--- Page 1 --- O2 2010 International Monetary Fund August 2010 IMF Country Report No. 10/263 Haiti: 2010 Article IV Consultation and Request for a Three-Year Arrangement Under the Extended Credit Facility- Staff Report; Staff Supplement; Public Information Notice on the Executive Board Discussion; and Statement by the Executive Director for Haiti Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. In the context of the 2010 Article IV consultation with Haiti, the following documents have been released and are included in this package: The staff report for the 2010 Article IV consultation, prepared by a staff team ofthe IMF, following discussions that ended on May 28, 2010, with the officials ofHaiti on economic developments and policies. Based on information available at the time ofthese discussions, the staff report was completed on June 30, 2010. The views expressed in the staff report are those of the staff team and do not necessarily reflect the views of the Executive Board of the IMF. A staff supplement consisting of the joint IMF/World Bank debt sustainability analysis. A Public Information Notice (PIN) summarizing the views ofthe Executive Board as expressed during its July 21, 2010 discussion of the staff report that concluded the Article IV consultation. A statement by the Executive Director for Haiti. The documents listed below have been or will be separately released. Letter of Intent sent to the IMF by the authorities ofHaiti* Memorandum of Economic and Financial Policies by the authorities of Haiti* Technical Memorandum ofl Understanding* * Also included in Staff Report The policy of publication of staff reports and other documents allows for the deletion of market-sensitive information. Copies of this report are available to the public from International Monetary Fund o Publication Services 700 19th Street, N.W. o Washington, D.C. 20431 Telephone: (202) 623-7430 0 Telefax: (202) 623-7201 E-mail: publications@imf.org Internet: htps/www.imf.org International Monetary Fund Washington, D.C. of Haiti* Technical Memorandum ofl Understanding* * Also included in Staff Report The policy of publication of staff reports and other documents allows for the deletion of market-sensitive information. Copies of this report are available to the public from International Monetary Fund o Publication Services 700 19th Street, N.W. o Washington, D.C. 20431 Telephone: (202) 623-7430 0 Telefax: (202) 623-7201 E-mail: publications@imf.org Internet: htps/www.imf.org International Monetary Fund Washington, D.C. --- Page 2 --- INTERNATIONAL MONETARY FUND HAITI and Request for a Three-Year Staff Report for the 2010 Article IV Consultation Credit Facility Arrangement Under the Extended Prepared by the Western Hemisphere Department (In consultation with other departments) by Gilbert Terrier and Dominique Desruelle Approved July 8, 2010 EXECUTIVE SUMMARY setback for Haiti, after several years of progress 12, 2010 earthquake was a major reforms. Performance under The January macroeconomic stability and implementing essential satisfactory, despite a series in maintaining (November 2006-May 2010) remained on the PRGF/ECF-supponed program social unrest. The sixth and last ECF review was completed ofs shocks, political instability, and of access equivalent to 80 percent of quota. January 27, 2010, together with an augmentation despite a relatively slow start of that the economy is now rebounding, at 120 percent of There are signs and losses from the earthquake are estimated However, the reconstruction activities. Damages and textile manufacturing are leading the recovery. 2009 GDP. Agriculture, construction, with about 1.3 million people still in temporary shelters. humanitarian situation remains dire, medium-term reconstruction plan hinges crucially Successful implementation of the authorities' Donors will need to accelerate disbursements of timely disbursement of aid commitments. a rapid improvement in on the in order for the reconstruction to proceed and to ensure and the amounts pledged reconstruction plan aims at sustainably raising medium-term growth to natural living conditions. The decentralized economic growth poles, reducing vulnerability reducing poverty by creating services, and strengthening state institutions. To support disasters, enhancing access to basic social which US$5.3 billion are to be disbursed over the reconstruction, donors pledged US$9.9 billion, of Haiti's debt. next 18 months. Donors are also committed to cancelling supported by a new ECF arrangement in an amount The proposed three-year program, macroeconomic policies and boosting equivalent to 50 percent of quota, aims at buttressing volatile aid inflows, Fund financing would help mitigate economic growth. In the context of large and These inflows (projected to triple to about excessive exchange rate and reserves movements. will likely place upward pressure on the currency, 15 percent of GDP a year on average in 2010-14) supply capacity and remove structural obstacles to which will have to be mitigated by efforts to expand has highlighted the urgency of moving Program risks remain high, but the earthquake institutions and economic competitiveness. unfinished reform agenda and further strengthening forward with the governance. of Article VIII, Sections 2, 3, and 4, and Relations with the Fund. Haiti has accepted the obligations and transfers for current transactions. The rate system is free of restrictions on payments for the exchange rate. its exchange remains a managed float with no pre-determined path de jure exchange regime ) supply capacity and remove structural obstacles to which will have to be mitigated by efforts to expand has highlighted the urgency of moving Program risks remain high, but the earthquake institutions and economic competitiveness. unfinished reform agenda and further strengthening forward with the governance. of Article VIII, Sections 2, 3, and 4, and Relations with the Fund. Haiti has accepted the obligations and transfers for current transactions. The rate system is free of restrictions on payments for the exchange rate. its exchange remains a managed float with no pre-determined path de jure exchange regime --- Page 3 --- Contents Page Executive Summary I. Post-Earthquake Challenges II. Recent Developments: An Incipient Recovery III. Policy Discussions: Building a Better Haiti. A. Haiti's Growth Challenges B. Macroeconomic Outlook C. Fiscal Policy D. Financial Sector Policies E. Monetary and Exchange Rate Policy. F. External Debt Sustainability IV. ECF Arrangement V. Staff Appraisal Tables 1. Selected Economic and Financial Indicators. 2a. Central Government Operations (in millions of gourdes). 2b. Central Government Operations (in percent ofGDP). 3. Summary Accounts of the Banking System 4. Balance of Payments 5. Financial Soundness Indicators of the Banking System 6. Medium-Term Scenario 7. Indicators of External Vulnerability 8. Millenium Development Goals 9. Proposed Schedule of Disbursements 10. Indicators of Capacity to Repay the Fund, 2010-2023. Figures 1. Recent Economic Indicators. 2. Financial Indicators of the Banking System. 3. Remittances 4. External Sector and Competitiveness. Boxes 1. The Fund's Response to the Earthquake and Donor Coordination 2. Haiti's National Action Plan for Recovery and Development 3. Recent Improvements in Governance Appendices I. Methodological Note for Post-earthquake GDP Estimates II. Assessing External Stability. Attachments I. Letter of Intent. II. Memorandum of Economic and Financial Policies.. III. Technical Memorandum ofUnderstanding --- Page 4 --- CHALLENGES' I. POST-EARTHQUAKE struck Haiti at a time when its 1. The massive January 12, 2010 earthquake caused unprecedented destruction of economic outlook was improving. The earthquake at 120 percent of 2009 GDP. capital, with damages and losses estimated and human and physical killed and 300,000 injured. Most ministries, hospitals, Over 225,000 persons were the political and security situations were schools were destroyed. Prior to the earthquake, in the tourism, energy, and textile gradually improving and foreign investors' interest economic growth reached close to manufacturing sectors had begun to materialize. In 2009, stability and implementing The authorities' success at maintaining macroeconomic the cancellation of 3 percent. reforms despite of numerous shocks allowed essential structural the HIPC/MDRI Initiative in mid-2009. US$1.2 billion of debt under the international emergency response has been generous, social 2. Although the improving, increasing risks of widespread humanitarian situation is only slowly presented its reconstruction UN conference in March, the government unrest. At a high-level Haiti. The international community committed plan, aiming at building a better which US$5.3 billion are to be disbursed over the US$9.9 billion in support of this plan, of Text Table 1:1 Donor Pledges 11 next 18 months (Text Table 1). In (in millions of U.S. dollars) 2012/13 Total weeks, the distribution of tents 2009/10 2010/11 2011/12 and recent ofhomeless bevond to about 96 percent families, large-scale cash-for-work Humanitarian aid 3,047 3,047 programs, and the reopening of schools 3,407 1,457 218 4,840 9,922 living conditions. Recovery and reconstruction 2,267 1,358 196 3,953 7,773 have helped improve Grant 441 100 5 270 816 However, about 1.3 million people Ofv which: budget support 132 32 18 20 202 remain in temporary shelters, at the Loan debt relief percent families, large-scale cash-for-work Humanitarian aid 3,047 3,047 programs, and the reopening of schools 3,407 1,457 218 4,840 9,922 living conditions. Recovery and reconstruction 2,267 1,358 196 3,953 7,773 have helped improve Grant 441 100 5 270 816 However, about 1.3 million people Ofv which: budget support 132 32 18 20 202 remain in temporary shelters, at the Loan debt relief 0 90 1,144 802 season. Recent New 296 68 4 777 start ofthe hurricane troops and Source: Unallocated United Nations, Office oft the Special Envoy for Haiti. attacks on MINUSTAH 1/As ofj June 7, 2010. rapidly rising insecurity are evidence of the rising discontent of the population. effective coordination of disbursement of the amounts pledged, capacity 3. Timely of the government's implementation reconstruction efforts, and strengthening Commission (IHCR) is expected to set are essential. The Interim Haiti Reconstruction and donor activities (including reconstruction priorities and coordinate government Fund - HRF) operated strategic Multi-Donor Trust Fund (MDTF, or Haiti Reconstruction of aid NGOS). A channel resources for the reconstruction. Disbursement by the World Bank will help Multi-Donor Trust Fund would enhance coordination through the government budget or the and local capacity building. during May 24-28, 2010. The staff team, which comprised and 1 Discussions were held in Port-au-Prince WHD), Ms. Riad (SPR), Mr. Gray (MCM), Ms. Deléchat (head), Ms. Martin and Ms. Touré (all by Mr. Perez (OED) for some of the policy (Resident Representative), was joined Minister Baudin, Central Bank Governor Mr. Bouhga-Hagbe Prime Minister Bellerive, Finance discussions. The team met with sector representatives. Castel, and other government and private 28, 2010. The staff team, which comprised and 1 Discussions were held in Port-au-Prince WHD), Ms. Riad (SPR), Mr. Gray (MCM), Ms. Deléchat (head), Ms. Martin and Ms. Touré (all by Mr. Perez (OED) for some of the policy (Resident Representative), was joined Minister Baudin, Central Bank Governor Mr. Bouhga-Hagbe Prime Minister Bellerive, Finance discussions. The team met with sector representatives. Castel, and other government and private --- Page 5 --- raising medium-term growth and Boosting investment will be key to sustainably to sustain 4. period. The authorities' objectives reducing poverty beyond the reconstruction and reduce the poverty rate of5-6 percent over the medium-term an annual rate of growth by 2015 are Text Table 2. Average Real GDP Growth (in percent) from 54 percent to 40 percent 2001-05 2006-09 20010-13 ambitious in light ofhistorical performance 1995-2000 (Text Table 2). Reaching these objectives 3.8 -0.5 2.3 4.2 will require boosting investment and with Haiti 3.5 5.3 5.2 5.5 improving infrastructure, in particular Low income countries 5.6 7.9 6.7 5.3 respect to electricity and roads; removing ECF Post-conflict countries countries 2.6 5.2 4.9 4.5 obstacles to private sector credit; improving Source: World Economic Outlook; Fund staff estimates. the business environment and economic governance; and enhancing the population's access to basic social services. supports macroeconomic policies 5. In this context, the new ECF arrangement inflows and raising medium-term growth, in the absorption of aid role in aimed at facilitating objectives. Fund resources would play an important be line with the authorities' rate and reserves fluctuations that may allowing the authorities to smooth out exchange inflows are expected to triple from an annual caused by large and volatile aid resources. Aid 2005-09 to almost 15 percent of GDP during FY of5-6 percent ofGDP during FY and exchange average and enhanced effectiveness of fiscal, monetary, The 2011-14. Close coordination effective spending and absorption of these inflows. rate policies will be needed to ensure the large financial and technical support program design complements and builds upon reconstruction (Box 1). provided by IFIs and bilateral donors for Haiti's DEVELOPMENTS: AN INCIPIENT RECOVERY II. RECENT since the earthquake. Agricultural Economic activity has rebounded rapidly are leading 6. (including debris removal), and textile manufacturing are production, construction which grew by 12 percent in January-May (year-on-year), are the recovery. Remittances, The trade deficit is widening, although exports supporting consumption and imports. reached 6.4 percent in May, in line with staff's recovering. Twelve-month inflation at end-September). The Gourde has projections for the end ofthis fiscal year (8.5 percent end-January, as the central bank broadly stable against the U.S. dollar since remained d'Haiti--BRH) has stepped up its net foreign exchange purchases. the (Banque de la République (from USS402 million at end-December), while NIR grew to US$646 million at end-May (Figure 1, Tables 1,3-4, MEFP 45). 12-month rate of base money growth rose to 28 percent for collection and weak spending have helped compensate 7. A recovery in revenue Revenue has been trending upward since January, and disbursements. amounts. The slow budget support represented about 80 percent ofbudgeted tax collections during February-May sales of and services is likely to continue, as oftaxes based on goods revenue collection from good performance strengthens. However, sustaining the favorable and audits. economic activity will require a strengthening in controls income taxes, based on FY 2009 activity, constraints and uncertain financing, spending has remained subdued due to capacity disbursements amounted to Capital in May. As of end-June, budget support but has started to pick up for the fiscal year ending in September (Table 2). only 30 percent of total commitments percent ofbudgeted tax collections during February-May sales of and services is likely to continue, as oftaxes based on goods revenue collection from good performance strengthens. However, sustaining the favorable and audits. economic activity will require a strengthening in controls income taxes, based on FY 2009 activity, constraints and uncertain financing, spending has remained subdued due to capacity disbursements amounted to Capital in May. As of end-June, budget support but has started to pick up for the fiscal year ending in September (Table 2). only 30 percent of total commitments --- Page 6 --- to the Earthquake and Donor Coordination Box 1. The Fund's Response coordinated with to the January 2010 earthquake was closely The Fund' 's prompt response donors. Emergency interventions in the multilateral and bilateral those of other major by support for the authorities' immediate aftermath of the earthquake are being replaced reconstruction plan over the medium-term. and by providing liquidity support The Fund responded promptly to the emergency functions. The US$102 million ECF augmentation technical assistance to restore basic state in the economy and finance emergency disbursed at end-January helped to keep cash flowing basic treasury and revenue assistance missions helped restore imports. Fund technical financial sector stability. These administration functions and provided advice on maintaining which focused on providing coordinated with other donors' interventions, efforts were closely agencies (World Bank, Sweden, office space and equipment to key government and basic IT temporary system as well as the government payroll USAID); reestablishing the payments and assessing the impact ofthe earthquake on functions (World Bank, IDB and U.S. Treasury); the insurance sector (World Bank). financial and technical reconstruction effort is supported by large-scale The long-term community. Substantial resources for reconstruction assistance from the international have been committed by donors. Additional projects, most of which are in the form of grants, million for this fiscal year and next. Most of budget support commitments amount to US$171 would cancel Haiti's S remaining debt. In this Haiti's creditors have also indicated that they aims at providing a coherent context, the proposed three-year ECF-supported arrangement from other donors. framework that would help anchor support macroeconomic medium-term technical is supported by a comprehensive core The new ECF program state institutions within the Fund's assistance strategy focused on strengthening a clear commitment to use the The Haitian authorities have expressed areas of expertise. reforms in certain areas, in particular revenue earthquake as an opportunity to accelerate will focus on tax policy and revenue administration, administration. In the fiscal area, Fund TA The Fund is also fiscal reporting, and Treasury management. budget preparation and planning, of a Partial Credit Guarantee scheme assisting in financial sector issues with the establishment the IDB and the U.S. Treasury; the (PCG Fund) in collaboration with the World Bank, and the design Treasury bill market; central bank recapitalization; in development of a domestic partners are building capacity ofa framework for insurance regulation. Haiti's development internal and external audits and complementary fields, such as payroll management, Bank), debt management (Canada, IDB), procurement, anti-corruption and governance restoration (World of IT systems (USAID). The European energy sector (World Bank, Canada), and financial management reforms. overall economic governance and public Union supports affected by the earthquake. At has been negatively 8. Banking sector capitalization and highly liquid. Credit and the Haitian banking system was well capitalized earnings, and end-2009, had improved, all banks posted positive deposits were growing, liquidity However, financial intermediation margins non-performing loan ratios had declined. pervasive. Bank capital has been remained wide, loan concentration high, and related lending loans rose from 8.6 percent of affected by the earthquake, and non-performing negatively . overall economic governance and public Union supports affected by the earthquake. At has been negatively 8. Banking sector capitalization and highly liquid. Credit and the Haitian banking system was well capitalized earnings, and end-2009, had improved, all banks posted positive deposits were growing, liquidity However, financial intermediation margins non-performing loan ratios had declined. pervasive. Bank capital has been remained wide, loan concentration high, and related lending loans rose from 8.6 percent of affected by the earthquake, and non-performing negatively --- Page 7 --- 2 The authorities estimate that a third of total loans in December to 12.1 percent in March. the Private sector credit have been impaired as a result of earthquake. MEFP bank loans may December and May (Figure 2, Table 5, 45)." declined by 12 percent between vulnerabilities of the non-bank 9. The earthquake also exposed the underlying and insurance companies were poorly financial sector. Both micro-finance institutions and, for the most part, Micro-finance institutions, which were undercapitalized to be able to repay existing regulated. hard-hit by the earthquake. For most borrowers insurance uninsured, were be extended and some new credit provided. The loans, maturities will need to estimated at around US$200 million. However, sector is also affected, with gross costs to have been appropriate, covering most reinsurance coverage for catastrophic events appears total cost. ofthe reinsured claims and about 75 percent ofthe volatile. Parliamentary and security situations are increasingly 2010. 10. The political 2010, have been postponed to November elections, originally scheduled for February and municipal elections. A with the presidential They will be held simultaneously ofthis calendar, compounded by an 18-month controversy has emerged about the feasibility which the Executive can govern by decree. The extension ofthe state of emergency during since the earthquake, as criminals security situation in Port-au-Prince has also deteriorated have increased, including of leaders escaped from prison, and kidnappings and gang foreigners. DISCUSSIONS: BUILDINGA BETTER HAITI III. POLICY reconstruction plan, which aims at has prepared an ambitious 11. The Government This plan focuses on creating raising long-term growth and reducing poverty. state institutions (Box 2). It also decentralized poles of economic growth and strengthening access to basic social to natural disasters and enhancing PRSP, the aims at reducing vulnerability identified in the plan are consistent with the although which services. The priority areas housing and territorial development issues, plan gives more prominence to addressing The authorities intend to prepare a PRSP update in have been heightened by the earthquake. that the reconstruction plan but, in the meantime, staff and the authorities agreed reduction and growth objectives. presents revised poverty SOCABANK in 2008, the NPL ratio rose from 2 Excluding BNC, a large bank which absorbed the failed 3.8 percent to 6.5 percent over the same period. insurance to pay down lines of to the fact that borrowers used their payments 3 This decline was due in part their businesses. credit until they are in a position to re-start authorities intend to prepare a PRSP update in have been heightened by the earthquake. that the reconstruction plan but, in the meantime, staff and the authorities agreed reduction and growth objectives. presents revised poverty SOCABANK in 2008, the NPL ratio rose from 2 Excluding BNC, a large bank which absorbed the failed 3.8 percent to 6.5 percent over the same period. insurance to pay down lines of to the fact that borrowers used their payments 3 This decline was due in part their businesses. credit until they are in a position to re-start --- Page 8 --- National Action Plan for Recovery and Development Box 2: Haiti's the authorities presented their On March 31, 2010 at a high-level UN donors' conference, raising long-run growth and reducing action plan for building a better Haiti, and reconstruction ten-year first 18-month period aims at starting the economic recovery is poverty. The emergency support to the affected population. Priority process, while continuing to provide needs ahead of the hurricane season. Schools and given to humanitarian and rehabilitation stabilize the financial system and restore SMEs access universities are reopening. Measures to credit will help restart economic activity and create jobs. to strategy is structured around four pillars: The longer-term development and growth from the capital to the rebuilding. Economic activity is to be decentralized This will also Territorial of regional economic centers. rest of the country through the development infrastructure, and implementing a require improving the transport and communication land settlement strategy with a reliable land registry. the Agriculture and private sector development are considered of Economic rebuilding. yields will be improved through the distribution main growth engines. Agricultural of irrigation and rural road networks. Private agricultural inputs and the development through: (i) strengthening the legal and regulatory sector development is to be promoted the establishment of manufacturing framework for doing business; (ii) facilitating and tourism development; (iii) attracting industries, tax-free zones, industrial areas, red tape; (iv) boosting credit to the private private investment, including by eliminating partnerships (PPPs) for to SMEs; and (v) seeking public-private sector, particularly large infrastructure projects. rates from 54 percent in 2009 to The plan aims at reducing poverty Social rebuilding, living under 1 U.S. dollar per day). 40 percent by 2015 (share of the population promoting employment and social Protecting the most vulnerable will be addressed by nets will be enhanced. inclusion. Basic public services and social safety will be political, economic, and social governance Institutional rebuilding. Improving The plan highlights the needs to support democratic critical to the success of the plan. institutions and seek political consensus. in June. process started to operate Institutions dedicated to manage the reconstruction (IHRC) is co-chaired by Prime Minister The Interim Haiti Reconstruction Commission Bill Clinton. Its mandate over the Bellerive and the UN Secretary General's S Special Envoy including coordination among all next 18 months will be to oversee reconstruction activity, number of Haitian and donor partners. The Commission is composed by an after equal 18 months by the Haiti Reconstruction The IHRC will be replaced Haiti Reconstruction Fund (HRF) representatives. (HRA). A Multi-Donor Trust Fund (MDTF) or All projects financed by the Agency the World Bank will support the reconstruction plan. managed will by have to be approved by the IHRC. HRF Bill Clinton. Its mandate over the Bellerive and the UN Secretary General's S Special Envoy including coordination among all next 18 months will be to oversee reconstruction activity, number of Haitian and donor partners. The Commission is composed by an after equal 18 months by the Haiti Reconstruction The IHRC will be replaced Haiti Reconstruction Fund (HRF) representatives. (HRA). A Multi-Donor Trust Fund (MDTF) or All projects financed by the Agency the World Bank will support the reconstruction plan. managed will by have to be approved by the IHRC. HRF --- Page 9 --- A. Haiti's Growth Challenges decades of volatile and declining growth. Real 12. Haiti has been impoverished by Text Figure 1. Haiti. Real Per Capita GDP Growth, 1965-2010 GDP per capita has contracted by 30 percent since the 1960s. Although macroeconomic stability was maintained performance improved in recent 0 and growth years, growth remained below the PRSP -5 Per capita real growth (in objective (4 percent) and was insufficient to percent) with 72 percent ofthe -10 Trend per capita real reduce poverty, growth population living under US$2 a day (Text -15 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 1 and Text Table 3). Source: IMF, Worldi Economic Outlook. Figure Text table 3. Haiti: Selected Social Indicators DPT Prevalence of Adult literacy immunization rate (percent of Human Life expectancy rate (percent of undernourishment (percent of population Development at birth (years) children ages above age 15) Index population) 12-23months) 55 2 0.53 Haiti 1 Low income countries 0.54 Latin America and the Caribbean 0.82 World Bank, World Development Indicators. Sources: UNDP, Human Development Report; Report. Haiti ranks 149th over 182 in the 2009 Human Development countries use the main European language. 2 Haiti uses the Creole literacy rate W hereas other growth performance is to agreed that this disappointing 13. Staff and the authorities of long-standing structural and extent attributable to the persistence and credit. Haiti's a large barriers, which continue to deter private investment in a few institutional degradation and concentration of the population extreme poverty, environmental disasters and other external shocks. Although have heightened vulnerability to natural and improving areas macroeconomic stability, strengthening governance, progress in maintaining these achievements do not seem to have yet political stability and security are notable, sector investment: reached the "critical mass" needed to boost private well as and democratic processes, as Progress made in strengthening governance be consolidated. Organizing a fair and improvements in the security situation, must is a challenge, but will be critical election 10 months after the earthquake free general and boosting donor and investor the government' S credibility to maintaining should help reverse the post-earthquake confidence. MINUSTAH's presence strong commitment to continue deterioration in the security situation. The authorities' is also welcome (see Box 3). strengthening governance health and education, 's access to basic social services, in particular since the The population enhanced. Living standards have deteriorated will need to be further must be made to reduce the risks of civil unrest earthquake and tangible improvements and enhance human capital and labor productivity. the earthquake free general and boosting donor and investor the government' S credibility to maintaining should help reverse the post-earthquake confidence. MINUSTAH's presence strong commitment to continue deterioration in the security situation. The authorities' is also welcome (see Box 3). strengthening governance health and education, 's access to basic social services, in particular since the The population enhanced. Living standards have deteriorated will need to be further must be made to reduce the risks of civil unrest earthquake and tangible improvements and enhance human capital and labor productivity. --- Page 10 --- and transportation, needs to be upgraded. Energy Infrastructure, in particular energy Roads, ports, airports, irrigation supply is inadequate, expensive and unreliable. need to be repaired or built from scratch. systems investment and credit. The Property rights are difficult to enforce, impeding private The judiciary system is weak civil and land registries are unreliable and incomplete. has been adversely affected by the and 80 percent ofthis system in Port-au-Prince earthquake. Administrative procedures for setting up Doing business is expensive and difficult. cumbersome (according to the 2010 World are lengthy, costly, and The new businesses it currently takes 180 days to start a business). Bank' s Doing Business indicators, (CFI) will need to be transformed into an Center for Facilitation of Investments efficient one-stop shop for foreign investors. Action Plan will help are confident that implementation oftheir while 14. The authorities to about 6 percent a year by 2015 address these issues and boost GDP growth that the reconstruction plan provides a sound significantly reducing poverty. Staff agreed noted that the substantial resources pledged by basis for sustainably raising growth, and Haiti's development challenges in a donors represented a unique opportunity to tackle that the authorities set clear comprehensive manner. Given vast needs, staff recommended focus their interventions where they further articulate their growth strategy, and be and coordinated by priorities, Donor-funded projects should prioritized could be the most effective. the authorities' priorities. Commission to reflect the Reconstruction decentralization was the cornerstone of the 15. Staff noted that successful economic activity, including across sectors Action Plan. Decentralization of economic the sources of authorities' would help expand and diversify (agriculture, tourism, textile manufacturing), resilience to shocks. Creating new economic growth, boost competitiveness, and enhance housing, and business-related services growth poles would imply developing infrastructure, authorities' strategy to engage in PPPs for To this aim, staff supported the minimizing costs in the provinces. and airports, to help attract private capital while the development of ports the importance of strong legal and regulatory to the budget. However, staff emphasized technical assistance in that area would be frameworks in this area, and noted that Fund a level playing field for investment, available. Staff also stressed the importance of creating other discriminatory incentives to the authorities not to use tax exemptions or and urged favor investment in the provinces. concrete measures to Staff highlighted the importance of rapidly adopting of a new 16. and growth. The introduction and enforcement tourism jumpstart decentralization direct investment in the textile and building code are critical to increasing foreign industrial zones. Strengthening the cadastre and sectors, and to developing new free trade and to rebuild and for activity to settle rights is also fundamental for the population hard hit by the earthquake, and a lack of property outside ofthe capital. Small businesses have been activities could delay the credit to the private sector in need of capital to restart works would create jobs and adequate The launching of major public and infrastructure these measures would recovery. momentum. Delays in implementing and risk generate a reconstruction 's ability to implement its plan weighing undermine confidence in the government' permanently on medium-term growth prospects. sectors, and to developing new free trade and to rebuild and for activity to settle rights is also fundamental for the population hard hit by the earthquake, and a lack of property outside ofthe capital. Small businesses have been activities could delay the credit to the private sector in need of capital to restart works would create jobs and adequate The launching of major public and infrastructure these measures would recovery. momentum. Delays in implementing and risk generate a reconstruction 's ability to implement its plan weighing undermine confidence in the government' permanently on medium-term growth prospects. --- Page 11 --- concurred that reforms to enhance 17. Over the medium-term, the authorities export competitiveness, while competitiveness would be critical in preserving The authorities agreed that non-price of large aid inflows (MEFP 122-24). business allowing the absorption and improvements in the better infrastructure, including roads and energy supply, investment. The government is climate would go a long way toward boosting private and improve the delivery of simplify business regulations, determined to cut red-tape, have started to revise the legal and financial regulation this judicial services. The authorities international FDI standards. Among other advantages, framework with a view to meeting benefit from the Haiti Economic Lift would enable Haiti's textile export sector to fully Haiti also concluded the Economic Program (HELP) Act. 4 On December 11, 2009, Union, joining the fourteen Caribbean Partnership Agreement (EPA) with the European The EPA is expected to strengthen Haiti's ties states that signed the EPA in October 2008. and allow it to benefit from a stable Union and with the region, both with the European and services as well as greater opportunities for foreign trading environment for goods investment. policies that discussions focused on macroeconomic 18. Against this backdrop, More efficient and transparent support growth and the authorities' plan. of the state would help revenue would enhance the credibility spending and renewed efforts to increase Measures to boost absorptive the of domestic resources for reconstruction. credit growth will and availability and exchange rate operations, and enhance capacity, modernize monetary be essential to eliciting the needed supply response. B. Macroeconomic Outlook outlook for FY 2010-13 agreed that the macroeconomic 19. Staff and the authorities heavily on the path of aid disbursements. uncertain and would depend ofGDP) was highly about US$1.5 billion a year (over percent Official grants are projected to average coordination of macroeconomic policies. until 2013, which will require careful 9 percent on average over growth should rebound strongly, to about In the near-term, reconstruction. Staff and the authorities agreed the next two years, driven mostly by based on detailed estimates of sectoral that the projected growth path was realistic, and the projected path of potential in each sector, given damages and losses, recovery inflation would remain high, at 8.6 percent in aid inflows (Appendix I). Annual bottlenecks, and strong demand. Inflation would FY 2011, due to supply and transport by end-FY 2013. gradually decline thereafter to 7 percent absorbed, assume that aid inflows are effectively spent and Medium-term projections fiscal and current account deficits associated with with the widening ofthe to be sustainably covered by grants. NIR reconstruction spending and imports throughout the period. By 2013, would remain at about 3 months of imports would converge to coverage fiscal deficit and the current account (excluding grants) both the the U.S. Congress on May 6, 2010 would extend Haiti's to the trade U.S. market for 4The HELP Act, which was passed HOPE by II initiative until 2020 and expand duty-free access factories. preferences provided under the The initiative is designed to create jobs for Haitian additional Haitian textile and apparel exports. sustainably covered by grants. NIR reconstruction spending and imports throughout the period. By 2013, would remain at about 3 months of imports would converge to coverage fiscal deficit and the current account (excluding grants) both the the U.S. Congress on May 6, 2010 would extend Haiti's to the trade U.S. market for 4The HELP Act, which was passed HOPE by II initiative until 2020 and expand duty-free access factories. preferences provided under the The initiative is designed to create jobs for Haitian additional Haitian textile and apparel exports. --- Page 12 --- sustainability, as indicated in the debt levels consistent with fiscal and external (Text Table 4, Table 6, analysis and staff' S exchange rate assessment and resilient than in sustainability Remittances to Haiti tend to be more countercyclical albeit at a slower MEFP 46). and are projected to continue to grow, other countries of the region external vulnerabilities remain high, than in recent months (Figure 3). However, growth (Table 7), pace remittances and exports could derail and weaker-than-anicipated will continue to pose risks over the medium term. while natural disasters Framework Text Table 4. Haiti: Medium-Term September Macroeconomic 30) (Fiscal year ending 2010 2011 2012 2013 (change over previous year unless otherwise 2.9 stated) -8.5 9.8 8.4 6.9 GDP at constant prices -4.7 8.5 8.6 7.5 7.0 Consumer prices (end-of-period) (in percent of GDP, unless otherwise stated) -3.9 -4.9 -4.2 Overall fiscal balance financed projects) -4.4 -4.4 -2.9 -6.8 -5.7 -4.1 -3.0 Overall fiscal balance (excl. grants and externally 0.2 0.1 0.0 0.0 0.0 Central bank net credit to the central government -3.2 -2.1 -3.7 -4.1 -4.1 Extemal current account balance (incl. official grants) 7.4 26.6 20.5 15.5 -16.8 12.7 External grants balance (excl. official grants) -10.6 -28.7 -24.2 -19.7 External current account (In millions of U.S. dollars, unless otherwise stated) 425 455 439 301 339 1,212 1,302 Net international reserves (program) 948 1,076 1,140 3.2 3.2 3.4 Liquid gross reserves year 2.9 3.1 In months ofi imports of the following Bank off the Republic of Haiti; and Fund staff estimates. Sources: Mnistryoft Economy and Finance; C. Fiscal Policy focused on short- and medium-term challenges 20. Fiscal policy discussions destroyed the tax administration associated with the reconstruction. The earthquake directors, and damaged tax records. Staff and building and information systems, killed many to find adequate office space and restore agreed that an immediate priority was execution at a the authorities has also further weakened spending capacity, noted basic functions. The earthquake Over the medium term, the authorities time where needs are both massive and urgent. revenue through a reform ofthe tax their main objectives were to: (i) raise domestic (ii) align that of modern and efficient tax and customs administrations; system and the building priorities within a programmatic framework; the budget and its financing to reconstruction management to enhance the quality and public financial and (iii) continue strengthening transparency of spending. Tax administration and policy tax reform and a stronger Staff and the authorities agreed that a comprehensive above 13 percent 21. administration would help raise domestic revenue collection fiscal was revenue of GDP in FY 2009, Haiti's pressure of GDP by FY 2013. At about percent has been set back further by the earthquake. The below that of similar countries, and it 5 See EBS/10/139, supplement 1, and Appendix II. its financing to reconstruction management to enhance the quality and public financial and (iii) continue strengthening transparency of spending. Tax administration and policy tax reform and a stronger Staff and the authorities agreed that a comprehensive above 13 percent 21. administration would help raise domestic revenue collection fiscal was revenue of GDP in FY 2009, Haiti's pressure of GDP by FY 2013. At about percent has been set back further by the earthquake. The below that of similar countries, and it 5 See EBS/10/139, supplement 1, and Appendix II. --- Page 13 --- broadening the tax base, combating fraud, authorities intend to increase revenue collection by efforts in leading an ambitious Staff also welcomed the authorities' revenue and reducing exemptions. which would help reach medium-term reform of the revenue administration, objectives. for rebuilding a modern and efficient 22. The authorities are designing a strategy will be refocused on performance and Tax and customs administration tax administration. and controls will be stepped up, and quarterly performance be fiscal missions, verification and implementation ofthe strategy will reports will be published (MEFP 11). from Design the Fund and other partners. supported by technical assistance including reforms will focus on a review of the tax system, the VAT, 23. Tax policy welcomed Fund technical assistance in reforming exemptions. The authorities ofa new tax code. As a first step, they excises, and income taxation, and for the preparation tasked with preparing and by end-September: 2010, a working group would be plan to establish, Parliament during FY 2011. These new laws submitting revised tax laws to short-run, the authorities agreed to introduce consolidated in a tax code in FY 2012. In the calls and car registration fees, which had (by end-September) a tax on incoming international to increase annual revenue by by the earthquake. These measures are expected continue reviewing been delayed The authorities also indicated that they would about 0.4 percent of GDP. would publish quarterly reports identifying all fiscal exemptions to reduce their number, and 2010 (MEFP 11, Table 2). expenditures by beneficiary sector, starting in September Fiscal spending fiscal authorities agreed that stronger and more transparent main 24. Staff and the additional budget support resources. In May, Haiti's institutions could help attract agreed on a revised set of priority measures to budget support donors and the authorities (Box 3). These measures would ongoing reforms to enhance economic governance donor pursue support disbursements, thereby strengthening form the basis for future budget of external financing. Staff and the authorities coordination and increasing the predictability in the fiscal area on this common matrix, which agreed to base program conditionality preparation and execution, revenue mobilization, includes measures to strengthen budget and audits and corruption prevention, as well as payroll and treasury management, controls spending. In the short-term, fiscal measures to increase and track poverty-reduction of data on: (i) quarterly spending on transparency will be enhanced through the publication transfers to investment project accounts, poverty-reducing expenditures; (ii) monthly subsidies and cash transfers by beneficiary including PetroCaribe projects; and (iii) monthly entity (MEFP 413-14). will be essential to support the public financial management shifting 25. Strengthening plan. The authorities envisage progressively first implementation of the reconstruction with key line ministries in FY 2012. As a budget approach, starting better to a programmatic investment programs will be prepared, informed by is step, rolling multi-year public spending. CARTAC and FAD technical assistance recording and tracking ofinvestment macro-fiscal unit at the Ministry ofFinance that would help supporting the establishment ofa in the budget. Budget planning will strengthen planning and better reflect spending priorities Treasury balances and of quarterly by the preparation of monthly reconciled be supported ngthening plan. The authorities envisage progressively first implementation of the reconstruction with key line ministries in FY 2012. As a budget approach, starting better to a programmatic investment programs will be prepared, informed by is step, rolling multi-year public spending. CARTAC and FAD technical assistance recording and tracking ofinvestment macro-fiscal unit at the Ministry ofFinance that would help supporting the establishment ofa in the budget. Budget planning will strengthen planning and better reflect spending priorities Treasury balances and of quarterly by the preparation of monthly reconciled be supported --- Page 14 --- Account will The progressive move to a Single Treasury plans for liquidity management. complement these reforms. (MEFP 414). in Governance Box 3. Haiti: Recent Improvements reforms aiming at improving Since 2004, the Haitian government has implemented The government is strongly committed to transparency and strengthening governance. the business environment, boost private continue with these reforms in order to improve continues to rank low in world governance indicators, Haiti investment, and create jobs. Although in several areas: progress has been made in recent years of budgets before the Achievements include: (i) approval of Public financial management. in the official journal; (ii) monthly publication start of the fiscal year and publication in budget execution (the share of information on budget execution; (iii) improvements fell from 62 percent of non-wage current spending executed without prior authorization (iv) reinforcement of expenditure in FY2004 to 3 percent in FY 2009); system spending the extension oft the current spending management and management and control through the deployment of public accountants (SYSDEP) to various branches of the government, establishment of civil service employment financial comptrollers in line ministries, ; (v) the auditing public accounts, submitting them verification systems based on attendance lists; (vi) the passing of a new Procurement law Parliament, and publishing audit results; and (vii) to in June 2009. authority (APN), the Financial audits of the national port (EDH), were Public enterprises. (TELECO), and the national electricity company 2010, telecommunications company firms in 2005. TELECO was privatized in May completed by international auditing from commercial activities. completing the central bank' 's disengagement Unit (ULCC) in 2004 to efforts. The government created an Anticorruption achievements' ' include the Anticorruption administration. The unit key fight corruption in the public declaration law for civil servants in 2008 and the adoption and implementation of an asset in March 2009. adoption of a national anticorruption strategy that area need to be pursued. governance, efforts in with the While Haiti has been strengthening Procurement law have yet to be adopted, and compliance The Most decrees implementing the and judicial branch should improve. declaration law among members of the legislative need to be asset investment spending, and overall fiscal transparency, these tracking and quality of public committed to implementing specific measures in further enhanced. The authorities have framework for budget support agreed with key areas, as part of the common conditionality donors. the poverty rate to 40 percent by 2015, the 26. To reach their objective of reducing by 30 percent by September 2011 priority social spending authorities aim at increasing the poverty situation and led to a deterioration (MEFP 413). The earthquake has aggravated access to social services and reducing highlighting the urgency of improving under the in food security, The authorities noted that public investments vulnerability to natural disasters. the delivery of public services including reconstruction plan would focus on improving nets, and developing transport and establishing basic social safety education and health, communication infrastructure. 