--- Page 1 --- MONETARY FUND INTERNATIONAL IMF Country Report No. 20/121 HAITI RELEASE; ARTICLE IV CONSULTATION-PRESS STATEMENT BY THE EXECUTIVE STAFF REPORT; AND April 2020 FOR HAITI DIRECTOR of the IMF holds bilateral discussions Under Article IV of the IMF's Articles Agreement, 2019 Article IV consultation with usually every year. In the context of the with members, been released and are included in this package: Haiti, the following documents have the views of the Executive Board as expressed during its A Press Release summarizing that concluded the Article IV 24, 2020 consideration of the staff report January consultation with Haiti. team of the IMF for the Executive Board's The Staff Report prepared by a staff discussions that ended on consideration January 24, 2020, following economic developments and policies. November 22, 2019 with the officials of Haiti on the staff report was information available at the time of these discussions, Based on completed on December 20, 2019. Annex prepared by the IMF staff. An Informational the World Bank. prepared by the staffs of the IMF and A Debt Sustainability Analysis updating information on recent developments. A Staff Statement by the Executive Director for Haiti. A Statement listed below will be separately released. The documents Selected Issues information and policy allows for the deletion of market-sensitive The IMF's transparency intentions in published staff reports and premature disclosure of the authorities' policy other documents. from Copies of this report are available to the public International Monetary Fund o Publication Services PO Box 92780 o Washington, D.C. 20090 (202) 623-7430 o Fax: (202) 623-7201 Telephone: Web: http/Awww.imf.org E-mail: publications@imforg Price: $18.00 per printed copy International Monetary Fund Washington, D.C. O 2020 International Monetary Fund -sensitive The IMF's transparency intentions in published staff reports and premature disclosure of the authorities' policy other documents. from Copies of this report are available to the public International Monetary Fund o Publication Services PO Box 92780 o Washington, D.C. 20090 (202) 623-7430 o Fax: (202) 623-7201 Telephone: Web: http/Awww.imf.org E-mail: publications@imforg Price: $18.00 per printed copy International Monetary Fund Washington, D.C. O 2020 International Monetary Fund --- Page 2 --- CM FUND MONETARY INTERNATIONAL International Monetary Fund 700 19th Street, NW USA Release No. 20/21 D.C. 20431 Press RELEASE Washington, FOR IMMEDIATE January 28, 2020 with Haiti 2019 Article IV Consultation Executive Board Concludes IMF Fund (IMF) concluded Monetary Executive Board of the International 24, 2020, the On January consultation with Haiti.' civil the Article IV 2019 political crisis and prolonged a protracted The crisis has taken a 2019, Haiti has been experiencing in the country. Since March down most economic activity exceeded 20 percent yearunrest that has at times shut vulnerable population: inflation 1.2 percent in fiscal the economy and the already contracted by an estimated the same toll on is estimated to have by 25 percent over on-year in September, output and the exchange rate depreciated increased, the fiscal 2019 (ending September 30), and the cost of energy subsidies The public year fiscal revenues have plummeted and domestic arrears rose sharply. period. As 3.8 of GDP in FY2019 the fiscal year. deficit widened to percent 40 percent to 47 percent over debt-to-GDP ratio jumped from The ministry of finance efforts to limit the deterioration. and, in considerable better control spending The authorities are making revenue collection and fiscal discipline and limit measures to improve the central bank to strengthen rates to is implementing with been its interest November, signed a new agreement The central bank has adjusting through the recession. of the government. the private sector monetary financing the same time trying to support contain inflation while at reforms, the outlook of good policies and comprehensive stabilization in 2020 without Absent sustained implementation assumption of some political remain negative this year and remains grim. Under the baseline growth would improve but slightly before reforms, to decline major political or economic term. Inflation is expected are primarily on the below 1.5 percent over the medium by 2025. Risks to the outlook of the current crisis, falling to below 10 percent important upsides. A resolution and return of eventually stability could bring able to reforms, downside but political committed and implement investment and potential growth. appointment of a new government community could lead to higher support from the international discussions with members, usually the IMF holds bilateral and discusses with officials IV of the IMF's Articles of Agreement, and financial information. a report, which 1 Under Article visits the country, collects economic to the staff prepares every year. A staff team developments and policies. On return headquarters. the country' 's economic discussion by the Executive Board. forms the basis for www.imf.org 202-623-7100 e Fax 202-623-6772 D.C. 20431 0 Telephone Washington, government community could lead to higher support from the international discussions with members, usually the IMF holds bilateral and discusses with officials IV of the IMF's Articles of Agreement, and financial information. a report, which 1 Under Article visits the country, collects economic to the staff prepares every year. A staff team developments and policies. On return headquarters. the country' 's economic discussion by the Executive Board. forms the basis for www.imf.org 202-623-7100 e Fax 202-623-6772 D.C. 20431 0 Telephone Washington, --- Page 3 --- Executive Board Assessment 2 staff They expressed concern about Directors agreed with the thrust of the appraisal. and Executive and stressed the urgency of restoring political the socio-political crisis in Haiti and tackling corruption. They called macroeconomic stability, addressing poverty and inequality, to address the country's stakeholders to work toward a broad-based national dialogue more inclusive growth. on all scope for much stronger and daunting challenges and realize the potential with donors and the Fund, including through Directors encouraged continued close cooperation Strategy as a basis for future Fund assistance, and welcomed the Country Engagement technical engagement. shifting scarce resources away from Directors stressed that severe fiscal constraints necessitate They underscored the importance spending toward social programs and investment. notional budget for FY2020. non-priority financing of fiscal deficits and preparing a revenues and reduce of limiting monetary authorities to focus on measures to boost domestic Directors encouraged the tax administration, prepare a resolution exemptions in the near term, while working to strengthen Directors commended the for budget arrears, and bolster public financial management. and stressed the need to plan on the new national plan for social protection, authorities for progress limited number of cash transfer programs. advance its approval and focus on a the anti-corruption policy priorities, including Directors underscored the urgency of updating strategy. They also committee envisioned in the 2009 anti-corruption of setting up the steering declaration system and conduct regular audits stressed the need to enforce the asset state-owned enterprises and other public entities. allow the exchange rate to adjust in an orderly fashion. Directors encouraged the authorities to monetary target, and encouraged the ahead, they recommended setting a quantitative the central Looking other institutional reforms. Directors supported monetary authorities to advance intermediation and inclusion, including via financial bank 's efforts to continue deepening fintech. sector will be crucial for fiscal reform of the energy Directors emphasized that well-sequenced by clear communications and sustainability and higher growth and must be accompanied the authorities to overhaul to offset the impact on vulnerable groups. They encouraged to reduce electricity costs, measures of EDH, work with stakeholders the management and performance and lower the related fiscal burden. the reliability and efficiency of energy supply, including improve to the economy's competitiveness, Broader structural reforms are needed improve bottlenecks, strengthen property rights, regulations, remove infrastructure efforts to streamline resilience to natural disasters is also a priority. and enhance governance. Building Chairman of the Board, summarizes the views of 2 the conclusion of the discussion, the Managing Director, as An of any qualifiers At is transmitted to the country's authorities. explanation Executive Directors, and this summary used in summing ups can be found here: 13522- . the reliability and efficiency of energy supply, including improve to the economy's competitiveness, Broader structural reforms are needed improve bottlenecks, strengthen property rights, regulations, remove infrastructure efforts to streamline resilience to natural disasters is also a priority. and enhance governance. Building Chairman of the Board, summarizes the views of 2 the conclusion of the discussion, the Managing Director, as An of any qualifiers At is transmitted to the country's authorities. explanation Executive Directors, and this summary used in summing ups can be found here: 13522- --- Page 4 --- Directors urged the authorities to take steps to improve the quality and timeliness of economic data, with the help of further Fund technical assistance. --- Page 5 --- Haiti: Selected Economic and Financial Indicators 1 Nominal GDP (2018): US$9.7 billion GDP per capita (2018): $890 Population (2016): 10.847 million Percent of population below poverty line (2012): 58 Estimated Projections 2017 2018 2019 2020 Output Real GDP growth (%) 1.2 1.5 -1.2 -0.4 0.9 Employment Unemployment (%) Prices Inflation, (end of period) (%) 15.4 13.3 20.1 17.5 14.5 Central Government Finances (In percent of GDP; unless otherwise indicated) Revenue and grants 17.7 17.3 13.6 13.4 14.2 Domestic Revenue 14.0 13.0 10.8 10.0 11.1 Grants 3.7 4.3 2.8 3.4 3.0 Expenditures 17.5 19.0 16.1 15.6 16.2 Current expenditures 12.2 12.7 12.5 11.5 11.4 Capital expenditures 5.3 6.2 3.6 4.1 4.8 Overall balance of the nonfinancial public sector, incl. grants? -0.9 -2.9 -3.8 -3.4 -3.1 Total public sector debt 38.3 39.9 47.0 46.1 44.9 Money and Credit Broad money (% change) 12.9 13.7 18.9 18.6 17.0 Credit to private sector (% change) 4.5 12.5 9.9 14.6 17.0 3-month BRH bond interest rate (%) 12.0 12.0 22.0 19.4 16.4 Balance of Payments (In percent of GDP; unless otherwise indicated) External current account balance (incl. official grants) -1.0 -3.9 -2.0 -0.9 -1.1 External current account balance (excl. official grants) -5.6 -7.9 -4.8 -3.2 -4.1 Foreign direct investment (FDI) 4.5 1.1 0.9 0.9 1.3 Reserves (in months of imports of the following year) 4.4 4.7 4.9 4.8 4.8 External public debt 24.2 23.5 27.4 25.4 24.2 Exchange Rate Real effective exchange rate (% change) (+ appreciation) 12.7 2.8 -10.8 Nominal GDP (millions of gourdes) 551,911 631,829 732,545 868,582 1,015,809 Nominal GDP (millions of U.S. dollars) 8,409 9,658 8,708 8,533 8,842 Sources: Ministry of Economy and Finance, Bank of the Republic of Haiti, World Bank, Fund staff estimates and 1/1 Fiscal years ending September 30. projections. 2/ Includes transfers to the state- -owned electricity company (EDH). .7 2.8 -10.8 Nominal GDP (millions of gourdes) 551,911 631,829 732,545 868,582 1,015,809 Nominal GDP (millions of U.S. dollars) 8,409 9,658 8,708 8,533 8,842 Sources: Ministry of Economy and Finance, Bank of the Republic of Haiti, World Bank, Fund staff estimates and 1/1 Fiscal years ending September 30. projections. 2/ Includes transfers to the state- -owned electricity company (EDH). --- Page 6 --- MONETARY FUND INTERNATIONAL HAITI FOR THE 2019 ARTICLE IV CONSULTATION STAFF REPORT December 20, 2019 team of the IMF for the Executive Board's consideration Staff Report prepared by a staff discussions with the Haiti authorities in 24, 2020. The staff report reflects 2019. lt on January available as of December 20, November 2019 and is based on the information and was and medium-term challenges and policy priorities focuses on Haiti near and resulted in unprecedented prepared before COVID-19 became a global pandemic markets. lt, therefore, does not reflect strains in global trade, commodity and financial priorities. The outbreak has of these developments and related policy the implications risks around the outlook. Staff is closely greatly amplified uncertainty and downside its impact and the the situation and will continue to work on assessing monitoring related policy response in Haiti and globally. KEY ISSUES frustration with high levels of corruption and inequality, Context: Driven by popular crisis and prolonged civil unrest. The Haiti has been experiencing a protracted political vulnerable population: output crisis has taken a toll on the economy and an already depreciated by 25 percent estimated 1.2 percent and the currency contracted by an 2019 while inflation exceeded 20 percent (y/y) against the U.S. dollar during fiscal year current account deficit is estimated to in September. With activity weak, the external inflows have dried up. The have shrunk to 2.0 percent of GDP while foreign capital arrears rose. worsened to 3.8 percent of GDP and domestic fiscal deficit stabilization in the political Outlook and risks: The baseline scenario assumes some reforms. This would allow situation by early-2020 but no major political or economic implementation of and in the absence of sustained growth to recover only gradually growth would remain low at about good policies and structural reforms, potential both domestic and external, 1.4 percent over the medium term. Downside risks, extreme natural disaster, drop remain elevated. A prolongation of political instability, of trade tensions would and/or a contraction in exports because in remittances, the absence of buffers and fragile social worsen the outlook, particularly given resolution and an appointed government able conditions. On the other hand, political international support and lead to fundamental reforms could attract to implement higher investment and potential growth. The challenge is to stabilize the macroeconomic Main policy recommendations: Staff encourage the authorities to continue situation in an unstable political context. financing by the central efforts to contain the fiscal deficit and its monetary their remain elevated. A prolongation of political instability, of trade tensions would and/or a contraction in exports because in remittances, the absence of buffers and fragile social worsen the outlook, particularly given resolution and an appointed government able conditions. On the other hand, political international support and lead to fundamental reforms could attract to implement higher investment and potential growth. The challenge is to stabilize the macroeconomic Main policy recommendations: Staff encourage the authorities to continue situation in an unstable political context. financing by the central efforts to contain the fiscal deficit and its monetary their --- Page 7 --- HAITI bank. Improving domestic revenue collection and redirecting current spending would help create space for much needed social and capital expenditures. Together with steps to strengthen the central bank's autonomy and legal framework, this would help reduce fiscal dominance. Other policy priorities include strengthening the social safety net, medium-term energy sector reform, and steps to tackle corruption and improve governance. Capacity development, enhanced cooperation with other development partners, and outreach with non-government stakeholders in Haiti would help raise ownership and support the implementation of staff's main recommendations. 2 INTERNATIONAL MONETARY FUND --- Page 8 --- HAITI D.C. and in Haiti during Discussions were held in Washington, Nicole Laframboise Approved By November 8-22, 2019. The IMF team comprised WHD), Patricia Alonso-Gamo Frederic Lambert, Rand Ghayad, Paola Aliperti (all (WHD) and Jeromin (head), Bellon (FAD), and Chiara Fratto (SPR). Ahmed Zorome (SPR) Matthieu and Gabriel Duvalsaint (local economist) Zettelmeyer (Resident Representative) in discussions in Haiti. Patricia assisted the team and participated meeting. Mr. Saraiva, Alonso-Gamo (WHD) joined the concluding and Mr. Pierre (OED) also participated in the meetings. Ms. Florestal, central bank Governor Dubois and Minister The IMF team met with of the of Finance Jouthe, and with senior officials, representatives Madina sector, civil society, other IFls, and academics. private assisted the team with logistics and Toshmuhamedova (WHD) contributed to the preparation of this report. CONTENTS -THE CHALLENGES OF A FRAGILE STATE BACKGROUND RECENT DEVELOPMENTS OUTLOOK AND RISKS MACROECONOMIC STABILITY POLICY DISCUSSIONS A. Fiscal Policy Exchange Rate, and Financial Sector Policies B. Monetary, C. Governance and Transparency D. The Social Safety Net E. Reform of the Energy Sector F. Statistical Issues STAFF APPRAISAL BOXES and Policies Since the 2018 SMP 1. Fund Relations Macroeconomic Stability. 2. Near-term Measures to Restore 3. The Fiscal Cost of Energy Subsidies FIGURES 2013-19 1. Real Sector Developments, 2. Fiscal Sector Developments, 2013-19 Sector Developments, 2013-19 3. Monetary 4. External Sector Development, 2013-19. 5. Social Indicators INTERNATIONAL MONETARY FUND 3 --- Page 9 --- HAITI TABLES 1. Selected Economic and Financial Indicators, FY2017-24 2a. Non-Financial Public Sector Operations, FY2017-24 (in millions of gourdes). 2b. Non-Financial Public Sector Operations, FY2017-24 (in percent of GDP) 3. Summary Accounts of the Banking System, FY2017-24 4a. Balance of Payments, FY2017-24 (in millions of US$) 4b. Balance of Payments, FY2017-24 (in percent of GDP) 5. Financial Soundness Indicators, June 2017-June 2019 ANNEXES I Country Engagement Strategy II. Risk Assessment Matrix III. External Sector Assessment IV. Proposals for Governance Reform V. Capacity Development Strategy, 4 INTERNATIONAL MONETARY FUND ancial Public Sector Operations, FY2017-24 (in percent of GDP) 3. Summary Accounts of the Banking System, FY2017-24 4a. Balance of Payments, FY2017-24 (in millions of US$) 4b. Balance of Payments, FY2017-24 (in percent of GDP) 5. Financial Soundness Indicators, June 2017-June 2019 ANNEXES I Country Engagement Strategy II. Risk Assessment Matrix III. External Sector Assessment IV. Proposals for Governance Reform V. Capacity Development Strategy, 4 INTERNATIONAL MONETARY FUND --- Page 10 --- HAITI OF A FRAGILE -THE CHALLENGES BACKGROUNDSTATE and history is marked by political instability, weak governance 1. Haiti's recent and four coups d'état since the Duvalier corruption. There have been 18 presidents sustained widespread Because of political instability and weak institutions, dictatorship ended in 1986. Since it disbanded its army in 1995, Haiti has implementation of policies has proved challenging. order and train the police force, although forces to maintain relied heavily on UN peacekeeping planned-to a smaller, mostly administrative was downsized in October-as the UN presence moved to reconstitute its own military. office. The government recently Over 58 percent of the population live below 2. Poverty is widespread and inequality high. income has stagnated since 2015 at line (US$2.41/day) and real per capita levels, with the national poverty of human development remain at distressing around US$870 (2018). Other indicators about 63 of the population with at 63 years, literacy at 62 percent, and only percent share was held by the life expectancy As of 2012, about half of the country's income access to safe water (2015). conditions has driven rising social and the lack of opportunity to improve living burden of high top 20 percent severe strains on the population given the discontent. The recent crisis has placed and of basic goods and services inflation on the poor shortages degradation contributes to Natural disasters are frequent and environmental earthquake 3. disasters hit Haiti during 1990-2017, including a devastating fragility. Some 82 natural and deforestation aggravate the in 2010. Weak infrastructure, anarchic urban development, Environmental degradation hinders social vulnerability to earthquakes and hurricanes. water pollution, and health country's including causing lower agriculture yields, and economic development, epidemics. and barriers to entry high. A growth and capital accumulation are low, 4. Productivity supply, weak regulations, and an under-developed low level of human capital, limited electricity Annual GDP growth averaged 1.4 percent from financial system have hindered private investment. and slightly below the average of FY2018, near the rate of population growth among a FY2015 through sector resources and capital are highly concentrated 1.5 percent from 1996-2017. Private during the Duvalier era through monopoly relatively small but powerful group- -much acquired rights and exclusive import licenses.2 Economic growth could come from to be explored. 5. There are growth opportunities environmental remediation, tourism, mining, several sectors, including construction, agriculture, services. social structures alternative energy, and Community-based and positive telecom, light manufacturing, a potential source of skills, resources are strong, and the Haitian diaspora presents data refer to the fiscal year ending September 30th, 1 In this report, annual II Country Diagnostic, May 2015. "Haiti: Towards a New Narrative Systematic 2 World Bank Group, INTERNATIONAL MONETARY FUND 5 growth could come from to be explored. 5. There are growth opportunities environmental remediation, tourism, mining, several sectors, including construction, agriculture, services. social structures alternative energy, and Community-based and positive telecom, light manufacturing, a potential source of skills, resources are strong, and the Haitian diaspora presents data refer to the fiscal year ending September 30th, 1 In this report, annual II Country Diagnostic, May 2015. "Haiti: Towards a New Narrative Systematic 2 World Bank Group, INTERNATIONAL MONETARY FUND 5 --- Page 11 --- HAITI of political stability and policy influence. To develop this potential, however, some degree continuity are needed. RECENT DEVELOPMENTS significantly over the past year. Following the 6. Economic conditions have deteriorated authorities' request for support and Monitored Program (SMP), staff responded to the after 2018 Staff March 2019 (Box 1). However, this could not proceed agreed ad referendum on a program in failure to ratify a replacement; subsequent attempts the resignation of Prime Minister Céant and elements, but poverty, inequality, and been The political crisis has many to have also unsuccessful. of public funds under the Petrocaribe program-appear corruption-most recently the misuse from passing budget laws for unrest. The political crisis has prevented the government and public be fueling reforms, and adversely affected revenue collection FY2019 and FY2020, impaired policy by 1.2 percent in FY2019 while supply shortages spending. Output is estimated to have contracted (y/y). External financial support helped push inflation above percent and currency depreciation in FY2019 and delayed project loans. has collapsed, with zero budget support Relations and Policies Since the 2018 SMP Box 1. Fund delays of Article IV programs since 2015 led to repeated terminated A series of on-off Fund-supported (ECF) approved in May 2015 consultations. The Extended Credit Facility arrangement 2016, in the aftermath of Hurricane Matthew, the without completion of the first review. In November Credit Facility (RCF). An SMP agreed in 2018 aimed SDR 30.715 million under the Rapid IMF approved upper credit tranche arrangement. to pave the way for a possible though reforms in the energy in August 2018 and achieved progress, d'Haiti (EDH) rose but The 2018 SMP expired rate of the state-owned company Électricité sector were incomplete. The billing of bidders to replace expired electricity supply fell short of the 50 percent target and the shortlisting eliminated fuel subsidies in July 2018 without contracts was late. Moreover, the government advance. This was followed by riots, reversal of the implementing planned mitigating measures in decision, and resignation of the prime minister. (Pacte de Gouvernance management did improve. A January 2019 agreement and ministry of finance Macroeconomic between the Banque de la République d'Haiti (BRH) of international Économique et Financière) helping to slow the pace to limit BRH financing of the fiscal deficit was implemented, negotiations, the authorities also eliminated the oil reserve decline. As recommended during program des Aides Publiques au Développement (BMPAD). import monopoly of the state Bureau de Monétisation (the Politique Nationale de Protection et de Efforts to draft a broad-based national plan on social policy information system (SIMAST) have Sociale-PNPPS) and expand coverage of the beneficiary Promotion continued despite political turbulence. for FY2019 was not approved by Unfortunately, other policies were disrupted. The budget While liberalization of oil imports was a parliament and no budget has been submitted for FY2020. on time, which has led to fuel shortages step forward, the government failed to pay fuel companies in the energy sector. and budget arrears and, as noted above, insufficient progress increased, the fiscal deficit widened. The 7. As revenues collapsed and energy subsidies FY2019 rose to an estimated 3.8 percent of GDP deficit of the non-financial public sector (NFPS) in drop in revenues in real terms, of GDP in FY2018, largely due to a 22 percent against 2.9 percent fixed prices in gourdes, and losses of the electricity increase in fuel subsidies to maintain from 4.6 to an support to the energy sector increased EDH. Estimates of total government company MONETARY FUND 6 INTERNATIONAL the fiscal deficit widened. The 7. As revenues collapsed and energy subsidies FY2019 rose to an estimated 3.8 percent of GDP deficit of the non-financial public sector (NFPS) in drop in revenues in real terms, of GDP in FY2018, largely due to a 22 percent against 2.9 percent fixed prices in gourdes, and losses of the electricity increase in fuel subsidies to maintain from 4.6 to an support to the energy sector increased EDH. Estimates of total government company MONETARY FUND 6 INTERNATIONAL --- Page 12 --- HAITI capital spending slashed domestical-financed 6.5 percent of GDP. In response, the government 10 percent in nominal terms. Despite the two-thirds and cut spending on goods and services by 3.0 points of by spending contracted by percentage jump in energy-related transfers, government of GDP, fuel shortages occurred, and external GDP. Domestic arrears though surged to 3.7 percent of GDP at end- September. oil company) reached 0.4 percent arrears (to a foreign Haiti: Annual Fiscal Losses from the Energy Sector FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 FY2013 10,253 8,651 9,941 11,662 14,060 Electricity losses (in millions of gourdes) 9,294 9,979 395 4,297 10,469 17,222 33,331 6,892 7,862 Fuel losses (in millions of gourdes) 4.6 2.5 2.7 3.7 4.6 6.5 Total losses of the energy sector (% of GDP) 4.4 Source: National Authorities and IMF staff calculations. debt jumped by and arrears accumulation, public 8. As a result of currency depreciation About 58 percent of public points to 47 percent of GDP at end-September." analysis 7 percentage rate valuation effects. The debt sustainability debt is external and subject to exchange despite a high risk of debt distress related nonetheless shows that public debt is still sustainable, natural disasters. fragilities and exceptional vulnerability to to institutional monetary financing of the The authorities succeeded in partially containing total 9. deficit and lower external financing pushed governmenti in FY2019. In FY2018, the higher GDP. In FY2019, BRH financing remained within financing by the BRH of the NFPS to 4.1 percent of (henceforth "Pacte, I Box 1) but inflation set in the January 2019 Pacte de Gouvernance as well as the range from the 2018 surge in BRH credit to the government on BRH rose due to a lagged impact of this financing by raising interest rates supply shortages (food). The BRH sterilized part and reducing net foreign 400-1000 basis points in June (depending on the maturity) and net bonds by by 26 percent during the fiscal year assets. Despite these efforts, base money grew 4 The BRH cut rates on BRH bonds international reserves (NIR) fell to US$649 million in September. sector after a few months of on November 15th to support the private by 500-700 basis points "peyi lock" (nation-wide lock-down). balance deficit has narrowed but the overall external 10. The external current account estimated to have shrunk from 3.9 percent of GDP The current account deficit is but also to weak has deteriorated. in FY2019 owing mostly to higher remittances in FY2018 to 2.0 percent of GDP affected by social unrest while net capital import growth. The tourism sector has been negatively by more than 25 percent in have mostly dried up. The exchange rate depreciated inflows and FDI stable between June-November. the first 9 months of FY2019 but was considerable efforts to limit the deterioration. The 11. The authorities are making to present a budget for 2020, despite the of finance announced in October its intention ministry to the central bank of 12.2 percent of GDP. 3 This includes the debt of the government reserves by US$68 million at end-September resulted in a downward revision of gross 4 A methodological change revised accordingly (Table 4). 2018. Historical series were INTERNATIONAL MONETARY FUND 7 between June-November. the first 9 months of FY2019 but was considerable efforts to limit the deterioration. The 11. The authorities are making to present a budget for 2020, despite the of finance announced in October its intention ministry to the central bank of 12.2 percent of GDP. 3 This includes the debt of the government reserves by US$68 million at end-September resulted in a downward revision of gross 4 A methodological change revised accordingly (Table 4). 2018. Historical series were INTERNATIONAL MONETARY FUND 7 --- Page 13 --- HAITI decision first announced in February to end end of the parliamentary session, and reiterated its collection. 5 The ministry also proposed in order to boost revenue most customs duties exemptions such as a rise in the price of aviation gasoline, short-term measures to contain energy subsidies, the temporary suspension of subsidies vehicles to propane, the conversion of public transportation the by power producers for overand collection of amounts allegedly due government Pacte to limit financing to EDH, the BRH and ministry of finance signed a new invoicing. On November 27, about 1.2 percent of GDP. of the deficit for FY2020 to 10 billion gourdes, affected by high that the banking system was negatively 12. Available data suggests loans (NPLS) rose rapidly in 2019, weak domestic demand. Non-performing interest rates and of banking sector stability risks. Banks which suggests the need for a cautious assessment and financial inclusion. The sector but play a limited role in the economy dominate the financial and dollars) has stabilized at around sector credit to GDP (in both gourdes on ratio of private remains high on average, with return equity Profitability assessed in local currency as have 19.7 percent. 2018 to 21.1 percent in June 2019 provisions declining from 23.9 percent in September assets was 21.7 percent in than NPLS. Regulatory capital to risk-weighted are increased more slowly Risks from currency mismatches well above the regulatory minimum (12 percent). to June 2019, limit banks' net open foreign exchange position limited as current prudential regulations more assets than liabilities in foreign of equity and the two systemic banks report and relatively 2.0 percent from the concentrated lending portfolios currency. The main vulnerabilities come underdeveloped credit risk management practices. 2,300 Reserves and Exchange Rate 75,000 Monetary Financingand Inflation 67,500 2,200 60,000 2,100 52,500 45,000 2,000 37,500 30,000 BRH net claims on central 1,900 Gross international reserves (US$ 22,500 government (millions of gourdes) 5 millions) 15,000 CPIi inflation, yly, eop, percent 1,800 Gourde/USD exchange rate, eop (RHS) 7,500 (RHS) 1,700 a - 16 o 2 9 67,500 2,200 60,000 2,100 52,500 45,000 2,000 37,500 30,000 BRH net claims on central 1,900 Gross international reserves (US$ 22,500 government (millions of gourdes) 5 millions) 15,000 CPIi inflation, yly, eop, percent 1,800 Gourde/USD exchange rate, eop (RHS) 7,500 (RHS) 1,700 a - 16 o 2 9 16 o 6 6 Sources: National Authorities and IMF staff calculations. OUTLOOK AND RISKS and comprehensive reforms, sustained implementation of good policies 13. Absent The baseline scenario assumes some political medium-term growth prospects remain grim. This would allow the stabilization in FY2020 but not enough to deliver material progress. remain negative at -0.4 percent. for FY2020 but growth would formulation of a notional budget the last legally approved Budget Law. budget, the law directs the state to implement 5 In the absence of an annual had reverted to the 2017/18 Budget Law. As of October 1, the government INTERNATIONAL MONETARY FUND --- Page 14 --- HAITI growth under the baseline is projected to Without measures to boost productivity, potential 6 External capital flows are expected to decrease remain below 1.5 percent over the medium term. and inflation would ease to 17.5 percent further in 2020 before recovering in subsequent years Short-term measures to contain energy by end-2020, falling to below 10 percent by 2025. in the fiscal deficit to (y/y) further cuts would imply a reduction subsidies combined with spending thereafter. Fiscal policy remains severely of GDP by 2021 where it would stabilize for several 3.1 percent and would need to rely on accumulation of arrears constrained by a lack of financing to recover somewhat with a to close the gap. Beyond 2020, tax revenues are expected such as suspension of all tax years collection and boost from recent measures normalization of revenue Fiscal losses to the energy sector except for those covered by treaties and diplomats. fuel prices and exemptions in real terms in line with international as a share of GDP would decline gradually remain above the long-term average of about modest measures to reduce EDH losses, but would deficit would shrink to 0.9 percent of of GDP (Table 2). The external current account that 3.0 percent remain weak. The external sector assessment suggests GDP in 2020 as demand and imports weaker than medium-term fundamentals and Haiti's external position at present is moderately desired policies (Annex II).7 could bring important upsides (Annex II). 