTS (percent) Target 9. Integrate the principles of sustainable development into policies and programs. Reverse the loss of environment resources. 25. Forest area (percent of total land area) 5.7 3.2 26. Nationally protected areas (percent of total land area) 0.4 0.4 0.4 27. GDP per unit of energy use (PPP $ per Kg oil equivalent) 7.7 6.2 6.4 6.4 0.2 0.1 0.2 0.2 28. CO2 emissions (metric tons per capita) 29. Proportion of population using solid fuels Target 10. Halve by 2015 proportion of people without access to safe drinking water 30. Access to improved water source (percent of population) 46 71 76.5 Target 11. Achieve by 2020 significant improvement for at least 100 million slum dwellers 31. Access to improved sanitation (percent of population) 28 34 66.2 32. Access to secure tenure (percent of population) Goal 8. Develop a Global Partnership for Development 1/ Target 16. Develop and implement strategies for productive work for youth 45. Unemployment rate of population ages 15-24 (total) Female Male Target 17. Provide access to affordable essential drugs 46. Proportion of population with access to affordable essential drugs Target 18. Make available new technologies, especially information and communications 6.9 8.4 20.7 32.5 55.2 47. Fixed line and mobile telephones (per 1,000 people) 48. Personal computers (per 1,000 people) Sources: World Bank; UN Statistics Division, and Fund staff estimates 1/ Targets 12-15 and indicators 33-44 are excluded because they cannot be measured on a country specific basis. These are related to official development assistance, market access, and HIPC initiative. 2/1 Data for 2004 are the same as 2003 data. , especially information and communications 6.9 8.4 20.7 32.5 55.2 47. Fixed line and mobile telephones (per 1,000 people) 48. Personal computers (per 1,000 people) Sources: World Bank; UN Statistics Division, and Fund staff estimates 1/ Targets 12-15 and indicators 33-44 are excluded because they cannot be measured on a country specific basis. These are related to official development assistance, market access, and HIPC initiative. 2/1 Data for 2004 are the same as 2003 data. --- Page 39 --- -37Table 13. Haiti: Status of Main Policy Actions Under the EPCA Status Fiscal Policy Prepare the 2005/06 budget according to the new budget nomenclature for all To be completed by end-April revenue and expenditure by end-March 2005. In particular: 2005. A Establish, by end-March 2005, a macro framework for the 2005/06 budget, and indicative ceilings for current and capital expenditures (inclusive of donor-financed spending) to be sent to spending ministries; and Limit the amount budgeted for the "interventions publiques" post to Decree ending the systematic 21 percent of domestically financed spending, and cease systematic internal control by the internal control for normal expenditure by end-December 2004 by the CSCCA has been approved by Cour Supérieure des Comptes et du Contentieux Administratif (CSCCA), the Cabinet and will shortly the external audit body established by the Constitution. be published in the next official journal. Complete a comprehensive survey to identify domestic payment arrears of the A consultant will be hired to central government by end-March 2005; verify the authenticity ofthe reported assist with the survey, which arrears by the CSCCA and establish a strategy to clear past arrears by endis envisaged to be completed June 2005. by end-June 2005. Finalize and publish the CSCCA's audit report on the annual accounts of the central government for 2001/02 and 2002/03 by end-September 2005. CSCCA to launch an audit of the treasury accounts for 2003/04 by endSeptember 2005, with a view to completing and publishing the audit by December 2005. Extend computerized data collection at customs. Customs has been training personnel to enhance computerized data collection. Implement pre-shipment verification to all ports of entry and borders of Haiti by September 2005. Establish a program for the reinforcement and use of the central tax payer file A program has been prepared. on the basis of tax payers' Fiscal Identification Number (NIF) by March 2005. Monetary and Financial Sector Policy Continue monthly briefing sessions between the BRH and the banking sector Monthly briefing sessions for and introduce quarterly briefings for the private sector to communicate the the banking sector have taken orientation of monetary policy and receive feedback. place regularly; however quarterly briefings for the private sector have not yet started. Strengthen surveillance of cooperatives, including by expanding on-site A plan to strengthen inspections. surveillance of cooperatives is in place. On-site inspection started in November 2004. Revise by September 2005 a draft of a new central bank (BRH) law that would establish independence of the central bank. and the banking sector Monthly briefing sessions for and introduce quarterly briefings for the private sector to communicate the the banking sector have taken orientation of monetary policy and receive feedback. place regularly; however quarterly briefings for the private sector have not yet started. Strengthen surveillance of cooperatives, including by expanding on-site A plan to strengthen inspections. surveillance of cooperatives is in place. On-site inspection started in November 2004. Revise by September 2005 a draft of a new central bank (BRH) law that would establish independence of the central bank. --- Page 40 --- - 38Table 13. Haiti: Status of Main Policy Actions Under the EPCA Complete IMF safeguards assessment. The on-site inspection was completed on March 18, 2005. Complete external audit of the 2003/04 BRH annual accounts by an An external audit firm has international, reputable auditing firm. been hired. Program financing and arrears clearance Regularize arrears to the World Bank. Completed. Contact Paris Club creditors to develop a plan for addressing arrears and start An informal standstill the data reconciliation process. agreement on payments to selected Paris Club creditors has been reached for the program period. Data reconciliation process ongoing. Governance Anti-Corruption Unit to become operational by end-December 2004. Completed. Complete pre-audit of Teleco and launch pre-audit of EDH by end-December Pre-audits of Teleco and EDH 2004. have been initiated. Complete a census of employment by end-March 2005 of the ministries and The census is envisaged to be key public enterprises (Teleco, EDH, CAMEP, AAN, and APN). completed by end-June 2005. Prepare by end-December terms of reference for hiring international financial Requests for offers for audits auditing firms with a view to launching the audit of CAMEP, AAN, and APN of the three public sector before end-June 2005. enterprises have been published. Other Set up a working group of the Ministry of Economy and Finance and the BRH Working group has been and establish meetings regularly to ensure quality and timeliness of fiscal and meeting twice a month since monetary data reporting. November 2004. Implement and publish new CPI by June 2005, with the August 2004 base. Good progress has been made on the implementation of'new CPI. --- Page 41 --- - 39Figure 1. Haiti- Inflation and Monetary Developments 1/ The exchange rate has stabilized, and CPI inflation has helped by a reduction of monetary financing ofthe budget and low food price inflation, notwithstanding been declining... pressures from international fuel prices. 60 17 Inflation and exchange rate Monthly inflation by component 50 14 (percent) Other 40 11 Monthly inflation DTransportation Food Exchange rate 30 8 (G/USS) 20 5 12-month inflation (percent, left axis) 10 2 T 0 1 e e S a & a U S de a y a 3 E E E É 3 U E S & 2 E E E 7 As credit to the central government has declined, and reducing the overall stock and interest rates on monetary authorities have eased monetary conditions BRH bonds. by accumulating net international reserves... 8,000 Contribution to gourde money growth 45 BRH bonds 7,000 40 (12-month percent change relative to gourde 6,000 money) Stock (millions of gourdes) / 5,000 M2 a W 4,000 / 3,000 10 Net credit to central government A 2,000 91-day bond rate (percent, left axis) 1,000 NIR -10 a é 8 8 a 8 0 y V y 0 a 0 do 3 a a S E - a 3 S E S à 3 E N Dy 0 3 E 3 & 2 Commercial banks' excess reserves increased while and banks reduced interest rates on gourde deposits recovery of credit to the private sector remains sluggish, tol below dollar deposit rates. 35 40 Commercial banks' excess reserves Interest rates 45 and credit to the private sector 30 35 (weighted average, percent) 000 NIR -10 a é 8 8 a 8 0 y V y 0 a 0 do 3 a a S E - a 3 S E S à 3 E N Dy 0 3 E 3 & 2 Commercial banks' excess reserves increased while and banks reduced interest rates on gourde deposits recovery of credit to the private sector remains sluggish, tol below dollar deposit rates. 35 40 Commercial banks' excess reserves Interest rates 45 and credit to the private sector 30 35 (weighted average, percent) 91-day BRH bond Excess reserves (as percent ofr required reserves) Gourde time deposit 15 I 10 10 Dollar time deposit Credit, 12-month 5 5 growth (perg cent, leR axisl V A 0 e e a e a a a 3 y U 2 de 00 80 a 8 3 & E E 3 E à E 8 2 à 3 2 DE s & Sources: BRH, IHSI, and Fund staff estimates 1/1 Data for March 2005 are estimated based on BRH weekly reports. Data available through March 25, 2005. --- Page 42 --- 40Figure 2. Haiti. Fiscal Developments 1/ (In percent of GDP; fiscal year ending September 30) Government revenues increased due to improved and while wages and salaries increased, non-wage customs administration, current expenditures declined sharply as spending through current accounts was restrained... Current Revenues Customs Duties Other Current Expenditures 10 Domestic Non-wage taxes 6 Wages and current Salaries expenditure Current a accounts 2/ (right scale) 2001 2002 2003H1 2003H2 2004H1 2004H2 2005H1 2001 2002 2003H1 2003H2 2004H1 2004H2 2005H1 2/ Spending through current accounts in percent ofl budgetary credits for nonwage current spending. ..helping improve the fiscal position. The fiscal program has remained broadly on track, except in the first half of 2004,.. Current Account Balance Net Central Bank Financing Actual A Program Second First SMP EPCA -2 -2 SMP 2001 2002 2003H1 2003H2 2004H1 2004H2 2005H1 2001 2002 2003H1 2003H2 2004H1 2004H2 2005H1 with a shift from domestic financing to external .and an increasing share of grant financing. financing.. 