40 percent by 2015, the 26. To reach their objective of reducing by 30 percent by September 2011 priority social spending authorities aim at increasing the poverty situation and led to a deterioration (MEFP 413). The earthquake has aggravated access to social services and reducing highlighting the urgency of improving under the in food security, The authorities noted that public investments vulnerability to natural disasters. the delivery of public services including reconstruction plan would focus on improving nets, and developing transport and establishing basic social safety education and health, communication infrastructure. --- Page 15 --- Budget financing for channeling aid through 27. The authorities expressed a strong preference or the MDTF. Staff agreed, noting coordination mechanisms, either the budget and existing better monitor fiscal developments, that this would help strengthen transparency, limited Staff and the authorities agreed of capacity. improve coordination in an environment projects, as well as previously off-budget resources all donor-financed government and budget to include in the revised FY 2010 and subsequent budgets to such as PetroCaribe financing, Commission (IHRC) is expected play execution reports. The Interim Haiti Reconstruction activities with reconstruction institutions and the leading role in coordinating reconstruction track aid disbursements to ensure transparency, NGOS). It will also donors (including between all actors involved (MEFP 49). coordination, and exchange ofinformation and the slow start of aid disbursements 28. Despite the large donor pledges, for the next 12-18 months has been a difficulties in securing adequate budget financing Support in FY2010-11 The immediate Text Table 5. Haiti: Budget concern. (inr milions of U.S. dollars, unless otherwi ise specified) needs of the affected population include the FY2010 FY2011 relocation of families in PrePostDisbursed temporary shelters ahead of earthquake Total Total the earthquake (in percenty" the hurricane season, Commitments Commitments provision of basic social 31.4 138.6 services, and the purchase Grants 150.0 104.8 254.7 50.0 and distribution of seeds and IDB 30.0 20.0 50.0 42.5 29.4 20.0 fertilizers. The shortfall in IDA 27.0 15.5 76.2 60.9 33.9 revenue caused by the European Union 76.2 7.8 7.8 100.0 earthquake has led the CARICOM 15.0 15.0 authorities to reprioritize Brazil 3.4 3.4 Colombia (UNASUR) 2.0 2.0 100.0 spending. Ecuador 26.1 26.1 25.0 26.1 Lower-than-budgeted and France 15.0 15.0 spending on wages Norway 6.6 goods and services has Spain 6.6 10.2 47.1 8.6 created room for higher United States 10.2 expenditure on transfers and Sources: Haitian authorities; and Fund staff estimates. subsidies (including on 'As of June 28, 2010. public utilities and hospitals investment spending, which could be well-above that have lost their revenue base) and needs. They have also allocated a originally budgeted amounts to meet post-earthquake to US$163 million) to emergency of accumulated PetroCaribe resources (up only 30 percent of all portion projects (MEFP 412). So far however, that relocation and infrastructure for this fiscal year has been disbursed, and ensuring scheduled budget support financing 2010 is a challenge. The program the remainder will be disbursed before end-September million could be compensated by an ad shortfall of up to US$25 envisages that a financing Based on projected quarterly budget support hoc issuance ofT-bills (MEFP 419). is fully financed (i.e. through end-June 2011). disbursements, the first year of the program remains for the last quarter of the fiscal However, a financing gap of about US$50 million ending in September 2011 (Text Table 5). year scheduled budget support financing 2010 is a challenge. The program the remainder will be disbursed before end-September million could be compensated by an ad shortfall of up to US$25 envisages that a financing Based on projected quarterly budget support hoc issuance ofT-bills (MEFP 419). is fully financed (i.e. through end-June 2011). disbursements, the first year of the program remains for the last quarter of the fiscal However, a financing gap of about US$50 million ending in September 2011 (Text Table 5). year --- Page 16 --- D. Financial Sector Policies private sector credit while 29. Staff and the authorities agreed that restarting efforts. Full financial stability will be critical to the reconstruction the 2008 FSAP, including preserving of the financial sector reforms identified by loans, implementation of collateral and ease the recovery of non-performing measures to lower the cost existing enterprises and boost credit. Staff would be the most effective way to support bank loans affected by the earthquake, provided welcomed the BRH's decision to restructure Staff also encouraged the BRH to relax before the earthquake. Staff that they were performing the delays in were related to the earthquake. provisioning against NPLS, when payments to introduce a regulatory and and the authorities agreed that it would be important on the establishment of a similar framework for the insurance sector, following supervisory for credit unions in FY 2009 (MEFP 415). framework rapidly with their plans to authorities highlighted the urgency of proceeding 30. The (PCG) scheme to restart private credit growth. establish a Partial Credit Guarantee Pillar 1 aims at restructuring viable bank loans The scheme is composed of two pillars: (a) business recovery; and (b) Pillar 2 supports new impacted by the earthquake and financing The PCG scheme can be accessed by banks lending to small and medium-sized enterprises. standards and have strong lending which are compliant with prudential related to and cooperatives commission is payable, and after a deductible amount procedures. An upfront scheme would guarantee up to 50 percent oft the unpaid bank-specific historic NPLS, the of the loan under Pillar 2. Access terms balance of loans under Pillar 1 and up to 80 percent although the BRH acknowledges that will be the same for state-owned and private banks, banks. require a heavier burden of proof for state-owned donors may secured. About US$100 million in Funding for the PCG still needs to be fully SO far only 31. Pillar 1 and US$30 million for Pillar 2. Donor funding to be capital is required for is insufficient in regard to the total amount estimated amounts to US$25-30 million, and US$130 million). Given the urgency ofthe situation, needed to capitalize the scheme (around launch the scheme promptly, setting aside on a staff agreed that the central bank should reserves (USS70 million) as initial guarantee. temporary basis some ofi its foreign exchange of operations oft the scheme, as loans during the first half year Over No payouts are expected for at least six months before claims can be made. losses covered must be non-performing additional resources to cover potential future time, the authorities will need to secure could be secured in the form of BRH guarantee. Such financing and replace the temporary through the MDTF. commitments from donors including in the 2008 FSAP financial reforms as identified 32. Staff noted that complementary intermediation. The authorities had made good would be essential to deepen financial credit bureau that would help lower the cost progress prior to the earthquake in setting up a in the earthquake, they are now rekindling oflending. Although the building was destroyed ahead with the establishment ofa their efforts in that area. The authorities also plan to press civil registry and cadastre (for centralized registry for movable collateral and a strengthened Reducing the spreads between which donors have offered funding and technical assistance). assessment capacity are also expected and borrowing rates, and improvements in risk legislation. lending Staff frecommended reforming insolvency to help boost credit. (MEFP 417). would help lower the cost progress prior to the earthquake in setting up a in the earthquake, they are now rekindling oflending. Although the building was destroyed ahead with the establishment ofa their efforts in that area. The authorities also plan to press civil registry and cadastre (for centralized registry for movable collateral and a strengthened Reducing the spreads between which donors have offered funding and technical assistance). assessment capacity are also expected and borrowing rates, and improvements in risk legislation. lending Staff frecommended reforming insolvency to help boost credit. (MEFP 417). --- Page 17 --- and Exchange Rate Policy E. Monetary almost 90 percent terms, Haiti's currency has appreciated by 33. In real effective this export indicators have between 2003 and December 2009. Despite ofU.S. appreciation, apparel imports up sharply in recent improved since 2003, with Haiti's export share textile export competitors (Figure and increases in market shares compared to regional real did represent an years, the authorities agreed that the pre-earthquake appreciation with the modest 4). Staffand sustained increase in aid and remittance inflows, equilibrium response to the analysis well within the model's error margins overvaluation uncovered by econometric (Appendix II). trend is likely to continue in the The authorities concurred that the appreciation and 34. which could pose important challenges to monetary and context of aid inflows, lags between large and lumpy aid inflows exchange rate management. In addition, Staff agreed that the central demand can lead to exchange rate volatility. smooth excessive related import since the earthquake had helped bank 's net purchases of foreign exchanges but noted that this had also contributed to rapid exchange rate volatility and rebuild reserves, that, going forward, such growth. With inflation rising, staff Trecommended that would continue to monetary sterilized. The authorities indicated they purchases be at least partly while noting that large reconstruction expenditures aim at containing base money growth, demand. They reiterated their commitment to could contribute to an increase in money tighten monetary policy if needed (MEFP418). operations authorities' plans include steps to improve the monetary have 35. The underdeveloped money markets, and excess liquidity framework. High dollarization, Staff and the authorities agreed on the limited the effectiveness of monetary policy. and of deepening financial importance of allowing for greater exchange rate flexibility the development of interest-rate markets over the medium term. This would help support of open market operations. The transmission mechanisms and enhance the effectiveness auctions (instead of sales where authorities also plan to develop regular foreign exchange to facilitate the absorption of aid both price and quantity are fixed) as part of a strategy (MEFP 419). inflows while managing exchange rate fluctuations bonds with T-bills, bank welcomed the prospect of replacing BRH of 36. The central operations as one of the main instruments and the associated move to open-market launching the domestic T-bill market with the monetary policy. The authorities envisage Staff noted that, in order to be successful, the publication ofa regular auction calendar. by in liquidity and of a T-bill market needed to be underpinned improvements Staff noted that T-bills development management, inflation forecasting, and debt management. debt to the central Treasury securitize the outstanding government would also be used to gradually (MEFP 419). bank and thus contribute to BRH recapitalization should be the authorities agreed that central bank independence 37. Staff and of the central bank to conduct monetary operations. enhanced to strengthen the ability plan would need to be complemented by Implementation of the central bank recapitalization law be submitted to Parliament by of a modern central bank law. The new (to for the gradual the adoption of central bank independence and provide FY 2011) will anchor the principle It will also provide for the rotation of external elimination of direct government financing. gradually (MEFP 419). bank and thus contribute to BRH recapitalization should be the authorities agreed that central bank independence 37. Staff and of the central bank to conduct monetary operations. enhanced to strengthen the ability plan would need to be complemented by Implementation of the central bank recapitalization law be submitted to Parliament by of a modern central bank law. The new (to for the gradual the adoption of central bank independence and provide FY 2011) will anchor the principle It will also provide for the rotation of external elimination of direct government financing. --- Page 18 --- within 6 months after the end of the and the publication of audited BRH accounts auditors fiscal year (MEFP 420). F. External Debt Sustainability risk of debt distress, as the earthquake has significantly relief 38. Haiti remains at high the delivery ofUS$1.2 billion in debt worsened the macroeconomic outlook. Despite Haiti remained at high risk of debt distress initiative in June 2009, the under the HIPC/MDRI massive reconstruction needs, deteriorating prior to the earthquake. By generating base, and further weakening debt management macroeconomic outlook, reducing the export debt outlook. The updated LIC DSA shows capacity, the earthquake further worsened Haiti's with the net present value (NPV) of debt-tothat Haiti's risk of debt distress remains high, threshold in the baseline scenario for ratio breaching the relevant policy-dependent exports the medium-term. multilateral and bilateral creditors after 39. Delivery of debt relief announced by improve the debt sustainability the Fund, would substantially 2009 debt stock the earthquake, including about 92 percent of Haiti's end-September outlook. Creditors representing Haiti's remaining debt. 6 Among the main (excluding the Fund) are committed to cancelling Bank has already cancelled SDR 24.3 million multilateral and bilateral creditors, the World debt relief for the IDB (US$479 million) is US$36 million as of May 21, 2010), and donor financing is (about effective in the near future, as soon as the committed million of expected to become that it would provide debt relief on US$395 available. Venezuela also confirmed deemed eligible to full stock debt relieft by PetroCaribe debt. 7 IfHaiti were to be 178.13 million) in outstanding cover about US$263 million (SDR debt the Fund, such relief would DSA scenario including these 2010. An alternative outstanding debt as of end-January ratio would breach the policyshows that, although the debt-to-exports on a relief commitments 2018, external debt would then be placed dependent ceiling between 2014 and shocks would remain high, highlighting the Nonetheless, vulnerability to should be downward path. needs mostly through grants; any new borrowing importance of covering financing terms. limited and on highly concessional debt management are committed to continue to strengthen middle, 40. The authorities of a debt unit with front, capacity. Ongoing efforts include the operationalization external and domestic debt. The legal back-office functions that would be overseeing building and debt law is underway. Capacity framework is being updated and work on a public cancel all ofHaiti's outstanding debt as part of HIPC/MDRI 6 Paris Club creditors have already committed to with Canada and the U.S. have already been signed, debt relief committed in July 2009. Bilateral agreements and Spain is imminent. and the signature of agreements with France, Italy namely, twofinancing ofoil imports is provided on concessional terms, ofoil shipments is 7Under the PetroCaribe arrangement, interest. The size of the financed portion year grace period, 25-year maturity and 1 percent varies between 30 percent oftotal shipments for oil prices determined based on prevailing oil prices and US$150 and above. US$40-50 per barrel to 70 percent for oil prices the U.S. have already been signed, debt relief committed in July 2009. Bilateral agreements and Spain is imminent. and the signature of agreements with France, Italy namely, twofinancing ofoil imports is provided on concessional terms, ofoil shipments is 7Under the PetroCaribe arrangement, interest. The size of the financed portion year grace period, 25-year maturity and 1 percent varies between 30 percent oftotal shipments for oil prices determined based on prevailing oil prices and US$150 and above. US$40-50 per barrel to 70 percent for oil prices --- Page 19 --- debt strategy that would form the of a medium-term efforts are focusing on the development basis for annual financing plans (MEFP 425). IV. ECF ARRANGEMENT Haiti's already protracted and substantial 41. Access. The earthquake has aggravated that most ofthe medium-term external financing balance-of-payments needs. However, given risks are high, including due to need is expected to be covered by grants and that program be relatively low, at 50 percent of capacity, staff proposes that access would be weaker implementation million). Nonetheless, Fund resources quota (SDR 40.95 million or US$60.43 smooth out exchange rate and reserves instrumental in allowing the central bank to Donors have also clearly indicated fluctuations caused by large and volatile aid resources. is an essential element for their progress under the Fund-supported program of each for that satisfactory that total access be set at 10 percent quota continued engagement. Staff proposes disbursements equivalent to 6 percent of quota followed by five in line the first two disbursements, and end-September test dates, reviews would be linked to end-March each. Program with Haiti's fiscal year (Table 9). for net central bank Performance criteria will include a zero ceiling central a 42. Monitoring. on net domestic assets ofthe government, credit to the central government, a ceiling of external and domestic arrears, and floor on NIRS, and zero ceilings on the accumulation debt. Indicative targets will help monitor the contracting or guaranteeing of non-concessional and base money growth. An indicative floor on domestic financing of the government, World Bank (MEFP Table net spending was set in close consultation with the revenue collection, poverty-reducing for FY 2010-11 will focus on improving T-bill 1). Structural reforms objectives spending, and developing a enhancing the efficiency and tracking of government and regular reporting of poverty-reducing market. The program will also promote transparent expenditures (MEFP Table 2). assumes and capacity to repay the Fund. The program in FY 2012. It 43. External financing order of about US$100 million a year starting continuing budget support in the adjustor to offset delayed disbursement of includes a US$50 million external financing domestic financing would be expected to already-identified budget support. The associated and at the latest, to be fully repaid within one unwind when the budget support is received 3.2 months ofi imports throughout the (TMU 36). Reserve coverage would average in 2016 at 4 percent of exports year Debt service to the Fund is projected to peak is expected program period. of domestic revenues. Debt service capacity of goods and services and 3 percent period, but would be significantly improved remain throughout the program debt relief on the to manageable relief materializes (Table 10). If the Fund provides once the committed debt 2010, debt service to the Fund would be outstanding debt stock as of end-January of goods and services and 0.5 of domestic significantly lower, at 0.7 percent of exports revenues in 2019. at the time of the first assessment should be completed 44. Safeguards. A safeguards in September 2008. The updated review. The last safeguards assessment was completed external audit of the BRH's financial assessment would be based on the progress ofthe 2009, and the documents provided by the statements for the fiscal year ending September 20, in implementing the key review. The authorities have made some progress BRH for -January of goods and services and 0.5 of domestic significantly lower, at 0.7 percent of exports revenues in 2019. at the time of the first assessment should be completed 44. Safeguards. A safeguards in September 2008. The updated review. The last safeguards assessment was completed external audit of the BRH's financial assessment would be based on the progress ofthe 2009, and the documents provided by the statements for the fiscal year ending September 20, in implementing the key review. The authorities have made some progress BRH for --- Page 20 --- assessment update. Revised reserve investment recommendations of the 2008 safeguards committee has been appointed. The external guidelines have been adopted and an investment and NIR data for FY 2009 have been audit of BRH accounts for FY 2008 has been published, committed to publishing the BRH audited verified by the external auditors. The authorities first review (MEFP Table 2). statements for FY 2009 by the time of the program financial by delays in risks include: (i) widespread social unrest, triggered constraints, 45. Risks. Key program and/or the elections; (ii) pervasive capacity the start of freconstruction activities, vulnerability to external shocks, in particular amplified by the earthquake; and (iii) high role to play, by delivering on disasters. The international community has an important with the natural New-York conference, and by assisting organization the commitments made at the in fiscal transparency and governance as of peaceful elections. Visible improvements mitigate political and social risks. Finally, the supported under the program would also help the Fund and other development partners aims comprehensive TA strategy implemented by capacity and strengthening institutions. at building V. STAFF APPRAISAL setback for Haiti, after years of 46. The January earthquake represents a major The earthquake caused damages and macroeconomic stability. progress in maintaining and affected one-third ofHaiti's population, making losses estimated at 120 percent ofGDP, The destruction ofl human and physical natural disasters in recent history. and it one ofthe largest need for recovery and reconstruction resources capital created a massive and immediate recent hard-won gains. radically altered the macroeconomic outlook, jeopardizing momentum and to use the determination to build on the reform believes that 47. The authorities' to build a better Haiti is commendable. Staff for earthquake as an opportunity an appropriate anchor National Action Plan for Recovery and Development provides more the and institutions ofthe country, and promote rebuilding the economic structure oft the Action Plan in a context of severe and effective policies. Implementation of all transparent close coordination and tracking ofinterventions capacity constraints will require external assistance through the government's development partners by the IHRC. Channeling coordination and local capacity building. budget or the MDTF would effectively support should start and Disbursement of the amounts pledged in New-York the aid pledges 48. The expectations created by large reconstruction should begin promptly. social unrest. On their part, and the limited progress SO far are increasing risks ofwidespread the relocation of families, adopt a authorities should continue their efforts to facilitate works to the anti-seismic norms, and launch large public programs new building code with generate a reconstruction momentum. but can be medium-term growth objectives are ambitious 49. The authorities' credit and investment are implemented. reached provided measures to boost scheme private is essential to restart private sector activity. The rapid implementation ofthe PCG also provides an opportunity to The reform momentum generated by the earthquake business environment. Development of implement structural reforms to improve the with the private sector would infrastructure, in particular transport and energy, in partnership a authorities should continue their efforts to facilitate works to the anti-seismic norms, and launch large public programs new building code with generate a reconstruction momentum. but can be medium-term growth objectives are ambitious 49. The authorities' credit and investment are implemented. reached provided measures to boost scheme private is essential to restart private sector activity. The rapid implementation ofthe PCG also provides an opportunity to The reform momentum generated by the earthquake business environment. Development of implement structural reforms to improve the with the private sector would infrastructure, in particular transport and energy, in partnership --- Page 21 --- in the civil and land registries and a simplification of boost investment. Improvements administrative procedures will be essential. needs to finance the budget is critical. The government 50. Securing adequate support including relocation of displaced to be able to address the urgent needs ofthe population, for the planting season and school year families, hurricane prevention, and preparations would seriously undermine the in September. The absence of such support starting and ongoing reconstruction efforts. govemment's 's credibility administration and improve the coverage, 51. Steps taken to strengthen revenue spending are welcome, and could help attract quality, tracking, and reporting of public restore the delivery of public services, generate further budget support. Investments to and improve the security and humanitarian private-sector-led; growth and employment. PFM reforms, supported by technical assistance, situation are particularly urgent. Ongoing and sustain the aid inflows. At the to enhance the transparency of spending, both the credibility of are essential domestic revenue collection will enhance same time, efforts to increase domestic resources for reconstruction. the state and its capacity to mobilize will be critical to ensuring Further improvements in the monetary framework The 52. while avoiding excessive inflationary pressures. the absorption of aid inflows associated with the large reconstruction needs appears widening ofthe external trade deficit inflows. In recent months, the central bank sustainable, as it is financed by aid and remittance to mitigate excessive exchange rate has appropriately stepped up foreign exchange purchases balance sheet considerations have volatility and rebuild its reserves level. However, Accelerating the reform of foreign prevented the central bank from sterilizing the purchases. the central bank are auctions, introducing Treasury bills, and recapitalizing The exchange the effectiveness of monetary policy. competitiveness essential measures to enhance with the foreign inflows should be mainly impact of the real appreciation associated supply-side bottlenecks, expanding addressed through structural policies aiming at reducing base and improving the business environment. the export reduce the risk of debt of committed debt relief should substantially after the 53. The delivery remain. Haiti's risk of debt distress remains high distress, but vulnerabilities will outlook, weakened capacity and even lower earthquake, due to the worsened macroeconomic most ofHaiti's creditors after the base. Delivery of debt relief committed by external debt would remain export improve the outlook, though needs earthquake would substantially the importance of covering financing vulnerable to a number of shocks, highlighting mostly through grants. arrangement under the authorities' request for a new three-year a necessary 54. Staff supports Although risks are high, the program provides the Extended Credit Facility. and donor support for the reconstruction process. anchor to the authorities' economic policies capacity and the large post-earthquake While limited due to Haiti's low debt-carrying will allow the authorities to smooth external grant commitments, Fund resources with large and lumpy aid disbursements. macroeconomic volatility associated with Haiti be held in accordance 55. It is proposed that the next Article IV consultation with the July 15, 2002 decision on consultation cycles. the authorities' request for a new three-year a necessary 54. Staff supports Although risks are high, the program provides the Extended Credit Facility. and donor support for the reconstruction process. anchor to the authorities' economic policies capacity and the large post-earthquake While limited due to Haiti's low debt-carrying will allow the authorities to smooth external grant commitments, Fund resources with large and lumpy aid disbursements. macroeconomic volatility associated with Haiti be held in accordance 55. It is proposed that the next Article IV consultation with the July 15, 2002 decision on consultation cycles. --- Page 22 --- Figure 1. Haiti: Recent Economic Indicators The. January earthquake fundamentaly atteredHait's macroeconomic outlook Growth collapsedwithr anumerous losses 60 sectors despite as astartereconstructons inproductive imports. Inflation is risingdue to supply-side 6 25 bottlenecks. Contributiont toreal GDP growth Monthlyl Inflation 40 -(yly percent) 21 (yly percent change) Renta and utilities = Transport 2 17 E Fuel a Food 0 13 a Other -1 HeadlineCPI -10 -2 9 -20 -3 -30 Net Exports -4 5 -40 a Private Investment -5 - Public Investment -6 -50 Consumption -7 -60 Real GDP Growbh(rightaus) -8 -3 -70 -9 2006 2007 2008 2009 2010 -10-7 Sep-08 Dec-08 Mar-09 Jun-09 Sep-09 Dec-09 Mar-10 collection The fiscalbalancei is worsening, with lower revenue andslow budget support disbursements. .and the current accountis (billionsof Gourdes) 5 60 deteriorating. ... 50 Balanced ofpayments 40 (percent of FGDP) 2 0 -10 -20 Total revenue and grants -30 -2 -5 Expenditure Grants 0 -40 -3 Cummulative Central Bank Remitances -10 financing (rightaxis) -50 Tradet balance -4 Sep-08 Mar-09 Sep-09 1 -60 Current Account (rightaxis) -5 Followingthe Mar-10 2006 2007 2008 2009 centralbankt to earthquake, large inflows are allowing the purchases.. engage in net foreigne exchange whicha are broadexchangerates contributing to the reserves buildup and (USr million) 100 43 stability since February. (Gourdes/Dollar) (US milion) 900 80 42 60 41 40 40 Net (right International axis) Reserves Exchange Rate P 500 20 39 0 38 Remittances NetFX Sales (right taxis) -20 37 Nov-08 Feb-09 May-09 Aug-09 Nov-09 Feb-10 -40 36 May-10 Nov-08 Feb-09 May-09 Aug-09 Nov-09 Feb-10 May-10 Sources: Haitian authorities; and IMF staff fcalculations. --- Page 23 --- Financial Indicators of the Banking System Figure 2. Haiti: further weakened banks profitability and andthe earthquaket Thei financials sector in Haiti remains underdeveloped. capitalpostion. remains low, and deposits .andi linterest rates remain uncompetitive. Financiali lintermediation arerisings sincethe earthquake.. Interest Rate Spreads int basispoints) DeposisandLoans 30 (loan minus depositrates. (bilionsofGourdes) BLoans mDeposits Gourdes US Dollars indicators have further weakeneds since the earthquake. Profitability 55 600 Neth Profits (losses) Profitability 45 500 (millionsofGourdes) (percent) 2.0 35 400 25 300 1.0 15 200 5 100 Return on Assets Return on Equity -5 0 0.0 though! banks remain highly liquid. .along with capitalization. DeposisandLoans 30 (loan minus depositrates. (bilionsofGourdes) BLoans mDeposits Gourdes US Dollars indicators have further weakeneds since the earthquake. Profitability 55 600 Neth Profits (losses) Profitability 45 500 (millionsofGourdes) (percent) 2.0 35 400 25 300 1.0 15 200 5 100 Return on Assets Return on Equity -5 0 0.0 though! banks remain highly liquid. .along with capitalization. Liquidity (In percent) 60 (percent) OTo total assets aTo deposits ONPLS tog gross loans mRegulatory capitalto risk- -weighted assets authorities; and Fundstaff calculations. Sources: Haitiana --- Page 24 --- Figure 3. Haiti: Remittances Remittances tol Haiti surgedi in the months following the earthquake, supporingcorsumptiont andmodest growth. While remittances in the region declined with the global crisis, those toi Haiti were resilient ands surgedfoliowing the earthquake. Remittances - - Dominican Republic 20 (yearly growih.3montimovingaverage) El Salvador Guatemala Honduras Haiti Mexico . Nicaragua -5 -10 -15 -20 -25 Mar-08 Jun-08 Sep-08 Dec-08 Mar-09 Jun-09 Sep-09 Dec-09 Mar-10 Remittances toi Haiti were less volatile thani in the more coneprctaaendorerates, correlated region, withthe U.S. businesscycle. 1.4 1.0 Volatility ofRemitanceFlows: 2006-09 1.2 Pocyrckcasyoffemtanoes 2/, 2006-09 (coefficient of variation) (correatoncoefidient) 1.0 0.8 0.8 0.6 0.6 0.4 0.4 0.2 0.0 0.2 -0.2 Haiti Region 0.0 lnd -0.4 ORemitances GDP Remittances to US GDP -0.6 * Re à a : f P0 CRS Mft UR XHA A WH IHO p This was fortunate given Haiti's particularly high dependence on suchi inflows... whechdwarftbilesports. Remittances, average 2006-09 Remittances, average 2006-09 30 (percentofGDP) (percentofexports) Inmmmnnd e d d Fadhe R Pete cede RP S Ar A * o MA a S 1A oo G # - 1 k Pe0 118 40 Vft A P o H VORA RL R CH Sources: Haitian authorities; WorldE Economic Outlook; HaverA Analytics; andFunds staff calculations. 1/Excluding Panama and Guatemala. 2/Correlation ofthe annual changei in remittancest to real GDP growth. --- Page 25 --- Figure 4. Haiti: External Sector and Competitiveness Mostcompetivreness. indicators indicatede leither some deteriorationi in recent years or arelatively worsep position than Thei trendi reala appreciation. since. 2003 was driven by relative priceincreases. The large current account deficiti is financed 120 20 by officialand privatetransfers. (index, 2000=100) M CurrentAccount 100 10 (percent of GDP) - - e -10 -20 40 -30 REER -40 Current Account Relativel Price Index NEER (righta axis) -50 Current account (excluding transfers) e leither some deteriorationi in recent years or arelatively worsep position than Thei trendi reala appreciation. since. 2003 was driven by relative priceincreases. The large current account deficiti is financed 120 20 by officialand privatetransfers. (index, 2000=100) M CurrentAccount 100 10 (percent of GDP) - - e -10 -20 40 -30 REER -40 Current Account Relativel Price Index NEER (righta axis) -50 Current account (excluding transfers) 2000 2002 2004 2006 2008 2010 -60 2000 2002 2004 2006 2008 2010 (proj.) Haiti was increasingly dependent on textile exports, Competitors in the region appear better positioned, in buti its overall U.S. market share declined. spite of Haiti's preferential laccess tot the U.S. market. 0.07 7 Exportst to theUS Export Share of int 95 (percent) Apparel thel United States (percent) 0.06 6 Haiti Nicaragua 0.05 5 - Dominica republic Guatemala Shareof USi Haiti'sexportst tothe US as aper IC cer ent oftotal Honduras El Salvador imports( s(right taxis) Peru Textile share(textile exports inpercent ofHait's total 0.04 4 exports tothe US) * 4 0.03 3 a - / * * . o = 6 - - 0.02 2 o 0.01 2000 2002 2004 2006 2008 2010 2000 2002 2004 2006 2008 2010 Haitididn't fare well in attractingFDI.. Asymptomofa more difficult business environment. 28 Foreign Direct Investment, 26 (2006-09 aerage.inpercentofGo) Haiti: CompanondlorgBanetsitdicabspoo) HTI DOM NIC GTM Avg. OvealfaningOutor83) 151 86 117 110 116 StartingaBusiness 180 107 95 156 135 2. ClosingaBusiness 155 146 70 93 116 3. RegisterngProperty 129 12 143 24 102 4. ObtainingCredit 135 71 87 4 74 5. Protectinginvestors 165 57 93 132 112 6.PayngT Taxes 99 70 165 109 111 7. TradingAcrossBorders 44 36 99 119 100 8. EnforcingContracts 92 86 67 103 87 a e S Sources: Haitian authorities; U.S. Department of Commerce andt the U.S. International Trade Commission (USCIT); WorldBankDoingi Business Project; World EconomicOuttook;: and IMF staff calculations. --- Page 26 --- Table 1. Haiti: Selected Economic and Financial Indicators (Fiscal year ending September 30) Nominal GDP (2009): US$ 6.5 56 billion GDP per capita (2009): US$ 661 Population (2009): 9.9 million Adult literacy (2008): 53 percent Share of pop. living with less than $1.25 a day (2001): 55 percent Unemployment rate (2003): 27 Share of pop. living with less than $2 a day (2001): 72 percent percent 2007/08 2008/09 Proj. Indicators (Fiscal year ending September 30) Nominal GDP (2009): US$ 6.5 56 billion GDP per capita (2009): US$ 661 Population (2009): 9.9 million Adult literacy (2008): 53 percent Share of pop. living with less than $1.25 a day (2001): 55 percent Unemployment rate (2003): 27 Share of pop. living with less than $2 a day (2001): 72 percent percent 2007/08 2008/09 Proj. Est. GDP Actual 1/ Prel. 2009/10 2010/11 2011/12 2012/13 (change over previous year unless otherwise stated) National income and prices GDP at constant prices 0.8 2.0 2.9 9.8 GDP deflator -8.5 8.4 6.9 Consumer 13.8 6.3 3.2 8.0 9.7 8.6 7.4 prices (period average) 14.4 5.1 3.4 4.9 8.8 8.6 Consumer prices (end-of-period) 19.8 1.0 -4.7 8.5 8.6 7.5 7.3 7.0 External sector Exports (f.o.b.) -6.2 0.1 12.4 -12.1 10.6 10.5 12.3 Imports (f.o.b.) 30.2 -0.8 -3.3 26.0 Real effective exchange rate (+ appreciation) 2.9 15.5 6.2 7.8 1.0 Central government Total revenue and grants 9.2 29.4 25.9 41.0 Total revenue excl. grants 34.6 5.5 7.6 Current expenditure 15.7 8.2 11.3 -12.1 29.5 34.4 23.5 Total expenditure 42.8 21.8 13.8 0.1 17.4 15.9 15.0 33.4 37.4 30.3 20.8 43.0 10.8 5.9 Money and credit Credit to the nonfinancial public sector (net)2/ -29.8 63.7 25.3 -8.8 Credit to private sector -32.1 0.9 -25.0 Base 25.2 12.8 14.7 -7.7 29.5 29.4 24.6 money 13.9 9.3 9.5 15.0 16.5 Broad money (incl. foreign currency deposits) 17.7 10.0 11.0 11.4 16.9 18.8 13.3 17.6 15.4 (in percent of GDP, unless otherwise stated) Central government Overall balance -3.1 0.0 -4.4 -2.9 -4.9 Overall balance (excl. grants) -7.5 -5.0 -11.1 17.3 -3.9 -4.2 Overall balance (excl. grants and externall-frnanced -21.7 -18.3 -15.0 Overall balance (excl. ext. -financed and projects) -2.3 -4.0 -4.4 -6.8 -5.7 -4.1 -3.0 projects project grants) -0.9 2.9 -2.9 -2.9 -3.9 Central bank net credit tot the central government 0.0 0.9 -4.1 -3.0 0.2 0.1 0.0 0.0 0.0 Savings and investment Gross investment 26.0 38.2 23.4 23.9 40.3 Gross national savings 21.5 34.9 38.6 39.8 Of which: Central government savings 20.2 21.7 34.9 36.2 35.7 External current account balance (incl. net credit tot the central government 0.0 0.9 -4.1 -3.0 0.2 0.1 0.0 0.0 0.0 Savings and investment Gross investment 26.0 38.2 23.4 23.9 40.3 Gross national savings 21.5 34.9 38.6 39.8 Of which: Central government savings 20.2 21.7 34.9 36.2 35.7 External current account balance (incl. official 1.4 0.9 1.2 2.2 1.2 1.1 2.0 grants) -4.5 -3.0 -2.1 Extemal current account balance (excl. official grants) -11.7 -3.2 -3.7 -4.1 -4.1 -12.4 -10.6 -28.7 -24.2 -19.7 -16.8 Public Debt External public debt (end-of-period) 29.5 13.8 16.6 22.0 Total public debt (end-ofperiod)3/ 37.7 23.2 21.6 21.9 21.6 External public debt service (in percent of 24.8 30.7 31.7 32.2 32.4 exports of goods and nonfactor services) 4/ 8.2 10.0 3.9 3.1 3.7 4.2 6.0 (in millions of U.S. dollars, unless otherwise stated) Overall balance of payments 41.5 -57.4 33.4 -17.3 -48.0 Net intemational reserves (program) 5/ 313.6 238.1 438.6 -4.0 -40.0 Liquid gross reserves 5/6/ 300.5 339.1 425.2 454.6 In months of imports off the following 707.8 754.7 947.5 1,076.2 1,139.8 1,212.0 1,302.2 year 2.9 3.0 2.9 3.1 3.2 3.2 3.4 Exchange rate (gourdes per dollar, end-of-period) 40.0 41.8 Nominal GDP (millions of gourdes) 251,464 266,885 266,885 263,736 317,527 Nominal GDP (millions of fU.S. dollars) 6,572 6,560 6,560 6,495 373,800 429,162 7,669 9,143 10,497 Sources: Ministry of Economy and Finance; Bank of the Republic of Haiti; Fund staff estimates; and World Bank. 1/ GDP ratios are calculated using nominal program figures for 2009 (numerator) and actual nominal GDP (denominator). 21 In 2008 it reflects accumulation of Petrocaribe-related resources; in 2009, it reflects the use of Petrocaribe-related in 2008. resources accumulated 3/ Coverage has been modified since EBS/09/16. Includes external public sector debt, domestic debt of the BRH bonds issued for monetary purposes. Reflects HIPC/MDRI debt reduction in 2009. central government, but excludes 4/ Includes HIPC/MDRI relief beginning in 2010. 5/ Excluding commercial bank forex deposits, letters of credit, guarantees, earmarked project accounts and U.S. bank reserves. the NIR definition has been changed relative to that of the previous program, with the SDR allocation no dollar-denominated netted liability. This table reports NIR under the new definition. longer out as a 6/ As of August 28, 2009, also includes the (general and special) SDR holdings of SDR 64. reduction in 2009. central government, but excludes 4/ Includes HIPC/MDRI relief beginning in 2010. 5/ Excluding commercial bank forex deposits, letters of credit, guarantees, earmarked project accounts and U.S. bank reserves. the NIR definition has been changed relative to that of the previous program, with the SDR allocation no dollar-denominated netted liability. This table reports NIR under the new definition. longer out as a 6/ As of August 28, 2009, also includes the (general and special) SDR holdings of SDR 64. .8 million. --- Page 27 --- Table 2a. Haiti: Central Government Operations (Fiscal year ending September 30; in millions of gourdes) 2007/08 2008/09 2009/10 Proj. Est. Prog. Est. Budget Proj. 2010/11 2011/12 2012/13 Total revenue and grants 37,901 49,062 47,717 76,853 64,208 90,524 Domestic revenue 26,849 29,041 29,881 34,925 26,258 33,991 95,542 102,804 Domestic taxes 18,026 19,663 19,954 23,873 16,649 22,376 45,677 56,416 Customs duties 7,917 8,939 8,958 10,570 8,702 10,777 31,761 37,695 Other current revenue 438 970 482 907 838 12,929 17,588 Grants 987 1,133 11,052 20,021 17,836 41,928 37,950 56,532 49,865 Budget support 3,485 5,956 3,873 3,168 10,273 5,737 207 46,388 206 Project grants 7,568 14,065 13,962 38,760 27,677 50,795 49,658 46,182 Total expenditure 1/ 45,680 62,497 59,534 88,198 71,915 102,825 Current expenditure 26,935 32,595 30,641 31,700 30,660 36,007 113,943 120,616 Wages and salaries 11,716 13,997 13,396 16,031 14,344 41,735 48,013 Net Operations 2/ 8,416 7,671 7,159 16,511 19,438 22,316 Operations 21 8,698 6,618 9,744 13,083 15,021 Interest 7,350 7,671 7,655 8,698 6,618 9,744 13,083 payments 1,768 2,259 2,242 1,559 1,698 1,751 1,867 15,021 External 928 1,064 1,106 420 507 694 2,578 844 Domestic 840 1,194 1,136 1,139 1,191 1,322 Transfers and subsidies 5,035 8,669 7,844 5,412 8,000 8,000 1,173 1,734 olw energy sector 4,258 3,448 2,000 3,500 4,445 7,348 8,098 Capital expenditure 18,745 29,902 28,894 56,498 41,255 66,818 72,207 2,990 3,433 Domestically financed 5,611 11,839 10,959 9,054 13,579 16,023 72,603 Ofy which: Treasury 5,611 3,021 2,225 7,892 12,417 14,753 17,941 19,436 21,399 Ofi which: not related to PetroCaribe spending 19,682 Ofv which: related to PetroCaribe spending 7,892 6,764 10,753 13,941 19,682 Of which: Counterpart funds 3/ 0 4,368 4,000 4,000 Foreign-financed 1,899 1,899 1,162 1,162 1,270 1,495 1,717 13,134 18,063 17,934 47,444 27,677 50,795 52,771 51,204 Overall balance -7,778 -13,435 -11,817 -11,345 -7,707 Excl. 764 10,753 13,941 19,682 Of which: Counterpart funds 3/ 0 4,368 4,000 4,000 Foreign-financed 1,899 1,899 1,162 1,162 1,270 1,495 1,717 13,134 18,063 17,934 47,444 27,677 50,795 52,771 51,204 Overall balance -7,778 -13,435 -11,817 -11,345 -7,707 Excl. grants -18,831 -12,301 -18,401 -17,812 -33,456 -29,653 -53,273 -45,657 -68,834 Excl. grants and externally financed projects -5,697 -15,394 -11,718 -5,828 -17,981 -68,266 -64,200 Excl. project grants and ext. financed projects 2,212 -9,437 -7,845 -2,660 -18,039 -15,495 -12,996 -7,707 -12,301 -15,288 -12,791 Financing 7,778 13,435 11,817 11,345 7,707 10,316 External net financing 6,786 8,298 8,210 8,399 9,859 9,530 14,312 13,729 Loans (net) 6,786 8,281 8,210 8,399 9,859 9,530 12,080 13,800 Disbursements 8,461 10,015 9,935 8,685 10,293 9,530 12,080 12,781 14,865 13,800 Budget Of which: support 2,895 6,017 5,963 0 10,293 9,530 9,668 9,844 Petrocaribe 1,951 5,996 5,963 0 10,293 9,530 9,668 Project loans 5,566 3,997 3,972 8,685 0 3,113 9,844 5,021 Amortization -1,676 -1,734 -1,725 285 -434 0 -701 Extemal financing to be committed -1,065 Arrears (net) 242 0 Internal net financing 83 3,603 2,082 2,946 -2,152 787 2,231 -71 Banking system -229 2,395 644 2,244 -4,704 BRH -988 96 -2,593 excl. Petrocaribe 121 2,395 644 2,244 171 Net T-bills for recap 644 2,244 Commercial banks 0 4,000 4,000 4,000 excl. Petrocaribe -349 0 -4,875 -988 96 -2,593 Net purchase of T-bills 0 957 4,542 5,764 7,251 Nonbank financing 957 4,542 5,764 7,251 Amortization 1,208 1,439 702 2,552 1,775 2,136 2,522 Counterpart funds 3/ -690 -460 -460 -460 -106 611 -1,251 Arrears (net) 1,899 1,899 1,162 1,162 1,270 1,495 1,717 HIPC Debt rescheduling interim relief 143 142 747 1,391 1,383 Unidentified financing (in U.S. dollars) 48 100 100 Sources: Ministry of Finance and Economy; and Fund staff estimates. 1/ Commitment basis except for domestically financed capital expenditure, which is reported on cash basis from 2007 onwards. 211 Includes statistical discrepancy. 3/ Sales proceeds from grants received in kind. --- Page 28 --- Table 2b. Haiti: Central Government Operations (Fiscal year ending September 30; in percent of GDP) 2007/08 2008/09 2009/10 Proj. 143 142 747 1,391 1,383 Unidentified financing (in U.S. dollars) 48 100 100 Sources: Ministry of Finance and Economy; and Fund staff estimates. 1/ Commitment basis except for domestically financed capital expenditure, which is reported on cash basis from 2007 onwards. 211 Includes statistical discrepancy. 