14. Risks are on the downside, but stability and security problems, little economic Internal risks include a continuation of political instability of the current crisis, extreme natural disasters. On the upside, a resolution the international reform, and committed to reform, and return of support from to appointment of a government growth. Externally, Haiti is vulnerable community could lead to higher investment and potential possibly by the termination of oil price shocks and a reduction in remittance flows, triggered a slowdown in the U.S. and Protected Status" of Haitian nationals in the U.S. or the U.S. HOPE Act, "Temporary cancellation of trade preferences, for example Canada. In an adverse scenario, FDI outflows in the textile sector, the main thriving would hurt Haitian exports and could lead to export sector. Authorities' Views baseline growth projection and risk The authorities broadly agreed with the staff's of alternative, more 15. would benefit from the presentation assessment. They indicated the report and unprecedented duration of the current positive macro scenarios. They emphasized the severity indicated that the political crisis was a crisis, which is forcing them to rethink existing plans. They could not be resolved independently of relentless poverty and inequality in Haiti and is the result of the A particularly worrying development the latter, and which would require external support. role of armed gangs. That said, they agreed deterioration of the security situation and growing of activity in early-2 2020 could lead to a resolution to the political situation and resumption in that a trajectory than forecast by staff. They emphasized rebound and would support a higher growth natural disasters. It is slightly above projected population 6 This number accounts for the average cost of likely GDP. growth, resulting in a modest increase in per capita not improve, the current account however, that desired policies would worsen, 7 The positive policy gap means, structural competitiveness problems. deficit, suggesting significant INTERNATIONAL MONETARY FUND 9 of the security situation and growing of activity in early-2 2020 could lead to a resolution to the political situation and resumption in that a trajectory than forecast by staff. They emphasized rebound and would support a higher growth natural disasters. It is slightly above projected population 6 This number accounts for the average cost of likely GDP. growth, resulting in a modest increase in per capita not improve, the current account however, that desired policies would worsen, 7 The positive policy gap means, structural competitiveness problems. deficit, suggesting significant INTERNATIONAL MONETARY FUND 9 --- Page 15 --- HAITI should be the priority objectives of any reform particular that creating jobs and boosting growth program. MACROECONOMIC STABILITY POLICY DISCUSSIONSpolicies to limit the economic deterioration in the Discussions focused on: (î) immediate and tackle corruption; environment and build capacity, strengthen governance, current in political stability. medium-term policies that would require improvements and (ii) by the current political the serious challenges to implementation posed that would Staff recognize was on short-term measures and security situation. As such, the emphasis with capacity building technical be feasible under the current circumstances, supported policy reforms, staff assistance (TA) from the Fund. In addition to fiscal and monetary net and authorities also focus on strengthening the social safety recommended the reforming the energy sector. A. Fiscal Policy authorities should prepare and publish a budget 16. As an immediate priority, the fiscal stability, the government needs a framework for FY2020. As a first step toward restoring constraints. The notional budget with a deficit target consistent with financing (119) notional budget domestic revenues by strengthening tax administration should include measures to stabilize three main taxes-income, sales (taxe sur le Exemptions under the and reducing tax expenditures. to at least 2.6 percent of GDP.8 The framework chiffre d'affaires), and import duties -amount stock of budget arrears. In the absence of should also include a plan for the resolution of the deficit of the NFPS of 3.4 percent of obvious financing sources, staff project a budget guidance or debt amortization, would be met by domestic GDP in FY2020. Gross financing needs, including the Pacte, and further arrears accumulation the central bank up to the limit under debt issuance, (123-24, Tables 2a-b). target for the NFPS of 2.0 percent staff recommend a deficit 17. Over the medium-term, that BRH financing of about 1.2 percent of of GDP. This target is consistent with staff estimates assuming that the money base grows at the not increase inflation in the medium term, would cover GDP would loans of about 0.8 percent of GDP per year same rate as nominal GDP. Net project Staff estimate that a target of 2.0 percent of GDP remaining financing needs under this framework. the medium term, leaving some room to would allow the debt ratio to decrease slightly over accommodate adverse shocks. significantly increasing domestic revenue 18. Reaching even that goal will require of the Directorate General of Taxes (DGI) strengthening the capacity collection. Staff recommend organizational structure, Administration (AGD), establishing a function-based risks, and the Customs information to detect compliance enhancing their data exchange and use of third-party Efforts to advance of large taxpayers, and reducing tax expenditures. consolidating the registry Haiti -European Union, France, Haiti (April 2019). 8 Évaluation de dépenses fiscales en 10 INTERNATIONAL MONETARY FUND . significantly increasing domestic revenue 18. Reaching even that goal will require of the Directorate General of Taxes (DGI) strengthening the capacity collection. Staff recommend organizational structure, Administration (AGD), establishing a function-based risks, and the Customs information to detect compliance enhancing their data exchange and use of third-party Efforts to advance of large taxpayers, and reducing tax expenditures. consolidating the registry Haiti -European Union, France, Haiti (April 2019). 8 Évaluation de dépenses fiscales en 10 INTERNATIONAL MONETARY FUND --- Page 16 --- HAITI increase the use of online tax payments should also computerization of customs operations and continue (see Annex IV). modernizing tax policy. They should follow through 19. The authorities should continue adopted in March 2018. In addition to drafting of the tax reform roadmap needed with implementation Tax Code and Procedure Code, other measures and advancing adoption of the new framework for municipal taxation and, as noted include excise tax reform, improvement of the eventually a transition from the These reforms, including above, reductions in tax expenditures. over the medium term if properly sequenced current sales tax to a VAT, should increase revenues and implemented. and social should be reallocated to growth-enhancing capital 20. Current expenditures on goods and services need to be spending. The public-sector wage bill and spending with attrition, adopting a price reference rationalized, including by adjusting the public workforce controls (122). Spending of goods and services, and better enforcing spending list for procurement of total spending, above the regional average. on goods and services represents 20 percent need to be eliminated over time after mitigating Transfers to the loss-making energy sector will of reform on the poor (Section C). measures are taken to compensate the impact (PFM) would improve governance and public finance management Haiti should 21. Strengthening funds. In line with TA recommendations, reduce the scope for misuse of public Account (TSA) to all ministries, autonomous coverage of the Treasury Single of continue expanding could be implemented regardless Other TA recommendations agencies, and public enterprises. spending procedures that turmoil, including ending recourse to "exceptional" fiscal framework the political should also adopt a medium-term undermine cash management. The authorities anchor. This would aid in annual budget (MTFF) with the NFPS deficit target as the main the to sustain a stronger pace stronger fiscal discipline, and allow government of fiscal formulation, impose the overall deficit in line with the medium-term goal of public investment while keeping providing TA in these areas. The Fund stands ready to continue sustainability. Authorities' Views determination to put in place an appropriate budget. 22. The authorities reiterated their obtain parliamentary approval, they are However, given the technical difficulties they face to for the purposes of framework that would be adopted by the government formulating a budget They stressed that security problems and "peyi expenditures and cash management. and tax and customs programming from physically delivering tax payments, lok" seriously impeded taxpayers reforms was also stopped. That said, they officials from going to work. Progress on revenue and took note of staff's short-term concurred with the need to raise domestic revenues additional measures underway to tax administration. They highlighted to suggestions to strengthen including exploring options to reduce transfers financing of the NFPS deficit, such reduce monetary to staff's baseline projections, sector that could generate more savings compared refunds from independent the energy reduction in transfers to EDH and seeking to set as negotiating a temporary sur-facturation (over-invoicing). They would prefer producers (IPPs) related to alleged power INTERNATIONAL MONETARY FUND 11 staff's short-term concurred with the need to raise domestic revenues additional measures underway to tax administration. They highlighted to suggestions to strengthen including exploring options to reduce transfers financing of the NFPS deficit, such reduce monetary to staff's baseline projections, sector that could generate more savings compared refunds from independent the energy reduction in transfers to EDH and seeking to set as negotiating a temporary sur-facturation (over-invoicing). They would prefer producers (IPPs) related to alleged power INTERNATIONAL MONETARY FUND 11 --- Page 17 --- HAITI surrounding growth and deficit target to account for the uncertainty a range for the medium-term investment projections. Near-term Measures to Restore Macroeconomic Stability Box 2. Fiscal: notional budget for 2020, as announced in October. Prepare and publish a and reduce tax exemptions. Remove customs duties exemptions Further rationalize non-essential spending. Prepare a plan for the resolution of arrears. Monetary: between the BRH and the ministry of finance. Enforce the new Pacte de Gouvernance Reduce base money growth. Governance: under the 2009 National Anti-Corruption Strategy, with Set up the steering committee envisaged independent representatives from civil society. officials. enforce the asset declaration system for senior public Strictly Social Protection: Formally adopt the PNPPS. Set up a robust cash-transfer distribution system. (for families with young children). Design and launch a cash-transfer pilot-program Energy Sector Reform: of EDH, including billing and collection. Overhaul the management and performance producers in a transparent manner. Renegotiate contracts with independent Rate, and Financial Sector Policies B. Monetary, Exchange a financing gap will persist. Staff While the Pacte aims to address fiscal dominance, financing of the 23. fiscal discipline and limit monetary commend the renewal of the Pacte to maintain external financing support not with the difficult economic situation, a financing deficit. Unfortunately, debt, staff estimate there would remain available, and a shallow market for domestic accumulation under the baseline (Table 2). Staff of 3.1 percent of GDP in 2020-met by arrears that this approach, gap and on balance, judged assessed the trade-off of different approaches least-worst option since it would financing of the deficit, was the less compared to massive monetary power of the poor, and would pose lower inflation thereby less erosion of purchasing of arrears imply At the same time, the negative consequences risk to macro and financial stability. of goods like fuel, interruptions in accumulation are non-trivial and likely to involve shortages in fiscal policy. In this lower growth, and erosion of confidence and limit public services like electricity, authorities to mobilize revenues in the near-term regard, it will be critical for the fiscal expenditures until policy reforms can occur. target should become the policy further ahead, a quantitative monetary to finance the 24. Looking declines. This would help the BRH resist pressure anchor as fiscal dominance beyond those laid out in its policy the exchange rate for reasons government or support with the development of a secondary market for framework. The BRH requested TA to help work on the transition to IFRS, amendments debt securities but should also advance and foreign exchange government in foreign reserve management to the central bank law, improvements 12 INTERNATIONAL MONETARY FUND until policy reforms can occur. target should become the policy further ahead, a quantitative monetary to finance the 24. Looking declines. This would help the BRH resist pressure anchor as fiscal dominance beyond those laid out in its policy the exchange rate for reasons government or support with the development of a secondary market for framework. The BRH requested TA to help work on the transition to IFRS, amendments debt securities but should also advance and foreign exchange government in foreign reserve management to the central bank law, improvements 12 INTERNATIONAL MONETARY FUND --- Page 18 --- HAITI of the quality of monetary statistics-with regulation, and development and strengthening reserves consistent with IMF guidelines. calculation of foreign exchange should be limited to instances of disorderly market 25. Foreign exchange interventions the exchange rate to adjust in an orderly fashion, conditions. In recent years, the BRH has allowed in remittances while using prudential in response to external shocks like a drop risk. While selling reserves to limit banks' vulnerability to forex liquidity measures, including reserve requirements, the second half of 2019, intervention should the exchange rate has been remarkably stable during in the short term, given the volatility or stabilizing market expectations be limited to smoothing to consumer prices. large and rapid exchange rate pass-through Credit to the intermediation are needed to support growth. 26. Improvements in financial 33 percent of the adult population has an about 19 percent of GDP, only to private sector represents (Findex), and 75 percent of bank lending goes only account at a formal financial institution framework, including contract This reflects weaknesses in the legal and institutional borrowers. between banks. With investment in infrastructure enforcement, and limited competition would be critical for raising access to finance connectivity, developing fintech and mobile banking by the BRH as part of its 2015 financial inclusion. These efforts could be supported and promoting National Financial Inclusion Strategy. assessment of the BRH was completed in assessment. An update safeguards Fiscal dominance 27. Safeguards continues to face significant safeguards risks. 2019, noting that the central bank reforms are required to strengthen its autonomy has strained its financial position and legislative While the BRH has taken and curb financing of the government. and governance arrangements annual audits, measures are still needed to reinforce steps to reduce delays in completion of its transitioning to International Financial and transparency, including by controls over financial accountability and tightening Standards (IFRS), revamping foreign reserves management, been initiated and the Reporting Steps towards transition to IFRS have the reporting of monetary statistics. amendments to the central bank law. BRH requested Fund TA to prepare legislative Authorities' Views faced in the conduct of monetary policy in The authorities discussed the challenges of deficit 28. concurred with staff's assumptions on the composition the current environment. They levels under the Pacte in order to avoid intend to keep BRH financing at agreed rate and financing as they and direct impact on the exchange excess liquidity creation given the high pass-through smaller, and the risk of arrears addressed since inflation. In their view, the financing gap would be would limit fiscal financing needs. Their and controls in place they expect that efforts underway private financing by accelerating reforms to medium-term strategy aims to crowd in domestic that its reaction function securities. The BRH explained deepen the market for government than on money supply as the high dollarization currently puts more weight on the exchange rate continue to view excessive exchange complicates quantitative money targeting. They in the market as of deposits with staff on the need to intervene rate fluctuations as undesirable and agreed the BRH is committed to volatility. With regards to banking supervision, needed to avoid excess INTERNATIONAL MONETARY FUND 13 expect that efforts underway private financing by accelerating reforms to medium-term strategy aims to crowd in domestic that its reaction function securities. The BRH explained deepen the market for government than on money supply as the high dollarization currently puts more weight on the exchange rate continue to view excessive exchange complicates quantitative money targeting. They in the market as of deposits with staff on the need to intervene rate fluctuations as undesirable and agreed the BRH is committed to volatility. With regards to banking supervision, needed to avoid excess INTERNATIONAL MONETARY FUND 13 --- Page 19 --- HAITI and to advancing reforms to promote financial continuing the transition to risk-based supervision business and moving forward with Fintech particularly raising access to finance for small inclusion, innovations. C. Governance and Transparency Haiti despite the authorities' prior Governance weaknesses continue to plague enhancing 29. (Annex IV). Notwithstanding some progress commitments to combat corruption to PFM, the draft law aimed at strengthening and transparency, notably with regard was never submitted to accountability de Lutte contre la Corruption, or ULCC) the anti-corruption unit (Unité implementation of the 2009 anticommittee tasked with monitoring parliament and the steering the anti-corruption framework is not corruption strategy was never established. Overall, powers and financial means to corruption. Relevant agencies lack the legal is limited. Staff adequately deterring and sanction of corruption offenses fulfill their mandates and the prosecution recommend revamping the anti-corruption priorities Governance Issues in Haiti and setting up the steering committee with CPIA accountability, transparency, and from independent members of civil corruptioni inthe participation The asset public sector society to monitor implementation. officials should CPIA quality and of declaration system for senior public AMUCFT Effectiveness measures of financial budgetary management be implemented in line with international best practices, including by verifying the accuracy of the CPIA quality of public sanctioning omissions and false Rule of law administration declaration, reporting, and ensuring public access to CPIA business Haiti -LICS declarations. Anti-money laundering (AML) measures environment regulatory would support anticorruption efforts, particularly by Sources: World Bank, Word Ratings Developmenti andIMF Indicators: staff cakulations Worwide Govemance elndikcators FATF, banks' implementation of due Consolidated Note Variables Assessment havebeen normalzed defined (0-lowest asthose with leveVrank. aGNIP Sshighest per capita, cakculated leveVrank). using strengthening exposed Lowi the Worid nkconecounseuoaes Bank kAtlas method, of$1025 calculatedusing or less in 2018. available For the data effectiveness from Burkinafaso, of (AMUCFT Ethiopia, diligence requirements on politically measures Haiti Madagascar, the average Tajkistan eofliCswas and Uganda and enhancing transparency by making persons information available. related beneficial ownership barriers to entry and rigidities that create reforms should aim at reducing 30. Regulatory Reforms are needed to better guarantee opportunities for rent seeking and corruption. A more level-playing field is and reduce business and import monopoly powers. sector growth. property rights investment, and promote private needed to stimulate competition, increase foreign infrastructure projects that tackle the efforts should be accompanied by select These regulatory investment to improve the power grid and telecommunicaworst physical bottlenecks and public tions network. Authorities" Views and governance agreed that rooting out corruption long-standing the 31. The authorities sustainable growth. They highlighted problems is a priority and essential for ensuring the strengthening of the antiachieved since the 2009 national strategy, including They described progress implementation challenges. corruption legal framework, although they recognized decade. More generally, they agreed underway to prepare a new strategy for the next the process 14 INTERNATIONAL MONETARY FUND investment to improve the power grid and telecommunicaworst physical bottlenecks and public tions network. Authorities" Views and governance agreed that rooting out corruption long-standing the 31. The authorities sustainable growth. They highlighted problems is a priority and essential for ensuring the strengthening of the antiachieved since the 2009 national strategy, including They described progress implementation challenges. corruption legal framework, although they recognized decade. More generally, they agreed underway to prepare a new strategy for the next the process 14 INTERNATIONAL MONETARY FUND --- Page 20 --- HAITI rights, reduce red tape, and create a would benefit from reforms to strengthen property that Haiti level playing field for all businesses. D. The Social Safety Net on the new policy PNPPS, despite Staff commend the authorities for their progress of social affairs and 32. is a national initiative led by the ministry the political turmoil. The PNPPS cooperation, and involving the ministries of labor (MAST), the ministry of planning and external organizations. A draft was submitted education, and women's' condition, and other public be for health, 2019 and a revised draft was expected to presented for national consultation in June and approach is a end-2019. This inclusive comprehensive approval by the Council of Ministers by effective social safety net-a prerequisite for good starting point to prepare a home-grown, more authorities to follow through with the of other structural reforms. Staff urge the the success timetable for finalizing the PNPPS. overlap and boost coverage, The goals of the PNPPS are to reduce program with 33. of is complex and ineffective, effectiveness, and ownership. The existing array programs Selected Issues Papers (SIP) on overlaps and weak delivery systems (see and inadequate coverage, the approach of eliminating some programs social protection and inequality). Staff support the authorities to focus on a limited giving MAST the primary coordination role but encourage that are simple in design and unconditional, quasi universal cash transfer programs staff number of countries. In coordination with the World Bank, have proven effective in other low-income as soon as possible. They should the authorities to design and launch a new pilot program which can be urge of the beneficiary information system (SIMAST), The continue expanding the coverage the delivery of health and education services. used to identify beneficiary groups and improve external support is phased out: while PNPPS should be based on a sustainable funding strategy as the PNPPS, funding for social financial flows may launch a pilot program and complement external from domestic budget resources. protection should come primarily for the require the development of a strong system 34. Effective transfer programs of cash transfers should be clarified quickly distribution of benefits. Methods for the distribution Hurricane Matthew and successful lessons learned from programs set up after Haiti by drawing on technological and financial infrastructures. examples in other countries, adapted to prevailing The mechanism chosen should from the World Bank and other partners. could draw on expertise and evaluation involving independent nonbe subject to regular and transparent monitoring the risks of mismanagement. representatives in order to reduce government Authorities' Views reduction is the number one priority and a The authorities stated clearly that poverty that the lack of 35. future reforms. They share staff's diagnostic prerequisite for the success of any has led to overlap and inefficiencies. They coordination between various programs and providers by employment programs the social safety net should be accompanied could stated that strengthening that unconditional cash transfer programs and stronger growth. They expressed concern consequences. The BRH scarce resources and lead to unintended hinder their ability to target INTERNATIONAL MONETARY FUND 15 Authorities' Views reduction is the number one priority and a The authorities stated clearly that poverty that the lack of 35. future reforms. They share staff's diagnostic prerequisite for the success of any has led to overlap and inefficiencies. They coordination between various programs and providers by employment programs the social safety net should be accompanied could stated that strengthening that unconditional cash transfer programs and stronger growth. They expressed concern consequences. The BRH scarce resources and lead to unintended hinder their ability to target INTERNATIONAL MONETARY FUND 15 --- Page 21 --- HAITI inclusion strategy could play an important role in emphasized that the 2015 national financial raising access to credit for entrepreneurs, helping to reduce poverty by supporting job creation, Fintech advances. payments between individuals with and facilitating E. Reform of the Energy Sector will not be possible without 36. Achieving higher rates of economic growth of Haitians have access to reform of the energy sector. Only 39 percent than half are not billed. The rest comprehensive electricity from the grid (EDH), more electricity. For those getting self-generation. Poor governance at EDH of the population relies on diesel or charcoal-powered from theft at collection points, middlemen and flawed controls have led to large losses, including entities, and illegal of electricity, non-payment by government who intervene in the provision is in flux with the end of the government import connections to the grid (see SIP). The fuel market in 2017, have led to fixed retail fuel prices since early 2015, with one exception monopoly, while efficiency losses and resource misallocation. subsidies, staff recommend initiating gradual 37. Given the growing fiscal cost of energy of GDP, direct fiscal losses are estimated reform of the sector. As a percent the SMP with respect and comprehensive in 2019 (Box 3). Earlier progress under at 4.5 percent in 2018 and 6.4 percent should be taken forward more aggressively. billing, and contracting practices to EDH accounting, of EDH needs to and Prices The management and oversight Import Prices Retail and costs, prices, and purchases Gasoline = Diesel Gasoline (pump) be overhauled when their contracts expire. Kerosene Diesel (pump) Kerosene (pump) from IPPS reviewed reform 0 350 Any eventual approach to fuel subsidy and differentiated to 8 300 should be well sequenced 8 250 affect higher income groups, preceded by measures to offset the impact on key targeted sector, and groups, particularly the transportation include a clear communications plan that lays out 15 15 15 16 S advance the rationale, timing and end-goals. It E S in social programs be in is essential that offsetting in reforms with redistributive implications. place before engaging for mix and off-grid electricity offer opportunities 38. The transition to a cleaner energy The private sector can play a role in pluralism (a mix of private and public sector)°. sources, namely greater required to increase the use of renewable energy to rural financing the investment efforts to provide electricity biomass, solar and wind, and complement the government's alleviate the adverse social and and energy sector reform would help areas. Clean energy plans and move Haiti toward its climate change economic impact of environmental degradation climate and natural disasters, Haiti An island country vulnerable to change mitigation targets. Policy Assessment which would help identify would in due course benefit from a Climate Change financing, and risk management strategies. relevant adaptation, 9 Rethinking Power Sector Reform, World Bank (2019) 16 INTERNATIONAL MONETARY FUND --- Page 22 --- HAITI Box 3. The Fiscal Cost of Energy Subsidies The energy sector in Haiti generates large fiscal and economic efficiency losses. Direct fiscal losses from the fuel and electricity sectors are estimated at 4.6 and 6.5 percent of GDP in FY2018 and FY2019 respectively (SIP). In FY2018, these comprised foregone tax revenues and transfers Fuel Prices and Revenue to cover the EDH losses (1.8 percent of GDP) and 1200 Fuel tax revenue (HTG millions) fuel price subsidies (2.7 percent of GDP), among Gasoline Gasoline retail price (HTG/gallon) (RHS) in Haiti generates large fiscal and economic efficiency losses. Direct fiscal losses from the fuel and electricity sectors are estimated at 4.6 and 6.5 percent of GDP in FY2018 and FY2019 respectively (SIP). In FY2018, these comprised foregone tax revenues and transfers Fuel Prices and Revenue to cover the EDH losses (1.8 percent of GDP) and 1200 Fuel tax revenue (HTG millions) fuel price subsidies (2.7 percent of GDP), among Gasoline Gasoline retail price (HTG/gallon) (RHS) price withouts subsidy (RHS) other things. Retail fuel prices have been administered since 2011, despite swings in international prices and gourde depreciation. When the fixed price was not sufficient to cover 600 payments to suppliers, excise taxes and custom duties were waived. As the retail and import prices diverged further, the government provided direct transfers to distributors in addition to forgoing taxes and duties. 