--- Page 1 --- MONETARY FUND INTERNATIONAL IMF Country Report No. 15/3 HAITI EXTENDED CREDIT FACILITY EIGHTH REVIEW UNDER THE OF FOR WAIVER OF NONOBSERVANCE January 2015 AND REQUEST CRITERION-STAFE REPORT; PRESS PERFORMANCE BY THE EXECUTIVE DIRECTOR RELEASE; AND STATEMENT FOR HAITI the Extended Credit Facility and request for waiver In the context of the eighth review under documents have been released and nonobservance of performance criterion, the following of are included in this package: staff team of the IMF for the Executive Board's The Staff Report prepared by a discussions that ended on November 7, consideration on December 17, 2014, following and policies underpinning the 2014, with the officials of Haiti on economic developments Based on information available at the under the Extended Credit Facility. 2014. IMF arrangement the staff report was completed on December 2, time of these discussions, information on recent developments. A Staff Statement of December 17, 2014 updating the Chair of the Executive Board. A Press Release including a statement by by the Executive Director for Haiti. A Statement listed below have been or will be separately released. The documents Letter of Intent sent to the IMF by the authorities of Haiti* Technical Memorandum of Understanding* Ex-Post Assessment of Longer-Term Program Engagement documents allows for the deletion of of publication of staff reports and other The policy market-sensitive information. of this report are available to the public from Copies International Monetary Fund o Publication Services PO Box 92780 o Washington, D.C. 20090 Telephone: (202) 623-7430 e Fax: (202) 623-7201 Web: http,/Awwwimf.org E-mail: pubications@imforg Price: $18.00 per printed copy International Monetary Fund Washington, D.C. O 2015 International Monetary Fund --- Page 2 --- MONETARY FUND INTERNATIONAL HAITI THE EXTENDED CREDIT FACILITY EIGHTH REVIEW UNDER OF FOR WAIVER OF NONOBSERVANCE December 2, 2014 AND REQUEST PERFORMANCE CRITERION EXECUTIVE SUMMARY Extended Credit Facility (ECF) arrangement. The This is the final review under the stability, and there was progress contributed to maintaining macroeconomic: under program The authorities intend to request a successor arrangement on structural reforms. in April; uncertainly remains on the the ECF. A new finance minister was appointed in FY2014 grew by 3.5-4 percent, elections. Preliminary data suggest that GDP timing of about 5 percent. An increase in fuel prices (in while inflation increased slightly to of GDP during FY2015. The should result in fiscal savings of at least percent but although October) reserves (NIR) was met, criterion on net international March performance criterion on net central bank the deficit was lower than projected, the performance Downside risks are significant and include credit to the central government was missed. of political tensions, and of Venezuela-related flows, a resumption upon a pull-back A total of SDR 1.638 million will become available vulnerability to weather events. under the ECF to completion of this review, bringing total disbursements SDR 40.950 million. Key Policy Recommendations: going forward, should come from a The policy mix, in particular the adjustment policy. The FY2015 fiscal lower fiscal deficit rather than from a tighter monetary of a medium-term plan should be reduced to mitigate financing risks as part deficit to restore fiscal sustainability. rate adjust more to market pressures. The central bank should let the exchange excess volatility and Intervention should be parsimonious, geared at avoiding fundamentals rate; it should be guided by disorderly movements in the exchange in the medium term. on the energy sector and on public Progress on structural reforms (including and is essential for should catalyze more donor support financial management) would entrench supporting growth. A possible new ECF arrangement sustained GDP growth. stability and promote policies to generate macroeconomic part deficit to restore fiscal sustainability. rate adjust more to market pressures. The central bank should let the exchange excess volatility and Intervention should be parsimonious, geared at avoiding fundamentals rate; it should be guided by disorderly movements in the exchange in the medium term. on the energy sector and on public Progress on structural reforms (including and is essential for should catalyze more donor support financial management) would entrench supporting growth. A possible new ECF arrangement sustained GDP growth. stability and promote policies to generate macroeconomic --- Page 3 --- HAITI Approved By Discussions were held in Port-au-Prince during May 14-23, A. Cheasty (WHD) August 4-8, and November 3-7, 2014. The staff team consisted of and B. Traa (SPR) Messrs. Di Bella (head), Ntamatungiro, Norton, and Ms. Yang (all WHD), Mses. Bova and Hanedar (FAD), Mr. Daan (STA), and Mr. Camard (resident representative). It met with President Martelly, Prime Minister Lamothe; Minister of Economy and Finance Jean-Marie; Central Bank Governor Castel; other senior government officials; representatives of the private sector; and development partners. Ms. Florestal (OED) participated in the policy discussions. CONTENTS CONTEXT AND PROGRAM PERFORMANCE EIGHTH REVIEW DISCUSSIONS A. Economic Outlook for FY2015 B. Fiscal Issues C. Monetary and Financial Policies EX POST ASSESSMENT AND DISCUSSIONS ON A POSSIBLE NEW ECF ARRANGEMENT 12 STAFF APPRAISAL BOX 1. Upside and Downside Risks from International Oil Prices FIGURES 1. Program Performance 2013-14 2. Recent Economic Developments, 2011-14 3. Fiscal Developments, 2011-14 4. Monetary and Financial Market Developments, 2011-14 5. Banking Sector, 2011-14 TABLES 1. Selected Economic and Financial Indicators, 2010/11-2014/15 2a. Central Government Operations, 2010/11-2014/15 2b. Central Government Operations, 2010/11-2014/15 3. Summary Accounts of the Banking System, 2010/11-2014/15 4a. Balance of Payments, 2010/2011-2014/15 4b. Balance of Payments, 2010/2011-2014/15 5. Financial Soundness Indicators, September 2011-June 2014 6. Indicators of Public Debt and External Vulnerability, 2010/11-2014/15 INTERNATIONAL MONETARY FUND 4/15 2b. Central Government Operations, 2010/11-2014/15 3. Summary Accounts of the Banking System, 2010/11-2014/15 4a. Balance of Payments, 2010/2011-2014/15 4b. Balance of Payments, 2010/2011-2014/15 5. Financial Soundness Indicators, September 2011-June 2014 6. Indicators of Public Debt and External Vulnerability, 2010/11-2014/15 INTERNATIONAL MONETARY FUND --- Page 4 --- HAITI 7. Proposed Schedule of Disbursements, 2014 8. Indicators of Capacity to Repay the Fund, 2014/15-2024/25 9. Indicative Targets and Quantitative Performance Criteria, September 2013-June 2014 10. Prior Actions and Structural Benchmarks through June 2014 APPENDICES I Letter of Intent Attachment I Technical Memorandum of Understanding II. Short-Term Impact of a Possible Sudden Stop of Petrocaribe Financing a INTERNATIONAL MONETARY FUND 3 --- Page 5 --- HAITI PERFORMANCE CONTEXT AND PROGRAM The budget for FY2014 was passed only in The situation remains challenging. this 1. political Chamber of Deputies, but not the Senate Against May; the FY2015 budget passed the an order (arrêté) rather than a law. In the government will execute the budget through Senate next January, but midbackdrop, Chamber of Deputies and half the expire addition, the terms for the October 2014 after the 'EI Rancho' agreement in term elections (which had been announced for for late 2015. Presidential elections are scheduled March) have been again postponed. FY2014. GDP growth was Economic growth and inflation evolved as expected during industry 2. consistent with projections, supported by construction, around 3.5-4 percent in FY2014, conditions mid-year. slow-growing exports and tighter monetary remains and commerce, despite almost 20 percent, although formal employment Employment in the apparel sector rose by due to pass-through from increased Inflation increased to 5.3 percent, y/y, through September, low. exchange rate depreciation. of GDP in FY2014 and continued to current account deficit decreased by 1 percent 3. The The deficit was 5.7 percent of GDP. Exports increased be mainly financed by Petrocaribe inflows. of exports) grew only modestly. Imports by 3 percent y/y, as apparel sales to the U.S. (90 percent the main source of foreign exchange, Private transfers remained tourist rose by 2 percent, as projected. The services account improved on increased with remittances growing by close to 12 percent. while FDI was 1 percent of GDP. The Petrocaribe flows were almost 4 percent of GDP, Central arrivals. in FY2014, somewhat faster than in recent years. exchange rate depreciated by 4 percent in FY2014 versus US$120 million in FY2013. Bank (BRH) net FX intervention was only US$21 million drew down nearly US$200 million, as the government Both gross reserves and NIR declined by below 5 months of prospective imports but deposits at the BRH. Reserve coverage decreased to remains broadly adequate. Domestic revenues (including deficit for FY2014 was lower than anticipated. due 4. The fiscal reached 12.3 percent of GDP, below program projections, National Education Fund resources) This revenue shortfall was more than offset by revenues caused by the fuel price freeze. bill allocations for to forgone in May included increased wage lower spending. Although the budget adopted (since April) measures to reduce the pace of teachers and the police, the Ministry of Finance applied The late adoption of the and services (including on travel and automobiles). the spending in goods execution by about 1 percent of GDP, and as a result, budget led to a short-fall in investment of GDP below program projections). deficit for FY2014 reached 6.3 percent of GDP (0.4 percent was than fiscal inflows and deposits. Use of deposits larger The deficit was financed by Petrocaribe in part explained by delays in setting T-bill were lower than programmed, expected as placements the Minister of Finance. up the debt management unit at 1 The fiscal year runs from October to September. INTERNATIONAL MONETARY FUND goods execution by about 1 percent of GDP, and as a result, budget led to a short-fall in investment of GDP below program projections). deficit for FY2014 reached 6.3 percent of GDP (0.4 percent was than fiscal inflows and deposits. Use of deposits larger The deficit was financed by Petrocaribe in part explained by delays in setting T-bill were lower than programmed, expected as placements the Minister of Finance. up the debt management unit at 1 The fiscal year runs from October to September. INTERNATIONAL MONETARY FUND --- Page 6 --- HAITI in mid-FY2014, was loosened somewhat Monetary policy, which had been tightened in the foreign 5. fiscal year. The BRH responded to downward pressures towards the end of the on gourde deposits by exchange market by increasing (in April) legal reserve requirements the 90-day bond rate (BRH's policy rate) points, to 37 percent. In addition, it increased their reserve requirements 2 percentage commercial banks to fulfill 10 percent of by 200 basis points and required (in addition to tightening in February and deposits in gourdes. This tightening Bank on foreign currency have contributed to increased dollarization. June 2013), reduced excess reserves and may 2014, from 16.4 percent in decreased to 9.4 percent yly in September by lending growth the BRH loosened monetary policy (in September) September 2013. Given this deceleration, government bonds towards reserve commercial banks to count gourde denominated of 2 percentage allowing of requirements on gourde deposits requirements (i.e., equivalent to a reduction to fulfill 10 percent of reserve requirements on points). In addition it reversed (in July) the obligation on foreign currency deposits in gourdes, and raised the reserve requirement market and other foreign currency to 40 percent. Intervention through open deposits by one percentage point, FY2014. operations was expansionary overall during loans despite a recent increase in non-performing Commercial banks remain healthy in currency 6. almost unchanged in FY2014, as increases (NPLS). Base money (program definition) was at the BRH following the loosening in circulation were offset by decreases in gourde deposits y/y through in fiscal In turn, broad money grew by 8.8 percent monetary policy at the end of the year. deposit growth. NPLS increased to September (below nominal GDP growth) on moderate but banks remain well-capitalized and in June 2014 from 2.4 percent in September 2013, 3.3 percent profitable. 3 2014 were observed. performance criteria for end-March central 7. All but one quantitative margin, the ceiling on net BRH credit to the While the floor on NIR was met with a significant placements of treasury bills. A waiver government was not observed, given lower-thun-programmed deficit lower than envisaged. The zero ceiling on deviation was minor and the fiscal is justified as the external debt with maturities up of public sector non-concessional the contracting or guaranteeing to and including one year was observed. reforms. The ECF the authorities made progress on structural the 8. Despite delays, 2014 to provide time to (i) establish arrangement was extended in August to late December the central bank and (ii) make infrastructure for the Treasury Single Account (TSA) at into the basic that takes consideration the accounting centers under a revised configuration with delay the operational workload distribution (thus meeting ministries' locations, as well as an equitable Further, the authorities began relevant end-March and end-June Structural Benchmarks). fuel prices in October, Box 1) to improve deficit reduction measures (including raising implementing suppliers for about G 2.9 billion. (0.7 percent of GDP); these from will 2 The BRH purchased government debt with public with existing BRH bonds. The stock of BRH bonds decreased be used for open market operations billion together at end-FY2014. G 6.2 billion at end-FY2013 to G4.9 restaurants, and hotels. 3 The small increase in NPLS was mainly concentrated in commerce, INTERNATIONAL MONETARY FUND 5 in October, Box 1) to improve deficit reduction measures (including raising implementing suppliers for about G 2.9 billion. (0.7 percent of GDP); these from will 2 The BRH purchased government debt with public with existing BRH bonds. The stock of BRH bonds decreased be used for open market operations billion together at end-FY2014. G 6.2 billion at end-FY2013 to G4.9 restaurants, and hotels. 3 The small increase in NPLS was mainly concentrated in commerce, INTERNATIONAL MONETARY FUND 5 --- Page 7 --- HAITI and the authorities shared with staff the fiscal balance by at least 1 percent of GDP in FY2015; the state-owned electricity company (EDH)." financial flows of the Downside Risks from International Oil Prices Box 1. Haiti: Upside and of trade. The WEO oil price baseline has declines in international oil prices improve Haiti's terms for 2015 are now about Recent reflect lower international prices. Oil price projections These been recently revised to (a decline from US$99 to US$85/barrel). lower than those in October's WEO projections 15 percent would reduce Haiti's oil deficit by US$140 million from Fuel Taxation prices Fiscal Revenues (1.5 percent of GDP). 2.5 (Percent of GDP) WEO fiscal Projectionv with oil prices inOctober's This positive terms-of-trade shock supports Windfallo due tol lower oil prices With the intention of realigning domestic and 2.0 revenue. international prices, and as part of fiscal consolidation 1.5 authorities increased fuel prices last October efforts, the 9.3 percent for diesel and 1.0 (7.5 percent for gasoline, The price freeze (in place since 6.2 percent for kerosene). revenues of about 0.5 March 2011) had resulted in foregone fuel of GDP. While the increases in domestic 0.0 FY14(a) FY15(b) Change(b a) 2 percent expected to yield 0.7 percent of Sources: Haitian Authorities: and IMF staff calculations. prices were originally the projected decrease in oil Prices: vs. Revised WEO Projections GDP in fiscal revenues, revenues of Oil (APSP, US dollars Orginal per barrel, quarterly average) prices may result in additional 0.8-1.0 percent of GDP (see chart). the decrease in oil prices may compound 105 However, vulnerabilities. Decreases in the oil bill 100 Actual Haiti's external inflows of would result in lower Petrocaribe financing are --November WEO about US$50 million (0.5 percent of GDP) as these fall 90 related to fuel purchases from Venezuela. Indeed, the October WEO oil could prompt a stop of Petrocaribe financing 85 in prices at about 3 percent of GDP in FY2015). As it is 80 Mar 13J Jun- 13 Sep- 13Dec- 13Mar-1 -14 Jun- 14 Sep- -14Dec -14Mar-15) Jun- 15 Sep- 15Dec- 15 (projected that these resources will be offset fully by other Source: IMFS staff calculations. unlikely shortfall would require significant the authorities are flows, the financing sector. To mitigate this risk, adjustment in investment and transfers to the electricity of GDP during FY2015, in part by improving billing decrease in fiscal deficit of around 2.5 percent targeting a and collection by EDH. windfall so as to maintain external all risks, the authorities should save any revenue should not be adjusted downwards until Considering prices continue to fall, pump prices The authorities buffers. In case international and foregone revenue costs are eliminated. domestic and international prices are aligned, will be saved. stressed that windfall revenues from lower oil prices oil prices is a positive terms of The decrease in international 9. Downside risks are significant. financing inflows (Box 1)5 Domestically, shock, but this could lead to a pull-back of Petrocaribe uncertainties trade deteriorate if political tensions continue given reforms could suffer and expectations that its FY2014 deficit was 2.5 percent of GDP. 4 The information on EDH suggests that was produced for the seventh ECF flows was analyzed in the DSA subsidies), 5 The impact of a stop of Venezuela-related domestic revenues (including by streamlining fuel review. Mitigating this risk requires increasing and reducing EDH's deficit. See Appendix II. containing expenditure (in particular transfers), INTERNATIONAL MONETARY FUND a pull-back of Petrocaribe uncertainties trade deteriorate if political tensions continue given reforms could suffer and expectations that its FY2014 deficit was 2.5 percent of GDP. 4 The information on EDH suggests that was produced for the seventh ECF flows was analyzed in the DSA subsidies), 5 The impact of a stop of Venezuela-related domestic revenues (including by streamlining fuel review. Mitigating this risk requires increasing and reducing EDH's deficit. See Appendix II. containing expenditure (in particular transfers), INTERNATIONAL MONETARY FUND --- Page 8 --- HAITI elections. The authorities should resist on the timing of (repeatedly postponed) parliamentary not be Haiti's twin deficits related to oil price decreases that may permanent. thus constraining spending pressures more monetary policy tightening, the exchange rate and require mechanisms have improved, may pressure continue to pose risks, although mitigating growth. Weather events price shocks. and the country remains vulnerable to commodity REVIEW DISCUSSIONS EIGHTH and the outlook and risks for FY2015 Staff and Discussions centered on developments in FY2014 and make investments measures to decrease the fiscal deficit, to focus transfers, with authorities discussed the policy mix towards a sustainable fiscal position, more productive. This should allow changing on the need to ensure TSA monetary policy. There were also discussions and on the main less restrictive international reserve buffers, implementation, improve the finances of EDH, preserve account the Ex Post Assessment (EPA) new ECF arrangement taking into elements of a possible recommendations. Economic Outlook for FY2015 A. but projections are subject to Growth is expected at 3.0-3.5 percent in FY2015, will partially offset 10. increases, and lower oil prices downside risks. The positive impact of remittance 6.5 (eop). The external current Inflation is projected to reach percent a the negative fiscal impulse. of GDP, on the back of a lower fiscal deficit and account deficit would decrease to 4.5 percent were on volatile oil prices. decreased oil bill. Staff cautioned on how dependent projections B. Fiscal Issues levels over the to reduce the fiscal deficit to sustainable 11. Staff urged the authorities distress remains high." 7 A gradual reduction in FY2015. Haiti's risk of debt with authorities' medium term, starting of monetary policy, in line the of the deficit would allow a progressive loosening and job creation. It would also help intention to crowd in private sector credit to boost growth shocks. This rebalancing international reserve buffers as a cushion to withstand months. maintain adequate should be an objective over the next 18-24 between fiscal and monetary policies the deficit. The deficit (program staff advice, the budget for FY2015 reduces The 12. In line with of GDP (from 6.3 percent of GDP in FY2014). definition) is targeted to decrease to 3.6 percent Therefore, the government decided to the Chamber of Deputies, but not the Senate. that some members of budget passed order (arrêté) rather than a law, a decision implement the budget through an Country Report No. 14/154) was issued on July 30. 