7.0 Net financing of the deficit 8.0 6.0 External net External financing financing 7.0 5.0 Internal net 4.0 financing 6.0 Grants 3.0 5.0 2.0 4.0 Loans 1.0 3.0 0.0 2.0 -1.0 1.0 -2.0 2001 2002 2003H1 2003H2 2004H1 2004H2 2005H1 0.0 2001 2002 2003H1 2003H2 2004H1 2004H2 2005H1 Sources: Ministry of Finance, BRH, and Fund staff estimates. 1/ Six-monthly data are annualized. --- Page 43 --- -41Figure 3. Haiti. External Developments Private remittances and official grants have .while both exports and imports were contributed to a balanced current account... unaffected by the developments in 2004. largely Current Account Balance 35 Trade Balance Trade Balance -19 1000 (million U.S. dollars) Private remittances (percent of GDP) Imports (right scale) Official grants -20 -21 -22 -500 Exports -23 -1000 Balance on goods and Current account -24 services -1500 incl. grants 43 --- -41Figure 3. Haiti. External Developments Private remittances and official grants have .while both exports and imports were contributed to a balanced current account... unaffected by the developments in 2004. largely Current Account Balance 35 Trade Balance Trade Balance -19 1000 (million U.S. dollars) Private remittances (percent of GDP) Imports (right scale) Official grants -20 -21 -22 -500 Exports -23 -1000 Balance on goods and Current account -24 services -1500 incl. grants 2004 -25 A sharp increase in private remittances.. .helped boost international reserves... 950 200 Private Remittances and Official Grants 160 (million U.S. dollars) 900 180 International Reserves (million U.S. dollars) 850 140 120 Net international reserves A 100 (program definition) Gross liquid assets Official grants ofthe BRH Net private 700 60 remittances (right scale) 600 0 .and contributed to a rebound in the real while exchange rate fluctuations strongly affected exchange rate, debt to GDP ratios. 0.045 50 Exchange rates External Debt (USS/gourdes) 0.040 Percent of GDP REER (left scale) 0.035 0.030 Million U.S. Exchange rate 0.025 dollars (right scale) 0.020 30 Jan-01 Jan-02 Jan-03 Jan-04 Sources: BRH and Fund staff estimates --- Page 44 --- -42ANNEX I HAITI-FUND RELATIONS As of March 31, 2005 I. Membership status: Joined September 8, 1953; Article VIII. Percent II. General resources account SDR Million of Quota 81.90 100.00 Quota Fund holdings of currency 92.06 112.41 Reserve position in Fund 0.07 0.08 Percent of III. SDR department: SDR Million Allocation Net cumulative allocation 13.70 100.00 0.03 0.19 Holdings IV. Outstanding purchases and loans: SDR Million Percent of Quota PRGF Arrangements 6.07 7.41 Emergency Post-Conflict Assistance 10.23 12.49 V. Financial arrangements: Amount Amount Type of Approval Expiration Approved Drawn Arrangement Date Date (SDR Million) (SDR million) PRGF 10/18/96 10/17/99 91.05 15.18 Stand-by 03/08/95 03/07/96 20.00 16.40 Stand-by 09/18/89 12/31/90 21.00 15.00 VI. Projected obligations to the Fund: (SDR million; based on existing use of resources and present holdings ofSDRs): Forthcoming Type of Approval Expiration Approved Drawn Arrangement Date Date (SDR Million) (SDR million) PRGF 10/18/96 10/17/99 91.05 15.18 Stand-by 03/08/95 03/07/96 20.00 16.40 Stand-by 09/18/89 12/31/90 21.00 15.00 VI. Projected obligations to the Fund: (SDR million; based on existing use of resources and present holdings ofSDRs): Forthcoming Principal 3.04 3.04 3.84 5.12 Charges/interes 0.54 0.70 0.69 0.65 0.48 t Total 3.57 3.71 0.69 4.49 5.60 --- Page 45 --- -43VII. Exchange arrangements: Managed floating with no predetermined path for the exchange rate. The change from a fixed to managed floating regime took place in January 1990. Haiti's exchange system is free of restrictions on the making of payments and transfers for current international transactions. Since September 1991 all transactions have taken place at the free (interbank) market rate. VIII. Article IV Consultation The last Article IV consultation was concluded by the Executive Board on January 24, 2003. Haiti is on the standard 12-month cycle. IX. Technical assistance: A long-term macroeconomic advisor worked in the president' S office from May 1999 to February 2001. Technical assistance missions since 1997: Department Dates Purpose TGS October 1997; February 1999 Information technology FAD April 2005 Public expenditure management. August September 2004 Public expenditure management June 1999 Industrial exemptions October 1998 Large taxpayer unit March 1997-September 1998 Exemptions system and investment code November 1997 Direct taxation and exemption system MFD March 2005 Monetary Operations July-August 2002 Money laundering January 2002 Banking supervision May 2001 Banking supervision October 2000 Money laundering October 2000 Banking supervision January 2000 Dollarization and policy response June 1999 Central bank organization August October 1998; June-July 1999; October 2000 Banking supervision July 1998 Banking law January 1997 Role of the central bank August 1997 Banking law and monetary policy October 1995-April 1998 Banking supervision --- Page 46 --- 44STA January 1996-October 1997; Real sector statistics June 1996; July 1996; February 1999; March 2000 February 1997; March 1998; Money and banking statistics August 1998 November 1996; March 2000 Balance of payments statistics LEG March, June, and Banking and central bank laws September 2000 INS April 2002 Course on financial programming X. Resident representative: Mr. Mounir Rached has been the Fund' S Resident Representative since October 2002 1996-October 1997; Real sector statistics June 1996; July 1996; February 1999; March 2000 February 1997; March 1998; Money and banking statistics August 1998 November 1996; March 2000 Balance of payments statistics LEG March, June, and Banking and central bank laws September 2000 INS April 2002 Course on financial programming X. Resident representative: Mr. Mounir Rached has been the Fund' S Resident Representative since October 2002 --- Page 47 --- ANNEX II -45Haiti-Relations with the World Bank Group (Prepared by World Bank Staff) March 2004, the World Bank stepped up its engagement Following the change of government in partnership to respond to Haiti' S social, in Haiti as part of a broader Gmnemmeaimulidoors needs assessment needs. In that context, a joint govemment-donors: Interim economic and institutional for the Transitional Government' S two year carried out in May provided the basis at an international donors conference on Framework (ICF). The ICF was presented and international Cooperation where donor countries July 19-20, 2004 at World Bank Headquarters, to support the implementation of the organizations pledged US$1.08 billion in fresh resources million in IDA grants and credits to support the ICF with up to US$150 and ICF. The Bank pledged million in small grants from the Post-Conflict Fund complemented with US$3.5 for Low Income Countries Under Stress (LICUS). US$6.4 million in small grants from the trust a Transitional Support Strategy (TSS) authorities have since prepared was The Bank and the Haitian the July 2004-June 2006. The TSS the Bank' S support to Haiti for period Board a fastto program 6, 2004. On the same day, the approved reviewed by the Bank' S Board on January for US$61 million and an Economic Governance Reform Operation (EGRO) million. The approval of the disbursing project for US$12 emergency recovery and disaster management to the World Bank on January 4, 2005. followed the clearance of Haiti' S arrears to IDA assistance technical assistance project (USS2 million) strengthen The Bank is also preparing a of policies and help improve the institutional capacity for the design and implementation in the future. During the second year of environment for increased donor financing US$75 million in institutional the Bank would provide up to an additional the implementation of the TSS, first ofthe program. This additional assistance IDA assistance contingent on progress in the year in rural areas and small towns, including help create economic and social opportunities investment program. In an may development projects and a multi-sectoral under through community-driven made maximum use of the grant provision effort to reduce Haiti' S debt burden, the Bank 2004/05 financing to Haiti. Under IDA convert into grants 51 percent ofi its fiscal year ofthe Bank' S IDA 13 to into a similar and possibly a larger share 14, there will be room to convert grants fiscal year 2005/06 financing to Haiti. and technical assistance span several thematic areas financial The Bank' S policy dialogue, policy performance, strategic communication including: civil society monitoring of governance audit and management, rural donor coordination, public enterprise sector antifor development, and financial control, public procurement, development, budgetary management fund, school feeding and public-private partnership corruption, management of road maintenance and early warning systems, rural disaster management in education, solid waste management, and management, and energy. safe water provision be room to convert grants fiscal year 2005/06 financing to Haiti. and technical assistance span several thematic areas financial The Bank' S policy dialogue, policy performance, strategic communication including: civil society monitoring of governance audit and management, rural donor coordination, public enterprise sector antifor development, and financial control, public procurement, development, budgetary management fund, school feeding and public-private partnership corruption, management of road maintenance and early warning systems, rural disaster management in education, solid waste management, and management, and energy. safe water provision --- Page 48 --- -46Since July 2004, the Bank' S disbursements to Haiti have amounted to about US$50 million, of which nearly US$47 million in budget support on account of the EGRO. The IFC' S priorities in Haiti include strengthening domestic financial institutions and job creation. The IFC currently has two investments in Haiti: (i) a USS400,000 equity investment in Micro Credit National; and (ii) a US$20 million investment in Grupo M - a Dominican textile