--- Page 1 --- MONETARY FUND INTERNATIONAL IMF Country Report No. 24/333 HAITI RELEASE; ARTICLE IV CONSULTATION-PRESS STATEMENT BY THE EXECUTIVE STAFF REPORT; AND December 2024 DIRECTOR FOR HAITI of the IMF holds bilateral discussions Under Article IV of the IMF's Articles Agreement, of the 2024 Article IV consultation with with members, usually every year. In the context and are included in this package: documents have been released Haiti, the following views of the Executive Board as expressed during its A Press Release summarizing the staff report that concluded the Article IV November 20, 2024, consideration of the consultation with Haiti. a staff team of the IMF for the Executive Board's The Staff Report prepared by discussions that ended on October 26, consideration on November 20, 2024, following and policies. Based on 2024, with the officials of Haiti on economic developments the staff report was completed information available at the time of these discussions, on November 6, 2024. Annex prepared by the IMF staff. An Informational staffs of the IMF and the World Bank. Analysis prepared by the A Debt Sustainability by the Staff Representative on Haiti A Statement by the Executive Director for Haiti. A Statement deletion of market-sensitive information and policy allows for the and The IMF's transparency policy intentions in published staff reports premature disclosure of the authorities' 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/Aswwnw.imf.org E-mail: publications@imforg International Monetary Fund Washington, D.C. O 2024 International Monetary Fund of market-sensitive information and policy allows for the and The IMF's transparency policy intentions in published staff reports premature disclosure of the authorities' 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/Aswwnw.imf.org E-mail: publications@imforg International Monetary Fund Washington, D.C. O 2024 International Monetary Fund --- Page 2 --- PRESS RELEASE IMF Executive PR 24/461 Board Concludes 2024 Article IV Consultation with Haiti FOR IMMEDIATE RELEASE Washington, DC - November 20, 2024: The Fund (IMF) concluded the Article IV Executive Board of the International consultation' with Haiti. Monetary Haiti faces an unprecedented economic, social, and security multidimensional crisis encompassing humanitarian, informal sector that relies heavily problems. The economy has a low tax base and a on volatile remittance flows. large consultation, Haiti has suffered a series of shocks, Since the last 2019 Article IV earthquake in 2021; cholera including the pandemic; a which led to a food crisis that outbreaks; and the economic spillovers of the war devastating in Ukraine, the last few years has triggered acute hunger. The severe deterioration of magnified these security over displaced people within and outside Haiti problems-leading to a surge in the number of and to a significant drop in potential Haiti's macroeconomic growth. supply-side shock caused outlook is challenging and subject to elevated feed inflation by the security crisis would continue to uncertainty. The unless the security outlook greatly affect growth and reconstruct basic infrastructure after improves. of Fiscal revenues, which are essential to needs, are only slowly recovering. years social unrest and support large development although this reflects Remittances would continue to finance sustainable mainly an exodus of human capital which could consumption, recovery. Growth is projected to be further undermine a only 1V2 percent over the medium term barely positive in 2025 and will stabilize at (pending further improvements in the security outlook). Executive Board Assessment? Executive Directors agreed with the thrust of the staff severity of Haiti's multidimensional crisis, appraisal. They acknowledged the shocks, and the ongoing political resulting from security, economic, humanitarian Haitian transition, which has population. The outlook remains greatly affected the well-being of the growth is expected to remain low. uncertain, as security continues to deteriorate, and achievements over the last few Despite the headwinds, Directors recognized the economic resilience and years in implementing reforms aimed at authorities' restoring macroeconomic stability. strengthening Directors noted that normalization of emphasizing the critical role of security is essential to improve economic as in supporting support from the international prospects, the reform efforts and helping rebuild critical community in this regard, as well infrastructure. Directors also 1 Under Article IV of the IMF's Articles of team visits the country, collects Agreement, the IMF holds bilateral and policies. On return to headquarters, economic the and staff financial information, and discusses discussions with officials with members, the usually every year. A staff 2 Att the prepares a report, which forms the basis for country's economic conclusion of the discussion, the discussion by the Executive developments http://www. and this summary is transmitted to the country's Managing Director, as Chairman of the Board, summarizes the views Board. IMF authorities. An explanation of any qualifiers used in of Executive Directors, PARMAALIE summings up can be found here: 700 19th Street NW Washington, DC 20431 USA IMForg financial information, and discusses discussions with officials with members, the usually every year. A staff 2 Att the prepares a report, which forms the basis for country's economic conclusion of the discussion, the discussion by the Executive developments http://www. and this summary is transmitted to the country's Managing Director, as Chairman of the Board, summarizes the views Board. IMF authorities. An explanation of any qualifiers used in of Executive Directors, PARMAALIE summings up can be found here: 700 19th Street NW Washington, DC 20431 USA IMForg --- Page 3 --- engagement with the Fund, particularly through capacity States and called for continued well-prioritized the Strategy for Fragile and Conflict Affected development, appropriately guided by Monitored Program, which would provide a welcomed the authorities' interest in a new Staff useful policy anchor. of the budget and their efforts to commended the authorities for the timely passing revenue Directors emphasized that further advancing the authorities' increase fiscal revenue. They address Haiti's immense development needs, notably mobilization agenda is paramount to code to broaden the tax base. Directors through the implementation of the new tax efforts to enhance the quality, efficiency, encouraged the authorities to step up the ongoing strong scrutiny and prompt audit of public spending and called for continued the and transparency the Fund's Food Shock Window. They emphasized of the resources provided through debt sustainability, including by avoiding need for sustained efforts to preserve social safety nets to protect the most vulnerable and non-concessional lending. Strengthening endeavors to foster gender equality will also be alleviate widespread poverty and continued critical. the monetary financing of the welcomed the authorities' commitment to keeping the Directors efforts to promote price stability and enhance deficit at zero and called for continued authorities to conclude and publish the 2023 monetary policy framework. They urged the and limit FX interventions only central bank audit to demonstrate commitment to transparency noted rising vulnerabilities in the to smooth excessive exchange rate volatility. Directors loans, and called for close monitoring and banking sector, particularly from non-performing frameworks. Further strengthening of to regulatory and supervisory continued improvements the AMLICFT framework is also needed. in the structural and governance Directors strongly underscored that progress implementing welcomed the authorities' efforts to reform agenda is critical to lift potential growth. frameworks They and leverage digitalization. They urged strengthen governance and anti-corruption assessment and accompanying action the authorities to publish the governance diagnostic to natural disasters and fostering financial plan as soon as finalized. Building resilience encouraged the authorities to improve data adequacy inclusion are also key. Directors strongly the quality and timeliness of monetary purposes, while continuing to prioritize for surveillance and reserve assets data. --- Page 4 --- Haiti: Selected Economic and Financial Indicators, FY2021- 27 (Fiscal year ending September 30) FY2021 FY2022 FY2023 FY2024 FY2025 FY2026 FY2027 Proj. Proj. Proj. Proj. (Change over previous year; unless otherwise indicated) National Income and Prices GDP at constant prices -1.8 1.7 -1.9 1.5 GDP deflator 1.5 19.3 29.8 31.5 29.1 23.2 17.6 10.4 Consumer prices (period average) 15.9 27.6 44.1 25.9 19.8 15.4 10.6 Consumer prices (end -of- period) 13.1 38.7 31.8 27.9 18.7 12.2 9.3 External Sector Exports (goods, valued in U.S. dollars, f.o.b.) 27.7 13.5 -25.5 -20 14.4 13.6 Imports (goods, valued in U.S. dollars, f.o.b.) 19.8 7.8 .9 27.6 44.1 25.9 19.8 15.4 10.6 Consumer prices (end -of- period) 13.1 38.7 31.8 27.9 18.7 12.2 9.3 External Sector Exports (goods, valued in U.S. dollars, f.o.b.) 27.7 13.5 -25.5 -20 14.4 13.6 Imports (goods, valued in U.S. dollars, f.o.b.) 19.8 7.8 5.5 Remittances (valued in U.S. dollars) 22.5 -7.3 0.1 5.5 Real effective exchange rate (eop; appreciation) 1/ -5 13.8 10.9 Money and Credit (valued in gourdes) Credit to private sector 15.2 17.4 -6.2 -5.3 21.1 14.7 Base money 21.5 23.1 3.1 13.5 11.5 Broad money 38.2 21.1 4.6 4.1 15.5 11.5 (In percent of GDP; unless otherwise indicated) Central Government Overall balance (including grants) -2.3 -1.8 0.9 7.2 -0.1 -1.4 -1.5 Domestic revenue 5.9 5.3 6.4 4.9 5.3 5.7 Grants 1.3 0.9 6.8 1.2 0.7 0.3 Expenditures 9.3 8.3 6.4 4.5 6.2 7.4 7.4 Current expenditures 7.4 6.8 4.9 3.4 4.2 4.2 4.3 Capital expenditures 1.9 1.6 1.5 1.1 2.1 3.2 3.1 Overall balance of the nonfinancial public sector 2/ -2.2 -1.7 6.6 -0.1 -1.4 -1.5 Savings and Investment Gross investment 15.9 13.9 6.1 7.8 10.7 14.2 Ofv which: public investment 1.9 1.6 1.5 1.1 2.1 3.2 3.1 Gross national savings 18.5 13.5 10.4 5.5 7.2 9.8 External current account balance (incl. official grants) 0.4 -2.3 -3.5 -0.5 -0.6 -0.9 -1.2 Net fuel exports -3.1 -4.5 -3.6 -2.4 -2.3 -2.3 -2.3 Public Debt External public debt (medium and long- term, eop) 12.9 12.3 12.9 1.5 1.4 2.7 4.1 Total public sector debt (end of period) 28.9 29.5 28.5 13.9 11.4 10.9 11.4 External public debt service 3/ 9.4 8.1 11.8 13.5 3.3 4.7 4.6 Memorandum Items: (In millions of dollars, unless otherwise indicated) Net international reserves 4/ and long- term, eop) 12.9 12.3 12.9 1.5 1.4 2.7 4.1 Total public sector debt (end of period) 28.9 29.5 28.5 13.9 11.4 10.9 11.4 External public debt service 3/ 9.4 8.1 11.8 13.5 3.3 4.7 4.6 Memorandum Items: (In millions of dollars, unless otherwise indicated) Net international reserves 4/ 1,159 1,341 1,501 Gross international reserves 2,534 2,067 2,346 2,496 2,621 2,771 2,921 In months ofi imports oft thef following year 5.6 4.7 5.3 5.6 5.6 5.6 5.6 Nominal GDP (millions of gourdes) 1,699,208 2,168,223 2,798,324 3,468,166 4,315,508 5,151,163 5,772,370 Sources: Ministry of Economy and Finance; Bank of the Republic of Haiti; World Bank; Fund staff estimates and projections. 1/ The real effective exchange rate for FY2024 reflects August 2024 data. 21 Includes transfers to the state- -owned electricity company (EDH), and unsettled payment obligations. 31 In percent of exports of goods and nonfactor services. Includes debt relief. 4/E Excludes banks' FX deposits, Venezuela escrow account, IMF liabilities (except Food Shock Window), and swaps. --- Page 5 --- MONETARY FUND INTERNATIONAL HAITI FOR THE 2024 ARTICLE IV CONSULTATION STAFF REPORT November 6, 2024 KEY ISSUES challenges. While security has Haiti is facing exceptional Recent developments. IV Consultation, it reached crisis deteriorated steadily since the last 2019 Article controlled 80 percent of the capital proportions in the first few months of 2024. Gangs disrupting supply chains, March-May 2024, paralyzing economic activity by The escalation of during and rekindling inflation pressures. destroying much infrastructure, and led to a surge in the number of violence has destroyed human and physical capital security situation accelerated brain drain. The worsened displaced people and greatly shocks, including the pandemic, Haiti's fragility, compounding its multiple Moïse, has amplified the assassination of President earthquake, political crisis following war in Ukraine a devastating from the economic spillovers of Russia's worsening malnutrition resulting outbreaks of infectious diseases. The economy which led to the food crisis, and repeated the contingent of the Multinational slowly normalizing. The first wave of -arrived in is only very by Kenya backed by the United NationsSecurity Support mission (MSS)-led The new government, in place since Haiti at the end of June to help re-establish security. 2026 (tasked with holding June 2024 with a time-bound mandate through February reforms that could elections), has a window of opportunity to implement and term. general potential over the medium long eventually help restore the country's The analytical work underpinning the policy Themes of the Article IV Consultation. with the authorities, focuses on discussions, prepared by staff in agreement resilience (to make them less pro-cyclical). strengthening policy frameworks to enhance growth; points to the the impact of crime and climate on potential It also quantifies to boost potential output; calls for strengthening importance of closing gender gaps revenue to support inclusive growth; digital infrastructure to generate additional tax the macro financial linkages, using examines the main sources of inflation; and analyzes diagnostic Initial findings from the IMF staff-led governance a balance sheet approach. report were also discussed. achieved under the 2022 SMP Staff-Monitored Program (SMP). Building on progress in June 2023, initially June 2022-May 2023, a new SMP was negotiated initial covering March 31, 2024. Despite meaningful covering the period June 30, 2023, through gaps revenue to support inclusive growth; digital infrastructure to generate additional tax the macro financial linkages, using examines the main sources of inflation; and analyzes diagnostic Initial findings from the IMF staff-led governance a balance sheet approach. report were also discussed. achieved under the 2022 SMP Staff-Monitored Program (SMP). Building on progress in June 2023, initially June 2022-May 2023, a new SMP was negotiated initial covering March 31, 2024. Despite meaningful covering the period June 30, 2023, through --- Page 6 --- HAITI 2023, the amendments to the including the timely approval of the budget in September dissemination of finance progress, law, and provision and timely financial intelligence unit (FIU) improved fronts. As a result of the IT incident in midslippages occurred on other of ministry data, program extensive than originally foreseen, the timeliness summer 2023, whose impact was far more of the First Review in December 2023. At that data suffered and prevented the conclusion The extension was meant to monetary by six months through September 2024. time the SMP was extended record of effective policy implementation, which was allow for