3/ Sales proceeds from grants received in kind. --- Page 28 --- Table 2b. Haiti: Central Government Operations (Fiscal year ending September 30; in percent of GDP) 2007/08 2008/09 2009/10 Proj. Actual Est. GDP 3/ Est. Budget Proj. 2010/11 2011/12 2012/13 Total revenue and grants 15.1 18.4 17.9 29.1 24.3 28.5 Domestic revenue 10.7 10.9 25.6 24.0 Domestic taxes 11.2 13.2 10.0 10.7 12.2 13.1 Customs 7.2 7.4 7.5 9.1 6.3 7.0 8.5 duties 3.1 3.3 3.4 4.0 3.4 8.8 Other current revenue 0.4 3.3 3.5 4.1 Grants 0.2 0.4 0.2 0.3 0.3 0.3 0.3 4.4 7.5 6.7 15.9 14.4 17.8 13.3 10.8 Budget support 1.4 2.2 1.5 1.2 3.9 1.8 0.1 0.0 Project grants 3.0 5.3 5.2 14.7 10.5 16.0 13.3 10.8 Total expenditure 1/ 18.2 23.4 22.3 33.4 27.3 32.4 30.5 Current expenditure 10.7 12.2 11.5 12.0 11.6 28.1 Wages and salaries 4.7 11.3 11.2 11.2 Net Operations 2/ 5.2 5.0 6.1 5.4 5.2 5.2 5.2 3.3 2.9 2.7 3.3 2.5 3.1 3.5 3.5 Operations 21 2.9 2.9 2.9 3.3 2.5 3.1 3.5 Interest payments 0.7 0.8 0.8 0.6 0.6 0.6 3.5 Transfers and subsidies 2.0 3.2 2.9 0.5 0.6 Of which: energy sector 2.1 3.0 2.5 2.0 1.9 Capital expenditure 1.6 1.3 0.8 1.3 1.4 0.8 0.8 7.5 11.2 10.8 21.4 15.6 21.0 19.3 16.9 Domestically financed 2.2 4.4 4.1 3.4 5.1 5.0 Of which: Treasury 2.2 1.1 5.2 5.0 Of which: not related to PetroCaribe spending 0.8 3.0 4.7 4.6 4.8 4.6 Of which: related to PetroCaribe spending 3.0 2.6 3.4 3.7 4.6 Of which: Counterpart funds 0.0 1.7 1.3 1.1 0.0 0.0 0.7 0.7 0.4 0.4 0.4 0.4 0.4 Foreign-financed 5.2 6.8 6.7 18.0 10.5 16.0 14.1 11.9 Overall balance -3.1 -5.0 -4.4 -4.3 -2.9 -3.9 -4.9 Excl. part funds 0.0 1.7 1.3 1.1 0.0 0.0 0.7 0.7 0.4 0.4 0.4 0.4 0.4 Foreign-financed 5.2 6.8 6.7 18.0 10.5 16.0 14.1 11.9 Overall balance -3.1 -5.0 -4.4 -4.3 -2.9 -3.9 -4.9 Excl. grants -7.5 -12.5 -11.1 -20.2 -21.7 -4.2 Excl. grants and exterally financed projects -2.3 -5.8 -4.4 -17.3 -18.3 -15.0 Excl. project grants and ext. financed projects -0.9 -3.5 -2.2 -6.8 -5.7 -4.1 -3.0 -2.9 -1.0 -2.9 -3.9 -4.1 -3.0 Financing 3.1 5.0 4.4 4.3 2.9 3.2 External net financing 2.7 3.1 3.1 3.2 3.8 3.2 Loans (net) 3.7 3.0 3.2 3.2 Disbursements 2.7 3.1 3.1 3.2 3.7 3.0 3.2 3.2 3.4 3.8 3.7 3.3 3.9 3.0 3.4 3.5 Budget support 1.2 2.3 2.2 0.0 3.9 3.0 2.6 2.3 Of which: Petrocaribe 0.8 2.2 2.2 0.0 3.9 3.0 2.3 Project loans 2.2 1.5 1.5 3.3 2.6 Amortization 0.8 1.2 External -0.7 -0.6 -0.6 -0.1 -0.2 0.0 -0.2 financing to be committed 0.0 0.0 0.0 0.0 0.0 0.0 -0.2 Arrears (net) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Internal net financing 0.0 1.4 0.8 1.1 -0.8 0.2 0.6 Banking system -0.1 0.9 0.2 0.9 -1.8 -0.3 0.0 0.0 BRH 0.0 0.9 0.2 0.9 0.1 0.0 0.0 -0.6 excl. 0.0 0.0 0.0 0.0 0.0 Internal net financing 0.0 1.4 0.8 1.1 -0.8 0.2 0.6 Banking system -0.1 0.9 0.2 0.9 -1.8 -0.3 0.0 0.0 BRH 0.0 0.9 0.2 0.9 0.1 0.0 0.0 -0.6 excl. Petrocaribe 0.0 Net T-bills for recap 0.2 0.9 0.0 0.0 0.0 0.0 Commercial banks 0.0 0.0 0.0 1.3 1.1 0.9 -0.1 0.0 0.0 0.0 -1.8 -0.3 0.0 excl. Petrocaribe -0.6 Net purchase of T-bills 0.0 0.0 0.4 1.4 1.5 1.7 Other nonbank financing 0.0 0.0 0.4 1.4 1.5 1.7 0.1 0.5 0.5 0.3 1.0 0.6 0.6 Amortization 0.6 Counterpart funds 41 -0.3 -0.2 0.0 0.0 0.0 0.0 0.0 Arrears (net) 0.7 0.7 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Rescheduling 0.1 0.1 0.1 0.0 0.0 0.0 HIPC interim relief 0.3 0.5 0.0 0.0 0.5 0.0 0.0 0.0 0.0 0.0 Unidentified financing 0.0 0.0 0.0 0.0 0.0 0.6 1.1 1.0 Sources: Ministry of Finance and Economy; and Fund staff estimates. 1/ Commitment basis except for domestically financed capital expenditure, which is reported on cash basis from 2007 onwards. 21 Includes statistical discrepancy. 3/ GDP ratios are calculated using nominal program figures for 2008 (numerator) and actual nominal GDP 4/ Sales proceeds from grants received in kind. (denominator). --- Page 29 --- Table 3. Haiti: Summary Accounts of the Banking System (Fiscal year ending September 30; in millions of gourdes) 2007/08 2008/09 Proj. Est. Prog. Act. 2009/10 2010/11 2011/12 2012/13 Central Bank Net foreign assets 21,035 21,522 24,953 24,304 (In millions of U.S. dollars) 8 (numerator) and actual nominal GDP 4/ Sales proceeds from grants received in kind. (denominator). --- Page 29 --- Table 3. Haiti: Summary Accounts of the Banking System (Fiscal year ending September 30; in millions of gourdes) 2007/08 2008/09 Proj. Est. Prog. Act. 2009/10 2010/11 2011/12 2012/13 Central Bank Net foreign assets 21,035 21,522 24,953 24,304 (In millions of U.S. dollars) 25,747 27,605 30,046 Net international reserves (program) 1/ 597 583 627 679 739 238 439 301 Commercial bank forex deposits 339 425 455 250 268 395 400 366 396 Net domestic assets 7,356 9,522 6,126 11,447 Net credit to the nonfinancial public sector 20,541 22,936 21,549 16,029 21,067 25,094 Of which: Net credit to the central government 20,607 23,002 23,118 21,918 21,918 21,918 21,918 Of which: t-bills 23,289 23,289 23,289 23,289 Liabilities to commercial banks (excl gourde deposits) -18,431 -20,777 -20,711 0 8,000 12,000 16,000 BRH bonds/Open market operations -25,958 -24,936 -19,882 -22,126 Counterpart of commercial bank forex deposits -9,601 -10,161 -9,552 -9,500 -8,500 -5,000 -6,000 Other -8,830 -10,616 -11,159 -16,458 -16,436 -14,882 -16,126 5,247 7,363 5,289 15,486 19,047 19,031 25,302 Base Money 28,392 31,043 31,080 35,751 Currency in circulation 13,030 41,776 48,672 55,140 Commercial bank gourde deposits 14,271 13,448 15,590 18,134 21,026 24,109 15,362 16,773 17,632 20,161 23,643 27,646 31,031 II. Consolidated Banking System Net foreign assets 39,111 38,603 41,490 45,406 48,177 (In millions of U.S. dollars) 52,658 57,539 Of which: Commercial banks NFA 909 993 1,088 1,172 1,294 1,414 402 396 506 546 616 Net domestic assets 53,469 63,196 61,303 69,121 Credit to the nonfinancial public sector 13,224 21,649 87,855 107,341 127,105 Credit to the private sector 16,575 11,253 10,265 10,361 7,767 In gourdes 37,496 42,291 43,002 39,697 51,418 66,552 82,906 In foreign currency 16,117 17,284 19,206 21,128 25,435 32,043 39,610 In millions of U.S. dollars 21,380 25,007 23,796 18,569 25,983 34,509 43,296 Other 589 570 445 632 848 1,064 2,748 -744 1,727 18,171 26,173 30,428 36,431 Broad money 92,580 101,800 102,794 114,528 136,032 159,999 Currency in circulation 13,030 14,271 13,448 15,590 18,134 184,644 Gourde deposits 37,050 39,829 41,182 44,583 53,676 21,026 63,189 24,109 Foreign currency deposits 42,500 47,700 48,164 54,354 72,548 In millions of U.S. 428 36,431 Broad money 92,580 101,800 102,794 114,528 136,032 159,999 Currency in circulation 13,030 14,271 13,448 15,590 18,134 184,644 Gourde deposits 37,050 39,829 41,182 44,583 53,676 21,026 63,189 24,109 Foreign currency deposits 42,500 47,700 48,164 54,354 72,548 In millions of U.S. dollars 64,222 75,784 87,987 1,064 1,124 1,153 1,303 1,563 1,863 2,163 (12-month percentage change) Currency in circulation 12.6 9.5 3.2 Base money 15.9 16.3 16.0 14.7 Gourde money (M2) 13.9 9.3 9.5 15.0 16.9 16.5 13.3 Broad money (M3) 12.4 8.0 9.1 10.1 19.3 17.3 14.8 17.7 10.0 11.0 11.4 18.8 17.6 15.4 Gourde deposits 12.4 7.5 11.2 8.3 20.4 17.7 14.8 Foreign currency deposits (U.S. dollars) 24.6 12.2 13.3 12.9 18.2 18.0 16.1 Credit to the nonfinancial public sector -29.8 63.7 25.3 -32.1 0.9 Credit to the private sector 25.2 12.8 14.7 -8.8 -25.0 Credit in gourdes -7.7 29.5 29.4 24.6 Credit in foreign currency (U.S. dollars) 21.3 7.2 19.2 10.0 20.4 26.0 23.6 28.3 17.0 11.3 22.0 39.9 32.8 25.5 Memorandum items: Foreign currency bank deposits (percent of total) 53.4 54.5 53.9 54.9 54.5 54.5 Foreign currency credit to private sector (percent of total) 57.0 59.1 55.3 46.8 50.5 54.8 Commercial Banks' Credit to Private Sector (percent of GDP) 21 14.2 15.8 15.4 14.3 15.4 17.1 51.9 52.2 18.6 Sources: Bank of the Republic of Haiti; and Fund staff estimates. 1/8 Excluding commercial bank forex deposits, letters of credit, guarantees, earmarked project accounts and U. .S. reserves. the NIR definition has been changed relative to that of the previous program, with the SDR allocation no dollar-denominated bank liability. This table reports NIR under the new definition. longer netted out as a 2/ GDP ratio calculated using nominal program figure for 2009 (numerator) and actual nominal GDP (denominator). --- Page 30 --- Table 4. Haiti: Balance of Payments (Fiscal year ending September 30; in millions of U.S. dollars) 2007/08 2008/09 Proj. Est. Prog. Est. 2009/10 2010/11 2011/12 2012/13 Current account -295.3 -213.9 -210. .8 -139.3 Current account (excluding grants) -769.0 -875.4 -698. 2 -283.7 376.6 -429. .6 -1,865.4 -1,856.3 -1,797.5 -1,763.7 Trade balance -1,617.0 -1600. 1 -1,486.0 -1,868.7 7 -2,429.4 Exports of goods 490.2 490.8 551.2 484.6 .6 535.9 -2,558. .3 Current account (excluding grants) -769.0 -875.4 -698. 2 -283.7 376.6 -429. .6 -1,865.4 -1,856.3 -1,797.5 -1,763.7 Trade balance -1,617.0 -1600. 1 -1,486.0 -1,868.7 7 -2,429.4 Exports of goods 490.2 490.8 551.2 484.6 .6 535.9 -2,558. -2,731.8 Of which: Assembly industry 423.3 591. 9 664.8 Imports of goods 432. 1 491.3 436. 7 485.0 538. 8 605.7 Of which: Petroleum -2,107.2 2 -2090.9 -2,037.2 -2,353.3 -2,965.3 -3,150.0 -3,396. 6 products -602. 2 -425.0 -384. .6 -433.8 -503.7 -508. 2 -513.9 Services (net) -420.6 -451.5 -462.7 -1,364.6 -892.0 -804. 6 Receipts 342.8 319.9 381.8 266.3 304. 4 -703.3 388. 4 Payments -763.4 -771.4 -844. .5 -1,630. .9 -1,196.4 -1,152.0 347.4 -1,091.7 Income (net) 16.0 -12.8 10.2 -5.4 Of which: Interest payments 1/ -24.6 -26.8 -3.5 13.8 49.5 -12.2 -12.5 -13.6 -17. .4 -21.3 Current transfers (net) 1,726. 4 1850.5 1,727.7 3,099.3 3,041.2 Official transfers (net) 473.7 661.5 487.4 2,972.. 2 2,956.0 Ofv which: budget support 1,726.0 1,572.5 1,420.8 1,334.1 Private transfers (net) 254.7 138.6 5.1 5.0 1,252. 7 1189.0 1,240.3 1,373. 2 1,468.6 1,551 .4 1,622.0 Capital and financial accounts 336.7 156.6 244. 1 122.0 279.7 328. Capital transfers (HIPC/MDRI) 0.0 1069.0 1,069.0 6 389.6 Public sector capital flows (net) 0.0 0.0 0.0 0.0 Loan disbursements 319.7 49.6 263.8 150.7 213.1 295.5 337.5 Amortization 1/ 363.5 98.0 186. financial accounts 336.7 156.6 244. 1 122.0 279.7 328. Capital transfers (HIPC/MDRI) 0.0 1069.0 1,069.0 6 389.6 Public sector capital flows (net) 0.0 0.0 0.0 0.0 Loan disbursements 319.7 49.6 263.8 150.7 213.1 295.5 337.5 Amortization 1/ 363.5 98.0 186. 4 161.3 230.2 312.6 363.6 Debt stock reduction (HIPC/MDRI) -43.8 -48.4 -24. .0 -10.7 -17.1 -17.1 -26.1 0.0 -1092.0 -1,092.0 0.0 0.0 Banks (net)2/ -143.0 50.0 56.5 110.0 0.0 0.0 Private sector capital flows 21 115.8 57.0 -0.8 -40.0 -70.0 -60.0 Of which: Foreign direct investment 81.4 106.7 103.2 112.0 29.8 20.0 38.0 81.4 106.7 103.2 Errors and omissions 3/ 44.2 0.0 26.0 0.0 112.0 0.0 0.0 0.0 Overall balance 41.5 -57.4 33.4 -17.3 -4.0 -48.0 -40.0 Financing -41.5 57.4 -33.4 17.3 -44.0 -52.0 Change in net foreign assets 4/ -63.4 19.5 -70.8 14.7 -44.0 -52.0 -60.0 Change in gross reserves -163.0 -46.7 -258.7 -128.6 -60.0 Liabilities -63.7 -72.1 -90.3 99.6 66.2 2 187.9 143.4 19.7 Utilization of Fund credits(net) 49.9 60.3 61.3 122.9 20.1 30.3 Purchases and loans 49.9 19.7 9.4 -0.7 Repayments 60.3 61.3 122.9 19.7 14.8 14.8 0.0 0.0 0.0 0.0 Other liabilities 0.0 -5.4 -15.5 49.7 5.9 126.6 20.4 0.0 Changei in arrears 0.0 0.0 10.7 31.0 Debt rescheduling 0.0 0.0 0.0 0.0 0.0 HIPC interim assistance 3.6 3.5 3.5 0.0 0.0 0.0 0.0 External financing to be committed 18.3 34.0 34.0 2.6 0.0 0.0 0.0 0.0 0.4 0.0 0.0 0.0 0.0 0.0 Financing gap 0.0 0.0 0.0 0.0 48.0 100.0 100.0 Memorandum items: Current account balance (in percent of GDP) -4.5 -3.0 -3.2 -2.1 Current account balance, excl. 18.3 34.0 34.0 2.6 0.0 0.0 0.0 0.0 0.4 0.0 0.0 0.0 0.0 0.0 Financing gap 0.0 0.0 0.0 0.0 48.0 100.0 100.0 Memorandum items: Current account balance (in percent of GDP) -4.5 -3.0 -3.2 -2.1 Current account balance, excl. grants (in percent of GDP) -11.7 -12.4 -10.6 -28.7 -3.7 -4.1 -4.1 Goods exports (f.o. .b) growth -6.2 0.1 12.4 -24.2 -19.7 -16.8 Goods import (f.o.b) growth -12.1 10.6 10.5 12.3 Debt service as percent of exports 30.2 -0.8 -3.3 15.5 26.0 6.2 7.8 Gross liquid international reserves (in millions of U.S. dollars) 8.2 9.3 3.9 3.1 3.7 4.2 6.0 707.8 754. 7 947.5 1,076.2 Gross liquid international reserves (in months 1,139.8 1,212.0 1,302.2 ofnext year's imports ofg goods and services) 2.9 3.0 2.9 3.1 3.2 3.2 3.4 Sources: Bank of the Republic of Haiti; and Fund staff estimates. ) 8.2 9.3 3.9 3.1 3.7 4.2 6.0 707.8 754. 7 947.5 1,076.2 Gross liquid international reserves (in months 1,139.8 1,212.0 1,302.2 ofnext year's imports ofg goods and services) 2.9 3.0 2.9 3.1 3.2 3.2 3.4 Sources: Bank of the Republic of Haiti; and Fund staff estimates. 1/ Includes HIPC/MDRI debt relief beginning in 2010 (2009 HIPC/MDRI debt relief is reflected below-t 2/ Includes NIR and commercial banks' foreign currency deposits with the BRH. -the-line). 3/ Includes short-term capital and errors and omissions for historical period. 4/ Petrocaribe resources for 2009 are recorded as private capital inflows and outflows of banks' NFA. --- Page 31 --- Table 5. Haiti: Financial Soundness Indicators of the Banking System (Fiscal year ending September 30; in percent unless otherwise indicated) 2006/07 2007/08 2008/09 2009/10 2009/10 Dec. Mar. Size and Growth Total assets (in millions of gourdes) 79,764 100,302 107,913 114,183 120,512 Of which: central bank bonds 9,008 9,397 9,552 6,552 8,339 35,405 35,880 31,264 Of which: : total loans 24,670 31,187 Total assets (in millions of U.S. dollars) 1/ 2,192 2,510 2,583 2,674 3,206 Total Deposits (in millions of gourdes) 66,031 84,725 92,460 98,351 104,073 Net Profits (loss) (in millions of gourdes) 202.3 483.7 359.8 274.6 214.8 10.9 10.8 13.3 13.4 11.7 Credit/GDP 29.2 34.6 37.8 42.6 45.0 Deposits/GDP Credit growth (net) from year before 2/ 9.9 29.3 14.2 15.2 0.9 Capital adequacy Regulatory capital to risk-weighted assets 3/ 19.0 12.6 16.4 11.7 10.0 7.0 6.1 6.7 6.9 6.5 Capital (net worth) to assets Asset quality and composition 28.3 29.1 30.9 29.6 24.0 Loans (net) to assets NPLS to loans 10.0 9.7 8.5 8.6 12.3 gross 8.5 6.4 5.9 5.8 7.4 Provisions to gross loans NPLS 85.5 66.4 69.6 66.7 59.8 Provisions to gross NPL less provisions to net worth 6.4 15.6 12.6 13.0 15.4 Earnings and profitability (annualized) 1.0 2.0 1.4 1.0 0.1 Net Eamnings/Assets (ROA) 14.7 30.9 20.5 14.5 2.0 Net Eamings/Equity (ROE) Net interest income to gross interest income 67.1 80.0 87.3 86.6 87.9 to net 86.0 73.5 74.1 76.2 75.4 Operating expenses profits Efficiency Interest rate spread in gourdes 4/ 10.2 12.4 19.5 19.1 20.5 Interest rate spread in U.S. dollars 4/ 8.9 10.7 10.9 11.4 Liquidity Liquid assets to total assets 5/ 46.5 35.4 46.9 54.4 48.4 56.1 41.9 44.4 49.5 49.5 Liquid assets to deposits 5/ Market Risk Foreign currency loans to total loans (net) 70.1 69.3 68.9 64.4 66.7 Foreign currency deposit to total deposits 52.4 58.2 56.9 60.1 59.8 Sources: Fund staff computations based on data from the Bank of the Republic of Haiti. 1/ Data for all years converted from gourdes. 21 Net credit equal to gross loans less non performing loans. 3/ The prudential requirement is 12 percent. 4/ Defined as the difference between average lending rate and average fixed deposit rate in the banking system. 5/ Liquid assets include cash and central bank bonds. 69.3 68.9 64.4 66.7 Foreign currency deposit to total deposits 52.4 58.2 56.9 60.1 59.8 Sources: Fund staff computations based on data from the Bank of the Republic of Haiti. 1/ Data for all years converted from gourdes. 21 Net credit equal to gross loans less non performing loans. 3/ The prudential requirement is 12 percent. 4/ Defined as the difference between average lending rate and average fixed deposit rate in the banking system. 5/ Liquid assets include cash and central bank bonds. --- Page 32 --- Table 6. Haiti: Medium-Term Scenario (Fiscal year ending September 30) Est. Proj. 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 Real sector (annual percentage rate) 0.8 2.9 -8.5 9.8 8.4 6.9 6.2 6.0 Real GDP growth 7.5 7.0 6.0 5.0 Inflation (CPI end-of-period) 19.8 -4.7 8.5 8.6 Fiscal sector (in percent of GDP) Central government overall balance (incl. grants) -3.1 -4.4 -2.9 -3.9 -4.9 -4.2 -4.1 -3.6 and 15.1 17.9 24.3 28.5 25.6 24.0 22.4 21.6 Total revenue grants 11.2 10.0 10.7 12.2 13.1 13.5 14.1 Central government revenue 10.7 18.2 22.3 27.3 32.4 30.5 28.1 26.5 25.2 Central government expenditure 0.8 -0.8 0.2 0.6 0.0 0.4 0.4 Domestic financing 0.0 External financing 1/ 2.7 3.1 3.7 3.0 3.2 3.2 2.8 2.4 Monetary sector 17.7 11.0 11.4 18.8 17.6 15.4 13.4 12.8 Growth in broad money (M3) External sector (in percent of GDP) -24.4 -23.5 Trade balance -24.6 -22.7 -28.8 -31.7 -28.0 -26.0 -6.4 -7.1 -21.0 -11.6 -8.8 -6.7 -4.7 -3.2 Services (net) 0.2 0.2 -0.1 0.0 0.2 0.5 0.6 0.5 Income (net) 19.1 18.9 21.1 19.1 17.0 15.5 14.3 13.8 Private transfers (net) 7.2 7.4 26.6 20.5 15.5 12.7 10.6 9.1 External grants -4.5 -3.2 -2.1 -3.7 -4.1 -4.1 -3.7 -3.3 Current account (incl. official transfers) Current account (excl. official transfers) -11.7 -10.6 -28.7 -24.2 -19.7 -16.8 -14.3 -12.4 External financing gap for central government 0.0 0.0 0.0 0.6 1.1 1.0 0.8 0.8 Liquid reserves (in millions of U.S. dollars) 708 948 1,076 1,140 1,212 1,302 1,381 1,454 gross 2.9 2.9 3.1 3.2 3.2 3.4 3.5 3.6 In months of imports of the following year Sources: Haitian authorities; and Fund staff estimates. 1/ Including rescheduling and HIPC relief. 0.0 0.6 1.1 1.0 0.8 0.8 Liquid reserves (in millions of U.S. dollars) 708 948 1,076 1,140 1,212 1,302 1,381 1,454 gross 2.9 2.9 3.1 3.2 3.2 3.4 3.5 3.6 In months of imports of the following year Sources: Haitian authorities; and Fund staff estimates. 1/ Including rescheduling and HIPC relief. --- Page 33 --- Table 7. Haiti: Indicators of External Vulnerability 11 (Units as indicated) 2007/08 2008/09 2009/10 Proj. 2010/11 2011/12 2012/13 Debt indicators 29.5 16.6 22.0 21.6 21.9 21.6 Total external public debt (in percent of GDP) 215.0 Total external public debt (in percent of exports 2/) 232.5 116.4 189.9 197.1 213.4 1.0 0.8 0.4 0.4 0.4 0.6 External debt service (in percent of GDP) 0.4 0.7 0.4 0.2 0.2 0.2 Amortization 0.4 0.4 0.2 0.2 0.2 0.2 Interest of 2/) 8.2 5.6 3.1 3.7 4.2 6.0 External debt service (in percent exports 2.0 2.4 3.9 Amortization 5.3 2.6 1.4 3.0 3.0 1.7 1.6 1.8 2.0 Interest External debt service (in percent of current central govt. revenues) 9.8 7.1 3.6 3.7 3.6 4.6 6.2 3.3 1.6 2.1 2.0 3.0 Amortization 3.5 3.8 1.9 1.7 1.6 1.5 Interest Other indicators 12-month basis in U.S. dollars) -6.2 12.4 -12.1 10.6 10.5 12.3 Exports (percent change, -3.3 15.5 26.0 6.2 7.8 Imports (percent change, 12-month basis in U.S. dollars) 30.2 21.9 Remittances and grants in percent of gross disposable income 20.8 20.8 32.3 28.4 24.5 Real effective exchange rate appreciation (+) (end of period) 2.9 1.0 Exchange rate (per U.S. dollar, period average) 38.3 40.7 -376.6 -429. 6 Current account balance (US$ million) 3/ -295.3 -210.8 -139.3 -283.7 Capital and financial account balance (US$ million) 4/ 336.7 244. 1 122.0 279.7 328.6 389.6 319.7 263.8 150.7 213. 1 295.5 337.5 Public sector 17.1 81.7 -28.6 66.7 33.2 52.0 Private sector 1302.2 707.8 8 947.5 1076.2 1139.8 1212.0 Liquid gross reserves (US$ million) 3.1 3.2 3.2 3.4 In months of imports of the following year 2/ 2.9 2.9 319.7 263.8 150.7 213. 1 295.5 337.5 Public sector 17.1 81.7 -28.6 66.7 33.2 52.0 Private sector 1302.2 707.8 8 947.5 1076.2 1139.8 1212.0 Liquid gross reserves (US$ million) 3.1 3.2 3.2 3.4 In months of imports of the following year 2/ 2.9 2.9 1928 1383 In percent of debt service due in the following year 99.6 127.4 125.6 112. 1 101.3 96.1 In percent of base money Sources: Bank of the Republic of Haiti; and Fund staff estimates. 1/1 Reflects HIPC/MDRI relief. 2/ Goods and services. 3/ 4/ Including Includes in grants. the private sector FDI, short-term capital, and errors and omissions in addition to bank flows. --- Page 34 --- Table 8. Haiti: Millennium Development Goals 1990 1995 2000 2005 2008 Goal 1: Eradicate extreme poverty and hunger Employment to population ratio, 15+, total (%) 56.0 54.0 55.0 56.0 Employment to population ratio, ages 15-24, total (%) 37.0 55.0 GDP per person employed (annual % growth) 39.0 44.0 46.0 48.0 Income share held by lowest 20% -10.0 -18.0 -1.0 -4.0 0.0 Malnutrition prevalence, weight for age (% of children under 5) 24.0 2.5 Poverty gap at $1.25 a day (PPP 13.9 18.9 18.9 Poverty headcount ratio at $1.25 a day (PPP)(% of population) 28.0 Prevalence of undernourishment (% of population) 55.0 Vulnerable employment, total (% of total employment) 63.0 60.0 58.0 Goal 2: Achieve universal primary education Literacy rate, youth female (% of females ages 15-24) Literacy rate, youth male (% of males ages 15-24) Persistence to last grade of primary, total (% of cohort) Primary completion rate, total (% of relevant age group) 29.0 Total enrollment, primary (% net) Goal 3: Promote gender equality and empower women Proportion of seats held by women in national parliaments (%) 4.0 Ratio of female to male enrollments in tertiary education 4.0 4.0 4.0 Ratio of female to male primary enrollment Ratio of female to male secondary enrollment 95.0 95.0 Share of women employed in the nonagricultural sector (% of total nonagricultural employment) 94.0 44.2 Goal 4: Reduce child mortality Immunization, measles (% of children ages 12-23 months) 31.0 49.0 Mortality rate, infant (per 1,000 live births) 55.0 58.0 58.0 Mortality rate, under-5 (per 1,000) 105.0 98.0 78.0 62.0 57.0 152.0 141.0 109.0 84.0 76.0 Goal 5: Improve maternal health Adolescent fertility rate (births per 1,000 women ages 15-19) Births attended by skilled health staff (% off total) 23.0 20.0 24.0 Contraceptive prevalence (% of women ages 15-49) 26.0 26.0 Maternal mortality ratio (modeled estimate, per 100,000 live births) 10.0 18.0 28.0 32.0 32.0 Pregnant women receiving prenatal care (%) 71.0 670.0 Unmet need for contraception (% of married women ages 15-49) 68.0 79.0 85.0 85.0 45.0 40.0 38.0 Goal 6: Combat HIVIAIDS, malaria, and other diseases Children with fever receiving antimalarial drugs (% of children under age 5 with fever) Condom use, population ages 15-24, female (% of females ages 15-24) 12.0 5.0 5.0 Condom use, population ages 15-24, male (% of males ages 15-24) 13.0 37.0 37.0 Incidence of tuberculosis (per 100,000 people) 28.0 42.0 42.0 Prevalence of HIV, female (% ages 15-24) 306.0 306.0 306.0 306.0 306.0 Prevalence of HIV, male (% ages 15-24) 1.4 1.4 Prevalence of HIV, total (% of population ages 15-49) 1.0 1.0 Tuberculosis cases detected under DOTS (%) 1.2 2.1 2.2 2.2 2.2 2.0 19.0 44.0 49.0 Goal 7: Ensure environmental sustainability CO2 emissions (kg per PPP $ of GDP) CO2 emissions (metric tons per capita) 0.1 0.1 0.2 0.2 Forest area (% of land area) 0.1 0.1 0.2 0.2 of population ages 15-49) 1.0 1.0 Tuberculosis cases detected under DOTS (%) 1.2 2.1 2.2 2.2 2.2 2.0 19.0 44.0 49.0 Goal 7: Ensure environmental sustainability CO2 emissions (kg per PPP $ of GDP) CO2 emissions (metric tons per capita) 0.1 0.1 0.2 0.2 Forest area (% of land area) 0.1 0.1 0.2 0.2 Improved sanitation facilities (% of population with access) 4.0 4.0 4.0 4.0 Improved water source (% of population with access) 29.0 27.0 24.0 19.0 19.0 Marine protected areas, (% of surface area) 52.0 54.0 56. 0 58.0 58.0 Nationally protected areas (% of total land area) 0.3 0.3 Goal 8: Develop a global partnership for development Aid per capita (current U.S. dollars) Debt service (PPG and IMF only, % of exports, excluding workers' remittances) 24.0 92.0 24.0 54.0 73.0 Internet users (per 100 people) 9.0 50.0 8.0 17.0 6.0 Mobile cellular subscriptions (per 100 people) 0.0 0.0 0.2 6.5 10.4 Telephone lines (per 100 people) 0.0 0.0 1.0 5.0 33.0 1.0 1.0 1.0 2.0 1.0 Source: World Development Indicators. --- Page 35 --- Table 9. Haiti: Proposed Schedule of Disbursements Amount Date Conditions for Disbursement 1/ SDR 8, 190,000 July 15, 2010 Executive Board approval of the three-year arrangement under the ECF. SDR 8,190,000 January 15, 2011 Observance of performance criteria for September 2010 and completion of the first review under the ECF arrangement. SDR 4,914,000 July 15, 2011 Observance of performance criteria for March 2011 and completion of the second review under the ECF arrangement. SDR 4,914,000 January 15, 2012 Observance of performance criteria for September 2011 and completion of the third review under the ECF arrangement. SDR 4,914,000 July 15, 2012 Observance of performance criteria for March 2012 and completion of the fourth review under the ECF arrangement. SDR 4,914,000 January 15, 2013 Observance of performance criteria for September 2012 and completion of the fifth review under the ECF arrangement. SDR 4,914,000 July 15, 2013 Observance of performance criteria for March 2013 and completion of the sixth review under the ECF arrangement. Source: IMF staff estimates and projections. Other than the generally applicable conditions for the Extended Credit Facility (ECF). 2 Observance of performance criteria for March 2012 and completion of the fourth review under the ECF arrangement. SDR 4,914,000 January 15, 2013 Observance of performance criteria for September 2012 and completion of the fifth review under the ECF arrangement. SDR 4,914,000 July 15, 2013 Observance of performance criteria for March 2013 and completion of the sixth review under the ECF arrangement. Source: IMF staff estimates and projections. Other than the generally applicable conditions for the Extended Credit Facility (ECF). --- Page 36 --- Table 10. Haiti Indicators of Capacity to Repay the Fund, 2010-23 (In fiscal year ending September 30) Projections 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Fund obligations based on existing credit (in millions of SDRS) 0.0 0.0 3.6 10.3 15.9 28.7 36.0 30.4 25.7 20.2 7.3 0.0 0.0 0.0 Principal 1.5 0.0 0.0 0.5 0.4 0.4 0.3 0.2 0.1 0.1 0.0 0.0 0.0 0.0 Charges andi interest 0.5 0.2 0.3 0.0 0.0 0.5 Fund obligations based on existing and prospective credit 1/ 3/ (in millions of SDRs) 15.9 28.7 38.5 35.2 32.5 28.4 15.5 5.7 3.4 1.5 1.5 0.0 0.0 0.0 0.0 3.6 10.3 Principal 0.2 0.3 0.0 0.0 0.5 0.5 0.5 0.5 0.4 0.3 0.2 0.1 0.1 0.0 0.0 0.0 Charges and interest 0.5 Total obligations based on existing and prospective credit 1/ 16.4 29.2 38.9 35.4 32.7 28.5 15.6 5.8 3.5 1.5 In millions of SDRs 2.0 0.2 0.3 0.0 0.0 4.1 10.8 58.4 53.3 49.1 42.8 23.4 8.7 5.2 2.2 In millions of U.S. 0.5 Total obligations based on existing and prospective credit 1/ 16.4 29.2 38.9 35.4 32.7 28.5 15.6 5.8 3.5 1.5 In millions of SDRs 2.0 0.2 0.3 0.0 0.0 4.1 10.8 58.4 53.3 49.1 42.8 23.4 8.7 5.2 2.2 In millions of U.S. dollars 3.0 0.3 0.4 0.0 0.0 6.1 16.3 24.6 43.9 0.1 0.4 0.0 0.0 0.0 0.0 0.6 1.5 2.0 3.3 4.0 3.4 2.9 2.3 1.2 0.4 0.2 Inp percent of exports of goods and services 0.1 15.3 25.9 26.2 37.6 48.1 31.4 26.2 21.6 12.2 4.7 3.4 1.5 In percent of debt service 21 3.3 0.6 2.9 0.1 1.2 1.6 2.4 3.0 2.5 2.1 1.7 0.8 0.3 0.2 0.1 In percent of government domestic revenues 0.5 0.0 0.1 0.0 0.0 0.5 20.0 35.6 47.5 43.3 39.9 34.8 19.0 7.0 4.2 1.8 Inp percent of quota 2.4 0.2 0.3 0.0 0.0 5.0 13.2 0.4 0.2 0.1 0.5 0.0 0.0 0.0 0.0 0.5 1.2 1.7 2.9 3.7 3.2 2.8 2.3 1.2 reserves Inp percent of gross international Outstanding Fund credit 189.4 160.6 122.1 87.0 54.5 26.2 10.7 4.9 1.5 0.0 In millions of SDRs 35.7 67.3 105.0 186.3 199.4 205.7 205.2 130.9 39.4 16.0 7.4 2.2 0.0 dollars 55.6 104.8 164.5 283.1 299.3 309.0 308.6 285.0 241.8 183.9 82.1 Inr millions ofU.S. .7 4.9 1.5 0.0 In millions of SDRs 35.7 67.3 105.0 186.3 199.4 205.7 205.2 130.9 39.4 16.0 7.4 2.2 0.0 dollars 55.6 104.8 164.5 283.1 299.3 309.0 308.6 285.0 241.8 183.9 82.1 Inr millions ofU.S. 29.3 23.6 18.0 12.6 8.3 4.8 2.1 0.8 0.4 0.1 0.0 In percent of exports of goods and services 7.1 12.6 17.6 37.7 35.6 32.9 151.4 77.2 43.7 19.9 8.3 4.0 1.4 0.0 In percent of debt service 21 60.4 225.1 1138.3 1221.5 974.5 774.9 490.8 302.7 207.0 0.1 0.0 9.0 14.9 22.4 43.8 36.5 27.7 22.4 18.0 13.4 9.3 6.1 3.5 1.5 0.6 0.2 In percent of government domestic revenues 243.5 250.6 231.2 196.1 149.1 106.2 66.6 31.9 13.0 6.0 1.8 0.0 In percent of quota 43.6 82.1 128.2 227.5 251.1 22.5 19.6 15.9 11.5 7.8 4.7 2.1 0.8 0.4 0.1 0.0 In percent of gross international reserves 9.3 13.8 16.2 24.7 24.7 24.1 Memorandum items: 840.3 939.3 1053.2 1209.4 1343.1 1454.7 1575.6 1706.5 1831.1 1946. .2 2068.6 2198.7 2337.0 Exports of goods and services (millions ofU.S. dollars) 782.1 833.0 932.9 750.9 169.7 187.7 198.3 192.0 183.6 155.4 151.7 91.9 46.5 14.4 23.2 30.7 39.9 62.9 94.1 116.8 121.5 Debt service (millions ofU.S. dollars)2/ 1117.2 1379.9 1586.3 1798.2 1975.6 2163.6 2363.2 2580.2 2816.0 3072.2 3309.2 3564.2 Domestic Revenues (millions ofU.S. dollars) 620.2 701.7 734.5 646.7 821.0 81.9 81.9 81.9 81.9 81.9 81.9 81.9 81.9 81.9 81.9 81.9 81.9 81.9 81.9 81.9 81.9 81.9 Quota (millions of SDRs) 1017.6 1146.3 1209.9 1282.0 1372.3 1451.2 1523.7 1599.9 1679.9 1763.9 1852.1 1944.7 2041.9 2144.0 2251.2 Gross international reserves (millions ofU.S. 81.9 81.9 81.9 81.9 81.9 81.9 81.9 81.9 Quota (millions of SDRs) 1017.6 1146.3 1209.9 1282.0 1372.3 1451.2 1523.7 1599.9 1679.9 1763.9 1852.1 1944.7 2041.9 2144.0 2251.2 Gross international reserves (millions ofU.S. dollars) 595.9 758.9 9,143 10,497 11,755 12,763 13,729 14,729 15,766 16,875 18,063 19,335 20,696 22,152 GDP (millions ofU.S. dollars) 5,858 6,572 6,560 6,495 7,669 Sources: Haitian authorities; and Fund staff estimates and projections. 11 Assumes disbursements of SDR 8. 190 million in July 2010 under new ECF arrangement. 211 Net of HIPC assistance. 3/ Obligations take into account the interest rate grace period and new interest rates which came into effect January 7, 2010. --- Page 37 --- ATTACHMENT I: HAITI: LETTER OF INTENT Port-au-Prince July 6, 2010 Mr. Dominique Strauss-Kahn Managing Director International Monetary Fund 700 19th Street, N.W. Washington, D.C. 20431 Dear Mr. Strauss-Kahn: and surrounding areas on January 12, 2010 1. The earthquake that struck Port-au-Prince under the previous ECF-supported is a major setback for Haiti. Overall performance sixth and last review was successfully concluded arrangement has been satisfactory, and the programs since 2004, Haiti has 27, 2010. Under successive Fund-supported stabilize the economy on January macroeconomic and financial policies that have helped Progress with implemented successive shocks, including the global slowdown. for the and restore growth despite critical improvements in governance allowed essential structural reforms including OfHIPC/MDRI debt relief in 2009. delivery infrastructure, threatening destroyed key economic and government to 120 2. The earthquake institutions. Total damages and losses amount these hard-won gains and weakening killed, and most ministries, hospitals and ofGDP. About 225,000 people were was swift and generous, but percent The international community's response are still living schools were destroyed. improving. About 1.3 million people the humanitarian situation is only slowly shelters and the hurricane season is starting. in temporary to build a better resources pledged represent a unique opportunity of aims at 3. The significant and Development Haiti Our National Action Plan for the Reconstruction of Haiti. poverty by: (i) creating decentralized poles raising long-term growth and reducing natural disasters; (iii) enhancing access to economic growth; (ii) reducing vulnerability to institutions. An Interim Commission for basic social services; and (iv) strengthening state the ofthe plan for the Reconstruction has been established to oversee implementation use of donor and Haiti's committed to the utmost transparency in the our first 18 months. We are fully in the process ofi implementing reforms in internal resources for reconstruction, and are from our development partners. framework, with technical support fiscal governance we Haiti's recovery and reconstruction, 4. As part of the international effort to support ECF arrangement in the amount of SDR request Fund support under a new three-year (July 2010hereby of quota. The new Fund-supported program 40.95 million, or 50 percent macroeconomic framework that will support the June/July 2013) will provide a coherent our first 18 months. We are fully in the process ofi implementing reforms in internal resources for reconstruction, and are from our development partners. framework, with technical support fiscal governance we Haiti's recovery and reconstruction, 4. As part of the international effort to support ECF arrangement in the amount of SDR request Fund support under a new three-year (July 2010hereby of quota. The new Fund-supported program 40.95 million, or 50 percent macroeconomic framework that will support the June/July 2013) will provide a coherent --- Page 38 --- implementation of our Action Plan and ensure the efficient spending and absorption of aid inflows. At the same time, technical assistance will help rebuild key economic institutions and strengthen administrative capacity. The attached Memorandum of Economic and Financial Policies (MEFP) outlines the medium-term and first year objectives of Haiti's proposed program to be supported under the ECF. Our economic program focuses on improving the quality and efficiency of public spending and increasing revenue through tax policy and administration reforms. Measures to boost absorptive capacity and enhance credit growth while maintaining financial sector stability will be essential to eliciting the needed supply response. Improvements in the business environment and concrete steps to encourage private credit and investment will be critical to support growth. 5. Approval of this request would result in a first disbursement of SDR 8.19 million, followed by six semi-annual disbursements. These resources will help us smooth excessive exchange rate and/or reserves movements caused by large and volatile aid inflows. Because the financing already committed by donors will be disbursed with a lag, we also request that be frontloaded, with the first two disbursements of 10 access under the new arrangement percent of quota each in the first year, followed by 5 disbursements equivalent to 6 percent of quota each in the following years. 6. The Government believes that the policies set forth in the attached MEFP are adequate to achieve the objectives of our program, but will take any further measures that become appropriate for this purpose. Haiti will keep consulting with the Fund on the may adoption of these measures and in advance of any revision to policies contained in the MEFP, in accordance with the Fund's policies on such consultation. 7. In line with our commitment to transparency in government operations, we agree to the publication of all ECF-related documents circulated to the IMF Executive Board. Sincerely yours, /s/ /s/ Ronald Baudin Charles Castel Minister of Economy and Finance Governor Republic of Haiti Bank ofthe Republic of Haiti Republic of Haiti will take any further measures that become appropriate for this purpose. Haiti will keep consulting with the Fund on the may adoption of these measures and in advance of any revision to policies contained in the MEFP, in accordance with the Fund's policies on such consultation. 7. In line with our commitment to transparency in government operations, we agree to the publication of all ECF-related documents circulated to the IMF Executive Board. Sincerely yours, /s/ /s/ Ronald Baudin Charles Castel Minister of Economy and Finance Governor Republic of Haiti Bank ofthe Republic of Haiti Republic of Haiti --- Page 39 --- OF ECONOMIC AND FINANCIAL POLICIES ATTACHMENT II: HAITI: MEMORANDUM I. Introduction toward macroeconomic stability and 1. After several years of significant progress setback. Anchored by prudent fiscal has been a major stabilize the growth, the January earthquake in recent years have helped policies to limit central bank financing, our policies coverage was raised and, despite the reduce inflation. The reserve rates in gourde and significantly reached close to 3 percent in FY 2009, one ofthe highest in global slowdown, growth qualifying Haiti for US$1.2 billion the region. Structural reforms also advanced, financial management (PFM) and tax HIPC/MDRI debt relief in June 2009. Public with the adoption ofl laws on administration have been enhanced. Governance was improved, and the establishment of an declaration for public officials and public procurement, and the asset central bank independence promote anti-corruption unit. Measures to strengthen Reforms in the social area have ofthe financial sector have been implemented. development health and education services. improved access to basic made in recent years determined to continue to build on the advances have moved 2. We are Immediately after the earthquake, we and to press on with our reform agenda. systems functions. However, the quickly to restore basic government and payment and material and the loss ofkey personnel constraints posed by the destruction ofbuildings ofthe international community. In the still largely need to be addressed, with the support our institutions, and are priority to rebuilding and strengthening short term, we are giving in transparency and economic governance. focusing on immediate improvements aims at building a Our Action Plan for National Recovery and Development causes of poverty 3. vulnerabilities and tackling the structural activity better Haiti by addressing our plan aims at: (i) decentralizing economic and underdevclopment. Specifically, agriculture and encouraging private sector to regional economic centers; (ii) developing rate from 54 percent in 2009 to 40 percent credit and investment; (ii) reducing the poverty to basic public services and developing by 2015 while improving our population s access and enhancing the efficiency and social safety nets; and (iv) improving governance transparency of public spending. crucially on the of our Action Plan depends for 4. The successful implementation aid inflows. A total ofUS$9.9 billion was pledged timeliness and management of the conference at the UN at the end of March. Of Haiti's reconstruction at the high level donor disbursed during this fiscal year and next, US$5.3 billion were committed to be this total, of GDP from recent years. Timely representing a tripling of aid flows as a percent to the transition from recovery to disbursement ofthe promised aid will be essential Commission (IHRC) will ensure that reconstruction. The Interim Haiti Reconstruction consistent with our action plan. Our economic resources are allocated to priority projects under the Extended Credit Facility, will program, anchored by a new three-year arrangement Structural measures to promote investment and ensure that the aid is spent transparently. boost the export base are designed to help competitiveness. expand .3 billion were committed to be this total, of GDP from recent years. Timely representing a tripling of aid flows as a percent to the transition from recovery to disbursement ofthe promised aid will be essential Commission (IHRC) will ensure that reconstruction. The Interim Haiti Reconstruction consistent with our action plan. Our economic resources are allocated to priority projects under the Extended Credit Facility, will program, anchored by a new three-year arrangement Structural measures to promote investment and ensure that the aid is spent transparently. boost the export base are designed to help competitiveness. expand --- Page 40 --- II. Recent Developments Agricultural production is Economic activity has rebounded since the earthquake. increases in the size of 5. than last year on account of clement weather, anticipated to be higher of seeds and fertilizers after the earthquake. Construction to irrigated areas, and distribution Textile exports to the United States recovered (including debris removal) has picked up. pre-earthquake levels by March 2010. upward since recovering. Revenue has been trending Revenue collection is gradually represent about 83 percent oft budgeted January, and collections during January-May constraints, weak revenue, and has remained low due to capacity thus amounts. Spending disbursements. Wages and operational expense payments low budget support central bank financing (US$35.3 million during had to be covered in part through end-May). As of end-May, only 30 and February, which was fully repaid by January committed for the year had been disbursed. percent ofbudget support The trade deficit has worsened but remittances have picked up. The trade balance compared to 5 percent ofGDP rose to more than 8 percent ofGDP in January-March, to the same period last year, while last year. Exports were 25 percent lower compared increased food and emergencyimports grew by more than 35 percent, reflecting immediately after the earthquake, and related imports. Remittance inflows surged (year-on-year). At end-May, NIR rose were up by 11.7 percent during January-May US$402 million at end-December. The gourde to US$646 million at end-May, from the U.S. dollar from end-2009. Twelve-month had appreciated by 5.3 percent against from 11 percent in December, reflecting in base money growth rose to 28 percent, for cash. part an increased preference and utilities stabilized to 6.4 percent, although rent, transport, but oil prices In May, inflation Monthly food prices decreased by 0.1 percent high for prices remain high. concern (annual inflation reached 18 percent and supply-side bottlenecks remain a rent and utilities and 7.5 percent for transportation). liquid, but bank capital has been negatively The banking sector remains. fairly loans are rising, Deposits affected by the earthquake, and non-performing and May. Over the same period, credit to increased by 10 percent between December Bank profitability decreased, as the average the private sector declined by 6.6 percent. January-March compared with a return on assets dropped to 0.1 percent during of last year. About a third of positive return rate of 1.4 percent in the same period and NPLS rose from 8.5 percent of bank loans is estimated to have been impaired, for NPLS dropped total loans in December to 12.3 percent in March. 59.8 Provisioning in March. of total NPLS in December to percent from 66.7 percent MACROECONOMIC FRAMEWORK III. MEDIUM-TERM policies aimed at Our objective is to implement a set of macroeconomic of our 6. large aid inflows and at supporting the successful implementation next 2-3 which managing the flow of donor resources to peak over the years, Action Plan. We expect and exchange rate policies. careful coordination of fiscal, monetary, will require in December to 12.3 percent in March. 59.8 Provisioning in March. of total NPLS in December to percent from 66.7 percent MACROECONOMIC FRAMEWORK III. MEDIUM-TERM policies aimed at Our objective is to implement a set of macroeconomic of our 6. large aid inflows and at supporting the successful implementation next 2-3 which managing the flow of donor resources to peak over the years, Action Plan. We expect and exchange rate policies. careful coordination of fiscal, monetary, will require --- Page 41 --- 2010, annual GDP growth is expected to peak at After a decline of8.5 percent in FY reconstruction. Private sector credit in FY 2011-12, driven mostly by The about 9 percent and raise medium-term growth. and investment should support the reconstruction Scheme and the implementation of establishment of a Partial Credit Guarantee will be critical steps in the measures to enhance the business environment tourism, and agriculture sectors effort. Higher activity in the assembly, reconstruction medium-term growth at about 6 percent. would sustain in FY 2010 and to decline to about Annual inflation is projected to rise to 8.5 percent bottlenecks would only 7 percent by FY 2013. Pressures from supply and remain transport strong in the context of the while domestic demand would ease gradually, reconstruction. is projected to widen to about The external current account deficit (excluding grants) 17 percent by FY 2013. Exports of GDP in FY 2010 and to decline to about at an average ofl 11 29 percent value by FY 2011, and grow would recover to their pre-carthquake will benefit from the Haiti FY 2013. Growth in textile exports percent through (HELP) Act. 1 Economic Lift Program FY 2013, financed by aid imports would grow strongly through about 3.2 percent Reconstruction-related should average inflows. The current account deficit including grants during the program period. is projected to rise deficit (excluding grants and foreign-financed projects) due to the The fiscal ofGDP in FY 2010 (from 4.4 percent in FY 2009) to close to 7 percent needs following the earthquake. A revenue shortfall and higher spending reform would help narrow the fiscal comprehensive tax policy and administration deficit to about 3 percent of GDP by FY 2013. ofaid and an increase in resources available for The timely disbursement the achievement of our macroeconomic objectives. reconstruction are essential to about US$1.5 billion a year (over 20 percent of Official grants are projected to average higher revenue, and external debt GDP) until 2013. Improved efficiency in spending, Non-recourse to also to free up resources for the reconstruction. relief are expected ofthe program (except on a temporary basis) central bank financing over the course introduction of T-bills by will continue to anchor our fiscal program. The planned domestic financing. To maintain March 2011 will provide an alternative source of public debt will be established debt sustainability, the path of domestic medium-term analysis. based on an updated debt sustainability 6, would extend Haiti's trade preferences provided under The HELP Act, approved by the U.S. Senate on May to the U.S. market for additional Haitian textile the HOPE II initiative until 2020 and expand duty-free access for Haitian factories. exports. This initiative is designed to create jobs and apparel of T-bills by will continue to anchor our fiscal program. The planned domestic financing. To maintain March 2011 will provide an alternative source of public debt will be established debt sustainability, the path of domestic medium-term analysis. based on an updated debt sustainability 6, would extend Haiti's trade preferences provided under The HELP Act, approved by the U.S. Senate on May to the U.S. market for additional Haitian textile the HOPE II initiative until 2020 and expand duty-free access for Haitian factories. exports. This initiative is designed to create jobs and apparel --- Page 42 --- IV. POLICY AND STRUCTURAL REFORM AGENDA of our Action Plan for National Recovery and Our 7. The overarching objective economic growth path and reduce poverty. Development is to set Haiti on a higher growth poles, reducing the vulnerability to decentralized economic plan focuses on creating social services, and strengthening state natural disasters, enhancing access to basic Reduction Strategy, with added institutions. These priorities are in line with our Poverty Measures to encourage private sector credit emphasis on housing and territorial development. of our strategy to raise medium-term growth. and investment are an essential component A. Fiscal Strategy to enhance the quality and effectiveness of 8. Our fiscal objectives are modern and efficient tax administration to reconstruction spending, while rebuilding a a multi-year fiscal framework domestic resources. We plan to gradually implement the raise that is consistent with our medium-term growth targets, anchored on debt sustainability and related sectoral priorities. A strategic objectives of our reconstruction program, spending and the introduction of a combination of higher revenue collection, more efficient available for reconstruction, while domestic T-bill market will increase the resource envelope allowing us to smooth out volatile aid inflows disbursements. to expand the coverage of the budget 9. To monitor developments better, we plan the Multi-Donor Trust Fund resources and spending channeled through in June. With to include which is managed by the World Bank, started operating (MDTF). The MTDF, to materialize for a few more months, large-scale donor disbursements not expected the recovery and the transition to the immediate budget support will be essential to support reconstruction objectives, the IHRC will reconstruction phase. In addition to setting strategic and tracking aid disbursements. A reconstruction activity play a key role in coordinating will reporting and transparency. database managed by the IHRC support Revenue measures and tax administration damaged the resources of the Tax Administration 10. The earthquake has severely collection remained well below potential, reflecting Agency. Prior to the earthquake, revenue with many exemptions. In the weaknesses in administration and a complex tax system facilities together with the aftermath ofthe earthquake, the lack of adequate building the operations of the tax systems and tax records are impeding all destruction of fthe information priority is to find adequate office space for and customs administrations. An immediate functions are restored. With donor support, we staff and ensure that basic administrative phase in the coming months. Revenue to transition away from the current emergency and taxpayer contributions, expect been recovering, driven by customs large of collection has already ofGDP in FY2010, equivalent to about 75 percent and is expected to reach 10 percent budgeted amounts. strategy will help boost revenue collections to 11. Implementation of our medium-term increase in revenue is to be generated through a 13 percent of GDP by FY 2013. The office space for and customs administrations. An immediate functions are restored. With donor support, we staff and ensure that basic administrative phase in the coming months. Revenue to transition away from the current emergency and taxpayer contributions, expect been recovering, driven by customs large of collection has already ofGDP in FY2010, equivalent to about 75 percent and is expected to reach 10 percent budgeted amounts. strategy will help boost revenue collections to 11. Implementation of our medium-term increase in revenue is to be generated through a 13 percent of GDP by FY 2013. The --- Page 43 --- with a view to broadening the base, comprehensive reform of the tax system, the building of modern and exemptions and combating fraud, and through ofthe VAT -at rationalizing administrations. The current low productivity that efficient tax and customs of 70 percent in the region indicates about 32 percent compared with an average the tax base could more than double seriously tackling tax evasion while broadening VAT revenue." 