--- Page 1 --- MONETARY FUND INTERNATIONAL IMF Country Report No. 22/207 HAITI RELEASE; AND PROGRAM-PRESS STAFF-MONITORED July 2022 STAFF REPORT documents have been Program, the following In the context of the Staff-Monitored released and are included in this package: A Press Release a staff team of the IMF for the Executive Board's The Staff Report prepared by in early-May 2022, with the officials of information, following discussions that ended the IMF arrangement developments and policies underpinning of Haiti on economic Based on information available at the time under the Staff-Monitored Program. on June 8 and approved on these discussions, the staff report was completed June 17, 2022. listed below have been or will be separately released: The documents Letter of Intent sent to the IMF by the authorities of Haiti* the authorities of Haiti* Memorandum of Economic and Financial Policies by Technical Memorandum of Understanding" *Also included in Staff Report information and policy allows for the deletion of market-sensitive and The IMF's transparency authorities' policy intentions in published staff reports premature disclosure of the other documents. of this report are available to the public from Copies International Monetary Fund o Publication Services PO Box 92780 o Washington, D.C. 20090 Telephone: (202) 623-7430 o Fax: (202) 623-7201 Web: http/Awww.imf.org E-mail: publications@imforg Price: $18.00 per printed copy International Monetary Fund Washington, D.C. O 2022 International Monetary Fund --- Page 2 --- PRESS RELEASE PR22/235 Program Approves a Staff-Monitored IMF Management for Haiti FOR IMMEDIATE RELEASE between national authorities and IMF staff to Staff Monitored Programs (SMPS) are informal agreements do not entail endorsement by the IMF economic program. As such, they process). SMP monitor the authorities' of SMPs under the Heavily Indebted Poor Countries Executive Board (with the exception staff reports are issued to the Board for information. restore macroeconomic Staff-Monitored Program (SMP) aims to help the government inflation on the poor. The goal given the heavy burden of high stability and lower inflation-a key build in the public sector, mobilize domestic revenues, Efforts to enhance governance elements of the SMP. and boost social spending are important capacity, suited to Haiti's fragility and, if implemented, The program comprises realistic measures tranche IMF-supported program. could pave the way to an upper credit of the International Monetary Fund (IMF) Washington, DC June 29, 2022: Management for Haiti after discussions from March-May, a Staff-Monitored Program (SMP) 2023. The SMP has approved June 17, 2022 and runs through May 31, 2022. The SMP was approved on authorities, keeping in mind Haiti's fragility and by IMF staff and the Haitian With timely was designed the authorities' economic policy objectives. of capacity constraints while supporting the authorities establish a track record implementation of the program, the SMP would help upper credit tranche possibly paving the way to an IMF-supported policy implementation, program. authorities and the IMF to monitor the between country financial SMPs are arrangements economic program but are not accompanied by implementation of the authorities' assistance. crisis and assassination of its Haiti has experienced a protracted political and an In recent years, pandemic, a surge in gang-related violence, president, lockdowns, the global economic and institutional frameworks and earthquake. These shocks have weakened and security conditions have administrative capacity, while socioeconomic adversely affected deteriorated to a distressing level. in FY2022, contraction, IMF staff expect growth to turn positive After three years of economic and to recover further to 1.4 percent the next year supported by an increase in investment, in socio-political stability. amidst modest improvements with continued flows of remittances would to implementing policies that difficult context, the authorities have committed and start to In this stability and growth, strengthen governance, begin to restore macroeconomic the SMP is geared to increasing provide poverty relief. With a strong focus on governance, agenda across the country, placing and raising ownership of the reform accountability IMF.org 700 19th Street NW Washington, DC 20431 USA to 1.4 percent the next year supported by an increase in investment, in socio-political stability. amidst modest improvements with continued flows of remittances would to implementing policies that difficult context, the authorities have committed and start to In this stability and growth, strengthen governance, begin to restore macroeconomic the SMP is geared to increasing provide poverty relief. With a strong focus on governance, agenda across the country, placing and raising ownership of the reform accountability IMF.org 700 19th Street NW Washington, DC 20431 USA --- Page 3 --- revenue administration, public finance management, emphasis on strengthening transparency, and anti-corruption measures. under which have collapsed in recent years The SMP also aims to raise domestic revenues, and the security crisis. The authorities have the strain of social unrest, collection problems, measures, including strengthening the committed to implementing a series of administrative portfolios, revise special tax number and cleaning up taxpayers' and use of the tax identification eliminating some exemptions, and finalize regimes in a new Tax Code, including by the Customs tariff. This will simplify the tax publish the new Tax Code, Customs Code and to abuses. and thus less prone governance system, making it more transparent fiscal deficit has fueled inflation, putting pressure on the Central bank financing of the fuel subsidy costs, further monetary exchange rate and leading to a vicious circle of higher thus aims to raise resources for financing of the deficit and higher inflation. The program of the fiscal deficit to reduce inflation. productive spending and reduce monetary financing burden placed on the poor from the high This is critical for the population given the heavy increase in prices. revenues and crowding out at least one third of domestic Fuel subsidies have been absorbing and education. They are also highly inequitable, productive spending on investment, health 10-20 percent of the income ladder in 90 percent of the benefits going to the top tackle this with over authorities plan to prepare the groundwork to eventually Haiti. In this light, the several social programs under the Programme issue. As a first step, they launched in April earlier fuel price adjustments. d'urgence targeted to the groups affected by framework and limit foreign authorities will also strengthen the monetary policy the with The Haitian excessive volatility to gradually eliminate spread exchange interventions to smooth to improve the financial regulatory framework market. Key steps are also planned international standards. the parallel laundering (AMLICFT) to meet and update regulations on anti-money IMF staff will work closely with the authorities to support Over the course of this SMP, them build public support. Indeed, most elements of implementation of their program and help IMF technical assistance and capacity the authorities' program are underpinned by ongoing with Haiti's other development The Fund will also continue to coordinate closely The first review of the SMP is building. to leverage efforts in support of common objectives. SMP could lead to an IMFpartners Satisfactory performance under the of the IMF's expected in September. that would require approval supported program under a multi-year arrangement IMF review. Executive Board. SMP are only subject to formal management to support Over the course of this SMP, them build public support. Indeed, most elements of implementation of their program and help IMF technical assistance and capacity the authorities' program are underpinned by ongoing with Haiti's other development The Fund will also continue to coordinate closely The first review of the SMP is building. to leverage efforts in support of common objectives. SMP could lead to an IMFpartners Satisfactory performance under the of the IMF's expected in September. that would require approval supported program under a multi-year arrangement IMF review. Executive Board. SMP are only subject to formal management --- Page 4 --- MONETARY FUND INTERNATIONAL HAITI STAFF-MONITORED PROGRAM June 17, 2022 SUMMARY EXECUTIVE a protracted political crisis, repeated country Context: Since 2018, Haiti has experienced assassination of its president and a deep lock <-downs and civil unrest, an earthquake, the in violence, worsening face economic imbalances, a surge gang recession. Policymakers aggravated by years of political instability. conditions, and dire social challenges poverty lt is not feasible for Haiti to implement an upper Staff-monitored program (SMP). at this time due to the weakened policy credit tranche (UCT) Fund-supported program during the protracted crisi is. The frameworks and erosion in administrative capacity supporte tefforts to reduce SMP ending May 31, 2023 would help build capacity, frameworks, address proposed strengthen fiscal and monetary policy inflation and raise growth, and take concrete steps to strengthen governance weaknesses and combat corruption, build a track record of policy assistance. A successful SMP is needed to social Haiti's prospects for a UCT program. implementation that would improve SMP policy recommendations: with measures consistent with agreed targets. Adopt a FY2022 budget ofthe deficit and limit foreign exchange (FX) Reduce central bank financing intervention to smoothing excess volatility. (PFM), notably with Mobilize revenues and strengthen public finance management of the tax base, alcohol, and car excises, expansion and simplification higher tobacco, management and controls. and measures to strengthen expenditure allocation to the ministry of social affairs (MAST) and Require a minimum budget the national plan for social protection (PNPPS). prepare an action plan to implement and rate policies by clarifying the the framework for monetary exchange Strengthen and foreign exchange rate operations. objectives and modalities for liquidity technical assistance (TA), including governance of Advance governance reforms with finance administration, and public management. the central bank, revenue --- Page 5 --- HAITI Approved By Discussions took place remotely from Washington during a Patricia Alonso-Gamo virtual mission from March 4-16, and continued until May 9, (WHD); Wes McGrew and 2022. The team comprised Nicole Laframboise (head), Noah Andrea Schaechter (both Ndela Ntsama, Rina Bhattacharya, Jean Francois Clevy, and SPR) Paola Aliperti (all WHD), Patrick Petit (FAD), Neil Shenai (SPR) pre-mission, and Gabriel Duvalsaint (local economist). Experts from FAD, FIN, LEG, and STA who are providing relevant technical assistance participated in some of the meetings. Langy Duverger (local office) and Grey Ramos (WHD) assisted the team with logistics and document preparation. Mr. Saraiva and Ms. Florestal (OED) participated in the discussions. CONTENTS BACKGROUND AND RECENT DEVELOPMENTS OUTLOOK AND RISKS STAFF-MONITORED PROGRAM A. Fiscal Framework and Short-Term Strategy. B. Fuel Market Reform and Social Assistance C. Monetary and Exchange Rate Policy. D. Financial Sector Policies E. Governance, F. Climate Change and Poverty Reduction G. Program Monitoring STAFF APPRAISAL BOX 1. GDP Rebasing FIGURES 1. Real Sector Developments, 2015-22 2. Fiscal Sector Developments, 2015-22 3. Monetary Sector Developments, 2015-22 4. Financial Sector Indicators, 2015-21 5. External Sector Development, 2015-22 6. Social Indicators 2 INTERNATIONAL MONETARY FUND Assistance C. Monetary and Exchange Rate Policy. D. Financial Sector Policies E. Governance, F. Climate Change and Poverty Reduction G. Program Monitoring STAFF APPRAISAL BOX 1. GDP Rebasing FIGURES 1. Real Sector Developments, 2015-22 2. Fiscal Sector Developments, 2015-22 3. Monetary Sector Developments, 2015-22 4. Financial Sector Indicators, 2015-21 5. External Sector Development, 2015-22 6. Social Indicators 2 INTERNATIONAL MONETARY FUND --- Page 6 --- HAITI TABLES 1. Quantitative and Indicative Targets, June 2022-March 2023 2. Proposed Prior Actions for SMP, 3. Proposed Structural Benchmarks for SMP 4. Selected Economic and Financial Indicators, FY2019-25 5a. Non-Financial Public Sector Operations, FY2019-25 (Millions of Gourdes). 5b. Non-Financial Public Sector Operations, FY2019-25 (Percent of GDP). 6. Summary Accounts of the Banking System, FY2019-25 7a. Balance of Payments, FY2019-25 (Millions of US$) 7b. Balance of Payments, FY2019-25 (Percent of GDP) 8. External Financing Requirements and Sources, FY 2019-25 9. Financial Soundness Indicators, June 2020-December 2021 ANNEXES I Recent Political History II. Public Debt Sustainability Analysis III. External Sector Assessment APPENDICES I Capacity Development Strategy, II. Letter of Intent Attachment I Memorandum on Economic and Financial Policies Attachment II. Technical Memorandum of Understanding INTERNATIONAL MONETARY FUND 3 , FY2019-25 (Millions of US$) 7b. Balance of Payments, FY2019-25 (Percent of GDP) 8. External Financing Requirements and Sources, FY 2019-25 9. Financial Soundness Indicators, June 2020-December 2021 ANNEXES I Recent Political History II. Public Debt Sustainability Analysis III. External Sector Assessment APPENDICES I Capacity Development Strategy, II. Letter of Intent Attachment I Memorandum on Economic and Financial Policies Attachment II. Technical Memorandum of Understanding INTERNATIONAL MONETARY FUND 3 --- Page 7 --- HAITI AND RECENT DEVELOPMENTS BACKGROUND shocks that have taken a toll on the Since 2019, Haiti has been battered by multiple crisis, 1. have been marked by a protracted political and population. The past few years economy lockdowns (Peyi-Lok), civil unrest, a president's 14 Economic Activity Indicator ICAE 1/ repeated and an earthquake, whose 10 (Fiscal year quarters, yly growth, in percent) assassination, the pandemic, of 2021 GDP Construction direct costs were estimated at 11 percent Overall ICAE The security situation has deteriorated (World Bank). control over regions significantly as gangs have expanded to 2 and infrastructure, at times bringing economic activity -6 halt. In this context, the economy contracted again in -10 a financing of the 2021, tax revenues fell further, monetary and, together with supply disruptions, deficit was high external financing remained low Source: IHSI and IMF staff ald indicator ulation qu ua er of fueled inflation. Official 1/ICAE high frequency indus stries and ser uncertainty. Confirmed cases activity covering agriculture, due to the enduring political low since however, have remained relatively of COVID-19, the pandemic started. mid-2021 to make the political transition more have taken steps since before 2. The authorities by President Moïse just days concerns. Appointed inclusive and address some governance office after a period of uncertainty and formed a assassination, Prime Minister Ariel Henry took He put into his eight members from opposition groups. in November that included and new government apaisée signed with some opposition groups place his Accord politique pour une gouvernance one third of the Senate. Prime extended the term of the remaining de civil society, and in early-2022 accord led by civil society (Accord however faces challenges and one other political Minister Henry of both accords are to establish a transitional Montana) is still in play. The main objectives timetable yet as the consensus appears to be and hold elections. There is no election government broad-based, legitimate elections. that preparation is needed to ensure and the IMF has been the largest source of external 3. Staff have remained engaged assistance without ex post conditionality to Haiti financing since 2019. The Fund provided financial with a disbursement under the Rapid about US$360 million in total since 2020, starting as well as equivalent to to 50 percent of Haiti's quota) Credit Facility in April 2020 (SDR 81.9 million, equivalent for a cumulative amount ofabout service falling due to the IMF during 2020 and 2021 about relief on debt and Relief Trust (CCRT). Haiti also received SDR 15 million under the Catastrophe Containment in 2021. An SMP agreed "ad referendum" in midSDR 157 million under the general SDR allocation related to procurement. After the authorities because of governance issues 2020 was not approved technical assistance (TA), to strengthen basic governance took steps during 2021, supported by Fund that SMP discussions could reamong other things, it was agreed safeguards in public procurement, start. MONETARY FUND 4 INTERNATIONAL 1 about relief on debt and Relief Trust (CCRT). Haiti also received SDR 15 million under the Catastrophe Containment in 2021. An SMP agreed "ad referendum" in midSDR 157 million under the general SDR allocation related to procurement. After the authorities because of governance issues 2020 was not approved technical assistance (TA), to strengthen basic governance took steps during 2021, supported by Fund that SMP discussions could reamong other things, it was agreed safeguards in public procurement, start. MONETARY FUND 4 INTERNATIONAL --- Page 8 --- HAITI OUTLOOK AND RISKS under the SMP accompanied The outlook is based on normative policy implementation of 4. assistance. The baseline scenario assumes implementation by an increase in international SMP. While the authorities' program aims to lay and select reforms under the SMP is assumed sound macro policies reform implementation after the for an eventual UCT arrangement, beyond 2023. the groundwork the uncertainties regarding policy commitment to be modest under the baseline given inflation and affect the balance of payments due to Spillovers from the war in Ukraine will likely raise impact on the poor. and food prices, which will have a negative higher commodity modestly to 0.3 percent in FY2022, supported by higher Growth is expected to pick up ofreforms, growth would stability and implementation investment. Assuming some political high supply of credit, facilitated by over the medium term with a moderately reach 1.5 percent situation, contributing to recovery. some improvement in the security through other components of the Inflation is expected to rise further as higher fuel prices pass fiscal deficit declines. Inflation is financing of the CPI basket, but would moderate as inflationary end-FY2023. falling to 14 percent by projected at 27.5 percent (y/y) at end-FY2022, be remain in surplus in FY2022 as political uncertainty, the The current account is expected to It is projected to show a small disruptions weigh on imports. security situation, and supply-side remittance inflows, a modest resumption in deficit over the medium term, supported by steady which together provide room for some and higher official transfers in FY2022-FY2023 exports, positive effect of reforms on productivity growth. import growth and drive a small sector (NFPS) is expected to decline to of GDP, the deficit of the nonfinancial public around 2.8 As a percent in FY2023 before stabilizing at 1.5 percent in FY2022 and widen to 2.3 percent availability and reflects assumption of fiscal stance is driven by financing percent. The near-term continued administered fuel prices. Box 1. GDP Rebasing rebased GDP series in October 2020. The new series was Haiti's statistical institute (IHSI) released a improved the quality of national accounts data rebased to 2012 fromthe old base of 1987 and significantly a more detailed breakdown of the includes now an estimate of the informal sector, provides Nominal GDP in gourdes under (Appendix I).It and updates Haiti to the 2008 System of National Accounts. led to a drop in all of services sector, was revised up by 65 (74) percent. Naturally this large for the new series for 2019 (2012) On the other hand, it highlighted the urgent need domestic the estimated fiscal and external ratios. revenues. mobilization and the low base of export resource Internal risks wide of risks, primarily on the downside. 5. Haiti is exposed to a range SMP, worsening governance and include a failure to implement policies under the proposed in social unrest, gang-related problems, heightened political instability and resumption Haiti is vulnerable to highercorruption and/or a surge in COVID cases. Externally, disruptions, natural disasters, remittance and external financing than-anticipated world fuel prices and/or lower-than-expected INTERNATIONAL MONETARY FUND 5 . revenues. mobilization and the low base of export resource Internal risks wide of risks, primarily on the downside. 5. Haiti is exposed to a range SMP, worsening governance and include a failure to implement policies under the proposed in social unrest, gang-related problems, heightened political instability and resumption Haiti is vulnerable to highercorruption and/or a surge in COVID cases. Externally, disruptions, natural disasters, remittance and external financing than-anticipated world fuel prices and/or lower-than-expected INTERNATIONAL MONETARY FUND 5 --- Page 9 --- HAITI would reduce Haiti's energy import bill. lower fuel prices over the medium term the flows. On the upside, mobilizing revenues, and strengthened governance, Without improved policies, progress recent low or negative growth, high poverty medium-term outlook would be similar to the could build some momentum for deeper, Alternatively, improvements under the SMP could raise to higher equilibrium. program that growth reforms under a UCT-supported more comprehensive levels in the medium term. and measures calibrated to Haiti's fragility Near term reform should focus on realistic failed reform efforts has 6. the repeated cycle of that would build capacity. A key factor underpinning on the sources offragility prepared that did not match Haiti's fragility. Earlier analysis the and been programs Strategy (CES) helped to inform policy in the context of the 2020 Country Engagement with the enhanced Fund strategy priorities in the proposed SMP, which are aligned with an capacity building aims to raise ownership of policies, including states. The authorities' program with its toll on the on fragile measures. By lowering inflation, heavy could emphasis on transparency and governance some social assistance, the program articulating anti-corruption measures, and providing to stick with poor, reform, including of fuel prices, and empower policy-makers and raise public support for ubiquitous governance weaknesses That said, downside risks are significant given with the unresolved sound policies. to influence implementation. Together corruption vulnerabilities which are likely the are very high. and security conditions, risks to program political crisis grave PROGRAM STAFF-MONITORED frameworks, support efforts to SMP would help strengthen fiscal and monetary policy take concrete steps to The proposed address some governance weaknesses, reduce inflation and raise growth, and institutional capacity. social assistance, and build administrative strengthen Fiscal Framework and Short-Term Strategy A. drive the fiscal stance. With the Financing constraints and weak revenue mobilization fiscal stance is 7. financing of the deficit to restore macro stability, the in FY2022 and goal of reducing inflationary A tax-to-GDP ratio of only 5.8 percent dictated mainly by the availability of financing. of GDP has necessitated combined cuts domestic amortization of 0.8 percent expenditures by 1.2 higher-than-expected and domesticall-funded capital in non-subsidy-related current spending needs. Fuel subsidy costs are expected to percent of GDP in order to contain gross fiscal financing world prices. While the non-subsidy rise by about 0.5 percent of GDP in FY2022 due to higher of GDP in FY2022 from 2.4 percent of cuts help lower the projected deficit to 1.5 percent of GDP on social spending to allocate funds equivalent to 0.15 percent GDP in FY2021, it provides space December 2021 fuel price increases on vulnerable groups. to mitigate the impact of the spending to rise to programs collection would allow domesticall-funded capital The modest rise in revenue positive growth while stabilizing the deficit of GDP by FY2025 which should help support 1.5 percent understanding of the sources of fragilityin Haiti, 1 Staff plant to extend the analysis in the original CES Fund to deepenthe policyand technical advice. An updated CES is expected the authorities, to better inform in consultationwith' before the end off the SMP. 6 INTERNATIONAL MONETARY FUND December 2021 fuel price increases on vulnerable groups. to mitigate the impact of the spending to rise to programs collection would allow domesticall-funded capital The modest rise in revenue positive growth while stabilizing the deficit of GDP by FY2025 which should help support 1.5 percent understanding of the sources of fragilityin Haiti, 1 Staff plant to extend the analysis in the original CES Fund to deepenthe policyand technical advice. An updated CES is expected the authorities, to better inform in consultationwith' before the end off the SMP. 6 INTERNATIONAL MONETARY FUND --- Page 10 --- HAITI In the event of a shortfall in projected external at about 2.8 percent of GDP in the medium-term. (QT, see 129). includes adjustors on quantitative targets budget support, the program with moderately higher budget support mobilization of revenues together 8. The modest for more productive spending. The government next few years will create some space prices to over the would resume the 1995 law allowing petroleum product announced in December 2021 they rose from 163 and 169 HTG per world prices: kerosene and diesel prices and adjust regularly to changing level that at the time covered costs, margins, gallon to 352 and 353 HTG, respectively-à 25 percent from 201 to 250 HTG (US$2,50) taxes-while the price of gasoline was raised by mechanism, subsequent statutory 1995 law did not include a price smoothing gallon. However, as the indicated they are not able to adjust per increases were not passed on. The authorities higher large world price additional hardship imposed on the population by prices for the foreseeable future given the situation, could fuel social unrest. Given that, together with the difficult security imported food prices and timing of this reform, and to be prudent, uncertainty surrounding the likelihood the very high in fuel price policy henceforth. baseline scenario does not assume any changes the SMP 4.0 Contributions to the Financing of the Fiscal Deficit 3.0 Contributions to FY2022 Fiscal Deficit (Percent of GDP) BBRHf DExternalf financing financing (Percent of GDP) 3.0 Other domestic financing 2.5 Fiscal deficit 2.0 2.0 1.5 1.0 1.0 Reduce deficit DIncrease deficit 0.0 0.5 0.0 FY2021 fiscal Tax revenue Grants subsidies Energy spending Current capital New FY2022 deficit fiscal -1.0 FY2021 FY2022 deficit increase saving expenditure Source: National Authorities and IMF staff calculations. for FY2022. In addition to the gradual application Revenue mobilization is a key priority other 9. increase excises on tobacco, alcohol and goods-as of fuel excises (112), the authorities will and implement a series of fadministrative proposed in a draft Tax Code to be finalized by September, number (TIN) and cleaning up strengthening the use of the tax identification mainly of measures, including that, given the narrow tax base consisting taxpayers' portfolios. The authorities emphasized port and airport, raising revenue taxpayers and imports transiting through the capital's base. While special a few large efforts to broaden the tax will depend on the security situation and longer-term eliminating some exemptions, a few will be revised in the new Tax Code, including by scale exemptions on necessities regimes and removing large existing incentives will likely be grandfathered through removal of As such, there is limited short term revenue potential will remain difficult. exemptions. INTERNATIONAL MONETARY FUND 7 --- Page 11 --- HAITI inflation and restore macro stability. financing will be reduced to help lower needs 10. Monetary reimbursement in FY2022 leads to gross financing A lower deficit but higher domestic debt 3.4 of GDP in FY2021. With about at2.9 percent of GDP in FY2022 compared to percent BRH is estimated at estimated domestic borrowing and project loans, financing 0.8 percent of GDP covered by be fully sterilized by issuance of central of GDP, of which 0.7 percent of GDP will BRH of the about 2.2 percent if needed. financing will be reduced to help lower needs 10. Monetary reimbursement in FY2022 leads to gross financing A lower deficit but higher domestic debt 3.4 of GDP in FY2021. With about at2.9 percent of GDP in FY2022 compared to percent BRH is estimated at estimated domestic borrowing and project loans, financing 0.8 percent of GDP covered by be fully sterilized by issuance of central of GDP, of which 0.7 percent of GDP will BRH of the about 2.2 percent if needed. This will ensure that financing bank bills or sales of foreign exchange (FX), the level consistent with staff estimates of in FY2022 is contained at 1.5 percent of GDP, than the rate of nominal GDP government (assuming money grows at or less non-inflationary monetary financing Text Table 1. Haiti: Financing of the Fiscal Deficit In FY2023 and and percent of GDP) over the medium-term). (Int billionHTG FY2021 FY2022 later years, central bank financing is HTGbn %ofGDP HTG bn %ofGDP projected to stabilize around 2 percent -5,865 -0.3 -7,490 -0.3 estimate of External financing 4,851 0.3 3,450 0.2 of GDP, reflecting a prudent Project loans -10,716 -0.6 -10,940 -0.5 demand for BRH securities by domestic Amortization 46,821 2.8 40,752 1.9 of an adverse shock, Domestic financing 49,839 2.9 46,533 2.2 banks. In the event BRH and T-Bills 3,751 0.2 12,275 0.6 authorities would need to take Commercial bank deposits 10,950 0.6 0 0.0 the Domestic suppliers -17,719 -1.0 -18,056 -0.8 contingency measures, including Domestic debt amortization Source. Authorities' data; andl IMF staff estimates and.projections mobilizing additional external support. risk of distress" " and debt carrying capacity is Public debt is sustainable with "high ratio, slightly 11. lowered by almost half the debt-to-GDP rated "medium". Although the GDP rebasing increase in external concessional deficits over the medium term, funded by a gradual value of public and higher primary export growth, brings the present financing against the background of subdued into the "high" range of debt distress guaranteed external debt as a share of exports deficit, dampened by the real publicly IMF-World Bank DSA (Annex II). A low primary in thresholds in the joint by lower inflation rate depreciation-drivent differential, and slower exchange is at interest rate/growth Debt carrying capacity unchanged to improved debt dynamics. the medium term-contribute to important risks and vulnerabilities. "medium" and the debt outlook remains subject structural fiscal reforms to raise revenues over 12. The authorities will start implementing authorities will start to tackle the structural medium term (19). Drawing on past Fund TA, the the authorities will the benchmarks (SB) under the program, decline in revenue collection. As structural draft Tax Code (Code général des impôts) and Tax with stakeholder consultations on a new finalize them (endproceed fiscale)- prepared with Fund TA-and Procedure Code (Livre de procédure they will also finalize and publish the September 2022 SB). Through the same consultation process, will simplify the tax system, making it SB). These codes Customs Code and tariffs (end-September abuses. Given the imperative of expanding and thus less prone to governance among more transparent the use of tax identification numbers Haiti's tax base, the authorities will also systematize departments (end-September SB). They including the tax, customs and treasury are financial agencies, reforms identified by TA experts, although payoffs plan other broader revenue administration involve the adoption of a medium-term reform plan expected only in the longer-term since these strengthening the core tax and customs both tax and customs agencies, aimed at modernizing and data matching. -September abuses. Given the imperative of expanding and thus less prone to governance among more transparent the use of tax identification numbers Haiti's tax base, the authorities will also systematize departments (end-September SB). They including the tax, customs and treasury are financial agencies, reforms identified by TA experts, although payoffs plan other broader revenue administration involve the adoption of a medium-term reform plan expected only in the longer-term since these strengthening the core tax and customs both tax and customs agencies, aimed at modernizing and data matching. functions, and making intensive use off technology INTERNATIONAL MONETARY FUND --- Page 12 --- HAITI to reduce the scope for financial management (PFM) reforms are necessary a 13. Public the quality of spending. The government adopted misuse of public funds and strengthen under the SMP. The treasury single account budget for FY2022 that is consistent with agreed targets central budgetary units, including to include all bank accounts of the (TSA) will be broadened borrowing costs (end-September SB). funds, thus improving controls and lowering The authorities emergency should be brought into the TSA over the medium-term. deficit Foreign-financed resources (MTBF) for FY2023-2025, with the NFPS will also prepare a medium-term budget framework The MTBF, which will be an annex to the FY2023 target the main anchor (end September SB). investment. Reforms on the TSA and MTBF will budget, will strengthen management of public Finally, in line with their commitment by Fund TA until at least September. on continue to be supported authorities published the audit on COVID-19 spending at the time of the RCF disbursement, the Court of Accounts and Administrative 2022. Based on a preliminary review, the Superior and June 9, view of the government's planning, management Disputes (CSCCA) paints a very negative flagging a lack ofsupporting documentation coordination of COVID-related spending, in particular which impeded the Court's ability to from the Ministry of Finance and other government agencies reflected the willingness of the Nonetheless, the audit quality was adequate, The render a full opinion. PFM issues in need of improvement. government to expose its weaknesses, and highlighted to address the questions and recommendauthorities should indicate what and when they intend at the time of the first review. ations laid out by the Court and staff will review these issues on the use of the SDR allocation. Prior to The authorities agreed to report transparently staff with the 14. into freely usable currencies, the engaged converting about half of their SDR allocation Guidance Note. The BRH and Ministry of Finance best as laid out in the Fund authorities on practices consistent with domestic legal and institutional signed a memorandum of understanding arising from the use of the SDR allocation for frameworks, clarifying the obligations of each party future use of SDRS. The authorities agreed to reportt ttransparently on any fiscal purposes. Fuel Market Reform and Social Assistance B. of the fuel sector in late-2021. The fuel import monopoly 15. The authorities initiated reform des Programmes d'Aide au to the government agency Bureau de Monétisation to be allocated through a granted last November, allowing imports Développement (BMPAD) was withdrawn of Economy and Finance (MEF). The premium competitive bidding process managed by the Ministry the winning bid and any fuel distributor recognized price index determines Fuel prices over an internationally or obtain supply from the winning bidders. can import at or below the winning premium made since then. In addition to but the authorities have not adjustments (see were raised in December time is needed for the compensating measures the reasons cited above (18), they said more intend to eventually eliminate fuel launched to take effect. They stated they below 116) recently subsidies when conditions permit. to mitigate the impact of December 16. As noted above, measures are being implemented income quintile absorbs over 90 percent of groups. While the top fuel price reforms on vulnerable industry directly and lower income fuel subsidy benefits, price increases affect the transport from the transport the (World Bank). have not adjustments (see were raised in December time is needed for the compensating measures the reasons cited above (18), they said more intend to eventually eliminate fuel launched to take effect. They stated they below 116) recently subsidies when conditions permit. to mitigate the impact of December 16. As noted above, measures are being implemented income quintile