6 AJ Joint Staff Advisory Note (JSAN) on the PRSP (IMF Haiti is classified as a weak performer based on 7 As concluded in the recent DSA (IMF Country Report No. 14/105). and Institutional Assessment (CPIA). average score in the World Bank' 'S Country Policy the its three-year framework and the financial situation of the municipalities, the 8 Staff had useful discussions about the institutional Staff advised that a future program may enlarge state-owned enterprises, and the social security system. all) of these entities. definition of the fiscal targets to include some (or INTERNATIONAL MONETARY FUND 7 PRSP (IMF Haiti is classified as a weak performer based on 7 As concluded in the recent DSA (IMF Country Report No. 14/105). and Institutional Assessment (CPIA). average score in the World Bank' 'S Country Policy the its three-year framework and the financial situation of the municipalities, the 8 Staff had useful discussions about the institutional Staff advised that a future program may enlarge state-owned enterprises, and the social security system. all) of these entities. definition of the fiscal targets to include some (or INTERNATIONAL MONETARY FUND 7 --- Page 9 --- HAITI the authorities argued that the implementation of However, Congress claim was unconstitutional. budget law. is consistent with the organic the budget as envisaged Domestic increases are mainly due to fuel price adjustments. 13. Projected revenue of GDP more than in FY2014). The to reach 14.1 percent of GDP (1.8 percent other price revenues are expected in October, and if necessary, plan authorities raised fuel prices by 8.4 percent on average, of GDP. This might not be needed given revenues by about 1.7 percent increases to reduce forgone but underscored the need for mitigating Staff welcomed this decision, current oil price projections. indicated that given capacity constraints, to protect the most vulnerable. The authorities in Haiti benefit measures for public health and universal education (which they increased budget allocations cost of 0.6 percent of GDP, and contained among others, for a combined fuel to the most vulnerable), 9 Staff stressed the need for domestic prices increases in the price of public transportation. fiscal revenues are gradually eliminated international prices, while ensuring that foregone reflect over 12-15 months (Box 1). by expanding the tax authorities agreed on the need to boost revenues 14. Staff and the authorities expect revenue increases (of about base and modernizing the tax system. The and tax administration. In addition, fiscal 0.3 percent of GDP) from the strengthening of customs adjustments to excise rates on alcoholic adopted in the FY2014 budget law (a tourist tax, 0.2 of GDP. Staff measures taxes) are projected to yield percent beverages, and environmental protection that budget support is expected to domestic revenues is essential given stressed that increasing FY2015 (from 1.2 percent of GDP in FY2014). decline to 0.8 percent of GDP in GDP. A decision to increase wages is projected to decrease as a share of 15. Public spending second half of FY2014 will have an impact on the wage for teachers and other civil servants in the bill will continue growing over the next few bill in FY2015 of about 0.5 percent of GDP. The wage 10 Mitigating measures following the national police and new primary schools are staffed." also includes years as on health and education. The fiscal program fuel price increases will raise spending the responsibility of municipalities) of allocations for the cost of public lighting (formerly to decline relative to FY2014 by of GDP" Other transfers, including to EDH, are expected to cover the cost of 0.2 percent bill will increase by 0.1 percent of GDP, in part 0.3 percent of GDP. The interest outstanding to suppliers. The authorities will servicing domestic debt issued to clear obligations ongoing investment projects in risk of a decline of Petrocaribe flows by only funding mitigate the down to more sustainable levels. FY2015, bringing capital expenditures with Petrocaribe resources. The deficit will continue to be mainly financed is 16. The budget deposits to be largely preserved, which decrease in the fiscal deficit will allow government stock of treasury bills is expected to increase by against negative shocks. The essential as insurance perspective. A recent World Bank study found that 9 Fuel subsidies are largely regressive from an richest income 20 percent distribution of the population. 90 percent of fuel subsidies accrued to the of health and education, and strengthen the 10 Increases in current spending are essential to improve reduced. the quality security situation as MINUSTAH forces are gradually national taxes of about 0.5 percent of GDP in FY2014. spending is partly financed by earmarked The municipalities' INTERNATIONAL MONETARY FUND government stock of treasury bills is expected to increase by against negative shocks. The essential as insurance perspective. A recent World Bank study found that 9 Fuel subsidies are largely regressive from an richest income 20 percent distribution of the population. 90 percent of fuel subsidies accrued to the of health and education, and strengthen the 10 Increases in current spending are essential to improve reduced. the quality security situation as MINUSTAH forces are gradually national taxes of about 0.5 percent of GDP in FY2014. spending is partly financed by earmarked The municipalities' INTERNATIONAL MONETARY FUND --- Page 10 --- HAITI should allow for better cash and of GDP. Staff emphasized that TSA implementation therefore avoiding any 0.4 percent lags in the payment for suppliers, debt management and result in predictable emergence of arrears. appropriate, but of structural reforms was broadly 17. Progress in the implementation 12 In particular, renewed efforts are needed in some areas. the tax base, Staff reiterated that efforts should be geared at expanding Tax Administration. rates. The authorities explained that work to including through increasing compliance medium (MTO) and large-tax payer (LTO) offices strengthen the capacity and operation of the local tax offices to the MTO) is ongoing the transfer of files from the LTO and other and (including Work also continued to improve compliance (with support from the Fund and Canada). for e-payments and the limited use of collection but the absence of a legal framework In enforce continue to represent major sources of inefficiency. commercial banks for tax payments IT network for tax collection is hampered by the lack of a nationally integrated officers were addition, tax and to counter smuggling, more customs filing. To increase customs revenue ex post controls, and work continued to measures were implemented to strengthen deployed, expand border posts from six to over thirty." code that will be submitted for The authorities have completed a new mining Tax Policy. has prepared a work plan that includes parliamentary adoption. The tax department burdensome small taxes. The authorities amendments to the tax code and a review of numerous also aim at reducing tax exemptions. assistance on fuel product pricing (in July). The authorities received IMF technical Fuel Pricing. to an automatic formula tracking international Staff argued that prices should be set according formula should be implemented following built-in buffer mechanism. Such a prices, with some authorities agreed that fuel prices need to track the elimination of foregone revenues. The international prices, and are analyzing staff proposals. The Fund has posted (with Canadian Treasury Single Account and Debt Management. advice on debt and cash management (in resident expert to provide financing) a long-term establishing reconfigured accounting centers June). Two orders by the Prime Minister (arrêtés) and functioning, were the Ministry of Finance control over their organization and granting end-November. Public accountants were redeployed published in the official gazette by implementation have resumed. In beginning in FY2015 and financial controls over investment at the BRH were opened (with the main account and revenue accounts parallel, the Treasury's accounts (for investment and current latter leveled daily). Most importantly, expenditure transformed into sub-accounts while specific held at BRH are in the process of being spending) of Finance and comprising high-level representatives of key 12 A strategic commission led by the Minister three months to take decisions on public financial management. stakeholders including donors, is meeting every by the recent resignation of its Director conditions for the Tax Department remain difficult as evidenced Working General. INTERNATIONAL MONETARY FUND 9 the BRH were opened (with the main account and revenue accounts parallel, the Treasury's accounts (for investment and current latter leveled daily). Most importantly, expenditure transformed into sub-accounts while specific held at BRH are in the process of being spending) of Finance and comprising high-level representatives of key 12 A strategic commission led by the Minister three months to take decisions on public financial management. stakeholders including donors, is meeting every by the recent resignation of its Director conditions for the Tax Department remain difficult as evidenced Working General. INTERNATIONAL MONETARY FUND 9 --- Page 11 --- HAITI accounts at BRH. Strengthening the debt accounts will be transformed into secondary the revenue due to the fact that Congress has not yet passed unit advanced more slowly, including corresponding law. stressed that a PIP review under the World Public Investment Program (PIP). The authorities will inform the work of a task force at Bank's Public Expenditure Review is ongoing. This analysis framework. The authorities intend to of Finance to assess the public investment to enhance the Ministry framework for both the Finance and Planning Ministries create a unified investment growth. the efficiency of public investment and boosting Minister established a joint working group (with the Electricity Sector. In March, the Prime and implementation of Bank, IDB, U.S., and the Fund) to track the sector's performance resulted in a World in improving billing and collection IFI-sponsored improvement plans. Slow progress contract. In parallel, the to place EDH under a private management power decision (in September) of in contracts with independent Prime Minister is seeking to reduce the cost electricity generation plant, are rehabilitating the only hydroelectric providers (IPPs). The IDB and Germany need to strengthen monitoring and costs. Staff emphasized the of a to decrease generation the sector's imbalance would be a key objective reporting, and argued that reducing and growth. future ECF arrangement to support fiscal sustainability possible and Financial Policies C. Monetary policy in a context of lower official Staff discussed the challenges facing monetary Staff expressed 18. should remain tight given still-large fiscal imbalances. inflows." Monetary policy bonds in the computation of legal reserve the view that authorizing banks to use government loosening of monetary should not be repeated as it would represent an unwarranted further is requirements staff noted that if tightening conditions. As legal reserve requirements are very high, Staff urged the BRH to keep needed, it should be implemented through open market reduced operations. and pressures in the exchange rate policy tight until the fiscal deficit is effectively monetary anchor monetary policy expectations. market subside. This would help additional of exchange rate changes to inflation poses 19. The strong pass-through the rate as a nominal anchor, its vulnerability Staff argued that Haiti's use of exchange reserves challenges. flows justify maintaining international to weather shocks, and the risks to Petrocaribe advice, staff stressed that foreign months of prospective imports. In line with previous shortbetween 4-5 and geared at avoiding unwarranted exchange market intervention should be parsimonious of the real exchange rate with fundamentals. This would allow continued alignment inflation term volatility. objectives should further anchor Appropriate communication of monetary policy buffers and would allow the exchange rate to Fiscal consolidation is crucial to preserve expectations. continue its role as a nominal anchor. Analysis" ") in the Staff Report for the Seventh ECF Review. 14 See Section A of Annex I ("Debt Sustainability 10 INTERNATIONAL MONETARY FUND months of prospective imports. In line with previous shortbetween 4-5 and geared at avoiding unwarranted exchange market intervention should be parsimonious of the real exchange rate with fundamentals. This would allow continued alignment inflation term volatility. objectives should further anchor Appropriate communication of monetary policy buffers and would allow the exchange rate to Fiscal consolidation is crucial to preserve expectations. continue its role as a nominal anchor. Analysis" ") in the Staff Report for the Seventh ECF Review. 14 See Section A of Annex I ("Debt Sustainability 10 INTERNATIONAL MONETARY FUND --- Page 12 --- HAITI rate level in advance of next of the real exchange 20. Staff discussed the appropriateness rate has drifted slowly upwards in recent Although the real exchange year's Article IV consultation. that its level continues to be broadly appropriate. years, preliminary staff calculations suggest structural reforms to increase productivity. Strengthening competitiveness will require advancing real exchange rate. 15 will allow increases in real wages and in the equilibrium This in turn remains low and high reserve requirements 21. Haiti's level of financial intermediation assets at end-2014 after a steady increase from banks. Net loans reached 43 percent of in constrain to have reached a plateau. Monetary policy tightening 25 percent in 2010, but they appear has reduced excess reserves, and thus, further FY2013 and FY2014 (despite the recent loosening) base. Staff argued that the will be tightly linked to expansions of the deposit may credit growth rates on private and public sector deposits application of identical legal reserve requirement maintain larger liquidity buffers. Staff constrain private sector credit, as public banks normally may, justify some forward marginal changes in reserve requirements suggested that going that this would penalize state-owned banks. Meanwhile, rebalancing, but the authorities contended staff consider that the high levels of credit NPLS remain low despite a recent increase, but of vulnerability. Staff reiterated that lending could be a source concentration and related-party should be implemented systematically. stress testing implementation, financial Staff discussed progress in improving monetary policy 22. of the anti-money laundering framework. sector deepening, and the implementation established to rate market. An electronic platform is being Strengthening the exchange and depth of the foreign exchange market. increase the transparency, efficiency, Fund technical assistance (in August) conducted an International reserve management. current practices. 16 Staff and at the BRH, and catalogued assessment of reserve management and agreed on a work program to implement the authorities discussed the findings new ECF. including in the context of a possible recommendations The mission enquired about progress with the Safeguard assessment recommendations. audited financial statements FY2013 audit of the BRH, and urged the authorities to publish assessment of the 2010 update safeguards before end-November 2014. The implementation investment committee's autonomy, and continues, albeit slowly. Progress in strengthening the was mixed, and the officer to monitor foreign reserves management appointing a compliance ranked Haiti as 143rd (out of 148 countries), underlining inadequate and 15. The latest "Global Competitiveness Report" labor regulations and low productivity, poor governance also infrastructure and access to financing, restrictive factors for doing business. The World Bank' S "Doing Business" political instability as the most problematic the (177 out of 189). ranked Haiti among the lowest in survey on reserve management included concluded that the BRH had implemented most recommendations the framework for reserve management The mission assessment. However, it also noted that risk and that there could be a in the 2010 update safeguards decisions could be better documented; could be strengthened; that reserve management decisions to the recently established internal guidelines. better alignment of portfolio management INTERNATIONAL MONETARY FUND 11 to financing, restrictive factors for doing business. The World Bank' S "Doing Business" political instability as the most problematic the (177 out of 189). ranked Haiti among the lowest in survey on reserve management included concluded that the BRH had implemented most recommendations the framework for reserve management The mission assessment. However, it also noted that risk and that there could be a in the 2010 update safeguards decisions could be better documented; could be strengthened; that reserve management decisions to the recently established internal guidelines. better alignment of portfolio management INTERNATIONAL MONETARY FUND 11 --- Page 13 --- HAITI safeguards assessment will be needed in of IFRS remains outstanding. An updated full adoption case of a successor arrangement institutions (MFIS). The related draft laws Cooperatives and Microfinance Laws on Financial are still awaiting parliamentary adoption. Financial Action Task Force (CFATF) recognizes that AML/CFT. In its latest report, the Caribbean addresses a number of its law in November 2013) issues. the new AML/CFT (promulgated authorities to redouble efforts to address remaining recommendations: Staff urged the DISCUSSIONS ON A ASSESSMENT AND EX POST POSSIBLE NEW ECF ARRANGEMENT staff argued that a new ECF with the conclusions of the Ex Post Assessment, needed 23. In line in macroeconomic: stability and support could help consolidate gains expect it to focus on arrangement intend to request a successor arrangement, structural reforms. The authorities anchor expectations in the context policies, and argued that it would help outset employment and growth should recognize from the risks. Staff agreed and stressed that a new program program of of heightened risks materialize. In particular, the authorities' what role it will play in case downside reforms under a possible new ECF arrangement should, deficit to ensure debt stability. This will require reducing the fiscal to the Entrench macroeconomic out, tax collection improved, and transfers sustainability. Fuel subsidies should be phased help rebuild buffers, and enhance reduced. This should crowd-in private credit, electricity sector rate as a nominal anchor. Improving the central bank's credibility in using the exchange more generally should and the conduct of monetary policy international reserve management also contribute to better macroeconomic outcomes. reduction. A fundamental objective will be to Remove bottlenecks to growth and poverty allow a fuller use of the benefits (in terms of strengthen growth and job creation. This should afforded by U.S. trade legislation of Haitian apparel exports to the U.S. market) in access creation, and higher labor productivity. Increases (HOPE/HELP acts) to promote job the value added of Haiti's exports. A new program competitiveness will progressively increase sector (including by developing a processes to promote the private at should address government the cadastre). A new program should aim comprehensive tax code and strengthening which constitutes a significant bottleneck to improving the operations of the electricity sector, coordination and transparency of donorgrowth and fiscal sustainability. Improved donor investment and boost growth and should promote effectiveness in public financed spending poverty reduction. 