--- Page 1 --- MONETARY FUND INTERNATIONAL IMF Country Report No. 15/157 HAITI REPORT FOR THE ARTICLE IV 2015 STAFF FOR A THREE-YEAR AND REQUEST June 2015 CONSULTATION EXTENDED CREDIT UNDER THE ARRANGEMENT STAFF REPORT; AND RELEASE; FACILITY-PRESS DIRECTOR FOR HAITI STATEMENT BY THE EXECUTIVE 2015 Article IV Consultation and request for a In the context of the Staff Report for the the following documents have under the Extended Credit Facility, three-year arrangement been released and are included in this package: and by the Chair of the Executive Board Press Releases including a statement during its May 18, 2015 summarizing the views of the Executive Board as expressed IV Consultation and on issues related to the Article consideration of the staff report the IMF arrangement. IMF for the Executive Board's The Staff Report prepared by a staff team of the that ended on March 20, 2015, consideration on May 18, 2015, following discussions and policies. Based on with the officials of Haiti on economic developments the staff report was completed information available at the time of these discussions, on May 6, 2015. Annex prepared by the IMF staff. An Informational the staffs of the IMF and the World Bank. Analysis prepared by A Debt Sustainability by the Executive Director for Haiti. A Statement released. documents listed below have been or will be separately The Intent sent to the IMF by the authorities of Haiti* Letter of and Financial Policies by the authorities of Haiti* Memorandum of Economic Technical Memorandum of Understanding" Selected Issues *Also included in Staff Report information and policy allows for the deletion of market-sensitive and The IMF's transparency authorities' policy intentions in published staff reports premature disclosure of the other documents. to the public from Copies of this report are available International Monetary Fund o Publication Services PO Box 92780 o Washington, D.C. 20090 Telephone: (202) 623-7430 o Fax: (202) 623-7201 Web: http/www.imf.org E-mail: pubications@imforg Price: $18.00 per printed copy International Monetary Fund Washington, D.C. Fund 0 2015 International Monetary and The IMF's transparency authorities' policy intentions in published staff reports premature disclosure of the other documents. to the public from Copies of this report are available International Monetary Fund o Publication Services PO Box 92780 o Washington, D.C. 20090 Telephone: (202) 623-7430 o Fax: (202) 623-7201 Web: http/www.imf.org E-mail: pubications@imforg Price: $18.00 per printed copy International Monetary Fund Washington, D.C. Fund 0 2015 International Monetary --- Page 2 --- CM MONETARY FUND INTERNATIONAL : International Monetary Fund 700 19th Street, NW USA Release No. 15/241 D. C. 20431 Press RELEASE Washington, FOR IMMEDIATE May 28, 2015 with Haiti 2015 Article IV Consultation IMF Executive Board Concludes Fund (IMF) concluded Monetary Executive Board of the International On May 18, 2015, the with Haiti. the 2015 Article IV consultation' under the Extended Credit Facility the (ECF), 2010 Haiti completed an arrangement stability after in In December 2014, economic growth and maintain slowed macroeconomic GDP growth to 2.7 percent which helped to support that affected agricultural output remained in the mid-single digits. The earthquake. A drought in FY2013), but inflation in part due to one-offi investment of FY2014 (from 4.2 percent central government remained high, at about 5 months overall fiscal deficit of the International reserves remained appropriate related to the Sandy storm. outlook, imports. growth underpins the medium-term to be of structural reforms to support GDP growth in FY2015 is expected is to The implementation subject to downside risks. in the medium term. Inflation projected which is nonetheless and to increase to 3-4 percent reserves to be equivalent to between with a between 2-3 percent, digits, and gross international mix. Risks are mainly associated remain in the mid-single thanks to a prudent policy from Venezuela, and weather 4-5 months of imports, oil prices, a stop in external financing rebound in international events. Executive Board Assessment stability in the aftermath authorities for maintaining macroeconomic adequate international Directors commended the positive growth, moderate inflation, growth remains ofthe 2010 earthquake noting Haiti's debt assessment. Nevertheless, the backdrop of a in remain against reserves, and an improvement significantly, and vulnerabilities that the authorities' new insufficient to reduce poverty environment. Directors agreed challenging domestic and external discussions with members, usually the IMF holds bilateral and discusses with officials IV IMF's Articles of Agreement, and financial information, a which 1 Under Article ofthe visits the country, collects economic to the staff prepares report, every year. A staff team developments and policies. On return headquarters, the country's economic for discussion by the Executive Board. the views of forms the basis Director, as Chairman of the Board, summarizes of any qualifiers ofthe discussion, the Managing the authorities. An explanation 2 At the conclusion is transmitted to country's Executive Directors, and this summary here: in summings up can be found NAM used www.imf.org 202-623-7100 e Fax 202-623-6772 D.C. 20431 0 Telephone Washington, prepares report, every year. A staff team developments and policies. On return headquarters, the country's economic for discussion by the Executive Board. the views of forms the basis Director, as Chairman of the Board, summarizes of any qualifiers ofthe discussion, the Managing the authorities. An explanation 2 At the conclusion is transmitted to country's Executive Directors, and this summary here: in summings up can be found NAM used www.imf.org 202-623-7100 e Fax 202-623-6772 D.C. 20431 0 Telephone Washington, --- Page 3 --- macroeconomic stability, and ambitious structural program appropriately focuses on entrenching inclusive growth and strengthen policy buffers. They reforms to enhance competitiveness. spur donor support will be important for the stressed that strong ownership and well-coordinated success ofthe program. the FY2015 budget consistent with reducing Directors welcomed the approval of a revised ofGDP over the medium term, in public sector to about 2% percent fiscal deficit of the non-financial objectives. They supported the front-loaded line with debt sustainability and program automatic fuel price mechanism and measures to consolidation, and noted that the adoption of an will help contain fiscal risks, and create space improve the performance ofthe electricity sector They stressed the importance of mitigating for increased priority social and investment spending. Going forward, Directors encouraged the the impact of the reforms on the poor and vulnerable. public financial management, including the authorities to follow through on reforms to improve tax administration and Single Account; and to strengthen implementation of the Treasury collection; and budgetary transparency. stance, as needed, until the encouraged the authorities to maintain a tight monetary in order to preserve Directors and to be ready to increase exchange rate flexibility, of fiscal deficit is reduced, and anchor inflationary expectations. A number adequate international reserve buffers risks materialize, meeting the target for Net Directors expressed concern that, if downside Directors took note of the contingency measures International Reserves could be challenging. Directors also encouraged the authorities to that may need to be implemented in such case. improvements in reserve management and strengthen the monetary policy framework, through ofthe foreign exchange market. the functioning while calling for noted that the banking sector remains well-capitalized and profitable, of sustained Directors financial sector risks. They also stressed the importance welcomed continued vigilance against intermediation and inclusion. In this regard, they efforts to further develop financial and encouraged the authorities to enact pending adoption of the new financial inclusion strategy, institutions. laws on financial cooperatives and microfinance reforms designed to lift Haiti's growth Directors supported the program' s emphasis on structural include: improvements to property rights, potential and enhance its competitiveness. Priorities business regulations; and infrastructure credit access and labor productivity; streamlining and performance of the electricity the governance development - most notably by strengthening sector. of the economic data, with technical the authorities to improve the quality Directors encouraged from the Fund and other donors. assistance --- Page 4 --- Haiti: Selected Economic and Financial Indicators, 2012/13-2018/19 (Fiscal year ending September 30) GDP per capita (2014): $833 Nominal GDP (2014): US$8.7 billion Percent of population below poverty line (2012): 58 Population (2014): 10.5 million 2017/18 2018/19 2012/2013 2013/2014 2014/15 2015/16 2016/17 Act. Prov. Proj. Proj. Page 4 --- Haiti: Selected Economic and Financial Indicators, 2012/13-2018/19 (Fiscal year ending September 30) GDP per capita (2014): $833 Nominal GDP (2014): US$8.7 billion Percent of population below poverty line (2012): 58 Population (2014): 10.5 million 2017/18 2018/19 2012/2013 2013/2014 2014/15 2015/16 2016/17 Act. Prov. Proj. Proj. Proj. Proj. Proj (Change over previous year; unless otherwise indicated) National income and prices 1/ 4.2 2.7 2.0-3.0 3.0-3.5 3.5-4.0 3.5-4.0 3.5-4.0 GDP at constant prices 6.6 3.8 6.6 6.4 5.4 5.0 5.0 GDP deflator 6.8 3.9 6.6 6.5 5.4 5.0 5.0 Consumer prices (period average) 4.5 5.3 7.1 5.9 5.0 5.0 5.0 Consumer prices (end- -of period) 18.3 4.2 5.0 5.4 6.0 6.7 7.0 Exports (goods, valued in dollars, f.o.b.) 8.1 3.4 -4.7 3.8 5.5 5.5 5.2 Imports (goods, valued in dollars, f.o.b.) 0.8 0.0 0.0 0.0 0.0 0.0 Real effective exchange rate (end of period; + appreciation) 0.7 Money and credit (valued in gourdes) 16.4 11.2 4.7 11.4 9.0 10.4 11.4 Credit to private sector (in dollars and gourdes) 7.0 8.1 8.2 7.1 Base money (currency in circulation and gourde deposits) 15.1 0.5 3.0 8.3 8.5 6.6 9.8 7.3 7.6 7.9 Broad money (incl. 0.7 Money and credit (valued in gourdes) 16.4 11.2 4.7 11.4 9.0 10.4 11.4 Credit to private sector (in dollars and gourdes) 7.0 8.1 8.2 7.1 Base money (currency in circulation and gourde deposits) 15.1 0.5 3.0 8.3 8.5 6.6 9.8 7.3 7.6 7.9 Broad money (incl. foreign currency deposits) (In percent of GDP; unless otherwise indicated) Central government -7.2 -6.4 -2.7 -1.9 -2.2 -2.0 -2.0 Overall balance (including grants) 15.0 15.3 15.5 12.8 12.5 14.7 14.7 Domestic revenue 8.1 6.5 6.1 5.6 5.3 5.0 4.8 Grants 2/ 28.1 25.4 23.4 22.2 22.5 22.3 22.3 Expenditures 12.0 12.6 12.5 12.5 12.5 12.5 12.5 Current expenditures 16.1 12.8 10.9 9.7 10.0 9.8 9.8 Capital expenditures 3/ -8.2 -7.4 -3.2 2.3 -2.4 -2.2 -2.0 Overall Balance of Total Non Financial Public Sector Savings and investment 30.1 31.2 26.6 24.8 24.9 24.7 24.8 Gross investment 16.1 12.8 10.9 9.7 10.0 9.8 9.8 Of which: public investment 21.0 21.2 23.7 24.8 23.1 21.0 21.1 Gross national savings 3.0 3.0 3.0 1.9 1.3 2.9 2.8 Of which: central government savings -3.7 -3.6 External current account balance (including official grants) 2/ -6.3 -6.3 -3.5 -3.8 -3.7 official -15.2 -12.8 -8.8 -8.8 -8.6 -8.5 -8.4 External current account balance (excluding grants) -8.4 Fuels -11.3 -11.9 -7.3 -7.8 -8.1 -8.3 External Balance: Fossil Public Debt and end 4/ 17.4 21.0 21.8 22.6 23.3 23.8 24.3 External public debt (medium long- -term, -of- -period) 28.9 5/ 19.5 24.1 25.5 26.4 27.2 28.2 Total public sector debt (end-of- period) 5.5 6.1 6.1 External public debt service 6/ 1.8 2.4 3.7 4.6 (In millions of dollars, unless otherwise indicated) -282 -178 -210 -61 .8 22.6 23.3 23.8 24.3 External public debt (medium long- -term, -of- -period) 28.9 5/ 19.5 24.1 25.5 26.4 27.2 28.2 Total public sector debt (end-of- period) 5.5 6.1 6.1 External public debt service 6/ 1.8 2.4 3.7 4.6 (In millions of dollars, unless otherwise indicated) -282 -178 -210 -61 Overall balance of payments 1,085 definition) 71 1,219 1,010 860 1,017 Net international reserves (program 2,010 Reserves 8/ 2,384 1,914 1,782 1,808 1,872 1,940 Gross International 6.3 5.3 4.8 4.6 4.5 4.5 4.5 In months ofi imports of the following year 605,653 Nominal GDP (millions of Gourdes) 364,526 388,809 424,832 466,707 510,359 555,960 8,451 8,711 9,054 9,475 10,012 10,589 11,199 Nominal GDP (millions of US$) Sources: Ministry of Economy and Finance; Bank of the Republic of Haiti; World Bank; Fund staff estimates and projections. and of 2.5 percent for FY2015; a range of 3-3.5 percent and a point projection of 3.25 percent 1/ Staff assume a range of 2-3 percent a point projection for growth in FY2016, and a range of 3.5-4.0 percent and a point projection of 3.75 percent for FY2017-FY2019. identified multilateral budget support (see Tables 4a and 4b). Until a new IMF supported program is approved, current 2/ A new ECF would catalyze account projections exclude these flows. 3/1 Includes state-owned electricity company (EDH). 4/ Debt ratios differ slightly from those in the DSA given the use of average, instead of end- of- period, exchange rates. 5/ Excludes central bank repurchase operations in FY2013. 6/1 In percent of exports of goods and nonfactor services. Includes debt relief. 7/1 Includes SDR allocation as both an asset and liability. 8/ Includes gold; includes transactions related to BRH repurchase operations; corresponds to BPM6 definition of reserves. 2/ A new ECF would catalyze account projections exclude these flows. 3/1 Includes state-owned electricity company (EDH). 4/ Debt ratios differ slightly from those in the DSA given the use of average, instead of end- of- period, exchange rates. 5/ Excludes central bank repurchase operations in FY2013. 6/1 In percent of exports of goods and nonfactor services. Includes debt relief. 7/1 Includes SDR allocation as both an asset and liability. 8/ Includes gold; includes transactions related to BRH repurchase operations; corresponds to BPM6 definition of reserves. --- Page 5 --- COM MONETARY FUND INTERNATIONAL International Monetary Fund Washington, D.C. 20431 USA Press Release No. 15/231 FOR IMMEDIATE RELEASE May 19, ,2015 Million Under ECF for Haiti Three-Year US$69.7 IMF Executive Board Approves approved a threeMonetary Fund (IMF) Monday under the Board of the International million, 60 percent of quota) arrangement The Executive million (about USS69.7 enables the immediate disbursement year SDR 49.14 (ECF) for Haiti. The approval US$10 million), while the remaining Extended Credit Facility to SDR 7.02 million (about subject to semi-annual program of an amount equivalent over the duration of the arrangement, amount will be phased reviews. Haiti's growth potential and reduce ECF-supported program aims to raise stability. The authorities' while entrenching macroeconomic vulnerabilities to shocks, Mr. Min Zhu, Deputy Managing Board's discussion on Haiti, Following the Executive made the following statement: Director, and Acting Chair, of the 2010 earthquake is stability in the aftermath moderate, and international "Haiti's pursuit of macrocconomic inflation has remained to sustained and commendable- growth has been positive, continued efforts are needed support maintain adequate Going forward, framework, and reserve levels adequate. institutions and the policy inclusive growth, strengthen buffers to absorb shocks. Extended Credit Facility (ECF) seeks and supported by the Fund's to spur inclusive growth, The new three-year program stability, improve competitiveness full country ownership. Donor macroeconomic that have to entrench through streamlined policies preserve buffers, the full financing ofthe program. from 7.5 percent support ensures non-financial public sector deficit term to targets a reduction of the and 2.5 percent in the medium the "The program ofGDP in FY2015 fiscal consolidation (allowing in FY2014 to 3.25 percent Lower oil prices will facilitate subsidies), while preserving pro-poor taxes if preserve sustainability. fuel taxes and lower electricity will safeguard fuel to raise fuel pricing mechanism govermment The adoption of an automatic spending. oil prices rebound. e www.imf.org 202-623-7100 0 Fax 202-623-6772 Washington, D.C. 20431 Telephone reduction of the and 2.5 percent in the medium the "The program ofGDP in FY2015 fiscal consolidation (allowing in FY2014 to 3.25 percent Lower oil prices will facilitate subsidies), while preserving pro-poor taxes if preserve sustainability. fuel taxes and lower electricity will safeguard fuel to raise fuel pricing mechanism govermment The adoption of an automatic spending. oil prices rebound. e www.imf.org 202-623-7100 0 Fax 202-623-6772 Washington, D.C. 20431 Telephone --- Page 6 --- Accordingly, the monetary policy stance will "The program aims to preserve price stability. to anchor exchange rate until fiscal consolidation proceeds to remain tight as needed international reserves at an appropriate level expectations. The policy mix seeks to keep ensure adequate buffers. to foster structural reform agenda focuses on strengthening competitiveness authorities' "The program's 's problems in the electricity sector; supports the growth. It tackles deep-seated and includes actions to increase policy effectiveness efforts to strengthen property rights; and public financial management, as well as through reforms in tax administration, tax policy economic statistics." 99 improvements in the monetary framework and ANNEX Recent Economic Developments under the Extended Credit Facility In December 2014, Haiti completed the arrangement and maintain macroeconomic (ECF), which helped support positive economic growth growth has been positive, it stability after the 2010 earthquake. However, while per Fiscal capita and external deficits rose to high has been insufficient to significantly reduce poverty. difficult socio-political environment, Haiti's S vulnerabilities. Due partly to a levels, increasing limited. progress on structural reform was Main Program Objectives stability and at deepening structural The program aims at entrenching macroeconomic The program seeks to maintain buffers in reforms, to support sustained and shared growth. reduce Haiti's vulnerability to shocks, and the form of foreign reserves and bank deposits to to growth by 3-4 percent over the policies. Real GDP is projected reforms addressing to avoid stop-and-go of structural and institutional medium term helped by the implementation in the business environment bottlenecks to growth and job creation, including improvements and cheap electricity. financial inclusion, and access to available fiscal and and property rights, contained in the mid-single digits, reflecting prudent Inflation is expected to be reserves would cover more than 4.5 months of monetary policies, while gross international imports. path and preserving buffers against Fiscal policy aims at placing public debt on deficit a sustainable of the non financial public sector to 2.5 downside risks. It targets a reduction in the spending. Fiscal ofGDP in the medium term, while preserving poverty-reducing fuel subsidies, the adjustment of consolidation percent will result from the elimination of regressive of losses in the levels, and the reduction quasi-fiscal investment spending to sustainable FY2015 budget includes a strong fiscal electricity sector. In this regard, the revised oil prices. To prevent a reemergence adjustment that takes advantage of the low international have adopted an automatic subsidies ifinternational prices rebound, the authorities oil into of fuel which will reflect international prices pricing mechanism for petroleum products, vulnerable. domestic fuel prices, while protecting the most --- Page 7 --- Additional Background Haiti, which became of member of the IMF on September 8, 1953, has an IMF quota of SDR 81.90 million. For additional background on the IMF and Haiti, see: http:/www.imf.org/external/country/HTIiindex.htm. --- Page 8 --- Haiti: Selected Economic and Financial Indicators, 2012/13-2018/19 (Fiscal year ending September 30) GDP per capita (2014): $833 Nominal GDP (2014): US$8.7 billion Percent of below poverty line (2012): 58 Population (2014): 10.5 million population 2012/2013 2013/2014 2014/15 2015/16 2016/17 2017/18 2018/19 Act. index.htm. --- Page 8 --- Haiti: Selected Economic and Financial Indicators, 2012/13-2018/19 (Fiscal year ending September 30) GDP per capita (2014): $833 Nominal GDP (2014): US$8.7 billion Percent of below poverty line (2012): 58 Population (2014): 10.5 million population 2012/2013 2013/2014 2014/15 2015/16 2016/17 2017/18 2018/19 Act. Prov. Proj. Proj. Proj. Proj. Proj. (Change over previous year; unless otherwise indicated) National income and prices 1/ 4.2 2.7 2.0-3.0 3.0-3.5 3.5-4.0 3.5-4.0 3.5-4.0 GDP at constant prices 6.6 3.8 6.6 6.4 5.4 5.0 5.0 GDP deflator 6.8 3.9 6.6 6.5 5.4 5.0 5.0 Consumer prices (period average) 5.9 5.0 5.0 5.0 Consumer prices (end- of- period) 4.5 5.3 7.1 18.3 4.2 5.0 5.4 6.0 6.7 7.0 Exports (goods, valued in dollars, f.o.b.) 5.5 5.2 Imports (goods, valued in dollars, f.o.b.) 8.1 3.4 -4.7 3.8 5.5 0.7 0.8 0.0 0.0 0.0 0.0 0.0 Real effective exchange rate (end of period; + appreciation) Money and credit (valued in gourdes) 11.2 4.7 11.4 9.0 10.4 11.4 Credit to private sector (in dollars and gourdes) 16.4 8.1 8.2 7.1 Base money (currency in circulation and gourde deposits) 15.1 0.5 3.0 7.0 6.6 9.8 7.3 7.6 7.9 8.3 8.5 Broad money (incl. ; + appreciation) Money and credit (valued in gourdes) 11.2 4.7 11.4 9.0 10.4 11.4 Credit to private sector (in dollars and gourdes) 16.4 8.1 8.2 7.1 Base money (currency in circulation and gourde deposits) 15.1 0.5 3.0 7.0 6.6 9.8 7.3 7.6 7.9 8.3 8.5 Broad money (incl. foreign currency deposits) (In percent of GDP; unless otherwise indicated) Central government -7.2 -6.4 -2.7 -1.9 -2.2 -2.0 -2.0 Overall balance (including grants) 12.8 12.5 14.7 14.7 15.0 15.3 15.5 Domestic revenue 8.1 6.5 6.1 5.6 5.3 5.0 4.8 Grants 2/ 28.1 25.4 23.4 22.2 22.5 22.3 22.3 Expenditures 12.0 12.6 12.5 12.5 12.5 12.5 12.5 Current expenditures 16.1 12.8 10.9 9.7 10.0 9.8 9.8 Capital expenditures -2.4 3/ -8.2 -7.4 -3.2 -2.3 -2.2 -2.0 Overall Balance of Total Non-Financial Public Sector Savings and investment 30.1 31.2 26.6 24.8 24.9 24.7 24.8 Gross investment 9.8 9.8 investment 16.1 12.8 10.9 9.7 10.0 Of which: public 21.0 21.2 23.7 24.8 23.1 21.0 21.1 Gross national savings 1.9 1.3 2.9 2.8 3.0 3.0 3.0 Of which: central government savings -3.7 -3.7 -3.6 External current account balance (including official grants) 21 -6.3 -6.3 -3.5 -3.8 official -15.2 -12.8 -8.8 -8.8 -8.6 -8.5 -8.4 External current account balance (excluding grants) -8.3 -8.4 External Balance: Fossil Fuels -11.3 -11.9 -7.3 -7.8 -8.1 Public Debt External public debt (medium and long- term, end- of period) 17.4 21.0 21.8 22.6 23.3 23.8 24.3 4/ debt (end 5/ 19.5 24.1 25.5 26.4 27.2 28.2 28.9 Total public sector -of- -period) 6.1 6.1 External public debt service 6/ 1.8 2.4 3.7 4.6 5.5 (In millions of dollars, unless otherwise indicated) -178 -210 -61 period) 17.4 21.0 21.8 22.6 23.3 23.8 24.3 4/ debt (end 5/ 19.5 24.1 25.5 26.4 27.2 28.2 28.9 Total public sector -of- -period) 6.1 6.1 External public debt service 6/ 1.8 2.4 3.7 4.6 5.5 (In millions of dollars, unless otherwise indicated) -178 -210 -61 Overall balance of payments 1,219 1,010 950 1,017 1,085 Net international reserves (program definition) 8/ 2,384 1,914 1,782 1,808 1,872 1,940 2,010 Gross International Reserves 4.5 In months of imports of the following year 6.3 5.3 4.8 4.6 4.5 4.5 364,526 388,809 424,832 466,707 510,359 555,960 605,653 Nominal GDP (millions of Gourdes) 10,012 10,589 11,199 Nominal GDP (millions of US$) 8,451 8,711 9,054 9,475 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 2-3 percent and a point projection of 2.5 percent for FY2015; a range of 3-3.5 percent and a point projection of 3.25 percent for growthi in FY2016, and a range of 3.5-4.0 percent and a point projection of 3.75 percent for FY2017-FY2019. identified multilateral support (see Tables 4a and 4b). Until a new IMF supported program is approved, 2/ A new ECF would catalyze budget current account projections exclude these flows. 3/1 Includes state- owned electricity company (EDH). 4/ Debt ratios differ slightly from those in the DSA given the use of average, instead of end -of- period, exchange rates 5/ Excludes central bank repurchase operations in FY2013. 6/1 In percent of exports of goods and nonfactor services. Includes debt relief. 7/ Includes SDR allocation as both an asset and liability. 8/ Includes gold; includes transactions related to BRH repurchase operations; corresponds to BPM6 definition of reserves. A new ECF would catalyze budget current account projections exclude these flows. 3/1 Includes state- owned electricity company (EDH). 4/ Debt ratios differ slightly from those in the DSA given the use of average, instead of end -of- period, exchange rates 5/ Excludes central bank repurchase operations in FY2013. 6/1 In percent of exports of goods and nonfactor services. Includes debt relief. 7/ Includes SDR allocation as both an asset and liability. 8/ Includes gold; includes transactions related to BRH repurchase operations; corresponds to BPM6 definition of reserves. --- Page 9 --- MONETARY FUND INTERNATIONAL HAITI AND FOR THE 2015 ARTICLE IV CONSULTATION STAFF REPORT UNDER THE ARRANGEMENT May 6, 2015 REQUEST FOR A THREE-YEAR EXTENDED CREDIT FACILITY KEY ISSUES Extended Credit Facility (ECF) completed arrangement under the Background. Haiti's recently after the 2010 earthquake. While Haiti has seen helped to maintain macroeconomic stability requires higher and sustained growth rates. four consecutive years of growth, reducing poverty to improve Haiti's growth potential Discussions focused on strategies Article IV Discussions. the current period of low international as well as how to leverage and external competiveness, particularly in the energy sector. These challenges oil prices to reduce Haiti's vulnerabilities, economic growth and achieve progress in poverty must be overcome in order to sustain strong reduction. Plan economic program, anchored on the Strategic The Proposed Program. The authorities' stability through a front-loaded fiscal of Haiti (PSDH), aims to entrench and for the Development vulnerabilities, and support growth adjustment, deepen institutional reform, mitigate of the non-financial public sector. QPCS now include a limit on the deficit employment. subsidies, improving PFM and expenditure Structural benchmarks focus on reducing for growth. The program focuses on: effectiveness, and creating an enabling environment spending. This would crowd in Lowering fiscal deficits while preserving poverty-reducing rate as a nominal anchor. buffers, and support the use of the exchange private credit, preserve creation with improvements in the business Removing bottlenecks to growth and job reliable electricity. and property rights, and access to cheaper and environment framework by addressing governance issues, strengthening Improving the policy management and the monetary policy budgetary transparency, the public investment framework. The Haitian authorities request a three-year arrangement Request for an ECF Arrangement. 49.14 million (60 percent of quota) in support of under the ECF in an amount equivalent to SDR economic reform program. their medium-term situation, which could delay include the complex political Risks. Risks to the program international petroleum prices, a sudden stop in implementation of reforms, a rebound in financing from Venezuela, and weather events. external --- Page 10 --- HAITI Approved By Discussions were held in Port-au-Prince A. Cheasty (WHD) and and March 16-20, 2015. The staff during February 2-12, B. Traa (SPR) (head), Ntamatungiro and team consisted of Messrs. Di Bella Hanedar (both FAD), Norton (all WHD), Mr. El Omari and Ms. Mr. Ishikawa (STA), and Mr. Camard representative). It met with Prime Minister Paul; (resident and Finance Laleau; Central Bank Minister of Economy Works Rousseau; other senior Governor Castel; Minister of Public the private sector; and government officials; representatives of participated in the development partners. Ms. Florestal (OED) policy discussions. CONTENTS HAITI AND THE FUND, 2006-2014 CONTEXT: LOW GROWTH AMID CONTINUED VULNERABILITY MEDIUM-TERM CHALLENGES: INCREASE GROWTH PRESERVE BUFFERS TO ADDRESS AND RISKS A. Structural Reforms for Sustained and Inclusive B. Preserving Economic Growth Macroeconomic Stability and Reducing Vulnerabilities Public the private sector; and government officials; representatives of participated in the development partners. Ms. Florestal (OED) policy discussions. CONTENTS HAITI AND THE FUND, 2006-2014 CONTEXT: LOW GROWTH AMID CONTINUED VULNERABILITY MEDIUM-TERM CHALLENGES: INCREASE GROWTH PRESERVE BUFFERS TO ADDRESS AND RISKS A. Structural Reforms for Sustained and Inclusive B. Preserving Economic Growth Macroeconomic Stability and Reducing Vulnerabilities A NEW ECF ARRANGEMENT: LIFTING BOTTLENECKS TO GROWTH AND ENTRENCHING MACROECONOMIC STABILITY A. Entrenching Macroeconomic B. Stability and Containing Risks Structural Reforms to Support Growth and the C. Program Modalities and Policy Framework Access STAFF APPRAISAL BOXES 1. Millennium Development Goals 2. GDP Growth Projections in the ECF 3. An Automatic Pricing Mechanism FIGURES 1. Recent Economic Developments, 2. Fiscal 2011-15 Developments, 2011-15 3. Monetary and Financial Market Developments, 4. Banking Sector, 2011-15 2011-14 2 INTERNATIONAL MONETARY FUND --- Page 11 --- HAITI TABLES 1. Selected Economic and Financial Indicators, 2012/13-2018/19 2a. Non-Financial Public Sector Operations, 2012/13-2018/19 (in millions of gourdes). 2b. Non-Financial Public Sector Operations, 2012/13-2018/19 (in percent of GDP), 2c. Central Government Gross Cash Flows, 2012/13-2018/19 3. Summary Accounts of the Banking System, 2012/13-2018/19 4a. Balance of Payments, 2012/13-2018/19 (in millions of US dollars) 4b. Balance of Payments, 2012/13-2018/19 (as a percentage of GDP on a fiscal year basis) 5. Financial Soundness Indicators, September 2013-September 2014 6. Indicators of Public Debt and External Vulnerability, 2012/13-2018/19 7. Proposed Schedule of Disbursements Under the Proposed ECF Arrangement, 2015-18 8a. Indicators of Capacity to Repay the Fund (Existing Fund Credit), 2014/15-2024/25 8b. Indicators of Capacity to Repay the Fund (Existing and Proposed Credit), 2014/15-2027-28 9. Indicative Targets and Quantitative Performance Criteria, June 2015-June 2016, 10. Proposed Prior Actions and Structural Benchmarks, FY 2015-16 11. Structural Reforms to be Implemented During ECF, 2015-17 APPENDICES I Letter of Intent Attachment 1. Memorandum of Economic and Financial Policies for 2015-2018 Attachment II. Technical Memorandum of Understanding II. Risk Assessment Matrix a INTERNATIONAL MONETARY FUND 3 (Existing and Proposed Credit), 2014/15-2027-28 9. Indicative Targets and Quantitative Performance Criteria, June 2015-June 2016, 10. Proposed Prior Actions and Structural Benchmarks, FY 2015-16 11. Structural Reforms to be Implemented During ECF, 2015-17 APPENDICES I Letter of Intent Attachment 1. Memorandum of Economic and Financial Policies for 2015-2018 Attachment II. Technical Memorandum of Understanding II. Risk Assessment Matrix a INTERNATIONAL MONETARY FUND 3 --- Page 12 --- HAITI HAITI AND THE FUND, 2006-2014 environment over the past ten years, the two previous Fund-supported Reflecting Haiti's challenging stability, rebuilding capacity and strengthening arrangements focused on maintaining macroeconomic the policy framework. with Haiti since 2006 focused on maintaining 1. Fund-supported programs and poverty reduction in a difficult macroeconomic stability and supporting growth aftermath of a period of severe political Haiti's 2006 program took place in the Reform environment. was approved after a devastating earthquake. instability, and the 2010 ECF arrangement Enhanced Heavily Indebted Poor Countries (HIPC), by debt relief under the Trust efforts were supported in 2009, and the Post Catastrophe Debt Relief the Multilateral Debt Relief Initiative (MDRI), the 2010-2014 Fund arrangement (PCDR), in 2010. Given urgent reconstruction needs, and anti-poverty spending. accommodated an ambitious public investment agenda, the authorities were encouraged to maintain 2. In the 2012 Article IV discussions, efforts to achieve sustained and inclusive macroeconomic stability while redoubling reform to create fiscal space for pro-poor Directors called for improved revenue administration reforms to improve the growth. spending, as well as public financial management would and growth-enhancing stressed that strong and inclusive growth require quality of public spending. Directors identified improving financial intermediation, structural reforms to improve competitiveness. They sector, and improving the business infrastructure bottlenecks, notably in the electricity addressing environment as key reform priorities. program engagement (EPA) assessment of Haiti's longer-term 3. The recent Ex-post of Haiti's previous Fund engagement. highlighted both achievements and disappointments macroeconomic stability. authorities had been successful in maintaining The EPA noted that the digits, and the authorities avoided excessive policy contained inflation in the mid-single GDP while Monetary reserve cushion. growth, rate volatility while maintaining an appropriate lower than projected and exchange favorable compared with Haiti's recent history, was rose to positive and concessional flows, fiscal and external deficits insufficient to reduce poverty. Financed by on structural reform was also mixed, levels, increasing Haiti's vulnerabilities. Progress in unsustainable utility (EDH), slower-than-projected progress at the state electricity with ongoing problems and legislative delays in modernizing the legal adopting the Treasury Single Account (TSA), limited progress in improving Haiti's business framework for the financial sector. The EPA observed climate, governance, and competitiveness. MONETARY FUND 4 INTERNATIONAL compared with Haiti's recent history, was rose to positive and concessional flows, fiscal and external deficits insufficient to reduce poverty. Financed by on structural reform was also mixed, levels, increasing Haiti's vulnerabilities. Progress in unsustainable utility (EDH), slower-than-projected progress at the state electricity with ongoing problems and legislative delays in modernizing the legal adopting the Treasury Single Account (TSA), limited progress in improving Haiti's business framework for the financial sector. The EPA observed climate, governance, and competitiveness. MONETARY FUND 4 INTERNATIONAL --- Page 13 --- HAITI GROWTH AMID CONTINUED CONTEXT: LOW VULNERABILITY proceeded, but growth was lower than expected. reconstruction following the 2010 earthquake sharply in FY2015. Aid-financed Petrocaribe flows, which are decreasing Fiscal deficits increased, mainly financed by The political situation adds to contained, given moderate exchange rate depreciation. Inflation remains policies and reduce fiscal vulnerabilities. decreases should be used to improve energy risks. Oil price 2010 earthquake provide the environment and the devastating 4. A complex political for recent economic developments. Policy Per- Capita GDP Growth, Actual vs. Program Projections context large aid flows without (2005- 2014, percent) challenges were related to absorbing sustainability. Repeatedly postponed Program projection (as of2 2010) compromising resulted in a political impasse at -Actual parliamentary elections end-2014. As part of the efforts to overcome the impasse, in January 2015, Mr. Evans Paul (an the President appointed, Minister to lead a opposition figure) as new Prime d'ouverture. As a result, many of the newly 2011 2012 2013 2014 gouvernement parties. However, 2005 2006 2007 2008 2009 2010 appointed ministers belong to opposition Sources: 2005-0 -09, PRGF program request: 2010-13: firstECFr review; 2014, fifth ECF reviev Parliament will not convene without a quorum to function, tensions eased further Current Account and Fiscal Deficits for most of 2015. Election-related calendar in (2005 -2014, percentofGDP) following the publication of the electoral Parliamentary and presidential elections are March 2015: for the second half of 2015. The new Parliament scheduled before end-2015, and a new President will be known inaugurated in February 2016. Fiscal deficit Currenta taccount deficit reconstruction spending, per capita 5. Fueled by FY2011, but meaningfully 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 GDP growth was positive since sustained Source: IMF staff estimates. poverty will require higher and reducing achieved its fourth consecutive year of Domestic and External Debt growth rates. Haiti last (2005- -2014, percentof GDP) real capita growth in FY2014. GDP growth year External debt -Domestic debt per decreased vis-a-vis FY2013 due in large part to 30 (2.7 percent) volatile sector, growth 25 Excluding the agricultural a drought. since FY2011, supported 20 has been steady at about percent While Haiti has seen 15 by construction, industry and services. its Millennium Development Goals progress in meeting since 2010 has not (MDGS, Box 1), per capita income growth 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 dent in poverty levels. 2 This reflects Source: IMFS staff estimates. made a significant institutions and interrelated factors, including weak to more moderate levels in the coming years. 1 Aid flows are expected to decrease 4, 2014). Report No. 15/4 (December 2 See Haiti Ex-Post Assessment, Country INTERNATIONAL MONETARY FUND 5 (MDGS, Box 1), per capita income growth 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 dent in poverty levels. 2 This reflects Source: IMFS staff estimates. made a significant institutions and interrelated factors, including weak to more moderate levels in the coming years. 1 Aid flows are expected to decrease 4, 2014). Report No. 15/4 (December 2 See Haiti Ex-Post Assessment, Country INTERNATIONAL MONETARY FUND 5 --- Page 14 --- HAITI inadequate policy frameworks, and predatory business practices, governance, lack of competition disasters, inadequate infrastructure, and still-low weak donor coordination, vulnerability to natural slowed implementation of structural A difficult socio-political environment labor productivity. reforms. Petrocaribe flows and account deficits widened with increased 6. Fiscal and current deficit increased to 6-7 percent of GDP during diminished buffers. The central government came from Petrocaribe inflows (which FY2013-FY2014, raising the current account deficit. Financing diminished fiscal and external buffers (in 4 percent of GDP during FY2009-FY2014), and by reserves) during averaged deposits at the banking system and international HIPC the form of government had fallen to 9 percent of GDP in FY2011 following FY2013-FY2014. External public debt (which rebounded to 21 percent of GDP in point and the debt write-offs after the earthquake), financing. Domestic completion Petrocaribe concessional FY2014, almost exclusively due to Venezuela-related shallow domestic financial markets. public debt is around 4 percent in FY2014, reflecting and Social Spending vs. Energy Subsidies 7. The energy sector's very poor performance (Percent ofGDP) Education driver of fiscal imbalances. The deficit mHealth Agriculture forgonefueltaves policies are a key of the state-owned SEdHdeficit (before central government transfers) 2.5 of EDH increased to percent electricity sector company substantial technical GDP in FY2014, due to low billing, 3 Domestic fuel prices losses and widespread electricity theft. frozen from March 2011 until October 2014, resulting were that peaked at about 2 percent of in foregone tax revenues of fuel Source: IMFS staffe estimates. The combined fiscal cost regressive 3-4 GDP in FY2014. social spending, which hovered around percent subsidies and EDH's deficit has been larger than opportunity to improve energy policies. of GDP since FY2010. Lower oil prices provide a unique depreciation at a moderate rate Bank (BRH) has striven to keep gourde 8. The Central Large external Net FX Intervention and Exchange Rate Depreciation given a high pass-through to inflation. 200 -NetFXi intervention, millions of USS. cumulative aid flows coupled with slow absorption resulted in a 150 -gourdes since October per dollar 2010 percent yly (right axis) build-up of international reserves in FY2010-FY2012. BRH 100 fiscal deficits in FY2013-FY2014 prompted the Higher and to tighten monetary policy to 50 Netsales to sell foreign exchange moderate at 3-4 percent Netp purchases keep exchange rate depreciation Some easing in the monetary stance at end- -50 per year. the payment of debt to 2012 2013 2014 2015 FY2014 (to accommodate resulted in pressures in the foreign exchange Sources BRH: and IMF staffe estimates. suppliers) risks have increased dollar hoarding of market, while political reserves declined to below 5 months imports by international and reduced supply. Accordingly, depreciate more (by about 6 percent y/y 2015. The BRH responded by letting the gourde February and Challenges for Growth." 3 See accompanying Selected Issues Paper "Opportunities accrued to the richest 20 percent of the 90 percent of fuel subsidies 4 According to the World Bank, about population. MONETARY FUND 6 INTERNATIONAL BRH: and IMF staffe estimates. suppliers) risks have increased dollar hoarding of market, while political reserves declined to below 5 months imports by international and reduced supply. Accordingly, depreciate more (by about 6 percent y/y 2015. The BRH responded by letting the gourde February and Challenges for Growth." 