absorbs over 90 percent of groups. While the top fuel price reforms on vulnerable industry directly and lower income fuel subsidy benefits, price increases affect the transport from the transport the (World Bank). Resistance to reform indirectly through higher food prices groups INTERNATIONAL MONETARY FUND 9 --- Page 13 --- HAITI with transport unions to design This time the authorities have been working sector has been strong. vehicles. They are allocating resources equivalent package, including identifying all eligible d'urgence a support four months to social benefits under the Programme to 0.15 percent of GDP over the next of the school canteen program, school bonds for comprising the distribution of hot meals, expansion buses, and fuel vouchers for the vehicles low-income parents, acquisition of 100 new school to allow designated 50,000 routes. The voucher system is expected registered on the main transport prices and will be managed in access to a certain number of gallons at discounted the Some of the participants who will in turn be reimbursed by government. coordination with fuel distributors, listed above may be continued after September. mitigating measures of the for fuel price reform should be a top priority The 17. Preparing the groundwork policy is inequitable and grossly inefficient. Staff stressed that Haiti's fuel price costs have averaged between government. absorb most of the benefits while the subsidy health, highest income groups This crowds out productive spending on investment, 2-3 percent of GDP annually since 2019. misallocation of scarce resources. Preparations education, and law and order, and results in a gross who benefits from subsidies, the new include communicating about the costs and tradeoffs, to exit the should most affected, and the eventual strategy assistance programs to compensate the groups should explain the eventual reform country from this no growth trap. The communication formula strategy that would gradually adjust prices to including adoption of a price smoothing With domestic revenue strategy, the public from sharp price swings. reduce the subsidy while protecting partners hesitating to provide budget collection at under 6 percent of GDP and development viable medium-term fiscal and growth to fund wasteful spending on fuel subsidies, a to envision without support is difficult under a Fund-supported program, outlook for Haiti, including addressing this flaw. to the new Politique Nationale will define the action plan implement 18. The government The system of social protection is fragmented by de Protection et de Promotion Sociale (PNPPS). providers that together constitute agencies, and international a large number of different programs, and effectiveness, including due to the of social assistance with limited coverage of MAST was either a patchwork Report 20/122). Over time, the mandate volatility of external funding (Country including at the request of international donors extra-budgetary activities, duplicated or sidelined by execution of Unfortunately, this undermined to limit governance risks in the programs. resulted in who sought weakened capacity at the MAST, and ownership of social policy, this, the the government's relative to amounts spent. To address government disjointed strategy with weak outcomes partners and involving an inclusive national prepared the PNPPS with assistance from development an action plan for its implementation. They committed to preparing this year consultation process. in line expand, and better coordinate social programs 19. The authorities aim to integrate, identified on-budget all public spending on with the PNPPS. Under the SMP, the authorities have Fonds d'Assistance Economique et Social including those executed by the off-budget and of social programs, the aim of centralizing the design implementation (FAES). In that way, the program supports It also includes as a QT a floor for budget social policy at the MAST over the medium-term. identified programs. This should support allocations for social spending purposes based on currently overall strategy under the PNPPS. In the ownership, and the effectiveness of Haiti's capacity building, 10 INTERNATIONAL MONETARY FUND the PNPPS. Under the SMP, the authorities have Fonds d'Assistance Economique et Social including those executed by the off-budget and of social programs, the aim of centralizing the design implementation (FAES). In that way, the program supports It also includes as a QT a floor for budget social policy at the MAST over the medium-term. identified programs. This should support allocations for social spending purposes based on currently overall strategy under the PNPPS. In the ownership, and the effectiveness of Haiti's capacity building, 10 INTERNATIONAL MONETARY FUND --- Page 14 --- HAITI of programs, including other agencies will remain involved to supportimglementation a short term, database of beneficiaries used to identify target populations, notably to expand the SIMAST and to finance monetary transfers and support supported by the WFP and World Bank, du secrétaire d'état à l'inclusion des program Klere Chimen and at the Bureau measures under the programs supported by the World Bank. handicapées (BSEIPH), both projects personnes the transparency of coordination under the MAST will involve increasing 20. Greater external aid on social and education projects, operations at FAES. Launched primarily to coordinate domestic resources with limited to no it has become an execution agency of other ministries' for years and its resources and Its governing board has not convened audit. As a oversight or accountability. or public review since the Petrocaribe programs have not been subject to documentation and annual financial statements of under the SMP, the authorities will provide quarterly (quarterly SB). All benchmark before June 2022 and meet regularly thereafter the FAES and the board will re-convene would also be transferred back to the MAST in domestically funded social program resources funded resources of the FAES should be included SB) and all externally 2023 budget (end-September in the budget in the medium term. and Exchange Rate Policy C. Monetary of a policy framework in a context 21. The BRH will take steps to strengthen the monetary been in a context of fiscal Monetary policy has passive more flexible exchange rate regime. real interest rates are negative, and required reserve dominance. The interest rate channel is weak, to: (i) adopting a ceiling on high. To anchor monetary policy, the BRH committed to 1.5 of GDP ratios relatively financing of the deficit percent credit to the NFPS as the main anchor to limit monetary short term liquidity 2.0 percent of GDP thereafter; and (i) conducting in in FY2022 and about including at seven-days, to manage excess liquidity operations at a fixed rate with full allotment, As the ceiling for BRH financing to the system and strengthen the policy transmission. (129), the the banking for shortfalls in external budget support government does not include an adjustor domestic sources or externally on concessional authorities will need to raise financing from other monetary financing above the level shortfall in external budget support. Any GDP thereafter) terms to cover any of GDP in FY2022 and 2.0 percent of agreed under the SMP framework (1.5 percent if necessary. To ensure that fiscal dominance would be sterilized, including through FX interventions the ministry of finance and BRH to reflect revising the Pacte between to is reduced, staff recommended this approach would help the BRH resist pressures the targets agreed under the program. Overall, in the FX market unduly. finance the government excessively or intervene the financial markets. The BRH has initiated 22. The authorities are working on deepening develop the inter bank money market with the securities market; reverse reforms to deepen government facilities, open market operations, repos, and new facilities, including overnight lending Deepening the securities market will provide an repos; and enhance domestic savings instruments. effective conduit for monetary policy. While source of funding to the treasury and a more consider that the alternative could help the BRH manage liquidity conditions, staff market facilities would benefit new money such as collateral policies and liquidity forecasts, design and use of these instruments, that they do not (i) undermine the discussion with Fund TA experts to ensure from in-depth INTERNATIONAL MONETARY FUND 11 deepen government facilities, open market operations, repos, and new facilities, including overnight lending Deepening the securities market will provide an repos; and enhance domestic savings instruments. effective conduit for monetary policy. While source of funding to the treasury and a more consider that the alternative could help the BRH manage liquidity conditions, staff market facilities would benefit new money such as collateral policies and liquidity forecasts, design and use of these instruments, that they do not (i) undermine the discussion with Fund TA experts to ensure from in-depth INTERNATIONAL MONETARY FUND 11 --- Page 15 --- HAITI market the central bank balance sheet to credit, incentives for banks to manage their risks; (ii) expose of the money market. While the risks; and (iii) create impediments to the functioning the of and liquidity on strengthening quality TA recommendations authorities agreed to continue implementing transmission of monetary data will be necessary statistics, staff stressed that more timely monetary for program monitoring. excessive volatility interventions in the FX market to smoothing 23. The BRH should limit to be broadly in line with medium-term rate. Haiti's external position is assessed in the of the exchange policies (Annex II). Since the sharp appreciation fundamentals and desired macroeconomic the BRH has managed an orderly exchange rate rate in the second half of 2020, there were large current account gourde/dollar intervening to calm market pressures when to limit banks' adjustment, prudential measures, including reserve requirements, 2021 to transactions while using from an estimated 25 percent in March vulnerability to FX liquidity risk. After narrowing widened to an estimated 12 percent by at end-2021, the parallel market premium (NIR) and about 4 percent the BRH will adopt a floor on net international reserves rate to end-March. Under the SMP, volatility, thereby allowing the exchange FX interventions to smoothing rule, with committed to limiting that an FX marketintervention absorber. 2 The authorities agreed serve primarily as a shock ofinterventions and encourage banks to targets, could enhance the transparency pre-defined way. manage their liquidity in a more forward-looking 80 Exchange Rate and FX Intervention USS million 2500 NFA and NIR of BRH - Net central bank FX (RHS) sales, BRH reference rate (US$ million) NFA NIR Parallel Interbank EXR market (RHS) EXR (RHS) I 931 938 1000 866 774 732 677 -20 452 492 -60 0 R 0 2015 2016 2017 2018 2019 2020 2021 2022 (P) Source: BRH and IMF staff calculations. reforms needed to strengthen the functioning concurred with staff on of 24. The authorities the BRH stated it would prepare a roadmap of the FX market. In consultation with IMF experts, mechanisms for FX interventions under the SMP to: (i) put in place appropriate (ii) FX marketreforms auctions in lieu of the foreign exchange allocation system; weekly FX such as well-designed would be adjusted only in the event ofa adjustor onthe fiscal targets, the NIR target 2 Consistent with the proposed shortfall in external budget support. allocation techniques, used to provide FX for on FX market are based on foreign exchange reference rate a weighted average of the 3 BRH interventions oil or food, when FX reserves are scarce, with BRH strategicimports.s such as and the informal market rate (40 percent). interbank market rate (60 percent) 12 INTERNATIONAL MONETARY FUND s in lieu of the foreign exchange allocation system; weekly FX such as well-designed would be adjusted only in the event ofa adjustor onthe fiscal targets, the NIR target 2 Consistent with the proposed shortfall in external budget support. allocation techniques, used to provide FX for on FX market are based on foreign exchange reference rate a weighted average of the 3 BRH interventions oil or food, when FX reserves are scarce, with BRH strategicimports.s such as and the informal market rate (40 percent). interbank market rate (60 percent) 12 INTERNATIONAL MONETARY FUND --- Page 16 --- HAITI and (iii) revise FX regulations and phasing out FX review limits on banks' net open FX positions; those introduced by Circular 114-2.4 This surrender requirements over the medium term, including flexible exchange rate and help would facilitate the management of a market-determined external roadmap market while promoting competitiveness. gradually eliminate the spread with the parallel restrictions or multiple currency if the FX regulations give rise to exchange on the Staff are examining committed to not impose or intensify restrictions practices (MCPS). The authorities have transactions, and not introduce or modify and transfers for current international making of payments MCPs. D. Financial Sector Policies monitoring of financial inclusion and growth are advancing, 25. While reforms to increase earlier, the banking sector remains small financial situation remains crucial. As noted financial banks' is largely unbanked. However, small non-bank relative to the economy and the population supervision of this sector, and the BRH has been strengthening institutions have been expanding the regulatory framework and move to riskincluding with the assistance of Fund TA to upgrade the of the COVID-19 Measures taken to support the sector at beginning with a moderate based supervision. banks' portfolios together contributed to supporting has pandemic, now removed, Over the next twelve months, the authorities' program accumulation of government securities. three key components: 13, the BRH adopted seven new draft banking regulations Banking supervision. On January consolidated prepared with the IMF expert on risk-based banking supervision-covering of financial institutions, authorizations of changes in the status supervision, licensing rules, of financial institutions, and IT Security. minimum capital requirements, reporting obligations classification and provisioning, credit risk Three additional draftregulations related to credit after consultations with and institutions' charts of account are expected while continuing concentration, committed to implementing these new regulations stakeholders. The BRH has supervision framework. to establish a risk-based inclusion and of fintech offers potential for increasing financial Digital money. The development which is bank-centric and lacks an growth, but requires an upgrade of the regulatoryframework need to partner with a supervised updated national payment system. Mobile money operators guidelines. The BRH is receiving bank to offer their services but are not subject to specific to provide guidance on the firms and has requested Fund assistance support from specialized (CBDC). Staff stressed that a cautious ongoing exploration of a retail central bank digital currency which is not fully established at is needed given the need for strong internal oversight approach the migration to new international the BRH. The authorities will also work on modernizing banks and money transfer companies: () exchange issued Circular 114-2 in September 2020 mandating (ii) convert all dollar remittances 4The BRH for persons not holding US dollar bank accounts; to sell 30 percent dollar remittancesi into gourdes reference rate, a less favorable rate; and (ii) for money transfer allowed companies, to keep a net open FX into gourdes att the BRH to banks-which themselves were/are not of FX purchased to the BRH and 40 percent position above 0.5 percent of equity. INTERNATIONAL MONETARY FUND 13 issued Circular 114-2 in September 2020 mandating (ii) convert all dollar remittances 4The BRH for persons not holding US dollar bank accounts; to sell 30 percent dollar remittancesi into gourdes reference rate, a less favorable rate; and (ii) for money transfer allowed companies, to keep a net open FX into gourdes att the BRH to banks-which themselves were/are not of FX purchased to the BRH and 40 percent position above 0.5 percent of equity. INTERNATIONAL MONETARY FUND 13 --- Page 17 --- HAITI and financial integrity, and new laws to standards that would promote interoperability messaging protect privacy and fight cyber-crime. Financial Action Task Force's identified Anti-money laundering (AML/CFT). The Caribbean Financial Action Task Force (FATF) deficiencies in Haiti's AML/CFT framework, and the Staff and the authorities widespread under increased monitoring. added Haiti to its grey list as a jurisdiction regarding AML/CFT. With TA from the IMF, need to revise the law against agreed on the urgent standards for approval by endthe BRH will bring it into compliance with FATF international should be part of a larger plan to address SB). These legislative revisions March 2023 (end-March necessary to exit the FATF's grey listing process legal and institutional AML/CFT deficienciesand build an effective framework. E. Governance include elements of governance and antiunder the SMP focus on, or 26. Most measures the authorities published a decree in November reforms (Table 3). With Fund TA, the publication corruption for public procurement contracts, including outlining the transparency requirements of successful bidders. Staff will be monitoring of tenders, contracts, and the beneficial owners As constitutional reform in SB under the program. implementation of the decree as a continuous committed to ensuring that in the future, the authorities Haiti is under consideration at some point of this court in accordance with the law governing the CSCCA guarantees the functioning institutions. They also requested a Fund international standards applicable to supreme audit authorities are working to finalize Diagnostic which they expect to publish. Finally, the Convention against Governance with the United Nations reform of anti-corruption laws to ensure compliance the Corruption. recommendations, the SMP puts emphasis 27. In line with the 2019 safeguards assessment its governance and accountability. central bank autonomy and improve central on reforms to enhance of Directors of the draft amendments to the These include: () the approval by the BRH Board SB) and (i) completion and in consultation with Fund staff (end-September Staff also urge bank law prepared and financial statements for 2021 (end-June SB). publication of the BRH external audit Reporting Standards, already supported by transition to International Financial of the the BRH to expedite the independence and modernization and resume required efforts to strengthen Fund TA, monitor of other recommendations audit and control functions. Staff will implementation Audit Committee of the internal including the reestablishment of the from the 2019 safeguards assessment, put in place prior to the RCF disbursementto BRH Board and implementation of the measures governance of foreignreserves management. strengthen Climate Change and Poverty Reduction F. disasters and climate change. Soil erosion and 28. Haiti is vulnerable to natural threatening economic and financial stability environmental degradation has increased vulnerabilities, In this context, the authorities productivity, growth, livelihoods, and food security. Bank and and affecting hazards and risks with assistance from the World hope to initiate a diagnosis of climate 14 INTERNATIONAL MONETARY FUND 9 safeguards assessment, put in place prior to the RCF disbursementto BRH Board and implementation of the measures governance of foreignreserves management. strengthen Climate Change and Poverty Reduction F. disasters and climate change. Soil erosion and 28. Haiti is vulnerable to natural threatening economic and financial stability environmental degradation has increased vulnerabilities, In this context, the authorities productivity, growth, livelihoods, and food security. Bank and and affecting hazards and risks with assistance from the World hope to initiate a diagnosis of climate 14 INTERNATIONAL MONETARY FUND --- Page 18 --- HAITI frameworks. The immediate priorities of better climate policies into macroeconomic of the state will IMF to integrate and raise revenues for the basic functioning the program to restore macro stability climate resilience and recovery plan. condition to launch a serve in parallel as a necessary conditions in Haiti. and security crisis has exacerbated poverty 29. The protracted political term on building social and macroeconomic stability noted above, the SMP is focused in the short the resources needed As necessary' to sustain policies and start raising and restoring growth, conditions the social safety net, the authorities have committed reduce Alongside efforts to extend capacity to poverty. its effectiveness in reducing poverty by increasing to better coordinate aid and strengthen social safety net. MAST and starting to build a cohesive and impactful at G. Program Monitoring in Table 1 below and comprise: (i) a Quantitative targets (QTs). Periodic QTs are presented a floor on NIR; 30. (ii) a ceiling on BRH net credit to the NFPS; (ii) floor on the NFPS primary balance; and (v) continuous QTs ofa zero allocations to MAST for social expenditure; (iv) a floor on budget and on domestic and external arrears accumulation. ceiling on non-concessional externalborrowing ani indicative target (IT). The QTs include an fiscal revenue is set as A floor on central government balance and NIR for shortfalls in expected external budget asymmetric adjuster on the NFPS primary given the need to increase productive allowing the government to spend the surplus that debtis sustainable (DSA, support, of Haiti's debt sustainability analysis public and spending and the findings credit to the NFPS. The test dates are set at end-June Annex II). There is no adjustor on BRH net and March 2023. end-December 2022. ITs will apply to September 2022 includes two prior actions (Table 2). In Structural benchmarks (SBs). The proposed program serve as important 31. identified SBs that are achievable in the short term, addition, the program has reforms to be undertaken in the context of a UCT-level stepping-stones towards more fundamental and political challenges. For most of (Table 3), and that reflect Haiti's capacity constraints with long-running TA program background work has already been prepared, the proposed SBs, considerable implementation. The proposed SBs focus on setting support from the Fund, which should facilitate revenue mobilization, PFM measures framework for stability, steps to strengthen or up a sound policy and governance measures to strengthen institutions controls and reporting, team has to improve budget resources. In the area of social policy, the raise accountability on the use of public IDB) and the authorities on the design of coordinated closely with key partners (WFP, World Bank, steps to build the required oft the PNPPS, taking SBs with the aim of promoting implementation transfers using existing beneficiary identification, infrastructure and legal framework to permit cash to launch a universal social benefit and for advancing progress STAFF APPRAISAL Haiti have been extremely difficult in recent years 32. Political and economic conditions in and reform. They have worked to are determined to advance stability took a first but the authorities and the fuel sector, and and governance in public procurement increase transparency INTERNATIONAL MONETARY FUND 15 WFP, World Bank, steps to build the required oft the PNPPS, taking SBs with the aim of promoting implementation transfers using existing beneficiary identification, infrastructure and legal framework to permit cash to launch a universal social benefit and for advancing progress STAFF APPRAISAL Haiti have been extremely difficult in recent years 32. Political and economic conditions in and reform. They have worked to are determined to advance stability took a first but the authorities and the fuel sector, and and governance in public procurement increase transparency INTERNATIONAL MONETARY FUND 15 --- Page 19 --- HAITI crack in the fiscal foundation related to fuel prices. step toward tackling the fundamental and external financing has led to a vicious circle Unproductive spending in the face of low revenues higher fuel subsidy costs, and SO on. of monetization of the deficit, inflation, currency depreciation, spending on fuel subsidies, a are reticent to fund unproductive and inequitable of this destructive As external partners is hard to envision without tackling the source sustainable medium-term outlook program, it will be important to take dynamic. To pave the way to a UCT-quality Fund-supported manner and in a way that protects the cost of fuel subsidies in a sustainable as soon as steps toward addressing the off this merry-go-round vulnerable. The authorities intend to move economy revenue the most the SMP, hope to start a cycle of productive spending, conditions permit and, supported by raising, growth and poverty reduction. cycle. The program includes reforms SMP takes steps to launch a virtuous room for 33. The proposed of public resources while making some to raise revenues and improve the management infrastructure and security. The much-needed spending on health, education, social assistance, to help them adjust to recent makes room to compensate vulnerable groups and customs authorities' program includes efforts to start boosting tax fuel price increases. In addition, their program These efforts are expected to be the productivity of current spending. collection and improving moderately by Haiti's development partners. supported administration would promote macro and revenue 34. Better budget management reduction. This would permit a greater condition for growth and poverty to on its core stability, a necessary giving the central bank the flexibility focus degree of monetary policy independence, adequate liquidity and stable financial objectives: stabilizing prices while maintaining of reducing BRH credit to the policy growth. Meeting the program objectives a more conditions to accommodate inflation down would be major first steps toward NFPS, maintaining NIR levels, and bringing objective since it helps improve the inflation is a critical social policy sound future. Lowering purchasing power of the poor. of widespread poverty is vital social relief up front to alleviate the hardship the authorities' 35. Providing In addition to lowering inflation, and launching growth. social safety net. to building support in support of the PNPPS and strengthening the program sets several benchmarks spending, including for the Programme Over the next year, budget resources to supportsocial will be assured under the SMP, enabling the and allocations to MAST and SIMAST d'Urgence authorities to assist vulnerable populations. of virtually all reforms measures are key components 36. Governance and anti-corruption in the collection and use of public This includes steps to strengthen accountability in the program. agencies, raise the transparency of public procurement, resources, including with extra-budgetary AML/CFT laws up to international standards. governance at the central bank, and bring that of partners. strengthen building the trust ofthe public and development This emphasis is important to start environment would benefit from macro stabilization, 37. The financial and business of law and order. Social, political, and economic greater political stability and restoration discouraging investment and has harmed the business environment in Haiti, uncertainty 16 INTERNATIONAL MONETARY FUND steps to strengthen accountability in the program. agencies, raise the transparency of public procurement, resources, including with extra-budgetary AML/CFT laws up to international standards. governance at the central bank, and bring that of partners. strengthen building the trust ofthe public and development This emphasis is important to start environment would benefit from macro stabilization, 37. The financial and business of law and order. Social, political, and economic greater political stability and restoration discouraging investment and has harmed the business environment in Haiti, uncertainty 16 INTERNATIONAL MONETARY FUND --- Page 20 --- HAITI employment. Fiscal and macroeconomic stability aims to promote a recovery in revenues to allow spending on the provision of the most basic goods and services, including on law and order. The deteriorationin security conditions now poses the main obstacle to private sector growth. 38. Fund staff support the authorities' request for an SMP but downside risks are very high. The authorities implemented the two prior actions, reinforcing a commitment to reform. The program takes account ofthe sources of Haiti's fragility identified in the first CES and has integrated these constraints into the formulation of realistic and tailored measures that can deliver some quick wins. The program also incorporates ongoing TA projects that are intensively synced with program goals and priorities, such as TA on budget formulation, tax reform and central bank governance. The program also reflects extensive collaboration with development partners to ensure that efforts are leveraged for maximum impact, including for example in the design and focus of social policy recommendations. That said, downside risks are significant, not least related to political fragility and the difficult security conditions that impede economic activity. In this regard, staff urge the authorities to communicate and raise awareness about the objectives of their economic program in order to build ownership and public support and raise the probability of its success. INTERNATIONAL MONETARY FUND 17 --- Page 21 --- Table 1. Haiti: Quantitative and Indicative Targets, June 2022-March 2023 1/ (In millions of Gourdes, unless otherwise indicated) Cumulative Flows from September 2021 Cumulative Flows from Actual Stock September 2022 at end- Sep. Dec. 2021 June. 2022 Sept. 2022 Dec. 2022 Mar. 2023 2/ Est. Quantitative Actual Indicative Quantitative Indicative target target target target I Periodic quantitative targets Net international reserves of central bank (in millions of U.S. dollars) floor 413.92 Primary balance of the non-financial public sector floor Net central bank credit to the non-financial public sector ceiling -8,813 -20,317 -28,860 -13,242 -26,484 Central Government 3/ 160,047 20,922 36,096 46,533 12,795 25,590 162,197 20,922 36,096 Other non-financial public sector entities 46,533 12,795 25,590 Budget allocation to MAST for social expenditure floor 4/ -2,150 0 3,000 3,300 3,300 6,600 II. Continuous quantitative targets Domestic arrears accumulation of the central Public sector external arrears accumulation (in government millions of U.S. dollars) Government 3/ 160,047 20,922 36,096 46,533 12,795 25,590 162,197 20,922 36,096 Other non-financial public sector entities 46,533 12,795 25,590 Budget allocation to MAST for social expenditure floor 4/ -2,150 0 3,000 3,300 3,300 6,600 II. Continuous quantitative targets Domestic arrears accumulation of the central Public sector external arrears accumulation (in government millions of U.S. dollars) U New contracting or guaranteeing by the public sector of nonconcessional external debt (in O millions ofl U.S. dollars) - ceiling II. Indicative targets Central government fiscal revenue, excluding grants floor 5/ 27,632 93,731 125,552 41,093 82,187 Memorandum items External budget support (in millions of U.S. dollars) 6/ Gross International Reserves (stock, in millions of U.S. dollars) 71 9.0 18.1 0.0 18.8 2,534 2,547 2,562 2,574 (in months of imports of goods and services of the following year) 2,603 2,613 5.8 5.6 5.5 5.0 4.8 4.8 Sources: Ministry of Finance, Bank of the Republic of Haiti, and Fund staff estimates. 1/ The program includes an adjuster on the NFPS primary balance and NIR target for shortfalls in external budget support lower than the planned amounts. The BRH include an adjuster. The Quantitative and Indicative Targets (QTs, ITs) are set for end month, ie. end- June and end- December financing to the Treasury does not 2/$ September 2021 refers to data at the end of FY2021. for QTs and end- September and end- -March for ITs. 3/ Excludes SDR allocation and resources freed by IMF CCRT debt relief. 4/ Budget envelope allocated to the Ministry of Social Affairs and Labor (MAST), excluding transfers to the population. The floor corresponds to the lower) on all social programs in the MAST budget, including resources allocated to/and sum of both budget allocation (or executed spending if implemented by the FAES, the Programme d'Urgence (2022), and Klere does government entities from supporting MAST program implementation. Chimen; not preclude other 5/ Includes domestic taxes on corporates, personal income and sales, and customs duties. 6/1 Timing of disbursements is uncertain; annual amount divided by quarter. 7/ For program monitoring purposes, the program exchange rate for the period May 2022 to May 2023 is HTG/US$ 100.0123 (BRH reference rate on December 16, 2021). (or executed spending if implemented by the FAES, the Programme d'Urgence (2022), and Klere does government entities from supporting MAST program implementation. Chimen; not preclude other 5/ Includes domestic taxes on corporates, personal income and sales, and customs duties. 6/1 Timing of disbursements is uncertain; annual amount divided by quarter. 7/ For program monitoring purposes, the program exchange rate for the period May 2022 to May 2023 is HTG/US$ 100.0123 (BRH reference rate on December 16, 2021). --- Page 22 --- HAITI Table 2. Haiti: Proposed Prior Actions for SMP Prior Actions Complete and publish the financial and operational audit on COVID-related spending agreed at the time of the RCF disbursement. Prior action Adopt and publish a budget for FY2022 consistent with agreed targets and fiscal measures under the SMP. Prior action Table 3. Haiti: Proposed Structural Benchmarks for SMP Measure Timing Governance Publish all public procurement contracts awarded since the publication of the November 2021 procurement decree No. 52, including information on the beneficial owners of successful bidders. monthly Approval by the BRH Board of Directors of draft amendments of the BRH law, prepared in consultation with IMF staff, which: (i) clarifies the objectives of the BRH, (ii) strengthens its end- Sept. 2022 autonomy, (ii) enhances its governance, and (iv) improves accountability and transparency. Approval by the Council of Ministers of revisions to the AML/CFT law prepared with Fund TA to address technical deficiencies identified in Haiti's FATF Action Plan and bring it into line end-March 2023 with FATF international standards. Public Finance Management I Governance Expand the Treasury Single Account (TSA) at the central bank to include all the central budgetary units, including the emergency fund. end-Sept. 2022 Prepare and adopt a medium-term budget framework, for FY2023, FY2024, and FY2025 with the NFPS deficit as the main anchor. end Sept 2022 Publish quarterly and annual reports on the operations and finances of Fonds d'assistance économiques et sociale (FAES) and reactivate the Governing Board of FAES again with Quarterly quarterly meetings thereafter. Tax Policy and Tax/Customs Administration Conclude public consultations on the tax code and tax procedures code and finalize codes. end-Sept. 2022 Publish all codes and tariffs relating to customs. end- Sept. 2022 Issue decree making use of TIN compulsory for all finance departments, with sanctions for fradulent or non-use, and publish TIN database and file of active taxpayers. end-Dec. 2022 Safeguards Complete FY2021 financial audit of BRH and publish the audited financial statements. end-June 2022 INTERNATIONAL MONETARY FUND 19 --- Page 23 --- HAITI Figure 1. Haiti: Real Sector Developments, 2015-22 1/ Real GDPcontracted) for thet sthidconsecutiveyeorin .andreftecting,) for the most part, a sharp declinein FY2021, declining by 1.8%.. investment by over 21 percent, Contribution to GDP Growth 12 Contribution to GDP Growth 4 (Supply- side GDP, percent) (Demand- -side GDP, percent) -3 Agriculture -2 Manufacturing Construction -8 -3 Services Investment Net exports Other Private consumption L J Public consumption -4 -13 Real GDP growth 2015 2016 2017 2018 2019 2020 2021 2015 2016 2017 2018 2019 2020 2021 and negativegrowth in all key sectorsparticularlyin : resulting ina sharp widening in the output 1.8 . agriculture,. gap(to percent of potential) and increase in unemployment. Contribution to ICAE Growth 6 (ylyr percent) Potential Growth and Unemployment 2/ (Percent) Private consumption L J Public consumption -4 -13 Real GDP growth 2015 2016 2017 2018 2019 2020 2021 2015 2016 2017 2018 2019 2020 2021 and negativegrowth in all key sectorsparticularlyin : resulting ina sharp widening in the output 1.8 . agriculture,. gap(to percent of potential) and increase in unemployment. Contribution to ICAE Growth 6 (ylyr percent) Potential Growth and Unemployment 2/ (Percent) Output gap (% of potential) -2 Potential real GDP growth Primary sector Unemployment rate -6 Secondary sector Tertiary sector y/y growth -5 2015 2016 2017 2018 2019 2020 2021 Inflationroses sharplyin late- 2021 and early J 22 recording 1.6 percent (m/m) and 25.9 percent (/y) in withshorpincreases in thecost of food and beverages, March. . utilities, housing, fuel andt Itransport. 