2 is to improve the equity ofthe tax system by On tax policy, our main objective the tax base. By end-September 2010, we rationalizing exemptions and broadening beneficiary sectors to raise awareness will start publishing tax expenditure reports by benchmark). We will also set up the and cost of exemptions (structural the tax on inefficiency of preparing a new tax code aimed at simplifying a working group in charge the base. This working group will system, increasing transparency, and broadening milestones by September 2010 (structural establish a work program with specific from the IMF. The objective is to submit benchmark), and request technical assistance and the income tax to Parliament, by a proposal to reform the VAT, excise taxation in the new tax code, which would end-FY 2011. These measures will also be reflected continue to keep the regime of be finalized during FY 2012. Meanwhile, we will under review, with a view to organizations exemptions for non-governmental and well-defined group of organizations by narrowing eligibility to a small tax and car registration 2010. The introduction of a telecommunication to introduce these end-December because ofthe earthquake, but we now plan fees has been delayed to yield about 0.4 percent ofGDP by September 2010, which are expected measures per year over the program period. overhaul the tax and customs administration. This We are developing a strategy to of the revenue administration focusing on: strategy will include a reorganization (c) computerization and (a) fiscal missions; (b) segmentation of taxpayers; (d) tighter controls; and (e) greater rationalization of local and regional networks; and publication of performance monitoring and accountability through the design program. In an To combat fraud, we will intensify our tax verification on the indicators. revenue mobilization efforts, reports effort to raise awareness and guide collections and the cost of performance ofthe tax system, including revenue and Finance website will be published on the Ministry of Economy exemptions, benchmark). starting in September 2010 (structural Expenditure policy and poverty-reduction objectives spending to focus on providing Following the earthquake, we have re-prioritized basic functions. 12. and restarting government humanitarian assistance to the population constraints, the shortfall in spending remained low due to capacity During January-April, of: (a) Total VAT revenue as a percentage ofGDP; divided by 2VAT productivity is caleulated as the ratio (b) the VAT rate. and Finance website will be published on the Ministry of Economy exemptions, benchmark). starting in September 2010 (structural Expenditure policy and poverty-reduction objectives spending to focus on providing Following the earthquake, we have re-prioritized basic functions. 12. and restarting government humanitarian assistance to the population constraints, the shortfall in spending remained low due to capacity During January-April, of: (a) Total VAT revenue as a percentage ofGDP; divided by 2VAT productivity is caleulated as the ratio (b) the VAT rate. --- Page 44 --- For the remainder ofthis year however, we and slow budget support disbursements. and education. As a revenue, expenditures on housing, hurricane prevention, million plan to accelerate priority also decided to allocate an amount ofUS$163 result ofthe emergency, we have to large infrastructure projects in the ofGDP) of available PetroCaribe resources the We are in (2.5 percent for the population displaced by earthquake. provinces, in order to create jobs for FY 2010 that will incorporate the updated the process of preparing a revised budget resources. 3 We will also strive to include spending allocations and our emergency fund revised budget for this year and in future to be financed under the MDTF in our projects budgets. to improve access to basic social has highlighted the urgency has led to 13. The earthquake against natural disasters. The earthquake services and strengthen the resilience levels. Hospitals and schools have been deterioration in food security and poverty investments on a sharp to reduce poverty by focusing public care destroyed. We are determined social safety nets, educational and health improving the delivery of public services, infrastructure. We are preparing a systems, as well as transportation and communication We will resume the publication of reports on PRSP update for no later than September 2011. education and agriculture) by end-June 2010 the execution of social expenditures (health, by at least 30 percent by action). Our goal is to raise priority social expenditures (prior September 2011. (PFM) and economic governance Public financial management and economic in public financial management in budget 14. Further improvements of our strategy. Remaining weaknesses governance are an essential component cash will be addressed taking execution and controls, as well as in management, Together with our main preparation, recent IMF technical assistance recommendations. financial into account identified key measures to further strengthen public development partners, we have have been summarized in the common management and economic governance. They of reforms that we will implement in the short conditionality matrix which presents the set To that effect, we will strengthen: term and our objectives. To strengthen our ability to prepare The framework ofannual budget preparation. frameworks, we have started to medium-term macroeconomic and expenditure and Finance, with the unit at the Ministry of Economy establish a macro-fiscal We intend to gradually move toward a assistance of an external consultant. with key line Ministries in FY 2012. programmatic budget approach, starting that will be in charge of managing the PetroCaribe 3 Until the date the new private bi-national company PetroCaribe resources will be: (i) treated as external financing program is legally established, all accumulated recorded as central government debt; and (iii) integrally transferred defined in 19 of the TMU; (ii) the new program will continue as paragraph for under the budget, the Until PetroCaribe funds are fully accounted of new inflows in government to budget. resources and for the accumulation to include adjustors for the use of PetroCaribe deposits with the banking system (TMU434). PetroCaribe 3 Until the date the new private bi-national company PetroCaribe resources will be: (i) treated as external financing program is legally established, all accumulated recorded as central government debt; and (iii) integrally transferred defined in 19 of the TMU; (ii) the new program will continue as paragraph for under the budget, the Until PetroCaribe funds are fully accounted of new inflows in government to budget. resources and for the accumulation to include adjustors for the use of PetroCaribe deposits with the banking system (TMU434). --- Page 45 --- and transparent reporting of budget Budget execution and reporting. More accurate and improve Treasury management, execution will help inform budget preparation As first step, we will focus overall accountability and governance. and while enhancing ofinvestment spending and current transfers on the monitoring and reporting subsidies. central government transfers to Beginning on June 30, 2010, we will publish PetroCaribe projects (prior project accounts, project by project, including projects will be action). Given that a large share of the reconstruction the Treasury's contribution to implemented outside of the budget framework, with reconstruction plans investment projects will have to be well-coordinated prepared by the IHRC. June 30, 2010, we will publish central government current Beginning on beneficiary sector to raise accountability (prior transfers and subsidies by action). investment execution from the in March 2011, we will publish to the - Starting system SYSGEP with particular attention computerized management and road sectors (structural benchmark). education, health, agriculture, is hampered by the multiplicity of Treasury management. Cash management of them with idle balances in periods Treasury accounts in the banking system, some Single Account (TSA) will when the Treasury is borrowing. Moving to a Treasury In order to initiate the significant savings and strengthen accounting. balances by generate monthly Treasury transition to a TSA, we will prepare comprehensive and make an inventory ofall end-September) 2010 (structural benchmark), BRH and commercial banks (structural government and donor accounts at the cash plans including benchmark). By March 2011, we will publish This quarterly will help better align donor support PetroCaribe spending and financing needs. and prioritization in spending needs, and enhance transparency to the country's execution (structural benchmark). B. Financial Sector Policies to increase private sector of Haiti and the BRH are taking steps both directly 15. The government The earthquake has affected banks, credit and preserve financial stability. and indirectly through its impact on through the destruction of physical assets and reluctant personnel to provide new credit due to uncertainty the quality ofloan portfolios. Banks appear and economic prospects more widely. about their clients' ' true financial situation because of to borrowers' cash flow. Non-performing loans have inevitably risen disruptions oftotal banking sector assets, of three banks, representing 27 percent in the economic The capital position The financial sector has an essential role to play their working needs to be strengthened. Viable firms have lost part or all of recovery and reconstruction ofthe country. loans and some new credit to continue to capital and some need a restructuring ofexisting of credit to new borrowers would support housing operate. At the same time, an expansion and overall economic activity. about their clients' ' true financial situation because of to borrowers' cash flow. Non-performing loans have inevitably risen disruptions oftotal banking sector assets, of three banks, representing 27 percent in the economic The capital position The financial sector has an essential role to play their working needs to be strengthened. Viable firms have lost part or all of recovery and reconstruction ofthe country. loans and some new credit to continue to capital and some need a restructuring ofexisting of credit to new borrowers would support housing operate. At the same time, an expansion and overall economic activity. --- Page 46 --- to establish a Partial Credit with donors, we therefore plan while 16. In close coordination renewed credit growth to the private sector Guarantee (PCG) scheme, to support A technical proposal, prepared with maintaining the stability of the banking system. Bank, has been finalized. The PCG scheme from the staffs ofthe IMF and the World two pillars: (a) Pillar 1, support US$200 and 250 millions, and will comprise the will require between bank and microcredit loans impacted by with a finite life, will aim at restructuring and (b) Pillar 2 will support new lending. In earthquake and financing business recovery; about US$100 million in capital is required order to start with the program, we estimate that that identified donor funding remains for Pillar 1 and US$30 million for Pillar 2. Given million in central bank reserves to fund the insufficient, we plan to set aside up to US$70 Pillar 1 and US$20 million for Pillar 2. This including US$50 million for to seek initial guarantee rapidly by mid-July 2010, while continuing will enable us to launch the scheme through the Multi-Donor Trust Fund. Under additional grant resources from donors, possibly the first six months, as loans must be the scheme, no payouts would occur during be made to the PCG. Unless losses were to non-performing for six months before claims can that the fund should be able to higher than expected at present, we anticipate with the be significantly when it is wound up. We are liaising closely repay a substantial amount of capital that the scheme is widely understood and sector and other economic agents to ensure banking operates effectively. reforms will support the expansion of private financial sector The earthquake has 17. Complementary financial sector supervision. credit and growth, while strengthening to address (i) structural obstacles to credit made even more urgent the adoption of measures the close link between private sector credit recommended by the 2008 FSAP, due to of the insurance sector. We growth and (ii) regulation and supervision and territorial development; measures to address these issues: intend to take the following collateral, and reduce the time and A set ofinitiatives to lower the cost oftaking loans. Key measures include the improve the ease ofrecovery of non-performing registry of security collateral and a establishment of a credit bureau and a centralized insolvency legislation in cadastre. At the same time, we will introduce comprehensive Parliament. framework for nonbank financial Introduction ofa regulatory and supervisory. under the previous ECF arrangement for institutions. Some progress had been made union law. For insurance companies, a credit unions, with the introduction of a credit in FY 2011. framework will be set up regulatory and supervisory C. Monetary Policy aid inflows poses important 18. The expected surge in reconstruction-related The increase in aid inflows, for monetary and exchange rate management. rate In challenges could lead to further real exchange appreciation. together with higher remittances, inflows and actual imports could cause excessive addition, lags between large and lumpy aid with its policy of recent months to rate. The BRH plans to continue volatility in the exchange credit unions, with the introduction of a credit in FY 2011. framework will be set up regulatory and supervisory C. Monetary Policy aid inflows poses important 18. The expected surge in reconstruction-related The increase in aid inflows, for monetary and exchange rate management. rate In challenges could lead to further real exchange appreciation. together with higher remittances, inflows and actual imports could cause excessive addition, lags between large and lumpy aid with its policy of recent months to rate. The BRH plans to continue volatility in the exchange --- Page 47 --- exchange with a view to of foreign exchange inflows to buy foreign ensure that take advantage exchange position. This policy will help continuing to strengthen its foreign import demand, while foreign exchange is available later for reconstruction-selated We will also enhance the BRH's mitigating the nominal appreciation of the currency. donors and NGOs and improve intervention strategy, strive to liaise with major the development oft the interbank communication on BRH operations while encouraging will continue to smooth out excessive exchange foreign exchange market. The central bank the exchange rate. The BRH stands ready to but still allow some flexibility in demand to be rate volatility monetary conditions if domestic appears drain excess reserves, and to tighten we will continue to aim at containing base exceeding the absorptive capacity of the economy; monetary policy target. money growth as our intermediary framework will in the monetary and exchange rate operations effectiveness has 19. Improvements of aid inflows. So far, monetary policy allow for the effective absorption of financial instruments, overly liquid been hampered in part by the limited availability We intend to continue to improve liquidity banks, and a history of fiscal dominance. development of a market for government management and inflation forecasting. The gradual policy and serve as a catalyst for securities will help improve the effectiveness of monetary markets. A predetermined public auction over time of domestic financial with the the development by end-March 2011 (structural benchmark) calendar for T-bills will be established T-bill issuance by end-March 2011. Should, objective of successfully organizing a first for this fiscal year, a first issue of T-bills however, a small fiscal financing gap remain could already take place before limited to US$25 million of net new borrowing to allow exchange rate 2010. These reforms will support our policy while continuing to end-September reflect further changes in underlying fundamentals, movements to rate volatility. smooth disruptive exchange further to enhance BRH independence. FY 2010-11, we will take steps as part ofthe 20. During ofthe BRH will be updated by end-March 2011, the The recapitalization plan benchmark). This update will include T-bill implementation project (structural of BRH claims on the government over a preparation of a calendar for the securitization scheduled for end-March several with the first tranche of the securitization to period of years, central bank law will be prepared and submitted 2011 (structural benchmark). A new central bank law would also enshrine central bank Parliament by end-September 2011 1. The audit and reserves management. independence and further strengthen external recommendations from the 2008 safeguards of the pending 21. Implementation in the context of the new ECF-supported assessment update will be accelerated and reserve investment guidelines An investment committee has been established, the of an program. The investment committee will oversee implementation and adopted (prior action). The central bank has made efforts to enhance competition overall investment strategy. auditors. This has caused delays in producing audited rotation in the hiring of external FY 2009, which were exacerbated by the earthquake. financial statements for FY 2008 and audited financial statements within a period of Nonetheless, we will strive to publish annual The FY 2008 audited accounts have been six months after the end of each fiscal year. accelerated and reserve investment guidelines An investment committee has been established, the of an program. The investment committee will oversee implementation and adopted (prior action). The central bank has made efforts to enhance competition overall investment strategy. auditors. This has caused delays in producing audited rotation in the hiring of external FY 2009, which were exacerbated by the earthquake. financial statements for FY 2008 and audited financial statements within a period of Nonetheless, we will strive to publish annual The FY 2008 audited accounts have been six months after the end of each fiscal year. --- Page 48 --- and the FY 2009 accounts will be published by published by end-June 2010 (prior action), 4 end-September 2010 (structural benchmark). Private Sector Activity and Investment D. Promoting sector We Action Plan depends eritically on private participation. 22. The success of our by reducing high transaction reforms to strengthen competitiveness and are implementing environment, facilitating access to credit, simplifying costs, improving the business Production costs are driven up by the lack of the establishment of new businesses. bottlenecks, low and costly access to infrastructure, including energy supply policies adequate environment. In addition, macroeconomic credit and a weak legal and judicial and aid inflows, while preserving should allow for the absorption of large persistent competitiveness. envisages large projects to improve the 23. Our decentralization strategy and create jobs in the provinces. We are transportation and energy infrastructure for Public-Private Partnerships to help working to establish a robust legal framework assistance oft the IMF. This will support the investment in these sectors with the and tourism. We are promote industries, including textiles, agribusiness, best development of export for residential buildings based on international preparing new construction guidelines and enforcing a new building code for practices, and are in the process of establishing foreign direct investment in the buildings. This will be critical for increasing commercial sectors and in developing new industrial zones. textile and tourism investment. Our the framework for business and 24. We are actively strengthening in Haiti's image as a country open for reform program seeks a tangible improvement and the legal framework for business and foreign investment. We will improve governance and increased private for financial market deepening investment, which are essential climate will also be important to enable Haiti's textile investment. An improved investment and access to the U.S. market. benefit from the HELP Act expanded sector to fully framework for we are simplifying the legal and regulatory With donor support, and we intend to revamp the investment investments in export-processing zones, for potential investors. promotion office as an effective one-stop shop financial sector development and encourage As part ofits efforts to promote priority to the development of a cadastre, investment, the government attaches high with a timetable for the surveying initially focused on development zones, together investment in these zones. of specialized cadastres to encourage and establishment verified end-June 2010 (prior action). 4 The FY 2009 NIR data have been by are simplifying the legal and regulatory With donor support, and we intend to revamp the investment investments in export-processing zones, for potential investors. promotion office as an effective one-stop shop financial sector development and encourage As part ofits efforts to promote priority to the development of a cadastre, investment, the government attaches high with a timetable for the surveying initially focused on development zones, together investment in these zones. of specialized cadastres to encourage and establishment verified end-June 2010 (prior action). 4 The FY 2009 NIR data have been by --- Page 49 --- E. Debt Management progress in strengthening debt 25. Prior to the earthquake, we made significant program and as part of the management capacity in the context of the ECF-supported external and domestic currency HIPC/MDRI debt relief process. Information on public software was installed and regular in a single database. The SYGADE and, to debt was centralized However, the earthquake was a major setback debt reports were being produced. we intend to: rebuild our debt management capacity, taken towards setting up a legal and Prepare a progress report on the steps by end-September 2010. institutional framework for public debt management of Economy and Finance by March 2011. Operationalize the debt unit at Ministry including clear Middle and back office functions will be fully operational, of memoranda of and the drafting assignments of functional responsibilities other ministries and the BRH to clearly establish understanding between the MEF and benchmark). responsibilities and avoid overlapping (structural 2011 that debt law to the Council of Ministers by end-September Submit a public institutional framework for public debt management establishes a sound legal and (structural benchmark). strategy, based on a comprehensive Prepare a medium-term debt management debt in FY 2012. This will help make analysis of the sustainability of total public financing requirements and better informed choices on how to meet the government's due account of constraints and potential contingent liabilities, while taking manage risks. V.J PROGRAM MONITORING will cover July 2010-June 2011. 26. The first year of the ECF-supported program quantitative benchmarks and semi-annual The program will be monitored using quarterly benchmarks, with test dates set at quantitative performance criteria and structural are set on net international reserves, net end-September and end-March. Quantitative targets bank credit to the central government and to domestic assets of the central bank, net central external arrears accumulation, and sector, public sector the entire nonfinancial public by the public sector (all non-concessional external loans contracted or guaranteed financing by the central government, performance criteria); base money, net domestic and a floor on poverty-reducing domestic arrears accumulation ofthe central definitions government, of these quantitative targets and spending (indicative targets) (Table 1). The Technical Memorandum ofUnderstanding adjustors are provided in the attached and listed in Table program benchmarks are set for end-March and end-September committee (TMU). Structural further defined in the TMU. A monitoring 2, including prior actions. They are the MEF and will be created by end-June 2010 to composed of high-level officials from the first review ofthe program to be completed implementation. We expect monitor program review to be completed by July 2011. by February 2011 and the second --- Page 50 --- 27. In accordance with the IMF's Articles of Agreement, we will refrain from imposing restrictions on payments and transfers for international transactions, introduce new or intensify trade restrictions for balance of payments purposes, resort to multiple currency practices, or enter into bilateral payments agreements incorporating restrictive practices with other IMF members. --- Page 51 --- Table 1. Haiti: Indicative Targets and Quantitative Performance Criteria Actual stock Cumulative Flows from September 2009 at end- Dec 09 Jun 2010 Sep 2010 Dec 2010 March 2011 Sep 09 Actual Proj. Test date Indicative Test date PC target PC (In millions of gourdes, unless otherwise indicated) I. Quantitative performance criteria Net central bank credit to the non-financial public sector ceiling Central Government 21,549 enter into bilateral payments agreements incorporating restrictive practices with other IMF members. --- Page 51 --- Table 1. Haiti: Indicative Targets and Quantitative Performance Criteria Actual stock Cumulative Flows from September 2009 at end- Dec 09 Jun 2010 Sep 2010 Dec 2010 March 2011 Sep 09 Actual Proj. Test date Indicative Test date PC target PC (In millions of gourdes, unless otherwise indicated) I. Quantitative performance criteria Net central bank credit to the non-financial public sector ceiling Central Government 21,549 Rest of non-financial public sector 23,118 Net domestic assets of the central bank ceiling 1/ -1,569 -10 Net international reserves of central bank (in millions of U.S. dollars) floor 11,562 5,095 6,142 10,193 12,689 13,123 -36 -25 -138 -128 -119 II. Continuous performance criteria Domestic arrears accumulation of the central government New contracting or guaranteeing by the public sector ofr nonconcessional external or foreign currency debt (In millions ofU.S. dollars) 2/ Up to and including one year Over one-year maturity Public sector external arrears accumulation (in millions of U.S. dollars) 33 0 III. Indicative targets Change in base money ceiling Net domestic credit to the central government ceiling 3/ 31,080 3,501 5,143 4,671 7,551 8,371 18,199 -5,793 Poverty reducing expenditures - floor 4/ -4,413 -2,909 -684 -433 2,399 7,198 9,597 12,716 15,835 Memorandum items Change in currency in circulation Net domestic credit to the rest of the of the non-financial public sector 13,448 2,404 1,986 2,142 4,768 5,039 Government total revenue, excluding grants -1,624 -72 Government total expenditure, excluding ext-fin investment 8,961 21,031 26,258 34,167 42,469 9,541 31,242 44,239 57,950 70,391 Sources: Ministry of Finance, Bank of the Republic of Haiti, and Fund staff estimates. 11 For program monitoring purposes, NDA is defined as monetary base minus program NIR in gourde terms. Program exchange of 2/ Excludes guarantees granted to the electricity sector in the form of credit/guarantee letters. rate G40 per US$. 3/This includes central bank, commercial bank, and non-bank financing to the government. It includes net T-bill issuance for 4/ Poverty reducing expenditures consist of domesticaly-fnanced spending in health, education, and agriculture. government financing. 70,391 Sources: Ministry of Finance, Bank of the Republic of Haiti, and Fund staff estimates. 11 For program monitoring purposes, NDA is defined as monetary base minus program NIR in gourde terms. Program exchange of 2/ Excludes guarantees granted to the electricity sector in the form of credit/guarantee letters. rate G40 per US$. 3/This includes central bank, commercial bank, and non-bank financing to the government. It includes net T-bill issuance for 4/ Poverty reducing expenditures consist of domesticaly-fnanced spending in health, education, and agriculture. government financing. --- Page 52 --- Table 2 a. Haiti: Structural Reform Objectives and Proposed Measures Objective Proposed Benchmarks Macro-criticality Prior Actions (completed) Start publishing quarterly reports on poverty-reducing expenditures Improve the tracking of poverty- Publish regular reports on poverty-reducing spending on ont the MEF website, including domesticaly-fnanced health, reducing expenditures the MEF website. education and agriculture spending. Improve timeliness of external audits of the BRH; enforce Completion: and publication of externally audited financial rotation of external auditors. statements for 2007/08; and external audit of 2008/09 NIR data. Improve the monetary policy framework and its effectiveness Establish an investment committee, and prepare and adopt Strengthen reserves management. reserve management guidelines. End-September 2010 Start publishing central government monthly transfers to investment project accounts, project by project, including PetroCaribe Strengthen the transparency of expenditure policy. projects. Strengthen fiscal discipline and Start publishing central government monthly transfers by transparency byi improving beneficiary entity. budget preparation, expenditure Start preparing monthly consolidated Treasury balances (TMU control and cash management Improve control of budget execution and fiscal reporting. 138). Prepare ani inventory of allo government and donor accounts at the Improve cashmanagement. BRH and BNC (TMU 139). Prepare quarterly reports with monthly data on the performances of Strengthen operation of tax and customs administrations. the tax system and the tax administration, including the cost of exemptions and revenue collected in the provinces (TMUT140). Start publishing a quarterly report thati identifies all fiscal Enhance the transparency of the tax exemption policy. expenditure by beneficiary sectors. Raise government revenue Set up a working group that would be tasked to prepare a studyto Introduce a new tax code that would increase revenue and simplify the tax system, increase revenue, improve tax productivity, rationalize the tax system. custom and fiscal administration, establish a work program with specific deadlines (TMU137). Improve the monetary policy Improve timeliness of external audits of the BRH; enforce Completion and publication of externally audited financial framework and its effectiveness rotation of external auditors. statements for 2008/09. Start producing quarterly reports with monthly data of investment Improve the tracking of investment spending and improve expenditure based on SYSGEP and publish them on the MEF Strengthen fiscal discipline and ability to make multi-year investment projections. website. transparencybyl improving budgetp preparation, expenditure Start preparimg and publishing monthly cash plans including control and cashr management Improve cashmanagement PetroCaribe spending and financing needs. Improve timeliness of external audits of the BRH; enforce Completion and publication of externally audited financial framework and its effectiveness rotation of external auditors. statements for 2008/09. Start producing quarterly reports with monthly data of investment Improve the tracking of investment spending and improve expenditure based on SYSGEP and publish them on the MEF Strengthen fiscal discipline and ability to make multi-year investment projections. website. transparencybyl improving budgetp preparation, expenditure Start preparimg and publishing monthly cash plans including control and cashr management Improve cashmanagement PetroCaribe spending and financing needs. --- Page 53 --- Table 2 b. Haiti: Structural Reform Objectives and Proposed Measures Macro-criticality Objective Proposed Benchmarks Second and third years of the program Improve cash management. Implement a Single Account Strengthen fiscal discipline and Treasury transparency byi improving Improve the tracking of investment spending and improve Prepare multi-year public investment programs, with budget preparation, expenditure ability to make multi-year investment projections. least three key ministries. starting at control and cash management Improve control of budget execution. Eliminate discrepancies between accounts provided by BRH, Treasury and revenue agencies and the TOFE. Customs code approved by Parliament, implementation Strengthen operation off tax and customs administrations. begins. Designandi implement monitorable performance indicators for Raise government revenue and AGD. DGI Enhance the transparency of the tax exemption policy. Continue publishing the quarterly report that identifies all fiscal Introduce a new tax code that would increas se revenue and expenditure by beneficiary sectors. rationalize.the.taxsvstem. Submit revised tax law to Parliament, begin implementation Introduce a securities law. Submission and adoption of a securities law by Parliament that would establish, inter alia, a security registry for collateral. Finance the government and develop domestic financial Sign a memorandum of understanding between the MEF and the markets BRH adopting T-bill implementation plan, including regular public Introduce a t-bill market and recapitalize the central bank. auction calendar (TMU 1141). Development of a secondary T-bill market including establishment of a security registry; and start of open-market and repo operations; continue implementation. of recapitalization: plan until BRH capital is replenished. Improve exchange rate management to cope with large Develop an exchange rate management aid inflows. also reform of the foreign exchange market. strategy encompassing Introduce a new central bank law that would, inter alia, Improve the monetary policy strengthen central bank independence, external audit and Submit the new central bank law to Parliament; ensure framework and its effectiveness Reserve.manadement. central bank law by Parliament and its implementation. adoption of Improve timeliness of external audits of the BRH; enforce Publish external audits within 6 months after the end of each fiscal rotation of external auditors. year; adopt a policy requiring that external auditors rotate every3 years. Financial sector stability and Maintain financial sector stability. Banking law approved by Parliament implementation development Improve access to financial services. Reform begins. legal regime for collateral. Complete the setting-up of the debt unit at the MEF and Debt unit fully operational; Preparation of annual debt build capacity to prepare a medium-term debt strategy. analyses and medium-term debt strategy. sustainability Debt management Strengthen the legal framework for debt Submit to Parliament a public debt law that would establish a management. sound legal and institutional framework for public debt management. Approval and implementation of the law. years. Financial sector stability and Maintain financial sector stability. Banking law approved by Parliament implementation development Improve access to financial services. Reform begins. legal regime for collateral. Complete the setting-up of the debt unit at the MEF and Debt unit fully operational; Preparation of annual debt build capacity to prepare a medium-term debt strategy. analyses and medium-term debt strategy. sustainability Debt management Strengthen the legal framework for debt Submit to Parliament a public debt law that would establish a management. sound legal and institutional framework for public debt management. Approval and implementation of the law. --- Page 54 --- TECHNICAL MEMORANDUM OF UNDERSTANDING ATTACHMENT III: HAITI: by the Extended Credit under the program supported 1. Haiti's performance on the basis of the observance of will be assessed Facility (ECF) arrangement with structural benchmarks. performance criteria as well as compliance quantitative (TMU) defines the quantitative This Technical Memorandum of Understanding benchmarks, and indicative of certain structural performance criteria, specification 2011, specified in Tables 1 and 2 ofthe targets for the period July 1", 2010-June 30, It also lays down the and Financial Policies (MEFP). Memorandum on Economic performance criteria under The quantitative monitoring and reporting requirements. and end-March 2011. The target for the program are set for end-September end-December 2010 is indicative. I. INSTITUTIONAL DEFINITIONS comprises the presidency, Central The central government and 2. government. national courts, treasury, line ministries prime minister's office, parliament, financed directly by foreign déconcentrés". It includes expenditures "organismes ministerial accounts (comptes-courants). donors through public sector includes the Non-financial public sector. The non-financial local 3. autonomous organizations, governments central government plus non-budgetary in which the government holds (enterprises and agencies and public sector enterprises of the shares). stake of more than 50 percent a controlling the non-financial sector. The total public sector comprises 4. Total public public sector and the central bank (BRH). II. QUANTITATIVE TARGETS Public Sector A. Net BRH Credit to the Non-Financial public sector equals net central bank 5. Net BRH credit to the non-financial bank credit to the rest ofthe credit to the central government plus net central non-financial public sector. is defined as, and will The change in net BRH credit to the central government 6. be measured using: from the BRH Change in net domestic credit to the central government a. to Table 10R ofthe BRH. according de projets' ") included in Change in the stock of project accounts ("Comptes credit to b. BRH will be excluded from change in net domestic Table 10R ofthe the central government as defined above. ancial bank credit to the rest ofthe credit to the central government plus net central non-financial public sector. is defined as, and will The change in net BRH credit to the central government 6. be measured using: from the BRH Change in net domestic credit to the central government a. to Table 10R ofthe BRH. according de projets' ") included in Change in the stock of project accounts ("Comptes credit to b. BRH will be excluded from change in net domestic Table 10R ofthe the central government as defined above. --- Page 55 --- Speciaux") and seized in the stock of Special Accounts ("Comptes will be C. Change included in Table 10R of the BRH values ("Valeurs Saisies UCREF") credit to the central government as excluded from the change in net domestic defined above.' non-financial public in net central bank credit to the rest of the 7. The change using: sector, is defined as, and will be measured (i.e, net credit to the nonChange in "créances nettes sur le secteur public" l'état" (i.e. d. minus the change in 66 créances nettes sur financial public sector) according to table 10R of the BRH. net credit to the central government), basis from the stock at The changes will be measured on a cumulative e. end-September 2009. Domestic Financing to the Central Government B. Net the change in to the central government will comprise 8. Net domestic financing (defined below) plus the change in sector credit to the central government the net net banking amortization, counterpart funds, and nonbank financing which includes securities by the central government issuance of Treasury bills and other government is defined domestic banking sector credit to the central governent to non-banks. Net as, and will be measured, using: from in the stock of net domestic credit to the central government of a. The change 10R of the BRH, plus, the change in the stock the BRH according to Table from domestic banks according net domestic credit ofthe central government of treasury bills 20R of the BRH, which will include the net issuance to Table securities by the central government for government and other government ofthe BRH are Securities issued for the recapitalization financing purposes. excluded from this defintion. defined accounts ("Comptes de projets"), as b. The change in the stock of project in net domestic banking sector will be excluded from the change in 6.b above, to the Central Government. Speciaux") and in the total stock of Special Accounts ("Comptes C. The change UCREF"), as defined in 6.c above, will be seized values ("Valeurs Saisies banking sector to the Central excluded from the change in net domestic Government. dollar-denominated central government sight deposits at Special Accounts ("Comptes Speciaux' ") refer to U.S. of the sales of in-kind aid (in the form of BRH. The balance ofthese accounts increase with the proceeds are earmarked to finance specific the received by the Haitian government; these proceeds of donors. wheat, maize, rice, etc.) Government without the explicit authorization respective projects and cannot be used by the Central from sales of grants received in kind. 2 Counterpart funds are proceeds the Central excluded from the change in net domestic Government. dollar-denominated central government sight deposits at Special Accounts ("Comptes Speciaux' ") refer to U.S. of the sales of in-kind aid (in the form of BRH. The balance ofthese accounts increase with the proceeds are earmarked to finance specific the received by the Haitian government; these proceeds of donors. wheat, maize, rice, etc.) Government without the explicit authorization respective projects and cannot be used by the Central from sales of grants received in kind. 2 Counterpart funds are proceeds --- Page 56 --- cumulative basis from the stock at end9. The changes will be measured on a September 2009. C. Net International Reserves international reserves will be measured using: 10. The change in net nettes" of the BRH Change in net foreign assets ("Réserves de change a. Table 10R); of commercial banks at the b. Minus the change in foreign currency deposits Euros des BCM à la BRH", and the BRH ("Dépôts à vue en dollars U.S. et en "CAM transfer" ofthe BRH Table 10R). accounts ("Comptes de projets") as Minus the change in the stock of project C. defined in 6.b above. Speciaux" ") in the in the stock of Special Accounts ("Comptes d. Minus change gourdes), and seized values ("Valeurs Saisies dollars and euros (and excluding UCREF"), the latter as defined in 6.c above. Special Drawing Rights (SDR) allocation Plus the change in the stock ofthe e. DTS") from the BRH Table 10R. ("Allocations in U.S. dollar terms and valued at the corresponding 11. Data will be expressed the BRH Table 10R. end-period market exchange rate from international reserves are the difference between 12. For definition purposes, net monetary gold, all claims on the BRH's gross foreign assets (comprising in currency on domestic SDR holdings, and BRH claims foreign of nonresidents, liabilities to nonresidents financial institutions) and reserve liabilities (including the full SDR allocation, maturity or less, use of Fund credit, and excluding institutions and one-year currency with domestic financial and trust funds)." Swaps in foreign excluded from net international encumbered reserve assets are pledged or otherwise reserves. basis from the stock at endThe changes will be measured on a cumulative 13. September 2009. D. Net Domestic Assets of the BRH ofthe BRH is defined as, and will be 14. The change in net domestic assets measured using: to Section I. below); definition according a. The change in base money (program and "Lettres de garantie") are reported in Table 10R as 3 Letters of credit and guarantee ("Lettres de crédit" exterieurs"), and therefore are already netted out of NIR. part of BRH foreign liabilities ("Engagements side since it is a long-term liability to the NIR does not net out the full SDR allocation on the liability SDR Program Department (and not the Fund). and will be 14. The change in net domestic assets measured using: to Section I. below); definition according a. The change in base money (program and "Lettres de garantie") are reported in Table 10R as 3 Letters of credit and guarantee ("Lettres de crédit" exterieurs"), and therefore are already netted out of NIR. part of BRH foreign liabilities ("Engagements side since it is a long-term liability to the NIR does not net out the full SDR allocation on the liability SDR Program Department (and not the Fund). --- Page 57 --- in the U.S. dollar amount of net international reserves b. Minus the change section C above), converted into gourdes at (program definition according to the program exchange rate. domestic assets of the BRH will use a program 15. The program definition of net June 2010- March 2011. rate ofG 40.0 per U.S. dollar for the period exchange basis from the stock at endThe changes will be measured on a cumulative 16. September 2009. Funds E. PetroCaribe-Related balance of PetroCaribe funds totaled 17. As of. June 15, 2010, the outstanding sight with US$2.0 million held in U.S. dollar-denominated US$152.7 million, the BRH, and the remaining US$150.7 million deposits of the central government at at domestic deposits of the central government in U.S. dollar denominated commercial banks. options to channel indicated that they were exploring 18. The authorities a binational Venezuela-Haiti inflows through ofthe new PeroanbeALBA-elated are finalized and the statutes corporation. 