3 See accompanying Selected Issues Paper "Opportunities accrued to the richest 20 percent of the 90 percent of fuel subsidies 4 According to the World Bank, about population. MONETARY FUND 6 INTERNATIONAL --- Page 15 --- HAITI policy in March through increased reserve through March), and by tightening monetary depends on lowering the fiscal rates. Anchoring inflation expectations requirements and policy 4-5 months of prospective imports. BRH reserves equivalent to deficit and maintaining Goals 1/ Box 1. Haiti: Millennium Development Millennium Development Goals (MDGS). towards achieving a number of the while the number of Haiti has made progress poverty dropped to about 25 percent, of people living under extreme in education grew from 47 The proportion old was halved. Net enrollment primary made children under 5 years and secondary education. Haiti also underweight gender parity in primary while access to percent in 1993 to 88 percent, attaining has decreased drastically since 1990, health indicators. Infant and child mortality also the spread of in Haiti has contained progress and maternal mortality was reduced. (see table). maternal healthcare improved have access to water 65 percent of households now improved HIV/AIDS, and nearly Haiti: Millennium Development Goals Indicators Baseline Current Status 2015 Target Goals Indicator 61.7 58.6 30.9 Millennium Development Proportion of peoplel living on less than $1.25aday 24.7 No target 1. Eradicate extreme poverty and hunger Proportion of people living under extreme poverty ($1, PPP) 50.2 30.0 No target Employment- -to- -populationratio children under five years of age 23.7 85.1 11.4 119 100 Prevalence ratei of in underweight the age group of 15-24 years of age 68.0 32.3 66.2 2. Achieve universal primary education Literacy Proportions of pupils starting grade 1 who reach last grade of primary 47.0 88.0 Net enrollment ratei in primary education and empower women Ratio of girls to boysi in: 0.9 No 3. Promote gender equality Primary education 1.0 30.0 target Secondary of education seats held by women in national parliament 2.7 4.3 44.2 Not target Proportion 50.4 Share of women in wage employment 156.1 88.0 36.4 Under five mortality rate 109.1 59.0 4. Reduce child mortality Infant mortality rate immunized against measles 25.8 85.0 100 100 Proportion of one- year- -old children 24.2 37.3 Proportion of births attended by skilled health personnel 157.0 No target 5. Improve maternal health Maternal mortality rate (per 100,000 live births) 2.9 1.8 No target People living with HIV, 15-49) years old (percentage) 1.0 0.9 No target 6. Combat HIV/AIDS, malaria, and other diseases Prevalence of HIV/AIDS aged 15-24 years old 5.0 No target Malaria death rate (per 100,000 population) 5.5 3.7 No target sustainability Proportion of land areas covered by forests (percentage) drinking water source 36.5 64.8 Min. ernal mortality rate (per 100,000 live births) 2.9 1.8 No target People living with HIV, 15-49) years old (percentage) 1.0 0.9 No target 6. Combat HIV/AIDS, malaria, and other diseases Prevalence of HIV/AIDS aged 15-24 years old 5.0 No target Malaria death rate (per 100,000 population) 5.5 3.7 No target sustainability Proportion of land areas covered by forests (percentage) drinking water source 36.5 64.8 Min. 72.7 62 7. Ensure environmentals Proportion of population using an improved 93.4 70.1 Slum populationa as percentage of urban 0.2 10.6 No target Internet users per 100inhabitants 8. Global partnership for development Source: United Nations MDG Indicators, 2013 Report and difficulties Last updated: 07/07/2014 remain, due to low capacity, insufficient resources Despite progress, vast challenges Strengthening safety nets, while increasing spending key stakeholders (including donors). remains essential. Continued to coordinate priorities and mobilizing donor support The in health and education, remain key Vulnerability to epidemics remains high. from rural areas to urban centers creates challenges. education through the implementation of migration and achieve free universal government's goal is to reduce poverty and the PSUGO (Programme de Scolarisation such as the Ede Pep (Help the People), of Haiti (PSDH) launched in May various social programs The Strategic Plan for the Development These efforts Universelle Gratuite et Obligatoire). Haiti an emerging country by 2030. reduction and making 2012, aims at speeding up poverty 2015. ongoing commitment beyond signal the country's 1/ This box was prepared by Daniela Cortez. would be appropriate for a country like Haiti reserves within this range to suggests that international "External Buffers and Competitiveness Staff analysis shocks. See Selected Issues Paper that is subject to multiple and frequent Absorb Shocks And Support Growth." INTERNATIONAL MONETARY FUND 7 --- Page 16 --- HAITI INCREASE GROWTH CHALLENGES: MEDIUM-TERM BUFFERS TO ADDRESS RISKS AND PRESERVE to spur sustained and policies to: strengthen competitiveness Article IV discussions focused on reforms safeguard macroeconomic stability by in the context of lower external support; vulnerabilities. and inclusive growth the policy framework to address fiscal and external buffers; and strengthen preserving Sustained and Inclusive Economic Growth A. Structural Reforms for reduction and social cohesion. Given the Sustained growth is essential for poverty structural reforms and 9. to growth needs to come from tapering of aid, staff argued that the impetus will also support growth. Potential growth institutional strengthening. Lower oil prices, if sustained, Business Indicators (2015) remain low as reforms Doing (Rank 100-best) and competitiveness are insufficient mHaiti SJamaica aDR ILAC 90 implemented in recent years N (impeding, e.g., taking full advantage of 80 a 3 70 The authorities and social cohesion. Given the Sustained growth is essential for poverty structural reforms and 9. to growth needs to come from tapering of aid, staff argued that the impetus will also support growth. Potential growth institutional strengthening. Lower oil prices, if sustained, Business Indicators (2015) remain low as reforms Doing (Rank 100-best) and competitiveness are insufficient mHaiti SJamaica aDR ILAC 90 implemented in recent years N (impeding, e.g., taking full advantage of 80 a 3 70 The authorities preferential trade agreements). concurred, but noted progress in social indicators out that the slow pace of reforms is at 40 30 30 20 and pointed nature, which times rooted in their complex sometimes affect vested interests. The authorities Registering Ease in Overall the need to carefully analyze trade Construction permits Startinga business property getting credit also highlighted that low average tariff rates (below Sources: Doing Business(2015) World Bank Report. policy, arguing and Common Market, in the Caribbean Community relative vis-à-vis countries CARICOM, levels) put domestic producers at a disadvantage constraints to competitiveness include: that the main region. 6 Staff and the authorities agreed rights constrain the real estate market, foreign Weak institutions. Weak property (which provides the basic investment, access to credit, and efficient agriculture Lack of transparency Haitians)." Predatory practices are widespread. livelihood to most unfavorable conditions for electricity contracting has resulted in, e.g., in government and hidden costs in the structure of fuel pump prices supply, high electricity costs, security. A still-large U.N. force continues to ensure (Box 3).5 caused severe decreases in the level of per-capita Domestic Politics. Political crises the yield for growth of income during the last 30 years (Box 2). Accordingly, maintaining political peace would be significant. and Challenges for Growth. 6 See accompanying Selected Issues Paper "Opportunities Economic Forum's "Global rights in the World 7 Haiti is ranked 147th (out of 148 countries) in property Competitivenes Index" for 2014. Perceptions Index" by Transparency ranked 166th (out of 177 countries) in the 2014 "Corruption Haiti is International. MONETARY FUND 8 INTERNATIONAL the yield for growth of income during the last 30 years (Box 2). Accordingly, maintaining political peace would be significant. and Challenges for Growth. 6 See accompanying Selected Issues Paper "Opportunities Economic Forum's "Global rights in the World 7 Haiti is ranked 147th (out of 148 countries) in property Competitivenes Index" for 2014. Perceptions Index" by Transparency ranked 166th (out of 177 countries) in the 2014 "Corruption Haiti is International. MONETARY FUND 8 INTERNATIONAL --- Page 17 --- HAITI services and electricity supply are inefficient and infrastructure. Port Inadequate is deficient to keep the country fully integrated. expensive, and road infrastructure is Fiscal policy implementation The policy framework needs strengthening. framework. A number of small taxes result in constrained by the lack of an integrated Administrative formalities for informational and operational costs to investors. enterprise creation add costs. and technical education is limited, Low labor productivity. Access to healthcare is the worst in LAC. These and social infrastructure restricting human capital formation, factors constrain investment. that significantly hamper Data provision has serious shortcomings and Data quality. national accounts and labor indicators. Fiscal surveillance. Most affected are the in coverage and adequate, but need improvements external sector data are broadly of economic data were seriously timeliness. Collection, production and distribution and the private sector affected by the 2010 earthquake. This deprives policy-makers including and accurate information about the economy, alike of access to timely potential opportunities. exchange rate (REER) level is broadly appropriate, 10. Staff argued Haiti's real effective and thus, that the gourde but that further appreciation may constrain competitiveness, The REER drifted slowly upwards should remain flexible to respond to changes in fundamentals. while well-contained, has been moderate and inflation, since 2010, as exchange rate depreciation Staff analysis suggests that the moderate has been higher than in Haiti's main trading partners. aid and remittance inflows, as well as a movement in the REER reflects both strong substantial debt upward asset position following post-earthquake significant improvement in the net foreign with no significant restrictions for capital relief. 10 Haiti's exchange system (a crawl-like arrrangement, since the 2012 Article IV consultation. movements) remains unchanged would be best addressed by Staff highlighted that Haiti's low competitiveness services, a 11. These range from a lack of basic public removing structural bottlenecks to growth. uncertainty and weak governance. The cumbersome legal and regulatory environment, to political rate would raise inflation and fuel in the nominal exchange authorities added that a sharp change and underscored the need to without appreciably improving competitiveness, social pressures base. diversify Haiti's productive and export Business" indicators for 2015. As pointed out on the World Bank's "Doing care should 9 Haiti is ranked 177th (out of countries) Business survey (see of business the -c evaluation of Doing nature, limited coverage in an independent these indicators given their, at times, subjective coverage and explanatory be exercised when interpreting which taken together tend to overstate the indicators' constraints, and a small sample, power. to Absorb Shocks And Support Growth." 10 See Selected Issues Paper "External Buffers and Competitiveness restrictions on the making of payments and Haiti's system is free from 11 Thus, as in the last Article IV consultation, transfers for current international transactions. INTERNATIONAL MONETARY FUND 9 Business survey (see of business the -c evaluation of Doing nature, limited coverage in an independent these indicators given their, at times, subjective coverage and explanatory be exercised when interpreting which taken together tend to overstate the indicators' constraints, and a small sample, power. to Absorb Shocks And Support Growth." 10 See Selected Issues Paper "External Buffers and Competitiveness restrictions on the making of payments and Haiti's system is free from 11 Thus, as in the last Article IV consultation, transfers for current international transactions. INTERNATIONAL MONETARY FUND 9 --- Page 18 --- HAITI Vulnerabilities Macroeconomic Stability and Reducing B. Preserving for growth. Staff and the macroeconomic stability is a prerequisite rate 12. Preserving stable rate of inflation underpinned by moderate exchange authorities agreed that a low and contribute to anchoring investors' expectations. depreciation and a sustainable fiscal position should buffers is essential to support Haiti's resilience They concurred that maintaining adequate financial and avoid stop-and-go growth dynamics. in the face of shocks, the quality of fiscal policy Rebuilding fiscal space and strengthening (i) deficit to agreed on the need to cut the central government's 13. Staff and the authorities reductions in available concessional financing buffers. This is also needed given expected are each to decline preserve External and Petrocaribe inflows projected between FY2014 and FY2018. grants winds down and on lower oil prices, respectively). by 2 percent of GDP (as earthquake rebuilding the need to preserve fiscal that in view of the limited domestic financing prospects, the central Staff argued sector), and to contain fiscal risks, buffers (in the form of deposits at the banking of GDP in FY2014 to about 2 percent GDP deficit should be reduced from 6%4 percent fiscal consolidation, but government distress has improved on the back of expected in FY2018. Haiti's risk of debt lower oil prices in the medium term. A rebound importantly, is based on a projection of significantly distress to become high again (see Debt however, could result in the risk of debt deficit to in oil prices, on the need to cut the preserve Sustainability Analysis, DSA)." 12 The authorities agreed the adjustment by keeping stability, but underlined the need for donors to support fiscal deficits will allow a macroeconomic Staff stressed that lower a steady flow of budgetary and project grants. in bank credit to the private sector. loosening of monetary policy and crowd gradual of reining in EDH's deficit. The authorities also agreed on the importance 14. Staff and the deficit by 0.5 percent of GDP in FY2015, given decrease in international oil prices reduces EDH's explained that the latter will be costs, and unchanged tariffs. The authorities EDH lower generation structure. They further explained that management adjusted only after an analysis of their to increase cash recovery based on revised FY2015 budget with an action plan presented a clients. The Ministry of Public Works (which oversees improved billing and collection from larger plan for the sector, with World Electricité de France (EDF) to develop a master EDH) has selected Bank financing. ratio is Staff noted that Haiti's revenue-to-GDP Domestic revenue should be increased. the authorities to 15. in part due to forgone fuel tax revenues. Staff urged which low by regional standards, oil prices to eliminate remaining fuel subsidies, take advantage of the decline in international authorities agreed, and highlighted that they 1.5-1.6 percent of GDP in FY2015. The should yield vulnerable to shocks to borrowing conditions and the 12 The DSA also shows that Haiti's external debt profile impact remains on public debt. The cost of a sudden stop of exchange rate, while shocks to growth have a negative assessed provided oil prices evolve as projected. Petrocaribe financing would be lower than previously 10 INTERNATIONAL MONETARY FUND . Staff urged which low by regional standards, oil prices to eliminate remaining fuel subsidies, take advantage of the decline in international authorities agreed, and highlighted that they 1.5-1.6 percent of GDP in FY2015. The should yield vulnerable to shocks to borrowing conditions and the 12 The DSA also shows that Haiti's external debt profile impact remains on public debt. The cost of a sudden stop of exchange rate, while shocks to growth have a negative assessed provided oil prices evolve as projected. Petrocaribe financing would be lower than previously 10 INTERNATIONAL MONETARY FUND --- Page 19 --- HAITI fuel prices. Staff further argued that multi-year resisted for large decreases in pump and medium had pressures administration (notably by strengthening the large investment in improving revenue and exempted entities), should allow domestic offices and the unit in charge of NGOS of several tax payers' FY2019. Staff stressed that the elimination to increase to 15.5 percent of GDP by VAT and revenue of the tax code, and that work towards implementation low-yield taxes will improve clarity noted that work in these areas is ongoing, with code should continue. The authorities a new mining help from donors, including the IMF. concurred on the need to strengthen the fiscal policy 16. Staff and the authorities and composition of public spending. framework with a view to improving the quality evaluation, and the public investment framework (including the preparation, of the Strengthening ineffective spending. Advancing the implementation monitoring of projects) will decrease debt and control over fiscal Single Account (TSA) will improve cash and management in both areas with help by Treasury explained that they have made significant progress and policy. The authorities the authorities to develop a more targeted sustainable the World Bank and the IMF. Staff urged them to poverty-reducing outlays blanket subsidies and reorienting social safety net. Eliminating social cohesion and improve human capital. The decrease and health) will build (such as education for priority expenditures, including on health, of transfers to EDH should create fiscal space decrease in MINUSTAH forces. national police, in view of the expected education, and a fully-staffed in EDH transfers will create space for priority expenditure The authorities agreed that the decrease and education spending under the PSUGO including for the national police, health expenditures, the World Bank to design a social tariff for technical assistance from program, and they requested public transportation. Staff stressed that budget the authorities to strengthen fiscal transparency. 17. Staff urged civil service pensions and future pension documents should report special accounts and programs, transactions with SOES (including liabilities, earmarked resources for municipalities, financial 14 The authorities explained that only transactions. contingent liabilities) and all Petrocaribe-funded included in the national budget, and that all central government-related transactions can be related to EDH) are already included in transactions (with the exception of those Petrocaribe-funded the budget. of framework and the soundness Strengthening the monetary policy (ii) the financial sector policy should be geared at keeping Staff and the authorities concurred that monetary both moderate 18. rates, this will require low and stable inflation rate. Given high pass-through This is only a rate depreciation expectations. and well-anchored exchange exchange rate depreciation, and if the expected path for the fiscal deficit is consistent possible if the REER is close to equilibrium, imports (i.e., sufficient for credible international reserves at 4-5 months of prospective with keeping Human Capital and Infrastructure Issues Paper "Public Expenditure in Haiti: Balancing 13 See accompanying Selected Formation." "Haiti's Public Sector: Explaining the ECF's Fiscal Target" 14 See accompanying Selected Issues Paper INTERNATIONAL MONETARY FUND 11 Given high pass-through This is only a rate depreciation expectations. and well-anchored exchange exchange rate depreciation, and if the expected path for the fiscal deficit is consistent possible if the REER is close to equilibrium, imports (i.e., sufficient for credible international reserves at 4-5 months of prospective with keeping Human Capital and Infrastructure Issues Paper "Public Expenditure in Haiti: Balancing 13 See accompanying Selected Formation." "Haiti's Public Sector: Explaining the ECF's Fiscal Target" 14 See accompanying Selected Issues Paper INTERNATIONAL MONETARY FUND 11 --- Page 20 --- HAITI market intervention should also reduce 15 Staff stressed that foreign exchange allow for more market intervention). fiscal consolidation falters, the BRH should volatility. Staff argued that if and reduce excess of buffers can negatively impact expectations exchange rate flexibility, as the depletion that unanchored expectations may result in a the room to react in the face of shocks. Staff cautioned dollarization. Strengthening the demand amid increasing volatility and higher decrease in gourde decisions will assist in managing expectations. communication of monetary policy policy tight until the fiscal deficit Staff the BRH to keep the stance of monetary the 19. urged have reduced excess reserves, strengthening is reduced. High legal reserve requirements credit Using OMOS for any further from open market operations (OMOS) to growth. as this will transmission to further increases in legal reserve requirements tightening should then be preferred market and strengthening the transmission help improving the functioning of the interbank money the instrument that it was used to tighten indicated that this is indeed mechanism. BRH authorities the BRH to consider using 5-year stance since mid-2014. Staff also encouraged the BRH to avoid the monetary end-FY2014 when conducting OMOS. Staff urged government bonds acquired at the use of exceptions in the computation of reserve makes 40 Headline and Effective average Required of goude Reserves and dollar rat this undermines their effect and 39 (Percent of Deposits. weighted requirements, as 16 The BRH's authorities 38 7 J - the policy stance less transparent. of 37 -Headline Reserve Rate indicated that they are analyzing the use government 36 bonds in OMOS, as well as their intention to issue dollar- 35 Effective Reserve Rate bonds to absorb liquidity and reduce foreign indexed Staff noted that, if market a exchange market pressures. rate priced, such bonds can help discover exchange However, staff cautioned that 30 depreciation expectations. exacerbate foreign exchange pressures if 2011 Sources: BRH FMIV Weekly; Funds Staff Calculations they also could the fiscal deficit is not swiftly reduced. BRH operations. Reserve management Staff noted that there is room to further improve IMF technical 20. recommendations and in line with the 2011 safeguards needs strengthening, exchange market would improve monetary policy assistance. Developing a deeper foreign exchange intervention. Timely access to effectiveness, as would an enhanced framework for foreign decision-making. The authorities information would help improve real-time monetary policy stressing that revised investment welcomed IMF technical assistance on reserve management, achieve the BRH's objective of securing a benchmark could help guidelines and a more appropriate capital preservation and liquidity without compromising positive real return on its reserve portfolio the interbank foreign exchange the efforts to continue developing objectives. They also highlighted market to reduce unnecessary exchange rate volatility. to Absorb Shocks And Support Growth." 15 See Selected Issues Paper "External Buffers and Competitiveness Policy and Financial Intermediation." 16 See Selected Issues Paper "Monetary 12 INTERNATIONAL MONETARY FUND real-time monetary policy stressing that revised investment welcomed IMF technical assistance on reserve management, achieve the BRH's objective of securing a benchmark could help guidelines and a more appropriate capital preservation and liquidity without compromising positive real return on its reserve portfolio the interbank foreign exchange the efforts to continue developing objectives. They also highlighted market to reduce unnecessary exchange rate volatility. to Absorb Shocks And Support Growth." 15 See Selected Issues Paper "External Buffers and Competitiveness Policy and Financial Intermediation." 16 See Selected Issues Paper "Monetary 12 INTERNATIONAL MONETARY FUND --- Page 21 --- HAITI under the ECF arrangement Box 2. Haiti: GDP Growth Projections Per capita GDP in Haiti in the past three decades has been negative. when Average per-capita GDP growth This situates Haiti in the bottom 5th percentile through 2014 was -1 percent. low-income growth in the thirty years (including countries of all levels of development, compared with a range of country groups This compares with a median per capita GDP growth countries (LICS), and non-resource rich LICS, see Table). rich LICS." for all LICS and 1.2 percent for non-resource rate of about 1.4 percent a number of stop-and-go growth weather and terms of trade shocks produced non-crisis years, this Political instability, GDP growth were positive during episodes. Although both headline and per-capita income levels, after political crisis. While performance did not offset the negative impact on per-capita about 20 percent of GDP), GDP per capita has disasters continue to affect Haiti (as agriculture is total factor (TFP) natural exercises suggest that productivity recovered after those. Standard growth accounting negative during crisis years (see Chart). positive in non-crisis years, but extremely growth was somewhat is underpinned by ambitious, yet framework of the ECF-supported program The macroeconomic achievable, per capita GDP growth rates. Concretely, GDP and Input Contributions GDP growth for 2015-2035 is assumed (Percent change, y/y) average per-capita about similar to the median for all country K at 2.2 percent, of a average real A This would be the result projected S groups. rate of 3.4 percent and population growth of CZZTFP GDP growth aglabor 1.2 percent? mCapital and -GDP Projections are conditional on political -GDP per Capita macroeconomic stability, and appropriate buffers to 5 1985-2 -2014 Crises Years 1/ Non- crises 2011-14 2015-35 withstand shocks and avoid stop-and-go growth Database: National Years2 2/ Authorities; andIMF staffc calculations space for catch-up growth, positive Sources: 1/7 "Crisisy United years Nations are: 19854 -87, 1990-94, 2001, 2002- 2004, 2008. and2 2010. dynamics. Given large increases in TFP. 2/ Non- crises years" excludes allo crises years. institutional change could generate large result of Accordingly, baseline GDP growth rates are the trends), increases in the capital stock (mainly due labor force increases (in line with demographic contribution. Stronger progress in structural expected investment), and a low (but positive) TFP have been observed in LICS that to still-high public increases in TFP. Relatively large TFP increases reforms could yield larger significantly improved their policy performance. and Projected Per Capita GDP Growth As A Haiti: Average 1985-2014 Per Capita Growth, 1985-2014 Percentile of World all Averages, Percentile, Non- (percent) Percentile, countries Percentile, LICS Resource Rich LICS Economic Earthquake (142) (51) (34) Transition from political and positive) TFP have been observed in LICS that to still-high public increases in TFP. Relatively large TFP increases reforms could yield larger significantly improved their policy performance. and Projected Per Capita GDP Growth As A Haiti: Average 1985-2014 Per Capita Growth, 1985-2014 Percentile of World all Averages, Percentile, Non- (percent) Percentile, countries Percentile, LICS Resource Rich LICS Economic Earthquake (142) (51) (34) Transition from political and Duvalier crises 1985-2014.Actual average 0 -1.0% 1.7% growth, average growth, 49 ex crisis years 1/ Memo: -4.2% average -5 Oil growth in crisis years Food and -10 2015-2019.Proi. -10 Coup price 2.1% d'Etat: Embargo shock -15 2020-2035.Proji -15 2.3% -20 Source: WEO, Fund Staff are calculations defined as 1985- 1987; 1990- 1994; 2001; 2002- -20 1988 1991 1994 1997 2000 2003 2006 2009 2012 1/Crisis yearsi in 2010. Haiti Authorities; andl IMF staff calculations. 2004; 2008, and Sources: National 51 LICS and 34 non-resource rich LICS) were obtained from for 142 countries (including rich LICS is based on 1 Data on per capita growth rates The distinction between all LICS and non-resource the World Development Indicators database. Developing Countries" (IMF, 2012) "Macroeconomic Policy Frameworks for Resource-Rich Nations. projections are those of IHSI and United Population INTERNATIONAL MONETARY FUND 13 2010. Haiti Authorities; andl IMF staff calculations. 2004; 2008, and Sources: National 51 LICS and 34 non-resource rich LICS) were obtained from for 142 countries (including rich LICS is based on 1 Data on per capita growth rates The distinction between all LICS and non-resource the World Development Indicators database. Developing Countries" (IMF, 2012) "Macroeconomic Policy Frameworks for Resource-Rich Nations. projections are those of IHSI and United Population INTERNATIONAL MONETARY FUND 13 --- Page 22 --- HAITI and profitable, but some sectors may 21. The banking sector remains well-capitalized relief effort winds down. Staff noted that come under pressure as the post-earthquake in commerce and non-tradable sectors. In commercial bank credit remains concentrated mainly (including hotels and restaurants, mainly particular, the service sector expanded after the earthquake demand that originated in the Port-au-Prince) to respond to the increased thus the service in the capital effort winds down, demand may decrease and international relief effort. As this the implementation of periodic under In this regard, staff recommended sector may come pressure. noted that financial soundness is safeguarded through stress testing to spot risks. The authorities consider stress tests. They explained that they periodic on-site and off-site inspections, but would sectors to provide time for such sectors to have allowed banks to renegotiate loans to non-tradable of such should be Staff cautioned that the use renegotiations adjust to the demand plateau. and that banks should be ready to withhold monitored, to assess the effect on capital ratios, concurred. The authorities stressed that new capital if needed. BRH authorities of terrorism dividends or inject laundering and combating the financing (in late 2013) of the anti-money Financial Action Task the adoption by the Caribbean (AML/CFT) law addressed a number of the recommendations reforms to the penal code) will need but cautioned that remaining reforms (including Force (CFATF), parliament approval. constraint to growth. Staff argued that deeper that low access to credit is a 22. Staff argued Intermediation can be increased by intermediation would support inclusive growth. The authorities financial and competition among financial institutions. Bank, strengthening property rights developed in consultation with the World highlighted their new financial inclusion strategy, of a credit bureau will result in reliable that recent reforms such as the establishment that and noted and businesses. The authorities explained information about the credit-worthiness of individuals financial cooperatives and on microfinance efforts to enact pending laws on they intend to resume in this sector has improved. institutions, and stressed that data collection LIFTING BOTTLENECKS A NEW ECF ARRANGEMENT: MACROECONOMIC GROWTH AND ENTRENCHING TO STABILITY and the medium-term challenges facing In line with the Ex-Post Assessment (EPA) recommendations seeks to entrench macroeconomic in the Article IV discussions, the new program policies Haiti identified reduction, through streamlined inclusive growth and sustained poverty stability and promote authorities. and actions that are fully owned by the aimed at accommodating post-earthquake 23. The previous ECF-supported program stability, and advancing structural reconstruction spending, maintaining macroeconomic made room for absorbing large challenges, the program reforms. Facing enormous reconstruction rate of inflation. Reforms were mainly external flows, while keeping a moderate and stable capacity. the policy framework and rebuilding addressed at improving 14 INTERNATIONAL MONETARY FUND policies Haiti identified reduction, through streamlined inclusive growth and sustained poverty stability and promote authorities. and actions that are fully owned by the aimed at accommodating post-earthquake 23. The previous ECF-supported program stability, and advancing structural reconstruction spending, maintaining macroeconomic made room for absorbing large challenges, the program reforms. Facing enormous reconstruction rate of inflation. Reforms were mainly external flows, while keeping a moderate and stable capacity. the policy framework and rebuilding addressed at improving 14 INTERNATIONAL MONETARY FUND --- Page 23 --- HAITI program aims at assistance tapers off, the new ECF-supported 24. As post-earthquake the policy framework, entrenching lifting bottlenecks to growth, strengthening growth dynamics. buffers to avoid stop-and-go macroeconomic stability and preserving buffers equivalent to 4-5 months of Sustainable fiscal deficits will allow preserving external Adequate buffers will also shocks that could derail growth. prospective imports, essential to absorb digits. PFM reforms will and keep inflation in the mid-single of contribute to anchor expectations EDH's performance will tackle a source the effectiveness of fiscal policy. Improving a reliable cadastre will strengthen Progress in implementing vulnerability while improving competitiveness. should make growth more and growth, while efforts at financial deepening support investment inclusive. Stability and Containing Risks Macroeconomic A. Entrenching 25. The macroeconomic Program definition of NFPS Included in Proposed Program Comments framework of the ECF-supported Institutional Aggregate Definition of NFPS program is underpinned by Central Government Yes Yes GDP growth rates (MEFP Petrocaribe- -related Spending/Financing Yes achievable PSUGO own resources Yes 110-11). GDP growth is projected at Road Fund Only transfers ofe earmarked in FY2015, and should corresponding national taxes spending. and Local 2-3 percent Partially Governments are small(2 pick up to 3-4 percent in the medium Local Governments percent and data of GDP are produced on aggregate) with reforms proceed significanti lags. term as structural (Box 2). Growth will be underpinned Social Security No Still low dependency ratios result consumption, Private Mandatory No insurpluses. by remittance-driven Civils Service construction, a growing textile State- owned Enterprises Yes Macro relevant industry, and will be supported by Electricity (ÉHD) No lower oil prices. Inflation is projected Port Airport Authority Authority (APN) (AAN) No No lags Postal Office (OPH) No Small size and significant to remain in the mid-single digits, Labor and Maternityl insurance Office (OFATMA) (OAVCT) No data provision. policy mix. The Third- -party vehicle insurance company No due to a prudent to Sugar Telecom Factory Company (USJLDD) (NETCO, 40 percent stake) No current account deficit is projected remain under 4 percent of GDP Source Ministry of Economy and Finance through FY2017, reflecting lower oil prices and fiscal consolidation. are tilted to the downside. Risks to the baseline GDP growth projections 26. situation poses challenges for policy Domestic politics. The complex political implementation, and for anchoring expectations. terms of trade shock; oil prices remain, Oil prices. The decline in oil prices is a positive financing has increased, and volatile. The risk of a stop in Petrocaribe however, highly of about 1 percentage point. this could result in lower GDP growth rebuilding winds down. Donor fatigue. Aid inflows are decreasing as earthquake risk. due to political stress) are a downside Slower aid flows (including INTERNATIONAL MONETARY FUND 15 --- Page 24 --- HAITI and natural disasters are responsible for stop-and-go Weather events. Weather shocks and institutional weaknesses dynamics and combined with low response capacity of GDP), is particularly of capital. Agriculture (over 20 percent prevent the accumulation vulnerable to weather events. market and the main source of U.S. growth. The U.S. is Haiti's largest export constitutes an upside risk. remittances (20 percent of GDP). Higher U.S. growth fiscal adjustment (MEFP 112, program is built on a front-loaded EDH (0.5 27. ITI and natural disasters are responsible for stop-and-go Weather events. Weather shocks and institutional weaknesses dynamics and combined with low response capacity of GDP), is particularly of capital. Agriculture (over 20 percent prevent the accumulation vulnerable to weather events. market and the main source of U.S. growth. The U.S. is Haiti's largest export constitutes an upside risk. remittances (20 percent of GDP). Higher U.S. growth fiscal adjustment (MEFP 112, program is built on a front-loaded EDH (0.5 27. The ECF-supported stems from the central government (3.7 percent of GDP) and 24-25). The deficit (including grants) of the The percent fiscal of adjustment GDP) the non-financial public sector (NFPS, I) 4.2 fiscal anchor, text table) is set to Nonfinancial public sector (+ program's from about 7V2 percent of GDP in Central goverment (I) 3.7 1.6 decrease in FY2015, and will Revenuea Budget sand.hudgetsupport support -0.4 1.5 FY2014 to 374 percent of GDP Fuelt taxes 0.2 decline further to less than 272 percent Fuel price increase 1.3 About half of the fiscal Admnistrative Locked- in windfall measures revenue (incl. vehicle tags) 0.3 in FY2016-FY2018. -2.1 consolidation in FY2015 is derived from lower Expenditure Transfers to electricy sector -0.5 -0.4 oil prices, and thus, should not Non- -electricity transfers 2/ for street lighting international Transfers to municipalities 0.1 fiscal impulse. The Mitigating measures for fuel price increases 1.0 result in a negative Wage bill3 -1.5 reduction in the NFPS deficit should bolster Petrocaribe- post- funded -Sandy investment investment -1.0 Exceptional sustainability while preserving povertyEDH deficit (after transfers) (II) 0.5 reducing spending, crowd in private sector Sources: Ministry of Economy and Finance: and Fund staff estimates. bank credit and preserve buffers. 1/ Excluding transfers were to municipalities classified for under street tronsfers. lighting. Some wages previously central adopted (as a prior for FY2015. In March 2015, the government that The program consistent with a deficit of 2.7 percent of GDP, action) a revised FY2015 budget reclassification of allocations for elections and street lighting, a (warranted) includes of capital spending towards more current transfers into wages, and a reduction financing. Central sustainable levels, in line with the large decline in Petrocaribe elimination of fuel will increase to 14.7 percent of GDP, given the Government revenue from the declining oil prices. Grants will subsidies and the lock-in of windfall revenue from the IDB and the 0.4 of GDP (with budget support expected increases decline by percent remain broadly stable, as wage bill (of European Union). Current spending will and increases for teachers and the reclassification of transfers 1 percent of GDP, given reductions in transfers, including to the electricity the national police), will be offset by spending concludes Investment will decline, as one-off post- Sandy emergency board sector. financing. In addition, EDH's projects receive budgetary and only ongoing for FY2015 with savings of about adopted (as a prior action) a revised budget reductions in production costs, a more 0.7 percent of GDP. Savings will come from in billing and collection at utilization of available supply, and improvements rational unchanged tariffs. The FY2016 budgets for the central government The program for FY2016-FY2018. 2015 in line with an NFPS deficit of and EDH will be adopted before end-September INTERNATIONAL MONETARY FUND --- Page 25 --- HAITI Savings will mainly come from additional 2.3 percent of GDP (structural benchmark). investment and additional gains from EDH efforts at rationalizing domesticaly-financed 2.2 of GDP by FY2018 (Central reforms. of available supply, and improvements rational unchanged tariffs. The FY2016 budgets for the central government The program for FY2016-FY2018. 