30 Inflation (Percent) T Contribution to Inflation (y/y growth) A 20 a A H A R. 15 H E R - I 10 Efransport DOthers Overall CPI (y/y) Furnishing, DHealth household equipment Overall CPI (m/m) RHS 5 BHousing. water, electricity Clothing and footwear -2 UFood and non: alcoholic cbeverages 15 16 15 - 9 00 2 2 N OOOOG NNNNNN NO 2 # y S be s X S > n Sources: National authorities; World Bank; International Labour Organization (ILO) and IMF staff calculations. 1/ Data are in fiscal years, ending September 30. 2/1 Unemployment total is the modeled ILO estimate 20 INTERNATIONAL MONETARY FUND --- Page 24 --- HAITI Figure 2. Haiti: Fiscal Sector Developments, 2015-22 1/ Whilet tax revenue has collapsed and remains oneofthe itis hard to see expenditures fall without in anyfurther lowest the world asa share ofGDP.. jeopardizing the most basic functions ofthe State. Taxes (Percent of GDP) Total Expenditure 18 (Percent of GDP) OTaxes on income & profits DExcises Wages and salaries Goods and services OCustoms duties mSales tax (TCA) Interest payments Transfers and subsidies 8 OLocal taxes DOthe/Unclassified taxes Capital domestic Capital foreign Total expenditure 2015 2016 2017 2018 2019 2020 2021 2015 2016 2017 2018 2019 2020 2021 The deficit is not high given the output gap, but has been without driven by inequitableand onysourcesoffnancing. leaving the central unproductive fuel subsidies bank to cover most of thefinancing need. Central Government Deficit With and Without 70 Financing by Source 21 3/ Energy Subsidies 3 (Percent of GDP) (Billions DPetrocaribe of gourdes) 50 DExternal financing DCentral bank Commercial banks - 30 ONonbank financing -1 Subsidies to the energy sector -2 -10 Deficit excl. subsidy to the energy sector Central government deficit 2015 2016 2017 2018 2019 2020 2021 -30 2015 2016 2017 2018 2019 2020 2021 This has put pressure on inflation andi the exchangerate, The fuel pricel hikein December provideds short-lived) and led to higher domestic debt. relief fiscal Central Government Debt (Percent of GDP) Fuel Prices and Revenue Domestic -1 Subsidies to the energy sector -2 -10 Deficit excl. subsidy to the energy sector Central government deficit 2015 2016 2017 2018 2019 2020 2021 -30 2015 2016 2017 2018 2019 2020 2021 This has put pressure on inflation andi the exchangerate, The fuel pricel hikein December provideds short-lived) and led to higher domestic debt. relief fiscal Central Government Debt (Percent of GDP) Fuel Prices and Revenue Domestic External Iut, Lul Total debt -2000 -3000 -4000 Net revenue (HTG millions) Avg effective retail price (HTG/gallon) (RHS) retail H -5000 Avg effective price W/O subsidy (HTG/gallon) (RHS) 80 16 66 - 8 00 0 10 00 8 a a N 2015 2016 2017 2018 2019 2020 2021 A a K 0 % 8 A Source: National authorities and IMF staff calculations. 1/ Data are in fiscal years, ending September 30. 2/ External financing includes project loan disbursements and external arrears net of amortization. 3/ Non bank financingi includes domestic supplier credits and domestic arrears. INTERNATIONAL MONETARY FUND 21 --- Page 25 --- HAITI Figure 3. Haiti: Monetary Sector Developments, 2015-22 1/ BRH financing ofthe government rose in FY2021.pushing up inflation... as liguidty/fomthebonking system stabilized. 30 BRH Financing to Government, Inflation BRH financing 150 Net Domestic Assets (NDA) of BRH (cumul, since Oct.1), (Billions of gourdes) HTG bn (RHS) Inflation (y/y), % change -30 -60 5 H -90 -120 Liabilities to commercial banks and other -10 Net credit to the -150 government NDA -180 Z 2015 2016 2017 2018 2019 2020 2021 Private sector credit picked up but lending in gourdes Lending rates are retreated. volatileandperiodicalydecouplercom the BRH policyrate. 20 Private Sector Credit Gourdes (% of GDP) Nominal Interest Rates FX (% of GDP) (Percent) Total (% of GDP) Total growth (y/y)- RHS Total growth (yly; end- Aug- -20 HTG/USS) RHS a A Short- -term interest rates (91-day BRH bonds) Lending rate 15 o o LE - LE 18 10 10 o 10 16 16 2 8 A E S e 3 € 3 & E g & B 0 Dollarization of deposits and credit has been stablein while excess structural liquidity in the terms ofthe constant exchange rate.. banking system is rising somewhat. 0.6 Dollarization Structural Liquidity Excess of Banking System 70 (Percent) (Billions of gourdes) Excess reserves - Reserve requirements Change in reserve req. ratio 0.4 Structural excess reserves Bond holdings FX deposits 0.2 FX credit FX deposits (end- -Aug- 20 HTG/US$) FX credit (end- Aug- 20 HTG/US$) Loan to deposit ratio (RHS) 0.0 -50 Source: National authorities and IMF staff calculations. 1/ Data arei in fiscaly years, ending September 30. 22 INTERNATIONAL MONETARY FUND --- Page 26 --- HAITI Figure 4. Haiti: Financial Sector Indicators, 2015-21 1/ The banking system has adequater reported capital buffers.. .but relativelyhigh) NPLS and related provisions. Capital Adequacy Ratio (Percent) NPLS and Provisions 9 (Percent) I Provisions/ gross NPL (RHS), NPL/ gross loans CAR minimun CAR 5 i5 16 5 e a 5 - - E E E 8 0 o 00 R a o - 8 R a 0 DE e N y S a b% 0 de 5 - e 5 00 E e E i AN - - ias A A3 Rk Profitabilityhas recovered sincethe exchanger rate. shock of August 2020 and has been stable since. whlelquiditycondition remain favorable. 140 Profitability gross NPL (RHS), NPL/ gross loans CAR minimun CAR 5 i5 16 5 e a 5 - - E E E 8 0 o 00 R a o - 8 R a 0 DE e N y S a b% 0 de 5 - e 5 00 E e E i AN - - ias A A3 Rk Profitabilityhas recovered sincethe exchanger rate. shock of August 2020 and has been stable since. whlelquiditycondition remain favorable. 140 Profitability Liquid Assets to Total Assets Ratio 120 (Percent) (Percent) ROE ROA RHS -20 -5 V 2 2 302 5 002 vo 288: 50 C 00 DE Source: National authorities and IMF staff calculations. 1/ Data are in fiscaly years, ending September 30. INTERNATIONAL MONETARY FUND 23 --- Page 27 --- HAITI Figure 5. Haiti: External Sector Developments, 2015-22 1/ The trade deficit declined somewhat as a percent of GDP whiler remittances (in percent of GDP) have returnedi to in 2020-2021 as imports weakened.. pre-pandemic levels, they remain strong. Exports and Imports (Percent of GDP) Remittances (net) Iln percent of GDP In millions of US$ (RHS) -20 -30 Exports of goods eZZZa Imports of goods Trade balance CA balance -40 2015 2016 2017 2018 2019 2020 2021 2015 2016 2017 2018 2019 2020 2021 0 The current account weakened against the background of and declining official assistance, although donor lower FDI... support jumpedfollowing the August earthquake. Composition of Capital and Financial Account (Percent of GDP) Official Assistance (2015-2021) 2Z PetroCaribe Project loans Earthquake Grants Aug-21 4 in % of GDP (RHS, rebased) = -2 in Other items -4 Net FDI Public sector capital flows (net) CA balance -6 Capital and financial account balance 2015 2016 2017 2018 2019 2020 2021 2015 2016 2017 2018 2019 2020 2021 The REERdepreciated after its sharp appreciationin Foreignreserves coverage. remains stable, but NIRhas September 2020, though it thoreentiytresdidupmerd been declining with rising external liabilities to banks. REER and NEER International Reserves 160 (Index) 3500 (USS million) GIR, months of imports (RHS) NIR NFA NEER REER 5 6 E 2 T Source: National authorities and IMF staff calculations. 1/ Data are in fiscal years, ending September 30. 24 INTERNATIONAL MONETARY FUND --- Page 28 --- HAITI Figure 6. Haiti: Social Indicators .and has reversed since 2018the small progress Political instability and securityproblenshove taken a heavy toll on Haitian society. made at reducing poverty. 100 Poverty Rates 1/ Total Displaced Persons by Violence (Percent) (Number of people) - Haiti Liberia - Kosovo Papua New Guinea 30000 - Burundi (RHS) Lebanon (RHS) International poverty rate ($1.9 in 2011 PPP) Lower middle- -income poverty rate ($3.2 in 2011 PPP) Upper middle- -income poverty rate ($5.5 in 2011 PPP) 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2010 2012 2014 2016 2018 2020 The absolute number of people undernourishedhas abhosghteundenouribhed as a percent ofthe fairly steady sincez 2010. reached historic highs. populationhasbent 5.6 Number of People Undernourished 65 Prevalence of Undernourishment (Millions, 3-year average) (Percent, 3- -year average) 5.4 5.3 million 5.2 people (20185 2020) 4.8 4.6 4.4 4 2016 2018 2020 The absolute number of people undernourishedhas abhosghteundenouribhed as a percent ofthe fairly steady sincez 2010. reached historic highs. populationhasbent 5.6 Number of People Undernourished 65 Prevalence of Undernourishment (Millions, 3-year average) (Percent, 3- -year average) 5.4 5.3 million 5.2 people (20185 2020) 4.8 4.6 4.4 "Sanitationrates"(World Bank) are well below those although youth literacyis signifcantyobovethe FCS states. FCS average and close to the world average. for : People Using at Least Basic Sanitation Services 120 Literacy rate 100 and Basic Drinking Water (Percent ofp people ages 15-24) (Percent of population) 80 - Haiti Burundi Lebanon Liberia Venezuela, RB Sanitation HTI Sanitation FCS Zimbabwe Sanitation World Water HTI Fragile World (RHS) and conflict affected situations (RHS) - Water FCS Water World 0 2000 2004 2008 2012 2016 2020 2010 2012 2014 2016 2018 2020 Sources: FAO, World Bank, World Development Indicators, and IMF staff calculations. 1/ Data was extracted from the World Bank, Macro Poverty Outlook April 2022. Data is not available from 2013 to 2017. INTERNATIONAL MONETARY FUND 25 --- Page 29 --- HAITI Table 4. Haiti: Selected Economic and Financial Indicators, FY2019-25 1/ (Fiscal year ending September 30) Nominal GDP (2021): US$21.0 billion Population (2021): 11.9 million GDP per capita (2021): US$1,765 Percent of population below poverty line (2012): 58.5 FY2019 FY2020 FY2021 FY2022 FY2023 FY2024 FY2025 Est. Proj. Proj. Proj. Proj. (Change over previous year; unless otherwise indicated) National income and prices GDP at constant prices -1.7 -3.3 -1.8 0.3 1.4 1.5 GDP deflator 1.5 17.6 20.6 19.3 26.1 17.5 13.4 Consumer prices (period average) 17.3 22.9 15.9 26.1 17.5 13.4 12.9 Consumer prices (end- of- period) 19.7 25.2 13.1 27.5 12.9 14.0 13.4 12.4 External Sector Exports (goods, valued in U.S. dollars, f.o.b.) 11.4 -26.3 27.7 7.0 5.0 5.6 Imports (goods, valued in U.S. dollars, f.o.b.) -6.0 16.7 22.3 12.8 6.2 5.8 Remittances (valued in U.S. dollars) 4.3 3.8 3.2 6.0 21.1 5.0 3.8 5.4 Real effective exchange rate (eop; appreciation; Jan. 22 for FY2022) -10.9 34.1 -4.6 13.6 5.5 Money and credit (valued in gourdes) Credit to private sector (in U.S. 6.0 16.7 22.3 12.8 6.2 5.8 Remittances (valued in U.S. dollars) 4.3 3.8 3.2 6.0 21.1 5.0 3.8 5.4 Real effective exchange rate (eop; appreciation; Jan. 22 for FY2022) -10.9 34.1 -4.6 13.6 5.5 Money and credit (valued in gourdes) Credit to private sector (in U.S. dollars and gourdes) 24.0 -11.2 15.2 5.8 Base money (currency in circulation and gourde deposits) 22.9 9.6 11.4 12.6 Broad money (excl. foreign currency deposits) 22.4 21.5 21.5 19.1 15.1 13.6 20.4 -0.3 38.2 20.8 16.9 15.1 13.6 (In percent of GDP; unless otherwise indicated) Central government Overall balance (including grants) -2.1 -2.4 -2.5 -1.5 -2.3 Domestic revenue -2.7 -2.8 Grants 6.4 6.2 5.9 5.8 6.4 6.7 7.1 Expenditures 1.7 1.3 2.4 2.7 2.4 2.3 1.7 Current expenditures 10.1 9.9 10.8 10.1 11.1 11.7 11.6 Capital expenditures 8.0 8.1 7.4 6.6 7.7 8.0 8.2 2.1 1.8 3.4 3.5 3.3 3.8 3.3 Overall balance of the nonfinancial public sector 1/ -1.7 3.2 -2.4 -1.5 -2.3 2.7 2.8 Savings and investment Gross investment 20.3 17.7 18.0 19.4 18.7 18.2 18.3 Ofi which: public investment 2.1 1.8 3.4 3.5 3.3 3.8 Gross national savings 19.2 18.8 18.5 20.2 18.1 17.7 3.3 External current account balance (incl. official grants) -1.1 1.1 0.5 0.8 -0.5 17.8 Net fuel exports -0.5 -0.6 -7.5 -5.0 -4.0 -6.1 -5.5 -5.0 -4.5 Public debt External public debt (medium and long- term, eop) 16.1 9.8 11.6 11.2 Total public sector debt (end- -of- period) 26.9 22.7 10.8 10.9 11.1 External public debt service 2/ 27.1 27.3 26.1 26.4 26.8 6.6 11.7 9.9 9.3 8.9 8.4 7.9 Memorandum items: (In millions of dollars, unless otherwise indicated) Overall balance of payments -207 139 -10 -36 Net international reserves (program definition) 11.2 Total public sector debt (end- -of- period) 26.9 22.7 10.8 10.9 11.1 External public debt service 2/ 27.1 27.3 26.1 26.4 26.8 6.6 11.7 9.9 9.3 8.9 8.4 7.9 Memorandum items: (In millions of dollars, unless otherwise indicated) Overall balance of payments -207 139 -10 -36 Net international reserves (program definition) Gross international reserves 498 504 515 2,100 2,501 2,534 2,574 2,604 In months of imports of the following year 6.0 5.7 5.8 5.0 2,629 2,654 Nominal GDP (millions of gourdes) 1,244,014 1,449,888 4.8 4.7 4.6 Nominal GDP (millions of U.S. dollars) 1,699,208 2,149,404 2,558,976 2,944,778 3,374,825 14,787 14,508 21,017 20,135 21,160 22,001 22,835 Sources: Ministry of Economy and Finance; Bank of the Republic of Haiti; World Bank; Fund staff estimates and projections. 1/1 Includes transfers to the state owned electricity company (EDH), and unsettled payment obligations. 2/Inp percent of exports of goods and nonfactor services. Includes debt relief. 26 INTERNATIONAL MONETARY FUND --- Page 30 --- HAITI Table 5a. Haiti: Non-Financial Public Sector Operations, FY2019-25 (Fiscalyear ending September 30; In millions of Gourdes) FY2019 FY2020 FY2021 FY2022 FY2023 FY2024 FY2025 Est. Proj. Proj. Proj Proj. 99,665 108,524 141,178 184,082 224,842 264,717 294,513 Total revenue and grants 90,046 100,635 125,552 164,374 198,196 238,817 Domestic revenue 53,299 79,071 52,378 74,012 87,286 112,266 135,110 162,941 Domestic taxes 20,098 21,127 22,613 31,166 43,503 53,006 64,122 Customs duties 99,665 108,524 141,178 184,082 224,842 264,717 294,513 Total revenue and grants 90,046 100,635 125,552 164,374 198,196 238,817 Domestic revenue 53,299 79,071 52,378 74,012 87,286 112,266 135,110 162,941 Domestic taxes 20,098 21,127 22,613 31,166 43,503 53,006 64,122 Customs duties Of which: fuel taxes 5,674 16,541 4,009 7,099 8,606 10,080 11,754 Other current revenue 20,594 18,478 40,543 58,530 60,468 66,521 55,696 Grants 0 3,868 2,647 1,930 9,070 11,377 11,823 Budget support 1/ 20,594 14,610 37,897 56,600 51,398 55,144 43,873 Project grants 125,952 143,265 184,164 217,344 282,768 344,728 389,989 Total expenditure 2/ 126,058 142,405 197,729 234,115 277,816 Current expenditure 99,835 117,479 40,280 45,333 55,130 68,134 84,446 100,122 118,119 Wages and salaries 23,022 32,119 35,472 32,899 53,738 64,785 75,934 Goods and services 4,401 6,136 7,679 3,398 3,604 6,014 4,958 Interest payments 33,134 27,984 28,842 36,970 54,586 63,071 76,085 Transfers and subsidies 13,395 11,838 9,111 9,111 10,757 12,379 14,187 Of which: Transfers to EDH 27,195 28,606 34,899 Of which: Fuel direct subsidies to oil companies 12,974 8,844 10,682 22,736 Exceptional expenditures 3/ 0 8,439 600 26,117 25,786 58,107 74,939 85,039 110,613 112,173 Capital expenditure 5,264 12,334 15,359 14,889 25,175 42,084 50,565 Domestically financed 20,853 13,452 42,748 60,050 59,863 68,529 61,608 Foreign- financed -26,286 -34,741 -42,987 -33,262 -57,925 -80,011 -95,476 Central government balance including grants -40,782 -31,742 -58,530 -78,003 -89,564 Excluding grants and externally financed projects -26,028 -39,767 -73,874 -87,797 Primary balance of NFPS, incl. grants and other transfers to EDH -22,888 -31,138 -36,972 -28,860 -52,967 (unsettled obligations) -5,746 11,058 -2,031 Adjustment payment -20,540 -45,800 -40,956 -33,262 -57,925 -80,011 -95,476 Overall balance of NFPS, including grants 20,540 45,800 40,956 33,262 57,925 80,011 95,476 Financing, NFPS -2,780 -6,728 -5,865 -7,490 -2,931 663 3,741 External net financing -6,790 -6,728 -2,640 -7,490 -2,931 663 3,741 Loans (net) 259 2,281 4,851 3,450 8,466 13,385 17,735 Disbursements -7,049 -9,009 -7,491 -10,940 -11,397 -12,721 -13,995 Amortization 4,010 0 -3,225 728 -5,865 -7,490 -2,931 663 3,741 External net financing -6,790 -6,728 -2,640 -7,490 -2,931 663 3,741 Loans (net) 259 2,281 4,851 3,450 8,466 13,385 17,735 Disbursements -7,049 -9,009 -7,491 -10,940 -11,397 -12,721 -13,995 Amortization 4,010 0 -3,225 Arrears (net) 23,320 52,527 46,821 40,752 60,857 79,347 91,735 Internal net financing 9,434 50,584 53,590 58,808 60,857 79,347 91,735 Banking system 9,823 41,255 49,839 46,533 51,180 58,896 67,497 BRH 4/ -388 9,329 3,751 12,275 9,677 20,452 24,239 Commercial banks 13,886 1,943 6,769 -18,056 Nonbank financing 5/ Memorandum items 32,754 29,332 31,984 53,840 60,684 63,523 71,576 Forgone fuel taxes and fuel direct subsidies 31,104 33,489 34,917 36,677 o/w Forgone fuel taxes 19,780 20,488 21,302 oil 12,974 8,844 10,682 22,736 27,195 28,606 34,899 o/w Fuel direct subsidies to companies 36,540 44,782 53,006 62,434 Health, education and agriculture spending 18,801 29,050 28,173 1,244,014 1,449,888 1,699,208 2,149,404 2,558,976 2,944,778 3,374,825 Nominal GDP Sources: Ministry of Finance and Economy; andi Fund staff estimates and projections. 1/1 Includes previously- programmed multilateral budget support that could be delayed, as well as CCRT debt relief. 2/ Commitment basis, except for domestically financ ced spending, which IS reported on thel basis of project account replenishments. 3/1 Includes all COVID- related expenditures for FY2020 and FY2021. 4/ Amounts include RCF financing for FY2020 andt thef full two- -year debt relief under the CCRT and for FY2021 half of the SDR allocation. 5/ Includes the net changei in the stock of government securities held by non banks, of checks that are noty yet cashed, of supplier credits and of domestic arrears. INTERNATIONAL MONETARY FUND 27 ment basis, except for domestically financ ced spending, which IS reported on thel basis of project account replenishments. 3/1 Includes all COVID- related expenditures for FY2020 and FY2021. 4/ Amounts include RCF financing for FY2020 andt thef full two- -year debt relief under the CCRT and for FY2021 half of the SDR allocation. 5/ Includes the net changei in the stock of government securities held by non banks, of checks that are noty yet cashed, of supplier credits and of domestic arrears. INTERNATIONAL MONETARY FUND 27 --- Page 31 --- HAITI Table 5b. Haiti: Non-Financial Public Sector Operations, FY2019-25 (Fiscal year ending September 30; percent of GDP) FY2019 FY2020 FY2021 FY2022 FY2023 FY2024 FY2025 Est. Proj. Proj. Proj Proj. 8.0 7.5 8.3 8.6 8.8 9.0 8.7 Total revenue and grants 6.4 6.2 5.9 5.8 6.4 6.7 7.1 Domestic revenue 4.3 3.6 4.4 4.1 4.4 4.6 4.8 Domestic taxes 1.6 1.5 1.3 1.5 1.7 1.8 1.9 Customs duties 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Of which: fuel taxes 0.2 0.3 0.3 0.3 0.3 0.5 1.1 Other current revenue 1.7 1.3 2.4 2.7 2.4 2.3 1.7 Grants 0.0 0.3 0.2 0.1 0.4 0.4 0.4 Budget support 1/ 1.7 1.0 2.2 2.6 2.0 1.9 1.3 Project grants 10.1 9.9 10.8 10.1 11.1 11.7 11.6 Total expenditure 2/ 8.0 8.1 7.4 6.6 7.7 8.0 8.2 Current expenditure 3.2 3.1 3.2 3.2 3.3 3.4 3.5 Wages and salaries 1.9 2.2 2.1 1.5 2.1 2.2 2.3 Goods and services 0.3 0.2 0.4 0.2 0.2 0.2 0.2 Interest payments 2.7 1.9 1.7 1.7 2.1 2.1 2.3 Transfers and subsidies 1.1 0.8 0.5 0.4 0.4 0.4 0.4 Of which: Transfers to EDH 1.1 1.1 1.0 1.0 Of which: Fuel direct subsidies to oil companies 1.0 0.6 0.6 0.0 0.6 0.0 0.0 0.0 0.0 0.0 Exceptional expenditures 3/ 2.1 1.8 3.4 3.5 3.3 3.8 3.3 Capital expenditure 0.4 0.9 0.9 0.7 1.0 1.4 1.5 Domestically financed 1.7 0.9 2.5 2.8 2.3 2.3 1.8 Foreign-financed -2.1 -2.4 -2.5 -1.5 -2.3 -2.7 -2.8 Central government balance including grants -2.4 -1.5 -2.3 -2.6 -2.7 Excluding grants and externally financed projects -2.1 -2.7 Primary balance of NFPS, incl. Domestically financed 1.7 0.9 2.5 2.8 2.3 2.3 1.8 Foreign-financed -2.1 -2.4 -2.5 -1.5 -2.3 -2.7 -2.8 Central government balance including grants -2.4 -1.5 -2.3 -2.6 -2.7 Excluding grants and externally financed projects -2.1 -2.7 Primary balance of NFPS, incl. grants and other transfers to EDH -1.8 -2.1 -2.2 -1.3 -2.1 -2.5 -2.6 -0.5 0.8 -0.1 0.0 0.0 0.0 0.0 Adjustment (unsettled payment obligations) -2.4 -1.5 -2.3 -2.7 -2.8 Overall balance of NFPS, including grants -1.7 -3.2 1.7 3.2 2.4 1.5 2.3 2.7 2.8 Financing, NFPS -0.2 -0.5 -0.3 -0.3 -0.1 0.0 0.1 External net financing -0.3 -0.1 0.0 0.1 -0.5 -0.5 -0.2 Loans (net) 0.0 0.2 0.3 0.2 0.3 0.5 0.5 Disbursements -0.6 -0.6 -0.4 -0.5 -0.4 -0.4 -0.4 Amortization 0.3 0.0 -0.2 0.0 0.0 0.0 0.0 Arrears (net) 1.9 3.6 2.8 1.9 2.4 2.7 2.7 Internal net financing 0.8 3.5 3.2 2.7 2.4 2.7 2.7 Banking system 0.8 2.8 2.9 2.2 2.0 2.0 2.0 BRH 4/ 0.0 0.6 0.2 0.6 0.4 0.7 0.7 Commercial banks 1.1 0.1 -0.4 -0.8 0.0 0.0 0.0 Nonbank financing 5/ Memorandum items 2.6 2.0 1.9 2.5 2.4 2.2 2.1 Forgone fuel taxes and fuel direct subsidies 1.2 1.1 1.6 1.4 1.3 1.4 1.3 o/w Forgone fuel taxes 1.0 0.6 0.6 1.1 1.1 1.0 1.0 o/w Fuel direct subsidies to oil companies 1.7 1.8 1.8 1.9 1.5 2.0 1.7 Health, education and agriculture spending 1,699,208 2,149,404 2,558,976 2,944,778 3,374,825 Nominal GDP (millions of gourdes) 1,244,014 1,449,888 Sources: Ministry of Financea and Economy; and Fund staff estimates and projections. 1/1 Includes previously- -programmed multilateral budget support that could be delayed, as well as CCRT debt relief. 2/ Commitment basis, except for domestically financed spending, which is reported on thel basis of project account replenishments. 3/1 Includes all COVID-related expenditures for FY2020 and FY2021. 4/ Amounts include RCF financing for FY2020 and the fullt two-year debt relief under the CCRT and for FY2021 half of the SDR allocation. 5/ Includes the net changei in the stock of government securities held by non- banks, of checks that are not yet cashed, of supplier credits and of domestic arrears. as well as CCRT debt relief. 2/ Commitment basis, except for domestically financed spending, which is reported on thel basis of project account replenishments. 3/1 Includes all COVID-related expenditures for FY2020 and FY2021. 4/ Amounts include RCF financing for FY2020 and the fullt two-year debt relief under the CCRT and for FY2021 half of the SDR allocation. 5/ Includes the net changei in the stock of government securities held by non- banks, of checks that are not yet cashed, of supplier credits and of domestic arrears. 28 INTERNATIONAL MONETARY FUND --- Page 32 --- HAITI Table 6. Haiti: Summary Accounts of the Banking System, FY2019-25 (Fiscal year ending September 30; In millions of gourdes, unless otherwise indicated) FY2019 FY2020 FY2021 FY2022 FY2023 FY2024 FY2025 Est. Proj Proj Proj. Proj. Central bank Net foreign assets 146,120 117,208 146,005 175,822 199,988 (In millions of U.S. dollars) 226,566 254,606 Ofv which: Net international reserves (in millions of U.S. dollars) 1/ 1,566 1,778 1,499 1,553 1,594 1,629 1,664 Of which Commercial bank forex deposits (in millions of U.S. dollars) 732 677 452 492 498 504 515 914 1,160 1,324 1,338 1,382 1,411 1,435 Net domestic assets -19,709 37,550 42,096 52,710 Net credit to the nonfinancial public sector 69,108 109,964 72,091 86,533 101,086 Of which: Net credit to the central government 159,923 206,456 257,636 316,531 384,028 Claims on central government 70,939 112,194 162,197 208,730 259,909 318,805 386,302 Central 107,087 143,984 200,974 247,332 298,512 357,407 424,904 government deposits 36,148 31,791 38,777 Ofv which: IMF PCDR debt relief 38,602 38,602 38,602 38,602 Liabilities to commercial banks (excl. gourde deposits) -4,776 -4,686 -2,634 -3,279 4,119 4,958 -5,798 BRH bonds/Open market operations 95,156 81,390 138,460 170,923 193,886 217,785 242,082 Commercial bank forex deposits 6,200 841 3,525 13,453 14,453 15,453 16,453 Other 88,956 80,549 134,935 157,470 179,433 202,332 225,629 6,339 8,976 20,632 17,176 8,342 12,213 -40,860 Base money 126,411 154,758 188,101 228,532 272,079 Currency in circulation 313,099 355,692 Commercial bank gourde deposits 66,530 96,234 108,670 120,944 134,314 148,923 165,012 59,881 58,524 79,431 107,588 137,765 164,176 190,680 II. 6,339 8,976 20,632 17,176 8,342 12,213 -40,860 Base money 126,411 154,758 188,101 228,532 272,079 Currency in circulation 313,099 355,692 Commercial bank gourde deposits 66,530 96,234 108,670 120,944 134,314 148,923 165,012 59,881 58,524 79,431 107,588 137,765 164,176 190,680 II. Consolidated banking system Net foreign assets 188,238 150,596 205,868 282,144 (In millions of U.S. dollars) 308,114 341,035 375,515 Of which: Commercial. banks NFA (in millions of U.S. dollars) 2,017 2,285 2,114 2,491 2,455 2,452 2,454 451 506 615 939 862 823 790 Net domestic assets 182,592 219,132 305,095 334,893 Credit to the nonfinancial public sector 80,286 130,870 412,896 488,677 567,069 Of which: Net credit to the central government 199,795 258,603 319,459 398,807 490,542 80,286 130,870 195,957 254,765 315,622 394,969 Claims on central government 133,988 178,659 252,599 311,231 372,088 486,705 Central government deposits 53,702 47,789 56,641 451,435 543,171 Credit to the private sector 56,466 56,466 56,466 56,466 In gourdes 130,485 115,840 133,478 141,241 154,802 172,494 194,143 In foreign currency 60,236 70,344 72,552 75,578 82,757 92,129 103,692 Other 70,250 45,495 60,926 65,663 72,045 80,365 90,451 -28,179 -27,577 -28,178 -64,951 -61,365 -82,624 -117,616 Broad money 370,830 369,728 510,963 617,036 721,009 Currency in circulation 829,712 942,584 Gourde deposits 60,743 85,390 98,150 110,424 123,794 138,403 154,492 Foreign currency deposits 90,630 114,581 134,373 166,210 196,775 231,729 266,037 (In millions of U.S. dollars) 215,530 165,194 270,986 322,188 370,693 422,132 476,181 2,310 2,506 2,782 2,845 2,954 3,035 3,112 (12-month percentage change) Currency in circulation 28.7 40.6 14.9 Base money 12.5 12.1 11.8 11.6 Broad money (M3) 22.9 22.4 21.5 21.5 19.1 15.1 13.6 20.4 -0.3 38.2 20.8 16.9 15.1 13.6 Gourde deposits -5.3 26.4 17.3 23.7 18.4 17.8 14.8 Foreign currency deposits 32.6 -23.4 64.0 18.9 15.1 13.9 12.8 Credit to the private sector 24.0 -11.2 15.2 Credit in gourdes 5.8 9.6 11.4 12.6 Credit in foreign currency 7.5 16.8 3.1 4.2 9.5 11.3 12.6 42.9 -35.2 33.9 7.8 9.7 11.5 12.6 Memorandum items: Foreign currency deposits (% of total private deposits) 71.0 59.7 67.4 65.9 Foreign curr. 24.0 -11.2 15.2 Credit in gourdes 5.8 9.6 11.4 12.6 Credit in foreign currency 7.5 16.8 3.1 4.2 9.5 11.3 12.6 42.9 -35.2 33.9 7.8 9.7 11.5 12.6 Memorandum items: Foreign currency deposits (% of total private deposits) 71.0 59.7 67.4 65.9 Foreign curr. credit to priv. sector (% of total) 53.7 39.2 45.5 65.2 64.4 64.0 Commercial banks' credit to private sector (% of GDP) 10.5 46.5 46.5 46.6 46.6 8.0 7.9 6.6 6.0 5.9 5.8 Sources: Bank of the Republic of Haiti; and Fund staff estimates and projections. 1/1 Program definition. Excludes commercial bank forex deposits, letters of credit, guarantees, earmarked project accounts and USS denominated bank reserves. A portion of SDR alloca ation IS in NIR. INTERNATIONAL MONETARY FUND 29 --- Page 33 --- HAITI Table 7a. Haiti: Balance of Payments, FY2019-25 (In millions ofUS$ on a fiscalyear basis; unless otherwise indicated) FY2019 FY2020 FY2021 FY2022 FY2023 FY2024 FY2025 Est. Proj. Proj. Proj. Proj. -169 154 -108 -114 -132 Current account (including grants) -389 -608 -611 -509 Current account (excluding grants) -350 -68 -3,318 -2,879 -3,474 -3,984 -4,247 -4,415 -4,555 Trade balance 1,202 885 1,130 1,209 1,269 1,340 1,418 Exports of goods 1,133 824 1,071 1,159 1,218 1,282 1,357 Of which: Assembly industry -4,520 -3,764 -4,604 -5,193 -5,516 -5,755 -5,973 Imports of goods -1,112 -720 -846 -1,236 -1,156 -1,097 -1,038 Of which: Fossil fuels -606 -603 -110 -313 -496 -500 -548 Services (net) Receipts -641 -441 -620 -618 -698 -761 -778 Payments Income (net) 3,210 3,321 4,044 4,616 4,635 4,840 4,941 Current transfers (net) 166 544 Official transfers (net) 2,741 2,906 3,518 3,694 3,835 4,043 4,264 Private transfers (net) Other transfers (net) -131 -104 -72 -190 Capital and financial accounts Capital transfers -92 -75 -35 -37 -7 Public sector capital flows (net) Loan disbursements -98 -95 -10 -107 -107 Amortization Foreign direct investment (net) -79 -76 -161 -324 Banks (net) 1/ -50 -35 Other items (net) 2/ -36 Errors and omissions -207 -10 -36 Overall balance 207 -139 -30 -25 -25 Financing decrease) 123 -350 -91 -40 -30 -25 -25 Change in net foreign assets (+ is -25 -25 O/w Change in gross reserves (+ is decrease) 123 -350 -91 -30 loans -12 -3 -10 -76 -161 -324 Banks (net) 1/ -50 -35 Other items (net) 2/ -36 Errors and omissions -207 -10 -36 Overall balance 207 -139 -30 -25 -25 Financing decrease) 123 -350 -91 -40 -30 -25 -25 Change in net foreign assets (+ is -25 -25 O/w Change in gross reserves (+ is decrease) 123 -350 -91 -30 loans -12 -3 -10 Change in IMF credit and (+ is increase) Exceptional financing o/w Changes in arrears 3/ o/w Debt rescheduling and debt relief 4/ Memorandum items: is decrease) 15 -246 -164 -14 -44 -30 -24 Change in US$ denom. reserve deposits at BRH (+ -11 Change in NIR (program definition) (+ is decrease) -40 -6 -6 11.4 -26.3 27.7 7.0 5.0 5.6 5.8 Exports of goods, f.o.b (percent change) 3.8 Imports of goods, f.o.b (percent change) -6.0 -16.7 22.3 12.8 6.2 4.3 Projected average oil price (U.S. dollars per barrel, APSP) 61.4 41.3 69.1 106.8 92.6 84.2 78.5 Debt service (in percent of exports of goods and services) 6.6 11.7 9.9 9.3 8.9 8.4 7.9 Gross international reserves (in millions of U.S. dollars) 2,100 2,501 2,534 2,574 2,604 2,629 2,654 (in months of next year's imports of goods and services) 6.0 5.7 5.8 5.0 4.8 4.7 4.6 of U.S. 14,787 14,508 21,017 20,135 21,160 22,001 22,835 Nominal GDP (millions dollars) Sources: Bank of the Republic of Haiti; and Fund staff estimates and projections. 1/0 Change in net foreign assets of commercial banks. 2/1 Includes arrears on oil imports. 3/1 Includes debt to Venezuela for oil shipments already paid by the GOH in local currency but not yet cleared in U.S. dollars. 4/ Includes the CCRT debt relief. 30 INTERNATIONAL MONETARY FUND 4.6 of U.S. 14,787 14,508 21,017 20,135 21,160 22,001 22,835 Nominal GDP (millions dollars) Sources: Bank of the Republic of Haiti; and Fund staff estimates and projections. 1/0 Change in net foreign assets of commercial banks. 2/1 Includes arrears on oil imports. 3/1 Includes debt to Venezuela for oil shipments already paid by the GOH in local currency but not yet cleared in U.S. dollars. 4/ Includes the CCRT debt relief. 30 INTERNATIONAL MONETARY FUND --- Page 34 --- HAITI Table 7b. Haiti: Balance of Payments, FY2019-25 (In percent of GDP on a fiscalyear basis; unless otherwise indicated) FY2019 FY2020 FY2021 FY2022 FY2023 FY2024 FY2025 Est. Proj. Proj. Proj. Proj. -1.1 1.1 0.5 0.8 -0.5 -0.5 -0.6 Current account (including grants) -2.4 0.2 -0.3 -1.9 -2.9 -2.8 -2.2 Current account (excluding grants) -22.4 -19.8 -16.5 -19.8 -20.1 -20.1 -19.9 Trade balance 8.1 6.1 5.4 6.0 6.0 6.1 6.2 Exports of goods 7.7 5.7 5.1 5.8 5.8 5.8 5.9 Of which: Assembly industry -30.6 -25.9 -21.9 -25.8 -26.1 -26.2 -26.2 Imports of goods -5.5 -4.5 Of which: Fossil fuels -7.5 -5.0 -4.0 -6.1 -5.0 -0.7 -2.2 -2.4 -2.5 -2.6 -2.8 -2.6 Services (net) 3.6 0.9 0.6 0.6 0.7 0.7 0.8 Receipts -4.3 -3.0 -3.0 -3.1 -3.3 -3.5 -3.4 Payments 0.3 0.2 0.1 0.1 0.3 0.3 0.4 Income (net) 21.7 22.9 19.2 22.9 21.9 22.0 21.6 Current transfers (net) 0.8 2.7 2.4 2.3 1.7 Official transfers (net) 1.2 0.9 18.5 20.0 16.7 18.3 18.1 18.4 18.7 Private transfers (net) 1.9 2.0 1.7 1.9 1.4 1.4 1.3 Other transfers (net) -0.9 -0.7 -0.3 -0.9 0.7 0.6 0.7 Capital and financial accounts 0.1 0.1 0.4 0.3 0.3 0.1 0.1 Capital transfers -0.6 -0.5 -0.2 0.1 -0.2 0.0 0.1 Public sector capital flows (net) 0.0 0.2 0.3 0.1 0.3 0.5 0.5 Loan disbursements -0.6 -0.7 -0.5 0.0 -0.5 -0.5 -0.5 Amortization 0.5 0.2 0.2 0.3 0.4 0.4 0.4 Foreign direct investment (net) 0.1 -0.5 -0.5 -0.8 -1.6 0.4 0.2 Banks (net) 1/ 0.0 0.0 0.0 Other items (net) 2/ -0.3 -0.2 0.1 0.0 0.6 0.6 -0.2 0.0 0.0 0.0 0.0 Errors and omissions -1.4 1.0 0.0 -0.2 0.1 0.1 0.1 Overall balance 1.4 -1.0 0.0 0.2 -0.1 -0.1 -0.1 Financing 0.8 -2.4 -0.4 -0.2 -0.1 -0.1 -0.1 Change in net foreign assets (+ is decrease) -0.1 0.7 0.0 0.0 0.0 0.0 0.0 Change in IMF credit and loans (+ is increase) 0.7 0.7 0.5 0.4 0.0 0.0 0.0 Exceptional financing 0.6 0.7 0.4 0.4 0.0 0.0 0.0 o/w Changes in arrears 3/ o/w Debt rescheduling and debt relief 1 Change in net foreign assets (+ is decrease) -0.1 0.7 0.0 0.0 0.0 0.0 0.0 Change in IMF credit and loans (+ is increase) 0.7 0.7 0.5 0.4 0.0 0.0 0.0 Exceptional financing 0.6 0.7 0.4 0.4 0.0 0.0 0.0 o/w Changes in arrears 3/ o/w Debt rescheduling and debt relief 4/ 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Memorandum items: 5.8 11.4 -26.3 27.7 7.0 5.0 5.6 Exports of goods, f.o.b (percent change) -6.0 -16.7 22.3 12.8 6.2 4.3 3.8 Imports of goods, f.o.b (percent change) 61.4 41.3 69.1 106.8 92.6 84.2 78.5 Projected average oil price (U.S. dollars per barrel, APSP) Debt service (in percent of exports of goods and services) 6.6 11.7 9.9 9.3 8.9 8.4 7.9 Nominal exchange rate (FY2022 on May 4) 84.1 99.9 80.9 107.8 Gross international reserves (in millions of U.S. dollars) 2,100 2,501 2,534 2,574 2,604 2,629 2,654 of and 6.0 5.7 5.8 5.0 4.8 4.7 4.6 (in months of next year's imports goods services) 21,160 22,001 22,835 Nominal GDP (millions of U.S. dollars) 14,787 14,508 21,017 20,135 Sources: Bank of the Republic of Haiti; and Fund staff estimates and projections. 1/ Changei in net foreign assets of commercial banks. 2/ Includes arrears on oil imports. 3/ Includes debt to Venezuela for oil shipments already paid by the GOH in local currency but not yet cleared in U.S. dollars. 4/ Includes the CCRT debt relief. INTERNATIONAL MONETARY FUND 31 --- Page 35 --- HAITI Table 8. Haiti: External Financing Requirements and Sources, FY 2019-25 1/ (In millions ofUS$ on a fiscal year basis; unless otherwise indicated) FY2019 FY2020 FY2021 FY2022 FY2023 FY2024 FY2025 Proj. Proj. Proj. Proj. Proj. 66 163 400 715 718 615 Requirements 350 -32 68 389 608 611 509 Current account deficit, excluding grants to the IMF 95 10 107 107 106 Debt amortization, excluding repayments 361 -145 62 324 715 718 615 Sources transfers, excluding official transfers 15 58 Capital 25 51 57 85 Foreign direct investment Official disbursements, excluding budget support 184 116 205 560 495 512 417 loans 70 100 120 Of which: Project commercial banks (net) -36 -27 -179 -324 77 39 Other flows, including 14 75 85 80 Official budget support 2/ Change in central bank's NFA (+ is decrease) 3/ 123 -350 -91 -40 -30 -25 -25 84 211 102 Additional Financing 0 111 IMF disbursement under RCF 6 11 IMF debt relief under CCRT Change in existing obligations to the IMF (+ is increase) -12 -5 -3 -10 Debt rescheduling and debt relief, excluding the Fund -1 93 96 Change in arrears 4/ Memorandum items: 2,100 2,501 2,534 2,574 2,604 2,629 2,654 Gross international reserves 5/ 6.0 5.7 5.8 5.0 4.8 4.7 4.6 (in months of next year's imports of goods and services) 0 224 Change in existing obligations to the IMF (+ is increase) -12 -5 -3 -10 Debt rescheduling and debt relief, excluding the Fund -1 93 96 Change in arrears 4/ Memorandum items: 2,100 2,501 2,534 2,574 2,604 2,629 2,654 Gross international reserves 5/ 6.0 5.7 5.8 5.0 4.8 4.7 4.6 (in months of next year's imports of goods and services) 0 224 SDR allocation Sources: Bank of the Republic of Haiti; and Fund staff estimates and projections. 1/ Components may not exactly match up to totals due to rounding. 2/1 Includes previously-programmed multilateral budget support that could be delayed. 3/ Excluding exceptional financing. in U.S. dollars. 