5 Until new institutional arrangements Officiel" (Le Moniteur), PetroCaribesociete mixte are published in the "Journal new direct external debt of the central related inflows will continue to constitute control ofthe central government, These resources are under the direct fiscal tables. They will government. will be fully reflected in program in and, for program purposes, whose are partly or entirely deposited loans, proceeds be treated as budget support (Petrocaribe deposits). Spending from government accounts in the banking system FY 2010), financed with a drawdown PetroCaribe resources (up to US$163 million in reflected in program in the banking system, will also be fully of PetroCaribe deposits tables. mixte, the annual budgets of the company ratification of the societe Audited 19. Following website before the beginning of the fiscal year. will be published on the MEF within six months ofthe end of each annual financial statements will be published financial year. Public Sector External and Foreign-Currency F. Nonconeessional Denominated Debt all forms of debt, including loans, suppliers' 20. The definition of debt comprises liabilities, which are credits, and leases, that constitute current, i.e. not contingent, of value in the form of arrangement through the provision created under a contractual Boliviarana de las Americas" : 5 ALBA refers to "Alternativa website before the beginning of the fiscal year. will be published on the MEF within six months ofthe end of each annual financial statements will be published financial year. Public Sector External and Foreign-Currency F. Nonconeessional Denominated Debt all forms of debt, including loans, suppliers' 20. The definition of debt comprises liabilities, which are credits, and leases, that constitute current, i.e. not contingent, of value in the form of arrangement through the provision created under a contractual Boliviarana de las Americas" : 5 ALBA refers to "Alternativa --- Page 58 --- and which require the obligor to make one or assets (including currency) or services, currency) or services, at some point in in the form of assets (including revised more payments Board Decision No. 12274, Point 9, and the future, as set forth in Executive on August 31, 2009. by the public sector of applies to the contracting and guaranteeing 21. A ceiling with original maturities of one year of debt with nonresidents for new nonconcessional debt and commitments contracted or guaranteed more. The ceiling applies to to private debt for which official which value has not yet been received. This applies constitute a contingent liability have been extended and which, therefore, guarantees of the public sector. arises from any explicit legal purposes, the guarantee of a debt 22. For program service a debt in the event of nonpayment by the obligation ofthe public sector to from implicit legal or in cash or in kind), or any debtor (involving payments to finance partially or in full any shortfall contractual obligation of the public sector incurred by the debtor. element of is concessional if it includes a grant 23. For program purposes, a debt element of a debt is the difference at least 35 percent, calculated as follows: the grant value, expressed as a the value (PV) of debt and its nominal of its between present of the debt." 6 The PV of debt at the time percentage ofthe nominal value the future stream of payments of debt service contracting is calculated by discounting commercial interest reference rates due on this debt, based on the currency specific and Development for Economic Cooperation (CIRRS) as laid out by the Organization the CIRR with a maturity of at least 15 years, ten-year-average (OECD).' For a debt debt and hence, its grant element. For debt with will be used to calculate the PV of CIRR will be used. To both the maturity ofless than 15 years, the six-month average periods as the same margin for differing repayment ten-year and six-month averages, for repayment periods of less those used by the OECD need to be added (0.75 percent for 20 to 29 years, and 1.25 1 percent for 15 to 19 years, 1.15 percent than years, percent for 30 years or more). rescheduling Excluded from the ceiling are short-term import-related credits, and 24. non-resident purchases of treasury bills, borrowing from the Fund, arrangements, sector in the form of letters of credit. guarantees for the electricity debt by the and of nonconcessional 25. The ceilings for contracting guaranteeing throughout defined in para.4) will be set at zero continuously total public sector (as the program period. 6 The element calculator can be found at , 1.15 percent than years, percent for 30 years or more). rescheduling Excluded from the ceiling are short-term import-related credits, and 24. non-resident purchases of treasury bills, borrowing from the Fund, arrangements, sector in the form of letters of credit. guarantees for the electricity debt by the and of nonconcessional 25. The ceilings for contracting guaranteeing throughout defined in para.4) will be set at zero continuously total public sector (as the program period. 6 The element calculator can be found at grant all aspects of the loan agreement, including maturity, 7 The grant element calculations will take commissions, into account and management fees. grace period, payment schedule, upfront --- Page 59 --- G. Arrears of the Central Government as overdue payments (principal and External arrears are defined 26. payment and by the central on debt contracted guaranteed interest) to non-residents to the terms of indebtedness of each government, and will be defined according arrears will be monitored on a creditor. The criterion of zero accumulation of external continuous basis. to include: (i) any bill Domestic arrears of the central government are defined services 27. ministry from a supplier for goods and that has been received by a spending has not been made within 90 days delivered (and verified) and for which payment to (ii) wage, salary, and other payment government after the due date of payment; allowances, that were due to be paid in a employees, including direct and indirect following month; and month but remained unpaid on the 30th ofthe after the due date given obligations which remain unpaid 30 days (iii) interest or principal in the stock of arrears on account of This definition excludes changes of payment. and valuation changes. interest, penalties H. Base Money is defined as, and will be measured using: 28. The change in base money in circulation from Table 10R ofthe The change in the stock of currency a. BRH. of commercial banks at the BRH, b. The change in the stock of reserve deposits banks (Dépôts a gourde sight deposits of commercial from Table 10R, using and cash-in-vault of commercial banks vue en gourdes des BCM a la BRH) (Encaisses des BCM). basis from the stock at endThe changes will be measured on a cumulative 29. September 2009. Expenditures I. Poverty-Reducing will be measured as the sum of 30. The growth in poverty reducing expenditure of agriculture, health, and spending for the Ministries in charge domesticall-financed basis from end-September education. This will be a flow measured on a cumulative 2009. ADJUSTMENTS III. QUARTERLY criteria and indicative targets will be adjusted for 31. The quarterly performance the following amounts: for Domestic Arrears Accumulation A. Adjustment central and the net for net BRH credit to the government 32. The ceilings will be adjusted downwards sector credit to the central government domestic banking domestic arrears accumulation. for the amount of outstanding spending for the Ministries in charge domesticall-financed basis from end-September education. This will be a flow measured on a cumulative 2009. ADJUSTMENTS III. QUARTERLY criteria and indicative targets will be adjusted for 31. The quarterly performance the following amounts: for Domestic Arrears Accumulation A. Adjustment central and the net for net BRH credit to the government 32. The ceilings will be adjusted downwards sector credit to the central government domestic banking domestic arrears accumulation. for the amount of outstanding --- Page 60 --- B. Adjustment for PetroCaribe-related Inflows in FY 2010 33. Until the binational company charged to administer PetroCaribe-related funds is legally established, any drawdown of PetroCaribe-related deposits will be considered as central government spending for program purposes. 34. The ceiling for net domestic credit to the central government will include movements in PetroCaribe accounts in the banking system and will be adjusted for the difference between the actual stock of PetroCaribe deposits in the banking system and programmed stock ofthese deposits in the banking system. The ceilings for net BRH credit to the central government, on BRH net domestic assets, and the floor for NIR will also include movements in PetroCaribe accounts at the BRH. They will be will be adjusted for the difference between the actual stock ofp PetroCaribe deposits at the BRH and the programmed stock of these deposits at the BRH. The adjustor will be calculated on a cumulative basis from October 1, 2009. Haiti. PetroCaribe Deposits September December March June September December March June September 2009 2009 2010 2010 2010 2010 2011 2011 2011 Total deposits in government accounts in the banking system Cumulative flows (Gmlns) 1804.3 1520.7 2114.3 1873.4 3269.4 4656.3 6034.2 7403.1 42.4 43.2 55.8 45.0 79.1 113.3 147.4 181.6 in US dollars (USS mlns) Stocks (Gmlns) 3713.2 5517.5 5233.9 5827.5 5586.6 6982.6 8369.5 9747.3 11116.3 in US dollars (USS mlns) 88.9 131.3 132.1 144.7 133.9 168.0 202.2 236.3 270.5 Deposits in government accounts at the BRH Cumulative flows (Gmlns) -90.3 -93.0 -93.0 -171.0 -171.0 -171.0 -171.0 -171.0 in US dollars (USS mlns) -2.2 -2.1 -2.2 -4.1 -4.1 -4.1 -4.1 -4.1 Stocks (Gmlns) 171.0 80.7 78.0 78.0 0.0 0.0 0.0 0.0 0.0 in US dollars (USSmlns) 4.1 1.9 2.0 1.9 0.0 0.0 0.0 0.0 0.0 Deposits in government accounts in commercial banks Cumulative flows (Gmlns) 1894.6 1613.7 2207.3 2044.5 3440.4 4827.3 6205.2 7574.1 in US dollars (USS mlns) 44.6 45.4 58.0 49.1 83.2 117.4 151.5 185.7 Stocks (Gmlns) 3542.2 5436.8 5155.9 5749.5 5586.6 6982.6 8369.5 9747.3 11116.3 in US dollars (US$ mlns) 84.8 129.4 130.1 142.8 133.9 168.0 202.2 236.3 270.5 Sources: Haitian Authorities and IMF Staff estimates and projections .1 83.2 117.4 151.5 185.7 Stocks (Gmlns) 3542.2 5436.8 5155.9 5749.5 5586.6 6982.6 8369.5 9747.3 11116.3 in US dollars (US$ mlns) 84.8 129.4 130.1 142.8 133.9 168.0 202.2 236.3 270.5 Sources: Haitian Authorities and IMF Staff estimates and projections --- Page 61 --- C. Adjustment for Net Program External Financing in FY 2010 35. The program ceilings on BRH net credit to the central government, net domestic financing to the government, and on BRH net domestic assets, and the floor on NIR reflect an assumed flow of net external financing, defined as disbursements of cash budgetary assistance, exceptional financing (including rescheduled principal and interest) and debt relief minus debt service. These amounts exclude all PetroCaribe flows. Program Net External Financing (In millions ofU.S. dollars) December March June September Cumulative basis Program net external financing -3.6 25.4 124.6 235.1 36. Ifactual net external financing is lower than programmed, the ceilings on net BRH credit to the central government, net domestic financing to the government, and on net BRH domestic assets will be adjusted upward, and the floor on NIR will be adjusted downward, by the amount ofthe difference between actual and programmed net external financing, converted into gourdes at the program exchange rate. The amount of this adjustment will be limited to US$50 million to smooth volatility in external financing, and would only offset temporary delays in disbursements of already-identified budget support. The adjuster will be calculated on a cumulative basis from October 1, 2009. Any amount of net BRH financing under this adjuster would be expected to unwind when the budget support is received, or, at the latest to be fully repaid within one year. adjusted downward, by the amount ofthe difference between actual and programmed net external financing, converted into gourdes at the program exchange rate. The amount of this adjustment will be limited to US$50 million to smooth volatility in external financing, and would only offset temporary delays in disbursements of already-identified budget support. The adjuster will be calculated on a cumulative basis from October 1, 2009. Any amount of net BRH financing under this adjuster would be expected to unwind when the budget support is received, or, at the latest to be fully repaid within one year. --- Page 62 --- CONDITIONALITY IV. CLARIFICATION OF STRUCTURAL A. Fiscal Sector efforts to introduce a new tax code 37. The structural benchmark on initiating MEF, and publishing a work program will involve setting up a working group in the 2010. deadlines on the MEF website by end-September with specific Treasury balances will consolidated 38. The benchmark on preparing monthly consolidating balances in all accounts on the MEF website a table involve publishing maintained by the Treasury, not later than three in the ledger of government accounts 2010 with end-June months after the end of each month, starting from end-September 2010 data. of all government and The structural benchmark on making an inventory to the 39. and BNC will involve preparing and submitting donor accounts at the BRH at the BRH and BNC and updating it IMF a list ofa all government and donor accounts needed. It will be set for end-September 2010. as quarterly reports with monthly data 40. The structural benchmark on publishing MEF website, involves for AGD, on the (for AGD and DGI) on revenue performance the number of importers in SYDONIA; publishing reports that include the following: during the month; the in SYDONIA that have imported the number of importers during the month in provinces; in SYDONIA that have imported number of importers of customs posts in provinces; the the total number of customs posts; the number of fuel produets and imports broad categories, including imports value of imports by various duties and taxes; collections by type of exempted from or zero-rated under For DGI, the benchmark involves duty and tax; and collections from provinces. in DGI files, including reports that include the number of taxpayers the number of publishing employees, and public enterprises; exempted taxpayers, government fulfilled their tax obligations, including exempted taxpayers in DGI files that have the aggregate turnover or government employees, and public enterprises; that have fulfilled taxpayers, labor, and non-labor costs for taxpayers revenue, aggregate profits, government employees, and their tax obligations, including exempted taxpayers, including in provinces. The and collections by type of tax or duty, public enterprises; with the initial test date set at end-September benchmark will be assessed quarterly 2010. Sector B. Monetary Policy and Financial the signature of a memorandum of understanding 41. The benchmark regarding establish the amount of government debt between the MEF and the BRH will (i) plan and (iii) set a calendar of owed to the BRH, (ii) update the BRH recapitalization and for BRH recapitalization. issuance with amounts to be issued for financing T-bill 2010. This will be set for end-September or duty, public enterprises; with the initial test date set at end-September benchmark will be assessed quarterly 2010. Sector B. Monetary Policy and Financial the signature of a memorandum of understanding 41. The benchmark regarding establish the amount of government debt between the MEF and the BRH will (i) plan and (iii) set a calendar of owed to the BRH, (ii) update the BRH recapitalization and for BRH recapitalization. issuance with amounts to be issued for financing T-bill 2010. This will be set for end-September --- Page 63 --- V. PROVISION OF INFORMATION 42. To ensure adequate monitoring oft the program, the authorities will provide daily, weekly and monthly monetary and fiscal indicators to IMF staff, details of any loan contract or guarantee to be ratified by a non-financial public sector entity, including public enterprises, before signature, as well as other data upon request. 43. Daily. The exchange rate. 44. Weekly. Monetary Indicators: (a) Stock of BRH bonds; (b) Deposits at commercial banks (in gourdes and U.S. dollars); (c) Credit to private sector (in gourdes and U.S. dollars); (d) Credit to central government and public sector (net); (e) Currency in circulation, (f) base money, (g) details of inflows and outflows of gross foreign exchange reserves, (h) volume of foreign exchange transactions, of which BRH sales and purchases; (i) gross international reserves; and (d) net international reserves (NIR). The NIR data will be reported using the following table format. Net International Reserves of the BRH 1/ (in USD millions) End-October, 2009 A. Gross Foreign Exchange Reserves 1,024.9 B. Gross Liabilities 439. 1 C. Net Foreign Assets (=A-B) 585.8 D. FX deposits of commercial banks & CAM transfer at the BRH 284. 1 E. Project accounts 8.9 F. Special accounts in U.S. dollars & euros 4.4 G. Seized values 3.0 H. SDR allocation (liability) 124.8 J. NIR (-C-D-E-F-G+H) 1/ Calculated using the current exchange rate from the 10R form. 410.3 45. Fiscal Indicators: (a) Revenues (internal, external, other) and (b) Expenditures on cash basis (wages and salaries, goods and services, external debt, current accounts). 46. These data will be reported with maximum five-day lag preliminary data (four weeks for final data). 47. Monthly data. Table 10 R and Table 20 R with a maximum of 30-day lag for final data. Tableau on the comptes courants with a maximum of 30-day lag for final data. "Project Accounts", , by donor, with a maximum of 30-day lag for final data Indicators: (a) Revenues (internal, external, other) and (b) Expenditures on cash basis (wages and salaries, goods and services, external debt, current accounts). 46. These data will be reported with maximum five-day lag preliminary data (four weeks for final data). 47. Monthly data. Table 10 R and Table 20 R with a maximum of 30-day lag for final data. Tableau on the comptes courants with a maximum of 30-day lag for final data. "Project Accounts", , by donor, with a maximum of 30-day lag for final data --- Page 64 --- Tableau de trésorerie de devises with a maximum of 30-day lag for final data. Tableau des Operations Financières de l'Etat (within 14 days). Table underlying the TOFE which enables the determination of checks in circulation and balance on investment project accounts. Set of external debt tables with a maximum 30-day lag for final data. Report of revenue collection of DGI (Rapport d'activités), with a maximum 30-day lag for final data. The aide memoire table, which includes monetary policy indicators (foreign exchange interventions, Gourde and foreign currency credit and deposits, monetary financing). Tables of revenue collection of AGD (Indicateurs d'activités aux ports, Rapport analytique des perceptions douanières à l'importation), with a maximum 30-day lag for final data. Balance of Bureau de Monetization accounts, including spending from "fonds de contrepartie" those movements related with flows linked to the ALBAPetroCaribe agreement. Balance of PetroCaribe'ALBA-related deposits at commercial banks and the BRH, with a maximum 30-day lag for final data. 48. Quarterly. Report on poverty-reducing expenditures, with a maximum 30-day lag for final data. A. Other Information 49. The authorities will share with staff the by-laws ofthe new binational (Venezuela-Haiti) entity (as soon as they are enacted), including any and all needed information to assess the nature of such new entity; the authorities will also share with staff the financing terms of any financing received by such entity, including and all information needed to assess whether any financing flows received by such any new entity constitute public debt (direct and/or contingent) of any form. . Quarterly. Report on poverty-reducing expenditures, with a maximum 30-day lag for final data. A. Other Information 49. The authorities will share with staff the by-laws ofthe new binational (Venezuela-Haiti) entity (as soon as they are enacted), including any and all needed information to assess the nature of such new entity; the authorities will also share with staff the financing terms of any financing received by such entity, including and all information needed to assess whether any financing flows received by such any new entity constitute public debt (direct and/or contingent) of any form. --- Page 65 --- GDP ESTIMATES' NOTE FOR POST-EARTHQUAKE APPENDIX I: HAmT-MiemosaLoacs3 Haiti's post-disaster GDP and describes the methodology used to generate based This note the earthquake impact on medium-term growth, preliminary staff estimates of This could be ofuse presents disaster needs assessment (PDNA). approach on the results oft the post in similar ponr-disansersitations damages and losses, estimated by PDNA 1. The earthquake caused unprecedented Estimates point to damages ofUSS4.2 billion at US$7.8 billion, or 120 percent ofGDP. (55 ofGDP). The PDNA gauged ofGDP) and losses ofUSS 3.6 billion percent next 18 months and at US$8.9 up (65 percent needs at US$3.9 billion for the recovery and reconstruction three years (Table 1).3 to USS 11.5 billion for the next Table 1. Post Disaster Needs Assessment Costing (in millions of U.S. dollars) 2010 2011 2012 2013 Total 4,237 Damages 4,237 796 289 99 3,561 Losses 2,377 863 398 75 2,942 Recovery 1,606 1,964 712 444 6,033 Reconstruction 2,913 PDNA Report, issued on March 30, 2010. Souce: Haiti Earthquake from estimated flows from the Post-disaster GDP projections were generated related to losses, 2. the 2009 GDP as a basis. Annual flows PDNA exercise and using combined and scaled with sectoral production recovery, and reconstruction needs were (Table 2)." We projected constant for changes in value-added Given coefficients to generate proxies and estimated annual change in value-added. price GDP using 2009 as a base year statistics and the unavailability ofinformation existing shortcomings in national accounts used to estimate national output and intermediate consumption, this approach was about constant annual GDP estimates. generate Prepared by Aminata Touré (WHD). recorded in financial accounts. However losses are flows of 2 Damages are stock of lost assets that should be foregone revenues. essential to rebuild post disaster. 3 Recovery and reconstruction needs are flow of resources related to GDP, such as losses from our GDP impact analysis. However other flows, 4 Damages are excluded and reconstruction are taken into account. and amounts needed for recovery --- Page 66 --- Table 2. Haiti: Losses, Recovery and Reconstruction Flows and Corresponding Value Added (in millions of U.S. dollars) 2010 2011 2012 2013 2014 2015 Total I. Losses Primary Sector Agriculture, farming and fishing Mining Sector 0 1,455 Secondary Manufacturing Electricity, gas, water Construction Services 0 1,977 0 3,561 Total II. Recovery and Reconstruction flows Primary Sector Agriculture, farming and fishing Mining Sector 3,748 Secondary Manufacturing water Electricity, gas, Construction 3,329 Services 1,219 1,134 5,007 Total 1,395 III. Value added 1/ Primary Sector -60 Agriculture, farming and fishing -60 0.9 4.4 0.8 0.2 1.1 0.0 0.0 0.0 0.0 0.0 0.0 Mining Secondary Sector -69 -13 Manufacturing water -44 -16 Electricity.gas, Construction Services -694 -98 Total Gross Value Added -569 Construction 3,329 Services 1,219 1,134 5,007 Total 1,395 III. Value added 1/ Primary Sector -60 Agriculture, farming and fishing -60 0.9 4.4 0.8 0.2 1.1 0.0 0.0 0.0 0.0 0.0 0.0 Mining Secondary Sector -69 -13 Manufacturing water -44 -16 Electricity.gas, Construction Services -694 -98 Total Gross Value Added -569 Sources: Haiti Earthquake PDNA Report, and staff estimates. 1/ These represent value added flow S obtained using followi ing steps. First, annual flow S related to losses recovery and reconstruction needs are added. Then, flow S are scaled wi ith sectoral production coefficients to generate proxies for the changes in value added. 3. The methodology used first isolated flows affecting domestic product on the income side. While we fully factored the flows oflosses, for the recovery and reconstruction we removed flows associated with activities not likely to generate income, or affect output and capital formation (Table 3). Specifically, we excluded activities related to the distribution of food assistance and cash for work programs. We also excluded imported household goods, education equipment, furniture and vehicles for the reconstruction. Overall, we are --- Page 67 --- of US$2.9 billion) and US$5.2 billion in US$2.6 billion in recovery funds (out reconstruction incorporating funds (out ofUSS6 billion). of Flows Retained from the PDNA 11 Table 3. Summary (in millions of U.S. dollars) Total 3,561 Losses 2,377 2,618 Recovery 21 1,138 5,186 Reconstruction 31 2,331 issued on March 1,663 30 2010; and staff estimates. Souces: Haiti Earthquake PDNA Report, to affect output and capital formation Flow s excluding activities that are not likely affect output, such as distribution of food assistance and 21 Excluding recovery activities that are not likely to cash for W ork programs amounting to US$324 million. education equipment and materials, 31 Excluding imported construction goods (household goods, amounting to US$847 million furniture, vehicles) that are not generating value added envelope was further scaled down 4. The projected recovery and reconstruction and incomes and absorptive capacity. non-residents services and re-phased to address The level ofthe PDNA needs was reduced Haiti: Real GDP Growth Projections assuming that only a portion of these resources 12 (in percent) would remunerate activities or services residents, and hence would not 8 provided by non count as value added for the Haitian economy. of the reconstruction resources was 2 The phasing from FY 2013 to FY 2015 to -2 0 also stretched from Pre-earthquake account for possible constraints arising -4 Post-earthquake to mobilize pledged resources, the -6 -8 country's time required limited absorptive capacity, and -10 2010 2011 2012 2013 2014 2015 bottlenecks (Table 4). Sources: 2009 Haiti Earhiquakerouanet authorities. ands staff estimates supply Table 4. Rephased and Reduced PDNA Envelope (in millions of U.S. dollars) 2012 2013 2014 2015 Total 2010 2011 2,377 796 289 488 3,561 5,007 Losses 1,395 1,134 879 624 486 Total Recovery and reconstruction 881 522 2,612 Recovery 1,135 253 358 549 486 488 2,395 Reconstruction PDNA Report, issued on March 30, 2010; and staff estimates. Souces: Haiti Earthquake months, in FY 2010 economic activity is Despite the recovery in activity of recent losses. The 5. 8.5 percent on account of the significant upfront estimated to contract by ofthe second quarter ofits fiscal year, disrupting earthquake hit Haiti at the beginning for public infrastructure services, manufacturing economic activity for the remaining quarters losses (67 percent) affected all sectors, industries, and commerce. The bulk ofthe earthquake the sector (Table 5). of construction hindering growth despite a 100 percent expansion and staff estimates. Souces: Haiti Earthquake months, in FY 2010 economic activity is Despite the recovery in activity of recent losses. The 5. 8.5 percent on account of the significant upfront estimated to contract by ofthe second quarter ofits fiscal year, disrupting earthquake hit Haiti at the beginning for public infrastructure services, manufacturing economic activity for the remaining quarters losses (67 percent) affected all sectors, industries, and commerce. The bulk ofthe earthquake the sector (Table 5). of construction hindering growth despite a 100 percent expansion --- Page 68 --- Table 5. Haiti: GDP Growth, 2010-15 GDP structure (in percent of GDP at 2009 prices total) 2009 2015 2009 2010 2011 2012 2013 2014 2015 Supply Side GDP (in million of Gourde) Primary Sector 28.7 28.3 76,567 79,092 83,127 87,308 91,341 95,347 99,393 Agriculture, farming and fishing 28.6 28.2 76,243 78,769 82,804 86,984 91,017 95,024 99,069 0.1 0.1 2009 2015 2009 2010 2011 2012 2013 2014 2015 Supply Side GDP (in million of Gourde) Primary Sector 28.7 28.3 76,567 79,092 83,127 87,308 91,341 95,347 99,393 Agriculture, farming and fishing 28.6 28.2 76,243 78,769 82,804 86,984 91,017 95,024 99,069 0.1 0.1 324 324 Mining Secondary Sector 20.7 38.5 55,224 62,828 79,665 95,858 110,791 125,691 135,167 Manufacturing 14.5 10.5 38,638 35,824 35,301 35,645 35,846 35,993 36,989 water 1.7 0.7 4,562 2,739 2,074 2,207 2,299 2,299 2,299 Electricity, gas, 42,289 58,006 72,647 87,399 95,879 Construction 4.5 27.3 12,025 24,265 Services 45.3 28.7 120,945 95,213 91,191 93,309 94,992 95,747 100,840 Total Gross Value Added 94.7 95.6 252,736 237,133 253,983 276,476 297,124 316,785 335,400 VAT 5.3 4.4 14,168 7,084 14,168 14,468 14,768 15,068 15,368 Real GDP 100.0 100.0 266,904 244,217 268,150 290,675 310,732 329,997 349,797 (percent change from previous period, unless otherwise indicated) 5.2 3.3 5.1 5.0 4.6 4.4 4.2 Primary Sector Agriculture, farming and fishing 5.2 3.3 5.1 5.0 4.6 4.4 4.3 6.3 0.0 0.0 0.0 0.0 0.0 0.0 Mining 4.1 13.8 26.8 20.3 15.6 13.4 7.5 Secondary Sector 3.7 -7.3 -1.5 1.0 0.6 0.4 2.8 Manufacturing water 30.8 -39.9 -24.3 6.4 4.2 0.0 0.0 Electricity, gas, 9.7 Construction 3.1 101.8 74.3 37.2 25.2 20.3 1.4 -21.3 -4.2 2.3 1.8 0.8 5.3 Services Total Gross Value Added 2.8 -6.2 7.1 8.9 7.5 6.6 5.9 4.1 -50.0 100.0 2.1 2.1 2.0 2.0 VAT 2.9 -8.5 9.8 8.4 6.9 6.2 6.0 Real GDP Sources: Haiti Earthquake PDNA Report, authorities, and staff estimates. 6. Growth in FY 2011 could reach 9.8 percent and average 7 percent over FY 2012-15 on account of recovery and construction activities. The economy would continue to endure losses until FY 2013, while growth is fueled by strong construction and recovery activities in addition to a gradual pick-up in services, manufacturing and mining. VAT 2.9 -8.5 9.8 8.4 6.9 6.2 6.0 Real GDP Sources: Haiti Earthquake PDNA Report, authorities, and staff estimates. 6. Growth in FY 2011 could reach 9.8 percent and average 7 percent over FY 2012-15 on account of recovery and construction activities. The economy would continue to endure losses until FY 2013, while growth is fueled by strong construction and recovery activities in addition to a gradual pick-up in services, manufacturing and mining. --- Page 69 --- EXTERNALSTAHLITY APPENDIX II: HAITI-ASSESSING economic data caused by the January 2010 earthquake The structural break in Haiti's Nonetheless, an analysis of exchange rate assessment. indicators can complicates a comprehensive projections and of non-price competitiveness medium-term current account of exchange rate dynamics in Haiti. assessment help inform a forward-looking by almost 90 percent Haiti's real effective exchange rate (REER) appreciated external aid inflows. In 1. driven by large remittances and during 2003-2008, in large part Haiti: Real Effective Exchange Rate 0.3 2009 the currency depreciated by about 160 (Index, 2000=100) 8 percent in real effective terms, reflecting 0.2 both a modest nominal depreciation and the of the food and fuel price shock. 120 0.1 unwinding has resumed in However, real appreciation 0.0 the aftermath ofthe earthquake. The REER rose by about 11 percent between December 60 -0.1 2009 and April 2010, driven by the nominal I NEER(RHS) about 6 percent SS a RPI(RHS) -0.2 appreciation of the gourde REER over the same period and higher inflation. -0.3 0 2003 2004 2005 2006 2007 2008 2009 2010 2. Haiti's de jure exchange Source: Authorities; andFund staff calculations. arrangement is floating, but since Haiti: Nominal Exchange Rate January 2010, is de facto classified as a 43 (Gourdes/Dollan) managed exchange rate regime ("other managed"). Following the earthquake, the central bank has been purchasing foreign to build reserves ahead of large future exchange demand related to the reconstruction. import exchange rate volatility 38 This has helped mitigate remittance inflows and an 37 associated with large increased supply of foreign exchange associated 36 with NGO activity in the country. 35 Jul-09 Oct-09 Jan-10 Apr- 10 account flows Source: National Authorities. 3. An analysis of current real 2009 suggested that the in up to December response to movements fundamentals, appreciation reflected mostly an equilibrium Haiti's growing trade deficit appears to be with little evidence of loss of competitiveness. and private). Export indicators have also sustainably financed by increasing transfers (official textile industry in 2008, Haiti's export improved since 2003. Following a retooling of the also to regional textile increased sharply in 2009, compared the share ofU.S apparel imports conducted on pre-carthquake data using export competitors. Econometric analysis pointed to some modest overvaluation, real effective exchange rate approach of error. equilibrium remained within the model' S margins which nonetheless 1 Prepared by Nagwa Riad (SPR). and private). Export indicators have also sustainably financed by increasing transfers (official textile industry in 2008, Haiti's export improved since 2003. Following a retooling of the also to regional textile increased sharply in 2009, compared the share ofU.S apparel imports conducted on pre-carthquake data using export competitors. Econometric analysis pointed to some modest overvaluation, real effective exchange rate approach of error. equilibrium remained within the model' S margins which nonetheless 1 Prepared by Nagwa Riad (SPR). --- Page 70 --- large current account deficits (excluding grants) be almost 4. Over the medium-term, imports are expected to associated with the surge in reconstruction-related Haiti: Current Account -40 entirely covered by grants. Official CAe exclgrants (RHS, (RHS, percent percent of of GDP) GDP) -35 transfers to Haiti averaged about 7 percent of 1800 CA Officialt inclgrants transfers (USD (USDmil) min) GDP a year during 2005-2009. Conservative 1600 Remittances Exports (USD mil) L -30 about likely flows of aid -25 assumptions disbursements based on existing -20 commitments could amount to about -15 14 percent of GDP a year on average during 800 600 -10 FY 2011-15. The current account deficit including grants is thus expected to return to 200 around 3 percent ofGDP by 2015 close to 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 the current account norm estimated for Haiti Source: Authorities; and Fund staffo calculations. prior to the earthquake. Inflows of increased in the aftermath of the earthquake. 5. Remittance inflows have million in February 2010 (a 32 percent increase remittances hit a record high of US$111 in FY 2010. The persistence in and are projected to grow by about percent On the one hand, year-on-year), inflows, however, is subject to some uncertainty. in the U.S. the surge in remittance status (TPS) for Haitian immigrants the introduction of the temporary protected Haiti: Remittance Inflows could underlie the observed surge in 160 (USDr millions) 2007/08 02008/09 remittances following the earthquake. At the same time, remittance inflows for 140 0 2009/10 below their level of April were slightly last year, suggesting possible tapering- 120 off oft the surge witnessed in the aftermath of the earthquake. Given these considerations, net remittance inflows 100 above are projected to grow for slightly FY 2011 and to 80 OCT NOV DEC JAN FEB MAR APR MAY JUN JUL AUG SEPT host country growth trends Source: Authorities: andi Fund staff calculations. gradually align with host country by FY 2015. on the upside. With textile exports 6. The outlook for exports could surprise almost entirely to the United States, the accounting for about 95 percent ofHaiti's exports, introduced by the U.S. could provide an Haiti Economic Lift Program (HELP) Act recently Among other provisions, the Act for Haiti's textile industry. important avenue expanding levels for certain knit and woven apparel products, would increase current tariff preference to tariff preferences. Textile production and raise the volume of those products eligible disrupted following the earthquake, but capacity and distribution networks were temporarily industry is operating at close to capacity. recent data show some recovery and the apparel protected status (TPS) for the United States announced it would grant temporary Haitians currently 2 Shortly after the earthquake in the U.S. The TPS would grant legal status to over 200,000 18 months to Haitians already them to transfer money home through formal channels. residing illegally in the U.S., allowing apparel products, would increase current tariff preference to tariff preferences. Textile production and raise the volume of those products eligible disrupted following the earthquake, but capacity and distribution networks were temporarily industry is operating at close to capacity. recent data show some recovery and the apparel protected status (TPS) for the United States announced it would grant temporary Haitians currently 2 Shortly after the earthquake in the U.S. The TPS would grant legal status to over 200,000 18 months to Haitians already them to transfer money home through formal channels. residing illegally in the U.S., allowing --- Page 71 --- Haiti: Textile exports to the U.S. in order for Haiti to benefit 45 (yssr millions, seasonally yadjusted) Therefore, industrial zones from the HELP Act, new must be established and FDI secured to production capacity and move up expand value chain. Provided the government the its to KNIT_SA WOVEN_SA moves expeditiously on objectives set up new industrial zones and implements measures to improve the climate, could grow at an business exports Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 even faster pace than currently projected. Jan-07 Source: National Authorities 7. Structural indicators indicate be in Haiti. Haiti consistently fares continues to limited stood at that non-price competitiveness regional standards. Its total network ofroads low on infrastructure indicators by is also the lowest in very 4,000 km in 2000. Haiti's electricity production and consumption in its neighbor, the about capita at only 2 percent the level the region, with consumption per share ofGDP continue to be among the Republic. FDI inflows to Haiti as a Indicators, Haiti still Dominican to the World Bank Doing Business a business, lowest in the region. According region in terms of ease of starting ranks last in the Latin America and Caribbean countries. Finally, Haiti has seen virtually no and in the lowest quintile among low income risk, as rated by the International of economic and political improvement on measures Country Risk Guide. Haiti: Electric Power Consumption Haiti: Roads.totalnetwok( (km) 1600 (kWh percapita) 60000 (kilometers) D SLV HTI 0 DOM SLV HND GTM BOL NIC HTI BOL NIC GTM HND DOM Source: WoldDerdsometindcion: Source: WosdDendkomentiadion: inflows were to be portion of the aid and remittance to 8. Even if an important of such scaled-up aid is expected absorbed via higher imports, the sheer magnitude resulting from the massive pressures. Excess capacity exert significant real appreciation mitigate the impact of the real appreciation destruction of physical capital may temporarily between fiscal and monetary and exchange rate coordination inflows and on inflation. Strengthened manage the surge in aid and external policies will be critical to appropriately the central bank could lean exchange rate volatility. In the short-term, over time real avoid excessive by building up reserves, but against excessive exchange rate volatility reforms to reduce supply-side bottlenecks, appreciation will be unavoidable. Structural environment would be essential in expand the export base and improve the business sector competitiveness. of exchange rate appreciation on external mitigating the impact destruction of physical capital may temporarily between fiscal and monetary and exchange rate coordination inflows and on inflation. Strengthened manage the surge in aid and external policies will be critical to appropriately the central bank could lean exchange rate volatility. In the short-term, over time real avoid excessive by building up reserves, but against excessive exchange rate volatility reforms to reduce supply-side bottlenecks, appreciation will be unavoidable. Structural environment would be essential in expand the export base and improve the business sector competitiveness. of exchange rate appreciation on external mitigating the impact --- Page 72 --- INTERNATIONAL MONETARY FUND DEVELOPMENT ASSOCIATION and INTERNATIONAL HAITI Analysis 2010 Joint Bank-Fund Staff Debt Sustainability the Staffs ofthe International Monetary Fund Prepared by Development Association and the International Gilbert Terrier and Dominique Desruelle (IMF) Approved by Kouame and Sudarshan Gooptu (IDA) and Auguste July 8, 2010 the Fund and Bank staffs in accordance with the The updated DSA was prepared. jointly by Framework (DSF) for low-income countries revised Joint Fund-Bank Debt Sustainability include debt relief provided or Under the baseline scenario that does not any the (LICS). following the January 2010 catastrophic earthquake, committed by official creditors distress remains high due to the deterioration of updated DSA shows that Haiti's risk of debt Although HIPC and MDRI relief have outlook and new borrowing. DSA findings the macroeconomic debt burden since June 2009, the updated substantially reduced Haiti's ratio would breach the indicate that the net present value (NPV) of the debt-to-exports scenario for the medium term. 1 Haiti's threshold in the baseline a narrow relevant policy-dependent the January earthquake, weaker near-term macroeconomic outlook following are key factors in the risk of debt base, together with new and projected borrowing, debt relief by multilateral export shows that delivery of announced distress. 2 An alternative scenario outlook. That scenario also and bilateral creditors would improve the debisustainability limited and on highly concessional terms. stresses the need. for new borrowing to remain evolution of external debt and the government's Staff will continue to closely monitor the and mobilize domestic resources. ability to secure highly concessional) financing I. BACKGROUND in June 2009 and qualified for US$1.2 billion Haiti reached the completion point amounted to 1. Initiative and MDRI. Debt service savings in debt relief under the HIPC US$972.7 million under MDRI The debt US$265 million under the HIPC Initiative and average score of2.86 on the World Bank's based on its three-year 1 Haiti is classified as a weak performer (CPIA). For a weak performer (defined as those with three-year Country Policy and Institutional Assessment thresholds for external debt sustainability are PV of debt-toCPIA ratings below 3.25), the indicative of PV of debt-to-revenue ratio of 200 percent, average 30 PV ofdebt-to-exports ratio 100 percent, Haiti is currently GDP ratio of percent, and debt service-to-revenue ratio of25 percent. debt service-to-exports ratio of 15 percent, classified as in high risk ofdebt distress. II, June 16, 2009. 2 Country Report No. 09/288, Appendix those with three-year Country Policy and Institutional Assessment thresholds for external debt sustainability are PV of debt-toCPIA ratings below 3.25), the indicative of PV of debt-to-revenue ratio of 200 percent, average 30 PV ofdebt-to-exports ratio 100 percent, Haiti is currently GDP ratio of percent, and debt service-to-revenue ratio of25 percent. debt service-to-exports ratio of 15 percent, classified as in high risk ofdebt distress. II, June 16, 2009. 2 Country Report No. 09/288, Appendix --- Page 73 --- stock in NPV terms was reduced from US$1,320 million at end-September 2008 to US$641 million at end-September 2009. 3 While most relief has been provided, conclusion of bilateral with some Paris Club creditors is still pending. 4 As a result of the debt agreements relief initiatives, Haiti's nominal external public and publicly guaranteed debt stock reached US$1.24 billion at end-September 2009 (about 19 percent of GDP), down from US$1.88 billion at end-September 2008 (Text Table 1). Assuming full delivery of Paris Club debt relief, debt stock at end-September 2009 would stand at US$1.06 billion (16.6 percent of GDP). 2. Haiti's public debt as of end-September 2009 was estimated at about 24.8 of GDP. Most ofthe public and publicly guaranteed (PPG) debt is owed to percent external creditors (about 67 percent), and the rest is domestic debt (equivalent to about 8.2 percent of GDP). The domestic debt corresponds to credit to the government from the central bank (BRH). Text Table 1. Haiti: Debt Stock as of end-September 2009 and end-March 2010 (In milions ofU.S. dollars, unless otherwise specified) September 2009 * March 2010 Amount Share Amount Share Creditors Providing Full Debt Relief (percentofbtal) (percentoftbtal) (percentofMarch debts stock excl. IMF) Multilateral creditors 676.7 54.4 828.9 56.0 45.4 IBRD/IDA2 38.8 3.1 37.2 2.5 3.1 IMF 165.6 13.3 273.6 18.5 IDB2/ 417.5 33.6 452.5 30.6 37.5 IFAD2 48.3 3.9 57.8 3.9 4.8 OPEC 6.6 0.5 7.8 0.5 Bilateral creditors 566.5 45.6 650.9 44.0 46.6 Paris Club 1/ 181.6 14.6 167.0 11.3 13.8 Canada 2.1 0.2 0.0 0.0 France 81.5 6.6 69.2 4.7 5.7 Spain 39.7 3.2 39.5 2.7 3.3 Italy 58.3 4.7 58.3 3.9 4.8 Non-Paris Club 384.9 31.0 483.9 32.7 32.7 Taiwan, Province of fChina 89.7 7.2 88.9 6.0 Venezuela 2/ 295.2 23.7 395.0 26.7 32.7 Total 1,243 100.0 1,480 100.0 92.0 Source: Haitan authorities; and IMF staff calculations. Haiiant fiscal year ending September. 1/1 Debt to be cancelled as partofParis Club agreementii tin June 2009 butt for which some bilateral agreements have yett to be concluded. 2/ Creditors thathave announced debtr reliefi initatives on Hait's outstanding debts stock. 3 Haiti's fiscal year ends in September. 4 Bilateral agreements for Italy, Spain, and France have been prepared and are awaiting signature by the Haitian authorities. Staff will continue to follow up with the authorities on the status of this process. 92.0 Source: Haitan authorities; and IMF staff calculations. Haiiant fiscal year ending September. 1/1 Debt to be cancelled as partofParis Club agreementii tin June 2009 butt for which some bilateral agreements have yett to be concluded. 2/ Creditors thathave announced debtr reliefi initatives on Hait's outstanding debts stock. 3 Haiti's fiscal year ends in September. 4 Bilateral agreements for Italy, Spain, and France have been prepared and are awaiting signature by the Haitian authorities. Staff will continue to follow up with the authorities on the status of this process. --- Page 74 --- 2009 rose by more than The level of external PPG debt at end-September In nominal 3. Point in June 2009. previously projected at the time of the Completion of GDP in 2009 under the Completion terms, Haiti's debt was expected to reach 13.2 percent debt stock. The largere-than-expected points lower than actual Point DSA-3 V2 percentage between 2008 and 2009 due to new borrowing (on increase reflects higher bilateral debt PetroCaribe agreement, on which no relief from Venezuela under the billion at endconcessional terms) initiative. 6 Haiti's external debt rose to US$1.48 was provided under the HIPC augmentation of January 2010, new IDB March 2010, reflecting the IMF emergency borrowing, and further PetroCaribe financing. reassessed in light of the catastrophic damage to 4. Haiti's debt situation is being are estimated at more than and losses from the earthquake has been the economy. Damages reconstruction and growth strategy 120 percent of 2009 GDP. A multi-year with the international community, for developed by the Haitian authorities in conjunction the New York Donors' : Conference in total ofUS$9.9 billion have been pledged at debt relief on which a their intentions to provide March 2010. Several creditors have announced initiative to alleviate debt service debt stocks, as part of a broader Haiti's outstanding constraints. These include: Haiti's outstanding debt of SDR 24.3 The World Bank provided debt relief on Debt relief became effective in million (about US$36 million as of May 21, 2010). to allocate the the 14 donors to the Debt Relief Trust Fund agreed May 2010 when resources needed to cover the debt cancellation. million to cancel Haiti's outstanding debt as of The IDB would provide US$479 loans in the existing project end-December 2009 and convert the undisbursed in March 2010 by the Board of into grants. Debt relief, which was approved committed donor portfolio effective in the near future, as soon as the Governors, will become financing is available. would cancel about US$50.7 million in outstanding IFAD announced in April that it against debt service due, on NPV terms) to be delivered in the form of grants debt (in basis. a pay-as-you-go in June 2009 is deemed a more reliable comparator in terms was of based on 5 The Completion Point DSA prepared No. 09/288), given that the January DSA Update DSA macroeconomic assumptions (Country Report (Country Report No. 10/35). The January 2010 uncertain data immediately following the earthquake reflecting both a worsened near-term very found Haiti's risk ofdebt distress to have increased markedly, discount rate, which increases the Update also borrowing. The updated DSA also reflects a lower outlook and new higher PV ofdebt. under the PetroCaribe agreement (US$104 million) resources accumulated would be set up 6 In the Completion Point DSA, that the binational company (Société Mixte) treated as debt on the understanding the debt ofthe binational were private financing from PetroCaribe flows would become PetroCaribe in early 2009, in which case The binational company is yet to be established, and total considered part company and not ofthe government. as of end-FY2009, in the amount ofUS$295 are now flows, including new flows accumulated of government debt. US$104 million) resources accumulated would be set up 6 In the Completion Point DSA, that the binational company (Société Mixte) treated as debt on the understanding the debt ofthe binational were private financing from PetroCaribe flows would become PetroCaribe in early 2009, in which case The binational company is yet to be established, and total considered part company and not ofthe government. as of end-FY2009, in the amount ofUS$295 are now flows, including new flows accumulated of government debt. --- Page 75 --- it would provide debt relief on Haiti's outstanding Venezuela officially confirmed ofUS$395 million. Modalities for debt debt as of January 25, 2010 in the amount relief have yet to be clarified. 