2015 in line with an NFPS deficit of and EDH will be adopted before end-September INTERNATIONAL MONETARY FUND --- Page 25 --- HAITI Savings will mainly come from additional 2.3 percent of GDP (structural benchmark). investment and additional gains from EDH efforts at rationalizing domesticaly-financed 2.2 of GDP by FY2018 (Central reforms. The NFPS deficit will decline to percent transfers- of 0.2 percent). To Government deficit of 2 percent and EDH deficit -after in the social and security net recruitments are only expected control current spending, and increases will not surpass inflation. sectors. Wages will not be indexed, flows would create a financing gap of Risk Management. A disruption of Petrocaribe of GDP in FY2016 relative to of GDP in FY2015 and of 2 percent about 1 percent and temporary drawdown of deposits projections. Additional donor financing The authorities program could offset half of the gap this and next fiscal year. that have and reserves projects will be initiated, and they explained that no new Petrocaribe-financed should the need arise. Thus, in identified projects that can be implemented more slowly will be adjusted to the authorities stressed that the spending pace the case of a stop, that the adoption (as a prior action), and absorb the shock. The authorities argued structural benchmark) of an implementation before end-FY2015 (as a continuous should contain mechanism for oil products to reflect international prices automatic in international oil prices (Box 3). fiscal risks derived from a rebound is geared at achieving a under the ECF-supported program The 28. The monetary program reserve buffer (MEFP 113-14). moderate and stable inflation while preserving a credible imports and ensure no international reserves at 4-5 months of prospective program will target monetary financing of the fiscal deficit. decline in NIR of about US$100 million during the The program for FY2015. After a the payment of debt to government first half of FY2015 (as the BRH accommodated increased dollar hoarding by the private sector suppliers at end-FY2014, but also due to to decline by at most responding to the political cycle), NIR are programmed decrease will come from the US$50 million in the second half of FY2015. The additional decline in Petrocaribe flows, deposits to partially absorb the strong use of government dollarization until the election cycle but also from an expected increase in deposit buffer to anchor expectations, concludes. Given the importance of a credible reserve the NIR target in case rate flexibility will be needed to meet increased exchange exchange rate pressures are higher than expected. INTERNATIONAL MONETARY FUND 17 --- Page 26 --- HAITI Box 3. Haiti: An Automatic Pricing Mechanism at and Sub Saharan African countries. Retail prices in Haiti are similar to those in Caribbean the Caribbean (LAC), developing Asia, Fuel prices higher than the average for Latin America and lower than the average end-2014 were somewhat in the Middle East and North Africa, but significantly however, closed after and the (heavily subsidized) prices The small gap that existed with the LAC average was, for advanced economies (see chart). pump price decreases last February. including a lack of transparency. structure for fuel products suffers from some shortcomings (based on The price structure are not those in invoices paid by importers used in the price and other costs in The base imported prices posting" quotes, a benchmark that includes insurance costs within the Platt's), but rather the "Caribbean This results in the double counting of some addition to the base price for refined oil products. and the "Caribbean posting" quotes is positive, and has price structure. The gap between actual import prices transferred to private sector importers, including for payment increased since April 2014 (see chart). from some shortcomings (based on The price structure are not those in invoices paid by importers used in the price and other costs in The base imported prices posting" quotes, a benchmark that includes insurance costs within the Platt's), but rather the "Caribbean This results in the double counting of some addition to the base price for refined oil products. and the "Caribbean posting" quotes is positive, and has price structure. The gap between actual import prices transferred to private sector importers, including for payment increased since April 2014 (see chart). This gap is structure" 1 These transfers have increased in the last shown in the price of storage costs which are not explicitly 12 months. Retail Prices and Platt's Effective Taxes (inUSS S/liter, endof2 2014) Price Gap Caribbean Posting percentof Haiti OLAC verage USS/gallon) Gasoline Gasoil aDevelopingAsia MidieEast andNorth Africa 0.6 20 Sub- Sahara Africa a dvancedEconomies 0.5 1.2 0.3 0.8 0.1 0.0 Gasoline Gasoil Keros e Nation Auth IMF taff Source National Auth orities; nd IMF staff calcul lations MF fiscal revenues from pricing mechanism (APM) to protect The authorities will implement an automatic fixed during March 2011-October 2014. The price fluctuations in international oil prices. Fuel prices were fixed. As international oil prices increased (and the that taxes were adjusted to keep pump prices the increased (e.g, in freeze implied taxes declined and the gap with fuel prices in region gourde depreciated), implicit fuel about 30 percent lower than in the Dominican Republic, June 2014, pump prices in Haiti were, on average, prices). In the context of the ECF, the authorities move broadly in tandem with international that prices are where retail prices before the end of FY2015. This will ensure international for committed to implementing an APM fiscal revenues and providing the right signal resource into domestic retail prices, preserving anchor about the causes of price passed-throughi fuel price adjustments and expectations in allocation. It will also depoliticize mechanism to prevent sharp increases in domestic prices changes. The APM will include a smoothing will allow for additional (forgone) revenues of up to to international price hikes. This mechanism will be (upwards or response However, international prices fully passed-through also G1 billion (0.2 percent of GDP). revenues reach G 1 billion in absolute terms. The authorities chain. downwards), whenever additional (forgone) actual imported prices and all costs in the value committed to revise the price structure SO it reflects This is in line with best well targeted mitigating measures. are also planning to implement was accompanied by the The authorities number of countries the elimination of fuel subsidies and practice. In this regard, in a (e.g. in the Dominican Republic, Paraguay, Nicaragua introduction of a social tariff for public transportation from the World Bank to design such a system. The planned The authorities have requested assistance when with the cost of blanket Panama). (0.2-0.3 percent of GDP) is minor compared fiscal cost of this direct subsidy subsidies in FY2014 (about 2 percent). Installed storage capacity is of storing the products they contract through private companies. 1/ The importers are in charge of three weeks of national consumption. estimated at 365,000 barrels, which is the equivalent INTERNATIONAL MONETARY FUND --- Page 27 --- HAITI proceeds and the electoral for FY2016-FY2017. As the fiscal adjustment The program to rebound as dollarization is gradually cycle comes to an end, NIR are programmed medium-term, fiscal consolidation will reduced and dollar hoarding declines. in FY2014 (about 2 percent). Installed storage capacity is of storing the products they contract through private companies. 1/ The importers are in charge of three weeks of national consumption. estimated at 365,000 barrels, which is the equivalent INTERNATIONAL MONETARY FUND --- Page 27 --- HAITI proceeds and the electoral for FY2016-FY2017. As the fiscal adjustment The program to rebound as dollarization is gradually cycle comes to an end, NIR are programmed medium-term, fiscal consolidation will reduced and dollar hoarding declines. Over the in of private sector loosening of monetary policy and a crowding of permit a gradual reserves. Monetary financing credit, without unwarranted pressures on international Debt Relief (PCDR) will be limited to a drawdown of Post-Catastrophe at the the government reserves and government deposits resources. This will ensure that international a possible disruption in levels to serve as cushions against BRH are at appropriate Petrocaribe and other shocks. Growth and the Policy Framework B. Structural Reforms to Support fiscal constraints to growth and completing Structural reforms will focus on removing in line with EPA 29. Actions will be focused and streamlined, and financial sector reforms under way. constraints and the ongoing TA agenda. recommendations. Their timing will be guided by capacity Actions will target lifting basic constraints to Growth and social cohesion (MEFP 117-22). 30. growth in areas of IMF expertise. will reduce fiscal risks and allow EDH's financial position Energy sector. Strengthening the main stakeholders in the electricity sector a gradual increase of supply. Accordingly, in a protocol for the sector (structural a work program to be reflected are preparing includes provisions to improve governance, strengthen benchmark)." The protocol and consolidate crossperformance, provide timely information for decision-making. and collection will audit the largest clients to boost billing arrears. The authorities of an automatic pricing (structural benchmark). The adoption and implementation international prices) will improve mechanism for domestic fuel products (to reflect structural blanket subsidies (prior action and continuous efficiency and prevent benchmark). 19 rights will boost Haiti's growth potential. Property rights. Strengthening property domestic and foreign investment, Transferable property rights will support private and can be a valuable credit the use of land as collateral, facilitate access to by allowing cadastre system would improve Haiti's input to broadening the tax base. A modern would encourage investments resilience to natural disasters, as stronger property rights work-program, the interimprovements. In line with their ongoing in structural will prepare an action plan for ministerial commission on land management 17. This effort is supported by the World Bank and the IDB. the central government has a vis-d-vis EDH,for the provision of electricity, to the financial 18 While IPPs have a creditor position of fuel. Consolidating these arrears will bring clarity creditor position vis-à-vis IPPs for the provision position of the sector's stakeholders. modern would encourage investments resilience to natural disasters, as stronger property rights work-program, the interimprovements. In line with their ongoing in structural will prepare an action plan for ministerial commission on land management 17. This effort is supported by the World Bank and the IDB. the central government has a vis-d-vis EDH,for the provision of electricity, to the financial 18 While IPPs have a creditor position of fuel. Consolidating these arrears will bring clarity creditor position vis-à-vis IPPs for the provision position of the sector's stakeholders. harmonization of custom duties across products. 19 Efficiency will also increase due to the gradual INTERNATIONAL MONETARY FUND 19 --- Page 28 --- HAITI framework and functioning of the cadastre FY2016-FY2017 to strengthen the legal (structural benchmark," credit bureau will help strengthen access to credit Access to credit. A fully-functioning reporting by financial by providing a tool to assess creditworthiness. Regular the authorities should allow institutions to the bureau is a crucial first step, but other indicators borrowers to build a credit history by incorporating potential first-time of utilities payment. The non-bank into the database, such as proof be of creditworthiness cooperatives, and microfinance) should financial sector (insurance companies, instruments such as leasing. 21 further developed, as should new financial will build on the progress in the MDG framework Poverty Reduction. The authorities spending on education, consistent increases in domesticaly-financed by targeting health, and agriculture (indicative target). authorities will prioritize the introduction of an Data quality. In the near term, the indicator of GDP growth economic index to serve as a leading IMF and overall quarterly With technical assistance from the (currently presented only on a yearly basis). including the change of the from France, the authorities will revamp national accounts, the results of which have also completed a household survey, base year. The authorities and poverty reduction as well on the will be crucial in improving estimates of poverty in the external accounts, and will force. The authorities will also address data gaps labor technical assistance to this end. request IMF drawn from the Public Finance Reform Strategy Fiscal Reforms (MEFP 123-27). Actions were public 31. tax policy and administration, improving adopted last year, and will focus on strengthening and creating an enabling environment enhancing expenditure effectiveness, financial management, for the private sector. code will be in charge of producing a draft of the tax Tax policy. A working group benchmark). This group will also assess the appointed by end-July 2015 (structural low yield and high costs, and the adoption elimination of a number of small taxes with The IMF will provide technical code and of a full-fledged VAT system. of a mining assistance in analyzing tax expenditures Actions will focus on restructuring and deepening taxpayer IMF Tax administration. taxpayers (identified with segmentation. Registration and audit of new potential the LTO and local tax offices to the transfer of files of medium taxpayers from support), 20 This effort is being supported by the IDB, France and Canada. with support from of the Financial Inclusion Strategy recently completed 21 This is in line with the recommendations and Financial Intermediation. the World Bank. See Selected Issues Paper "Monetary Policy 20 INTERNATIONAL MONETARY FUND ledged VAT system. of a mining assistance in analyzing tax expenditures Actions will focus on restructuring and deepening taxpayer IMF Tax administration. taxpayers (identified with segmentation. Registration and audit of new potential the LTO and local tax offices to the transfer of files of medium taxpayers from support), 20 This effort is being supported by the IDB, France and Canada. with support from of the Financial Inclusion Strategy recently completed 21 This is in line with the recommendations and Financial Intermediation. the World Bank. See Selected Issues Paper "Monetary Policy 20 INTERNATIONAL MONETARY FUND --- Page 29 --- HAITI the unit in charge of NGOS and benchmark), and strengthening the MTO (structural Strengthening IT tax management will exempted entities will increase compliance. Reforms at customs country-wide monitoring of tax payer filings. and the improve the fight against smuggling administration will contain tax exemptions, for Customs Data of information from the Automated System communication (structural benchmark) (ASYCUDA) to the tax department for auditing purposes Work on the TSA will continue, including the Public financial management. sub-accounts and of specific revenue conversion of spending accounts into Treasury of all remaining accounting accounts; and the establishment accounts into secondary benchmark). To this end, the government centers by end-September 2015 (structural memorandum placing all public has implemented the terms of a December 2014 also to be BRH under the control of public accountants, a measure accounts at the action). Actions to strengthen cash and applied by the state-owned bank BNC (prior will make their best effort will complement this work. The authorities debt management of the ministry of finance and on public SO that the draft laws on the reorganization To ensure respect of the following the election of a new parliament. debt are adopted modalities for the clearance of offbudgetary process, the government has tightened Improving the effectiveness budget commitments (continuous structural benchmark). and reduce costs for the private of public investment will help upgrade infrastructure TSA to the rest of the NFPS will help the expansion of the sector. In the medium-term, improve the coverage of public sector finances. sector reforms (MEFP 128-31). The ECF-supported program 32. Monetary and financial and reforms to improve the monetary policy targets regulatory and supervisory enhancements inclusive growth. financing deepening, and support framework, promote framework Actions to improve the BRH's reserve management Reserve management. decisions and better will include better documentation of reserve management in line with IMF decisions to internal guidelines, alignment of portfolio management will prepare periodic reports on recommendations. The authorities technical assistance the BRH's three goals in managing its the liquidity of gross reserves, and will quantify The authorities will refine liquidity, and return). reserve portfolio (capital preservation, with external managers to ensure the investment guidelines and benchmarks agreed conformity with the BRH's objectives. Actions in this area will include improving the reporting of Foreign exchange market. exchange auctions, setting up an electronic transactions, beginning single-price foreign interbank market for foreign exchange platform for FX transactions, and establishing an with an increased number of participants. the investment committee's Safeguards. Actions will be geared at strengthening officer to provide from investment operations, appointing a compliance autonomy INTERNATIONAL MONETARY FUND 21 , and return). reserve portfolio (capital preservation, with external managers to ensure the investment guidelines and benchmarks agreed conformity with the BRH's objectives. Actions in this area will include improving the reporting of Foreign exchange market. exchange auctions, setting up an electronic transactions, beginning single-price foreign interbank market for foreign exchange platform for FX transactions, and establishing an with an increased number of participants. the investment committee's Safeguards. Actions will be geared at strengthening officer to provide from investment operations, appointing a compliance autonomy INTERNATIONAL MONETARY FUND 21 --- Page 30 --- HAITI policy and investment guidelines, and independent oversight of foreign reserves achieving full adoption of IFRS.22 AML/CFT. The authorities will request IMF technical Banking supervision and them on a regular basis to stress with a view of implementing assistance on testing, remaining CFTAF recommendations on identify risks. The authorities will implement Task Force (FATF) standard, with a and implement the 2012 Financial Action AML/CFT, and address tax evasion. view to improve governance Modalities and Access C. Program under the Fund's be supported by an arrangement 33. It is proposed that Haiti's program with access of 60 percent of Credit Facility (ECF). Staff proposes a 3-year arrangement reviews with test Extended with disbursements subject to semi-annual quota divided in seven equal tranches, ensure that international reserves remain 23 Proposed access would dates in March and September. to large and frequent shocks like Haiti. Debt close to their appropriate value for a country exposed considers Fund support essential for the service to the Fund would remain manageable. Staff including because of its catalytic effect on successful implementation of Haiti's economic program, thus ensuring that the program is fully the provision of budget support from multilateral donors, the authorities are making good faith financed. As set out in the protocol for the electricity sector, efforts in resolving EDH's arrears. performance criteria and Performance will be monitored through quantitative net central bank 34. Performance criteria will include: (i) a ceiling on indicative targets (MEFP 132). on net domestic assets of the central bank; non-financial public sector; (ii) a ceiling of the noncredit to the of the central bank; (iv) a ceiling on the deficit (ii) a floor on net international reserves domestic financing of the central government. financial public sector; and (v) a ceiling on the accumulation of public sector criteria will include: zero ceilings on (i) debt. An indicative Continuous performance of non-concessional external arrears; and (ii) the contracting or guaranteeing expenditure. poverty-reducing floor will be set for domestcaly-financed of a committee dedicated to monitoring 35. Staff recommends the establishment The authorities decided that the implementation of reforms under the ECF-supported program. from the BRH, EDH, that it include representatives Secretary of State for Finance lead this committee; the Ministry of Finance; and that it work Treasury and Economic Studies Directorates at between and Budget, This should result in better communication closely with the Fund Resident Representative. are undertaken in matters related to the and ensure that consultations the Fund and the authorities, ECF-supported program. assessment to be completed no later than the first review 22 IMF safeguards policy requires an update safeguards under the new ECF arrangement. 23 This reflects Haiti's fiscal year (October -September). MONETARY FUND 22 INTERNATIONAL EDH, that it include representatives Secretary of State for Finance lead this committee; the Ministry of Finance; and that it work Treasury and Economic Studies Directorates at between and Budget, This should result in better communication closely with the Fund Resident Representative. are undertaken in matters related to the and ensure that consultations the Fund and the authorities, ECF-supported program. assessment to be completed no later than the first review 22 IMF safeguards policy requires an update safeguards under the new ECF arrangement. 23 This reflects Haiti's fiscal year (October -September). MONETARY FUND 22 INTERNATIONAL --- Page 31 --- HAITI STAFF APPRAISAL Haiti has continued to successfully maintain 36. Since the 2012 Article IV Consultation, the surge, and subsequent decline, in stability. The authorities have navigated reconstruction macroeconomic earthquake, and have carried out significant financial flows following the devastating International reserves remain appropriate, and buffers and avoiding high inflation. mid-1980s. while maintaining stretch of growth in per capita income since the the country has seen the longest structural reforms to improve Raising Haiti's growth rate requires deep-seated with its recent 37. record is positive when compared competitiveness. While Haiti's recent growth reduce poverty. Raising Haiti's fallen short of expectations and is insufficient to rapidly to history, it has medium term) will require addressing structural bottlenecks growth rate (to 3 - 4 percent in the business environment and property rights, and growth and job creation with improvements in the of secure and transferable land property and reliable electricity. The development and access to cheaper is a key reform that would support investment rights through a functioning cadastre system including via a credit bureau and the Financial inclusion should be pursued, unlock financing. institutions. promotion of credit cooperatives and microfinance FY2015 includes a fiscal adjustment and an unchanged 38. The appropriate policy mix for of GDP over the past two years), stance. The fiscal deficit (that rose to 6-7 percent decline in Petrocaribe monetary policy of GDP, in part due to the strong the needs to be reined in to about percent have appropriately taken advantage of flows, and the need to preserve buffers. The authorities related with fuel taxes, while the adoption of decrease in oil prices to eliminate foregone revenues address the fiscal risks associated with a price mechanism for oil products should to sustainable levels an automatic reflects a return rebound of oil prices. While part of the necessary adjustment collection, the poor performance of the spending and improvements in revenue The monetary of investment been a key driver of fiscal imbalances. electricity sector must be addressed, as it has until fiscal consolidation tight, and should remain unchanged The policy stance is appropriately the use of the exchange rate as a nominal anchor. proceeds. Fiscal consolidation will support rate flexibility to ensure that international central bank should be prepared to increase exchange falters. buffers remain appropriate if fiscal consolidation reserve The electoral impasse has delayed the The policy framework needs further improvement. a after a new 39. the backlog of draft laws should be top priority legislative reform agenda, and clearing should continue to be improved, is elected later this year. Public financial management should also be a parliament of a TSA. Enhancing budgetary transparency including via the final establishment continue to develop its reserve management framework key priority, and the central bank should market. Improving the quality of economic the functioning of the foreign exchange and improve shortcomings that hamper surveillance. data is essential, given serious macroeconomic stability, address program seeks to entrench 40. The new ECF-supported These objectives will be achieved through of vulnerabilities, and promote growth. have the commitment sources actions that are fully owned by the authorities. They streamlined policies and INTERNATIONAL MONETARY FUND 23 TSA. Enhancing budgetary transparency including via the final establishment continue to develop its reserve management framework key priority, and the central bank should market. Improving the quality of economic the functioning of the foreign exchange and improve shortcomings that hamper surveillance. data is essential, given serious macroeconomic stability, address program seeks to entrench 40. The new ECF-supported These objectives will be achieved through of vulnerabilities, and promote growth. have the commitment sources actions that are fully owned by the authorities. They streamlined policies and INTERNATIONAL MONETARY FUND 23 --- Page 32 --- HAITI external imbalances and the proposed set of policies aimed at correcting of and capacity to implement the seeks to address the main sources repayment to the Fund. 24 In this regard, program in the Article IV enabling Ex-Post Assessment (EPA), and also highlighted vulnerability identified by the discussions. fiscal sustainability, while program will be geared at ensuring 41. The ECF-supported for FY2015 is an appropriate response spending. The revised budget shocks. preserving poverty-reducing fiscal buffers, which are essential to face unanticipated to existing constraints and preserves the medium-term is consistent with (of around 2/2 percent of GDP) through the ECFThe deficit target the deficit of the non-financial public sector, ensuring fiscal sustainability. By targeting of fiscal vulnerability, in particular the stateprogram appropriately covers all sources created by the current supported seeks to lock-in the fiscal gains owned electricity utility (EDH). The program of an automatic fuel pricing mechanism will environment. In this regard, the adoption for low oil price shocks. The design of a targeted social tariff public help protect revenue against oil price on the population. will mitigate the impact of fuel price volatility transport that inflation remains the authorities' efforts to ensure 42. The new program will support well-anchored. The BRH will keep the stance of moderate and stable, and inflation expectations and will avoid the use of until the fiscal deficit is reduced, monetary policy tight, as needed, Increasing exchange rate flexibility is exceptions in the computation of reserve requirements. while ensuring that the real exchange rate is warranted to maintain adequate international reserves communication on monetary policy should Fiscal consolidation and improved close to equilibrium. help in managing expectations. sustained economic growth reforms under the program aim at supporting 43. Structural in line with Article IV and EPA recommendations. and reducing Haiti's vulnerabilities, will provide needed fiscal space for fuel subsidies and improving tax administration of the TSA, Reducing while PFM reforms, particularly the implementation spending in education and health, the effectiveness of public investment will the framework for fiscal policy. Increasing with a land will strengthen and reduce costs for the private sector. Gradual progress in help improve infrastructure investor perceptions. While initial steps at reining cadastre will unlock investment and improve the signing of a protocol for the sector) are the financial situation of EDH (including through (including the World Bank and IDB) to improve welcome the work with other development partners viable electricity sector will attract billing and collection should be deepened. A financially costs. The positive spillovers to and result in increases in supply and lower generation be investment, and poverty reduction would substantial. productivity, reduction of vulnerabilities, for Fund assistance under the ECF in an amount 44. Staff supports the authorities' request contribute to maintaining an appropriate level of to 60 percent of quota. The ECF will loaded fiscal adjustment and equivalent The front international reserves, and thus to anchoring expectations. standard, as required by Fund policy. 24 Accordingly, the proposed ECF meets the UCT conditionality 24 INTERNATIONAL MONETARY FUND A financially costs. The positive spillovers to and result in increases in supply and lower generation be investment, and poverty reduction would substantial. productivity, reduction of vulnerabilities, for Fund assistance under the ECF in an amount 44. Staff supports the authorities' request contribute to maintaining an appropriate level of to 60 percent of quota. The ECF will loaded fiscal adjustment and equivalent The front international reserves, and thus to anchoring expectations. standard, as required by Fund policy. 24 Accordingly, the proposed ECF meets the UCT conditionality 24 INTERNATIONAL MONETARY FUND --- Page 33 --- HAITI the implementation of prior actions are indicative of the authorities' determination, to maintain macroeconomic stability and mitigate existing risks. 45. It is proposed that the next Article IV Consultation with Haiti take place on the 24-month cycle, subject to the decision on consultation cycles. 25 25 Decision No. 14747-(10/96), September 28, 2010. INTERNATIONAL MONETARY FUND 25 --- Page 34 --- HAITI Figure 1. Haiti: Recent Economic Developments, 2011-15 1/ Haiti'scurrent account deficitiss set to narrow sharplyon lower smmnatondipwolempive. -despitelargelyftat, projectedt transfers ands slow grow in goodsand services exports. 4 4000 Current Account Exports and Transfers 1 (Percent ofGDP) (US$ millions) DExports OCurrent transfers (net) 3000 -2 -2 DServices Receipts -5 -5 2000 -8 Current account balance -8 - Fuelimports -11 -14 -14 2011 2012 2013 2014 2015(P) 2011 2012 2013 2014 2015(P) .Lower oil prices have also reduced concessional lflows Pre-election dollar hoarding, presssuredt the exchange from Venezuela. rate, and central bank intervention has been limited... Financing (USS millions) Exchange Rates 2015(P) -2 Net central bank FX intervention, US$ millions -20 -4 (rght- -axis) -600 -400 -200 0 200 400 600 800 1000 Gourde/US$ -6 Depreciation, -40 MForeign directinvestment (net) MChangei in net foreign assets percent yly I Errors and omissions IF PetroCaribef financing -8 -60 and a high level of pass- throughis raising inflation from Meanwhilethepaceofreserve loss has slowed, and reserve recent lows. coverageremainscomfortable. 20 5000 Inflation International Reserves (percent change, yly) Core (USS millions) Headline 15 4000 Food Grossinternational reserves, months imports Administeredprices (rightaxis)2/ Neti international reserves 10 3000 Net foreignassets 5 2000 0 1000 -5 -5 2013 2014 2015 2013 2014 2015 Source: National Authorities; and IMF staff estimates. 1/ Data are in fiscal years. 2/ Gross international reserves exclude central bank repurchase operations in 2013. 26 INTERNATIONAL MONETARY FUND --- Page 35 --- HAITI Figure 2. Haiti: Fiscal Developments, 2011-15 1/ .Duet to a significant increase in fuel tax revenue as well as Revenues (excluding project grants) ares set torise sharplyin collection. improvedtax FY2015.. 20 18 Taxes D Custom duties Domestic Revenue and Budget Support 16 (Percent ofGDP) D Taxes ong goods and services 16 (Percent ofGDP) D Domestic revenue DOther OBudget supportgrants 15 14 D Income tax 10 8 5 4 2011 2012 2013 2014 2015(P) 2011 2012 2013 2014 2015(P) Thedeclinei in international oil prices decreased Petrocaribe flows, andometicaly-tnanncedcopitols spending is decreasing to prompting a slowdown in Petrocaribe investment spending.. sustainablelevels (Percent ofGDP) D Taxes ong goods and services 16 (Percent ofGDP) D Domestic revenue DOther OBudget supportgrants 15 14 D Income tax 10 8 5 4 2011 2012 2013 2014 2015(P) 2011 2012 2013 2014 2015(P) Thedeclinei in international oil prices decreased Petrocaribe flows, andometicaly-tnanncedcopitols spending is decreasing to prompting a slowdown in Petrocaribe investment spending.. sustainablelevels 40 40 Expenditure Petrocaribe Balance Primary Domesticaly-financed (Percent ofGDP) (Percent ofGDP) D Wages and salaries Investment 30 30 OGoods andservices Transfers to EDH OTransfers and subsidies Loans to electridtysector Dom.-financed capitalexp. Inflows Petrocaribe debt(right axis) 20 20 10 10 2011 2012 2013 2014 2015(P) 2011 2012 2013 2014 2015(P) .although Petrocaribe flows remain an important These factors are: sharply reducing the overall fiscal deficit.. sourceoffinancing. -20 10 -14 Financing Deficit of the Central Government Central bank (Percent ofGDP) -12 (Percent ofGDP) Central govemment -18 8 OCommerdal banks deficit OOther domestic financing -10 Excluding grants -16 6 Petrocaribe flows -8 (right axis) -14 4 -6 -12 2 -4 -10 0 -2 -8 -2 -2 2011 2012 2013 2014 2015(P) 2011 2012 2013 2014 2015(P) Source: National Authorities; and IMF staff estimates. 1/ Data are in fiscaly years unless noted otherwise. INTERNATIONAL MONETARY FUND 27 --- Page 36 --- HAITI Figure 3. Haiti: Monetary and Financial Market Developments, 2011-14 1/ Basemoney growthi remains near zero on monetarypolicy -atthoughthishasi not generated excess liquidityorprivate changes allowing gourdereservestofalL credit, becauset ther reserves areallocatedfors specificuses. 45 120 Contributions to Base Money Growth (Percentage points, y/y) Loan-to-Deposit Ratio 100 (Percent) Bank reserves Excess reservesas shareoftotal 20 deposits (right axis) Currencyincirculation Private sector creditto private Base money sector deposits 15 60 -15 -15 0 2012 2013 2014 2015 2013 2014 2015 Credit grouribasiendtendilonedipuriqularlyingourdis. ..and is closely tied to deposit growth, which is moderate. 30 35 Credit Growth to the Private Sector Contributions to Broad Money Growth 60 (Percent) Gourde credit growth 30 (Percentage points y/y) Dollar credit growth D Dollar deposits Private sector credit/GDP (rightaxis) - Gourde deposits mCurencyindirculation 15 10 TFI -15 2012 2013 2014 2015 Dollarization, remains elevated.,porticularyofdeposits. ..andi real interest rates have fallen as inflationhas increased. 70 30 Dollarization of Deposits and Credit RealInterest Rates 65 (Percent) (Percent) Real BRH 91 dayrate (right axis) Real average lendingrate ingourdes Deposits Credit 45 10 40 5 -5 -10 Source: National Authorities; and IMF staff estimates. 1/ Data are in fiscalyears. 28 INTERNATIONAL MONETARY FUND --- Page 37 --- HAITI Figure 4. Haiti: Banking Sector, 2011-15 1/ sector is dominated. Bank credit is concentrated. in services, in particular The Haitian banking by largebanks, commerce, transportation, and real estate. although the sector is slowlydiversifying85 Bank Credit I Commerce Share ofTop 3 Banks in Total Banking Sector by Sector Services, utilities & transportation (Percent) MAssets (% total banking assets) (Percent oftotal) I Real estate MIndustrial sector I Deposit(%1 total bankingdeposits) Consumerl loan mHospitaltysector mOthers Figure 4. Haiti: Banking Sector, 2011-15 1/ sector is dominated. Bank credit is concentrated. in services, in particular The Haitian banking by largebanks, commerce, transportation, and real estate. although the sector is slowlydiversifying85 Bank Credit I Commerce Share ofTop 3 Banks in Total Banking Sector by Sector Services, utilities & transportation (Percent) MAssets (% total banking assets) (Percent oftotal) I Real estate MIndustrial sector I Deposit(%1 total bankingdeposits) Consumerl loan mHospitaltysector mOthers 78 2011 Teysterscopatedadepayrmatiorensinearemaimodoette and banks remain profitable despite recent increasses in regulatoryminimumNPLS. 20 7 Capital Adequacy Ratio Earnings and Profitability (Percent) (Percent) Regulatorycapital to risk- weighted NPLS to gross loans assets ROA Regulatoryminimum ROE (right axis) 10 0 Source: Haitian National Authorities; and IMF staff estimates. 1/ Data are in fiscal years. INTERNATIONAL MONETARY FUND 29 --- Page 38 --- HAITI Table 1. Haiti: Selected Economic and Financial Indicators, 2012/13-2018/19 (Fiscal year ending September 30) Nominal GDP (2014): US$8.7 billion Population (2014): 10.5 million GDP per capita (2014): $833 Percent of population below poverty line (2012): 58 2012/2013 2013/2014 2014/15 2015/16 2016/17 2017/18 2018/19 Act Prov. Proj. Proj. Proj. Proj. Proj. (Change over previous year; unless otherwise indicated) National income and prices 1/ GDP at constant prices 4.2 2.7 2.0-3.0 3.0-3.5 3.5-4.0 3.5-4.0 GDP deflator 6.6 3.8 6.6 6.4 3.5-4.0 Consumer prices (period average) 6.8 3.9 6.6 5.4 5.0 5.0 Consumer prices (end -of -period) 4.5 6.5 5.4 5.0 5.0 5.3 7.1 5.9 5.0 5.0 5.0 Exports (goods, valued in dollars, f.o.b.) 18.3 4.2 5.0 5.4 6.0 Imports (goods, valued in dollars, f.o.b.) 8.1 3.4 -4.7 6.7 7.0 Real effective exchange rate (end of period; appreciation) 0.7 0.8 3.8 5.5 5.5 5.2 0.0 0.0 0.0 0.0 0.0 Money and credit (valued in gourdes) Credit to private sector (in dollars and gourdes) 16.4 11.2 4.7 11.4 Base money (currency in circulation and gourde deposits) 15.1 0.5 3.0 7.0 9.0 10.4 11.4 Broad money (incl. 0.7 0.8 3.8 5.5 5.5 5.2 0.0 0.0 0.0 0.0 0.0 Money and credit (valued in gourdes) Credit to private sector (in dollars and gourdes) 16.4 11.2 4.7 11.4 Base money (currency in circulation and gourde deposits) 15.1 0.5 3.0 7.0 9.0 10.4 11.4 Broad money (incl. foreign currency deposits) 6.6 9.8 7.3 8.1 8.2 7.1 7.6 7.9 8.3 8.5 (In percent of GDP; unless otherwise indicated) Central government Overall balance (including grants) -7.2 -6.4 -2.7 1.9 -2.2 Domestic revenue 12.8 12.5 14.7 14.7 -2.0 -2.0 Grants 15.0 15.3 15.5 Expenditures 8.1 6.5 6.1 5.6 5.3 5.0 4.8 Current expenditures 28.1 25.4 23.4 22.2 22.5 22.3 22.3 Capital expenditures 12.0 12.6 12.5 12.5 12.5 12.5 12.5 16.1 12.8 10.9 9.7 10.0 9.8 Overall Balance of Total Non- Financial Public Sector 3/ -8.2 -7.4 -3.2 9.8 -2.3 -2.4 -2.2 -2.0 Savings and investment Gross investment 30.1 31.2 26.6 24.8 Of which: public nvestment 16.1 12.8 24.9 24.7 24.8 Gross national savings 10.9 9.7 10.0 9.8 9.8 23.7 24.8 23.1 21.0 21.1 Of which: central government savings 1.9 1.3 2.9 2.8 3.0 21.0 21.2 External current account balance (including official grants) 2/ -6.3 -6.3 3.0 3.0 External current account balance (excluding official grants) -15.2 -12.8 -3.5 -3.8 -3.7 3.7 -3.6 -8.8 -8.8 External Balance: Fossil Fuels -11.3 -11.9 -8.6 -8.5 -8.4 -7.3 -7.8 -8.1 -8.3 -8.4 Public Debt External public debt (medium and long- -term, end -of- period) 4/ 17.4 21.0 Total public sector debt (end- -of- period) 5/ 19.5 21.8 22.6 23.3 23.8 24.3 External public debt service 6/ 24.1 25.5 26.4 27.2 28.2 28.9 1.8 2.4 3.7 4.6 5.5 6.1 6.1 (In millions of dollars, unless otherwise indicated) Overall balance of payments -282 -210 -61 Neti international reserves (program definition) 7/ 1,219 1,010 ) 5/ 19.5 21.8 22.6 23.3 23.8 24.3 External public debt service 6/ 24.1 25.5 26.4 27.2 28.2 28.9 1.8 2.4 3.7 4.6 5.5 6.1 6.1 (In millions of dollars, unless otherwise indicated) Overall balance of payments -282 -210 -61 Neti international reserves (program definition) 7/ 1,219 1,010 Gross International Reserves 8/ 950 1,017 1,085 In months of imports of the following 2,384 1,914 1,782 1,808 1,872 1,940 2,010 year 6.3 5.3 4.8 4.6 4.5 Nominal GDP (millions of Gourdes) 364,526 388,809 424,832 4.5 4.5 Nominal GDP (millions of US$) 8,451 466,707 510,359 555,960 605,653 8,711 9,054 9,475 10,012 10,589 11,199 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 2-3 percent and a point projection of 2.5 percent for FY2015; a range of 3-3.5 percent and a in FY2016, and a range of 3.5-4.0 percent and a point projection of 3.75 percent for FY2017- -FY2019. point projection of 3.25 percent for growth 2/ Anew ECF would catalyze identified multilateral budget support (see Tables 4a and 4b). Until new IMF- supported IS projections exclude these flows. program approved, current account 3/ Includes state- -owned electricity company (EDH). 4/ Debt ratios differ slightly from those in the DSA given the use of average, instead of end- -of- -period, exchange rates. 5/ Excludes central bank repurchase operations in FY2013. 6/In percent of exports of goods and nonfactor services. Includes debt relief. 7/ Includes SDR allocation as both an asset and liability. 8/1 Includes gold; includes transactions related to BRHr repurchase operations; corresponds to BPM6 definition of reserves. 