5n to With administered fuel prices lower compared to prices in the region, smuggling has risen. Retail fuel prices in Haiti are now about 50 percent lower than in neighboring Dominican Republic. This large difference has created an incentive to smuggle petroleum products to the DR, increasing the budgetary burden for Haiti. Chronic losses at EDH have been covered by the budget. The state subsidizes the electricity sector in four ways: (i) foregone tax revenues-collected by EDH but never transferred; (ii) the provision of free fuel to thermal plants; (ii) payment guarantees in the form of electricity purchases 120 Price Difference between Haiti and Dominican from IPPs on behalf of EDH; and (iv) the Republic payment of fuel purchased by Sogener, 110 (Im gourdes) supposedly in exchange for incomplete payments by EDH for electricity supplied. EDH 80 routinely pays late charges on its billings from 70 IPPs, continues to maintain unpaid debts to them, and in the past has borrowed from the state bank Banque Nationale de Crédit to fund 40 operations. The financing of EDH (through Gasoline Diesel Kerosene transfers, arrears, and loans) is neither clear nor transparent. FY2017/18 Subsidy Components % of GDP Fuel 2.7 EDH and others 1.8 (i) Sales tax collected by EDH but not transferred 0.1 (ii) Free fuel to EDH and PBM power plants 0.6 (ii) Electricity purchase from IPPS on behalf of EDH 1.0 Subtotal: EDH subsidy 1.7 (iv) Free fuel to Sogener power plants 0.1 Total Energy Sector 4.6 Sources: National Authorities and IMF staff calculations. INTERNATIONAL MONETARY FUND 17 /18 Subsidy Components % of GDP Fuel 2.7 EDH and others 1.8 (i) Sales tax collected by EDH but not transferred 0.1 (ii) Free fuel to EDH and PBM power plants 0.6 (ii) Electricity purchase from IPPS on behalf of EDH 1.0 Subtotal: EDH subsidy 1.7 (iv) Free fuel to Sogener power plants 0.1 Total Energy Sector 4.6 Sources: National Authorities and IMF staff calculations. INTERNATIONAL MONETARY FUND 17 --- Page 23 --- HAITI Authorities' Views sector reforms would improve the concurred with staff that energy 39. The authorities constraint on growth. They agreed productivity of fiscal spending and remove an important but noted that painstaking efforts fiscal costs of the current system were unsustainable They that the including to offset its impact on the poor. needed to prepare in advance for reform, at EDH, and were technical and commercial losses and weak management agreed that addressing high deficits in the sector would reduce quasi-fiscal poor governance F. Statistical Issues data is essential given shortcomings that hamper 40. Improving the quality of economic accounts and labor indicators, while fiscal surveillance. The biggest priorities relate to national timeliness. With Fund-supported TA, sector data need improvement in coverage and In and external statistics and reduce publication lags. the authorities should produce revised monetary Standard Reporting Forms (SRFS) for improving the timeliness and quality of the with IMF particular, calculation of foreign exchange reserves consistent monetary statistics-with guidelines-is a priority. STAFF APPRAISAL a heavy toll on the economy and an 41. The costs of the current political crisis are taking in 2019 and 2020 while Growth is expected to be negative already vulnerable population. reduced the power of households, at about 20 percent. This has purchasing revenues have inflation is running assistance has nearly dried up, domestic especially the poorest. External budgetary the but realistic baseline assumption and budget arrears have risen. Under gloomy is fallen sharply, situation (but no fundamental reform), potential growth of only a stabilization in the political Haiti has potential for much stronger and more estimated at 1.4 percent over the medium-term. political stability and sustained inclusive growth, but its realization will require some implementation of good policies. challenges faced by the monetary and fiscal 42. While acknowledging the considerable should be to stabilize the authorities in the current context, the immediate priority approved by parliament, the fiscal macroeconomic situation. In the absence of a formal budget would include measures to framework for 2020 that authorities should implement a budgetary Staff recommended implementing domestic revenues and contain non-priority spending. sharing of boost capacity, including improving actions laid out in recent TA to develop tax administration the register of large taxpayers, and third-party data to detect fraud, consolidating data, using customs operations. continuing progress to computerize challenge to close the the authorities face a daunting 43. Under present circumstances, crisis stand in stark relief. With options From this angle, the costs of the ongoing to coordinate closely to financing gap. and fiscal authorities to continue limited, it will be critical for the monetary limit until reforms can be mobilize revenues in the near-term, and expenditures manage risks, 18 INTERNATIONAL MONETARY FUND to develop tax administration the register of large taxpayers, and third-party data to detect fraud, consolidating data, using customs operations. continuing progress to computerize challenge to close the the authorities face a daunting 43. Under present circumstances, crisis stand in stark relief. With options From this angle, the costs of the ongoing to coordinate closely to financing gap. and fiscal authorities to continue limited, it will be critical for the monetary limit until reforms can be mobilize revenues in the near-term, and expenditures manage risks, 18 INTERNATIONAL MONETARY FUND --- Page 24 --- HAITI advice and technical assistance and stands implemented. The IMF continues to provide policy conditions permit. ready to help with more intensive support when political authorities will need to shift resources away from 44. Looking further ahead, the fiscal investment. Strengthening PFM should non-priority spending toward social programs and for the purchase of goods and improve governance, including by adopting reference prices transfers to the energy sector. The services, tighter controls on spending, and gradually reducing and public entities, enforce coverage of the TSA to all ministries Haiti government should expand plan for arrears. It would be useful for accounting and audits, and prepare a resolution for the NFPS deficit. Staff proper framework anchored around a target to adopt a medium-term budget TA in the areas of tax administration and PFM. stand ready to provide additional allow the exchange rate to adjust in an orderly The central bank should continue to should set a 45. dominance issue is addressed in due course, monetary policy or fashion. When the fiscal resist to monetize the deficit growth target for the money supply SO as to pressures The BRH should work quantitative for reasons other than to smooth excess volatility. support the exchange rate of reserve management, the transition of advance key institutional reforms in the areas foreign in the quality of to amendment of the central bank law, and improvement financial reporting to IFRS, further TA in these areas. To deepen statistics. The Fund stands ready to provide the authorities to monetary staff urged monetary financial intermediation and access to financial products, term, reforms are needed to financial technology. Over the longer accelerate efforts to develop environment, in particular with regard to the address weaknesses in the legal and institutional enforcement of contracts. and key actions could be implemented remains an obstacle to prosperity the steering 46. Corruption should update the anti-corruption strategy, set up in the short-term. The authorities from civil society, and implement the asset committee with independent representatives AML measures should support the fight declaration system in line with international best practices. and 'know your customer' rules. Regular against corruption and include insisting on verification Court of Auditors should be enforced and administrations by the High audits of public companies to present a new draft law to parliament and published. Staff also encourage the government the anti-corruption framework. (when possible) to strengthen could be deployed more effectively. resources devoted to social protection its adoption by 47. Existing for their efforts to finalize the PNPPS and urge IMF staff commend the authorities recommend the introduction of a limited of Ministers. Within this framework, staff in line with the Council under the auspices of MAST. Existing programs not number of cash transfer programs down. The information system SIMAST should serve the objectives of the PNPPS should be wound expanded. The methods for the identification of beneficiaries and its coverage as the basis for the and coordinated with the development of distribution of transfers should be clarified quickly mobile and financial infrastructures. INTERNATIONAL MONETARY FUND 19 to finalize the PNPPS and urge IMF staff commend the authorities recommend the introduction of a limited of Ministers. Within this framework, staff in line with the Council under the auspices of MAST. Existing programs not number of cash transfer programs down. The information system SIMAST should serve the objectives of the PNPPS should be wound expanded. The methods for the identification of beneficiaries and its coverage as the basis for the and coordinated with the development of distribution of transfers should be clarified quickly mobile and financial infrastructures. INTERNATIONAL MONETARY FUND 19 --- Page 25 --- HAITI sector is needed for fiscal sustainability and Fundamental reform of the energy and of 48. a drastic overhaul of the management performance higher growth. In the electricity sector, renegotiation of contracts with independent EDH is the first priority, followed by the transparent was to protect purchasing power, yet In the fuel sector, the original goal of fixing prices financing which producers. costs and fiscal deficits led to monetary this logic has unraveled: subsidy of higher subsidy costs, deficits, monetary depreciation and a vicious cycle contributed to inflation, in consultation with relevant stakeholders, financing and inflation. Any reform must be developed and involve a strong measures to offset the impact on vulnerable groups, be preceded by possible approaches with the authorities, including communications plan ex ante. Staff discussed over time, and accompanied by reforms differentiated by product and phased The implementing to providers and users of public transport. compensating measures, such as assistance matrix towards renewable, to include diversification of the energy authorities are encouraged cleaner energy sources in their reform plan. reforms are needed to open and level the playing 49. In the medium term, regulatory property rights and remove import and business. Haiti needs to ensure stronger efforts field for private and raise investment. These regulatory industry monopolies to lower barriers to entry bottlenecks and public infrastructure projects to address key should be accompanied by and the telecommunication network. investment to improve the electric power grid their efforts to improve the quality, coverage, 50. Staff urge the authorities to continue and timeliness of statistical data. take place on the standard that the next Article IV consultation 51. It is recommended 12-month cycle. 20 INTERNATIONAL MONETARY FUND --- Page 26 --- HAITI Figure 1. Haiti: Real Sector Developments, 2013-19' Inflation reached 20 percent in August (y/y). Services and agriculture accounted for most of the growth in recent years, but most sectors contracted in FY2019. Inflation Contribution to GDP Growth (Percent change, eop,) y/y) (Percent) Agriculture Manufacturing Construction Services Other E GDP Growth Overall CPI Local Imported -1 La - 18 V -2 L A be A 2013 2014 2015 2016 2017 2018 2019 E Net transfers, including remittances, reached 40 percent of GNI per capita has stagnated since 2000, HDI has GDP in FY2019. though improved slightly. Gross National Income 2,000 (US$ billion) GNIF Per Capita and HDI Value Gross Domestic Income 1,750 Net Transfers from the rest off the world 0.8 Gross National Disposable Income 1,500 0.6 1,250 1,000 0.4 HDI value 0.2 GNI per capita, 2011 PPP$ (RHS) 250 2013 2014 2015 2016 2017 2018 2019 E 2015 2018 Fuel consumption is projected to have declined in FY2019 Unemployment is recorded at 13.5 due to supply and demand constraints. percent. Consumptionoffuel Products 2/ Unemployment, Total 3/ (Millions ofUS gallons) 18 (Percent of total labor force) OGasoline ODiesel DKerosene, 2013 2014 2015 2016 2017 2018 2019 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 Sources: National Authorities; UNDP; World Bank; International Labour Organization (ILO) and IMF staff calculations. 1/ Data are in fiscal years, ending September 30. 2/1 Data for 2019 is only available until August 2019. 3/ Modeled ILO estimate. INTERNATIONAL MONETARY FUND 21 Diesel DKerosene, 2013 2014 2015 2016 2017 2018 2019 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 Sources: National Authorities; UNDP; World Bank; International Labour Organization (ILO) and IMF staff calculations. 1/ Data are in fiscal years, ending September 30. 2/1 Data for 2019 is only available until August 2019. 3/ Modeled ILO estimate. INTERNATIONAL MONETARY FUND 21 --- Page 27 --- HAITI Figure 2. Haiti: Fiscal Sector Developments, 2013-191 Fuel tax revenues have turned negative as the difference Public investment is projected to fall below 5 percent of between world prices and fixed retail prices has widened. GDP in FY2019. 25 Public Investment Fuel Prices and Revenue - Fuel tax revenue (HTG millions) (Percent of GDP) 1200 - - Gasoline retail price (HTG/gallon) (RHS) 370 20 Petrocaribe Gasoline price withouts subsidy (RHS) Foreign-financed Domestically. financed 310 15 Total capital expenditure i5 15 16 2013 2014 2015 2016 2017 2018 2019 E accompanied by increasing domestic arears while BRH The NFPS deficit has deteriorated since FY2017... financing has been contained23 50 Financing by Source Nonfinancial Public Sector Deficit 9 (Percent of GDP) 40 (Billions sof gourdes) OPetrocaribe DExternal financing transfers to OCentral bank Other OCommerdal banks EDH Central govemment ONonbank financing deficit Overall deficit of NFPS -10 -1 -20 2013 2014 2015 2016 2017 2018 2019 E 2013 2014 2015 2016 2017 2018 2019 E Tax revenue collection is structurally low and has fallen... limiting the resources available for social spending. Taxes Social Spending Ministry of Agriculture 20 (Percento of GDP) (Percent of total expenditure) Ministry of Education 18 OTaxes on income & profits DExcises OMinistry of Public Health 16 OCustoms duties OSalest tax (TCA) OLocal taxes DOther taxes 0 2013 2014 2015 2016 2017 2018 2019 E 2013 2014 2015 2016 2017 2018 2019 E Sources: National Authorities and IMF staff calculations. 1/ Data are in fiscal years, ending September 30. 2/ External financing under Financing by Source includes project loan disbursements and external arrears net of amortization. 3/1 Non bank financing under Financing by Source includes domestic supplier credits and domestic arrears. and 2019. 4/ Social spending includes health, education, and agriculture spending. No data breakdown between Ministries for years 2013-15 22 INTERNATIONAL MONETARY FUND --- Page 28 --- HAITI Figure 3. Haiti: Monetary Sector Developments, 2013-191 The dollarization of deposits is increasing.. fueled by the resumption of credit growth in dollars.. 80 Dollarization Credit Growth to the Private Sector (Percent) (Percent) Deposits Credit -10 Dollar credit growth Gourde credit growth Private sector credit as % GDP (RHS) -20 & and dollar deposit growth, while gourde deposit growth has stalled. The BRH raised the rates on central bank CDs in June, Contributions to Broad Money Growth Nominal Interest Rates 30 (Percent, y/y) (Percent) Sector Developments, 2013-191 The dollarization of deposits is increasing.. fueled by the resumption of credit growth in dollars.. 80 Dollarization Credit Growth to the Private Sector (Percent) (Percent) Deposits Credit -10 Dollar credit growth Gourde credit growth Private sector credit as % GDP (RHS) -20 & and dollar deposit growth, while gourde deposit growth has stalled. The BRH raised the rates on central bank CDs in June, Contributions to Broad Money Growth Nominal Interest Rates 30 (Percent, y/y) (Percent) - swyd Myw I Currency in circulation Short- tem interest rates (91 day -5 Gourde deposits BRH bonds) D Dollar deposits Lending rate n n 1 10 A A e 5 .and has tried to contain NFPS financing.. which helped prevent a large drop in NIR. 90 Net Domestic Assets (NDA) of BRH NFA and NIR of BRH (Billionsof gourdes) (US$ million) NFA NIR -10 -30 -50 1000 908 823 827 830 -70 677 649 -90 Liabilities to commercial banks and other -110 Net credit to the central govemment -130 Net credit to the rest of NFPS -150 NDA 2013 2014 2015 2016 2017 2018 2019 E 2013 2014 2015 2016 2017 2018 2019 E Sources: National Authorities and IMF staff calculations. 1/ Data are in fiscal years, ending September 30. INTERNATIONAL MONETARY FUND 23 --- Page 29 --- HAITI Figure 4. Haiti: External Sector Development, 2013-191 The trade balance as a share of GDP sank to its -partly offset by growth in remittances to an estimated 35 lowest point in 7 years... percent of GDP (USS 3,043 millions) in FY2019. Exports and Imports 40 Remittances 20 (Percent of GDP) 35 (Percentof GDP) Remittances YY % change (RHS) -20 -30 -40 Exports of goods -50 Imports of goods -60 Trade balance 2013 2014 2015 2016 2017 2018 2019 2013 2014 2015 2016 2017 2018 2019 E 0 With weak imports, the current account deficit shrunk to 2.0 percent of GDP in FY2019. Led by a drop in FDI, net financial flows declined in FY 2019. Current Account Composition of Capital and Financial Account (Percent of GDP) 12 (Percent of GDP) -2 -5 Current account balance Fuel imports -8 -2 -4 Other items (net). -6 Banks (net) -11 Net FDI -8 Public sector capital flows (net) -14 -10 Capital transfers -12 Capital and financial account balance 2013 2014 2015 2016 2017 2018 2019 2013 2014 2015 2016 2017 2018 2019 E The gourde depreciated until June, then leveled off Import coverage by gross reserves has been largely stable since mid-2017. Exchange Rate and FX Intervention International Reserves 3500 (USSmillion)- GIR, months ofi imports (RHS) 1 hue NIR NFA la - Net central bank FX sales, US$ million (RHS) Gourde/USD exchange rate, eop, 16 S 6 80 & 8 9 Sources: National Authorities and IMF staff calculations. 1/ Data arei in fiscal years, ending September 30. 24 INTERNATIONAL MONETARY FUND --- Page 30 --- HAITI Figure 5. Haiti: Social Indicators 2012 1/ Clean Water and Sanitation, 20176/ Poverty Headcount Ratio, (Percent of populationusing these services) (% of population) I Basic sanitation 74.9 Basic drinking water . Urban . Overall poverty a Rural 58.5 Gourde/USD exchange rate, eop, 16 S 6 80 & 8 9 Sources: National Authorities and IMF staff calculations. 1/ Data arei in fiscal years, ending September 30. 24 INTERNATIONAL MONETARY FUND --- Page 30 --- HAITI Figure 5. Haiti: Social Indicators 2012 1/ Clean Water and Sanitation, 20176/ Poverty Headcount Ratio, (Percent of populationusing these services) (% of population) I Basic sanitation 74.9 Basic drinking water . Urban . Overall poverty a Rural 58.5 40.6 Haiti Central South Caribbean America America small states 65 GINI Index 2/ Infant Mortality Rate and Life Expectancy 3/ 60 (0-1 100, where0= perfectequality, last available data) a 1e a a Haiti infant mortality rate (per 1,000 births) 30 Haiti life expectancy, total (years) (RHS) - LICS infant mortality rate (per 1000 births) 10 LICS life expectancy, total (years) (RHS) HND PAN GTM CRI NIC DOM HTI SLV 2017 2017 2014 2017 2014 2016 2012 2017 2000 2002 2004 2006 2008 2010 2012 2014 2016 0.7 Human Capital Index (HCI), 2017 5/ Literacy Rate, 2016 4/ 6/ * 100 (Percent ofp people ages 15 +) 0.6 (Scale 0-1) I HCI female I HCI male HCI, 80 a Female 0.5 Male 0.4 0.3 0.2 0.1 0.0 HTI GTM HND DOM SLV NIC PAN CRI Haiti Caribbean Central South America small states Amerca Sources: UNICEF, WHO, World Bank, Global Poverty Working Group and IMF staff calculations. 1/1 Latest available data. The poverty headcount ratio is the percentage of the given population living below the national poverty lines. 2/1 HND, PAN, GTM, CRI, DOM,HTI and SLV denote respectively Honduras, Panama, Guatemala, Costa Rica, Dominican Republic, Haiti and El Salvador. are defined as those with a GNI per capita (calculated the World Bank Atlas method) of $1,025 or less in 3/ Low income countries (LICS) using 4/ 2018. Average for Central American countries was calculated based on 2016 data or latest available for each country. 5/ The HCI index score ranges from 01 to 1 and measures the amount of human capital that a child born today can expect to attain by age 18. It attempts to measure the productivity of the next generation of workers compared to workers with complete education and full health. 6/ For South America: Argentina, Bolivia, Brazil, Chile, Colombia, Ecuador, Paraguay, Peru, Uruguay, Venezuela and Mexico. INTERNATIONAL MONETARY FUND 25 --- Page 31 --- HAITI Table 1. Haiti: Selected Economic and Financial Indicators, FY2017-24 1 (Fiscal year ending September 30) (Fiscal year ending September 30) Nominal GDP (2018): US$9.7 billion Population (2016): 10.847 million GDP per capita (2018): $890 Percent of population below poverty line (2012): 58 FY2017 FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 FY2024 Est. Est. Proj. Proj. Proj. Proj. Proj. (Change over previousy year; unless otherwise indicated) National income and prices GDP at constant prices 1.2 1.5 -1.2 -0.4 GDP deflator 0.9 0.7 1.1 1.2 13.4 12.8 17.3 Consumer prices (period average) 19.0 15.9 13.1 11.4 10.4 14.7 12.9 17.3 19.0 Consumer prices (end- of period) 15.4 13.3 15.9 13.1 11.4 10.4 20.1 17.5 14.5 12.0 11.0 10.0 External Sector Exports (goods, valued in U.S. 1 1.2 13.4 12.8 17.3 Consumer prices (period average) 19.0 15.9 13.1 11.4 10.4 14.7 12.9 17.3 19.0 Consumer prices (end- of period) 15.4 13.3 15.9 13.1 11.4 10.4 20.1 17.5 14.5 12.0 11.0 10.0 External Sector Exports (goods, valued in U.S. dollars, f.o.b.) -0.9 8.8 11.3 3.7 2.2 Imports (goods, valuedin U.S. dollars, f.o.b.) 13.6 24.0 -2.3 2.8 3.4 4.3 Remittances (valued in U.S. dollars) -2.3 1.7 3.3 4.1 4.3 Real effective exchange rate (end of period; appreciation) 10.7 21.1 8.5 6.2 3.7 2.5 2.9 3.6 12.7 2.8 10.8 Money and credit (valued in gourdes) Credit to private sector (in U.S. .0 -2.3 2.8 3.4 4.3 Remittances (valued in U.S. dollars) -2.3 1.7 3.3 4.1 4.3 Real effective exchange rate (end of period; appreciation) 10.7 21.1 8.5 6.2 3.7 2.5 2.9 3.6 12.7 2.8 10.8 Money and credit (valued in gourdes) Credit to private sector (in U.S. dollars and gourdes) 4.5 12.5 9.9 Base money (currency in circulation. and gourde deposits) 23.4 25.8 14.6 17.0 14.0 12.6 11.8 Broad money (excl. foreign currency deposits) 21.3 18.6 17.0 14.0 12.6 11.8 12.9 13.7 18.9 18.6 17.0 14.0 12.6 11.8 (In percent of GDP; unless otherwise indicated) Centra al government Overall balance (including grants) 0.3 -1.7 -2.5 -2.0 Domestic revenue 14.0 -2.2 -1.7 -2.0 -2.0 Grants 13.0 10.8 10.0 11.1 12.1 12.5 12.9 Expenditures 3.7 4.3 2.8 3.4 3.0 3.0 3.0 3.0 Current expenditures 17.5 19.0 16.1 15.6 16.2 16.8 17.5 17.9 Capital expenditures 12.2 12.7 12.5 11.5 11.4 11.7 12.0 12.1 Overall balance oft the nonfin ancial public sector 5.3 6.2 3.6 4.1 4.8 5.1 5.5 5.8 -0.9 -2.9 -3.8 -3.4 -3.1 -2.8 -3.1 -3.1 Savings andi investment Gross investment 29.0 29.0 27.9 28.5 Ofv which: public investment 5.3 6.2 3.6 28.9 29.0 29.5 29.9 Gross national savings 4.1 4.8 5.1 5.5 5.8 28.0 25.1 25.9 27.7 External current account balance (including official grants) -1.0 -3.9 27.8 27.5 27.3 27.6 External current account balance (excluding official grants) -5.6 -7.9 -2.0 -0.9 -1.1 -1.5 -2.1 -2.4 Net fuel exports -4.8 -3.2 -4.1 -5.1 -5.4 -9.1 10.1 12.8 -12.5 -11.6 -11.2 -10.9 10.8 Public debt External public debt (medium and long term, end of- period) 242 23.5 27.4 25.4 Total public sector debt (end-of- period) 38.3 24.2 23.3 23.1 23.2 External public debt service 39.9 47.0 46.1 44.9 44.1 43.9 43.7 5.9 6.1 6.9 7.9 7.9 7.9 8.0 8.0 Memorandum items: (In millions of dollars, unless otherwise indicated) Overall balance of payments -72 Net international reserves (program definition) -21 4 Total public sector debt (end-of- period) 38.3 24.2 23.3 23.1 23.2 External public debt service 39.9 47.0 46.1 44.9 44.1 43.9 43.7 5.9 6.1 6.9 7.9 7.9 7.9 8.0 8.0 Memorandum items: (In millions of dollars, unless otherwise indicated) Overall balance of payments -72 Net international reserves (program definition) -21 Gross international reserves 2,086 2,086 2,178 In months ofi imports oft the following year 4.4 4.7 2,145 2,207 2,255 2,292 2,331 Nominal GDP (millions of gourdes) 4.9 4.8 4.8 4.7 4.6 4.5 Nominal GDP (millions ofl U.S. dollars) 551,911 631,829 732,545 868,582 1,015,809 1,157,591 1,303,813 1,458,023 Output gap (% of potential) 8,409 9,658 8,708 8,533 8,842 9,135 9,454 9,798 -0.2 -0.3 3.2 -5.2 -4.4 -3.7 -3.2 Sources: -2.0 Ministry of Economy and Finance; Bank oft the Republic of Haiti; World Bank: Fund staff estimates and projections. 1/Includes state- owned electricity company (EDH). 2/In percent of exports of goods and nonfactor services. Includes debt relief. 26 INTERNATIONAL MONETARY FUND 9,658 8,708 8,533 8,842 9,135 9,454 9,798 -0.2 -0.3 3.2 -5.2 -4.4 -3.7 -3.2 Sources: -2.0 Ministry of Economy and Finance; Bank oft the Republic of Haiti; World Bank: Fund staff estimates and projections. 1/Includes state- owned electricity company (EDH). 2/In percent of exports of goods and nonfactor services. Includes debt relief. 26 INTERNATIONAL MONETARY FUND --- Page 32 --- HAITI Table 2a. Haiti: Non-Financial Public Sector Operations, FY2017-24 (Fiscal year ending September 30; in millions of gourdes) FY2017 FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 FY2024 Total revenue and grants Est Est. Proj Proj Proj. Proj. Proj. Domestic revenue 97,906 109,107 99,931 116,654 144,212 174,553 202,057 231,485 Domestic taxes 77,459 82,089 79,067 87,184 113,250 139,758 163,350 187,628 Customs duties 53,450 56,858 53,299 60,322 79,804 99,328 117,031 133,497 Other current revenue 21,654 22,533 20,098 22,583 28,443 33,570 39,114 45,199 Of which: FNE 2,355 2,698 5,670 4,279 5,004 6,860 7,205 8,932 1,902 2,105 2,068 2,345 2,743 Ofv which: FER 227 245 165 3,125 3,520 3,937 Grants 196 229 261 425 621 20,447 27,018 20,864 29,469 30,962 34,795 38,707 43,858 Budget support 3,053 3,467 1,406 1,585 2,391 Project grants 17,394 23,551 20,864 28,063 29,377 32,404 2,751 3,575 35,955 40,282 Total expenditure 21 96,429 119,965 118,296 135,624 164,514 Current expenditure 67,062 80,516 91,923 100,251 194,378 228,043 260,342 Wages and salaries 115,374 134,989 156,523 175,921 Goods and services 33,746 37,645 40,280 47,772 56,885 65,404 75,621 84,565 21,132 25,312 23,022 23,452 27,427 Interest payments 1,389 1,936 34,728 43,678 49,573 External 3,398 3,162 3,590 4,071 4,621 5,324 Domestic 939 1,300 1,702 2,032 2,236 2,506 2,838 3,330 450 635 1,696 1,130 1,354 Transfers and subsidies 10,796 15,623 1,565 1,783 1,994 Nonenergy sector 25,222 25,865 27,472 30,787 32,603 36,459 3/ 7,328 11,381 6,766 5,211 7,111 10,418 11,734 Energy sector 3,467 4,243 18,456 20,653 20,361 20,369 20,869 13,122 23,337 Capital expenditure 29,367 39,449 26,374 35,374 49,140 59,388 71,520 Domestically financed 11,062 15,460 5,260 5,722 8,045 84,421 Ofi which: Treasury 11,062 15,460 10,763 10,464 11,848 Of which: related to Petrocaribe 5,260 5,722 8,045 10,763 10,464 11,848 Ofv which: FNE and FER related spending spending 1,648 39,449 26,374 35,374 49,140 59,388 71,520 Domestically financed 11,062 15,460 5,260 5,722 8,045 84,421 Ofi which: Treasury 11,062 15,460 10,763 10,464 11,848 Of which: related to Petrocaribe 5,260 5,722 8,045 10,763 10,464 11,848 Ofv which: FNE and FER related spending spending 1,648 2,857 1,994 1.397 2,541 2,972 Memo: Post- -Hurricane Reconstruction Spending 3,311 3,387 3,945 4,558 5,055 Foreign- -financed 18,305 23,988 21,114 29,651 41,095 48,625 61,056 72,573 Central government balance including grants 1,477 10,858 -18,365 -18,970 -20,302 19,824 Excluding grants -18,970 37,877 -39,229 -48,440 -51,264 25,987 -28,857 Excluding grants and externally financed projects -665 -13,888 18,115 -54,620 64,693 -72,714 Other transfers to EDH 18,789 10,169 5,995 3,637 -141 Of which: receivables from the electricity sector -6,474 7,419 -9,604 10,401 -11,174 12,733 14,863 -16,038 Of which: EDH letters of credit -792 -863 -550 -520 -559 -637 -743 802 -5,682 6,556 9,054 9,881 10,615 Primary balance of NFPS, including gra ants 3,609 -16,341 -24,571 12,097 14,120 -15,236 Overall balance of NFPS, including grants -4,997 -18,277 26,210 -27,886 -28,487 36,229 -39,571 Adjustment (unsettled payment obligations) -27,969 -29,372 -31,476 -32,558 -40,850 -44,895 3,332 9,200 1,956 Financing, NFPS External net financing 8,329 27,477 29,925 29,372 31,476 32,558 40,850 44,895 Loans (net) 875 3,379 2,845 7,680 111 2,819 9,998 15,132 Disbursements 875 3,379 -6,799 7,680 969 4,010 11,295 16,530 Of which: Petrocaribe 5,739 1,799 250 1,588 11,718 16,221 25,101 32,291 Project loans 4,828 1,362 Amortization 911 437 250 1,588 11,718 16,221 25,101 32,291 Arrears (net) -4,864 -5,178 -7,049 -9,268 10,749 12,210 13,806 -15,760 0 3,954 0 -1,080 1,191 1,296 1,399 Internal net financing 7,454 30,856 32,770 37,052 31,587 29,739 Banking system 10,509 25,736 10,875 12,141 14,750 30,852 29,763 BRH 17,298 22,091 28,787 9,402 26,038 10,141 10,000 11,695 Ofw which: change in deposits 364 849 403 13,328 15,011 16,787 Of, which: change in claims on the government 9,039 189 9,738 1,010 1,010 1,010 1,010 Of which: BRHI lending related to hurr. Matthew (RCF) 2,608 8,990 10,685 12,318 14,001 16,7 787 Ofwhich BRH on- lending of IMF funds to the government 0 -989 1,149 695 Ofw which: change in deposits 364 849 403 13,328 15,011 16,787 Of, which: change in claims on the government 9,039 189 9,738 1,010 1,010 1,010 1,010 Of which: BRHI lending related to hurr. Matthew (RCF) 2,608 8,990 10,685 12,318 14,001 16,7 787 Ofwhich BRH on- lending of IMF funds to the government 0 -989 1,149 Commercial banks 1,107 -302 734 2,141 3,054 Of which: change in deposits 1,341 3,971 7,080 12,000 Ofv which: change in government securities -235 Nonbank financing* 302 734 2,141 3,054 3,971 7,080 12,000 -3,054 5,120 21,895 24,910 16,837 12,440 Ofwhich: change in government securities 4,839 -2,409 2,319 1,644 2,150 8,760 977 Ofwhich change in checks in circulation 1,784 2,027 2,300 2,450 2,000 Ofv which change in supplier credits 1,881 Ofwhich: domestic arrears 5,502 698 3,860 4,573 26,793 27,126 19,260 10,140 6,310 1,023 Memorandum items Total costs of EDH to public sector 9,941 11,662 14,060 15,654 Forgone fuel taxes and fuel direct subsidies 10,469 17,222 16,905 19,203 21,833 25,477 Health, education and agriculture spending 33,331 39,903 39,133 38,401 38,401 38,401 Nominal GDP 17,317 20,744 18,314 17,372 23,364 27,782 32,595 37,909 551,911 631,829 732,545 868,582 1,015,809 1,157,591 1,303,813 1.458,023 Sources: Ministry of Financea and Economy, andFund'staffe estimates and projections. 1/Includesp previously- programmedr multilateral budget support that couldt be delayed. 2/Commitmentt basis, except for domestic cally financed spending. which is.reported on the basis ofp project ace count 3/Comprises payments on beha alf of EDH for electricity generation, tax xpayments remit itted to EDH and transfers to fuel replenishments. distributors 4/1 Includest the net changei in thes stock of government securities held by non- -banks, of check ks that are not yet cashed, of supplier credits tor maintain and of pump prices. domestic arrears. INTERNATIONAL MONETARY FUND 27 support that couldt be delayed. 2/Commitmentt basis, except for domestic cally financed spending. which is.reported on the basis ofp project ace count 3/Comprises payments on beha alf of EDH for electricity generation, tax xpayments remit itted to EDH and transfers to fuel replenishments. distributors 4/1 Includest the net changei in thes stock of government securities held by non- -banks, of check ks that are not yet cashed, of supplier credits tor maintain and of pump prices. domestic arrears. INTERNATIONAL MONETARY FUND 27 --- Page 33 --- HAITI Table 2b. Haiti: Non-Financial Public Sector Operations, FY2017-24 (Fiscal year ending September 30; percent of GDP) FY2017 FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 FY2024 Total revenue and grants Est. Est. Proj Proj Proj. Proj Proj 17.7 17.3 13.6 13.4 Domestic revenue 14.2 15.1 15.5 15.9 14.0 13.0 10.8 11.1 Domestic taxes 10.0 12.1 12.5 12.9 Customs 9.7 9.0 7.3 6.9 7.9 8.6 duties 3.9 3.6 2.7 2.6 9.0 9.2 Of which: fuel taxes 0.7 0.5 2.8 2.9 3.0 3.1 Other current revenue 0.0 0.0 0.0 0.0 0.0 0.0 0.4 0.4 0.8 0.5 Of which: FNE 0.5 0.6 0.6 0.6 0.3 0.3 0.3 0.3 Of which: FER 0.3 0.3 0.3 0.3 0.0 0.0 0.0 0.0 0.0 Grants 0.0 0.0 0.0 3.7 4.3 2.8 3.4 3.0 3.0 3.0 Budget support 0.6 0.5 0.0 0.2 0.2 0.2 0.2 3.0 Project grants 3.2 3.7 2.8 3.2 2.9 0.2 2.8 2.8 2.8 Total expenditure 21 17.5 19.0 16.1 15.6 16.2 Current expenditure 16.8 17.5 17.9 12.2 12.7 12.5 11.5 11.4 11.7 Wages and salaries 6.1 6.0 5.5 12.0 12.1 Goods and services 5.5 5.6 5.7 5.8 5.8 3.8 4.0 3.1 2.7 2.7 Interest payments 3.0 3.4 3.4 External 0.3 0.3 0.5 0.4 0.4 0.4 0.4 0.4 Domestic 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.1 0.1 0.2 0.1 Transfers and subsidies 0.1 0.1 0.1 0.1 2.0 2.5 3.4 3.0 Non- energy sector 1.3 2.7 2.7 2.5 2.5 1.8 0.9 0.6 0.7 0.9 Energy sector 0.9 0.9 0.6 0.7 2.5 2.4 2.0 1.8 1.6 1.6 Capital expenditure 5.3 6.2 3.6 4.1 4.8 5.1 5.5 Domestically financed 2.0 2.4 0.7 0.7 5.8 Of which: Treasury 2.0 2.4 0.8 0.9 0.8 0.8 ofv which: related to Petrocaribe spending 0.7 0.7 0.8 0.9 0.8 0.8 0.3 0.0 0.0 0.0 0.0 Ofv which: FNE and FER related spending 0.5 0.3 0.0 0.0 0.0 Memo: Post- Hurricane Reconstruction: Spending 0.2 0.3 0.3 0.3 0.3 0.3 Foreign- financed 0.6 0.8 0.0 0.0 0.0 3.3 3.8 2.9 3.4 4.0 4.2 4.7 5.0 Central government balance including .0 Ofv which: FNE and FER related spending 0.5 0.3 0.0 0.0 0.0 Memo: Post- Hurricane Reconstruction: Spending 0.2 0.3 0.3 0.3 0.3 0.3 Foreign- financed 0.6 0.8 0.0 0.0 0.0 3.3 3.8 2.9 3.4 4.0 4.2 4.7 5.0 Central government balance including grants 0.3 1.7 -2.5 -2.2 -2.0 1.7 Excluding grants -3.4 -6.0 -5.4 -2.0 -2.0 Excluding grants and externally financed projects -0.1 -2.2 -5.6 -5.0 -4.7 -5.0 -5.0 Other transfers to EDH -2.5 -2.2 -1.0 -0.5 -0.3 0.0 Ofv which: receivables from the electricity sector -1.2 -1.2 -1.3 -1.2 -1.1 -1,1 -1.1 -1.1 Of which: EDH letters of credit -0.1 -0.1 -0.1 -0.1 -0.1 -0.1 -0.1 -0.1 1.0 -1.0 1.2 -1.1 1.0 Primary balance of NFPS, including grants -0.7 -2.6 -3.4 -1.0 1.1 -1.0 Overall balance of NFPS, including grants -0.9 -3.0 -2.7 -2.5 -2.8 -2.7 Adjustment (unsettied payment obligations) -2.9 -3.8 -3.4 -3.1 -2.8 -3.1 -3.1 0.6 1.5 0.3 0.0 0.0 0.0 0.0 0.0 Financing, NFPS 1.5 4.3 4.1 3.4 3.1 2.8 Externalnet financing 0.2 -0.5 -0.4 3.1 3.1 Loans (net) -0.9 0.0 0.2 0.8 1.0 0.2 -0.5 -0.9 -0.9 Disburs ements 0.1 0.3 0.9 1.1 1.0 0.3 0.0 0.2 1.2 Of which: Petrocaribe 0.9 0.2 1.4 1.9 2.2 Project loans 0.0 0.0 0.0 0.0 0.0 0.0 Amortization 0.2 0.1 0.0 0.2 1.2 1.4 1.9 2.2 Arrears (net) -0.9 -0.8 -1.0 -1.1 -1.1 -1.1 -1.1 -1.1 0.0 0.0 0.5 0.0 -0.1 -0.1 -0.1 -0.1 Int al net financing 1.4 4.9 4.5 4.3 3.1 2.6 Banking system 1.9 2.4 2.0 BRH 1.5 1.4 1.5 1.5 1.7 2.0 Ofwhich: 1.7 4.1 1.4 1.2 1.2 1.2 1.2 change in deposits 0.1 0.1 0.1 0.1 0.1 1.2 Ofwhich: change in claims on the government 1.6 4.0 1.3 1.0 0.1 0.1 0.0 Ofv which: BRH lending related to hurr. .4 1.5 1.5 1.7 2.0 Ofwhich: 1.7 4.1 1.4 1.2 1.2 1.2 1.2 change in deposits 0.1 0.1 0.1 0.1 0.1 1.2 Ofwhich: change in claims on the government 1.6 4.0 1.3 1.0 0.1 0.1 0.0 Ofv which: BRH lending related to hurr. Matthew (RCF) 0.5 1.1 1.1 1.1 1.2 Ofwhich: BRH on- -lending of IMF funds to the government 0.0 0.0 -0.1 -0.1 Commercial banks 0.0 0.0 0.0 0.0 0.2 0.0 0.1 0.2 0.3 Of which: change in deposits 0.2 0.0 0.3 0.5 0.8 Of which: change in government securities 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.1 0.2 0.3 Nonbank financing 0.3 0.5 0.8 -0.6 0.8 3.0 2.9 1.7 Of which: change in government securities -0.9 -0.4 1.1 0.7 0.1 Ofv which: change in checks in circ on 0.3 -0.3 0.2 0.2 0.2 0.2 0.1 Ofv which: change in supplier credits 0.3 -0.3 0.0 0.0 0.0 0.0 0.0 0.0 0.9 -0.1 -0.4 Of which: domestic arrears 0.0 0.5 0.0 0.0 0.0 0.0 3.7 3.1 1.9 0.9 0.5 -0.1 Memorandumi items Total costs of EDH to public sector 1.8 1.8 1.9 1.8 1.7 Forgone fuel taxes and fuel direct subsidies 1.9 2.7 4.6 1.7 1.7 1.7 Health, educa ation and agriculture spending 3.1 4.6 3.9 3.3 2.9 2.6 Nominal GDP (millions of gourdes) 3.3 2.5 2.0 2.3 2.4 2.5 2.6 551,911 631,829 724,757 868,582 1,015,809 1,157,591 1,303,813 1,458,023 Sources: Ministry of Finance and Economy; and Funds staffe estimates and projections. 1/Includes previously programmed multilateral budget support that could be delayed. 2/ Commitment basis, except for domestically finance ceds spending. which is reported lon theb basis of project acc count replenishments. 