17 In line with IMF safeguards policy. MONETARY FUND 12 INTERNATIONAL to promote job the value added of Haiti's exports. A new program competitiveness will progressively increase sector (including by developing a processes to promote the private at should address government the cadastre). A new program should aim comprehensive tax code and strengthening which constitutes a significant bottleneck to improving the operations of the electricity sector, coordination and transparency of donorgrowth and fiscal sustainability. Improved donor investment and boost growth and should promote effectiveness in public financed spending poverty reduction. 17 In line with IMF safeguards policy. MONETARY FUND 12 INTERNATIONAL --- Page 14 --- HAITI of the budget process. This would increase Strengthen the governance and transparency for poverty reduction) and could the effectiveness and efficiency of fiscal policy (including of the TSA; improving donor flows. This will require finalizing the implementation unlock further and effectiveness of the public and enhancing the transparency cash and debt management; investment framework. of economic data complicates policy design, Improve economic statistics. The poor quality would catalyze technical A possible new ECF arrangement implementation, and ex post analysis. statistics. There is also room to improve assistance mainly on national accounts and employment balance of payments statistics. STAFF APPRAISAL for Haiti. Over the past 472 years, the 24. This is the final review under the ECF arrangement an anchor after the devastating stability and provided program contributed to macroeconomic structural front has been steady but slow. Both earthquake of January 2010. Progress on the the pace of reforms, as highlighted in the unforeseen shocks and Haiti's continued fragility inhibited constraints will be needed to achieve capacity, infrastructure, and governance EPA. Addressing sustained growth and reduce poverty. Economic growth and since the seventh review has been broadly satisfactory. criteria 25. Progress All but one quantitative performance inflation during FY2014 were similar to projections. fronts took longer than expected, but and prior actions on the fiscal and structural were observed the observance of structural benchmarks. were implemented, ensuring terms-of-trade shock but Decreased oil prices are a positive 26. Downside risks are significant. Petrocaribe flows. The authorities should resist pressures increase the likelihood of a sudden stop of decreases, particularly as they may not be fiscal spending in response to the price affected if political for unsustainable could be negatively permanent Reform momentum and economic expectations tensions in the event of a commodity price and Haiti remains vulnerable to social tensions deepen, risks. Renewed reform efforts should support higher shock. Weather events also pose significant contain risks, and promote additional donor support. growth, and continue through the medium term. Fiscal consolidation should begin in FY2015 buffers, and achieve 27. essential to restore debt sustainability, protect external Lower fiscal deficits are subsidies, enlarging the tax base, and conducive to growth. To this end, focusing should a policy mix more decreases in external flows. The authorities combating evasion are crucial to offset expected of domestic fuel prices to for ending the fuel price freeze. A gradual convergence of GDP). The current be commended forgone revenues (of at least 2 percent international prices should eliminate in that regard. The lower international oil prices provides a unique opportunity environment of should protect the most vulnerable. implementation of mitigating measures to improving of the electricity sector will contribute the performance in 28. Strengthening Government transfers to EDH remained large government finances and support growth. decision by the Prime Minister to place EDH A recent FY2014, in a context of still-weak performance. INTERNATIONAL MONETARY FUND 13 gradual convergence of GDP). The current be commended forgone revenues (of at least 2 percent international prices should eliminate in that regard. The lower international oil prices provides a unique opportunity environment of should protect the most vulnerable. implementation of mitigating measures to improving of the electricity sector will contribute the performance in 28. Strengthening Government transfers to EDH remained large government finances and support growth. decision by the Prime Minister to place EDH A recent FY2014, in a context of still-weak performance. INTERNATIONAL MONETARY FUND 13 --- Page 15 --- HAITI result in in billing and collection. contract is expected to improvements a under a management of the electricity sector would constitute monitoring, reporting and performance Strengthening cornerstone of a new ECF arrangement. need to be deepened to financial management advanced, but will 29. Reforms in public despite delays mainly rooted in capacity and have lasting results. TSA implementation progressed and transparency of the budget process infrastructure constraints. Strengthening the governance in these areas will gradually result in a more higher donor flows. Pushing forward under should promote the public investment framework (currently effective fiscal policy. In particular, improving facilitate growth. The public debt law and in the context of the World Bank' s PER) should analysis of finance need to be passed by Parliament. the law reorganizing the ministry policy. High legal reserve consolidation is a pre-condition for loosening monetary 30. Fiscal should be implemented through open requirements imply that any needed further tightening to inflation and the use of of exchange rate changes market operations. The strong pass-through international reserves to anchor expectations. the exchange rate as nominal anchor require sufficient weather shocks and the possibility of a together with Haiti's vulnerability to 4-5 months of These considerations, international reserves between sudden stop of Petrocaribe flows justify keeping objectives should further anchor Appropriate communication of policy prospective imports. expectations. should be implemented. The Central safeguard assessment recommendations end31. Pending to be published with delays, by FY2013 audited financial statements are expected Bank's of outstanding safeguards recommendations November 2014. Accelerating the implementation of the Investment Committee, remains including IFRS adoption and strengthening the autonomy identified areas that need of foreign reserve management guidelines important. An assessment assistance by the Fund. On bank supervision, strengthening, including through further technical risks. Many CFATF systematically to address existing stress testing should be performed of the AML/CFT law, but further action is recommendations were addressed by the promulgation and on microfinance insurance companies and on financial cooperatives needed. Laws on institutions need to be passed by Parliament. and review under the ECF arrangement recommend the completion of the eighth 32. Staff of performance criterion. the granting of a waiver of nonobservance 14 INTERNATIONAL MONETARY FUND --- Page 16 --- HAITI Figure 1. Haiti: Program Performance 2013-14 1/ Performance Criteria Thel March PC and June IT on net international reserves andgiven base money performance, thisresulted in lowerweremet with largemargins. than- -programmed. net domestic assetsofthe BRH. 1400 25 Netinternational Reserves Net Domestic Assets (US$ millions) Actual 20 (Billions, gourdes) - o Adjusted floor 1200 Actual o Adjusted ceiling 1000 10 600 -5 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 -5 Thel March PC on net BRHcredittothe, government was and the repos that exceeded due to owe-thonprojietedireurybitplacement, continuous PC onnon-concesionale tidioronsbemonedfite debt wereunwound. Net BRH Credit to the Central Government 18 600 (Billions, gourdes) Contracting of Non- -Concessional Debt 16 500 (US$ millions, cumulative since Sep-09) Actual Actual 14 400 * Adjusted ceiling Continuous ceiling -13 Mar-14 Jun-14 -5 Thel March PC on net BRHcredittothe, government was and the repos that exceeded due to owe-thonprojietedireurybitplacement, continuous PC onnon-concesionale tidioronsbemonedfite debt wereunwound. Net BRH Credit to the Central Government 18 600 (Billions, gourdes) Contracting of Non- -Concessional Debt 16 500 (US$ millions, cumulative since Sep-09) Actual Actual 14 400 * Adjusted ceiling Continuous ceiling 12 300 10 200 8 100 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Jun- 14 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 0 Indicative Targets Baser money was lower thanprojected tasi monetarypolicy .andi increases in checks incirculation and other financing changes redicedgourdereenves. itemspushedup net domestic credit earlyin the year. fiscaly 60 20 Monetary Base Net Dom. Financing to Central Government Actual 55 (Billions.gourdes) (Billions, gourdes) I Indicativet target 0 Actual e Adjusted target 35 0 30 -5 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 -5 Jun-14 Source: National Authorities; and IMF staff estimates. 1/June and December are indicative. INTERNATIONAL MONETARY FUND 15 --- Page 17 --- HAITI Figure 2. Haiti: Recent Economic Developments, 2011-14 1/ Import growth wasabout equal to eoportsandtrangersin .but thecurrent account deficit narrowed somewhat FY2014.. ona normalizing services balance. Exports and Imports 50 5 Current Account 4000 (US$ millions; and percent ofGDP) (Percent ofGDP) Current account balance Services balance -2000 -25 -4000 Exports -5 -5 Imports -50 -6000 Current transfers (net) Trade balance, % ofGDP (right axis) -8000 -75 -10 -10 Thedeficit continues to bel largely financed by concessional, flowsf from Venezuela.. .and decreases in net foreignassets of the BRH. Financing (US$ millions) International Reserves (USSmillions) Gross international reserves, months imports 12 (righta axis)2/ Net international reserves Net foreignasssts, 2000 T - - Ian - T -600 -400 -200 0 200 400 600 800 1000 1000 MForeign dir recti investment (net) Changein net foreign assets - Errorsand omissions MPetroCaribef financing Inflation is beginning to rise from recent lows.. and the real exchange ratehas appreciotedgrodually 20 140 Inflation (percent change,y y/y) Core Exchangel Rates Headline 130 (Oct 2009-July2014) Nominal effective Food exchange rate (2010=100) Administeredprices Real effective exchange 38 rate (2010=100) Gourde per U.S. dollar (right axis) - -5 5 80 Source: National Authorities; and IMF staff estimates. 1/ Data are in fiscal years. 2/ Gross international reserves exclude central bank repurchase operations in 2013. 16 INTERNATIONAL MONETARY FUND --- Page 18 --- HAITI Figure 3. Haiti: Fiscal Developments, 2011-14 1/ Revenues (excluding project grants)were flat in FY2014.. aslorgefrgonecustioms revenues offset a generallygood performanceoftaxrevenue. Taxes OCustom duties Domestic Revenue and Budget Support ofGDP) D Taxes ongoods and services 15 (Percent ofGDP) DDomestic revenue (Percent OOther Incometax OBudget supportgrants bank repurchase operations in 2013. 16 INTERNATIONAL MONETARY FUND --- Page 18 --- HAITI Figure 3. Haiti: Fiscal Developments, 2011-14 1/ Revenues (excluding project grants)were flat in FY2014.. aslorgefrgonecustioms revenues offset a generallygood performanceoftaxrevenue. Taxes OCustom duties Domestic Revenue and Budget Support ofGDP) D Taxes ongoods and services 15 (Percent ofGDP) DDomestic revenue (Percent OOther Incometax OBudget supportgrants Domesticaly-financede capital expenditure fell, due to delays in .and petrocqribe-relatedspending also slowed down. theondoghionoftheny2014t budget... 50 12 Petrocaribe balance Primary domestical-financed expenditure (Percent ofGDP) 10 (Percent ofGDP) OWages and salaries Investment OGoods ands services Transfers to EDH Loans to electridtysector OTransfers and subsidies Inflows Dom-fnancedcapialexp. Petrocaribe debt(rightaxis), 10 2 theoverall and the deficit was largelyt financed by Petrocaribet flows and a Duet to lower than-projectedcapitel expenditure, decrease in government deposits witht the banking system. fiscal deficit was lower than under the program.. 32 10 Revenue and Expenditure (2014) Financing OCentral bank (Percent ofGDP) 8 (Percent ofGDP) OCommerdal banks MProgram DActual DOther domestic financing J Petrocaribe flows - -8 -8 -2 Domestic Current Capital Balance -2 Revenue Grants expenditure expenditure Source: National Authorities; and IMF staff estimates. 1/ Data are in fiscal years unless noted otherwise. INTERNATIONAL MONETARY FUND 17 --- Page 19 --- HAITI Figure 4. Haiti: Monetary and Financial Market Developments, 2011-14 1/ Base money growthshrank to zero at end-year as monetary .but broad money growthreninedstobler reflecting policychangesollwedgourderecerves tof fall.. moderate deposit growth. 45 34 Contributions to Base Money Growth Contributions to Broad Money Growth Percentage points, y/y) 28 (Percentage points, y/y) Bank reserves L Dollar deposits Currenyincirculation Base money Gourde deposits 15 16 Currencyincirculation -15 -15 -2 -2 Tighter policies have reduced banks' excess reserves, .and led to an increase in real interest and rates constraining credit... lending (onaverage) in FY2014. 25 30 Loan-to-Deposit Ratio RealInterest Rates 100 (Percent) 25 (Percent) Real BRHS 91 Excess reservesas shareoftotal 20 dayrate deposits (right axis) (right axis) Private sector creditto Real average lendingr grate private ingourdes sector deposits I 5 5 -5 -10 Theser measures have served to cool credit growth, Meanwhile deposit dollarization remains highand credit particulorlyingourdes dollrirationhosrecenhasrecently-increosed 30 70 Credit Growth to the Private Sector Dollarization of Deposits and Credit 60 (Percent) 65 (Percent) Gourde credit growth Dollar credit growth 25 60 Private sector credit/GDP (rightaxis) Deposits Credit 15 45 -15 10 35 Source: National Authorities; and IMF staff estimates. 1/ Data are in fiscal years. 18 INTERNATIONAL MONETARY FUND --- Page 20 --- HAITI Figure 5. Haiti: Banking Sector, 2011-14 1/ The Haitian banking sector is dominated byl largebanks. Bank credit is concentratedin: services, in particular commerce, transportation, andr real estate Share ofTop 3 Banks in Total Banking Sector Bank Credit by ICommerce (Percent) Sector I Services, utilities & transportation HAssets (%total banking assets) (Percent oftotal) I Real estate I Deposit(%t totalbankingdeposty) II Industrial sector IC Consumer loan I Hospitalitys sector I Others 20 --- HAITI Figure 5. Haiti: Banking Sector, 2011-14 1/ The Haitian banking sector is dominated byl largebanks. Bank credit is concentratedin: services, in particular commerce, transportation, andr real estate Share ofTop 3 Banks in Total Banking Sector Bank Credit by ICommerce (Percent) Sector I Services, utilities & transportation HAssets (%total banking assets) (Percent oftotal) I Real estate I Deposit(%t totalbankingdeposty) II Industrial sector IC Consumer loan I Hospitalitys sector I Others Thesystem's capital adequacyratio remains abovethe andbanks remain proftabledepiteosmal increase in regulatoryminimumNPLsin FY2014. 20 7 Capital Adequacy Ratio (Percent) Earnings and Profitability (Percent) Regulatorycapital to risk -weighted assets NPLS to gross loans Regulatoryminimum ROA ROE (right axis) Source: Haitian National Authorities; and IMF staff estimates. 1/ Data are in fiscalyears. INTERNATIONAL MONETARY FUND 19 --- Page 21 --- HAITI Table 1. Haiti: Selected Economic and Financial Indicators, 2010/11-2014/15 (Fiscal Year Ending September 30) Nominal GDP (2013): US$8.5 billion Population (2013): 10.3 million GDP per capita (2013): $820 GDP per capita (2013): $820 Percent of population below poverty line (2012): 58 2010/11 2011/2012 2012/2013 2013/14 2014/15 Prog. Act. Act. Prov. (IMF Report Country No. Est. 2/ Proj. 14/105) (Change over previous year; unless otherwise indicated) National income and prices 1/ GDP at constant prices 5.5 2.9 4.3 4.0 3.5-4 GDP deflator 3.0-3.5 7.5 5.3 6.6 5.1 4.6 6.5 Consumer prices (period average) 7.4 6.8 6.8 4.1 3.9 6.7 Consumer prices (end of period) 10.4 6.5 4.5 5.7 5.3 6.5 External sector Exports (goods, valued in dollars, f.o.b.) 36.3 1.0 13.9 7.5 3.2 4.5 Imports (goods, valued in dollars, f.o.b.) 10.1 -7.1 8.1 2.0 Real effective exchange rate (end of period; appreciation) 2.0 2.3 0.7 1.9 -1.5 n.a. ) 10.4 6.5 4.5 5.7 5.3 6.5 External sector Exports (goods, valued in dollars, f.o.b.) 36.3 1.0 13.9 7.5 3.2 4.5 Imports (goods, valued in dollars, f.o.b.) 10.1 -7.1 8.1 2.0 Real effective exchange rate (end of period; appreciation) 2.0 2.3 0.7 1.9 -1.5 n.a. n.a. n.a. Money and credit (valued in gourdes) Credit to private sector (in dollars and gourdes) 24.5 29.8 16.4 8.0 9.4 Base money (currency in circulation and gourde deposits) 6.0 -3.7 15.1 7.1 7.4 Broad money (incl. foreign currency deposits) 10.4 6.9 0.5 8.0 6.6 8.5 8.8 8.2 (In percent of GDP; unless otherwise indicated) Central government Overall balance (including grants) 3.6 4.8 -7.1 6.7 6.3 -3.6 Domestic revenue 12.8 12.8 12.7 13.2 12.3 14.1 Grants 9.1 10.6 8.1 7.4 6.9 5.9 Expenditures 25.5 28.2 27.9 27.3 25.5 23.5 Current expenditures 11.6 11.9 11.8 12.5 12.2 12.9 Capital expenditures 13.9 16.3 16.1 14.9 13.2 10.6 Savings and investment Gross investment 27.9 29.5 30.0 29.2 27.2 Of which: public investment 13.9 24.5 Gross national 16.3 16.1 14.9 13.2 10.6 savings 23.5 23.9 23.3 23.3 21.5 Of which: central government savings 2.4 1.2 1.9 20.0 External current account balance (including official grants) -4.3 1.9 1.3 2.0 External current account balance (excluding official -5.7 -6.7 -5.8 -5.7 -4.5 grants) 23.6 18.2 -15.6 13.6 -12.6 -10.4 Public Debt 3/ External public debt (medium and long- term, end of period) 8.7 13.5 17.4 19.8 Total public sector debt (end- -of- period) 4/ 8.7 14.4 19.5 20.6 22.2 External public debt service 5/ 22.9 23.7 26.1 0.1 0.7 1.6 2.4 2.4 4.0 (In millions of dollars, unless otherwise indicated) Overall balance of payments 4 Public Debt 3/ External public debt (medium and long- term, end of period) 8.7 13.5 17.4 19.8 Total public sector debt (end- -of- period) 4/ 8.7 14.4 19.5 20.6 22.2 External public debt service 5/ 22.9 23.7 26.1 0.1 0.7 1.6 2.4 2.4 4.0 (In millions of dollars, unless otherwise indicated) Overall balance of payments -282 -68 -178 -33 Net international reserves (program definition) 6/ 1,180 1,305 1,222 Liquid gross reserves 7/ 1,124 1,007 In months of imports of the 2,000 2,184 2,242 1,940 1,782 1,754 following year 5.7 5.9 6.0 4.9 4.8 Nominal GDP (millions of Gourdes) 302,854 328,061 364,811 398,705 4.5 Nominal GDP (millions of US$) 395,902 435,183 7,516 7,890 8,458 8,980 8,867 9,365 Sources: Ministry of Economy and Finance; Bank of the Republic of Haiti; World Bank; Fund staff estimates and projections. 