30 INTERNATIONAL MONETARY FUND --- Page 39 --- HAITI Table 2a. Haiti: Non-Financial Public Sector Operations, 2012/13-2018/19 (Fiscal year ending September 30; in millions of gourdes) 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 Total revenue and grants Act Prov. Proj Proj Proj Proj Proj. 76,193 73,906 88,006 94,692 103,647 112,843 Domestic reven ue 46,811 48,775 62,254 68,396 76,742 84,927 123,014 93,942 Domestic taxes 29.578 33,735 39,432 43,117 48,843 54,618 Customs duties 14,230 13,401 17,967 20,302 22,456 24,379 61.137 Ofv which: fuel taxes 1,028 820 7,400 8,221 8,990 26,346 Other current revenue 3,002 1.639 4,855 4,977 5,443 9,794 10,669 Ofv which: FNE 1,954 1,313 1,812 1,991 2.177 5,930 6,460 of which: FER ,230 13,401 17,967 20,302 22,456 24,379 61.137 Ofv which: fuel taxes 1,028 820 7,400 8,221 8,990 26,346 Other current revenue 3,002 1.639 4,855 4,977 5,443 9,794 10,669 Ofv which: FNE 1,954 1,313 1,812 1,991 2.177 5,930 6,460 of which: FER 2,371 2,583 Grants 654 715 779 848 29,383 25,130 25,752 26,295 26,905 27,917 Budget support 3,791 4,999 3,300 3,145 2,182 1,191 29,071 0 Project grants 25.591 20,131 22,452 23,151 24, 4,723 26,725 29,071 Total expenditure 3/ 102,394 98,764 99,402 103,556 114,655 Current expenditure 43,662 48,914 53,050 58,460 63,847 123,895 69,517 134,993 75,619 Wages and salaries 20,007 22,625 28,993 29,772 32,557 35,466 Goods ands services 11,320 13,175 14,637 15,221 16,645 18,132 38,636 Interest payments 1.879 1,861 1,770 3,179 3.352 3,892 19,753 External 575 661 948 1,072 1,206 1,335 4472 1,472 Domestic 1,304 1,200 822 2,107 2,145 2,557 Transfers and subsidies 10,456 11,253 7,651 10,288 11,293 12,027 3,000 Ofv which energy sector 5,988 5,686 4,353 5,803 6,375 6,669 12,758 Ofwhich: mitigating measures (fuel) 0 266 1,167 1,276 1,390 6,921 Capital expenditure 58,732 49,850 46,352 45,096 50,808 54,379 59,374 1,514 Domestically financed 32,870 28,922 23,196 19,680 24,003 25,180 Ofw which: Treasury 32,870 28,922 23,196 19,680 24,003 25,180 27,098 Ofwhich: related to PetroCaribe spending 14,450 14,596 9,354 4,315 7,312 7,781 27,098 8,946 Ofw which: PCDR 1,587 1,404 2,680 1,893 2,828 Ofwhich: FNE and FER related spending 1,704 1,460 2,407 2,644 2,892 3,150 Foreign- financed 25,863 20,928 23,156 25,417 26,805 29,198 32,276 3,431 Overall balance including grants -26,201 24,858 -11,396 -8,864 1,008 -11,052 -11,979 Excluding grants 55,583 49,989 37,148 35,160 -37,913 38,969 41,051 Excluding grants and externally financed projects -29,720 29,060 992 -9,743 -11,108 Overall balance of NFPS, including grants 29,945 28,853 13,471 10,678 -12,469 9,770 -8,774 12,016 12,179 Adjustment (unsettled payment obligations) 3,221 2,228 Financing. 11,979 Excluding grants 55,583 49,989 37,148 35,160 -37,913 38,969 41,051 Excluding grants and externally financed projects -29,720 29,060 992 -9,743 -11,108 Overall balance of NFPS, including grants 29,945 28,853 13,471 10,678 -12,469 9,770 -8,774 12,016 12,179 Adjustment (unsettled payment obligations) 3,221 2,228 Financing. central government 29,422 27,086 13,471 10,678 12,469 External net financing 16,637 15,597 6.850 8,234 9,417 12,016 12,179 Loans (net) 16,637 15,597 6,850 8,234 9,417 9,795 9,795 10,691 Disbursements 17,426 16,725 8,803 11,083 14,018 15,154 10,691 16,541 Of which: Petrocaribe 17,154 15,928 8,099 8,817 11,936 12,681 13,336 Project loans 272 797 704 2,266 2,082 2,473 3,205 Amortization 789 1.129 -1,953 -2,849 -4,601 -5,360 Arrears (net) 5,850 Internal net financing 12,785 11,490 6,621 2,444 3,052 Banking system 14,026 9,589 14,120 2,581 3,450 2,221 1,119 1,488 BRH 2,332 4,834 7,865 1.319 2,255 574 712 of which: deposits, excluding Petrocaribe 745 868 -574 Of which: PCDR 5,759 Ofw which: gover ment bonds 1,587 1.097 2,680 1,893 2,828 0 2.869 -574 -574 -574 -574 Commercial banks 11,694 4,755 6,255 1,262 1,195 1,693 -574 Ofwhich: deposits Petrocaribe 4,982 3,168 3,120 -366 -455 -926 1,285 Ofv which: deposits, excluding Petrocaribe 3,836 2,387 1,500 -926 Ofwhich: T-bills 2,875 1,105 2,702 2,724 3,693 0 Ofv which: government bonds 0 2,869 1,635 -1,074 1,074 -1,074 3,285 Nonbank financing" -1,241 1,900 -7,499 -137 -398 1,102 -1,074 Ofv which: T-bills 1,800 -250 0 1,363 602 1,602 777 777 Ofwhich: Amort. Long- term obligations 1,800 -1,845 -1,761 -1,500 -1,000 Ofwhich: Receivables from the electricity sector 3,366 -2.541 1,541 -1,814 1,461 -500 -964 Ofwhich EDHI letters of credit 0 1,004 -535 -200 Ofwhich Checks n circulation -63 Ofwhich: Post- Sandy government obligations 71 1,680 4,058 -5,738 Other EDH financing 378.1 3,545.0 2,075 1,814 1,461 964 200 Memorandumi items Balance of Petrod ocaribe deposits 8,555 5,389 2,269 3,090 at BRH 2,635 4,016 4942 at commercial banks 8,555 0 5,387 2,267 2,633 4,014 Balance OfPCDR account (in millions ofUS$) 194 162 3.088 4,940 Social spending (in millions of Gourdes) 14,350 14,197 ,075 1,814 1,461 964 200 Memorandumi items Balance of Petrod ocaribe deposits 8,555 5,389 2,269 3,090 at BRH 2,635 4,016 4942 at commercial banks 8,555 0 5,387 2,267 2,633 4,014 Balance OfPCDR account (in millions ofUS$) 194 162 3.088 4,940 Social spending (in millions of Gourdes) 14,350 14,197 Nominal GDP (millions of Gourdes) 364,526 15,269 17,735 19,904 22,238 25,437 388,809 424,832 466,707 510,359 555.960 605.653 Sources: Ministry of Finance and Economy, and Fund staffe estimates and 1/ The outturn for FY2013- FY2014. and projections for FY2015 onwards include projections. revenues oft the Nationa al Education Fund (FNE). for include revenues ofthe Road Fund (FER). Projections FY2015 onwards 2/1 Includesi identifiedin multilateral budget support expected to be catalyzed by a ew IMF- -supported (see Tables 4a and 4b). 3/ Commtment basis, except for domestically.f financeds spending. which is reported on the basis of project program account replenishments. 4/includes transfers from Petrocariber resources from FY2011 onwards to finance electric icity 5/ Capital spending for FY2013 and FY20141 includes post- Sandy emergency outlays. generation. 6/1 Includes Treasury bills, the increase in outstanding debt ofl IPPS ViS- d- vis BMPAD, increases ral governr nment claims vis- ViS EDH, net checks in and payments ofj judiciary sentences and other domestic claims. circulation, 7/Theg governmentp placed bonds for G57bilionint the bankings system ate end-FY2014 to clear post-Sandy obligationsd during FY2015. INTERNATIONAL MONETARY FUND 31 electric icity 5/ Capital spending for FY2013 and FY20141 includes post- Sandy emergency outlays. generation. 6/1 Includes Treasury bills, the increase in outstanding debt ofl IPPS ViS- d- vis BMPAD, increases ral governr nment claims vis- ViS EDH, net checks in and payments ofj judiciary sentences and other domestic claims. circulation, 7/Theg governmentp placed bonds for G57bilionint the bankings system ate end-FY2014 to clear post-Sandy obligationsd during FY2015. INTERNATIONAL MONETARY FUND 31 --- Page 40 --- HAITI Table 2b. Haiti: Non-Financial Public Sector Operations, 2012/13-2018/19 (Fiscal year ending September 30; in percent of GDP) 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 Total revenue and grants Act Prov Proj Proj. Proj Proj Proj 20.9 19.0 20.7 20.3 20.3 Domestic revenu ue 12.8 12.5 14.7 14.7 15.0 20.3 20.3 Domestic taxes 8.1 8.7 9.3 9.2 9.6 15.3 15.5 Customs duties 3.9 3.4 4.2 4.4 4.4 9.8 101 Of which: fuelt taxes 0.3 02 1.7 1.8 1.8 4.4 1.8 4.4 Other current revenue 0.8 0.4 1.1 1.1 1.1 ofv which: FNE 0.5 0.3 0.4 0.4 0.4 0.4 1.1 1.1 Ofv which: FER 0.0 00 0.1 0.1 0.1 0.1 0.1 0.4 Grants 8.1 6.5 6.1 5.6 Budget support 21 1.0 1.3 5.3 5.0 4.8 Project grants 0.8 0.7 0.4 02 0.0 7.0 52 5.3 5.0 4.8 4.8 4.8 Total expenditure 3/ 28.1 25.4 23.4 22.2 22.5 Current expenditure 12.0 12.6 12.5 12.5 12.5 22.3 12.5 22.3 Wages and salaries 5.5 5.8 6.8 6.4 6.4 6.4 12.5 6.4 Goods and services 3.1 3.4 3.4 3.3 3.3 3.3 Interest payment 0.5 0.5 0.4 0.7 0.7 0.7 3.3 External 0.2 0.2 0.2 0.2 02 02 0.7 0.2 Domestic 0.4 5.5 5.8 6.8 6.4 6.4 6.4 12.5 6.4 Goods and services 3.1 3.4 3.4 3.3 3.3 3.3 Interest payment 0.5 0.5 0.4 0.7 0.7 0.7 3.3 External 0.2 0.2 0.2 0.2 02 02 0.7 0.2 Domestic 0.4 0.5 0.4 0.5 0.5 Transfers and subsidies 2.9 2.9 1.8 2.2 Ofv which: energy sector 4/ 1.6 1.5 1.0 2.2 2.2 2.1 Ofwhich: mitigating measures (fuel) 0.0 0.0 0.1 1.2 1.2 1.2 Capital expenditure 0.2 0.3 0.3 16.1 12.8 10.9 9.7 Domestically financed > 9.0 7.4 10.0 9.8 Ofwhich: Treasury 5.5 4.2 4.7 4.5 9.0 7.4 5.5 4.2 4.5 Ofv which related to PetroCaribe spending 4.0 3.8 2.2 0.9 1.4 Ofwhich: PCDR 0.4 0.4 0.6 0.6 Ofwhich: FNE and FER related spending 0.5 0.4 0.6 0.6 0.6 0.0 0.6 Foreign- financed 7.1 5.4 5.5 5.4 5.3 5.3 0.6 5.3 Overall balance including grants -6.4 1.9 2.2 -2.0 -2.0 Excluding grants -15:2 -12.9 -7.5 7.4 7.0 Excluding grants and externally financed projects -8.2 7.5 6.8 Overall balance of NFPS, including grants -8.2 -2.3 -1.8 1.4 -2.4 2.2 -2.0 Adjustment (unsettled payment obligations) 0.9 0.6 0.0 0.0 0.0 0.0 0.0 Financing, central government 8.1 7.0 2.3 External net financing 4.6 4.0 1.6 22 20 Loans (net) .5 6.8 Overall balance of NFPS, including grants -8.2 -2.3 -1.8 1.4 -2.4 2.2 -2.0 Adjustment (unsettled payment obligations) 0.9 0.6 0.0 0.0 0.0 0.0 0.0 Financing, central government 8.1 7.0 2.3 External net financing 4.6 4.0 1.6 22 20 Loans (net) 1.8 1.8 Disbursements 1.6 4.0 1.6 1.8 1.8 1.8 1.8 4.8 4.3 2.4 2.7 2.7 Of which: Petrocaribe 4.7 4.1 1.9 2.3 2.3 2.7 Project loans 0.1 0.2 0.2 0.5 0.4 0.4 2.2 0.5 Amortization -0.2 -0.3 -0.5 -0.6 -0.9 Arrears (net) 0.0 0.0 0.0 00 0.0 -10 0.0 -1.0 0.0 Internal netf financing 3.5 3.0 1.6 0.5 0.6 0.4 Banking system 3.8 2.5 3.3 0.6 0.7 02 0.2 0.1 BRH 0.6 1.9 0.3 0.4 -0.1 Of which: deposits, excluding Petrocaribe 02 0.2 1.4 0.0 0.0 0.0 -0.1 Ofv which: PCDR 0.4 0.3 0.6 0.4 0.6 0.0 0.0 Ofv which: government bonds 0.0 0.7 -0.1 -0.1 -0.1 -0.1 -0.1 0.0 Commercialbanks 3.2 12 1.5 0.3 0.2 0.3 Ofv which: deposits Petrocaribe 1.4 0.8 0.7 -0.1 -0.1 -0.2 -0.2 0.2 Ofwhich: deposits, excluding Petrocaribe 11 -0.6 0.4 0.0 0.0 0.0 Ofw which: T-bills 0.8 0.3 0.0 0.6 0.5 0.7 0.0 Of which: government bonds 0.0 0.7 0.4 -02 -0.2 -0.2 -0.2 0.5 Nonbank financing" -0.3 0.5 -18 0.0 -0.1 0.2 Of which: T-bills 0.5 -0.1 0.0 03 0.1 0.3 0.1 Ofwhich: Amort Long- term obligations -0.5 -0.5 0.4 -0.3 -0.2 0.1 Ofv which: Receivables from the electricity sector -0.9 0.7 -0.4 -0.4 -0.3 -0.2 -0.1 0.0 Ofwhich EDH letters ofd credit 0.0 -0.3 -0.1 0.0 0.0 0.0 0.0 Ofwhich: Checks in circulation 0.1 00 0.0 0.0 0.0 0.0 0.0 Ofw which: Post- Sandy gover ment obligations 0.5 1.0 -1.4 0.0 0.0 0.0 Other EDH financing 0.1 0.9 0.5 04 0.0 0.0 0.3 0.2 0.0 Memorandum items Balance of Petrocaribe deposits 23 1.4 0.5 0.6 0.6 at BRH 0.0 0.0 0.0 0.0 0.0 0.7 0.8 at commercial banks 2.3 1.4 0.5 0.6 0.0 0.0 Balance of PCDR account (in millions of USS) 0.1 0.0 0.0 0.0 0.6 00 0.7 0.8 Social spending (in millions of Gourdes) 3.9 3.7 3.6 3.8 0.0 0.0 Nominal GDP (millions of Gourdes) 364,526 388, .7 0.8 at commercial banks 2.3 1.4 0.5 0.6 0.0 0.0 Balance of PCDR account (in millions of USS) 0.1 0.0 0.0 0.0 0.6 00 0.7 0.8 Social spending (in millions of Gourdes) 3.9 3.7 3.6 3.8 0.0 0.0 Nominal GDP (millions of Gourdes) 364,526 388, 809 424,832 466, 707 3.9 a. na. 510,359 555,960 605,653 Sources: Ministry ofF Finance and Economy; and Fund staff estimates and; projections. 1/ The outturn for FY2013- -FY2014 and projections for FY2015 onwar rds include revenues of the National Education Fund (FNE). for FY2015 onwards include revenues oft the Road Fund (FER). Projections 2/1 Includes identified multilateralt budget support expected to be catalyzed bya new IMF supported program (see Tables 4a and 4b). 3/ Commitment basis, except for domestically financed spending. whichis reported on the basis of project account replenishments. 4/Includes transfers from Petrocaribe resources from FY2011 onwards to finance electricity generation. 5/Capital's spending for FY2013 and FY2014 includes post- Sandy emergency outlays. 6/ Includes Treasury bills, the increase outstanding debt ofl IPPS VIS- d- is BMPAD, increas es tral gover nment claims vis- vis EDH, net n and payments ofjudiciary sentences and other domestic claims. checks circulation, 7/Theg governmentp placed bonds for657bilionint the-banking Systematend-Fy2014 to clear post-Sandy obligations during FY2015. 32 INTERNATIONAL MONETARY FUND --- Page 41 --- HAITI Table 2c. Haiti: Central Government Gross Cash Flows, 2012/13-2018/19 (Fiscal year ending September 30; in millions of gourdes) 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 Act. Prov. Proj. Proj Proj Proj. Proj. Gross cash inflow 34,932 33,917 24,362 17,040 20,172 20,449 Debt placement 33,252 29,860 24,362 17,040 20,172 20,449 20,603 20,603 Domestic (including use of bank deposits) 15,826 13,134 15,559 5,958 6,154 5,295 BRH 4,062 2,332 4,834 8,439 1,893 2,828 Commercial banks 11,694 4,755 7,121 2,702 2,724 3,693 3,285 Nonbanks 1,800 3,545 1,363 602 1,602 External 17,426 16,725 8,803 11,083 14,018 15,154 Arrears accumulation 1,680 4,058 16,541 U Gross cash outflow 34,932 33,917 24,362 17,040 20,172 20,449 20,603 Primary deficit 24,322 22,998 9,626 5,686 7,656 7,160 Interest 7,507 1,879 1,861 1,770 3,179 3,352 3,892 Amortization 4,472 5,955 6,769 7,229 8,176 9,164 9,397 Domestic 8,624 5,166 5,640 5,276 5,328 4,564 4,037 2,773 BRH 603 Primary deficit 24,322 22,998 9,626 5,686 7,656 7,160 Interest 7,507 1,879 1,861 1,770 3,179 3,352 3,892 Amortization 4,472 5,955 6,769 7,229 8,176 9,164 9,397 Domestic 8,624 5,166 5,640 5,276 5,328 4,564 4,037 2,773 BRH Commercial banks 1,440 1,529 2,000 2,000 Nonbanks 5,166 5,640 3,837 3,314 2,461 1,464 External 1,129 1,953 2,849 4,601 5,360 5,850 Arrears payments 2,776 2,291 5,738 Net cash flow Memorandum items Overall fiscal balance -26,201 -24,858 -11,396 -8,864 -11,008 -11,052 Registered debt 27,297 50,388 67,522 76,386 87,393 98,446 110,425 -11,979 Domestic 10,660 18,155 28,437 29,068 30,658 31,916 External 33,204 16,637 32,234 39,084 47,318 56,735 66,530 Stock of Arrears 3,970 5,738 77,220 Nominal GDP 364,526 388,809 424,832 466,707 510,359 555,960 605,653 Inpercent of GDP Gross cash outflow 9.6 8.7 5.7 3.7 4.0 3.7 3.4 Overall fiscal balance 7.2 6.4 2.7 1.9 2.2 2.0 2.0 Amortization needs 1.6 1.7 1.7 1.8 1.8 1.7 1.4 Arrears payments 0.8 0.6 1.4 0.0 0.0 0.0 0.0 Sources: Sources: Ministry of Finance and Economy; and Fund staff estimates and projections. INTERNATIONAL MONETARY FUND 33 --- Page 42 --- HAITI Table 3. Haiti: Summary Accounts of the Banking System, 2012/13-2018/19 (Fiscal year ending September 30; in millions of gourds, unless otherwise indicated) 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 Act. Prov. Proj. Proj Proj. Proj. Proj Central Bank Net foreign assets 78,456 73,940 72,074 76,410 (In millions of US$) 1,793 82,266 88,887 95,968 Net international reserves (program) 1/ 1,623 1,492 1,521 1,590 1,668 1,749 1,219 1,010 Commercial bank forex deposits 1,017 1,085 Net domestic assets 30,534 -25,791 -22,494 Net credit to the nonfinancial public sector 4,848 12,330 -23,341 -24,912 -26,840 -29,523 Of which: Net credit to the central government 21,209 22,828 25,082 24,509 23,935 Of which: T-bills 11,308 16,142 24,007 25,326 27,581 27,007 26,433 Of which: IMF PCDR Debt Relief ,085 Net domestic assets 30,534 -25,791 -22,494 Net credit to the nonfinancial public sector 4,848 12,330 -23,341 -24,912 -26,840 -29,523 Of which: Net credit to the central government 21,209 22,828 25,082 24,509 23,935 Of which: T-bills 11,308 16,142 24,007 25,326 27,581 27,007 26,433 Of which: IMF PCDR Debt Relief Liabilities to commercial banks (excl gourde deposits) -8,498 -7,401 4,721 2,828 35,918 -38,025 -43,258 BRH bonds/Open market operations -5,945 -43,155 -44,397 -44,234 -45,157 Counterpart of commercial bank forex deposits 29,973 4,709 -7,000 -5,500 -5,156 -3,200 -2,200 Other 33,316 36,258 37,655 -39,241 -41,034 -42,957 -96 3,014 -5,597 -7,115 -8,301 Base Money 47,922 48,150 49,580 53,069 57,354 Currency in circulation 62,048 66,445 Commercial bank gourde deposits 21,352 23,865 26,365 28,963 31,672 34,502 37,586 26,570 24,285 23,216 24,105 25,682 27,545 28,858 II Consolidated Banking System Net foreign assets 100,972 95,190 94,254 98,759 103,993 (In millions of US$) 2,308 110,200 117,920 Ofv which: Commercial banks NFA 2,089 1,952 1,966 2,010 2,068 2,149 Net domestic assets 57,800 79,192 92,858 102,573 Credit to the nonfinancial public sector 4,583 113,245 125,069 137,347 Of which: Net credit to the central government 7,519 20,608 23,989 27,938 29,557 30,768 2,195 11,785 23,696 26,777 Credit to the private sector 76,350 84,871 30,726 32,345 33,556 In gourdes 88,837 98,998 107,921 119,189 132,783 In foreign currency 45,597 48,108 50,645 56,508 63,297 71,183 80,391 In millions of US$ 30,753 36,763 38,192 42,490 44,624 48,006 52,392 Other ,785 23,696 26,777 Credit to the private sector 76,350 84,871 30,726 32,345 33,556 In gourdes 88,837 98,998 107,921 119,189 132,783 In foreign currency 45,597 48,108 50,645 56,508 63,297 71,183 80,391 In millions of US$ 30,753 36,763 38,192 42,490 44,624 48,006 52,392 Other -13,967 -13,198 -16,587 -20,413 -22,614 23,678 Broad -26,205 money 158,772 174,382 187,112 201,332 Currency in circulation 217,238 235,268 255,266 Gourde deposits 21,352 23,865 26,365 28,963 31,672 34,502 37,586 Foreign currency deposits 60,277 64,709 66,392 71,769 77,870 85,112 93,197 77,142 85,808 94,356 In millions of USS 100,600 107,696 115,655 124,483 1,764 1,884 1,954 2,003 2,082 2,171 2,268 (12- month percentage change) Currency in circulation 5.5 11.8 10.5 Base money 9.9 9.4 8.9 8.9 15.1 0.5 3.0 7.0 8.1 Gourde money (M2) 8.6 8.5 8.2 7.1 Broad money (M3) 4.7 8.6 8.7 9.2 9.3 6.6 9.8 7.3 7.6 7.9 8.3 Gourde deposits 8.5 Foreign 9.7 7.4 2.6 8.1 8.5 9.3 currency deposits 4.6 11.2 10.0 6.6 7.1 9.5 7.4 7.6 Credit to the private sector 16.4 Credit in gourdes 11.2 4.7 11.4 9.0 10.4 11.4 19.8 5.5 5.3 11.6 Credit in foreign currency 12.0 12.5 12.9 11.7 19.5 3.9 11.3 5.0 7.6 9.1 Memorandum items: Foreign currency deposits (percent of total private deposits) 56.1 57.0 58.7 58.4 Foreign curr. credit to priv. sector (percent of total) 40.3 58.0 57.6 57.2 43.3 43.0 42.9 41.3 40.3 Commercial Banks' Credit to Private Sector (percent of GDP) 20.2 21.0 39.5 20.1 20.4 20.4 20.6 Sources: Bank of the Republic of Haiti; and Fund staff estimates and projections. 21.1 1/ Excluding commercial bank forex deposits, letters of credit, guarantees, earmarked project accounts and U.S.dollar- -denomir inated bank reserves. The SDR allocation is not netted out of NIR. 34 INTERNATIONAL MONETARY FUND --- Page 43 --- HAITI Table 4a. Haiti: Balance of Payments, 2012/13-2018/19 (In millions of US dollars on a fiscal year basis, unless otherwise indicated) 2012/13 2013/2014 2014/15 2015/16 2016/17 2017/18 2018/19 Act. Prov. Proj. Proj Proj Proj Proj Current account (including grants) 1/ -535 -552 -362 -374 Current account (excluding grants) -1,285 -1,115 -391 -402 -796 -832 -859 -900 -940 Trade balance 2,412 2,487 2,277 2,347 2,470 Exports of goods -2,593 -2,707 Of which: Assembly industry 6/17 2017/18 2018/19 Act. Prov. Proj. Proj Proj Proj Proj Current account (including grants) 1/ -535 -552 -362 -374 Current account (excluding grants) -1,285 -1,115 -391 -402 -796 -832 -859 -900 -940 Trade balance 2,412 2,487 2,277 2,347 2,470 Exports of goods -2,593 -2,707 Of which: Assembly industry 1,004 1,058 1,122 1,197 1,281 1,018 Imports of goods 3,329 3,443 -3,281 1,086 1,162 Of which: Fossil Fuels -3,406 -3,592 -3,791 -3,988 -951 -1,039 -663 -735 -814 -877 -937 Services (net) -438 -369 -288 -287 -287 Receipts -282 Payments -1,090 1,070 1,017 -1,056 -1,113 -1,175 -1,233 Income (net) -4 Ofv which: Interest payments -13 -15 -10 -22 -20 -22 -26 -27 Current transfers (net) 2,283 2,291 2,251 2,280 2,387 Official transfers (net) 2,500 2,609 Of which: budget support Private transfers (net) 1,533 1,728 1,772 1,810 1,902 1,991 2,072 Capital and financial accounts Capital transfers Debt stock reduction Public sector capital flows (net) Loan disbursements Amortization -15 -25 -42 -58 -90 -102 -108 Foreign direct investment (net) Banks (net) 2/ Other items (net) -71 -32 -27 -14 Errors and omissions 3/ -477 -148 Overall balance -282 -178 -210 -61 Financing -23 -66 -75 Change in net foreign assets -77 Change in gross reserves -29 -69 -78 -80 -38 -27 -63 Liabilities -69 -70 Utilizat ation of Fund credits(net) -300 90 -102 -108 Foreign direct investment (net) Banks (net) 2/ Other items (net) -71 -32 -27 -14 Errors and omissions 3/ -477 -148 Overall balance -282 -178 -210 -61 Financing -23 -66 -75 Change in net foreign assets -77 Change in gross reserves -29 -69 -78 -80 -38 -27 -63 Liabilities -69 -70 Utilizat ation of Fund credits(net) -300 -11 Other liabilities 4/ -10 -11 -302 Debt rescheduling and debt relief Financing Gap -74 -84 -63 -43 Proposed Access Identified Budget Support (IDB and EU) morandum items: Current account (in percent of GDP) -6.3 -6.3 -3.5 -3.8 -3.7 -3.7 Excluding official transfers -15.2 12.8 -8.8 -8.8 -8.6 -3.6 Exports of goods, f.o.b (percent change) 18.3 4.2 5.0 5.4 -8.5 -8.4 Imports of goods, fo.b (percent change) 8.1 3.4 6.0 6.7 7.0 Projected average oil price (US$ per barrel, APSP) 103.4 4.7 3.8 5.5 5.5 5.2 Debt service (in percent of exports of goods and services) 1.8 103.7 2.4 61.2 64.4 69.7 71.8 73.1 3.7 4.6 5.5 Gross International reserves (in millions of US$) 6/ 2,384 1,914 1,782 6.1 6.1 (inr months of fnexty year'si imports of goods and services) 6.3 5.3 1,808 1,872 1,940 2,010 4.8 4.6 4.5 4.5 4.5 Sources: Bank of the Republic of Haiti; and Fund staff estimates andp projections. 1/Ar new ECF would catalyze identified multilateral budget support. Until a new IMF supported program is approved, current account 3/Change in net foreign assets of commercial banks. projections exclude these flows 3/ Errors and omissions for FY2013 and FY2014 likely reflect underreported imports. 4/1 Includes repurchase operations contracted in FY2013 and unwound in FY2014. 5/1 Identified multilateral budget support assumed to be catalyzed by a new IMF supported program. 6/1 Includes gold; reflects unwinding of repurchase operations in FY2014. INTERNATIONAL MONETARY FUND 35 CF would catalyze identified multilateral budget support. Until a new IMF supported program is approved, current account 3/Change in net foreign assets of commercial banks. projections exclude these flows 3/ Errors and omissions for FY2013 and FY2014 likely reflect underreported imports. 4/1 Includes repurchase operations contracted in FY2013 and unwound in FY2014. 5/1 Identified multilateral budget support assumed to be catalyzed by a new IMF supported program. 6/1 Includes gold; reflects unwinding of repurchase operations in FY2014. INTERNATIONAL MONETARY FUND 35 --- Page 44 --- HAITI Table 4b. Haiti: Balance of Payments, 2012/13-2018/19 (As a percentage of GDP on a fiscal year basis, unless otherwise indicated) 2012/2013 2013/2014 2014/15 2015/16 2016/17 2017/18 2018/2019 Act Prov. Proj Proj Proj Proj Proj Current account (including grants) 1/ -6.3 -6.3 -3.5 -3.8 Current account (excluding grants) -15.2 -12.8 -8.8 -3.7 3.7 -3.6 8.8 -8.6 -8.5 -8.4 Trade balance -28.5 -28.5 -25.1 -24.8 -24.7 Exports of goods 10.9 11.0 11.1 -24.5 -24.2 Of which: Assembly industry 11.2 11.2 11.3 11.4 Imports of goods 9.9 10.0 10.1 10.1 10.2 10.3 10.4 -39.4 -39.5 -36.2 -35.9 35.9 Ofv which: Fossil Fuels -11.3 -11.9 -7.3 -35.8 -35.6 -7.8 8.1 -8.3 -8.4 Services (net) -5.2 -4.2 -3.2 -3.0 -2.9 Receipts -2.7 -2.5 7.7 8.0 8.1 8.1 8.3 8.4 8.5 Payments 12.9 -12.3 -11.2 -11.1 -11.1 11.1 11.0 Income (net) 0.4 0.1 0.0 -0.1 0.0 Ofv which: Interest payments -0.2 -0.2 -0.2 -0.1 -0.2 -0.2 -0.2 -0.2 -0.2 Current transfers (net) 27.0 26.3 24.9 24.1 Official transfers (net) 8.9 23.8 23.6 23.3 Ofv which: budget support 7.0 5.3 5.0 5.1 5.2 5.2 Private transfers (net) 1.0 1.3 0.0 0.0 0.0 0.0 0.0 18.1 19.8 19.6 19.1 19.0 18.8 18.5 Capital and financial accounts 8.6 6.0 1.2 3.2 3.8 Capital transfers 4.0 4.3 0.2 0.3 0.5 0.3 0.0 Debt stock reduc tion 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Public sector capital flows (net) 4.6 4.0 1.6 1.8 Loan disbursements 1.8 1.8 1.8 4.8 4.3 2.1 2.4 Amortization 2.7 2.7 2.7 -0.2 -0.3 -0.5 -0.6 -0.9 -1.0 -1.0 Foreign direct investment (net) 1.9 1.1 1.2 Banks (net) 2/ 1.8 2.0 2.3 2.6 Other items (net) 1.9 0.6 0.1 0.2 0.2 0.2 0.0 0.0 0.0 -2.1 -0.7 -0.3 -0.3 -0.1 Errors and omissions 3/ -5.6 -1.7 0.0 0.0 0.0 0.0 0.0 Overall balance -3.3 -2.0 2.3 -0.6 0.0 0.3 0.7 Financing 3.3 2.0 1.5 -0.2 -0.7 Change in net foreign assets 3.2 2.0 1.4 -0. -0.3 -0.1 Errors and omissions 3/ -5.6 -1.7 0.0 0.0 0.0 0.0 0.0 Overall balance -3.3 -2.0 2.3 -0.6 0.0 0.3 0.7 Financing 3.3 2.0 1.5 -0.2 -0.7 Change in net foreign assets 3.2 2.0 1.4 -0. 7 -0.7 Change in gross reserves 0.3 -0.7 -0.7 -0.7 Liabilities -0.4 5.4 1.5 -0.3 -0.6 -0.6 -0.6 Utilization of Fund credits(net) 3.7 -3.4 0.0 0.0 -0.1 -0.1 -0.1 4/ 0.1 0.0 0.0 0.0 -0.1 Other liabilities -0.1 -0.1 3.6 -3.5 0.0 0.0 0.0 Debt rescheduling and debt relief 0.1 0.1 0.1 0.0 0.0 0.1 0.0 0.0 0.0 Financing Gap 0.0 0.0 -0.8 -0.9 -0.6 -0.4 0.0 Proposed Access Budget Support (IDB and EU) 5/ 0.1 0.2 0.2 0.2 0.0 0.7 0.7 0.4 0.2 0.0 Memorandumi items: Exports of goods, f.o.b (percent change) 18.3 4.2 5.0 5.4 6.0 Imports of goods, f.o.b (percent change) 8.1 3.4 -4.7 3.8 6.7 7.0 Projected. average oil price (US$ per barrel, APSP) 103.4 103.7 5.5 5.5 5.2 Debt service (in percent of exports of goods and services) 1.8 2.4 61.2 64.4 69.7 71.8 73.1 Gross liquid international reserves (in millions of USS) 2,384 3.7 4.6 5.5 6.1 6.1 (in months of next year's imports of goods and services) 6.3 1,914 1,782 1,808 1,872 1,940 2,010 5.3 4.8 4.6 4.5 4.5 4.5 Sources: Bank of the Republic of Haiti; and Fund staff estim ates and projections. 1/Anew ECF would catalyze identified multilateral budget support. Until a new IMF- supported program iS approved, current 3/ Changei in net foreign assets of commercial banks. account projections exclude these flows. 3/1 Errors and omissions for FY2013 and FY2014 likely reflect underreported imports. 4/Includes repurchase operations contra acted in FY2013 and unwound in FY2014. 5/1 Identified multilateral budget support assumed to be catalyzed by a new IMF- supported program. 6/1 Includes gold; reflects unwinding of repurchase operations in FY2014. ECF would catalyze identified multilateral budget support. Until a new IMF- supported program iS approved, current 3/ Changei in net foreign assets of commercial banks. account projections exclude these flows. 3/1 Errors and omissions for FY2013 and FY2014 likely reflect underreported imports. 4/Includes repurchase operations contra acted in FY2013 and unwound in FY2014. 5/1 Identified multilateral budget support assumed to be catalyzed by a new IMF- supported program. 6/1 Includes gold; reflects unwinding of repurchase operations in FY2014. 36 INTERNATIONAL MONETARY FUND --- Page 45 --- HAITI Table 5. Haiti: Financial Soundness Indicators, September 2013-September 2014 (In percent; unless otherwise indicated) Sep- -13 Dec-13 Mar-14 Jun-14 Sep-14 Size and growth Dec-14 Asset volume (in US$ millions ) 4020.5 4004.3 4068.2 4046.3 4276.0 Deposit volume (in USS millions ) 3328.4 3303.5 3386.9 4173.7 Asset growth (in gourde terms) since beginning of fiscal year 3.2 -0.1 3328.9 3463.6 3397.2 Credit growth (net, in gourde terms) since beginning of fiscal 2.9 4.3 10.6 0.2 year 19.9 2.3 3.0 3.3 9.7 2.4 Capital adequacy Regulatory capital to risk -weighted assets 17.3 17.1 17.7 17.5 Assets to Regulatory Capital 17.8 18.0 12.0 9.3 13.5 13.6 13.6 13.3 Asset quality and composition Loans (net) to assets 35.3 36.2 35.4 NPLS to gross loans 35.0 35.1 35.8 2.4 4.3 4.6 3.3 3.0 Provisions to gross loans 1.8 4.3 Provisions to NPLS 1.8 2.2 2.3 2.2 2.3 gross 72.2 41.5 46.5 NPLS less provisions to net worth 69.3 72.1 54.9 3.3 11.7 11.7 4.7 4.0 8.9 Earnings and profitability (cumulative since beginning of fiscal year) Return on Assets (ROA) 1.7 1.3 1.4 1.9 1.6 1.5 Return on equity (ROE) 22.9 17.4 18.6 20.7 Net interest income to gross interest income 25.3 19.9 92.5 91.3 90.4 87.9 87.1 87.6 Operating expenses to net profits 67.6 67.0 65.9 59.9 65.6 64.1 Efficiency Interest rate spread 1/ 7.5 7.4 7.2 8.1 7.7 7.8 Liquidity Liquid assets to total assets 41.6 40.5 41.5 39.4 40.0 Liquid assets to deposits 2/ 40.0 50.2 49.1 49.8 47.9 49.4 49.1 Dollarization Foreign currency loans to total loans (net) 48.2 48.8 49.7 51.9 52.4 Foreign currency deposits to total deposits 55.1 55.4 58.1 53.1 Foreign.currency loans to foreign currency deposits 37.3 58.5 57.3 56.5 Sources: BRH Banking System Financial Summary; and IMF estimates and 38.6 36.4 37.8 39.5 41.3 projections. These indicators reflect the aggregated of the licensed banks in operation in Haiti; thus figures in this table may not exactly match the information in Table 3, which reflect the results consolidated nine banking system. 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. INTERNATIONAL MONETARY FUND 37 57.3 56.5 Sources: BRH Banking System Financial Summary; and IMF estimates and 38.6 36.4 37.8 39.5 41.3 projections. These indicators reflect the aggregated of the licensed banks in operation in Haiti; thus figures in this table may not exactly match the information in Table 3, which reflect the results consolidated nine banking system. 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. INTERNATIONAL MONETARY FUND 37 --- Page 46 --- HAITI Table 6. Haiti: Indicators of Public Debt and External Vulnerability, 2012/13-2018/19 (Units as indicated) 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 Act. Prov. Proj. Proj. Proj Proj. Proj Debt indicators Total external public debt (in percent of GDP) 1/ 17.4 21.0 21.8 22.6 Total external public debt (in percent of exports) 2/ 93.9 23.3 23.8 24.3 Total public debt (in percent of GDP) 110.3 113.6 116.8 116.4 115.4 114.3 19.5 24.1 25.5 26.4 27.2 Total public debt (in millions of USS) 1,626 2,056 2,240 28.2 28.9 o/w domestic debt 2,453 2,681 2,941 3,186 o/w Petrocaribe 1,235 1,576 1,717 1,849 2,003 o/w other external debt 2,158 2,309 External debt service (in percent of GDP) 0.3 Amortization 0.5 0.7 0.9 1.2 1.3 1.3 Interest 0.2 0.3 0.5 0.6 1.0 1.1 1.1 0.2 0.2 0.2 0.2 0.2 Ex kternal debt service (in percent of exports) 2/ 1.8 2.4 0.2 0.2 External debt service (in percent of current centra ral govt. revenues) 2.6 3.7 3.7 4.6 5.5 6.1 6.1 4.7 5.9 8.0 8.5 8.4 Other indicators Exports of goods and servic ces (percent change, 12-month basis in US$) 18.5 5.6 4.6 5.4 Imports of goods and services (percent change, 12-month basis in US$) 5.3 2.1 4.8 3.8 6.6 7.0 7.1 Remittances and grants in percent of gross disposable income 21.2 20.8 19.9 5.5 5.5 5.2 Exchange rate (per U.S. dollar, period average) 43.1 44.6 19.4 19.3 19.1 18.9 Current account balance (millions of US$) 3/ -535 -552 Capital and financial account balance (millions of US$) -362 -374 -391 -402 8 6.6 7.0 7.1 Remittances and grants in percent of gross disposable income 21.2 20.8 19.9 5.5 5.5 5.2 Exchange rate (per U.S. dollar, period average) 43.1 44.6 19.4 19.3 19.1 18.9 Current account balance (millions of US$) 3/ -535 -552 Capital and financial account balance (millions of US$) -362 -374 -391 -402 Liquid gross reserves (millions of US$) 2,242 1,782 In months of imports of the following year 2/ 1,650 1,677 1,740 1,809 1,878 6.0 5.0 4.4 4.3 4.2 In percent of debt service due in the following year 5,593 2,883 2,012 4.2 4.2 In percent of base money 1,394 1,266 1,235 1,163 204.7 168.6 160.7 158.7 156.9 155.3 155.1 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, rates. 2/ Goods and services exchange 3/1 Including grants, bute excluding for FY2015- -FY2018 identified budget suport expected to be catalyzed by a new IMF- -supported program. 4/1 Includes thei impact of central bank repurchase operations in FY2013; excludes gold. 38 INTERNATIONAL MONETARY FUND --- Page 47 --- HAITI Table 7. Haiti: Proposed Schedule of Disbursements Under the Proposed ECF Arrangement, 2015-18 Amount Availability Date Conditions for Disbursement 1/ SDR 7,020,000 5/18/2015 Executive Board approval of the three-year arrangement under the ECF. SDR 7,020,000 10/30/2015 Observance of performance criteria for September 2015 and completion of the first review under the ECF arrangement. SDR 7,020,000 4/30/2016 Observance of performance criteria for March 2016 and completion of the second review under the ECF arrangement. SDR 7,020,000 10/30/2016 Observance of performance criteria for September 2016 and completion of the third review under the ECF arrangement. SDR 7,020,000 4/30/2017 Observance of performance criteria for March 2017 and completion of the fourth review under the ECF arrangement SDR 7,020,000 10/30/2017 Observance of performance criteria for September 2017 and completion of the fifth review under the ECF arrangement. SDR 7,020,000 4/30/2018 Observance of performance criteria for March 2018 and completion of the sixth review under the ECF arrangement. Memorandum: Prospective Total Access under the ECF arrangement: SDR 49,140,000 Other than the generally applicable conditions for the Extended Credit Facility (ECF) arrangement INTERNATIONAL MONETARY FUND 39 SDR 7,020,000 10/30/2017 Observance of performance criteria for September 2017 and completion of the fifth review under the ECF arrangement. SDR 7,020,000 4/30/2018 Observance of performance criteria for March 2018 and completion of the sixth review under the ECF arrangement. Memorandum: Prospective Total Access under the ECF arrangement: SDR 49,140,000 Other than the generally applicable conditions for the Extended Credit Facility (ECF) arrangement INTERNATIONAL MONETARY FUND 39 --- Page 48 --- HAITI Table 8a. Haiti: Indicators of Capacity to Repay the Fund (Existing Fund Credit), 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 8.0 6.6 3.9 0.7 Interest 0.0 0.0 0.0 0.0 0.0 0.1 0.0 0.0 1.5 0.0 0.0 0.2 0.0 Total obligations based on existing credit In millions of SDRS 0.0 1.6 4.3 6.7 7.6 8.1 6.6 3.9 1.5 In millions of US$ 0.0 2.3 6.1 9.6 10.8 11.5 0.7 0.2 In percent of 9.4 5.6 2.1 0.9 0.2 exports 0.0 0.1 0.3 0.5 0.5 0.5 0.4 0.2 0.1 0.0 government revenue 0.0 0.2 0.3 0.4 0.4 0.4 0.3 0.1 0.0 0.0 0.0 reserves 0.0 0.1 0.3 0.5 0.6 0.6 0.5 0.3 0.0 debt service 0.0 0.1 0.0 0.0 2.8 5.0 7.0 7.4 7.1 5.4 3.0 1.1 0.4 quota 0.0 2.0 5.2 8.2 9.2 9.9 8.0 4.8 1.8 0.8 0.1 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 0.8 In millions of US$ 59.6 57.5 51.6 41.7 30.6 0.2 0.0 Inp percent of 18.8 9.2 3.4 1.2 0.2 0.0 exports 3.6 3.2 2.7 2.0 1.4 0.8 0.4 0.1 0.0 0.0 government revenues 4.4 4.0 3.3 2.5 1.7 1.0 0.5 0.2 0.0 reserves 0.1 0.0 0.0 3.3 3.2 2.7 2.1 1.5 0.9 0.4 0.1 quota 50.0 48.0 42.8 0.0 0.0 0.0 34.6 25.4 15.6 7.6 2.8 1.0 0.2 0.0 Memorandum items: Exports 1.7 1.8 1.9 2.1 2.2 2.4 Government revenues 1/3/ 1.4 2.5 2.7 2.9 3.1 3.3 1/4/ 1.4 1.6 1.7 1.8 1.9 2.0 2.2 2.3 2.4 Reserves 1.8 1.8 1.9 2.0 2.0 2.6 Debt service 1/ 2.1 2.2 2.3 2.5 2.6 2.7 0.1 0.1 0.1 0.1 0.2 0.2 0. 3.3 1/4/ 1.4 1.6 1.7 1.8 1.9 2.0 2.2 2.3 2.4 Reserves 1.8 1.8 1.9 2.0 2.0 2.6 Debt service 1/ 2.1 2.2 2.3 2.5 2.6 2.7 0.1 0.1 0.1 0.1 0.2 0.2 0. 2 0.2 0.2 Quota (in millions of SDRs) 81.9 81.9 81.9 81.9 0.2 0.2 GDP 1/ 81.9 81.9 81.9 81.9 81.9 81.9 81.9 9.2 9.6 10.2 10.8 11.5 12.1 12.8 13.5 14.2 15.0 15.8 Sources: Haitian authorities; and Fund staff estimates and projections. 0.2 Quota (in millions of SDRs) 81.9 81.9 81.9 81.9 0.2 0.2 GDP 1/ 81.9 81.9 81.9 81.9 81.9 81.9 81.9 9.2 9.6 10.2 10.8 11.5 12.1 12.8 13.5 14.2 15.0 15.8 Sources: Haitian authorities; and Fund staff estimates and projections. Note: Data covers Haiti's fiscal year, which runs from October 1 to September 30. 1/In billions of U.S. dollars. 2/ Exports of goods and services. 3/ Central government domestic revenues. 4/ Gross liquid international reserves, end of period. 40 INTERNATIONAL MONETARY FUND --- Page 49 --- HAITI Table 8b. Haiti: Indicators of Capacity to Repay the Fund (Existing and Proposed Credit), 2014/15-2027/28 (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 2025/26 2026/27 2027/28 Fund obligations based on existing credit (in millions of SDRs) Principal 0.0 1.6 4.3 6.7 7.5 8.0 6.6 3.9 1.5 0.7 0.2 Interest 0.0 0.0 0.0 0.0 0.0 0.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Fund obligations based on existing and prospective credit (in millions of SDRS) Principal Interest 0.0 1.6 4.3 6.7 7.5 8.0 8.7 8.9 9.2 10.5 10.0 7.7 4.9 0.0 0.0 0.0 0.0 0.1 0.2 0.2 0.1 0.1 0.1 0.1 0.0 0.0 2.1 0.0 Total obligations based on existing and prospective credit In millions of SDRS 0.0 1.6 4.3 6.7 7.6 8.2 8.8 9.0 In millions of USS 0.0 2.3 6.1 9.6 10.9 11.7 9.3 10.6 10.0 7.8 4.9 2.1 Inp percent of 12.5 12.8 13.2 15.0 14.3 11.0 7.0 3.0 exports 0.0 0.1 0.3 0.5 0.5 0.5 0.5 0.5 0.5 0.5 gover nment revenue 0.0 0.2 0.3 0.4 0.4 0.4 0.4 0.3 0.3 0.4 0.3 0.2 0.1 reserves 0.0 0.1 0.3 0.5 0.6 0.6 0.6 0.6 0.6 0.3 0.2 0.2 0.1 0.0 debt service 0.0 2.8 5.0 7.0 7.4 7.2 7.2 6.9 6.6 0.6 0.6 0.4 0.3 0.1 quota 0.0 2.0 5.2 8.2 9.3 10.0 10.8 11.0 11.4 6.8 5.9 4.2 2.4 0.9 12.9 12.3 9.5 6.0 2.6 Outstanding Fund credit (end of period) In millions of SDRS 48.0 60.4 70.2 77.5 69.9 61.9 44.4 In millions of US$ 67.7 85.7 100.2 110.7 99.9 88.4 53.3 35.2 24.7 14.7 7.0 2.1 0.0 In percent of 76.1 63.4 50.3 35.3 21.0 10.0 3.0 0.0 exports 3.9 4.7 5.1 5.3 4.5 3.7 3.0 2.4 1.7 1.2 government revenues 5.1 6.2 6.7 6.8 5.8 4.7 3.8 3.0 0. 7.0 2.1 0.0 In percent of 76.1 63.4 50.3 35.3 21.0 10.0 3.0 0.0 exports 3.9 4.7 5.1 5.3 4.5 3.7 3.0 2.4 1.7 1.2 government revenues 5.1 6.2 6.7 6.8 5.8 4.7 3.8 3.0 0. 6 0.3 0.1 0.0 reserves 4.1 5.1 5.8 6.1 5.3 4.5 3.7 2.9 2.2 2.2 1.5 0.8 0.4 0.1 0.0 quota 58.6 73.7 85.7 94.6 85.4 75.6 65.0 54.2 1.5 0.8 0.4 0.1 0.0 43.0 30.2 18.0 8.6 2.6 0.0 Me lemorandum items: Exports 1/2/ 1/3 1.7 1.8 1.9 2.1 2.2 2.4 2.5 2.7 2.9 3.1 3.3 Government revenues 1.3 1.4 1.5 1.6 1.7 1.9 3.5 3.8 4.0 Reserves 1/4/ 1.6 1.7 2.0 2.1 2.2 2.4 2.5 2.7 2.9 3.1 Debt service 1/ 0.1 1.7 1.8 1.9 2.0 2.1 2.2 2.3 2.4 2.5 2.6 2.7 2.9 Quota (in millions of SDRS) 0.1 0.1 0.1 0.1 0.2 0.2 0.2 0.2 0.2 0.2 0.3 0.3 0.3 GDP 1/ 81.9 81.9 81.9 81.9 81.9 81.9 81.9 81.9 81.9 81.9 81.9 81.9 81.9 9.1 9.5 10.0 10.6 11.2 11.8 12.5 13.2 13.9 14.6 15.5 16.3 17.2 81.9 18.1 Sources: Haitian authorities; and Fund staff estimates and projections. 1/ 81.9 81.9 81.9 81.9 81.9 81.9 81.9 81.9 81.9 81.9 81.9 81.9 81.9 9.1 9.5 10.0 10.6 11.2 11.8 12.5 13.2 13.9 14.6 15.5 16.3 17.2 81.9 18.1 Sources: Haitian authorities; and Fund staff estimates and projections. Note: Data covers Haiti' s fiscal year, which runs from October ltos September 30. 1/Int billions of U.S. dollars. 2/ Exports of goods and services. 3/Central government domestic revenues. 4/Grossli liquidi international reserves, end ofp period. INTERNATIONAL MONETARY FUND 41 --- Page 50 --- N Table 9. Haiti: Indicative Targets and Quantitative Performance Criteria, June 2015-June 2016 1/ (In millions of gourdes, unless otherwise indicated) Cumulative flows since end- September 2014 Actual Stock December 2014 March 2015 June 2015 September 2015 December 2015 March 2016 June 2016 at endSeptember Est. Indicative Performance Performance Proj target Criterion Indicative target Criterion Indicative target L Quantitative performance criteria (measured as cumulative flows since September 2014) Net central bank credit to the non-financial public sector ceiling 12,330 5,970 6,425 7,652 Net domestic assets of the central bank ceiling -23,625 6,834 8,879 9,284 9,689 10,094 Neti international res serves of central bank (in millions of U.S. dollars) floor 1,010 -50 8,538 8,645 9,550 10,199 10,849 10,559 Deficit of the Non-P -Financial Public Sector ceiling -100 -117 -150 -150 -150 -130 Domestic Financing of Central Government ceiling 4,000 8,856 11,242 13,471 16,141 18,810 21,480 n. Continuous performance criteria 1,178 4,854 5,817 6,621 7,232 7,843 8,454 New contracting or guaranteeing by the public sector of nonconcessional external debt (In millions of U.S. dollars) Up to and including one year Over one- -year maturity Public sector external arrears accumulation (in millions of U.S. dollars) m. Indicative targets Poverty reducing expenditures floor 2/ 3,630 7,421 11,345 15,269 19,490 23,889 28,446 Memorandum items Net Central Bank Credit to the Central Government 16,142 Stock of Base money 5,797 5,971 6,918 7,865 8,195 8,524 8,854 Gross International Reserves (in millions of U.S. dollars) 48,150 52,851 51,761 50,671 49,580 50,452 51,325 52,197 1,914 1,817 1,808 1,794 1,782 1,782 1,782 Sources: Ministry of Finance, Bank of the Republic of Haiti, and Fund staff estimates and projections. 1,802 1/ Excludes guarantees to the electricity sector in the form of credit/guarantee letters. 2/ Poverty reducing expenditures consist of domestically- -financed spending in health, education, and agriculture. 3/1 Excludes US$ -denominated commercial bank reserves at the central bank ,671 49,580 50,452 51,325 52,197 1,914 1,817 1,808 1,794 1,782 1,782 1,782 Sources: Ministry of Finance, Bank of the Republic of Haiti, and Fund staff estimates and projections. 1,802 1/ Excludes guarantees to the electricity sector in the form of credit/guarantee letters. 2/ Poverty reducing expenditures consist of domestically- -financed spending in health, education, and agriculture. 