more time to accumulate a track and build the capacity to provide high-quality eventually disrupted by the unfolding security crisis, including a collapse in tax insecurity in the spring led to further slippages, latter data. The worsened structural benchmarks and in providing data. The collection and delays in achieving some attributable to the lockdowns. With the new interim reflected reduced capacity in compiling statistics to let the 2023 SMP lapse, rather than government in place, the authorities and staff agreed finalization of the budget, which would anchor it further, and to start a new SMP after the extending the new quantitative targets. Policy recommendations financing of the budget to zero, the budget for FY2025 and keep the monetary Implement consistent with the objective of price stability. diagnostic assessment as soon reforms, including publish the governance reforms. Advance governance action plan) and advance anti-corruption as completed (and adopting accompanying management and controls and revenue collection, expenditure Adopt measures to strengthen and for protecting the most vulnerable -and allocations for social spending increase budget assess their impact. funds. and accountability in the use of public Strengthen public finance reporting, transparency, interventions to smoothing excess volatility and well-signaled Continue to limit foreign exchange foreign reserve build-up. audit of the Central Bank for FY2023 as soon as possible. Complete and publish the the Fund and enhance data transparency through timeline Provide more timely data to publication of core economic data. 2 INTERNATIONAL MONETARY FUND controls and revenue collection, expenditure Adopt measures to strengthen and for protecting the most vulnerable -and allocations for social spending increase budget assess their impact. funds. and accountability in the use of public Strengthen public finance reporting, transparency, interventions to smoothing excess volatility and well-signaled Continue to limit foreign exchange foreign reserve build-up. audit of the Central Bank for FY2023 as soon as possible. Complete and publish the the Fund and enhance data transparency through timeline Provide more timely data to publication of core economic data. 2 INTERNATIONAL MONETARY FUND --- Page 7 --- HAITI Approved By Policy discussions started in Patricia person in Alonso-Gamo and 2-3, 2024, continued remotely Washington DC during July Peter Dohlman with several additional during July 24-August 5, 2024, September and concluded meetings throughout August and October in person in Washington DC 21-26, 2024. The team comprised Patrizia during (head), Noah Ndela, Arsène Kaho, Gonzalo Tumbarello Passadore (all WHD), Henrique Huertas, and Juan (STA), Jinkyu Chociay (SPR), Mher Barseghyan (Port-au-Prince Sung, (FAD) and Gabriel Duvalsaint and Ralph Wata office). Monique Newiak (SPR) discussion on gender and inclusion. Joel Lee participated in the (SPR), and Pamela Cardoso (LEG), Parisa Kamali on Article VIII and Capital (MCM) participated in the discussions members included Flow Management Former team Weicheng Lian and Justin Matz. provided excellent research assistance, Toyosi Ojo coordinated all work related to mission Soungbe Coquillat preparations. The mission met with Prime scheduling and document Minister of Economy and Finance Minister Garry Conille External and Minister of Planning and Cooperation Ketleen Florestal, Central Bank Ronald Gabriel, other senior Governor the donor community, government officials, members of sector. Ms. Ludmilla NGOS, and representatives of the private Buteau Allien (OED all policy and technical discussions. advisor) participated to (Executive Director) and Mr. Bruno Mr. André Roncaglia Director) joined the Saraiva (Alternate Executive concluding meetings. CONTENTS THE SETTING RECENT DEVELOPMENTS OUTLOOK AND RISKS 2023 SMP PERFORMANCE POLICY DISCUSSIONS A. Fiscal policy-From Crisis to Resilience B. Strengthening Social Assistance C. Addressing Governance and Enhancing D. Implementing Transparency to Lift Potential Growth Structural Reforms to Support Potential Growth E. Strengthening Monetary and Exchange Rate F. Policy Frameworks Safeguarding Financial Sector Stability G. Improving Data Adequacy for Surveillance and Other Issues STAFF APPRAISAL BOX 1. Scarring from Multiple Crises-Loss in Potential Output INTERNATIONAL MONETARY FUND 3 ICY DISCUSSIONS A. Fiscal policy-From Crisis to Resilience B. Strengthening Social Assistance C. Addressing Governance and Enhancing D. Implementing Transparency to Lift Potential Growth Structural Reforms to Support Potential Growth E. Strengthening Monetary and Exchange Rate F. Policy Frameworks Safeguarding Financial Sector Stability G. Improving Data Adequacy for Surveillance and Other Issues STAFF APPRAISAL BOX 1. Scarring from Multiple Crises-Loss in Potential Output INTERNATIONAL MONETARY FUND 3 --- Page 8 --- HAITI FIGURES 1. Indicators of Well-Being and Digital Access 2. Monitoring Economic Activity Through Satellite Data 3. Revenue Performance, 2019-24 4. Real Sector Developments, 2016-24 5. Fiscal Sector Developments, 2016-24 6. Monetary and Financial Sectors Developments, 2017-24 7. External Sector Developments, 2017-24 TABLES 1. FSW. Spending Priorities Indicated by the Authorities 2. Selected Economic and Financial Indicators, 2021-29 3a. Non-Financial Public Sector Operations, 2021-29 3b. Non-Financial Public Sector Operations, 2021-29 4a. Balance of Payments, 2021-29 4b. Balance of Payments, 2021-29 5. Summary Accounts of the Banking System, 2021-29 6. External Financing Requirements and Sources, 2021-29 7. Financial Soundness Indicators, June 2021-June 2024 ANNEXES I Country Engagement Strategy II. Impact of Crime on Economic Activity III A. Closing Gender Gaps III B. Macro-Critical Gender Gaps: The Case of Haiti IV. Risk Assessment Matrix V. Domestic Revenue Mobilization: Reaping the Benefits of Digitalization through GovTech 69 VI A. Assessing the Fiscal Policy Stance VI B. Strengthening the Fiscal Framework by Revising the Fuel Subsidy Regime VII. Options to Further Strengthen Monetary and Exchange Rate Policy. VIII. Assessing Macro-financial Linkages Using a Balance Sheet Approach IX. Data Issues X. External Sector Assessment XI. Inflation Dynamics in Haiti XII. Greening Haiti-Climate Policy and Structural Reforms XIII. Past IMF Recommendations and Implementation Status APPENDICES I. Joint Governance Matrix on Recent, Ongoing, and Forthcoming Capicity Development by the IMF and Development Partners 4 INTERNATIONAL MONETARY FUND --- Page 9 --- HAITI THE SETTING 1. Haiti is a fragile and conflict-affected state a low-income country with multiple challenges. Half its population lives below the poverty line. The economy has a low tax base and a large informal sector that relies heavily on volatile remittance flows. Since the last 2019 Article IV consultation, Haiti has suffered a series of crises and shocks, including the pandemic; a devastating earthquake in 2021; cholera outbreaks; and the economic spillovers of the war in Ukraine, which led to a food crisis that triggered acute hunger. The severe deterioration of the political and security situation over the last few years (including the assassination of President Moïse in 2021) has magnified these problems--leading to a surge in the number of displaced people (within the country and outside), a worsening brain drain, fatigue in host communities and in the region, and tighter capacity constraints (Annex I). Governance and corruption problems are pervasive.' 2. Political and social insecurity deteriorated further during February-May 2024, reaching crisis proportions. 2 Gang violence inferred attacks on government buildings, police installations, and such key infrastructure as airports, roads, and ports. Schools have been forced to close and most Port-au-Prince residents have been cut off from critical supplies of food and healthcare. Gangs Total Number of People Displaced from Haiti Forcibly Displaced and State ss Persons from Haiti (Thousands, annual data, end of each year) (Thousands) tighter capacity constraints (Annex I). Governance and corruption problems are pervasive.' 2. Political and social insecurity deteriorated further during February-May 2024, reaching crisis proportions. 2 Gang violence inferred attacks on government buildings, police installations, and such key infrastructure as airports, roads, and ports. Schools have been forced to close and most Port-au-Prince residents have been cut off from critical supplies of food and healthcare. Gangs Total Number of People Displaced from Haiti Forcibly Displaced and State ss Persons from Haiti (Thousands, annual data, end of each year) (Thousands) 2 2023 m20241 1/ 2018 2019 2020 2021 2022 2023 2024 - Source: United Nations High Commisioner for Refugees. USA Brazil Mexico Canada France Dominic an Costa Rica Note: Includes refugees, asylum- seekers and other people in Source: United Nations High Commisioner for Rep. need of international protection. 1/ Data refers to thef first six months of 2024. Refugees. Losing Talent, 2022 Net Remittances: Regional Perspective (Percentage of people, college- -educated citizens living abroad) a percent of imports of goods and services percent of GDP (right scale) Haiti Ghana 30 60 Mozambique Kenya Lao PDR Uganda Angola Somalia ESalvador SriLanka I R 10 a S Source: World Bank Migration Database. EARRRS Note: Chart only indicates countries with population more than Dom. Rep. Guatemala Honduras Nicarag five million. 1/Data ces are Bank on koftheRepublic afiscal lyeart basis. arameun WEO, BOPSY andil IMF staff 2024, annu ons 1 Since late 2022, the United Nations, Canada, the EU, the United Kingdom, the United States, and other countries have imposed sanctions on high-profile Haitians for criminal activities. 2 According to UN data, homicides more than doubled in 2023 relative to 2022 and tripled relative to the pandemic time. In 2024 homicide rates increased by 50 percent relative to 2023. Furthermore, 702,973 predisplaced within Haiti as of September 2024 (see UN International Organization for people were Migration agency), in addition the 400,000 people who are displaced from Haiti. to INTERNATIONAL MONETARY FUND 5 --- Page 10 --- HAITI control large part of the capital, The widespread disorder has compounded the populations' heightened Haiti's fragility and suffering from severe malnutrition (Figure 1). Figure 1. Haiti: Indicators of Life Well-Being and expectancy in Haiti is Digital Access world.. among the lowest in the and children rate is Life Expectancy mortality very high. Mortality Rate of Children Below Five Years bados (Per 1,000 live births) Old enada Am The the Gre ibbea Barbad m2022 nica m2016 nd Ne Hondu lux stat Nicaragua Belize Tobago Pacific isla Vincent and ena PRG Only 50 percent of the population has electricity.. access to and sanitation services are below other Access to Electricity Conflict Affected States, Fragile and (Percent ofp population) St. Kitts and Nevis People Perce Using of population) at Least Basic Sanitation Services Jamai ica St. Vincent andt he. Dominica m2022 Barbados Antigua and Barbuda Lat tin Ame ica and Caribbea Honduras Guyana Nicaragua Pacific island small states IDA only Guyan FCS obago Hai nd uda Barb ados Internet access is still limited... as is the use of Individuals Using the Internet mobile phones. Percent of population) Mobile Cellular Subscriptions (Per 100 people) go Tobag Guater Barbados bbean pean Barbados all stat tes uci Hond Nid taragua Kinbati Lucia Sources: World Development Indicators and IMF staff Association; PRGT=Poverty calculation. Note: Reduction and Growth Trust; IDA=International Development FCS-Fragile and Conflict-Affected States. 6 INTERNATIONAL MONETARY FUND as is the use of Individuals Using the Internet mobile phones. Percent of population) Mobile Cellular Subscriptions (Per 100 people) go Tobag Guater Barbados bbean pean Barbados all stat tes uci Hond Nid taragua Kinbati Lucia Sources: World Development Indicators and IMF staff Association; PRGT=Poverty calculation. Note: Reduction and Growth Trust; IDA=International Development FCS-Fragile and Conflict-Affected States. 6 INTERNATIONAL MONETARY FUND --- Page 11 --- HAITI mandate to restore in place since June 2024 has a time-bound 3. The government for orderly general elections in February economic growth, and pave the way Council was established in security, Transitional Presidential (for the first time since 2016). A nine-member presidency until February 2026. of CARICOM, acting as the country's April 2024, with the support Security Support Mission (MSS)-led by Kenya The first waves of the contingent of the Multinational in restoring security has been in Haiti at the end of June 2024. Progress backed by the UN-arrived of the MSS is still too small relatively to the originally maintained that the size and slow as the authorities resources being one of the main issues expected presence to be impactful, with lack of mission to have access to considerably requested the MSS to be replaced by a UN peacekeeping further 600 police officers by the end of additional funding and personnel. Kenya has committed a and others host an increasing remain closed due to security the year. Some schools in the capital their homes. A further escalation which could not return to destroyed number of displaced people of violence took place since early October 2024. RECENT DEVELOPMENTS 4. Data point to a dire situation. Crime and GDP Per Capita Macroeconomic conditions remain difficult, with Ha 2021 five consecutive years of negative Haiti recording 1.9 I (2019-23). Real GDP growth was negative growth 2023. This percent in FY2023, ending in September disruptions in production, exports, and in reflected the distribution of goods and services (including energy) in local markets. The economy collapsed 2024 and has yet to fully recover. US dollar) during March-May closed from March Ln(GDP per WorldE capitain Economic Outlook database. and IMF staff The airport in Port-au-Prince was calculations. Sou urces: World Development Indicators, which homicider rates are availablei in 2021. All and port capacity was at a minimum, as Note: refer The sample to the valuesi consists in 2021, of 101 except countries for forv the one of" "Haiti 2023". to May of trade flows using dots crisis has evidenced by staff's monitoring shock caused by the security Portwatch (Figure 2). The supply-side satellite data through crisis: after 10 months of steady and remarkable fed inflation and worsened the hunger (year-on-year) in greatly resumed rising in February 2024, reaching 27.9 percent decline, inflation September. Haiti: Trade and Remittances Data Percentage change Amount (in millions of US dollar) FY19-23 FY23 FY24 VS average FY24 VS FY23 FY24 FY19-23 Period (average) Fiscal year to date 642 782 N -28 N-18 Exports October -July 3,547 3,868 N -3 N 8 Imports October July 3,650 3,065 2,745 A 15 A 12 Net Remittances October August 2,662 Latest available month 71 N -33 N 5 Exports July 388 377 A 4 A 3 Imports July 287 254 A 14 A 13 Net Remittances August Sources: BRH and Fund staff estimates. INTERNATIONAL MONETARY FUND 7 642 782 N -28 N-18 Exports October -July 3,547 3,868 N -3 N 8 Imports October July 3,650 3,065 2,745 A 15 A 12 Net Remittances October August 2,662 Latest available month 71 N -33 N 5 Exports July 388 377 A 4 A 3 Imports July 287 254 A 14 A 13 Net Remittances August Sources: BRH and Fund staff estimates. INTERNATIONAL MONETARY FUND 7 --- Page 12 --- HAITI Figure 2. Haiti: Monitoring Economic Activity Through Satellite Data The pandemic and the intensification of criminal activity have disrupted trade flows. Import and export volumes, and the number of cargo and tanker ships are on a downward trend. Daily Import and Export Volumes Average Daily Ship Arrivals 2.0 1.0 1.2 1.8 0.9 Import volume 1.6 Cargo ships 0.8 Export volume (right scale) 1.4 Tanker ships (right scale) 0.7 0.8 1.2 0.6 0.6 1.0 0.5 0.8 0.4 0.4 0.3 0.6 0.2 0.2 0.4 Satellite data suggest that trade activity fell dramatically beginning in March-April 2024. 