company with an important investment in Haiti to finance the start-up of an industrial park/free trade zone located just across the border in Ouanaminthe, Haiti. The most recent World Bank Country Assistance Strategy for Haiti was reviewed by the Bank' S Board in 1996. --- Page 49 --- ANNEX III 47. Haiti- Relations with the IDB (Prepared by IDB Staff) under its ongoing transition strategy of re-engagement The IDB' S portfolio of 10 projects in full implementation, supporting Haiti' S (2003-04), totaling US$400 million, is presently in 2003, the IDB has disbursed over agenda. Since reactivation of its lending July balance of reconstruetion end-2004, leaving an available US$80 million ofthis amount through investment and policy-based loans, are US$320 million. These interventions, combining technical assistance and nonfinancial of nonreimbursable complemented with a strong program and implementation and increase country products to underpin program and policy preparation knowledge. US$263 million in additional financing to support implementation S In July 2004, the IDB pledged To operationalize this pledge in full, the IDB' of the Interim Cooperation Framework (ICF). Transition Strategy (2005-06) on March 9, 2005, Board of Executive Directors approved a new million, to continue financing Haiti' S transition covering over 11 operations, totaling US$270 strengthens efforts to stabilize the economy, actions. This strategy agenda as well as longer-term social needs, lay the foundation for pro-poor governance reforms, alleviate pressing and lead to an deepen and environmental management, growth, strengthen natural disaster prevention elected government in 2006. in Haiti thus supports longer-term economic governance The IDB' S growing involvement of fiscal management and tax reform and in the critical areas with the IMF and reforms, particularly institutional development, in close coordination administration, and associated financing for high impact investments to the World Bank. In parallel, the IDB provides and increase provision of basic services rehabilitate critical infrastructure, increase productivity, national level. As an overarching objective, IDB vulnerable groups and communities on a strategy based to support and institution-building program execution builds on an implementation special measures to strengthen local capacities to flexible approach. This approach includes high-level special on a disbursements, and is also pursued through facilitate execution and speed up missions. implementation and monitoring review all pillars of fHaiti's short and medium term reconstruction to create ruleThe Bank supports and national dialogue with technical assistance agenda: (a) political governance resolution, and for dealing with gender issues; (b) based mechanisms for alternative dispute through fiscal and financial sector reform and institutional development through economic governance administration reform; (c) economic recovery loans, and capacity building for public and private sector development; further rebuilding infrastructure (roads, ports, airports) development program; and loans to intensification with a rural economy to basic assistance to agriculture and for watershed management; and (d) access reduce the impact of natural disasters for low income youth training program to increase opportunities urban services through a vocational living standards and income generation in and meet private sector skill demands; improve of the interior, through an urban rehabilitation areas of the capital and main cities and towns loan. ; (c) economic recovery loans, and capacity building for public and private sector development; further rebuilding infrastructure (roads, ports, airports) development program; and loans to intensification with a rural economy to basic assistance to agriculture and for watershed management; and (d) access reduce the impact of natural disasters for low income youth training program to increase opportunities urban services through a vocational living standards and income generation in and meet private sector skill demands; improve of the interior, through an urban rehabilitation areas of the capital and main cities and towns loan. --- Page 50 --- ANNEX IV HAITI-STATISTICAL ISSUES (HIS) is publishing a harmonized CPI on a Real sector: The Haitian Institute of Statistics Fund technical assistance. The institute has and facilitated by assistance monthly basis, as recommended recommendations made by several Fund technical for made progress in implementing sector statistics, and it has published national accounts mission to improve the quality of real interim base year 1986/87. The institute also 1986/87 to 2003/2004 based on the including indices of the period activity of the real sector on a quarterly basis, March 2000 publishes data on economic and domestic and external trade. The industrial production, energy, construction, that the HIS establish a new base year for technical assistance STA mission had recommended a new CPI which has been accounts and a revised CPI. The HIS will soon publish of the 2000 household survey. national (August 2004) using the weights rebased to a more recent period on a periodic basis; in the past, these have The HIS carries out household budgetary surveys education and employment. A further by studies on issues such as housing, in work for the been complemented The Institute is currently engaged the preparatory to address the study on transport is underway. Further technical assistance may be needed fourth population and habitat census. hinder the quality of real sector statistics. deficiencies that continue to outstanding and annual GFS data on a regular basis for Government finance: Haiti reports monthly in the GFS Yearbook for the past in IFS. However, no GFS data have been published mission recommended the publication given that the 1995 multisector is slow 15 years. This is a disappointing and reporting of GFS data to the Fund. Progress of establishment of a system of compilation Data provided in 2001 via the Central Bank due to the lack ofhuman and financial resources. to insufficient detail and consistency not in the 2001 GFSY owing to the link Haiti were published to extend coverage and breakdowns, improve to problems. Further work is required transactions as well as the outstanding debt, and between the nonfinancial and the financial require additional human breakdown of expenditure. These improvements the ministerial compile a functional ofbudgetary expenditures, especially on and financial resources. The reporting increase transparency. There is a need to improve discretionary accounts should be improved to enterprises, as well as of the accounts ofthe of publication of accounts of public the timeliness nonfinancial public sector. statistics has helped to improve the accounts: Continuous work on monetary balance sheets ofthe Bank of the Monetary and classification of accounts in the analytical been undertaken to strengthen sectorization and commercial banks. Efforts have enforce Republic ofHaiti (BRH) banks SO as to strengthen bank supervision, reporting requirements for commercial and step up the fight against illicit transactions. reporting according to Basel Core Principles, and reporting of money and banking This has at times affected the timeliness of compilation statistics. of balance of has been made towards improving the reliability has Balance of payments: Progress several technical assistance mission recommendations payments data. The implementation of data. Notwithstanding the progress, in the balance of payment data, contributed to an improvement in the methodology for compiling trade there is scope for improvement, most notably use of existing sources, (such as trade and services data and making more systematic collecting agencies, airlines, and oil companies). customs, port and airport , and reporting of money and banking This has at times affected the timeliness of compilation statistics. of balance of has been made towards improving the reliability has Balance of payments: Progress several technical assistance mission recommendations payments data. The implementation of data. Notwithstanding the progress, in the balance of payment data, contributed to an improvement in the methodology for compiling trade there is scope for improvement, most notably use of existing sources, (such as trade and services data and making more systematic collecting agencies, airlines, and oil companies). customs, port and airport --- Page 51 --- 49HAITI: TABLE OF COMMON INDICATORS REQUIRED FOR SURVEILLANCE AS OF APRIL 29, 2005 Date of Date Frequency Frequency Frequency latest received of of of observation Data 6/ Reporting 6/ Publication 6/ Exchange Rates Apr. 2005 Apr. 2005 D D M International Reserve Assets and Reserve Apr. 2005 Apr. 2005 D D Liabilities of the Monetary Authorities 1/ M Reserve/Base Money Feb. 2005 Apr. 2005 M M M Broad Money Feb. 2005 Apr. 2005 M M M Central Bank Balance Sheet Feb. 2005 Apr. 2005 M M M Consolidated Balance Sheet of the Banking System Feb. 2005 Apr. 2005 M M M Interest Rates 2/ Apr. 2005 Apr. 2005 W W M Consumer Price Index Mar. 2005 Apr. 2005 M M M Revenue, Expenditure, Balance and Composition NA NA NA NA of Financing 3/ - General Government 4/ NA Revenue, Expenditure, Balance and Composition Mar. 2005 Apr. 2005 M M of Financing 3/- Central Government M Stocks ofCentral Government and Central Sept. 2004 Apr. 2004 A I A Govemmen-Guaranteed Debt 5/ External Current Account Balance Sept. 2004 Nov. 2004 A I A Exports and Imports of Goods and Services Sept. 2004 Nov. 2004 A A NA GDP/GNP Jan. 2005 A A A Gross External Debt Sept. 2004 Apr. 2004 A I A 1/ Includes reserve assets pledged or otherwise encumbered as well as net derivative positions. 2/ Both market-based and officill-determined, including discount rates, money market rates, rates on treasury bills, notes and bonds. 3/1 Foreign, domestic bank, and domestic nonbank financing. 4/: The general government consists of the central government (budgetary funds, extra budgetary funds, and social and local governments. security funds) and state 5/ Including currency and maturity composition. 6/ Daily (D); Weekly (W); Monthly (M); Quarterly (Q); Annually (A); Irregular (I); Not Available (NA). or otherwise encumbered as well as net derivative positions. 