3/C Comprises payments on behalf of EDHf for electricity generation, tax payments remitted to EDH andt transfers to fuel 4/1 Includes the net change in the stock of governments securities held byr non-I -banks, of checks thata are noty yet cashed, of distributors supplier credits to maintain andiof pump prices. domestic arrears. 28 INTERNATIONAL MONETARY FUND /Includes previously programmed multilateral budget support that could be delayed. 2/ Commitment basis, except for domestically finance ceds spending. which is reported lon theb basis of project acc count replenishments. 3/C Comprises payments on behalf of EDHf for electricity generation, tax payments remitted to EDH andt transfers to fuel 4/1 Includes the net change in the stock of governments securities held byr non-I -banks, of checks thata are noty yet cashed, of distributors supplier credits to maintain andiof pump prices. domestic arrears. 28 INTERNATIONAL MONETARY FUND --- Page 34 --- HAITI Table 3. Haiti: Summary Accounts of the Banking System, FY2017-24 (Fiscal year ending September 30; in millions of gourdes, unless otherwise indicated) FY2017 FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 FY2024 Est. Proj Proj Proj. Proj. Proj. I Centralb bank Net foreign assets 110,515 111,424 145,492 164,756 192,922 218,871 (In millions ofU.S. dollars) 1,763 1,593 244,429 270,537 Net international reserves 1/ 1,559 1,538 1,611 1,670 1,719 1,769 Comm ercial bank forex deposits 913 1,000 1,045 1,088 1,129 1,174 Net domestic assets -27,876 -7,904 22,151 -18,510 Net credit to the nonfinancial public sector 35,964 60,690 21,887 -23,963 24,901 -25,044 Ofwhich: Net credit to the central government 37,624 68,708 78,708 90,404 103,731 118,743 135,530 Claims on central government 61,947 71,119 81,120 92,815 106,143 121,154 137,941 64,377 89,566 107,087 116,077 126,762 Central government deposits 26,753 27,620 35,967 34,957 33,947 139,080 153,082 169,868 Ofw which: IMF PCDR debt relief 6,058 32,937 31,927 31,927 Liabilities to commercial banks (excl gourde deposits) 71,851 77,597 -5,208 4,773 BRH bonds/Open market operations 12,214 86,961 108,944 127,016 144,421 162,370 181,300 Commercial bank forex deposits 12,695 1,840 1,840 1,840 1,840 1,840 1,840 Other 59,637 64,902 85,121 107,104 125,176 142,581 160,530 179,460 8,011 9,004 3,898 11,726 14,726 16,726 18,726 20,726 Base money 80,834 101,716 123,341 146,246 171,035 Currency in circulation 38,471 47,201 60,700 194,908 219,527 245,492 Commercial bank gourde deposits 42,364 71,973 84,172 95,921 108,037 120,815 54,514 62,641 74,273 86,863 98,987 111,490 124,677 II Consolidated banking system Netf foreign assets 166,185 164,520 218,722 247,159 (In millions ofU.S. dollars) 2,651 282,636 315,083 348,810 382,802 Ofi which: Commercial banks NFA 2,351 2,344 2,307 2,360 2,405 2,454 2,504 108,037 120,815 54,514 62,641 74,273 86,863 98,987 111,490 124,677 II Consolidated banking system Netf foreign assets 166,185 164,520 218,722 247,159 (In millions ofU.S. dollars) 2,651 282,636 315,083 348,810 382,802 Ofi which: Commercial banks NFA 2,351 2,344 2,307 2,360 2,405 2,454 2,504 Net domestic assets 104,058 142,507 144,187 183,144 Credit to the nonfinancial public sector 21,892 50,815 220,604 258,397 297,110 339,515 Ofv which Net credit to the central government 26,485 61,079 59,567 71,708 86,458 103,756 125,848 154,634 Claims on central government 70,986 83,127 97,877 115,175 137,267 166,053 Central 41,919 67,229 77,136 89,277 104,027 121,325 143,417 government deposits 15,435 6,150 6,150 6,150 172,204 Credit to the private sector 6,150 6,150 6,150 6,150 In gourdes 110,788 124,628 137,574 156,791 182,405 207,071 232,510 259,339 Inf foreign currency 66,905 75,426 83,480 94,816 109,925 124,475 139,480 155,306 In millions of U.S. dollars 43,883 49,203 54,094 61,975 72,480 82,597 93,030 104,033 6,150 6,150 6,150 6,150 In gourdes 110,788 124,628 137,574 156,791 182,405 207,071 232,510 259,339 Inf foreign currency 66,905 75,426 83,480 94,816 109,925 124,475 139,480 155,306 In millions of U.S. dollars 43,883 49,203 54,094 61,975 72,480 82,597 93,030 104,033 Other 28,622 -32,937 52,954 45,355 48,259 -52,431 -61,248 -74,459 Broad money 268,438 305,222 362,909 430,303 Currency in circulation 38,471 47,201 503,240 573,480 645,919 722,316 Gourde deposits 60,700 71,973 84,172 95,921 108,037 120,815 Foreign currency deposits 79,933 97,211 115,584 137,048 160,278 182,649 205,721 230,053 In millions ofU.S. dollars 150,034 160,810 186,624 221,282 258,789 294,910 332,161 371,448 2,393 2,298 2,000 2,066 2,161 2,251 2,337 2,429 (12- month percentage change) Currency in irculation 14.3 22.7 28.6 17.0 Base money 18.6 14.0 12.6 11.8 Gourde money (M2) 23.4 25.8 21.3 18.6 17.0 14.0 12.6 11.8 Broad money (M3) 10.3 22.0 22.1 18.6 17.0 14.0 12.6 11.8 12.9 13.7 18.9 18.6 17.0 14.0 12.6 Gourde deposits 8.5 11.8 Foreign currency deposits 21.6 18.9 18.6 17.0 14.0 12.6 11.8 15.1 7.2 16.1 18.6 17.0 14.0 12.6 11.8 Credit to the private sector 4.5 12.5 9.9 14.6 Credit in gourdes 2.0 17.0 14.0 12.6 11.8 Credit in foreign currency 12.8 9.9 14.6 17.0 14.0 12.6 11.8 8.3 12.1 9.9 14.6 17.0 14.0 12.6 11.8 Memorandum items: Foreign currency deposits (percent of total private deposits) 61.9 59.2 59.1 59.5 Foreign curr. credit to priv. sector (percent of total) 41.2 41.0 41.0 59.8 60.1 60.2 60.4 Commercial banks' credit to private sector (percent of GDP) 19.3 19.0 41.0 41.0 41.0 41.0 41.0 18.0 17.4 17.4 17.4 17.4 17.4 Sources: Bank kofthe Republic ofHaitt andF Funds staff estimates and projections. 1/Program definition. Excludes con ommercialt bank forex deposits, letters of credit, guarantees, marked project accounts and USS dend inated bank serves. The SDR allocation iS not netted out of NIR. INTERNATIONAL MONETARY FUND 29 of GDP) 19.3 19.0 41.0 41.0 41.0 41.0 41.0 18.0 17.4 17.4 17.4 17.4 17.4 Sources: Bank kofthe Republic ofHaitt andF Funds staff estimates and projections. 1/Program definition. Excludes con ommercialt bank forex deposits, letters of credit, guarantees, marked project accounts and USS dend inated bank serves. The SDR allocation iS not netted out of NIR. INTERNATIONAL MONETARY FUND 29 --- Page 35 --- HAITI Table 4a. Haiti: Balance of Payments, FY2017-24 (In millions of US$ on a fiscal year basis; unless otherwise indicated) FY2017 FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 FY2024 Est. Proj Proj. Proj Proj Proj Current account (including grants) -84 -373 -174 Current account (excluding grants) -75 -93 -136 -200 -235 -469 -759 -422 -274 -363 -410 -480 -530 Trade balance 2,626 3,406 -3,180 -3,035 -3,079 Exports of goods -3,187 -3,329 -3,471 Of which: Assembly industry 1,078 1,200 1,244 1,272 1,307 1,351 1,408 Imports of goods 887 987 1,173 1,166 1,192 1,225 1,266 1,312 Of which: Fossil fuels -3,618 4,484 380 4,279 -4,350 4,494 4,680 -4,880 Ofv which: Food products -766 -972 -1,117 1,066 -1,025 -1,019 1,031 1,055 Services (net) -867 910 -752 -785 795 -807 815 826 Receipts -399 -486 -552 -660 -685 -709 -741 -779 Payments 450 292 310 321 -1,072 1,187 1,002 -952 -987 1,019 1,061 1,113 Income (net) Ofv which: Interest payments -14 -20 -20 -20 -20 -21 -22 Current transfers (net) Official transfers (net) 2,883 3,469 3,509 3,572 3,621 3,709 3,816 3,959 Ofv which: budget support 386 248 198 270 275 281 Private transfers (net) Other transfers (net) 2,316 2,805 3,043 3,232 3,351 3,435 3,536 3,665 278 218 Capital and financial accounts 186 319 Capital transfers 54 166 195 249 285 Public sector capital flows (net) -92 -86 Loan disbursements -2 Amortization 16 102 128 182 217 -66 -71 -95 -102 -104 -105 -107 -106 Foreign direct es stment (net) Banks (net) 2/ 75 114 136 152 162 Other items (net) -267 -26 Ofwhich: repayment ofa arrears 5/ 75 229 -9 -8 -27 Errors and omissions -8 -93 -19 Overall balance -72 -21 Financing Change in net foreign assets (+ iS decrease) -73 -59 -49 -50 -12 o/w Change in gross reserves (+ decrease) -73 -59 -49 -50 o/w Liabilities (+ is increase) -92 -62 -48 -37 -39 -12 Utilization of Fund credit (net) -12 -11 -12 Changes in arrears 3/ -13 -10 -8 -27 Errors and omissions -8 -93 -19 Overall balance -72 -21 Financing Change in net foreign assets (+ iS decrease) -73 -59 -49 -50 -12 o/w Change in gross reserves (+ decrease) -73 -59 -49 -50 o/w Liabilities (+ is increase) -92 -62 -48 -37 -39 -12 Utilization of Fund credit (net) -12 -11 -12 Changes in arrears 3/ -13 -10 -12 -11 Other liabilities Debt rescheduling and debt relief Memorandum items: Change in U.S. dollar- denominated reserve deposits at BRH (+ decrease) -52 Change in NIR (program definition) (+ decrease) -87 -43 Current account (in percent of GDP) -3 -28 -17 Excluding official transfers 1.0 -3.9 -2.0 -0.9 -1.1 -1.5 2.1 -2.4 Exports of goods, f.o.b (percent change) -5.6 -7.9 -4.8 -3.2 -4.1 4.5 -5.1 -5.4 -0.9 8.8 11.3 3.7 Imports of goods, fo.b (percent change) 13.6 2.2 2.8 3.4 4.3 24.0 -2.3 -2.3 1.7 Increase in Arrears 3.3 4.1 4.3 Projected average oil price (U.S. dollars per barrel, APSP) 52.8 68.3 60.6 Debt service (in percent of exports of goods and services) 5.9 58.0 55.3 54.6 54.7 55.2 Gross international reserves (in millions ofU.S. dollars) 6.1 6.9 7.9 7.9 7.9 8.0 8.0 (in months of next year's imports of goods and services) 2,086 4.4 2,086 2,178 2,145 2,207 2,255 2,292 2,331 Nominal GDP (millions ofUs. dollars) 4.7 4.9 4.8 4.8 4.7 4.6 4.5 8,409 9,658 8,708 8,533 8,842 9,135 9,454 Sources: Bank oft the Republic of Haiti; and Fund staff estimates and projections. 9.798 Includes previously- -programmed multilateralt budget support that couldbe delayed. 2/Change n net foreign assets of commercial banks. 3/ Includes debt to Venezuela for oil shipments already paid by the GOHi in local currency but noty yet clearedi in U.S. dollars. 4/ Includes gold. 5/ Includes arrears on oili imports 30 INTERNATIONAL MONETARY FUND 8,409 9,658 8,708 8,533 8,842 9,135 9,454 Sources: Bank oft the Republic of Haiti; and Fund staff estimates and projections. 9.798 Includes previously- -programmed multilateralt budget support that couldbe delayed. 2/Change n net foreign assets of commercial banks. 3/ Includes debt to Venezuela for oil shipments already paid by the GOHi in local currency but noty yet clearedi in U.S. dollars. 4/ Includes gold. 5/ Includes arrears on oili imports 30 INTERNATIONAL MONETARY FUND --- Page 36 --- HAITI Table 4b. Haiti: Balance of Payments, FY2017-24 (In percent of GDP on a fiscal year basis; unless otherwise indicated) FY2017 FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 FY2024 Est Proj. Proj Proj. Proj Proj. Current account (including grants) -1.0 -3.9 -2.0 -0.9 -1.1 -1.5 Current account (excluding grants) -5.6 -7.9 -4.8 -3.2 -4.1 -2.1 -2.4 4.5 -5.1 -5.4 Trade balance -31.2 -35.3 -36.5 -35.6 -34.8 34.9 Exports of goods 11.8 11.2 13.8 14.6 14.4 14.3 -35.2 -35.4 Ofwhich: Assembly industry 10.6 10.2 13.5 14.3 14.4 Imports of goods 13.7 13.5 13.4 13.4 13.4 -43.0 -46.4 50.3 -50.2 -49.2 -49.2 -49.5 Ofwhich: Fossil fuels -9.1 -10.1 -12.8 12.5 -11.6 -49.8 Ofv which: Food products 10.3 -9.4 -8.6 -11.2 -10.9 -10.8 Services (net) -9.2 -9.0 -8.8 -8.6 -8.4 -4.7 -5.0 6.3 -7.7 -7.7 -7.8 -7.8 -7.9 Receipts 8.0 7.3 5.2 3.4 3.4 3.4 3.4 3.4 Payments 12.7 -12.3 -11.5 -11.2 -11.2 -11.2 -11.2 -11.4 Income (net) 0.7 0.5 0.6 0.6 0.6 0.6 Of which: Interest payments -0.2 -0.2 -0.2 0.6 0.6 -0.2 -0.2 -0.2 -0.2 -0.2 Current transfers (net) 34.3 35.9 40.3 41.9 40.9 Official transfers (net) 40.6 40.4 40.4 4.6 4.0 2.8 2.3 3.0 Ofv which: budget support 0.6 0.5 0.0 3.0 3.0 3.0 Private transfers (net) 0.2 0.2 0.2 0.2 0.2 27.5 29.0 34.9 37.9 37.9 37.6 Other transfers (net) 37.4 37.4 2.2 2.9 2.5 1.7 0.0 0.0 0.0 0.0 Capital and financial accounts 2.2 3.3 2.3 0.6 1.9 2.1 2.6 Capital transfers 0.3 0.3 0.2 0.1 0.3 0.3 2.9 0.3 0.4 Public sector capital flows (net) 0.3 -0.5 1.1 -1.0 0.0 0.3 Loan disbursements 1.0 0.3 0.0 0.8 1.1 Amortization 0.2 1.2 1.4 1.9 2.2 0.8 -0.7 -1.1 1.2 1.2 1.1 -1.1 1.1 Foreign direct investment (net) 4.5 1.1 0.9 0.9 Banks (net) 2/ 1.3 1.5 1.6 1.7 -3.2 1.6 -0.3 0.2 0.2 0.2 Other items (net) 0.4 0.8 2.6 0.0 0.0 Of which: repayment of arrears 5/ 0.5 0.0 -0.1 -0.1 -0 Foreign direct investment (net) 4.5 1.1 0.9 0.9 Banks (net) 2/ 1.3 1.5 1.6 1.7 -3.2 1.6 -0.3 0.2 0.2 0.2 Other items (net) 0.4 0.8 2.6 0.0 0.0 Of which: repayment of arrears 5/ 0.5 0.0 -0.1 -0.1 -0 .3 Errors and omissions 1.1 -0.1 -0.1 -0.1 -0.1 -0.2 -0.2 0.0 0.0 0.0 0.0 0.0 Overall balance 0.1 -0.7 0.1 0.2 0.8 0.6 0.5 0.5 Financing -0.1 0.7 -0.1 0.2 -0.8 Change in net foreign assets (+ IS decrease) -0.1 0.7 -0.1 0.2 -0.6 -0.5 -0.5 -0.8 Change in gross reserves (+ IS decrease) -2.2 0.0 -1.1 -0.6 -0.5 -0.5 Liabilities (+ is increase) 0.4 -0.7 0.5 -0.4 0.4 2.1 0.7 0.9 -0.1 -0.1 -0.1 -0.1 Jtilization of Fund credit (net) 0.4 -0.1 -0.2 -0.1 -0.1 -0.1 Changes in arrears 3/ 1.6 -0.1 -0.1 -0.1 0.9 1.1 0.0 0.0 0.0 Other liabilities 0.0 0.0 0.0 -0.1 0.0 0.0 0.0 0.0 0.0 Debt rescheduling and debt relief 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Memorandum items: Exports of goods, fo.b (percent change) -0.9 8.8 11.3 3.7 2.2 2.8 3.4 Imports of goods, fo.b (percent change) 13.6 24.0 -2.3 -2.3 1.7 4.3 Projected average oil price (U.S. dollars per barrel, APSP) 52.8 68.3 60.6 3.3 4.1 4.3 58.0 55.3 54.6 Increase in Arrears (in percent of GDP) S/ 54.7 55.2 0.5 Debt service (in percent of exports of goods and services) 5.9 6.1 6.9 7.9 7.9 Nominal exchange rate 65.6 7.9 8.0 8.0 65.4 Gross international reserves (in millions ofU.S. dollars) 4/ 2,086 2,086 2,178 2,145 2,207 (in months of nexty year's imports of goods and services) 4.4 4.7 4.9 4.8 2,255 2,292 2,331 Nominal GDP (millions of fUS dollars) 8409 9658 4.8 4.7 4.6 4.5 8708 8533 8842 9135 9454 9798 Sources: Bank of the Republic ofHaiti; and Fund staff estimates and projections. 086 2,086 2,178 2,145 2,207 (in months of nexty year's imports of goods and services) 4.4 4.7 4.9 4.8 2,255 2,292 2,331 Nominal GDP (millions of fUS dollars) 8409 9658 4.8 4.7 4.6 4.5 8708 8533 8842 9135 9454 9798 Sources: Bank of the Republic ofHaiti; and Fund staff estimates and projections. 1/Includes previously- programme ed multil teral budget support that could be delayed. 2/Changei in net foreign assets of commero cial banks. 3/Includes debt to Venezuela for oil shipments already paid by the GOH inl local currency but not yet clear ed in U.S. dollars. 4/ Includes gold. S/Includes arrears on oil imports INTERNATIONAL MONETARY FUND 31 --- Page 37 --- HAITI Table 5. Haiti: Financial Soundness June 2017-June Indicators, (In percent; unless otherwise indicated) Jun-17 Sep-17 Dec-17 Mar-18 Jun-18 Sep-18 Dec-18 Mar-19 Size and growth Jun-19 Asset volume (in USS millions) 4828.1 4841.4 4878.0 4955.6 Deposit volume (in USS millions) ) 4838.5 4734.2 4646.8 4514.3 4218.5 Asset growth (in gourde terms) since beginning of fiscal year 3858.9 3882.5 3868.2 3940.1 3881.5 3848.9 3764.5 3638.1 3412.1 Credit growth (net, in gourde terms) since beginning of fiscal year 10.7 11.9 2.0 5.7 5.9 8.3 7.8 13.0 18.9 2.7 9.7 4.6 10.5 12.1 17.3 9.5 11.4 19.8 Capital adequacy Regulatory capital to risk -weighted assets 29.3 25.3 25.5 24.9 Assets to regulatory capital 23.0 23.4 22.5 22.27 21.71 9.8 11.2 10.9 11.1 12.1 11.6 11.8 11.99 12.37 Asset quality and composition Loans (net) to assets 27.2 NPLS to gross loans 28.7 29.4 30.0 30.4 31.1 31.6 30.63 31.29 Provisions to gross loans 3.8 2.9 2.8 4.0 3.6 2.5 2.9 4.36 7.47 Provisions to gross NPLS 2.8 2.7 2.5 2.4 2.4 2.2 2.2 2.34 2.52 NPLS less provisions to net worth 72.4 90.6 90.7 59.4 66.9 87.9 75.5 53.66 33.76 2.9 0.9 0.8 5.4 4.4 1.1 2.6 7.31 18.99 Earnings and profitability (cumulative since beginning of fiscal year) Return on assets (ROA) 12.5 1.1 1.5 1.4 1.7 Return on equity (ROE) 2.1 2.3 2.00 1.80 130.5 11.8 15.9 14.8 19.7 Neti interest income to gross interest inc me 75.7 76.9 23.9 25.5 22.96 21.11 Operating expenses to net profits 79.0 78.8 77.3 78.3 79.5 78.48 76.21 21.9 76.0 66.6 67.5 65.0 63.4 56.6 58.87 63.52 Efficiency Interest rate spread 10.0 9.9 9.8 9.5 9.5 9.9 9.9 9.73 9.75 Liquidity Liquid assets to total assets 45.0 44.5 44.8 44.1 Liquid assets to deposits 2 45.8 45.3 45.2 44.38 44.47 56.3 55.5 56.5 55.5 57.1 55.8 55.8 55.07 54.98 Dollar tion Foreign.currency loans to total loans (net) 45.9 48.8 47.8 44.7 45.5 46.8 Foreign.currency deposits to total deposits 63.1 63.9 63.3 48.9 49.58 51.31 Foreign currency loans to foreign currency deposits 24.7 61.5 60.5 61.3 63.5 65.46 68.41 27.3 28.0 27.4 28.5 29.1 30 .98 Dollar tion Foreign.currency loans to total loans (net) 45.9 48.8 47.8 44.7 45.5 46.8 Foreign.currency deposits to total deposits 63.1 63.9 63.3 48.9 49.58 51.31 Foreign currency loans to foreign currency deposits 24.7 61.5 60.5 61.3 63.5 65.46 68.41 27.3 28.0 27.4 28.5 29.1 30 .0 28.79 29.02 Sources: BRHE Banking System Financial Summary: andIMFe estimates and projections. These indic cators reflect the resultsoft Haiti; thus figures in this stable may not exactly match the informationin Table which reflect the consolidated aggregatedr ther nine licensedt banks in operation in 1/Defined as the differenc ce between average lending rate and averagef fixed deposit ratei in thel bankings system. bankings system. 2/1 Liquid assets comprise cash and central bank bonds. 32 INTERNATIONAL MONETARY FUND --- Page 38 --- HAITI Engagement Strategy Annex I. Country with Haiti have been disappointing. An 1. The results of past Fund-supported arrangements of failure to complete the first review and an approved in 2015 lapsed because international ECF arrangement progress. Despite other extensive SMP ended in August 2018 with incomplete foreign interventions have SO far failed to assistance and financial aid following the 2010 earthquake, and partners of development and humanitarian projects and deliver change. Moreover, the proliferation uncoordinated and inefficient delivery of goods has contributed to fragmentation of programs, services, and importantly, a loss of policy ownership. In addition to typical sources of warrants a careful and tailored approach. and 2. Haiti's fragility and conflict, poverty, inequality, weak capacity fragility related to political instability (i) high to natural disasters; sources of fragility: susceptibility infrastructure, Haiti has other important (ii) weak business regulations and institutions and little national ownership of policies; rent- (ii) weak concentration of economic power and encouraged judiciary which have contributed to a insufficient means to maintain security and order. activities among public officials; and (iv) seeking reform efforts. Based on a broad and factors underlie the cycle of failed undermined 3. Several recurring Ex-Post Assessment, the following issues stocktaking, including from the 2015 did not match in terms of objective to break the cycle: (i) reform programs past efforts and must be addressed to carry out the multiple and not always welland design Haiti's fragility and limited capacity of the relief and scope international partners; (ii) Haitian ownership coordinated projects initiated by of, all Haitians was inadequate (ISE (ii) investment in, and empowerment reform agenda was lacking; in the use of public funds was weak or absent. 2014); and (iv) accountability and transparency (CES) aims to raise awareness and build consensus and 4. Concept. This engagement strategy in Haiti for a set of basic economic principles that commitment among internal stakeholders Given the lack of effective of economic stability and policy continuity. an underpin the imperative sustained reforms, the goal would be to develop institutional and political commitment for communications by exploiting the strong 'commitment device' that effectively leverages alternative Haitian culture of active civil society. address the issues identified above in two steps. 5. Approach. The strategy attempts to around a basic set of generic economic Step 1. The first would be to start to build consensus that could attract universal support. consistent with Haiti's limited capacity, in Haiti principles and objectives, endorsed by key stakeholders would need to be owned by the government, and by the This consensus civil society, and eventually the opposition) supported (including the private sector, labor, international community. (and stakeholders) to spell out their Step 2. The second step would be to encourage policymakers table in Haiti could be an opportunity to in writing. An international forum or round device'. Given the weakness of engagements and develop this as a form of 'commitment tool to initiate the dialogue national framework or could help institutions and the political system, a different public INTERNATIONAL MONETARY FUND 33 by the government, and by the This consensus civil society, and eventually the opposition) supported (including the private sector, labor, international community. (and stakeholders) to spell out their Step 2. The second step would be to encourage policymakers table in Haiti could be an opportunity to in writing. An international forum or round device'. Given the weakness of engagements and develop this as a form of 'commitment tool to initiate the dialogue national framework or could help institutions and the political system, a different public INTERNATIONAL MONETARY FUND 33 --- Page 39 --- HAITI and follow through on the most basic principles of mobilize commitment, empower Haitians, function more effectively. at least until such time as national systems macroeconomic management, document could provide an The formulation of a Poverty Reduction and Growth Strategy of more detailed reform proposals to for discussion among domestic stakeholders identified. opportunity and achieve the basic objectives previously implement those principles stakeholders and to assemble IMF role. The Fund is well placed to initiate a dialogue among would be by 6. international financial institutions strengthened foreign partners. Coordination between World bank and the IDB through the creation of a formalizing the ongoing cooperation with the director level. The group could meet at least tripartite working group at the mission chief/country plans. to discuss reform progress and future engagement quarterly should begin soon. Staff initiated Informal outreach in Haiti and with external partners and objectives 7. Timing. the Article IV consultation on the broad concept discussions with stakeholders during although many flagged the challenges. Preliminary feedback was positive, of the proposed strategy. be critical in promoting the process on the ground. The Resident Representative would is in place that is in a position to commit to and 8. Potential fund support. When a government economic stability and sustainability, the policies that would put Haiti on a path toward combination, implement support. Under those conditions, an RCF/SMP to Fund could consider financing balance of payments need, could provide a bridge contingent on the determination of an urgent need to be appropriately adapted to the The combination of facilities would of broader social an ECF arrangement. and should include rapid implementation Fragile and Conflict States guidelines bolster public support and ownership of reform. policies to alleviate social distress and protection would focus on four key objectives: Economic reform priorities. The reform strategy (ii) building a 9. (ii) strengthening governance and transparency, (i) restoring macroeconomic stability, sector. social safety net, and (iv) reforming the energy critical for ongoing capacity building, should support program 10. Capacity building. Fund TA is lessons from past TA. The provision of TA also conditions, and be informed by the experience and periods of political crisis when lending IMF engagement with Haiti even during a allows for continuous efforts to monitor and trace resource use- addressing operations cannot move forward. Including development assistance (see Annex IV). disincentive to donors at present-could help mobilize will be key to advance the strategy and raise 11. Outreach and communications with the government would be important. understanding of key issues. A coordinated approach with stakeholders and to raise will have a key role in outreach the of the The Resident Representative particularly highlighting purpose awareness and support among the broader public, and policy continuity-and focusing on build consensus on the need for macro stability Haiti's active civil engagement strategy-to the social safety net and fight corruption. and the reforms that strengthen be to help gain traction for these goals free media are assets that could leveraged the most effective and relatively It would be important in due course to harness strengthen national ownership. including radio and social media. particular to Haiti, modes of news transmission 34 INTERNATIONAL MONETARY FUND the of the The Resident Representative particularly highlighting purpose awareness and support among the broader public, and policy continuity-and focusing on build consensus on the need for macro stability Haiti's active civil engagement strategy-to the social safety net and fight corruption. and the reforms that strengthen be to help gain traction for these goals free media are assets that could leveraged the most effective and relatively It would be important in due course to harness strengthen national ownership. including radio and social media. particular to Haiti, modes of news transmission 34 INTERNATIONAL MONETARY FUND --- Page 40 --- HAITI Annex II. Risk Assessment Matrix' Source of Risk and Likelihood Horizon Expected Impact on the Policy Response Direction Economy Domestic Risks Absence of High Short- and Can lead to lower revenues, Focus on a few Reforms /Weak Medium slowdown in aid disbursements priorities. Proceed Macroeconomic term and lower FDI flows. carefully to avoid reversals. Strengthen Polices administrative capacity through technical assistance. Implement an effective communication strategy to build popular support. Implement mitigating measures to offset any effects on the most vulnerable. Political Instability High Short- and Could impede the Build a national political Mediumimplementation of structural consensus on a term reforms, constrain growth, and sustainable growth weaken the business reform agenda. environment. Could delay the Engage with all approval of key legislation and stakeholders to limit progress in the reform strengthen the business agenda. climate and enhance poverty reduction efforts. Fuel Shortages High Short-term Would negatively affect growth Resolve any arrears with and social stability. fuel providers. In the medium-term, design a strategy to reduce the fiscal cost of fuel subsidies. Extreme Natural High ShortCan result in loss of human life Develop a Disasters Medium- and destruction of infrastructure. comprehensive disaster (e.g., framework, hurricanes, and Long- Can disrupt agriculture financing earthquakes and term production and increase food including disaster-linked inflation. Could also result in low social protections and droughts) growth prospects and delays in the buildup of financial poverty reduction. buffers. Build physical infrastructure to cope with disasters. 1 The Risk Assessment Matrix (RAM) shows events that could materially alter the baseline path (the scenario most likely to materialize in the view of IMF staff). The relative likelihood is the staff's subjective assessment of the risks surrounding the baseline ("low" is meant to indicate a probability below 10 percent, "medium" a probability between 10 and 30 percent, and "high" a probability between 30 and 50 percent). The RAM reflects staff views on the source of risks and overall level of concern as of the time of discussions with the authorities. INTERNATIONAL MONETARY FUND 35 . 1 The Risk Assessment Matrix (RAM) shows events that could materially alter the baseline path (the scenario most likely to materialize in the view of IMF staff). The relative likelihood is the staff's subjective assessment of the risks surrounding the baseline ("low" is meant to indicate a probability below 10 percent, "medium" a probability between 10 and 30 percent, and "high" a probability between 30 and 50 percent). The RAM reflects staff views on the source of risks and overall level of concern as of the time of discussions with the authorities. INTERNATIONAL MONETARY FUND 35 --- Page 41 --- HAITI Source of Risk and Likelihood Horizon Expected Impact on the Policy Response Direction Economy External Risks Rising High Short- and Escalating and unpredictable Improve business Protectionism Medium trade actions imperil the global conditions for term trade system and international manufacturers currently cooperation. In an adverse benefiting from the scenario, this could result in early HOPE/HELP preferences. cancellation of HOPE/HELP trade Implement structural preferences, for example. reforms to increase competitiveness. Weaker-thanMedium Short- and Low growth in the U.S. has Build buffers and Expected Global Mediumsignificant spillovers which can increase flexibility in Economic Growth term undermine Haiti's medium-term macroeconomic policies growth and slowdown any to help absorb shocks. reform process. Can result in Adopt structural lower remittances and exports. reforms to increase competitiveness. Promote investments in tourism and agriculture. Tighter Global High Short- and An abrupt deterioration in Strengthen bank Financial Medium- market sentiment could result in buffers to cover macro- capital Conditions term sharp increases in interest rates financial risks. Ensure and associated tightening of debt issuance is not financial conditions. Higher debt indexed to global service could add pressures to interest rates when leveraged firms and increase possible. refinancing risks. Large Swings in Medium Short- and Given fuel regulated prices, Consider fuel Energy Prices Medium- elevated world subsidy energy price reform. Build social term volatility poses higher risk to the safety net to offset any budget. negative effects on the most vulnerable. 36 INTERNATIONAL MONETARY FUND Conditions term sharp increases in interest rates financial risks. Ensure and associated tightening of debt issuance is not financial conditions. Higher debt indexed to global service could add pressures to interest rates when leveraged firms and increase possible. refinancing risks. Large Swings in Medium Short- and Given fuel regulated prices, Consider fuel Energy Prices Medium- elevated world subsidy energy price reform. Build social term volatility poses higher risk to the safety net to offset any budget. negative effects on the most vulnerable. 36 INTERNATIONAL MONETARY FUND --- Page 42 --- HAITI III. External Sector Assessment Annex weaker than mediumof Haiti in FY2019 is assessed to be moderately the The external position policies. It should be noted that and desired macroeconomic term fundamentals contraction, a decline in public spending assessment occurs in the recent context of output and a surge in arrears, points of GDP, demand and import compression, by 3.0 percentage financing might have prevented. developments that larger external A. External Balance Sheets 30, 2019. Gross liabilities of about 18 percent of GDP as of September 1. Haiti had net external of the central bank's international reserves external assets of 30.5 percent of GDP consisted primarily sector at 32 percent of the total. Gross of the total and other investments by the banking for 55 at 55 percent of GDP, with foreign direct investment (FDI) accounting external liabilities stood at 48.7 percent terms, mostly (82 percent) owed liabilities. Public external debt is all on concessional percent of these liabilities. After the devastating 2010 earthquake, and accounts for one-half of gross a net asset to Venezuela, in foreign reserves, resulting in positive donor grant inflows contributed to a surge debt and FDI increased while large In subsequent years, both public external position during FY2010-2012. foreign reserves declined. 60 Net International Investment Position (NIIP) (Percent cof GDP, eop) 1/ E 4 20 A I 20 Banking sector Direct investment Other investment assets Nonbanking sector Public external debt -60 FX reserves liabilities Net IIP Other investment -80 R 8 0 2 A Sources: Bank of the Republic of Haiti and IMF staff calculations 1/ Data for FY2017- FY2019 are provisional. Assessment ratio is projected to worsen over current account deficits, Haiti's NIIP/GDP to remain 2. Given persistent to finance capital expenditures is expected the medium term. Public external borrowing decline in the external debt -to-GDP ratio under the baseline assumptions, leading to a gradual base in 2019, rising weak from its sharp drop and low the medium-term. FDI is projected to recover but low given over about 1.8 percent of GDP by 2025, an improvement from under 1.0 percent of GDP to the investment needs of the country. INTERNATIONAL MONETARY FUND 37 's NIIP/GDP to remain 2. Given persistent to finance capital expenditures is expected the medium term. Public external borrowing decline in the external debt -to-GDP ratio under the baseline assumptions, leading to a gradual base in 2019, rising weak from its sharp drop and low the medium-term. FDI is projected to recover but low given over about 1.8 percent of GDP by 2025, an improvement from under 1.0 percent of GDP to the investment needs of the country. INTERNATIONAL MONETARY FUND 37 --- Page 43 --- HAITI B. The Current Account deficit that is deficit comprised of a large goods trade 3. Haiti runs a current account (CA) Haiti amount to 35 percent of GDP, making it private remittances. Remittances to about mostly offset by in the region. 1 The trade deficit has averaged of remittances on food one of the largest recipients Goods exports are low and Haiti depends heavily 38 percent of GDP over the past 10 years. about 19 percent over the last low share of exports in GDP, averaging limited and fuel imports. The relatively including poor port and road infrastructure, decade, reflects long term structural weaknesses, water shortages, and a weak legal and availability of credit, insufficient and unreliable electricity, decile of the World Bank's Doing Business environment 2 Haiti is ranked in the lowest than of regulatory accounting for more three-quarters are concentrated, with apparels essentials index. 