1/ Staff assume a range of 3.5-4 percent and a point projection of 3.75 percent for growth in FY2014; and a range of 3-3.5 percent and projection of 3.25 percent for FY2015. a point 2/ Figures for FY2014 are preliminary and based on incomplete information. 3/1 Debt ratios differ slightly from those in the DSA given the use of average, instead of end of period, exchange rates. 4/ Excludes central bank repurchase operations in FY2013. 5/ In percent of exports of goods and nonfactor ser vices. Includes debt relief. 6/1 Includes SDR allocation as both an asset and liability. 7/E Excludes gold; includes transactions related to BRHrepurchase operations. 20 INTERNATIONAL MONETARY FUND --- Page 22 --- HAITI Table 2a. Haiti: Central Government Operations, 2010/11-2014/15 (Fiscal year ending September 30; in millions of gourdes) 2010/2011 2011/2012 2012/13 2013/2014 2014/15 Prog. (IMF Country Report No Act. Act Prov. 14/105) Est Proj Total revenue and grants 66,321 76,774 75,855 82,249 76,085 Domestic revenue 38,893 41,970 46,475 52,679 48,669 86,987 Domestic taxes 24,460 28,076 29,242 34,597 33,380 61,429 Customs duties 13,672 13,721 14,230 15,378 13,401 38,291 Ofv which: fuelt taxes 1,573 1,877 1,028 18,128 Other current revenuet 7,989 Ofi which: FNE 3,002 2,704 1,888 5,010 na. 1,350 1,954 1,562 1,500 Ofwhich: FER na. Grants 1,300 27,428 34,803 29,380 29,570 27,415 25,558 Budget support 3,492 1,123 3,791 4,573 5,001 3,324 Project grants 23,935 33,681 25,589 24,997 22,414 22,234 Total expenditure 2/ 77,352 92,490 101,888 109,036 100,894 102,481 Current expenditure 35,232 39,006 43,158 49,801 48,473 56,185 Wages and's salaries 14,809 16,706 20,007 23,700 22,625 Goods and services 7,525 11,406 11,320 13,820 27,000 Interest payments 13,175 14,643 1,272 1,359 1,711 1,755 1,774 2,348 External ,888 109,036 100,894 102,481 Current expenditure 35,232 39,006 43,158 49,801 48,473 56,185 Wages and's salaries 14,809 16,706 20,007 23,700 22,625 Goods and services 7,525 11,406 11,320 13,820 27,000 Interest payments 13,175 14,643 1,272 1,359 1,711 1,755 1,774 2,348 External Domestic 1,048 1,119 1,130 1,304 1,184 1,200 1,300 Transfers and subsidies 11,626 9,534 10,120 10,526 10,898 12,195 Ofwhich: energy sector 8,233 4,844 5,652 5,741 5,331 5,100 Ofv which: mitigating measures (fuel) Capital expenditure 2,781 42,120 53,484 58,730 59,234 52,421 46,296 Domestically financed 17,642 19,252 32,870 33,923 29,209 23,581 Ofw which: Treasury 16,431 19,252 32,870 33,923 29,209 23,581 Ofv which: related to PetroCaribe spending 7,479 9,264 14,450 15,151 14,596 Ofv which: PCDR 1,130 1,587 11,500 Ofv which: FNE and FER related spending 1,404 3,010 Foreign- financed 1,704 1,748 2,800 24,478 34,232 25,861 25,312 23,212 22,716 Overall balance including grants 11,031 -15,716 -26,033 -26,787 24,809 -15,494 Excluding grants 38,458 -50,520 55,413 -56,357 52,224 41,052 Excluding grants and externally financed projects 13,980 -16,288 -29,552 31,045 29,013 -18,337 Adjustment (unsettled payment obligations) -18 3,388 -410 Financing 11,013 15,855 29,421 26,787 24,399 15,494 External net financing 16,341 15,454 16,636 16,076 15,601 Loans (net) 16,341 15,454 16,636 16,076 12,110 Disbursements 15,601 12,110 16,419 15,581 17,425 17,214 16,730 14,218 Of which: Petrocaribe 13,216 15,029 17,153 16,899 15,933 13,736 Project loans Amortization -77 -127 789 -1,138 -1,129 Arrears (net) 2,108 Internal net financing 5,328 402 12,785 10,711 8,798 3,384 Banking system 7,163 -3,480 14,026 11,537 10,442 13,505 BRH -2,912 -433 2,332 5,200 5,272 of which PCDR 1,130 1,587 7,505 Ofv which: bonds 3,000 1,097 3,010 government 2,869 -574 Commercial banks 4,251 -3,048 11,694 6,337 5,171 6,000 Of which: T-bills 2,875 1,875 1,105 1,053 Of which: government bonds Nonbank financing 2,869 -574 1.835 3,882 1,241 825 1,645 Ofw which: T-bills 10,121 1,800 1,875 -250 1,000 Ofwhich: Amort Long- term obligations 1,800 Ofwhich Receivables from the electricity sector 1,845 1.883 3,366 2,541 -2,500 Ofwhich EDHI letters of credit 875 1,875 1,105 1,053 Of which: government bonds Nonbank financing 2,869 -574 1.835 3,882 1,241 825 1,645 Ofw which: T-bills 10,121 1,800 1,875 -250 1,000 Ofwhich: Amort Long- term obligations 1,800 Ofwhich Receivables from the electricity sector 1,845 1.883 3,366 2,541 -2,500 Ofwhich EDHI letters of credit Ofwhich: Checks in circulation 1,004 1,000 Ofwhich: Post6/ -63 Sandy government obligations 1,680 0 4,058 -5,738 Memorandum items Balance of Petrocaribe deposits 10,490 13,538 8,555 4,900 at BRH 5,389 3,889 at commercial banks 10,490 13,538 8,555 4,100 3,887 Balance of PCDR account (in millions of USS) 138 5,387 Social spending (in millions of Gourdes) 9,700 13,774 Nominal GDP (millions of Gourdes) 14,350 15,500 14,197.0 16,977.6 302,854 328,061 364,811 398,705 395,902 435,183 Sources: Ministry of Finance and Economy, and Fund staff estimates and projections. 1/The outturn for FY2013-FY2014. and projections for FY2015 include revenues of the National Education Fund (FNE). Projections for FY2015 include revenues of the Road Fund (FER). 2/ Commitment basis, except for domestically financed spending, which is reported on the basis of project account replenishments. 3/1 Includes transfers from Petrocaribe resources from FY2011 onwards. 4/ Capital spending for FY2013 and FY2014 includes post- Sandy emergency outlays. 5/1 Includes Treasury bills, the increase in outstanding debt of IPPS vis-d- vis BMPAD, increases in central government claims vis- d- -vis EDH, net checks in circulation, and payments of judiciary sentences and other domestic claims. 6/ The government placed bonds for G5.7 billioninthe banking system at end- FY2014 to to clear post- -Sandy obligations during FY2015. INTERNATIONAL MONETARY FUND 21 Petrocaribe resources from FY2011 onwards. 4/ Capital spending for FY2013 and FY2014 includes post- Sandy emergency outlays. 5/1 Includes Treasury bills, the increase in outstanding debt of IPPS vis-d- vis BMPAD, increases in central government claims vis- d- -vis EDH, net checks in circulation, and payments of judiciary sentences and other domestic claims. 6/ The government placed bonds for G5.7 billioninthe banking system at end- FY2014 to to clear post- -Sandy obligations during FY2015. INTERNATIONAL MONETARY FUND 21 --- Page 23 --- HAITI Table 2b. Haiti: Central Government Operations, 2010/11-2014/15 (Fiscal year ending September 30; in percent of GDP) 2010/2011 2011/2012 2012/13 2013/2014 2014/15 Prog. (IMF Country Act Act. Prov. ReportNo. 14/105) Est. Proj Total revenue and grants 21.9 23.4 20.8 20.6 19.2 20.0 Domestic revenue 12.8 12.8 12.7 13.2 12.3 14.1 Domestic taxes 8.1 8.6 8.0 8.7 8.4 Customs duties 4.5 4.2 3.9 3.9 3.4 8.8 Of which: fuel taxes 0.5 0.6 0.3 4.2 Other current revenue' 0.3 0.1 0.2 1.8 Ofv which: FNE 0.8 0.7 0.5 1.2 0.0 0.4 0.5 0.4 Of which: FER 0.0 0.0 0.0 0.3 Grants 0.0 0.3 9.1 10.6 8.1 7.4 6.9 5.9 Budget support 1.2 0.3 1.0 1.1 1.3 0.8 Project grants 7.9 10.3 7.0 6.3 5.7 5.1 Total expenditure 2/ 25.5 28.2 27.9 27.3 25.5 23.5 Current expenditure 11.6 11.9 11.8 12.5 Wages and salaries 4.9 5.1 5.5 5.9 12.2 12.9 Goods and services 2.5 3.5 3.1 5.7 6.2 Interest payments 0.4 0.4 3.5 3.3 3.4 External 0.5 0.4 0.4 0.5 0.1 0.1 0.1 0.1 0.1 Domestic 0.4 0.3 0.4 0.3 0.2 Transfers and subsidies 3.8 2.9 0.3 0.3 Of which: energy sector 3/ 2.8 2.6 2.8 2.8 Ofy which: 2.7 1.5 1.5 1.4 1.3 1.2 mitigating measures (fuel) 0.0 0.0 0.0 0.0 Capital expenditure 13.9 16.3 16.1 0.6 Domestically financed 4/ 14.9 13.2 10.6 Of which: Treasury 5.8 5.9 9.0 8.5 7.4 5.4 5.4 5.9 9.0 8.5 7.4 Ofwhich: related to PetroCaribe spending 2.5 2.8 4.0 3.8 3.7 5.4 Ofv which: PCDR 0.0 0.3 0.4 0.4 2.6 Ofv which: FNE and FER related spending 0.5 0.7 Foreign-financed 0.4 0.6 8.1 10.4 7.1 6.3 5.9 5.2 Overall balance including grants -3.6 -4.8 -7.1 -6.7 -6.3 -3.6 Excluding grants -12.7 -15.4 -15.2 -14.1 -13.2 -9.4 Excluding grants and externally financed projects -4.6 -5.0 -8.1 -7.8 -7.3 -4.2 Adjustment (unsettled payment obligations) 0.0 0.0 0.9 0.0 -0.1 0.0 Financing 3.6 4.8 8.1 6.7 6.2 3.6 External netf financing 5.4 4.7 4.6 4.0 3.9 2.8 Loans (net) 5.4 4.7 4.6 4.0 3.9 2.8 Disbursements 5.4 4 Adjustment (unsettled payment obligations) 0.0 0.0 0.9 0.0 -0.1 0.0 Financing 3.6 4.8 8.1 6.7 6.2 3.6 External netf financing 5.4 4.7 4.6 4.0 3.9 2.8 Loans (net) 5.4 4.7 4.6 4.0 3.9 2.8 Disbursements 5.4 4 .7 4.8 4.3 4.2 Of which: Petrocaribe 4.4 4.6 4.7 4.2 4.0 3.3 3.2 Project loans 0.2 0.2 0.1 0.1 0.2 0.1 Amortization 0.0 0.0 -0.2 -0.3 -0.5 Arrears (net) 0.0 0.0 0.0 0.0 -0.3 0.0 0.0 Internal net financing -1.8 0.1 3.5 2.7 2.2 0.8 Banking system -2.4 -1.1 3.8 2.9 2.6 BRH -1.0 -0.1 0.6 1.3 1.3 3.1 of which PCDR 0.0 0.3 0.4 0.8 0.3 1.7 Ofv which: government bonds 0.0 0.0 0.0 0.0 0.7 0.7 Commercial banks 1.4 -0.9 3.2 1.6 1.3 0.1 Of which: T-bills -0.1 0.0 0.8 0.5 0.3 1.4 Ofwhich: government bonds 0.0 0.0 0.0 0.7 0.2 Nonbank financing" 0.6 1.2 -0.3 -0.2 -0.1 Ofv which: T- bills 0.0 0.0 -0.4 -2.3 Ofwhich: Amort Long- term obligations 0.0 0.0 0.5 0.5 -0.1 0.2 Ofw which: receivables from the electricity sector 0.0 0.0 -0.5 -0.9 -0.5 -0.4 Ofwhich: EDHI letters of credit 0.0 0.0 0.0 -0.6 -0.6 Ofwhich: Checks in circulation 0.0 0.0 0.1 -0.3 -0.2 Ofwhich: Post- Sandy government obligations 6/ 0.0 0.0 0.5 0.0 0.0 0.0 1.0 -1.3 Balance of Petrocaribe deposits 3.5 4.1 2.3 1.2 1.4 at BRH 0.0 0.0 0.0 0.2 0.0 0.9 at commercial banks 3.5 4.1 2.3 1.4 0.0 Balance of PCDR account 3.6 3.1 1.0 0.9 Social spending 2.3 1.6 1.6 1.0 3.2 4.2 3.9 3.9 3.6 3.9 Sources: Ministry of Finance and Economy; and Fund staff estimates and projections. .0 0.0 0.0 0.2 0.0 0.9 at commercial banks 3.5 4.1 2.3 1.4 0.0 Balance of PCDR account 3.6 3.1 1.0 0.9 Social spending 2.3 1.6 1.6 1.0 3.2 4.2 3.9 3.9 3.6 3.9 Sources: Ministry of Finance and Economy; and Fund staff estimates and projections. 1/ The outturn for FY2013- -FY2014 and projections for FY2015 include revenues of the National Education Fund (FNE). for FY2015 include revenues of the Road Fund (FER). Projections 2/ Commitment basis, except for domestically financed spending. which IS reported on the basis of project account replenishments. 3/1 Includes transfers from Petrocaribe resources from FY2011 onwards. 4/ Capital spending for FY2013 and FY2014 includes post- Sandy emergency outlays. 5/1 Includes Treasury bills, the increas in outstanding debt of IPPS vis-à- vis BMPAD, increase in central government claims vis-à- -vis EDH, net in circulation, and payments of judiciary sentences and other domestic claims. checks 6/T The government placed bonds for G 5.7 billion in the banking system ate end-f FY2014 to to clear post- Sandy obligations during FY2015. 22 INTERNATIONAL MONETARY FUND --- Page 24 --- HAITI Table 3. Haiti: Summary Accounts of the Banking System, 2010/11-2014/15 (Fiscal year ending September 30; in millions of gourds, unless otherwise indicated) 2010/2011 2011/12 2012/13 2013/14 2014/15 Prog. (IMF Country Report No. Act Act. Prov. 14/105) Est. Proj L Central Bank Net foreign assets 72,470 87,474 78,456 (In millions of US$) 77,929 73,940 75,421 Net international reserves (program) 1/ 1,773 2,067 1,793 1,730 1,622 1,592 1,180 1,305 1,222 Commercial bank forex deposits 1,124 1,007 718 731 Net domestic assets -29,235 -45,833 -30,534 Net credit to the nonfinancial public sector 5,196 -26,359 -25,788 -23,435 Of which: Net credit to the central government 3,424 4,848 12,985 12,767 20,986 Of which: T-bills 9,408 8,975 11,308 16,485 16,579 24,084 Of which: IMF PCDR Debt Relief -10,865 Liabilities to commercial banks (excl gourde deposits) -35,191 -10,086 -8,498 -5,498 -7,401 -4,391 BRH bonds/Open market operations -42,736 -35,918 -38,301 -38,022 -40,816 -6,328 -5,742 -5,945 -5,945 Counterpart of commercial bank forex deposits -28,863 -36,994 -4,709 -5,000 Other -29,973 -32,356 -33,313 -35,816 -6,522 1,042 -532 -3,605 Base Money 43,235 41,641 47,922 51,571 Currency in circulation 48,153 51,987 18,401 20,232 21,352 Commercial bank gourde deposits 24,834 21,410 26,570 23,336 23,865 26,233 28,235 24,288 25,754 I Consolidated Banking System Net foreign assets 104,581 116,015 100,972 (In millions of US$) 98,204 94,514 96,269 2,559 2,741 2,308 2,180 Of which: Commercial banks NFA circulation 48,153 51,987 18,401 20,232 21,352 Commercial bank gourde deposits 24,834 21,410 26,570 23,336 23,865 26,233 28,235 24,288 25,754 I Consolidated Banking System Net foreign assets 104,581 116,015 100,972 (In millions of US$) 98,204 94,514 96,269 2,559 2,741 2,308 2,180 Of which: Commercial banks NFA 2,075 2,032 450 452 Net domestic assets 34,743 32,923 57,800 Credit to the nonfinancial public sector -12,416 74,133 78,228 90,639 -17,727 4,583 Of which: Net credit to the central government -8,055 -11,831 9,863 8,540 22,760 Credit to the private sector 50,526 2,195 13,709 12,638 26,143 65,573 76,350 In gourdes 82,287 83,494 89,686 Inf foreign currency 28,086 38,048 45,597 50,122 47,263 50,946 22,440 27,525 30,753 32,165 In millions of US$ 36,231 38,740 Other 714 795 -3,366 -14,922 -13,967 -18,017 -13,806 -21,807 Broad money 139,324 148,938 158,772 172,337 Currency in circulation 172,742 186,907 18,401 20,232 21,352 Gourde deposits 23,336 23,865 26,233 Foreign currency deposits 52,164 54,933 60,277 66,036 64,017 69,459 68,760 73,774 77,142 In millions of US$ 82,965 84,860 91,216 1,682 1,743 1,764 1,841 1,863 1,925 (12-month percentage change) Currency in circulation 6.5 9.9 5.5 Base money 9.3 11.8 9.9 Gourde money (M2) 6.0 3.7 15.1 7.1 0.5 8.0 Broad money (M3) 7.2 6.5 8.6 9.4 7.7 8.9 10.4 6.9 6.6 8.5 8.8 8.2 Gourde deposits 7.5 5.3 9.7 9.5 6.2 8.5 Foreign currency deposits 13.9 7.3 4.6 7.5 10.0 7.5 Credit to the private sector 24.5 29.8 16.4 8.0 Credit in gourdes 29.4 9.4 7.4 Credit in foreign currency 35.5 19.8 10.2 3.7 7.8 18.9 22.7 11.7 4.8 17.8 6.9 Memorandum items: Foreign currency deposits (percent of total private deposits) 56.9 57.3 56.1 55.7 57.0 Foreign curr. credit to priv. sector (percent of total) 44.4 42.0 40.3 56.8 Commercial Banks' Credit to Private Sector (percent of GDP) 15.9 19.2 39.8 43.4 43.2 20.2 19.9 20.3 19.9 Sources: Bank of the Republic of Haiti; and Fund staff estimates and projections. 1/ Excluding commercial bank forex deposits, letters of credit, guarantees, earmarked project accounts and U.S.dollar- denominated bank reserves. The SDR allocation is not netted out of NIR. INTERNATIONAL MONETARY FUND 23 .0 40.3 56.8 Commercial Banks' Credit to Private Sector (percent of GDP) 15.9 19.2 39.8 43.4 43.2 20.2 19.9 20.3 19.9 Sources: Bank of the Republic of Haiti; and Fund staff estimates and projections. 1/ Excluding commercial bank forex deposits, letters of credit, guarantees, earmarked project accounts and U.S.dollar- denominated bank reserves. The SDR allocation is not netted out of NIR. INTERNATIONAL MONETARY FUND 23 --- Page 25 --- HAITI Table 4a. Haiti: Balance of Payments, 2010/2011-2014/15 (In millions of US$ on a fiscal year basis; unless otherwise indicated) 2010/11 2011/12 2012/13 2013/2014 2014/2015 Prog. (IMF Country Act. Act. Prov. Report No. Est. 14/105) Proj. Current account (including grants) -326 -448 -569 Current account (excluding grants) -523 -502 -420 1,772 -1,436 -1,319 1,223 1,116 -970 Trade balance -2,546 -2,304 2,446 -2,443 -2,479 2,388 Exports of goods Of which Assembly industry 940 912 890 862 Imports of goods -3,314 -3,079 3,329 -3,383 3,392 Of which: Petroleum products -770 -3,341 909 -968 -834 Services (net) -575 -567 -438 -434 377 -362 Receipts 696 701 Payments -1,119 -1,116 1,090 1,130 1,079 -1,095 Income (net) Of which: Interest payments -7 -6 -13 -13 -23 Current transfers (net) 2,757 2,368 2,283 2,316 2,342 Official transfers (net) 2,337 Of which: budget support 1,446 700 614 103 112 Private transfers (net) 1,311 1,380 1,533 1,616 1,728 1,787 Capital and financial accounts Capital transfers 1/ 456 537 Debt stock reduction 2/ -486 -65 Public sector capital flows (net) Loan disbursements 362 349 388 375 Amortization -2 -6 -15 -26 -25 -45 Foreign direct investment (net) Banks (net) 3/ -83 Other items (net) -36 -124 700 614 103 112 Private transfers (net) 1,311 1,380 1,533 1,616 1,728 1,787 Capital and financial accounts Capital transfers 1/ 456 537 Debt stock reduction 2/ -486 -65 Public sector capital flows (net) Loan disbursements 362 349 388 375 Amortization -2 -6 -15 -26 -25 -45 Foreign direct investment (net) Banks (net) 3/ -83 Other items (net) -36 -124 Errors and omissions 4/ -103 -445 0 -213 Overall balance -68 -178 -33 Financing -159 -288 68 178 Change in net foreign assets -166 -293 65 171 Change in gross reserves -210 -38 397 471 Liabilities -4 -332 -300 Utilization of Fund credits(net) Other liabilities 5/ -26 -337 -302 Debt rescheduling and debt relief Memorandum items: Current account (in percent of GDP) -4.3 -5.7 Excluding official transfers -6.7 -5.8 -5.7 4.5 Exports of fo.b -23.6 -18.2 -15.6 -13.6 -12.6 10.4 goods, (percent change) 36.3 1.0 13.9 7.5 3.2 4.5 Imports of goods, f.o.b (percent change) 10.1 -7.1 8.1 2.0 Debt service (in percent of exports of goods and services) 0.1 0.7 1.9 -1.5 1.6 2.4 Gross liquid international reserves (in millions of US$) 6/ 2.4 4.0 (in months of nexty year's imports of goods and services) 2,000 2,184 2,242 1,940 1,782 1,754 5.7 5.9 6.0 4.9 4.8 4.5 Sources: Bank of the Republic of Haiti; and Fund staff estimates and projections. 1/1 Includes IDB, IMF (PCDR), Venezuela, World Bank debt relief in 2010- 2011; and assumption of IFAD debt cancellation in 2014. 2/ Debt relief by Venezuela, World Bank (2010), IDB (2011), projected cancellation of debt by IFAD (2014). IMF/PCDR debt relief in 2010 reflected below 3/ Change in net foreign assets of commercial banks. the line. 4/ Errors and omissions for FY2013 likely reflects underreported imports. 5/ Includes repurchase operations contracted in FY2013 and unwound in FY2014. 6/ Excludes gold; includes repurchase operations contracted in FY2013 and unwound in FY2014. 24 INTERNATIONAL MONETARY FUND cancellation in 2014. 2/ Debt relief by Venezuela, World Bank (2010), IDB (2011), projected cancellation of debt by IFAD (2014). IMF/PCDR debt relief in 2010 reflected below 3/ Change in net foreign assets of commercial banks. the line. 4/ Errors and omissions for FY2013 likely reflects underreported imports. 5/ Includes repurchase operations contracted in FY2013 and unwound in FY2014. 6/ Excludes gold; includes repurchase operations contracted in FY2013 and unwound in FY2014. 