2/ Both market-based and officill-determined, including discount rates, money market rates, rates on treasury bills, notes and bonds. 3/1 Foreign, domestic bank, and domestic nonbank financing. 4/: The general government consists of the central government (budgetary funds, extra budgetary funds, and social and local governments. security funds) and state 5/ Including currency and maturity composition. 6/ Daily (D); Weekly (W); Monthly (M); Quarterly (Q); Annually (A); Irregular (I); Not Available (NA). --- Page 52 --- ANNEX V HAITI-DEBT SUSTAINABILITY ANALYSIS using the framework for debt analysis (DSA) prepared This note presents a sustainability 2004 (Debt Sustainability in Low-Income low-income countries approved in early Framework and Policy Implications) Countries-Propocals for an Operational with World Bank staff based on a new (www.imf.org). This DSA will be updated jointly Fund and the Bank in April 2005 framework considered by the Boards of the Assessments in Low-Income Framework for Debt Sustainability scenario (Operational (www.imf.org). The macroeconomic Countries- Further Considerations) described in Section III.D of this Staff underlying this DSA is the baseline scenario end-2004 debt data and takes into account the Report. The analysis is based on estimated 2004 donors' conference, updated in the of financial assistance at the July19-20, World Bank-IMF formal pledges IV consultation discussions. A joint context of the 2005 Article is planned for later in 2005 and will assessment ofHaiti' S HIPC eligibility preliminary reconciled data. be based on loan-by-loan analysis presented in this paper suggest that 1. The results of the debt sustainability Under the baseline debt burden is high and could become a source ofvulnerability. term. In Haiti' S indicators will remain high over the medium scenario, Haiti' S debt-burden particular: ratio was well above levels the NPV of external debt-to-exports At end-2004, This result is robust to whether current year exports considered to be sustainable. However, other key debt ratios average is used as a denominator. considered or the three-year at levels generally NPV of debt-to-GDP and debt senvice-o-exports-were to be sustainable. ratio is expected to only gradually decline The NPV of external debt-to-export to grow faster than the economy as during 2005-23. Although exports are projected remains above 150 percent for the next a whole, the ratio of NPV of debt-to-exports The other key ratios-NPV of debt-tofive years and above 100 percent until 2020. decline to half their projected to gradually GDP and debt service-o-cxponts-arc present levels over the next 20 years. similar results." 2 As analysis of the total public debt yields The debt sustainability and the NPV of total public debt-todomestic debt as a share of GDP is very small, of the external debt-to-GDP ratio. ratio declines closely in line with the NPV GDP of and services. I Ratios are calculated relative to exports goods central bank short-term bonds held by commercial banks. 2 The stock of domestic debt consists of their projected to gradually GDP and debt service-o-cxponts-arc present levels over the next 20 years. similar results." 2 As analysis of the total public debt yields The debt sustainability and the NPV of total public debt-todomestic debt as a share of GDP is very small, of the external debt-to-GDP ratio. ratio declines closely in line with the NPV GDP of and services. I Ratios are calculated relative to exports goods central bank short-term bonds held by commercial banks. 2 The stock of domestic debt consists of --- Page 53 --- -51 ratio declines from about 200 percent in The NPV of total public debt-to-revenue until 2011, largely reflecting low revenue 2004, and remains above 150 percent ratio declines from about mobilization in Haiti. The debt service-to-revenue reflecting in part the targeted increase 14 percent in 2004 to below 5 percent in 2015, in the revenue mobilization. indicators are very sensitive to changes in 2. Haiti's external debt and debt-service external shocks have a significant impact on the economic environment. Indeed, plausible results ofthe alternative scenarios used to the debt ratios (Box 1, and Figures 1 and 2). The Haiti' S vulnerability to shocks are as follows: assess standard scenario is generated as a combination of (one-half and official A worst-case the GDP deflator, and private deviation) shocks to export growth, >9 the NPV of debt-to-exports ratio transfers. 3 Under such an *6 extreme stress test, above 150 percent for the entire would double relative to the baseline and remain of debt-to-GDP and debt period. Also, the other key debt ratios-NPV thresholds projection increase above the conventional sustainability seniecto-smputs-sould for several years. variables were to remain at their historical (1995-2003) If key macroeconomic ratios would be slower than in the baseline averages, the decline in the debt macroeconomic scenario. The historical scenario attempts to replicate assistance past to Haiti, and is less performance under the previous cycle ofexternal favorable than the baseline scenario. would reduce calculated NPV of An increase in international interest rates discount rates" scenario, it is assumed Haiti's debt. Under an alternative "variable NPV of future debt service would follow that discount rates applied to estimate the interest rates. This would result in Haiti's the WEO projected increase in U.S. dollar of exports of goods and services debt levels in NPV terms falling below 150 percent in 2005. element of all future assistance would lower debt An increase in the grant of the assumed concessional indicators. For example, if half currently decline to burden in the form of grants, Haiti' S debt burden would borrowing were provided than under the baseline scenario. sustainable levels about five years faster envisaged scenarios for total public debt also indicate continued Two alternative assuming real GDP growth and the primary vulnerability. The historical scenario, that were tested and found to produce less "extreme" 3 Other shocks (scaled to historical levels) lower real GDP and export growth, as well as a results include: borrowing on less favorable terms, sharp depreciation of the exchange rate. For example, if half currently decline to burden in the form of grants, Haiti' S debt burden would borrowing were provided than under the baseline scenario. sustainable levels about five years faster envisaged scenarios for total public debt also indicate continued Two alternative assuming real GDP growth and the primary vulnerability. The historical scenario, that were tested and found to produce less "extreme" 3 Other shocks (scaled to historical levels) lower real GDP and export growth, as well as a results include: borrowing on less favorable terms, sharp depreciation of the exchange rate. --- Page 54 --- -52deficit equal the historical 1995-2003 averages, only marginally differs from the baseline, as the impact of lower growth is offset by a lower primary deficit. Under the most extreme stress test (real GDP growth in 2005 and 2006 is assumed to be one standard deviation lower than the baseline growth rate), indicators of total public debt decline much less favorably than under the baseline, with the highest debt ratio in 2013. 3. The analysis suggests that Haiti's debt burden will remain high for a considerable period. Under the present financing mix, Haiti' S debt burden-in terms of NPV of debt-to-exports- would remain above 150 percent over the medium term. Moreover, Haiti' S debt burden is very sensitive to changes in the external environment and financing mix. Haiti' S debt indicators would remain above the sustainability thresholds for several years under the "most extreme stress" test, and would improve more slowly than under the baseline scenario ifkey variables were to remain at their historical averages. 4. These conclusions are not intended to preempt the results of the planned preliminary HIPC DSA, which will be based on more detailed debt data and a different methodology. The planned study will assess Haiti' S HIPC eligibility on the basis ofNPV of debt-to-exports ratio, and is expected to be prepared jointly with World Bank staffin late 2005. 4 4 Haiti does not qualify under the "fiscal window, 79 which requires a revenue-to-GDP ratio above 15 percent (as well as a 30 percent exports-to-GDP ratio). --- Page 55 --- - 53Box 1. Key Assumptions and Scenarios Key assumptions underlying the baseline scenario: Current account: Income elasticity of imports is assumed to be unity. Exports grow somewhat faster than GDP (reflecting their potential in manufacturing, agriculture, and tourism). Private remittances would stabilize as a share ofGDP during 2005-09 and decline gradually thereafter. Capital account: Foreign direct investment is assumed to grow in line with GDP, net annual borrowing to remain positive in the long run (but fall as a share ofGDP), and the terms of new borrowing to be highly concessional (based on the weighted average oft the present financing mix) interest rate of1.6 percent, grace period of 9.6 years, and a maturity of 38 years); External debt in arrears not addressed until 2007; Public sector revenues and grants as a percentage ofGDP increase up from 13 to 23 percent over the projection period. Public sector expenditure increases in line with public sector revenues and grants. The average real interest rate on domestic short-term debt is 1 percent. Unless otherwise noted, a 5 percent discount rate is used for all years and all creditors. Main alternative scenarios: Historical scenario: Key variables are assumed to remain at their historical (1995-03) in 2004-23. These variables include real GDP growth, CPI inflation (used as a proxy for averages GDP deflator due to data deficiencies), noninterest current account in percent ofGDP, and non-debt creating flows (Table 1); The most extreme stress test is a combination of lowering growth ofreal GDP, export value, and private and official transfers by one-half standard deviation, and increasing the GDP deflator by the same magnitude; Variable discount rate: The discount rates are projected to move in lockstep with WEO projected U.S. dollar LIBOR rates i.e., 3.31 percent in 2005, 4.12 percent in 2006, and 4.35 for outer years; The higher grant element scenario assumes that half of current borrowing is provided in the form of grants. creating flows (Table 1); The most extreme stress test is a combination of lowering growth ofreal GDP, export value, and private and official transfers by one-half standard deviation, and increasing the GDP deflator by the same magnitude; Variable discount rate: The discount rates are projected to move in lockstep with WEO projected U.S. dollar LIBOR rates i.e., 3.31 percent in 2005, 4.12 percent in 2006, and 4.35 for outer years; The higher grant element scenario assumes that half of current borrowing is provided in the form of grants. --- Page 56 --- -54Figure 1. Haiti: Indicators of Public and Publicly Guaranteed External Debt Under Alternative Scenarios, 2004-2023 (In percent) NPV of debt-to-GDP ratio Baseline Variable discount ratel/ 50 percent of loan as grant financing 2/ 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 NPV of debt-to-exports ratio Baseline Variable discount ratel/ 50 percent of loan as grant financing 2/ 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Debt service-to-exports ratio (results of all scenarios identical) Baseline -1 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Source: Fund staff projections and simulations. 