4/ Includes debt to Venezuela for oil shipments already paid by the GOH in local currency but not yet cleared 5/ Includes gold. 32 INTERNATIONAL MONETARY FUND --- Page 36 --- HAITI Table 9. Haiti: Financial Soundness Indicators, June 2020-December 2021 (In percent; unless otherwise indicated) Jun-20 Sep-20 Dec-20 Mar-21 Jun-21 Sep-21 Dec-21 Size and growth Asset volume (in USS millions ) 4332.7 4319.1 5754.2 Deposit volume (in USS millions ) 5745.0 5340.4 5341.3 5320.3 3554.5 3382.5 4577.6 4613.0 4318.4 4351.5 Asset growth (in gourde terms), y/y 23.5 -6.7 1.0 3.9 4327.3 Credit growth (net, in gourde terms), y/y 5.7 -13.7 0.9 38.8 32.2 -8.3 -5.0 -2.1 21.2 20.6 Capital adequacy Regulatory capital to risk- -weighted assets 21.3 26.2 27.3 22.6 Regulatory capital to assets 18.4 22.3 20.8 7.4 9.2 9.3 8.1 7.0 7.9 7.6 Asset quality and composition Loans (net) to assets 26.8 28.7 27.1 25.8 NPLS to gross loans 26.0 25.1 24.8 8.0 5.0 5.4 7.1 5.9 5.6 Provisions to gross loans 5.0 5.3 6.3 Provisions to gross NPLS 5.8 5.8 6.0 5.8 6.1 63.0 105.4 107.5 81.8 NPLS less provisions to equity 101.6 103.1 96.5 11.6 -0.9 -1.3 4.2 0.3 -0.6 0.7 Earnings and profitability Q/Q annualized Return on assets (ROA) 2.1 -0.9 1.9 1.9 2.0 Return on equity (ROE) 27.9 1.9 1.3 10.7 20.2 21.4 Net interest income to gross interest income 78.0 24.6 23.8 16.7 78.2 80.7 83.2 83.3 82.2 82.7 Operating expenses to net profits 55.1 106.8 58.4 57.0 57.9 60.8 61.9 Cumulative since beginning of the fiscal year Return on assets (ROA) 1.6 1.1 1.9 1.9 1.9 Return on equity (ROE) 21.0 1.9 1.3 13.0 20.2 21.1 Net interest income to gross interest income 22.3 22.6 16.7 76.7 77.0 80.7 82.0 82.4 82.4 82.7 Operating expenses to net profits 60.7 70.1 58.4 57.7 57.7 58.6 61.9 Efficiency Interest rate spread 1/ 8.6 9.7 8.6 9.9 9.3 9.4 9.1 Liquidity Liquid assets to total assets 2/ 49.2 45.3 47.3 Liquid assets to deposits 2/ 48.6 48.1 50.3 48.5 60.0 57.8 59.4 60.6 59.4 61.8 59.6 Dollarization Foreign currency loans to total loans (net) 57.0 40.0 42.8 45.5 Foreign currency deposits to total deposits 70.6 58.5 43.5 44.9 47.2 59.6 60.1 63.8 66.1 66.5 Foreign currency loans to foreign currency deposits 26.4 25.1 24.5 24.3 21.9 20.9 21.6 Source: BRH Banking System Financial Summary and IMF staff calculations. .6 Dollarization Foreign currency loans to total loans (net) 57.0 40.0 42.8 45.5 Foreign currency deposits to total deposits 70.6 58.5 43.5 44.9 47.2 59.6 60.1 63.8 66.1 66.5 Foreign currency loans to foreign currency deposits 26.4 25.1 24.5 24.3 21.9 20.9 21.6 Source: BRH Banking System Financial Summary and IMF staff calculations. These indicators reflect the aggregated results of the operation in Haiti; thus figures in this table may not exactly match the information in Table 3, which reflect the consolidated banking eight licensed banksin system. 1/ Defined as the difference between average lending rate and average fixed deposit rate in the banking system. 2/L Liquid assets comprise cash and central bank bonds. INTERNATIONAL MONETARY FUND 33 --- Page 37 --- HAITI Annex I. Recent Political History Date Event October 15, 2015 First round of elections in which president Martelly, received 33 Jovenel Moïse, allegedlya a protégé of outgoing These results were contested, percent of the vote and qualified for a runoff. following street protests. New and the ballot was ultimately annulled in June 2016 November elections were held on November 20, Moïse won Haiti's 20, 2016. voter turnout of only Presidential 21 elections with almost 56 percent of the vote and a percent. February 7, 2017 Moïse inaugurated as President. October 2017 The United Nations ends its Haiti (MINUSTAH). Asmaller 13-year-long United Nations Stabilization Mission in Support in Haiti (MINUJUSTH), mission, the United Nations Mission for Justice institutions and protecting human succeeded it, focusing on strengthening judicial rights. November 2017 The Haitian Senate's Special Commission of report detailing alleged Investigation issued a officials embezzlement and fraud by current and former 656-page managing US$2 billion in loans from Haitian oil program from 2008 to 2016. Public Venezuela 's PetroCaribe discounted high-ranking officials in his pressure reportedly led Moïse to fire two July 2018 government for their involvement in the scandal. The government eliminated fuel subsidies without mitigating measures in advance. This was followed implementing planned immediate reversal of the decision. by riots and subsequent September 17, PM Jean Guy Lafontant increases and general resigned, following protests and riots over fuel price Céant political discontent and was replaced by PM. MJean-Henry March 21, 2019 PM Jean-Henry Céant resigned and replaced by PM Jean-Michel immediately following agre eement in principle with IMF staff Lapin, May 2019 A follow on a three year ECF. up report by Haiti's Superior Court of Auditors and Disputes (CSCCA) on PetroCaribe alleges President Administrative Martelly) and other officials embezzled Moïse (and former president the Martelly administration millions of dollars. The report alleges that infrastructure projects that it contracted never built a company then led by Moïse to carry out January 13, 2020 or completed. President Moïse announced that the for two thirds of the senate had mandates the lower house deputies and Moise then expired. This left Haiti with no governed by decree until his death. legislative branch; severalj judges from the Superior Audit Court During 2020 Moise removed presidential decrees. and reduced its independence via March 4, 2020 PM. Jean-Michel Lapin replaced by PM Joseph Jouthe. April 14, 2021 PM Joseph Jouthe 2017-2021 replaced by PM Claude Joseph, the fifth in three President Moïse faced years. believed that his five-year challenges to his mandate from opposition leaders who mandate should end on February7, 2021, five years to 34 INTERNATIONAL MONETARY FUND j judges from the Superior Audit Court During 2020 Moise removed presidential decrees. and reduced its independence via March 4, 2020 PM. Jean-Michel Lapin replaced by PM Joseph Jouthe. April 14, 2021 PM Joseph Jouthe 2017-2021 replaced by PM Claude Joseph, the fifth in three President Moïse faced years. believed that his five-year challenges to his mandate from opposition leaders who mandate should end on February7, 2021, five years to 34 INTERNATIONAL MONETARY FUND --- Page 38 --- HAITI Date Event the day since his predecessor, President argued that his term would end five Martelly, left office. President Moïse inaugurated as President thatis years from the date when he was support by some of the international on February 7, 2022. This position receives some July 7, 2021 President community. Moïse assassinated. at his privater residence throwing the countryinto political chaos early in the morning, vacuum. The acting Prime Minister and uncertainty amid a major political appointed PM by President Moise two Joseph announces control but Ariel Henry, July 20, 2021 days prior to his assassination, Ariel Henry took office as PM. Of the 18 cabinet contends. previous Moïse cabinet or administration. positions, 10 were part of the September 17, Prime Minister Henry signed. a political accord (Accord gouvernance apaisée) with some opposition politique pour une them a formal role through their groups and civil society that gives (i) the Autorité de Contrôle et de membership in various mechanisms, issued by the government; Suivi, a new body that will validate all including: decrees 33 members of civil (ii) the Assemblée Nationale Constituante made three society tasked with producing a draft up of months; and (ii) the new Conseil Electorale constitution within organizing the elections some time before end-2022 Provisoire, responsible for The accord does not specify if or when a constitutional place but states that the Prime Minister, referendum will take barred from participating in the election. Ministers, and other senior officials are an important first step in forging While the accord appears formally to be Prime Minister Henry is facing consensus and starting to re-build institutions, his government, particularly from mounting challenges to his legitimacy and that of political accord. opposition groups that did not sign the November 24, Prime Minister Ariel government Henry inaugurated a new government. The followed multiple negotiations with formation of the and implements the Political Accord for Peaceful political parties and civil society September 17, 2021. The main objectives ofthe Governance signed on ofa transitional government, the agreement are the establishment constitution. holding of elections, and the drafting of a new No date set for next Presidential Election or for a constitutional At least one other political accord led referendum Montana). by civil society is still in play (Accord de January, 2022 Prime Minister Ariel Henry flees the celebration of Haiti's independencei in Gonaïves under gunfire from 218 years of presence in the city, located 150 km North of gangs who were protesting his independence was dedared on January 1, 1804. Port-au-Prince and where Haiti's term of the remaining one third of the Senate Prime Minister Henry extends the INTERNATIONAL MONETARY FUND 35 a constitutional At least one other political accord led referendum Montana). by civil society is still in play (Accord de January, 2022 Prime Minister Ariel Henry flees the celebration of Haiti's independencei in Gonaïves under gunfire from 218 years of presence in the city, located 150 km North of gangs who were protesting his independence was dedared on January 1, 1804. Port-au-Prince and where Haiti's term of the remaining one third of the Senate Prime Minister Henry extends the INTERNATIONAL MONETARY FUND 35 --- Page 39 --- HAITI Annex II. Public Debt Sustainability Analysis Haiti: Joint Bank-Fund Debt Sustainability Risk of external debt distress Analysis' Overall risk of debt distress High? High Granularity in the risk rating Debt is sustainable Application of fjudgment Yes: High probability of protracted threshold breaches on external debt under a 20-year horizon from FY2033 and important risks and to debt outlook. vulnerabilities Haiti's risk of debt distress is assessed to be Although the GDP rebasing lowered "high" but overall public debt remains sustainable by almost half the deficits over the medium term debt-to-GDP ratio, slightly funded by a modest increase in higher primary predicted against the background of subdued external concessional financing are and publicly guaranteed (PPG) external export growth. This brings the present value of debt as a public to-exports and debt percentage of exports and the ratios of debt service-to-revenue into the serviceoverall rating of "high". Haiti is an FCV "high" range of debt distress, justifying maintaining an defined by the World Bank) and tailored country (a country affected by fragility, conflict, and violence to large natural disaster stress tests suggest that its debt risk as shocks, which are statistically rating remains vulnerable public debt and broadly, a modest frequent Nevertheless, the moderate level of interest rates, and the implementation recovery of economic activity in fiscal year 2022, continued low the SMP baseline scenario ofsome structural reforms that boost point to a sustainable public debt. growth potential under assessment remains subject to downside risks Although debt ratios have and institutional as Haiti continues to face improved, this fragilities and exceptional important economic, policy are also present. vulnerability to natural disasters, and debt data limitations A. Public Debt Coverage 1. Coverage. Gross public debt used for this DSA governments, extrabudgetary autonomous covers the central government, local Electricité d'Haiti (EDH), and advances organisms, the state-owned electricity by the Banque de la company government. External debt data come from the BRH République d'Haiti (BRH) to the creditors, including foreign oil and include debt to multilateral and bilateral debtis defined on a companies, as well as an estimate of contingent residency basis. No data is available on liabilities. External state-owned enterprises (SOE), and guaranteed debt, including to other committed to expanding the debt non-guaranteed SOE debt. However, the government is coverage to SOES. Ongoing efforts aiming ati improving debt data Robert Approved Taliercio by Patricia Alonso-Gamo (WHD); Wes McGrew and Andrea (IDA World Bank). Schaechter (both SPR); Marcello 2 The current Estevao and WEO. Haiti's debt- Composite -carrying Index (CI) is estimated at 2.813 and is based on the Bank' S capacity remains medium. 2020 CPIA and the October 2021 36 INTERNATIONAL MONETARY FUND -guaranteed SOE debt. However, the government is coverage to SOES. Ongoing efforts aiming ati improving debt data Robert Approved Taliercio by Patricia Alonso-Gamo (WHD); Wes McGrew and Andrea (IDA World Bank). Schaechter (both SPR); Marcello 2 The current Estevao and WEO. Haiti's debt- Composite -carrying Index (CI) is estimated at 2.813 and is based on the Bank' S capacity remains medium. 2020 CPIA and the October 2021 36 INTERNATIONAL MONETARY FUND --- Page 40 --- HAITI by the review are supported disclosure of the debt portfolio and public collection, the preparation World Bank (Text Table 1). of claims of the overall banking as the sum credits and domestic public debt is calculated sector (NFPS) plus suppliers' Fund's 2. Gross to the non-financial public claims data come from the the BRH) The banking of the sector (including by the authorities. BRH to the IMF. The accounts domestic arrears as reported 2SR tables reported by the and social Report Forms 1SR and Gratuite, et Obligatoire (PSUGO) Standardized Universelle, ONA) are consolidated de Scolarisation education fund Programme Office Nationale dAsuronce-Vieilese- public debt does not funds (Pension civile and the calculation of domestic be security absence of data, to negligible: rest of the NFPS. In the sector, which are understood are with the held outside of the banking or goods and services, include T-bills and bonds spending on wages and salaries, (paid) the fiscal year SO payments related to current budget and typically processed norms, Overdue in the subsequent year's added to debt as per accounting effectively recorded domestic arrears (instead of being the recent pastthis has happened they are not recorded as delays are assessed)3. In BRH, about 11.8 certain criteria such as 90-day Government debtto i.e., after due to oil distribution companies. mostly with payments serviced. percent off the GDP, is not 1. Haiti: Public Debt Coverage Check box Text Table X Subsectors of the public sector X X 1 Central government X 2 State: and local government X Other elements in the general government o/w: Social security fund funds (EBFS) sector, including to SOES) 5 o/w: Extra budgetary other entitiesi in the public and private: 6 Guarantees (to on behalf of the government) 7 Central bank (borrowed 8 Non-s guaranteeds SOE debt Resonst for deviations tromthed delaults settings Reeriestet Detault T Uudtortan analynis L nC2 eiputiconet Opeceto ofGDP 2othere elementsofthes generalsg andnotg governe gurentedbyt ment notca ytheg capundint. governr ment) 2/ 3speontoloes Romomteloe stoc 3sotve deb( (guaranted Partnenhip (PPP) Somuetaor Sot det ot SFI 4P Public Financial Privatep market (the default value ofs pere ent OfGDPI he untry's public debtd definition ady nclue includesa Tewigolod.binge anestimated exte eemtercon terna contingent abilties ountrie whose Aly capt red nder Tredebauits isassessedt shocko of2% toben ofGDP reglgbie willibe setiggeredforco acountry teamr may reduce this to0% govemmnets on Debt S public debt-toB. Background lowered Haiti's accounts in 2020 markedly institute (IHSI) in to the national the Haitian statistics 3. The revision oft technical assistance (TA), accounts that produced a large GDP ratio. After severalyears national of the informal released re-based and re-benchmarked due in parti to the inclusion October 2020 GDP by 65 percent (FY2019), revision in nominal upward responsible for orders created by a public entity by the Treasury. Since are defined as all payment after authorizationt to pay given as payment 3 Payment arrears on expenditures but not yet paid 90 days 90 deadline, they are not accounted payments the day authorizing expenditure payments does not go beyond the maturity of overdue arrears. MONETARY FUND 37 INTERNATIONALI informal released re-based and re-benchmarked due in parti to the inclusion October 2020 GDP by 65 percent (FY2019), revision in nominal upward responsible for orders created by a public entity by the Treasury. Since are defined as all payment after authorizationt to pay given as payment 3 Payment arrears on expenditures but not yet paid 90 days 90 deadline, they are not accounted payments the day authorizing expenditure payments does not go beyond the maturity of overdue arrears. MONETARY FUND 37 INTERNATIONALI --- Page 41 --- HAITI sector. 4 These revisions lowered debt ratios significantly. As a percent of GDP, public debt declined to 22.7 percent in FY2020 from 51.9 percent of GDP as previously projected in the 2020 DSA under the Rapid Credit Facility (RCF), and 27.1 percent in FY2021.5 At the same time, the domestic revenue ratios dropped sharply as a result of the rebasing but also due to a real decline in revenue administration, and collection. As a percentage of GDP, domestic revenues fell to 5.9 percent in FY2021 compared to 6.4 percent in FY2019 compared to 10.7 percent under the old GDP series. Foreign exchange receipts from exports of goods and services also fell to an estimated 6 percent of GDP in FY2021 from 11.7 percent of GDP in FY2019, or 18.2 percent under the old series. As evidenced by the ongoing deterioration in revenue trends (and the very low ratios), Haiti's debt service capacity has not improved (see below and Figure 1). 4. At end-FY2021, Haiti's S stock of public sector debt totaled US$4.7 billion (27.1 percent of GDP). External public debt accounted for 42.7 percent oftotal public debt (11.6 percent of GDP) of which 72.2 percent was debt arising from oil imports financed by Venezuela's Petrocaribe program (Text Table 2). The remainder was largely concessional debt from Text Table 2. Haiti: Structure of Public Debt at End-2021 multilateral creditors, including the (Fiscal-year basis) International Fund for Agricultural in percent of US$ millions total debt GDP Development (IFAD) and the IMF. Total External Debt 2019.1 42.7 11.6 There is no public information on Multilateral creditors 256.2 5.4 1.5 private external debt. Domestic public o/w IMF 162.8 3.4 0.9 o/w OPEC 41.4 0.9 0.2 debt amounted to US$2.7 billion o/w IFAD 52.0 1.1 0.3 compared to US$2.8 billion in FY2020. o/w IDA 0.0 0.0 0.0 Nearly 80 percent was in the form of Bilateral creditors 1810.2 38.3 10.4 Venezuela 1497.0 31.7 8.6 central bank advances to the o/w PetroCaribe 1471.0 31.1 8.4 government. This drop in domestic o/w BANDES 26.0 0.6 0.1 Taiwan, Province of China 313.2 6.6 1.8 debt in U.S. dollars resulted largely Other borrowing 7.8 0.2 0.0 from valuation effects as the gourde depreciated by 48 percent against the Total Domestic Debt 2708.1 57.3 15.5 U.S. dollar in FY2021. Haiti continues Other BRH 2063.6 43.7 11.8 creditors 644.6 13.6 3.7 to have "technical arrears"to Total Debt Venezuela of about US$425.57 million, 4727.2 100.0 27.1 about 2 percent of GDP (September Sources: Haitian authorities, and Fund staff estimates. 30, 2021).5 4 Annual data refer to the fiscal year ending September 30. 5 See Appendix below. Additional minor revisions by the IHSI in May 2021 raised nominal GDP slightlywithout affecting growth rates. 6 Haiti has encountered difficulties processing payments to Venezuela for debts incurred under the Petrocaribe agreement due to issues related to international sanctions. For now, debt service payments to Venezuela placed in an escrow account in U.S. dollars held at the BRH. are being 38 INTERNATIONAL MONETARY FUND (September Sources: Haitian authorities, and Fund staff estimates. 30, 2021).5 4 Annual data refer to the fiscal year ending September 30. 5 See Appendix below. Additional minor revisions by the IHSI in May 2021 raised nominal GDP slightlywithout affecting growth rates. 6 Haiti has encountered difficulties processing payments to Venezuela for debts incurred under the Petrocaribe agreement due to issues related to international sanctions. For now, debt service payments to Venezuela placed in an escrow account in U.S. dollars held at the BRH. are being 38 INTERNATIONAL MONETARY FUND --- Page 42 --- HAITI relief received after the 2010 earthquake. Haiti Public debt has increased since the debt after the 2010 5. relief of about US$1.0 billion from international creditors benefited from debtr under the Post-Catastrophe Debt Relief Trust including US$268 million from the IMF external debt fell from 19 earthquake, from the World Bank. 7 As a result, public Fund (CCRT) and US$36 million of GDP in FY2011 (both using old GDP of GDP at end-FY2009 to less than 9.0 percent disbursements related to percent increased steadily until FY2020, mostly driven by series). After that, debt side, and by unremunerated advances with Venezuela on the external from domestic nonthe PetroCaribe agreement obtained some financing from the BRH on the domestic side. The government loan from Taiwan Province of China (US$123 million) in FY2018 and signed a 8 In 2020, the financial companies the latter was disbursed in tranches. April (US$150 million) in January 2019, although million) under the RCF to help a disbursement of US$111.6 million (SDR81.9 relief in IMF Board approved Haiti was also granted debt April needs related to the COVID-19 pandemic. debt service to cover worth US$22.6 million (SDR 15.21 million) covering under the IMF's updated CCRT 2022. Haiti also benefited from an SDR due from April 14, 2020 to April 13, half the IMF falling in 2021, with the central bank on-lending allocation of US$224 million (SDR 157 million) August to 2021 earthquake recovery. 10 for emergency spending, including related to the government collection further in FY2021. As noted above, revenue 6. The fiscal situation deteriorated conditions, while higher international low, in part due to the difficult security higher fuel remained particularly increase in the fiscal deficit, mainly through the oil prices contributed to a significant deficit of 2.4 percent of GDP in FY2021 compared to subsidies. While the NFPS posted a primary outturn mostly reflected in the 2020 DSA, this better -than-anticipated as 3.1 percent of GDP projected were limited mainly to the central bank re-based nominal GDP. Financing sources US$80 million was the higher relatively low. Donor support of about value external budget support remained earthquake. In this context, the present in the aftermath of the August provided in late-FY2021 2021. 11 debt stood at21 percent of GDP in September of public from the IDA Crisis Response Window (CRW) to US$508 million in grant financing 7 The World Bank also provided restoration of capacityin the country. support reconstruction: and long -term Taiwan Province of China to compensate for the which includes grants from the government of to the loan, is assessed to be 8 The loan package, low fixed rate and the current higher variable rate applicable millioni is expected in FY2022, with the difference betweena US$82.5 million! has been disbursed so far, US$30 concessional. Of this loan, later. remainder US$37.5 millionto be disbursed and Relief Trust, 2021. 9 See Catastrophe Containment when used, that is when holdings fall below allocations debt 10 While not contributing to gross public debt directly, the DSA as a long-term debt liabilityinthe gross external through on-lending for instance, SDR use enters debt service. statistics and the net interest payments in the debt reported int the 2015 and 2020 DSAS the present value of public and GDP has been 11 This number cannot be compared directlyto to include BRH advances to the government (ii) since: (i) the coverage of debt has changed rebased. INTERNATIONAL MONETARY FUND 39 when used, that is when holdings fall below allocations debt 10 While not contributing to gross public debt directly, the DSA as a long-term debt liabilityinthe gross external through on-lending for instance, SDR use enters debt service. statistics and the net interest payments in the debt reported int the 2015 and 2020 DSAS the present value of public and GDP has been 11 This number cannot be compared directlyto to include BRH advances to the government (ii) since: (i) the coverage of debt has changed rebased. INTERNATIONAL MONETARY FUND 39 --- Page 43 --- HAITI Forecasts on Macroeconomic C. Background under a one-year Funda assumes normative policy implementation 7. The baseline and growth. In this context, the outlook presents supported program to restore macro-stability to restore stability, and sufficient implementation of sound macro-policies and FDI and raise a modest recovery, attract some external financing of selectreforms that would help Program (SMP) aims to implementation While the proposed Staff-Monitored investment, growth and real incomes. reform implementation after the arrangement, lay the ground for an eventual upper-credt-tranche uncertainties predicting policy commitment SMP is assumed to be modestgiven the one- -year beyond 2023. after contracting by 1.7 percent to turn positive in FY2022 to 0.3 percent crisis Real GDP is projected in FY2021 amidst a protracted political in FY2019, 3.3 percent in FY2020, and 1.8 percent FY2022 is driven by a mild rebound in the (Text Table 3). Growth for and the COVID pandemic and as noted above, risks to the growth service sector as social unrest abates. Nonetheless, with possible presidential and particularly linked to political uncertainty Moreover, outlook are significant, and/or a rise in confirmed COVID cases. parliamentary elections, security challenges, prospects remain grim given structural reforms, medium-term growth baseline scenario, without comprehensive crisis and collapse in investment Under the the protracted political-security of select reforms, including in stability and implementation which assumes some political could reach 1.5 percent over the mediumvocational training to boost productivity, growth and their effect on growth. 12 the probability of natural disasters term, taking into account Assumptions Compared to the Text Table 3. Haiti: Macroeconomic Previous DSA 1/ 2023-26 Avg 2027-37 Avg Previous 2022 Current Previous Current Previous Current DSA DSA DSA DSA DSA DSA (annual percentage change, unless otherwisei indicated) 0.3 1.2 1.5 1.4 1.5 Real GDP 13.1 0.7 26.1 14.4 13.8 10.9 9.7 Consumer prices (period average) (in percent of GDP, unless otherwise indicated) 8.9 19.7 9.7 15.1 8.6 17.8 Total revenue and grants 12.1 5.8 13.7 6.9 14.9 7.61 Ofv which: Revenue 16.8 10.1 20.3 11.6 22.8 13.0 Total expenditure 5.1 3.5 7.0 3.5 9.6 4.5 Of which: Capital expenditure -1.7 -1.5 -3.7 -2.6 -4.0 -3.3 -2.0 Overall balance 1.5 0.8 -1.6 -0.5 -3.0 7.1 Current account balance 16.7 6.6 15.5 6.9 14.9 29.5 Exports of goods and services 60.4 28.9 51.6 29.4 50.8 Imports of goodsands services Sources: Haitian authorities; and Fund staff estimates and projections. average presented are conditional to data availability. 1/1 The previous DSA forecasted data until FY2037, therefore accounting exercise, using a neoclassical -term is based on a growth for and UN projections 12 The 1.5 percent long growthprojectioni of35 percent based on staff projections investment rate (1.2 with a labor share the period 2020-2025 at the same productionfunction: growth, and assuming that TFP grows over projection 0.1 above the average observed for labor force for 2013-2019. Growth of 1.5 percent is percent in Haiti. percent) as the estimated average which about 77 natural disasters were recorded realrate over 2013-2019, a period during 40 INTERNATIONAL MONETARY FUND 12 The 1.5 percent long growthprojectioni of35 percent based on staff projections investment rate (1.2 with a labor share the period 2020-2025 at the same productionfunction: growth, and assuming that TFP grows over projection 0.1 above the average observed for labor force for 2013-2019. Growth of 1.5 percent is percent in Haiti. percent) as the estimated average which about 77 natural disasters were recorded realrate over 2013-2019, a period during 40 INTERNATIONAL MONETARY FUND --- Page 44 --- HAITI inflation declined gradually to 13.1 percent (y/y) by After peaking at 25.2 percent yly in FY2020, gourde appreciation. It is projected at September 2021, in part a lagged reaction to the large rate of 26.1 percent, and is with 12-month period-average 27.5 percent (y/y) at end-FY2022, moderate growth baseline. A stable real expected to decline slowly over time under the medium-term following the gradual the U.S. dollar is assumed over the exchange rate vis-à-vis bilateral rate being driven by the inflation differential depreciationi in FY2021, with the nominal vis-à-vis the U.S. 1.5 of GDP in FY2022 from 2.4 percent of the NFPS is projected to decline to percent to make room The deficit other than energy subsidies is compressed of GDP in FY2021 as current spending deficit is expected to increase to around 2.8 percent for large domestic debtreimbursement The realistic levels and the baseline scenario of GDP in FY2025 as expenditures revert to more uncertainty surrounding the in fuel price policy given the very high tax assumes no changes which results to higher forgone fuel taxes, thus, lower likelihood and timing of this reform, to increase gradually to reach about 3.3 revenues. Over the long term, the deficit is expected mentioned above and the taking into account baseline assumptions percent of GDP on average, would increase both current spending for emergency likely impact of natural disasters. The latter purposes. The resulting deficit assistance to victims and capital spending for reconstruction including concessional multilateral increase is expected to be financed with external financing, and advances from the BRH limited to some domestic market financing, and bilateral financing, around 2.0 percent of GDP. of GDP is projected in FY2022 following a An external current account surplus of0.8 percent in recorded remittances and in FY2021 arising from a 21 percent surge under surplus of 0.5 percent surplus will reflect a pick -up in official transfers despite a rebound in imports. The FY2022 to remain subdued. With no fuel price the SMP while export and import growth are expected somehow are crowding out public capital reform in the baseline scenario, higher fuel subsidies and promote exports, e.g., roads and spending, including in critical infrastructure to support and long term, the current account Over the medium ports, resulting to lower exportgrowth. of GDP as remittance inflows are projected deficit is expected to stabilize at around 0.6 percent to follow historical trends. to be mostly funded by a moderate increase needs are assumed 8. Future gross financing debt instruments while central bank lending concessional financing and domestic some external in external to be contained. The SMP is expected to catalyze to the government is expected in percent of gross financing needs, the financing to fund more capital expenditures, nonetheless, term as government increases borrowing of external financing could decrease over the long are to share which at this time are not remunerated, expected through T-bills. Central bank advances, above a level consistent with low around 2 percent of GDP over the medium term, slightly short-term debt remain domestic financing would come from inflation (1.5 percent of GDP). The remaining INTERNATIONAL MONETARY FUND 41 expected to catalyze to the government is expected in percent of gross financing needs, the financing to fund more capital expenditures, nonetheless, term as government increases borrowing of external financing could decrease over the long are to share which at this time are not remunerated, expected through T-bills. Central bank advances, above a level consistent with low around 2 percent of GDP over the medium term, slightly short-term debt remain domestic financing would come from inflation (1.5 percent of GDP). The remaining INTERNATIONAL MONETARY FUND 41 --- Page 45 --- HAITI to increase graduallyin commercial banks. 13 The latter's share is assumed instruments purchased by the authorities deepen the marketfor the long-term as the SMP contains BRH fiscal financing, banks to diversify their portfolios would securities, and opportunities for commercial contracted or government of fiscal dominance. 14 External debt financing, likely be modest in a context and increasing moderately in relative terms guaranteed, is assumed to be mostly non-concessional of modest structural reform implementation. against the background between The realism tool shows some differences are credible. unusual 9. The baseline assumptions from the impact on external debt of the debt dynamics coming in part past and projected contraction the last three years, exchange rate appreciation, FY2020 current account surplus, activity related to the real interestrate due to and for total public debt, from improved dynamics deficit, including related to high advances from the BRH and a higher primary 3). More broadly, the unremunerated and timing of fuel price reform (Figure uncertainty surrounding the likelihood has been mostly driven by the levels of the debt-to-GDP over the past three years rate change in public differential, though exchange deficit, dampened by the real interest rate/growth the projected factors primary contributor in FY2020. Under the baseline scenario, real GDP appreciation was a major the same as in the past, with the exception of the affecting debt ratios remain broadly resumption of financing sources in an which is projected to be positive and a gradual The past forecast error growth reforms underpinned by a Fund-supported program. environment of modest for the public debt ratio than the median of other is either similar for the external debt ratio or lower LICS and LMICS (Figure 3). falls outside the top is realistic. The planned adjustment 10. The projected fiscal adjustment fiscal deficit, suggesting a modestyet distribution of past adjustments of the primary The quartile of the the uncertainty offuel price reform (Figure 4). reasonable and credible pace of adjustment given of the political and security situation, as forecast for FY2022 is driven by some stabilization The baseline growth growth months, unrelated to any projected fiscal adjustment witnessed in recent in FY2022 following three years of contraction. projection assumes a modest resumption of activity path is largely independent of the would rise modestly over the medium term. This growth some increase Growth reflects somewhat more stable tax revenues, gradual projected fiscal position which credit from the BRH (Figure 4). in external financing, and limited additional Classification and Stress Tests D. Country debt carrying capacity is 2.78, resulting The value of the composite indicator to assess be as "weak" if 11. 15 Haiti's debt carrying capacity would classified in a "medium" classification. above the 15.5 percent cut-off remittances as a share of GDP were not SO high. Remittances-to-GDP 2.69 cut-off value (see Table Debt Carrying 2013-2021) push the index above the (on average over debt showni in Table 3 reflect unremunerated CB financing 13 Real interest rates on domestic in domestic currency. 14 Projected internal financing is assumed to be exclusively Bank' 's 2020 CPIA and the October 2021 Index (CI) is estimated at 2.78 and is based on the 15 The current Composite capacity remains "medium" ". WEO. Haiti's debt-carrying 42 INTERNATIONAL MONETARY FUND 2.69 cut-off value (see Table Debt Carrying 2013-2021) push the index above the (on average over debt showni in Table 3 reflect unremunerated CB financing 13 Real interest rates on domestic in domestic currency. 14 Projected internal financing is assumed to be exclusively Bank' 's 2020 CPIA and the October 2021 Index (CI) is estimated at 2.78 and is based on the 15 The current Composite capacity remains "medium" ". WEO. Haiti's debt-carrying 42 INTERNATIONAL MONETARY FUND --- Page 46 --- HAITI Capacity). Relative to the last DSA, the Composite Indicator (CI) has declined from 2.86 to 2.78 due to a stronger contribution from import coverage ofreserves and weaker contribution from growth. 12. This classification sets higher external and public debt thresholds to assess the risk of debt distress. The present value of external debt can go as high as 40 percent of GDP or 180 percent of exports ofgoods and services, and the present value of public debt can reach 55 percent of GDP before the model-based risk of distress increases. The benchmarks for external debt service are 15 percent of exports of goods and services and 18 percent of fiscal revenues (Table 1). 13. In addition to the standard stress tests, the analysis considers the effects on debt of a one-off major natural disaster shock. This type of shock is particularly relevant for Haiti given its history of frequent major natural disasters. The shock assumes damages of 25 percent of GDP, similar to those caused by Hurricane Matthew that hit Haiti in 2016. While the damages and losses following the 2010 earthquake were estimated at 120 percent of FY2009 GDP, this type of disaster is not as hurricanes, thus considered a tail risk event. 