7 about US$12 million in interest and Taiwan, Province of China, has offered to pay debt. payments on Haiti's outstanding to provide a five-year moratorium on principal the establishment of the PostIn June 2010, the IMF Executive Board approved instrument to assist 5. Trust. The PCDR is a dedicated Catastrophe Debt Relief (PCDR) disasters like Haiti. Such a mechanism would countries affected by catastrophic natural and would also be available to other lowenable the Fund to provide debt reliefto Haiti disasters in the future. Debt relief from income countries that are hit by similar catastrophic effort to cancel Haiti's remaining debt. the Fund would complement a concerted international debt as of endaccounting for about 92 percent of Haiti's outstanding to Official creditors have already delivered or are firmly committed March 2010 (excluding the Fund) stocks (Text Table 1). IfHaiti's eligibility for providing debt relief on outstanding debt stock relief could be provided on Haiti's assistance under the PCDR is approved, debt of SDR 178.13 million. obligations to the Fund in the amount outstanding accumulated since the The current DSA framework includes new borrowing FY 2015. 6. in June 2009, as well as projected new borrowing through Completion Point from Venezuela under the accumulated concessional trade financing of this portion of In particular, million is now included. The treatment PetroCaribe agreement ofUS$295 2010 DSA Update. 8 The framework also debt follows the same approach as in the January contracted in December 2009 with the the new airport loan (US$33 million) flows, the framework incorporates Venezuela (BANDES). 9 In terms of new Development Bank of through FY 2013, together with accumulated includes projected ECF disbursements million in FY 2010 and projected future PetroCaribe PetroCaribe flows ofUS$160 million a year through FY 2015. borrowing in the range ofUS$230-250 DEBT SUSTAINABILITY OUTLOOK, 2010-2030 II. EXTERNAL Baseline Scenario framework for the long-term debt sustainability 7. The baseline macroeconomic recent developments as well as the analysis has been revised to take into account macroeconomic assumptions are impact of the 2010 earthquake. Key macrocconomic cancellation of US$295 million outstanding as of end-September 7 The DSA scenario with debt relief assumes (future) flows in 2010. 2009, plus US$100 million in subsequent agreement were considered resources accumulated under the PetroCaribe 8 In the January 2010 DSA Update, part of government debt. the minimum concessionality criteria required under 9 The terms ofthe airport loan from BANDES did not meet criterion on contracting ofexternal nonand therefore a waiver on the performance the ECF (Country Report No. 10/14). the ECF arrangement at the time of the Sixth Review under concessional debt was requested September 7 The DSA scenario with debt relief assumes (future) flows in 2010. 2009, plus US$100 million in subsequent agreement were considered resources accumulated under the PetroCaribe 8 In the January 2010 DSA Update, part of government debt. the minimum concessionality criteria required under 9 The terms ofthe airport loan from BANDES did not meet criterion on contracting ofexternal nonand therefore a waiver on the performance the ECF (Country Report No. 10/14). the ECF arrangement at the time of the Sixth Review under concessional debt was requested --- Page 76 --- are somewhat more summarized in Box 1 and Text Table 2. Long-term assumptions DSA. Specifically, long-run compared to those used in the completion point massive reconstruction effort optimistic higher, reflecting the growth is now assumed to be slightly Government revenues (excluding grants) are projected to take place over the medium-term. ECF's objectives. Exports of goods and to increase, in line with the new of until FY 2013. also projected a year, but decline in percent GDP services would grow by 10-12 percent their levels and rise to more recover gradually to pre-earthquake in FY 2011, They would subsequently would surge by more than 60 percent than 17 percent of GDP by 2030. Imports to remain somewhat elevated in the in line with the reconstruction plan. Imports ofGDP are expected in 2030. medium-term and revert to about 35 percent outlook compared to the Completion 8. Given a weaker near-term macroeconomic remains at high risk of debt distress after the Point DSA and higher borrowing, Haiti of external debt relative to exports earthquake (Figure 1). Haiti's present value (PV) of 187 percent in 2013 before indicative threshold until 2022, reaching a peak GDP breaches the in 2022. Despite higher average growth declining gradually to less than 100 percent Point, exports (in percent of between FY 2011 and FY 2013 compared to the Completion much higher. The to be lower and imports and government expenditure in 2010 (at GDP) are projected below the relevant policy threshold PV ofthe debt-to-revenue ratio is slightly period. but declines steadily over the projection 23.5 percent) continued borrowing under the 9. Higher borrowing in 2009, and projected raises risks to debt sustainability. PetroCaribe arrangement through 2015, substantially the HIPC Completion Point outlook has worsened since reaching DSA Haiti's debt sustainability bilateral borrowing. Based on the January 2010 in June 2009, mainly due to new million alone raised the PV of external accumulated PetroCaribe debt ofUSS295 Update, debt by more than 45 percentage points of exports Haiti: Debt Service Profile in FY 2010. Although the terms ofPetroCaribe 120.0 financing are highly concessional, the continued 100.0 accumulation of PetroCaribe borrowing, which is 80.0 about US$230-250 a expected to increase by of oil S 60.0 million a year based on current projections 9 5 40.0 imports, poses a risk to medium-term debt of future 20.0 servicing capacity. 10 However, the terms PetroCaribe borrowing have yet to be clarified. 0.0 2010 2013 2016 2019 2022 2025 2028 2031 of creating a private binational Total_olddebt Total_new debt The possibility inflows corporation that would use accumulated the table. Ifand when that happens, future finance energy and social projects is still on add to debt. On the to liabilities and no longer public PetroCaribe flows would become private Dominican Republic, Venezuela indicated other hand, at the June 21d donor summit in the ofoil imports is provided on concessional terms, namely, based two10 Under the PetroCaribe arrangement, financing interest. The size ofthe portion financed is determined period, 25-year maturity and 1 percent for oil prices US$40-50 per barrel to year grace oil prices and varies between 30 percent oftotal shipments on 70 prevailing percent for oil prices US$150 and above. On the to liabilities and no longer public PetroCaribe flows would become private Dominican Republic, Venezuela indicated other hand, at the June 21d donor summit in the ofoil imports is provided on concessional terms, namely, based two10 Under the PetroCaribe arrangement, financing interest. The size ofthe portion financed is determined period, 25-year maturity and 1 percent for oil prices US$40-50 per barrel to year grace oil prices and varies between 30 percent oftotal shipments on 70 prevailing percent for oil prices US$150 and above. --- Page 77 --- inflows over the coming years could be converted that a large share of future PetroCaribe into grants. remains vulnerable to a analysis, Haiti's debt situation the 10. Based on the sensitivity to less favorable export performance. With combination of shocks, but in particular alternative and shock scenarios worsen all exception of the debt service-to-revenues ratio, the the ratios would exceed the relevant ofHaiti's debt stock and service indicators. Importantly, debt-to-revenue, as well as debt-to-GDP thresholds in the case of the PV of debt-to-exports, ratio, Haiti is most vulnerable to ratios. In the particular case off the PV ofthe debt-to-exports flows. Together, these shocks and non-debt creating a combined shock to growth, exports, ratios to 400 percent in FY 2012 before declining, could push the PV of debt-to-exports, threshold up for the projection period. although it would remain above the breach in the baseline scenario precludes a 11. The prolonged nature of the rating using the remittance-based modification of Haiti's risk of debt distress (DSF) for low-income countries framework. The revised debt sustainability framework remittances in the determination ofa in August 2009 allows for the effect of taking into consideration approved risk of debt distress. Under the new guidelines, however, to the thresholds under the country's the risk of debt distress only ifbreaches A remittances can change into account remittances) are not very protracted. baseline or stress tests (i.e. before taking of the breach of the thresholds could be 10 benchmark for the maximum permissible length half of the projection period) (SM/10/16). In starting from the current year (i.e. about 2022 in the baseline scenario, and years ratio is breached until under the case of Haiti, the debt-to-exports ratio sustain a protracted breach all indicators except for the debt service-to-revenues the stress tests. Debt Relief Scenario improve long run debt Delivery of announced debt relief would significantly of relief on debt stocks 12. (Figure 2). The debt relief scenario assumes delivery World Bank, IDB, IFAD, and sustainability in paragraph 5 by the 2009 as outlined to the Fund as of as of fend-September also assumes debt relief on outstanding credit of PetroCaribe. The scenario 11 This would translate into a debt stock relief end-January 2010 (i.e. SDR 178.13 million). The debt relief scenario maintains USS965 million in nominal terms as of end-2009. PetroCaribe about the projected accumulation of the assumption in the baseline regarding all debt indicators remain outlined in paragraph 6. Based on these assumptions, with the of the borrowing relevant threshold in the baseline scenario, exception threshold between below the policy breaches the policy relevant debt-to-exports indicator which temporarily 2014 and 2018. remain sensitive to external shocks. Breaches 13. Debt dynamics would however scenario (the combination shock) for the three would persist under the most extreme shock 2009 in addition to SDR 73.13 million 11 This includes SDR 105 million outstanding as of end- September disbursed in January 2010. outlined in paragraph 6. Based on these assumptions, with the of the borrowing relevant threshold in the baseline scenario, exception threshold between below the policy breaches the policy relevant debt-to-exports indicator which temporarily 2014 and 2018. remain sensitive to external shocks. Breaches 13. Debt dynamics would however scenario (the combination shock) for the three would persist under the most extreme shock 2009 in addition to SDR 73.13 million 11 This includes SDR 105 million outstanding as of end- September disbursed in January 2010. --- Page 78 --- and (c) PV of debt-toindicators: (a) PV of debt-to-GDP; (b) PV of debt-to-exports; to stock protracted for the debt-to-exports indicator (peaking revenue. The breach is particularly until 2027). This highlights Haiti's 297 percent in 2012 and remaining above percent from its very narrow export base. continued external debt vulnerability, in part stemming III. PUBLIC DEBT SUSTAINABILITY ANALYSIS debt indicators remain somewhat unchanged 14. In the baseline scenario, public The PV of public debt-to-GDP remains at about over the projection period (Figure 3). This stability reflects a decrease in the level of 30 percent throughout the projection period. which increases from external debt that is offset by an increase in domestic borrowing, 2030. The PV ofthe debt-to-revenue 8 percent ofGDP in FY 2010 to 20 percent of GDP and by remains at that level over the ratio rises gradually to about 160 percent by 2016 projection period. public debt on a sharper rising trajectory over the and to 15. Shock scenarios put sensitive to growth shocks projection period. Public debt indicators are particularly shock and lower primary balance flows. Moreover, a combination of a growth ratios well above the debt-creating raise the PV of debt-to-GDP and debt-to-revenue would significantly baseline scenario. IV. DEBT MANAGEMENT disrupted existing debt management 16. The earthquake is thought to have severely been Based on an assessment ofthe systems. The Ministry of Finance building has will damaged. be needed to recover data, set up a further technical and financial support damages, and rehabilitate physical infrastructure. working computer system, setback, given recent steady progress. Debt 17. The earthquake is a major Haiti since the decision point was reached in management capacity had improved in the BRH and the MEF had completed the December 2006. In the area of debt recording, DMFAS system, version 5.3, which installation of the most recent version ofUNCTAD and security of debt data. In part resulting allows for improvements in the availability, quality debt reporting by the government had also from the upgrade to the latest DMFAS system, improved. had also been made in establishing 18. Prior to the earthquake, satisfactory although progress the finalization of the draft operations the debt unit at the Ministry of Finance, framework for debt management did depend on the manual, and the legal and institutional UNCTAD and CEMLA. results of ongoing technical assistance by V. CONCLUSIONS remains high even after HIPC and MDRI 19. Haiti's risk of external debt distress breaches the 100 percent threshold for a debt relief. The PV of debt-to-exports ratio indicators remain below their relevant thresholds. prolonged period, even though other debt had also been made in establishing 18. Prior to the earthquake, satisfactory although progress the finalization of the draft operations the debt unit at the Ministry of Finance, framework for debt management did depend on the manual, and the legal and institutional UNCTAD and CEMLA. results of ongoing technical assistance by V. CONCLUSIONS remains high even after HIPC and MDRI 19. Haiti's risk of external debt distress breaches the 100 percent threshold for a debt relief. The PV of debt-to-exports ratio indicators remain below their relevant thresholds. prolonged period, even though other debt --- Page 79 --- of debt relief commitments would The analysis, however, shows that implementation outlook and contribute to the reconstruction significantly improve the debt sustainability immediate financing needs through grants and donors meet Haiti's large and effort, provided highly concessional loans. Box 1: Macroeconomic Assumptions by 8.5 percent in FY 2010 following the devastation of Growth and inflation. After contracting rebound to almost 10 percent in FY 2011, averaging about the earthquake, growth is expected to FY2015 on the back of significant reconstruction related 7.5 percent a year between FY2011 and trend. Long-run growth is projected to be slightly aid inflows, before reverting to its long-run Point (CP) DSA (5 percent against 4.5 percent), higher than the rate assumed in the Completion aid-inflows and reforms to expand to absorptive assuming effective utilization ofthe surge in to about 8 percent in FY 2011 and ofthe economy. Inflation is projected to increase side bottlenecks capacity domestic demand and short-run supply FY 2012 on account of increased Inflation is expected to revert to about 6.5 percent associated with large reconstruction aid inflows. starting FY 2014. ofGDP in FY 2009, is projected at about Fiscal policy. Revenue, which reached 11 percent administrative and physical capacities. 10 percent of GDP due to severe losses in government gradually, in line with the rebound in economic Government revenues are expected to recover in 2015. Primary spending is projected to peak to activity, and to increase to 14 percent ofGDP in line with the surge in reconstruction-based aid about 32 percent ofGDP in 2011 and 2012 GDP in the long run. The fiscal deficit is expected to inflows before falling to about 22 percent of 3.4 percent ofGDP from 2016 onwards. peak at 5 percent of GDP in 2012, and to average billion year in Grants are assumed to peak to about US$1.5 per US$1.1 billion Grants and financing. activity rebound and average about FY 2011-12 as reconstruction and economic that Haiti would remain eligible for concessional per year through FY 2015. It is assumed most ofl Haiti's external borrowing needs from assistance from IDA and IDB which would cover external borrowing is 35 percent. Following the 2018 onwards. The assumed grant element of 2011, new domestic financing will remain capped to introduction of a Treasury-bill market during maintain medium-term public debt sustainability. in textile production by 20 percent in FY 2010 due to damage rebound Current account. After contracting of goods and services are projected to capacity and to distribution infrastructure, exports 2011-15 and reach their pre-carthquake value by and grow by an average of 12 percent in FY about 18 ofGDP by 2030, slightly higher than 2016. Exports are assumed to increase to percent the other hand, are projected to surge to about CP assumption. Imports of goods and services, reconstruction on related imports, and to revert to about 52 percent ofGDP in FY 2011-121 reflecting deficit excluding grants in percent ofGDP is 37 percent of GDP by 2030. The current account and FY 2011 to about 29 percent and 24 percent, projected to widen significantly in FY 2010 by FY 2015. The current account deficit is respectively, before declining to about 13 percent to average 3.5 percent ofGDP in expected to be covered largely by grants and is projected FY 2013-15 and 4.4 percent through 2030. to revert to about 52 percent ofGDP in FY 2011-121 reflecting deficit excluding grants in percent ofGDP is 37 percent of GDP by 2030. The current account and FY 2011 to about 29 percent and 24 percent, projected to widen significantly in FY 2010 by FY 2015. The current account deficit is respectively, before declining to about 13 percent to average 3.5 percent ofGDP in expected to be covered largely by grants and is projected FY 2013-15 and 4.4 percent through 2030. --- Page 80 --- Text Table 2. Haiti: Long-Term Macroeconomic Assumptions, FY 2010-2030 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2030 Averages 2010-19 2020-30 (Annual percentage change) National income and prices GDP at constant prices 2.9 -8.5 9.8 8.4 6.9 6.2 6.0 5.5 GDP deflator 3.2 8.0 9.7 8.6 7.4 5.2 5.0 5.0 5.0 5.0 5.0 Real GDP per capita (local currency) 1.2 -7.9 6.5 5.0 5.0 5.0 5.0 5.0 5.0 6.5 5.0 5.6 6.7 5.2 4.6 4.9 3.9 Consumer prices (period average) 3.4 5.0 8.7 8.6 7.3 3.7 3.5 3.5 3.7 3.4 3.6 6.5 6.5 6.5 6.5 6.5 6.5 6.5 6.9 6.5 External sector (value in USD) Exports of goods and non-factor services 12.0 -19.5 11.9 11.8 12.1 14.8 12.3 11.1 11.1 Imports of goods and non-factor services 0.4 38.3 4.5 3.4 4.3 3.3 10.8 10.6 10.2 8.7 10.5 2.8 7.7 7.2 7.0 7.0 7.0 8.5 7.0 Central government (value in Gourdes) Total revenue and grants 25.9 34.6 41.0 5.5 7.6 5.7 8.0 6.7 Central government revenue 1/ 11.3 -12.1 29.5 34.4 23.5 16.1 6.6 10.5 10.6 9.9 13.7 9.8 Central government primary expenditure 30.9 21.3 43.9 16.8 13.7 12.8 12.5 12.4 10.9 15.9 11.2 10.9 5.3 5.9 6.2 8.6 6.8 9.3 9.3 8.3 12.8 9.3 (In percent of GDP, unless otherwise indicated) National income Nominal GDP (Gourdes, billions) 267 264 318 374 429 485 543 Nominal GDP (USD billions) 6.6 6.5 7.7 601 665 733 808 2,363 468 1,461 GDP 9.1 10.5 11.8 12.8 13.6 14.6 15.6 16.7 per capita (US dollars) 661 656 740 868 981 1,082 1,157 35.3 10.9 24.9 1,226 1,295 1,366 1,441 External sector 2,642 1,003 1,983 Non-interest current account deficit 2/, 3/ -4.7 -3.4 -1.8 -3.0 -3.7 -4.1 -4.0 -3.7 -4.8 -5.3 Exports of goods and non-factor services 14.2 11.6 11.0 10.3 10.0 10.3 10.6 -5.3 -4.0 -3.9 -4.9 Imports of goods and non-factor services 43.9 61.3 54.3 47.1 11.1 11.5 11.9 12.3 17.5 11.3 14.8 External current account balance (excl grants) 1/ -10.6 -28.7 42.8 39.4 37.3 37 11.6 11.0 10.3 10.0 10.3 10.6 -5.3 -4.0 -3.9 -4.9 Imports of goods and non-factor services 43.9 61.3 54.3 47.1 11.1 11.5 11.9 12.3 17.5 11.3 14.8 External current account balance (excl grants) 1/ -10.6 -28.7 42.8 39.4 37.3 37 .8 37.8 37.8 37.7 37.5 43.9 37.6 -24.2 -19.6 -16.8 -14.3 -12.4 -10.9 -11.1 External current account balance (incl grants) 21 -3.2 -2.1 -3.7 -4.1 -4.1 -3.7 -11.2 -10.9 -6.9 -16.0 -9.0 Liquid gross reserves (in months of imports of G&S 2.8 3.1 2.9 3.0 3.1 -3.3 -3.5 -4.5 -4.9 -4.9 -3.6 -3.7 -4.4 3.2 3.5 3.3 3.3 3.2 3.2 2.7 3.2 2.9 Central government Central government overall balance (incl grants) 2/ -4.4 -2.9 -3.9 -4.9 -4.2 -4.1 -3.6 -3.8 Total revenue and grants 17.9 24.3 28.5 25.6 24.0 22.4 21.6 -3.8 -3.6 -3.4 -2.6 -3.9 -3.1 Central government revenue (excl grants) 1/ 11.2 10.0 10.7 12.2 13.1 13.5 20.8 20.1 20.2 20.2 19.3 22.5 19.8 Central government primary expenditure 21.7 26.6 14.1 14.5 14.8 15.1 15.4 16.9 12.9 16.3 31.8 30.0 27.5 25.7 24.4 24.0 23.2 23.0 22.8 Sources: Countryaurthonites; and staff estimates and projections. 20.7 25.8 21.9 1/ Excluding grants 2/1 Including grants 3/ Includes interest earned on foreign exchange reserves. --- Page 81 --- Figure 1. Haiti: Indicators of Public and Publicly Guaranteed External Debt under Alternatives Scenarios, 2010-2030 1/ b.PV of debt-to GDP ratio a.Debt Accumulation 40 60 35 50 a 30 - - - € 15 20 10 10 AAlnna 2 p10 2015 2020 2025 2030 -5 -10 M Rate of Debt Accumulation e Grant- equivalent financing (%ofGDP) Grant element of new borrowing (%rights scale) d.PVofdebt-to-rvenuemtin crvafatisesoeusais. - - - 100 - - - - - - 0 - -50 2030 -100 2010 f.Debtservice-to-revenue ratio e.Debt service.do-sponsmis - - - 25 - - 2015 2020 Baseline - Historical: scenario Most extreme shock 1/ Threshold Sources: Country authorities; and staff estimates and projections. 1/ The most extreme stress test is the test that yields the highest ratio in 2020. In figure b. it corresponds to a Combination shock; in C. to a Combination shock; in d. to a Combination shock; in e. to a Combination shock and in figure f. to a Combination shock 2010 f.Debtservice-to-revenue ratio e.Debt service.do-sponsmis - - - 25 - - 2015 2020 Baseline - Historical: scenario Most extreme shock 1/ Threshold Sources: Country authorities; and staff estimates and projections. 1/ The most extreme stress test is the test that yields the highest ratio in 2020. In figure b. it corresponds to a Combination shock; in C. to a Combination shock; in d. to a Combination shock; in e. to a Combination shock and in figure f. to a Combination shock --- Page 82 --- Table la. Haiti: Externall Debt Sustainability Framework, Bascline Scenario, 2007-2030 1/ (Inpercent tofGDP, unless otherwise indicated) Actual Historical Standard Projections 2016-20; Average Deviation 2010-2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 Average 2007 2008 2009 2010 2011 2012 2013 2014 2015 Average 21.1 20.4 19.7 18.9 18.1 17.4 16.9 16.4 15.8 15.1 14.5 13.8 13.0 12.2 11.4 25.6 29.5 16.6 22.0 21.6 21.9 21.6 21.6 21.9 External debt (nominal) 1/ 21.6 21.9 21.1 20.4 19.7 18.9 18.1 17.4 16.9 16.4 15.8 15.1 14.5 13.8 13.0 12.2 11.4 (PPG) 25.6 29.5 16.6 22.0 21.6 21.9 21.6 -0.7 -0.7 -0.8 -0.8 o/w public and publicly guaranteed 5.4 -0.4 0.3 -0.3 0.0 0.3 -0.8 -0.7 -0.7 -0.7 -0.9 -0.6 -0.5 -0.5 -0.6 -0.6 -0.8 Change inextemaldebt -2.9 3.9 12.9 1.4 2.4 2.8 2.7 2.6 2.5 2.4 2.4 2.2 2.1 1.9 1.7 1.5 1.3 1.0 -6.3 1.3 2.7 2.4 0.5 1.5 1.8 1.6 1.2 3.6 3.4 4. Change inextemaldebt -2.9 3.9 12.9 1.4 2.4 2.8 2.7 2.6 2.5 2.4 2.4 2.2 2.1 1.9 1.7 1.5 1.3 1.0 -6.3 1.3 2.7 2.4 0.5 1.5 1.8 1.6 1.2 3.6 3.4 4. Identified net debt- -creating flows 3.2 3.6 3.6 2.9 3.1 4.1 4.5 4.5 4.5 4.5 4.5 4.5 4.4 4.3 4.1 4.0 3.8 Non- -interest current account deficit 0.1 4.2 3.0 1.5 1.8 1.5 3.2 27.1 26.7 26.3 25.8 25.4 25.0 24.6 24.2 23.6 23.1 22.6 22.1 21.6 21.0 20.5 20.0 31.0 29.7 50.0 43.7 37.1 33.1 29.5 Deficit m balance of goods and services 26.3 11.1 11.5 11.9 12.3 12.7 13.1 13.5 14.0 14.5 15.0 15.5 16.0 16.5 17.0 17.5 13.4 12.7 14.2 11.6 11.0 10.3 10.1 10.4 10.7 37.7 37.7 37.7 37.6 37.6 37.6 37.6 37.5 37.5 Exports 61.6 54.7 47.4 43.2 39.8 37.8 37.8 37.8 37.8 37.7 37.7 37.6 Imports 39.6 43.7 43.9 -21.6 -20.8 -20.4 -20.0 19.6 -19.2 -18.8 18.4 18.0 -17.7 -17.3 -17.0 -16.7 -16.5 -16.2 -18.5 inflow) -25.9 -26.3 -26.3 -27.4 2.7 -47.9 -40.1 -32.8 -28.5 -25.1 -23.1 -3.9 -3.7 -3.4 Nete current transfers (negative -26.7 -15.7 12.8 -10.7 -9.2 -7.4 -6.6 -6.4 -6.1 -5.7 -5.4 -5.1 -4.8 -4.6 -4.3 4.1 -3.5 o/w official -6.7 -7.2 -7.4 -20.7 -2.0 -1.4 -1.0 -0.9 -1.0 -0.9 -0.9 -0.7 -0.7 -0.7 -0.6 -0.6 -0.5 -0.5 -0.4 flows net inflow) -0.2 -0.5 -0.3 -0.6 -0.4 -0.6 -1.0 -1.1 -1.1 -2.0 1.5 Other current account (negative -1.0 -0.9 -0.8 -1.0 -1.1 -1.2 -1.3 -1.4 -1.5 -1.6 -1.6 -1.7 -1.7 -1.8 -1.8 -1.9 -1.9 inflow) -1.3 -0.5 -0.6 -0.9 1.1 -1.1 -1.3 -0.8 -0.4 -0.4 -0.4 -0.4 Net FDI (negative 2.0 -1.4 -1.2 -1.0 -0.8 -0.9 -0.7 -0.6 -0.6 -0.6 -0.5 -0.5 -0.5 -0.5 -0.5 -0.5 -0.5 Endogenous debt dynamics 21 -5.2 -2.5 0.2 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.3 0.3 0. -1.2 -1.0 -0.8 -0.9 -0.7 -0.6 -0.6 -0.6 -0.5 -0.5 -0.5 -0.5 -0.5 -0.5 -0.5 Endogenous debt dynamics 21 -5.2 -2.5 0.2 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.3 0.3 0. 3 0.3 0.3 0.3 0.3 0.2 0.2 0.2 0.2 Contribution from nominali interest rate 0.1 0.2 0.2 0.6 -1.3 -1.0 -1.0 -0.9 -0.9 -0.8 -0.8 -0.8 -0.8 -0.7 -0.7 -0.7 -0.6 -0.6 -0.6 -0.8 -0.2 -0.9 1.4 -1.8 -1.5 -1.3 -1.2 -1.1 Contribution from realGDP growth Contribution from price and exchange rate changes -4.5 -2.6 0.9 -2.1 -1.6 -0.9 -2.2 -3.0 -3.5 -3.4 -3.4 -3.2 -3.0 -2.9 -2.9 -2.7 -2.6 -2.4 -2.3 -2.1 -1.8 Residual (3-4)31 3.4 2.6 -15.6 3.0 -0.9 -1.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 -0.4 -0.3 15.6 0.0 0.0 0.0 0.0 0.0 0.0 0.0 o/w exceptional financing 17.9 17.1 16.4 15.6 14.8 14.3 13.8 13.3 12.8 12.3 11.7 11.1 10.5 9.9 9.2 15.5 19.6 18.8 19.1 18.9 18.9 18.8 58.0 52.5 PV of Texternal debt 4/ 170.0 184.1 187.2 182.7 176.0 161.3 149.0 137.5 126.9 116.7 108.8 102.2 95.1 88.3 81.8 75.7 69.6 63.8 Inp percent ofe exports 108.8 169.2 17.9 17.1 16.4 15.6 14.8 14.3 13.8 13.3 12.8 12.3 11.7 11.1 10.5 9.9 9.2 15.5 19.6 18.8 19.1 18.9 18.9 18.8 52.5 PV of PPG extemal debt 170.0 184.1 182.7 176.0 161.3 149.0 137.5 126.9 116.7 108.8 102.2 95.1 88.3 81.8 75.7 69.6 63.8 58.0 Inp percent of exports 108.8 169.2 187.2 133.1 124.0 116.2 108.7 101.8 94.7 89.4 86.0 82.5 78.8 75.1 71.3 67.3 63.2 58.9 54.6 138.3 197.0 175.9 156.4 143.3 139.7 4.1 In percent of governmen ent revenues 5.9 7.6 9.5 10.3 12.5 12.0 11.2 9.7 8.4 6.5 5.8 5.6 5.2 5.0 4.6 4.6 4.4 4.3 Debt service-to-ex xports ratio (in percent) 6.8 5.8 3.7 6.2 5.7 10.3 12.5 12.0 11.2 9.7 8.4 6.5 5.8 5.6 5.2 5. 5 12.0 11.2 9.7 8.4 6.5 5.8 5.6 5.2 5.0 4.6 4.6 4.4 4.3 Debt service-to-ex xports ratio (in percent) 6.8 5.8 3.7 6.2 5.7 10.3 12.5 12.0 11.2 9.7 8.4 6.5 5.8 5.6 5.2 5. 0 4.6 4.6 4.4 4.3 4.1 PPGdebt service- -to-exports ratio (in percent) 6.8 5.8 3.7 6.2 5.7 5.9 7.6 9.5 9.6 9.4 8.9 7.7 6.8 5.3 4.9 4.8 4.7 4.6 4.4 4.4 4.4 4.3 4.2 8.5 6.9 4.7 7.2 5.9 5.0 5.8 7.3 7.8 0.7 PPG debt service- -to-rev venue ratio (in percent) 0.3 0.4 0.4 0.4 0.5 0.6 0.7 0.7 0.7 0.7 0.8 0.8 0.8 0.8 0.8 0.8 0.8 0.8 im Total gross financing need (Billions ofl U.S. .2 5.9 5.0 5.8 7.3 7.8 0.7 PPG debt service- -to-rev venue ratio (in percent) 0.3 0.4 0.4 0.4 0.5 0.6 0.7 0.7 0.7 0.7 0.8 0.8 0.8 0.8 0.8 0.8 0.8 0.8 im Total gross financing need (Billions ofl U.S. dollars) 0.0 0.3 0.2 0.1 0.2 4.0 3.2 2.6 3.9 4.7 5.2 5.2 5.3 5.2 5.0 5.1 5.0 4.9 4.8 4.7 4.6 4.4 4.2 Non-i interest current account deficit that stabilizes debt ratio 3.0 0.4 15.9 -3.9 3.6 3.3 Key macroeconomic: assumptions 6.0 4.8 5.5 5.2 5.0 5.0 5.0 5.0 5.0 5.0 5.0 5.0 5.0 5.0 5.0 5.0 5.0 5.1 3.3 0.8 2.9 0.8 2.0 -8.5 9.8 8.4 6.9 6.2 1.9 1.9 1.9 1.9 1.9 1.9 1.9 RealGDP growth (in percent) 7.8 6.8 7.4 5.4 1.9 6.6 1.9 1.9 1.9 1.9 1.9 1.9 1.9 1.9 1.9 GDP deflator inUS dollar terms (change m percent) 18.8 11.2 -3.0 9.1 13.9 10.0 2.0 2.0 2.3 2.1 2.0 2.0 2.0 1.9 1.8 1.8 1.8 1.8 1.8 1.8 1.7 1.7 1.7 1.7 1.8 5/ 0.5 1.0 0.7 -0.4 1.4 3.6 2.2 2.0 1.9 10.5 10.2 10.7 Effective interest rate (percent) 11.6 12.1 14.8 12.2 7.2 11.6 11.1 10.8 10.6 10.5 10.4 10.3 11.0 10.9 10.7 10.6 10.4 10.3 Growth of fexports of G&S (US dollar terms, in percent) 12.1 6.5 12.0 11.5 4.4 -19.6 11.8 3.1 9.4 7.5 7.2 7.0 7.0 7.0 7.0 7.0 7.0 7.0 7.0 7.0 7.0 7.0 7.0 7.0 7.0 (US dollar terms, 8.7 23.6 0.4 13.0 7.7 38.2 4.2 3.3 4.5 3.3 35.2 35.2 35.0 Growth ofi imports ofG&S inpercent) 25.6 30.3 31.5 31.6 32.8 33.0 30.8 35.2 34.5 34.3 34.1 35.2 35.2 35.2 35.2 35.2 35.2 35.2 35.2 35.2 16.0 Grant element ofr new public sector borrowing (in percent) 10.0 12.2 13.2 13.5 14.2 14.5 14.8 15.1 15.4 15.7 16.0 16.1 16.2 16.3 16.4 16.5 16.6 16.7 16.8 16.9 Govemment revenues (excluding grants, m percent ofGDP) 10.6 10.7 11.2 10.7 1.2 1.1 1.0 1.0 0.9 0.9 0.9 0.9 0.9 0.9 0.9 15.1 15.4 15.7 16.0 16.1 16.2 16.3 16.4 16.5 16.6 16.7 16.8 16.9 Govemment revenues (excluding grants, m percent ofGDP) 10.6 10.7 11.2 10.7 1.2 1.1 1.0 1.0 0.9 0.9 0.9 0.9 0.9 0.9 0.9 0.9 0.9 0.9 0.9 0.9 0.9 0.9 (in Billions ofUS dollars) 71 0.3 0.3 0. 4 0.9 1.4 1.3 0.9 0.8 0.8 0.8 0.8 0.8 0.8 0.8 0.8 0.8 0.8 0.8 0.8 0.9 0.9 Aid flows 0.3 0.3 0.4 0.9 1.4 1.2 1.1 1.0 1.0 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 o/w Grants 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.1 0.1 0.1 0.1 2.8 2.6 4.3 olw Concessionall lkans 19.2 14.8 11.8 9.9 8.5 7.0 6.0 5.6 5.3 4.9 4.7 4.4 4.1 3.9 3.6 3.4 3.2 3.0 Grant- -equivalent financing (in percent ofGDP)8/ 15.7 84.3 85.7 82.3 86.5 83.8 84.4 85.4 87.4 86.9 85.8 85.7 86.2 86.4 86.6 87.3 87.4 88.5 88.9 86.5 Grant- equivalent financing (m percent of external financi cing) 8/ 80.9 87.6 83.6 Memorandum items: 9.0 12.6 13.6 14.6 15.6 16.7 17.9 19.1 20.5 21.9 23.4 25.1 26.9 28.8 30.8 32.9 35.3 5.9 6.6 6.6 6.5 7.6 10.4 11.6 7.0 7.0 7.1 Nominal GDP (Billions ofl US dollars) -1.4 17.3 19.2 14.8 12.0 8.6 11.7 7.6 7.3 7.0 7.0 7.0 7.0 7.0 7.0 7.0 7.0 7.0 7.0 7.0 Nominal dollar GDP growth 22.8 12.2 -0.2 2.2 2.4 2.4 2.5 2.6 2.6 2.7 2.7 2.8 2.9 3.0 3.1 3.2 3.2 3.3 3.3 3.3 PV ofPPG extemaldebt (in Billions ofl US dollars) 1.0 1.2 1.4 1.7 2.0 1.5 2.9 0.4 0.5 0.4 0.4 0.3 0.4 0.5 0.5 0.4 0.3 0.3 0.2 0.1 0.0 0.0 0.3 3.6 3.2 3.9 2.7 2.3 3.4 3.6 3.8 4.0 (PVt-1 PVt-1 1)GDPt- (in percent) 1.4 1.5 1.6 1.6 1.7 1.8 1.9 2.0 2.1 2.3 2.4 2.5 2.6 2.8 2.9 3.1 3.3 Gross remittances (Billions ofUS dollars) 1.1 1.3 1.2 16.4 16.5 15.7 15.0 14.4 13.8 13.1 12.6 12.2 11.8 11.4 10 .6 1.6 1.7 1.8 1.9 2.0 2.1 2.3 2.4 2.5 2.6 2.8 2.9 3.1 3.3 Gross remittances (Billions ofUS dollars) 1.1 1.3 1.2 16.4 16.5 15.7 15.0 14.4 13.8 13.1 12.6 12.2 11.8 11.4 10 .9 10.5 10.0 9.4 8.8 8.3 PV ofPPG externaldebt (in percent ofGDP remittances) 13.0 16.2 15.7 16.3 16.5 71.0 67.4 63.8 60.4 56.9 54.3 52.2 49.8 47.4 44.9 42.4 39.9 37.3 34.5 31.9 46.7 59.7 61.7 69.3 73.5 76.3 75.2 2.6 PV ofPPG external debt (in percent of fexports remittances) 2.1 2.2 3.0 4.0 4.4 5.5 5.4 5.2 4.6 4.1 3.2 3.0 2.9 2.8 2.7 2.6 2.6 2.5 2.5 Debt service ofPPG exteraldebt (in percent ofexports + remitt 1.6 2.2 Sources: Country authorities; and staff estimates and projections. 1/ Includes both public and private sector externaldebt. interest rate; realGDP growth rate, and p growthr rate ofGDP deflatori in U.S. dollar terms. 2/1 Derived as [r- g p(1+ +g)/(1+gtptgp) times previous period debt ratio, withr nominali g For aboi includes contribution from price and exchange rate changes. 3/ Includes exceptional financi ing (i.e. changes in arrears and debt relief); changes m gross foreign assets; and valuation adjustments. projections 4/ Assumes that PV ofprivate sector debt equivalent to its face value. 5/ Current- -year interest payments divided by previous period debt stock. 6/1 Historicala averages and standard deviations are generally derived over the past 10 years, subject to data availability. 71 Defined as grants, conc essional loans, and debt relief. between the face value and the PV ofr new debt). 8/ Grant- -equivalent financ cing inc cludes grants provided directly to the goverment and through new borrowing (difference --- Page 83 --- Table lb. Haiti: Sensitivity Analysis for Key Indicators of Public and Publicly Guaranteed External Debt, 2010-2030 (In percent) Projections 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 PV of debt-to GDP ratio Baseline 20 19 19 19 19 19 18 17 16 16 15 14 14 13 13 12 A. Alternative Scenarios 12 11 10 A1. Key variables at their historical laverages in 2010-20301 1/ 20 19 20 19 18 A2. New public sector loans on less favorable terms in 2010-20 2030 2 20 20 21 21 17 15 12 9 7 4 3 1 0 -2 3 -3 4 -5 -5 5 22 22 21 21 21 20 19 19 19 18 18 18 17 16 16 15 14 B. . Key variables at their historical laverages in 2010-20301 1/ 20 19 20 19 18 A2. New public sector loans on less favorable terms in 2010-20 2030 2 20 20 21 21 17 15 12 9 7 4 3 1 0 -2 3 -3 4 -5 -5 5 22 22 21 21 21 20 19 19 19 18 18 18 17 16 16 15 14 B. Bound' Tests Bl. RealGDP growth at historical av erage minus one standard devi viation in 2011-2012 20 21 23 B2. Export value growth at historicala average minus one standard deviation in 2011-20123/ 20 19 23 23 23 22 21 20 19 18 18 17 16 16 15 14 14 13 12 B3. US dollar GDP deflator at historical average minus one standard deviation in 2011-2012 20 20 20 20 19 18 17 16 15 15 14 14 13 13 12 11 11 B4. Net non- debt creating flows at historical average minus one standard deviation in 2011-2012.4/ 20 21 25 25 25 25 23 22 21 20 19 19 18 17 17 16 15 15 14 10 12 B5. Combination of B1-B4 using one-half standard deviation shocks 20 30 35 33 32 32 30 29 28 27 25 24 22 21 20 18 17 B6. One-time 30 percent nominal 20 36 53 51 49 47 45 44 42 40 38 35 16 15 14 13 depreciation relative to thel baseline in 20115/ 20 26 27 26 26 26 25 24 23 22 33 31 29 27 25 24 22 20 18 21 20 19 19 18 17 16 16 15 14 13 PVofdebt-to-exports ratio Baseline 169 170 184 187 183 176 161 149 137 127 117 109 102 95 88 82 76 70 64 A. Alternative Scenarios 58 53 Al. Key variables at their historical averages in 2010-2030 1/ 169 174 189 A2. New public sector loans on less favorable terms in 2010-20302 169 179 187 174 157 131 104 77 55 35 20 8 -2 -11 -17 -22 -26 -28 N 201 209 209 206 193 183 173 163 153 145 139 131 124 117 110 103 96 -29 89 -29 83 B. Bound Tests B1. Real GDP growth at historical average minus one standard deviation in 2011-2012 169 171 185 188 B2. Export value growth at historical av erage minus one standard deviation in 2011-20123/ 169 181 184 177 162 150 138 128 117 109 103 96 89 82 76 70 64 B3. US dollar GDP deflator at historical average minus one standard deviation in 2011-2012 210 212 207 199 182 168 156 144 132 123 115 107 99 92 85 78 71 58 53 B4. Net non- debt creating flows at historical average minus one standard deviation 169 171 185 188 184 177 162 150 138 128 117 109 103 96 89 65 59 in 2011-2012.4/ 169 273 340 331 295 82 76 70 64 58 53 B5. Combination ofB1-B4 using one-half standard dev iation shocks 312 272 252 233 217 198 180 165 150 136 123 112 101 90 81 B6. creating flows at historical average minus one standard deviation 169 171 185 188 184 177 162 150 138 128 117 109 103 96 89 65 59 in 2011-2012.4/ 169 273 340 331 295 82 76 70 64 58 53 B5. Combination ofB1-B4 using one-half standard dev iation shocks 312 272 252 233 217 198 180 165 150 136 123 112 101 90 81 B6. One- -time 301 percent nominal depreciation relative to the baseline in 2011 5/ 290 401 388 364 344 317 293 272 253 231 210 191 173 157 141 127 114 169 171 185 188 184 177 162 150 138 128 117 109 103 96 89 82 76 70 102 64 91 81 58 53 PVofdeht-de-revenue ratio Baseline 197 176 156 143 140 133 124 116 109 102 95 89 86 83 79 75 71 67 63 59 55 A.. Alternative Scenarios Al. Key variables at their historical averages in 2010-2030 1/ 197 180 161 143 A2.1 New public sector loans on less favorable terms in 2010-20302 133 119 101 81 61 44 28 16 7 -2 -10 -16 -21 -25 197 185 171 160 160 156 149 143 137 131 124 119 117 114 111 107 104 99 -28 95 -29 91 -30 B. Bound' Tests B1. Real GDP growth at historicala average minus one standard deviation in 2011-2012 197 197 192 176 171 B2. Export value growth at historical av erage minus one tandard dev iation in 2011-20123/ 197 180 164 163 152 143 134 125 116 110 106 101 97 92 88 83 78 72 67 B3. US dollar GDP deflator at historical average minus one dard deviation in 2011-2012 150 145 138 129 121 113 106 99 93 89 85 81 77 73 69 65 B4. Net non- -debt creating flows at historical average minus one tandard deviation in 2011-2012.4/ 197 199 204 186 182 173 161 151 142 132 123 116 112 107 103 98 93 88 82 60 56 B5. Combination ofB1-B4 using one-half standard deviation shocks 197 283 289 253 239 223 209 196 185 174 160 148 139 130 121 113 105 97 90 77 71 B6. - -debt creating flows at historical average minus one tandard deviation in 2011-2012.4/ 197 199 204 186 182 173 161 151 142 132 123 116 112 107 103 98 93 88 82 60 56 B5. Combination ofB1-B4 using one-half standard deviation shocks 197 283 289 253 239 223 209 196 185 174 160 148 139 130 121 113 105 97 90 77 71 B6. One-time 30 percent nominal 197 338 439 383 359 335 314 295 278 261 82 75 depreciation relative to the baseline in 2011. 5/ 197 246 219 200 195 186 173 162 152 242 222 208 194 180 167 155 143 131 119 108 142 132 125 120 115 110 105 100 94 88 82 76 --- Page 84 --- Table lb. Haiti: Sensitivity Analysis for Key Indicators of Public and Publicly Guaranteed External Debt, 2010-2030 (continued) (In percent) Debt service-to-exports ratio 6 6 8 9 10 12 12 11 10 8 6 6 6 5 5 5 5 4 Baseline A. Alternative Scenarios 6 7 9 11 12 14 13 12 9 7 5 3 3 2 2 Al. Key variables at their historicala averages in 2010-2030 1/ 9 9 7 7 6 6 8 11 13 12 13 12 11 10 A2.) New public sector loans on less favorable terms in 2010-2030 B.I Bound' Tests in 2011-2012 8 9 10 12 12 11 10 6 6 Bl. RealGDP growth at historical laverage minus one standard deviation 12 11 7 6 B2. Export value growth at historicalaverage minus one standard deviation in 2011-20123/ 8 10 11 14 13 10 8 6 6 6 B3. US dollar GDP deflator at historical average minus one standard deviation in 2011-2012 8 9 10 12 12 11 11 13 12 11 10 B4. Net non-debt creatingt flows at historical average minus one standard deviation in 2011-20124/ 10 12 12 14 14 13 14 12 14 14 13 12 1 10 B5. Combination ofB1-B4 using one-halfs standard dev iation shocks 12 13 14 16 15 10 8 6 6 5 5 B6. One-time 301 percent nominal depreciation relative to the baseline in 2011 5/ 8 9 10 12 12 11 Debt service-to-revenue ratio 7 6 5 6 7 8 10 9 9 8 7 5 5 5 5 Baseline A.Alternative Scenarios 7 6 7 8 9 11 10 9 4 using one-halfs standard dev iation shocks 12 13 14 16 15 10 8 6 6 5 5 B6. One-time 301 percent nominal depreciation relative to the baseline in 2011 5/ 8 9 10 12 12 11 Debt service-to-revenue ratio 7 6 5 6 7 8 10 9 9 8 7 5 5 5 5 Baseline A.Alternative Scenarios 7 6 7 8 9 11 10 9 0 0 0 A1. Key variables at their historical averages in 2010-2030 11 9 9 8 6 6 6 5 7 6 5 6 8 10 10 10 A2. New public sector loans on less favorable terms in 2010-20302 B.I Bound' Tests Bl. RealGDP growth at historicala average minus one standard deviation in 2011-2012 10 12 11 11 minus one standard deviation in 2011-20123/ 7 8 10 9 9 8 B2. Export value growth at historicala average 10 12 12 11 10 7 6 B3. US dollar GDP deflator at historical average minus one standard deviation in 2011-2012 10 9 10 10 9 7 7 7 B4. Net non-debt creatingf flows at historical average minus ones standard deviation in 2011-20124 4/ 7 6 11 11 14 15 15 14 14 13 12 12 11 11 10 10 one-half standard deviation shocks 7 7 11 13 13 15 15 B5. Combination ofB1-B4 using 7 8 8 10 11 13 13 12 11 9 7 7 7 6 6 B6. One-time 301 percent nominal depreciation relative to the baseline in 20115/ Memorandum item: 33 33 33 33 33 33 33 33 33 33 33 33 33 33 33 33 33 33 33 Grant element assumed on residual financing (i.e., financing required above baseline) 6/ 33 33 Sources: Country authorities; and staff estimates and projections. 1/ Variables include realGDP growth, growth ofGDP deflator (in U.S. dollar terms), non-interest current account in percent ofGDP, and non-debt creating flows. than in the baseline., while grace and maturity periods are the same as in the baseline. 21 Assumes that the interest rate on new borrowing is by percentage points higher return to its baseline level after the shock (implicitly assuming 3/ Exports values are assumed to remain permanently at the lower level, but the current account as a share ofGDP is assumed to an offsetting adjustment in import levels). 4/ Includes official and private transfers and FDI. 5/1 Depreciation is defined as percentage decline in dollar/l local currency rate, such that it never exceeds 100p percent. 6/ Applies to all stress scenarios except for A2(less favorable financing)in which the terms on all new financing are as specified in footnote 2. --- Page 85 --- Figure 2. Haiti--Debt ReliefScenario: Indicators ofPublic and Publicly Guaranteed External Debt under Altematives Scenarios, 2010-2030 1/ a. DebtAccumulation b.PVofdebt-to GDP ratio 40 50 25 30 a - - - - - - - 10 10 R Bn a a a 2010 2015 2020 2025 2030 EA Rate of Debt. Accumulation Grant- -equivalent financing (%of GDP) 2015 2020 2025 2030 Grant element ofr new borowing (%right scale) c.PV ofdebtde-sponsmaitic. dPefsduemeucats -2030 1/ a. DebtAccumulation b.PVofdebt-to GDP ratio 40 50 25 30 a - - - - - - - 10 10 R Bn a a a 2010 2015 2020 2025 2030 EA Rate of Debt. Accumulation Grant- -equivalent financing (%of GDP) 2015 2020 2025 2030 Grant element ofr new borowing (%right scale) c.PV ofdebtde-sponsmaitic. dPefsduemeucats 200 - - - - - -50 -50 -100 -100 2010 2015 2020 2025 2030 2010 2015 2020 2025 2030 e.Debt servkedte-syponsrats f.Debts service-to-revenue ratio - - - - - - - - - - - - - - 0 30 - - 0 -2 -5 2010 2015 2020 2025 2030 2010 2015 2020 2025 2030 Baseline Historicals scenario Most extremes shock 1/ Threshold Sources: Country authorities; and staff estimates and projections. 1/1 The most extreme stress test is the test that yields the highest ratio in 2020. In figure b. it corresponds to a Combination shock; in c. to a Combination shock; in d. to a Combination shock; in e. to a Combination shock and in figure f. to a Combination shock -2 -5 2010 2015 2020 2025 2030 2010 2015 2020 2025 2030 Baseline Historicals scenario Most extremes shock 1/ Threshold Sources: Country authorities; and staff estimates and projections. 1/1 The most extreme stress test is the test that yields the highest ratio in 2020. In figure b. it corresponds to a Combination shock; in c. to a Combination shock; in d. to a Combination shock; in e. to a Combination shock and in figure f. to a Combination shock --- Page 86 --- Table 2a. Haiti-- Debt Relief Scenario: Externall Debt Sustainability Framework, Baseline Scenario, 2007-2030 1/ (Inpercent of( GDP, unless otherwise indicated) Actual Historical Standard Projections 2016-20: Average Deviation 2010- 2015 2016 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 Average 2007 2008 2009 2010 2011 2012 2013 2014 2015 Average 2017 15.0 15.1 15.0 14.7 14.3 14.1 13.9 13.8 13.5 13.2 12.8 12.4 11.9 11.2 10.6 1/ 25.6 29.5 16.6 5.1 8.0 10.7 12.1 13.5 15.1 13.9 13.2 12.8 12.4 11.9 11.2 10.6 External debt (nominal) 5.1 8.0 10.7 12.1 13.5 15.0 15.1 15.1 15.0 14.7 14.3 14.1 13.8 13.5 o/w public and publicly guaranteed (PPG) 25.6 29.5 16.6 1.4 1.4 1.4 0.1 0.1 -0.1 -0.3 -0.4 -0.2 -0.1 -0.2 -0.3 -0.3 -0.4 -0.5 -0.5 -0.6 -0.7 Change inexteraldebt -2.9 3.9 -12.9 -11.5 2.9 2.7 1.6 1.8 2.8 3.2 3.1 3.0 2.9 2.8 2.7 2.6 2.4 2.2 2.0 1.8 1.5 1.3 -6.3 1.3 2.7 2.3 1.8 2.3 2.3 2.0 4.2 4.0 3.8 4.4 Identified net debt-c -creating flows 1.9 3.4 3.8 3.8 3.3 3.0 3.3 4.4 4.8 4.8 4.8 4.8 4.8 4.8 4.7 4.5 4.4 3.6 Non-i -interest current account deficit 0.1 4.2 3.0 1.5 1.8 26.8 26.5 26.0 25.6 25.2 24.8 24.4 23.8 23.3 22.8 22.3 21.8 21.2 20.7 20.2 29.7 50.0 43.7 37.1 33.1 29.5 27.1 Deficit in balance of goods and services 26.3 31.0 10.4 11.0 11.3 11.7 12.1 12.5 12.9 13.3 13.8 14.3 14.8 15.3 15.8 16.3 16.8 17.3 13.4 12.7 14.2 11.6 11.0 10.3 10.1 10.7 37.7 37.7 37.7 37.7 37.6 37.6 37.6 37.6 37.6 37.5 37.5 Exports 39.6 43.7 43.9 61.6 54.7 47.4 43.2 39.8 37.8 37.8 37.8 37.8 37.7 -18.0 -17.3 -17.0 16.7 -16.5 -16.2 18.5 Imports 2.7 -47.9 -40.1 -32.8 -28.5 -25. 37.6 37.6 37.6 37.5 37.5 Exports 39.6 43.7 43.9 61.6 54.7 47.4 43.2 39.8 37.8 37.8 37.8 37.8 37.7 -18.0 -17.3 -17.0 16.7 -16.5 -16.2 18.5 Imports 2.7 -47.9 -40.1 -32.8 -28.5 -25. 1 -23.1 -21.6 -20.8 -20.4 -20.0 19.6 19.2 -18.8 18.4 -17.7 Net current transfers (negative inflow) -25.9 -26.3 26.3 -27.4 -15.7 12.8 -10.7 -9.2 -7.4 -6.6 -6.4 -6.1 -5.7 -5.4 -5.1 4.8 -4.6 -4.3 -4.1 -3.9 -3.7 -3.5 -3.4 -6.7 7.2 -7.4 -26.7 -20.7 -0.5 -0.5 -0.4 o/ w official -0.2 -0.2 -0.4 -0.8 -1.0 -1.0 -1.9 -1.3 -0.8 -0.8 -0.8 -0.8 -0.8 -0.7 -0.7 -0.6 -0.6 -0.6 Other current account flows (negative neti inflow) -0.2 -0.5 -0.3 -0.8 -0.8 -1.0 -1.1 -1.2 -1.3 -1.4 -1.5 -1.6 -1.6 -1.7 -1.7 -1.8 -1.8 -1.9 -1.9 -2.0 -1.5 Net FDI (negative inflow) -1.3 -0.5 -0.6 -0.9 1.1 -1.1 -1.3 -1.0 -0.9 -0.5 -0.5 -0.5 -0.5 -0.5 -0.5 -0.4 -0.4 -0.4 -0.4 -0.4 -0.4 -0.4 -0.4 -0.4 Endogenous debt dynamics 2/ -5.2 -2.5 0.2 1.5 -0.4 -0.5 -0.5 -0.5 -0.6 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 Contribution from nominali interest rate 0.1 0.2 0.2 0.1 0.1 0.1 0.1 0.2 0.2 -0.8 -0.7 -0.7 -0.7 -0.7 -0.7 -0.7 -0.7 -0.6 -0.6 -0.6 -0.6 -0.6 -0.6 -0.5 -0.8 -0.2 -0.9 1.4 -0.4 -0.6 -0.6 -0.7 -0.8 Contribution: from realGDP growth Contribution fromprice and exchange rate changes -4.5 -2.6 0.9 0.4 -0.9 -0.1 -1.6 -2.7 -3.3 -3.4 -3.4 -3.1 -2.9 -2.9 -2.8 -2.7 -2.5 -2.4 -2.3 -2.1 -1.9 Residual (3-4)3 3/ 3.4 2.6 15.6 -13.7 1.1 -0.6 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 -0.4 -0.3 15.6 -13.7 0.0 0.0 0.0 0.0 0.0 o/w exceptional financing 11.4 12.3 12.2 12.2 11.9 11.6 11.2 11.0 10.9 10.8 10.6 10.3 10.1 9.7 9.3 8.8 8.3 1. .0 0.0 0.0 0.0 -0.4 -0.3 15.6 -13.7 0.0 0.0 0.0 0.0 0.0 o/w exceptional financing 11.4 12.3 12.2 12.2 11.9 11.6 11.2 11.0 10.9 10.8 10.6 10.3 10.1 9.7 9.3 8.8 8.3 1. 