3/1 Excludes US$ -denominated commercial bank reserves at the central bank --- Page 51 --- HAITI Table 10. Haiti: Proposed Prior Actions and Structural Benchmarks, FY 2015-16 Measure Timing Rationale Adoption of far revised budget for the central government for FY2015 consistent with a deficit of at most G13.5bn; TMU 132. PA Promote fiscal's sustainability Adoption of an automatic price mec hanism for refined oil products (gasoline 95, diesel, and kerosene products); TMU134. PA Eliminate fuels subsidies and contain fiscal risks Implement TSA- related actions in line with paragraph 35 oft the TMU. PA Advance TSA implementation EDH Board adoption ofar revised budget for EDH consister nt with savings of at least G3.4 4bn in FY2015; TMU133. PA Improve performance of electricity sector and contain Signature ofa protocol by the PM, thel Minister of Public Works, thel Minister of Finance, EDH, and other stakeholders that fiscalrisks lays out the obligations of different stakeholders in achieving the targeted improvement in the electricity sector's SB Improve performance of performance;' TMU 138. End-J June 2015 electricity sector and contain fiscalr risks Implement an automatic price formula for fuel products; TMU 134 and 136. SB Continuous as of End- Eliminate fuel subsidies and June 2015 contain fiscalr risks Payment of unpaid off- budget CG commitments; TMU137. SB Tobe observed continuously Improve fiscal transparency Establish av working group to producet by end-, July 2016a preliminary draft of a tax code thatwill put all tax laws into a generalt tax code and eliminatea al larger number of small taxes with low yields and high costs; TMU139 SB End- July 2015 Improve tax policy TheLTO and loc cal tax offices to complete thet transfer of all medium taxpayers' files to thel MTO; TMU 140. SB End- 2015 August Improve tax administration Adoption of FY2016 budgets for the Central Government and EDH consi tent with a NFPS deficit of2 2.3percent of GDP; TMU1 141. SB End- September 2015 Promote fiscal sustainability Establish and make operational allr remaining accounting centers; TMU 142. SB EndSeptember 2015 Advance TSAi implementation Ani interministerial working group shares with IMF staff an agreed. action plan for 2016- 17to strenghten the legal framework and functioning of the cadastre; TMU143. SB End- February 2016 Improvel business climate Inlinev with EDH protocol, complete audit of the 200largest clients, complete analysis on EDH tariff determination and Improve of penalties for non- payment; TMU 144. SB End- March 2016 electricity sector performance and contain Implementa a program to ensure tax compliance of importers with an annual turnover above G10r million buty who are not fiscalr risks currently covered by the LTO/MTO; TMU 1145 SB End- April 2016 Improve tax administration INTERNATIONAL MONETARY FUND 43 6 Improvel business climate Inlinev with EDH protocol, complete audit of the 200largest clients, complete analysis on EDH tariff determination and Improve of penalties for non- payment; TMU 144. SB End- March 2016 electricity sector performance and contain Implementa a program to ensure tax compliance of importers with an annual turnover above G10r million buty who are not fiscalr risks currently covered by the LTO/MTO; TMU 1145 SB End- April 2016 Improve tax administration INTERNATIONAL MONETARY FUND 43 --- Page 52 --- HAITI Table 11. Haiti: Structural Reforms to be Implemented During ECF, 2015-17 1/ Macro-critical, Area Planned Reforms Actions Targeted Period Design an implementa program to ensure compliance of importers an annual turnover above G10 billion but who are not currently covered by 2015 Improve the effectiveness of the thel LTO/MTO" Increaset tax LTO and MTO compliance and Thel MTO administers the medium taxpayers' files effecitvely including modernize the tax those transferred from thel LTO andl localt tax offices to theMTO** system Finalize anew taxcode ande eliminates small taxes withl lowy yield** 2016-17 Rationalize the tax system Completes studies on tax expenditures 2015-17 Introduction of full- -fledged VAT system 2017-18 Adopt the new mining law 2016-17 Transform all ministerial accounts into Treasury sub- accounts and secondary accounts* Implement thel TSA Establish ther remaining accounting centers* Strengthen the Improvel PFM Include framework for fiscal accounts of autonomous agencies, public enterprises and policy donor accounts in the TSA 2015-16 Improved cash and debt Adopt the draft laws on the reorganization of ther ministry of finance management and' on public debt Avoid blanket fuel subsidies Adopt an automatic price formula* 2015-16 Implement an automatic price formula** Better target poverty- reducing Streamlinet thes spending categories covered under poverty- -reducing expenditure expenditure 2015-16 Improve expenditure Improve the effect ctiveness of Implement recommendations of thel World Bank study completed in quality publici investment September 2014 2015-17 Set cup thel legal framework for the National Education Fund (FNE) 2015-17 Improve budgetary transparency Include operations on special accounts in budget documents (FNE, FER, pension system for civil servants, transactions with SOES, Petrocaribe 2015-17 resources) Control systemic risks Conduct periodic stress tests for thel banking sector 2015-17 Strengthen banking supervision Strengthen the AML/CFT Adopting the Financial Intelligence Unit (UCREF) Bill, new Penal and framework Criminal Investigation Codes in line with the CFATF action plan, and Strengthen the implementing the AML/CFT framework. 2015-17 financial sector Develop thef financial sector Adoptt the pending draft law on Linsurance.companies Strenghten monetary Develop the Forex market Implement MCM recommendations toi improve thef functioning of the policy framework forexr market 2015-17 Implement safeguards recommendations Adopt IFRS, strenghten independece ofi investment committee 2015-17 Reduce subsidies to EDH Submit EDH under a management contract 2015-17 Eliminate cross arrears 2015-17 Improve performance Improve the framework for of the electricity sector electricity sector and strenghten Conduct audits of largest clients toi increasel billing and recovery". 2015-17 performance Review contracts with IPPs 2015-16 Review tariff determination. andp penalties for non- payment ** Removel bottlenecks tol 2016-17 growth Strenghten property rights Set up a cadastre** 2015-16 Improve business climate Adopt pending draft laws on financial cooperatives and microfinance Improve access to credit institutions Ensure-full operation of the credit bureau 2015-16 Iimprove economic statistics for policy Improve data quality Strengthen national, labor and external accounts implementation 2015- 17 1/ Possible Prior actions (PA) arer marked with an asterisk (*) and structural benchmarks (SB) two asterisk 44 INTERNATIONAL MONETARY FUND -17 growth Strenghten property rights Set up a cadastre** 2015-16 Improve business climate Adopt pending draft laws on financial cooperatives and microfinance Improve access to credit institutions Ensure-full operation of the credit bureau 2015-16 Iimprove economic statistics for policy Improve data quality Strengthen national, labor and external accounts implementation 2015- 17 1/ Possible Prior actions (PA) arer marked with an asterisk (*) and structural benchmarks (SB) two asterisk 44 INTERNATIONAL MONETARY FUND --- Page 53 --- HAITI Appendix I. Letter of Intent May 4, 2015 Mme. Christine Lagarde Managing Director International Monetary Fund Washington, D.C. Mme. Managing Director: macroeconomic policies that have helped 1. Over the past five years, Haiti has implemented the of the 2010 earthquake and macroeconomic stability while recovering from impact under the maintain reforms. These policies were supported by an arrangement advance key structural determined to move to a new phase, reinforcing IMF's Extended Credit Facility (ECF). We are now and significantly new efforts to boost Haiti's growth potential into these gains while undertaking Our ultimate goal is to transform Haiti increase the living standards of the Haitian people. macroeconomic stability while economy by 2030, which will require entrenching We an emerging foreign and domestic private investment. improving Haiti's infrastructure and boosting outlined in the attached implemented to date and the program believe that the policies basis for our request for a new ECF arrangement. memorandum provide a sound support under a 2015-May 2018) for which we are requesting 2. The new program (May anchor and a framework for necessary medium-term new ECF will provide a macroeconomic and Financial Policies (MEFP) outlines the Memorandum of Economic reforms. The attached We are determined to further strengthen of our program. and first-year and medium-term objectives in the face of declining external assistance domestic revenue to sustain domestic investment We will also continue to the effectiveness of poverty-reducing expenditures. Single to increase building on the establishment of the Treasury strengthen public financial management, investment and higher growth, notably in the Account, while addressing bottlenecks to private electricity sector. opportunity to reinforce period covered by the program offers a unique 3. The three- -year and to pursue new reforms to deliver sustained the gains Haiti has made since the earthquake would facilitate rapid progress in the over the medium-term. Doing SO fuel subsidies and inclusive growth resources previously devoted to fight against poverty. Our program thus redirects investment. We also plan a wide the most vulnerable, and supporting productive to to protecting from land tenure reform promoting of measures to boost Haiti's growth potential, range domestic industry. Fund Engagement in Haiti highlights, As the recent Ex Post Assessment of Longer-Term and to 4. on the need to maintain macroeconomic stability there is consensus within Haitian society INTERNATIONAL MONETARY FUND 45 earthquake would facilitate rapid progress in the over the medium-term. Doing SO fuel subsidies and inclusive growth resources previously devoted to fight against poverty. Our program thus redirects investment. We also plan a wide the most vulnerable, and supporting productive to to protecting from land tenure reform promoting of measures to boost Haiti's growth potential, range domestic industry. Fund Engagement in Haiti highlights, As the recent Ex Post Assessment of Longer-Term and to 4. on the need to maintain macroeconomic stability there is consensus within Haitian society INTERNATIONAL MONETARY FUND 45 --- Page 54 --- HAITI implement necessary reforms to promote better governance and strong and sustainable growth. In this regard, we will continue to work with our international partners. In particular, the authorities believe that implementing a new IMF-supported program will demonstrate Haiti's commitment to sound economic policies. 5. In order to facilitate the implementation of our program and reduce remaining balance of payments vulnerabilities, the Government of Haiti requests assistance under the IMF's ECF in an amount equivalent to SDR 49.14 million, or 60 percent of quota, to be disbursed in seven equal tranches over three years. Approval of this request would result in an immediate disbursement of SDR 7.02 million. A first review of the program would be completed no later than December 31, 2015, and a second review by June 30, 2016. 6. We believe that the policies set forth in the attached MEFP are sufficient to achieve the goals set forth in our program, but we stand ready to undertake further measures as needed. We will consult with the Fund on the adoption of such measures, and in advance of any revision to the policies contained in the MEFP, in accordance with the Fund's policies. In particular, the authorities and Fund staff will discuss (including during program reviews), on any unexpected developments that could affect the economic program to jointly analyze their impact and best courses of action, without compromising the program's objectives. We intend to provide timely information necessary for monitoring economic developments and the implementation of policies defined in the program, as agreed under the attached Technical Memorandum of Understanding, or upon request. Sincerely yours, /s/ /s/ Charles Castel, Wilson Laleau, Governor, Central Bank of Haiti Minister of Economy and Finance 46 INTERNATIONAL MONETARY FUND In particular, the authorities and Fund staff will discuss (including during program reviews), on any unexpected developments that could affect the economic program to jointly analyze their impact and best courses of action, without compromising the program's objectives. We intend to provide timely information necessary for monitoring economic developments and the implementation of policies defined in the program, as agreed under the attached Technical Memorandum of Understanding, or upon request. Sincerely yours, /s/ /s/ Charles Castel, Wilson Laleau, Governor, Central Bank of Haiti Minister of Economy and Finance 46 INTERNATIONAL MONETARY FUND --- Page 55 --- HAITI Economic and Financial Policies for Attachment 1. Memorandum of 2015-2018 Introduction the of Haiti implemented in the devastating earthquake of 2010, government Extend Credit 1. Following supported by the IMF under the 2010-2014 an economic and financial program together with support from Haiti's (ECF). Policies taken over the past several years, structural reforms, Facility macroeconomic stability, advance key development partners, helped assure Strategy (the Strategic Plan for the and pursue the objectives of our Poverty Reduction and to address remaining obstacles to of Haiti, PSDH). To consolidate this progress economic Development has prepared a new medium-term strong and sustained growth, the government program for 2015-2018. recent of Economic and Financial Policies (MEFP) presents 2. This Memorandum and structural policies of Haiti's mediumand performance as well as economic ECF developments IMF support under a new three-year term program for which we are requesting arrangement. overarching objective is to program, the government's 3. Under the new ECF-supported for continuous progress in poverty reduction. boost Haiti's long-term growth potential, allowing this will require addressing barriers to macroeconomic stability, In addition to maintaining sector development, and raising adequate domestic and foreign investment, supporting private In face of declining aid, a while improving public financial management. domestic revenue help address Haiti's crucial broader tax base and an efficient execution of public spending needs. We recognize that the infrastructure gaps and as well as its pressing social spending to growth and a significant fiscal sector in particular has been both a key bottleneck under the new ECFelectricity reducing its deficit and improving its performance drain, and will prioritize supported program. Taking Stock of the Last ECF arrangement Fund was approved in the context of a catastrophic with the 4. Haiti's previous arrangement and economic damage. However, the earthquake earthquake that caused massive loss of life relief from Haiti's international increase in aid flows, as well as debt also triggered a huge Debt Relief (PCDR) Trust. including from the IMF under the Post-Catastrophe partners, macroeconomic achievement under the previous program was maintaining 5. The key shocks, including a cholera epidemic and the stability and a return to growth despite severe spending and a surge in remittances from impact of Hurricane Sandy. Fuelled by reconstruction 2011. Inflation was contained in the midHaitians living abroad, growth has been steady since rate volatility and monetary policy that limited exchange single digits, aided by a prudent assistance from the IMF and other increased reserve buffers. Taking advantage of technical INTERNATIONAL MONETARY FUND 47 partners, macroeconomic achievement under the previous program was maintaining 5. The key shocks, including a cholera epidemic and the stability and a return to growth despite severe spending and a surge in remittances from impact of Hurricane Sandy. Fuelled by reconstruction 2011. Inflation was contained in the midHaitians living abroad, growth has been steady since rate volatility and monetary policy that limited exchange single digits, aided by a prudent assistance from the IMF and other increased reserve buffers. Taking advantage of technical INTERNATIONAL MONETARY FUND 47 --- Page 56 --- HAITI in revenue administration and in there was also progress on structural reforms, notably partners, Account (TSA). completing the first steps towards a Treasury Single while higher than there is much that remains to be done. Economic growth, reduce 6. Nevertheless, lower than projected and insufficient to rapidly in Haiti's recent history, was significantly and remained dependent on foreign Public investment was also lower than projected, increased to poverty. The fiscal deficit in FY2013 and FY2014 million grants and Petrocaribe financing. subsidies that cost US$ 350-450 unsustainable levels, in particular due to onerous energy in nominal gourde terms from March These were driven by pump prices that were fixed d'Haiti (EDH). per year. and by large transfers to the loss-making Electricité while 2011 until October 2014, 20 percent of GDP by end FY2014. Finally, External public debt rebounded and exceeded access to credit remains low was successful in anchoring inflation expectations, monetary policy and concentrated in a few sectors. and other structural reform was steady but slow, given capacity 7. Progress on the offices were established, but tax constraints. Large (LTO) and medium (MTO) taxpayer to broaden the tax base. There were should be further improved compliance and enforcement of the TSA, but the basic infrastructure was some delays in proceeding towards adoption made operational for the largest established in FY2014, and the accounting centers were financial sector regulation, and on Other structural reforms, including in tax policy, ministries. proceeded only slowly. public debt management Recent Economic Developments in FY2014. Growth achieved its fourth consecutive year of real per capita growth to a 8. Haiti versus 4.2 percent in FY2013, due in large part was lower than expected at about 2.7 percent volatile agricultural sector growth, growth drought in some areas of the country. Excluding the by construction, industry and at about 4 percent in recent years, supported lower has been steady ending FY2014 at 5.3 percent despite services. Inflation continued to be well-contained, at over 6 percent of GDP in production. The current account deficit was still large helped Haiti preserve an agricultural Venezuela under the Petrocaribe Agreement FY2014, but financing from adequate reserve buffer. sector contributing high, with the energy 9. The fiscal deficit in FY2014 was unsustainably of GDP. Wage increases to teachers around US$ 450 million to a deficit that exceeded 7 percent increased to historic highs, in and the police will have a full-year effect in FY2015. Investment The fiscal deficit was financed related to Hurricane Sandy. particular due to capital spending drawdown on government Petrocaribe resources, and a larger-than programmed remained mainly by bills remains shallow. Monetary policy deposits, as the domestic market for treasury international reserve buffers. The gourde price stability and adequate focused on maintaining keep inflation expectations anchored, despite depreciated moderately during FY2014, helping However, private sector credit growth reduced intervention in the exchange rate market. increasing only by 5.2 percent, during FY 2014, with credit in gourdes decelerated to 11.2 percent but also barriers to broader access to credit. reflecting more binding liquidity constraints 48 INTERNATIONAL MONETARY FUND bills remains shallow. Monetary policy deposits, as the domestic market for treasury international reserve buffers. The gourde price stability and adequate focused on maintaining keep inflation expectations anchored, despite depreciated moderately during FY2014, helping However, private sector credit growth reduced intervention in the exchange rate market. increasing only by 5.2 percent, during FY 2014, with credit in gourdes decelerated to 11.2 percent but also barriers to broader access to credit. reflecting more binding liquidity constraints 48 INTERNATIONAL MONETARY FUND --- Page 57 --- HAITI Macroeconomic Framework for FY2015-FY2018 to remain in the 2-3 percent range Economic growth (as measured by GDP) is projected would continue 10. in public and private investment, although remittances in FY2015, on a slowdown the downside given ongoing weakness in domestic consumption. Risks are on in FY2015, as to support is to remain in the mid-single digits agricultural production. Inflation projected in the fiscal deficit, should ensure moderate prudent monetary policy, helped by a decrease oil prices should contribute to contain The fall in international exchange rate depreciation. production. For FY2016-FY2018, despite continued weakness in domestic agricultural is to remain in inflation, about 3.5 percent, while inflation projected GDP growth is expected to average the mid-single digits. decline to the 3 percent of GDP range in 11. The external current account deficit should declines in the oil bill. Financing of the the positive impact of international oil price are tied to FY2015, given likewise decrease as Petrocaribe flows (which current account deficit, however, would the current account deficit the oil bill) will fall by more than US$200 million. For FY2016-FY2018, oil prices are somewhat towards 4 percent of GDP, as international is expected to widen expected to gradually increase in the medium-term. deficit. The deficit of the for FY2015 will significantly reduce the fiscal of 12. The revised budget definition) should decrease to about 3.2 percent non-financial public sector (NFPS, program will add 1.5 percent of GDP more to GDP (from 7.4 percent of GDP in FY2014). Petroleum-taxes in tax and customs administration are eliminated, while improvement revenues, as fuel subsidies domestic revenues should reach 14.7 percent should help enhance fiscal revenues. Accordingly, is projected to decline relative of GDP more than in FY2014). Public spending on and of GDP (2.2 percent will increase, while spending goods to FY2014. The wage bill (for teachers and police) the sector will be contained. will reflect the cost of elections. Transfers to electricity from services of GDP, a more sustainable level. Financing Capital spending will decrease to 10.9 percent will mainly come from domestic sources, Petrocaribe will fall sharply, and thus, budget financing from the IDB and the European drawing down government deposits. Budget support from the including million, and the authorities have requested budget support Union is expected at US$70 will be further reduced (to 2.3 percent of GDP World Bank. The NFPS deficit for FY2016-FY2018 sustainable. The ECF-supported program SO to ensure that public debt remains in on average), external debt sustainability in case of changes expected includes adjusters to ensure fiscal and external financing. inflation in the mid-single policy in FY2015 remains focused on containing a decision to 13. Monetary increased somewhat early in the fiscal year following digits. Exchange rate pressures banking system to count towards reserve allow certain Treasury bonds placed in the stance occurred together with a strong requirements. This loosening in the monetary policy expand credit to the private sector. reduction in the fiscal deficit, allowing banks to moderately mission of anchoring inflation FY2016-FY2018, the BRH will continue focused in its core The BRH is aware that Haiti During level of foreign reserves. expectations while maintaining an adequate from a decrease in external will continue to be exposed to a wide range of risks, ranging crucial to maintain a comfortable in the terms of trade, and thus it is financing to a reversal INTERNATIONAL MONETARY FUND 49 a strong requirements. This loosening in the monetary policy expand credit to the private sector. reduction in the fiscal deficit, allowing banks to moderately mission of anchoring inflation FY2016-FY2018, the BRH will continue focused in its core The BRH is aware that Haiti During level of foreign reserves. expectations while maintaining an adequate from a decrease in external will continue to be exposed to a wide range of risks, ranging crucial to maintain a comfortable in the terms of trade, and thus it is financing to a reversal INTERNATIONAL MONETARY FUND 49 --- Page 58 --- HAITI The BRH will intervene to smooth exchange rate reserve cushion of around 5 months of imports. stress that continued budget originated in temporary factors. The authorities movements is essential to keep exchange rate depreciation support from Haiti's development partners expectations well-anchored. To this end, the transmission of monetary policy. 14. The central bank is working to improve bills directly to the public to absorb the possibility of issuing dollar-indexed such the BRH is analyzing market pressures; the BRH is aware that issuing liquidity and to reduce foreign-exchange fiscal deficit is sustainable. The monetary authorities bills is only possible in a context where the inclusion, including through the operation of to reduce obstacles to financial also are committed document borrower creditworthiness. a new credit bureau to better Economic and Financial Policies for FY2015-FY2018 will serve as a reference for economic 15. The PSDH and its three-year investment program Haiti into an emerging country by 2030, and financial policies. The PSDH intends to transform which involves making better based on four pillars. The first is a territorial refoundation, and and is Land urban planning, electrification, of, and of, Haiti's land. management, refoundation, use protection fall within this pillar. The second pillar is economic environmental protection all and domestic investment in Haiti's most which targets policies intended to spur foreign but also in the agricultural sector, in manufacturing and tourism, health competitive sectors, particularly of social refoundation targets modern order to spur formal employment. The third pillar of social inclusion and networks accessible to all Haitians, as well as policies of the and education refoundation, foresees an overhaul legal gender equality. The final pillar, institutional judiciary, and decentralized public administration, an independent framework as well as boosting government entities. is two-fold: first, to achieve fiscal 16. The authorities' challenge for the coming years needs; and second, to unlock the ability to meet urgent spending sustainability while maintaining To meet this dual challenge, the Haiti's growth potential and reduce extreme poverty. bottlenecks to growth; (ii) intends to implement a program that: (i) removes financial and monetary reforms government framework for fiscal policy; and (ii) implements strengthens the framework and facilitate access to credit. to improve the policy Bottlenecks to Growth A. Removing during the previous achieved four consecutive years of economic growth 17. While Haiti has been sufficient to rapidly reduce poverty. Going Fund-supported arrangement, it has not structural reforms, particularly and sustained growth will require deep-seated must forward, strong flows. As the PSDH establishes, growth-supporting policies given ongoing declines in aid sustainable. environmentally, and socially be economically, and to combat extreme poverty, the government 18. To help ensure that growth is inclusive, process and will look to streamline the social in its budget will continue to prioritize expenditures An appropriate level of social categories covered under poverty-reducing expenditures. developing a human capital through a would also promote economic growth by expenditures 50 INTERNATIONAL MONETARY FUND and sustained growth will require deep-seated must forward, strong flows. As the PSDH establishes, growth-supporting policies given ongoing declines in aid sustainable. environmentally, and socially be economically, and to combat extreme poverty, the government 18. To help ensure that growth is inclusive, process and will look to streamline the social in its budget will continue to prioritize expenditures An appropriate level of social categories covered under poverty-reducing expenditures. developing a human capital through a would also promote economic growth by expenditures 50 INTERNATIONAL MONETARY FUND --- Page 59 --- HAITI small farms, and boost productivity by educated workforce, improve efficiencies at many more expanding access to healthcare. sector, and in particular the operation of the electricity 19. Improving infrastructure, Haiti's growth potential. Strengthening expanding access to credit, are fundamental to enhancing result in better governance and increased framework of the energy sector should the the regulatory investment to the sector. Other reforms, notably improving transparency and attract services, would likewise spur growth. efficiency and reducing the cost of port modern through the establishment of a property rights, including rights 20. Strengthening dividends. Securing transferable property cadastre, would produce enormous growth investment, which are now often increase incentives to private domestic and foreign would would of the underlying land. The impact delayed by uncertainties and disputes over ownership construction of new factories to be felt across the entire economy, from facilitating the to use land as collateral would also more efficient farming techniques. The ability of Haitians, promoting which is now effectively denied to the large majority greatly facilitate access to credit, market. A modern cadastre system would and would promote the development of a mortgage property rights would encourage Haiti's resilience to natural disasters, as stronger commission on land improve Accordingly, the inter-ministerial investments in structural improvements. 2016 an agreed action plan for management will share with IMF staff by end-February of the cadastre (structural the legal framework and functioning FY2016-FY2017 to strengthen benchmark). of the program, as formal jobs are Promoting formal sector employment is a key goal informal sector 21. than those in the likely to be better paid and offer greater opportunities employs most Haitians. The PSDH in commerce and agriculture) which currently with Haiti's (including manufacturing and tourism, as being aligned identifies two sectors in particular, offered by the United States under the comparative advantages. The trade preferences textile market, and the government HELP/HOPE Acts offer Haiti unparalleled access to the U.S. that these preferences are development of this sector and work to ensure location in will both encourage potential, due both to Haiti's beautiful extended. The tourism sector also holds great warmth and friendliness of its people. heart of the Caribbean but also due to the natural and security, both of the in infrastructure Attracting more visitors will require steady improvements the quality of public a broader revenue base and by improving which would be served by expenditures. lost their lives in the 2010 earthquake, and dedicated civil servants This has an 22. Many experienced collection and distribution of economic data. which proved to be a major blow in the access to timely and accurate not only because it deprives policy-makers actors are impact on growth direction of the economy, but because private sector information about the state and economic opportunities. We therefore less likely to be able to identify and act on potential partners to improve the quality of commit to work with the Fund and other technical assistance of the program. Key short-term the national, labor, and external accounts over the course indicator to serve as a reliable include the introduction a headline economic activity objectives INTERNATIONAL MONETARY FUND 51 to be a major blow in the access to timely and accurate not only because it deprives policy-makers actors are impact on growth direction of the economy, but because private sector information about the state and economic opportunities. We therefore less likely to be able to identify and act on potential partners to improve the quality of commit to work with the Fund and other technical assistance of the program. Key short-term the national, labor, and external accounts over the course indicator to serve as a reliable include the introduction a headline economic activity objectives INTERNATIONAL MONETARY FUND 51 --- Page 60 --- HAITI the national accounts, including by indicator for economic growth, and to modernize leading updating the base year. the Framework for Fiscal Policy B. Strengthening buffers to cushion against sustainable fiscal policies and maintain deficits 23. We will implement stability, as excessive shocks. Fiscal sustainability is crucial to macroeconomic while out credit to the potential pressures and higher inflation, crowding stoke exchange rate depreciation Haiti's vulnerability to a wide range of shocks, private sector, reducing Haiti's growth potential. flows or a rebound in international oil prices, reduction of external financing including a potential including in the form of international reserves and require the maintenance of buffers, downside risks. According, we deposits in the banking sector as insurance against consistent with a deficit of at government for the central government for FY2015 of adopted a revised budget fiscal deficits would also allow a gradual loosening most G13.5 billion (prior action). Lower Particular efforts will be made to target monetary policy and crowd in private sector credit. reduction. The authorities trust expenditures with high impact on growth and poverty for the implementation quality will provide additional financial support that the international community to achieve a balanced growth path. The stronger of high return investments, which are essential of public financial management as we are fiscal position will be accompanied by a strengthening in this area, drawing on the Public Finance determined to implementing a wide range of reforms arising from off-budget CG adopted in 2013. The clearance of obligations and Reform Strategy analysis of supporting documentation commitments will be made only after a thorough (continuous structural benchmark). proper budgeting of fuel price will require preventing a reemergence 24. Achieving fiscal sustainability an automatic fuel price adjustment subsidies. In this regard the government has adopted as of end-June 2015 as end-April (prior action), which will begin implementation mechanism by benchmark). The automatic in 34 and 36 of the TMU (structural the described paragraphs will help protect public finances. Accordingly, mechanism, based on international practices, by direct subsidies to public implementation of this mechanism will be complemented allow to smooth the effect of fuel (at a cost of about 0.3 percent of GDP), that will the authorities are drafting a transportation tariffs. In addition, price volatility on urban public transportation which reviews the price structure for refined framework for the fuel sector, new regulatory order for them to reflect actual imported CIF prices. products at the pump, in in EDH finances. For this will also require a substantial improvement includes 25. Fiscal sustainability for the deficit of the NFPS, which the ECF-supported program will have a target and collection, as reason improvement in billing EDH. Reducing EDH's deficit will require a significant which should contribute to reducing high the efficiency in energy production, the Minister well as increasing the Prime Minister, the Minister of Public Works, generation costs. For this purpose, before end-June 2015 a protocol for the of Finance, EDH, and other stakeholders will sign stakeholders in achieving the targeted electricity sector that lays out the obligations of different The protocol includes improvement in the sector's performance (structural benchmark). for non-payment, the to the revision of electricity tariffs, penalties provisions with respect with Independent Power Producers (IPPs), elimination of cross-arrears, the review of contracts MONETARY FUND 52 INTERNATIONAL increasing the Prime Minister, the Minister of Public Works, generation costs. For this purpose, before end-June 2015 a protocol for the of Finance, EDH, and other stakeholders will sign stakeholders in achieving the targeted electricity sector that lays out the obligations of different The protocol includes improvement in the sector's performance (structural benchmark). for non-payment, the to the revision of electricity tariffs, penalties provisions with respect with Independent Power Producers (IPPs), elimination of cross-arrears, the review of contracts MONETARY FUND 52 INTERNATIONAL --- Page 61 --- HAITI the finalization of an audit of EDH, as well and the increase in transparency, in particular through In particular for FY2015, and diffusion to allow for better monitoring. an as better data production oil prices and the adoption of measures targeting the combination of lower international points, will allow adoption of a cash recovery index (CRI) of about 4 percentage increase in the G3.4 billion that will reduce the deficit (before revised EDH budget with savings of at least GDP action). For the coming months, from 2.5 percent of GDP to 1.7 percent of (prior the audit transfers) on in the reform protocol, including completing the EDH will implement actions agreed and penalties for clients, having a first analysis of EDH tariff determination for of the 200 largest for 2016-2018 (structural benchmark end-March non-payment, and updating an action plan 2016). element to strengthening Haiti's fiscal domestic revenue is another key collection 26. Increasing needs to be enhanced both in revenue position. Haiti's current system performance small taxes with low yield and high tax compliance by removing cumbersome and in improving will establish a formal working group costs ("taxes de nuisance"). Accordingly, the government code that will revise and put all tax laws benchmark) to draft a new tax will by July 2015 (structural of taxes de nuisance. The working group into a general tax code and eliminate a number 2016. The working group will also draft of the tax code by end-July of the produce a preliminary VAT system, and the modernization prepare the adoption of a mining code, a full-fledged tax offices will complete the the LTO and local income tax. To improve tax administration, 2015 (structural benchmark). As of all medium taxpayer files to the MTO by end-August transfer readily discovered by identifying large importers in coverage of the LTO and MTO can be a to ensure gaps the will implement program that are not covered by these tax offices, government of over G10 million who are not currently by importers with an annual turnover term, the tax compliance 2016 (structural benchmark). In the medium covered by the LTO/MTO by end-April on tax expenditures, adopt a mining will finalize the tax code, complete a study all of which are key government tax and introduce a full-fledged VAT system, code, reform the income element of a modern tax system. financial management and committed to a further strengthening of public end27. We remaining towards the TSA, to be established by Further progress the quality of public expenditures. will implement the terms of a protocol signed FY2015, is essential. To this end, the government of December 18, 2014 placing all the MEF and the BRH on the TSA as well as the MEF decision and the BRH has ensured its by accounts at the BRH under the control of public accounts, 35 of the TMU (prior action). public state-owned bank BNC as described in paragraph application by the Accounting Center Economic centers were installed in March, namely and Four new accounting Sector IV, Accounting Center Political Sector I, Sector II, Accounting Center Economic accounting centers will be established and Accounting Center Political Sector II. All remaining In the medium-term, the TSA will operational by end- September 2015 (structural benchmark). public enterprises, and donor to include the accounts of autonomous agencies, be expanded of public investment, the government will implement accounts. To improve the effectiveness completed in September 2014, and will draw of the World Bank study relevant recommendations of countries in the regions. on the experience INTERNATIONAL MONETARY FUND 53 Sector IV, Accounting Center Political Sector I, Sector II, Accounting Center Economic accounting centers will be established and Accounting Center Political Sector II. All remaining In the medium-term, the TSA will operational by end- September 2015 (structural benchmark). public enterprises, and donor to include the accounts of autonomous agencies, be expanded of public investment, the government will implement accounts. To improve the effectiveness completed in September 2014, and will draw of the World Bank study relevant recommendations of countries in the regions. on the experience INTERNATIONAL MONETARY FUND 53 --- Page 62 --- HAITI C. Monetary and Financial Reforms growth and sector remains low, acting as a key obstacle to economic 28. Credit to the private intermediation by strengthening property rights inclusion. We intend to boost financial competition among financial via a land cadastre) as well as by encouraging greater and (including enactment of pending laws on financial cooperatives institutions. We will pursue of the credit bureau, institutions, and will promote the use recently-established microfinance information flows will broaden access to credit. which by improving financial sector supervision to better The intends to further strengthen the financing of 29. government and combating risks and enhance the anti-money laundering sector, control systemic We will conduct periodic stress tests of the banking terrorism (AML/CFT) framework. and Capital Markets Department (MCM), and assistance from the Monetary based on technical framework for cooperatives and microfinance develop the surveillance and regulatory for financial inclusion. The latter will institutions, in line with the recently adopted strategy indicators on the website of the central improving data collection and distribution of key the Financial Intelligence require framework, the government will adopt bank. To enhance the AML/CFT Codes in line with the Caribbean Unit (UCREF) Bill, the new Penal and Criminal Investigation the AML/CFT framework. As part Action Task Force (CFATF) action plan implementing of the Financial of the financial sector, we will pursue the adoption of our efforts to pursue a deepening draft law on insurance companies. framework and the operations of in the monetary policy 30. We also prioritize improvements policy decisions onto the real economy, the BRH, which would help transmit more effectively tail risks. To develop the foreign increase transparency, and guard against its functioning. reduce volatility, 2011 MCM recommendations to improve exchange market, we will implement while reducing its frequency to This will target a unification of the FX intervention process for exchange. of a deeper interbank market foreign promote the development monetary policy and financial We remain committed to structural reforms to strengthen of the 31. IMF technical assistance on the functioning transparency. The BRH received (in May) for improving the reporting of foreign exchange market resulting in recommendations foreign reserve The IMF also provided advice (in August) on strengthening transactions. incorporating the mission's management; the BRH established a work program of the 2010 Safeguards We continue to implement the recommendations financial statements were recommendations. mission, and in this regard, the FY2013 BRH of assessment follow-up committed to strengthening the autonomy the published in November 2014. We are officer to monitor foreign reserves investment committee, and are appointing a compliance standards. of IFRS accounting management as well as a full adoption Program Monitoring in the context of the intends to take all the necessary measures agreed 32. The government in Tables 1 and 2 of this Memorandum. A committee ECF-supported program, as indicated State Secretary of Finance, with participation of monitoring, chaired by the the dedicated to program units of the Ministry of Finance (including of the BRH, EDH, as well as relevant representatives MONETARY FUND 54 INTERNATIONAL investment committee, and are appointing a compliance standards. of IFRS accounting management as well as a full adoption Program Monitoring in the context of the intends to take all the necessary measures agreed 32. The government in Tables 1 and 2 of this Memorandum. A committee ECF-supported program, as indicated State Secretary of Finance, with participation of monitoring, chaired by the the dedicated to program units of the Ministry of Finance (including of the BRH, EDH, as well as relevant representatives MONETARY FUND 54 INTERNATIONAL --- Page 63 --- HAITI Economic Studies, Budget and Treasury Directorates), has been set up. The program will be monitored based on performance criteria as of end-March and end-September, continuous performance criteria, indicative targets as of end-June and December, as well as structural benchmarks. Performance criteria and indicative targets are defined in the technical memorandum of understanding (TMU, Attachment 2), which also defines the scope and frequency of data to be reported for program monitoring purposes. INTERNATIONAL MONETARY FUND 55 --- Page 64 --- Table 1. Haiti: Indicative Targets and Quantitative Performance June Criteria, 2015-June 2016 Cumulative flows since end- -September 2014 Actual Stock December 2014 March 2015 June 2015 September 2015] December 2015 March 2016 June 2016 at endSeptember Est. Performance Performance Proj. Indicative target Criterion Indicative target Indicative target Criterion L Quantitative performance criteria (measured as cumulative flows since September 2014) Net central bank credit to the non- financial public sector ceiling 12,330 5,970 6,425 Net domestic assets of the central bank ceiling -23,625 6,834 7,652 8,879 9,284 9,689 10,094 Net international reserves of central bank (in millions of U.S. dollars) floor 1,010 -50 8,538 8,645 9,550 10,199 10,849 10,559 Deficit of the Non Financial Public Sector ceiling -100 -117 -150 -150 -150 -130 Domestic Financing of Central Government ceiling 4,000 8,856 11,242 13,471 16,141 18,810 21,480 n. Continuous performance criteria 1,178 4,854 5,817 6,621 7,232 7,843 8,454 New contracting or guaranteeing by the public sector of nonconcessional external debt (In millions of U.S. dollars) 1/ Up to and including one year Over one- year maturity Public sector external arrears accumulation (in millions of U.S. dollars) m. Indicative targets Poverty reducing expenditures floor 2/ 3,630 7,421 11,345 15,269 19,490 23,889 28,446 Memorandum items Net Central Bank Credit to the Central Government 16,142 5,797 5,971 Stock of Base money 3/ 6,918 7,865 8,195 8,524 8,854 Gross International Reserves (in millions of fU.S. dollars) 48,150 1,914 52,851 51,761 50,671 49,580 50,452 51,325 52,197 1,817 1,808 1,794 1,782 1,782 1,782 Sources: Ministry of Finance, Bank of the Republic of Haiti, and Fund staff estima ates and projections. 