16 The stress test on as statistically frequent combined contingent liabilities on external and domestic debt was updated to reflect available data. 16 See "Small States' Resilience to Natural Disasters and Climate Change - Role for the IMF," - IMF, December 2016. INTERNATIONAL MONETARY FUND 43 --- Page 47 --- A Table 1. Haiti: Debt Carrying Capacity and Thresholds Debt CaryingCapetys and Thresholds Country Country Code Haiti Dex.Carrying Ca Applicable thresholds Medium Final Classficationt based on Classfication nbasedo on APPLICABLE current vntage the prevous wntage Cusifeatonbasedo ont the two APPLICABLE Mediu previous vintages Medium Medum EXTERNAL debt burc den thres esholds 2.78 2.80 Medum TOTAL debt 2.82 of debti of public benchma R EAHE debtin GDP Debt se Calculation of the CI Index E Comp Coefficients (A) 10-yeara values CPIA pant CIScore of Real growth rate 0.385 om idel CILLenE framework (in percent) 2.749 1.06 38% Imp or coverage of reserve es 2.719 0.556 0.02 (in percent) Cut-off valu lues Import Ov verage ofreserves 2 4.052 42.604 1.73 Weak (in percent) 62% CI< 2.69 Remittances -3.990 18. 151 -0.72 Medium in percer nt) -26% 2.69 SCIs World economic 2.022 .033 Strong (inpercent) 0.28 10% CI> 3.05 13.520 3.137 0.42 15% Clrati 2.784 Medium Retrencoanmemnotnp by Classiciation EXTERNALdeDED PV of debt Exports GDP TOTALEUDIE Debt service PV debti in percent Exports oltotalpubice ofGDP Wea Revenue 151 -0.72 Medium in percer nt) -26% 2.69 SCIs World economic 2.022 .033 Strong (inpercent) 0.28 10% CI> 3.05 13.520 3.137 0.42 15% Clrati 2.784 Medium Retrencoanmemnotnp by Classiciation EXTERNALdeDED PV of debt Exports GDP TOTALEUDIE Debt service PV debti in percent Exports oltotalpubice ofGDP Wea Revenue --- Page 48 --- HAITI E. Debt Sustainability External Debt Sustainability Analysis indicators of Haiti's external debt path are 14. Under the baseline scenario, most value of debt-to-GDP (Figure 1 breach indicative thresholds except the present in projected to the medium term, funded by a gradual increase and Table 3). Slightly higher primary deficits over of subdued export growth, brings the external concessional financing, against the background into the "high" range of debt distress value of PPG external debt as a share of exports around 112.4 percent in FY2022, present value of debt-to-exports, which starts at that thresholds. The present the 180 percent threshold and staying above reaches 186.6 percent in FY2033, breaching ratio remains below the threshold thereafter (323.3 percent in FY2043). The debtsenvice-to-exports which it exceeds by FY2039 to reach 24.1 under the baseline scenario until FY2038, the threshold in of 18 percent the ratio of debt service to revenue only breaches percent by FY2043. Meanwhile, indicators over a longer (20-year) horizon partly FY2041. Breaches in thresholds of these two key related to Haiti's institutional mobilization and subdued exportgrowth and reflect weaker tax revenue during the protracted political crisis fragility, decline in productive capacity and competitiveness to large natural disasters, and the subsidization of petroleum products, vulnerability shows a steady prolonged debt. The present value of external debt-to-GDP impact of climate change on debt distress. Iti is projected to gradually increase but remains below the threshold of assessing modestly to 20.8 percent in in FY2022 to 13.3 percent by FY2033, rising increase from 7.4 percent of external borrowing to finance public investment FY2043. This would reflect a gradual resumption political stability and policy implementation. projects related to improved realism of the baseline scenario. Debt arising from The historical scenario highlights the from 2012-2018. If 15. Petrocaribe program increased at a fast pace oil imports financed by Venezuela's were replaced by their 10-year historical variables in the baseline projection and the key macroeconomic debt would reflect a significantly higher over-optimistic average, the resulting path of external threshold breaches for many including earlier and more prolonged (unrealistic) debt accumulation, which excludes another Petrocaribe-type of PPG external debt. Under the SMP baseline, to breach of indicators from a relatively low base, leading external financing would resume gradually program, threshold only over a longer (20-year) horizon. the debt-to-exports and of debt dynamics to a drop in remittances 16. Stress tests confirm the vulnerability a decline in both current transfers and disasters. A shock to non-debt creating flows, i.e., debt above the 180 natural would bring the present value of external FDI inflows by one standard deviation, and the debt service-to-exports ratio above the percent-of-exports threshold much earlier in 2025 remittances would present a more severe threshold after seven years (2029). A drop in also 15 percent impact on the external debt trajectory, bringing shock. A natural disaster shock has a significant ratio above its threshold (Table 4). the external debt-to-exports 17 DSF guidance note, paragraph8 187. INTERNATIONAL MONETARY FUND 45 the 180 natural would bring the present value of external FDI inflows by one standard deviation, and the debt service-to-exports ratio above the percent-of-exports threshold much earlier in 2025 remittances would present a more severe threshold after seven years (2029). A drop in also 15 percent impact on the external debt trajectory, bringing shock. A natural disaster shock has a significant ratio above its threshold (Table 4). the external debt-to-exports 17 DSF guidance note, paragraph8 187. INTERNATIONAL MONETARY FUND 45 --- Page 49 --- HAITI Public Sector Debt Sustainability Analysis scenario. Total public debt is projected at Public debt is sustainable under the baseline In value terms, public 17. 2027, rising to 50.2 percent by FY2043. present around 27 percent of GDP until FY2043, around 11 percentage points below would reach a maximum of 43.6 percent of GDP in in some debt 2, Table 3). A few characteristics of the debt profile the corresponding benchmark (Figure i) its relatively long maturity to multilateral help to limit potential vulnerabilities, in particular: 57 percent), and iii) the ways high share denominated in gourdes (about creditors, ii) a relatively Thanks to these features, Haiti's government investment base comprised mostly of public agencies. moderate over a 10-year horizon, as financing needs. Debt service appears has funded its gross of public debt, are not serviced in short term, including advances from the BRH, a significant portion of these advances could raise debt service principal and interest payments. However, repayment attached to reimbursement of those depending on conditions over the long run significantly, advances. below its benchmark for all stress test 18. While the public debt ratio remains largely Under the most extreme natural disaster scenarios, it is highly vulnerable to natural disasters. exceeds 55 percent over a longer value of the public debt-to-GDP ratio barely in the scenario, the present (Table 5). Nonetheless, it increases by 60 percent horizon (20-year) after the year ofthe shock in the baseline) before declining aftershock to reach 44 percent in 2025 (against23 percent slightly exceeding the threshold and exhibits a tail effect over a longer horizon, the horizon progressively, of natural disasters over longer-term around FY2041, reflecting a higher probability horizon warrants consideration. (Table 5). This proximity to the threshold over longer F. Risk Rating and Vulnerabilities to several risks and vulnerabilities. Public 19. The debt outlook for Haiti remains subject term with the modest economic recovery to stabilize as a share of GDP in the near (Table debt is expected annual impact of natural disasters under the SMP while accounting for the average of expected would be stronger with extended implementation 3). Potential growth and external financing would decline marginally due to improved tax reforms and Haiti's annual gross financing needs of continued BRH financing over the collection. Rollover risk is low under the assumption to stabilize at revenue term, central bank financing is assumed four-five years. However, over the long In this next by issuance of short term bills by the government 2.0 percent of GDP, gradually replaced debt-to-GDP is projected below its although the present value of external public debt, the present value of environment, baseline, other indicators of external e.g., indicative benchmarks under the benchmark by 2033 due to subdued export debt-to-exports ratio would breach its indicative of weaker revenue mobilization. In in 2041 because growth, and for the debt service-to-revenue disaster shock similar in magnitude to Hurricane addition, a drop in remittances or a natural in some thresholds of external debt in debt ratios and breaches Matthew would imply an increase also vulnerable to a drop in official and private indicators. The external debt service capacity is breaches of the threshold (Table 4). illustrated by the debt service to revenues calls for transfers and FDI, as "medium", unchanged from the last DSA, which capacity has remained Haiti's debt-carrying 46 INTERNATIONAL MONETARY FUND the debt service-to-revenue disaster shock similar in magnitude to Hurricane addition, a drop in remittances or a natural in some thresholds of external debt in debt ratios and breaches Matthew would imply an increase also vulnerable to a drop in official and private indicators. The external debt service capacity is breaches of the threshold (Table 4). illustrated by the debt service to revenues calls for transfers and FDI, as "medium", unchanged from the last DSA, which capacity has remained Haiti's debt-carrying 46 INTERNATIONAL MONETARY FUND --- Page 50 --- HAITI and reforms to raise investment and growth, stepping up efforts to strengthen revenue mobilization by the SMP. as recommended risk of debt distress. Although the GDP rebasing 20. Haiti's risk rating remains "high" outlook assumes an increase in external lowered by almost half the debt-to-GDP ratio, the by the BRH to fund slightly higher concessional financing in place of some monetary financing export growth and weaker revenue medium term in a context of subdued primary deficits over the breaches, as observed under the baseline mobilization. This combination results in threshold affected by fragility and violence and DSA. Moreover, Haiti is a country scenario in the previous beyond the baseline, the most likely stress exposed to natural hazards and climate change. Looking disasters show that external debt and scenarios accounting for the high probability of natural major natural disaster or decline in debt service would breach some thresholds. Another horizon. On this external public debt dynamics, even under a 10-year remittances would substantially worsen analysis is warranted in consideration of these vulnerabilities in the debt sustainability of implementing basis, The DSA highlights the importance maintaining the risk of debt distress as "high". by the SMP and preparing for and managing the authorities' economic reform program supported the adverse effects of natural disasters. Authorities' - Views debt analysis and its agreed with the thrust of the sustainability risks 21. The authorities scenario as realistic but emphasized possible upside conclusions. They viewed staff's baseline that several important sectors of Haiti's mobilization and exports forecasts, given note of Haiti's to tax revenue situation stabilizes further. They took might rebound faster if the political that the risk of economy result of GDP rebasing and concurred country's lower ratios of debt-to-GDP as a capacity should remain unchanged distress remains classified as "high" while its debt-carrying which debt level of investment is critical to raise potential growth, at "medium". They noted that a higher term. The BRH highlighted some widen the current account deficit over the medium which could could and ongoing transition to IFRS-9, implications of reforms related to its governance advances to the as well as of the central bank's government, bring changes to the accounting that efforts to deepen financial markets, and to Moreover, the BRH noted monetary interest payments. debt securities in particular, could help reduce develop the market for government financing to the government gradually. INTERNATIONAL MONETARY FUND 47 --- Page 51 --- HAITI Figure 1. Haiti: Indicators of Public and Publicly Guaranteed External Debt under Alternatives Scenarios, 2023-43 PV of Debt- -to GDP Ratio PV of Debt- to- -Exports Ratio A - - Most extreme shock is Natural disaster Most extreme shock LS Natural disaster 2023 2025 2027 2029 2031 2033 2035 2037 2039 2041 2043 2023 2025 2027 2029 2031 2033 2035 2037 2039 2041 2043 Debt Service- to- Exports Ratio Debt Service- to- -Revenue Ratio enarios, 2023-43 PV of Debt- -to GDP Ratio PV of Debt- to- -Exports Ratio A - - Most extreme shock is Natural disaster Most extreme shock LS Natural disaster 2023 2025 2027 2029 2031 2033 2035 2037 2039 2041 2043 2023 2025 2027 2029 2031 2033 2035 2037 2039 2041 2043 Debt Service- to- Exports Ratio Debt Service- to- -Revenue Ratio = Most extreme shock is Combination Most extreme shock is Non- debt flows 2023 2025 2027 2029 2031 2033 2035 2037 2039 2041 2043 2023 2025 2027 2029 2031 2033 2035 2037 2039 2041 2043 Baseline Historical scenario Most extreme shock 1, Threshold Customization of Default Settings Borrowing Assumptions for Stress Tests* Size Interactions Default User defined Shares of marginal debt External PPGI MLT.debt 100% Tailored Tests Terms of marginal debt Combined CLS Yes Avg. nominal interest rate on new borrowing inUSD 1.6% Natural Disasters Yes No USD Discount rate 1.6% Commodity Prices 21 n.a. n.a. Avg. maturity (incl. grace period) 5.0% 5.0% 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 by the shocks under the interactions of the default settings for the stress are assumed to be covered by PPG external MLT debt in the external DSA stress tests tests. "n.a. indicates that the stress test does not of marginal debt are based on baseline Default terms 10-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 2033. 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 to be presented (if extreme shock even after disregarding the one- off breach, only that stress test (with a one-off breach) would be happens the most 2/T The magnitude of shocks used for the commodity price shock stress test are based on the commodity prices outlook presented. research department. prepared by the IMF 48 INTERNATIONAL MONETARY FUND --- Page 52 --- HAITI Figure 2. Haiti: Indicators of Public Debt Under Alternatives Scenarios, 202 3-43 PV of Debt-to- GDP Ratio Most extreme shock is Natural disaster 2023 2025 2027 2029 2031 PV of Debt- -to- -Revenue Ratio 2033 2035 2037 2039 2041 2043 Debt Service- to- Revenue Ratio Most extreme shock is Natural disaster Most extreme shock is Natural disaster 20232 2025 2027 2029 2031 2033 20352 2037 2039 2041 2043 Baseline 2023 2025 2027 2029 2031 2033 2035 2037 2039 2041 2043 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 18% 18% Domestic short- term 0% 0% Terms of marginal debt 82% 82% External MLT debt Avg. nominal interest rate on new borrowing in USD Avg. maturity (incl, grace period) 1.6% 1.6% Avg. grace period Domestic MLT debt 2039 2041 2043 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 18% 18% Domestic short- term 0% 0% Terms of marginal debt 82% 82% External MLT debt Avg. nominal interest rate on new borrowing in USD Avg. maturity (incl, grace period) 1.6% 1.6% Avg. grace period 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 financing to -9.1% -9.1% the stress tests in the public DSA. Default terms of covert the additional financing needs generated by the shocks under Sources: Country marginal debt are based on baseline 10- -year authorities; and staff estimates and projections. 1/T The most ex xtreme stress test is the test that yields projections. also presented (if any), while the one- off breach is deemed thel highest ratio in or before 2033. The stress test with a one off breach breach happens to be the most extreme shock away for mechanical signals. When a stress test with a IS breach) would be presented. even after disregarding the one- off breach, only that one off stress test (with a one- off INTERNATIONAL MONETARY FUND 49 --- Page 53 --- HAITI Figure 3. Haiti: Drivers of Debt Dynamics-Baseline Scenario External Debt Gross Nominal PPG External Debt Debt-creating Flows (in percent of GDP; DSA Unexpected Changes in Debt 1/ vintages) (percent of GDP) (past 5 years, percent of GDP) Current DSA BResidual Previous DSA DSA-2016 proj - DP Price and 2 Interquarble range (25- 75) excha ge rate Real GDP growth Changein PPG debt 3/ Nominal est te D rent Median account FDI debt 5-year 5-year nexpected Dis on across LICS 2/ historical projected ges change change Public Debt Gross Nominal Public Debt Debt-creating Flows (in percent of GDP; DSA vintages) Unexpected Changes in Debt 1/ (percent of GDP) of DResidu (past years, GDP) Cur rrent DSA percent Previous DSA proj. DSA 2016 Dother debt creating gflows 10 Interquarti range (25-7 tile 75) BReal Exchange - rate iation 0 A OK RPESa growth Changein debt - - - OR eal interest rate -10 a Primary defi ficit -5 -20 ebt Medan 88 D9 R % a m E 5- year 5- -year Con R 0 R a A a A A R R R R historical projected unexpected Distributi across LICS 2/ change change 15 changes 1/ Difference betw een anticipated and actual contri ributions on debt ratios. 2/1 Distribution across LICs for wh hich LICI DSAS w ere produced. 3/ Given the relatively low private external debt for average low- -income countries, a ppt change in PPG external debt should of the external debt dynamics equation. bel largely explained by the drivers 50 INTERNATIONAL MONETARY FUND - year 5- -year Con R 0 R a A a A A R R R R historical projected unexpected Distributi across LICS 2/ change change 15 changes 1/ Difference betw een anticipated and actual contri ributions on debt ratios. 2/1 Distribution across LICs for wh hich LICI DSAS w ere produced. 3/ Given the relatively low private external debt for average low- -income countries, a ppt change in PPG external debt should of the external debt dynamics equation. bel largely explained by the drivers 50 INTERNATIONAL MONETARY FUND --- Page 54 --- HAITI Figure 4. Haiti: Realism Tools Fiscal Adjustment and Possible Growth Paths 1/ 3-Year Adjustment in Primary Balance (Percentage points of GDP) 3.0 DDistribution 1/ Projected 3-yr adjustment 3-year rPB adjustmento greater than a Spercentagep poins ofGDP e approx topquartile E 2017 2018 2019 2020 2021 2022 2023 2024 ac $ Multiplier= 0.2 Multiplier 0.4 Baseline -Multiplier=0.6 - - - Multiplier-0.8 since 1/Bars refer to annual sides scale) andl lines show 1/ Data cover Fund- -supportedp dprograms for LICS (excluding emerg gency financing) approveds projectedfiscala differentf adjustment/right-hands fiscal hand sides scale). 1990. The size of yeara adjustmentf from program inceptionist found ont theh horizontal axis; the possible real GDP growth paths under multipliers (leftperc of sampleist found on the vertical axis. Rates Contribution to Real GDP growth Public and Private Investment (percent of GDP) (percent, 5- year average) 2.0 1.0 0.5 0.0 Proje ed SA 0.5 1.0 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 Gov. Invest. Curr. DSA Contri ribution of other factors Priv. Invest. Curr. DSA Contribution of government capital INTERNATIONAL MONETARY FUND 51 Rates Contribution to Real GDP growth Public and Private Investment (percent of GDP) (percent, 5- year average) 2.0 1.0 0.5 0.0 Proje ed SA 0.5 1.0 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 Gov. Invest. Curr. DSA Contri ribution of other factors Priv. Invest. Curr. DSA Contribution of government capital INTERNATIONAL MONETARY FUND 51 --- Page 55 --- HAITI Table 2. Haiti: Structure of Public Debt and Debt Service (Fiscal-year basis) Debt (at end 2021) Debt Service In percent of 2021 2022 2023 2021 2022 2023 US$ millions total debt GDP US$ millions In percent of GDP Total 4727.2 100.0 27.1 123.9 124.0 124.7 0.7 0.7 0.6 External 2019.1 42.7 11.6 123.9 124.0 124.7 0.7 0.7 0.6 Multilateral creditors 256.2 5.4 1.5 20.2 20.5 21.4 0.1 IMF 162.8 3.4 0.9 11.9 12.3 13.3 0.1 0.1 OPEC 0.1 0.1 0.1 41.4 0.9 0.2 5.2 5.1 5.0 0.0 0.0 IFAD 52.0 1.1 0.3 3.1 3.1 3.1 0.0 IDA 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Bilateral creditors 1810.2 38.3 10.4 103.7 103.5 103.3 0.6 Paris Club 0.5 0.5 Non-Paris Club 1810.2 38.3 10.4 103.7 103.5 103.3 0.6 Venezuela 1497.0 31.7 8.6 96.6 96.5 0.5 0.5 PetroCaribe 96.5 0.6 0.5 0.5 1471.0 31.1 8.4 94.5 94.5 94.5 0.5 BANDES 26.0 0.6 0.1 2.1 2.0 2.0 0.5 0.5 Taiwan, Province of China 313.2 6.6 0.0 0.0 0.0 Bonds 1.8 7.1 7.0 6.8 0.0 0.0 0.0 Commercial creditors Other international creditors 7.8 0.2 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Domestic 2708.1 57.3 15.5 Held by non-residents, total Held by residents, total 2708.1 57.3 15.5 Loans, total 2708.1 57.3 15.5 BRH 2063.6 43.7 11.8 Other creditors (incl.T-Bills) 644.6 13.6 3.7 Memo items Collaterized debt Contingent liabilities 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Nominal GDP (US$ millions) 21016.8 0.0 0.0 Sources: Haitian authorities, and Fund staff estimates. 52 INTERNATIONAL MONETARY FUND 1 57.3 15.5 BRH 2063.6 43.7 11.8 Other creditors (incl.T-Bills) 644.6 13.6 3.7 Memo items Collaterized debt Contingent liabilities 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Nominal GDP (US$ millions) 21016.8 0.0 0.0 Sources: Haitian authorities, and Fund staff estimates. 52 INTERNATIONAL MONETARY FUND --- Page 56 --- Scenario, 2020-2043 Framework, Baseline Haiti: External Debt Sustainability Table 3. indicated) Percent of GDP, unless otherwise (In Averages 8/ Projections Mistorical Projections Actual 2026 2027 2028 2033 2043 Definition of external/ domestic debt Residency-* based 2020 2021 2022 2023 2024 2025 .5 12.8 13.6 13.6 betw the wo No 11.6 10.8 10.9 113 113 11.5 11.5 12.5 5.7 12.8 10.9 E NE 10.8 ternal debt (not 1/ (PPG) : 11.6 1.0 ofwhich public and publicly guaran nteed 0.4 0.1 0.1 02 03 .2 .0 -63 1.7 -04 0.0 0.0 0.1 -0.3 1.3 0.0 0.7 : Changei nexternal debt 1.0 3.8 0.4 0.4 0.5 0.5 21.5 22.4 entified net debt- creating flows 1.2 0.6 : 22.8 226 21.9 21.5 225 Debt Acc cumula ation Non-interest current accot leficit 220 18.9 22.3 22.7 6. 0.0 0.1 -0.3 1.3 0.0 0.7 : Changei nexternal debt 1.0 3.8 0.4 0.4 0.5 0.5 21.5 22.4 entified net debt- creating flows 1.2 0.6 : 22.8 226 21.9 21.5 225 Debt Acc cumula ation Non-interest current accot leficit 220 18.9 22.3 22.7 6. 6.8 7.0 7.1 9.6 29.6 3.5 Deficit inbala anc goods and 0 0 28.9 5.6 29.4 296 29.6 9.1 28.8 19.9 296 199 -20.2 -19.1 -20.6 Exports 29.0 249 192 22.9 21 9 -22.0 -21.6 -210 20.3 0.3 04 0.6 3.0 Imports infl -229 2.7 23 1.7 -03 Net current tran (nega ve -09 -0.8 -03 -0.4 -0.5 -05 0.5 05 -0.8 1.2 2.5 ofwhich: officiol et ow) -0.3 02 .4 0.6 0 0.1 Other current account ows (ne at 0.2 06 0.4 0.1 0.1 : 0.1 0.1 : 3.0 0.1 0.1 0.1 t rolinegative inflow) 0.1 -02 Endogenour debi.dynam mics2/ 0.1 0.1 2 0.2 02 -02 Contributiont rom nominal interestr ate 0.5 0.8 0.7 Contribution fromreal GDP growth 05 0.4 0.2 0.1 0.4 .6 Contribution fromprice andexchange ate anges 5.3 .1 0.0 0.0 0.0 00 Radall/ -0.5 04 0.0 00 0.5 ofwhich exceptional financing 13.3 20.8 7.5 .8 8.6 74 7.3 7.3 186.6 323.3 2029 2031 Sustainability indic cate ors 108.7 108.1 107.1 106 106 120.6 10.0 24.1 2023 2025 2027 PVotP PPG external debt- -to- GDP ratio 112.4 8.4 1.9 8.3 8.3 9.3 19.8 Pvotp PPG external debt- to- exports ratio 11.7 9.9 9.3 8.5 7.8 8.2 7.8 297.1 - Rate ofDebt Accumulation (KofGDP) PPG debts service to exports ratio 13.1 10.0 10.5 132.7 146 6.8 Grant equkalenttrancinge service- ratio element ofnew! borrowing g(Nrightscale) PPGd debt -to-revenuer (Million ofU.S. dollars) Gross external ng need 0.8 External Idebt (nominal) 1/ Key macroeconor mic assul mp ons 1.0 0.8 mofwhich: Private Real GDP growth (in percent) 0.3 0.8 GDP deflator inUs dollar terms nge npercent) 3.7 Effective interest rate (perce ent) 4/ 5.7 Growth of exports ofG&S (US dollar terms, inpercer 24. PPGd debt -to-revenuer (Million ofU.S. dollars) Gross external ng need 0.8 External Idebt (nominal) 1/ Key macroeconor mic assul mp ons 1.0 0.8 mofwhich: Private Real GDP growth (in percent) 0.3 0.8 GDP deflator inUs dollar terms nge npercent) 3.7 Effective interest rate (perce ent) 4/ 5.7 Growth of exports ofG&S (US dollar terms, inpercer 24. 7.8 Growth ofi imports ofG8S(USd dollar terms, inpercent) 1307.8 2.6 element ofr new public sector borrowing (in ent percent) 138.9 3.0 3.6 Grante Goverr oment revenues lecludinggrant perce ofGDP) 68.7 652 66.7 72.7 Aid flows (in MilionofUS dollrs)S/ 6/ 35.1 77.7 76. 77.0 30,267 3,590 Grant- -equivalent financing percent ofGDP)6 financing) 6/ 21,160 22,835 713 24,545 25317 3.7 4.8 3.8 Grant- equivalentf financing (inpero ent external 14,508 21,017 ,135 5.1 3.8 3.8 No ominal GDP (MilionofUS dollars) 44.9 E ominal dollar GDP growth 20.8 120.6 1866 323.3 Memor andum items: 0.0 PVO ofexternal debt7/ 9.3 2029 2031 2033 perc ent of fexports 11.7 2023 2025 exports ratio I Total xternal debt servicePV of PPGe external debti (inMiliono ofUSd dollars) (PVt- PVt- 1/GDPI (inpercent) debt atio 5.1 23 Non- interest current account deficit that stabilizes I ands staff estimates and dprojections deflator JS. dollar terms Enomin nal appred ciation ofthel loca rrency. and share Sourc rces Country authonties ate GDP growt rate growthr rate ofGDP Includest both public and.privates sector external debt. previous period debt ratio, withr inal intere ate changes 2/ Derived astr 9 p(1+g) Ea(10V01 1ngrprgltimesp intotale external debt. For projections also includes co ontribut ionf from pri ice and exchanger externald debt and valuation adjustme - of flocal currency denominatede changes arrearsa and debt relief: changes gross foreign assets: 3/Includes sexceptionall financing (Le. divided by previous period debt stock. a 4/Current- year interest paymentsd loans, and debt relief. (differenceb betw the ace value and thePVofr newd debt). 5/ Defined asgrants concessionall providedd directly to the gover ment and through newt borrowing Grant- equivalenti financing includes.g grants; sface value are over the firsty year ofprojection and the next 10years. Assumes that PV ofprivates sector debt isequivalenttoits availability, whe ereas projections aver erages are derivedover thepast 10y years, subjectto.datas S 8/ Historical averages generally S 4/Current- year interest paymentsd loans, and debt relief. (differenceb betw the ace value and thePVofr newd debt). 5/ Defined asgrants concessionall providedd directly to the gover ment and through newt borrowing Grant- equivalenti financing includes.g grants; sface value are over the firsty year ofprojection and the next 10years. Assumes that PV ofprivates sector debt isequivalenttoits availability, whe ereas projections aver erages are derivedover thepast 10y years, subjectto.datas S 8/ Historical averages generally S --- Page 57 --- Scenario, 2020-2043 Framework, Baseline Public Sector Debt Sustainability Table 4. Haiti: indicated) unless otherwise K (In Percent of GDP, Average6/ Projections Actual Histori ical Projections - - 2024 2025 2026 2027 2028 2033 24.5 29.7 Definition of Residency2020 2021_ 2022 2023 26.8 27.1 27.9 289 35.3 25.7 12.8 13.6 ernal omestic debt based 22.7 27.3 26.1 26.4 10.9 11.1 113 11.5 12.5 18.9 11.2 10.8 differe rence blic debt 1/ 9.8 R sthere m naterial No ofwhiche sector external debt 04 03 0.7 10 0.4 0.8 etweenthetwo criteria? 42 4.4 0.2 1.1 03 0.5 0.8 2.0 2.6 ublic sector debt 3.2 0.3 .4 2.6 2.5 2.6 2.7 9.7 9.3 nge pul 21 2.2 13 2.5 Public sector debt 1/ ntified debt- ating flows 8.6 12.0 mi ted Primary deficit 2.3 12.7 11.8 ich local- ancy Revenue and.grants 10.5 24 9.9 10.9 11.5 113 11.7 1.8 -1.6 .5 reign ency der ofw which: grants 9.6 4.0 3.2 2.2 2.1 which: Prir mary est 7.7 1.1 2.9 22 2.1 20 1.3 debtdynamics 25 1.8 1.6 Contributiont trominterest rate/growth differential 3.7 04 0.4 04 04 0.4 ofwhich contribution from erage eal interest 4 0.1 0.0 0.0 ofwhich contribution reai GDP growth 68 2.8 0.2 .0 .0 .0 Contribution from real xCh nge depre 0.0 0.0 0.0 00 00 debt-creating flows 00 0.0 00 0.0 0.0 Omheridentifled receipts (negative) 00 0.0 00 3 00 04 04 0.4 ofwhich contribution from erage eal interest 4 0.1 0.0 0.0 ofwhich contribution reai GDP growth 68 2.8 0.2 .0 .0 .0 Contribution from real xCh nge depre 0.0 0.0 0.0 00 00 debt-creating flows 00 0.0 00 0.0 0.0 Omheridentifled receipts (negative) 00 0.0 00 3 00 : Privatization ation : Recogntion of contingentli hiabi eg bank scapit 0.1 -0.1 0.0 00 E Debt trelief(HIPC and the 2.8 0.4 .0 Other debt creating reducing flow specity) 2023 2025 2027 2029 2031 2033 Rudeal 23.7 24. 25.1 29.9 43.6 23.9 22.9 23.1 23.5 258.5 261 266.5 304.5 411.8 Sustainability indicators 279.6 260.7 257.4 269.1 73.8 87.1 113.7 197.6 ofwhich: heldbyr residents PVofpublic debt-to- -GDP ratio2/ 8.1 7.9 25.5 45.6 61.4 0.9 14.0 heldby non- residents pvofp public debt-t to revenue and grants ratio 12.7 10.3 2.8 4.8 ofwhich: Debts service- to-r revenue andg grants sratio3 31 30 20 Gross financing need 1.5 1.5 0.8 0.8 1.5 18 Key macroeco conomic and fiscal assumptions -33 0.9 0.9 09 5.6 10.6 Real GDP growth (in percent) debt (inp percen nt) 11.0 10.5 Average nominal interestrated on externa 15.9 3.5 Average eal interestr rate on domestic debt(inpercent) 40.7 1.8 12.9 Real exch inger rate depreciation(is perc cent, indicates depreciation) 20.6 26.1 1.8 1.9 5.5 Inflatio onr ate (GDP deflator, inpercent) deflator percent) (deflatedt by GDP 00 00 2027 2029 2031 Grow wth ofr real; orimary spending 2023 2025 Primary deficit that stabilizes the debt- 10-GDP ratios/ sector debt) PV ofcont tingent liabilities (not includedi inpublics Sourc ces Country authorities and staffestimatesa nt. Definitiono and projections. of fexternal debt isi Residency- based. IDSA the size of differ ere enc ces dependi ling exchanger rates project ons 1/Coverage fdebt The general governmen the DSA differs from the external with 2/ The underly lying pVofe external debt- to- -GDPI ratio under public medium and long -term, ands short- term debt. debt creating/reducingt flows. Debt serviceis sdefined as thes sumofi interesta and amortizationofr debt service plus thes stock ofshort- -term debt theendofthel last period debt ratio and onlyi other inthey year inquestion. Gross financing needi defineda as the primary deficitplusd debt. -to GDP ratio aprimary surplus). which would stabilizes the first year ofprojectiona andthen next 10years. 5/Defineda dasaprimary deficit minus change the public 10years. subject to data availability. whereas project tions aver rages are overthef 6/ Historical averages are generally derived over thep past defined as thes sumofi interesta and amortizationofr debt service plus thes stock ofshort- -term debt theendofthel last period debt ratio and onlyi other inthey year inquestion. Gross financing needi defineda as the primary deficitplusd debt. -to GDP ratio aprimary surplus). which would stabilizes the first year ofprojectiona andthen next 10years. 5/Defineda dasaprimary deficit minus change the public 10years. subject to data availability. whereas project tions aver rages are overthef 6/ Historical averages are generally derived over thep past --- Page 58 --- HAITI Table 5. Haiti: Sensitivity Analysis for Key Indicators of Public and Publicly Guaranteed External Debt, 2023-2043 (In Percent) 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 Projections 2033 1/ 2034 2035 2036 2037 2038 2039 2040 2041 2042 2043 PVofd debt- to GDPr ratio Baseline A. Alternative Scenarios 12 14 15 anables their historical 023 20 21 22 24 25 27 28 Bound Tests Real GDP growth Pris imary balance B3. Exports Otherf flows 3/ 85 Depreciation 86 Combin ationof81 85 Tailored Tests Combir inedconti es Natural disaster C3. Commoditys price C4 Market Financ ncing Thre est ld Baseline Alternative Scenarios Key vari riablesat ttheir 128 38 149 172 193 214 235 255 276 295 313 343 359 402 430 455 184 B. Bound Tests B1 ReaGDPg growth Primary ybalance B3. Exports B4 Other flows 3/ B5. Depreciat ation B6. Combir B1 85 C. Tailored Tests C1 Combined contin jent liabilitie ies Naturald disaster C3 Commodityp price C4. MarketF Financi ng Threshold Baseline Alternative Scenarios var ablesat theirh Bound Tests RealGDP grov owtt Primary bal lan Exports Other fows 3/ Depreciation Combination Tailored Tests Combined contin ent abil C2 Natural Idisaster Commodity price Market Financing Threshold Baseline A. Alternative Scenarios Key iables attheirhistori ical 21 22 23 Bound Tests Real GDP growth B2 Primary balance Exports 84 Other flown 85 Deprecation B6. Combination fB C. Tailoredt Tests C1 Combined es C2. Natural disaster C3 Commoditye price C4. Marketfinancing Thr sho hold Sourcer Country authorities staffe and; projections /AB baldv value indicates abr REREEE 2/Vanablesir includer real GDP growth GDP defator(inS dollar tern ns), on nter Includes officiala landprivate transfers. andFDI INTERNATIONAL MONETARY FUND 55 --- Page 59 --- HAITI for Indicators of Public Debt, 2023-2043 Table 6. Haiti: Sensitivity Analysis Key Projections 1/ 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 2043 PV ofDebt- to GDP Ratio 23 23 23 24 24 25 26 2 27 28 29 30 31 32 34 35 36 38 40 41 Baseline Alternative Scenarios 20 19 19 19 19 19 19 19 A1 Keyvariablesatt their historical rages in 2023- 2033 2/ 23 23 23 B. Bound Tests Real GDP growth B2 Primary balance B3 Exports B4. Others flows BS. Depreciation B6. Combination.ofB1: 85 C. Tailored Tests C1. Combined contingent liabilities C2. Naturaldisaster C3. Commodity price C4. MarketF Financing na 55 55 55 55 55 55 19 19 19 19 19 19 19 A1 Keyvariablesatt their historical rages in 2023- 2033 2/ 23 23 23 B. Bound Tests Real GDP growth B2 Primary balance B3 Exports B4. Others flows BS. Depreciation B6. Combination.ofB1: 85 C. Tailored Tests C1. Combined contingent liabilities C2. Naturaldisaster C3. Commodity price C4. MarketF Financing na 55 55 55 55 55 55 55 55 55 55 55 Public debt benchmark Debt- to Rev Rat tio 257 269 266 273 2 281 289 23 333 344 56 368 Baseline A. Alternatives Scenarios 247 242 235 230 225 221 218 215 213 212 212 212 212 212 214 211 210 A1 Key variablesatt their historical ages 2023- 2033 2/ 261 255 263 B. Bound Tests ResGDP growth 261 270 B2 Primary balance 261 27 B3 Exports 261 26 B4. Otherf flows B5 Depreciation B6. Combination of 85 C. Tailored Tests Combinedo contir ngent liabil C2. Naturaldisaster C3. Commodity price C4 Market Financi ing Del 25 46 87 94 117 122 127 134 Baseline A. Alternative Scenarios 61 72 82 85 87 87 85 85 86 87 88 A1 Key variablesat attheir historical ge 20 23 B. Bound Tests 08 117 125 132 138 143 147 153 60 67 B1. ReslGDP growth 105 10 14 117 120 125 B2. Primary balance 101 107 112 115 119 123 B3. Exports 04 111 B4. Otherf fiows 3/ 95 100 108 111 115 85. Depreciation 99 105 B6. Combination.ef81- B5 C. Tailored Tests C1. Combined contir ngent liabilities C2 Natural disaster C3. Commodity price C4. Market Financing Sources Country authonities ands staffestimatesa and; dprojections 1/Abold valuei indicates abreachofthet benchmark. 2/ Variables include real GDP growth. GDP deflator andp primary deficit tin inperc ent of GDP 56 INTERNATIONAL MONETARY FUND ows 3/ 95 100 108 111 115 85. Depreciation 99 105 B6. Combination.ef81- B5 C. Tailored Tests C1. Combined contir ngent liabilities C2 Natural disaster C3. Commodity price C4. Market Financing Sources Country authonities ands staffestimatesa and; dprojections 1/Abold valuei indicates abreachofthet benchmark. 