111 Dec 25 Dec 8Jan 22. Jan 5Feb 191 Feb 4 Mar 18Mar 1Apr 15Apr 29Apr 13May 27 May DE 15Jul 29, Jul 12A Aug 26Aug 95 Sep 23 Sep 7Oct 21 Oct 0 Number of Cargo Ships 0 Number of Tanker Ships 7-day Moving Average Prior Year: 7-day Moving Average Sources: IMF Portwatch (daily data), IMF Swift Monitor, and FlightsRadar24. Left upper chart: the blue line is the quarterly average of the daily arrivals of cargo ships. The red line is the quarterly average of the daily arrivals of tanker ships. Right upper chart: quarterly average of the daily import and export volumes. 8 INTERNATIONAL MONETARY FUND 29, Jul 12A Aug 26Aug 95 Sep 23 Sep 7Oct 21 Oct 0 Number of Cargo Ships 0 Number of Tanker Ships 7-day Moving Average Prior Year: 7-day Moving Average Sources: IMF Portwatch (daily data), IMF Swift Monitor, and FlightsRadar24. Left upper chart: the blue line is the quarterly average of the daily arrivals of cargo ships. The red line is the quarterly average of the daily arrivals of tanker ships. Right upper chart: quarterly average of the daily import and export volumes. 8 INTERNATIONAL MONETARY FUND --- Page 13 --- HAITI Crises-Loss in Potential Output Box 1. Haiti: Scarring from Multiple 2019 and 2023, Haiti's potential real GDP Change in Potential Real GDP, 2019-23 Results. Between while that of a (Percent per year) fell on average by about 2 percent a year, (Figure group increased by 3.2 percent a year comparator total gap between Haiti and the 1.1). The cumulative the is equal to 25 percent comparator group in period (Figure 1.2)." accounting exercise with a Methodology. We use a growth Regional comparators production function: Haiti Cobb Douglass Y = A.CK,"(Le h)1-0, Changei in Potential Index Real 2019-100) GDP 2019-23 real GDP, Lt is labor force, hr is human capital, and 130 (Percent per HTI year, COM where Y; is and Ar is total factor productivity. K; is capital stock, for the impact of natural disasters on Step 1. To account in investment I which capital stock, we remove changes natural disasters (to efforts after are due to reconstruction stock in the recovery phase). 70 2019 2020 2021 2022 2023 avoid upward bias in capital model for Sources: Haver. Analytics, WEO, estimation and JIMF accounting staff calculations for natural disasters. Regional Jamaica To this end, we estimate an ARIMA (1,0,1) natural Note: compara Potential ato include: realGDP Antigua and Barbuda, Bahamas, Belize. Dominica, and investment and introduce a two-lag dummy for obtain a modified investment series: the effect of natural disasters, we disasters. After subtracting IE. by using the perpetual inventory method with Calculate the corrected capital stock, KE Step2. investment process, 1E, as an input. the "correct" for changes in population and labor force accounting Step 3. Obtain the human-apitalbadjuated in average years of schooling when available. framework, the contribution of total factor Step 4. Estimate, using the growth accounting productivity as a residual: h)1-a. At = Y,/CKE)-(Le using the filter of Hodrick-Prescott. Step 5. Compute the trend for productivity, ATrend Step 6. Use Aprend and KE to obtain potential output: h,)1-a Ypot = APrend(KE Le The channels through which crime affects of crime and climate on potential output. IMF computes the effect of The impact accumulation, and human capital. (2023) growth are productivity, capital of Latin American countries, with an elasticity ranging crime on real GDP growth in a cross section in logs). Using homicide rate (i.e., -0.3 and -0.4 with respect to the homicide rate (measured to 59 in 2024, we conclude between inhabitants) for Haiti which surged from 11 in 2019 climate homicides per 100,000 in real GDP of at least 1.2 percent per year. In addition, that crime could account for a drop the difference between K. and KE (with the the computation of potential output through aftermath of a natural will impact to efforts in the for the upward bias due reconstruction latter correcting the effect on natural disasters on productivity. disaster) and through Note: Regional Economic Outlook: Western Hemisphere, by: Sinem Kilic and Juan Passadore (WHD). Potential Growth," Online Annex 4, "Crime and its 1/Prepared "Securing Low Inflation and Nurturing Estimates of the homicide rate for October 2023.(imf.org), in Latin America and the Caribbean." Note: Macroeconomic Consequences Office in Haiti. 2024 (through August) are from UN Integrated INTERNATIONAL MONETARY FUND 9 latter correcting the effect on natural disasters on productivity. disaster) and through Note: Regional Economic Outlook: Western Hemisphere, by: Sinem Kilic and Juan Passadore (WHD). Potential Growth," Online Annex 4, "Crime and its 1/Prepared "Securing Low Inflation and Nurturing Estimates of the homicide rate for October 2023.(imf.org), in Latin America and the Caribbean." Note: Macroeconomic Consequences Office in Haiti. 2024 (through August) are from UN Integrated INTERNATIONAL MONETARY FUND 9 --- Page 14 --- HAITI 5. Latest data suggest that trade collapsed in Haiti: Foreign Exchange Interventions by the Reserve Bank of Haiti recent months while remittances held (Cumulative purchases per fiscal year, in millions of US dollars) up. The current account deficit widened in FY2023 to 372 -FY21 -FY22 FY23 -FY24 percent of GDP owing mainly to a collapse in exports (especially textile). The external position of Haiti in FY2023 is assessed as weaker than the level implied by fundamentals and desirable policies (Annex X). Preliminary BOP data point to a narrowing deficit SO far in FY2024 to V2 percent of GDP, mainly the result -100 of Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep large import compression (amid strong real-side Sources: Bank of the Republic of Haiti and IMF staff calculat tions. restraints on economic activity) and robust remittances. As a result, reserve buffers have been rebuilt to a comfortable level. Gross International Reserves (GIR) increased from US$2.1 billion at end-September 2022 to US$2.3 billion at endSeptember 2023-and stood at US$2.5 billion (equivalent to 5.7 months of imports) in August 2024. Net International Reserves (NIR) for September 2023 stood at US$356 million and jumped to almost US$1 billion (US$963 million in August 2024). The increase in net international reserves in FY2024 (US$607 million through August) was supported by net FX purchases by the BRH (US$471 million in the whole year, text chart), benefitting from a favorable FX supply in the market driven by remittances. Relative to the net reserves, gross reserves increased by a lower amount in FY2024 Haiti: Calculation of BRH Net International Reserves (In millions of US dollars) Sep 2023 Oct 2023 2023 Dec 2023 Jan 2024 Feb 2024 Mar 2024 Apr 2024 May 2024 Jun2024 Jul2024 Aug 2024 Sep Change 2024A. Grossi International Reserves 2,346 2,301 2,394 2.587 2,341 2,334 Monetaryg gold 109 16 18 121 120 118 2.429 129 2.365 134 2,421 2,451 2,455 2,533 188 Holdings.off foreign-currency 60 42 137 136 141 146 Investments Demand deposits abroad abroad 371 34 330 542 396 113 SDRholdings 06 1,67 78 54 1,750 1,646 569 535 79 446 475 Reserve Positioninithe Fund 1/ 110 109 104 101 101 B. Liabilitiestot Reserve Related Liabilities 43 143 139 140 378 the IMF, excluding Food Shock Window 1/ 137 138 347 343 345 253 Short term loans from private non- residents Liabilities to IFls C FX Denominated Liabilities to Residents 1,813 1,777 1,7 770 ,743 FXlabilties to commercialbarks. microfinance. and caisses depargne 1,265 229 222 1,238 205 1,279 1,296 1,316 25 1,292 1,28 80 533 GovemnmentF FX deposits (Venezuela transitory account) 515 515 515 138 347 343 345 253 Short term loans from private non- residents Liabilities to IFls C FX Denominated Liabilities to Residents 1,813 1,777 1,7 770 ,743 FXlabilties to commercialbarks. microfinance. and caisses depargne 1,265 229 222 1,238 205 1,279 1,296 1,316 25 1,292 1,28 80 533 GovemnmentF FX deposits (Venezuela transitory account) 515 515 515 Swaps with francial institutions D. Other FX Liabilities Off- balances sheet FXI liabilities Project accounts Special accounts E Neti International Reserves (A B C-D) 356 348 451 671 691 658 736 684 720 Memorandumit items 763 874 963 607 FF Foods Shocky Wirndow (FSW)- -Liability to the IMF 1/ 107.7 1076 1092 109.9 108.9 108.7 108.4 G Netir International Reservesdeductingf FSW(E F) 248 240 341 561 582 549 627 107.9 576 108.4 107.7 108.8 1103 1/ IMF data. 611 655 765 852 604 Sources BRH.I IFS, andIMF staffc cakculations Reserves Accumulation and Bilateral Exchange Rate Bilateral Exchange Rate NIR (millions of US dollar, rights scale) 1,080 (Gourde per US dollar) Gourde per US dollar e 140 e 145 #120 2 140 o o 135 DE 100 - 130 a -BRH refe xe exo hange E 125 timated two- nd December 202 120 Estima nated band 8 8 a a a N N 8 8 8 4 8 a $ 3 3 $ $ 3 2 I 1 à ê $ E Source es: Bank of the Republic of Haiti and IMF staff sti im Sources: Bank of the Republic of Haiti andl IMF staff estimates. 10 INTERNATIONAL MONETARY FUND --- Page 15 --- HAITI which reduced both FX August) due to the settlement with Venezuela, and (US$188 million through exhibited a crawl-like behavior between June assets and FX liabilities. The exchange rate the U.S. dollar since then. The 2023 and has stabilized within a 2 percent band against deficit, in line with 2022-23 December the monetary financing of the fiscal authorities have continued to reduce SMP objectives. Inflation Monetary Financing of the Budget (Percent) (In percent of GDP) -Overall CPI (year on year) Food CPI (year on year) reduced both FX August) due to the settlement with Venezuela, and (US$188 million through exhibited a crawl-like behavior between June assets and FX liabilities. The exchange rate the U.S. dollar since then. The 2023 and has stabilized within a 2 percent band against deficit, in line with 2022-23 December the monetary financing of the fiscal authorities have continued to reduce SMP objectives. Inflation Monetary Financing of the Budget (Percent) (In percent of GDP) -Overall CPI (year on year) Food CPI (year on year) a 2 8 2022 2023 2024 1/ R E S 2 2 2019 2020 2021 Financières de TEtat-TOFE) % Sources: Ministry of Finance (Tableau des Operations of Statistics and Informatics (IHSI), and Bank oft the Republic of Haiti. andl IMF are staffe on estimates. a fiscal- year basis. 2024 refers to October 2023- July 2024, annualized. Sources: Haitian Institute 1/ Data implemented in early 2024 significantly reduced 6. Debt restructuring with Venezuela 2023, Haiti's outstanding Petrocaribe debt stock and debt service of Haiti. By end-September 2024, Haiti and the with US$642 million in arrears. In January debt to Venezuela was US$2.2 billion, of Petrocaribe debt of about US$1.7 billion Venezuela finalized an agreement on a debt forgiveness Haiti's debt-to-GDP ratio of US$500 million. As a result, in exchange for a lump-sum payment authorities to save approximately annually US$95 dropped to 14 percent in FY 2024 allowing the million (or 12.5 billion gourdes) in debt service. OUTLOOK AND RISKS outlook for Haiti Haiti: Real GDP under Different Scenarios 7. The macroeconomic clouded. Growth in FY2024 (ended in remains 2024) is expected to be negative (for 100 September the sixth consecutive year), at minus 4 percent. Growth could reach 1 percent in FY2025 and 112 96 over the medium term if the security percent improves. But further social turmoil Elevated crime rate situation economic activity. 92 -In- Crime -between back to case pre- -pandemic would continue to disrupt Staff's analysis suggests that bolstering domestic 90 2024 2025 2026 2027 2028 2029 could greatly enhance growth. Should Sources: 2022 World 2023 Bank Indicators and the World Economic Outlook database security by the homicide rate) be brought annually in crime (proxied could be as large as 1.9 percentage points levels, the impact on growth all else to pre-pandemic point in steady state (long term), short and medium term (Annex II) and 1 percentage level of the that the medium- and long-term staff's analysis (Annex III A) indicates labor equal. Furthermore, should Haiti's gender gap, proxied by different gender close. GDP could rise by 5-15 percent would be even larger if education gaps were to rates, close. The increase in GDP participation INTERNATIONAL MONETARY FUND 11 percentage points levels, the impact on growth all else to pre-pandemic point in steady state (long term), short and medium term (Annex II) and 1 percentage level of the that the medium- and long-term staff's analysis (Annex III A) indicates labor equal. Furthermore, should Haiti's gender gap, proxied by different gender close. GDP could rise by 5-15 percent would be even larger if education gaps were to rates, close. The increase in GDP participation INTERNATIONAL MONETARY FUND 11 --- Page 16 --- HAITI the medium term, assuming adequate macroeconomic Inflation is projected to ease further over deficit of the NFPS is projected at about on the security front. The fiscal in the policies and improvement deficit is projected to increase to 1 percent of GDP 0.1 percent of GDP. The current account to grow this year, assuming recover. Gross reserves are expected remain medium term as imports mission and strong remittances; they could confidence-building from the Kenya deployment 5V2-6 months of imports over the medium term. at shadow (Annex IV, RAM). These risks include Domestic and external risks cast a long especially if 8. disruptions to economic activity, intensified political instability; continuous gang-related crisis; natural disasters; and of the MSS is delayed; a worsening of the hunger volatile remittance flows, full deployment law. Haiti is vulnerable to pervasive corruption and weak rule of Externally, and renewed surges in global food and reduced external financing from development partners, to elevated uncertainty. Given the baseline for Haiti is subject energy prices. The macroeconomic vulnerable to macro risks that could erode fragility, conflict, and violence, it is highly of recession, problems in country's Such risks include continuation confidence in the baseline projection. and the transitional government's weakened revenue owing to a resurgence of violence, financing of the mobilizing policy. Under this adverse scenario, substantial monetary outlook is capacity to implement macroeconomic stability. The debt risk budget would likely resume, further undermining capacity will be downgraded in the in light of the high likelihood that Haiti debt carrying of fundamentals. The negative, analysis (DSA) absent significant strengthening country This is because next debt sustainability Haiti's risk of debt distress as high but sustainable. accompanying DSA still assesses development and infrastructure needs, and its exposure