1/ The discount rates are projected to increase as in WEO. 2/ Assuming about half of current borrowing will be provided as grants. --- Page 57 --- -55Figure 2. Haiti. Indicators of Public and Publicly-Guaranted External Debt Under Alternative Scenarios, 2004-23 (In percent) NPV of debt-to-GDP ratio Baseline Historical scenario Most extreme stress test 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 NPV of debt-to-exports ratio Baseline Most ext treme stress test Historical scenario 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Debt service-to-exports ratio Baseline Historical scenario Most extreme stress test 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Source: Staff projections and simulations. --- Page 58 --- -56Figure 3. Haiti: Indicators of Total Public Debt Under Alternative Scenarios, 2004-2023 1/ (In percent) NPV of debt-to-GDP ratio Baseline Historical scenario Most extreme stress test 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 NPV of Debt-to-Revenue Ratio 2/ Baseline Historical scenario Most extreme stress test 3. Haiti: Indicators of Total Public Debt Under Alternative Scenarios, 2004-2023 1/ (In percent) NPV of debt-to-GDP ratio Baseline Historical scenario Most extreme stress test 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 NPV of Debt-to-Revenue Ratio 2/ Baseline Historical scenario Most extreme stress test 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Debt Service-to-Revenue Ratio 2/ Baseline Historical scenario Most eX xtreme stress test 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Source: Fund staff projections and simulations. 1/1 Most extreme stress test yields highest ratio in 2013. This test uses the baseline real GDP growth rate minus one standard deviation in 2005 and 2006. 2/ Reserves exclude grants. --- Page 59 --- 57- - S a a 8 S 8 S 2 I 2 a 6E a a 0 E - 2 2 8 - - - & à a E - a 8 4 I de 8 a S S - a U a a V 2 2 2 - - a 8 e 8 3 0 o 8E 8 - o a - a # 4 2 - 2 S 2 & N a 8 E a 3 o P - 3 LE - a # S - 4 2 - S 8 N C E E 0 8 2 9 - 80 DE S a a a 3 $ a 2 7 - a a # S 8 E A E x 0 a 0 E 2 E S o o a y I 2 9 2 A 2 E 2 00 - a A 2 e 2 S E E a # - - P - & à a a # a a 3 N a 8 E a 3 o P - 3 LE - a # S - 4 2 - S 8 N C E E 0 8 2 9 - 80 DE S a a a 3 $ a 2 7 - a a # S 8 E A E x 0 a 0 E 2 E S o o a y I 2 9 2 A 2 E 2 00 - a A 2 e 2 S E E a # - - P - & à a a # a a 3 --- Page 60 --- - 58Table 2. Haiti: Sensitivity Analyses for Key Indicators of Public and Publicly Guaranteed External Debt, 2003-23 (In percent) Estimate Projections 2003 2004 2005 2006 2013 2023 NPV of debt- to- GDP ratio Baseline 31 27 22 23 19 13 A. Alternative Scenarios Al. Key variables at their historical averages in 2004-23 1/ 31 27 A2. New public sector loans on less favorable terms in 2004-232/ 22 21 19 A3. Discount rates are 51 percent in 2004, and increase in lockstep with WEO 2/ 31 27 25 24 20 A4. Half of new borrowing in 2005-2023 is assumed tol be provided as grants 2/ 31 31 27 19 18 15 10 21 21 15 B. Bound Tests BI. Real GDP growth at historical average minus onc standard deviation in 2004-05 31 27 B2. Export value growth at historical average minus one standard deviation in 2004-05 31 31 27 23 24 20 13 B3. US dollar GDP deflator at historical average minus one standard deviation in 2004-05 24 23 20 13 B4. Net non-debt creating flows at historical average minus one standard deviation in 2004-05 4/ 31 27 27 24 24 20 13 B5. Combination ofB1- -B4 using one-I half standard deviation shocks 24 24 19 13 B6. One- -time 30 percent nominal depreciation relative to the baseline in 2004 5/ 31 27 34 42 33 19 31 27 31 31 25 17 NPV of debt to- -exports ratio Baseline 196 187 173 171 140 80 A. Alternative Scenarios A1. Key variables at their historical averages in 2004-23 1/ 196 187 A2. New public sector loans on less favorable terms in 2004-232 2/ 167 160 137 88 A3. Discount rates are 5percent in 2004, and increase in lockstep with WEO2 196 187 193 178 143 91 A4. Halfo of new borrowing in 2005-2023 is assumed tol be provided as grants 2/ 196 187 149 137 109 64 196 187 166 159 106 49 B. Bound Tests Bl, Real GDP growth at histo or prical average minus one standard deviation in 2004-05 B2. Export value growth at historical average minus one standard deviation in 2004-05 3/ 196 187 163 173 157 88 B3. US dollar GDP deflator atl historical average minus one standard deviation in 2004-05 208 254 239 138 B4. Net non-debt creating flows at historical average minus one standard deviation in 2004-05 4/ 196 196 187 163 173 157 88 B5. Combination of B1- -B4 using one-half standard deviation shocks 173 182 165 91 B6. One- -time 30; percent nominal depreciation relative to the baseline in 2004 5/ 196 187 260 346 300 150 196 187 163 173 157 88 Debt service ratio Baseline 12 10 239 138 B4. Net non-debt creating flows at historical average minus one standard deviation in 2004-05 4/ 196 196 187 163 173 157 88 B5. Combination of B1- -B4 using one-half standard deviation shocks 173 182 165 91 B6. One- -time 30; percent nominal depreciation relative to the baseline in 2004 5/ 196 187 260 346 300 150 196 187 163 173 157 88 Debt service ratio Baseline 12 10 A. Alternative Scenarios Al. Key variables at their historical averages in 2004-23 1/ A2. New public sector loans on less favorable terms in 2004-232/ 12 10 A3. Discount rates are 5 percent in 2004, and increase in lockstep with WEO2/ 12 10 10 10 A4. Half of new borrowing in 2005-2023 1S assumed tot be provided as grants 2/ 12 12 10 B. Bound" Tests B1. Real GDP growth at historical average minus one stand ndard deviation in 2004-05 B2. Export value growth at historical average minus one standard deviation in 2004-05 3/ B3. US dollar GDP deflator at historical average minus one standard deviation in 2004-05 12 10 14 10 B4. Net non-debt creating flows at historical average minus one standard deviation in 2004-05 4/ 12 12 10 10 B5. Combination of B1-B4 using one- -half standard deviation shocks 10 10 B6. One- -time 30 percent nominal depreciation relativet to the baseline in 2004 5/ 12 12 10 Memora randumi item: Grant element assumed on residual financing (i.e., financing required above baseline) 6/ 43 43 Source: Staff projections and simulations. 1/ Variables include real GDP growth, growth of GDP deflator (in U.S. dollar terms), non- interest current account in percent ofGDP, and 21 Assumes that the interest rate on new borrowing 1S by 21 percentage points higher than in the baseline while grace and nondebt creating flows. 3/ Exports values are assumed to remain permanently at the lower level, but the current account maturity periods are the same as in the baseline. (implicitly assuming an offsetting adjustment in import levels). as share of GDP IS assumed tor return to its baseline level after the shock 4/ Includes official and private transfers and FDI. 5/ Depreciation is defined as percentage decline in dollar/local currency rate, such that it never ex xceeds 100 6/ Applies to all stress scenarios except for A2(less favorable financing) in which the terms on all new financing percent. are as specified in footnote 2. --- Page 61 --- 59Table 3. Haiti: Averages and Standard Deviations Used for Alternative Scenarios 1995-2003 Standard Average Deviation Non-interest current account balance (in percent ofGDP) -2.0 3.3 Real GDP growth 2.4 3.3 CPI, end of period (proxy for GDP deflator in U.S. dollars) 17.1 10.4 Export growth (US dollar terms, in percent) 15.9 24.1 Net transfers to GDP ratio 19.5 5.6 Net non-debt creating flows (FDI) to GDP ratio 0.2 0.2 Source: Fund staff calculations. -2003 Standard Average Deviation Non-interest current account balance (in percent ofGDP) -2.0 3.3 Real GDP growth 2.4 3.3 CPI, end of period (proxy for GDP deflator in U.S. dollars) 17.1 10.4 Export growth (US dollar terms, in percent) 15.9 24.1 Net transfers to GDP ratio 19.5 5.6 Net non-debt creating flows (FDI) to GDP ratio 0.2 0.2 Source: Fund staff calculations. --- Page 62 --- 60a a 8 o S 8 S 8 8 8 8 s - 9 8 E a N 2 S - 8 8 8 8 8 8 2 2 a E 8 S X 8 8 8 8 8 8 9 N 3 X C : : N o - a 3 a 8 S 8 8 8 a a a R B S 2 4o 3 3 R : a - a 8 8 8 8 8 S G a a 8 o Do C - 2 é a a a - 3 8 8 8 8 8 a S o 8 a 0 N S a 9 0 2 3 9 2 2 2 3 a 3 A à - X 8 S 8 8 8 3 2 a a 8 a à N a : - O 7 - a 3 2 3 2 7 3 3 - a 8 8 3 8 8 . C S 2 8 * a a 8 o Do C - 2 é a a a - 3 8 8 8 8 8 a S o 8 a 0 N S a 9 0 2 3 9 2 2 2 3 a 3 A à - X 8 S 8 8 8 3 2 a a 8 a à N a : - O 7 - a 3 2 3 2 7 3 3 - a 8 8 3 8 8 . C S 2 8 * Ni a I - a - 8 8 8 8 8 S S E E E N - - : 0 a é o 8 8 8 8 8 3 9 - E K E 8 a a A a R 2 --- Page 63 --- Alternate Executive Director for Haiti Statement by Roberto Steiner, Advisor to Executive Director and Ketleen Florestal, May 16, 2005 and staff for a fruitful we would like to thank management On behalf of our authorities, our for the recent technical dialogue. We would also like to express appreciation that resulted from the policy missions from MFD and FAD. The recommendations the interim assistance also Fund assistance supports Safeguard Assessment are appreciated. institutions. We agree with the thrust government' S efforts