2/ Variables include real GDP growth. GDP deflator andp primary deficit tin inperc ent of GDP 56 INTERNATIONAL MONETARY FUND --- Page 60 --- HAITI III. External Sector Assessment Annex FY2021 is assessed to be broadly in line with The external position of Haiti in Overall Assessment: policies. fundamentals and desired macroeconomic medium-term should continue to move toward a marketPotential Policy Responses: The authorities market premium, enhance external (FX) rate to eliminate the parallel excess determined foreign exchange Intervention should be limited to smoothing sustainability, and improve competitiveness. requirements and intervention should market expectations. FX surrender volatility and stabilizing including on exporters and remittancecarefully against the costs of these policies, be weighed dependent households. Assets and Liabilities: Position and Trajectory Foreign of about 5.6 percent of GDP in FY2021. Gross Background. Haiti had net external liabilities of GDP, with the central bank's estimated at 15.5 percent external assets are provisionally of total gross external assets. Gross reserves at about $1.8 billion or 55 percent for international with foreign direct investment (FDI) accounting external liabilities were 21.1 percent of GDP, consisting of public external debt. of these liabilities and about 50 percent donor grant about 45 percent terms. After the 2010 earthquake large external debt is on concessional Most public during FY2010-2013. Subsequently public inflows contributed to a positive net asset position NIIP. increased while foreign reserves declined, reducing external debt deficits, Haiti's NIIP/GDP ratio is projected to Assessment. Given persistent current account CA adjustment is not necessaryin over the medium term. While a significant moving worsen moderately reducing the depletion of FX reserves by the immediate term given development needs, would exchange rate and enhancing competitiveness toward a more market-determined could also increase the local Haiti's NIIP in the medium term. Such a movement assets. strengthen further strengthening gross external currency value of Haiti's FX reserves, 40 Net Internationall Investment Position (NIIP) (Percent of GDP, eop) a 20 22 8 V 6 E M ASS Banking sector BO Direct investment - Other investment assets -40 vzn Nonbanking sector VZZA Public external debt Net FX reserve es of monetary authorities Net IIP EE Other nv estme ent liabilities J 60 0 a g 60 Sourc he tepublic Haiti an d IMF staff Debt Assets: Gross Liab.: 21.1 Debt Liab.: 10.7 20211 (% GDP) NIIP: -5.6 Gross Assets: 15.5 8.5 INTERNATIONAL MONETARY FUND 57 M ASS Banking sector BO Direct investment - Other investment assets -40 vzn Nonbanking sector VZZA Public external debt Net FX reserve es of monetary authorities Net IIP EE Other nv estme ent liabilities J 60 0 a g 60 Sourc he tepublic Haiti an d IMF staff Debt Assets: Gross Liab.: 21.1 Debt Liab.: 10.7 20211 (% GDP) NIIP: -5.6 Gross Assets: 15.5 8.5 INTERNATIONAL MONETARY FUND 57 --- Page 61 --- HAITI Current Account about 0.5 percent of GDP in FY2021 from Haiti's current account surplus halved to FY2020. Continued strong growth Background. picked up from a low base in 1.1 percenti in FY 2020 as imports Haiti is one of the largest inflows also contributed to rising current receipts. of GDP in remittances net private transfers of about percent recipients of remittances in the region, receiving in and services worth about 19 Remittances are offset by a large trade deficit goods of GDP in in FY2021. and services reached about 25 percent percent of FY2021 GDP. Imports ofgoods of GDP worth of total imports in the FY2021, with oil imports accounting for about 4 percent and are impacted by factors Haiti's goods exports are low in regional comparison and road same period. rate. These factors include poor port not directly linked to the real exchange and water; and Haiti's legal and regulatory infrastructure; limited availability of credit, electricity, by a concentra ration of vulnerabilities to exogenous shocks are exacerbated - environment. Haiti's (apparels account for more than three exports, both in terms of product lines and destinations absorbs about 70 percent); dependence on exports, of which the United States quarters of goods disasters. and natural imports of essential products; 18 Exports of Goods 60 Current Account Balance 16 Percent of GDP; average over 2018-21) (Percent of GDP) 2 2 a 2 - a - - a -20 S La 1 a a a 2 A - a 3 Goods exports RUUTISY CIS Goods Income imports balance -40 Services transfers balance CZIZZA Priv ivate transfers Official Current account balance Haiti Other members of the Trade balance Caribbean Community -60 (CARICOM, average) R Sources: IMF, World Economic Outlook database and IMF staff calculations. Source: Bank of the Republic of Haiti and IMF staff calculations. model results would indicate that results of Haiti's EBA-lite CA Assessment. The quantitative fundamentals and desirable FY2021 CA balance is broadly in line with medium-term Haiti's policies. related to the EBA-lite CA model, which includes adjustors for temporaryfactors GDP based on The 2021 CA gap of 1.3 percent of 2021 COVID-19 pandemic, found a model-identified of GDP and a norm of -0.7 percent of current account of 0.7 percent CA gap, with a cyclically-adjusted about4.4 percent of GDP to the model-estimated GDP. Policy gaps contributed factors and residuals (see table below). to unidentified country-specific the restattributable semi-elasticity to 0.3 from about 0.1, Staff adjusted upward the model-based CA-REER elasticity for Haiti was too low given Haiti's reflecting staff's assessment that the model-given value chains and a low with little integration into global status as an open, fragile economy import and export elasticity measurement undiversified export base. Staff used a 5-year and of GDP. weighted by 2021 import and exportshares 58 INTERNATIONAL MONETARY FUND factors and residuals (see table below). to unidentified country-specific the restattributable semi-elasticity to 0.3 from about 0.1, Staff adjusted upward the model-based CA-REER elasticity for Haiti was too low given Haiti's reflecting staff's assessment that the model-given value chains and a low with little integration into global status as an open, fragile economy import and export elasticity measurement undiversified export base. Staff used a 5-year and of GDP. weighted by 2021 import and exportshares 58 INTERNATIONAL MONETARY FUND --- Page 62 --- HAITI Haiti: Model Estimates for 2021 (in percent of GDP) CA model REER model CA-Actual 0.5 Cyclical contributions (from model) (-) 0.0 COVID-19 adjustor (+) 1/ 0.5 Additional temporary/statistical factors (+) 0.0 Natural disasters and conflicts (-) 0.3 Adjusted CA 0.7 CA Norm (from model) 2/ -0.7 Adjustments to the norm (+) 0.0 Adjusted CA Norm -0.7 CA Gap 1.3 -1.3 o/w Relative policy gap 4.4 Elasticity -0.30 REER Gap (in percent) -4.5 4.5 1/ Additional cyclical adjustment to account for the temporary impact of the pandemic tourism (0.47 percent of GDP). 2/ Cyclically adjusted, including multilateral consistency adjustments. The model-based results from the EBA-lite CA model, as well as the results of the EBA-lite REER model, both suggest that Haiti's FY2021 external position is broadly in line with the level suggested by fundamentals and desirable policies. Staff note that the results of the CA-model should be interpreted with caution as the political crisis, the security and law and order situation, supply-side disruptions and containment measures from the COVID-19 pandemic led to demand-related import compression that artificially strengthened the current account balance relative to fundamentals. Hence staff's assessment is that Haiti's external position in FY2021 is broadly in line with medium-term fundamentals and desired macroeconomic policies. While fiscal consolidation over the medium term would help support an improvement in the CA balance, measures are needed to increase productivity and lower private precautionary saving, including via policies that will support greater inclusion (e.g., reforms envisaged under the SMP, including higher spending on social assistance, education and health, and measures to increase financial access). Strengthening the business climate, phasing out FX surrender requirements, and moving toward a more market-determined exchange rate could help exporters, bolstering competitiveness over the medium term. Real Exchange Rate Background. The real effective exchange rate (REER) at end of period (eop) depreciated by about 4.6 percent in FY2021 compared to FY2020, with the nominal effective exchange rate depreciating by 11.2 percent over the same period. However, since end-FY2019, the REER has the authorities' intervention in the FX market to appreciated about 45 percent - reflecting in part INTERNATIONAL MONETARY FUND 59 market-determined exchange rate could help exporters, bolstering competitiveness over the medium term. Real Exchange Rate Background. The real effective exchange rate (REER) at end of period (eop) depreciated by about 4.6 percent in FY2021 compared to FY2020, with the nominal effective exchange rate depreciating by 11.2 percent over the same period. However, since end-FY2019, the REER has the authorities' intervention in the FX market to appreciated about 45 percent - reflecting in part INTERNATIONAL MONETARY FUND 59 --- Page 63 --- HAITI defend the value ofthe gourde, sanctions and on two commercial banks due to marketregulations, new regulations on international violations of FX money transfers. Assessment. The EBA-lite REER model estimates the REER was overvalued by 4.5 (Index, Effective Exchange Rates percent (compared to an CY2010= 100; fiscal- -year averages) undervaluation of 4.5 percent implied by the EBA-lite CA model). Nominal effective exchange rate This overvaluation likely reflects the Real effective exchange rate appreciation episode of the nominal rate in 2020-2021. Going exchange 50 and forward, monetary exchange rate policy should seek to phase out FX surrender requirements and limit FX intervention to smoothing excess volatility, which can allow the gourde to Sources: IMF, Info or ma adjust to a more market-determined level. Staff requirements could lead to a slight findings would imply that a phasing out of these nominal stand by to contain second-round depreciation of the currency. Monetary policy should phasing out monetary inflationary impacts a relaxation of these while financing of the deficit and intervention policies over time. Capital and Financial Accounts: Flows and Policy Measures Background. FDI inflows have averaged about 1.0 lower than the regional average. In FY2021, percent per year since the 2010 reflecting lower disbursement FDI flows were low relative to historic earthquake, offor private projects amid averages, uncertainty. In September 2020, the authorities considerable global and domestic transfer companies to pay dollar remittances introduced regulations that would require rate, and sell 30 percent of FX in gourdes using the BRH's reference money purchased from exchange which themselves are not allowed to remittances to the BRH and 40 percent to banks, is anticipated that FDI flows keep a net open FX position above 0.5 will be in line with historical percent of equity. It relaxation of FX surrender averages in the medium term, requirements and though a risks. improvements in the business climate are upside Assessment. Haiti's FX surrender regime could and some domestic producers if the BRH's jeopardize the operations of the export sector surrender requirements does not reflect reference exchange rate required to be used for the competitiveness. Gradually market conditions, therefore detracting from relaxing the surrender Haiti's fragile context and need for requirements would be appropriate export diversification. given FX Intervention and Reserves Level Background. As of billion, around 12 end-September. 2021, Haiti's gross internationalreserves: stood percent of 2021 GDP and to at about $2.5 Net international reserves (NIR) fell to about equivalent roughly 5.8 months of 2021 imports. central bank's accrual of FX reserve related $452 million as ofend September 2021 due to the liabilities to the banking sector. In August 2021, Haiti 60 INTERNATIONAL MONETARY FUND appropriate export diversification. given FX Intervention and Reserves Level Background. As of billion, around 12 end-September. 2021, Haiti's gross internationalreserves: stood percent of 2021 GDP and to at about $2.5 Net international reserves (NIR) fell to about equivalent roughly 5.8 months of 2021 imports. central bank's accrual of FX reserve related $452 million as ofend September 2021 due to the liabilities to the banking sector. In August 2021, Haiti 60 INTERNATIONAL MONETARY FUND --- Page 64 --- HAITI million, half ofwhich the authorities converted received its SDR allocation of approximately $224 2021 earthquake, the financing needs related to an August to freely usable currency for urgent rate regime is floating, but its de facto crisis, and the pandemic. Haiti's de jure exchange the in the security The central bank tracks developments for regime is a "other managed" arrangement. to domestic prices, implications rate market given its high estimated pass-through path during 2021 exchange and impact on growth. NIR were on a declining In liquidity in the banking system, these have leveled off in 2022. FX sales to defend the nominal exchange rate, though million in the due to about US$117 million in FY2021 and US$16 this context, the BRH on net purchased Adequacy Assessment first six months of FY2022. Nonetheless, and 7.0 Reserve ARA-CC model-based results regulations that channeled dollars to 6.0 despite the formal FX market, a parallel-official 5.0 exchange rate gap emerged in late-2020, 4.0 peaking at about 25 percent in March 2021. 3.0 While the premium declined to an estimated 2.0 4 percent at end-December 2021, the spread 1.0 has widened again in recent months to about in March 2022 (chart). 0.0 LIC reserve 3-month rule Actual 12 percent reserves template Assessment. Gross international reserves is adequate to finance more than against the threecoverage reserve adequacy when benchmarked five months of imports, implying gross model-based results of the IMF's Assessing month import coverage rule of thumb and the metric. However, net external for Credit Constrained economies (ARA-CC) risks Reserves Adequacy that Haiti could be subject to external sustainability buffers are considerably lower, implying liabilities. Efforts to defend the nominal should they be unable to roll over their reserve -related accumulation ofreserve -related liabilities, including through the continued value ofthe gourde, buffers, absence of a strong export sector, highvulnerabilities given the limited to would heighten been volatile, and the lack of a robust macro-framework" reliance on remittances which have FX surrender requirements and limiting fixed exchange rate. Gradually removing while supporta a more volatility would help strengthen external resilience FX intervention to smoothing excessive 3000) providing needed FX to exporters. International Reserves 80 Exchange Rate and FX Intervention 1400 (USS millions) 60 Net centralbank FX sales, USS million -BRHI reference rate (RHS) - NIR, monetary file 40 Parallel EXR( (RHS) NIR, aider memoire GIR, monetary file (RHS) 1500 -20 2 N a 60 10 d6 16 C o 8 8 S a 16 16 0 0 & R 2 & 18 10 3 $ 3 18 8 S 8 $ à 3 1 8 % I a 2 E a à 8 6 a 00 ef 1 g ê e S % A E de 2 X E a 8 Source: BRHa andl IMF staffc calculations. Source: BRH and IMF staff calculations. INTERNATIONAL MONETARY FUND 61 1500 -20 2 N a 60 10 d6 16 C o 8 8 S a 16 16 0 0 & R 2 & 18 10 3 $ 3 18 8 S 8 $ à 3 1 8 % I a 2 E a à 8 6 a 00 ef 1 g ê e S % A E de 2 X E a 8 Source: BRHa andl IMF staffc calculations. Source: BRH and IMF staff calculations. INTERNATIONAL MONETARY FUND 61 --- Page 65 --- HAITI Development Strategy Appendix I. Capacity is low. Over the pasttwo years, Haiti has received 1. The capacity of Haiti's institutions tax policy, public financial extensive TA from FAD, MCM, STA and CARTAC, on tax administration, and national accounts statistics. banking supervision, and monetary, external, price slow, in part due to acute management has been relatively However, the implementation of TArecommendations of a Treasury Single Account (TSA) constraints and political instability. The establishment Similarly, the capacity first TA mission in June 2014 and is still not complete. has been ongoing since the in 2014, has not progressed despite followreorganization of the tax administration, first proposed missions in 2015, 2017, and early 2019. up Box 1. Rebasing of the National Accounts in October 2020, thel last step of a multi -year statistical institute (IHSI) released a rebased GDP series the of national Haiti's by the Fund, World Bank, and France, to improve quality includes an estimate of effort by the IHSI, supported rebased to 2012 fromthe old base of 1987 andi accounts data. The new series was breakdown of the services sector, and updates Haiti to the the informal sector, provides a more detailed both the primary and tertiary sectors increased; on the 2008 System of National Accounts. The shares of while that of investment was revised down. expenditure side, the share of consumptionincressedi was revised up by 65 (74) percent. under the new series for 2019 (2012base year) VS. 1.2 percent Nominal GDP in gourdes under the new series was 2.1 percent on average Annual real GDP growth from 2000-2018 higher based series and a 29 percent appreciation ofthe for before rebasing. The combination of the of FY) contributed to a jump in U.S. dollar GDP gourdes/US dollar exchange rate in September 2020 (end Naturally the higher GDP series led to a sizeable FY2020 of90 percent compared to the previous measure. evident by comparing present ratios to Board drop in all of the estimated fiscal and external ratios, documents from early 2020 (CCRT or RCF board reports). 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 fknowledge, and build improve assistin the coordination of TA and the hands-on TA advisors can Similarly, the preparation by the authorities more intensively than mission-based support. reform has been capacity and feuille de route) ahead of any TA-supported ofa roadmap (note de cadrage staff and facilitate the implementation of proposed found to improve traction with technical changes. term aims to reinforce capacity on the priorities 3. Priorities. The TA program in the near indicated their priorities for TA are to: () needed to achieve the program objectives. The authorities collection; (ii) improve public financial reform tax policy with a new tax code; (ii) strengthen revenue local markets for foreign and strengthen management and fiscal a accountability; (iv) develop data compilation and reporting debt securities; and (v) improve in exchange (FX) and government To ensure maximum effectiveness the pursuit (monetary, price, and national accounts statistics). TA focus on tax and customs administration to objectives, staff propose that Fund reform of of program including governance of state enterprises, mobilize revenues, public financial management policy (including social spending). sector and reduction in fiscal losses, and expenditure the energy 62 INTERNATIONAL MONETARY FUND strengthen revenue local markets for foreign and strengthen management and fiscal a accountability; (iv) develop data compilation and reporting debt securities; and (v) improve in exchange (FX) and government To ensure maximum effectiveness the pursuit (monetary, price, and national accounts statistics). TA focus on tax and customs administration to objectives, staff propose that Fund reform of of program including governance of state enterprises, mobilize revenues, public financial management policy (including social spending). sector and reduction in fiscal losses, and expenditure the energy 62 INTERNATIONAL MONETARY FUND --- Page 66 --- HAITI Capacity development in the transition of the central bank' s financial reporting to IFRS, amendments to the central bank law, foreign reserve management, FX market development and review ofFX regulations and development, anti-corruption legislation, and improving the timeliness and quality oft the Standard Reporting Forms (SRFS) for monetary statistics with calculation of FX reserves consistent with IMF guidelines-would be necessaryin the event ofapproval of a new financing arrangement. Details about TA priorities by department are provided in the table next page. 4. Main partners. Many donors are financing capacity development or providing TA in Haiti. The main financial partners include Canada, the E.U. and the U.S. The main technical partners include USAID (social protection, electricity market and oil import market), the World Bank (social protection, health, transport, AML-CFT, and resilience to natural disasters), the IDB (transport, water and sanitation) and the World Food Program (social protection). To strengthen coordination and improve the effectiveness of TA, a partnership framework (cadre de partenariat) has been in place since May 2017 with the Haitian government and the financial and technical partners in the areas of fiscal reform and public financial management. A similar type of partnership is being considered in the area ofsocial protection. A. Technical Assistance by Function FAD Area Objectives Progress-to-date Risks 1) Strengthent the tax (DGI) and customs (AGD)administrations core functions witha viewto improvingt their performance and Weak and inadequate Tax and contributing tomeetingthe No progress since 2017. governance, inabilityto Customs govermenfsrevenuer goals. Request for financingo ofa long- identify clear prioritiesand Administration 2) Improve performance term expertbythe Revenue lack ofpoliticalwillinthe management and govemance Mobilization Trust Fund. absence ofFund program (leadership, dataintegrity, to implementrelevant transparency, accountability) strategies 3) Prepare the groundworkto introduce a VAT. 1) Fullyi implement the Treasury Single Account and improve Mixed progresssince departure of cashmanagement long-term expert in March2018. 2) Improve public accounting Delays in reform implementation. 3) Improve financialcontrol over Ground rules for the preparation expenditure execution and executionofthe budgetneed Weak Public Financial 4) Strengthenintemaland external to be improvedand followed capacity and political Management controls bylnspection Générale before introducing furtherreforms. instability hinder the des Finances and Courdes TAmissionsare scheduled inJune implementation ofFund' S Comptes (CSCCA)respectively 2022to (i) support development of recommendations 5) Introduce a medium-term a MTBF and the budgetprocess budget framework(MTBF), and (ii) expand the TSA coverage, 6) Introduce pluriannual both in line withr related SMP investment programming structural benchmark. INTERNATIONAL MONETARY FUND 63 capacity and political Management controls bylnspection Générale before introducing furtherreforms. instability hinder the des Finances and Courdes TAmissionsare scheduled inJune implementation ofFund' S Comptes (CSCCA)respectively 2022to (i) support development of recommendations 5) Introduce a medium-term a MTBF and the budgetprocess budget framework(MTBF), and (ii) expand the TSA coverage, 6) Introduce pluriannual both in line withr related SMP investment programming structural benchmark. INTERNATIONAL MONETARY FUND 63 --- Page 67 --- HAITI Area Objectives Progress-to-date Risks The draft Tax Code and Tax Procedure Codeare completed and need to be submittedto Giventhe current absence Undertake consultations onthe new parliament Reformofthe taxofparliament process, Tax tax code and Taxi Procedure Code, related funding jofthe Fonds implementationriskist Policy National d'Education high. and prepare final copies for adoption and Fonds Internala and extemalreview d'Entretien Routier to be tackled process mayleadto separately. TA is scheduled in June- inconsisitendiesorcluanges July 2022to support achievement inpolicydirections. ofthe structural benchmark ontax policy. A reform offuel prices was announced in December 2021, but is not yet fullyimplemented Highrisko of Support the implementation ofthe (notablyonadjustment mismanagement Energy Sector proposedreform offuel prices, and mechanism). Somemore stepsare corruption and political Reform extend reforms to the importmarket needed on gasoline(Mogas9), resistance, High and electricity sector. and supportshould beprovidedto reputational riskt for the affected populations. However, the Fund in case offailure. importmarket has not been Strong vestedi interests. reformed, and there is stillno plan for the snergy/electrichysecdtor. Public Risks to be evaluatedafter Investment Finalize and implement a public Team proposal; FAD PIMA mission the PIMAI is finalized. Management investment management assessment underway. January Significant implementation risks expected. 1) Assess effectivenessofsocial Expenditure spending Policy 2) Identify measures torationalize Team proposal spending MCM Area Objectives Progress-to-date Risks Transition to Gap analysis and preparation ofa Low roadmapfor IFRS Mission occurred, some progress. capacity may delaythe IFRS recommendation). (Safeguards time frame now 2 years out implementation. Doesnot seem priority for BRH. Debt Evaluate the currentstateofdebt Management issuance Politicalinstabitymay hinder the and Market Identifyand address existing gapsin Request by BRH necessary coordinationwiththe Development the regulatory framework ministryoffinance Monetary Important complement for Operations and Diagnostic ofthe legaland work on debt marketand Liquidity operational frameworks Request by BRH FX market development; Management BRH may not see as priority FXMarket FXr market development andreview ofsupporting FX regulations. Request by BRH BRH's limited capacityto Banking Transition to risk basedsupervision Medium-term, donor-financed absorbTA and high Supervision project. turnover ofsupervisorystaf mayhinder Central Bank Provide guidanceto the Bank ofthe TAi is underwayJune -September This TA will not progress. endorse Digital Currency RepublicofHaiti (BRH)onthe 2022to assess the BRH'sreadiness decsiontoissueornot any 64 INTERNATIONAL MONETARY FUND andreview ofsupporting FX regulations. Request by BRH BRH's limited capacityto Banking Transition to risk basedsupervision Medium-term, donor-financed absorbTA and high Supervision project. turnover ofsupervisorystaf mayhinder Central Bank Provide guidanceto the Bank ofthe TAi is underwayJune -September This TA will not progress. endorse Digital Currency RepublicofHaiti (BRH)onthe 2022to assess the BRH'sreadiness decsiontoissueornot any 64 INTERNATIONAL MONETARY FUND --- Page 68 --- HAITI exploration ofa retailCBDC, a priority and identify gaps to beaddressed issue CBDC but provide goal ofthe BRH, focused on maco- before proceeding to the test guidance int thinking economic implications, the legal phase. Staffrecommend a cautious through major issuesand highlight the risksof frameworkand financialintegrity approach. issues, and technologicalchoices. proceedingwithout sufficient preparation. STA Risks Area Objectives Progress-to-date Rebased ICPI was published in November2018. May 2020TA mission (CARTACWorld Bank) Real Sector GDP and price index rebasing supportedt the IHSIto update the Statistics base year for the nationalaccounts from 1987 to 2012 and backcast the GDPseries for FY2001-19. Monetary Reconcile the current monetary Successful mission occurred midStatistics statistics sentto the IMF for 2020. Still excessive lagin surveillancepurpose withthe Standardized Report Form informationavailable inthe reporting. Improvingt the timeliness standardizedreporting' forms and quality ofthe Standardized Review the computationofgrossand Report Forms shouldbe a net foreignreserves prerequisite for approval ofar new program. Government Improvements offiscalstatistics Missions occurred in 2018 and Lack oftractionwiththe Finance compilationand disseminationwith 2020, but little progress SO far with authorities andavailability Statistics respect to classifications, and respect to a comprehensive oftimelyand detailed coverage and scope ofdata. coverage ofallr revenue, source data expenditure, and financingin disseminatedf fiscalstatistics (TOFE) LEG and FIN Progress-to-date Risks Area Objectives Provide advice on the draftofthe new. anti-corruptionlegisationand Comments senth tby LEG on the Lack oftractionwitht the Anti-corruption its compliancewiththel UN Antidraft law authorities Corruption Convention. 1) Clarifythe roles and objectivesof CATF Mutual Evaluation report, eachactor ofthe AMLregime prepared bythe World Bank, was Lack oftractionwiththe 2) Prepare law on countering the publishedinJ June 2018. Haiti authorities, lack oftechnical financing ofterrorism placed on FATFGreyl Listi in 2021. capacityand effectiveness AML-CFT Offer made for TA in drafting laws oflegislative processesdue to meet FATF standards and to non-functioning comply with FATF Action Plan. No Parliament. formal response, / acceptance received. future Fund Follow twoughonscommedision Necessaryfor Safeguards ofthe 2019SafeguardsAssessment financing INTERNATIONAL MONETARY FUND 65 8. Haiti authorities, lack oftechnical financing ofterrorism placed on FATFGreyl Listi in 2021. capacityand effectiveness AML-CFT Offer made for TA in drafting laws oflegislative processesdue to meet FATF standards and to non-functioning comply with FATF Action Plan. No Parliament. formal response, / acceptance received. future Fund Follow twoughonscommedision Necessaryfor Safeguards ofthe 2019SafeguardsAssessment financing INTERNATIONAL MONETARY FUND 65 --- Page 69 --- HAITI CARTAC Area Objectives Progress-to-date Risks Strengthen compilationand Lack oftractionwiththe dissemination ofdataonHait's CARTAC report in. July authorities andavailability External Sector balance ofpayments, improve the published detailed Statistics 2021. oftimelyand qualityand accuracy ofthe data. source data. 66 INTERNATIONAL MONETARY FUND --- Page 70 --- HAITI Appendix II. Letter ofIntent Port-au-Prince, Haiti June 9, 2022 Kristalina GEORGIEVA Managing Director International Monetary Fund Washington, D.C. 20431 Madam Managing Director: multiple shocks including a protracted socio Since 2018, our country has been hit by tremors, a hurricane, an upsurge in crisis, followed in 2021 by an earthquake and repeated His Excellency political in July 2021 of the President of the Republic, violence, and the assassination poverty and had a very adverse impact on Mr. Jovenel Moïse. These shocks have exacerbated in FY2021. In this difficult economic activity, which contracted for the third consecutive has year been our main source of external alongside Haiti and context, the IMF has remained engaged equivalent to around US$360 million related financing since 2019, providing financial assistance under the Rapid Credit Facility, debt of SDR 81.9 million (US$111.6 million) and Relief Trust with a disbursement million) under the Catastrophe Containment relief of SDR 15.2 million (US$22.6 million). Since your meeting with the late President (CCRT), and the 2021 SDR allocation (US$224 on the preliminary measures Moïse in December 2020, we have made notable progress letter is to Jovenel Consequently, the purpose of this discussed, in particular related to governance. Program (SMP). formally request a Staff-Monitored by signaling to donors our commitment We hope that this program will act as a catalyst stability and reforms needed to restore macroeconomic and willingness to implement the policies sound macroeconomic policies and Overall, Haiti must engage in implementing and growth. development partners and restore population improving governance in order to reassure could create the necessary conditions for Satisfactory implementation of the SMP credit tranche. confidence. with the Fund, with financing from the upper negotiating a subsequent program and Financial Policies (MEFP) describes recent The attached Memorandum of Economic program. Given the the objectives and policies of our economic developments and presents to implement the difficult of fiscal financing at this time, we are determined of macro limited sources financing, which has been a source measures needed to reduce the recourse to monetary retail prices for petroleum products. We instability. At first, at the end of 2021, we have adjusted conditions permit and when the with these adjustments when socio-economic intend to continue d'urgence-to support the groups most launched recently under the Programme measures INTERNATIONAL MONETARY FUND 67 Given the the objectives and policies of our economic developments and presents to implement the difficult of fiscal financing at this time, we are determined of macro limited sources financing, which has been a source measures needed to reduce the recourse to monetary retail prices for petroleum products. We instability. At first, at the end of 2021, we have adjusted conditions permit and when the with these adjustments when socio-economic intend to continue d'urgence-to support the groups most launched recently under the Programme measures INTERNATIONAL MONETARY FUND 67 --- Page 71 --- HAITI be implemented. We are also committed to adversely affected by fuel prices fluctuations-will public financial management. We customs revenue collection and improving strengthening tax and ofthe budget deficit and its negative impact this approach to help reduce the monetization public expect while increasing resources for financing priority on inflation and the exchange rate, of social safety net aimed at poverty reduction, scaling up the implementation investments and improving the security climate. programs, finalizing the budget for FY2022 in line measures will be established first by for Fiscal policy and, second, by adopting and publishing a budget with the program's objectives and measures agreed under the SMP. Together with our 2022-2023 consistent with the objectives and not fiscal year non-concessional external borrowing commitments to not contract or guarantee any measures will contribute to ensuring external arrears, these fiscal policy accumulate new payment debt. medium-term sustainability of Haiti's public the a solid anchor and maintain an orderly functioning Monetary policy will aim to establish while limiting money market, also with a view to allowing more flexibility and to ofthe foreign exchange monetary financing of the budget deficit laundering risks. We commit to reducing reserves. Foreign exchange market maintaining a floor for an adequate level of net international The BRH will continue to take interventions will be aimed only at limiting excessive volatility. including revising the risks related to the use of IMF resources, to measures to address safeguard audit for FY2021, and possibly finalizing the transition central bank law, completing the external to monitor the soundness of financial standards. The BRH will also continue and IFRS accounting related, inter alia, to risk-based banking supervision institutions and finalize regulatory texts legal framework for the fight against cybercrime. We are determined to put in place an appropriate with caution towards the and terrorist financing and will continue to proceed money laundering implementation of a digital currency. and promote a period of this SMP will allow to strengthen governance we The twelve-month economic growth. As part of this program, foundation for stronger, sustainable, and inclusive of Social Protection and Promotion" the implementation of the "National Policy based on the will strengthen the coverage of the system of money transfers (PNPPS). We intend to expand shocks in the most vulnerable thus strengthening our efforts to mitigate sector for SIMAST registry, the primary deficit of the nonfinancial public segments of the population. While limiting Ministry of Social Affairs in order to have increased the budget allocation of the social FY2022, we of measures and programs of improve its capacity in the design and implementation protection. with the objectives of our The policies set out in the attached MEFP are consistent as needed and will consult We are ready to take further measures are economic and social agenda. in the MEFP, in line with IMF practice. We before any revisions to the policies set out transfers IMF staff restrictions on the making of payments and committed to not imposing or intensifying multiple currency practices. We international transactions, and introducing or modifying the economic for current that may have an impact on will inform IMF staff of any events or developments 68 INTERNATIONAL MONETARY FUND with the objectives of our The policies set out in the attached MEFP are consistent as needed and will consult We are ready to take further measures are economic and social agenda. in the MEFP, in line with IMF practice. We before any revisions to the policies set out transfers IMF staff restrictions on the making of payments and committed to not imposing or intensifying multiple currency practices. We international transactions, and introducing or modifying the economic for current that may have an impact on will inform IMF staff of any events or developments 68 INTERNATIONAL MONETARY FUND --- Page 72 --- HAITI program in order to jointly examine the consequences and optimal measures to address them, without compromising the program's objectives. We will provide in good time the necessary data and information to enable IMF staff to monitor economic developments and the implementation of the policies set out in the program, in accordance with the attached Technical Memorandum of Understanding or upon request. Please accept, Madam Managing Director, the expression of our highest consideration. Is/ Js/_ Michel Patrick Boisvert Jean Baden Dubois Minister for Economy and Finance Governor of the Bank of the Republic of Haiti Attachments: Memorandum of Economic and Financial Policies Technical Memorandum of Understanding INTERNATIONAL MONETARY FUND 69 --- Page 73 --- HAITI and Financial Policies on Economic Attachment I. Memorandum A. Introduction social and political crises followed by an Since 2018, our country has been hit by protracted of the 1. and the assassination of the President earthquake and subsequent tremors, a hurricane, not to mention the negative effects of the Mr. Jovenel Moïse in July 2021, Republic, His Excellency crisis in Eastern Europe. These pandemic and the adverse effects of the geopolitical which contracted for COVID-19 poverty and had a major impact on activity, a multiple shocks have aggravated 30). Tax revenue and customs revenue as the third consecutive year in FY2021 (ending September deficit was