24 INTERNATIONAL MONETARY FUND --- Page 26 --- HAITI Table 4b. Haiti: Balance of Payments, 2010/2011-2014/15 (As a percentage of GDP on a fiscal year basis; unless otherwise indicated) 2010/11 2011/12 2012/2013 2013/2014 2014/2015 Prog. (IMF Country Act. Act. Prov. Report No. 14/105) Est. Proj. Current account (including grants) -4.3 -5.7 -6.7 5.8 Current acc count (excluding grants) -5.7 -4.5 -23.6 18.2 -15.6 -13.6 -12.6 -10.4 Trade balance -33.9 -29.2 -28.9 -27.2 28.0 Exports of goods -25.5 10.2 9.8 10.4 10.5 10.3 Of which: Assembly industry 9.5 9.3 10.2 9.9 9.9 9.7 Imports of goods -44.1 9.6 -39.0 -39.4 -37.7 38.3 Ofv which: Petroleum products -35.7 -10.2 10.4 -11.2 -10.1 10.9 -8.9 Services (net) -7.7 7.2 5.2 -4.8 -4.3 -3.9 Receipts 7.2 7.0 7.7 7.8 7.9 7.8 Payments -14.9 -14.1 -12.9 -12.6 -12.2 -11.7 Income (net) 0.5 0.7 0.4 0.4 Of which: Interest payments 0.1 -0.1 0.0 -0.1 -0.1 0.1 -0.1 -0.2 Current transfers (net) 36.7 30.0 27.0 25.8 Official transfers (net) 26.4 25.0 Of which: budget support 19.2 12.5 8.9 7.8 6.9 5.9 1.2 0.3 1.0 1.1 1.3 0.8 Private transfers (net) 17.4 17.5 18.1 18.0 19.5 19.1 Capital and financial accounts 7.8 8.6 Capital transfers 1/ 8.7 5.1 6.1 4.1 8.7 1.0 0.2 0.7 Debt stock reduction 2/ 0.3 0.0 -6.5 0.0 0.0 -0.7 0.0 0.0 Public sector capital flows (net) 4.5 4.7 4.6 4.0 Loan disbursements 3.9 2.8 4.5 4.7 4.8 4.3 4.2 Amortization 3.3 0.0 -0.1 -0.2 -0.3 -0.3 -0.5 Foreign direct investment (net) 1.6 2.0 1.9 1.7 Banks (net) 3/ 1.1 1.2 -1.1 1.4 1.9 0.8 Other items (net) 0.7 0.1 0.6 -0.5 0.0 -1.4 0.0 0.0 Errors and omissions 4/ -1.4 0.8 -5.3 0.0 -2.4 0.0 Overall balance 2.1 3.6 -3.3 -0.8 -2.0 -0.4 Financing -2.1 -3.6 3.3 0.8 2.0 0.4 Change in net foreign assets -2.2 -3.7 3.2 0.7 Change in gross reserves 1.9 0.3 -2.8 -3.7 -0.4 4.4 5.3 0.3 Liabilities 0.6 -0.1 3.7 -3.7 -3.4 0.0 Utilization of Fund credits(net) 0.2 0.3 Other liabilities 5/ 0.1 0.1 0.0 0.0 0.4 -0.3 3.6 -3.8 -3.4 0.0 Debt rescheduling and 0.3 -2.8 -3.7 -0.4 4.4 5.3 0.3 Liabilities 0.6 -0.1 3.7 -3.7 -3.4 0.0 Utilization of Fund credits(net) 0.2 0.3 Other liabilities 5/ 0.1 0.1 0.0 0.0 0.4 -0.3 3.6 -3.8 -3.4 0.0 Debt rescheduling and debt relief 0.1 0.1 0.1 0.0 0.1 0.0 Memorandum items: Exports of goods, f.o.b (percent change) 36.3 1.0 13.9 Imports of goods, f.o.b (percent change) 7.5 3.2 4.5 10.1 -7.1 8.1 2.0 Debt service (in percent of exports of goods and services) 0.1 0.7 1.9 -1.5 1.6 2.4 Gross liquid international reserves (in millions of US$) 6/ 2,000 2.4 4.0 (in months of next year's imports of goods and services) 2,184 2,242 1,940 1,782 1,754 5.7 5.9 6.0 4.9 4.8 4.5 Sources: Bank of the Republic of Haiti; and Fund staff estimates and projections. 1/1 Includes IDB, IMF (PCDR), Venezuela, World Bank debt relief in 2010-2011; and assumption of IFAD debt cancellation in 2014. 2/ Debt relief by Venezuela, World Bank (2010), IDB (2011), projected cancellation of debt by IFAD (2014). IMF/PCDR debt relief in 2010 reflected below 3/ Change in net foreign assets of commercial banks. the line. 4/ Errors and omissions for FY2013 likely reflects underreported imports. 5/1 Includes repurchase operations contracted in FY2013 and unwound in FY2014. , IMF (PCDR), Venezuela, World Bank debt relief in 2010-2011; and assumption of IFAD debt cancellation in 2014. 2/ Debt relief by Venezuela, World Bank (2010), IDB (2011), projected cancellation of debt by IFAD (2014). IMF/PCDR debt relief in 2010 reflected below 3/ Change in net foreign assets of commercial banks. the line. 4/ Errors and omissions for FY2013 likely reflects underreported imports. 5/1 Includes repurchase operations contracted in FY2013 and unwound in FY2014. 6/E Excludes gold; includes repurchase operations contracted in FY2013 and unwound in FY2014. INTERNATIONAL MONETARY FUND 25 --- Page 27 --- HAITI Table 5. Haiti: Financial Soundness Indicators, September 2011-June 2014 (In percent; unless otherwise indicated) Sep-11 Sep-12 Dec-13 Size and growth Sep-13 Mar-14 Jun-14 Asset volume (in US$ millions ) 3778.0 4036.1 4020.5 4004.3 Deposit volume (in US$ millions ) 3325.4 4068.2 4046.3 3474.9 3328.4 Asset growth (in gourde terms) since beginning of fiscal year 11.6 10.8 3303.5 3386.9 3328.9 Credit growth (net, in gourde terms) since beginning of fiscal 31.5 3.2 -0.1 2.9 4.3 year 34.0 19.9 2.3 3.0 3.3 Capital adequacy Regulatory capital to risk-weighted assets 16.5 16.8 17.3 17.1 17.7 17.5 Assets to Regulatory Capital 14.7 13.3 12.0 9.3 13.5 13.6 Asset quality and composition Loans (net) to assets 25.1 30.4 35.3 NPLS to gross loans 36.2 35.4 35.0 3.7 2.4 2.4 4.3 Provisions to gross loans 4.6 3.3 Provisions to NPLS 3.4 2.3 1.8 1.8 2.2 2.3 gross 93.1 96.7 72.2 46.5 NPLS less provisions to net worth 41.5 69.3 1.1 0.4 3.3 11.7 11.7 4.7 Earnings and profitability (cumulative since beginning of fiscal year) Return on Assets (ROA) 1.6 1.5 1.7 1.3 1.4 Return on equity (ROE) 1.9 Net interest income to gross interest income 26.3 23.6 22.9 17.4 18.6 25.3 91.7 92.7 92.5 91.3 90.4 87.9 Operating expenses to net profits 67.6 68.5 67.6 67.0 65.9 59.9 Efficiency Interest rate spread 1/ 8.6 7.4 7.5 7.4 7.2 8.1 Liquidity Liquid assets to total assets 21 49.5 45.5 41.6 40.5 Liquid assets to deposits 2/ 41.5 39.4 56.3 52.8 50.2 49.1 49.8 47.9 Dollarization Foreign currency loans to total loans (net) 55.7 51.7 48.2 48.8 49.7 Foreign currency deposits to total deposits 62.3 62.9 55.1 55.4 51.9 Foreign.currency loans to foreign currency deposits 25.5 29.0 37.3 58.1 58.5 Sources: BRH Banking System Financial Summary; and IMF estimates and projections. These indicators reflect the 38.6 36.4 37.8 licensed banks in operation in Haiti; thus figures in this table may not exactly match the information in Table 3, which aggregated reflect results of the nine banking system. the consolidated 1/ Defined as the difference between average lending rate and average fixed deposit rate in the banking system. 2/ Liquid assets comprise cash and central bank bonds. 26 INTERNATIONAL MONETARY FUND 25.5 29.0 37.3 58.1 58.5 Sources: BRH Banking System Financial Summary; and IMF estimates and projections. These indicators reflect the 38.6 36.4 37.8 licensed banks in operation in Haiti; thus figures in this table may not exactly match the information in Table 3, which aggregated reflect results of the nine banking system. the consolidated 1/ Defined as the difference between average lending rate and average fixed deposit rate in the banking system. 2/ Liquid assets comprise cash and central bank bonds. 26 INTERNATIONAL MONETARY FUND --- Page 28 --- HAITI Table 6. Haiti: Indicators of Public Debt and External Vulnerability, 2010/11-2014/15 (Units as indicated) 2010/11 2011/12 2012/13 2013/14 2014/15 Act. Act. Prov. Est. Proj. Debt indicators Total external public debt (in percent of GDP) 1/ 8.7 13.5 17.4 20.6 Total external public debt (in percent of exports) 21 50.1 80.6 22.2 Total public debt (in percent of GDP) 96.0 113.3 123.5 8.7 14.4 19.5 23.7 26.1 Total public debt (in millions of US$) 1,270 1,777 2,263 o/w domestic debt 2,588 O/w Petrocaribe 1,235 1,574 o/w other external debt 1,833 External debt service (in percent of GDP) 0.0 0.1 0.3 0.4 0.7 Amortization 0.0 0.0 0.2 0.3 0.5 Interest 0.0 0.1 0.1 0.1 0.2 External debt service (in percent of exports) 21 0.1 0.7 1.6 2.4 External debt service (in percent of current central govt. revenues) 0.2 0.9 4.0 2.3 3.5 5.1 Other indicators Exports of goods and services (percent change, 12- -month basis in US$) 29.1 1.0 15.9 5.1 Imports of goods and services (percent change, 12-month basis in US$) 3.4 -5.4 5.3 4.5 Remittances and grants in percent of gross disposable income 26.7 23.0 1.1 -0.8 21.2 20.9 20.0 Exchange rate (per U.S. dollar, period average) 40.3 41.6 43.1 44.7 Current account balance (millions of US$) 3/ -326 -448 -569 Capital and financial account balance (millions of US$) -502 -420 Liquid gross reserves (millions of US$) 5/ 2,000 2,184 2,242 In months of imports of the following year 21 1,782 1,754 5.7 5.9 6.0 4.8 4.5 In percent of debt service due in the following year 23,209 8,854 5,876 Inp percent of base money 2,618 1,923 189.1 222.0 204.7 168.6 159.9 Sources: Bank of the Republic of Haiti; and Fund staff estimates and projections. 1/ Reflects debt relief. Debt ratios differ slightly from those in the DSA given the use of average, instead of end- -of period, 2/ Goods and services; excludes gold. exchange rates. 3/1 Including grants. 4/1 Includes in the private sector FDI, capital transfers, and errors and omissions in addition to bank flows. 5/ Includes the impact of central bank repurchase operations in FY2013. INTERNATIONAL MONETARY FUND 27 204.7 168.6 159.9 Sources: Bank of the Republic of Haiti; and Fund staff estimates and projections. 1/ Reflects debt relief. Debt ratios differ slightly from those in the DSA given the use of average, instead of end- -of period, 2/ Goods and services; excludes gold. exchange rates. 3/1 Including grants. 4/1 Includes in the private sector FDI, capital transfers, and errors and omissions in addition to bank flows. 5/ Includes the impact of central bank repurchase operations in FY2013. INTERNATIONAL MONETARY FUND 27 --- Page 29 --- HAITI Table 7. Haiti: Proposed Schedule of Disbursements, 2014 Amount Availability Date Conditions for Disbursement 1/ SDR 8, 190,000 July 21, 2010 Executive Board approval of the three-year arrangement under the ECF. Completed SDR 8,190,000 January 15, 2011 Observance of performance criteria for September 2010 and completion of the first review under the ECF arrangement. Completed SDR 4,914,000 July 15, 2011 Observance of performance criteria for March 2011 and Completed completion of the second review under the ECF arrangement 2/ SDR 4,914,000 January 15, 2012 Observance of performance criteria for September 2011 and Completed completion of the third review under the ECF arrangement. 2/ SDR 4,914,000 July 15, 2012 Observance of performance criteria for March 2012 and completion of the fourth review under the ECF arrangement. Completed SDR 4,914,000 January 15, 2013 Observance of performance criteria for September 2012 and Completed completion of the fifth review under the ECF arrangement SDR 1,638,000 August 7, 2013 Observance of performance criteria for March 2013 and completion of the sixth review under the ECF arrangement. Completed SDR 1,638,000 March 26, 2014 Observance of performance criteria for September 2013 and completion of the seventh review under the ECF arrangement. Completed SDR 1,638,000 December 17, 2014 Observance of performance criteria for March 2014 and completion of the eighth review under the ECF arrangement. Memorandum Prospective Total Access under the ECF arrangement: SDR 40,950,000 1/ Other than the generally applicable conditions for the Extended Credit Facility (ECF) arrangement. The second and third reviews were combined 28 INTERNATIONAL MONETARY FUND March 26, 2014 Observance of performance criteria for September 2013 and completion of the seventh review under the ECF arrangement. Completed SDR 1,638,000 December 17, 2014 Observance of performance criteria for March 2014 and completion of the eighth review under the ECF arrangement. Memorandum Prospective Total Access under the ECF arrangement: SDR 40,950,000 1/ Other than the generally applicable conditions for the Extended Credit Facility (ECF) arrangement. The second and third reviews were combined 28 INTERNATIONAL MONETARY FUND --- Page 30 --- HAITI Table 8. Haiti: Indicators of Capacity to Repay the Fund, 2014/15-2024/25 (Units as indicated) 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22 2022/23 2023/24 2024/25 Fund obligations based on existing credit (in millions of SDRs) Principal 0.0 1.6 4.3 6.7 7.5 7.9 6.2 3.6 1.2 Interest 0.1 0.1 0.1 0.1 0.1 0.0 0.0 0.0 0.0 0.3 0.0 0.0 0.0 Fund obligations based on existing and prospective credit (in millions of SDRS) Principal 0.0 1.6 4.3 6.7 7.5 8.0 6.6 3.9 1.5 Interest 0.1 0.1 0.1 0.1 0.1 0.1 0.0 0.0 0.0 0.7 0.2 0.0 0.0 Total obligations based on existing and prospective credit In millions of SDRS 0.1 1.7 4.4 6.8 7.6 8.1 6.6 3.9 In millions of US$ 0.2 2.7 6.7 10.5 1.5 0.7 0.2 In percent of 11.8 12.5 10.2 6.1 2.3 1.0 0.2 exports 0.0 0.2 0.4 0.5 0.6 0.6 0.4 0.2 0.1 government revenue 0.0 0.2 0.3 0.4 0.3 0.3 0.2 0.1 0.0 0.0 reserves 0.0 0.1 0.3 0.5 0.5 0.5 0.4 0.2 0.0 0.0 0.0 debt service 0.2 2.9 5.8 7.5 6.9 6.2 4.4 0.1 0.0 0.0 quota 0.1 2.1 5.3 8.3 9.3 2.3 0.8 0.3 0.1 9.9 8.0 4.8 1.8 0.8 0.2 Outstanding Fund credit (end of period) In millions of SDRS 41.0 39.3 35.1 28.3 20.8 12.8 6.2 2.3 In millions of US$ 62.9 60.6 54.3 0.8 0.2 0.0 43.9 32.2 19.8 9.7 3.6 1.3 Inp percent of 0.2 0.0 exports 3.7 3.4 2.9 2.2 1.5 0.9 0.4 0.1 0.0 0.0 0.0 government revenues 4.8 4.1 3.2 2.4 1.6 0.9 0.4 0.0 reserves 0.1 0.0 0.0 3.6 3.3 2.8 2.1 1.4 0.8 0.4 0.1 0.0 quota 50.0 48.0 42.8 34.6 25.4 15.6 7.6 2.8 1.0 0.0 0.2 0.0 0.0 Memorandum items: Exports 1/2/ 1.7 1.8 1.9 2.0 2.1 2.3 2.4 2.6 2.8 3.0 Government revenues 1/3/ 1.3 1.5 1.7 1. 0 quota 50.0 48.0 42.8 34.6 25.4 15.6 7.6 2.8 1.0 0.0 0.2 0.0 0.0 Memorandum items: Exports 1/2/ 1.7 1.8 1.9 2.0 2.1 2.3 2.4 2.6 2.8 3.0 Government revenues 1/3/ 1.3 1.5 1.7 1. 8 2.0 3.3 Reserves 1/ 4/ 2.1 2.3 2.4 2.6 2.8 3.1 1/ 1.8 1.8 1.9 2.1 2.3 2.4 2.5 2.7 Debt service 0.1 0.1 0.1 0.1 0.2 0.2 0.2 2.9 3.2 3.4 Quota (in millions of SDRS) 81.9 81.9 81.9 0.3 0.3 0.3 0.4 GDP 1/ 81.9 81.9 81.9 81.9 81.9 81.9 81.9 81.9 9.4 10.0 10.8 11.6 12.4 13.3 14.2 15.2 16.3 17.4 18.6 Sources: Haitian authorities; and Fund staff estimates and projections. Note: Data covers Haiti's fiscaly year, which runs from October 11 to September 30. 1/In billions of U.S. dollars. 2/ Exports of goods and services. 3/ Central government domestic revenues. 4/ Grossl liquidi international reserves, end of period. INTERNATIONAL MONETARY FUND 29 --- Page 31 --- E Table 9. Haiti: Indicative Targets and Quantitative Performance Criteria, September 2013-June 2014 - (In millions of gourds, unless otherwise indicated) - Cumulative Flows Since September 2009 Actual September 2013 December 2013 March 2014 stock at June 2014 Sept. end- 09 PC Adjusted Actual Status 1/ Indicative Adjusted Actual Status PC Adjusted Actual Indicative target Status target Adjusted Actual Status L Quantitative performance criteria Net centra ral bank credit to the non-financial public sector ceiling 21,378 -13,199 -12,809 -16,531 Central Government -11,816 -12,095 -10,260 - -11,063 -12,036 9,079 -9,763 -10,352 22,969 -11,578 -11,188 -11,662 M -10,206 Rest of non- financial public sector -10,278 -10,557 -6,129 NM -9,063 -10,036 6,058 NM -7,763 Net domestic 1,591 1,621 -1,621 -4,869 M -1,538 1,538 4,131 -8,352 -7,763 NM assets of the central bank ceiling 14,447 -9,036 -10,152 -15,410 M M -2,000 2,000 -3,022 M -2,000 -2,000 -2,443 M Net international reserves of central bank (in millions of U.S. dollars) floor 416 582 -5,472 4,112 -10,959 M 215 2,375 -9,427 M 3,459 4,769 -5,883 M 610 806 M 517 483 712 M 422 368 575 M 375 342 605 M 1. Continuous performance criteria Domestic arrears accumulation of the central government 0 0 0 0 M New contracting or guaranteeing by the public sector of nonconcessional 0 0 M 0 0 0 M 0 0 0 M external or foreign currency debt (In millions of U.S. -10,959 M 215 2,375 -9,427 M 3,459 4,769 -5,883 M 610 806 M 517 483 712 M 422 368 575 M 375 342 605 M 1. Continuous performance criteria Domestic arrears accumulation of the central government 0 0 0 0 M New contracting or guaranteeing by the public sector of nonconcessional 0 0 M 0 0 0 M 0 0 0 M external or foreign currency debt (In millions of U.S. dollars) 0 33 33 334 NM 33 Up to and including one year 33 410 NM 33 33 33 M 33 33 0 0 301 NM 33 M Over one -year maturity 0 33 33 0 377 NM 0 0 0 M 0 0 0 M Public sector external arrears accumulation (in millions of U.S. dollars) 0 0 33 M 33 33 33 M 33 33 33 M 0 0 M 0 0 0 M 33 33 33 M 0 0 M 0 0 0 M II. Indicative targets Change in base money ceiling 31,080 14,262 14,262 16,842 NM 15,225 Net domestic credit to the centr ral government ceiling 2/ 19,392 15,225 17,514 NM 17,095 17,095 13,584 M 18,459 18,459 18,309 M 5/ -19,271 -18,881 -15,151 NM -16,917 -17,196 9,634 NM Poverty reducing expenditures - floor n.a. 38,656 10,830 11,803 -7,841 NM -8,210 -8,799 9,680 M 45,718 45,918 M 42,531 49,593 48,923 NM 46,606 53,668 51,467 NM 50,481 50,481 54,497 M Memorandum items Change in currency in circulation 13,448 9,009 9,009 7,904 Net domestic credit to the rest of the non- financial public sector 1,663 -1,894 -1,894 9,285 9,285 11,574 9,456 9,456 9,023 9,284 9,284 Government total revenue, excluding grants -5,115 -1,811 -1,811 4,433 2,500 2,500 3,370 2,500 9,263 29,881 156,289 156,289 158,764 169,962 169,962 170,920 2,500 -2,815 Government total expenditure, excluding externally- -financed investment 42,099 218,739 218,739 228,298 186,078 186,078 183,585 198,411 198,411 195,670 235,944 235,944 245,673 268,193 Sources: Ministry of Finance, Bank of the Republic of Haiti, and Fund staff estimates and projections. 268,193 264,450 287,587 287,587 280,844 1/M Met; NM Not Met. 21 Adjusted targets exclude the use of IMF PCDR debt relief. 3/ Excludes guarantees to the electricity sector in the form of credit/guarantee letters. The US$33 million in non-concessional external 4/ Figures for September 2013 and December 2013 reflect the contracting of for international lending of over one- -year maturity refers to a BANDES (Venezuela) loan for airport construction. 5/ repos reserve management these operations were fully unwound endPoverty reducing expenditures consist of domestically- -financed spending in health, education, and agriculture. . 21 Adjusted targets exclude the use of IMF PCDR debt relief. 3/ Excludes guarantees to the electricity sector in the form of credit/guarantee letters. The US$33 million in non-concessional external 4/ Figures for September 2013 and December 2013 reflect the contracting of for international lending of over one- -year maturity refers to a BANDES (Venezuela) loan for airport construction. 