to natural disasters, its large However, of Haiti's large the result of a lack of security and poor infrastructure. still-low potential growth--mainly the of the authorities to secure donor financing of overall debt hinges on ability the sustainability over the short to medium term. has a narrow window of opportunity to implement 9. That said, the current government over the medium and long term. reforms that could help restore the country's potential outside the region support the Kenya-led Official transfers could rise if countries within and Normalization of the additional financing and if they support Haiti's reconstruction. with the operation with medium-term outlook. If this were combined security situation would greatly improve the it could bring back the foreign direct implementation of a strong anti-corruption strategy, Should downside risks materialize, additional investment FDI and talent that have left the country. stability and support priority (via grants) will be essential to preserve macro donor support financing. spending, without reverting to monetary outlook is consistent with that of IMF staff. Authorities' views. The authorities' economic the real 10. in and of themselves, do not accurately portray That said, they believe that GDP numbers, of the current humanitarian, social, and conditions of the Haitian population and the extent has nonetheless a narrow window of economic, crises. They indicated that the current government challenges, the country could face reforms. Quite apart from the immense the sector opportunity to implement term that would require strong support from private meaningful prospects in the medium only a small current account deficit in partners. The authorities expect and large development 12 INTERNATIONAL MONETARY FUND economic the real 10. in and of themselves, do not accurately portray That said, they believe that GDP numbers, of the current humanitarian, social, and conditions of the Haitian population and the extent has nonetheless a narrow window of economic, crises. They indicated that the current government challenges, the country could face reforms. Quite apart from the immense the sector opportunity to implement term that would require strong support from private meaningful prospects in the medium only a small current account deficit in partners. The authorities expect and large development 12 INTERNATIONAL MONETARY FUND --- Page 17 --- HAITI trade flow disruption, as well as strong FY2024, a result of import compression and security-related medium term, they see risks of a wider current remittances (supported by migration). Over the and a potential slowdown in shortfall attributable to imports of consumer goods United States. They also account of Temporary Protected Status by the remittances related to the expiration of deriving mainly from the downside and an exceptional level uncertainty see risks tilted to the lead to further brain drain, prevent FDI inflows, and unsettled security situation, which could multilateral and bilateral external long-term growth. They see large needs continue to undermine prospects to finance the large development assistance as paramount for supporting growth to preserve debt sustainability. the continuation of grant financing as essential and see 2023 SMP PERFORMANCE SMP under the 2022 SMP (June 2022-May 2023), a new 11. Building on progress achieved off track despite the authorities' continuously in June 2023. The new SMP went and delay in was negotiated attack on the central bank in June 2023 close engagement with staff.3 A cyber/IT of the first review in December 2023. The timely monetary data prevented the completion (CD) assistance providing data by providing capacity development Fund addressed concerns about monetary the first time the reserve data according to the to the central bank in helping it compile for " The central bank recompiled manually international standard provided by the "reserve template. introduced. A FIN-tailored new bank balance sheet data, prior to a new software being reserve central March 2024 revealed persistent weaknesses in foreign safeguard-monitorina mission in bonds. The main lesson of the 2023 with 60 percent of reserves invested in corporate is insufficient to management, level of security, the authorities' commitment SMP is that without a minimum until March 2024, the fiscal aggregates successful implementation. Despite the challenges, more conservative ensure (2023 SMP) and the fiscal stance was were in line with the approved program than expected. data and lower security situation led to further slippages (in providing also the result 12. The worsened achievement of some structural benchmarks), tax collection and in delaying the because of the lockdowns. This prevented the of reduced capacity in data compilation Reviews in March. Despite slippages, the authorities completion of the combined First and Second were met until March. But implementation continued to deliver, and most quantitative targets (QTs) have continued to share detailed quarterly benchmarks has been mixed. The authorities of fiscal of structural monthly reports on the execution financial statements for the FAES and have provided to the template provided by staff, financed by the Food Shock Window (FSW)- according has conducted spending after the end of each month. The General Finance Inspectorate no later than 45 days resources and is transmitting the internal audits of all ministries that use FSW emergency Administrative Disputes (CSCCA). The documentation to the Superior Court of Accounts and structural benchmark on the of the December 2023 target-the authorities also had met-ahead of the organic law on the financial intelligence Council of Ministries' approval of the amendments of the SMP extension were not met. These benchmarks introduced in December as part unit. But all 2023 and extended in December 2023 through September 2024. 3 The initial nine-month SMP was approved in June INTERNATIONAL MONETARY FUND 13 internal audits of all ministries that use FSW emergency Administrative Disputes (CSCCA). The documentation to the Superior Court of Accounts and structural benchmark on the of the December 2023 target-the authorities also had met-ahead of the organic law on the financial intelligence Council of Ministries' approval of the amendments of the SMP extension were not met. These benchmarks introduced in December as part unit. But all 2023 and extended in December 2023 through September 2024. 3 The initial nine-month SMP was approved in June INTERNATIONAL MONETARY FUND 13 --- Page 18 --- HAITI detailed information on government include: (i) provision of more granular monetary data, including of aggregate numbers, which was deposits at the central bank, as opposed to the provision and financial delay; (ii) publication of core macroeconomic provided to staff with substantial of the e-GDDS; (ii) publication of governance according to timeliness and periodicity of the indicators, by the authorities; and (iv) publication diagnostics and an accompanying action plan agreed had been made on most fronts. Until audit of the central bank for FY2023, albeit progress diagnostic with an upcoming to conclude the government was in place, it was not possible the a new government central bank has been much delayed because Superior agreed action plan. The audit of the Court of Accounts has yet to approve the audit firm's contract. POLICY DISCUSSIONS Crisis to Resilience A. Fiscal policy-From the lowest in the world (5 percent of GDP). Revenues. Haiti's level of tax revenue is among customs) has 13. and security crises, domestic revenue (excluding As a result of the social, political, before the escalation of gang activity in early remained below pre-pandemic levels (Figure 3)-even It rose by 55 percent, yearin FY2023 was very promising. 2024. That said, tax revenue performance duties (which grew 120 percent). These duties in FY2023, thanks mainly to higher custom fuel import taxes on-year domestic revenue, which largely reflected higher accounted for 35 percent of total Excise taxes also outperformed expectations, surging and improved customs revenue administration. of total domestic revenue. Revenue grew sharply although representing only 5 percent which grew 310 percent, mainly to continued strong customs collections during October-December 2023, owing declining in early 2024 and collapsed by 73 well above inflation. But revenue began in July 2024. 48 percent y/y, economic paralysis, before beginning a mild recovery percent in March 2024, reflecting Article IV consultation, the government has passed 14. Recent reforms. Since the last 2019 the medium term: 1) new tax code (and reforms aimed at raising domestic revenue over to be important in December 2022, which was originally supposed accompanying tax procedure code) finalization of implementing regulations;* implemented in October 2024 but is now on hold pending in March 2023. The tax of customs tariffs; and 3) a new customs code adopted tax and corporate 2) the publication rationalize and simplify the personal income and tax procedure codes seek to and eliminating many exemptions. Tax and by broadening the tax base income tax, including and corruption, due to the complex administrations remain vulnerable to arbitrariness of and customs and the low level of digitalization. Overall lack transparency of system, inequitable processes, mechanisms leave officials and executives weak integrity standards and oversight accountability, administrations exposed to corruption risks. tax and customs documentation and simplified declaration include certain provisions on: (i) transfer pricing subject to excise, (iv) 4 Pending regulations exempt from turnover taxes, (ii) detailed list of products of special regimes model, (ii) detailed list of products members of the tax litigation appeal commission, (v) application numbers, (vii) audit procedures for appointing and industrial parks), (vi) registration and tax identification (investment code, free zones, for tax officials, and (ix) taxpayers charter and users' service policy. procedures, (viii) code of conduct 14 INTERNATIONAL MONETARY FUND include certain provisions on: (i) transfer pricing subject to excise, (iv) 4 Pending regulations exempt from turnover taxes, (ii) detailed list of products of special regimes model, (ii) detailed list of products members of the tax litigation appeal commission, (v) application numbers, (vii) audit procedures for appointing and industrial parks), (vi) registration and tax identification (investment code, free zones, for tax officials, and (ix) taxpayers charter and users' service policy. procedures, (viii) code of conduct 14 INTERNATIONAL MONETARY FUND --- Page 19 --- HAITI both in the short and medium term and 15. The capacity to raise taxes is essential, of the new tax it the restoration of security, implementation digitalization can help. But requires (Annex V) suggests that, over the Staff's analysis code, and enhanced revenue administration. infrastructure of customs administration from strengthening the digital the medium term, revenue gains of 0.6-0.9 percent of GDP a year by limiting (GovTech) could generate additional tax revenue goods or of smuggling. Other trade fraud on the value, origin, and tariffs on imported impact of on the website of the 2024-27 strategic reforms include the adoption and publication of important administration to improve transparency reform plan of the tax administration and custom administrations. The results for both tax and customs strategic objectives and expected for their digitization. For the Directorate of declaration procedures is a prerequisite abolishing the issuance simplification Générale des Impôts or DGI), staff recommended General General of Taxes (Direction tax return procedure. On the authorizations in the context of the periodic staff encouraged of payment Générale des Douanes or AGD), strongly Administration of Customs (Administration by Article 108 of the Customs Code. apply the simplified procedure as recommended increase transparency in to initially the tax and customs administrations would Intensive use of technologies by and reduce face-to-face strengthen traceability of the core operations; to comply with revenue administration; of officers into the affairs of users intending interactions; and minimize the intrusion Accordingly, the customs and tax and meet their reporting and payment obligations. mobile the law available technological solutions developed by administrations must take advantage of the initially, and subsequently by bank phone operators to set up tax payments by mobile telephone of DGI and AGD IT systems, with a to establish the interconnection transfer. It will also be essential more efficiently against frauds. The data to enlarge the taxbase and fight between the tax view to exchange the information exchange protocol authorities can make progress by formalizing electronic exchange of data, administrations and developing the platform to support authorities who and customs development activities targeting local the planned capacity as well as implementing tax base. will oversee the determination of the property the authorities have limited spending Since the last 2019 Article IV consultation, But fiscal was at 16. Spending. of fiscal buffers. policy averages, which enabled a rebuilding of GDP, relative to historical FY2023, spending decreased by 1.9 percent (Annex VI A). In (relative to best weakly countercyclical 5 Other current expenditures were contained thanks to a large drop in fuel subsidies. Haiti: Execution of Social Spending -Jun. 2023 Oct. 2023-Jun. 2024 FY2023 Oct. 2022In millions FY2022 In millions In percent In millions In percent In percent In millions In percent of GDP of gourdes of GDP of gourdes of GDP of gourdes of GDP of gourdes 1,218 0.05 1,113 Ministry 1,953 0.07 2,031 0.07 16,133 Agriculture 0.09 25,151 0.95 17,811 0.70 Education 0.96 20,767 0.90 0.26 4,929 0.20 4,600 0.30 6,433 0.26 7,327 2,652 0.05 1,264 Health 0.12 3,301 0.14 MAST 0.18 3,964 1.43 26,611 1.00 23,109 1.53 33,117 1.35 37,810 Total of Economy and Finance (MEF) and Fund staff estimates. Sources: Ministry reductions on diesel and kerosene). The reduced prices of all fuel products (with larger and the price of 51 In July 2023, the authorities the price of kerosene, from 665 to 615 gourdes; price of diesel fell from 670 to 620 gourdes; gasoline from 570 to 560 gourdes. INTERNATIONAL MONETARY FUND 15 ,109 1.53 33,117 1.35 37,810 Total of Economy and Finance (MEF) and Fund staff estimates. Sources: Ministry reductions on diesel and kerosene). The reduced prices of all fuel products (with larger and the price of 51 In July 2023, the authorities the price of kerosene, from 665 to 615 gourdes; price of diesel fell from 670 to 620 gourdes; gasoline from 570 to 560 gourdes. INTERNATIONAL MONETARY FUND 15 --- Page 20 --- HAITI inflation), with nominal wages and salaries rising at an annual rate of 17 percent and goods and services by 20 percent t-and declining as a percent of GDP. Social spending was equivalent to 1.3 percent of GDP, below the previous year (1%2 percent) the result of the deteriorating security situation's impact on implementation. Lockdowns triggered by gang violence also hampered the authorities' ability to spend in FY2024 (at least through June). Figure 3. Haiti: Revenue Performance, 2019-24 Total Tax Revenue Total Domestic Taxes - a - 3 2 a a a Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Customs Duties Total Tax Revenue (Annual percentage change) 145 A 157 MFY2023 FY2024 70 39 - -5 iile -30 1 A 4 A -14 -55 -73 -25 -80 Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May June July Sources: Ministry of Finance (Tableau des opérations financières del l'Etat) and IMF staff calculations. Sources: Ministry of Economy and Finance and IMF staff calculations. As for the top charts and lower left chart: index, cumulative values, September 2019= 100, nominal GDP discounted. 