contained at 2.4 percent of GDP both decreased further though the budget more financing came from percentage the backdrop of declining external support, been of GDP in FY2021. Against The social and human costs of the crisis have the central bank, which pushed up inflation. as 'food insecure'in 2021. with more than one third of the population now registered significant, to facilitate a political transition in a peaceful 2. The government has taken measures that includes members of The Prime Minister, Ariel Henry, formed a new government of which are to environment. Accord, the main objectives the former opposition and put in place a political also initiated a dialog with other groups elections for a new government. The government and the establishment of an organize with the aims of building a broad consensus organized by civil society an election timetable. Council tasked with, among other things, preparing Electoral Staff-Monitored Program (SMP) to In this context, we have asked for IMF support under a the Haitian 3. the socio-economic situation and put implement the measures needed to improve make more inclusive and sustainable. This 12which we aim to economy back on a growth path, take stock of the macro situation, strengthen our ending in May 2023 will help us month program efforts to contain inflation and boostgrowth, macroeconomic management capacities, support weaknesses, and take fiscal and monetary policy frameworks, address governance more resources to allocate strengthen social protection. It will also help us raise concrete measures to advance the end of the SMP, to have laid a solid law and order. We therefore intend, by toward restoring credit tranche Fund-supported arrangement. foundation to underpin discussions for an upper Policies (MEFP) presents the baseline This Memorandum on Economic and Financial overall objectives and 4. is based and lays out the macroeconomic scenario upon which our program will It reflects the shared views of and structural policy priorities that we pursue. the macroeconomic how bestto restore economic stability, strengthen the Haitian authorities and IMF staff on foundations for inclusive and sustainable improve social protection, and lay the conditions for all Haitians. governance, reduce poverty and improve the living economic growth that will 70 INTERNATIONAL MONETARY FUND discussions for an upper Policies (MEFP) presents the baseline This Memorandum on Economic and Financial overall objectives and 4. is based and lays out the macroeconomic scenario upon which our program will It reflects the shared views of and structural policy priorities that we pursue. the macroeconomic how bestto restore economic stability, strengthen the Haitian authorities and IMF staff on foundations for inclusive and sustainable improve social protection, and lay the conditions for all Haitians. governance, reduce poverty and improve the living economic growth that will 70 INTERNATIONAL MONETARY FUND --- Page 74 --- HAITI B. Macroeconomic Framework FY2021 and FY2022 have been dominated by the Macroeconomic developments during 5. uncertainty linked to the and demand for goods and services, in the political crisis on the supply situation, and the spillover effects of the crisis and the country's difficult security COVID pandemic the implementation of sound macroeconomic Eastern Europe. Our baseline scenario assumes The scope of these reforms is realistic structural reforms during the SMP period. conflict policies and some situation and the impact of the given the challenges related to the uncertain socio-political could be considered modest, they are in Eastern Europe on the global economy. While they productivity growth and catalyze a recovery of investment and higher essential steps to underpin stronger external financial support. for three consecutive years, including FY2021 (ending 6. Economic activity has contracted 1.8 percent Of the many reasons for this September 30) during which real GDP declined by related supply disruptions, the economic contraction, we would cite: political instability, Mr. Jovenel Moïse, a resurgence of assassination of the President off the Republic, His Excellency private consumption, despite further decline in investment, and suppressed gang-related violence, a was estimated at 15.5 percent remittance inflows and credit growth. Formal unemployment Poverty rates have increased strong the informal market has expanded significantly. reached 25.9 in 2020 (ILO). However, 'food insecure'in 2021 (UN). Inflation and about 4.3 million people were considered in local markets, high monetary financing (y/y) in March 2022, driven by supply disruptions and higher food import percent of alternative sources of financing, oft the budget deficit given the absence in FY2022 with real GDP growth expected prices. Economic activity is expected to rebound modestly is at 27 percent (y/y) at in investment Inflation projected at 0.3 percent, supported by a recoveryi end-September or 26 percent on average. for several years. Tax revenues fell to 5.8 percent 7. Public finances have been under pressure subsidies strained the budget, accounting for of GDP in FY2021 and the costs of petroleum product reducing in order to reacted in FY2021 by expenditures one third oftax revenues. The government 3.2 of GDP in FY2020. For diesel and contain the deficit to 2.4 percent of GDP compared to percent and kerosene), the government used in Haiti (diesel kerosene, two off the three petroleum products 1995 Law which allowed retail prices to adjust announced in December that we would revert to the in December, the price per changes. With increases exceeding 100 percent The regularly to world price by the retail price formula at that time. of these two products rose to the level prescribed domestic debt gallon 24.4 percent at that time. Despite high price of gasoline was increased by only the impact ofthe earlier fuel price amortization this year and some new social spending to mitigate the budget deficit of the of the population, we project to keep increase on vulnerable segments of GDP. nonfinancial public sector (NFPS) at 1.5 percent has been the main source of budget financing in 8. The Banque de la République d'Haiti (BRH) needs of the NFPS in FY2021. contributing about 85 percent oft the gross financing levels, they recent years, financing remained low compared to historical Although external grants and project INTERNATIONAL MONETARY FUND 71 ization this year and some new social spending to mitigate the budget deficit of the of the population, we project to keep increase on vulnerable segments of GDP. nonfinancial public sector (NFPS) at 1.5 percent has been the main source of budget financing in 8. The Banque de la République d'Haiti (BRH) needs of the NFPS in FY2021. contributing about 85 percent oft the gross financing levels, they recent years, financing remained low compared to historical Although external grants and project INTERNATIONAL MONETARY FUND 71 --- Page 75 --- HAITI The government also used half in FY2021, in part related to the August 2021 earthquake. for increased Rights (SDRs) for emergency expenditures, including of the allocation of Special Drawing humanitarian assistance after the earthquake (118). under the effects of fiscal dominance. Net credit to 9. Monetary policy continued to struggle in FY2021 compared to the previous year. the government by the BRH increased by 44.6 percent to accelerate in June. It reached a trend in early 2021 but started in March Inflation was on a downward before dropping to 1.6 percent (m/m) monthly rate of4.1 percent (m/m) in November bills at 10 percent since March 2020, the interest rate on its 91-day 2022. The BRH has maintained benchmark for rates in the banking system, although the transmission to lending rates, the key market remains weak, partly due to the shallow government securities of GDP in FY2021, down account surplus is estimated at 0.5 percent 10. The external current demand recovered. The increase in imports from 1.1 percent of GDP in fiscal year 2020, as domestic additional contribution of the SDR offset higher net transfers. With the The current during FY2021 partially stabilized at 5.8 months of projected imports. allocation, gross international reserves of GDP in FY2022 thanks to continued robust account surplus is projected at around 0.8 percent official transfers. It will contribute to remittance flows, a modest recovery in exports, and higher inflows of foreign direct investment ofthe capital account deficit, driven by modest financing part and an increase in banks' net foreign assets. by the BRH in 2020 to strengthen foreign exchange regulations 11. After the efforts undertaken forces, including with foreign exchange laundering and counter certain speculative 63 in September to fight money dollar rate appreciated rapidly from 121 to market interventions, the gourde/US emerged between the formal rate and the 2020, by about 48 percent. In early 2021, a large spread to about 25 percent. While the rate market rate- estimated on the basis of surveys 10-15 percent. parallel in late- 2021, it has since widened to between decreased to around 5 percent and financing needs of the NFPS of Nevertheless, with domestic instability in FY2021 gross while minimizing the BRH was able to smooth exchange rate fluctuations reserves 3.4 percent of GDP, a stable level of gross international volatility risks in the banking sector and maintaining (see above). deterioration in the macrorelatively stable. However, given the 12. The financial sector appears monitor the sector closely. The capital adequacy environment, the BRH will continue to in FY2021, with economic 20.8 and bank profitability recovered ratio at the end of December 2021 was percent transactions, while non-performing growth in credit and profits from foreign exchange 2022. The measures taken by stronger slightly to 7.7 percent of total loans in February loans (NPLS) increased of the COVID-19 pandemic and a moderate the BRH to support the sector at the beginning banks' portfolios. Bank liquidity securities contributed to supporting accumulation of government source of funding. with the growth of deposits being an important remains high, 72 INTERNATIONAL MONETARY FUND profitability recovered ratio at the end of December 2021 was percent transactions, while non-performing growth in credit and profits from foreign exchange 2022. The measures taken by stronger slightly to 7.7 percent of total loans in February loans (NPLS) increased of the COVID-19 pandemic and a moderate the BRH to support the sector at the beginning banks' portfolios. Bank liquidity securities contributed to supporting accumulation of government source of funding. with the growth of deposits being an important remains high, 72 INTERNATIONAL MONETARY FUND --- Page 76 --- HAITI C. Fiscal Policy and Short-Term Strategy of reducing monetary financing of Fiscal policy in FY2022 will be in line with our objectives the 13. inflation. The fiscal stance in FY2022 is dictated by the deficit by the BRH to help lower the large output gap. Financing would come availability of financing in FY2022, notwithstanding As a result, and despite very the central bank, external financing and domestic borrowing. balance of the from will aim at keeping a floor for the primary difficult economic conditions, fiscal policy of GDP in FY2022. 1 Despite net subsidy target -QT) at a deficit of1.5 percent FY2021), we intend to NFPS (quantitative of 1.1 percent of GDP (0.6 percent of GDP in for spending on petroleum products fiscal space for higher social spending contain other current expenditures in order to preserve December hike in fuel prices and the segments of the population affected by the with vulnerable The modest mobilization of revenues together significant increase in the rate ofi finflation.? will allow a small increase in domesticallyhigher budget support in the next fiscal year deficit at around moderately medium term, we will stabilize the budget financed capital expenditures. In the 2.8 percent of GDP. in in December 2021 to return to regular adjustments 14. The decision taken by the government subsidies and create space for productive fuel prices was a promising step to reduce fuel product prices after December due to However, we were not able to adjust petroleum imported food prices and expenditures. by the population arising from higher the additional hardship experienced fuel social unrest. We also are waiting for the with the difficult security situation that could to have a positive impact on the vulnerable measures recently launched (see 121) compensating before moving ahead with additional increases. groups targeted for support, to decline by 0.9 percent of GDP excluding fuel subsidies are projected 15. Current expenditures tax rates on many products, such as alcohol, tobacco, in FY2022. On the revenue side, we increased for in the draft General Tax Code. We and soft drinks, by aligning excise taxes with those provided correct delays in collecting registration intend also to eliminate a number of customs exemptions, increase in revenues. We adopted and duties, and strengthen controls for an overall modest under the SMP (prior action). FY2022 in line with the objectives agreed published a budgetfor financing to help lower inflation. Gross financing 16. We intend to significantly reduce monetary to 3.4 percent of GDP in at 2.9 percent of GDP, compared needs for FY2022 are now estimated be at 2.2 percent of GDP in FY2022 by the BRH will capped FY2021. Financing of the government of GDP in FY2021. As BRH financing equivalent to to BRH financing of 2.9 percent financing (QT) as compared the BRH will sterilize the remaining 1.5 percent of GDP is estimated to be non-inflationary, and, if necessary, FX interventions. Residual absorption operations of0.7 percent of GDP by liquidity covered domestic borrowing and external needs of0.7 percent of GDP will be by financing and to net internatio nal adjustor to the floor of the NFPS primarybalance of 1The program includes an asymmetric is lower than projected. Please see the Technical Memorandum reserves (NIR) if external budget support Understanding, Annex II. 21 Total budgetarysubidyless excise revenue. INTERNATIONAL MONETARY FUND 73 be non-inflationary, and, if necessary, FX interventions. Residual absorption operations of0.7 percent of GDP by liquidity covered domestic borrowing and external needs of0.7 percent of GDP will be by financing and to net internatio nal adjustor to the floor of the NFPS primarybalance of 1The program includes an asymmetric is lower than projected. Please see the Technical Memorandum reserves (NIR) if external budget support Understanding, Annex II. 21 Total budgetarysubidyless excise revenue. INTERNATIONAL MONETARY FUND 73 --- Page 77 --- HAITI of a of the 2021 SDR allocation would financing. If necessary, additional use portion pacte" concessional In addition, we will update the financing contribute to the financing of the government. Finance in line with these objectives. We will pursue between the BRH and Ministry of Economy and of the government is projected to in FY2023, although central bank financing demand by the same principles GDP after FY2022, reflecting a prudent forecast of stabilize at around 2.0 percent of domestic banks for BRH securities. priority. As the draft General Tax Code Revenue mobilization remains a key government by the end of 17. these documents will be finalized (CGI) and the draft Tax Procedure Codes are ready, in the General Tax Code and tax The simplification of the tax system proposed make September 2022 (SB). in view of the need to broaden the tax base. We will administration reforms are priorities publishing key data on the taxpayer identifier withrevenue administration, in particular by will also the Customs Code progress for all financial agencies (SB). We publish and making its use mandatory and the Customs Tariff (SB). and public finance management (PFM) long-standing efforts to strengthen 18. We will continue we will consolidate into the Treasury Single improve the quality of public spending. For this purpose, central budgetary, including the central bank the bank accounts of all to Account (TSA) at the devoted to this reform in recent years and we intend emergency fund (SB). Much effort has been the budget, we will adopt and publish by make it fully operational in 2022-2023. As regards under the SMP. In for FY2023 in line with the objectives agreed September 30, 2022 a budget framework for fiscal years 2023, 2024, and addition, we will develop a medium-term budgetary assistin the formulation of the annual with the deficit of the NFPS as the main anchor to annual budget 2025, investment while maintaining a sustainable budget and guide an increase in public investment management will help to (SB). Ongoing technical assistance (TA) on public on June 9 of the trajectory and implementation. The publication improve coordination in project planning by the Supreme Court of Auditors and spending, which was prepared audit of COVID-related for launching the SMP (prior action). Administrative Litigation (CSCCA), was a priority the use of the SDR allocation in a transparent manner. Before 19. We intend to report on usable currencies, we discussed with IMF about half of the allocation of SDRS into freely Memorandum of converting set out in the IMF Guidance Note. We established a staff best practices as of Economy and Finance in accordance with Understanding between the BRH and the Ministry of each party and governing the institutional frameworks, clarifying the obligations Haitian legal and In this respect, during FY2021, some resources use of the SDR allocation for budgetary purposes. the social spending, and the spending related to earthquake, were used to finance emergency National Police. Product Market and Social Protection D. Reform of the Petroleum in the context of high prices on the 2021, the government took the decision, on 20. In December of petroleum products by eliminating subsidies informal market, to start adjusting the prices Given the delays in implementing programs to without triggering social unrest. diesel and kerosene, 74 INTERNATIONAL MONETARY FUND In this respect, during FY2021, some resources use of the SDR allocation for budgetary purposes. the social spending, and the spending related to earthquake, were used to finance emergency National Police. Product Market and Social Protection D. Reform of the Petroleum in the context of high prices on the 2021, the government took the decision, on 20. In December of petroleum products by eliminating subsidies informal market, to start adjusting the prices Given the delays in implementing programs to without triggering social unrest. diesel and kerosene, 74 INTERNATIONAL MONETARY FUND --- Page 78 --- HAITI and the jump in world prices related to the mitigate the social impact of these price increases in the near future. That said, we intend to we are not able to adjust prices and conflict in Eastern Europe, permit. However, to be prudent eliminate fuel subsidies as soon as conditions the elimination of fuel eventually and medium-term outlook do not assume conservative, the FY2022 budget subsidies. swiftly several measures to mitigate the negative 21. At the same time, we will implement groups. To this end, the product prices on vulnerable impact of the last hike in petroleum 20, 2022 compensating measures for the Council of Ministers adopted on April transport operators, school kits, government FY2022 in the form of vouchers for registered public remainder of canteens and community restaurants, plans to school canteens, mobile works. In addition hot meals through schoolchildren, and labor -intensive public modernize public transport vehicles for before the first price adjustment, a these we intend to prepare and implement This to measures, the need to eventually eliminate fuel subsidies. communications plan explaining and benefits for the population of communications effort will aim to explain the objectives of the benefit goes to the top expenditure on fuel subsidies-ofv which 93 percent that will support redirecting expenditure one fifth of the population-towards of higher fuel income group representing short term measures to mitigate the impact growth and social protection, particularly prices on the most vulnerable groups. market, taking inspiration from the 22. We will continue reforms of petroleum products World Bank TA. The government agency Office recommendations provided in 2020 by the IMF and had by mid-2020 been reinstated Assistance Programs (BMPAD) for Monetization of Development However, due to the fuel supply disruptions importer of petroleum products. in 2021 to as the monopoly governance, we decided November observed last year and in an effort to strengthen products. BMPAD now organizes the reduce the role of BMPAD in the actual supply of petroleum basis of a widely used international price tender process every two months to determine, on the directly. We also intend to at which any petroleum company may import the legal index, the premium BMPAD in the import of petroleum products by amending eliminate any involvement of for the petroleum products sector and provisions and establish a regulatory framework strengthening related regulatoryinstitutions. towards building a coherent social safety net Our reform includes the first steps with a number of 23. program system is fragmented, large with national coverage. Our current social protection without sufficient coordination. We international agencies, and providers operating National Policy for Social programs, structure envisaged in the intend to: (i) implement the governance 2020- by end-2022; and (ii) in collaboration with Protection and Promotion (PNPPS) -approved in an action plan to implement the registry database SIMAST, prepare donors and with the beneficiary framework for the design and end-March 2023. The PNPPS serves as the strategic under the of PNPPS by for social protection and promotion aegis implementation of measures and programs and with the aim of better of Social Affairs and Labor (MAST). For this purpose, and improve the Ministry of social programs in order to strengthen governance coordinating the management by Organic Law 24/11/1983), will be reinforced efficiency, the central role of the MAST (established INTERNATIONAL MONETARY FUND 75 beneficiary framework for the design and end-March 2023. The PNPPS serves as the strategic under the of PNPPS by for social protection and promotion aegis implementation of measures and programs and with the aim of better of Social Affairs and Labor (MAST). For this purpose, and improve the Ministry of social programs in order to strengthen governance coordinating the management by Organic Law 24/11/1983), will be reinforced efficiency, the central role of the MAST (established INTERNATIONAL MONETARY FUND 75 --- Page 79 --- HAITI transfers to the population) in line allocation for MAST (excluding with an increase in the budget to the sum oft the budget allocation (or with the floor set as a QT. This floor corresponds in the MAST budget, including the implemented if lower) for all social programs Fund (FAES), the expenditure by the Economic and Social Assistance resources allocated and implemented and the activities of the Bureau of the State Emergency Program (2022), the Klere Chimen project, These resources will help MAST of Persons with Disabilities (BSEIPH). Secretary for the Inclusion costs of these programs. In addition, and should enable it to finance the management data collection for build capacity from April 2022 will strengthen MAST the resources to be allocated to MAST SIMAST database, and the financing of updating information in the registering new households, for the Klere Chimen program (quantitative objective). cash transfers and accompanying measures ofthe activities of the FAES, which carries 24. In this context, we will increase the accountability development partners. In addition, we extrabudgetary programs financed mostly by of FAES out various the consolidated quarterly financial statements undertake to provide, from March 31, 2022, directors before end -June 2022, with functioning of its board of and to restore the regular will transfer all domestically funded social programs subsequent quarterly meetings (SB). We from the 2023 budget year onwards. We are the FAES under the supervision of MAST executed by and activities in the medium-term budgetanyframework. also planning to include all FAES resources mechanism would acceler ate the development Moving to cash transfers as a shock response the World Bank, and other 25. In collaboration with the IMF, of a more reliable social assistance system. activities into SIMAST which will allow us to relevant partners, we are planning to integrate other the MAST in time to execute digital cash transfers to beneficiaries. This will permit or other methods. provide fashion via mobile operators automated payments in a secure and transparent and Exchange Policy E. Monetary framework in a context of greater exchange 26. We will work to strengthen the monetary policy will: (i) adopt a ceiling on net credit to anchor monetary policy. To this end, we rate flexibility and to financing of the budget deficit (QT); and NFPS to serve as the main anchor for limiting monetary the operations with the aim ofreducing inflationary (ii) conduct short-term liquidity absorption transmission. 3 As the ceiling on BRH financing to the pressures and strengthening monetary policy will need to raise financing from other does not include an adjustor, the government weaker balance, if government external financing to finance a primary domestic sources or concessional securities market, strengthen The BRH has initiated reforms to develop the government regulations; we have necessary. framework with new facilities, and review foreign exchange securities the monetary policy The deepening of the government requested TA to support these FX marketreforms. and a more effective alternative source of financing for the government of market will provide an continue implementing the recommendations for the conduct of monetary policy. We will means Memorandum of Understanding.Annex II. 3 Please see the Technical 76 INTERNATIONAL MONETARY FUND primary domestic sources or concessional securities market, strengthen The BRH has initiated reforms to develop the government regulations; we have necessary. framework with new facilities, and review foreign exchange securities the monetary policy The deepening of the government requested TA to support these FX marketreforms. and a more effective alternative source of financing for the government of market will provide an continue implementing the recommendations for the conduct of monetary policy. We will means Memorandum of Understanding.Annex II. 3 Please see the Technical 76 INTERNATIONAL MONETARY FUND --- Page 80 --- HAITI particularly since more frequent and timely the quality of monetary statistics, TA on enhancing be needed for program monitoring. reporting of monetary data will external shocks and highly dependent on private 27. As our economy remains sensitive to absorber for the economy. In this context, the transfers, the exchange rate should act as a shock market to smoothing excessive exchange BRH will limit its interventions in the foreign exchange (FX) reserves (QT) and a FX To this end, we will adopt a floor on net international role shock absorber and rate fluctuations. rate can play the of marketintervention rule to ensure that the exchange with the IMF's Monetary and Capital foreign reserves are preserved. In addition, in consultation FX market reform that will develop a more the BRH will prepare a roadmap for to FX intervention Markets Department, including those related flexible exchange rate and further reduce vulnerabilities, of this market. This reform strategy of FX liquidity and the regulation the techniques, the management and transparent FX market, including during the SMP will establish the basis for a competitive mechanism for foreign exchange preparation of measures to: (i) put in place an appropriate exchange positions taking into account intervention; (ii) revise the limits on banks' net open foreign of revising Circular 114-2 based on and (ii) finalize the process we the best international practices; stakeholders by the end of the SMP (May 2023). Finally, consultations with the IMF and other making of payments and transfers for restrictions on the commit to not imposing or intensifying multiple currency practices. transactions, and introducing or modifying current international Regulation and Financial Policies F. Banking financial inclusion banking supervision and increase 28. We will continue reforms to strengthen To this end: to supportgrowth. assistance of the IMF expert, its banking supervision by The BRH will strengthen, with the finalize the remaining texts on banking regulations. approach. It will also adopting a risk-based the feasibility of issuing a central bank digital The BRH will continue to make efforts to assess to financial integrity and the need for exercising caution given the risks related Markets currency (CBDC), TA from the IMF's Monetary and Capital robust internal supervision. We have requested associated with the deployment of our address the risks Department to help us adequately foreign firms and collaboration has been CBDC. Support has been received from specialized in the Caribbean. We that have already launched a CBDC, particularly test initiated with countries issues to consider before proceeding to the hope that this assistance helps us identify key the migration to new international We will also work on modernizing phase for digital currency. interoperability and financial integrity. messaging standards thatwould promote framework to fight money laundering and We are determined to put in place a robust legal Action Task Force (CFATF) has identified terrorist financing (AML/CFT). The Caribbean Financial FATF has added Haiti to its "gray" list in Haiti's system for AML/CFT and the arising inter many shortcomings monitoring. In order to address these shortcomings ofjurisdictions under increased with the status of a jurisdiction under framework, offset the risks associated alia from the legal reduce potential stresses on correspondent banking increased monitoring by the FATF, and INTERNATIONAL MONETARY FUND 77 We are determined to put in place a robust legal Action Task Force (CFATF) has identified terrorist financing (AML/CFT). The Caribbean Financial FATF has added Haiti to its "gray" list in Haiti's system for AML/CFT and the arising inter many shortcomings monitoring. In order to address these shortcomings ofjurisdictions under increased with the status of a jurisdiction under framework, offset the risks associated alia from the legal reduce potential stresses on correspondent banking increased monitoring by the FATF, and INTERNATIONAL MONETARY FUND 77 --- Page 81 --- HAITI and other technical have requested TA from the IMF's Legal Department relationships, we Laundering and Terrorism Financing partners to prepare a draft amendment to the Anti-Money The amendment will be approved by it into line with FATF international standards. Act to bring December 2022 (SB). the Council of Ministers by G. Governance and Safeguards with a view to reassuring Most of the reforms in our program aim to strengthen governance drafted and 29. With TA support from the Fund, we published the public and our international partners. requirements for public procurement, including last November a decree mandating transparency owners of successful bidders in all requirements and publication of the beneficial of this decree the disclosure We will ensure the implementation of the provisions public contracts and concessions. reform of the procurement law. We will (monthly SB) and start preparations for a comprehensive and Administrative Litigation (CSCCA) the Supreme Court of Auditors ensure that the law governing with the standards applicable to supreme the functioning of that court in accordance IMF staff. We commit to guarantees to be led by audit institutions. We also call for a Governance Diagnostic into our reform report and would incorporate its recommendations amendments publishing the Diagnostic half ofthe SMP. Finally, we will work to finalize including during the second with the United program, effective implementation and compliance to the anti-corruption laws to ensure Nations Convention against Corruption. of the 2019 IMF Safeguards 30. We will continue to implement the recommendations the Board of the BRH of the draft Assessment In particular, we will ensure: (i) approval by with the TA from the IMF by the end amendments to the Central Bank Law prepared in consultation external audit of the BRH for the year 2022 (SB benchmark); (ii) completion of the end-June 2022 of September of the audited financial statements by ending September 30, 2021 and publication BRH Board of Directors, including the revised the Audit Committee of the in (SB); and (ii) re-establish will also ensure implementation of the measures put charter of the committee, by end-2022. We Credit Facility (RCF) to strengthen the in 2020 under the Rapid to place prior to the disbursement The BRHwill also accelerate the transition of the management of foreign reserves. efforts to modernize and strengthen governance Reporting Standards (IFRS) and resume International Financial internal audit and control functions. the independence of the and the Fight Against Poverty H. Climate Change social and macroeconomic reform agenda focuses in the short term on maintaining needed to 31. Our policies and mobilize the resources stability and restoring growth, necessary to support social net, we plan to improve the In parallel with efforts to build a safety of reduce poverty. in order to increase its impact and optimize the restructuring coordination of external assistance of climate hazards or risks with under MAST. In addition, we intend to initiate an analysis climate policies into agencies World Bank and the IMF in order to better integrate climate the assistance of the Haiti's vulnerability to natural disasters and macroeconomic and policy frameworks, given change. 78 INTERNATIONAL MONETARY FUND the resources stability and restoring growth, necessary to support social net, we plan to improve the In parallel with efforts to build a safety of reduce poverty. in order to increase its impact and optimize the restructuring coordination of external assistance of climate hazards or risks with under MAST. In addition, we intend to initiate an analysis climate policies into agencies World Bank and the IMF in order to better integrate climate the assistance of the Haiti's vulnerability to natural disasters and macroeconomic and policy frameworks, given change. 78 INTERNATIONAL MONETARY FUND --- Page 82 --- HAITI I. Monitoring of the Program 32. We intend to take all the necessary measures agreed under the SMP with the IMF, as set out in Tables 1, 2, and 3 of this Memorandum (below). A program-montoring committee, comprised of representatives from the Ministry of Economy and Finance and the BRH, has been set up. This committee will request the participation of representatives from other sectors as appropriate and will meet at a minimum every quarter with the Minister of Economy and Finance and the Governor ofthe BRH to present a progress report on the implementation oft the SMP. Our program will be monitored using QTs at the end ofJune and December 2022, with indicative targets at the end of September 2022 and March 2023 as defined in Table 1, and SBs as listed in Table 3. The specific items are defined in the attached Technical Memorandum of Understanding (Annex II), which also includes the list and frequency of data to be provided for monitoring of the program. We will focus on the timely provision of this data for the program monitoring. 