to restore the credibility of public authorities consent to their publication. and would like to confirm that our of the papers, under the EPCA is underscored in the papers. While also Haiti's overall good performance have to a large extent been restored, the reports macroeconomic and financial stability reforms. We wish to stress the authorities' note delays in implementing certain structural institutional reforms, which for the most part determination to carry forward much needed The is faced with the been delayed due to factors beyond their control. government that are critical have financial stability and trying to re-build institutions and with daunting task of fostering in the context of an unstable security situation for growth and poverty alleviation, inevitably confronts. that a transitional government the political complexities Recent developments in public finance 2005 has been voted by the Council of budget for April-September to The supplementary shortly. It aims mostly at re-orienting expenditures Ministers and is due to be published delayed disbursements of donor assistance stimulate economic activity, taking into account to the elections, the funding of These relate mainly service and additional necessary expenditures. of fuel, and the increased cost of the SGS the power company's (EDH) purchases of imports. Additional funds have been contract to cover the pre-shipment inspection external funding of its purchases of fuel, which allocated to EDH to replace the concluded supply of 12 hours per day. The costs to maintaining a minimum electricity have been in are indispensable requested, have quadrupled as more physical inspections and fraud, of SGS inspections in order to improve taxation at customs discourage addition to paper verifications the border with the Dominican Republic. particularly in the case of imports through number of its skilled staff, who is either The public sector is being depleted of a significant in Haiti by the private sector and international organizations to emigrating or being pulled further weakened the public sector's capacity salaries. This has two through more competitive To halt the hemorrhage of qualified staff, general out reforms and execute projects. this increase corrected carry cumulating to 45 percent. Nevertheless, wage increases were granted, reduction in real wages during the past decade. only partially the significant arrears in public entities is a complex process, The census of employment and payments retained was to have an ad hoc committee do a which is being completed. The methodology have the Ministry of Economy and each institution and to subsequently Police Force census within of the findings. The census at the National Finance (MEF) carry a verification competitive To halt the hemorrhage of qualified staff, general out reforms and execute projects. this increase corrected carry cumulating to 45 percent. Nevertheless, wage increases were granted, reduction in real wages during the past decade. only partially the significant arrears in public entities is a complex process, The census of employment and payments retained was to have an ad hoc committee do a which is being completed. The methodology have the Ministry of Economy and each institution and to subsequently Police Force census within of the findings. The census at the National Finance (MEF) carry a verification --- Page 64 --- 2Education Ministry is noteworthy as it by the MEF. The case of the will be shortly completed in the public sector, and a particularly problematic is the single most important employer and accumulated arrears. Arrears in this Ministry case given past disorderly hiring practices for 43 public institutions is already complete. are being reviewed by the MEF. The census for the 23 other public hoc committee responsible for the census of employment The final report of The ad of its work. institutions has been reinstated after a temporary suspension is scheduled for the end of June. the census of employment from the central bank (BRH). With fiscal The government had projected zero financing donor disbursements, important cuts in receipts lagging and in the absence of expected delayed. Nevertheless, the expenditures were operated and certain budgeted outlays reduction in investment contributed to kept current with its debt service. The confidence. The government economic activity in the context of low business the would depressing further Fund staff its concern that failure to invigorate economy of government shared with building process, and discussed the possibility impact on the democratic outlays for have a significant and of using BRH credit to cover exceptional undertaking budget reallocations USAID support to the electricity sector. the elections and to offset the end of tax collection. Revenues have picked up is redoubling efforts to increase controls and The government due to the strengthened administrative during the last three months, mostly service. Customs receipts have also improved recovery of arrears by the internal revenue difficulties controlling fraud at the border with recently, even if the administration is having U.S. Treasury, the IADB, and the Fund, an Dominican Republic. With the support of the of the the is expected in the short term. The strengthening improvement of tax administration undertaken with help from UNCTAD. infrastructure of provincial custom offices is being management and expenditure control believes that improved budget has been The interim government The expenditure approval process fiscal consolidation. are paramount to sustainable of regular budget processes and a very significant of rationalized, allowing for observance efforts are being undertaken with the help reduction of current account use. Modernization process has been reinstated and and the World Bank. The annuity of the budget process was the IADB is on track. Two weeks ago the budget preparation of the budget for FY 2005-06 Minister of the broad orientations for its launched with the publication by the Prime ministries. The draft officially the request for investment budgets from sector of the preparation, including with civil society in July. The pre-audit TELECO, budget will be ready for discussion and the modernization of its state-owned communications company, has been completed for the audit of EDH, the electricity accounting system is underway. Terms of reference with financial assistance from drawn and the audit will be carried soon, company, are being the World Bank and the Canadian government. transparency and efficiency. The The motto behind public sector reforms is accountability, distributed monthly by e-mail to a wide list Table of Operations of the Central Government international is organizations, and to scholars of members of civil society, the private sector, at the end of this month of its interested parties. The MEF has announced the launching and reform and medium for informing on budget execution website. It is to be an important system is underway. Terms of reference with financial assistance from drawn and the audit will be carried soon, company, are being the World Bank and the Canadian government. transparency and efficiency. The The motto behind public sector reforms is accountability, distributed monthly by e-mail to a wide list Table of Operations of the Central Government international is organizations, and to scholars of members of civil society, the private sector, at the end of this month of its interested parties. The MEF has announced the launching and reform and medium for informing on budget execution website. It is to be an important --- Page 65 --- 3unit created in September 2004 has been fully implementation. The anti-corruption operational since December. policy and the BRH's balance sheet Monetary reduce inflation sharply, enhance fiscal position, the BRH was able to in With the strengthened rate stability. Nevertheless, challenges remain, official reserves and ensure exchange of the banking sector, the pass-through of particular the high level of dollarization of monetary policy instruments, international fuel prices, the limited scope for diversification of the BRH's balance sheet. and the vulnerability to service its debt to the BRH did During the past fiscal year interest paid by the government banks on central bank paper. Recently, not cover the cost of interest paid to commercial interest rates on bonds while still maintaining an however, the BRH has been able to decrease which represents close to 60 percent of stock of bonds. Interest on government debt, issued. In spite of this, the BRH adequate covers the cost of the central bank paper BRH receipts, now without endangering its balance feels that it needs more room to carry out its operations MEF to raise the monthly interest payments An has been reached with the into interestsheet. agreement credit to the central government to the BRH. The conversion of outstanding the medium term and should significantly improve bearing bonds is being contemplated for at the different functions of the central bank revenue. Fund TA has been looking While unusual and central its fiscal role as collector of taxes for the government. into bank, particularly be alleviated of this function without taking costly to the bank, the BRH cannot its needs to be modernized and the actual capacity of the fiscal administration, consideration necessity to raise fiscal revenue significantly. strengthened, and the imperative that interest rates on bonds be Staff mentions problems of excess liquidity and suggests take into account the operational increased. Although sensible, this suggestion fails to fully 2004 the BRH sold in its weekly framework of bond market operations. Since mid-August due during that week, keeping thus the auction just enough bonds to replace those coming This meant that the BRH fixed both prices bond stock constant at around 3.5 billion gourdes. Recently, the BRH issued an and quantities. In turn, banks started overbidding. their excess liquidity. Simultaneously, administrative order forbidding banks to bid beyond market, the BRH has decided to because of signs of nervousness in the exchange rate bonds now reach 4.8 billion gourdes. increase weekly volumes sold. As a result, outstanding portion of excess interest rates, the BRH was able to mop up an