1,802 1/E Excludes guarantees to the electricity sector in the form of credit/guarantee letters. 2/ Poverty reducing expenditures consist of domestcaly-franced spending in health, education, and agriculture. 3/ Excludes US$- -denominated commercial bank reserves at the central bank 50,671 49,580 50,452 51,325 52,197 1,817 1,808 1,794 1,782 1,782 1,782 Sources: Ministry of Finance, Bank of the Republic of Haiti, and Fund staff estima ates and projections. 1,802 1/E Excludes guarantees to the electricity sector in the form of credit/guarantee letters. 2/ Poverty reducing expenditures consist of domestcaly-franced spending in health, education, and agriculture. 3/ Excludes US$- -denominated commercial bank reserves at the central bank --- Page 65 --- HAITI Table 2. Haiti: Prior Actions and Structural Benchmarks, FY2015-FY2016 Measure Timing Rationale Adoption of a revised budget for the central government for FY2015 consistent with a deficit of at most G1 13.5 TMU 132. bn; PA Promote fiscal sustainability Adoption of an automatic price mechanism for refined oil products (gasoline 95, diesel, and kerosene products); TMU134. PA Eliminate fuel subsidies and contain fiscal risks Implement TSA -related actions in line with paragraph 35 of the TMU. PA Advance TSA implementation EDH Board adoption of ar revised budget for EDH consistent with savings of at least G3.4bn in FY2015; TMU133. PA Improve performance of electricity sector and contain Signature ofa a protocol by the PM, thel Minister of Public Works, the Minister of Finance, EDH, and other stakeholders that fiscal risks lays out the obligations of different stakeholders in achieving the targetedi improvement in the electricity sector's SB Improve performance of performance: TMU138. End- June 2015 electricity sector and contain fiscalrisks Implement an automatic price formula for fuel products; TMU134 and 136. SB Continuous as of End- Eliminate fuel subsidies and June 2015 contain fiscalr risks Payment of unpaid off- budget CG commitments; TMU137. SB Tol be observed continuously Improve fiscal transparency Establish a working group to producel by end- -July 2016a preliminary draft of atax code that will put all tax laws general tax code and eliminate a large number of small taxes with low yields and high costs; TMU139 intoa SB End- July 2015 Improve tax policy Thel LTO and local tax offices to complete the transfer of all medium taxpayers' files to the MTO; TMU140. SB EndAugust 2015 Improve tax administration Adoption of FY2016 budgets for the Central Government and EDH consist tent with a NFPS deficit of 2.3 percent of GDP; TMU141. SB End- September 2015 Promote fiscal sustainability Establish and make operational all remaining accounting centers; TMU142. SB EndSeptember 2015 Advance TSA implementation An interministerial working group shares with IMF staff an agreed act ction plan for 2016- 17 to strenghten the legal framework and functioning of the cadastre; TMU143. SB End- February 2016 Improvel business climate Inlinev with EDH protocol, complete audit oft the 200largest clients, complete analysis on EDH tariff determi ination and Improve performance of penalties for non- payment; TMU 144. SB End- March 2016 electricity sector and contain Implement a program to ensure tax compliance of importers with an annual turnov er abov ve G10 million but who are not fiscal risks currently covered by thel LTO/MTO; TMUT45. SB End- April 2016 Improve tax administration INTERNATIONAL MONETARY FUND 57 Improvel business climate Inlinev with EDH protocol, complete audit oft the 200largest clients, complete analysis on EDH tariff determi ination and Improve performance of penalties for non- payment; TMU 144. SB End- March 2016 electricity sector and contain Implement a program to ensure tax compliance of importers with an annual turnov er abov ve G10 million but who are not fiscal risks currently covered by thel LTO/MTO; TMUT45. SB End- April 2016 Improve tax administration INTERNATIONAL MONETARY FUND 57 --- Page 66 --- HAITI Memorandum of Understanding Attachment II. Technical (TMU) defines quantitative performance This technical memorandum of understanding (SBs) for Haiti's 1. actions (PAs), and structural benchmarks criteria (QPCS), indicative targets (ITs), prior from 2015-18. It also supported by the Extended Credit Facility (ECF) arrangement Unless otherwise program the of such a program. establishes the framework for monitoring implementation flows from end-September 2014, and ITs will be evaluated in terms of cumulative specified, all QPCS of Economic and Financial Policies (MEFP). in Table 1 of the Memorandum as specified Definitions otherwise indicated, the CG refers to the central 2. Central Government (CG). Unless (municipalities), the central bank (BRH) administration of Haiti and excludes local administrations and state-owned enterprises financial institutions, autonomous state organizations donors and other public domestic taxes and other levies and by foreign (SOES). CG expenditures are financed by and foreign public debt grants, ministerial accounts (comptes-courants) Bureau de through, inter alia, foreign financed with Petrocaribe-flows (as reported by (including Petrocaribe). All transactions BMPAD) constitute, for the purpose of the Monétisation des Programmes d'Aide au Développement, ECF, CG operations. Road Fund (Fonds d'Entretien Routier, FER) Funds and Programs. These include the transfers. For the 3. Special the PSUGO program in addition to Treasury and resources mobilized to finance FER and PSUGO will be recorded as revenues, with of the ECF, resources levied to finance recorded within CG deposits at purpose from revenues through variation of deposits total expenses differing the BRH. transmits, and distributes electricity. Flows Electricité d'Haiti (EDH). An SOE that produces, on 4. through sales taxes collected between EDH and the CG include (i) CG transfers (including transfers); (ii) transfers financed consumption and not devolved to the CG, and budgetary company (PBM); electricity for the operation of a tri-national electricity generation CG with Petrocaribe resources power producers (IPPS) by debiting of letters of credit in favor of independent of financial (ii) the payment generation bills by EDH; (iv) the accumulation deposits at the BRH to cancel unpaid of EDH arrears for unpaid the CG for fuel purchases by IPPS, which are a counterpart under operations claims by ECF arrangement (i) and (ii) are recorded generation bills. For the purpose of the items "below the line". "above the line", while (ii) and (iv) are recorded under financing special The NFPS includes the central government, 5. Non-financial public sector (NFPS). autonomous organizations, local and (defined in paragraph 3), non-budgetary a stake funds programs in which the government holds controlling governments and SOES (enterprises and agencies defined in paragraph 4), but excluding the than 50 of the shares, including EDH, of more percent BRH and state-owned commercial banks. The PS comprises the NFPS and the BRH. 6. The public sector (PS). 58 INTERNATIONAL MONETARY FUND special The NFPS includes the central government, 5. Non-financial public sector (NFPS). autonomous organizations, local and (defined in paragraph 3), non-budgetary a stake funds programs in which the government holds controlling governments and SOES (enterprises and agencies defined in paragraph 4), but excluding the than 50 of the shares, including EDH, of more percent BRH and state-owned commercial banks. The PS comprises the NFPS and the BRH. 6. The public sector (PS). 58 INTERNATIONAL MONETARY FUND --- Page 67 --- HAITI 7. Net BRH credit to the NFPS. It is defined liabilities vis-à-vis the NFPS as the difference between BRH assets and includes net BRH credit vis-à-vis (Créances nettes sur le secteur public) according to Table 10R. the CG; and, net BRH credit vis-à-vis This 8. Domestic the rest of the NFPS. arrears of the CG. They are defined that are unpaid. Domestic arrears of the CG as expenditures accepted by the exclude unpaid Treasury 9. Unpaid off-budget off-budget government commitments. budget CG commitments. These refer to process (originating in ministries or other obligations arising outside the claims on central government public agencies), that may result in resources. contingent 10. Net domestic financing (NDF) of the CG. It is credit to the CG (see paragraph 7); defined as the sum of (i) net central Table (ii) net credit from domestic bank 20R), which includes changes in CG commercial banks (as reported in CG securities to commercial deposits and the net issuance of bills banks; and (iii) net non-bank treasury and other issuance of Treasury bills and other CG credit to the CG, which includes net of the CG vis-à-vis the electricity securities to non-banks, the change in net creditor sector position vis nonbank institutions (including IPPs and EDH), other CG claims and debts and the (including the change in net checks issued and vis-àpayment of judicial sentences), and the net not cashed, suppliers' credit, change in domestic 11. Net external arrears of CG (paragraph 8). disbursements financing (NEF) of the CG. It is defined as the sum of (including financing under (i) new external loan but excluding the IMF); (ii) external Petrocaribe as well as loans from other external loan amortizations; and (iii) the net partners, change in external Table 1: Projected External Net arrears. (Cumulative Financing of the Central fiscal flows since Government end-September 2014, in millions of Jun-15 gourdes) Net Financing Sep-15 Dec-15 Mar-16 Loans (net) 5,426 6,850 8,909 Jun-16 5,426 6,850 10,967 13,026 Disbursements 6,788 8,909 10,967 Of which: Petrocaribe 8,803 11,574 14,344 13,026 6,312 8,099 17,115 Project loans 10,303 12,507 14,711 Amortization 1,271 1,837 Arrears (net) -1,362 -1,953 -2,665 2,404 -3,377 Jun-16 5,426 6,850 10,967 13,026 Disbursements 6,788 8,909 10,967 Of which: Petrocaribe 8,803 11,574 14,344 13,026 6,312 8,099 17,115 Project loans 10,303 12,507 14,711 Amortization 1,271 1,837 Arrears (net) -1,362 -1,953 -2,665 2,404 -3,377 -4,089 12. EDH's deficit after CG cash income related transfers. For the purpose of the EDH to the distribution of program, revenues include all as CG transfers (subventions, electricity (recettes d'energie and recettes including those financed with diverses), as well including retained taxes). EDH expenditures budgetary and Petrocaribe resources, include: (i) current corresponding to the fiscal year (i.e., spending (dépenses excluding the d'exploitation) current electricity bills by IPPS and PBM, cancelation of arrears with IPPS); these include, (ii) capital spending. fuel, administration, wages, and Revenues and expenditures maintenance; and, any changes in claims or debts from correspond to the fiscal year under financing). EDH's deficit previous fiscal years will be recorded below consideration; after CG transfers will be the line (as revenues (including CG transfers to measured as EDH expenditures, minus EDH EDH). INTERNATIONAL MONETARY FUND 59 --- Page 68 --- HAITI the NFPS deficit target will be NFPS Deficit target. For the purposes of the program, 11); plus, EDH's 13. 10); plus, NEF of the CG (paragraph defined as the sum of NDF of the CG (paragraph deficit after CG transfers (paragraph 12). Haiti's bilateral or multilateral Grants. Budgetary grants are grants received from the World Bank, the 14. Budgetary the Inter-American Development Bank, partners (including the European Union, for general or sector budget support purposes. Fund, and bilateral donors) Haiti Reconstruction Quarterly Budget Support Disbursements Table 2: Projected 2014, in millions of U.S. dollars) (Cumulative flows since end-September Mar-16 Jun-16 Jun-15 Sep-15 Dec-15 36.7 Donor 36.7 36.7 36.7 European Union 0.0 27.0 54.0 54.0 IDB 27.0 27.0 90.7 90.7 27.0 63.7 63.7 Total of the CG. It is measured as the sum of the domesticallyExpenditure 15. Poverty-Reducing Ministries of Health, Education and Agriculture. financed expenditure by the definition of debt is set out in of the performance criteria, the 16. Debt. For the purposes Point 9, as revised on August 31, 2009 Executive Board Decision No.6230-(79/140), to mean a current, i.e., not contingent, liability, (Decision No. 14416-09/91) : Debt will be understood of value in the form of assets through the provision in created under a contractual arrangement the obligor to make one or more payments currency) or services, and which requires schedule; these payments (including or services, according to a specific the form of assets (including currency) interest liabilities incurred under the contract. Point 9, as revised on August 31, 2009 Executive Board Decision No.6230-(79/140), to mean a current, i.e., not contingent, liability, (Decision No. 14416-09/91) : Debt will be understood of value in the form of assets through the provision in created under a contractual arrangement the obligor to make one or more payments currency) or services, and which requires schedule; these payments (including or services, according to a specific the form of assets (including currency) interest liabilities incurred under the contract. the obligor of the principal and/or and leases? will discharge ones being loans', suppliers' credits?, Debts can take a number of forms, the primary and judicially-awarded damages Under the definition of debt set out above, arrears, penalties, obligation that constitutes debt are from the failure to make payment under a contractual arising debt. of the performance criteria on the by the PS. For the purposes 17. Debt guarantees external debt, a public sector debt guarantee of nonconcessional contracting or guaranteeing of an undertaking that the obligor will by the lender made on the basis and Loans are advances of money to the obligor bonds, debentures, commercial loans, and buyers' credits) is required to repay the funds in the future (including deposits, to fully collateralized loans, under which the obligor as exchanges of assets that are equivalent the collateral from the buyer in the future (such temporary the funds, and usually pay interest, by repurchasing repay repurchase agreements and official swap arrangements). until sometime after the where the supplier permits the obligor to defer payments 2 Suppliers' credits are contracts or services are provided. date on which the goods are delivered the lessee has the right to use for one or more under which property is provided that of the while the lessor 3 Leases are arrangements shorter than the total expected service life property, of specified period(s) of time that are usually of this guideline, the debt is the present value (at the those inception retains the title to the property. For the purpose be made the period of the agreement, excluding payments the lease) of all lease payments expected to of during the property. necessary for the operation, repair, or maintenance INTERNATIONAL MONETARY FUND --- Page 69 --- HAITI debt in the event of non-payment by the borrower obligation to service a means an explicit legal (through payment in cash or in kind). of the ECF, an external debt is considered 18. Debt concessionality. For the purposes if it includes a grant element of at least 35 percent." concessional serviced with and to non-residents. It External debt. It is defined as debt contracted or 19. domestically by the PS and held by non-residents. excludes debt issued obligations (principal and interest) debt. They include all debt-service out in 20. Arrears on external that are due but not paid on the due date as set loans contracted or guaranteed by the PS with external on exclude those arising from obligations being renegotiated the loan contract; they creditors and (or) those that are litigious. FY2015 and FY2016 is 47 gourdes exchange rate. The program exchange rate for 21. Program per dollar. the BRH. Reserve assets are those external assets Gross international reserves (GIR) of balance of 22. by monetary authorities for meeting payments available to and controlled rate, and for that are readily markets to affect the currency exchange financing needs, for intervention in exchange confidence in the currency and the economy, and other related purposes (such as maintaining must be foreign currency assets and assets for foreign borrowing). Reserve assets are the serving as a basis the concept of reserve assets exist. Potential assets are excluded. Underlying details, please that actually for use, II by the monetary authorities. For further notions of "control," and "availability and International Investment Position refer to the IMF's sixth edition of the Balance of Payments Reserves and Foreign Currency Manual and the Guidelines for a Data Template: International conform to this definition. intervention in exchange confidence in the currency and the economy, and other related purposes (such as maintaining must be foreign currency assets and assets for foreign borrowing). Reserve assets are the serving as a basis the concept of reserve assets exist. Potential assets are excluded. Underlying details, please that actually for use, II by the monetary authorities. For further notions of "control," and "availability and International Investment Position refer to the IMF's sixth edition of the Balance of Payments Reserves and Foreign Currency Manual and the Guidelines for a Data Template: International conform to this definition. Swaps in the BRH in Table 10R should Liquidity? GIR as reported by and pledged or otherwise encumbered reserve with domestic financial institutions foreign currency assets are excluded from GIR. foreign (NIR) of the BRH. They are defined as BRH's gross 23. Net international reserves Special Drawing Rights - monetary gold, all claims on nonresidents, exchange assets (comprising on domestic financial institutions); minus, gross and BRH claims in foreign currency banks at the SDR- holdings, minus, foreign currency deposits of commercial short-term reserve-related liabilities, BCM à la BRH, and the CAM transfer); all from BRH (Dépôts à vue en dollars U.S. with domestic financial institutions foreign currency assets are excluded from GIR. foreign (NIR) of the BRH. They are defined as BRH's gross 23. Net international reserves Special Drawing Rights - monetary gold, all claims on nonresidents, exchange assets (comprising on domestic financial institutions); minus, gross and BRH claims in foreign currency banks at the SDR- holdings, minus, foreign currency deposits of commercial short-term reserve-related liabilities, BCM à la BRH, and the CAM transfer); all from BRH (Dépôts à vue en dollars U.S. et en Euros des Table 10R (Table 3). calculate the grant element of a wide range of financial packages: 4This page on the IMF website provides a tool to D and the 5 See the Balance of Payments Manual, -- Guideline for a Data Template, - INTERNATIONAL MONETARY FUND 61 --- Page 70 --- HAITI 2014 1/ Reserves BRH, End-September Table 3: Net International (In millions of U.S. dollars) 1,913.7 A. Gross Foreign Exchange Reserves 290.7 B. Gross Liabilities 1,623.0 C. Net Foreign Assets (=A-B) and CAM transfer at the BRH 731.3 D. FX deposits of commercial banks 118.7 E. SDR allocation (liability) 1,010.4 J. NIR (=C-D+E) Source: Haitian authorities; and Fund staff estimates. 1/ Figures are preliminary. of the ECF, as the stock of currency in Monetary Base. It is defined, for the purpose banks (Dépôts a 24. banks; plus, Gourde sight deposits of commercial all circulation outside commercial of commercial banks (Encaisses des BCM), des BCM a la BRH); plus, cash-in-vault vue en gourdes from Table 10R. It is defined as the stock of currency in Assets (NDA) of the BRH. at 25. Net Domestic 23) converted into Gourdes 24); minus, NIR (in U.S. dollars, paragraph circulation (see paragraph the program exchange rate (paragraph 21). Performance Criteria (QPCS) Quantitative the in net BRH credit to the NFPS 26. The QPCS for 2015-16 include ceilings on: change 25); the change in NDF of the CG (paragraph 7); the change in the NDA of the BRH (paragraph also include a zero ceiling for 10); and, the deficit of the NFPS (paragraph 13). They a zero ceiling on the (paragraph external public debt, to be evaluated continuously; accumulation of arrears on external debt; and a floor by the public sector of non-concessional new contracting or guaranteeing on the change in the NIR of the BRH. non-concessional external undertakes not to contract or guarantee any to external 27. The government Table 1. These performance criteria apply the ceilings identified in MEFP 18. This debt beyond being defined in paragraph defined in paragraphs 16 and 19, with concessionality a debt as by the government that constitutes contingent QPC also applies to any private debt guaranteed Excluded from the ceiling are short t-term importliability as defined in paragraph 17. non-resident purchases of government borrowing from the Fund, related credits, rescheduling arrangements that are indexed to the exchange rate. This BRH bills treasury bills, and gourde-denominated continuously. criterion, to be observed commitment is a performance Adjustment the change in the NDA of the BRH, the in net BRH credit to the NFPS, on 28. The ceilings on change NFPS will be adjusted upwards, and the floor in NDF of the CG, and the deficit of the are lower the change downwards, if budget support grants the change in the NIR of the BRH will be adjusted will be applied provided the deviations are as shown in Table 2. This adjustor amounts. than programmed, the disbursements of programmed, already identified, temporary and only reflect delays in 62 INTERNATIONAL MONETARY FUND the NDA of the BRH, the in net BRH credit to the NFPS, on 28. The ceilings on change NFPS will be adjusted upwards, and the floor in NDF of the CG, and the deficit of the are lower the change downwards, if budget support grants the change in the NIR of the BRH will be adjusted will be applied provided the deviations are as shown in Table 2. This adjustor amounts. than programmed, the disbursements of programmed, already identified, temporary and only reflect delays in 62 INTERNATIONAL MONETARY FUND --- Page 71 --- HAITI Staff and the authorities will will not be applied if the deviations are not temporary. and in The adjustor deviations (in the timing of disbursements consult with donors to determine whether any consider that deviations are temporary if amounts amounts) can be considered temporary. Staff will first of the following fiscal year, at within the fiscal year, or during the quarter are to be disbursed the latest. upwards if NEF of the CG is lower than The ceiling on NDF of the CG will be adjusted million. 29. in Table 1. This adjustment will be capped at US$10 programmed, as shown if NEF of the CG is higher than The deficit of the NFPS will be adjusted upwards, million. If NEF of the CG 30. in Table 1. This adjustment will be capped at US$20 programmed, as shown million, NDF to the CG will be adjusted downwards by more than US$20 is higher than programmed external financing and US$20 million. by the difference between the additional Indicative Targets (ITs) and Memorandum Items of the CG measured expenditures The only IT in the program is a floor on poverty-reducing as 31. criteria table will include, yearly basis. The quantitative performance on a cumulative change in the stock of GIR. memorandum, the cumulative Prior Actions (PAs) for FY2015. The government of a revised budget for the central government billion. 32. Adoption with a deficit for the NFPS of at most G13.5 will adopt a revised budget consistent The Board of EDH will adopt a revised of a revised budget for EDH for FY2015. FY2015. 33. Adoption with savings of at least G3.4 billion during budget for FY2015 will be consistent (i.e., gasoline 95, mechanism for refined oil products 34. Adoption of an automatic price be the (in the official gazette or a The prior action will publication diesel, and kerosene products). interministeriel portant application d'une décision newspaper of large circulation) of Circulaire elements (i) the law of 1995 Premier Ministre (the "Circular") stating the following adoptée par le will be applied from end-June 2015 at the latest; establishing the automatic price mechanism the Ministry of Finance (MEF) will publish (in from end-June 2015, after each shipment, for each the price structure (ii) beginning the theoretical price structure product, a newspaper of large circulation) of the stabilization margin; and (ii) the application and the theoretical value for stock margin in application, before end-June 2015 if the value of the stabilization of points () and (ii) above will begin in such a case, pump prices will be increased SO the decreases below G -1 billion (minus G 1 billion); G -1 billion. The same criterion will apply value of the stabilization margin never decreases below upwards SO to avoid at all times that the end-June 2015 onwards: pump prices will be adjusted of the stabilization from decreases below G -1 billion. In case the value value of the stabilization margin prices could be adjusted downwards. The margin surpasses G 1 billion (plus G 1 billion), pump Fund as of March, 2015 Table 4. Accumulation of Stabilization theoretical value of the (January-March, in millions of gourdes) stabilization margin at mid-March Gasoline 95 Diesel Kerosene Total 2015 was minus G 27 million as of -66 -27 March 2015 (Table 4). The 30 Authorities; and IMF staff calculations. authorities will share with Fund Sources: Haitian INTERNATIONAL MONETARY FUND 63 billion (plus G 1 billion), pump Fund as of March, 2015 Table 4. Accumulation of Stabilization theoretical value of the (January-March, in millions of gourdes) stabilization margin at mid-March Gasoline 95 Diesel Kerosene Total 2015 was minus G 27 million as of -66 -27 March 2015 (Table 4). The 30 Authorities; and IMF staff calculations. authorities will share with Fund Sources: Haitian INTERNATIONAL MONETARY FUND 63 --- Page 72 --- HAITI revise the price structure to include effective import staff the effective import prices, and commit to posting" quotations as soon as possible. prices instead of "Caribbean As part of the transformation of Single Account (TSA) and accounting centers. into the 35. Treasury with BRH in the name of the central administration sub-accounts, current accounts opened December 2014) to advance this process with minimum MEF and the BRH signed a protocol (in of this protocol include: (i) The Treasury will delay. Prior actions related with the implementation and the BRH will produce a pilot IT to be developed send to the BRH the technical specifications Sector I" (its generalization to all accounting solution for accounting centers under "Economic accounts at the BRH, The MEF and BRH will regroup government centers will be made in stages); (ii) be closed and accounts that will be dormant accounts that will still with a view of identifying the accounts that are open The MEF will analyze government transformed in TSA sub-accounts. of them or passing them under and private) with a view closing in commercial banks (state-owned the decision by the MEF adopted on December 18, MEF control. Prior actions associated with the BRH and the BNC (Banque Nationale de include: (i) the MEF will ensure that all accounts open at the BRH will allow the public under the control of a public accountant; and (ii) The action Crédit) are that are under their respective responsibility. prior accountants access to the accounts in March 2015 between the BRH and BNC of understanding signed associated with a memorandum behalf of the Tax department (DGI) and the includes: (i) tax revenues collected by the BNC on the central treasury account within department (AGD) will begin to be transferred to includes: (i) five customs of accounting centers 48 hours. The prior action related with the implementation Center Economic Sector II; Accounting centers will be installed, namely Accounting Political Sector I; new accounting Center Political Sector I; Accounting Center Center Economic Sector IV; Accounting and Central Accounting Center. Structural Benchmarks (SBs) of the automatic price Mechanism. The implementation 36. Automatic Fuel Price Adjustment benchmark to be observed in paragraph 34 will be a structural endmechanism as discussed mechanism will begin implementation by continuously. The automatic fuel price adjustment decreases below G -1 billion, as explained in June 2015, at the latest, unless the stabilization margin upwards SO the stabilization margin is at paragraph 34. In such a case, pump prices will be adjusted will be monitored through the of the mechanism all times above G -1 billion. Implementation margin (on a monthly basis) as described in calculation of the value for the stock of the stabilization paragraph 34. during the life of the off-budget CG commitments. If at any point 37. Payment of unpaid rise to claims on the central government, the ministry unpaid off-budget expenditures give documentation to program, them as debts, will (i) analyze the supporting of finance, before recognizing effective public spending); (ii) before such establish the appropriateness of their nature (as through a revision. This structural cleared, they will be incorporated in the budget, commitments are the reduction of all accounts opened with BRH and BNC, entailing and 6 This is in line with the objective to consolidate (all entities): 2 sub- -accounts for current and investment expenditure the number of sub- -accounts to 3 by ministry the inactive accounts. one sub-account for own revenues, and closing 64 INTERNATIONAL MONETARY FUND of finance, before recognizing effective public spending); (ii) before such establish the appropriateness of their nature (as through a revision. This structural cleared, they will be incorporated in the budget, commitments are the reduction of all accounts opened with BRH and BNC, entailing and 6 This is in line with the objective to consolidate (all entities): 2 sub- -accounts for current and investment expenditure the number of sub- -accounts to 3 by ministry the inactive accounts. one sub-account for own revenues, and closing 64 INTERNATIONAL MONETARY FUND --- Page 73 --- HAITI benchmark will require the continuously. Monitoring of this structural benchmark will be observed basis) the stock and composition of offof Finance to report to IMF staff (on a monthly Ministry commitments that arrive at the Treasury. budget CG The Prime Minister, the Minister of Public Signature of protocol for the reform of EDH. end-June 2015, 38. and other stakeholders will sign a protocol (by Works, the Minister of Finance, EDH, stakeholders in achieving the targeted at the latest) that lays out the obligations of different will include provisions with respect the improvement in the sector's performance. The protocol elimination of cross-arrears, the review of tariffs, penalties for non-payment, the finalization of an revision electricity in particular through the of contracts with IPPs, and the increase in transparency, diffusion to allow for better monitoring. audit of EDH, as well as better data production and will establish a for strengthening tax policy. The government tax 39. Establish a working group 2015 for drafting the tax code that will put all working group (under the reform unit) by end-July number of small taxes ('taxes de nuisance") tax code and to eliminate a large draft laws into a general costs. The working group will produce the preliminary with low yield and high administrative by end-July 2016. The large taxpayers' office (LTO) as the medium taxpayers' office (MTO). files to the MTO. 40. Strengthening the transfer of all medium-size tax payer well as local tax offices will complete 2015. These actions will be completed by end-August for FY2016 Government and EDH will adopt budgets NFPS Deficit for FY2016. The Central These actions 41. NFPS of 2.3 percent of GDP in line with the program. consistent with a deficit for the will be completed by end-September 2015. and efficiency of accounting centers. To ensure rapidity 42. Establishment of remaining accounting centers 1 and 2 of the economic controls on the implementation of investment projects, Centers Economic Sector -ACES I, II, III, sector were split into four accounting centers (Accounting since the first half of FY2014. As part of All established accounting centers are operational and budget and IV). capabilities, a training plan for public accountants the strengthening of management 2015. The authorities will implement an interfacing administrators is planned for the month of April and SYDONIA) with the accounting the information systems of revenues collection (TAX-solution timetable. The plan to set up other accounting system (GL) in line with the already established timetable. This action will be completed by centers continues in line with the already established end September 2015. system. The government has cadastre and property rights 43. Establishing a modern With donor assistance, the commission on land management. established an inter-ministerial the cadastre on a pilot basis in a number of municipalities. commission is conducting an inventory of to strengthen the legal framework will transmit an action plan for FY2016-FY2017 The commission in Haiti by no later than end-February 2016. and functioning of the cadastre EDH will, before EDH active clients. In line with the agreed protocol, tariff 44. Audit of 200 largest clients, and have a first analysis of EDH the audit of the 200 largest end-March 2016, complete and updated action plan for FY2016-FY2018. determination and penalties for non-payment, INTERNATIONAL MONETARY FUND 65 legal framework will transmit an action plan for FY2016-FY2017 The commission in Haiti by no later than end-February 2016. and functioning of the cadastre EDH will, before EDH active clients. In line with the agreed protocol, tariff 44. Audit of 200 largest clients, and have a first analysis of EDH the audit of the 200 largest end-March 2016, complete and updated action plan for FY2016-FY2018. determination and penalties for non-payment, INTERNATIONAL MONETARY FUND 65 --- Page 74 --- HAITI 45. Implement a program to ensure compliance of importers with an annual turnover above G10 million but who are not currently covered by LTO/MTO (End-April 2016). On a regular basis, the Customs Department (AGD) will communicate to the Tax Department (DGI) information on import activities generated by ASYCUDA SO that the DGI can identify new large taxpayers and ensure that they are properly covered by tax administration. 46. Information concerning the implementation of measures constituting structural benchmarks will be reported to the IMF staff no later than two weeks after their scheduled implementation date. Data Provision for Program Monitoring 47. To facilitate program monitoring, the government will report the information indicated in electronic format in the following summary table to IMF staff (Table 5). 