5/ repos reserve management these operations were fully unwound endPoverty reducing expenditures consist of domestically- -financed spending in health, education, and agriculture. The revised targets reflect data revisions. by February 2014. --- Page 32 --- HAITI Table 10. Haiti: Prior Actions and Structural Benchmarks through June 2014 Measure Timing Status Rationale Make operational the Treasury Single Account (TSA) by implementing the agreements between the Ministry of Finance and BRH (minutes of May1 14, 2014 and the memorandum of understanding on the TSA PA Before completion of between the Ministry of Finance and BRH of July 2013) as clarified in the review Met Improve cash management paragraph 3of the TMU. Establish accounting centers ensuring rapidity and efficiency of controls on the implementation of investment projects as clarified in paragraph 4 PA Before completion of Met Improve cash management oft the TMU. the review and controls Take fiscal measures to reduce the fiscal deficit by at least 1 percent of Before completion of Fiscal GDP in FY2015 as clarified in paragraph 5of the TMU. PA the review Met sustainability, buffers The Minister of Finance (in collaboration with EDH) will share with Fund against external shocks staff a report on the electricity sector, as clarified in paragraph 6of the PA Before completion of Improve financial TMU. the review Met transparency in the public sector Operationalize the second accounting center comprising the Ministries of the Plan, Public Works, and Agriculture 2/ SB End -March 2014 Observed Improve cash management and controls Operationalize the accounting centers SO that at least 80 percent of budgetary expenses are collectively covered SB End- June 2014 Observed Improve cash management and controls 1/PA: Prior Action; SB: Structural Benchmark 2/ Accounting centers 1 and 2 were subsequently split into 4 accounting centers to address operational concerns by some spending ministries. INTERNATIONAL MONETARY FUND 31 Operationalize the second accounting center comprising the Ministries of the Plan, Public Works, and Agriculture 2/ SB End -March 2014 Observed Improve cash management and controls Operationalize the accounting centers SO that at least 80 percent of budgetary expenses are collectively covered SB End- June 2014 Observed Improve cash management and controls 1/PA: Prior Action; SB: Structural Benchmark 2/ Accounting centers 1 and 2 were subsequently split into 4 accounting centers to address operational concerns by some spending ministries. INTERNATIONAL MONETARY FUND 31 --- Page 33 --- HAITI Appendix I. Letter of Intent November 28, 2014 Christine Lagarde Managing Director International Monetary Fund Washington, D.C. Madam Managing Director: reaffirms its commitment In this last review under the ECF, the Haitian government All the 1. structural reforms. stability and to implement growth-oriented criterion on net to macroeconomic criteria under the program were met, except the end-March 2014 performance which was missed due to delays in the placement central bank credit to the central government, the fiscal deficit lower than bills. We request a waiver as the deviation was minor, of treasury objectives of the program were met. Similarly, envisaged, and the overall macroeconomic structural agenda, and all the structural was made in the implementation of the 1-2). We are committed to progress and end-June 2014 were met (Tables benchmarks for end-March and to deepening structural reforms to reach implementing appropriate macroeconomic policies Plan for the Development of 2014-2016 framework of the Strategic the objectives of our new job creation, and poverty reduction. We are Haiti (PSDH), namely high and sustainable growth, vulnerabilities underlying the Haitian determined to tackle the structural imbalances and improve the living conditions of and to realize Haiti's growth potential to significantly partners, including economy We count on the continued support of our development the Haitian people. the IMF. in 2014 Economic Developments but remained positive in perEconomic growth decelerated slightly in FY2014, of 2. budget and the impact drought Some delays in the execution of the investment capita terms. which is estimated in the 3.5-4 percent range, compared in parts of the country affected growth, which declined to 3.2 percent in March, projected under the program. Inflation, at with 4 percent of the gourde remained moderate to 5.3 percent in September. The depreciation in the edged up actions by Central Bank (BRH) including intervention 4.1 percent yly at end-year, following relative to FY2013. Due to favorable developments in foreign exchange market, though reduced the external position remained strong and remittances, import fuel prices and budget support, reserves covered almost 5 months of imports. by year-end gross The FY2014 budget adopted in was consistent with the program. 3. Fiscal performance increases to teachers and the police in line with the program. The April wage of May was broadly for other outlays. A revenue shortfall of 0.9 percent were compensated by lower allocations INTERNATIONAL MONETARY FUND -year, following relative to FY2013. Due to favorable developments in foreign exchange market, though reduced the external position remained strong and remittances, import fuel prices and budget support, reserves covered almost 5 months of imports. by year-end gross The FY2014 budget adopted in was consistent with the program. 3. Fiscal performance increases to teachers and the police in line with the program. The April wage of May was broadly for other outlays. A revenue shortfall of 0.9 percent were compensated by lower allocations INTERNATIONAL MONETARY FUND --- Page 34 --- HAITI revenue was lower than budgeted and the late mainly because fuel tax in GDP was recorded, of the revenue measures included adoption of the budget law deferred the implementation of excises rates on a new tourist tax of US$10, the adjustment the the budget law, notably alcoholic beverages, and taxes aimed at protecting domesticaly-produced and imported shortfall was more than compensated by environment and road infrastructure. As the revenue resulted in an overall fiscal particularly on investment, budget execution on lower expenditure, points of GDP. The indicative target deficit lower than programmed by 0.4 percentage second half of the year. The fiscal deficit was poverty-reducing expenditure was reached in the the T-bill placement was lower by concessional Petrocaribe resources. Because the financed mainly deposits. As a result, there was a larger drawdown on government than projected, net central bank credit to the government was not quantitative target for end-March on observed. in the deficit. The deficit (program 4. The budget for FY2015 entails a reduction 6.3 of GDP in FY2014). would decrease to about 3.6 percent of GDP (from percent the expansion of the tax definition) increases are mainly due to the fuel price adjustment, are Projected revenue administrations. Domestic revenues expected base and the modernization of tax and customs To mitigate the effect of the price reach 14.1 percent of GDP (1.8 pp more than in FY2014). and increases to allocations for health and education contained increase, we have increased budget is projected to remain broadly stable in the price of public transportation. Public spending half of FY2014, in particular for teachers and relative to FY2014. The wage increase in the second FY2015. The deficit will continue to be police, will have a full-year impact on the wage bill in from the IDB and the European financed with Petrocaribe resources. Budget support mainly to reach US$71.5 million. Union is programmed and Exchange Rate Policies Monetary price stability and adequate policy remained focused on maintaining the 5. Monetary 2014, the BRH tightened monetary policy by raising international reserves. Effective April 1, 3 to 5 percent on 91-day bills) and by policy rates on central bank bills by 200 basis points (from from 35 to 37 percent. It also required the legal reserve requirements on gourde deposits deposits with raising of their required reserves on foreign-currency banks to constitute 10 percent on foreign-currency deposits from gourdes. In July, the BRH increased reserve requirements constitution of these reserves was returned to Moreover, the modality for the keep 39 to 40 percent. depreciated moderately during FY2014, helping 100 percent foreign currency. The gourde intervention in the exchange rate market. The inflation expectations anchored despite reduced from 16.4 percent in FY2013 to growth of bank credit to the private sector decelerated only by 3.7 percent. The during FY 2014, with credit in gourdes increasing to allow some 9.4 percent the Central Bank (in September) deceleration in private sector credit prompted loosening monetary policy bonds to count towards legal reserve requirements, down as these bonds fall due." 1 government measure will be progressively wound somewhat. This exceptional debts with domestic contractors for G5.7 billion (1.4 percent 1 During September, 2014, the government cleared of 5-year government bonds with monthly amortizations. of GDP). Clearing this debt involved the issuance (continued) INTERNATIONAL MONETARY FUND 33 increasing to allow some 9.4 percent the Central Bank (in September) deceleration in private sector credit prompted loosening monetary policy bonds to count towards legal reserve requirements, down as these bonds fall due." 1 government measure will be progressively wound somewhat. This exceptional debts with domestic contractors for G5.7 billion (1.4 percent 1 During September, 2014, the government cleared of 5-year government bonds with monthly amortizations. of GDP). Clearing this debt involved the issuance (continued) INTERNATIONAL MONETARY FUND 33 --- Page 35 --- HAITI anchor, the BRH remains committed to maintaining an To keep the exchange rate as a nominal from shocks. level of foreign reserves to shield the economy adequate reforms to strengthen monetary policy and 6. We remain committed to structural IMF technical assistance on the functioning The BRH received (in May), the reporting of financial transparency. for improving exchange market that produced recommendations of the foreign advice (in August) on strengthening foreign reserve transactions. The IMF also provided that takes into consideration the mission's management; the BRH established a work program of the 2010 Safeguards recommendations. We continued to implement the recommendations statements were mission, and in this regard, the FY2013 BRH financial assessment follow-up the investment committee's in November 2014. We are committed to strengthening as well published officer to monitor foreign reserves management autonomy, and appointing a compliance full adoption of IFRS accounting standards. as with the Structural Reforms account (TSA). The Treasury was made towards the treasury single of the general 7. Progress and closure of dormant accounts and implementation in continued the identification the number of accounts in gourdes and ledger (GL) software accelerated. By end-September, Consistent with agreements between the dollars was reduced to 548 and 303, respectively. Memorandum of Understanding), the following Ministry of Finance and the BRH (see Technical at the BRH, the Treasury's (i) four Treasury accounts were opened and actions were implemented: dedicated to revenue from the Tax Department, Customs, main account and three accounts revenue accounts began to be transferred respectively; (ii) balances in the three access to other revenues, and (ii) the Treasury began to have real-time daily to the Treasury's main account; to the Treasury the balances of all its these accounts and the BRH started communicating main account (for accounting and government accounts with the BRH, including the Treasury's of the TSA at end-FY2015, the Pending the full establishment cash management purposes). documentation from government Ministry of Finance will continue to require supporting account or with requests for payment project replenishments. institutions together accounting centers. The advances with establishing 8. There were significant sectors and for the Tax department were centers for the economic and socio-cultural accounting accounting The two orders ("arrêtés") of the Prime Minister establishing established as planned. over their organization and functioning centers and granting the Minister of Finance authority November, respectively. The configuration in the national gazette in October and an were published with corresponding ministries and equitable of the accounting centers ensures proximity centers for the economic sector ministries workload distribution. In particular, the two accounting Public accountants were centers (ACES I, II, I, and IV)? were split into four accounting billion of these bonds towards meeting reserve requirements. The Commercial banks were allowed to count G2.8 Central Bank will use these bonds for open market operations. ACES II includes the Ministries of of Finance, Tourism and Trade and Industry; the Ministry of 2 ACESII includes the Ministries the Ministry of Public Works; and ACES IV includes Planning and Environment; ACES III includes Agriculture. FUND 3. 4 INTERNATIONAL MONETARY , the two accounting Public accountants were centers (ACES I, II, I, and IV)? were split into four accounting billion of these bonds towards meeting reserve requirements. The Commercial banks were allowed to count G2.8 Central Bank will use these bonds for open market operations. ACES II includes the Ministries of of Finance, Tourism and Trade and Industry; the Ministry of 2 ACESII includes the Ministries the Ministry of Public Works; and ACES IV includes Planning and Environment; ACES III includes Agriculture. FUND 3. 4 INTERNATIONAL MONETARY --- Page 36 --- HAITI centers resumed normal operations following redeployed on October 1, 2014 and the accounting structural benchmarks for end-March These actions ensured the observance of the these actions. and end-June. the debt unit and improving the public 9. Efforts continued in strengthening of the middle and front offices framework. The Ministry of Finance initiated staffing the investment and debt unit. Regarding public investment, government all as well as of the cash management and of capital spending. By end-May 2014, the execution rate quality FY2014. is working on increasing their and execution plans for ministries and public entities had submitted procurement review (completed at endof the World Bank's public investment The recommendations the quality of government spending. September) will help improve domestic revenue. The tax recognizes the need to increase 10. The Government the tax base; facilitating the filing measures focused on expanding department is implementing through electronic means; and capacity building. and payment of taxes by tax-payers, including use of cross-checks between the compliance rate, including through a greater The office Enhancing will enable reaching these objectives. large taxpayer customs and tax departments, be The new office charged with and the medium taxpayer office (MTO) will strengthened. collection results are (LTO) entities will help reduce tax evasion. Revenue combat monitoring exempted customs revenue, we will monitored and published on a regular basis. Regarding of controls at busy border posts. smuggling through a revamping reduce subsidies on is implementing a plan to gradually and 11. The government with World Bank, IMF, and UNDP assistance petroleum products. The plan was developed that delivers assistance to the most by strengthening the social safety net over a 12-15-month is supported to phasing out fuel subsidies vulnerable. The authorities are committed formula that reflects changes in afterwards a price adjustment period and to implement international oil prices. sustainability of the electricity established to restore the financial 12. A framework was committee (Commission Energie) charged with sector. The Prime Minister chairs an energy reforms; the committee includes ensuring timely implementation of electricity sector The government has decided representatives of the government and of development partners. management contract and functions of Electricité d'Haiti (EDH) under a private thermal to place some the Peligre dam and the Carrefour power preparatory work is underway. Meanwhile, power producers and discussions with three independent on the station are being rehabilitated, to reduce electricity prices. Monthly reports continue with a view to reaching agreements of Finance which will share them with will be transmitted to the Ministry sector's performance IMF staff. Successor ECF Arrangement Medium-Term Policies and a Possible IMF and accelerate reforms and intend to request 13. We are determined to pursue objective of the reform agenda is to support under a new ECF arrangement. The overarching allocation of domestic and foreign resources. sustained growth by ensuring an efficient helping to support would be geared at such objective, including by A new IMF-supported program INTERNATIONAL MONETARY FUND 35 a view to reaching agreements of Finance which will share them with will be transmitted to the Ministry sector's performance IMF staff. Successor ECF Arrangement Medium-Term Policies and a Possible IMF and accelerate reforms and intend to request 13. We are determined to pursue objective of the reform agenda is to support under a new ECF arrangement. The overarching allocation of domestic and foreign resources. sustained growth by ensuring an efficient helping to support would be geared at such objective, including by A new IMF-supported program INTERNATIONAL MONETARY FUND 35 --- Page 37 --- HAITI imbalances. Reforms and policies will help developing address the economy's structural and foreign direct investment and foreign capacities by facilitating the mobilization of domestic and help build buffers. In turn, measures would tackle the economy's vulnerabilities aid. These bank in the conduct of an adequate and prudent monetary policy they would support the central would help us consolidate the and crowd in private credit. A new Fund-supported program reforms implemented in recent years. investment and to environment is essential for private 14. Improving the business Reforms in this area are urgently needed to raise transform Haiti into an emerging economy. domestic and foreign direct investment. The productivity and competitiveness, SO as to increase the simplification of intends to remove investment bottlenecks, through (including energy government corruption, infrastructure improvements administrative procedures, combating through strengthening the cadastre and access), and the protection of property rights (in part and sustainability of the Improving the functioning simplifying real estate transfer procedures). and poverty reduction. The creation sector is essential for growth, fiscal sustainability, electricity reduce reliance on external assistance. of an investment fund could help reform initiatives have begun to promote growth. projects and code, the 15. Wide-ranging with the review of the investment Reforms of the business environment are underway Investment Facilitation Center (CFI). A new zones, and the strengthening of the law on industrial of companies and considerably reduces delays. electronic window allows online registration creation of micro industrial parks, and the Programs to support smaller enterprises, the of economic activity and the establishment of basic infrastructure facilitate the restructuring regional development. Following zones in line with the goal of balanced development of regional the Northern region has inaugurated an airport the construction of the industrial park of Caracol, investments should enable the investment. In the south, key and receives significant Investment protection agreements were signed notably development of tourism and agriculture. The Investment Fund will be the main with Spain and the Bahamas; others are being negotiated. will help improve the Haiti's Reconstruction Fund. Its establishment mechanism replacing investments in sectors with high growth potential. financing of the economy and support a understanding of inclusion policy will permit comprehensive Implementation of a financial obstacles to financial deepening across sectors. requests recorded under the ECF arrangement, the government 16. In view of progress the the granting of waiver of of the eighth and final review of arrangement, million. We the approval and the disbursement of SDR 1.638 non-observance of performance criterion, on the deletions policy. of the Staff Report subject to the provisions consent to the publication Sincerely yours, /s/ /s/ Marie Carmelle Jean-Marie Charles Castel, Minister of Economy and Finance Governor, Central Bank of Haiti 36 INTERNATIONAL MONETARY FUND . requests recorded under the ECF arrangement, the government 16. In view of progress the the granting of waiver of of the eighth and final review of arrangement, million. We the approval and the disbursement of SDR 1.638 non-observance of performance criterion, on the deletions policy. of the Staff Report subject to the provisions consent to the publication Sincerely yours, /s/ /s/ Marie Carmelle Jean-Marie Charles Castel, Minister of Economy and Finance Governor, Central Bank of Haiti 36 INTERNATIONAL MONETARY FUND --- Page 38 --- Table 1. Haiti: Indicative Targets and Quantitative Performance Criteria, September 2013-June 2014 (In millions of gourds, unless otherwise indicated) Cumulative Flows Since September 2009 Actual September 2013 December 2013 March 2014 stock at June2 2014 end- Sept PC Indicative Adjusted Actual Status target Adjusted Actual Status PC Adjusted Actual Status Indicative Adjusted Actual Status target L. Quantitative performance criteria Net central bank credit to the non- financial public sector ceiling 21,378 -13,199 -12,809 Central Government -16,531 11,816 12,095 10,260 11,063 12,036 9,079 -9,763 Rest of non- financial public sector 22,969 11,578 -11,188 11,662 M 10,278 10,557 6,129 NM -9,063 10,036 6,058 -7,763 10,352 10,206 1,591 -1,621 1,621 4,869 M 1,538 NM 8,352 7,763 NM Net domestic assets of the central bank ceiling 14,447 -9,036 10,152 1,538 4,131 M 2,000 2,000 -3,022 M -2,000 -2,000 -2,443 M Net internat tional reserves of central bank (in millions ofl U.S. dollars)- floor 416 582 -15,410 M -5,472 -4,112 10,959 M 215 2,375 9,427 M 3,459 4,769 5,883 M 610 806 M 517 483 712 M 422 368 575 M 375 342 M m. Continuous performance criteria Domestic arrears accumulation oft the central government 0 0 0 0 M New contracting or guaranteeing by the public sector of nonconcessional 0 0 M 0 0 0 M 0 0 0 M external or foreign currency debt (In millions ofl U.S. dollars) 0 33 33 Up to and including one year 4/ 334 NM 33 33 410 NM 33 33 0 0 0 33 M 33 33 33 M Over one- year maturity 0 33 33 301 NM 0 0 377 NM 0 0 0 M 0 0 0 M Public sector external arrears accumulation (in millions of U.S. 33 M 33 33 33 M dollars) 0 0 0 0 M 0 0 0 M 33 33 M 33 33 33 M 0 0 0 M 0 0 0 M m. Indicative targets Changei in base money ceiling 31,080 14,262 14,262 16,842 NM Net domestic credit to the central government ceiling 2/ 19,392 15,225 15,225 17,514 NM 17,095 17,095 13,584 M 18,459 18,459 Poverty reducing expenditures floor 19,271 -18,881 -15,151 NM 16,917 17,196 9,634 NM 10,830 11,803 -7,841 NM 8,210 18,309 M n.a. in base money ceiling 31,080 14,262 14,262 16,842 NM Net domestic credit to the central government ceiling 2/ 19,392 15,225 15,225 17,514 NM 17,095 17,095 13,584 M 18,459 18,459 Poverty reducing expenditures floor 19,271 -18,881 -15,151 NM 16,917 17,196 9,634 NM 10,830 11,803 -7,841 NM 8,210 18,309 M n.a. 38,656 45,718 45,918 M 42,531 49,593 48,923 NM 46,606 53,668 8,799 -9,680 M 51,467 NM 50,481 50,481 54,497 M Memorandum items Change in currency in circulation 13,448 9,009 9,009 7,904 Net domestic credit to the rest of the non- financial public sector 1,663 -1,894 9,285 9,285 11,574 9,456 9,456 9,023 9,284 9,284 9,263 Government total revenue, excluding grants -1,894 5,115 -1,811 1,811 -4,433 -2,500 2,500 3,370 2,500 Government total expenditure, excluding 29,881 156,289 156,289 158,764 169,962 169,962 170,920 186,078 2,500 2,815 externally- -financedi investment 42,099 218,739 218,739 228,298 235,944 235,944 186,078 183,585 198,411 198,411 195,670 Sources: Ministry of Finance, Bank of the Republic of Haiti, and Fund staff estimates and 245,673 268,193 268,193 264,450 287,587 287,587 280,844 projections. 1/M Met; NM Not Met. 2/A Adjusted targets exclude the use ofl IMF PCDR debt relief. 3/ Excludes guarantees to the electricity sector in the form of credit/guarantee letters. The US$33 million in non- concessional extern al of over 4/ Figures for September 2013a andt December 2013 reflect the contracting of for international lending one- -year maturity refers to a BANDES (Venezuela) loan for airport constru ction. 5/Poverty reducing expenditures consist of repos reserve management; these operations were fully unwound by end- February 2014. /A Adjusted targets exclude the use ofl IMF PCDR debt relief. 3/ Excludes guarantees to the electricity sector in the form of credit/guarantee letters. The US$33 million in non- concessional extern al of over 4/ Figures for September 2013a andt December 2013 reflect the contracting of for international lending one- -year maturity refers to a BANDES (Venezuela) loan for airport constru ction. 5/Poverty reducing expenditures consist of repos reserve management; these operations were fully unwound by end- February 2014. domestically- -financed spending in health, education, and agriculture. The revised targets reflect data revisions. - --- Page 39 --- HAITI Table 2. Haiti: Prior Actions and Structural Benchmarks through June 2014 1/ Measure Timing Status Rationale Make operational the Treasury Single Account (TSA) by implementing the agreements between thel Ministry of Finance and BRH (minutes of May 14, 2014 and the memorandum of understanding on the TSA PA Before completion of between the Ministry of Finance and BRH of July 2013) as clarified in the review Met Improve cash management paragraph 3 of the TMU. Establish accounting centers ensuring rapidity and efficiency of controls on the implementation of investment projects as clarified in paragraph 4 PA Before completion of Met Improve cash management of the TMU. the review and controls Take fiscal measures to reduce the fiscal deficit by at least 1 percent of Before completion of GDP in FY2015 as clarified in paragraph 5 of the TMU. PA the review Met Fiscal sustainability, buffers The Minister of Finance (in collaboration with EDH) will share with Fund against external shocks staff a report on the electricity sector, as clarified in paragraph 6of the PA Before completion of Improve financial TMU. the review Met transparency in the public sector Operationalize the second accounting center comprising thel Ministries oft the Plan, Public Works, and. Agriculture 2/ SB End March 2014 Observed Improve cash management and controls Operationalize the accounting centers SO that at least 80 percent of budgetary expenses are collectively covered SB End- June 2014 Observed Improve cash management and controls 1/PA: Prior Action; SB: Structural Benchmark 2/1 Accounting centers 1a and 2were subsequently split into 4 accounting centers to address operational concerns by some spending ministries. 38 INTERNATIONAL MONETARY FUND Operationalize the second accounting center comprising thel Ministries oft the Plan, Public Works, and. Agriculture 2/ SB End March 2014 Observed Improve cash management and controls Operationalize the accounting centers SO that at least 80 percent of budgetary expenses are collectively covered SB End- June 2014 Observed Improve cash management and controls 1/PA: Prior Action; SB: Structural Benchmark 2/1 Accounting centers 1a and 2were subsequently split into 4 accounting centers to address operational concerns by some spending ministries. 38 INTERNATIONAL MONETARY FUND --- Page 40 --- HAITI Memorandum of Understanding Attachment I. Technical Memoranda of Understanding (IMF Country Report 1. All aspects of the Technical No. 11/106, Appendix III; IMF Country Report No. 10/263, Attachment III; IMF Country Report Appendix III; IMF Country Report III; IMF Country Report No.12/220, IMF Country No. 12/74, Appendix No.13/260, Attachment 2; and No. 13/90, Attachment 2; IMF Country Report 2010; May, 2011; April, 2012; Attachment 1) issued on August, Report No. 14/105, and March 2014, respectively, remain valid, except August, 2012; March, 2013; August, 2013; 2014 Letter of Intent and those indicated revisions incorporated in the November for new below. criteria and indicative performance The program will be monitored by quantitative 2014 are indicative. 2. Table 1 of the letter of intent. The targets for end-June targets as shown in basis from the stock at end- September 2009. Prior The changes will be measured on a cumulative in Table 2 of the letter of intent. actions and structural benchmarks are shown Clarification of Structural Conditionality Single Account (TSA). The authorities the Treasury 3. Prior Action on making operational of Finance and the BRH (minutes of the agreements between the Ministry Ministry of Finance will implement on the TSA between the 14, 2014 and the memorandum of understanding the Treasury's main account May including the following actions: (i) opening and the BRH of July 2013) the Customs department (AGD) and other and revenue accounts for the Tax department (DGI), (ii) the Treasury's real time access to these leveling of revenue accounts; revenue, as well as the daily the BRH will communicate to the Treasury As the banker of the Treasury, as of June 2014, main account, for accounts. accounts with the BRH, including the Treasury's the balances of all government for the work of the weekly cash accounting purposes and cash management. In preparation chaired by the Minister of Finance, committee and of the strategic pilot committee reports on the cash position management will prepare weekly and monthly beginning in June 2014 the Treasury the BRH. In the context of the account balances and other data provided by the reconciled with the into sub-accounts of of spending accounts (current and investment spending) will transmit to the conversion accounts into secondary accounts, the Treasury Treasury and of specific revenue The BRH will produce the IT solution for the pilot for development. will BRH the technical specifications The in consultation with the BRH, center Economic sector I". Treasury, to 3 ministry site of "Accounting (reduction of the number of sub-accounts per continue the overhaul of the accounts spending and 1 secondary account for entities): 2 sub-accounts for current and investment (all specific revenues. centers. To ensure rapidity and Prior action on the establishment of accounting centers 1 and 2 of 4. of investment projects, accounting - efficiency of controls on the implementation centers (Accounting Center Economic Sector the economic sector were split into four accounting INTERNATIONAL MONETARY FUND 39 Economic sector I". Treasury, to 3 ministry site of "Accounting (reduction of the number of sub-accounts per continue the overhaul of the accounts spending and 1 secondary account for entities): 2 sub-accounts for current and investment (all specific revenues. centers. To ensure rapidity and Prior action on the establishment of accounting centers 1 and 2 of 4. of investment projects, accounting - efficiency of controls on the implementation centers (Accounting Center Economic Sector the economic sector were split into four accounting INTERNATIONAL MONETARY FUND 39 --- Page 41 --- HAITI since the first half of accounting centers are operational ACES I, I, II, and IV). All established continues in line with the already established FY2014. The plan to set up other accounting centers Prime Minister establishing the central timetable. To this effect, the two orders (arrêtés) of the in the official gazette (Le ministerial accounting centers were published accounting center and the letters for public accountants have been signed by Moniteur) by end-November 2014. Nomination the Minister of Finance. 2014-2015. The draft budget law for 2014-15 Prior Action on the fiscal deficit for review under the ECF. 5. is in line with discussions for the eighth submitted to parliament for adoption the fiscal deficit for at least 1 percent of the authorities took measures to decrease In this regard, fiscal deficit is defined as under the ECF arrangement, end-November 2014. The overall of funds such GDP by revenue (including revenues special namely the difference between, on the one hand, comprising current outlays FNE and FER) and grants, and on the other hand expenditure, (including projects as sector) and investment spending Petrocaribe transfers to the electricity debt relief, as well as (including resources, by resources from IMF post-catastrophe financed by Petrocaribe of special funds such as FNE and FER). spending (EDH). The the finances of the state-owned electricity company 6. Monthly Report on of Public Works and EDH), have shared with Ministry of Finance (in collaboration with the Ministry sector, that includes a monthly end-November 2014, a report on the electricity the Fund staff, before describing the stock of cross debts between cash flow of EDH; and also, a monthly report FY2013 and FY2014. different agents in the sector. The reports cover Studies and Provision of Information Reports, the authorities will provide daily, adequate monitoring of the program, 7. To ensure indicators to IMF staff as described in IMF Country weekly, and monthly monetary and fiscal in paragraph 10 of the letter of Attachment III and its updates. As described Report No. 10/263, consult with IMF staff on the terms and concessionality March 2014, the government undertakes to any external debt. before contracting or guaranteeing of all proposed new loan agreements financed with treasury and Petrocaribe-related 8. Quarterly Report on Investment Fund staff a copy of a quarterly report on the resources. The authorities will share with effective implementation and cash advances implementation of the PIP that differentiates between amounts) of projects by type of contract accounts and provides a breakdown (by gourde The report will to project amendment to contract, etc.). bidding, sole-source procurement, documentation award (competitive and of contract amounts for which supporting allow a close monitoring of contracts of Finance will use this information to is made available to the Ministry of Finance. The Ministry a replenishment of project accounts, if further information is required before authorizing determine and Industry; ACES II includes the Ministries of 1 ACESIi includes the Ministries of Finance, Tourism and Trade of Public Works; and ACES IV includes the Ministry of and Environment; ACES III includes the Ministry Planning Agriculture. 40 INTERNATIONAL MONETARY FUND , sole-source procurement, documentation award (competitive and of contract amounts for which supporting allow a close monitoring of contracts of Finance will use this information to is made available to the Ministry of Finance. The Ministry a replenishment of project accounts, if further information is required before authorizing determine and Industry; ACES II includes the Ministries of 1 ACESIi includes the Ministries of Finance, Tourism and Trade of Public Works; and ACES IV includes the Ministry of and Environment; ACES III includes the Ministry Planning Agriculture. 40 INTERNATIONAL MONETARY FUND --- Page 42 --- HAITI until the TSA is operational. A similar procedure will be implemented vis-à-vis investment spending financed with Petrocaribe-related resources. The quarterly report will be shared with Fund staff one month after the end of the quarter. The reports corresponding to FY2014 have been communicated before end-November 2014. 9. Analysis on Fuel Price Subsidies. The government will gradually reduce fuel subsidies, while designing, with assistance from the World Bank, a social safety net that delivers assistance to the most vulnerable. In this connection, the government increased fuel prices, effective October 10, 2014. The government has communicated to Fund staff the associated study before end-November 2014. The government remains committed to achieving the fuel revenue target in the budget for FY2015. In this regard, declines in international oil market prices will not be reflected in domestic fuel prices before the gap between domestic prices and international reference prices is eliminated. INTERNATIONAL MONETARY FUND 41 --- Page 43 --- HAITI Impact of a Possible Stop of Appendix II. Short-Term Petrocaribe Financing and external accounts. While the flows are the main financing item in the fiscal the risk that Petrocaribe external shock for Haiti it also increases decrease in international oil prices is a positive flows. Staff currently project that Venezuela will no longer be able to sustain Petrocaribe-related somewhat lower than observed in recent flows would reach about 3 percent of GDP in FY2015, remain these Petrocaribe financing would nonetheless (when they averaged 4-4.5 percent of GDP). flows have been used to finance years item in the fiscal and external accounts. These (EDH). the main financing and the deficit of the state-owned electricity company government infrastructure projects fiscal adjustment and lead, in the short flows will require a substantial A stop in Petrocaribe would need to cut domestcaly-financed in GDP The authorities term, to a decrease growth. resources in FY2014. spending, about half of which drew on Petrocaribe-related which would result in investment sector would also need to be reduced, Moreover, transfers to the electricity including through better would likely also be strengthened, longer blackouts. EDH performance a sudden stop of these inflows could subtract billing and collection. If not offset by other flows, 2-3 percentage points from GDP growth. in Petrocaribe inflows. Haiti could fully offset the reduction markets It is unlikely that the government has no access to international financial has limited alternative financing sources: the country extent, the government could cushion financial market remains shallow. To some and its domestic of government deposits at the banking system the impact on the economy through a drawdown banks, which represented 1.4 percent of of Petrocaribe-related deposits at commercial anchor the large (including the role of the exchange rate as nominal (given GDP at end-FY2014). However, limits the extent to which government pass-through of exchange rate depreciation to inflation), expectations. Moreover, monetary deposits can be used without negatively affecting depreciation difficult. is already tight, and further tightening may prove policy on the mobilization of additional donor The need to cut the fiscal deficit will also depend anchored, contain the budget support would be important to keep expectations to the flows. Additional erosion of external buffers. Haiti's commitment negative impact on growth, and limit the reforms (in particular with respect to continued implementation of a program of structural of the deficit of EDH) will be important financial management, and a reduction strengthening public to mobilizing further donor support. is based on current oil price forecasts, as the level of The fall in net Petrocaribe financing projected for This FY2015 fall (to about 3 percent of GDP) assumes no disruption or Petrocaribe financing is a function of the oil price. change in the Petrocaribe terms. MONETARY FUND 42 INTERNATIONAL negative impact on growth, and limit the reforms (in particular with respect to continued implementation of a program of structural of the deficit of EDH) will be important financial management, and a reduction strengthening public to mobilizing further donor support. is based on current oil price forecasts, as the level of The fall in net Petrocaribe financing projected for This FY2015 fall (to about 3 percent of GDP) assumes no disruption or Petrocaribe financing is a function of the oil price. change in the Petrocaribe terms. MONETARY FUND 42 INTERNATIONAL --- Page 44 --- Statement by IMF Staff Representative on Haiti December 17, 2014 situation since the Staff Report was issued to 1. This is an update of the political does not change the thrust of staff 3, 2014. This update the Executive Board on December appraisal. down on December 13. Mr. Lamothe's 2. Prime Minister Lamothe stepped was one of a number of to allow the formation of a new consensus government, President Martelly at resignation, Commission" created by recommendations issued by a "Consultative is to resolve the political crisis that end-November. The purpose of these recommendations elections. 