8 4.5 6.4 8.7 10.1 48.2 PV ofexternald Idebt4 4/ 109.8 114.7 111.2 107.5 101.9 95.8 89.7 85.4 82.0 77.9 73.7 69.7 65.7 61.4 57.1 52.6 12.3 38.9 58.1 84.3 99.9 10.9 10.6 10.3 10.1 9.7 9.3 8.8 8.3 In percent ofexports 1.8 4.5 6.4 8.7 10.1 11.4 12.3 12.2 12.2 11.9 11.6 11.2 11.0 10.8 48.2 PV of PPGe external debt 84.3 109.8 114.7 111.2 107.5 101.9 95.8 89.7 85.4 82.0 77.9 73.7 69.7 65.7 61.4 57.1 52.6 12.3 38.9 58.1 99.9 64.9 58.7 52.8 49.5 In percent of exports 45.2 60.2 71.6 76.5 84.0 86.8 84.7 82.4 79.2 75.5 71.7 69.1 67.9 66.6 63.1 61.1 55.9 In percent of governme ent revenues 15.7 1.3 2.2 3.3 4.1 6.5 7.0 7.1 6.6 6.0 4.5 4.0 3.9 3.6 3.4 3.3 3.3 3.4 3.4 3.3 Debts service- -to-exports ratio (in percent) 6.8 5.8 3.7 1.1 1.0 2.2 3.3 4.1 6.5 7.0 7.1 6.6 6.0 4.5 4.0 3.9 3.6 3.4 3.3 3.3 3.4 3.4 3.3 PPG debt service-t -to-exports ratio (in percent) 6.8 5.8 3.7 1.1 1.0 1.3 1.7 2.5 3.1 4.9 5.3 5.5 5.2 4.8 3.6 3.4 3.3 3.2 3.1 3.0 3.2 3.3 3.4 3.4 PPGdebt service- -to-revenue ratio (in percent) 8.5 6.9 4.7 1.3 1.0 1.1 0.3 0.4 0.6 0.7 0.7 0.7 0.7 0.8 0.8 0.8 0.8 0.8 0.8 0.8 0.8 0.8 0.3 0.3 0.3 s Total gross financing need (Billions ofU.S. PPGdebt service- -to-revenue ratio (in percent) 8.5 6.9 4.7 1.3 1.0 1.1 0.3 0.4 0.6 0.7 0.7 0.7 0.7 0.8 0.8 0.8 0.8 0.8 0.8 0.8 0.8 0.8 0.3 0.3 0.3 s Total gross financing need (Billions ofU.S. dollars) 0.0 0.3 0.2 0.1 0.2 3.1 4.3 5.0 5.1 5.2 5.0 4.9 5.0 4.9 4.8 4.7 4.7 4.6 4.4 4.2 ratio 3.0 0.4 15.9 13.4 0.5 1.1 2.3 1.9 1.6 Non- interest current account deficit that stabilizes debt Key macroe conomic assumptions 6.2 6.0 4.8 5.5 5.2 5.0 5.0 5.0 5.0 5.0 5.0 5.0 5.0 5.0 5.0 5.0 5.0 5.0 5.1 3.3 0.8 2.9 0.8 2.0 -8.5 9.8 8.4 6.9 1.9 1.9 1.9 1.9 RealGDP growth (inp percent) 13.9 7.8 6.8 10.0 7.4 5.4 1.9 6.6 1.9 1.9 1.9 1.9 1.9 1.9 1.9 1.9 1.9 1.9 1.9 1.9 GDP deflator in US dollar terms (change in percent) 18.8 11.2 -3.0 9.1 1.5 1.7 1.7 1.3 1.6 1.6 1.6 1.6 1.6 1.6 1.6 1.6 1.6 1.6 1.6 1.5 1.5 1.5 1.5 1.6 0.5 1.0 0.7 -0.4 1.4 0.4 1.4 1.3 10.4 10.2 10.6 Effective interest rate (percent)S/ 11.8 12.1 12.2 7.2 10.6 10.2 10.8 10.7 10.6 10.5 10.4 11.1 10.9 10.8 10.7 10.5 10.3 Growth of exports ofG&S (US dollar terms, mp percent) 12.1 6.5 12.0 11.5 4.4 -19.6 11.6 14.8 3.1 9.4 7.5 7.2 7.0 7.0 7.0 7.0 7.0 7.0 7.0 7.0 7.0 7.0 7.0 7.0 7.0 7.0 Growth of imports of G&S (US dollar terms, m percent) 8.7 23.6 0.4 13.0 7.7 38.2 4.2 3.3 4.5 3.3 30.5 35.2 35.2 35.2 35.2 35.2 35.2 35.2 35.2 35.2 35.2 35.2 35.2 35.2 35.2 35.2 23.5 30.3 31.5 31.6 32.8 33.0 35.2 16.3 16.4 16.6 16.7 16.8 16.9 16.0 Grant element ofnew public sector borrowing (in percent) 10.7 12.2 13.2 13.5 14.2 14.5 14.8 15.1 15.4 15.7 16.0 16.1 16.2 16.5 0.9 Government revenues (excluding grants, in percent ofGDP) 10.6 10.7 11.2 10.0 0.9 1.4 1.3 1.2 1.1 1.0 1.0 0.9 0.9 0.9 0.9 .2 13.2 13.5 14.2 14.5 14.8 15.1 15.4 15.7 16.0 16.1 16.2 16.5 0.9 Government revenues (excluding grants, in percent ofGDP) 10.6 10.7 11.2 10.0 0.9 1.4 1.3 1.2 1.1 1.0 1.0 0.9 0.9 0.9 0.9 0.9 0.9 0.9 0.9 0.9 0.9 0.9 0.9 0.9 flows (in] Billions ofUS dollars) 0.3 0.3 0.4 0.9 0.8 0.8 0.8 0.8 0.8 0.8 0.8 0.8 0.8 0.8 0.8 0.8 0.9 0.9 Aid 0.3 0.3 0.4 0.9 1.4 1.2 1.1 1.0 1.0 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 o/w Grants 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.1 0.1 0.1 0.1 0.1 2.6 4.3 o/w Concessionalk loans 14.8 11.8 9.9 8.5 7.0 5.9 5.6 5.3 4.9 4.7 4.4 4.1 3.9 3.6 3.4 3.2 3.0 2.8 Grant- -equivalent financing (in percent ofGDP) 8/ 15.3 19.2 83.6 82.3 86.5 84.6 85.5 86.7 87.4 86.9 85.8 85.7 86.2 86.4 86.6 87.3 87.4 88.5 88.9 86.7 Grant- -equivalent financing (in percent ofe fextemal financ ing) 8/ 85.2 87.6 84.3 85.7 35.3 Mer emorandum items 9.0 11.6 12.6 13.6 14.6 15.6 16.7 17.9 19.1 20.5 21.9 23.4 25.1 26.9 28.8 30.8 32.9 Nominal GDP (Billions ofUS dollars) 5.9 6.6 6.6 6.5 7.6 10.4 8.6 11.7 7.6 7.3 7.0 7.0 7.0 7.0 7.0 7.0 7.0 7.0 7.0 7.0 7.0 7.0 7.0 7.1 22.8 12.2 -0.2 -1.4 17.3 19.2 14.8 12.0 2.9 3.0 Nominal dollar GDP growth 0.5 0.8 1.1 1.3 1.6 1.7 1.8 1.9 1.9 2.0 2.1 2.2 2.4 2.5 2.6 2.7 2.8 2.9 PV ofPPG extemald debt (in Billions ofl US dollars) 0.1 0.3 2.0 2.9 0.9 0.8 0.6 0.5 0.4 0.6 0.6 0.6 0.5 0.5 0.4 0.3 0.3 0.2 0.1 0.5 2.6 3.2 4.0 2.9 2.7 3.6 3.8 4.0 (PV-PVE-I)GDPE -1 (in percent) 1.4 1.5 1.6 1.6 1.7 1.8 1.9 2.0 2.1 2.3 2.4 2.5 2.6 2.8 2.9 3.1 3.3 3.4 Gross remittances (Billions ofUS dollars) 1.1 1.3 1.2 10.5 10 3.6 3.8 4.0 (PV-PVE-I)GDPE -1 (in percent) 1.4 1.5 1.6 1.6 1.7 1.8 1.9 2.0 2.1 2.3 2.4 2.5 2.6 2.8 2.9 3.1 3.3 3.4 Gross remittances (Billions ofUS dollars) 1.1 1.3 1.2 10.5 10 .2 9.9 9.7 9.7 9.5 9.4 9.2 9.0 8.7 8.3 7.9 7.5 3.7 5.4 7.4 8.7 9.9 10.7 10.7 10.7 31.2 29.1 PV ofPPG external debt (in percent ofGDP remittances) 39.2 49.0 48.7 48.1 46.9 45.2 43.4 42.3 41.5 40.5 39.3 38.0 36.6 35.0 33.2 5.3 13.7 21.1 31.7 45.8 PV ofPPGextemal debt (inpercent ofexports + remittances) 0.4 0.5 0.9 1.4 1.7 2.8 3.1 3.3 3.1 2.9 2.2 2.1 2.0 1.9 1.9 1.8 1.9 2.0 2.0 2.0 Debt service ofl fPPG externaldebt( (in percent ofexports remitta: 1.6 0.4 Sources: Country authorities; and staff estimates and projections. 1/1 Includes bothy public and private sector extemal debt. growth rate, and p growth rate ofGDP deflator in U.S. dollar terms. 2/ Derived as [r- g- p(1 1+g)(1+g-p*g)t times previous period debt ratio, withr nominal interest rate; 8= realGDP abo includes contribution fromp price and exchange rate changes. 3/1 Includes exceptional financi ing (ie., changes ina arrears and debt relief); changes m gross foreign assets; and valuation adjustments. Forp projections 4/ Assumest that PV of private sector debti IS equivalent to its face value. 5/ Current- year interest payments divided by previous period debt stock. 6/ Historicala averages and standard deviations are generally derived over the past 10 years, subject to data availability. 71 Defined as grants, concessionall loans, and debt relief between the face value and the PV ofnew debt). 8/ Grant- -equivalent financ cing includes grants provided directly to the govemment and through new borrowing (difierence --- Page 87 --- Table 2b.Haiti--Debt Relief Scenario: Sensitivity Analysis for Key Indicators of Public and Publicly Guaranteed External Debt, 2010-2030 (In percent) Projections 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 PV of deb bt-to GDP ratio Baseline 5 6 10 11 12 12 12 12 12 11 11 11 11 11 10 10 10 9 A. Alternative: Scenarios A1. Key variables at their historical laverages in 2010-2030 1/ A2. New public sector loans on less favorable terms in 2010-20302 7 8 8 8 7 5 3 1 -1 -2 -4 -5 -6 -6 -7 -7 -8 10 12 14 16 16 16 16 16 16 16 16 16 16 15 15 15 15 14 -8 14 -8 B.I Bound Tests Bl. Alternative: Scenarios A1. Key variables at their historical laverages in 2010-2030 1/ A2. New public sector loans on less favorable terms in 2010-20302 7 8 8 8 7 5 3 1 -1 -2 -4 -5 -6 -6 -7 -7 -8 10 12 14 16 16 16 16 16 16 16 16 16 16 15 15 15 15 14 -8 14 -8 B.I Bound Tests Bl. Real GDP growth at historical average minus one standard deviation in 2011-2012 11 12 B2. Export value growth at historical average minus one standard devi iation in 2011-20123/ 14 15 15 15 15 14 14 14 13 13 13 13 12 12 11 11 10 B3. US dollar GDP deflator at historical: average minus one standard deviation in 2011-2012 10 11 12 13 13 13 13 12 12 12 11 11 11 11 10 10 10 B4. Net non-debt creating flows at historical average minus one standard deviation in 2011-2012.4/ 18 11 13 15 16 16 16 16 15 15 14 14 14 14 13 13 13 12 12 11 B5. Combination ofB1-B41 using one- -half standard deviation shocks 25 25 25 25 25 24 23 23 22 20 19 18 17 17 16 15 14 13 B6. One- time 30 percent nominal depreciation relative to 22 40 39 38 39 38 37 36 35 33 31 28 26 the baseline in 20115/ 5 9 12 14 16 17 17 17 17 16 16 15 29 25 23 22 20 19 17 15 15 15 14 14 14 13 12 12 PV ofdebt-to-exports ratio Baseline 39 58 84 100 110 115 111 108 102 96 90 85 82 78 74 70 66 61 A. Alternative Scenarios 57 53 48 Al. Key variables at their historical averages in 2010-2030 1/ 39 52 70 76 A2. New public sector loans on less favorable terms in 2010-2030 2 39 67 78 75 63 45 25 7 -8 -19 -27 -34 -39 -43 -45 -46 -46 -45 -44 16 101 122 136 145 143 142 138 132 126 122 118 114 109 105 100 95 89 84 78 B.I Bound' Tests Bl. Real GDP growth at historical average minus one standard deviation in 2011-2012 39 59 85 100 B2. Export value growth at historical average minus one standard deviation in 2011-20123/ 39 64 110 115 112 108 102 96 90 86 82 78 74 70 66 62 57 53 48 B3. US dollar GDP deflator at historical average minus one standard deviation in 2011-2012 39 101 117 127 132 128 123 117 110 103 97 93 88 83 79 74 69 64 59 B4. Net non-debt creating flows at historical average minus one standard deviation in 2011-2012 4/ 59 85 100 110 115 112 108 102 96 90 86 82 78 74 70 66 B5. Combination ofB1-B4 one- -half 39 161 240 243 239 234 223 212 199 187 62 57 53 48 using standard dev iation shocks 39 175 297 172 158 146 133 122 112 102 93 84 76 68 B6. historical average minus one standard deviation in 2011-2012 4/ 59 85 100 110 115 112 108 102 96 90 86 82 78 74 70 66 B5. Combination ofB1-B4 one- -half 39 161 240 243 239 234 223 212 199 187 62 57 53 48 using standard dev iation shocks 39 175 297 172 158 146 133 122 112 102 93 84 76 68 B6. One- -time 301 percent nominal depreciation relative to the baseline in 20115/ 59 297 288 280 266 253 237 222 205 187 172 156 142 129 118 106 96 39 85 100 110 115 112 108 102 96 90 86 82 78 74 70 66 62 57 53 86 48 PV ofdel bt-to-revenue ratio Baseline 45 60 72 76 84 87 85 82 79 76 72 69 68 67 65 63 61 59 56 53 49 A. Alternative Scenarios Al. Key variables at their historical averages in 2010-2030 1/ 45 54 59 58 60 A2. New public sector loans on less favorable terms in 2010-20302 45 69 57 48 34 19 5 -7 -16 -23 -29 -34 -39 -42 -44 -45 -45 86 93 104 110 109 109 107 104 101 99 98 97 96 95 93 90 88 84 -45 81 B. Bound Tests B1. Real GDP growth at historical average minus onc standard deviation in 2011-2012 45 67 88 94 B2. Export value growth. at historical laverage minus one standard deviation in 2011-20123/ 103 107 104 101 97 93 88 85 83 82 80 77 75 72 69 65 B3. US dollar GDP deflator at historical average minu IS one standard deviation in 2011-2012 45 63 79 82 89 92 89 87 83 80 75 73 71 69 67 65 63 61 58 54 61 51 B4. Net non-debt creating flows at historical average minus one standard deviation in 2011-20124/ 68 93 100 109 113 110 107 103 98 93 90 88 87 85 82 80 76 73 69 B5. Combination of B1-B41 using one- -half standard deviation shocks 45 166 204 186 183 177 169 162 155 147 137 128 121 114 107 101 95 89 B6. One-time 30 percent nominal depreci ciation relative to the baseline in 2011 5/ 45 204 325 293 284 273 261 250 238 226 211 195 183 172 161 151 141 131 121 82 76 69 45 84 100 107 117 121 118 115 111 106 100 97 95 93 91 88 85 82 78 111 74 101 69 --- Page 88 --- Table 2b.Haiti--Debt Relief Scenario: Sensitivity Analysis for Key Indicators of Public and Publicly Guaranteed External Debt, 2010-2030 (continued) (In percent) Debt service-to-exports ratio 2 3 4 6 7 7 7 6 4 4 4 4 3 3 3 3 3 Baseline A. Alternative Scenarios 2 3 4 7 7 7 6 5 -1 Al.Key variables at their historicala laverages in 2010-2030 1/ 2 3 4 7 7 9 8 9 8 8 7 7 A2.1 New public sector loans on less favorable terms in 2010-20302 B. Bound? Tests Bl. RealGDP growth at historical average minus one standard deviation in 2011-2012 B2. Export value growth at historical average minus one standard deviation in 2011-20123/ 4 7 7 7 6 5 -1 Al.Key variables at their historicala laverages in 2010-2030 1/ 2 3 4 7 7 9 8 9 8 8 7 7 A2.1 New public sector loans on less favorable terms in 2010-20302 B. Bound? Tests Bl. RealGDP growth at historical average minus one standard deviation in 2011-2012 B2. Export value growth at historical average minus one standard deviation in 2011-20123/ B3. US dollar GDP deflator at historical average minus one standard deviation in 2011-2012 10 10 B4. Net non-debt creating flows at historical average minus one standard deviation in 2011-2012.4/ 10 10 12 12 11 11 10 B5. Combination ofB1-B4 using one-half standard deviation shocks 3 4 6 7 B6. One-time 301 percent nominal depreciation relative to the baseline in 2011 5/ Debt service-to-revenue ratio 2 3 3 5 5 6 5 5 4 3 3 3 3 3 3 3 3 3 Baseline A.Alternative Scenarios 1 -1 -I 1 -1 A1. Key variables at their historical averages in 2010-2030 1/ 6 6 A2. New public sector loans on less favorable terms in 2010-2030 2 B.I Bound Tests Bl. RealGDP growth at historicala average minus one standard deviation in 2011-2012 B2. Export value growth at historicalaverage minus one standard deviation in 2011-20123/ B3. US dollar GDP deflator at historical average minus one standard deviation in 2011-2012 6 7 7 6 8 8 B4. Net non-debt creating! flows at historical average minus one standard deviation in 2011-20124 4/ 9 10 10 9 12 13 12 12 11 10 10 10 B5. Combination ofBI-B4 using one-half standard deviation shocks 2 2 3 4 7 7 8 7 7 5 5 5 4 4 4 4 B6. One-time 30p percent nominal depreciation relative to the baseline in 20115/ Memorandum item: 33 33 33 33 33 33 33 33 33 33 33 33 33 33 33 33 33 33 33 33 Grant element assumed on residual financing (ie., financing required above baseline)6/ Sources: Country authorities; and staff estimates and projections. 1/ Variables include realGDP growth, growth ofGDP deflator (in U.S. dollar terms), non-interest current account in percent ofGDP, and non-debt creating flows. new is 21 than in the baseline., while grace and maturity periods are the same as in the baseline. 21 Assumes that the interest rate on borrowing by percentage points higher share is assumed to return to its baseline levela after the shock (implicitly assuming 3/1 Exports values are assumed to remain permanently at the lower level, but the current account as a ofGDPi an offsetting adjustment in import levels). 4/ Includes official and private transfers and FDI. 5/1 Depreciation is defined as percentage decline in dollarlbcalcumency rate, such that it never exceeds 1001 percent. 6/ Applies to all stress scenarios except for A2(less favorable financing) in which the terms on all new financing are as specified in footnote 2. --- Page 89 --- Figure 3. Haiti: Indicators ofPublic Debt Under Alternative Scenarios, 2010-2030 1/ Baseline Fix Primary Bala ance Most extreme shock Growth Historicalscenario 90 PV of Debt-to-GDP Ratio 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 450 PV of Debt-to-Revenue Ratio 2/ 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 Debt Service-to-Revenue Ratio 2/ Under Alternative Scenarios, 2010-2030 1/ Baseline Fix Primary Bala ance Most extreme shock Growth Historicalscenario 90 PV of Debt-to-GDP Ratio 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 450 PV of Debt-to-Revenue Ratio 2/ 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 Debt Service-to-Revenue Ratio 2/ - - 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 Sources: Country authorities; and staff estimates and projections. 1/ The most extreme stress test is the test that yields the highest ratio in 2020. 2/1 Revenues are defined inclusive of grants. --- Page 90 --- Table 3a.Haiti: Public Sector Debt Sustainability Framework, Baseline Scenario, 2007-2030 (In percent of GDP, unless otherwise indicated) Actual Estimate Projections Standard 2007 2008 2009 Average 2010-15 2016-30 Deviation 2010 2011 2012 2013 2014 2015 Average 2020 2030 Average Public sector debt 1/ 34.9 37.7 24.8 o/w foreign-currency denominated 25.6 30.7 31.7 32.3 32.4 33.2 34.2 35.1 29.5 16.6 22.0 21.6 21.9 21.6 21.6 21.9 18.1 32.1 11.4 Change in public sector debt -4.4 2.7 -12.9 Identified debt-creating flows 5.9 1.0 0.5 0.2 0.8 1.0 -5.9 0.8 3.5 -0.3 -0.6 Primary deficit 3.4 -1.6 0.0 0.0 0.6 0.8 0.5 -0.2 Revenue and -1.1 2.5 3.8 1.9 1.6 1.9 3.1 4.3 3.4 2.8 grants 15.8 15.1 17.9 3.3 3.1 2.0 1.2 2.0 ofwhich:grants 24.4 28.7 25.7 24.1 22.5 21.8 20.2 19.3 Primary monancea)espeadrure 5.3 4.4 6.7 14.5 18.0 13.5 10.9 9.0 7.6 14.7 17.6 21.7 26.3 4.6 2.4 Automatic debt dynamics 31.8 29.9 27.5 25.8 24.5 22.2 -4.7 -1.7 -0.3 20.5 Contribution from interest rate/growth differential -1.8 1.5 -4.7 -4.3 -3.4 -2.7 -2.0 -1.5 -1.4 ofwhich: contribution from av 1.9 -1.0 2.6 -2.9 -2.8 -2.3 -2.0 -1.9 verage realinterest rate -0.5 2.2 0.0 0.3 -1.5 -1.7 ofwhich: contribution. 3 20.5 Contribution from interest rate/growth differential -1.8 1.5 -4.7 -4.3 -3.4 -2.7 -2.0 -1.5 -1.4 ofwhich: contribution from av 1.9 -1.0 2.6 -2.9 -2.8 -2.3 -2.0 -1.9 verage realinterest rate -0.5 2.2 0.0 0.3 -1.5 -1.7 ofwhich: contribution. from real GDPgrowth -1.3 -0.3 -1.1 -0.1 -0.4 -0.3 -0.1 0.1 0.2 -0.2 Contribution from real exchange rate depreciation 2.3 -2.7 -2.5 -2.1 1.9 -2.0 -1.7 -2.9 -3.6 0.7 -1.6 Other identified debt-creating flows -1.1 -1.8 -1.4 -1.1 -0.7 0.0 0.0 0.0 0.0 0.0 Privatization receipts (negative) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Recognition ofimplicit or contingent liabilities 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Debt relief(HIPC. 0.7 0.0 0.0 0.0 0.0 0.0 Privatization receipts (negative) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Recognition ofimplicit or contingent liabilities 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Debt relief(HIPC. and other) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Other 0.0 0.0 0.0 0.0 0.0 (specify, e.g. bank recapitalization) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Residual, including asset changes 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.5 1.9 -16.4 2.4 2.6 0.6 0.2 0.1 0.2 -0.7 -0.4 Other Sustainability Indicators PVof publiesector debt 9.4 8.2 23.7 o/w foreign-currency denominated 28.3 28.9 29.4 29.7 30.5 31.2 0.0 0.0 15.5 31.8 30.0 o/w external 19.6 18.8 19.1 18.9 18.9 18.8 14.8 9.2 15.5 PVofcontingent liabilities (not included in public sector debt) 19.6 18.8 19.1 18.9 18.9 18.8 14.8 9.2 Gross financing need 2/ 10.3 11.7 12.5 PV of public sector debt-to-revenue and grants rati io (in percent) 59.0 54.4 132.5 11.4 11.4 13.8 13.6 14.4 14.8 18.8 21.7 PV of public sector debt-to-revenue ratio (in percent) 88.3 76.8 116.0 100.6 114.5 123.3 135.5 143.1 157.5 155.4 o/ w extemal3/ 211.6 284.5 270.6 241.3 225.4 225.4 220.1 203.3 177.8 Debt service-to-revenue and grants ratio (in percent) 4/ 10.6 7.1 138.3 5.4 197.0 175.9 156.4 143.3 139.7 133.1 94.7 54.6 Debt service-to-revenue ratio (in percent) 4/ 4.8 3.6 3.6 4.9 6.6 7.7 9.7 9.5 15.8 10.1 8.5 Primary deficit that stabilizes the debt- -to-GDP ratio 3.2 11.8 9.8 7.6 8.9 11.0 11.9 12.5 -0.2 16.7 -4.0 2.0 3.7 3.2 2.5 1.7 2.3 10.8 1.8 Key macroeconomic and fiscal assumptions Real GDP growth (in percent) Average nominal int terest rate on forex debt (in 3.3 0.8 2.9 0.8 2.0 -8.5 9.8 8.4 6.9 6.2 6.0 5.0 percent) 0.5 1.0 0.7 -0.4 1.4 4.8 5.0 5.1 Average real interest rate on domest tic debt (in percent) 0.7 -8.5 3.6 2.2 2.0 1.9 2.0 2.0 2.3 1.9 1.7 2.3 -8.9 1.8 Real exchange rate depreciation (in percent, + indicates 7.9 -2.4 -3.6 -4.5 -2.7 -1.1 0.5 -2.3 1.0 depreciation) -10.9 -12.6 2.6 -7.0 13.8 1.0 1.0 Inflation rate (GDP deflator, in percent) 7.2 13.8 3.2 -5.9 : Growth of real primary spending (deflated by GDP deflator, in 15.0 8.1 8.0 9.7 8.6 7.4 6.5 5.0 7.5 percent) 0. 2.3 1.0 depreciation) -10.9 -12.6 2.6 -7.0 13.8 1.0 1.0 Inflation rate (GDP deflator, in percent) 7.2 13.8 3.2 -5.9 : Growth of real primary spending (deflated by GDP deflator, in 15.0 8.1 8.0 9.7 8.6 7.4 6.5 5.0 7.5 percent) 0. 0 0.2 0.3 0.1 5.0 5.0 5.0 Grant element of new external borrowing (in percent) 0.2 0.1 0.3 0.0 0.0 0.0 0.0 0.1 0.0 0.0 0.0 Sources: Country authorities; and staff 25.6 30.3 31.5 31.6 32.8 33.0 30.8 35.2 35.2 estimates and projections. 1/ Includes gross external debt of or guaranteed by the central government and central bank, and 2/ Gross financing need is defined as the primary deficit plus debt gross domesti ic debt of the central government. 3/ Revenues service plus the stock of short- -term debt at the end ofthe last period. excluding grants. 4/ Debt servicei is defined as the sun n of interest and amortization. of medium and long-term debt. 5/1 Historical averages and standard deviations are generally derived over the past 10) years, subject to data availability. --- Page 91 --- Table 3b. Haiti: Sensitivity Analysis for Key Indicators of Public Debt 2010-2030 Projections 2010 2011 2012 2013 2014 2015 2020 2030 PV ofI Debt-to-GDP Ratio 28 29 29 30 31 31 32 30 Baseline A. Alternative scenarios balance 28 30 30 30 31 32 34 33 Al. RealGDP growth and primary are at historical averages 25 25 25 24 26 A2. Primary balance is unchanged from2 2010 Analysis for Key Indicators of Public Debt 2010-2030 Projections 2010 2011 2012 2013 2014 2015 2020 2030 PV ofI Debt-to-GDP Ratio 28 29 29 30 31 31 32 30 Baseline A. Alternative scenarios balance 28 30 30 30 31 32 34 33 Al. RealGDP growth and primary are at historical averages 25 25 25 24 26 A2. Primary balance is unchanged from2 2010 28 29 30 30 32 33 36 45 A3. Permanently lower GDP growth 1/ B. Bound tests Bl. RealGDP growth is at historical average minus one standard deviations in 2011-2012 28 33 40 43 46 50 65 88 B2. Primary balance is at historicalaverage minus one standard deviations in 2011-2012 28 29 29 29 30 31 32 30 B3. Combination of fBI-B2 using one half standard deviation shocks 28 31 32 35 39 43 57 78 in 2011 28 35 35 35 35 35 36 35 B4. One-time 30percent realdepreciation 28 39 38 38 38 38 38 35 B5. 10percent ofGDPi increase in other debt-creating flows in 2011 PV ofl Debt-to-Revenue Ratio 2/ 116 101 114 123 135 143 157 155 Baseline A. Alternative scenarios 116 99 107 114 123 131 143 142 Al. RealGDP growth and primary balance are at historical averages 116 97 102 105 111 115 121 133 A2. Primary balance is unchanged from 2010 116 101 115 125 139 149 178 232 A3. Permanently lower GDP growth 1/ B.] Boundtests Bl. RealGDP growth is at historical average minus one standard deviations in 2011-2012 116 108 139 161 189 212 305 446 B2. Primary balance is at historicalaverage minus one standard deviations in 2011-2012 116 102 113 122 134 142 157 155 B3. Combination ofBI-B2 using one half standard deviation shocks 116 102 114 135 161 183 268 397 116 124 136 144 155 162 178 181 B4. One-time 30percent realdepreciation in flows in 2011 116 135 149 156 168 175 187 179 B5. 10percent ofGDP increase in other debt-creating Debt Service-to-Resenue Ratio 2/ 5 4 4 5 7 8 10 9 Baseline A. Alternative scenarios 8 11 7 A1. RealGDP growth and primary balance are at historical averages A2. Primary balance is unchanged from 2010 4 3 5 4 4 7 8 10 13 A3. Permanently lower GDP growth 1/ B.I Bound tests Bl. RealGDP growth is at historical average minus one standard deviations in 2011-2012 10 16 27 B2. Primary balance is at historicala laverage minus one standard deviations in 2011-2012 7 8 10 9 B3. Combination ofBI-B2 using one half standard deviation shocks 4 4 7 9 14 23 4 5 8 10 12 13 B4. One-time 30 percent real depreciation in 5 4 5 8 9 11 12 B5. 10percent ofGDP increase in other debt-creating flows in 2011 Sources: Country authorities; and staffestimates and projections. 1/Assumes that realGDP growth is at baseline minus one standard deviation div ided by the square root ofthe length ofthe projection period. 2/1 Revenues are defined inclusive of grants. deviation shocks 4 4 7 9 14 23 4 5 8 10 12 13 B4. One-time 30 percent real depreciation in 5 4 5 8 9 11 12 B5. 10percent ofGDP increase in other debt-creating flows in 2011 Sources: Country authorities; and staffestimates and projections. 1/Assumes that realGDP growth is at baseline minus one standard deviation div ided by the square root ofthe length ofthe projection period. 2/1 Revenues are defined inclusive of grants. --- Page 92 --- INTERNATIONAL MONETARY FUND HAITI Staff Report for the 2010 Article IV Consultation and Request for a Three-Year Arrangement Under the Extended Credit Facility Informational Annex Prepared by the Western Hemisphere Department (In collaboration with other departments) July 8, 2010 Contents Page Annexes I. Fund Relations II Relations with the Inter-American Development Bank III. Relations with the World Bank Group. X --- Page 93 --- Annex I Fund Relations (As of May 31, 2010) I. Membership Status: Joined: September 08, 1953; Article VIII member II. General Resources Account: SDR Million %Quota Quota 81.90 100.00 Fund holdings of currency 81.83 99.92 Reserve Position 0.07 0.08 Holdings Exchange Rate III. SDR Department: SDR Million %Allocation Net cumulative allocation 78.51 100.00 Holdings 68.91 87.77 IV. Outstanding Purchases and Loans: SDR Million %Quota ECF Arrangements 178.13 217. V. Latest Financial Arrangements: Date of Expiration Amount Approved Amount Drawn Type Arrangement Date (SDR Million) (SDR Million) ECF Nov 20, 2006 May 31, 2010 180.18 180.18 ECF Oct 18, 1996 Oct 17, 1999 91.05 15.18 Stand-By Mar 08, 1995 Mar 07, 1996 20.00 16.40 IV. Projected Payments to Fund (without HIPC Assistance)" (SDR Million; based on existing use of resources and present holdings of SDRS): Forthcoming angement Date (SDR Million) (SDR Million) ECF Nov 20, 2006 May 31, 2010 180.18 180.18 ECF Oct 18, 1996 Oct 17, 1999 91.05 15.18 Stand-By Mar 08, 1995 Mar 07, 1996 20.00 16.40 IV. Projected Payments to Fund (without HIPC Assistance)" (SDR Million; based on existing use of resources and present holdings of SDRS): Forthcoming Principal 3.57 10.30 15.85 Charges/Interest 0.02 0.02 0.47 0.45 0.42 Total 0.02 0.02 4.04 10.75 16.27 1 When a member has overdue financial obligations outstanding for more than three months, the amount of such arrears will be shown in this section. --- Page 94 --- VII. Implementation of HIPC Initiative: Enhanced I. Commitment of HIPC assistance Framework Nov 2006 Decision point date Assistance committed 1/ 140.30 by all creditors (USS Million) 3.12 Of which: IMF assistance (USS million) (SDR equivalent in millions) 2.10 Completion point date June 2009 II. Disbursement of IMF assistance (SDR Million) Assistance disbursed to the member 2.10 0.29 Interim assistance Completion point balance 1.81 Additional disbursement of interest income 2/ 0.23 2.34 Total disbursements 1/ Assistance committed under the original framework is expressed in net present value (NPV) terms at the completion point, and assistance committed under the enhanced framework is expressed in NPV terms at the decision point. Hence these two amounts cannot be added. 2/ Under the enhanced framework, an additional disbursement is made at the completion point corresponding to interest income earned on the amount committed at the decision point but not disbursed during the interim period. VIII. Implementation of Multilateral Debt Relief Initiative (MDRI): Not Applicable IX. Exchange Arrangement Haiti's S de jure exchange rate arrangement is floating. The de facto exchange rate arrangement has been reclassified with the January 12, 2010 earthquake from crawl-like to "other managed" arrangement. Prior to the earthquake, the gourde was on a depreciating trend against the US dollar and remained within a narrow band between April 1, 2008 and January 10, 2010. Consequently, during that period, the de facto IMF classification has been retrospectively reclassified to a crawl-like arrangement. Since the earthquake, the exchange rate has appreciated and remained somewhat more volatile. Therefore, effective January 11, 2010, the de facto arrangement has been reclassified to other managed from crawl-like. 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. . Consequently, during that period, the de facto IMF classification has been retrospectively reclassified to a crawl-like arrangement. Since the earthquake, the exchange rate has appreciated and remained somewhat more volatile. Therefore, effective January 11, 2010, the de facto arrangement has been reclassified to other managed from crawl-like. 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. --- Page 95 --- X. Safeguards Assessment The update assessment of the Banque de la République d'Haiti (BRH) was concluded in September 2008. The authorities have made progress in implementing safeguards recommendations, but improvements are still needed in a number of areas. At the time, the qualitative analysis of the main differences between currently used accounting principles and IFRS did not reveal major differences and suggested that a gradual adoption of IFRS by the BRH was feasible. The Audit Committee was set up, but its capacity needs to be strengthened. Vulnerabilities remain in the areas of foreign reserves management, the timely conduct of external audits, and timely production of audited financial statements. The impact of the January 2010 earthquake on the key safeguards within the central bank is not yet clear. A reassessment will be necessary in the future in the context of the new program. XI. Article IV Consultation The last Article IV consultation was concluded by the Executive Board on July 9, 2007. Haiti is on a 24-month cycle. The conclusion ofthe 2009 Article IV consultation has been delayed, including by the January 12, 2010 earthquake. XII. Technical Assistance Haiti has benefited from the following IMF technical assistance missions since 2005: Department Dates Purpose FAD July 2010 Tax policy June 2010 Revenue administration (Control of revenue exemptions) February 2010 Revenue administration (Tax and customs administration)' February 2010 Cash management November 2009 Public financial management November 2009 Budget preparation and execution September 2009 Evaluation oft tax and customs administrations November 2006 Public expenditure management April 2005 Public expenditure management May 2005 Tax policy and revenue administration 1 Joint mission with CARTAC. --- Page 96 --- CARTAC April-June 2010 Macro-fiscal unit development November 2009 National accounts statistics April 2008 Customs administration MCM March 2010 Partial credit guarantee scheme December 2009 Development of domestic debt market November 2009 Insurance sector March 2008 FSAP and ROSC on Banking Supervision November 2007 BRH recapitalization plan March 2007 Banking law (jointly with LEG) May 2006 Accounting ofthe central bank November 2005 Implementation ofa bond auction mechanism March 2005 Monetary operations STA April-May and GDDS workshop November 2007 May, October and Monetary and financial statistics, Government December 2006 Finance statistics November 2005 Multisector statistics and May 2006 LEG March 2007 Banking law XIII. Resident Representative Mr. Jacques Bouhga Hagbe is the Fund's Resident Representative since July 1, 2010 replacing Mr. Graeme Justice. 6 Accounting ofthe central bank November 2005 Implementation ofa bond auction mechanism March 2005 Monetary operations STA April-May and GDDS workshop November 2007 May, October and Monetary and financial statistics, Government December 2006 Finance statistics November 2005 Multisector statistics and May 2006 LEG March 2007 Banking law XIII. Resident Representative Mr. Jacques Bouhga Hagbe is the Fund's Resident Representative since July 1, 2010 replacing Mr. Graeme Justice. --- Page 97 --- Bank with the Inter-American Development Annex II. Relations (As of June 15, 2010) presence of 50 years and a largest multilateral donor with an uninterrupted 12th, The IDB is Haiti's Government of Haiti. In the aftermath of. January commitment to the people and and human resources to strong the IDB has mobilized unprecedented financial and other 2010 earthquake, ofHaiti. In collaboration with the government respond to the multiple needs in humanitarian relief efforts, reconstruction, donors, the Bank has extensively been engaged social services. rehabilitation activities, and delivery of basic investments, the Bank has assumed Beyond the financing of key recovery and development and of new including assisting in the design implementation additional responsibilities mechanisms such as the Interim Haiti Reconstruction earthquake recovery institutional Fund (HRF). Commission (IHRC) and the Haiti Reconstruction Action Plan for National Recovery The Bank has also played a key role in the Government's sector analysis of projects. and Reconstruction by undertaking a comprehensive Key Developments for 2010 for 2010-11. In addition, in USS400 million in new grants In March 2010, the Bank pledged the replenishment the Haiti Grant Facility for April 2010, the Board of Governors approved 2020. This amounts to US$2.2 billion over the US$200 million per year starting in 2011 until commitment to Haiti's reconstruction the Bank's s long term recovery, next eleven years, representing crucial investments for Haiti's S post-earthquake plan. These resources will finance and to establish the platform for long term to tackle extreme poverty and inequality, and social development. economic growth as well as institutional and development, the Bank can with the government, to support recovery water and In consultation education, transport, take the lead in following five ofits areas of expertise: These areas are the most critical ones, sanitation, agriculture, and private sector development. has established teams in both field and in which the Bank has a proven track record and headquarters. million and would be structured in 9 in 2010 amounts to US$200 US$15 The Bank lending portfolio housing, US$50 million in budget support, operations: US$30 million for temporary US$20 million for the partial credit million for water and sanitation in Port-au-Prince, in Port-au-Prince, US$3 million for fund, US$14 million for an electricity project and US$14 million guarantee US$54 million for Transport infrastructure, the remaining an e-government platform, were approved in April 2010, while for education. The first two operations of 2010. should be approved in the third quarter debt with the Bank projects Board of Governors agreed to cancel Haiti's outstanding external The IDB about 40 percent of the government's amounting US$479 million and representing the undisbursed loans portion, totaling about debt. The IDB Governors also agreed to convert resources for critical investments. million into grants, thereby freeing up public under which US$186 by the 2009 HIPC/MDRI debt relied initiatives, These decisions were preceded 2010, while for education. The first two operations of 2010. should be approved in the third quarter debt with the Bank projects Board of Governors agreed to cancel Haiti's outstanding external The IDB about 40 percent of the government's amounting US$479 million and representing the undisbursed loans portion, totaling about debt. The IDB Governors also agreed to convert resources for critical investments. million into grants, thereby freeing up public under which US$186 by the 2009 HIPC/MDRI debt relied initiatives, These decisions were preceded --- Page 98 --- in debt relief, clearing the way for the Government to the IDB granted about US$511 million undertake vital public investments. Portfolio Indicators consisted of 28 investment and sector As of. June 15, 2010, the IDB's active portfolio US$394 million or 50 percent is already million out of which in projects for a total ofUSS793 ofUS$50 million is expected to be disbursed disbursed. In addition, a budget support grant million in 2009, and are expected to reach reached US$127 June 2010. IDB disbursements US$180 million in 2010. sectors: transport (USS272 million or program in key strategic of The IDB has a comprehensive and environment (US$140 million or 17 percent 34 percent ofthe portfolio), agriculture (USS88 million or 11percent of the portfolio). the portfolio) and water and sanitation ofUSS18 million, most of Investment Fund (MIF) has an active portfolio relief The Multilateral aftermath of the earthquake. In addition to operations which has been approved in the million this year, the MIF supports projects to in the housing sector, which totaled US$5.5 micro, small and medium the business environment and (ii) strengthen the impact of remittances. (i) improve activities to enhance enterprises. The MIF has also supported complement to the Bank's (TC) portfolio has been an important The Technical Cooperation consisted of43 operations representing operational program, as of May 2010, the program US$18 million. Bank Technical Projects Multilateral Fund Administered Cooperation Investment Funds* Number of Operations Amount Approved Available Figures in millions Balance of US$, as of May 31, 2010. CIDA, EC, and OFID *The Bank currently administers funds US$50 from CDB, million granted as budget support for FY 2010. "Approved amount does not include donors' resources. This includes about US$20 The IDB administers US$175 million of other in the education, transport, and water million in soft loans from OFID for different projects EU for vocational training and sanitation sectors; US$8 million grant from the road and and over US$80 million from CIDA for primary agricultural health initiatives; total million from the Spanish construction projects. The Bank also administers a ofUSS65 and rural areas. Finally, a Fund for water and sanitation projects in urban, peri-urban CDB in electricity, Water has been reached with OFID, KFW, and the interest in US$45 million agreement the earthquake, these donors expressed education and social protection. Following reconstruction strategy. financial and technical support to the government's providing 8 million grant from the road and and over US$80 million from CIDA for primary agricultural health initiatives; total million from the Spanish construction projects. The Bank also administers a ofUSS65 and rural areas. Finally, a Fund for water and sanitation projects in urban, peri-urban CDB in electricity, Water has been reached with OFID, KFW, and the interest in US$45 million agreement the earthquake, these donors expressed education and social protection. Following reconstruction strategy. financial and technical support to the government's providing --- Page 99 --- Annex III. Relations with the World Bank Group (As of June 17, 2010) in Haiti since March 2004, as part of a broader The World Bank stepped up its engagement and donors, to address Haiti's social, partnership between the transitional government Framework (ICF). and institutional needs under the Interim Cooperation economic the FY2009-12 Country Assistance Strategy On June 2, 2009, the Bank' 's Board approved Bank and the IFC to align their assistance with the (CAS), prepared jointly by the World Reduction Strategy Paper (the DSNCRP). The country's National Growth and Poverty and local development; (ii) investing in has three main pillars: (i) promoting growth across the CAS is an strategy and (iii) reducing vulnerability to disasters. Cutting in the delivery human capital; institution building and support for the Government emphasis on longer-term the imperatives of recovery, visible results. The CAS also reflects strategic 2008 hurricane season. of quick, in the aftermath ofthe devastating reconstruction, and risk mitigation, Association (IDA) resources for the new The total envelope of International Development million. Normal IDA allocations were supplemented four-year CAS period is around US$121 the catastrophic 2008 hurricane by US$40 million of post-disaster assistance following is in grant form. All current IDA and trust fund assistance season. for Haiti, and more US$283 million of IDA resources Since 2005, the Bank has approved million from the Education for All Fast-Track than US$55 million from trust funds ($22 Initiative Catalytic Fund). World Bank has pledged US$189 million in additional In the aftermath ofthe earthquake, the million will come from IDA (US$115 million in funding through FY2011, ofwhich $154 relief to cancel Haiti's remaining IDA debt. IDA and US$39 million in debt new grants; and institutional emergency recent Board approvals were: (i) an infrastructure The most March 2010; (ii) a US$12.5 million Development Policy projects (USS65 million), in Reform Operation) in December 2010; and (iii) Operation (the Third Economic Governance for the Transport and Territorial Development US$12 million of Additional Financing repairs in December 2010. project, to cover cost overruns and post-hurricane envisioned in just three areas in which the From FY 2010 onwards, new IDA projects education, are and institutional strengthening Bank already has a strong program: CDD, support of $US30 million is being (including budget support). The upcoming budget the end ofthe Haitian fiscal year. Most of of which is expected by finalized, the disbursement (commitment US$199 million) are being the 14 pre-existing IDA investment projects the created by the earthquake. The redeployed and/or restructured to respond to challenges those that focus on education and Bank utilizes the capacity of existing projects, assistance including quickly and effectively. community-driven development, to provide Disaster Needs Assessment (PDNA) led by the The Bank has participated in the Post needs and losses and plan for recovery and Government with Haiti's partners to assess jointly by the World Bank, the European reconstruction. The Assessment, coordinated by finalized, the disbursement (commitment US$199 million) are being the 14 pre-existing IDA investment projects the created by the earthquake. The redeployed and/or restructured to respond to challenges those that focus on education and Bank utilizes the capacity of existing projects, assistance including quickly and effectively. community-driven development, to provide Disaster Needs Assessment (PDNA) led by the The Bank has participated in the Post needs and losses and plan for recovery and Government with Haiti's partners to assess jointly by the World Bank, the European reconstruction. The Assessment, coordinated --- Page 100 --- Development Bank, and the United Nations Development The World Union, the Inter-American and recovery needs at $11.5 billion. Programme (UNDP), put total reconstruction with a team of more than 30 people on the Bank participated in the eight priority areas, International Development Association (IDA) of ground. At the government' 's request, the Trustee and fiscal agent for the Haiti Reconstruction the World Bank Group will serve as the for recovery and reconstruction process. Fund, which mobilizes international support the priorities of Finance Corporation (IFC) has supported government's for The International access to quality basic services, particularly promoting economic growth and improving its activities in Haiti over the past two years the most vulnerable groups. IFC has expanded with three staff in its office, co-located in and established a full-time presence in the country, have focused on four key areas: the financial World Bank office. IFC activities in Haiti with IDA and the and investment climate. IFC has worked closely sector, infrastructure, textiles, and concrete actions that: (i) support the the donor community to identify targeted and resulting in income generating activities; and development of a sustainable private sector access to finance, and SMES. improve the business climate in infrastructure, by fostering (ii) help activities features investment to generate employment Among the recent free zones and industrial parks for such investments. investment in apparel and improving and the CTMO-Hope, the Investment Climate Working with the Minister of Commerce and land bottlenecks to new investment; (ii) Department is working to: (i) remove legal investors have sites within which to begin their improve the zone infrastructure to ensure new new investment leads and provide operations rapidly and efficiently; and (iii) generate is undertaking a demand analysis for manufacturers. The project aftercare to existing to inform the decentralization policy identification of findustrial sites outside Port-au-Prince $1.26 million from the Netherlands Haitian Government. The project is funded by (Belgium). ofthe Affairs and the Government of the Wallonia Region sector Ministry of Foreign million of loans to six private IFC also approved in March 2010 a US$35 package These include a bottling plant, an clients to facilitate the resumption of their operations. two banks, and a micro-credit institution. independent power producer, a textile company, in telecommunications or tourism) are investment opportunities (for example Second-stage being considered. -au-Prince $1.26 million from the Netherlands Haitian Government. The project is funded by (Belgium). ofthe Affairs and the Government of the Wallonia Region sector Ministry of Foreign million of loans to six private IFC also approved in March 2010 a US$35 package These include a bottling plant, an clients to facilitate the resumption of their operations. two banks, and a micro-credit institution. independent power producer, a textile company, in telecommunications or tourism) are investment opportunities (for example Second-stage being considered. --- Page 101 --- Executive Director for Haiti, Renato Perez, Statement by Paulo Nogueira Batista, and Eduardo Saboia, Advisor to Executive Senior Advisor to Executive Director Director July 21, 2010 authorities, we would like to thank the Managing Director 1. On behalf of our Haitian of the country. We would also for his efforts in support of the recovery and reconstruction the ofthe Post-Catastrophe the IMF staff for their work on establishment worked hard to like to commend The staffteam that deals with Haiti has also Debt Relief (PCDR) Trust Fund. under the Extended Credit Facility (ECF) and bring to the Board the new three-year Haitian program authorities have asked us to express their the request for debt stock relief. The with the IMF. Technical assistance in several appreciation ofthe dialogue and cooperation the role that the institution has debt cancellation, as well as catalytic areas, the proposed for Haiti, are highly valued by the government. played in mobilizing support when the economic performance was strong, as we 2. The earthquake struck the country Board meeting on Haiti. During FY 2009, mentioned in our buff statement for the January had strengthened, inflation was in line reached 2.9 percent. Business confidence agenda. GDP growth were moving forward with the macroreform with the program, and the authorities international crisis, in FY 2009, exports increased by Even during the worst period of the reserves had been rising considerably. 12 percent relatively to FY 2008. International ECF was considered by staff as broadly Performance for the sixth and last review ofthe structural reforms and improvements including satisfactory. The overall policy performance, debt relief in 2009. allowed for the delivery OfHIPC/MDRI in governance, of Port-ausince the earthquake that destroyed the major part in 3. Six months have passed more Haitians that any other natural disaster Prince in January 2010, killing and injuring more than one third of the population, were the country's history. Over 3.7 million people, a broad picture of the extent of human affected by the earthquake. The staff report provides Conditions remain very difficult. For instance, suffering and the size of the economic losses. have been removed, according to a UN only 275,000 of 20 million cubic meters of rubble indicates that the recovery and report. The post-disaster needs assessment (PDNA) billion over the next three years. In the reconstruction needs may reach as much as US$11.5 hurricane season, and the population of upcoming weeks, Haiti will face the beginning ofthe against these risks. Port-au-Prince has perhaps never been SO unprotected International response to the earthquake pledges by donors announced at the high-level 4. The authorities welcome the generous their commitment to greater transparency and UN conference in March 2010 and reaffirm However, the slow pace of disbursement of accountability in the use of financial resources. those for budget support in FY 2010 -remains the amounts pledged by donors particularly limited for monetary financing and, concern for the authorities, who have space on a grant basis a major framework, can only receive external financing given the debt sustainability or through highly concessional loans. been SO unprotected International response to the earthquake pledges by donors announced at the high-level 4. The authorities welcome the generous their commitment to greater transparency and UN conference in March 2010 and reaffirm However, the slow pace of disbursement of accountability in the use of financial resources. those for budget support in FY 2010 -remains the amounts pledged by donors particularly limited for monetary financing and, concern for the authorities, who have space on a grant basis a major framework, can only receive external financing given the debt sustainability or through highly concessional loans. --- Page 102 --- disbursements would undermine Haiti's recovery. 