3 Goods exports Dependence on imports of basic of which the U.S. absorbs about 70 percent. shocks. goods exports exacerbate Haiti's vulnerabilities to exogenous and frequent natural disasters of GDP in FY2019 from 3.9 percent of GDP account deficit shrank to 2.0 percent The 4. The current in total imports and an increase in remittances. earlier, largely due to a reduction offset strong private a year fuel prices was largely by modest rise in fuel imports due to higher global share of GDP in two decades. The CA of GDP-the highest level as a remittance flows at 34.9 percent of GDP in spite of the continued to increase slowly to about 2.3 percent deficit in FY2020 is projected growth in private remittances. 30 Exports of Goods Balance (Percent of GDP; average over 2014-18) Current Account 60 (Percent of GDP) a 2 2 24 20 à a 2 A 0 N -20 - a N - à - -40 - -60 DGoods exports income 3Goods imports balance DS Services balance Private transfers -80 JOfficial transfers Current account balance Caribbean Trade balance Haiti Other members of the -100 (CARICOM, average) a Community Sources: IMF, World Economic Outlook database and IMF staff calculations Sources: Bank of the Republic of Haiti and IMF staff calculations. Assessment the FY2019 CA balance to be based on the refined EBA-lite model shows would 5. Staff's assessment fundamentals and desired policies suggest. moderately weaker than what medium-term No. June 2017. 1 See IMF Working Paper WP/17/144, 2 See IMF Country Report No. 15/158, June 2015. Business Indicators as (i) they are not a country rankings under the Doing statistical 3 Caution is needed in interpreting environment in most countries, (ii) there is no internationally than accepted their comprehensive measure of business what the laws and regulations provide for rather standard for these indicators, (ii) they assess is ongoing to assess recent changes in methodology. implementation, and (iv) an external review 38 INTERNATIONAL MONETARY FUND June 2017. 1 See IMF Working Paper WP/17/144, 2 See IMF Country Report No. 15/158, June 2015. Business Indicators as (i) they are not a country rankings under the Doing statistical 3 Caution is needed in interpreting environment in most countries, (ii) there is no internationally than accepted their comprehensive measure of business what the laws and regulations provide for rather standard for these indicators, (ii) they assess is ongoing to assess recent changes in methodology. implementation, and (iv) an external review 38 INTERNATIONAL MONETARY FUND --- Page 44 --- HAITI to the historical worsened over the last few years compared The CA model's fit has significantly crisis involves output contraction, demandAs noted above, the recent context of political that the model-based average. and a rise in arrears, developments complicate uncertainty related import compression, downward to account for heightened exercise. Accordingly, staff adjusted the CA norm model (Table 1). The size of the adjustment was sizeable political shocks not captured by the value of the and the the model residual for 2019 and the average calculated based on the difference between is -2.0 percent of GDP; the mutiateraly.consistent residual in the last 5 years. As a result, the CA gap CA balance is -3.5 cyclically-adjusted CA norm is -1.5 percent of GDP and the cyclically-adjusted of GDP to the model-estimated contribute about 2.8 percentage points percent of GDP. Policy gaps factors and/or regression residuals. CA gap and the rest reflects unidentified country-specific Assessment of the Current Account Balance Annex Table 1. Haiti: Model Adjusted -3.3% -3.3% CA-Actual 0.2% 0.2% Cyclical Contributions (from model) -3.5% -3.5% Cyclically adjusted CA 1.4% 0.7% CA-Fitted -4.7% -4.0% Residual -1.2% -1.9% -2.1% CA-Norm -1.4% Cyclically adjusted CA Norm -0.8% -1.5% Matilateraily.Consistent Cyclically-adjusted CA Norm -2.7% -2.0% CA-Gap 2.8% 2.8% of/which Policy gap Source: IMF staff estimates. while enhancing long-term Structural reforms could help achieve fiscal sustainability savings. This 6. increase and lower private precautionary growth. Measures are needed to productivity indicators and human capital, including higher in social would involve policies to support improvement and increased access to finance. spending on social protection, education and health, and key reforms are needed to boost private review of the business environment A comprehensive investment and export competitiveness. Real Exchange Rate This was due by 10.8 percent in FY2019. rate (REER) depreciated 7. The real effective exchange exchange rate (NEER) by 23.6 percent. to depreciation in the nominal effective desired level (P*) in the country under study relative to its considers the actual policy (P) and its as a share of GDP, is 41 The EBA-lite model is defined as (P - Pwona) - (P* P*world). The overall policy gap, in reserves -0.04 percent; trading partners. Thus, policy gap public health expenditure 1.02 percent; changes with relative broken down into: fiscal policy 0.78 percent; credit growth 0.16 percent; and capital controls when combined private credit level -0.06 percent; aversion private 0.96 percent. productivity and global risk INTERNATIONAL MONETARY FUND 39 as a share of GDP, is 41 The EBA-lite model is defined as (P - Pwona) - (P* P*world). The overall policy gap, in reserves -0.04 percent; trading partners. Thus, policy gap public health expenditure 1.02 percent; changes with relative broken down into: fiscal policy 0.78 percent; credit growth 0.16 percent; and capital controls when combined private credit level -0.06 percent; aversion private 0.96 percent. productivity and global risk INTERNATIONAL MONETARY FUND 39 --- Page 45 --- HAITI Annex Table 2. Haiti: Assessment of the Real Exchange Rate (In percent) Gap EBA-lite REER index model -1.9 Of which: contributions from identified policy gaps -1 contributions from natural disasters and conflicts 0.1 unexplained residual -0.01 Source: IMF staff estimates. Assessment Effective Exchange Rates 200 (Index, CY2010=1 100; fiscal- -yeara averages) 8. The EBA-lite REER model estimates the REER gap Nominal effective exchanger rate at -1.9 percent. On this basis, the position is assessed 150 Real effective exchangerate to be broadly consistent with fundamentals and desirable policy settings. Monetary policy should continue to strive for lower inflation, reduce direct financing of the government, and allow exchange rate flexibility. C. Capital and Financial Flows 9. Haiti maintains an open financial account but receives limited portfolio inflows. At 1.7 percent of GDP average over the past ten years, FDI inflows to Haiti are lower than the regional average. In FY2019, financial flows remained largely stable as a share of GDP, reflecting lower disbursement for public projects and a rise in non-banking sector inflows. Assessment 10. Over the medium term, the capital and financial accounts are expected to remain in modest surplus. Under the baseline, the political crisis would abate and FDI and external financing associated with public investment projects would recover somewhat. These flows, combined with a sustainable level of CA deficit, would support a modest improvement in the overall balance of payments. 3.5 Capital and Financial Account Balance Net Direct Investment Inflows 30 (Percent of GDP) 3.0 (Percent of GDP; average over 2014 18) 25 mCapital account mPublic sector disbursements (gross) 2.5 20 CPublic sector amortization ODirect investment 15 mBanking sector 2.0 CNonbanking and other flows 10 Capital and financial account balance 1.5 0 a 1.0 -5 0.5 -10 0.0 Haiti Other members of the Caribbean Community (CARICOM, average) Sources: Bank of the Republic of Haiti and IMF sta aff lat tio or Sources: IMF, World Economic Outlook database and IMF staff calculations. 40 INTERNATIONAL MONETARY FUND --- Page 46 --- HAITI D. Foreign Reserves 11. As of September 2019, gross international 200 Gross International Reserves reserves stood at about US$2.18 billion, 160 In percent of GDP equivalent to about 4.8 months of next years' 140 In percent of exports of goods and projected imports of goods and services. Haiti's 120 services In months of nexty year's imports de of goods ands services (RHS) de jure exchange rate regime is floating, but facto 100 regime is classified as "crawl-like". The central bank tracks the developments in the exchange rate Reserves 11. As of September 2019, gross international 200 Gross International Reserves reserves stood at about US$2.18 billion, 160 In percent of GDP equivalent to about 4.8 months of next years' 140 In percent of exports of goods and projected imports of goods and services. Haiti's 120 services In months of nexty year's imports de of goods ands services (RHS) de jure exchange rate regime is floating, but facto 100 regime is classified as "crawl-like". The central bank tracks the developments in the exchange rate market given its high pass-through to domestic prices, implications for liquidity in the banking system, and impact on growth. BRH intervenes in the foreign exchange market mostly to manage volatility Sources: Bank of the Republic of Haiti and IMF staff in the exchange rate, but also to provide market liquidity and build up reserves. Assessment 12. Gross international reserves are at present adequate to finance more than 4 months of prospective imports of goods and services, although this adequacy level has steadily declined in recent years. The IMF's reserve adequacy estimate for low-income economies suggests that 23/4-4 months of current import coverage of reserves would be adequate. 5 At 4.8 months of prospective import coverage, gross reserves for FY2019 are assessed to be adequate under current assumptions. However, the above estimate is sensitive to assumptions of unconditional probability of a large shock affecting the economy. Thus, higher reserves would serve as an important buffer, but they are not substitutes for needed policy adjustments and structural reforms. 5 These estimates consider the current de facto exchange rate regime, and assume (i) risk neutrality, (ii) opportunity cost of holding reserves at 412-and 6% percent range, and (iii) an unconditional probability of a large shock at 50 percent. For more discussions, see IMF, 2016, Guidance Note on the Assessment of Reserve Adequacy and Related Considerations, June 2016. INTERNATIONAL MONETARY FUND 41 affecting the economy. Thus, higher reserves would serve as an important buffer, but they are not substitutes for needed policy adjustments and structural reforms. 5 These estimates consider the current de facto exchange rate regime, and assume (i) risk neutrality, (ii) opportunity cost of holding reserves at 412-and 6% percent range, and (iii) an unconditional probability of a large shock at 50 percent. For more discussions, see IMF, 2016, Guidance Note on the Assessment of Reserve Adequacy and Related Considerations, June 2016. INTERNATIONAL MONETARY FUND 41 --- Page 47 --- HAITI for Governance Reform Annex IV. Proposals manner the elements of reform of this annex is to assemble in an integrated The purpose and that would contribute clearly to that fall under the Fund's core competencies and tackling corruption in Haiti.' transparency and accountability, improving governance, agreement, the 2019 safeguards of the March staff-level These draw on the framework TA. assessment of the central bank (BRH), and ongoing A. Context vulnerabilities. Corruption is perceived as high and 1. Haiti faces severe governance does not appear to be enforced. Out of 232 legislation widespread. The existing anti-corruption 2018, less than half submitted an asset presidents and ministers over the period 2008-February did SO at the end of their tenure, as of their tenure and only 11 percent declaration at the beginning did not submit asset declarations, nor did required by law. Of the tax controllers, 99 percent creation of the Anti-Corruption Unit of 2 Since the percent of senators and 93 percent congressmen. only 39 cases have been prosecuted by the de Lutte Contre la Corruption or ULCC) in 2004, Haiti's financial (Unité the UCREF (Unité Centrale de Renseignements Financiers), referred justice system. In 2018, of financial activity, but reported receiving about 400 reports suspicious Force intelligence agency, the Caribbean Financial Action Task (CFATF), less than twelve to the judiciary. According to for money-laundering offences for successful prosecution or conviction Haiti has not recorded any the past five years (2014-18).3 of state functions and have significant These vulnerabilities affect all categories central bank 2. Fiscal governance, financial sector oversight, negative effects on the economy. rule of law, and the AML-CFT and operations, the quality of market regulation, to corruption. Fiscal governance weaknesses that create vulnerability framework all suffer from governance effects on tax revenue and customs collection, governance weaknesses have significant negative The central bank's autonomy and spending effectiveness, and the fiscal position. confidence is hindered by public by a weak legal framework. Business weak accountability are compromised The rule of law, and capacity of the police are weak property rights and contract enforcement. of crimes, fueling popular resentment undermine the enforcement of laws and prosecution and national and sector-focused A recent report based on a broad-based to against the government. the following issues as the key impediments dialogue launched by President Moïse highlighted and interference by the executive modernization: the lack of independence of the judiciary economic Haiti's affairs, the weaknesses of political parties, and and legislative powers in judicial monopolies. framework "Review of 1997 Guidance Note on 1 The focus is in line with the Fund's enhanced Enhanced governance Fund Engagement" April 2018. Governance - -A proposed Framework for May 2019. déclaration de patrimoine, un engagement citoyen, 2 FJKL, La loi portant Financing Measures, Republic of Haiti, Mutual Evaluation Laundering and Counter-Terrorist 3 CFTAF-GAFIC, Anti-Money Report, July 2019. 42 INTERNATIONAL MONETARY FUND and legislative powers in judicial monopolies. framework "Review of 1997 Guidance Note on 1 The focus is in line with the Fund's enhanced Enhanced governance Fund Engagement" April 2018. Governance - -A proposed Framework for May 2019. déclaration de patrimoine, un engagement citoyen, 2 FJKL, La loi portant Financing Measures, Republic of Haiti, Mutual Evaluation Laundering and Counter-Terrorist 3 CFTAF-GAFIC, Anti-Money Report, July 2019. 42 INTERNATIONAL MONETARY FUND --- Page 48 --- HAITI issue since revelation of the misuse of Corruption has become a more serious released in 3. Haiti's 2010 earthquake. In two reports Petrocaribe funds in the years following Supérieure des Comptes et du Contentieux January and May 2019, the Superior Audit Court (Court into the use of 77 percent (US$1.6 details of its investigation Administratif or CSCCA) presented the context of the Petrocaribe program, highlighting billion) of the total funds received in for judiciary action against involved officials. widespread mismanagement and misuse and calling in October and November 2018, and again scandal triggered large demonstrations and the The Petrocaribe better accounting of the use of funds in February 2019, with protesters demanding replacement of officials involved. B. Priorities for Reform Framework Strengthening the Anti-corruption framework to fight corruption are in Although elements of the legal and institutional involved in the fight 4. is lacking. Control bodies and institutions and is place, its effective implementation The ULCC employs only 130 people corruption lack the legal powers and resources. the ULCC, the 2014 OAS against (administrative districts). Beyond present in just half of the départements Convention against Corruption calls for the on the implementation of the Interamerican Nationale des report of the CSCCA, the Public Procurement Commission (Commission du Pouvoir Judiciare or strengthening Judiciary Council (Conseil Supérieur Marchés Publics or CNMP), the Superior Générale des Finances or IGF).9 CSPJ), and the Finance Inspection (Inspection corruption should be enhanced. The 5. The prevention and enforcement against and the director general at the Steering appointment and employment rules of commissioners role for of civil their with a greater representatives Committee should better ensure independence, should be guaranteed. The authorities Public reporting of the work of the commission The draft antisociety. strategy and ensure its proper implementation. should update the anti-corruption line with the requirements of the United Nations corruption legislation should be brought into and authority of the antiConvention against Corruption by strengthening the independence office should be given the power to and increasing its transparency. The new for senior public corruption agency them. The asset declaration system prosecute crimes in addition to investigating best practices, including by in line with international officials should be properly implemented the failure and false reporting, and having verifying the accuracy of the declaration, sanctioning public access to the declarations. accountability. The CSCCA should progressively 6. Transparency is key to raising public made available by the ministry of audit and publish all annual consolidated financial statements published, as was the case for the reports finance. All reports by the CSCCA should be systematically Petro Caribe, Volume 1 and 2, January and May 2019. 4 CSCCA, Audit Spécifique de Gestion du Fonds contre la Corruption, République d'Haiti, 5 Mécanisme de Suivi de la Mise en CEuvre de la Convention Interaméricaine Rapport Final, September 2014. INTERNATIONAL MONETARY FUND 43 to raising public made available by the ministry of audit and publish all annual consolidated financial statements published, as was the case for the reports finance. All reports by the CSCCA should be systematically Petro Caribe, Volume 1 and 2, January and May 2019. 4 CSCCA, Audit Spécifique de Gestion du Fonds contre la Corruption, République d'Haiti, 5 Mécanisme de Suivi de la Mise en CEuvre de la Convention Interaméricaine Rapport Final, September 2014. INTERNATIONAL MONETARY FUND 43 --- Page 49 --- HAITI and benefits of all public officials and high civil servants on the use of Petrocaribe funds. The wages requirement for public officials and high-level civil should be publicly available. The asset declaration servants should be better enforced. Public Financial Management (PFM) the for misuse of public funds. While Haiti in PFM would reduce scope expert in the 7. Improvements of several TA missions, the presence of a long-term has benefited from the support the of the TA recommendations and Finance is key to ensure implementation ministry of Economy constraints of the Haitian administration. given the significant capacity of the PFM reform strategy. Account (TSA) is a major component cash 8. The Treasury Single the TSA can help to ease payments, strengthen By consolidating all state financial resources, arrears, reduce borrowing costs, and improve management and prevent new expenditure payments TSA has been extended to 18 ministriesand transparency. Since 2014, the existing fiscal reporting expenditure e-by consolidating or linking for more than half of total public of the accounting entities and agencies within the administrative jurisdiction individual bank accounts held by March 2019, there remained over 900 accounts at state into or to a single account. However, as of Crédit. there are about 74 Nationale de Specifically, the central bank (BRH) and at the Banque institutions that could be merged rapidly at the BRH by various ministries and public accounts open in the TSA. procedures" and enforcing the timely the use of "exceptional spending The use of lettres 9. Limiting would raise transparency and accountability. reporting of financial accounts and spending authorization, to pay which bypass regular financial control procedures in 2015-16 to de virement, from 8.1 percent of total budget spending expenditures, have grown monitoring for government in early FY2019 and jeopardize the proper around 16 percent of total budget spending accounts should be improved to facilitate spending. The coverage and quality of financial of public public finances monitoring. fiscal and investment plan is needed to improve 10. A medium-term budget framework reforms would strengthen the credibility of fiscal Both management and spending prioritization. formulation while ensuring that the fiscal discipline and aid in budget and policy, impose greater financed. It would also allow proper monitoring selected investment projects are properly Public Investment Management Assessment investment projects. Eventually a prioritizing of ongoing investment process. would help guide the reform of the public Customs Collection assessments allow for considerable discretion Current customs processes and valuation at the 11. customs officers. There remain large revenue leakages and uneven enforcement by is that AGD records imports from the Dominican customs agency (AGD). A prominent example recorded by the Dominican Republic (see SIP). Republic at one half of the level of exports to Haiti customs duties exemptions (machinery, According to World Bank preliminary estimates, numerous 44 INTERNATIONAL MONETARY FUND investment projects. Eventually a prioritizing of ongoing investment process. would help guide the reform of the public Customs Collection assessments allow for considerable discretion Current customs processes and valuation at the 11. customs officers. There remain large revenue leakages and uneven enforcement by is that AGD records imports from the Dominican customs agency (AGD). A prominent example recorded by the Dominican Republic (see SIP). Republic at one half of the level of exports to Haiti customs duties exemptions (machinery, According to World Bank preliminary estimates, numerous 44 INTERNATIONAL MONETARY FUND --- Page 50 --- HAITI materials needed for the development of specific sectors, spare parts, semi-finished products, the equivalent of 0.8 percent of GDP in by NGOS) may be costing the Haitian government imports customs duties. recommended in 2018 to strengthen swift implementation of the measures 12. Staff urges the interconnectivity of the information systems customs administration. This includes improving data sharing and verification and administrations (DGI and AGD) to facilitate of the tax and customs input manifests for imported goods ASYCUDA software to automatically increasing the use of the clearance. 6 Staff welcome the authorities' project to in customs bond awaiting uses ASYCUDA). and manage goods customs administration (the latter also connect the Haitian and Dominican Republic price list to be systematically used to further combat fraud, AGD should also establish a reference of a long-term To limited staff capacity of the AGD, the presence duties. Given the very assess customs for the success of these reforms. expert is viewed as essential or peripatetic Utility (EDH) Enterprises (SOES) and the Public Electricity Governance of State-owned out in the Décret du 17 mai is weak. The rules governing SOES are spelled 13. SOE governance Centrale de l'Etat. Board members are appointed by 2005 portant Organisation de (Administration obligations are limited and often Council of Ministers after approval by the Senate. Reporting the in financial statistics. SOE accounts are not consolidated government not enforced. of about 2 of GDP per year. This reflects a combination 14. EDH losses amount to percent of accounts is not billed, and payments not and governance. A large share to the weak management and many users are reportedly informally connected collected, administrative costs are high, lack transparency and often Purchase agreements with energy suppliers 7 As a focus grid but not registered. EDH from optimizing across energy sources." clause that prevents with the include a "take-or-pay" gains, notably on transparency, for reform under the 2018 SMP, EDH registered important which rose from 40 to 50 percent, and first full budget, on the billing rate, publication of the utility's out to public bid (see SIP). contracts, some of which are now being put on supply by EDH of an annual budget. Staff recommend the timely adoption and publication to raise invoicing and 15. with a multi-year plan should have cash flow projections along benchmarks to The budget concluded in March 2019 set structural collection rates. The staff-level agreement contracts with private electricity suppliers. Business Regulations of lower the costs of starting a business, improve the protection 16. Haiti needs to According to the Doing Business and the minority investors, and reduce market dominance. in the world on these three Reports, Haiti is one of the weakest performers Global Competitiveness and industrial parks is a step towards of ASYCUDA at ports, airports, border checkpoints, in import valuation, 6 Partial implementation and increasing revenue generation by reducing discretion automating customs processes and reducing the risk of fraudulent import declarations. providing real-time information, how affects the performance of SOES. Medas and Sy (2019) for evidence on corruption 7 See Baum, Hackney, INTERNATIONAL MONETARY FUND 45 the minority investors, and reduce market dominance. in the world on these three Reports, Haiti is one of the weakest performers Global Competitiveness and industrial parks is a step towards of ASYCUDA at ports, airports, border checkpoints, in import valuation, 6 Partial implementation and increasing revenue generation by reducing discretion automating customs processes and reducing the risk of fraudulent import declarations. providing real-time information, how affects the performance of SOES. Medas and Sy (2019) for evidence on corruption 7 See Baum, Hackney, INTERNATIONAL MONETARY FUND 45 --- Page 51 --- HAITI from the absence of a legal framework for dimensions. 8 The lack of a level-playing field resulting behavior. As a result, consumer discourages investment and drives rent-extraction in Haiti than in other competition to be 40 to 50 percent higher prices, including for food products, are reported countries in the region. Tax Code and Administration This will clarify tax code needs to be approved by parliament and published. the tax 17. The draft Future TA missions will focus on drafting the tax rules and help to improve compliance. taxpayers' unit), and reviewing the capacity to enforce the tax policy (large procedure code, building derogatory regimes and tax exemptions. for future tax reforms, of the tax administration (DGI) is a prerequisite with key functions 18. Reorganization structure is not aligned of a VAT. The DGI's organizational for such as introduction operations are not effectively controlled; and the monitoring function is lacking. Day-to-day the stock of arrears is unknown. A draft organic register is unreliable while example, the taxpayers' awaits submission to parliament. law to reorganize the DGI still Central Bank Governance and Operations identified the need to reinforce the central bank's 19. The 2019 safeguards assessment framework. The report noted weaknesses with regard autonomy, accountability and governance and governance arrangements financial the central bank's institutional and financial autonomy in these areas, to and reserves management. Improvements reporting practices, audit mechanisms, and transition to International Financial Reporting including through comprehensive legal reforms First steps towards the transition to IFRS Standards (IFRS) to increase transparency, are key priorities. were initiated in 2019. AML/CFT by the Evaluation Report of AML/CFT measures published 20. The July 2019 Mutual Haiti a low level of effectiveness of its Caribbean Financial Action Task Force (CFATF) graded 9 The report noted that "Haiti has AML/CFT regime and called for fundamental improvements. and understanding its ML/TF risk assessment that is geared towards identifying not conducted any ML/TF risk assessment, the jurisdiction's authorities ML/TF risks". As a result of the absence of any Technical compliance with FATF have not taken any measures to mitigate ML/TF risks. ratings for all immediate recommendations is weak: Haiti was found to have low effectiveness of 40 FATF recommendations with 38 out outcomes and to be partially compliant or non-compliant with the FATF standards and their should be swiftly taken to ensure compliance banking Further steps framework, and to prevent pressure on correspondent effective implementation into Haiti's costs, including for trade and relationships, which could increase financial intermediation area. Bank is advising the authorities in the AML/CFT remittances. The World World Economic Forum, Global Competitiveness Report 2018. 8 World Bank, Doing Business 2019, Haiti, 16th edition; and counter-terrorist financing measures Force (CFATF), Anti-money laundering 9 Caribbean Financial Action Task 2019. Republic of Haiti, Mutual Evaluation Report, 46 INTERNATIONAL MONETARY FUND Further steps framework, and to prevent pressure on correspondent effective implementation into Haiti's costs, including for trade and relationships, which could increase financial intermediation area. Bank is advising the authorities in the AML/CFT remittances. The World World Economic Forum, Global Competitiveness Report 2018. 8 World Bank, Doing Business 2019, Haiti, 16th edition; and counter-terrorist financing measures Force (CFATF), Anti-money laundering 9 Caribbean Financial Action Task 2019. Republic of Haiti, Mutual Evaluation Report, 46 INTERNATIONAL MONETARY FUND --- Page 52 --- Annex Figure 1. Haiti: IMF Contributions to Governance Reforms Political favoritism Theft CSCCA ULCC Rent seeking 0 Gangs o UCREF Lettres de 0 Cronyism 0 Discretion virement Anti-corruption legislation FAD + LEG LEG FAD - PFM SOE reforms... Treasury Single Account Governance/ law Fiscal data coverage Management Budget process Audit, etc MTFF Energy Independence Laws rule of law PIMA/ Procurement Transparency Regulations Fuel subsidies FAD 1- Revenue Accountability Accounting standards Tax policy + regulations Equity Reporting Tax administration Level playing field Oversight Customs administration Order Corporate governance MCM + LEG + FIN Fairness Investigation Central Bank law Price list Openness Prosecution ASYCUDA Merit Publication Safeguards - BRH IFRS standard VL LTX, AGD/DGI AML/CFT T World Bank Doing business Monopolies . Starting a business Product markets e Regulations Fuel subsidies FAD 1- Revenue Accountability Accounting standards Tax policy + regulations Equity Reporting Tax administration Level playing field Oversight Customs administration Order Corporate governance MCM + LEG + FIN Fairness Investigation Central Bank law Price list Openness Prosecution ASYCUDA Merit Publication Safeguards - BRH IFRS standard VL LTX, AGD/DGI AML/CFT T World Bank Doing business Monopolies . Starting a business Product markets e --- Page 53 --- HAITI Development Strategy Annex V. Capacity is low. Over the past two years, Haiti has received 1. The capacity of Haiti's institutions tax policy, public financial extensive TA from FAD, MCM, and CARTAC, on tax administration, statistics. However, the banking supervision, and price and national accounts due to acute capacity management, has been relatively slow, in part implementation of TA recommendations' of a Treasury Single Account (TSA) has been constraints and political instability. The establishment and is still not complete. Similarly, the reorganization since the first TA mission in June 2014 follow-up missions in ongoing first proposed in 2014, has not progressed despite of the tax administration, 2015, 2017, and early 2019. and the preparation of roadmaps would 2. The presence of resident long-term experts shows that resident long-term ownership and make TA more effective. Past experience transfer of knowledge, and build improve of TA and the hands-on TA advisors can assist in the coordination Similarly, the preparation by the authorities of than mission-based support. been found capacity more intensively de route) ahead of any TA-supported reform has a roadmap (note de cadrage and feuille the implementation of proposed changes. traction with technical staff and facilitate tax with a new tax to improve their priorities for TA are to: (i) reform policy Priorities. The authorities indicated public financial management and fiscal code; (i) strengthen revenue collection; (iii) improve markets for foreign exchange and government debt accountability; (iv) develop and strengthen local (monetary, price, and national accounts securities; and (v) improve data compilation and reporting that Fund TA focus on tax and customs statistics). To ensure maximum effectiveness, staff propose of state enterprises, reform of the administration, public financial management including governance (including social spending). and reduction in fiscal losses, and expenditure policy central bank's energy sector transition of the development in the areas of foreign reserve management, regulation and Capacity amendments to the central bank law, foreign exchange financial reporting to IFRS, the timeliness and quality of the Standard anti-corruption legislation, and improving reserves development, statistics-with calculation of foreign exchange Reporting Forms (SRFS) for monetary in the event of approval of a new financing consistent with IMF guidelines-would be necessary in the table next page. Details about TA priorities by department are provided arrangement. development or providing TA in Haiti. Main partners. Many donors are financing capacity include 3. Canada, the E.U. and the U.S. The main technical partners The main financial partners include market), the World Bank (social electricity market, and oil import water USAID (social protection, and resilience to natural disasters), the IDB (transport, protection, health, transport, AML-CFT, protection). To strengthen coordination and and sanitation) and the World Food Program (social (cadre de partenariat) has been in place improve the effectiveness of TA, a partnership framework and technical partners in the areas of 2017 with the Haitian government and the financial considered in since May A similar type of partnership is being fiscal reform and public financial management. the area of social protection. 