1 In order of mid-term parliamentary has resulted from the repeated postponement current ministers remain in office until the continuity of the administration the to ensure replaced. a wide elections, the Commission also recommended 3. To pave the way to new changes to the Constitution. It envisages range of political reforms, including possible President Martelly to governdissolution of the legislature on January 12, leaving 2 The the prerogatives reserved for Parliament." for the constitutional the subject to the protections before such date, the Parliament should approve Commission further recommended that who would form a unity government. In appointment of a new consensus Prime Minister passed on the organization of agreement should be forged and legislation addition, a political that should be held later in 2015. These parliamentary and presidential elections both the government and the political recommendations are currently being analyzed by early January. are expected to continue through opposition and negotiations 2014. The terms of the representatives to the Chamber of occurred in October This will prevent the The last such postponement Senators expire on January 12, 2015. Deputies as well as those ofl half of the remaining legislature to have the quorum needed to function. Consultative", December 8, 2014. --Recommandations de la Commission later in 2015. These parliamentary and presidential elections both the government and the political recommendations are currently being analyzed by early January. are expected to continue through opposition and negotiations 2014. The terms of the representatives to the Chamber of occurred in October This will prevent the The last such postponement Senators expire on January 12, 2015. Deputies as well as those ofl half of the remaining legislature to have the quorum needed to function. Consultative", December 8, 2014. --Recommandations de la Commission --- Page 45 --- COM MONETARY FUND INTERNATIONAL International Monetary Fund Washington, D.C. 20431 USA Press Release No. 14/596 FOR IMMEDIATE RELEASE December 19, 2014 Final Review under Haiti's ECF Executive Board Completes Eight US$2.4 and Million Disbursement IMF's Arrangement: and Approves Monetary Fund (IMF) completed Executive Board oft the International supported by the On December 17, the Haiti's performance under its program will enable an and final review of of the review total the eighth Facility (ECF) arrangement. Completion (US$2.4 million), bringing Extended Credit equivalent to SDR 1.638 million under the ECF arrangement. immediate disbursement 40.95 million (USS60 million) disbursements to SDR observance on performance a request for a waiver of non was missed due to Board also approved which deficit. The Executive bank credit to the central government, fiscal criterion on net central bills, and despite a loerdhamproganmeti delays in the placement of treasury Release No. 10/299) on July 21, 2010 (see Press of about SDR 178 ECF arrangement was approved debt to the Fund Haiti's the full relief of the country's outstanding together with then to US$268 million). million (equivalent Shinohara, Deputy on Haiti, Mr. Naoyuki the Executive Board's S discussion Following Director and Acting Chair, said: by the Managing completion ofthe program supported that performance: and successful difficult circumstances and headline "Haiti's satisfactory given the exceptionally in line with projections ECF is commendable, particularly Growth in FY2014 was remain high. Progress was also followed the 2010 earthquake. although fiscal imbalances regarding the implementation inflation remained moderate, reform agenda, most notably system, and an initial made in advancing the structural the public accounting Single Account, strengthening ofthe Treasury reduction in fuel subsidies. and the Haitian authorities essential to reduce vulnerabilities, financing risks in FY2015. "Fiscal consolidation remains the fiscal deficit and address external will help to mobilize have taken steps to reduce tax and customs administration The ongoing effort to strengthen o www.imf.org 202-623-7100 e Fax 202-623-6772 Washington, D.C. 20431 Telephone --- Page 46 --- additional revenues, in tandem with continued streamlining of expenditures, while safeguarding priority social spending. To this end, the authorities have reduced fuel subsidies, together with mitigating measures, and are planning to restructure the electricity sector, which has become a large drain on the budget. Reforms are also ongoing in the areas of public financial and international reserve management. "Monetary restraint in support of a tightened fiscal stance will help to curb inflationary pressures and reduce exchange rate pressures. Efforts will also be made to strengthen the financial sector's supervisory and regulatory framework, with a view to enhancing financial stability. Greater exchange rate flexibility- with foreign exchange interventions limited primarily to smoothing large fluctuations- will contribute to strengthening reserve buffers. "As stressed by the Ex-Post Assessment ofLonger-Term Program Engagement (EPA), Fundsupported programs since 2006 have helped Haiti promote macroeconomic stability and encouraged structural reforms, given Haiti's domestic and external vulnerabilities. However, while growth after the 2010 earthquake has been positive, it has been below original projections in the context of weaknesses in aid effectiveness; and fiscal deficits and public debt stocks have risen. "The authorities intend to deepen implementation ofkey reforms, possibly under a new medium-term program to be negotiated with the Fund. Such a program would help in consolidating macroeconomic stability and removing remaining bottlenecks to sustained growth and poverty reduction." 99 ), Fundsupported programs since 2006 have helped Haiti promote macroeconomic stability and encouraged structural reforms, given Haiti's domestic and external vulnerabilities. However, while growth after the 2010 earthquake has been positive, it has been below original projections in the context of weaknesses in aid effectiveness; and fiscal deficits and public debt stocks have risen. "The authorities intend to deepen implementation ofkey reforms, possibly under a new medium-term program to be negotiated with the Fund. Such a program would help in consolidating macroeconomic stability and removing remaining bottlenecks to sustained growth and poverty reduction." 99 --- Page 47 --- Batista, Executive Director for Haiti, Statement by Paulo Nogueira Executive Director, and Héctor Torres, Alternate Advisors to the Executive Director Ketleen Florestal and Carlo Hubert Janvier, December 17, 2014 authorities, we thank staff and management for the 1. On behalf of our Haitian This last review of the 2010 Extended Credit reports and the constructive dialogue. when were guided by the urgent need Facility (ECF) marks the closure of an era policies institutions and avoid a infrastructure, render functional public to reconstruct earthquake of 2010. On the macroeconomic humanitarian crisis after the devastating through public investments that were front, the key objective was to ensure robust growth was to be restrained in a financed. Exchange rate volatility of to be mostly externally minimum control over the timing, uses and volumes context where the authorities had front, the 2010 program aimed at inflows of foreign exchange. On the structural on increasing expenditure financial public management with an emphasis Treasury strengthening through the implementation of the Single controls and transparency mainly and debt management. Account. It also sought to improve tax administration economic growth has been steadily 2. Although generally below projections, achieved on the structural front, several increasing. While commendable progress was head-on in the period ahead. Among important issues linger and need to be addressed in the performance of the consider as priorities: the improvement these our authorities and efficiency in public expenditure electricity sector; the enhancement of transparency of the Single systems, in particular through the full implementation Natural disasters (e.g.: floods, management ofthe fuel subsidy. Treasury Account; and the phasing-out that needs to be taken into account in all public hurricanes, droughts) remain a key risk including the recent and programming. But new challenges are emerging, the planning Minister and impending formation of a Government, resignation of the Prime decreased availability of donor grants and of beginning of an electoral year and the make the strengthening of tax collection PetroCaribe financing for Haiti. Such challenges of tax administration even more pressing. and the rationalizing is indispensable to achieve robust and macroeconomic stability A 3. Maintaining and achieve greater social cohesion. sustainable growth, eradicate extreme poverty achieved thus far and entice additional successor ECF would help safeguard the progress effective and efficient aid. financing and private investment as well as more concessional Private sector initiative the of the private sector (domestic 4. The Haitian authorities count on participation infrastruetures and the creation of in the construction of public and social A and foreign) been taken to encourage private investment. Several initiatives have already and new jobs. unit created within the Ministry of Economy Public Private Partnership (PPP) aining and achieve greater social cohesion. sustainable growth, eradicate extreme poverty achieved thus far and entice additional successor ECF would help safeguard the progress effective and efficient aid. financing and private investment as well as more concessional Private sector initiative the of the private sector (domestic 4. The Haitian authorities count on participation infrastruetures and the creation of in the construction of public and social A and foreign) been taken to encourage private investment. Several initiatives have already and new jobs. unit created within the Ministry of Economy Public Private Partnership (PPP) --- Page 48 --- institutional framework for PPPs in Finance is entrusted with the preparation of the the options being considered to Management contracts are among the infrastructure projeets. Simultaneously, Ministry the delivery of public services such as electricity. fund. improve the creation of an investment of Economy and Finance is spearheading framework for doing business are also 5. Measures to strengthen the legal several initiatives that essential. Reforms in the energy sector are one among the considered framework. A presidential commission is revising will require changes in the legal identified as outdated or excessively regulations that the business community has available a number of draft laws to the The commission has already made cumbersome. of them have been submitted to Parliament. public and some main factor depressing private activities. With 6. Credit scarcity is one of the Development Bank assistance from the World Bank and the Inter-American technical in July 2014 with the remit of reducing information (IDB), a credit bureau was opened obstacles to the provision of credit for that have been identified as one of the and preparing asymmetries The authorities are also developing projects commercially viable projects. framework to regulate and strengthen the SME sector. A new legal legislation to support consideration. Last September, the central bank microfinance is under parliamentary to ensure that even the most humble financial inclusion strategy launched an ambitious and financial services. Haitians can have access to credit Donor engagement the need to address weaknesses in absorptive 7. The authorities acknowledge their task by (i) better aligning their capacity but also call on donors to facilitate avoiding the creation of parallel with national priorities; (ii) and cooperation programs ministries oftheir experienced structures that weaken public institutions by stripping be matched by the public valued staff with compensation packages that cannot are most rules; and (iv) ensuring that funds pledged sector; (iii) harmonizing procurement the latter, the authorities believe disbursed in a timely and predictable manner. Regarding of legislation as disbursements to the approval to condition that it is counterproductive the into horse-trading with and forces government this leverages parliamentarians lawmakers. deserves to be revisited. In order to strengthen 8. Technical assistance (TA) of TA, a critical mass of public servants institutional capacity and increase the efficiency be achieved in a reasonable skills needs to be formed and this can only of resident with specific initiatives and the more frequent use timeframe through in-country training of officials in short-term expert visits or participation advisors. Delivering TA through reinforce the government's seminar or conferences) can only external forums (courses, and in a limited fashion. Additionally, more institutional capacity in the long run ited. In order to strengthen 8. Technical assistance (TA) of TA, a critical mass of public servants institutional capacity and increase the efficiency be achieved in a reasonable skills needs to be formed and this can only of resident with specific initiatives and the more frequent use timeframe through in-country training of officials in short-term expert visits or participation advisors. Delivering TA through reinforce the government's seminar or conferences) can only external forums (courses, and in a limited fashion. Additionally, more institutional capacity in the long run --- Page 49 --- when financing sector specific TA, coordination among donors is warranted, particularly recommendations. avoid of efforts and conflicting in order to duplication Fiscal and public financial management since the seventh review has been 9. As highlighted in the staff report, progress Treasury Account was particularly satisfactory. The implementation of the Single centers broadly included finding office space to host the accounting challenging. Difficulties outreach and training sessions for relevant personnel ("postes comptables "), organizing transition to the new system. After a bumpy in sector ministries and ensuring a smooth towards full implementation. Account is now well underway start, the Single Treasury (EDH) and low petroleum prices at 10. The subsidization of the electricity company of domestic fuel public finances. A gradual convergence the pump have overburdened fiscal revenues. Contracts with independent prices to international prices will increase need to be revised to improve government producers (IPPs) in the electricity sector company, power decrease non-technical losses of the electricity finances and support growth. To including the use of pre-paid meters several new measures the authorities are considering distributors of electricity into formal entrepreneurs and transforming small private illegal EDH and sell it retail to their clients, mostly who would buy pre-paid electricity from those with low purchasing power. Money, credit and the. financial sector than and the gap in financing the fiscal 11. T-bill placement was lower envisaged deposits at the central bank deficit was filled by a larger drawdown on government credit to the central government was (BRH). Hence, the performance criterion on BRH nominal GDP growth. The BRH missed. However, broad money grew moderately, below fiscal year by increasing interest monetary policy during the second half ofthe of tightened The central bank also sought with the combination rates and reserve requirements. of deposits and credit. With the exchange these instruments to contain the dollarization rate on inflation only moderately, the effect of exchange pass-through In of rate depreciating level (5.3 percent) in FY14. light limited. Inflation stayed at a low single digit was sector, the authorities decided in September the deceleration of credit to the private allowing them to include treasury constraints on commercial banks by between 4 to to lower liquidity International reserves were maintained bills as part of reserve requirements. under the program. 5 months of imports, higher than the stipulated Most banks are well capitalized and 12. The financial system remains healthy. in the level of financial intermediation. profitable and there has been a steady increase incentives to hold BRH bonds; of policy rates initiated in 2011 reduced to 6.7 The reduction of banks' assets in 2014 compared accordingly, they account for only 2.8 percent percent in 2010. between 4 to to lower liquidity International reserves were maintained bills as part of reserve requirements. under the program. 5 months of imports, higher than the stipulated Most banks are well capitalized and 12. The financial system remains healthy. in the level of financial intermediation. profitable and there has been a steady increase incentives to hold BRH bonds; of policy rates initiated in 2011 reduced to 6.7 The reduction of banks' assets in 2014 compared accordingly, they account for only 2.8 percent percent in 2010. --- Page 50 --- institutions have a fundamental role in 13. Financial cooperatives and microfinance in both urban and poverty given their extensive presence promoting growth and fighting legislation to regulate them. However, rural areas. Parliament has committed to approve approval, it is not and the number of laws awaiting given recent political developments in the very short term. that the legislation will be promulgated anticipated The Ex Post Assessment and future engagement mission's role was to assess the Fund's S engagement 14. The first Ex Post Assessment of 2006 and 2010 with a view to in Haiti under the two most recent arrangements have already issued a comprehensive drawing lessons for the future. Our authorities ahead ofthe discussions with the comment' on the draft report they had received written the following additional comments: mission chief. They have requested us to convey reforms should not be overly ambitious; They agree with staff that planned as the experiences do not have to be as protracted nevertheless, change processes where, based on a Paul Collier study mentioned in paragraph 38 ofthe EPA report is estimated. With time of 59 years to transition from fragility" income "an average Haiti can become a middle determined leadership and national consensus, country within the next decade. "the challenge is to balance the They also agree that in fixing targets for fiscal policy, and infrastructure needs and to fiscal consolidation with Haiti's large social need for consistent with the social and political determine a feasible pace of adjustment 41, second bullet point). context" (ref. paragraph with the Fund requires that the authorities Full domestic ownership of an arrangement them marshal political consensus in remain in the driver's seat while the Fund helps support for the program's objectives. refers to the missed performance criterion on 15. Finally, since the EPA report back to the issue. With the the authorities have asked us to come account of the repos, the central bank s portfolio by transaction, the BRH simply sought to diversify view, reserve repos securities with higher returns. In the authorities' investing funds in safe that capital preservation plays a key should not be unduly constrained, given management investment policy. Limits to routine reserve management role in the central bank' s This point has been should not be imposed under a Fund program. of operations like repos this chair in previous discussions. The slowness clearly made by the authorities and by bureaucratic and inflexible approach is yet another indication of the the Fund's response that often sets the tone in this institution. Engagement (SM/14/319), Appendix 1 pages 31-33. Haiti-Ex Post Assessment ofLonger-Term Program