17. Fiscal balance. The authorities containment of current spending yielded a zero balance for the non-financial public sector (NFPS) in FY2023 (while the SMP envisaged a deficit of 1.9 percent of GDP). Monetary financing reached 1 percent of GDP at the end of FY2023, below the 1.4 percent projected at the SMP's outset. The FY2024 budget (approved on September 28, 2023) was consistent with the 2023 SMP goal of reducing monetary financing of the deficit to lower inflation and restore stability. The fiscal balance of the NFPS is expected to register a surplus equal to 0.7 percent of GDP (excluding a one-off capital transfer owing to the repayment of the debt to Venezuela), with spending underperforming by 1.9 percentage points of GDP relative to FY2023. 16 INTERNATIONAL MONETARY FUND , below the 1.4 percent projected at the SMP's outset. The FY2024 budget (approved on September 28, 2023) was consistent with the 2023 SMP goal of reducing monetary financing of the deficit to lower inflation and restore stability. The fiscal balance of the NFPS is expected to register a surplus equal to 0.7 percent of GDP (excluding a one-off capital transfer owing to the repayment of the debt to Venezuela), with spending underperforming by 1.9 percentage points of GDP relative to FY2023. 16 INTERNATIONAL MONETARY FUND --- Page 21 --- HAITI at zero in FY2024. At the only moderately, fuel subsidies are projected With global oil prices rising at 0.7 of GDP. same time, revenue on fuel imports is projected budget. In August 2024, the Council of Ministries 18. FY2024 revised budget and FY2025 take into account the lower revenue relative to passed swiftly a revised budget (budget rectificatif) to -and to re-direct former interest budget and the recent debt operation with Venezuela the start of the new the original was approved on time before to social spending. The FY2025 budget and the fiscal stance is payments in line with staff projections; fiscal year and points to a balanced budget, size of total revenues and grants as well as capital appropriate. Staff and the authorities differ in the authorities (by 0.9 percent of GDP) lower revenues and grants relative to the on the spending. Staff projects of GDP), with capital spending depending and lower capital spending (also by 0.8 percent grants, the authorities have To mitigate fiscal risks from lower project need to be size of project grants. Shortfalls in revenue or external project grants discussed with staff a contingency plan. spending in FY2025, while preserving planned increases in current and capital arrears to offset by limiting The authorities agreed to avoid running domestic social spending on the most vulnerable. financing of fiscal deficits. finance shortfalls and avoid resuming monetary introduced measures to close gender gaps. These 19. Gender. The FY2025 budget purposefully under the Ministry of Industry called the Support for Women's Entrepreneurship with a include: a project youth, particularly women, budget and Commerce designed to support new jobs among allocation by 30 percent relative to the previous allocation of 75 million gourdes; and an increased total amount of 150 million gourdes) to Ministry for Women's Affairs (for a year budget to the security and protection of women. promote gender equality rights and strengthen the forward estimates in fiscal framework. The authorities published deficit to 20. The medium-term fiscal balance is expected to shift into small equal line with the 2022 SMP commitment. The The medium-term forecast rests on an of GDP (Table 3b) over the medium term. as a 1.4-1.7 percent infrastructure needs and goods and service spending increase in capital spending to support increase in wages (to retain talent). In addition, the mild recovery unfolds; it also assumes a small administration reforms, while monetary ratio will rise gradually, owing to further revenue of the tax code over tax- -to-GDP will be capped at zero percent of GDP. Implementation financing of the budget medium term is also expected to raise tax revenue. the Social Assistance B. Strengthening have advanced and should continue. On 21. Efforts to strengthen social safety nets fuel cards to low-income started distributing the long-awaited September 9, 2023, the government of fuel price adjustments and to better sector to mitigate the impact workers in the transportation by cash transfer (checks) to the most vulnerable target subsidies. These actions were accompanied Bank and WFP helped maintain and expand. identified in the SIMAST database, which the World as INTERNATIONAL MONETARY FUND 17 is also expected to raise tax revenue. the Social Assistance B. Strengthening have advanced and should continue. On 21. Efforts to strengthen social safety nets fuel cards to low-income started distributing the long-awaited September 9, 2023, the government of fuel price adjustments and to better sector to mitigate the impact workers in the transportation by cash transfer (checks) to the most vulnerable target subsidies. These actions were accompanied Bank and WFP helped maintain and expand. identified in the SIMAST database, which the World as INTERNATIONAL MONETARY FUND 17 --- Page 22 --- HAITI fiscal sustainability and revisions were essential to ensure medium-term 22. Fuel subsidy Given the political and social implications, the has been made to adjust the prices. both in terms of the modalities progress authorities have been following a cautious home-grown approach, have reviewed the retail priceof the reform, guided by good policy principles. They allow changes in and timing amendment of the 1995 Law, in order to setting mechanism, as part of a draft on to consumers, with a smoothing fuel prices and exchange rates to be partly passed a reform in due international variation of retail prices, and they are considering mechanism that caps the monthly 2022, which allowed prices at the implemented in September course. Since the price adjustment been allowing changes in international costs, the government has considering pump to cover supply on to consumers. This would protect the budget fuel prices and exchange rates to be partly passed finance management, and encourage the from large international price volatility, improve public price mechanism is being of fuel products. In addition, a smoothing between consumers efficient consumption international price and exchange rate volatility and considered that would distribute subsidies in some periods (when oil prices rise) and the budget. The smoothing will generate than otherwise without smoothing. Staff savings in others (when oil prices drop) but lower policy to help the authorities' reform communication emphasized the importance of an elaborated sector and strengthening framework for the petroleum-products a strategy. Establishing a regulatory the authorities' reform priorities. Introducing related regulatory institutions should remain among the volatility of fuel net revenues and retail mechanism (Annex VI B) would reduce the simple smoothing mechanism caps monthly price changes, prices. Moreover, since the proposed pricing adjustments-which could help will not be subject to ad hoc unforeseen discretionary population enhance social stability. Fuel Prices and Net Revenues Contribution of Energy Subsidies to the Fiscal Balance 8,000 (Percent of GDP) mFiscalt balance excluding energy subsidies 6,000 mEnergy subsidies 4,000 6 -Global Fiscal balance oil prices, US dollar per gallon (right scale) 2,000 -100 -2,000 -300 - Net fuel revenue (milliorls of gomides) 25 -4,000 -500 -6,000 Price differential= cost price regulated price (gourde per gallon) (right scale) -700 -8,000 5 0 2 - 4 2016 2017 2018 2019 2020 2021 2022 2023 2024 1/ Sources: World Economic Outlook (WEO) and IMF staff projections. 1/1 Data refers to the first six months of 2024. related to commitments previously Food Shock Window (FSW). Until July 2024, spending or 20 percent 23. had been limited (about 3 billion gourdes indicated by the authorities on food security and ongoing political transition prevented Criminal activity, lockdown, children of total FSW disbursement). at the more vulnerable population (e.g., from targeting spending The authorities the previous government a result of gang activity and displacements). could not attend schools regularly as authorized to be spent (Table 1). lately detailed information of the amount provided 18 INTERNATIONAL MONETARY FUND previously Food Shock Window (FSW). Until July 2024, spending or 20 percent 23. had been limited (about 3 billion gourdes indicated by the authorities on food security and ongoing political transition prevented Criminal activity, lockdown, children of total FSW disbursement). at the more vulnerable population (e.g., from targeting spending The authorities the previous government a result of gang activity and displacements). could not attend schools regularly as authorized to be spent (Table 1). lately detailed information of the amount provided 18 INTERNATIONAL MONETARY FUND --- Page 23 --- HAITI multiple challenges posed by the Authorities' Views. The authorities indicated that despite also emphasized 24. the FY2025 budget on time. They difficult juncture, they were able to be approved priorities as reflected in specific inequality is one of the government's to that reducing gender budget. These essentially aim strengthen allocation of gender areas in the recently approved education and training as well as their by improving women's support for women's empowerment labor market. These efforts also include improving access to financing and participation in the maternal mortality, and the to health care, with a view in particular to reducing violence. The authorities access dedicated to protection against gender- based implementation of programs through the WFP, but they indicated channeling the FSW resources were open minded regarding them through the budget to demonstrate spending from channeling having a strong preference and avoid the overhead costs from a third party. capacity, exercise more ownership, Transparency to Lift Potential Governance and Enhancing C. Addressing Growth governance diagnostic and publishing the results of the Fund-supported will be 25. Finalizing Similarly, the authorities' continued commitment assessment by December 2024 is urgent. identified in the action plan. implementation of priority recommendations for serious critical to ensuring an agency or center (Pôle Anti-Corruption) Important priority areas include establishing offences and publishing asset organized crime, corruption and related money laundering action plan of the governance diagnostics declarations of top officials. The implementation of the and fight a road map for reforms to enhance governance should be a priority and should provide CD not only from the Fund but also from The implementation of the plan will require strengthening domestic corruption. urged the authorities to continue development partners. Staff strongly financing of the budget While mobilization, thereby sustaining reductions in monetary which is also revenue than this has reflected lower spending, such financing has been lately lower expected, Such expenditure levels will not be threats preventing full execution. the result of the security fragility and widespread poverty. As security sustainable nor preferable given the economy's mobilization will be necessary to finance large stabilizes and spending capacity rises, higher revenue reforms to enhance digitalization, needs. Staff underscored the importance of sustaining funds. On the investment collection and use of public and accountability in tax revenue and enhancing transparency capacity, better targeting social spending, expenditure side, increasing spending donor support. of public spending are key for attracting transparency INTERNATIONAL MONETARY FUND 19 . the result of the security fragility and widespread poverty. As security sustainable nor preferable given the economy's mobilization will be necessary to finance large stabilizes and spending capacity rises, higher revenue reforms to enhance digitalization, needs. Staff underscored the importance of sustaining funds. On the investment collection and use of public and accountability in tax revenue and enhancing transparency capacity, better targeting social spending, expenditure side, increasing spending donor support. of public spending are key for attracting transparency INTERNATIONAL MONETARY FUND 19 --- Page 24 --- HAITI Table 1. Haiti: FSW. Spending Priorities Indicated by the Authorities (In millions of gourdes) Institution Purpose Measure Original Spent 2/ Authorized to allocation 1/ be spent 3/ Reactivation of community restaurants 2,000 Food security and mobile canteens Distribution of food to Fonds d'Assistance vulnerable households 1,134 Economique et Social (paniers de solidarité) (FAES) Cash transfer to vulnerable households 2,500 Cash distribution to vulnerable population Cash to workers in subcontracting industries 1,500 1,113 Ministry of National Cash transfer to vulnera able Education and Vocational hous seholds to encourage school Support to parents 7,500 5,561 Training attendance or nts/subsidies to public transportation drivers Fuel cards for drivers 1,600 Ministry of Trade and Industry Support for Micro, Small and Establishment ofas seed Me edium sized enterprises with funding mechanism to difficulties finance businesses Organization of an awareness and extension campaign for implementation of the Mult Itisectoral emergency program for healing and social reintegration Social Reintegration of young Ministry of Social Affairs people and Labor Strengthening MAST reception centers Extension, Updating and Strengthening of SIMAST Support plan for internally displaced persons 1,050 Monitorng/Evaluation: and reporting Ministry of Public Works, Implementation of High Labor Transportation and Intensity Works (HIMO) Communication throughout the 10 geographical departments of the country Ministry of Agriculture, Support for the Food Security Natural Resources and Subprogram Rural Development Anthrax Vaccination Campaign Ministry of Women's Affairs and Women's Feeding Women in Detention Rights Total 15,600 3,089 9,104 Source: Ministry ofE Economy and'Finance. 1/ Allocatedu under the FY23 budget 2/ Spent until the adoption of the revised FY24 budget. No spending occurr ed during October 2023- July 2024. 3/F Funds transferred by MEF toi ns titutions under the revised FY24 budget (endingi in September 2024). 20 INTERNATIONAL MONETARY FUND Rural Development Anthrax Vaccination Campaign Ministry of Women's Affairs and Women's Feeding Women in Detention Rights Total 15,600 3,089 9,104 Source: Ministry ofE Economy and'Finance. 1/ Allocatedu under the FY23 budget 2/ Spent until the adoption of the revised FY24 budget. No spending occurr ed during October 2023- July 2024. 