48 INTERNATIONAL MONETARY FUND water USAID (social protection, and resilience to natural disasters), the IDB (transport, protection, health, transport, AML-CFT, protection). To strengthen coordination and and sanitation) and the World Food Program (social (cadre de partenariat) has been in place improve the effectiveness of TA, a partnership framework and technical partners in the areas of 2017 with the Haitian government and the financial considered in since May A similar type of partnership is being fiscal reform and public financial management. the area of social protection. 48 INTERNATIONAL MONETARY FUND --- Page 54 --- HAITI Technical Assistance by Function FAD Area Objectives Progress-to-date Risks 1) Strengthen the tax (DGI) and customs (AGD) administrations" core functions with a view to improving their Weak and inadequate Tax and performance and contributing to meeting No progress since 2017. governance, inability to Customs the government' 's revenue goals. Request for financing of a identify clear priorities and 2) Improve performance long-term expert by the lack of will in Administration management and political the governance (leadership, data integrity, Revenue Mobilization Trust absence of Fund program transparency, accountability) Fund. to implement relevant 3) Prepare the groundwork to introduce a strategies VAT. 1) Fully implement the Treasury Single Account and improve cash management Mixed progress since 2) Improve public accounting departure of long-term 3) Improve financial control over expert in March 2018. expenditure execution Delays in reform Public Financial 4) Strengthen internal and external controls implementation. Ground Weak capacity and political Management by Inspection Générale des Finances and rules for the preparation instability hinder the Cour des and execution of the implementation of Fund's Comptes (CSCCA) respectively recommendations 5) Introduce a medium-term budget budget need to be framework improved and followed 6) Introduce pluriannual investment before introducing further programming reforms The tax code draft is complete and needs to be Given the currently 1) Undertake consultations on the new tax submitted to parliament. dysfunctional code parliamentary Reform of derogatory process, Tax Policy 2) Draft tax procedure code regimes and of the taxrisk is high. implementation Internal and 3) Review derogatory regimes (investment related funding of the Fonds external review code and SEZS) National d'Education and lead to inconsistencies process may or Fonds d'Entretien Routier to changes in policy directions. be tackled separately. Complex reform. High risk of mismanagement and Energy Sector Prepare roadmap for the elimination of fuel Workshop organized in Reform price subsidies corruption. High June 2018. reputational risk for the Fund in case of failure. Strong vested interests. Public Investment Conduct a public investment management assessment Team proposal Management Expenditure 1) Assess effectiveness of social spending Policy 2) Identify measures to rationalize Team proposal spending INTERNATIONAL MONETARY FUND 49 Entretien Routier to changes in policy directions. be tackled separately. Complex reform. High risk of mismanagement and Energy Sector Prepare roadmap for the elimination of fuel Workshop organized in Reform price subsidies corruption. High June 2018. reputational risk for the Fund in case of failure. Strong vested interests. Public Investment Conduct a public investment management assessment Team proposal Management Expenditure 1) Assess effectiveness of social spending Policy 2) Identify measures to rationalize Team proposal spending INTERNATIONAL MONETARY FUND 49 --- Page 55 --- HAITI MCM Risks Area Objectives Progress-to-date Transition to Gap analysis and preparation of a roadmap Mission scheduled for July Low capacity may delay the IFRS for IFRS implementation. Debt 1) Evaluate the current state of debt Political instability may hinder the necessary Management issuance Request by BRH coordination with the and Market 2) Identify and address existing gaps in the framework ministry of finance Development regulatory Monetary Operations and Diagnostic of the legal and operational Request by BRH Liquidity frameworks Management Regulatory framework and dollarization Request by BRH FX Market pressures. Easing of supply pressures Medium-term, donorContingent on appointment Banking Transition to risk-based supervision financed project. of long-term expert Supervision STA Risks Area Objectives Progress-to-date Rebased CPI was published in November 2018. Supply Real Sector and use tables for 2011-12, GDP and price index rebasing a benchmark for the new Statistics base year, have been compiled. Monetary 1) Reconcile the current monetary statistics The possibility for the Fund Statistics sent to the IMF for surveillance purpose to provide TA was discussed with the information available in the with the authorities in standardized reporting forms March. 2) Review the computation of gross and Improving the timeliness net foreign reserves and quality of the SRFS should be a prerequisite for approval of a new program. LEG and FIN Risks Area Objectives Progress-to-date Provide advice on the draft of the new anti- Comments sent by LEG on Lack of traction with the Anti-corruption corruption legislation the draft law authorities CATF Mutual Evaluation 1) Clarify the roles and objectives of each report, prepared by the actor of the AML regime World Bank, was published AML-CFT 2) Prepare law on countering the financing in June 2018. Any TA of terrorism needs to be coordinated with the World Bank. Follow through on recommendations of the Necessary for future Fund Safeguards 2019 Safeguards Assessment financing 50 INTERNATIONAL MONETARY FUND --- Page 56 --- a INTERNATIONAL MONETARY FUND HAITI STAFF REPORT FOR THE 2019 ARTICLE IV December 20, 2019 CONSULTATION-INFORMATIONAL ANNEX Prepared By Western Hemisphere Department CONTENTS FUND RELATIONS STATISTICAL ISSUES --- Page 57 --- HAITI FUND RELATIONS (As of December 4, 2019) Membership Status: Joined September 8, 1953; Article VIII General Resources Account: SDR Million Percent of Quota 163.80 100.00 Quota Fund holdings of currency 143.26 87.46 Reserve Tranche Position 20.54 12.54 SDR Million Percent of Allocation SDR Department: Net cumulative allocation 78.51 100.00 33.04 42.09 Holdings Outstanding Purchases and Loans: SDR Million Percent of Quota 30.71 18.75 RCF Loans 33.06 20.19 ECF Arrangements Latest Financial Arrangements: Amount Expiration Amount Drawn Type Approval Date Date Approved (SDR Million) (SDR Million) ECF May 18, 2015 November 17, 2016 49.14 7.02 ECF July 21, 2010 December 24, 2014 40.95 40.95 ECF'/ November 20, 2006 January 29, 2010 180.18 180.18 1/ Formerly PRGF Projected Payments to Fund (SDR Million; based on existing use of resources and present holdings of SDRs): Type Approval Date Date Approved (SDR Million) (SDR Million) ECF May 18, 2015 November 17, 2016 49.14 7.02 ECF July 21, 2010 December 24, 2014 40.95 40.95 ECF'/ November 20, 2006 January 29, 2010 180.18 180.18 1/ Formerly PRGF Projected Payments to Fund (SDR Million; based on existing use of resources and present holdings of SDRs): 6.22 8.89 7.14 11.48 9.02 Principal 0.39 0.52 0.52 0.52 0.52 Charges/Interest Total 6.61 9.41 7.66 12.00 9.54 Exchange Rate Arrangement and Exchange Restrictions: Haiti's currency is the gourde. The de jure exchange rate regime is floating. The de facto exchange rate arrangement has been classified as a crawl-like arrangement since April 2008, except for a short period of post-earthquake disruption in the exchange rate market from January through February of 2010 and between March 2017 and June 2018, during which time the gourde was classified as November 1 As the arrangement fell off track shortly after, no reviews were completed and the ECF was cancelled in 2016. As a result, no key reforms were implemented and the majority of the 2016 safeguards recommendations remains outstanding (see next page). 2 INTERNATIONAL MONETARY FUND facto exchange rate arrangement has been classified as a crawl-like arrangement since April 2008, except for a short period of post-earthquake disruption in the exchange rate market from January through February of 2010 and between March 2017 and June 2018, during which time the gourde was classified as November 1 As the arrangement fell off track shortly after, no reviews were completed and the ECF was cancelled in 2016. As a result, no key reforms were implemented and the majority of the 2016 safeguards recommendations remains outstanding (see next page). 2 INTERNATIONAL MONETARY FUND --- Page 58 --- HAITI of Article VII, Sections 2, 3, and arrangement. Haiti has accepted the obligations and transfers for another managed free of restrictions on the making of payments 4, and maintains an exchange system current international transactions. Safeguards Assessment: with the request for an in August 2019 in connection The last assessment of the BRH was completed concluded that safeguards risks at the BRH RCF arrangement in early-2019.2 The assessment amendments to the BRH Law to remained high and made the recommendations to: complete transparency and decisionthe central bank's autonomy, enhance its accountability, reinforce membership and strengthen oversight by the Board; making structure, and establish independent financial reporting practices by operational modalities of the Audit Committee; strengthen of the internal audit function; IFRS with IMF TA support; complete the modernization including regarding implementing in reserve management, strengthen governance and accountability arrangements of operational responsibilities; and Investment Committee composition and strict segregation and to strategic the the BRH investment policy transitioning prepare a medium-term plan for updating with the principles of safety and liquidity incumbent allocation and portfolios that are consistent asset upon a central bank. stalled after the worsening recommendations, although progress Initial advances were made on some mid-2019. In this context, risks remain as to the and security crisis in the country of the political adequacy of safeguards for Fund resources. Article IV Consultations: No. 13/90). concluded on March 20, 2015 (IMF Country Report The last Article IV consultation was D.C. and in Haiti during November 8Consultation discussions were held in Washington, Rand Paola The current Laframboise (head), Frederic Lambert, Ghayad, 22, 2019. The IMF team comprised Nicole Chiara Fratto (SPR). Ahmed Zorome (Resident Aliperti (all WHD), Matthieu Bellon (FAD), and assisted the team and participated in Representative) and Gabriel Duvalsaint (local economist) meeting. The IMF team met (WHD) joined the concluding discussions in Haiti. Patricia Alonso-Gamo Dubois and Acting Minister of Finance Joseph Jouthe, with acting central bank Governor Jean Baden civil society, other IFIs, and academics. of the private sector, and with senior officials, representatives also participated in the meetings. Ms. Florestal, and Mr. Pierre (OED) Mr. Saraiva, standard 12 month cycle. Article IV consultation take place on the It is recommended that the next Resident Representative: since September 26, 2019, replacing Zorome has been the Fund's Resident Representative Mr. Ahmed Mr. Gaston Mpatswe. request for support and agreed ad referendum on a a staff responded to the authorities' minister and absence of 2 Following the 2018 SMP, this could not proceed after the resignation of the prime program in March 2019. However, successor government. INTERNATIONAL MONETARY FUND 3 Mr. Saraiva, standard 12 month cycle. Article IV consultation take place on the It is recommended that the next Resident Representative: since September 26, 2019, replacing Zorome has been the Fund's Resident Representative Mr. Ahmed Mr. Gaston Mpatswe. request for support and agreed ad referendum on a a staff responded to the authorities' minister and absence of 2 Following the 2018 SMP, this could not proceed after the resignation of the prime program in March 2019. However, successor government. INTERNATIONAL MONETARY FUND 3 --- Page 59 --- HAITI Technical Assistance: Haiti has received the following IMF technical assistance missions since November 2012:3 Department Dates Purpose FAD February 2019 Scoping mission on Revenue Administration January 2019 Strengthening the TSA January 2019 Consultation of new Tax Code February 2018 Tax Policy January 2018 Treasury Management July 2017 Tax Administration May 2017 Tax Administration April 2017 Treasury Single Account November 2016 Income Tax Reform December 2015 Cash and Debt Management October 2015 Tax Policy March 2015 Tax Administration November 2014 Tax Administration October2014 Tax Administration August 2014 Tax Administration July 2014 Energy Subsidy Reform June 2014 Mining Taxation April 2014 Cash and Treasury Management February 2014 Tax Administration November 2013 Tax Administration, July 2013 Public Financial Management June 2013 Tax Administration April 2013 Cash and Treasury Management April 2013 Value-Added Tax March 2013 Public Accounting March 2013 Macro-fiscal January 2013 Tax Administration FIN March/April 2019 Safeguards Assessment Mission MCM July 2019 Develop program to transition to IFRS November 2018 Drafting a Banking Chart of Accounts November 2018 Banking Supervision & Regulation September 2018 Banking Supervision & Regulation July 2018 Banking Supervision & Regulation May 2018 Banking Supervision & Regulation 3 For previous technical assistance missions please consult the Haiti 2012 Article IV consultation available at tihpuherxintferdestenaiaigutbshocr20134r1390p01 4 INTERNATIONAL MONETARY FUND --- Page 60 --- HAITI Department Dates Purpose March 2018 Banking Supervision & Regulation January 2018 Banking Supervision & Regulation October 2017 Banking Supervision & Regulation August 2017 Banking Supervision August 2016 Stress-Testing for the Banking System June 2016 Banking Supervision July 2015 Credit Union Supervision & Risk Based Supervision November 2014 Credit Union Supervision August 2014 Reserve Management Guidelines May 2014 Foreign Exchange Market February 2014 Credit Union Supervision April 2013 Macroprudential Policies STA April 2019 CARTAC: National Accounts-Review Progress on Rebasing GDP January 2019 Cash management and Fiscal Reporting May 2018 Government Finance Statistics February 2018 Consumer Price Index - Rebasing October 2017 National Accounts March 2018 Consumer Prices/Producer Prices November 2016 Balance of Payments Statistics and IIP July 2016 National Accounts June 2016 Development of Financial Health Indicators May 2016 Consumer Price Index April 2016 Remittances & Reserves May 2015 National Accounts Statistics November 2014 Automatic Data Exchange System for Customs June 2014 National Accounts Statistics June 2013 Consumer Price Index June 2013 National Accounts LEG June 2013 Drafting of a general tax code INTERNATIONAL MONETARY FUND 5 Producer Prices November 2016 Balance of Payments Statistics and IIP July 2016 National Accounts June 2016 Development of Financial Health Indicators May 2016 Consumer Price Index April 2016 Remittances & Reserves May 2015 National Accounts Statistics November 2014 Automatic Data Exchange System for Customs June 2014 National Accounts Statistics June 2013 Consumer Price Index June 2013 National Accounts LEG June 2013 Drafting of a general tax code INTERNATIONAL MONETARY FUND 5 --- Page 61 --- HAITI STATISTICAL ISSUES (as of December 9, 2019) Assessment of Data Adequacy for Surveillance I. surveillance. Most affected are has serious shortcomings that significantly hamper data are broadly adequate, General: Data provision indicators. Fiscal, monetary and external sector the national accounts and labor in coverage and timeliness. but need improvements statistical system was severely affected by the National Accounts and Real Sector Data. The Haitian constant price GDP data does not adequately The 1986/1987 base year of Assistance January 2010 earthquake. since then. The Caribbean Regional Technical capture the structural shifts in the economy the supply and use tables (SUTS) for 2012 and Centre (CARTAC) has been providing TA on compiling since 2013. In addition, the World Bank has the GDP estimates, with six missions undertaken and GDP, with the revised GDP rebasing two to assist with the SUTS rebasing and funded a resident advisor over years 2020. Other shortcomings include incomplete estimates expected to be released around May or June sector and the lack of quarterly GDP data. untimely reporting on performance in the agricultural of Statistics on information Statistics. The monthly CPI is compiled by the Haitian Institute the reference year. Four Price and Labor Conditions Survey structure, using 2017/18 as based on a 2012 Household Living 2018 helped finalize expenditure weights and compilation CARTAC missions from May 2016 to August methodology and comprises 287 products. training. The index follows a Laspeyres but these are not system, and provided estimates of inflation of local and imported goods, The statistical institute also produces accurate estimation of the contributions to overall consistent with the headline survey, preventing an is the employment index The only labor statistic published inflation from local and imported goods. (December 2018 latest available). of Finance in the form of a monthly Finance Statistics. Staff receive data from the Ministry and surveillance. Data Government (TOFE) for program monitoring "Table of Government Financial Operations" weaknesses including limited coverage, high aggregation, presentation is broadly adequate but has such as net lending, financing and Petrocaribemisclassifications, the non-reporting of major categories service. There is a need to improve the timeliness and incomplete information on debt the electricity related operations, agencies and public enterprises, particularly of publication of the accounts of autonomous public sector. The reporting of budgetary utility EDH, to establish the accounts of the nonfinancial should be improved to increase transparency. expenditures, especially on ministerial discretionary accounts, to the GFSM 2001/2014 framework for are encouraged to establish a plan for migrating debt data, covering The authorities and comprehensive gross public compiling fiscal statistics. Data on local governments public sector, is lacking and external public debt of the non-financial both domestic of the balance sheets of the central bank and and Financial Statistics. The monthly accounts However, there are some Monetary for surveillance. consolidated banking sector are broadly adequate There is also a need to expand the between the central bank and commercial bank accounts. into the survey of inconsistencies institutions to include credit unions and cooperatives institutional coverage of financial of reported data to the Fund. Improving the corporations, and to improve the timeliness Forms-with calculation of depository statistics data reported through the Standard Reporting timeliness of monetary with IMF guidelines- -should be a priority. foreign exchange reserves in line Financial Access Survey (FAS) including the two series indicators of the the UN Haiti reports data on several 100,000 adults and ATMS per 100,000 adults) adopted by indicators (commercial bank branches per Goals (SDGS). to monitor Target 8.10 of the Sustainable Development indicators (FSIs), Haiti currently does not Sector Surveillance. With regard to financial soundness Financial for dissemination on the Fund website. report data to the Fund MONETARY FUND 6 INTERNATIONAL IMF guidelines- -should be a priority. foreign exchange reserves in line Financial Access Survey (FAS) including the two series indicators of the the UN Haiti reports data on several 100,000 adults and ATMS per 100,000 adults) adopted by indicators (commercial bank branches per Goals (SDGS). to monitor Target 8.10 of the Sustainable Development indicators (FSIs), Haiti currently does not Sector Surveillance. With regard to financial soundness Financial for dissemination on the Fund website. report data to the Fund MONETARY FUND 6 INTERNATIONAL --- Page 62 --- HAITI 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 official and private flows, as well as recording of the external assets and liabilities of the private sector. Data at the quarterly and annual frequencies should be consistent. The most recent mission from CARTAC (April 2018) noted some progress but highlighted important work ahead on improving trade data coverage and implementing the business survey (direct investment and private external debt). II. Data Standards and Quality Haiti participates in the Fund' S General Data No data ROSC is available. Dissemination System. III. 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 7 --- Page 63 --- HAITI Table 1. Haiti: Table of Common Indicators Required for Surveillance (as of December 2019) Frequency Frequency Frequency Date of Latest Date of of of Observation Received Data Reporting Publication Exchange Rates November 2019 November 2019 D D International Reserve Assets and September 2019 November 2019 M M Reserve Liabilities of the Monetary Authorities' 2019 November 2019 M M Reserve/Base Money September Broad Money August 2019 November 2019 M M Central Bank Balance Sheet September 2019 November 2019 M M Consolidated Balance Sheet of the August 2019 November 2019 M M Banking System November 2019 November 2019 W W M Interest Rates? Consumer Price Index September 2019 November 2019 M M M Revenue, Expenditure, Balance and September 2019 November 2019 M M M Composition of Financing General Government Revenue, Expenditure, Balance and September 2019 November 2019 M M M Composition of Financing'- Central Government Stocks of Central Government and September 2019 November 2019 M Central Government-Guaranteed Debt Balance Q Q Q External Current Account Q1 July Exports and Imports of Goods and Q1 2019 July 2019 C Services Dec 2018 A A A GDP/GNP Gross External Debt September 2019 November 2019 M M International Investment Positions July 2019 A A A Includes reserve assets pledged or otherwise encumbered as well as net derivative positions. 2Both market based and officially- -determined, including discount rates, money market rates, rates on treasury bills, notes and bonds. Foreign, domestic bank, and domestic nonbank financing. 4The general government consists of the central government (budgetary funds, extra budgetary funds, and social security funds) and state and local governments. SIncluding currency and maturity composition. *Daily (D) Weekly (W), Monthly (M), Quarterly(Q), Annually (A); Irregular () Not Available (NA). 8 INTERNATIONAL MONETARY FUND pledged or otherwise encumbered as well as net derivative positions. 2Both market based and officially- -determined, including discount rates, money market rates, rates on treasury bills, notes and bonds. Foreign, domestic bank, and domestic nonbank financing. 4The general government consists of the central government (budgetary funds, extra budgetary funds, and social security funds) and state and local governments. SIncluding currency and maturity composition. *Daily (D) Weekly (W), Monthly (M), Quarterly(Q), Annually (A); Irregular () Not Available (NA). 8 INTERNATIONAL MONETARY FUND --- Page 64 --- MONETARY FUND INTERNATIONAL HAITI FOR THE 2019 ARTICLE IV STAFF REPORT ANALYSIS SUSTAINABILITY December 20, 2019 CONSULTATION-DERT staffs of the International Monetary Fund and Approved By Prepared by Alonso-Gamo, the World Bank. Patricia Jeromin Zettelmeyer (IMF), and Marcello Estevâo (IDA) Haiti: Joint Bank-Fund Debt Sustainability Analysis Risk of external debt distress High Overall risk of debt distress High in the risk rating Debt is sustainable. and Granularity Yes: High probability of protracted Application of judgment substantial threshold breaches from FY2034. in accordance with the revised joint The Debt Sustainability Analysis (DSA) was prepared low-income countries (LICS). 1 Haiti's risk Bank-Fund debt sustainability framework (DSF) for risk rating for both external and of debt distress is assessed to be high, despite a model-based to change the rating from overall public debt of "moderate. !! The application ofjudgement threshold breaches under the of "moderate' to "high" is justified by the high probability fragilities and exceptional scenario from FY2034, and by Haiti's institutional baseline FCV (that is, a country affected by vulnerability to natural disasters. Haiti is an country and tailored stress tests suggest conflict, and violence as defined by the World Bank) natural disaster shocks fragility, FY2019-2029 is very vulnerable to large that its debt risk rating over the moderate level of public debt and very frequent. Nevertheless, which are statistically the next ten years point to a sustainable public debt. broadly stable debt trajectory over Framework for Low-Income Countries (LIC-DSF), 1 Guidance Note on the Bank-Fund Debt Sustainability February 2018. (that is, a country affected by vulnerability to natural disasters. Haiti is an country and tailored stress tests suggest conflict, and violence as defined by the World Bank) natural disaster shocks fragility, FY2019-2029 is very vulnerable to large that its debt risk rating over the moderate level of public debt and very frequent. Nevertheless, which are statistically the next ten years point to a sustainable public debt. broadly stable debt trajectory over Framework for Low-Income Countries (LIC-DSF), 1 Guidance Note on the Bank-Fund Debt Sustainability February 2018. --- Page 65 --- HAITI DEBT COVERAGE PUBLIC local governments, for the DSA covers the central government d'Haiti (EDH), and Gross public debt used electricity company, Electricité to other 1. Coverage. the state-owned debt, including autonomous organisms No data is available on guaranteed extrabudgetary the central bank to the government. SOE debt. advances by (SOE), and non-guaranted sector state-owned enterprises of claims of the overall banking debt is calculated as the sum plus suppliers' credits and Gross domestic public public sector (NFPS) 10R and 20R tables 2. central bank) to the non-financial claims data come from the (including the the authorities. The banking fund de Scolarisation arrears reported by The education Programme Nationale domestic d'Haiti (BRH). civile and Ofice reported by the Banque de la République and social security funds (Pension absence of data, the Universelle, Gratuite, et Obligatoire (PSUGO) with the rest of the NFPS. In the of the banking sector. LONA) are consolidated T-bills and bonds held outside dAsuronce-Vieilese- public debt does not include creditors calculation for domestic and bilateral the BRH and include debt to multilateral basis. debt data come from debt is defined on a residency 3. External oil company. External arrears to a foreign and payment Public Debt Coverage Haiti: Sub-sectors covered X Subsectors of the public sector X X Central government X 2 State and local government government X Other elementsi in the general 4 o/w: Social security fund funds (EBFS) sector, including to SOES) 5 o/w: Extra budgetary other entitiesi int the public and private: Guarantees (to (borrowed on behalf of the government) Centrall bank SOE debt for deviations fromt the 8 Non-guaranteeds The generalg igoverament Used fort the Reasons defaults settings oipubiliced debt Default analysis 0.0 ICOAACODAC 0 percento of GDP 2.0 governmentr notc capuredin 1/ 2 percent of ofP GDP ppPs stock 0.0 Other elementsoft the generalg andmoto Agurantedibyd the goverment1 35 5 percento percento of GDP 5.0 SoE's debt (guaranteeda of GDPi iS the minimum value) 7.0 definition 4 pPP Financialn market(t (the default value of 51 percent guaranteedo debti is notf fully captured undert is assessedt the country's to! be public negligible. debt a country Total 12-3-4-5.(0np AperdmtoiGon of GDPV will bet triggeredif for countries whose government-o with SoE's S debt not guaranteedt by the governmentis 1/Thed defaults shock indludedi of2 2%6 in the government debt( (1.) andr risks associatedv (1.). team Ifitis may already reducet thist to0%. ON DEBT BACKGROUND sector debt totaled Haiti's s stock of public of total end of the 2019 fiscal year, debt accounts for 58.2 percent 4. At the of GDP). External public is debt arising from oil imports US$3.7 billion (47 percent of GDP) of which 86 percent debt from multilateral public debt (27.4 percent is largely concessional and the IMF. There is outstanding The remainder (IFAD) financed by Venezuela' 's Petrocaribe. Fund for Agricultural Development including the International creditors, refer to the fiscal year ending September 30. 2 Annual data MONETARY FUND 2 INTERNATIONAL year, debt accounts for 58.2 percent 4. At the of GDP). External public is debt arising from oil imports US$3.7 billion (47 percent of GDP) of which 86 percent debt from multilateral public debt (27.4 percent is largely concessional and the IMF. There is outstanding The remainder (IFAD) financed by Venezuela' 's Petrocaribe. Fund for Agricultural Development including the International creditors, refer to the fiscal year ending September 30. 2 Annual data MONETARY FUND 2 INTERNATIONAL --- Page 66 --- HAITI Haiti: Structure of Public Debt at end-2019 available information on private (Fiscal- -year basis) no publicly debt amounts in percent of external debt. Domestic public of central USS millions total debt GDP to US$1.5 billion, mostly in the form 2147.9 58.2 27.4 bank advances to the government. External Total External Debt 177.4 4.8 2.3 technical arrears to Venezuela of about Mulilateral creditors 79.8 2.2 1.0 of September 30, 2019) are o/w IMF OPEC 49.3 1.3 0.6 US$260 million (as o/w 48.3 1.3 0.6 in the process of being resolved,3 o/w o/w IFAD IDA 0.0 0.0 0.0 relief Bilateral creditors 1923.4 52.1 24.5 23.6 5. Debt has increased since the debt Venezuela 1853.0 50.2 49.5 23.3 the 2010 earthquake. Haiti o/w PetroCaribe 1826.2 26.8 0.7 0.3 that followed US$1 billion in debt relief o/w BANDES Province of China 70.4 1.9 0.9 benefited from about Taiwan, 0.6 international creditors after the earthquake, Other borrowing 47.0 1.3 from US$268 million from the IMF (under the Debt 1541.4 41.8 19.6 including Relief Trust Fund) and Total Domestic 960.2 26.0 12.2 Post-Catastrophe Debt BRH 581.2 15.8 7.4 million from the World Bank. 4 As a result, Other creditors US$36 debt fell from 19 percent at end- Total Debt 3689.3 100.0 47.0 external public than 9.0 of GDP in FY2011. authorities, and Fund staff estimates. FY2009 to less percent Sources: Haitian Since then, debt has increased steadily, mostly with Venezuela on the external side, and by disbursements related to the PetroCaribe agreement the driven by domestic side. More recently, government unremunerated advances from the central bank on the and signed a loan from Taiwan domestic suppliers (US$123 million) in FY2018 obtained funding from the latter has not been disbursed.5 million) in January 2019, although Province of China (US$150 last than was projected in the have been more conservative 6. Fiscal policy and public borrowing conservative than expected in FY2017, with the NFPS DSA of November 2016. Fiscal policy proved more to the 4.1 percent of GDP projected in the deficit of only 0.7 percent of GDP compared 2018.5 posting a primary debt stood at 30.4 percent of GDP in September 2016 DSA. As a result, the present value of public FORECASTS ON MACROECONOMIC BACKGROUND sub-optimal equilibrium with scenario assumes conservatively a low growth, not 7. . Fiscal policy and public borrowing conservative than expected in FY2017, with the NFPS DSA of November 2016. Fiscal policy proved more to the 4.1 percent of GDP projected in the deficit of only 0.7 percent of GDP compared 2018.5 posting a primary debt stood at 30.4 percent of GDP in September 2016 DSA. As a result, the present value of public FORECASTS ON MACROECONOMIC BACKGROUND sub-optimal equilibrium with scenario assumes conservatively a low growth, not 7. The baseline to permit a degree of stability but resolution of the political crisis in the short-term in activity and enough reforms. This would allow for some resumption enough to implement ambitious external financing. processing difficulties with some of these arrears but the authorities have encountered Debt service payments 3 Haiti has attempted to pay to Venezuela under the Petrocaribe agreement. financial institutions in making regular payments account in U.S. dollars at the central bank. to Venezuela are made into an escrow US$508 million in grant financing from the IDA Crisis the earthquake, the World Bank provided of in the country. 