important to if Without raising market. The BRH stands ready change posture liquidity and stabilize the exchange rate the situation SO warrants. Assessment report, showing no imminent The BRH is thankful for the Safeguard and recommendations of the vulnerabilities. BRH officials consider the conclusions The mission concluded that many assessment a useful tool in framing its reform agenda. at the BRH, including a wellsafeguard framework are present elements of an adequate framework that guarantees its operational functioning external auditing mechanism, a legal reserves. However, the report operations and foreign independence, and well-managed of which the bank was already addressing. They underlined certain vulnerabilities, some the exchange rate the situation SO warrants. Assessment report, showing no imminent The BRH is thankful for the Safeguard and recommendations of the vulnerabilities. BRH officials consider the conclusions The mission concluded that many assessment a useful tool in framing its reform agenda. at the BRH, including a wellsafeguard framework are present elements of an adequate framework that guarantees its operational functioning external auditing mechanism, a legal reserves. However, the report operations and foreign independence, and well-managed of which the bank was already addressing. They underlined certain vulnerabilities, some --- Page 66 --- A of generating and exchanging of written guidelines relative to the process of the concerned a lack and potentially conflicting functions information within and between departments will, as usual, be published on the BRH's The interim audit report internal audit department. web site and later in its annual report. and the BRH board is confident that the The banking sector has been under constant scrutiny BRH does not intend to relax prudential vulnerabilities are modest. The the vulnerability of financial system's on foreign currency deposits, given FSAP regulations and reserve requirements shock. The authorities believe that an the dollarized banking system to an external Fund will be able to attend to this request promptly. would be beneficial and hope that the Debt sustainability under the HIPC could be eligible for assistance The latest DSA suggests that Haiti potentially 2003 and 2004 after full use Initiative. The ratio of NPV of debt to exports at end-September 200 and 199 percent respectively. debt relief mechanisms was estimated to be adopted of traditional this year, well beyond the threshold This ratio is projected to be around percent that the assessment of eligibility being under the operational framework. We are hopeful will be concluded soon. Debt relief is urgently carried out by the World Bank and the Fund and political instability. Given Haiti's needed to break the cycle of low growth, poverty, will be provided primarily in the form hope that additional support large debt, our authorities of grants. Conclusions and downside risks. The recent forward, Haiti faces a number of challenges under the CBTPA Looking and the expiration of the benefits elimination of the ATC quotas will affect growth and employment. A (Caribbean Basin Trade Partnership Act) in 2008, the HOPE bill by the United States Congress. factor would be the passage of compensating that this will in fact happen. The authorities are hopeful resources and donor coordination are to timely disbursement of pledged million Donor commitment resources. Staff has identified a US$50 paramount for an efficient use of scarce convinced that once a new government is financing gap for FY06. Our authorities are fast and the financing gap will be closed. the donor community will be able to move elected, I-PRSP in development and poverty reduction strategy The development of a medium-term in order to reduce delays in embarking on a the course of the next twelve months is important the long-standing negative trend which will be instrumental in changing for achieving the PRGF arrangement, indicators and vital to mobilizing adequate funding of social and economic MDG goals. paramount for an efficient use of scarce convinced that once a new government is financing gap for FY06. Our authorities are fast and the financing gap will be closed. the donor community will be able to move elected, I-PRSP in development and poverty reduction strategy The development of a medium-term in order to reduce delays in embarking on a the course of the next twelve months is important the long-standing negative trend which will be instrumental in changing for achieving the PRGF arrangement, indicators and vital to mobilizing adequate funding of social and economic MDG goals. --- Page 67 --- FUND EXTERNAL MONETARY RELATIONS INTERNATIONAL DEPARTMENT Notice Public Information International Monetary Fund (PIN) No. 05/78 700 19th Street, NW C. 20431 USA Public Information Notice Washington, D. FOR IMMEDIATE RELEASE June 17, 2005 with Haiti 2005 Article IV Consultation Executive Board Concludes IMF Fund (IMF) concluded the Board of the International Monetary On May 16, 2005, the Executive with Haiti. 1 Article IV consultation Background during the early 2000s as the conditions in Haiti deteriorated significantly and private investment, and Economic and social undermined external financial support stagnation, high inflation, in continued political stalemate to a halt. This resulted in economic and the devastating floods reforms came turmoil in early 2004 of real GDP by and structural unemployment. The political difficulties and led to a contraction widespread compounded these May and September and 334 percent in 2003/04. 2004 prepared a broad social pledges that was formed in early community and substantial The transition government support of the international The govemments with economic strategy that gained 2004 donors' conference. Program (SMP) assistance during a July in the context of a Staff-Monitored were supported of financial policies were framed 2004, and from October 2004 by the macroeconomic which was approved the Fund covering the period Post-Conflict Apnl-September Assistance (EPCA), by the Fund's Emergency 10, 2005. Fund's Board on January holds bilateral discussions with Articles of Agreement, the IMF collects economic and financial Under Article IV of the IMF's A staff team visits the country, developments and policies. the members, usually every year. with officials the country's economic which forms the basis for discussion of by the information, and discusses the staff prepares a report, the Managing Director, as Chairman to the On return to headquarters. At the conclusion of the discussion, and this summary is transmitted Executive Board. the views of Executive Directors, Board, summarizes country's authorities. o www.imf.org 202-623-7100 Fax 202-623-6772 Washington, D.C. 20431 Telephone financial Under Article IV of the IMF's A staff team visits the country, developments and policies. the members, usually every year. with officials the country's economic which forms the basis for discussion of by the information, and discusses the staff prepares a report, the Managing Director, as Chairman to the On return to headquarters. At the conclusion of the discussion, and this summary is transmitted Executive Board. the views of Executive Directors, Board, summarizes country's authorities. o www.imf.org 202-623-7100 Fax 202-623-6772 Washington, D.C. 20431 Telephone --- Page 68 --- 2security and the rule of law in for 2004/05 aims to: (i) strengthen recovery and The authorities' program elections in 2005; (ii) create conditions for economic and the preparation for national infrastructure; (ii) enhance governance reconstruction of government and social (iv) improve access to basic institutional and administrative capacity of the government; for the unskilled and for displaced opportunities services; and (v) promote employment populations. has been satisfactory. Performance under the SMP and the EPCA-supported program rate has stabilized; inflation has stability has been largely restored; the exchange owing to slower-thanFinancial reserves have increased. However, partly two of declined; and net international economic recovery in the first quarters anticipated project disbursements by donors, as indicated by exports and fiscal 2004/05 appears to have been weaker than expected, sector. This suggests a risk that as well as stagnant credit to the private especially in view of revenue performance, for 2004/05 may not be attained, the GDP growth objective of 27%2 percent of under the Agreement on Textiles unsettled political situation and the lifting quotas the still and Clothing. approval structural reforms. The expenditure Progress has also been made in implementing use of ministerial current accounts was process has been streamlined and the discretionary Unit became operational by end-2004, reduced. In addition, the Anti-Corruption were initiated, and requests sharply telephone and electricity companies In the financial pre-audits of the state-owned public sector enterprises were published. for offers for audits of three other key and the external audit of the Bank of the Republic of sector, the IMF safeguards assessment completed. Haiti (BRH) accounts have been largely Executive Board Assessment achieved by the Haitian authorities toward Executive Directors welcomed the progress and were encouraged The macroeconomic stability and implementing structural reforms, EPCA policy, which is restoring under the program supported by the Fund's and security conditions by Haiti's performance noted in particular that, despite difficult political in the broadly on track. They the authorities have been successful stabilizing and the devastating floods in 2004, international reserves. Directors exchange rate, bringing down inflation, and strengthening that would promote faster growth observed that the key challenge is to put in place policies social services, institutional capacity, and adequate fiscal revenues for improving and generate and for bringing down poverty. infrastructure, donors, clear considered that the actions taken by the authorities to reengage in Haiti have been important Directors the World Bank, and increase the Fund's involvement the rate of growth and arrears to development program aimed at raising steps toward a medium-term reducing poverty. confidence ahead