5. A shortfall in budget support variables presented in the staff report will Projections for GDP and other macroeconomic fails to materialize. We call upon Executive have to be revised downwards if budget support through with the prompt to their capitals the urgency of following Directors to convey particularly before the end of FY 2010. delivery ofl budget support assistance, of countries, including from our We note in passing that some countries or groups disbursed 6. Brazil, Ecuador and CARICOM), have significant efforts to assist constituency (for example, The Dominican Republic has made great amounts, partly for budget support. The staff report does not always do justice to Haiti since immediately after the earthquake. there is no reference to the Dominican these efforts and contributions. For instance, mention the fact that Brazil has already Republic's role. Moreover, Table 5 (p.14) does not Fund channel, including disbursed US$ 55 million through the Haiti Reconstruction US$15 million in budget support. and Extended Credit Facility (ECF) Post-Catastrophe Debt Relief (PCDR) ofthe PCDR Trust Fund, which as The authorities welcome the recent establishment We believe 7. the Haitian experience after the earthquake. the Board knows was modeled on It constitutes a useful framework for that the PCDR will be of considerable help to Haiti. circumstances in the future. countries that may face similarly extreme other member reiterate their strong commitment to sound 8. By requesting a new ECF, the authorities Action Plan for the Reconstruction and macroeconomic management and to the National growth and poverty of Haiti. This action plan is oriented to promoting reducing vulnerability to Development decentralized poles of economic activity, state reduction by creating social services, and strengthening natural disasters, enhancing access to basic Intent. It is essential for the successful institutions, as explained in the Letter of financed. This means, among ofthe ECF that the program be adequately during the implementation donors should match their pledges, especially other things, that disbursements by first 18 months. and Financial Policies, the Internal As mentioned in the Memorandum of Economic efforts will be 9. by the earthquake. Important Revenue Agency (DGI) was nearly destroyed S capacity to mobilize a larger required to restore tax administration and the government' will be critical to the recovery and amount of domestic resources. Donor support modernization of the DGI and customs administration. reform and side, the program includes a comprehensive technical 10. On the expenditure to the population' 's needs. The Fund's redefinition of spending priorities in response to improving public financial assistance has been and will continue to be instrumental and the efficiency of government spending. management by the Fund under authorities and the staff indicate that the resources provided 11. The of finternational reserves and ofthe exchange the ECF will be used to smooth the volatility This approach is consistent with the associated with large and lumpy aid disbursements. rate and customs administration. reform and side, the program includes a comprehensive technical 10. On the expenditure to the population' 's needs. The Fund's redefinition of spending priorities in response to improving public financial assistance has been and will continue to be instrumental and the efficiency of government spending. management by the Fund under authorities and the staff indicate that the resources provided 11. The of finternational reserves and ofthe exchange the ECF will be used to smooth the volatility This approach is consistent with the associated with large and lumpy aid disbursements. rate --- Page 103 --- for Board envisaged under the program presented limited amount of new resources consideration. in Haiti' S action plan believe that strong private sector participation 12. The authorities bottlenecks, improving energy supply, reducing requires removing critical infrastructure credit. They welcome the IMF's support in transaction costs, and increasing the access to which they expect will lead establishing the legal framework for public-private partnership, sectors such as tourism and textiles. of foreign direct investment in economic to an increase Financial sector liquidity, non-performing loans the Haitian banking sector has adequate The authorities 13. Although credit has declined since the earthquake. have increased and private sector the Partial Credit Guarantee (PCG) and the staff agree on the urgency ofimplementing in situation to adequately service their debts. scheme. Many debtors are not or will not be a back on its feet until banks and that the economy will not get a The authorities are convinced the supply of credit, even if at lower microfinance institutions are in a position to expand level than in the pre-earthquake period. PCG is estimated by the central bank (BRH) at 14. The adequate size ofthe this number. However, according to information US$130 million, and staff has endorsed confirmed by the authorities, only US$35 million provided to us by World Bank staff, and in the near term for this purpose (by the have been pledged or are expected to be pledged Fund). Given the urgency, Bank, and one donor to the Haiti Reconstruction The IDB, the World US$70 million from its own international reserves. the BRH has decided to set aside staff supports this decision. A new start the immense authorities would like to stress that, despite 15. Looking forward, our for its own future. While appreciating the suffering and challenges, Haiti takes responsibility realizes that the country's community, the government help provided by the international initiative ofits own citizens in a democratic setting. prospects depend fundamentally on the rich culture and heritage. In the late 18th The Haitian people are resilient and proud oft ftheir Haiti led the way in the struggle for century and during most ofthe 19th century, few countries have left such a strong mark and the abolition of slavery. Very dead. Paradoxically, today's independence These strengths may be dormant, but are not on world history. to make a new start. tragedy could be transformed into an opportunity government help provided by the international initiative ofits own citizens in a democratic setting. prospects depend fundamentally on the rich culture and heritage. In the late 18th The Haitian people are resilient and proud oft ftheir Haiti led the way in the struggle for century and during most ofthe 19th century, few countries have left such a strong mark and the abolition of slavery. Very dead. Paradoxically, today's independence These strengths may be dormant, but are not on world history. to make a new start. tragedy could be transformed into an opportunity --- Page 104 --- INTERNATIONAL MONETARY FUND HAITI for Debt Stock Relief Under Staff Assessment of Eligibility and Qualification Fund Debt ReliefTrust the Post-Catastrophe Prepared by the Western Hemisphere Department (In consultation with other departments) by Gilbert Terrier and Dominique Desruelle Approved July 8, 2010 has caused extensive casualties and unprecedented The January 12, 2010 earthquake difficult medium-term balance-ofpayments damage to Haiti, considerably worsening already would be critical, for meeting the situations. Resources, freed by debt stock relief efforts. and debt by the earthquake and subsequent recovery balance-ofpayments needs exacerbated debt stock relief under the PCDR Trust considers that Haiti is eligible and qualifies for obligations Staff debt Haiti's eligible the authorities' : request for full reliefon on Fund, and supports include the PRGT credit that was outstanding toward the Fund. Eligible obligations ofJanuary 29, 2010. All the necessary January 12, 2010, and the ECF disbursement debt stock relief are in place. conditions for disbursement by the Fund of the I. Eligibility for PCDR Assistance debt relief under the PCDR Trust, and the 1. Haiti is eligible and qualifies for Trust definition of a qualifying January 12, 2010 earthquake meets the PCDR with annual per capita income of Disaster.' Haiti is a PRGT-eligible country ofUS$1,135. The Catastrophic well below the current IDA operational threshold US$661 in 2009human and physical losses, Port-au-Prince caused unprecedented earthquake that struck GDP the Post Disaster Needs Assessment (PDNA) estimated at about 120 percent of 2009 by Bank. About 3.7 million people (over conducted jointly by the United Nations and the World the earthquake; an 2 were directly affected by a third of Haiti's 9.7 million population, 300,000 injured. According to the Haitian estimated 250,000 persons were killed and over and economic infrastructure has been 60 percent of government, administrative government, destroyed. an eligible member must: (i) qualify for for debt stock relief under the PCDR Trust Instrument, To qualify additional qualifications for debt stock relief. debt flow relief; and (ii) meet 2 Haiti's 2009 population as estimated by the U.S. Census Bureau. and the World the earthquake; an 2 were directly affected by a third of Haiti's 9.7 million population, 300,000 injured. According to the Haitian estimated 250,000 persons were killed and over and economic infrastructure has been 60 percent of government, administrative government, destroyed. an eligible member must: (i) qualify for for debt stock relief under the PCDR Trust Instrument, To qualify additional qualifications for debt stock relief. debt flow relief; and (ii) meet 2 Haiti's 2009 population as estimated by the U.S. Census Bureau. --- Page 105 --- Stock Relief Under the PCDR Trust Fund II. Qualification for Debt exacerbated Haiti's already difficult balance-of-payments 2. The earthquake has debt situation. The earthquake has generated needs and worsened its already difficult balance-of-payments needs, deteriorated the and massive long-lasting reconsiruction-related base, and weakened debt outlook, reduced an already narrow export macroeconomic management capacity. billion over the next ten years. Reconstruction costs could amount to US$11.5 at about and reconstruction have already grown Imports related to recovery and are expected to remain high over since the earthquake aid 35 percent year-on-year the large aid commitments announced SO far, the medium term. Notwithstanding and substantial financing gaps to be disbursements have been slow to materialize, beyond the period that would and debt relief are projected to persist the covered by grants at least 2015. This also takes into account be covered by debt flow relief, through meet sector demand for reserves cushion to private need to maintain a sufficient and to mitigate vulnerability to exchange without severe market disruptions, foreign including natural disasters (Table 1). external shocks, (DSA) shows that, prior to the delivery of The updated Debt Sustainability Analysis ratio would remain above 100 debt relief, Haiti's debt-to-exports thus remain at high risk of any post-earthquake with at 187 percent in 2013, and percent until 2022, a peak of a broader initiative by the (see EBS/10/139, Sup. 1). Thus, as part debt distress Haiti's debt burden, resources freed by debt international community to alleviate the above-mentioned stock relief by the Fund would be critical for meeting balance-ofpayments needs. Debt and Delivery of Assistance III. Eligible Fund that would be eligible for stock debt obligations to the 3. Haiti's outstanding SDR 178.13 million. This includes the PRGT relief under the PCDR Trust amount to 12, 2010, and the ECF SDR 105 million that was outstanding as of January 2010. credit of of SDR 73.13 million made on January 29, disbursement (including an augmentation) relief under the PCDR since it would still debt would be considered for stock debt All of this Haiti has made all scheduled debt service payments be outstanding as of January 12, 2012. 2010. While Haiti would be eligible for the debt that was outstanding as of January 12, there will be no on under the PCDR Trust until January 12, 2012, debt flow relief on this debt applicable debt service until June 2012.' this period, and, following the Fund's waiver of interest 3 No principal payment is scheduled to fall due during end-December 2011, the next interest payment on this debt is charges on all of its concessional loans through scheduled for June 2012. outstanding as of January 12, 2012. 2010. While Haiti would be eligible for the debt that was outstanding as of January 12, there will be no on under the PCDR Trust until January 12, 2012, debt flow relief on this debt applicable debt service until June 2012.' this period, and, following the Fund's waiver of interest 3 No principal payment is scheduled to fall due during end-December 2011, the next interest payment on this debt is charges on all of its concessional loans through scheduled for June 2012. --- Page 106 --- 4. Debt relief from the Fund would complement a concerted international effort to cancel Haiti's remaining debt. Official creditors accounting for about 92 percent ofHaiti's outstanding debt as of end-March 2010 (excluding the Fund) have already delivered or are firmly committed to providing debt relief on outstanding debt stocks (Text Table 1). Paris Club creditors have already committed to cancel Haiti's debt as part of the HIPC/MDRI initiative as of July 2009. While some creditors have already signed bilateral debt cancellation agreements with Haiti, signature of agreements with France, Italy and Spain is still pending, though the process is in its final stages. In May 2010, the World Bank approved debt stock reliefin the amount of SDR 24.3 million (about US$36 million), financed by individual donors' contributions. Debt relief by the IDB on US$479 million in outstanding stock and undisbursed loan amounts, which was approved in March 2010 by the Board of Governors, will become effective in the near future, as soon as the committed donor financing is available. IFAD announced in April it would cancel about US$50.7 million in outstanding debt (in NPV terms), to be delivered in the form of grants against debt service basis. Venezuela also confirmed that it would provide US$395 due, on a pay-as-you-go million in debt relief on outstanding PetroCaribe obligations as of January 25, 2010. Text Table 1. Haiti: Debt Stock as of end-September 2009 and end-March 2010 (In millions ofU.S. dollars, unless otherwise specified) September 2009 March 2010 Amount Share Amount Share Creditors Providing Full Debt Relief (percentoftotal) (percentoftotal) (percentofMarch debtstock excl. IMF) Multilateral creditors 676.7 54.4 828.9 56.0 45.4 IBRD/IDA 2/ 38.8 3.1 37.2 2.5 3.1 IMF 165.6 13.3 273.6 18.5 IDB2 2/ 417.5 33.6 452.5 30.6 37.5 IFAD 2/ 48.3 3.9 57.8 3.9 4.8 OPEC 6.6 0.5 7.8 0.5 Bilateral creditors 566.5 45.6 650.9 44.0 46.6 Paris Club 1/ 181.6 14.6 167.0 11.3 13.8 Canada 2.1 0.2 0.0 0.0 France 81.5 6.6 69.2 4.7 5.7 Spain 39.7 3.2 39.5 2.7 3.3 Italy 58.3 4.7 58.3 3.9 4.8 Non-Paris Club 384.9 31.0 483.9 32.7 32.7 Taiwan, Province ofChina 89.7 7.2 88.9 6.0 Venezuela 2/ 295.2 23.7 395.0 26.7 32.7 Total 1,243 100.0 1,480 100.0 92.0 Source: Haitian authorities; and IMF staffcalculations. Haitian fiscal year ending September. 1/ Debt to be cancelled as partofParis Club agreement in June 2009 butf for which some bilateral agreements have yeto be concluded. 2/ Creditors thathave announced debtreliefi finitiatives on Hait's outstanding debt stock. 4Taiwan, Province of China, has offered to pay about US$12 million in interest and to provide a five-year moratorium on principal payments. 7 Total 1,243 100.0 1,480 100.0 92.0 Source: Haitian authorities; and IMF staffcalculations. Haitian fiscal year ending September. 1/ Debt to be cancelled as partofParis Club agreement in June 2009 butf for which some bilateral agreements have yeto be concluded. 2/ Creditors thathave announced debtreliefi finitiatives on Hait's outstanding debt stock. 4Taiwan, Province of China, has offered to pay about US$12 million in interest and to provide a five-year moratorium on principal payments. --- Page 107 --- the six months since the earthquake has remained 5. Policy implementation over to use the earthquake as an satisfactory, and the authorities are determined in the staff report for the 2010 Article IV opportunity to build a better Haiti. As indicated the authorities have consultation and request for a new ECF arrangement (EBS/10/139), since the earthquake. Their prudent macroeconomic policies continued to implement and Development aims at sustainably raising National Action Plan for Reconstruction decentralized economic growth poles, medium-term growth and reducing poverty by creating to basic social services, and reducing vulnerability to natural disasters, enhancing access billion to support the institutions. Donors pledged a total ofUS$9.9 strengthening state billion are to be disbursed over the next 18 months. reconstruction plan, of which US$5.3 committed to program, the authorities are 6. Under the new ECF-supported macroeconomic stability, addressing implementing policies consistent with maintaining The authorities' needs, and promoting sustained growth. the and the large reconstruction revenue collection and increasing efficiency economic strategy focuses on: (i) raising operations to facilitate the absorption of transparency of spending; (ii) upgrading monetary (iii) restarting credit while maintaining aid inflows and effectively manage related pressures; credit guarantee scheme; and through the creation of a partial financial sector stability the export base, through improvements in (iv) attracting investment and expanding program is and the business environment. The new ECF-supported coordinated infrastructure medium-term technical assistance strategy, underpinned by a comprehensive assistance from the Fund focusing on with Haiti's development partners, with technical preparation and planning and Treasury financial sector issues, revenue administration, budget management. IV. Staff Appraisal for debt-stock relief under the PCDR 7. Staff supports the authorities' request relief. As indicated in the attached letter, and recommends disbursement of such affected Trust, amounting to about 120 percent of 2009 GDP, the earthquake caused destruction substantial and long-lasting more than a third of Haiti's population, and generated the debt relief are critical to meeting needs. The resources freed by six-month period balance-of-payments Haiti's debt on a sustainable path. In the these needs and to placing financial resources and capacity, the authorities have following the earthquake, with limited functions and payment systems. They have moved promptly to restore basic administrative reconstruction effort. Going macroeconomic stability and launched a coordinated ECF maintained policies are to be supported by a new three-year arrangement forward, macroeconomic coordination will continue with the and, in that context, staffis confident that close The authorities' reconstruction and of these policies. authorities in the design implementation with official creditors accounting for efforts are supported by the international community, 2010 (excluding the Fund) having ofHaiti's outstanding debt as of end-March relief. 92 percent made firm commitments to providing debt stock already delivered or having --- Page 108 --- Table 1. Haiti: Balance of Payments (Fiscal year ending September 30; in millions of U.S. dollars) 2007/08 2008/09 Proj. Est. Prog. Est. 2009/10 2010/11 2011/12 2012/13 Current account -295.3 -213.9 -210.8 -139. 3 Current account (excluding grants) -769.0 -875. 4 -698. 2 -283.7 -376.6 -429. .6 -1,865. --- Table 1. Haiti: Balance of Payments (Fiscal year ending September 30; in millions of U.S. dollars) 2007/08 2008/09 Proj. Est. Prog. Est. 2009/10 2010/11 2011/12 2012/13 Current account -295.3 -213.9 -210.8 -139. 3 Current account (excluding grants) -769.0 -875. 4 -698. 2 -283.7 -376.6 -429. .6 -1,865. 4 -1,856.3 -1,797. .5 -1,763.7 Trade balance -1,617.0 -1600.1 -1,486.0 -1,868. 7 -2,429. 4 Exports of goods 490. 2 490.8 551.2 484. 6 535.9 -2,558. 591.9 -2,731.8 Of which: Assembly industry 423.3 432. 1 491.3 436.7 485.0 538.8 664.8 Imports of goods -2,107.2 -2090.9 -2,037.2 -2,353.3 605. 7 Of which: Petroleum products -602 2 -425.0 -384. .6 -433.8 -2,965.3 -3,150.0 -3,396. 6 -503.7 -508.2 -513.9 Services (net) -420.6 -451.5 -462.7 -1,364.6 -892.0 -804. 6 Receipts 342.8 319.9 381.8 266.3 304.4 347.4 -703.3 388. Payments -763.4 -771.4 -844.5 -1,630.9 -1,196.4 -1,152.0 -1,091.7 Income (net) 16.0 -12.8 10.2 -5.4 13.8 Ofv which: Interest payments 1/ -24.6 -26.8 -12.2 -3.5 49.5 -12.5 -13.6 -17.4 -21.3 Current transfers (net) 1,726. 4 1850.5 1,727.7 3,099.3 3,041.2 Official transfers (net) 473.7 661.5 487. .4 1,726.0 2,972.2 2,956.0 Of which: budget support 1,572.5 1,420.8 1,334. 1 Private transfers (net) 254. 7 138.6 5.1 5.0 1,252.7 1189.0 1,240.3 1,373.2 1,468.6 1,551.4 1,622.0 Capital and financial accounts 336.7 156.6 244.1 122.0 279.7 328.6 Capital transfers (HIPCIMDRI) 0.0 1069.0 1,069. 1,420.8 1,334. 1 Private transfers (net) 254. 7 138.6 5.1 5.0 1,252.7 1189.0 1,240.3 1,373.2 1,468.6 1,551.4 1,622.0 Capital and financial accounts 336.7 156.6 244.1 122.0 279.7 328.6 Capital transfers (HIPCIMDRI) 0.0 1069.0 1,069. .0 0.0 389.6 Public sector capital flows (net) 319.7 49.6 263.8 0.0 0.0 0.0 Loan disbursements 150.7 213.1 295.5 337.5 Amortization 1/ 363.5 98.0 186. 4 161.3 230.2 312.6 363.6 Debt stock reduction (HIPC/MDRI) -43.8 -48.4 -24.0 -10.7 -17.1 -17.1 -26.1 Banks (net): 2/ 0.0 -1092.0 -1,092.0 0.0 0.0 0.0 0.0 Private sector capital flows 2/ -143.0 50.0 56.5 -110.0 -40.0 -70.0 -60.0 Of which: Foreign direct investment 115.8 57.0 -0.8 81.4 106.7 103.2 112.0 29.8 20.0 38.0 81.4 106.7 103.2 Errors and omissions 3/ 44.2 0.0 26.0 0.0 0.0 112.0 Overall balance 0.0 0.0 41.5 -57.4 33.4 -17.3 -4.0 -48.0 -40.0 Financing -41.5 57.4 -33.4 17.3 -44.0 -52.0 Change in net foreign assets 4/ -63.4 19.5 -70.8 14.7 -44.0 -52.0 -60.0 Change in gross reserves -163.0 -46.7 -258.7 128.6 -72.1 -60.0 Liabilities -63.7 -90.3 99.6 66. .2 187.9 143.4 19.7 Utilization of Fund credits(net) 49.9 60.3 20.1 30.3 Purchases and loans 61.3 122.9 19.7 9.4 -0.7 Repayments 49.9 60.3 61.3 122.9 19.7 14.8 14.8 0.0 0.0 0.0 0.0 Other liabilities 49.7 0.0 -5.4 -15.5 Change in arrears 5.9 126.6 20.4 0.0 10.7 31.0 Debt rescheduling 0.0 0.0 0.0 0.0 0.0 0.0 0.0 HIPC interim assistance 3.6 3.5 3.5 0.0 0.0 0.0 0.0 Exteral financing to be committed 18.3 34.0 34.0 2.6 0.0 0.0 0.0 0.0 0.4 0.0 0.0 0.0 0.0 0.0 Financing gap 0.0 0.0 0.0 0.0 48.0 100.0 100.0 Memorandum items: Current account balance (in percent of GDP) -4.5 -3.0 -3.2 -2.1 Current account balance, excl. 18.3 34.0 34.0 2.6 0.0 0.0 0.0 0.0 0.4 0.0 0.0 0.0 0.0 0.0 Financing gap 0.0 0.0 0.0 0.0 48.0 100.0 100.0 Memorandum items: Current account balance (in percent of GDP) -4.5 -3.0 -3.2 -2.1 Current account balance, excl. grants (in percent of GDP) -11.7 -12.4 -10.6 -28.7 -3.7 -4.1 -4.1 Goods exports (f.o.b) growth -6.2 -24. 2 -19.7 -16.8 Goods import (f.o.b) growth 0.1 12.4 -12.1 10.6 10.5 12.3 Debt service as percent of exports 30.2 -0.8 -3.3 15.5 26.0 6.2 7.8 Gross liquid international reserves (in millions of U.S. dollars) 707.8 8.2 9.3 3.9 3.1 3.7 4.2 6.0 Gross liquid international reserves (in months 754.7 947.5 1,076. 2 1,139.8 1,212.0 1,302. 2 of next year's imports of goods and services) 2.9 3.0 2.9 3.1 3.2 3.2 3.4 Sources: Bank of the Republic of Haiti; and Fund staff estimates. 707.8 8.2 9.3 3.9 3.1 3.7 4.2 6.0 Gross liquid international reserves (in months 754.7 947.5 1,076. 2 1,139.8 1,212.0 1,302. 2 of next year's imports of goods and services) 2.9 3.0 2.9 3.1 3.2 3.2 3.4 Sources: Bank of the Republic of Haiti; and Fund staff estimates. 1/1 Includes HIPC/MDRI debt relief beginning in 2010 (2009 HIPC/MDRI debt relief is reflected below-t 2/ Includes NIR and commercial banks' foreign currency deposits with the BRH. the-line). 3/ Includes short-term capital and errors and omissions for historical period. 4/ Petrocaribe resources for 2009 are recorded as private capital inflows and outflows of banks' NFA. --- Page 109 --- Debt Relief under the PCDR Trust Attachment I: Letter Requesting Port-au-Prince July 6, 2010 Mr. Dominique Strauss-Kahn Managing Director International Monetary Fund 700 19th Street, N.W. Washington, D.C. 20431 Dear Mr. Strauss-Kahn: caused damages and losses estimated 1. As you know, the January 12, 2010 earthquake amount to USS11.5 billion over the next 10 of GDP, and reconstruction costs in Port-au-Prince and at percent million Haitians (over a third of our population) living years. About 3.7 affected by the disaster. By generating massive neighboring cities have been directly outlook, and reducing the export reconstruction needs, deteriorating the macroeconomic and debt outlook. has further worsened Haiti's balance-of-payments base, the earthquake contribution to the from the Fund and other creditors would be a critical the 2. Debt relief Haiti's debt outlook. Considering very reconstruction effort and substantially improve balance of payments needs in the coming years, high debt burden and the large and persistent criteria for debt stock relief under that Haiti meets the eligibility and qualification such relief from we believe Relief (PCDR) Trust Fund, and hereby request the Post-Catastrophe Debt under the PCDR Trust. the Fund in the form of grant financing maintained macroeconomie stability 3. Since the earthquake, we have successfully is still operating. After the despite the difficult conditions in which our administration and payments systems disaster, we have moved swiftly to restore basic government and inflation remains contained. functions, with donor support. The economy is recovering, normalizing. The Gourde has been Revenue collection and spending execution are gradually exchange reserves in anticipation of large broadly stable, and we have been building foreign demand related to the reconstruction. future import plan aims at building a better Haiti, restoring 4. Going forward, our reconstruction sustainable path. We are committed to the sustained growth, and placing Haiti's debt on a of foreign aid inflows, while maintaining implementation of our plan with the support which will be supported by a new three-year ECF macroeconomic stability. These policies, of Economic and Financial Policies. We are described in our Memorandum problems and arrangement, to address our balance-of-payments believe that these policies are appropriate these problems. will refrain from any measures that could compound related to the reconstruction. future import plan aims at building a better Haiti, restoring 4. Going forward, our reconstruction sustainable path. We are committed to the sustained growth, and placing Haiti's debt on a of foreign aid inflows, while maintaining implementation of our plan with the support which will be supported by a new three-year ECF macroeconomic stability. These policies, of Economic and Financial Policies. We are described in our Memorandum problems and arrangement, to address our balance-of-payments believe that these policies are appropriate these problems. will refrain from any measures that could compound --- Page 110 --- Sincerely yours, /sl Is/ Ronald Baudin Charles Castel Minister of Economy and Finance Governor Republic of Haiti Bank ofthe Republic of Haiti Republic of Haiti --- Page 111 --- EXTERNAL MONETARY FUND RELATIONS INTERNATIONAL DEPARTMENT Notice Public Information Y Notice (PIN) No. 10/xx Public Information RELEASE FOR IMMEDIATE [July XX, 2010] with 2010 Article IV Consultation Executive Board Concludes IMF Haiti Monetary Fund (IMF) the Executive Board of the International 1 On July 21, 2010, Article IV consultation with Haiti. concluded the Background Haiti. Progress since 2004 in was a major setback for essential 12, 2010 earthquake growth, and implementing The January stability, resuming billion of debt under the HIPC/MDRI rates in maintaining macroconomic of US$1.2 in one of the highest reforms allowed the cancellation Growth reached 2.9 percent 2009, and manufacturing output. Initiative in June 2009. fueled by stronger agricultural to the unwinding of the international the Western Hemisphere, virtually zero in December due contain the deficit (excluding Annual inflation was shock. Prudent fiscal policies helped of GDP, while the external in food and fuel price financed projects) to 4.4 percent GDP (from 4.8 percent of GDP grants and externally deficit narrowed to 3.2 percent of and resilient remittances. current account strong exports, low import prices, estimated at 120 percent 2008), helped by damages and losses, injured. Most ministries, caused unprecedented were killed and 300,000 The earthquake persons were The humanitarian GDP. Over 225,000 region destroyed. of 2009 schools in the Port-au-Prince people remaining in temporary hospitals, and with 1.3 million country in the Western situation is only slowly improving, Haiti was already the poorest Nations Development Program shelters. Before the earthquake, bottom quartile of the United Hemisphere, ranking in the Index. presented its (UNDP) Human Development in New York in March, the government better Haiti. The plan level donor conference and to build a At a high Plan for Recovery Development National Action discussions with the IMF holds bilateral and financial Article IV of the IMF's Articles team of Agreement, visits the country, collects economic and policies. members, Under usually every year. A officials staff the country's economic developments the basis for discussion information, and discusses with staff a report, which forms Director, as the prepares the Managing is On return to headquarters. At the conclusion of the discussion, and this summary by the Executive Board. summarizes the views of Executive Directors, Chairman of the Board, authorities. transmitted to the country's high Plan for Recovery Development National Action discussions with the IMF holds bilateral and financial Article IV of the IMF's Articles team of Agreement, visits the country, collects economic and policies. members, Under usually every year. A officials staff the country's economic developments the basis for discussion information, and discusses with staff a report, which forms Director, as the prepares the Managing is On return to headquarters. At the conclusion of the discussion, and this summary by the Executive Board. summarizes the views of Executive Directors, Chairman of the Board, authorities. transmitted to the country's --- Page 112 --- medium-term growth and reducing poverty by creating aims at sustainably raising reducing vulnerability to natural disasters, decentralized economic growth poles, state institutions. Donors enhancing access to basic social services, and strengthening reconstruction, of which pledged US$9.9 billion in support of Haiti's months. Although actual generously US$5.3 billion are to be disbursed over the next 18 related to the reconstruction could disbursements SO far have been slow, external aid triple as a share of GDP over the next 3-5 years. construction (including activity, led by a rebound in agriculture, at A recovery in economic is mitigating the GDP decline (projected debris removal), and textile manufacturing, 2010). Twelve month inflation 8.5 percent for the fiscal year ending in September increase of 8.5 percent for the year. reached 6.4 percent in May, in line with a projected as the BRH has stepped The gourde has remained broadly stable since end-January, to US$646 million at end-May (from its net foreign exchange purchases. NIR grew collection since January and up A recovery in revenue US$402 million at end-December). slow support disbursements. However, have compensated for budget weak spending of families, education, energy, and transport priority spending on relocation months. To maintain financial sector stability infrastructure should pick up in the coming credit guarantee scheme, with restart credit, the central bank is launching a partial and from the IMF and the World Bank. technical support Executive Board Assessment with the thrust of the staff appraisal. They noted that Executive Directors broadly agreed setback for Haiti, after several years a major the January 2010 earthquake represented Directors commended the authorities for quickly of improved economic performance. sound policies in the very difficult functions and maintaining restoring basic government They welcomed the incipient economic recovery, conditions following the earthquake. of the resources pledged by donors for and stressed that swift disbursement of the economic program will be crucial to reconstruction and steady implementation sustain growth. to build a better Haiti in the Directors praised the authorities for their determination the authorities' National Action Plan for aftermath of the earthquake. They welcomed that the priorities outlined in the Plan should Recovery and Development and agreed Directors also noted that, in the context of severe guide the reconstruction process. implementation of the Action Plan will require close capacity constraints, the successful Reconstruction Commission. coordination by the Interim Haitian from donors is essential to fund Directors agreed that securing adequate budget support commitment to further strengthen priority programs. They welcomed the authorities' to enhance domestic resource generation. revenue administration and reform tax policy efforts to prioritize and align spending with Directors also welcomed the authorities' the tracking and reporting of public spending. reconstruction priorities, and to improve framework will be critical to stressed that further improvements in the monetary to accelerate Directors of monetary policy. They welcomed plans central enhancing the effectiveness introduce Treasury bills, and recapitalize the foreign exchange auctions reform, that the exchange rate is broadly in line bank. Directors also noted staff's assessment adequate budget support commitment to further strengthen priority programs. They welcomed the authorities' to enhance domestic resource generation. revenue administration and reform tax policy efforts to prioritize and align spending with Directors also welcomed the authorities' the tracking and reporting of public spending. reconstruction priorities, and to improve framework will be critical to stressed that further improvements in the monetary to accelerate Directors of monetary policy. They welcomed plans central enhancing the effectiveness introduce Treasury bills, and recapitalize the foreign exchange auctions reform, that the exchange rate is broadly in line bank. Directors also noted staff's assessment --- Page 113 --- that additional exchange rate flexibility with economic fundamentals and underscored while avoiding inflationary pressures. ensure the absorption of aid inflows will help in the business climate and in Directors concurred that steadfast improvements and private credit, reduce supply-side governance are required to boost investment welcomed the implementation of the bottlenecks, and expand the export base. They step to restart private sector activity Partial Credit Guarantee scheme as an important of economic activity will require strong and noted that the successful decentralization partnerships with the private sector. provides an important Directors agreed that the new three-year ECF-supported donor program in the context of the authorities' economic policies and support policies anchor to the a coherent set of macroeconomic reconstruction process. The program provides and growth objectives, including by that will support the authorities' reconstruction aid inflows. The program is out the impact on the economy of large expected assistance strategy focused on smoothing medium-term technical supported by a comprehensive strengthening state institutions. criteria for debt stock relief that Haiti met the eligibility and qualification the and other Directors agreed They noted that debt relief from Fund under the PCDR Trust Fund. Haiti's protracted balance-of-payments creditors would free vital resources to alleviate Given Haiti's persistent high debt needs, which have been exacerbated by the earthquake. needs should be covered mostly Directors emphasized that future financing vulnerabilities, financing. through grants and highly concessional will be held in accordance that the next Article IV consultation with Haiti with Fund It is expected decision on the consultation cycle for members with the Executive Board arrangements. of the IMF's form part of the IMF's efforts to promote transparency Public Information Notices (PINS) and policies. With the consent of the country views and analysis of economic developments after Executive Board discussions of Article IV consultations (or countries) concerned, PINS are issued of developments at the regional level, of post-program with member countries, of its surveillance of member countries with longer-term program engagements. otherwise monitoring, and of ex post assessments Board discussions of general policy matters, unless PINS are also issued after Executive case. decided by the Executive Board in a particular Board arrangements. of the IMF's form part of the IMF's efforts to promote transparency Public Information Notices (PINS) and policies. With the consent of the country views and analysis of economic developments after Executive Board discussions of Article IV consultations (or countries) concerned, PINS are issued of developments at the regional level, of post-program with member countries, of its surveillance of member countries with longer-term program engagements. otherwise monitoring, and of ex post assessments Board discussions of general policy matters, unless PINS are also issued after Executive case. decided by the Executive Board in a particular --- Page 114 --- Haiti: Selected Economic and Financial Indicators 2006/07 2007/08 2008/09 2009/10 (proj) (Annual percentage change, unless otherwise indicated) Domestic economy 3.3 0.8 2.9 -8.5 GDP at constant prices 7.9 19.8 -4.7 8.5 Consumer prices (end-of-period) 25.0 26.0 23.4 23.9 Gross domestic investment (in percent of GDP) 24.8 21.5 20.2 21.7 Gross national savings (in percent of GDP) (In percent of GDP) Public finances 0.2 -3.1 -4.4 -2.9 Central government overall balance (including grants) Central government overall balance (excluding grants) -5.0 -7.5 -11.1 -17.3 3.2 1.4 1.2 2.2 Public sector savings (Changes in percent of beginning-of-period broad money) Money and credit 7.6 -1.2 3.7 8.5 Net domestic assets -5.2 Credit to the public sector (net) -1.9 -7.2 3.6 3.9 9.6 5.9 -3.2 Credit to the private sector 17.7 11.0 11.4 Broad money (including foreign currency deposits) 4.8 (Annual percentage change, unless otherwise indicated) External sector 5.7 -6.2 12.4 -12.1 Exports (f.o.b.) 4.5 30.2 -3.3 15.5 Imports (f.o.b.) official in of -0.3 -4.5 -3.2 -2.1 Current account balance (including grants, percent GDP) of GDP) -6.9 -11.7 -10.6 -28.7 Current account balance (excluding official grants, in percent External public debt (end-of-period, in percent of GDP) 25.6 29.5 16.6 22.0 External public debt service (in percent of exports of goods 8.3 8.2 3.9 3.1 and nonfactor services) 290.4 313.6 438.6 300.5 Net international reserves (in millions of U. .S. dollars) 1/ Liquid gross reserves (in millions of U.S. dollars) 2/ 544.7 707.8 947.5 1076.2 2.3 2.9 2.9 3.1 In months of imports of the following year Real effective exchange rate (appreciation +) 15.3 2.9 1.0 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. 2/ Gross reserves excluding capital contributions to international organizations. 1/ Liquid gross reserves (in millions of U.S. dollars) 2/ 544.7 707.8 947.5 1076.2 2.3 2.9 2.9 3.1 In months of imports of the following year Real effective exchange rate (appreciation +) 15.3 2.9 1.0 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. 2/ Gross reserves excluding capital contributions to international organizations. --- Page 115 --- EXTERNAL FUND RELATIONS DEPARTMENT MONETARY INTERN ATIONAL International Monetary Fund Washington, D.C. 20431 USA Press Release No. 10/299 FOR IMMEDIATE RELEASE July 21, 2010 New Three-Year Program to Cancels Haiti's Debt and Approves IMF Executive Board Reconstruction: and Economic Growth Support approved the full International Monetary Fund (IMF) today SDR 178 million The Executive Board ofthe liabilities to the Fund, of about arrangement for cancellation of Haiti's outstanding The Board also approved a new three-year authorities to support the (equivalent to US$268 million). Facility (ECF) requested by the Haiti under the Extended Credit program. and growth country's S reconstruction Haiti's longer term reconstruction of a broad strategy to support 2010. The cancellation of existing Both decisions form part earthquake of January 12, in the days plans, following the devastating Director Dominique Strauss-Kahn a "Marshall Plan" advocated by IMF Managing effort to launch debt was of a concerted international and forwardfollowing the disaster as part The new program provides a strong in the country, and will for the reconstruction ofthe country. economic stability and reconstruction looking framework to support contributions. also help catalyze donors' Mr. Strauss-Kahn said, "so on their promises to Haiti quickly," and social tensions "Donors must start delivering living standards quickly improved, community pledged reconstruction can be accelerated, donors' conference in March, the international is to be disbursed over the soothed." " At a high-level of which USS 5.3 billion USS 9.9 billion to Haiti's reconstruction, next 18 months. substantial balance-ofpayments IMF debt relief will help Haiti to meet by the Post-Catastrophe Resources freed by The debt reliefi is financed to very poor countries exacerbated by the earthquake. by the Fund help needs Trust Fund, recently established factsheet). Debt Relief(PCDR) natural disasters (see attached hit by catastrophic (about US$ 60 million) over three will provide SDR 40.9 million central bank manage potential The new ECF arrangement international reserves and help the raises in the prices of basic years to boost Haiti'si local currency - important to avoid net debt. Financing in the value ofthe adding to the country's swings consumed by the poor - without end-2011 and thereafter zero to 0.5 percent, is commodities interest rate until interest waiver under the ECF carries a zero period of 5V years. The temporary of 10 years and a grace with a maturity 0 www.imf.org 202-623-7100 e Fax 202-623-6772 D.C. 20431 0 Telephone Washington, Haiti'si local currency - important to avoid net debt. Financing in the value ofthe adding to the country's swings consumed by the poor - without end-2011 and thereafter zero to 0.5 percent, is commodities interest rate until interest waiver under the ECF carries a zero period of 5V years. The temporary of 10 years and a grace with a maturity 0 www.imf.org 202-623-7100 e Fax 202-623-6772 D.C. 20431 0 Telephone Washington, --- Page 116 --- in July 2009 to support the IMF's lending to lowpart oft the package that was approved internal resources, including the use of resources income countries, financed from the IMF'si (see Factsheet "Financing the linked to the gold sales, and through bilateral contributions Countries' "). The new program also includes Fund's Concessional Lending to Low-Income authorities that will help protect macroeconomic important policy commitments from the stability, and strengthen fiscal governance. framework to support the will provide a coherent macroeconomic of aid "The new program Plan and ensure efficient spending and absorption implementation of our Action and Finance Ronald Baudin said. inflows, " Haiti's Minister of Economy Technical Assistance medium-term technical assistance program The IMF will also provide a comprehensive concentrating in the areas of tax policies, revenue aimed at strengthening state institutions, and helping the country in organizing its administration, budget preparation and execution, first ever issuance of government securities. credit and investment will be the business environment and fostering private of Haiti "Improving of the Bank ofthe Republic 29 Charles Castel, Governor essential to support growth, rebuild economic institutions and build said. "The Fund's S technical assistance will help capacity." Board discussion on Haiti, Mr. Naoyuki Shinohara Deputy Following the Executive Chair, issued the following statement: Managing Director and Acting for Haiti, after several years of progress in "The January 2010 earthquake was devastating and implementing essential reforms. The maintaining economic stability, resuming growth, implementation in the six-month period authorities are to be commended for good policy and weakened capacity. the in spite of limited financial resources since earthquake, conditions for debt stock relief under the PCDR "Haiti meets the eligibility and qualification under the PCDR Trust Fund are critical to Trust Fund. Resources freed by debt stock relief needs exacerbated by the earthquake meeting the large and protracted balancc-of-payments Haiti's debt on a sustainable path. Debt relief recovery efforts, and to placing debt after and subsequent international effort to cancel Haiti's remaining from the Fund is part of a concerted the earthquake. arrangement provides a coherent macroeconomic "The newly approved ECF-supported reconstruction and growth objectives. The framework to support the authorities' ofthe authorities' reconstruction plan, depends macroeconomic outlook, and implementation Furthermore, improvements disbursement ofthe large donor pledges. crucially on the timely will be essential to raise medium-term growth, in infrastructure and the business environment ancc-of-payments Haiti's debt on a sustainable path. Debt relief recovery efforts, and to placing debt after and subsequent international effort to cancel Haiti's remaining from the Fund is part of a concerted the earthquake. arrangement provides a coherent macroeconomic "The newly approved ECF-supported reconstruction and growth objectives. The framework to support the authorities' ofthe authorities' reconstruction plan, depends macroeconomic outlook, and implementation Furthermore, improvements disbursement ofthe large donor pledges. crucially on the timely will be essential to raise medium-term growth, in infrastructure and the business environment --- Page 117 --- base. The establishment of a partial investment and expanding the export by attracting private sector credit credit guarantee fund will help restart private the impact on the economy ofl large "The Fund-supported program aims at smoothing ofGDP over in the next 3 years. expected aid flows, projected to triple to about 15 percent and its financing with are to raise domestic revenue, align the budget and Fiscal objectives fiscal governance. Monetary reconstruction priorities, and continue strengthening of aid inflows, while will be upgraded to facilitate the absorption exchange rate policies and inflation under control The program avoiding large swings in the exchange rate keeping assistance strategy, coordinated with medium term technical is supported by a comprehensive Haiti's development partners." 93 ANNEX Recent Economic Developments destruction ofhuman and physical The earthquake of January 12, 2010 caused unprecedented GDP. The disaster struck the country at with losses estimated at 120 percent of 2009 capital, after several years of prudent macroeconomic a time when its outlook was improving almost 3 percent, the second-fastest rate in the management. In 2009, Haiti's growth reached Western Hemisphere. after the earthquake. Agricultural production, A still fragile recovery is taking place economic activity, while remittances, construction and textile manufacturing are supporting of 2010 (over the previous year), are 12 percent between January and May is still which grew by are recovering, although the trade deficit supporting consumption and imports. Exports widening. Main Program Objectives policies that can support growth and the Haitian The program is focused on macroeconomic the aid inflows. It includes reconstruction plan, as well as help manage authorities' of spending, increasing revenues, modernizing improving the efficiency and transparency credit growth. and exchange rate operations, and enhancing monetary 9 percent in fiscal year 2011-12, due mostly to Growth: GDP is projected to expand by reconstruction activity, and 6 percent by 2015. in the current fiscal year and to decline to 7 percent Inflation: expected to reach 8.5 percent by 2013. collection to 13 percent of GDP by 2013, from 10% Fiscal strategy: to boost revenue the quality and effectiveness of The authorities' objective is to enhance percent currently. and rebuild a more modern and efficient tax administration. reconstruction spending --- Page 118 --- Monetary policy: the program aims at building a sustainable external position while absorbing the reconstruction-related foreign exchange flows. To enhance the effectiveness of monetary policy, further steps will be taken to improve the Bank ofthe Republic ofHaiti's independence. The authorities also aim at gradually developing a market for government securities.