4 In addition, following reconstruction and long-term restoration capacity Response Window (CRW) to support Taiwan Province of China to compensate for the which includes grants from the government of to the loan, is assessed to be 5 The loan package, fixed rate and the currently-higher variable rate applicable difference between a low concessional. debt reported in the 2016 DSA since the coverage of to the present value of public 6 This number cannot be compared the central bank' 's advances to the government. debt has changed to include INTERNATIONAL MONETARY FUND 3 4 In addition, following reconstruction and long-term restoration capacity Response Window (CRW) to support Taiwan Province of China to compensate for the which includes grants from the government of to the loan, is assessed to be 5 The loan package, fixed rate and the currently-higher variable rate applicable difference between a low concessional. debt reported in the 2016 DSA since the coverage of to the present value of public 6 This number cannot be compared the central bank' 's advances to the government. debt has changed to include INTERNATIONAL MONETARY FUND 3 --- Page 67 --- HAITI political crisis. Growth for have in FY2019 amidst a protracted Real GDP is estimated to dropped Absent reforms, at around -0.4 percent. comprehensive FY2020 is projected to stay negative reaching only 1.5 percent, prospects remain grim with potential growth 7 Revisions medium-term growth disasters and their effect on growth into account. taking the high probability of natural economic developments since then and vis-à-vis the 2016 DSA reflect in the macroframework staff's current baseline projections. stabilize and gradually in 2019, inflation is expected to After peaking above 20 percent y/y stable real exchange rate vis-à-vis the U.S. over the medium term. A the converge to a single digit nominal bilateral exchange rate is driven by dollar is assumed over the longer term, SO the differential vis-à-vis the United States. inflation of GDP in FY2019, as domestic revenues of the NFPS is estimated at 3.8 percent is to The deficit the cost of fuel subsidies. The deficit projected pushed up dropped and currency depreciation constrained by the lack of financing and limited contract to 3.1 percent of GDP by FY2025, is to widen to 4.1 percent of credit from the BRH. Beyond 2025, the deficit projected Those would increase both additional for the likely impact of natural disasters. GDP on average to account victims and capital spending for reconstruction for emergency assistance to current spending to be mostly externally financed through The resulting deficit increase is expected purposes. multilateral or bilateral financing. concessional of GDP in FY2019 owing to deficit is estimated to have shrunk to percent term as The current account The deficit is expected to widen in the longer weak import growth and higher remittances. natural disasters ensues. inflows normalize and the impact of remittance Compared to the Previous DSA Haiti: Macroeconomic Assumptions 2021-24 Avg 2025-35 Avg Previous Current Previous Current Previous DSA Current DSA DSA DSA DSA DSA (annual percentage change, unless otherwise indicated) 2.4 1.0 2.0 1.5 3.0 -0.4 12.7 5.0 9.4 Real GDP 5.0 19.0 5.0 Consumer prices (period average) unless otherwise indicated) (in percent of GDP, 19.7 13.4 19.5 15.2 19.0 17.5 Total revenue and grants 15.1 10.0 16.0 12.2 18.0 14.5 20.4 Of which: Revenue 22.5 15.6 22.6 17.1 21.9 8.3 Total expenditure 11.0 4.1 10.8 5.3 12.2 -3.1 Of which: Capital expenditure -3.2 -3.4 -3.1 -3.0 -2.9 -3.5 Overall balance -1.8 -0.9 -1.7 -1.8 -2.0 17.8 Current account balance 23.7 18.0 24.5 17.7 27.3 -61.6 Exports of goods and services -55.6 -61.3 -53.9 -60.7 -51.4 Imports of goods and services Sources: Haitian authorities; and Fund staff estimates and projections. exercise, using a neoclassical growth projection is based on a growth accounting the same growth rate of 7 The 1.5 percent long-term share of 54 percent (Cicowiez and Filippo, 2018), assuming to account for the average production function with a labor and zero TFP growth, and subtracting about 1 percent also to the labor and capital as during 1996-2018 Melina, and Papageorgiou, 2019). Growth of 1.5 percent recorded corresponds in Haiti. impact of natural disasters (Cantelmo, a period during which 77 natural disasters were average observed real rate over 1996-2018, MONETARY FUND 4 INTERNATIONAL percent long-term share of 54 percent (Cicowiez and Filippo, 2018), assuming to account for the average production function with a labor and zero TFP growth, and subtracting about 1 percent also to the labor and capital as during 1996-2018 Melina, and Papageorgiou, 2019). Growth of 1.5 percent recorded corresponds in Haiti. impact of natural disasters (Cantelmo, a period during which 77 natural disasters were average observed real rate over 1996-2018, MONETARY FUND 4 INTERNATIONAL --- Page 68 --- HAITI the rollover of central needs are assumed to be met both internally-by 8. Future gross financing Central bank advances are not remunerated. bank advances to the government- and externally. bills held by commercial banks. The share internal financing takes the form of short-term treasury as the domestic financial Remaining from T-bills is assumed to increase in the long-term concessional. It of internal financing coming contracted or guaranteed, is assumed to be mostly market deepens. 8 External debt financing, to similar levels every IDA cycle. that the IDA18 allocation to Haiti will be replenished is assumed differences between past and credible. The realism tool shows some 9. The baseline assumptions are on external debt of a lower current account deficit debt dynamics coming in part from the impact that previous vintages were projected for total public debt from a lower primary deficit, suggesting and FDI balance and debt -creating flows above those actually pessimistic (Figure 3). The current baseline scenario projects in the coverage and measure of observed in the past 5 years, but the latter may also reflecti improvements debt. falls outside the top quartile of fiscal is realistic. The planned adjustment credible of 10. The projected adjustment fiscal deficit, suggesting a reasonable and pace the distribution of past adjustments of the primary adjustment (Figure 4). the assumed stabilization of the political forecast for 2020 and 2021 is driven by 11. The growth The baseline growth projection assumes near-zero situation unrelated to the projected fiscal adjustment. reduction in uncertainty allow for a modest growth in FY2020 as the political stabilization and ensuing recover in 2021. This growth path is largely in the second half of the year. Growth would further a of activity supporting recovery which would result from resumption independent of the expected fiscal adjustment higher revenue collection (Figure 4). AND STRESS TESTS CLASSIFICATION COUNTRY is 2.86, resulting in a The value of the composite indicator to assess debt carrying capacity if remittances as a share 12. would be classified as weak "medium" classification. 9 Haiti's debt carrying capacity cut-off (on average over 2013-22) above the 15.5 percent of GDP were not SO high. Remittances-to-GDP: Debt Capacity). Previous DSA vintages, using the index above the 2.69 cutoff value (see Table Carrying debt capacity. brings indicator, had a weak carrying the average CPIA score instead of the composite debt thresholds to assess the risk of debt sets higher external and public of of 13. This classification as high as 40 percent of GDP or 180 percent exports distress. The present value of external debt can go reach 55 of GDP, before the modelof public debt can percent goods and services, and the present-value external debt service are 15 percent of exports of goods based risk of distress increases. The benchmarks for and services and 18 percent of fiscal revenues. considers the effects on debt of a one-off In addition to the standard stress tests, the analysis that hit Haiti in 2016. This 14. to Hurricane Matthew natural disaster shock of a similar magnitude major is assumed to be exclusively in domestic currency. 8 Projected internal financing 2019 WEO and 2018 CPIA data. 9 The calculation of the composite index uses October INTERNATIONAL MONETARY FUND 5 -value external debt service are 15 percent of exports of goods based risk of distress increases. The benchmarks for and services and 18 percent of fiscal revenues. considers the effects on debt of a one-off In addition to the standard stress tests, the analysis that hit Haiti in 2016. This 14. to Hurricane Matthew natural disaster shock of a similar magnitude major is assumed to be exclusively in domestic currency. 8 Projected internal financing 2019 WEO and 2018 CPIA data. 9 The calculation of the composite index uses October INTERNATIONAL MONETARY FUND 5 --- Page 69 --- HAITI type of shock is particularly relevant since, during the past decade, Haiti has been struck by several major natural disasters. This shock assumes damages of 25 percent of GDP, similar to those caused by Hurricane Matthew. The damages and estimated losses following the 2010 earthquake were estimated at 120 percent of FY2009 GDP. However, this type of disaster is not as statistically frequent as hurricanes, thus considered a tail risk event. 10 10 See IMF Policy Paper, "Small States' Resilience to Natural Disasters and Climate Change Role for the IMF," December 2016. 6 INTERNATIONAL MONETARY FUND --- Page 70 --- Debt LGarrying Haiti: Debt Carrying Capacity and Thresholds Capacity and Thresholds Country Country Code Haiti DestCaryung Capacity Medlium Applicable thresholds Final Clasiication basedo on Classificationt current untage basedon Classificationt APPLICABLE Medium thepredous Vintage twop previous basedont the Medium wintages 2.86 Medium EXTERNAL APPLICABLE 2.92 Medium debt burden thresholds 2.97 PVofc debti in%of TOTALI public debt Exports PVoftotal public debtin tbenchmark GDP percentolGop Calculation of the CII Index Exports Debt service in %of Components Revenue Coefficients (A) Real CPIA 10-year values(B) average CIS Score components (in growthn percent rate 0.385 2.816 (AB)-C) Contribution of ew Import coverage otreserves 2.719 1.08 components framework Import (in percent) 1.391 0.04 38% coverage (in percenty ofresen rves*2 4.052 37.187 1% Weak Cut-c off values Remiltlances -3.990 1.51 53% World (in percent) 13.829 -0.55 Medium CI< 2.69 (in economic percent) growth 2.022 15.494 -19% Strong 2.69 SCIs 13.520 0.31 11% 3.05 CIScore 3.499 0.47 CI> 3.05 Clrating 17% 2.863 100% Reference: Medium Thresholds by Classiciation -ERIARCUDIDNE PV of debt in %of rdent thresho olc Weak Exports Medium GDP Strong Debts Exports service in %of 180 40 TOTALBUbIICG aombibenchmars - Revenue 15.494 -19% Strong 2.69 SCIs 13.520 0.31 11% 3.05 CIScore 3.499 0.47 CI> 3.05 Clrating 17% 2.863 100% Reference: Medium Thresholds by Classiciation -ERIARCUDIDNE PV of debt in %of rdent thresho olc Weak Exports Medium GDP Strong Debts Exports service in %of 180 40 TOTALBUbIICG aombibenchmars - Revenue vemaipeice debti tinpercent ofGDP Weak T Mediun 55 Stron C --- Page 71 --- HAITI DEBT SUSTAINABILITY A. External Debt Sustainability Analysis external debt path is projected to breach the indicative 15. Under the baseline scenario, Haiti's breaches are projected to take place under the threshold from FY2034 onward (Figure1). No threshold fragility and its exceptional vulnerability to standard 10-year projection period. However, Haiti's institutional consideration of the debt dynamics over a natural disasters and the impact of climate change warrant show and sustained breaches of large horizon. 11 Within that period, two debt indicators large increase from longer (20-year) value of external debt-to-GDP is projected to gradually the relevant threshold. The present and to 44.2 percent in FY2040 on account of external 15.8 percent in FY2020 to 21.8 percent in FY2030, up the present value of debt-to-exports borrowing to finance the (re)construction of infrastructure. Similarly, in 2040, breaching the 180 percent increases from 87.8 percent in FY2020 to up to 237.3 percent point below the gradually ratio remains one percentage threshold in FY2034. The external debt service-to-revenue of external debt on concessional terms. threshold of 18 percent in 2040 thanks to the large share scenario. The path of debt that scenario highlights the realism of the baseline 16. The historical baseline being permanently replaced by variables in the projection would result from key macroeconomic threshold breaches for all the average would imply earlier and more prolonged their 10-year historical external debt considered. indicators of public and publicly guaranteed debt to a drop in remittances and natural Stress tests confirm the vulnerability of dynamics inflows one standard 17. in both current transfers and FDI by disasters. A shock to non-debt flows (decline above the 180-percent-of-exports would bring the present value of external debt persistently for more than 10 years. A deviation) ratio above the 18 percent threshold threshold, and the debt service-to-revenue external debt trajectory, bringing the present natural disaster shock has the largest negative impact on the value of debt-to-GDP to 54 percent by 2040 (Table 3). Public Sector Debt Sustainability Analysis B. Total public debt is projected to remain Public debt is sustainable under the baseline scenario. 35.6 of GDP in 18. value terms, public debt would reach percent below 47 percent of GDP until 2025. In present benchmark (Tables 2 and 4). around 20 percentage points below the corresponding FY2025, benchmark. Under the most extreme test scenarios show debt crossing the public debt the 19. Stress ratio would exceed percent disaster scenario, the present value of the public-debt-to-GDP natural shock and after 2035 (Figure 2, Table 4). year of the 11 DSF guidance note, paragraph 87. 8 INTERNATIONAL MONETARY FUND 18. value terms, public debt would reach percent below 47 percent of GDP until 2025. In present benchmark (Tables 2 and 4). around 20 percentage points below the corresponding FY2025, benchmark. Under the most extreme test scenarios show debt crossing the public debt the 19. Stress ratio would exceed percent disaster scenario, the present value of the public-debt-to-GDP natural shock and after 2035 (Figure 2, Table 4). year of the 11 DSF guidance note, paragraph 87. 8 INTERNATIONAL MONETARY FUND --- Page 72 --- HAITI RATING AND VULNERABILITIES RISK several risks. Public debt is expected to grow as a 20. The debt outlook for Haiti is subject to accounting for the average annual share of GDP over the medium to long term, as potential growth, needs decline marginally. The present of natural disasters, remains weak and Haiti's financing are to breach their impact debt-to-GDP and debt-to-exports ratios projected values of the external public and FY2034 under the baseline. A drop in remittances indicative benchmarks respectively in FY2036 Matthew would imply earlier breaches disaster shock similar in magnitude to Hurricane or a natural the historical scenario. of the thresholds, as would distress. Haiti is a country affected by fragility, conflict, 21. Haiti remains at high-risk of debt to natural hazards and climate and one of the countries in the world most exposed likely and violence, horizon, the baseline, most beyond the first 10 years of the projection and substantial change. Looking of natural disasters forecasts protracted scenario accounting for the high probability while an additional major natural disaster breaches of the external debt burden indicator thresholds, these debt dynamics, even under a 10-year decline in remittances would substantially aggravate risk for or a to the model-based rating of moderate horizon. On this basis, judgment has been applied of high risk for both measures. external and overall public debt distress to an assessment both AUTHORITIES' VIEWS analysis and the assessment. The agreed with the debt sustainability bank's 22. The authorities transition to IFRS-9 for the accounting of the central BRH highlighted the implications of the and its efforts to develop the market for advances to the government as well as interest payments, reduce its financing of the debt securities which would help it progressively remuneration of BRH's government would require a higher They indicated that IFRS-9 compliance for domestic debt payments. They government. and the establishment of a timetable in claims on the government would require higher levels of investment, particularly emphasized that achieving growth increase the stock of debt, if the associated infrastructure. While high public investment can debt through higher they would have a positive impact on sustainability investments are productive, authorities agreed that Haiti needs concessional funding, growth, income and exports. While the would be made available to finance that sufficient concessional resources they were skeptical a strong and inclusive growth. productive investments that could generate INTERNATIONAL MONETARY FUND 9 --- Page 73 --- HAITI Figure 1. Haiti: Indicators of Public and Publicly Guaranteed External Debt under Alternatives Scenarios, 2020-40 PV of debt- -to GDP ratio PV of debt to- -exports ratio - - Most extreme shock is Non- debt flows Most extreme shock is Combination 2020 2022 2024 2026 2028 2030 2032 2034 2036 2038 2040 2020 2022 2024 2026 2028 2030 2032 2034 2036 2038 2040 Debt service- to- -exports ratio Debt service-to-revenue ratio Alternatives Scenarios, 2020-40 PV of debt- -to GDP ratio PV of debt to- -exports ratio - - Most extreme shock is Non- debt flows Most extreme shock is Combination 2020 2022 2024 2026 2028 2030 2032 2034 2036 2038 2040 2020 2022 2024 2026 2028 2030 2032 2034 2036 2038 2040 Debt service- to- -exports ratio Debt service-to-revenue ratio Most extren me shock is Combination Most extreme shock LS Non-debt flows 2020 2022 2024 2026 2028 2030 2032 2034 2036 2038 2040 2020 2022 2024 2026 2028 2030 2032 2034 2036 2038 2040 Baseline Historical scenario Most ex xtreme shock 1/ Threshold Customization of Default Settings Borrowing Assumptions for Stress Tests* Size Interactions Default User defined Shares of marginal debt Externall PPG MLT debt 100% Tailored Tests Terms of marginal debt CombinedCLs No Avg. nominali interest rate on new borrowingi in USD 1.7% 1.7% Naturall Disasters Yes No USD Discount rate 5.0% 5.0% Commodity Prices n.a. n.a. Avg. maturity (incl. grace period) Market Financing n.a. n.a. Avg. grace period Note: "Yes" indicates any change to the size or Note: All the additional financing needs generated the shocks under interactions of the default settings for the stress are assumed to be covered by PPG external MLT by the stress tests debt in the : tests. "n.a. indicates that the stress test does not of marginal debt are based on baseline 10external DSA. Default terms year projections. apply. Sources: Country authorities; and staff estimates and projections. 1/ The most extreme stress test is the test that yields the highest ratio in or before 2030. Stress tests with one off breaches are also any), while these one off breaches are deemed away for mechanical signals. When a stress test with a one- -off breach presented (if exterme shock even after disregarding the one-off breach, only that stress test (with a off happens to be the most one- breach) would be presented. 2/ The magnitude of shocks used for the commodity price shock stress test are based on the commodity research department. prices outlook prepared by the IMF 10 INTERNATIONAL MONETARY FUND --- Page 74 --- HAITI Figure 2. Haiti: Indicators of Public Debt Under Alternatives PV of Debt-to-GDP Scenarios, 2020-40 Ratio 20 Most extreme shock is Natural disaster 2020 2022 2024 2026 2028 PV of Debt2030 2032 2034 2036 2038 -to-Revenue Ratio Debt Service-to-Revenue Ratio Mox extreme shock is 200 Naturel disaster - / / / 50 Most extreme shock is Natural disaster 2020. 2022 2024 2026 2028 20302032 20342036 20382 2040 Baseline 2020 2022 2024 2026 2028 2030 2032 2034 2036 2038 2040 Public debt benchmark Most extreme shock 1/ Historical scenario Borrowing Assumptions for Stress Tests* Default User defined Shares of marginal debt External PPG medium. and long- -term Domestic medium and long- -term 11% 11% Domestic short-term 0% Terms of marginal debt 89% 0% External MLT debt 89% Avg. nominal interest rate on new Avg. maturity (incl. grace period) borrowing in USD 1.7% Avg. grace period 1.7% Domestic MLT debt 2036 2038 2040 Public debt benchmark Most extreme shock 1/ Historical scenario Borrowing Assumptions for Stress Tests* Default User defined Shares of marginal debt External PPG medium. and long- -term Domestic medium and long- -term 11% 11% Domestic short-term 0% Terms of marginal debt 89% 0% External MLT debt 89% Avg. nominal interest rate on new Avg. maturity (incl. grace period) borrowing in USD 1.7% Avg. grace period 1.7% Domestic MLT debt Avg. real interest rate on new borrowing Avg. maturity (incl. grace period) 0.0% 0.0% Avg. grace period Domestic: short- term debt Avg. real interest rate Note: The public DSA allows for domestic -9.1% shocks under the stress tests in the financing to cover the additional financing needs -9.1% projections. public DSA. Default terms of marginal debt generated by the are based on baseline 10-year Sources: Country authorities; and staff estimates and projections. 1/ The most extreme stress test is the test that one-off breach is also presented (if yields the highest ratio in or before 2030. a stress test with a any), while the one- -off breach is The stress test with a breach, one off breach happens to be the most exterme deemed away for mechanical signals. When only that stress test (with a one-off breach) would be shock even after disregarding the one-off presented. INTERNATIONAL MONETARY FUND 11 --- Page 75 --- HAITI Scenario External Debt Figure 3. Haiti: Drivers of Debt Dynamics-Baseline External debt Gross Nominal PPG External Debt Debt-creating flows Unexpected Changes in Debt 1/ (in percent of GDP; DSA vintages) (percent of GDP) (past 5 years, percent of GDP) Current DSA BResidual = Previous DSA proj. Interquartile DSA-2014 A range (25 75) aPrice and exchange rate OR Real GDP PPG growth 0 Say debt 1 - 1 - - 1 a Nominal interest rate Median BCurrent account FDI -10 Changein 5-year 5-year expected Distributi across LIC PPGdebt 34 historical projected change change Public debt Unexpected Changes in Debt 1/ Gross Nominal Public Debt Debt-creating flows (in percent of GDP; DSA vintages) (percent of GDP) (past 5 years, percent of GDP) DResidu 40 Current DSA Previous DSA proj. Interquartile DSA- 2014 Dother debt range(25-75) reatngflows BReal 20 Exch hange ate lation attiose hangein debt growth est A ate OPr nary deficit -15 -20 -20 Median 5-year 5-year -25 Distribution across LICS 2/ e DE 9 a % E 8 historical projected Contribution of a R R R a a a a R 30 unexpected change change 1/Difference betw een anticipated and actual contributions on debt ratios. 2/0 Distribution across LICs for wI hich LICI DSAS W ere produced. low external debt for low -income countries, a ppt changei in PPG external debt should be largely explained by the drivers 3/ Given the relatively private average of the external debt dynamics equation. 12 INTERNATIONAL MONETARY FUND 25 Distribution across LICS 2/ e DE 9 a % E 8 historical projected Contribution of a R R R a a a a R 30 unexpected change change 1/Difference betw een anticipated and actual contributions on debt ratios. 2/0 Distribution across LICs for wI hich LICI DSAS W ere produced. low external debt for low -income countries, a ppt changei in PPG external debt should be largely explained by the drivers 3/ Given the relatively private average of the external debt dynamics equation. 12 INTERNATIONAL MONETARY FUND --- Page 76 --- HAITI Figure 4. Haiti: Realism Tools 3-Year Adjustment in Primary Balance Fiscal Adjustment and Possible Growth Paths 1/ (Percentage points of GDP) DDistribution 1/ Projected3 3-yr adjustment 3y year PBa adjustmentg greater than Spercent ntage points ofGDP approx topq quart L5 S LO a 05 C 0.5 a FEE E 8 8 a 2 2014 2015 2016 2017 2018 2019 2020 2021 Baseline Multiplier=0.2 Mu ult iplier .4 - - -Multiplier=0.6 - - -Multiplier =0.8 1/Data cover Fund-s supporteds programs. forl LICS( s(excludinge emergency financir ting) approveds since 1/Bars refer toa annual projected.f fiscal adjustment (right-han ind side scale): andl lines show 1990. The: size of3 3-yeara adjustment.fromp programi inceptionisf found on thet horizontal axis; the possible real GDP growth paths under differentfi fiscal multipliers (left- hand sides scale). perce cent of sample IS found on the vertical axis. Public and Private Investment Rates Contribution to Real GDP growth (percent of GDP) (percent, 5- year average) 3.5 3.0 2.5 2.0 1.5 1.0 0.5 istor ric V. Projected(Curr. DSA) 0.5 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Gov. Invest. Curr. DSA Contril ibution of other factors Priv.l Invest. Curr. DSA Contri ibution of government capital INTERNATIONAL MONETARY FUND 13 ) (percent, 5- year average) 3.5 3.0 2.5 2.0 1.5 1.0 0.5 istor ric V. Projected(Curr. DSA) 0.5 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Gov. Invest. Curr. DSA Contril ibution of other factors Priv.l Invest. Curr. DSA Contri ibution of government capital INTERNATIONAL MONETARY FUND 13 --- Page 77 --- 2017-40 T Framework, Baseline Scenario, External Debt Sustainability Table 1. Haiti: indicated) Z of GDP, unless otherwise (in percent 8/ a Average Projections Projections L Historical Actual based D 2024 2025 2030 2040 debt Residence 2020 2021 2022 2023 20.1 25.3 Dmotrmmreer No 2017 2018 2019 23.3 23.2 23.3 23.2 31.8 60.3 60.3 20.1 25.3 Istl there amaterial difference between the 24.2 23.5 27. .4 25.3 24.1 24.1 23.3 23.2 23.3 23.2 31.8 wo criteria? External debt (nominal) 1/ 242 23.5 27.4 25.3 (PPG) -0.2 - ofwhiche public andp publicly guaranted -2.0 -1.2 -0.8 -0.1 0.2 1.6 0.4 -3.2 -0.7 3.9 0.1 -0.5 -0.2 0.3 0.5 2.7 3.6 2.0 Change in external debt 4.9 0.4 R 0.6 0.8 1.3 1.9 2.2 43.5 22 43.9 43.5 38.0 43.4 dentified net debt-creating flows 0.8 3.7 42.6 42.7 43.0 43.4 17.7 17.8 18.6 Debt Accumulation Noninter est current account deficit 36.0 40.3 42.9 43.3 18.0 17.8 17.7 17.7 17.8 61.7 62.1 5.0 Deficiti inbalance of goods and services 19.8 18.4 18.9 61.3 60.4 60.4 60.7 61.2 61.2 40.2 39.6 -33.7 -40.5 Exports 55.8 58.7 61.8 -41.9 40.9 40.6 -40.4 40.4 40.5 17.8 17.7 17.7 17.8 61.7 62.1 5.0 Deficiti inbalance of goods and services 19.8 18.4 18.9 61.3 60.4 60.4 60.7 61.2 61.2 40.2 39.6 -33.7 -40.5 Exports 55.8 58.7 61.8 -41.9 40.9 40.6 -40.4 40.4 40.5 Imports -34.3 -35.9 40.3 -3.0 3.0 3.0 3.0 3.1 -3.0 1.0 6 -0.6 -0.8 4.0 Net currenttr transfers (negative inflow) 4.6 4.0 2.8 2.3 -0.8 -0.8 -0.8 0.8 0.8 -1.8 1.6 of which official -0.9 0.7 0.8 -0.8 -0.9 1.3 1.5 1.6 1.7 0.0 3.0 Other current account flows (negative net inflow) 4.5 0.3 0.0 0.0 0.0 0.0 0.1 0.4 FDI (negative -inflow) 1.2 2.9 : 0.2 0.2 0.2 0.2 0.2 -0.4 -0.9 2.0 debtd dynamics 21 0.2 0.2 0. 0.2 -0.2 -0.2 -0.2 -0.3 -0.3 rate .3 0.3 0.1 Faualee Contribution from nominalinterestr 0.3 4 -0.7 0.0 Contributionf from real GDP growth 1.1 -2.8 2.3 -0.8 0.6 -0.4 -0.3 -0.6 1.6 0.0 0.0 1.0 Contributiont from price and exchange rate changes 1.7 -0.3 0.2 22 0.0 0.0 00 0.0 0.0 Residual3/ 1.7 -0.9 0.0 0.0 ofwhich: excephionolf financing 15.0 15.2 21.8 44.2 15.8 15.2 14.8 14.8 85.6 122.4 237.3 2022 2024 2026 2028 Sustainabilltyi indicators *** 16.1 87.8 85.6 83.9 83.8 84.5 7.2 7.7 15.5 PVof PPG external debt- -to- GDP ratio 85.0 7.9 7.8 7.7 7.6 7.4 9.4 17.2 PV of PPG external debt- to- exports ratio 5.7 6.1 6.9 14.1 12.5 11.3 10.7 10.2 9.8 280.3 593.4 - Rate off Debt Accumulation (% of GDP) PPG debts service- -to- exports ratio 8.0 8.7 12.1 82.6 104.5 154.5 179.7 178.8 -Grant -equivalent financing scale) service- -to-revenue ratio -210.9 356.5 192.7 101.3 Grant element of new borrowing (%rights PPG debt need (Million of U.S. .3 10.7 10.2 9.8 280.3 593.4 - Rate off Debt Accumulation (% of GDP) PPG debts service- -to- exports ratio 8.0 8.7 12.1 82.6 104.5 154.5 179.7 178.8 -Grant -equivalent financing scale) service- -to-revenue ratio -210.9 356.5 192.7 101.3 Grant element of new borrowing (%rights PPG debt need (Million of U.S. dollars) 1.4 1.1 Gross external financing 1.5 1.5 2.4 1.2 -0.4 09 0.7 27 22 22 1.7 External debt (nominal) 1/ Key macroeconomic: assumptions 1.2 1.5 1.6 2.7 2.5 2.4 1.5 1.8 0.5 1.1 13.2 8. 1.0 3.0 mofy which: Private Real GDP growth (in.percent) terms (change percent) 1.0 0.9 0.8 0.9 0.9 4.3 3.6 8 4.3 5.3 GDP deflator in US dollar 0.7 6.9 2.4 2.8 4.1 3.8 3.9 7.9 3.6 Effective interestr rate (percent)4 4/ 3.6 6.9 2.8 20 3.3 4.4 32.3 36.0 Growth of exports of G&S (US dollar terms, in percent) 20.9 -5. 0.9 4.3 3.6 8 4.3 5.3 GDP deflator in US dollar 0.7 6.9 2.4 2.8 4.1 3.8 3.9 7.9 3.6 Effective interestr rate (percent)4 4/ 3.6 6.9 2.8 20 3.3 4.4 32.3 36.0 Growth of exports of G&S (US dollar terms, in percent) 20.9 -5. 42.4 40.0 37.3 36.2 36.2 32.8 14.6 16.8 12.9 12.9 30 Growth of imports of G&S (US dollar terms, percent) 10.0 11.1 12.1 12.5 12.9 364.8 13.0 435.2 606.2 Grant elementofr new public sector borrowing (in percent) of GDP) 14.0 13.0 -6550.8 10.8 305.1 321.5 326.6 332.7 346.7 3.8 4.4 4.3 3.9 Governmentr revenues (excluding grants, in percent 1186.1 -2965.9 3.5 3.5 .6 3.8 73.7 60.0 61.0 73.1 20 Aidf flows (in Million of US dollars)5/ of GDP) 6/ 99.9 84.2 80.9 75.3 73.0 10, 199 12,773 18,473 Grant- -equivalent financing (in percent external financing) 6/ 8,533 8,842 9,1 135 9,454 9,798 3.8 3.8 3.1 3.6 Grant -equivalent financing (in percent of 8,409 9,658 8.708 2.0 3.6 3.3 3.5 3.6 Nominal GDP (Milion ofl US dollars) 5.4 14.9 -9.8 Nominal dollar GDP growth 15.2 21.8 44.2 16.1 15.8 15.2 14.8 4.8 15.0 84.5 85.6 122.4 237.3 Memorandum items: 85.0 87.8 85.6 83.9 83.8 7.4 7.7 15.5 PV of fexternald debt 7/ 7.9 7.8 1545.8 2783.9 81563 2024 2026 2028 2030 impercento of exports 5.7 6.1 6.9 1348.5 1347.5 1356.3 1401 71.6 2.6 2.1 2020 2022 Total external debts service to-6 exports ratio 1401.4 -0.6 0.0 0.5 0.7 0.8 2.1 PV of PPGe external debt (in Million of US dollars) 2.7 2.1 20 2.0 2.4 0.2 (PVt -PVt- 1/GDPt 1 (in percent) debt ratio 4.0 4.4 -2.1 Non- interest current account deficit that stabilizes and staff estimates and projections. of GDP deflator U.S. dollar terms, E-nominal appreciation of Sources: Country authorities, real GDP growth rate, growth rate and private sector external debt ratio, with nominal interest rate; 9 1/ Includes both public. gp) times previous period debt cor from price and exchange rate changes. 2/ Derived as Ir 9 p(1*g) + Ea (1.01(1-g*p* external debt in total external debt adjustments. For projections also includes ontribution thelocal currency, and a= share of local currency- -denominatede and changes gross foreigna assets; and valuation financing (ie. ominal appreciation of Sources: Country authorities, real GDP growth rate, growth rate and private sector external debt ratio, with nominal interest rate; 9 1/ Includes both public. gp) times previous period debt cor from price and exchange rate changes. 2/ Derived as Ir 9 p(1*g) + Ea (1.01(1-g*p* external debt in total external debt adjustments. For projections also includes ontribution thelocal currency, and a= share of local currency- -denominatede and changes gross foreigna assets; and valuation financing (ie. changes arrears debtr relien; 3/ Includes exceptionalt interest payments divided by previous period debts stock andt the PV of new debt). 4/ Current year lloans, and debtreliet new borrowing (difference between the face value 5/ Defined as grants. concessionall directly to the government and through the next 10years. 6/ Grant equivalentf financing includes grants provided its face value. are over the first year of projectiona and 71 Assumes that PV of private sector debtis is equivalentto the 10) years, subject to data availability, whereas projections averages are derived over past 8/ Historical averages generally --- Page 78 --- 2017-40 Framework, Baseline Scenario, Public Sector Debt Sustainability Table 2. Haiti: otherwise indicated) of GDP, unless (in percent Average 6/ Projections Actual 2025 2030 2040 Historical Projections 2019 2020 2021 2022 2023 2024 49.0 70.3 35.5 45.1 Definition of Residency- based 2017 2018 44.1 43.9 43.7 43.4 31.8 60.3 20.1 25.3 debt 46.1 44.9 naternal/domestice 38.3 39.9 47.0 24.1 23.3 23.2 23.3 23.2 Publics sector debt 1/ 24.2 23.5 27.4 25.3 isthereamaterial No -0.3 1.3 difference between the two ofwhich, external debt -12 -0.8 -0.2 -0.2 1.4 2.2 0.3 -2.5 1.6 7.0 -09 -0.6 0.0 0.0 0.2 2.9 3.4 2.9 criteria? sector debt 0.5 -0.6 -0.9 2.7 2.7 H Change in public -5.4 3.0 2.7 2.5 2.8 16.1 17.6 19.8 19.2 15.9 Public sector debt 1/ flows 0.7 2.6 15.9 E identified debt-< -creating 13.6 13.4 14.2 15.1 15.5 3.0 3.1 3.0 3.0 Primary deficit 17.7 17.3 2.8 3.4 3.0 3.0 3.0 18.6 188 20.5 22.7 22.6 18.9 of which: local-currency denominated Revenue and grants 3.7 4.3 16.4 16.9 17.5 18.3 -1.7 1.5 ofwhich: grants 18.4 19.9 17.0 3.7 3.1 2.8 -2.7 -2.8 1.6 1.3 . 4 3.0 3.0 3.0 18.6 188 20.5 22.7 22.6 18.9 of which: local-currency denominated Revenue and grants 3.7 4.3 16.4 16.9 17.5 18.3 -1.7 1.5 ofwhich: grants 18.4 19.9 17.0 3.7 3.1 2.8 -2.7 -2.8 1.6 1.3 . of which: foreign- currency ydenominated Primary yinoninteresti expenditure 6.0 -2.1 1.8 -3.6 -3.2 -3.3 -2.7 -2.6 -2.5 -2.4 -0.9 -0.3 Automaticd debt dynamics -2.1 -2.3 -2.1 -3.3 -2.9 -24 -2.1 -2.0 -1.8 -0.7 -1.0 Contribution from interest trate/growth differential 1.6 1.7 -2.5 -0.4 -0.3 -0.5 -0.5 -0.6 of which: contribution from average real interest rate -0.5 -0.6 0.5 0.2 0 0.0 0.0 of which: contribution from real GDP growth 4.0 02 3.8 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Contribution from real lexchangeratec depreciation 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 arcating! 5 -0.6 0.5 0.2 0 0.0 0.0 of which: contribution from real GDP growth 4.0 02 3.8 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Contribution from real lexchangeratec depreciation 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 arcating! flows 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Costcemreroen Prvatizationt receipts (negative) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Recognition of contingent liabilities (e.9. bank recapitalization) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 2 -0.8 -0.4 10 Debt trelief (HIPC and other) 0.0 0.0 00 0.0 -0.7 -0.6 0.4 -0.4 0.7 -0.1 Other debt creating or reducing fiow (please specify) 2.9 1.1 1.9 0.7 2020 2022 2024 2026 2028 2030 Residual 35.8 35.6 39.2 54.6 37.5 37.4 36.8 36.2 36.0 225.6 220.8 223.2 275.4 Sustainability indicators -GDP 2/ 278.8 258.9 240.0 232.4 122.8 106.3 56.8 mofv held by residents PV of public debt -to- ratio 274.8 134.8 132.0 129.1 126.0 21.6 14.1 fwhich: PV of public debt to- -revenue and grants ratio 72.6 73.1 108.2 136.7 22.1 22.4 22.8 22.7 22.5 mofw which: held by non-residents Debt service- -to-revenue and grants ratio 3/ 13.5 15.2 18.1 21.1 Gross financing need 4/ 1.4 1.5 1.5 1.4 1.1 50 -0.4 0.9 0.7 1.1 12 1.1 1.5 1.9 0.5 1.2 Key macroeconomica and fiscal assumptions 1.2 1.5 -1.2 0.9 09 1.0 1.0 1.1 4.1 -2.9 -6.7 -8.1 40 Real GDP growth (in percent) percent) 0.7 0.9 1.0 -15.3 12.7 -10.5 -9.5 -8.7 -7.9 1.3 Averager nominali interest rate on external debt (in 11.2 -10.6 -134 5.0 50 9.2 9.9 Average real interest trate on domestic debt (in percent) depreciation) -14.7 0.8 16.3 15.9 13.1 11.4 10.4 9.4 0.4 -0.8 0.5 2.9 20 Reale exchange rate depreciation( (in percent indicates 13.4 12.8 17.3 19.0 3.9 4.3 5.3 3.0 2.6 1.6 1.5 0.1 2.7 10 Inflation rate (GDP deflator, in percent) -4.8 9.5 -15.4 -3.6 3.3 3.0 29 3.0 ofr spending (deflated by GDP deflator, in percent) 3.1 0.9 -3.7 3.9 3.9 0.0 0.0 0.0 0.0 0.0 Growth real primary 5/ 0.0 0.0 0.0 0.0 2020 2022 2024 2026 2028 Primary deficitt that stabilizes the debt to- -GDP ratio5 sector debt) 0.0 0.0 PV of contingent liabilities (noti includedi inpublic Sources: Country authorities; and staff estimates and projections. 