of the of reviving economic activity and restoring the need for a Directors noted urgency 2005. In this context, they recognized the elections scheduled for November 2005 that would help safeguard social and security supplementary budget for April-September for bringing down poverty. infrastructure, donors, clear considered that the actions taken by the authorities to reengage in Haiti have been important Directors the World Bank, and increase the Fund's involvement the rate of growth and arrears to development program aimed at raising steps toward a medium-term reducing poverty. confidence ahead of the of reviving economic activity and restoring the need for a Directors noted urgency 2005. In this context, they recognized the elections scheduled for November 2005 that would help safeguard social and security supplementary budget for April-September --- Page 69 --- - 3revenues and donor disbursements. in the context of lower-than-envisaged additional assistance from the expenditures the authorities' efforts to secure and to fully cover the cost Directors supported to help close the financing gap in 2004/05 loans or international community assistance should be in the form of highly concessional of elections, noting that such authorities' development strategy. They encouraged grants and be well-coordinated with the closely with donors, including through regular to continue to cooperate agreed at last the Haitian authorities of the social and economic agenda information sharing, on the implementation the steps being taken to accelerate donor year's donor conference, and welcomed of for next year's budget. disbursements and advance the preparation projects the 2005/06 budget in time to allow for welcomed the authorities' intention to prepare a elected Directors and civil society, noting that newly government donor consultations with political parties of the fiscal year, and the importance of aligning would begin its term in the middle for the budget will be to strengthen revenue with the budget priorities. Key objectives the tax base, in order to help meet support including through broadening to avoid funding collection and administration, Directors welcomed the government's objective of to urgent expenditure demands. They looked forward to the adoption measures expenditures with central bank financing. control, and supported Fund technical budget management and expenditure improve assistance in this area. and agreed that Haiti's debt welcomed the staff's analysis of debt sustainability noted the authorities' efforts Directors and could become a source of vulnerability. They debt be avoided and burden is high that nonconcessional to clear debt service arrears, and recommended concessional terms or through grants. official assistance be provided either on highly of Haiti's Heavily Indebted new forward to a joint Fund-Bank preliminary analysis their Directors looked undertaken later in 2005. A few Directors expressed (HIPC) eligibility to be the HIPC Initiative if Haiti Poor Country initiatives toward granting debt relief under willingness to support was found to be eligible. in policy and absorb the excess liquidity underscored the need to tighten monetary under the EPCADirectors the monetary and external objectives in the the banking system to safeguard implementation of the intended change supported program. They supported a rapid bank bonds, in line with the recommendations of mechanism for auctioning central concern about the auctioning technical assistance mission. Directors expressed intentions to the Fund's recent of the central bank, and welcomed the authorities' significant operational losses financial position in next year's budget. They also include a plan for strengthening its assessment mission, and encouraged the welcomed the completion of the IMF safeguards bank. Directors supported the authorities' of the interim audit report of the central mission to assess the condition publication Financial Sector Assessment Program (FSAP) that a flexible request for a remaining weaknesses. Directors agreed net of the financial sector and identify well, and supported the objective of increasing exchange rate regime has served Haiti international reserves over the medium term. in the first half of the fiscal year in implementing the Directors welcomed the progress achieved of the authorities' completion of their reform agenda and stressed the importance structural assessment mission, and encouraged the welcomed the completion of the IMF safeguards bank. Directors supported the authorities' of the interim audit report of the central mission to assess the condition publication Financial Sector Assessment Program (FSAP) that a flexible request for a remaining weaknesses. Directors agreed net of the financial sector and identify well, and supported the objective of increasing exchange rate regime has served Haiti international reserves over the medium term. in the first half of the fiscal year in implementing the Directors welcomed the progress achieved of the authorities' completion of their reform agenda and stressed the importance structural --- Page 70 --- 4Directors encouraged the commitments as agreed under the program. In particular, of employment, remaining the survey of domestic arrears, the census government the of authorities to complete execution. While Directors acknowledged importance and publish information on budget the need to ensure that government electricity supplies, they also underscored and carried out in a sustaining electricity utility are used appropriately in the transfers to the state-owned expenditure control mechanisms transparent manner. They called for strengthened procedures for all energy-related contracts. electricity company, and for competitive bidding economic growth rate over the medium term. Directors noted the challenge of raising Haiti's consensus on the social and economic strategy, would require achieving broad domestic situation. In This reconciliation, and actions to improve the security the progress toward national macroeconomic policies, speed up addition, it will be essential to maintain prudent related to strengthening capacity in the public implementation of reforms, particularly those Directors reiterated the Fund's readiness sector, and improving governance and transparency. further drawing under the EPCA-supported program to continue its support to Haiti through a track record of policy implementation under continued technical assistance. A satisfactory (PRSP) would and on a Poverty Reduction Strategy Paper the EPCA program, and progress future Poverty Reduction and Growth Facility (PRGF) provide a basis for discussions on a supported program. the quality and Haitian authorities to take decisive steps to improve of further Directors urged the to the Fund, and in particular to take advantage timeliness of statistical data reporting technical assistance in this respect. of the IMF's Notices (PINS) form part of the IMF's efforts to promote transparency of the country (or countries) Public Information developments and policies. With the consent with member views and analysis of economic Board discussions of Article IV consultations of ex concerned, PINS are issued after Executive at the regional level, of post-program monitoring, also and issued after countries, of its surveillance of countries developments with longer-term program engagements. PINS the are Executive Board in post assessments of member matters, unless otherwise decided by Executive Board discussions of general policy 2005 Article IV Consultation is also available. case. The Staff Report for the a particular to promote transparency of the country (or countries) Public Information developments and policies. With the consent with member views and analysis of economic Board discussions of Article IV consultations of ex concerned, PINS are issued after Executive at the regional level, of post-program monitoring, also and issued after countries, of its surveillance of countries developments with longer-term program engagements. PINS the are Executive Board in post assessments of member matters, unless otherwise decided by Executive Board discussions of general policy 2005 Article IV Consultation is also available. case. The Staff Report for the a particular --- Page 71 --- 5Haiti: Selected Economic and Financial Indicators Fiscal Year Ending September 30 2001 2002 2003 2004 2005 Proj. (Annual percentage change, unless otherwise indicated) Domestic economy -1.0 -0.5 0.5 -3.8 2.5 GDP at constant prices 12.3 10.1 42.5 22.5 12.0 Consumer prices (end-of-period) 25.9 24.9 30.7 27.3 29.1 Gross domestic investment (in percent of GDP) of 22.3 22.4 29.8 26.5 25.7 Gross national savings (in percent GDP) (In percent of GDP) Public finances -2.4 -3.0 -3.5 -2.4 -1.5 Central government overall balance (including grants) overall -2.8 -3.2 -3.6 -3.7 -6.6 Central government balance (excluding grants) -0.6 1.0 -0.3 1.0 -0.6 Public sector savings (Changes in percent of beginning-of-period broad money) Money and credit 9.4 17.0 26.2 10.6 6.2 Net domestic assets 4.6 0.0 8.5 9.4 9.3 Credit to the public sector (net) -3.5 5.9 13.0 3.4 4.9 Credit to the private sector 12.5 5.2 17.2 39.8 9.1 Broad money (including foreign currency deposits) (Annual percentage change, unless otherwise indicated) External sector -7.8 -10.5 21.0 12.8 8.6 Exports (f.o.b.) -2.9 -6.9 13.6 6.0 31.6 Imports (f.o.b.) -1.0 -0.1 0.4 0.2 Current account balance (including official grants, in percent of GDP) -2.0 Current account balance (excluding official grants, in percent of GDP) -6.5 -4.9 -4.8 -2.8 -8.6 External public debt (end-of-period, in percent of GDP) 33.6 36.1 44.4 37.2 31.2 External public debt service (in percent of exports of goods 8.7 7.9 8.5 9.2 9.3 and nonfactor services) Net international reserves (in millions of U.S. dollars) 1/ 108.8 53.0 38.8 54.5 83.6 reserves (in millions of U.S. dollars) 2/ 227.3 177.7 157.1 206.9 277.1 Liquid gross 2.2 1.5 1.2 1.3 1.6 In months of imports of the following year 7.9 -8.9 -8.5 31.6 Real effective exchange rate (appreciation +) Sources: Ministry of Economy and Finance; Bank of the Republic of Haiti; and Fund staff estimates. 1/ Excludes commercial banks' foreign currency deposits with the BRH. 21 Gross reserves excluding capital contributions to international organizations.