3/F Funds transferred by MEF toi ns titutions under the revised FY24 budget (endingi in September 2024). 20 INTERNATIONAL MONETARY FUND --- Page 25 --- HAITI reforms should continue to enhance public 26. Public financial management (PFM) have been providing more and accountability. The authorities and finance reporting, transparency, spending on wages, goods and services, detailed monthly data on budget execution (including (on the website of the Direction investment by ministry and by project) and publishing They continue to share more capital execution by line ministries. Générale du Budget, MEF) detailed budget and Social Assistance (FAES), financial statements for the Fund for Economic the mediumdetailed quarterly FAD. The staff stressed the need to prepare following PFM best practices provided by medium term fiscal framework (MTFF), and framework (MTBF), based on the adopted at the ministry term budget ceilings to guide budget preparation to set expenditure a mediumuse a top-down approach run, each key line ministry should prepare level. Building on this reform, in the medium ceilings to ensure better resource framework (MTEF) using its defined expenditure volume of unspecified term expenditure PFM reforms could include: 1) limit the allocation and prioritization. Other 3-5 percent of total government by bringing it down to around expenditure in the budget 2) reinstate the financial controller's expenditure to improve fiscal transparency (text table); 3) adopt, and implement a control over public investment expenditures; prerogatives about a priori law to streamline its internal execution manual; 4) revise the procurement 5) further revised expenditure system competitive and transparent; control mechanisms and make the procurement General of Finance and the internal and external audits, including by the Inspectorate and publish an annual strengthen Disputes (CSCCA) to produce Superior Court of Accounts and Administrative report to follow-up TA recommendations. Haiti: Unspecified Expenditure in the Budget FY2024 FY2025 FY2021 FY2022 FY2023 Inp percentof Inmillions Inp percent of of Inr millions Inp percent of In millions Inp percent of of In gourdes millions total of gourdes total expenditure In millions Inpercento of gourdes total expenditure of gourdes total expenditure expenditure of gourdes total expenditure 11.2 22,263 9.6 32,150 10.7 1/ 24,624 14.7 20,778 11.4 26,650 21.4 52,139 22.4 67,879 22.5 Publici intervention 37,945 22.6 33,679 18.5 50,640 301,065 Other public expenditure 2/ 181,592 236,972 232,913 public intervention. All the specified Total lexpenditure 167,707 Among the different items composingt total expenditure. one unspecifiedo called Source 1/Therecently Ministry approved ofFinance 2024- and -25 Economy budget categorizes intervention, expenditures sum in uptot terms the of administra total expene ati nditure ive agencies the (ministries). budget. nei item labeled" "Other Public Expenditure" is also unspecified. expenditures of administrative 2024 agencies -25 budget plus also publici uses dlassification accoding't toe economica other public activities (spendingpurposes) sum uptothet Among total expenditurein these, thet budget 2/ Allt The the recently especitiedespendtures approved2 ofe feconomica activities (spending purposes), plus expenditures. the trust of investors and are paramount for rebuilding in governance 27. Improvements ODA flows in recent years. The forthcoming governance development partners, given low dialogue with development partners. On action plan would help guide the government's should be implemented diagnostic on the reserve template monetary data, the recent STA recommendations central bank for the fiscal year ending September transparency. The audit of the swiftly to enhance end of December 2024. 2023 should be finalized by the context of the recent tailored safeguard monitoring Recommendations by FIN in the and 28. urgently. Strengthening the governance mission in March should be implemented would also be key for enhancing the accountability arrangements in reserves management commit to undertaking (in close of central bank operations. The BRH should review of reserves transparency Fund CD) an external comprehensive consultation with staff and through INTERNATIONAL MONETARY FUND 21 year ending September transparency. The audit of the swiftly to enhance end of December 2024. 2023 should be finalized by the context of the recent tailored safeguard monitoring Recommendations by FIN in the and 28. urgently. Strengthening the governance mission in March should be implemented would also be key for enhancing the accountability arrangements in reserves management commit to undertaking (in close of central bank operations. The BRH should review of reserves transparency Fund CD) an external comprehensive consultation with staff and through INTERNATIONAL MONETARY FUND 21 --- Page 26 --- HAITI for central shortcomings and align with leading practices practices to address current asset allocation; management related to, inter alia: (i) governance; (ii) poloygudeinestaraegie. BRH a banks on aspects should establish a roadmap to guide the through and (ii) portfolio composition. The review external assessment of its portfolio to in the medium term. The BRH should undergo an the assets); and (ii) transition (considering the nature and quality of determine: () the actual level of liquidity short term, to effectively transition to a that may be available to the BRH, in the The the alternatives of liquidity and security. shortcomings more aligned with the principles Assistance over reserve portfolio assessments and the 2015 Technical highlighted in the 2016 and 2019 safeguards asset allocation, remain valid. and guidelines as well as the strategic the investment policy their commitment to fight corruption and Authorities' Views. The authorities reiterated that 29. of the action plan. They recognize as a centerpiece government's achieving strengthen governance is essential to restoring macroeconomic stability, tangible and rapid progress in this area fragility, including violence. They the root causes of the country's inclusive growth, and addressing and to build on the recommendations to intend to publish the IMF governance diagnostic reforms, with a focus on strengthening and accelerate the implementation of ongoing and anti-corruption and anticomplement financial sector oversight, the rule of law, public finance governance, money laundering frameworks. Potential Growth Structural Reforms to Support D. Implementing reforms needed to exit the immediate crisis, Haiti needs to implement 30. Beyond challenges, Haiti also faces enormous long-term fragility. While facing huge development fiscal space, improving the quality of public This will require continuing preserving the and human capital. In opportunities. infrastructure (both physical and digital) spending, investing in resilient investments should be financed by stepping international assistance, these large by addition to tapping could greatly enhance economic activity mobilization. Closing gender gaps up efforts in revenue in the labor market. Other measures 5-15 percent (Annex III A) by boosting women's participation women's health and reducing maternal a tax system, improving access to include tailoring gender-friendly increasing financial inclusion. Unequal raising level of education and job skills, cash transfers that mortality, targeted social spending, conditional education could be addressed through Needs to Achieve the Sustainable Development Goals encourage girls' access to Haiti: Additional Spending IMF staffe estimatesof Haiti Haiti( (most and child allowances additionals SDG Main Indicator (2015)" recenty" Objective education, Category SDG Indicator Spending Needsin Description' to reduce the dropout rate of persentotGpp' Maternal mortality 391 350 70 From a sectoral Human Capital Health (SDG 3) 4.8 ratio Literacy Rate 85 83 100 girls. Haiti has untapped Development Education(SDG4 4) 7.7 Population using at 65 67 100 perspective, Water, Sanitationa and 1.6 leastt basic drinking opportunities on the tourism Hygiene (SDG6) waters services witha access 41 47 100 which would require Physical Development Capital Electricity (SDG 7) 0.1 Population to electricity sector, Population using 14 40 100 sizable investment to improve Roads (SDG 9) 0.2 internet business environment. Tapping Total All fives SDGS 144 SDG. 4) 7.7 Population using at 65 67 100 perspective, Water, Sanitationa and 1.6 leastt basic drinking opportunities on the tourism Hygiene (SDG6) waters services witha access 41 47 100 which would require Physical Development Capital Electricity (SDG 7) 0.1 Population to electricity sector, Population using 14 40 100 sizable investment to improve Roads (SDG 9) 0.2 internet business environment. Tapping Total All fives SDGS 144 SDG. Expressed as percent of2 2030GDP. of these calls for a Additional SDGS spending needs are Transformation estimated for Center the entire and related data availability for Haiti Maternal mortality ratio as expressed as as percent number oftotal. opportunities 2Maini indicator is defined by SDG livet births. Literacy rate percent ofp populationa aged 15- -24. All other rindicators expressed strategy maternal "Relates only deaths tor per main 100,0001 indicator mentioned. comprehensive both the public and "Relates only ton main indicatorr mentioned. Needs ofthe Datai SDGS, is latesta 2023: available. . of these calls for a Additional SDGS spending needs are Transformation estimated for Center the entire and related data availability for Haiti Maternal mortality ratio as expressed as as percent number oftotal. opportunities 2Maini indicator is defined by SDG livet births. Literacy rate percent ofp populationa aged 15- -24. All other rindicators expressed strategy maternal "Relates only deaths tor per main 100,0001 indicator mentioned. comprehensive both the public and "Relates only ton main indicatorr mentioned. Needs ofthe Datai SDGS, is latesta 2023: available. UNS SDGA Report and IMF staff calculations. involving Sources: Howt to Assess Spending INTERNATIONAL MONETARY FUND --- Page 27 --- HAITI Capital Stock and Infrastructure Quality, Latest Value sector. Staff discussed the authorities' Available the private for human capital (Percent of GDP, left axis; Rank, right axis) specific development objectives and physical - Haiti o Caribbean LIDCS 0 development (health, education) and infrastructure (water and sanitation, electricity, for the medium term and aligned them to ê 90 roads) estimates of the additional spending to of 60 80 3 staff's Goals (SDGS) on achieve Sustainable Development & 30 Staff estimated that for Haiti the these areas. needs to achieve these five SDGS are % spending of GDP, using 2030 GDP. equivalent to 14.4 percent The does not reflect only fiscal costs. The spending achievements of these goals will require a combination of 1) higher revenue, 2) donor financing channeled through the budget to avoid (not already efficiency of spending; 1 (highest) 140 (lowest) double counting), 3) higher Staff estimates Sources: IMF Investment and Capital capital Stock Dataset, stock asa and fraction World of Economic the GDP. and 4) private sector financing. quality Forum. Riaht hand Note: side Left rankinas hand side, of public aualitv of infrastructure. indicates that capital stock and infrastructure unrest. years of social for Haiti is low which is not surprising given Climate Change and Natural Disasters disasters and climate shocks which poses severe 31. Haiti is very much exposed to natural human cost, natural disasters and challenges. In addition to their devastating growth macro-critical infrastructure and other capital and impacting potential climate change destroy or damage (Box 1). resilience and actions aimed at strengthening 32. The government is implementing the potential of renewable energy through to climate change. Investments to exploit of USAID. Irrigation adaptation in rural areas are in progress with the support the development of micro-grids management are being implemented adoption of new technical packages and ecosystem With the aim of projects, sector and food security. the resilience of the agricultural in order to strengthen efforts are focused on bridge and road constructions. improving accessibility and rural resilience, to disaster risks, the budget allocates every effective and efficient responses Furthermore, to provide insurance in Latin America and the Caribbean US$6-7 million for three parametric Readiness and Adaptive Capacity year Key Natural Hazard Statistics for 1990- -2020 0.7 CHL (Number of people affected) BRB 100,00 000 Fk lood 0.6 BRA ARG CRI URY E PRMEX SUR PAN_ JTO ide 0.5 ECU JAM .GRD 1,000 00.000 MCSTM; SIVe BLZ COt DOM N PER 1 0.4 HND BoL GUY ATG de 0.3 HTI 0.2 0.2 0.3 0.4 0.5 0.6 0.7 Readiness 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 018 Sources: IMF- Adapted ND- GAIN, andl IMF staff calculations. INTERNATIONAL MONETARY FUND 23 IVe BLZ COt DOM N PER 1 0.4 HND BoL GUY ATG de 0.3 HTI 0.2 0.2 0.3 0.4 0.5 0.6 0.7 Readiness 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 018 Sources: IMF- Adapted ND- GAIN, andl IMF staff calculations. INTERNATIONAL MONETARY FUND 23 --- Page 28 --- HAITI and floods. In addition, the budget has a special policies against risks such as hurricane, earthquake, working to set up warning systems Fund. The government is currently allocation in the Emergency vulnerable to climate shocks. shelters in the departments most and temporary disasters and climate change entails a multi-pillar resilience to natural 33. Enhancing ex ante and ex strategy at the national and Multi-pillar strategy: strengthening levels. It post resilience regional, and multilateral Domestic Private/Public Blateral/Multilateral also requires enhancing Haiti's risk Ex ante (Annex XII). Risk Assess vulnerability disaster costs into Surveillance and - Capacity management capacity Identification Incorporate national budget planning 4 Development into macro framework integratef and fiscal the and Assessment costs DSAS and enhance PFM systems 34. Authorities' Views. The Self Insure Build buffers Surveillance and Capacity achievements of SDGS will require Enhance preparedness Development - help calculate the Risk Investi in smarti infrastructure efficiency of public investment financial support from development 60 Reduction Enhance debt management (PIMA) The government is fully capacity _Caribbean Catastrophe partners. resilience to Transfer Risk Risk Insurance Facility (CCRIF, committed to build parametrici insurance) climate shocks. It intends to finalize Ex post Financial Support in December 2024 a Climate Coping Resilient and andr Emergency reconstruction response Other Emergency bilateral support or multilateral Prosperity Plan to tackle the climate Note: Green Recovery shows where the IMF has been involved. support including through a fullemergency, of renewable energy in due course. scale deployment Rate Policy Frameworks Monetary and Exchange E. Strengthening since the last Article IV policy framework was strengthened during 35. Haiti's monetary has increased lately. The monetary stance consultation and central bank independence of the budget was reduced to has been tighter than programmed, as financing to reduce the last two years frameworks. The current policy mix enhancing the credibility of the policy financing of zero, thereby fiscal adjustment and zero monetary inflation (through the combination of continued high levels (which lead to large should help bring inflation down from currently that the budget) Nonetheless, staff's analysis (Annex XI) suggests negative real rate of about 15 percent). supply-side shocks. Thus, restrictive associated with security-related inflation is more recently inflation under control without a and fiscal policies will not be sufficient to keep monetary outlook. Staff continued to recommend: normalization of the security greater exchange rate flexibility, avoiding monetary financing of credit to the NFPS as the main anchor to continuing a ceiling on the deficit; and fixed rate (policy rate) and full allotment to operations at a short-term liquidity-absorbing the monetary and exchange rate frameworks. strengthen exchange (FX) market continue to limit its interventions in the foreign 36. The BRH should and signaling a build-up of NIR. Deposit and excessive exchange rate volatility to smoothing 24 INTERNATIONAL MONETARY FUND outlook. Staff continued to recommend: normalization of the security greater exchange rate flexibility, avoiding monetary financing of credit to the NFPS as the main anchor to continuing a ceiling on the deficit; and fixed rate (policy rate) and full allotment to operations at a short-term liquidity-absorbing the monetary and exchange rate frameworks. strengthen exchange (FX) market continue to limit its interventions in the foreign 36. The BRH should and signaling a build-up of NIR. Deposit and excessive exchange rate volatility to smoothing 24 INTERNATIONAL MONETARY FUND --- Page 29 --- HAITI limits the effectiveness of monetary policy and remains high (Figure 6), which Recent data credit dollarization to external shocks and financial instability. heightens the economy's susceptibility the FX market are also to rebuild NIR. Staff that the authorities' interventions in suggest recommended that the BRH: mechanism for FX interventions, such as well-designed put in place an appropriate system. FX auctions, in lieu of the FX allocation weekly work on an FX market intervention rule; and advance its ongoing position limits (Annex VII, para 15). complete the revision of banks' net open The de facto exchange rate is The de jure exchange rate is floating. 