33. We will undertake internal and external communications and engage the various state institutions and other national actors, including representatives of civil society, the private sector, non-governmental organizations, media, and other stakeholders, in order to strengthen the level of ownership and public support for the program's reform agenda. We undertake to publish this Memorandum and the accompanying IMF Staff Report online on the website ofthe Ministry of Economy and Finance as soon as the SMP has been approved by the IMF and before June 30, 2022. INTERNATIONAL MONETARY FUND 79 --- Page 83 --- Table 1. Haiti: Quantitative and Indicative Targets, June 2022-March 2023 1/ (In millions of Gourdes, unless otherwise indicated) Flux cumulés depuis septembre 2021 Flux cumulés depuis Encours réel à septembre 2022 fin sept. 2021 Déc. 2021 Juin 2022 Sept. 2022 Déc. 2022 Mars 2023 2/ Est. Objectif Effectif Objectif Objectif Objectif quantitatif indicatif quantitatif indicatif I. Objectifs quantitatifs périodiques Réserves internationales nettes de la banque centrale (en US$ millions) plancher 413.92 27 30 Solde primaire du secteur public non financier plancher -8,813 -20,317 Crédit net de la banque centrale au secteur public non financier plafond -28,860 -13,242 -26,484 160,047 20,922 36,096 Administration centrale 3/ 46,533 12,795 25,590 162,197 20,922 36,096 Autres entités non financières du secteur public 46,533 12,795 25,590 Dotation -2,150 budgétaire au MAST pour les dépenses sociales plancher 4/ 3,000 3,300 3,300 6,600 II. Objectifs quantitatifs continus Accumulation d'arriérés intérieurs par l'administration centrale 922 36,096 Administration centrale 3/ 46,533 12,795 25,590 162,197 20,922 36,096 Autres entités non financières du secteur public 46,533 12,795 25,590 Dotation -2,150 budgétaire au MAST pour les dépenses sociales plancher 4/ 3,000 3,300 3,300 6,600 II. Objectifs quantitatifs continus Accumulation d'arriérés intérieurs par l'administration centrale Accumulation d'a 'arriérés extérieurs par le secteur public (en millions de dollars) Nouvelle dette extérieure non concessionnelle contractée ou garantie par le secteur public (en millions de dollars US) plafond III. Objectifs indicatifs Recettes fiscales du gouvernement central, hors dons plancher 5/ 27,632 93,731 125,552 41,093 82,187 Postes pour mémoire Appui budgétaire (en millions de dollars) 6/ Réserves internationales brutes (en millions de dollars) 71 9.0 18.1 0.0 18.8 (en mois d'importations de biens et de services de l'année suivante) 2,534 2,547 2,562 2,574 2,603 2,613 5.8 5.6 5.5 5.0 4.8 4.8 Sources Ministère des Finances Banque de la République d'Haiti; ; estimations des services du FMI. 1/Le programme comprend un ajusteur asymétrique sur le plancher du solde primaire du SPNF et sur les réserves internationales nets (RIN) pour les prévus. Le plafond du financement de la BRH au Trésor n'inclus pas d'ajusteur. appuis budgétaires extérieurs inférieure aux montants 2/1 Les données de septembre 2021 se rapportent à celles de la fin de l'exercice 2021. 3/ Exclut les allocations de DTS et les ressou urces libérées par l'allégement de la dette au titre du fonds fiduciaire ARC du FMI. 4/L'e 'enveloppe budgétaire affectée au Ministère des Affaires Sociales et du Travail (MAST), hors transferts à la population. Le à exécutées si elles sont inférieures) pour tous les programmes sociaux du MAST, plancher correspond la somme de l'allocation budgétaire (ou des dépenses cela n'empêche budget y compris les ressources allouées et mises en ceuvre par le FAES, le Programme Klere pas d'autres entités gouvernementales d'appuyer la mise en ceuvre des programmes du MAST. d'Urgence (2022), et Chimen; 5/ Comprend les impôts intérieurs sur les entreprises, le revenu des personnes physiques et les ventes ainsi que les droits de douane. 6/ Le calendrier des décaissements esti incertain montant annuel divisé par trimestre. 7/ Aux fins du suivi du programme le taux de change qui sera utilisé pour la période mai 2022 à mai 2023 est de 100,0123 gourdes dollar, pour un let taux de référence BRH au16 décembre 2021 rgence (2022), et Chimen; 5/ Comprend les impôts intérieurs sur les entreprises, le revenu des personnes physiques et les ventes ainsi que les droits de douane. 6/ Le calendrier des décaissements esti incertain montant annuel divisé par trimestre. 7/ Aux fins du suivi du programme le taux de change qui sera utilisé pour la période mai 2022 à mai 2023 est de 100,0123 gourdes dollar, pour un let taux de référence BRH au16 décembre 2021 --- Page 84 --- HAITI Table 2. Haiti: Proposed Prior Actions for SMP Prior Actions Complete and publish the financial and operational audit on COVID-related spending agreed at the time of the RCF disbursement. Prior action Adopt and publish a budget for FY2022 consistent with agreed targets and fiscal measures under the SMP. Prior action Table 3. Haiti: Proposed Structural Benchmarks for SMP Measure Governance Timing Publish all public procurement contracts awarded since the publication of the November 2021 procurement decree No. 52, including information on the beneficial owners of successful bidders. monthly Approval by the BRH Board of Directors of draft amendments of the BRH law, prepared in consultation with IMF staff, which: (i) clarifies the objectives of the BRH, (ii) strengthens its end- Sept. 2022 autonomy, (ii) enhances its governance, and (iv) improves accountability and transparency. Approval by the Council of Ministers of revisions to the AML/CFT law prepared with Fund TA to address technical deficiencies identified in Haiti's FATF Action Plan and bring it into line with FATF end-March 2023 international standards. Public Finance Management I Governance Expand the Treasury Single Account (TSA) at the central bank to include all the central budgetary units, including the emergency fund. end- Sept. 2022 Prepare and adopt a medium-term budget framework, for FY2023, FY2024, and FY2025 with the NFPS deficit as the main anchor. end Sept. 2022 Publish quarterly and annual reports on the operations and finances of Fonds d'assistance économiques et sociale (FAES) and reactivate the Governing Board of FAES again with quarterly meetings thereafter. Quarterly Tax Policy and Tax/Customs Administration Conclude public consultations on the tax code and tax procedures code and finalize codes. end-Sept. 2022 Publish all codes and tariffs relating to customs. end-Sept. 2022 Issue decree making use of TIN compulsory for all finance departments, with sanctions for fradulent or non use, and publish TIN database and file of active taxpayers. end-Dec. 2022 Safeguards Complete FY2021 financial audit of BRH and publish the audited financial statements. end-June 2022 INTERNATIONAL MONETARY FUND 81 and Tax/Customs Administration Conclude public consultations on the tax code and tax procedures code and finalize codes. end-Sept. 2022 Publish all codes and tariffs relating to customs. end-Sept. 2022 Issue decree making use of TIN compulsory for all finance departments, with sanctions for fradulent or non use, and publish TIN database and file of active taxpayers. end-Dec. 2022 Safeguards Complete FY2021 financial audit of BRH and publish the audited financial statements. end-June 2022 INTERNATIONAL MONETARY FUND 81 --- Page 85 --- HAITI Memorandum of Understanding Attachment II. Technical Staff-Monitored Program (SMP) ending May 31 1. Haiti's performance under the 12-month and structural benchmarks (SBs). The 2023, will be assessed based on quantitative targets (QTs) This Technical Memorandum of implemented two prior actions (see MEFP text table). and the staff of the authorities defines the QTs established by the Haitian authorities Understanding (TMU) the program. It also defines the arrangements International Monetary Fund (IMF) for monitoring implementation. of data that will permit staff to monitor program for the transmission A. Definitions indicated, central government refers to the 2. Central Government. Unless otherwise (municipalities), the central administration of Haiti and excludes local administrations of an central financial institutions, autonomous state organizations bank (BRH), and other public and state -owned enterprises. Central government administrative, cultural, or scientific nature, other domestic levies and by foreign donors, domestic taxes and expenditures are financed by (comptes courants), and domestic and through, inter alia, foreign grants, ministerial accounts foreign public debt. These include the Road Fund (Fonds d'entretien routier, 3. Special funds and programs. Free, and Compulsory Schooling mobilized to finance the Universal, FER) and the resources transfers. Under the Staff-Monitored (PSUGO) for education, in addition to Treasury the National Education Fund, Program levied to finance FER and PSUGO (through Program, the resources revenues. FNE) will be recorded as central government Fund (FAES). FAES is an autonomous state financial 4. Economic and Social Assistance and Finance. The mission of under the supervision of the Ministry of Economy the conditions entity, currently labor-intensive projects aimed at improving living the FAES is to fund short-term, their potential. It is in urban and rural areas and increasing productive and of poor people financed by the public Treasury foreign responsible for implementing social programs donors. Assistance Programs (BMPAD). The BMPAD 5. Office for Monetization of Development under the supervision of the Ministry of is an autonomous state administrative organization of grant and/or loan agreements Economy and Finance. The BMPAD ensures the implementation lender, as part of the monetization between the government and a donor or foreign programs concluded in Haiti. In particular, it finances and monitors approved of development aid programs the monetization of aid in kind. and projects from the funds generated by enterprise that produces, supplies, and Electricité d'Haiti (EDH). EDH is a state-owned include () CG 6. EDH and the Central Government (CG) distributes electricity. Flows between consumption and not through sales taxes collected on electricity in transfers to EDH (including bills); (ii) the payment of letters of credit devolved to the CG, and the payment of fuel purchase bills unpaid by EDH; (ii) the producers to settle power generation favor of independent power 82 INTERNATIONAL MONETARY FUND enterprise that produces, supplies, and Electricité d'Haiti (EDH). EDH is a state-owned include () CG 6. EDH and the Central Government (CG) distributes electricity. Flows between consumption and not through sales taxes collected on electricity in transfers to EDH (including bills); (ii) the payment of letters of credit devolved to the CG, and the payment of fuel purchase bills unpaid by EDH; (ii) the producers to settle power generation favor of independent power 82 INTERNATIONAL MONETARY FUND --- Page 86 --- HAITI for the purchase of fuel, which are the counterpart payment of bills from independent producers Staff-Monitored Program, transfers from bills. Under the of EDH arrears for unpaid generation "above the line/ I while letters of credit and central government are recorded under operations "below the line. " financial receivables are entered under the operations The NFPS includes the central government, special 7. Non-financial public sector (NFPS). state organizations ofan (defined in paragraph 3), other autonomous funds and programs the FAES and the BMPAD (paragraphs administrative, cultural, or scientific nature, including and the National Old Age Insurance 6), the Civil Service Pension Plan and 5), EDH (paragraph Office (ONA), and local governments. the nonfinancial public sector, state Public sector (PS). The public sector comprises and the 8. financial SOES (enterprises over 50 percent state -owned), owned banks, and nonbank BRH. received from Haiti's bilateral or grants. Budgetary grants are grants Bank, the 9. Budgetary Union, the Inter -American Development multilateral partners (including the European and bilateral donors) for general or sector budget World Bank, the Caribbean Development Bank, support purposes. B. Quantitative Targets (QT) will be monitored using the following indicators. 10. The implementation of the program of cumulated flows from a reference otherwise indicated, all QTs will be assessed in terms the reference date is Unless fiscal year (e.g., for fiscal year 2021-2022 date set at the end of the previous Memorandum on Economic and Financial 2021), as specified in Table 1 of the end-September Policies. liabilities, and flows rates. For the purposes of the program, all assets, 11. Program exchange valued "at the program exchange rates, as defined denominated in foreign currency will be budgetary accounts, which of elements that affect the government's below, with the exception the of the program, it has been agreed will be evaluated at current exchange rates. For purposes reference rate as at December 16, exchange rates: HTG 100.0123/USS (BRH by to use the following (rates as at December 16, 2021 published 2021), US$1.133600/EUR and SDR 0.7154070/USS rms mth.aspx). the IMF on its website - caarzanaraoee Bank Credit to the Nonfinancial Public Sector Net Central nonfinancial public sector is defined as the difference 12. Net central bank credit to the nonfinancial public sector (net claims on the between BRH assets and liabilities vis-à-vis the by the BRH to the Report Forms 1SR or 2SR reported public sector) according to Standardized and net BRH credit vis-à-vis the rest includes the net BRH credit to central government IMF. This calculation of the net BRH credit to the nonfinancial public of the nonfinancial public sector. The sector is shown below as of September 30, 2021. INTERNATIONAL MONETARY FUND 83 Net central bank credit to the nonfinancial public sector (net claims on the between BRH assets and liabilities vis-à-vis the by the BRH to the Report Forms 1SR or 2SR reported public sector) according to Standardized and net BRH credit vis-à-vis the rest includes the net BRH credit to central government IMF. This calculation of the net BRH credit to the nonfinancial public of the nonfinancial public sector. The sector is shown below as of September 30, 2021. INTERNATIONAL MONETARY FUND 83 --- Page 87 --- HAITI of Net Central Bank Credit to the NFPS Components (In millions of gourdes) September 160,047,059.23 sector Net central bank credit to the nonfinancial public 162,196,977.99 Net credit on central government 200,791,090.44 Claims on central government 38,777,196.75 Deposits by government 26,730,369.21 Deposits in current accounts 7,073,003.48 Sight deposits (HTG) 19,657,365.73 Sight deposits (US$) 594.75 Securities seized UCREF 636,307.08 Sundry accounts payable 329,125.56 Certified checks 25,041.45 Certified bank checks 55,669.97 Foreign Debt Special Fund 6,762,697.60 Treasury special accounts 375,029.84 Civil pension - investments transaction 2,410,591.87 IMF debt relief after disaster 276,996.07 from autonomous agencies (ONA) Minus: Deposits sector -2,149,918.76 Net credit to the rest of the nonfinancial public 610,420.96 Claims on the rest of the nonfinancial public sector 2,760,339.72 Deposits by the rest of the nonfinancial public sector 276,996.07 autonomous agencies (ONA) (HTG and US$) Deposits by deposits and certified checks) 489,202.33 Local government deposits (sight in gourdes and 1,994,141.32 by state-owned enterprises (sight deposits Deposits US$ and certified checks) Netinternational Reserves central bank are those external assets that are international reserves of the 13. The gross authorities for meeting balance of payments readily available to and controlled by monetary to affect the exchange rate, and for other financing needs, for intervention in exchange markets and the economy, and serving confidence in the currency that related purposes such as maintaining must be foreign currency assets and assets as a basis for foreign borrowing. Reserve assets the concept of reserve assets are the actually exist. All contingent assets are excluded. Underlying authorities. 1 The gross international of' 'availability for use' and 'control' by the monetary to this notions Report Forms 1SR or 2SR must conform reserves reported by the BRH from Standardized holdings of Special Drawing definition. They include monetary gold, liquid assets, including with domestic financial and IMF reserve position. Swaps in foreign currency Rights (SDRs), and Guidelines 1 See Balance of Payments Manual, ISA for a Data Template 84 INTERNATIONAL MONETARY FUND reserve assets are the actually exist. All contingent assets are excluded. Underlying authorities. 1 The gross international of' 'availability for use' and 'control' by the monetary to this notions Report Forms 1SR or 2SR must conform reserves reported by the BRH from Standardized holdings of Special Drawing definition. They include monetary gold, liquid assets, including with domestic financial and IMF reserve position. Swaps in foreign currency Rights (SDRs), and Guidelines 1 See Balance of Payments Manual, ISA for a Data Template 84 INTERNATIONAL MONETARY FUND --- Page 88 --- HAITI encumbered reserve assets are excluded from gross institutions and pledged or otherwise international reserves. of the BRH are defined as the gross international 14. The net international reserves excluding allocations of special drawing reserve of the BRH, minus (i) gross external liabilities of international financial liabilities related to Haiti's participation in the capital in US rights and of commercial banks at the BRH (sight deposits institutions, (ii) foreign currency deposits (ii) commitments related to foreign dollars and euro from BCM to BRH, and the CAM transfer), and (v) project accounts, all from transactions, (iv) special foreign currency accounts, IMF accounts currency swap 2SR with the exception of the balances ofthe Standardized Report Forms 1SR or which come from the IMF position in the IMF, and liabilities to the IMF), (SDR holding, reserve reserves is illustrated below. The calculation of BRH net international Finance Department Calculation of BRH Net International Reserves (In thousands) September 2021 September 2021 (USS)' (gourdes) BRH gross international reserves 9,880,753.71 98,795.39 59,975.62 Goldl holdings 5,998,299.64 242,997.22 Foreign currency 24,302,710.70 Foreign sight deposits 189,797,159.80 1,897,738.18 Investments abroad 13,972,219.51 139,705.01 SDRS holdings (according to IMF books) 2,818,820.50 28,184.74 IMF reserve position (based on IMF books) 70,137,904.62 701,292.79 Minus: Foreign liabilities Of which: Foreign liabilities (excluding liabilities related 8,518,510.82 85,174.63 to Haiti's participationint the capital of international financial institutions) 42,558,855.10 425,536.21 Debt service payment to PDVSA 1,460,675.36 14,604.96 Of-balance-sheet foreign currency liabilities 17,599,863.34 175,976.99 Liabilities to the IMF (based on IMF books) 129,098,781.43 1,290,829.04 Minus: Deposits in foreign currency 6,002,703.60 60,019.65 Minus: Foreign currency swap transactions 133,391.45 1,333.75 Minus: Special accounts in foreign currency 67.74 0.68 Minus: Project accounts 41,397,115.02 413,920.24 Net international reserves of the BRH Exchange rate: HTG 100,0123/USS exchange market are defined in the Interventions of the BRH in the foreign 15. of Economic and Financial Policies. Memorandum reserves will lower than expected the floor on net international 16. If budgetary grants are difference in question. Conversely, the floor will downwards by the amount of the be adjusted INTERNATIONAL MONETARY FUND 85 .74 0.68 Minus: Project accounts 41,397,115.02 413,920.24 Net international reserves of the BRH Exchange rate: HTG 100,0123/USS exchange market are defined in the Interventions of the BRH in the foreign 15. of Economic and Financial Policies. Memorandum reserves will lower than expected the floor on net international 16. If budgetary grants are difference in question. Conversely, the floor will downwards by the amount of the be adjusted INTERNATIONAL MONETARY FUND 85 --- Page 89 --- HAITI grants exceeding the expected levels by the amount of budgetary not be adjusted upwards mentioned in the table below. Projected Budgetary Grants (In millions ofUS dollars) Cumulative flows since end-September: Cumulative flows since end -September 2021 March2023 June 2023 Sept. 2023 June 2022 Sept. 2022 Dec. 2022 Dec. 2021 March2022 9.1 18.1 0.0 18.8 Balance of the Nonfinancial Public Sector Primary accepted by the ofthe central government refer to expenditure 17. Domestic arrears of the corresponding goods and services. and unpaid after 90 days, despite the delivery Treasury do not include unpaid oft-budgetgoverment Domestic arrears of central government commitments. commitments refer to liabilities incurred 18. Unpaid off-budget central government other bodies), which may give rise to process (from ministries or public outside the budgetary resources. contingent claims against central government public sector (NFPS) corresponds to the 19. Net domestic financing of the nonfinancial credit to the NFPS; (ii) net credit from of the following elements: (i) net central bank Form 2SR), sum banks to the NFPS (as reported in the Standardized Report NFPS domestic commercial and the net issuance of Treasury bills and other which includes changes in NFPS deposits credit to the NFPS, which includes the net securities to commercial banks; and (iii) net nonbank institutions, the change in the net bills and other NFPS securities to nonbank and issuance of Treasury sector (including independent power producers), position of the NFPS vis-à-vis the electricity arrears of central government. in suppliers' credit and domestic the net change public sector (NFPS) corresponds to the 20. Net external financing of the nonfinancial IMF loans) and (ii) the net change in sum of (i) new external loan disbursements (excluding external arrears minus external loan amortizations. balance of the nonfinancial public 21. For the purposes of the program, the primary domestic financing of the NFPS and corresponds to the sum of the following: net debt. If sector (NFPS) interest payments on public external financing of the NFPS, after deducting balance of the NFPS net levels, the floor on the primary budgetary grants do not reach the expected of budgetary support are in adjuster. More specifically, if the amounts includes an asymmetric balance will be reduced by the amount of those deficits. deficit, the floors on the primary the floor on the primary balance will if external budget support exceeds projections, Conversely, not change. 86 INTERNATIONAL MONETARY FUND sum of the following: net debt. If sector (NFPS) interest payments on public external financing of the NFPS, after deducting balance of the NFPS net levels, the floor on the primary budgetary grants do not reach the expected of budgetary support are in adjuster. More specifically, if the amounts includes an asymmetric balance will be reduced by the amount of those deficits. deficit, the floors on the primary the floor on the primary balance will if external budget support exceeds projections, Conversely, not change. 86 INTERNATIONAL MONETARY FUND --- Page 90 --- HAITI ofSocial Affairs and Labor Budget Allocation to the Ministry of Social Affairs and Labor (MAST) for social 22. The budget allocation to the Ministry transfers to the population) of the budget expenditure is defined as the sum (excluding all social of the MAST budget, implemented if lower) for programs (2022), allocation (or expenditure by the FAES, the Emergency Program including the resources allocated and implemented for Disability Inclusion activities of the Office of the State Secretary Klere Chimen, and the other entities from be noted that this does not prevent government of (BSEIPH). It should The floor on the QT applies to the sum the implementation of MAST programs. supporting the allocations mentioned. External by the Public Sector of Non-concessional New Contracting or Guaranteeing Debt 8 of the Guidelines on of debt. The definition of debt is set in paragraph of 23. Definition adopted by Decision No. 16919-(20/103) Public Debt Conditionality in Fund Arrangements, of these guidelines, the term "debt" will the Executive Board (October 28, 2020). For the purpose created under a contractual to mean a current, ie., not contingent, liability, or services, be understood ofvalue in the form of assets (including currency) arrangement through the provision in the form of assets (including the obligor to make one or more payments and which requires in time; these payments will discharge the principal currency) or services, at some future point(s) Debts can take a number of forms, the interest liabilities incurred under the contract. and/or primary ones being as follows: by the lender made on the basis of an ie., advances of money to the obligor bonds, i. loans, the funds in the future (including deposits, undertaking that the obligor will repay and temporary exchanges of ass ets commercial loans and buyers' credits) to debentures, loans under which the obligor is required that are equivalent to fully collateralized the collateral from the buyer in the funds, and usually pay interest, by repurchasing repay agreements and official swap arrangements); the future (such as repurchase where the supplier permits the obligor to defer payments ii. suppliers' credits, i.e., contracts are delivered or services are provided; until some time after the date on which the goods and is provided which the lessee has the right iii. leases, i.e., arrangements under which property that are usually shorter than the total period(s) of time to use for one or more specified lessor retains the title to the property. For expected service life ofthe property, while the the of the lease) of all the debtis the PV (at inception the purpose of these guidelines, the period of the agreement excluding expected to be made during lease payments repair, or maintenance of the property. those payments that cover the operation, INTERNATIONAL MONETARY FUND 87 is provided which the lessee has the right iii. leases, i.e., arrangements under which property that are usually shorter than the total period(s) of time to use for one or more specified lessor retains the title to the property. For expected service life ofthe property, while the the of the lease) of all the debtis the PV (at inception the purpose of these guidelines, the period of the agreement excluding expected to be made during lease payments repair, or maintenance of the property. those payments that cover the operation, INTERNATIONAL MONETARY FUND 87 --- Page 91 --- HAITI Nonfinancial public sector and comprised the Gross debt is debt owned by 24. public d'Haiti (BRH) to the government (see Debt Sustainably advances by the Banque de la République Analysis). of the program, a debt by the public sector. For the purposes event of 25. Debt guarantees to service a debtin the by the public sector means an explicit legal obligation guarantee borrower (in return for payment in cash or in kind). non-payment by the concessional if it includes a grant Concessional debt. An external debt is considered 26. element of at least 35 percent? sector which is contacted or serviced External public debt. This is the debt of the public 27. debt issued domestically by the vis-à-vis non-residents. It includes, where applicable, that non-residents do not hold debt government and held by non-residents. This TMU assumes external debt will be adjusted if new by the public sector. The stock of issued domestically information becomes available. undertakes not to contract or guarantee any new non - 28. The central government also applies to domestic debt. It also applies concessional external debt. This quantitative target that constitutes a contingent liability. debt guaranteed by the central government to any private (with a maturity of less than one year) import-related Excluded from the ceiling are short-term from the IMF, non-resident purchases of treasury credits, rescheduling arrangements, borrowing indexed to the exchange rate. This quantitative and BRH bills that are will be immediately bills, gourde-denominated by the authorities and any non-observance target will be monitored continuously reportto the Fund. Public Sector External Arrears Accumulation sector. They include all debt-service obligations 29. Arrears on external debt of the public the public sector that are due to and interest) on loans contracted or guaranteed by contract; they exclude those (principal on the due date as set out in the loan non-residents but not paid external creditors and (or) those that are arising from obligations being renegotiated with on the non-accumulation of new litigious. For the purpose of assessing the quantitative target from non-payment of debt service external debt arrears by the public sector, arrears resulting creditor are excluded from the sanctions preventing payments to the and due to international will be monitored continuously by the authorities previous definition. This quantitative target Fund. non-observance will be immediately report to the any Accumulation ofthe Central Government Domestic Arrears They include all debt-service debt of the central government. 30. Arrears on domestic contracted or guaranteed by the central government obligations (principal and interest) on loans element of a wide range of financial packages is available at: 2A toolto calculate the grant 4rratr 88 INTERNATIONAL MONETARY FUND --- Page 92 --- HAITI that are due to residents but not paid 90 days after the due date set out in the loan contract. The quantitative target on domestic arrears accumulation will be monitored continuously by the authorities and any non-observance will be immediately report to the Fund. C. Reporting of Data for the Monitoring of the Program 31. In order to facilitate monitoring of the program, the government will provide IMF staff with the information set out in the following summary table. Any data revisions will be promptly communicated to IMF staff. 32. The authorities will inform IMF staff in writing at least 10 working days (excluding public holidays in Haiti) before any change in economic and financial policies that may affect the outcome of the program. Such policies include, for example, changes in tax or customs legislation, wage policy, and support for public or private enterprises. With respect to continuous QTs, the authorities will report any non-observance to the IMF promptly. INTERNATIONAL MONETARY FUND 89 IMF staff with the information set out in the following summary table. Any data revisions will be promptly communicated to IMF staff. 32. The authorities will inform IMF staff in writing at least 10 working days (excluding public holidays in Haiti) before any change in economic and financial policies that may affect the outcome of the program. Such policies include, for example, changes in tax or customs legislation, wage policy, and support for public or private enterprises. With respect to continuous QTs, the authorities will report any non-observance to the IMF promptly. INTERNATIONAL MONETARY FUND 89 --- Page 93 --- HAITI Summary of Data to be Provided Sector Type of data Frequency Reporting deadline Real Sector National accounts Annual Year-end + 3 months Quarterly economic indicators (economice cycle) Quarterly Quarter-end + 2 months Consumer price index (including breakdowns) Monthly Month-end + 3 weeks Public Finances Fiscal revenues (internal, external, other) Monthly Month-end + 1 week (4 final weeks final data) Expenditures on Cash Basis (wages and salaries, Month-end + 1 week (4 goods and services, external debt, current accounts) Monthly final weeks final data) Table of government financial transactions (TOFE) Monthly Month-end + 2 weeks Balance on current accounts Month-end + one and operation ofprojects Monthly month Table Underlying TOFE, which enables the determination ofchecks in circulation and balance Monthly Month-end + one on investment project accounts month Table on budget implementation with breakdown by ministry and other bodies and by type of Monthly Month-end + one expenditure month Total monthly amount of expenditure executed by Month-end + one transfer letters Monthly month Report on Revenue Collection of DGI (progress Month-end + one report) Monthly month Tables of revenue collection of AGD (port activity indicators, analytical report of customs receipts on Monthly Month-end + one import) month Table ofrevenue collected and authorized Month-end + one expenditure (TEREDA) Monthly month Detailed revenue and expenditures of BMPAD Quarterly Quarter-end + one month Report on social protection expenditures Quarterly 30-day lag (final data) Table on the implementationofthe PSUGO program Quarterly 30-day lag (final data) Dashboard ofthe state electricityutility EDH showing monthly information on the productionof electricity, making explicit the composition of Monthly 30-day lag (final data) production! byindependent electricity producers, EDH, and by region. EDH commercial data allowing the calculation of EDH's billing and collectionrates Monthly Month-end + one week EDH cash data including all revenues and all Month-end + one expenditures (operating, investment, and other) Monthly month Information on any off-budget claims presented for Month-end + one payment Monthly month 90 INTERNATIONAL MONETARY FUND EDH showing monthly information on the productionof electricity, making explicit the composition of Monthly 30-day lag (final data) production! byindependent electricity producers, EDH, and by region. EDH commercial data allowing the calculation of EDH's billing and collectionrates Monthly Month-end + one week EDH cash data including all revenues and all Month-end + one expenditures (operating, investment, and other) Monthly month Information on any off-budget claims presented for Month-end + one payment Monthly month 90 INTERNATIONAL MONETARY FUND --- Page 94 --- HAITI Sector Type of data Frequency Reporting deadline Stock of unpaid off-budget central government Month-end + one liabilities Monthly month Data on all fuel shipments per product giving the CIF import price, the full price structure (including stabilization margin)and import and consumption Monthly Month-end + one week quantities. Data on actual collections for each month with a breakdown per product and tax type. Table ofi import prices of petroleum products, by Month-end + one arrival Monthly month Table of imported quantities of petroleum products Monthly Month-end + one month Stabilizationmargjin" table ofthe Directorate of the Month-end + one Tax Inspectorate Monthly month "Petroleum product tax" table of the Directorate of Month-end + one the Tax Inspectorate Monthly month Details of the stock of all government borrowing and debt securities (interest rate, maturity, creditorif Annual End of financial year known) + 31 months Full amortizationtable ofdomestic and external End of financial government debt Annual year + 3 months Statement of stocks and flows of repayment of suppliers' credits and payment arrears Monthly Month-end + one week Monetary and Financial Data Exchange rate Daily Day-end + one day Monetary base and sources thereof and currency in circulation. Weekly Week-end + one week Aide Memoire Table containing, inter alia: (i) stock of BRH bonds; (ii) deposits at commercial banks; (iii) credit to private sector (in gourdes and U.S. dollars); (iv) details ofinflows and outflows of foreign exchange reserves, including budget support received; (v) volume offoreign exchange Weekly Week -end + one week transactions, including BRH sales and purchases; (vi) gross and net international reserves; (vii) net BRH creditto central government and the non-financial public sector; and stocks and interest rates of BRH bills. Tables of monetarystatistics showing, inter alia, the balance sheet of the BRH (Table Standardized Month-end Report Form-1SR) and the consolidated banking Monthly + one month sector Table Standardized Report Form 2SR) IMF Weekly Tables showing, inter alia, the average and weighted interest rates on gourde and U.S. Month-end + one dollar-denominated deposits and credit, and the Monthly month excess reserves in the banking system. INTERNATIONAL MONETARY FUND 91 interest rates of BRH bills. Tables of monetarystatistics showing, inter alia, the balance sheet of the BRH (Table Standardized Month-end Report Form-1SR) and the consolidated banking Monthly + one month sector Table Standardized Report Form 2SR) IMF Weekly Tables showing, inter alia, the average and weighted interest rates on gourde and U.S. Month-end + one dollar-denominated deposits and credit, and the Monthly month excess reserves in the banking system. INTERNATIONAL MONETARY FUND 91 --- Page 95 --- HAITI Sector Type of data Frequency Reporting deadline Monetary and financial statistics. Standardized reporting form, balance sheets ofthe Central Bank Monthly Month-end + one and other depositorycorporations. month Information on the composition ofgross reserves. Monthly Month-end + one month Banking supervision statistics and commercial Quarter-end + one indicators on commercial banks. Quarterly month The calendar and planned placements of BRH gourde-denominated dollar-indexed bills, including Quarterly Quarter-end + one in banks and nonbanks. month Audited financial statements ofthe BRH Annual Year-end + 3 months Balance of Payments Balance of payments (first version) Quarterly Quarter-end + 6 weeks Revised balance of payments Quarterly 31 months after the first reporting BRH FX cash flow table; quarterly projections Quarter-end + one through end of fiscal year. Quarterly month External Debt External debt report prepared by the BRH showing monthly disbursements; debt service, debt Month-end + one forgiveness and rescheduling, arrears, and debt Monthly month stocks. Details of any external public debt and debt Month-end + one guaranteed by the State Monthly month Data on stocks, accumulation, and repayment of external arrears Monthly Month-end + 6 weeks Table of complete amortizationofeexternal debt Annual End of financial year + 3 months International Investment Position (IIP) Annual Year-end + 3 months 92 INTERNATIONAL MONETARY FUND