66 INTERNATIONAL MONETARY FUND --- Page 75 --- HAITI Table 5. Summary of Reporting Requirements Sector Type of Data Frequency Reporting Deadline Real Sector National Accounts Annual Year- -end + 3 months Quarterly Economic Indicators (Conjoncture Economique) Quarterly Quarter- End 2 months Consumer Price Index Breakdowns Monthly Month End + 3 weeks Public Finance Fiscal Revenues (internal, external, other) Weekly Week end 1 week (4 weeks final data) Expenditures on Cash Basis (wages and salaries, goods and services, external debt, current accounts) Weekly Week- end 1 week (4 weeks final data) Central Government TOFE (Tableau des Operations Financières de l'Etat) Montly Month- -end 2 weeks Table on Current Accounts (Balance des Comptes Courants et de Fonctionment des Projets) Montly Month- -end one month Table Underlying TOFE, which enables the determination of checks in circulation and balance on invesmtent project accounts Montly Month -end one month Report of Revenue Collection of DGI (Rapport d'activités) Monthly Month -end one month Tables of revenue collection of AGD (Indicateurs d'activités aux ports, Rapport analytique des perceptions douanières à l'importation) Monthly Month- -end one month Balance of BMPAD accounts, including () financing under the Petrocaribe agreement by shipment and terms therof; (ii) transfers to Monthly Month -end one month project accounts; (i1) transfers to IPPS; and (iv) transfers to EDH. Balance of PetroCarbe/AUBA-related deposits at commercial banks andt the BRH, in gourdes and in foreign currency. Monthly Month- end one month Report on Poverty- -Reducing Expenditures Quarterly 30-day lag (final data) Table on the implementation of the PSUGO program Quarterly 30- -day lag (final data) Tableau de Bord of the the state electricity utility EDH showing monthly information on the production of electricity, making explicit Monthly 30-day lag (final data) the composition of production by IPP, EDH, and by region Information of any off- budget claims presented for payment Monthly Month end one month Stock of unpaid off- budget CG commitments. Monthly Month- -end one month Data on all fuel shipments per product giving the CIF import price, thef full price structur re (including "marge de stabilization") and import and consumption quantities. Data on actual collections for Monthly Month- -end one week each month with decomposition per product and tax type. Balance of the stock of the Stabilization Fund for fuel products Monthly Month -end one week Monetary and Financial Data Exchange Rate Daily Day- -end one day Monetary base and sources thereof under the program definition, broad definition (sens large), and currency in circulation. Weekly Week -end one week Aide Memoire Table containing, inter alia: (i) Stock of BRH bonds; (ii) Deposits at commercial banks; (ii) credit to private sector (in gourdes and U.S. one week each month with decomposition per product and tax type. Balance of the stock of the Stabilization Fund for fuel products Monthly Month -end one week Monetary and Financial Data Exchange Rate Daily Day- -end one day Monetary base and sources thereof under the program definition, broad definition (sens large), and currency in circulation. Weekly Week -end one week Aide Memoire Table containing, inter alia: (i) Stock of BRH bonds; (ii) Deposits at commercial banks; (ii) credit to private sector (in gourdes and U.S. dollars; (iv) details of inflows and outflows of foreign exchange reserves including budget support received; (v) Weekly Week end one week volume of FX transactions including BRH sales and purchases; (vi) gross and net international reserves; and (vi) net BRH credit to the central government and non- -financial public sector. Statistiques monétaires tables showing, inter alia, the balance sheet of the BRH (Table 10R) and the consolidated banking sector (Table Monthly Month- end + one month 20R) FMI Weekly Tables showing, inter alia, the average and weighted interest rates on gourde and U.S. dollar -denominated deposits and Monthly Month- end + one month credit; and excess reserves in the banking system. Information on the composition of gross reserves; based on the template provided by STA expert in March 2015. Monthly Month end one month Banking supervision statistics and financial indicators on commerical banks Quarterly Quarter end one month The calendar and planned placements of BRH bills including to banks and non banks, including in gourdes and in dollar indexed bonds Quarterly Quarter- end one month Audited Financial Statements of the BRH Yearly Year- -end three months Balance of Payments Balance of Payments Quarterly Quarter end one month Revised Balance of Payments Quarterly 31 months after original submission BRH FX cash flow table (Tableau de treso rie de devises); quarterly projections through end of fiscal year. Quarterly Quarter end one month External debt report (Rapport Dette Externe) prepared by the BRH External Debt showing monthly disbursements; debt service, debt forgiveness and Monthly Month- end one month rescheduling, arrears, and debt stocks. Details on any nonconcessional external public debt and debt guaranteed byt the government, including those excluded from the Monthly Month end one month ceiling as described in paragraph XX Data on outstanding balances, accumulation, and repayment of external arrears will be forwarded within six weeks after the end of each month. Monthly Month- end + six weeks INTERNATIONAL MONETARY FUND 67 Externe) prepared by the BRH External Debt showing monthly disbursements; debt service, debt forgiveness and Monthly Month- end one month rescheduling, arrears, and debt stocks. Details on any nonconcessional external public debt and debt guaranteed byt the government, including those excluded from the Monthly Month end one month ceiling as described in paragraph XX Data on outstanding balances, accumulation, and repayment of external arrears will be forwarded within six weeks after the end of each month. Monthly Month- end + six weeks INTERNATIONAL MONETARY FUND 67 --- Page 76 --- & - Appendix II. Risk Assessment Matrix Overall Level of Concern Policy Response Nature/Source of Risk Likelihood of realization Expected Impacti if Risk is Materialized (High, Medium, or Low) (High, Medium, or Low) Medium Strengthen business climate to make full use of Medium and would advantages in HOPE/HELP acts, including by U.S. Higher- than-anticipated growth on thel back Remittances apparel export growth enhancing efficiency of electricity sector and of 1. Higher-than-expected of continued improvement in labor markets increase, supporting domestic demand and the the PIP. Increase the exchange rate flexibility. growth growth outlook. Formal employment would be pushed upwards High Promotei inclusive political and economic Medium/High institutions and open discussions on the reform Political tensions increase in the wake of Popular protests may impede thei implementation agenda. Engage with all stakeholders to strengthen 2. Political Instability the dissolution of parliament and the of structural reforms, constrain growth, and thel business climate and enhance poverty President's ruling by decree, as provided for heigthen fiscal vulnerabilities or deplete reserves. reduction efforts. Haiti's constitution. Privatei investment and growth remain low. High Keep Petrocaribe-r related deposits at adequate High would cut levels by adjusting spending plans to available Petrocaribe-related flows decrease Asudden stop of Petrocaribe resources domestic revenue mobilization. 3. Venezuela'smacroeconomic significantly with possibility of a sudden GDP growth, although the decline in oil prices resources. Promote reforms aimed at EDH's financial situation worsens stop. would mitigate its impact. Financing of the PIP and Accelerate Seek additional budget support of EDH's deficit would be constrained. sustainability. High Maintain financial buffers and Increase flexibility Medium up oil Inflation would increase, and the current account ofe exchange rate policy. Eliminate blanket Geopolitical or natural events push subsidies, focusing them on the poor. Enhance 4. Oil Prices Increase and food prices. and the growth outlook would deteriorate. efficiency of the electricity sector. High Increase flexibility of exchanger rate policy and Medium maintain fiscal buffers. Strengthen the national and Although natural disasters are Natural disasters have resulted in loss of life, Strengthen effectiveness 5. Natural Disasters unpredictable, Haiti's geographical location infrastructure destruction and disruption of riskr of fiscal management policy to system. reach the poor fast. Focus makes it prone to be affected by these production, in particular of agriculture. transfers and subsidies. shocks. High Promote domest tic revenue mobilization. Maintain Medium Public investment decreases and the growth financial buffers and increase flexibility of Following the effortafter the earthquake, exchange rate policy. Continue implementation of 6. Donor Fatigue donor flows decrease more rapidly than outlook deteriorates. Fiscal and external accounts structural reforms and strengthen governance and projected. also deteriorate. AML/CFT efforts. shows events that could materially alter the baseline path (the scenario most likely to materialize in the view of IMF staff). The relative 1/ The Risk Assessment Matrix (RAM) baseline ("low" is meant indicate a probability below 10 percent, "medium" a probability between likelihood is the staff's subjective assessment of the risks surrounding the toi of concern as of the time of 10and 30 percent, and "high" a probability between 30 and 50 percent). The RAM reflects staff views on the source of risks and overall level discussions with the authorities. Non-mutually exclusive risks may interact and materialize jointly. alter the baseline path (the scenario most likely to materialize in the view of IMF staff). The relative 1/ The Risk Assessment Matrix (RAM) baseline ("low" is meant indicate a probability below 10 percent, "medium" a probability between likelihood is the staff's subjective assessment of the risks surrounding the toi of concern as of the time of 10and 30 percent, and "high" a probability between 30 and 50 percent). The RAM reflects staff views on the source of risks and overall level discussions with the authorities. Non-mutually exclusive risks may interact and materialize jointly. --- Page 77 --- MONETARY FUND INTERNATIONAL HAITI REPORT FOR THE 2015 ARTICLE IV CONSULTATION STAFF UNDER ARRANGEMENT May 6, 2015 AND REQUEST FOR A THREE-YEAR THE EXTENDED CREDIT TACUTY-IPORMATONAL ANNEX Prepared By Western Hemisphere Department CONTENTS FUND RELATIONS JOINT WORLD BANK-IMF WORK PROGRAM, 2015-16 DEVELOPMENT BANK RELATIONS WITH THE INTER-AMERICAN STATISTICAL ISSUES --- Page 78 --- HAITI FUND RELATIONS (As of March 31, 2015) Membership Status: Joined September 8, 1953; Article VIII General Resources Account: SDR Million Percent of Quota 81.90 100.00 Quota Fund holdings of currency 81.83 99.92 Reserve position in Fund 0.07 0.08 SDR Million Percent of Allocation SDR Department: Net cumulative allocation 78.51 100.00 68.81 87.64 Holdings Outstanding Purchases and Loans: SDR Million Percent of Quota ECF Arrangement 40.95 50.00 Financial Arrangements: Type Approval Expiration Amount Approved Amount Drawn Date Date (SDR million) (SDR million) ECF 07/21/2010 12/24/2014 40.95 40.95 ECF 1/ 11/20/2006 1/29/2010 180.18 180.18 ECF 1/ 10/18/1996 10/17/1999 91.05 15.18 1/ Formerly PRGF Projected Payments to the Fund (SDR million; based on existing use of resources and present holdings of SDRs): Amount Drawn Date Date (SDR million) (SDR million) ECF 07/21/2010 12/24/2014 40.95 40.95 ECF 1/ 11/20/2006 1/29/2010 180.18 180.18 ECF 1/ 10/18/1996 10/17/1999 91.05 15.18 1/ Formerly PRGF Projected Payments to the Fund (SDR million; based on existing use of resources and present holdings of SDRs): Principal 2.46 4.26 6.72 7.70 Charges/Interest 0.01 0.01 0.01 0.06 Total 2.46 4.26 6.72 7.76 2 INTERNATIONAL MONETARY FUND --- Page 79 --- HAITI and Exchange Restrictions: Exchange Rate Arrangement rate regime is floating. The de facto exchange Haiti's currency is the gourde. The de jure exchange since April 2008, except for a short has been classified as a crawl-like arrangement February of rate arrangement in the exchange rate market from January through period of post-earthquake disruption as an other managed arrangement. Haiti has 2010, during which time the gourde was classified and 4, and maintains an exchange system free of Article VIII, Sections 2, 3, accepted the obligations and transfers for current international transactions. of restrictions on the making of payments Safeguards Assessment: concluded in January 2011. The assessment noted that An update safeguards assessment was elements of the safeguards framework the serious setback resulting from the earthquake, also concluded that despite remain in place. However, the safeguards assessment within the central bank of external audit and reserves emerged, particularly, in the areas governance, new vulnerabilities vulnerabilities, the safeguards assessment recommended In order to address these selection policy in the area of management auditors, as well the adoption of a formal rotation of the external the adoption of a global reserves management policy external audit. The assessment recommended internally as well as reserves managed externally. and guidelines, to cover both reserves managed bodies including through the aim to strengthen the oversight Compliance Other recommendations Committee, and the appointment of an independent reconstitution of the Investment before the first review under the new ECF Officer. An update assessment will be required arrangement. Article IV Consultations: on March 11, 2013 (IMF Country Report No. (13/90). The last Article IV consultation was concluded 20-27, 2014. The IMF team were held in Port-au-Prince Dublin during January (all WHD), and Consultations Abdelrahmi Bessaha, Olga Sulla, Alain Brousseau comprised Mr. Boileau Loko (head), assisted the mission. Ms. Jacques Bouhga-Hagbe, the resident representative, The mission met Elva Bova (FAD). Director's office participated in the discussions. Ketleen Florestal from the Executive and Finance Jean Marie, Minister of Commerce with Prime Minister Lamothe, Minister of Economy Minister Delegate in charge of Human Rights Laleau, Minister of Agriculture Jacques, and economic officials. and Industry Governor Castle, and senior financial and the Fight against Poverty Auguste, the donor and diplomatic community and the private The mission also met with representatives of cycle. with Haiti are on the 24-month sector. Article IV consultations Technical Assistance: assistance missions since November 2012:"' Haiti has received the following IMF technical consult the Haiti 2012 Article IV consultation 1 For previous technical assistance missions please available at - INTERNATIONAL MONETARY FUND 3 Minister Delegate in charge of Human Rights Laleau, Minister of Agriculture Jacques, and economic officials. and Industry Governor Castle, and senior financial and the Fight against Poverty Auguste, the donor and diplomatic community and the private The mission also met with representatives of cycle. with Haiti are on the 24-month sector. Article IV consultations Technical Assistance: assistance missions since November 2012:"' Haiti has received the following IMF technical consult the Haiti 2012 Article IV consultation 1 For previous technical assistance missions please available at - INTERNATIONAL MONETARY FUND 3 --- Page 80 --- HAITI Department Dates Purpose FAD Mar 2015 Tax Administration Nov 2014 Tax Administration Oct 2014 Tax Administration Aug 2014 Tax Administration Jul 2014 Energy Subsidy Reform Jun 2014 Mining Taxation Apr 2014 Cash and Treasury Management Feb 2014 Tax Administration Nov 2013 Tax Administration Jul 2013 Public Financial Management Jun 2013 Tax Administration Apr 2013 Cash and Treasury Management Apr 2013 Value-Added Tax Mar 2013 Public Accounting Mar 2013 Macro-fiscal Jan 2013 Tax Administration Dec 2012 Tax Policy Nov 2012 Cash and Treasury Management MCM Nov 2014 Credit Union Supervision Aug 2014 Reserve Management Guidelines May 2014 Foreign Exchange Market 4 INTERNATIONAL MONETARY FUND --- Page 81 --- HAITI Feb 2014 Credit Union Supervision April 2013 Macroprudential Policies STA Jun 2014 National Accounts Statistics Jun 2013 Consumer Price Index June 2013 National Accounts LEG Jun 2013 Drafting of a general tax code Dec 2012 Drafting of a VAT law Resident Representative: Mr. Wayne Camard has been the Fund's Resident Representative since August 1, 2013, replacing Mr. Jacques Bouhga-Hagbe. INTERNATIONAL MONETARY FUND 5 --- Page 82 --- HAITI WORK PROGRAM, 2015-16 JOINT WORLD BANK-IMF with the World Bank during the Article IV The IMF country team coordinated closely Bank staff participating actively in all consultation mission and staff visit, with World Economist and Program Leader, World discussions. The teams were led by Mr. Raju Singh (Lead and Mr. Gabriel Di Bella (IMF Mission Chief for Haiti). Bank) Haiti should be commended for maintaining macroeconomic The teams agreed that while needed to raise Haiti's growth rate and ensure stability, deep-seated structural reforms are that electricity should be a top reform in poverty reduction. The teams agreed and because steady progress large fiscal costs crowd out other public spending priority, both because the sector's constitutes a key obstacle to economic development. poor and unreliable electricity service ministries, the teams coordinated and responsible government to Together with the electricity utility issues into the ECF arrangement, and will continue closely in the incorporation of electricity sector do SO over the course of the program. analysis (See Debt Sustainability the debt sustainability in The teams also jointly developed fuel prices drove the improvement Analysis). They agreed that the recent fall in international DSA, and is thus vulnerable to a as compared with the previous Haiti's projected debt sustainability underscored the need for an automatic fuel price mechanism, sudden reversal. The results therefore the risk of a rebound in prices while mitigating measures, to guard against together with targeted Bank and the Fund have been active in providing technical the most vulnerable. Both the protecting assistance in this area. Provisional Timing Expected Delivery Title Products of Mission Date Mutual Information on Relevant Work Programs A. End-June, 2015 in Systematic Country Ongoing Bank work program next 12 months Diagnostic End-June, 2015 Public Expenditure Ongoing Review Infrastructure and Ongoing Institutions Emergency Recovery Program - Support on PFM Business Development Ongoing and Investment - MONETARY FUND 6 INTERNATIONAL active in providing technical the most vulnerable. Both the protecting assistance in this area. Provisional Timing Expected Delivery Title Products of Mission Date Mutual Information on Relevant Work Programs A. End-June, 2015 in Systematic Country Ongoing Bank work program next 12 months Diagnostic End-June, 2015 Public Expenditure Ongoing Review Infrastructure and Ongoing Institutions Emergency Recovery Program - Support on PFM Business Development Ongoing and Investment - MONETARY FUND 6 INTERNATIONAL --- Page 83 --- HAITI Value Chain Analyses and Review of Tax Exemptions Programmatic Social Ongoing End-June 2016 Protection Knowledge Work Study on Economic Ongoing End-June 2016 and Fiscal Impacts of Disasters in Haiti and Analysis of the Government's Fiscal Management of Disasters B. Requests for Work Program Inputs World Bank request to Periodic update of the Continuous IMF macro-framework IMF request to World Regular update on Bank Continuous Bank activities C. Agreement on Joint Products and Missions Joint Products in next Joint Bank-Fund Debt Ongoing May 12 months Sustainability Analysis (Update) INTERNATIONAL MONETARY FUND 7 --- Page 84 --- HAITI WITH THE INTER-AMERICAN RELATIONS DEVELOPMENT BANK (As of March 2015) presence for 50 years, the IDB has multilateral donor, with an uninterrupted IDB has As Haiti's largest of Haiti. Consequently, the commitment to the people and Government to the needs of the a strong financial and human resources to respond multiple Bank mobilized unprecedented 2010. In the aftermath of the shock, the engaged country after the earthquake of January 12th, relief efforts, reconstruction and and other donors in humanitarian extensively with the Government of basic social services. rehabilitation activities, as well as the delivery beyond the financing of key recovery and The Bank also assumed additional responsibilities plans and active roles in the design investments, including support for sector-wide such as the Haiti development recovery institutional mechanisms and implementation of the earthquake of three Partner Entities. Reconstruction Fund (HRF), for which it acts as one Action Plan for National to support the Government's Bank The Bank is uniquely positioned priority sectors and focus its resources, the In order to identify and Recovery and Reconstruction. of its project pipeline, past experience sector analysis and the GOH carried out a comprehensive GOH and other international and Haitian advantage, relationships with key to other areas of comparative strength and reputation with respect stakeholders, as well as the Bank's comparative donors. Developments Since the Earthquake A. Key also agreed to cancel the IDB Board of Governors In the months following the earthquake, US$479 million constituted about 40% of the debt with the Bank, which at undisbursed Haiti's outstanding The IDB Governors also agreed to convert the for Government's external liabilities. thereby freeing up public resources some US$186 million into grants, when the portion of loans, totaling by the 2009 E-HIPC/MDRI initiative critical investments. These decisions were preceded the way for the Government to undertake some US$511 million in debt relief, clearing IDB granted vital public investments. than US$2.3 billion in new grants for the The Bank also pledged to provide Haiti more development plans. This decision to fund its recovery efforts and long-term will 2010-20 period with Haiti's reconstruction plan. These resources sealed the Bank's long-term commitment recovery, to tackle extreme poverty and finance investments vital for Haiti's post-earthquake economic growth as well as institutional and and to establish the platform for long term inequality, social development. critical areas of support for recovery and development, On the basis of an analysis of the most Bank focuses its projects on six sector with the GOH, the as well as consultations FUND 8 INTERNATIONAL MONETARY development plans. This decision to fund its recovery efforts and long-term will 2010-20 period with Haiti's reconstruction plan. These resources sealed the Bank's long-term commitment recovery, to tackle extreme poverty and finance investments vital for Haiti's post-earthquake economic growth as well as institutional and and to establish the platform for long term inequality, social development. critical areas of support for recovery and development, On the basis of an analysis of the most Bank focuses its projects on six sector with the GOH, the as well as consultations FUND 8 INTERNATIONAL MONETARY --- Page 85 --- HAITI Education, Private sector Development, Water and Sanitation, programmatic areas:, Agriculture, and transport. total reached US$1,139M, and total disbursements Since the earthquake, approvals show evolution and priority sector of IDB approvals US$893.9M. The following tables by year by and disbursements: IDB Disbursements IDB Approvals Total Total 2012 2013 2014 2015 2010- 2010 2011 2012 2013 2014 2015 2010Priority Sectors 2010 2011 174.0 19.6 23.8 10.5 7.1 36.8 2.3 100.1 Education 50.0 50.0 50.0 24.0 0.0 66.0 71.0 40.5 55.0 252.5 16.1 34.3 38.4 29.0 117.8 Private Sector Development 20.0 110.7 2.6 41.0 21.4 27.7 12.3 0.3 105.5 Energy 14.0 55.0 12.0 22.0 7.7 81.8 35.5 15.0 65.5 13.6 16.5 16.8 10.5 24.3 0.0 Water & Sanitation 15.0 10.6 16.8 28.8 38.0 31.6 0.1 125.7 Agriculture & Environment 15.0 42.0 40.0 50.0 147.0 55.0 70.5 50.0 62.0 291.5 71.5 32.2 28.6 49.9 66.5 0.1 248.8 Transport & Infrastructure 54.0 98.0 58.9 28.4 6.9 14.7 5.0 0.1 114.2 Other 98.0 893.9 241.0 188.0 213.7 0.0 1,139.2 176.9 174.8 147.4 186.3 205.6 3.0 Total 251.0 245.5 INTERNATIONAL MONETARY FUND 9 66.5 0.1 248.8 Transport & Infrastructure 54.0 98.0 58.9 28.4 6.9 14.7 5.0 0.1 114.2 Other 98.0 893.9 241.0 188.0 213.7 0.0 1,139.2 176.9 174.8 147.4 186.3 205.6 3.0 Total 251.0 245.5 INTERNATIONAL MONETARY FUND 9 --- Page 86 --- HAITI STATISTICAL ISSUES A. Assessment of Data Adequacy for Surveillance General: Data provision has serious affected are the national accounts shortcomings that significantly hamper and labor indicators. Fiscal surveillance. Most broadly adequate, but need and external sector data are improvements in coverage and timeliness. National Accounts and Real Sector Data. The Haitian by the January 2010 earthquake Since the statistical system was severely impacted estimates of the national earthquake Haiti has only published 1986/1987 accounts and no longer publishes final preliminary base year of constant price GDP data, which results. Another issue is the structural shifts in the economy since then. The does not adequately capture the this area in coordination with other Fund continues to provide technical TA providers, assistance in to 2012 and improving compilation aiming at moving the base year from methods. Other 1986/87 untimely reporting on performance in the shortcomings include incomplete and quarterly economic indicator that could be agricultural sector, and the lack over an overall used to estimate quarterly GDP. Price and Labor Statistics. CPI is based on a 2000 household compiled by the Haitian Institute of Statistics on a Laspeyres survey structure, using 2004 as the reference The information methodology and comprises 287 products. The year. index follows estimates of inflation of local and statistical institute also produces survey, imported goods, but these are not preventing an accurate estimation of the consistent with the headline imported goods. No labor statistics are contributions to overall inflation from local and published. Government Finance Statistics. Staff receive data from the monthly "Table of Government Financial Ministry of Finance in the form of a surveillance. Data Operations" (TOFE) for program presentation is broadly adequate but has monitoring and coverage, high aggregation, weaknesses including limited lending, misclassifications, the of financing and Petrocaribe-related non-reporting major categories such as net service, There is a need to improve the operations, and incomplete information on debt agencies and public enterprises, timeliness of publication of the accounts of autonomous of the nonfinancial particularly the electricity utility EDH, to establish public sector. The reporting of the accounts ministerial discretionary accounts, should be budgetary expenditures, especially on are encouraged to improved to increase The establish a plan for migrating to the GFSM transparency. authorities compiling fiscal statistics. 2001/2014 framework for Monetary and Financial Statistics. The monthly bank and the consolidated accounts of the balance sheets of the banking sector are central are some inconsistencies between the broadly adequate for surveillance. central bank and However, there a need to expand institutional coverage of commercial bank accounts. There is also cooperatives into the survey of financial institutions to include credit unions and reported data to the Fund. depository corporations, and to improve the timeliness of 10 INTERNATIONAL MONETARY FUND the GFSM transparency. authorities compiling fiscal statistics. 2001/2014 framework for Monetary and Financial Statistics. The monthly bank and the consolidated accounts of the balance sheets of the banking sector are central are some inconsistencies between the broadly adequate for surveillance. central bank and However, there a need to expand institutional coverage of commercial bank accounts. There is also cooperatives into the survey of financial institutions to include credit unions and reported data to the Fund. depository corporations, and to improve the timeliness of 10 INTERNATIONAL MONETARY FUND --- Page 87 --- HAITI Financial Sector Surveillance. With regard to financial soundness indicators (FSIs), Haiti currently does not report data to the Fund for dissemination on the Fund website. External Sector Statistics. Balance of payments data is broadly adequate for surveillance but suffers from some deficiencies in scope, source data, and timeliness. Large errors and omissions, as well as gaps between the data reported by Haiti and its partners indicate incomplete coverage of current and financial account transactions. Special attention should be given to customs data coverage and classification of post-earthquake official and private flows, as well as recording of the external assets and liabilities of the private sector. CARTAC is ready to facilitate any TA upon the authorities' request. B. Data Standards and Quality Haiti participates in the Fund's General Data No data ROSC is available. Dissemination System. C. Reporting to STA Haiti currently does not report monthly or annual fiscal data to STA for publication in the International Financial Statistics (IFS) or in the Government Finance Statistics Year (GFSY), respectively. Haiti reports annual IIP and quarterly balance of payments to STA, although these suffer from a lack of consistency. INTERNATIONAL MONETARY FUND 11 --- Page 88 --- HAITI Haiti: Table of Common Indicators Required for Surveillance (As of April 2015) Date of Frequen Frequency Latest Date Frequency of cy of of Received Publication" Observation Data9 Reporting" Exchange Rates April 2015 April 2015 D D D International Reserve Assets and Reserve March 2015 April 2015 M M I Liabilities of the Monetary Authorities' Reserve/Base Money April 2015 April 2015 M M I Broad Money March 2015 April 2015 M M T Central Bank Balance Sheet April 2015 April 2015 M M I Consolidated Balance Sheet of the Banking February April 2015 M M I System Interest Rates? April 2015 April 2015 W W Consumer Price Index March 2015 April 2015 M M M Revenue, Expenditure, Balance and Composition January 2015 March 2015 M M M of Financing' - General Government" Revenue, Expenditure, Balance and Composition January 2015 March 2015 M M M of Financing - Central Government Stocks of Central Government and Central September November M Q I Government-Guaranteed Debt External Current Account Balance 2015:Q1 March 2015 Q Q Q Exports and Imports of Goods and Services January 2015 March 2015 M M GDP/GNP Dec 2014 A A A Gross External Debt February April 2015 M M I International Investment Positions June 2014 A A A 1 Includes reserve assets pledged or otherwise encumbered as well as net derivative positions. Both market-based and officially-determined, including discount rates, money market rates, rates on bills, notes and bonds. treasury 3 Foreign, domestic bank, and domestic nonbank financing. The general government consists of the central government (budgetary funds, extra budgetary funds, and social security funds) and state and local governments. "Including currency and maturity composition. *Daily (D), Weekly (W), Monthly (M), Quarterly (Q), Annually (A); Irregular (I) Not Available (NA). 12 INTERNATIONAL MONETARY FUND encumbered as well as net derivative positions. Both market-based and officially-determined, including discount rates, money market rates, rates on bills, notes and bonds. treasury 3 Foreign, domestic bank, and domestic nonbank financing. The general government consists of the central government (budgetary funds, extra budgetary funds, and social security funds) and state and local governments. "Including currency and maturity composition. *Daily (D), Weekly (W), Monthly (M), Quarterly (Q), Annually (A); Irregular (I) Not Available (NA). 12 INTERNATIONAL MONETARY FUND --- Page 89 --- MONETARY FUND INTERNATIONAL HAITI FOR THE 2015 ARTICLE IV CONSULTATION STAFF REPORT ARRANGEMENT UNDER FOR A THREE-YEAR May 6, 2015 AND REQUEST SUSTAINABILITY EXTENDED CREDIT FACILITY-DEBT THE ANALYSIS International Monetary Fund and the By Prepared by the Approved World Bank Adrienne. Cheasty, Bob Traa (IMF) and John Panzer (IDA) with the revised joint Analysis (DSA) was prepared in accordance This Debt Sustainability for low-income countries (LICS). Haiti's Bank-Fund debt sustainability framework (DSF) on the back of significantly lower risk of debt distress has improved from high to moderate balance of risks is still to the consolidation. However, the oil prices and some fiscal would result in an increase in the likelihood of debt downside, and a rebound in oil prices become high again. 2 The country's distress and the risk of external debt distress would while protecting social and continues to be ensuring macro stability main challenge cohesion and growth. Policies under the baseline investment spending needed for social allow to broadly lock-in the fiscal gains scenario assume improved energy policies that external debt profile is vulnerable to associated with lower oil prices. The country's rate; moreover, a decline in borrowing conditions and the exchange changes in oil prices, on public debt. The cost of a sudden stop the rate of growth would have a negative impact assessed (EBS/14/33) provided oil Petrocaribe inflows would be lower than previously Haiti's debt of lower levels. However, given the extreme sensitivity of prices continue to be at distress implied by this DSA should be in the risk of debt to shocks, improvements that Haiti maintain prudent macroeconomic interpreted with great caution. It is essential management, and deepen debt management and public financial policies, strengthen structural reforms to boost exports and growth. of Some Aspects of the Low-Income Country Debt Sustainability the 1 World Bank and IMF (2009). "Review BUFF/09/146); World Bank and IMF (2012), "Revisiting Framework." ." (DA/SecM2009-0397 SM/09/216; Countries," (SM/12/10). In line with the guidance note, "a Debt Sustainability Framework for Low Income of the overall risk of debt distress since the previous change in the external risk rating or in the assessment this full DSA was prepared jointly by IMF and World Bank staffs. DSA would warrant a full DSA". Accordingly, Haiti is classified as a weak performer based on 2 Thresholds are set according to the country's CPIA the World ranking. Bank's Country Policy and Institutional Assessment the 2011-13 average score of 2.88 in CPIA ratings below 3.25), its three-year (defined as those with three-year average and 27 percent (CPIA) framework. For weak performers are PV debt-to-GDP ratio of 30 percent are indicative thresholds for external debt sustainability ratio of 100 percent and 80 percent when remittances when remittances are included; PV debt-to-exports debt service-to-exports ratio of 15 percent and 12 percent included, PV debt-to-revenue ratio of 200 percent, ratio of 25 percent. with remittances; and debt service-to-revenue A ratings below 3.25), its three-year (defined as those with three-year average and 27 percent (CPIA) framework. For weak performers are PV debt-to-GDP ratio of 30 percent are indicative thresholds for external debt sustainability ratio of 100 percent and 80 percent when remittances when remittances are included; PV debt-to-exports debt service-to-exports ratio of 15 percent and 12 percent included, PV debt-to-revenue ratio of 200 percent, ratio of 25 percent. with remittances; and debt service-to-revenue --- Page 90 --- HAITI Background sector debt amounted to US$2,279 million, At end-2014, Haiti's stock of public terms (Text 1. by external debt on concessional of GDP), composed almost exclusively million to (24.8 percent million, of which US$136 corresponded Table 1). External debt amounted to US$1,825 to Venezuela (US$1,574 million of debt, and US$1,690 million to bilateral debt, mainly form of treasury bills multilateral US$230 million, mostly in the Petrocaribe debt). Domestic public debt was about debt to a commercial banks and about US$45 million is a publicly guaranteed largely held by commercial EDH (Electricité d'Haiti). bank contracted by the state-owned electricity company in favor of and debtor positions with the private sector appear 2. Other outstanding creditor remains a net creditor to the consolidated banking sector. The non-financial public sector million at the public deposits at commercial banks (about US$228 system, mainly reflecting Petrocaribe and other vis-à-vis independent power end-2014). In addition, the public sector maintains a debtor position million; in turn the IPPs have accumulated by EDH for about US$350 fuel. producers (IPPs), for arrears million at end-2014), for the provision of arrears to the central government (US$200 accumulating Outlook, 2015-35 A. Macroeconomic Haiti's main challenge is to balance Text Table 1. Haiti: Structure of External Public Debt at end-2014 3. fiscal adjustment in percent of the need for a gradual needs. A USS millions total debt GDP 1/ with large social and investment fiscal adjustment 1825.4 100.0 21.0 stronger-than-waranted at the cost Total 135.7 7.4 1.6 may result in a better debt profile Multilateral creditors 57.2 3.1 0.7 of lower GDP growth and slower progress in IMF 0.0 0.0 0.0 too large World Bank 61.0 3.3 0.7 addressing social needs. Conversely, IFAD 0.0 0.0 0.0 deficit could compromise IDB 17.5 1.0 0.2 a primary In particular, the OPEC 1689.7 92.6 19.4 macroeconomic stability. Official bilateral creditors 1600.4 87.7 18.4 baseline scenario is based on the following Venezuela 1573.7 86.2 18.1 PetroCaribe 26.7 1.5 0.3 assumptions: BANDES 89.3 4.9 1.0 include an annual Taiwan, Province of China and Fund staff estimates. Projections of about Sources: Haitian authorities; differs slightly from that in Tables la and 3a given the use of average real GDP growth 1/ The debt ratio of- exchange rates. starting from average, instead of end -period, 3.4 percent, 2.5 percent growth rate in 2015, higher growth, and then declining reforms yield increasing to 3.8 by 2019 as structural progressively to 3 percent by 2035. rate vis-à-vis the US dollar. A stable real exchange in 2016-20 in line with to decline in 2015 and increase gradually Oil prices are projected thereafter. WEO, and to remain constant in real terms of fiscal consolidation, as the positive fiscal impact Fiscal projections include an upfront central increase to about is locked in. Domestic revenues of the government lower oil prices in 2014), while foreign grants will gradually 18.4 percent of GDP by 2035 (from 12.5 percent of GDP in 2014). Primary expenditure decrease to about 2 percent of GDP (from 6.5 percent MONETARY FUND 2 INTERNATIONAL 5 and increase gradually Oil prices are projected thereafter. WEO, and to remain constant in real terms of fiscal consolidation, as the positive fiscal impact Fiscal projections include an upfront central increase to about is locked in. Domestic revenues of the government lower oil prices in 2014), while foreign grants will gradually 18.4 percent of GDP by 2035 (from 12.5 percent of GDP in 2014). Primary expenditure decrease to about 2 percent of GDP (from 6.5 percent MONETARY FUND 2 INTERNATIONAL --- Page 91 --- HAITI (including EDH's deficit) is projected to decline from 27.8 percent of GDP in 2014 to 21.1 percent in 2035, with capital expenditure (domestically and externally financed) stabilizing at 10 percent of GDP by 2035, reflecting lower Petrocaribe financing. This would involve an adjustment in the non-financial public sector (NFPS) primary balance of about 6p percentage points of GDP during the projection period. The primary deficit in 2035 (about 0.6 percent of GDP) would be consistent with a decreasing debt ratio. For the external outlook, projections consider a significant improvement of the trade deficit (from 32.8 percent of GDP in 2014 to 13.5 percent in 2035), in large part due to lower oil prices, and gradually increasing FDI (from 1.1 percent of GDP in 2014 to 3.7 percent in 2035). The projections further assume Petrocaribe debt inflows will decrease significantly, given the reduced oil bill (from 11.1 percent of GDP in 2014 to 8.2 percent in 2010 (the end of the WEO projection period). As the country develops, transfers (both official and remittances) would decline gradually, from 26.3 percent of GDP in 2014 to 11.2 percent in 2035. 4. Gross financing needs will be covered by a combination of external and domestic debt. Gross financing needs are projected to average about 3.3 percent of GDP per year, which will be financed by external debt flows (about 3.0 percent of GDP) and the rest by domestic debt (and deposit withdrawals in 2015-17). The DSA assumes that external borrowing would be almost evenly split between Petrocaribe flows and additional external bilateral borrowing at concessional terms. Domestic borrowing would comprise only treasury bills with 1-5 year maturities, and 8.8 percent interest rate (in US$ terms). For 2015-17, withdrawals of balances of the PCDR account are also projected, for a total amount of 1.6 percent of GDP.3 Text Table 2. DSA 2015 VS. DSA 2014 Average Average 2013-17 2018-31 Previous Current Previous Current DSA DSA DSA DSA (annual percentage change, unless otherwise indicated) Real GDP 4.1 3.3 3.5 3.5 Consumer prices (period average) 5.3 6.0 5.0 5.0 (in percent of GDP, unless otherwise indicated) Total revenue and grants 20.6 20.2 20.7 20.5 Of which: Revenue 13.4 13.9 16.0 16.4 Primary expenditure 26.6 23.8 24.2 22.0 Of which: Capital expenditure 14.6 11.9 11.5 10.6 Overall balance -6.5 -4.1 -4.5 -2.1 Current account balance -5.9 -4.7 -5.0 -3.5 Exports of goods and services 18.5 19.1 21.3 21.3 Imports of goods and services -49.8 -49.1 -44.6 -43.5 Source: Haitian authorities; and Fund staff estimates and projections. 3 The baseline scenario assumes that the country will be able to secure the concessional financing needed to smooth out the adjustment of the primary deficit over several years, and that structural reforms proceed, but slowly. INTERNATIONAL MONETARY FUND 3 account balance -5.9 -4.7 -5.0 -3.5 Exports of goods and services 18.5 19.1 21.3 21.3 Imports of goods and services -49.8 -49.1 -44.6 -43.5 Source: Haitian authorities; and Fund staff estimates and projections. 3 The baseline scenario assumes that the country will be able to secure the concessional financing needed to smooth out the adjustment of the primary deficit over several years, and that structural reforms proceed, but slowly. INTERNATIONAL MONETARY FUND 3 --- Page 92 --- HAITI from about 25 percent of GDP in 2014 to The DSA projects that public debt will grow of GDP in 2014 to 5. external debt will grow from around 21.4 percent 39 percent of GDP in 2035. In turn, would be lower than in the previous DSA, as 30.5 percent of GDP in 2035. External debt accumulation oil bill; the grant element of new borrowing Petrocaribe inflows will be lower on the back of a decreased resort to multilateral financing. (Tables from 36 percent to 38 percent due to greater would increase slightly 1 to 3). assumptions with respect to the macroeconomic The main differences in the medium-term previous DSA are as follow (Text Table 2), the positive impulse marked down slightly in view of recent performance; of GDP growth was assumed to be broadly offset by the effect on growth to growth from lower oil prices was Inflation would be broadly unchanged as socio-political environment. a more challenging passed on to consumers. lower oil prices are only marginal elimination in 2015 of to be larger on the back of the Government revenues are projected foregone revenues linked with fuel taxes. the HELP and similar as in the previous DSA, given Export growth would follow a trajectory conditions for apparel exports to the U.S. HOPE initiatives, which provide advantageous decreased oil prices, but non-oil Imports, however, were revised down significantly given rebuild infrastructure, as well as Haiti's similar, reflecting the country's needs to imports are status as a net food importer. percent of GDP in terms (19.8 Remittances continue to be significant in the short-to-medium decline to 9.4 percent of GDP in almost double all goods exports) and are projected to 2014, 2035, similar to the previous DSA. Outlook, 2015-35 B. Debt Sustainability The more favorable debt distress improved from high to moderate. 