37. Exchange rate system. discussed with the authorities whether any changes classified as stabilized since January 2024. Staff since the last 2019 Article IV that could introduced in the foreign exchange system had been but did not find any such evidence. influence capital flows (CFMS) indicated that the main goal of monetary policy remains 38. Authorities' Views. The authorities to keeping the monetary financing The fiscal and monetary authorities are committed with net purchases of price stability. that FX market interventions (lately of the budget to zero. They also indicated of the gourde (i.e., prevent further have been aimed mainly at smoothing the volatility that the gourde dollars) cushion. The authorities acknowledged appreciation) and improving the reserves would not boost exports (as in real terms and noted that a depreciation is to has been appreciating and that a stable gourde important and structural problems are the main impediments) not the monetary base security also indicated that the FX purchases did expand ensure price stability. They attributable mainly to supply-side factors (i.e., security have been and that inflationary pressures stated they do not engage in prioritization constraints to the movement of goods). The authorities provision of FX to critical sectors FX market but note that there has been targeted the or rationing in the imports during COVID, and more recently (through commercial banks), such as pharmaceutical informal FX market, focused on cash authorities acknowledge the existence of an benefits oil sector. The in Haiti). The informal market transactions (as there is dual circulation of paper currency informal economy, and its ability to reach constraints, the large size of the from lower administrative Assets and Net International Reserves of the Central Bank Exchange Rate and Foreign Exchange Interventions Net Foreign (Millions of US dollars) 2,500 mNet foreign assets (NFA) I Net international reserves (NIR) 2,000 -30 Mcmr -60 1,500 -90 USS milli 1,000 775 736 679 RH (rightscale) Exchare 150 a N N N Q 9 a 1o 5 3 & 3 S 3 2017 2018 2019 2020 2021 2022 2023 2024 1/ of the Republic of Haiti and IMF staff estimates. Sources: Bank of the Republic of Haiti and IMF staff estimates Sources: Bank The BRH is trying to 1/ August 2024. consumers in more locations. of recent maintain that the main goals market agents into formality. The authorities bring more INTERNATIONAL MONETARY FUND 25 150 a N N N Q 9 a 1o 5 3 & 3 S 3 2017 2018 2019 2020 2021 2022 2023 2024 1/ of the Republic of Haiti and IMF staff estimates. Sources: Bank of the Republic of Haiti and IMF staff estimates Sources: Bank The BRH is trying to 1/ August 2024. consumers in more locations. of recent maintain that the main goals market agents into formality. The authorities bring more INTERNATIONAL MONETARY FUND 25 --- Page 30 --- HAITI remittance unfavorable regulations were to bring more formality to the FX market rates and abuses, not to change the and protect consumers from that transfer houses remain able allocation of funds by market to send funds abroad agents. They affirm through the financial sector if they desire, F. Safeguarding Financial Sector Stability 39. Background. Haiti ranks low on the Fund's Financial Development Index. Its financial Financial small, with the assets system is 1.0 Development Index the entire (excluding the central bank) of system equivalent to less than 20 0.8 of GDP. Haiti also has percent underdeveloped capital 0.6 markets, with limited trading activity in stocks, and other securities. It would bonds, 0.4 financial greatly benefit from deepening. Credit-to-GDP declined to 5.3 0.2 percent in FY2023 (from 10.5 percent in 0.0 banks reduced 2019) as G7 lending to the private sector, Sources: IMF G20 EMs LAC LIDC FCS Haiti because of the security crisis. Staff estimated mainly Notes: EMS-Emerging Financial Development Markets, LAC=Latin Index database America andl IMF staff estimates credit-to-GDP the Income and Developing countries, and and Carribean, LIDC=Low gap at negative 22 percent in June 2024. FCS=Fragile Conflict Affected States. concentrated, with the three largest banks Haiti's banking sector remains highly (Annex VIII). The holding more than 80 percent of worsening of the security crisis and banking system assets financial sector. Vulnerabilities have governance issues have also weakened the increased, as reflected in lower more-than-doubling of non-performing capital adequacy ratios and a 40 Financial Depth Credit to GDP Gap (Percent) 8 30 I E 25 hli Dy -5 & of 20 Il a D0 15 -10 -15 -20 -25 Haiti -30 om to the private sector (perce ent 60 ofGDP) Sources: World Bank databank, World Economic Sources: Note: Credit Reserve gapis Bank the of percent Haiti and IMF staff calculations Outlook, and IMF staff calculations. estimated with a one- -sided HP deviation filter. of the Credit to- GDP ratio from trend, loans-from 5 percent in 2020 to 12 percent in June meet the minimum capital 2024. All banks but one, which is adequacy ratio of 12 state-owned, was replaced in early August following percent. The Board of the National Bank of Credit the supervision of the central bank. internal investigations, and the new Board was financial More information is needed to placed under sector, including the size of a fully assess the risks faced by the BRH has been strengthening possible recapitalization and the public funds banking supervision, with Fund required. The framework and move to risk-based assistance, to upgrade the hurt the financial supervision. But six years of recession and regulatory system. The BRH is advancing reforms security crisis have credit, including in rural areas. Fiscal to increase financial inclusion and access to out, with no monetary dominance, a pervasive problem until 2022, has financing of the deficit expected for FY2024 been phased (ending in September 2024). 26 INTERNATIONAL MONETARY FUND ization and the public funds banking supervision, with Fund required. The framework and move to risk-based assistance, to upgrade the hurt the financial supervision. But six years of recession and regulatory system. The BRH is advancing reforms security crisis have credit, including in rural areas. Fiscal to increase financial inclusion and access to out, with no monetary dominance, a pervasive problem until 2022, has financing of the deficit expected for FY2024 been phased (ending in September 2024). 26 INTERNATIONAL MONETARY FUND --- Page 31 --- HAITI on offshore funding and are thus corporates, however, continue to rely primarily The BRH has Nonfinancial and sudden withdrawals from external lenders. vulnerable to currency mismatches and access to credit, including in rural areas. advanced reforms to increase financial inclusion 40. Reform efforts should focus on: authorities discussed this option which could liquidity assistance (ELA). Staff and reasons, and the BRH is Emergency banks continue to retain liquidity for precautionary prove beneficial as considering it. test of the new risk assessment supervision. The BRH has carried out a conclusive revised on credit Banking banks. It adopted and published the regulation grids and rating matrix on two on credit risk classification and The final version of the revised regulation is by risk concentration. supervision department, expected provisioning, recently reviewed by the BRH's banking chart of accounts for financial November. Staff recommended to: (i) finalize the new continue the end following a quasi-suspension, and (ii) institutions, (ii) reactivate off-site supervision execution of the annual on-site inspection program. implement CBDC but The BRH conveyed that it does not plan to immediately in Digital money. in the central bank framework, stressed the importance of having put a placeholder time and resources to Staff argued that devoting anticipation of future implementation. other pending priorities and money is premature at this stage, given considering a digital it should consider all aspects of the project's indicated that if the BRH decides to proceed of costs and risks, before proceeding. and feasibility, including a robust evaluation desirability (AML/CFT). The Council of laundering/combating the financing of terrorism Financier Anti-money the Unité Centrale de Renseignement Ministers has adopted a new Decree Reorganizing law. The decree aims to ensure the Financial Intelligence Unit (FIU) organic and its (UCREF) to replace to conduct operational and strategic analysis, UCREF's operational autonomy, its power The decree has of information held by other government agencies. access to a broad range the Board of Directors and its full implemented, including by nominating and started being that the FIU fully exercises its broader powers implementation is necessary to ensure the AML/CFT framework Separately, an April 2023 decree which revamped in the latest report by responsibilities. on 18 of the 40 FATF recommendations allowed Haiti to receive upgrades was also made to the effectiveness Caribbean Financial Action Task Force. Recent progress risk assessment, the of some work on the national of the AML/CFT system, including the resumption of a tool for riskin December 2025, and the operationalization now expected to be completed the BRH. The authorities should build on this based supervision of financial institutions by to exit the FATF grey list and ease and continue to address the other steps necessary assessing the risks related progress banking relationships, including potential pressures on correspondent further pursuing efforts to implement riskinformal cash-based sector and legal persons, to the missions, including more recently in October 2023 on Haiti's 6 Staff has provided extensive support through past TA banking chart of account alignment with IFRS 9. INTERNATIONAL MONETARY FUND 27 now expected to be completed the BRH. The authorities should build on this based supervision of financial institutions by to exit the FATF grey list and ease and continue to address the other steps necessary assessing the risks related progress banking relationships, including potential pressures on correspondent further pursuing efforts to implement riskinformal cash-based sector and legal persons, to the missions, including more recently in October 2023 on Haiti's 6 Staff has provided extensive support through past TA banking chart of account alignment with IFRS 9. INTERNATIONAL MONETARY FUND 27 --- Page 32 --- HAITI inspections (to the extent permitted by the based supervision of Fls by stepping up on-site and ensuring transparency remedial actions for non-compliance, security situation) and applying The authorities should also take and beneficial ownership information on legal persons. and of basic Designated Non-Financial Businesses urgent steps to designate supervisors for high-risk notaries and lawyers performing trust and Professions such as gambling and lottery sectors; and measures to reinforce service provider (TSCP) activities. Other key priority of criminal assets company of ML related to corruption and the recovery investigations and prosecutions Diagnostic report. will be recommended in the Governance from recessions and The authorities indicated that scarring multiple 41. Authorities" Views. health of the financial sector. They indicated that persistent insecurity had a large impact on the of loans. They also relaunching growth is essential to prevent further increase non-performing tests. On AML/CFT, the authorities technical assistance from the Fund to perform stress that more requested achieved and acknowledged several ongoing efforts to build on the progress (ML/TF) risks and exit highlighted financing reforms are needed to mitigate money laundering/terrorist will assess ML/TF risks related to urgent Financial Action Task Force (FATF) grey list. A new committee EU's Global Facility on the information with support from the legal persons and it has started collecting and technical capacity to treat and analyze AML/CFT. The UCREF is working to improve its human to competent authorities. The transactions reports and disseminate financial intelligence which is planning an on-site suspicious of the UN Office on Drugs and Crime, UCREF will have the support software. The UCREF is engaging an advanced data collection and management and mission to install Contre la Corruption, ULCC) and law enforcement the Unit (Unité de Lutte and other with Anti-Corruption domestic cooperation on money laundering, corruption, judicial authorities to reinforce a national task force to combat these with the aim to create key predicate crime investigations, in several countries in the region, threats. The UCREF is seeking to sign MOUS with counterparts MOUs should also be stepped with countries with existing while acknowledging that cooperation for high-risk Designated Non-Financial These reforms include designating supervisors sector, and nominating the up. assessing the risks related to the informal Businesses and Professions, and independent (the latter having Board of Directors to ensure that it is fully operational UCREF's been delayed by the political crisis). for Surveillance and Other Issues G. Improving Data Adequacy surveillance somewhat in the data provided to the Fund are hampering and 42. Shortcomings achieved-in particular in compiling disseminating (Annex IX). While much progress has been since the last Article IV-new shocks (related fiscal data (especially at the central government level) of 2023 and a sustained brain drain) problems at the central bank in the summer to the substantial to technological and, at times, led to setbacks relative have prevented broader advancements, of monetary data had been subject to results achieved in the context of the 2022 SMP. The provision since the IT shock; and the Revisions, especially to NIR, have been meaningful central delay, until recently. central bank staff from physically accessing surge of gang activity in early 2024 prevented of SOE flow and debt data could generate fiscal risks. 