3.1 0.9 -3.7 3.9 3.9 0.0 0.0 0.0 0.0 0.0 Growth real primary 5/ 0.0 0.0 0.0 0.0 2020 2022 2024 2026 2028 Primary deficitt that stabilizes the debt to- -GDP ratio5 sector debt) 0.0 0.0 PV of contingent liabilities (noti includedi inpublic Sources: Country authorities; and staff estimates and projections. of external debti is Residency -based. depending on exchange rates projections. 1/Coverage of debt: The generalg government Definition public DSA differs fromt the external DSAV with the size of differences 2/1 The underlying PV of external debt- -to- -GDP ratio under the ofr medium and long- term, and short- term debt the last period and other debt creating/reducing filows. 3/Debts service is defined as the sum of interest and amortization plus debt service plus the stock of short- term debt at the end oft the debt ratio only in the year in question. 4/ Gross financing needi is defined as the primary deficity ratio a primary surplus), which would stabilizes first year of projection and the next 10y years. deficit minus a change in the public debt -t0-GDP averages are over the 5/ Defined as a primary derived over the past 10 years, subject to data availability. whereas projections 6/ Historicala averages are generally - --- Page 79 --- HAITI for Indicators of Public and Table 3. Haiti: Sensitivity Analysis Key Publicly Guaranteed External Debt, 2020-40 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 Projections 2030 1/ 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 PV ofd debt- to GDP ratio 16 - 15 15 2 15 2 15 15 44 44 Baseline Alternative Scenarios 2/ 17 18 19 20 21 23 24 27 29 42 45 49 52 55 57 59 60 A1 Key var ables at their historic B. Bound Tests B1. RealGDPg growth Primary balance B3 Exports B4 Other flows 3/ B5 Depreciation B6 Combination C. Tailored Tests C1 Combinedcontingent liabilites c2 Natural disaster C3 Commodity price C4. Market Financi ing Threshol ld PV ratio Baseline A Alternatives Scenarios 2/ 100 105 27 137 A1 Key variables their histori Bound Tests Real GDP growth Primary balan Exports Other flows 3/ Depreci ciation Combination.ofB14 C. Tailored Tests Combined continger liabilitie ties C2. Natural disaster Commodity price Market Financin ing Threshold 180 180 180 Debt Baseline Alternatives Scenarios Key variables at their ist to 20 2030 Bound Tests B1 RealGDP gro wth 82 Primary balance Exports B4. Other flows 3/ 85 Depreciation B6. Combination C. Tailored Tests 1.Combined contingent liabilit ibes C2 Natural disaster C3. Commodity price C4. Market Financing Threshold Debt Baseline A. Alternative Scenarios 21 22 Key variables heir historic 2020- 2030 Bound Tests B1 RealGDP growth Prmarybalance Exports B4. Other flows 31 BS. Depreciation 86. Combinationo 85 C. Tailored Tests C1. Combined conting ngent liabil bes C2 Natural disaster C3. Commodity price C4. Market Financing Threshold Sources Country authorites and estimates andp projections. 1/Aboldv value indicates abreach 0E tiveshold. 21 Variables includer realGDP growth, GDP deflator (inu JS dol llar Includes offcial and private transfers and FDL 16 INTERNATIONAL MONETARY FUND Prmarybalance Exports B4. Other flows 31 BS. Depreciation 86. Combinationo 85 C. Tailored Tests C1. Combined conting ngent liabil bes C2 Natural disaster C3. Commodity price C4. Market Financing Threshold Sources Country authorites and estimates andp projections. 1/Aboldv value indicates abreach 0E tiveshold. 21 Variables includer realGDP growth, GDP deflator (inu JS dol llar Includes offcial and private transfers and FDL 16 INTERNATIONAL MONETARY FUND --- Page 80 --- HAITI for Indicators of Public Debt, 2020-40 Table 4. Haiti: Sensitivity Analysis Key Projections 1/ 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 1_8012_303 2034 2035 2036 2037 2038 2039 2040 PVofD Debt- -to- -GDP Ratio 36 35 36 39 39 40 53 55 Baseline Alternative Scenarios 2/ 37 41 41 41 41 40 40 39 39 38 38 39 40 40 Key variables theirhistonical ave erages 2030 B. Bound Tests B1 RealGDP growth 32. Primarybala lance 83. Exports B4. Other flows 3/ 85 Depreciation B6. Combination B1 B5 C. Tailored Tests Combined contingent liabilit ilities C2. Natural disaster C3. Commodity price C4. Market Financing 55 55 55 55 55 55 55 55 55 55 55 55 Public debt bench ark PV Baseline Alternative Scenarios 279 272 262 258 254 251 243 239 211 210 211 213 216 218 Key variables at their historic cal aver rages Bound Tests 81 RealGDP growth B2. Primary balance B3. Exports B4 Other flows 3/ 85 Depreciation B6 Combination ofB B5 Tailored Tests C1 Combined.contirns ingent liabilities C2 Naturald disaster C3. Commodity price C4. Market Financing Baseline Alternative Scenarios 140 138 35 130 125 120 112 40 42 47 Key vari riables attheir historic cal ave ages 2020Bound Tests Real GDP growth B2. Primary balance B3. Exports B4. Other flows 3/ 85 Depreciation B6. Combination ofB1 B5 C. Tailored Tests C1. ombined contingent liabilities C2. Naturaldisaster C3. Commoditys price C4. Market Financing Sources Country authoribes and staff estimates and projections. 1/ bold value indicates abreachofthet benchmark 2/ Variables include real GDP growth GDP deflator and prim deficit per fGDP 3/ Includes official and privatet transfers and FDL INTERNATIONAL MONETARY FUND 17 B3. Exports B4. Other flows 3/ 85 Depreciation B6. Combination ofB1 B5 C. Tailored Tests C1. ombined contingent liabilities C2. Naturaldisaster C3. Commoditys price C4. Market Financing Sources Country authoribes and staff estimates and projections. 1/ bold value indicates abreachofthet benchmark 2/ Variables include real GDP growth GDP deflator and prim deficit per fGDP 3/ Includes official and privatet transfers and FDL INTERNATIONAL MONETARY FUND 17 --- Page 81 --- Statement by the Staff Representative on Haiti Executive Board Meeting January 24, 2020 This statement provides information that has become available since the staff report was finalized. This information does not alter the thrust of the staff appraisal. 1. Dissolution of parliament. It was not possible to hold parliamentary elections by endOctober 2019 as programmed due to failure to approve a new electoral law, the absence of a budget, and no agreement on the composition of the Provisional Electoral Council. As a result, President Moïse announced that the mandates of all deputies in the legislature and two-thirds of the senate had formally expired on January 13th, leaving the country without a legislative body and creating what he called an "institutional void". However, there is disagreement regarding the number of departing senators and the term of their mandate as determined by the constitution. Pending acceptance by these departing senators that their mandate has ended, and based on precedent, it is understood that the president would rule by decree. The next presidential election is due in December 2021. 2. Anti-government protests. Public demonstrations waned towards the end of 2019 and schools and businesses have re-opened. Employees of the Haitian Institute of Statistics (IHSI) have been on strike since October 2019 to protest the dismissal of the head of the institution, halting its activities and the publication of economic indicators. 3. Fiscal policy. Staff have received no indication that the authorities have prepared or published a notional budget for FY2020, as recommended by staff (to guide fiscal policy and assist with programming expenditures and cash management). President Moïse announced on January 13th that he would allocate the 2020 salaries ofthe departed senators and deputies, which he valued at 1.16 billion gourdes (US$11.7 million), to build 10 schools. 4. Food insecurity. The WFP reports that 3.7 million people in Haiti (one in three) need food assistance, while the UN Humanitarian Affairs Office (OCHA) warned that this number could reach 4.2 million by March, with some 1.2 million likely to experience "emergency levels". The deterioration in food security has been driven by supply disruptions related to social unrest during 2019, high inflation and depreciation of the gourd against the U.S. dollar, and a drought in 2018 that lasted until mid-2019 and led to a decline in agriculture production by about 12 percent in many parts of the country. million people in Haiti (one in three) need food assistance, while the UN Humanitarian Affairs Office (OCHA) warned that this number could reach 4.2 million by March, with some 1.2 million likely to experience "emergency levels". The deterioration in food security has been driven by supply disruptions related to social unrest during 2019, high inflation and depreciation of the gourd against the U.S. dollar, and a drought in 2018 that lasted until mid-2019 and led to a decline in agriculture production by about 12 percent in many parts of the country. --- Page 82 --- Executive Director for Haiti and Statement by Mr. Bevilaqua, Director, and Ms. Florestal, Mr. Saraiva, Alternate Executive Director for Haiti Advisor to the Executive January 24, 2020 2019 Article IV consultation took place under exceptional The discussions for Haiti's of the strong commitment of the circumstances and are an unequivocal testimony Given the unique circumstances that authorities and the IMF team to complete the process. WHD for making effectual mission travel to Haiti in November 2019, we commend in FCS impeded for completing Article IV consultations use of the flexibility in Fund's guidance discussions were held mostly through teleconferencing, countries. Accordingly, the technical for the policy discussions. while the authorities consented to come to Washington is evidence of the quality of the dialogue between The comprehensive set of documents and of the wealth of information gathered Fund staff and their Haitian counterparts Such engagement led to the during the past four years of continuous Fund engagement. 2018 SMP and to the staff level successful implementation of the that adoption and largely Nonetheless, the repeated socio-political shocks agreement on an ECF in March 2019. negotiations and Article IV since 2015 had impeded the conclusion of program prevailed consultations. with several weeks of "peyi lok" disruption, which culminated is The recent socio-economic economic and social activities were severely halted, (country lockdown) whereby all impact. In November 2019, at the time deemed to have had very damaging and long-lasting lok" and at the height of IV discussions, Haiti was at its sixth week of"peyi off the Article social crisis ignited by the 2018 fuel price hikes uncertainty. The looming political and the country to a standstill. For the first time intensified after March 2019 and effectively brought estimated to have contracted, while inflation since the devastating 2010 earthquake, GDP is of the currency. A humanitarian reached 20 percent yoy, pushed by a 32 percent depreciation has ensued and remains as a major challenge. crisis led by shortages of food and social services situation has become economic activity is gradually resuming, as the security the country must avoid a Currently, stakeholders seem to tacitly agree that less volatile and domestic signs that the daily life may be Challenges abound but there are hopeful downward spiral. of schools after several months. Indisputably, starting to normalize, including the reopening of the political situation should not be juncture. However, the complexity Haiti is at a decisive challenges at hand. While a thorough addressing the multiple an impediment to immediately crisis is still pending, it is known that the tourism industry assessment ofthe impact of the recent of hotels. Likewise, with the plunging activity including the closure of is facing severe challenges, institutions (MFIs) are confronting the rapid increase the banking sector and microfinance another wave of migration of skilled labor suggests NPLS. In addition, anecdotal evidence of yet constraint to growth moving dearth ofhuman capital may become a more binding that Haiti's forward. challenges at hand. While a thorough addressing the multiple an impediment to immediately crisis is still pending, it is known that the tourism industry assessment ofthe impact of the recent of hotels. Likewise, with the plunging activity including the closure of is facing severe challenges, institutions (MFIs) are confronting the rapid increase the banking sector and microfinance another wave of migration of skilled labor suggests NPLS. In addition, anecdotal evidence of yet constraint to growth moving dearth ofhuman capital may become a more binding that Haiti's forward. --- Page 83 --- necessary reforms to its commitment to undertake The Government has reaffirmed the conditions for economic growth. The macroeconomic stability and restore economic reestablish view that key priorities at this juncture are: curbing Haitian authorities share staff's governance and developing social deterioration, reforming the energy sector, strengthening were taken recently to stave off the challenging environment, measures Most safety nets. Despite balance and avert unsustainable monetary financing. further deterioration of the fiscal agreement between the Ministry of the "Pacte de Gouvernance"- a cash management the current fiscal year, in notably, Finance and the Central Bank - was renewed to cover of the Economy and The authorities hope that the signing and observance an effort to curb monetary financing. ofthe uncertainty and reassure investors. pact will contribute to quell some governance strengthen tax collection, Measures have also been taken to rein in tax expenditures, public financial management. of domestic arrears and improve and to control the accumulation exemptions are effectively prohibited The authorities seek to ensure that discretionarytax beneficiaries. Also, to facilitate tax by NGOS and other become limit the abuse ofthis privilege tested in pilot form and will collection, the payment of taxes through banks was recently at the border with the technical issues are solved. To quell leakages effective once a few signed in 2017, the exchange of information Dominican Republic, in line with the protocol Republic has started in September 2019, the custom offices of Haiti and the Dominican session for between still need to be ironed out. In addition, a training while certain technical challenges for February 2020 mostly to enhance their custom officers of both countries is scheduled coordinated approach in the management of theborder. with the Fund's baseline authorities have drafted a framework - consistent Moreover, the and reestablish the budget budget support to dispel uncertainty scenario of no external and sustainable growth. The fiscal constraint and a tool to promote equity to the preceding as a binding is to be shrunk by up to 20 percent in comparison The total FY20 budget envelope linked to the contraction of economic activity. due to the sharp drop in fiscal revenues the few weeks are year by the new Government during following details of the budget to be adopted from the Fund with a those lines. It is expected that a positive signaling still being crafted along outlook with further of a program could unleash a more optimistic possible approval engagement from development partners. of fiscal imbalance and requires a multi-pronged The energy sector is the main source diversified and efficient. The the leaks and become more competitive, the approach to suppress the Fund on fuel subsidy reform in synchrony with authorities look forward to working with the analytical chapters on fuel subsidies building of appropriate social safety nets. We welcome for the efforts to be and consider the recommendations key inputs and the electricity sector the government has transferred the fuel undertaken. As underscored in the staff report, the risk of fuel shortages, the responsibility to the private sector. To minimize of products in purchasing make to suppliers petroleum administration has committed to regular payments collection at EDH under the SMP Progress registered in billing and order to reduce arrears. during the recent crisis, since billing and collection continued until early 2019 but were reversed in the income flow among the hindered by the roadblocks and the interruption were severely population and businesses. the electricity sector the government has transferred the fuel undertaken. As underscored in the staff report, the risk of fuel shortages, the responsibility to the private sector. To minimize of products in purchasing make to suppliers petroleum administration has committed to regular payments collection at EDH under the SMP Progress registered in billing and order to reduce arrears. during the recent crisis, since billing and collection continued until early 2019 but were reversed in the income flow among the hindered by the roadblocks and the interruption were severely population and businesses. --- Page 84 --- its financial performance including by cutting Currently EDH is taking forceful steps to improve by the Ministry of Economy and arrears off the grid, while being supported bill. clients in payment oftheir electricity public entities to ensure timely payments Finance's directive instructing transparency and accountability are Strengthening governance and promoting greater Within the framework of accelerating its indeed among the authorities' highest priorities. the head of the anti-corruption unit against corruption, the authorities appointed, as functions in the legal fight track record in previous high-profile (ULCC), a legal expert with a strong unit issued a press release informing the rapid system. On January 10, the anti-corruption officials and setting January 31st in to the asset declaration by government two increase compliance the unit is moving forward with at least highas the deadline to comply. Concurrently, the conclusions of which should be made public profile investigations into fraudulent activities, week the ULCC organized an open-door its course. Also, this past acts once it would not jeopardize its work and knowledge about what is considered day to promote a better understanding of of corruption. financial markets, easing Bank continues to take steps towards reinvigorating level The Central and maintaining an adequate mainly from exchange rate volatility environment, inflation pressures BRH officials are pursuing a stable macroeconomic reserves. credit and of international and the vast infrastructure gap to stimulate while addressing institutional weaknesses of monetary conditions in the last However, they also acknowledge that the tightening low and increased growth. on credit in a context of already credit growth of fiscal year may have impinged conditions in the first three months volatility of the exchange rate. Continuous disruptive in failure to service credit, threatening decline in sales resulted in an increase of FY20 and ensuing In this context, with the combination and stability ofthe financial system. the Central the profitability activity leading to a steadier exchange rate, tighter monetary policy and plunging cautious not to pose threats to its policy stance, while remaining Bank decided to recalibrate price stability. indicator. The continues to see the exchange rate as a key policy who The Central Bank power, including the most vulnerable, exchange rate severely affects residents' purchasing authority remains attentive for most of their basic-good needs. The monetary the strong depend on imports market that may need to be contained considering to tensions on the foreign exchange Notwithstanding the Central Bank pass-through of exchange rate fluctuations to inflation. international reserves remained interventions during the past year, the net of foreign exchange reserves still represent over 5 months imports. above 700 million US dollars and gross of the national financial also working on the implementation The authorities are actively is to boost financial adopted in 2015. Fintech use being promoted to access the inclusion strategy for economic agents intermediation. The recent launching of a web-based platform The National Financial services is expected to foster competition. different costs of financial with a view to stimulate financial Plan is expected to be adopted in the near term, Education inclusion through financial education. foreign exchange reserves still represent over 5 months imports. above 700 million US dollars and gross of the national financial also working on the implementation The authorities are actively is to boost financial adopted in 2015. Fintech use being promoted to access the inclusion strategy for economic agents intermediation. The recent launching of a web-based platform The National Financial services is expected to foster competition. different costs of financial with a view to stimulate financial Plan is expected to be adopted in the near term, Education inclusion through financial education. --- Page 85 --- issues raised in the Fund's progress has also been achieved in addressing assistance for the legal Significant report. Haiti has received instrumental technical to safeguards assessment as well as the drafting of modifications aspects of IFRS compliance, have been and banking supervision framework. Relatedly, seven draft regulations the macro-prudential supervision before finalization and adoption. They cover capital shared with the banking sector for feedback cross-ownership of capitals, as in relation to Basel II, internal control, governance, institutions. The Central Bank requirements level of equity shares ofbanks in non-financial with the well as adequate and establish a risk-based supervision framework will implement those measures support of ongoing MCMTA. toward closing the gaps identified at the With regards to AML/CFT, Haiti is working in the summer of 2018. A comprehensive Fourth round of mutual evaluation undertaken address the absence of risk assessments, which is has been adopted to technical and risk-sensitive strategy the international standards of effectiveness and considered to have impeded achieving Committee in collaboration with government compliance. The National Anti-Money Laundering to fulfill all AML/CFT stakeholders from the private sector are striving officials and key legislation and regulations by the requirements for technical compliance of applicable has been delayed because ofthe November 2020 progress report deadline. However, progress of relevant TA by the World of delivery recent country lockdown and ensuing postponement Bank. and the economy back on the path of sustainable To secure macroeconomic stability put recovery plan with wide-ranging and inclusive growth, the adoption of a comprehensive the IMF's unwavering and active and external support is essential. In this regard, remains critical domestic with Haiti has a crucial role. Strong domestic resource mobilization of fragility, as well as engagement but will not be enough to address the sources and will decisively pursued LICS, Haiti is particularly vulnerable to sharp swings social and infrastructure needs. Like most of external financing flows. prices, natural disasters, and the unpredictability meeting the in commodity partners, progress made towards Without resuming support from development economic crisis. Predictable, timely and irremediably be reversed with the current and SDGS, may a sustainable program of economic growth effective donor support is needed to implement short-term negative impact of structural reforms on stability with critical measures to mitigate anticipated the most vulnerable. and social safety nets need to be at the core of any macroeconomic contributed to filling the Strengthening initiated during the past couple of years a structural program. Programs they represented dispersed efforts without significant gaps in social safety nets. However, with support from the international sustainable source of financing. During the past year, constructed within the Ministry of Social ofbeneficiaries has been community, a central registry role in ensuring that the upcoming cash transfer Affairs and is expected to play an instrumental to abuses. In line with Fund's guidance effectively targets the neediest and is not prone of social safety nets to mitigate program countries in fragile situations, they see the creation for work in of reform measures as an essential prerequisite. potential negative impact . Programs they represented dispersed efforts without significant gaps in social safety nets. However, with support from the international sustainable source of financing. During the past year, constructed within the Ministry of Social ofbeneficiaries has been community, a central registry role in ensuring that the upcoming cash transfer Affairs and is expected to play an instrumental to abuses. In line with Fund's guidance effectively targets the neediest and is not prone of social safety nets to mitigate program countries in fragile situations, they see the creation for work in of reform measures as an essential prerequisite. potential negative impact --- Page 86 --- that Haiti was now assessed to be at moderate The authorities took note of the conclusion They are hopeful that soon their debt distress but with a weak debt carrying capacity. risk of targeted measures to reestablish domestic resources and implement efforts to mobilize by enough grant resources from international macroeconomic stability will be supported In this regard, they are convinced take the of sustainable and inclusive growth. partners to path and financial engagement will be paramount. through its technical that Fund' S strong signaling with countries in fragile welcome the framing of the Fund's engagement on Haiti's Our authorities and stand ready to work with the Fund situations in a medium-term perspective CES in Annex I ofthe staff report Strategy (CES). The draft presented Country Engagement of initiatives and lack of coordination clearly points to the damage caused by fragmentation of goods and services and, most development partners leading to inefficient delivery areas is welcome, namely, among The strategic focus on four importantly, loss of policy ownership. social safety net, and energy. That said, macroeconomic stability, governance and transparency, ofthe Fund benefits ofa CES would be to facilitate a strong engagement one ofthe main avoiding counterproductive stop and go approaches. throughout episodes of increased fragility, address key issues, such as: (i) the profile of it would be important for the CES to the and In addition, and turnover rates; (ii) streamlining team members and their level of experience are more in line with the country of conditionality, to ensure they realistic timing and sequencing of the modalities ofTA delivery to ensure institutional capacity; and (iii) the finetuning of reform. country and avoid undermining domestic ownership effective transmission ofknowledge that Haiti is to other technical and financial partners Stronger IMF engagement will signal its economy and needs urgent to make in adjusting and reforming of Failure in a position progress exist in countries with multiple sources fragility. now. Ideal conditions rarely instability and support with Haiti may tip the country over into deeper fragility, to effectively engage poverty. realistic timing and sequencing of the modalities ofTA delivery to ensure institutional capacity; and (iii) the finetuning of reform. country and avoid undermining domestic ownership effective transmission ofknowledge that Haiti is to other technical and financial partners Stronger IMF engagement will signal its economy and needs urgent to make in adjusting and reforming of Failure in a position progress exist in countries with multiple sources fragility. now. Ideal conditions rarely instability and support with Haiti may tip the country over into deeper fragility, to effectively engage poverty. --- Page 87 --- BR BANQUE DE LA RÉPUBLIQUE D'HAITI Réf.: CA#11-2020 Port-Au-Prince, January 22, 2020 Executive Board International Monetary Fund Washington D.C. Dear Members of the Executive Board, As you know, per our unwavering valuation of the Fund's engagement with Haiti, this past December 2019, the discussions of the Article IV consultations were held under exceptional circumstances. We seize this opportunity to reiterate our appreciation to Fund management for the use of flexible logistical arrangements. Our purpose herein is three-fold. First, we seek to reassure you even under the exceptional temporary circumstances of not having a functioning Legislative Branch the President is determined to uphold democratic principles of good governance. Second, we wish to complement the comprehensive Article IV reports and staff's update with noteworthy/mportant recent developments. Third, we want to formally reiterate our request for the Fund's timely technical and financial support. The lack of an operational Parliament will not lead to a situation of unwarranted ruling by decree, The Executive branch intends to adopt two unavoidable decrees: one to ensure that that fiscal operations in 2020 are based on a realistic and appropriate budget and another to lay the rules for the organization of parliamentary elections by the end of 2020, We also plan to adopt five laws with high-growth impact potential which were submitted to but never voted by Parliament. They pertain to issues related to leasing, microfinance, incorporation, the credit bureau, insurance and land registry. Copies of these laws can be made available to the Fund although they were all drafted with TA from the Fund and other international partners. Our near-term priority is to reestablish macro-stability, The renewal this past November/December 2019 of the "Pacte de Gouvernance", the cashflow agreement between the Central Bank and the Ministry of Economy and Finance is instrumental to fiscal consolidation while helping increase the efficiency of monetary policy and reduce exchange rate volatility as well as decrease the pass-through to inflation. The budget framework prepared for FY20 by the Ministry of Economy and Finance with the assumption of zero budget support is to be submitted to the New Government for consideration as well as consultations with the private sector, civil society and the donor community in order to make appropriate adjustments before adoption by the Council of Ministers and the President of the Republic. Pacte de Gouvernance", the cashflow agreement between the Central Bank and the Ministry of Economy and Finance is instrumental to fiscal consolidation while helping increase the efficiency of monetary policy and reduce exchange rate volatility as well as decrease the pass-through to inflation. The budget framework prepared for FY20 by the Ministry of Economy and Finance with the assumption of zero budget support is to be submitted to the New Government for consideration as well as consultations with the private sector, civil society and the donor community in order to make appropriate adjustments before adoption by the Council of Ministers and the President of the Republic. --- Page 88 --- Itis our hope that this can be done within a few weeks after the inauguration of the new Government and that it would already include reliable external support commitments. Our efforts to strengthen governance are multifold. In the energy sector we have already taken decisive actions to relieve the State from the onerous purchases of electricity from IPPS. We stand ready to launch a bid within this fiscal year for the recruitment of a domestic or international partner to overhaul the management of EDH with a view to reestablish financial viability. Already we are taking steps to reduce budget subsidies to EDH by ensuring that each public entity pays its electric bills. To avoid inefficiencies and fraud in personnel payments, with support from the IDB all personnel databases under the purview of the Ministry of Economy and Finance have been unified. In addition, to enhance transparency in public financial management, we are committed not only to publish the adopted national budget as was customary in the past but also publish periodically information on its execution. The fight against illicit financial flows and money laundering as well as against the illegal traffic of Therefore, the new Director of the anti-corruption unit (ULCC) is children are high in agenda of priorities. being given not only needed logistical support but also strong presidential backing to ensure that its investigations are followed up by judiciary action. All relevant parties, public and private, are thriving to address weaknesses identified at the last mutual evaluation of GAFIC and present a strong record by the November 2020 deadline. The Central Bank has recently undergone an updated safeguards assessment and its Board values the ensuing recommendations as they help shape its work program. Currently, we are giving urgent priority to addressing some of the weaknesses that the safeguards team suggested may subject the Central Bank to risks of compromising its accountability and autonomy. In particular, with regards to the Central Bank organic law we are awaiting TA from the IMF (LEG) to move forward with the new draft. Designing a path towards inclusive and sustainable growth while addressing immediate socioeconomic needs of the most vulnerable is our chief challenge. The socio-economic indicators have worsened dramatically with the "peyi lok" and the most vulnerable are severely impacted. In line with IMF recommendations we have worked towards a unified registry of beneficiaries and are at the final phases of preparing the logistics of an unconditional cash transfer program. The Fund for Social and Economic Assistance (FAES) in collaboration with the Ministry of Social Affairs and Labor is taking the lead in implementation. As the President works towards the swift inauguration of a more politically diverse Government, one of National Unity, we call on the Fund to help Haiti seize the current window of opportunity to move out of fragility. Peace and social stability are essential prerequisites for the successful implementation of economic program. The current situation gives Us the opportunity to establish the legal any consolidation and sustainable framework that could be conducive to macroeconomic stability/fiscal growth. Strong signaling from the Fund is indispensable for Haiti to deepen engagement with other international partners and receive the level of support it needs at this juncture. A a Joseph PUTHE Jean Baden DUBOIS - Minister Governor