6. Haiti's risk of external fiscal impact), as well as consolidation efforts initiated assessment reflects lower oil prices (with significant would be breached under the baseline scenario by the Haitian authorities in early 2015. No debt threshold results. First, while the debt service-to-exports and (Fig.1). Caution is however essential in interpreting these would not breach the respective thresholds ratios under the baseline scenario in oil (of the debt service-to-revenue trend. Second, a permanent increase prices during the projection period, they are on an upward and a return to a situation of high debt distress would result in the breach of most thresholds, and to revenue 50 percent) LIC-DSA, the ratios of PV of debt to GDP, to exports ratio of (see section C). Under the previous service to revenue was a boarder case, and the would be breached by 2021-2022; the ratio of debt period, was on an upward trend. while below the threshold during the projection debt service to exports, terms and to higher is vulnerable to changes in borrowing 7. Haiti's external position remains vulnerable to shocks, particularly on borrowing exchange rate depreciation. Haiti's external debt entire projection period would cause the terms. An increase by 200 bps in the interest rate over the ratio to be breached starting ratio and the PV of debt-to-GDP thresholds for the PV of debt -to-exports and the debt service-to-revenue FY2028 (Tables 3b). In addition, while the debt service-to-exports would be on an upward from threshold during the projection period, they ratios would not breach the respective MONETARY FUND 4 INTERNATIONAL to shocks, particularly on borrowing exchange rate depreciation. Haiti's external debt entire projection period would cause the terms. An increase by 200 bps in the interest rate over the ratio to be breached starting ratio and the PV of debt-to-GDP thresholds for the PV of debt -to-exports and the debt service-to-revenue FY2028 (Tables 3b). In addition, while the debt service-to-exports would be on an upward from threshold during the projection period, they ratios would not breach the respective MONETARY FUND 4 INTERNATIONAL --- Page 93 --- HAITI Higher oil prices would result in increased stress, trend under terms and depreciation shocks, respectively. as described below. vulnerable to growth and policy shocks. Under Public sector debt indicators continue to be (Table 2). Shocks to 8. ratio would remain below the threshold the baseline scenario, the PV of debt-to-GDP high public debt indicators. The threshold balance would result in unsustainably growth and the primary FY2028. ratio would be exceeded by for the PV of debt-to-GDP C. Increased Stress Scenarios A 'Sudden Stop' of Petrocaribe Inflows since the last DSA. Significantly lower The likelihood of a stop of Petrocaribe flows increased the likelihood of 9. tight) financing constrains. As a result, oil prices have worsened Venezuela' 's (already very financing has become more likely. in financing terms, or an outright stop, of Petrocaribe change to fiscal adjustment and lower Petrocaribe flows would lead, in the short-term, 10. A stop of flows starting in FY2016 would impact investment spending GDP growth. A sudden stop of Petrocaribe growth. The shock to growth would bring and the financing of the electricity sector, negatively affecting would be cushioned by a decrease below the baseline. The impact on the economy a domestic tax revenues deposits (including Petrocaribe deposits), revenues, some drawdown of government in domestic and additional bilateral assistance. reduction in international reserves, assessed given lower oil prices. the would be lower than previously 11. The impact on economy in Petrocaribe financing (as the latter depends on The decline in oil prices causes an automatic decrease lower flows compared with the last DSA Petrocaribe continues. The financing the size of the oil bill), even if than offset by the improvement in the oil bill of GDP on average in 2015-17), will be more residual Petrocaribe flows (1.3 percent 2015-17). The effect of a stop of (3.3 percent of GDP on average during to subtract about 1 percent point from growth in 2015-17), is expected (2.0 percent on average during to curtail Petrocaribe-financed capital expenditures FY2016-FY2017, as the authorities would be compelled and transfers to the electricity sector. and the risk of external debt The stock of public debt would remain broadly unchanged of the shock, 12. Debt ratios would deteriorate slightly in the aftermath a distress would remain moderate. However, the lower Petrocaribe flows would force given lower GDP growth, and some REER depreciation. would be broadly unchanged with respect to the faster fiscal consolidation, and thus, debt ratios somewhat baseline at the end of the projection period. A Rebound of Oil Prices increase in oil external debt distress. A permanent oil prices would result in increased result in decreases in 13. Higher policy implementation, and would prices by 50 percent in 2016 would complicate the impact of the higher prices on electricity GDP growth and in fiscal pressures, in particular through the debt stock would increase to above and thus, on EDH's deficit. Under this scenario, generation 50 percent of GDP by 2035. INTERNATIONAL MONETARY FUND 5 ratios somewhat baseline at the end of the projection period. A Rebound of Oil Prices increase in oil external debt distress. A permanent oil prices would result in increased result in decreases in 13. Higher policy implementation, and would prices by 50 percent in 2016 would complicate the impact of the higher prices on electricity GDP growth and in fiscal pressures, in particular through the debt stock would increase to above and thus, on EDH's deficit. Under this scenario, generation 50 percent of GDP by 2035. INTERNATIONAL MONETARY FUND 5 --- Page 94 --- HAITI and the risk of external debt distress The stock of external debt would increase significantly would be breached by 14. The ratios of PV of debt to GDP, to exports and to revenue would become high. and to exports, while below the respective thresholds 2020-2021; the ratios of debt service to revenue Moreover Haiti's debt would remain period, would be on an upward trend. during the projection vulnerable to terms and depreciation shocks. D. Conclusions Haiti's risk of debt distress improved, but that it could 15. The updated DSA suggests that rebound. The debt is also vulnerable to shocks to deteriorate should growth fall short or oil prices of Petrocaribe financing would negatively borrowing terms and the exchange rate. A sudden stop debt ratios. However, growth, worsening temporarily public impact growth and bring about a REER depreciation, assessed, given that lower oil prices act of a stop of these flows is much weaker than previously debt stress and the impact shock. An increase in oil prices would result in increased as the main buffer to absorb the This suggests caution in interpreting the the risk of external debt distress would become high again. that a significant portion of the current oil improvement in Haiti's debt distress, as it is very likely a unique observed Against this backdrop, the lower oil prices provide price decrease will prove to be temporary. which will lock in fiscal and efficiency gains. The opportunity to switch to good energy policies, the effectiveness of public investment) is of structural reforms (including improving for LICS, as assumed in the implementation above its historical norm, and close to the average necessary to push up growth crucial that Haiti maintains prudent macroeconomic DSA. As highlighted in the previous DSA, it remains and PFM more generally, the effectiveness of public investment debt management, of structural reforms policies; strengthens sector, and continues the implementation improves the sustainability of the electricity and growth. the investment climate, in order to boost exports to improve of the DSA. Staff and the authorities broadly concurred with the main findings 16. The authorities of the updated DSA, as well as main risks affecting discussed the main assumptions and conclusions need to increase the yield on growth of public the baseline. The authorities agreed with the sector, in view of surrounding the primary deficit of the non-financial public investment, and more generally to contain the implementation of reforms, but highlighted risks. They agreed on the need to speed up discussions originated the financing the complexity of some reforms, or lengthy that a number of constraints (including down the process." 4 in the presence of vested interests) have slowed in Port-au-Prince, during February 2015. 4 Discussions were held on a Seminar on Debt Sustainability MONETARY FUND 6 INTERNATIONAL baseline. The authorities agreed with the sector, in view of surrounding the primary deficit of the non-financial public investment, and more generally to contain the implementation of reforms, but highlighted risks. They agreed on the need to speed up discussions originated the financing the complexity of some reforms, or lengthy that a number of constraints (including down the process." 4 in the presence of vested interests) have slowed in Port-au-Prince, during February 2015. 4 Discussions were held on a Seminar on Debt Sustainability MONETARY FUND 6 INTERNATIONAL --- Page 95 --- Table 1. Haiti: Public Sector Debt Sustainability Baseline Framework, Scenario, 2012-2035 (In percent GDP, unless otherwise indicated) Actual Estimate Proiections 2012 2013 2014 Average Deviation Standard 2015 2016 2017 2015-20 2021-35 2018 2019 2020 Average 2025 2035 Average Public sector debt 1/ 15.8 19.5 24.1 of which: foreign-currency denominated 13.8 17.7 21.4 25.5 26.4 27.2 28.2 28.9 29.3 33.2 34.4 22.4 23.0 23.6 24.2 24.7 25.3 30.2 32.2 Change in public sector debt 4.3 3.7 4.6 Identified debt -creating flows 1.4 0.9 0.8 1.0 0.7 0.4 0.7 -0.5 4.2 7.0 7.5 0.8 0.8 0.9 0.7 0.6 0.6 Primary deficit 4.7 8.0 7.2 0.4 -0.6 Revenue and grants 3.2 3.0 3.1 2.1 2.3 1.9 1.7 1.6 2.1 1.7 0.6 1.4 of which: 23.4 22.6 20.6 22.1 21.9 22.1 22.3 22.4 23.0 20.5 20.4 grants 10.6 8.1 6.5 6.1 5.6 5.3 5.0 4.8 4.8 Primary (noninterest) expenditure 28.1 30.6 27.8 4.1 2.0 Automatic debt dynamics 25.2 24.0 24.4 24.2 24.1 24.7 22.2 21.1 Contribution from interest -0.5 -0.9 -0.3 -0.6 -1.0 -1.2 -1.1 -1.1 1.1 -1.3 -1.3 rate/growth differential -0.6 -0.9 -0.4 -0.7 -0.8 -1.1 of which: contribution from average real interest rate -0.2 -0.3 0.1 -1.1 -1.1 1.1 -1.3 -1.3 ofv which: contribution from real GDP growth -0.1 0.0 -0.1 -0.1 -0.1 -0.1 -0.2 -0.2 -0.3 -0.6 -0.5 -0.6 -0.8 -1.0 1.0 Contribution from real exchange rate depreciation 0.0 0.0 0.1 1.0 -1.0 -1.1 -1.0 Other identified flows 0.2 -0.2 -0.1 0.0 0.0 0.0 debt-creating 0.0 0.0 0.6 -1.8 -0.3 -0.2 -0.1 0.0 0.0 Privatization receipts (negative) 0.0 0.0 0.0 0.0 0.0 Recognition of implicit or contingent liabilities 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Debt relief (HIPC and other) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Domestic obligations and arrears 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.6 -1.8 -0.3 -0.2 -0.1 0.0 0 0.0 0.0 Debt relief (HIPC and other) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Domestic obligations and arrears 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.6 -1.8 -0.3 -0.2 -0.1 0.0 Residual, including asset changes 0.1 -3.3 -2.9 0.0 0.0 0.0 0.6 0.1 -0.1 0.3 0.1 -0.2 0.2 0.2 Other Sustainability Indicators PV of public sector debt 17.4 ofv which: foreign- -currency denominated 18.7 19.5 20.2 21.1 21.6 21.8 24.2 25.3 of which: external 14.7 15.7 16.2 16.7 17.1 17.5 17.9 21.2 23.0 PV of contingent liabilities (not included in public sector debt) 14.7 15.7 16.2 16.7 17.1 17.5 17.9 21.2 23.0 Gross financing need 2/ 6.7 10.2 12.3 PVof public sector debt to- re ever nue and grants ratio (in percent) 84.5 7.8 6.2 7.4 7.5 7.5 7.6 7.1 5.5 PVof public sector debt to- revenue ratio (in percent) 123.1 84.7 89.4 91.3 94.6 96.4 94.8 117.7 123.7 of which: external 3/ 116.8 120.3 119.8 122.1 122.7 119.8 146.9 137.4 Debt service- -to- revenue and grants ratio (in percent) 4/ 0.6 3.9 104.1 18.8 97.9 99.6 98.9 99.0 99.1 98.1 128.8 125.2 Debt service- to- revenue ratio (in percent) 4/ 1.0 6.1 12.5 8.0 11.2 12.2 11.0 10.6 12.1 13.4 27.4 Primary deficit that stabilizes the debt to-GDP ratio 0.4 4.3 2.6 17.3 10.8 14.8 15.8 13.9 13.4 15.2 14.9 1.7 1.2 1.5 0.9 1.0 1.2 1.0 1.1 Key macroeconomic and fiscal assumptions Real GDP growth (in percent) 2.9 4.2 2.7 2.1 3.0 2.5 3.2 Average nominal interest rate on forex debt (in percent) 0.6 1.2 10 3.8 3.7 3.8 3.5 3.4 3.5 3.0 3.3 Averager reali interest rate on domestic debt (in percent) -4.7 -3.4 1.1 0.6 1.2 1.2 1.2 1.3 1.3 1.3 1.2 1.2 1.0 11 Real exchange rate depreciation (in percent, + indicates depreciation 0.3 -0.4 -2.3 -4.3 1.9 -3.8 0.7 0.4 2.0 2.4 13" 0.5 1.2 1.6' 1.5 Inflation rate (GDP deflator, in percent) 0.6 0.0 4.7 0.8 Growth of real (deflated 5.3 6.6 3.8 8.6 4.8 6.6 6.4 5.4 5.0 5.0 5.0 primary spending by GDP deflator, in percer 13.5 13.3 -6.4 2.1 6.3 5.6 5.0 5.0 5.0 Grant element of new external borrowing (in percent) -7.4 -1.5 5.4 2.8 3.4 6.1 1.5 0.5 2.6 2.3 36.5 37.3 36.9 37.0 37.2 37.6 37.1 .0 primary spending by GDP deflator, in percer 13.5 13.3 -6.4 2.1 6.3 5.6 5.0 5.0 5.0 Grant element of new external borrowing (in percent) -7.4 -1.5 5.4 2.8 3.4 6.1 1.5 0.5 2.6 2.3 36.5 37.3 36.9 37.0 37.2 37.6 37.1 39.2 39.4 Sources: Country authorities; and staff estimates and projections. 1/Thel DSA reflects flows for ther non- financial public sector. Central Bank accounts are mostly balanced. Debt iS expressed in gross terms. 2/ Gross financing need is defined as the primary deficit plus debt service plus the stock of short term debt at the end of thel last period. 3/ Revenues excluding grants. 4/ Debt service is defined as the sum of interest and amortization of medium and long term debt. 5/ Historicala averages and standard deviations are generally derived over the past 10y years, subjectt to data availability. a --- Page 96 --- HAITI Table 2. Haiti: Sensitivity Analysis for Key Indicators of Public Debt, 2015-2035 Projections 2015 2016 2017 2018 2019 2020 2025 2035 PV of Debt- to- GDP Ratio Baseline 19 20 20 21 22 22 24 25 A. Alternative scenarios A1. Real GDP growth and primary balance are at historical averages 19 21 A2. Primary balance is unchanged from 2015 26 28 35 51 A3. Permanently lower GDP growth 1/ 19 20 22 23 25 26 32 44 A4. Alternative Scenario: Petrocaribe Sudden 19 20 21 22 23 24 30 44 Stop 19 21 22 23 23 23 23 22 B. Bound tests B1. Real GDP growth is at historical average minus one standard deviations in 2016-2017 19 21 B2. Primary balance is at historical average minus one standard deviations in 2016-2017 27 29 36 45 B3. Combination of B1-B2 using one half standard deviation shocks 19 23 26 27 27 27 29 29 B4. One- time 30 percent real depreciation in 2016 19 22 25 27 28 29 34 39 B5. 10 percent of GDP increase in other debt -creating flows in 2016 19 26 26 27 27 27 27 29 19 28 28 28 28 28 30 29 PV of Debt-to-Revenue Ratio 2/ Baseline 85 89 91 95 96 95 118 124 A. Alternative scenarios A1. Real GDP growth and primary balance are at historical averages A2. Primary balance is unchanged from 2015 94 100 108 116 119 167 244 A3. Permanently lower GDP growth 1/ 85 93 98 105 111 113 155 217 A4. Alternative Scenario: Petrocaribe Sudden Stop 85 90 93 98 102 103 143 214 85 99 103 104 103 102 114 112 B. Bound tests B1. Real GDP growth is at historical average minus one standard deviations in 2016-2017 85 94 B2. Primary balance is at historical average minus one standard deviations in 2016-2017 85 104 105 114 120 123 170 218 B3. Combination of B1-B2 using onel half standard deviation shocks 119 121 121 117 140 140 B4. One- time 30 percent real depreciation in 2016 85 100 112 118 122 123 161 192 B5. 10 percent of GDP increase in other debt -creating flows in 2016 85 85 120 119 120 119 115 133 142 126 125 126 126 123 145 143 Debt Service- -to-Revenue Ratio 2/ Baseline 13 8 11 12 11 11 12 13 A. 119 121 121 117 140 140 B4. One- time 30 percent real depreciation in 2016 85 100 112 118 122 123 161 192 B5. 10 percent of GDP increase in other debt -creating flows in 2016 85 85 120 119 120 119 115 133 142 126 125 126 126 123 145 143 Debt Service- -to-Revenue Ratio 2/ Baseline 13 8 11 12 11 11 12 13 A. Alternative scenarios A1. Real GDP growth and primary balance are at historical averages 13 8 12 14 A2. Primary balance is unchanged from 2015 13 14 18 28 A3. Permanently lower GDP growth 1/ 13 8 11 14 13 13 16 25 A4. Alternative Scenario: Petrocaribe Sudden Stop 13 8 11 13 12 11 15 24 13 8 11 13 11 11 12 13 B. Bound tests B1. Real GDP growth is at historical average minus one standard deviations in 2016-2017 13 8 B2. Primary balance is at historical average minus one standard deviations in 2016-2017 12 14 14 14 18 25 B3. Combination of B1-B2 using one half standard deviation shocks 13 8 12 18 17 14 14 16 B4. One time 30 percent real depreciation in 2016 13 8 12 16 15 14 17 22 B5. 10 percent of GDP increase in other debt creating flows in 2016 13 9 13 15 14 14 17 22 13 8 14 23 15 14 15 16 Sources: Country authorities; and staff estimates and projections. 25 B3. Combination of B1-B2 using one half standard deviation shocks 13 8 12 18 17 14 14 16 B4. One time 30 percent real depreciation in 2016 13 8 12 16 15 14 17 22 B5. 10 percent of GDP increase in other debt creating flows in 2016 13 9 13 15 14 14 17 22 13 8 14 23 15 14 15 16 Sources: Country authorities; and staff estimates and projections. 1/A Assumes that real GDP growth is at baseline minus one standard deviation divided by the square root of the length of the 2/ Revenues are defined inclusive of grants. projection period. 8 INTERNATIONAL MONETARY FUND --- Page 97 --- Table 3a. Haiti: External Debt Sustainability Framework, Baseline Scenario, 2012-2035 1/ (In percent of GDP, unless otherwise indicated) Actual Historicals/ Standard 6/ Projections Average Deviation 2015-2 -2020 2021-2035 2012 2013 2014 2015 2016 2017 2018 2019 2020 Average 2025 2035 External debt (nominal) 1/ 13.8 17.7 21.4 22.4 23.0 23.6 Average of which: public and publicly guaranteed (PPG) 13.8 17.7 21.4 24.2 24.7 25.3 30.2 32.2 Change in external debt 4.9 3.9 3.7 22.4 23.0 23.6 24.2 24.7 25.3 30.2 32.2 Identifie ed net debt- -creating flows 3.3 3.5 4.7 1.0 0.6 0.6 0.5 0.5 0.6 1.0 -0.3 Non- interest current account deficit 5.6 6.2 6.2 1.8 1.4 0.9 0.6 0.1 0.1 0.2 -1.3 Deficit in balance of goods and services 36.4 33.7 32.8 2.9 2.6 3.3 3.6 3.5 3.4 3.3 3.1 3.3 3.0 3.1 Exports 28.3 27.8 27.5 27.2 26.7 25.6 22.0 13.5 Imports 16.8 18.6 19.0 19.1 19.3 19.5 19.7 19.9 20.1 21.2 25.4 Net 53.2 52.3 51.8 47.5 47.1 47.0 46.9 46.6 45.7 current transfers (negative inflow) -30.0 27.0 -26.3 -30.4 6.9 -25.6 -24.7 -24.3 -23.8 43.2 38.9 ofwhich: official -12.5 -8.9 -6.5 -23.3 22.5 -19.0 -11.2 -16.6 Other current account flows (negative net inflow) -0.7 -0.5 -0.3 -6.0 -5.6 -5.3 5.0 -4.8 4.8 -4.1 -2.0 Net FDI (negative inflow) -2.0 -1.9 -1.1 0.5 0.5 0.2 0.0 -0.1 0.0 0.2 0.7 Endogenous debt dynamics 21 -0.4 -1.6 0.9 -1.2 -1.8 -2.0 -2.3 -2.6 -2.5 -2.8 -3.7 -3.1 Contribution from nominal interestr rate 0.1 -0.8 -0.4 -0.3 -0.4 -0.5 -0.6 -0.6 -0.5 -0.6 -0.6 Contribution from real GDP growth 0.2 0.2 0.2 0.3 0.3 0.3 0.3 0.3 0.3 0.3 Contribution from price and exchange rate changes -0.2 -0.2 -0.5 -0.5 -0.5 -0.7 -0.8 -0.8 -0.9 -0.8 -1.0 -0.9 -0.4 -0.1 Residual (3-4) 3/ 1.6 0.4 -0.9 -0.8 -0.8 of which: exceptional financing -0.1 0.1 -0.4 -0.3 0.0 0.4 0.5 1.2 1.0 -0.5 -0.3 5 -0.5 -0.7 -0.8 -0.8 -0.9 -0.8 -1.0 -0.9 -0.4 -0.1 Residual (3-4) 3/ 1.6 0.4 -0.9 -0.8 -0.8 of which: exceptional financing -0.1 0.1 -0.4 -0.3 0.0 0.4 0.5 1.2 1.0 -0.5 -0.3 0.0 0.0 0.0 0.0 0.0 0.0 PV of external debt 4/ 14.7 Inpercent of exports 15.7 16.2 16.7 17.1 17.5 17.9 21.2 23.0 PV of PPG external debt 77.4 81.7 83.9 85.6 86.7 87.6 89.0 99.8 90.5 In percent of exports 14.7 15.7 16.2 16.7 17.1 17.5 17.9 21.2 23.0 In percent of government revenues 77.4 81.7 83.9 85.6 86.7 87.6 89.0 99.8 90.5 Debt service- to- -exports ratio (in percent) 0.7 1.8 104.1 2.4 97.9 99.6 98.9 99.0 99.1 98.1 128.8 125.2 PPG debt service- -to- exports ratio (in percent) 0.7 1.8 2.4 3.7 4.6 5.5 6.1 6.1 6.3 6.5 7.6 PPG debt service- to- -revenue ratio (in percent) 1.0 2.3 3.3 3.7 4.6 5.5 6.1 6.1 6.3 6.5 7.6 Total gross financing need (Billions ofl U.S. G debt service- -to- exports ratio (in percent) 0.7 1.8 2.4 3.7 4.6 5.5 6.1 6.1 6.3 6.5 7.6 PPG debt service- to- -revenue ratio (in percent) 1.0 2.3 3.3 3.7 4.6 5.5 6.1 6.1 6.3 6.5 7.6 Total gross financing need (Billions ofl U.S. dollars) 0.3 0.4 0.5 4.4 5.5 6.4 6.9 6.9 7.0 8.4 10.5 Non- -interest current account deficit that stabilizes debt ratio 0.7 2.2 2.4 0.3 0.3 0.3 0.2 0.2 0.2 0.3 0.3 2.2 3.0 2.8 2.9 2.8 2.5 2.2 3.3 Key macroeconomic assumptions Real GDP growth (in percent) 2.9 4.2 2.7 2.1 3.0 2.5 3.2 3.8 GDP deflator in US dollar terms (change in percent) 2.0 2.8 0.3 7.4 7.5 1.4 3.7 3.8 3.5 3.4 3.5 3.0 3.3 Effective interest rate (percent) 5/ 0.6 1.2 1.0 1.1 1.4 1.8 1.9 1.9 1.9 1.7 1.9 1.9 1.9 Growth of exports of G&S (US dollar terms, in percent) 1.0 18.5 0.6 1.2 1.2 1.2 1.3 1.3 1.3 1.2 1.2 1.0 1.1 Growth of imports of G&S (US dollar terms, in percent) -5.4 5.3 5.6 2.1 12.8 9.2 4.6 5.4 6.6 7.0 7.1 6.4 6.2 6.8 7.2 7.0 Grant element of new public sector borrowing (in percent) 12.3 16.7 -4.8 3.8 5.5 5.5 5.2 3.5 3.1 4.1 4.1 4.2 Government revenues (excluding grants, in percent of GDP) 12.8 14.5 14.1 36.5 37.3 36.9 37.0 37.2 37.6 37.1 39.2 39.4 39.1 Aid flows (in Billions of US dollars) 7/ 16.7 18.4 17.6 16.0 16.2 16.9 17.3 17.6 18.2 16.5 18.4 17.1 of which: Grants 0.8 0.7 0.6 0.7 0.8 0.8 0.8 0.8 0.9 1.2 1.2 of which: Concessional loans 15.9 17.7 17.1 0.5 0.5 0.5 0.5 0.5 0.6 0.6 0.5 Grant equivalent financing (in percent of GDP) 8/ 0.2 0.2 0.3 0.3 0.3 0.3 0.6 0.7 Grant- equivalent financing (in percent of external financing) 8/ 6.8 6.5 6.3 6.0 5.8 5.9 5.5 3.2 4.7 83.8 81.4 78.4 77.8 77.2 76.8 71.5 64.9 70.3 Memorandum items: Nominal GDP (Billions of US dollars) 7.9 8.5 8.7 9.1 9.5 10.0 Nominal dollar GDP growth 5.0 7.1 3.1 10.6 11.2 11.8 15.5 25.7 PVof PPG external debt (in Billions of US dollars) 1.3 3.9 4.7 5.7 5.8 5.8 5.5 5.2 5.5 5.0 5.3 (PVt- PVt- 1)/GDPt- 1 (in percent) 9.1 9.5 10.0 Nominal dollar GDP growth 5.0 7.1 3.1 10.6 11.2 11.8 15.5 25.7 PVof PPG external debt (in Billions of US dollars) 1.3 3.9 4.7 5.7 5.8 5.8 5.5 5.2 5.5 5.0 5.3 (PVt- PVt- 1)/GDPt- 1 (in percent) 1.4 1.5 1.6 1.8 1.9 2.1 3.2 5.8 Gross workers' remittances (Billions of US dollars) 1.4 1.5 1.7 1.4 1.4 1.5 1.4 1.4 1.4 1.4 1.9 0.9 1.5 PV of PPG external debt (in percent of GDP remittances) 1.8 1.8 1.9 2.0 2.1 2.1 2.3 2.4 PV of PPG external debt (in percent of exports + remittances) 12.3 37.9 13.1 13.6 14.0 14.4 14.7 15.2 18.4 21.1 Debt service of PPG external debt (in percent of exports + remittance 1.2 40.4 42.1 43.3 44.4 45.4 47.3 58.7 66.5 1.8 2.3 2.8 3.1 3.2 3.4 3.8 5.6 Sources: Country authorities; and staff estimates and projections. 1/1 Includes both public and private sector external debt. 2/1 Derived as [r g pl-g1/-g*p*gp) times previous period debt ratio, with nominal interest rate; g real GDP growth rate, and defl in 3/1 Includes exceptional financing (i.e., changes in arrears and debt relief); changes in gross foreign assets; and valuation p growth rate of GDP flator U.S. dollar terms. 4/ Assumes that PV of private sector debti is equivalent to its face value. adjustments. For projections also includes contribution from price and exchange rate changes. 5/Current- year interest payments divided by previous period debt stock 6/ Historical averages and standard deviations are generally derived over the past 10 years, subject to data availability. 7/Defined as grants, concessional loans, and debt relief. E 8/ Grant- -equivalent financing includes grants provided directly to the government and through new borrowing (difference between the face value and the PV of new debt). --- Page 98 --- HAITI Table 3b. Haiti: Sensitivity Analysis for Key Indicators of Public and Publicly Guaranteed External Debt, 2015-2035 (In percent) Projections 2015 2016 2017 2018 2019 2020 2025 2035 PV of deb-1o-60P-remitancas ratio Baseline 13 14 14 14 15 15 18 21 A. Alternative Scenarios A1. Key variables at their historical averages in 2015-2035 1/ 13 13 13 A2. New public sector loans on less favorable terms in 2015-2035 2/ 13 13 14 17 21 A3. Alternative Scenario: A Permanent 50 13 14 15 15 16 17 23 31 percent increase in Oil Prices in 2015 13 15 18 20 22 24 32 31 B. Bound Tests B1. Real GDP growth at historical average minus one standard deviation in 2016- 2017 13 14 15 15 16 B2. 13 13 A2. New public sector loans on less favorable terms in 2015-2035 2/ 13 13 14 17 21 A3. Alternative Scenario: A Permanent 50 13 14 15 15 16 17 23 31 percent increase in Oil Prices in 2015 13 15 18 20 22 24 32 31 B. Bound Tests B1. Real GDP growth at historical average minus one standard deviation in 2016- 2017 13 14 15 15 16 B2. Export value growth. at historical average minus one standard deviation in 2016- 2017 3/ 13 13 14 15 15 16 20 22 B3. US dollar GDP deflator at historic al average minus one standard deviation in 2016- 2017 13 13 14 15 16 19 21 B4. Net non- debt creating flows at historical averager minus one standard deviation in 2016- 2017 4/ 13 15 16 17 17 15 15 19 21 B5. Combination of B1- -B4 using one-I -half standard deviation shocks 17 20 21 B6. One time 30 percent nominal depreciation relative to the baseline in 2016 5/ 13 12 12 12 13 13 17 21 13 18 18 19 19 20 24 28 PV of debt-to-exports +1 remittances ratio Baseline 40 42 43 44 45 47 59 66 A. Alternative Scenarios A1. Key variables at their historical averages in 2015-2035 1/ 40 40 41 41 43 A2. New public sector loans on less favorable terms in 2015- 2035 2/ 40 43 45 61 76 A3. Alternative Scenario: A Permanent 50 percent increase in Oil Prices in 2015 45 48 50 54 74 96 39 47 55 62 69 76 104 97 B. Bound Tests B1. Real GDP growth at historical average minus one standard deviation in 2016-2017 40 41 43 44 45 B2. Export value growth at historical average minus one standard deviation in 2016-20173/ 40 42 46 47 47 58 65 B3. USdollar GDP deflator at historical average minus one standard deviation in 2016-2 2017 40 41 43 48 50 61 68 B4. Net non- debt creating flows at historical averager minus one standard deviation in 2016- 2017 4/ 40 46 51 44 45 47 58 65 B5. Combination of B1- B4 using one half standard deviation shocks 51 52 54 63 67 B6. One- time 30 percent nominal depreciation relative to the baseline 40 36 34 36 37 39 51 62 in 2016 5/ 40 41 43 44 45 47 58 65 PV of debt- to-revenue ratio Baseline 98 100 99 99 99 98 129 125 A. Alternative Scenarios A1. Key variables at their historical averages in 2015-2035 1/ 98 93 89 87 A2. New public sector loans on less favorable terms in 2015-2035 2/ 87 86 116 121 A3. Alternative Scenario: A Permanent 50 101 104 107 110 111 162 181 percent increase in Oil Prices in 2015 95 111 125 138 151 159 228 183 B. Bound Tests B1. Real GDP growth at historical average minus one standard deviation in 2016- 2017 98 102 106 106 B2. 1/ 98 93 89 87 A2. New public sector loans on less favorable terms in 2015-2035 2/ 87 86 116 121 A3. Alternative Scenario: A Permanent 50 101 104 107 110 111 162 181 percent increase in Oil Prices in 2015 95 111 125 138 151 159 228 183 B. Bound Tests B1. Real GDP growth at historical average minus one standard deviation in 2016- 2017 98 102 106 106 B2. Export value growth. at historical average minus one standard deviation in 2016- 2017 3/ 98 99 102 106 105 138 134 B3. US dollar GDP deflator at historical average minus one standard deviation in 2016- 2017 98 99 102 102 100 130 124 B4. Netr non- debt creating flows at historical averager minus one standard deviat ion 2016101 101 101 100 131 127 B5. Combination of B1 B4 in 2017 4/ 98 107 114 114 113 112 138 125 using one- half standard deviation shocks 98 90 84 84 85 B6. One time 30 percent nominal depreciation relative to the baseline in 2016 5/ 84 118 123 98 139 138 138 139 137 180 175 10 INTERNATIONAL MONETARY FUND --- Page 99 --- for Indicators of Public and Publicly Guaranteed External Debt, 2015-2035 (concluded) Table 3b. Haiti: Sensitivity Analysis Key (In percent) Debt senketempesusemetuee ratio 2 2 3 3 3 3 Baseline A. Alternative Scenarios A1. Key variables at their historical averages in 2015-2035 1/ A2. New public sector loans on less favorable terms in 2015-2035 2/ A3. Alternative Scenario: A Permanent 50 percent increase in Oil Prices in 2015 2 2 3 3 B. Bound Tests B1. Real GDP growth at historical average minus one standard deviation in 2016- 2017 B2. Export value growth at historical average minus one standard deviation in 2016- 20173/ B3. USdollar GDP deflator at historica al average minus one standard devia iation in 2016- 2017 B4. Netr non- debt creating flows at historical average minus one standard deviation in 2016- 2017. 4/ B5. Combination of B1- -B4 using one-half standard deviation shocks B6. One time 30 percent nominal depreciation relative to the baseline in 2016 5/ Debt service-to-revenue ratio 4 5 6 7 8 10 Baseline A. Alternative Scenarios 6 8 A1. Key variables at their historical averages in 2015-2035 1/ 8 11 17 A2. New public sector loans on less favorable terms in 2015-2035 2/ A3. Alternative Scenario: A Permanent 50 percent increase in Oil Prices in 2015 8 8 14 18 B. Bound Tests B1. Real GDP growth at historical average minus one standard deviation in 2016-2017 -to-revenue ratio 4 5 6 7 8 10 Baseline A. Alternative Scenarios 6 8 A1. Key variables at their historical averages in 2015-2035 1/ 8 11 17 A2. New public sector loans on less favorable terms in 2015-2035 2/ A3. Alternative Scenario: A Permanent 50 percent increase in Oil Prices in 2015 8 8 14 18 B. Bound Tests B1. Real GDP growth at historical average minus one standard deviation in 2016-2017 B2. Export value growth at historic cal average minus one standard deviation in 2016- 2017 3/ 7 7 6 7 9 11 B3. US dollar GDP deflator at historic cal average minus one standard deviation in 2016- 2017 7 7 7 10 11 B4. Net non- debt creating flows at historic cal average minus one standard deviation in 2016-2 2017 4/ shocks 4 5 6 7 7 7 7 10 B5. Combination of B1 B4 using one- half standard deviation 10 10 12 15 B6. One- time 30 percent nominal depreciation relative to the baseline in 2016 5/ 4 8 9 10 Memorandum item: above baseline) 6/ 38 38 38 38 38 38 38 38 Grant element assumed on residual financing (i.e., financing required Sources: Country authorities; and staff estimates and projections. of GDP deflator (in U.S. dollar terms), non-interest current account in percent of GDP, and non- debt creating flows. 1/V Variables include real GDP growth, growth than in the baseline, while grace and maturity periods are the same as in the baseline. 2/1 Assumes that the interest rate on new borrowing is by 2 percentage points higher to return to its baseline level after the shock (implicitly assuming 3/ Exports values are assumed to remain permanently at the lower level, but the current account as a share of GDP is assumed an offsetting adjustment in import levels). 4/ Includes official and private transfers and FDI 5/ Depreciation is defined as percentage decline in dollar/ /local currency rate, such that it never exceeds 100 percent. 6/ Applies to all stress scenarios except for A2 (less favorable financing) in which the terms on all new financing are as specified in footnote 2. --- Page 100 --- HAITI Figure 1. Haiti: Indicators of Public and Publicly Guaranteed External Debt Under Alternative Scenarios, 2015-2035 1/ a. Debt Accumulation b.PV of debHo-GDP-remittnces.ratio 40 40 40 35 - 2 39 30 0 ( 38 25 37 20 37 15 35 5 Rate of Debt Accumulation Grant equivalent financing (% of GDP) Grant element of new borrowing (% right scale) c.PV of debtio-exports*remitances ratio d.PV of debt-to-revenue. ratio - - - - - - - e.Debt service-to-exportstremitances ratio f.Debt service-lo-revenue ratio - Baseline Historical scenario Most extreme shock 1/ Threshold 50% Inc. Oil Prices Sources: Country authorities; and staff estimates and projections. 1/ The most extreme stress test is the test that yields the highest ratio on or before 2025. In figure b. it corresponds to a One- time depreciation shock; in C. to a Terms shock; in d. to a One- time depreciation shock; in e. to a Terms shock and in figure f. to a One- time depreciation shock. 12 INTERNATIONAL MONETARY FUND --- Page 101 --- HAITI Figure 2. Haiti: Indicators of Public Debt Under Alternative Scenarios, 2015-2035 1/ Baseline Fix Primary Balance Most extreme shock 1/ Historical scenario - - - Public debt benchmark Petrocaribe Stops PV of Debt-to-GDP Ratio a - - = 1 iU - - - C M M 2015 2017 2019 2021 2023 2025 2027 2029 2031 2033 2035 PV of Debt-to-Revenue Ratio 2/ - --- Page 101 --- HAITI Figure 2. Haiti: Indicators of Public Debt Under Alternative Scenarios, 2015-2035 1/ Baseline Fix Primary Balance Most extreme shock 1/ Historical scenario - - - Public debt benchmark Petrocaribe Stops PV of Debt-to-GDP Ratio a - - = 1 iU - - - C M M 2015 2017 2019 2021 2023 2025 2027 2029 2031 2033 2035 PV of Debt-to-Revenue Ratio 2/ - 2015 2017 2019 2021 2023 2025 2027 2029 2031 2033 2035 Debt Service-to-Revenue Ratio 2/ 2015 2017 2019 2021 2023 2025 2027 2029 2031 2033 2035 Sources: Country authorities; and staff estimates and projections. 1/ The most extreme stress test is the test that yields the highest ratio on or before 2025. 2/ Revenues are defined inclusive of grants. INTERNATIONAL MONETARY FUND 13 --- Page 102 --- Batista, Executive Director for Haiti, Statement by Paulo Nogueira Executive Director, Oliveira Lima, Alternate Executive Director and Ketleen Florestal, Advisor to the May 18, 2015 thank and staff for the we would like to management 1. On behalf of our authorities, continued engagement with Haiti. Recent Developments ofthe eighth review of the last 2. At the time of the Executive Board's discussion the Government of Haiti had already Extended Credit Facility (ECF) this past December, with the Fund and specified the priority indicated that it would want a successor arrangement staff were initiated in March 2015, less than Negotiations with areas for the new program. took office. Concurrently, the authorities were two months after a new Government including the shrinking budget funding from confronted with significant challenges, that had fallen rapidly. Repeated strikes were PetroCaribe, given its link to petroleum prices convened by unions in the transportation sector called from different sectors. Some ofthose, prices at the pump, became violent and to press the Government to reduce petroleum complicated the social and economic situation. continued to press ahead with politically-sensitive reforms, 3. The Haitian authorities with elections on all levels including despite the fact that 2015 is an electoral year and efficiency of public presidential. The reforms seek to enhance the transparency of the single treasury management, in particular with the full implementation fuel subsidies. expenditure of the electricity sector and to phase-out account, to improve the performance was exemplified by the completion of The authorities' commitment to fiscal sustainability mechanism for refined oil actions: (i) the adoption of an automatic price the two key prior starting in June 2015; and (ii) the adoption by products with regular price adjustments d'Haiti - EDH) of a revised budget with board ofthe public electricity company (Electricité substantial programmed savings. transformation of the Government'; s program lays the basis for a significant to external 4. The and reducing its vulnerability Haitian economy by enhancing its growth potential bottlenecks to growth and strengthen the fiscal shocks. Key program targets are to remove to pursue tax and fiscal administration framework. The authorities are also committed The authorities' reform package is policy to build sustainable fiscal conditions. and reforms as a way Besides phasing out untargeted fuel price subsidies and ambitious and comprehensive. the seeks to improve tax compliance upgrading the performance of EDH, program and the functioning of the cadastre, and to collection, to strengthen the legal framework enhance access to credit. Electricity Sector Reforms that there is a small window of opportunity to jumpstart the 5. The authorities consider of the IMF and several donors. As stated in reforms in the electricity sector, with the support ' reform package is policy to build sustainable fiscal conditions. and reforms as a way Besides phasing out untargeted fuel price subsidies and ambitious and comprehensive. the seeks to improve tax compliance upgrading the performance of EDH, program and the functioning of the cadastre, and to collection, to strengthen the legal framework enhance access to credit. Electricity Sector Reforms that there is a small window of opportunity to jumpstart the 5. The authorities consider of the IMF and several donors. As stated in reforms in the electricity sector, with the support --- Page 103 --- bottleneck to growth and a significant MEFP, the electricity sector has been both a key how the weak the and the selected issues paper have underscored fiscal drain. The staff report several aspects of economic life and social ofthe electricity sector is affecting also These performance and inefficiencies at EDH are highlighted. well-being. The sources oflosses producers and, until recently, weak include onerous contracts with independent power donors and within public entities. coordination among overhaul in their determination to achieve a complete 6. Our authorities wish to reiterate the reforms jeopardize vested interests and sector. However, as staff indicated, and the electricity resistance both domestically authorities know they will continue to face strong results the will and domestic ownership positive externally. They are confident that with political among donors and The authorities also look forward to better coordination can be achieved. by domestic and external stakeholders. an enhanced level of accountability committed to of petroleum at the pump, the authorities are has 7. As for the pricing are better targeted. The Government depoliticize the system and to ensure that subsidies that would shelter the from the World Bank to design a program sought technical support price increases in public of the population from significant vulnerable segments transportation. Monetary and Exchange Rate Policy to their commitments under authorities place great emphasis on adhering the 8. The Haitian of that, they have expressed concerns regarding the ECF program with the Fund. Because (NIRs). The concerns ofthe Haitian performance criterion (PC) on net international reserves prices since the close of reinforced by the rapid increase in petroleum of an authorities are from US$50 to US$65 per barrel; by expectations negotiations about six weeks ago, and by the prospects of a decrease in travel increase in food imports due to a recent drought; elections. inflows linked to uncertainties related to the upcoming about the limit the adjusters may impose on their 9. The authorities are also concerned The program takes into account take of additional external support. of capacity to advantage time of and sets up caps to the amount assistance that was confirmed at the negotiation those caps, external financing external financing that can be freely used. Beyond additional domestic financing to the central government will entail a reduction in the amount of net allowed in the program. On the debt sustainability analysis is considered this year to be at moderate risk of 10. According to staff's assessment, Haiti from high to moderate is However, staff warns that the change in classification Hence, debt distress. in the terms of trade. due to the fall in oil prices and ensuing improvement Our authorities share mostly oil decrease could be temporary. caution as the price find staff's staff recommends warranted in contracting debt. However, they the view that continued prudence is the upside risk from the increased considerations on the DSA unbalanced, because potential is considered this year to be at moderate risk of 10. According to staff's assessment, Haiti from high to moderate is However, staff warns that the change in classification Hence, debt distress. in the terms of trade. due to the fall in oil prices and ensuing improvement Our authorities share mostly oil decrease could be temporary. caution as the price find staff's staff recommends warranted in contracting debt. However, they the view that continued prudence is the upside risk from the increased considerations on the DSA unbalanced, because potential --- Page 104 --- economic activity in the United States, which would impact Haiti particularly through remittances, does not seem to have been considered. Conclusions 11. The Fund should support the authorities' efforts to undertake difficult reforms in an electoral year. At the time of the last Board discussion, Directors advised that future Fund engagements with Haiti be guided by the recommendations of the Ex Post Assessment of Longer-Term Program Engagement, including the need for a more realistic policy framework and greater ownership. As we have underlined on several occasions, full domestic ownership of an arrangement with the IMF requires that the authorities remain in the driver's seat while the Fund helps them marshal support for the program. 12. Haiti is a country in a fragile situation, member of the g7+ grouping. We believe that this is one of the instances in which the Fund could showcase its willingness to cater appropriately to the needs of this segment ofthe membership. With the reduction of PetroCaribe flows expected to be of about 50 percent, there is also a pressing need to develop innovative lending mechanisms that would ease the current financing constraints and allow Haiti to invest in a better future.