7 Lack of comprehensiveness 28 INTERNATIONAL MONETARY FUND brain drain) problems at the central bank in the summer to the substantial to technological and, at times, led to setbacks relative have prevented broader advancements, of monetary data had been subject to results achieved in the context of the 2022 SMP. The provision since the IT shock; and the Revisions, especially to NIR, have been meaningful central delay, until recently. central bank staff from physically accessing surge of gang activity in early 2024 prevented of SOE flow and debt data could generate fiscal risks. 7 Lack of comprehensiveness 28 INTERNATIONAL MONETARY FUND --- Page 33 --- HAITI location in a dangerous part of the capital). for many months (given the bank's and it bank premises 2024 when activities at the BRH normalized Timeliness has improved since late summer TA from the Fund's Statistics Department has the manual recompilation of data. Recent Investment Position data, which completed limitations in the BOP and International identified data compilation to 3.4 percent of GDP in FY2023, Table 4b). affect the estimates of errors and omissions (equivalent partner support-not channeled of the official statistics to capture some development other forms of The inability through the financial system, and through the budget-remitancest not channeled income and stock-flow inconsistencies may informal activity, incomplete information on investment hampered the production of timely these large errors and omissions. Insecurity has greatly environment has made explain national accounts. The challenging security and adequate data, including on GDP data. it very difficult to undertake surveys to compile will conduct a mission to assess GDP data sources and 43. Over the next few months, staff structure of the economy-which methodology. This work will ascertain whether the current and human capital since at least severe declines in capital stock, total factor productivity, the 2012 suffered displacement is still appropriately represented by 2020, as well as huge population Pending this assessment and a new action plan, benchmark year or whether changes are necessary. quarterly GDP data has been put on timeline to begin compiling and disseminating to close data gaps over the ongoing authorities the strategy to improve capacity hold. Staff discussed with the and careful sequencing. time (Annex I). This requires firm prioritization the adoption of international discussed issues related to the SDR allocation, of 44. Staff matters. Staff emphasized the importance finance reporting standards, and safeguard-related fiscal use of the SDR allocation. Staff also reinforcing institutional frameworks governing the and for communicating measures for SDR-related spending underscored the need for transparency conversion of their SDR allocation into freely usable publicly on the BRH or MEF websites any future future SDR conversions. The team discussed with currencies-and the need to engage Fund staff on as well as the in reaching full recovery after the cyberattack, to the BRH the ongoing progress with best practices. Further efforts are needed alignment of the foreign reserve framework 2019 assessment and the recent targeted safeguards recommendations from the and Staff will implement reserves, monetary data, cyber-resilience. monitoring mission, particularly on foreign continue to engage with the BRH on these issues. In line with the Fund Strategy for Fragile and Conflict45. Country Engagement Strategy. main partners and finalized an States, staff coordinated closely with Haiti's development the sources of fragility, the Affected Strategy (CES). The CES (Annex I) identifies of updated Country Engagement to tackle them-as well as the main areas capacity development strategy, and policies collaboration with development partners. reiterated their commitment to data transparency and 46. Authorities' Views. The authorities to the IT incident at the central bank. They indicated that delays over the last year were due mainly GDP calculations owing to the inability to that it was difficult to improve the quality of also indicated conduct business surveys. INTERNATIONAL MONETARY FUND 29 development the sources of fragility, the Affected Strategy (CES). The CES (Annex I) identifies of updated Country Engagement to tackle them-as well as the main areas capacity development strategy, and policies collaboration with development partners. reiterated their commitment to data transparency and 46. Authorities' Views. The authorities to the IT incident at the central bank. They indicated that delays over the last year were due mainly GDP calculations owing to the inability to that it was difficult to improve the quality of also indicated conduct business surveys. INTERNATIONAL MONETARY FUND 29 --- Page 34 --- HAITI STAFF APPRAISAL multidimensional crisis encompassing humanitarian, 47. Haiti faces an unprecedented transition. Since the last 2019 It is also facing a political economic, social, and security problems. leading to destruction of physical security has deteriorated severely, acceleration Article IV consultation, massive human displacement, and further infrastructure, prolonged economic paralysis, situation was compounded by including from key institutions. The dire security in 2021, of brain drain, assassination of President Moïse, an earthquake repeated several shocks: the pandemic, the Russia' S war in Ukraine. The food crisis and insecurity, waves of cholera, and a hunger crisis linked to further fueled inflation, the most regressive tax in addition to causing terrible human suffering, have undermined growth prospects over the Pervasive governance issues have further on poor people. last few years and potential GDP has dropped. outlook and extremely high 48. All in all, Haiti faces a challenging macroeconomic crisis would continue to greatly affect shock caused by the security uncertainty. The supply-side Fiscal revenues, which are essential and feed inflation unless the security outlook improves. development needs, growth infrastructure after years of social unrest and support large this to reconstruct basic would continue to finance consumption, although are only slowly recovering. Remittances which could further undermine a sustainable recovery. reflects mainly an exodus of human capital further improvements in the security Growth is projected to be barely positive in 2025 (pending medium term. and would stabilize at only 172 percent over the outlook) reforms that can window of opportunity to implement 49. The authorities have a narrow help restore the country's potential help Haiti move from crisis to resilience and eventually of the 2024-25 budget, medium and long term. Staff welcomes the timely passing over the priority is to re-start mobilizing budgeting measures. An urgent government including gender result of the insecurity) to support large development its collapse early this year as a revenue (after needs and increase well-targeted spending. safety net will be essential for cushioning the Continued strengthening of the social The authorities 50. and alleviating widespread poverty. impact of the shocks on the population implementing the fuel reform strategy to steps, since the 2019 Article IV toward instead of ad hoc took meaningful fuel prices to be regularly passed on to consumers allow changes in international follow through with the adjustments. Staff recommends that the authorities to protect the or sudden price which should be accompanied by mitigating measures implementation of this reform communication strategy. Efforts to improve the quality most vulnerable, together with an effective should continue. The use of and enhance transparency of public spending of public spending should be audited. resources related to the FSW promptly the economy would need to receive the 51. A government-led strategy to relaunch This assistance is indispensable to essential financing support of the international community. term, but also in the short term. Without quality spending not only in the medium and long should take the form of grants. The support compression. This assistance it, Haiti would suffer large import 30 INTERNATIONAL MONETARY FUND the quality most vulnerable, together with an effective should continue. The use of and enhance transparency of public spending of public spending should be audited. resources related to the FSW promptly the economy would need to receive the 51. A government-led strategy to relaunch This assistance is indispensable to essential financing support of the international community. term, but also in the short term. Without quality spending not only in the medium and long should take the form of grants. The support compression. This assistance it, Haiti would suffer large import 30 INTERNATIONAL MONETARY FUND --- Page 35 --- HAITI loans which can quickly undermine debt authorities should avoid contracting non-concessional sustainability. and consistent with the tightening has been appropriate 52. The careful pace of monetary authorities' commitment to keeping monetary of fighting inflation. The fiscal and monetary frameworks, despite still goal has enhanced the credibility of the policy financing of the deficit at zero stance will not be sufficient to keep inflation inflation. But this restrictive monetary including high supply-side of security which is essential to reignite growth, under control without a normalization (FX) reserves, re-built during 2023-24, from the private sector. The adequate foreign exchange FX intervention should continue to be buffer in a shock-prone economy like Haiti. remain a valuable not substitute for macroeconomic policy used only to smooth excessive exchange rate volatility, framework with best practices when needed. The alignment of the foreign reserves financial audit of the BRH is urgent and adjustment financial risks. The FY2023 would also be critical for avoiding in demonstrating transparency. would be an important step its eventual publication financial risks. vulnerabilities is paramount for mitigating sector The risks associated 53. Addressing-financial recession have affected the financial sector. The worsened security crisis and and underscore the need for an loans (NPLS) warrant close monitoring with high non-performing The BRH has been strengthening banking supervision, urgent plan to mitigate a further increase. framework and move to risk-based supervision. with Fund assistance, to upgrade the regulatory should continue including with technical assistance. Efforts data provision to the Fund. the authorities to prioritize efforts to improve 54. Staff urges assets data should continue to be the top The quality and timeliness of monetary and reserve face shortcomings that should be Real sector data, in particular GDP, continues to priority. technical assistance. addressed with forthcoming commitment to publish the governance diagnostic 55. We welcome the authorities' would provide a road map for reforms to enhance assessment and accompanying action plan. It in close collaboration with should be implemented for governance and fight corruption-and reforms to strengthen governance is essential development partners. Sustaining progress on sector (and attract FDI). growth and building the trust of the private ensuring inclusive for Haiti be held on the recommends that the next Article IV consultation 56. Staff standard 12-month cycle. INTERNATIONAL MONETARY FUND 31 --- Page 36 --- HAITI Figure 4. Haiti: Real Sector Developments, 2016-24 Real GDP has contracted for five consecutive years... 1 due to a drop in investment and net exports. Contribution to GDP Growth (Supply-side) Contribution to GDP Growth (Demand-side) (Percent) (Percent) Investment Net exports Private consumption D Public consumption Real GDP growth -1 D Other -2 Services -3 D Constructiad Manufacturing -4 Agriculture -5 -5 Taxes less subsidies on products -6 Real GDP growth 2017 2018 2019 2020 2021 2022 2023 -10 2017 2018 2019 2020 2021 2022 2023 Conjunctional indicators point to negative growth .in particular construction, manufacturing, and across all sectors... agriculture. Conjunctural Indicator of Economic Activity Conjunctural Indicator of Economic Activity (ICAE): Contribution to Growth (Percent, y/y) 8 (Percent, y/y) Primary sector Construction Secondary sector Overall ICAE Tertiary sector Agriculture yly growth Manufacturing -2 HH -4 -4 -6 10 2017 2018 2019 2020 2021 2022 2023 Conjunctional indicators point to negative growth .in particular construction, manufacturing, and across all sectors... agriculture. Conjunctural Indicator of Economic Activity Conjunctural Indicator of Economic Activity (ICAE): Contribution to Growth (Percent, y/y) 8 (Percent, y/y) Primary sector Construction Secondary sector Overall ICAE Tertiary sector Agriculture yly growth Manufacturing -2 HH -4 -4 -6 Inflation started to pick up again in 2024. The output gap has widened since 2017. Inflation Potential Growth and Unemployment (Percent) (Percent) Overall CPI (year-on-yeard Overall CPI (month-on-menth, right scale) Output gap (percent of potential) Unemployment rate 2017 2018 2019 2020 2021 2022 2023 Sources: Haitian Institute of Statistics and Informatics (IHSI), Bank of the Republic of Haiti, and IMF staff calculations. 1/ Ona fiscal-year basis, ending on September 30. 32 INTERNATIONAL MONETARY FUND --- Page 37 --- HAITI Figure 5. Haiti: Fiscal Sector Developments, 2016-24 Tax revenues are extremely low. Spending has declined... Taxes Total Expenditure (Percent of GDP) (Percent of GDP) BTaxes on income & profits DExcises 10 OCustoms duties mSales tax (TCA) Wages and salaries Goods and services DLocal taxes DOthe/Unclassified taxes 16 D Interest payments Transfers and subsidies Capital- domestic Total expenditure Capital foreign BERRERE 2017 2018 2019 2020 2021 2022 2023 m 2017 2018 2019 2020 2021 2022 2023 The fiscal deficit fell in 2023 due to lower fuel .including social spending. subsidies... Social Spending Central 2.0 Government Deficit With and mS Share oft total expenditure 25 2.0 Without Energy Subsidies olnp percent of GDP (right axis) 1.6 (Percent of 1.6 GDP) 1.2 15 1.2 0.8 0.8 0.4 0.4 a a a o a a A a A a 2 a a a à a a A 0.0 0.0 Subsidies to the energy sector PRR -2 Deficit excl. subsidy to the energy sector Ministry of Ministry of Ministry of Ministry of Central government deficit Agriculture Education Public Social -3 Health Affairs and Total 2017 2018 2019 2020 2021 2022 2023 Labor which reduced the need for monetization. Government debt declined in early 2024. Contribution to the Financing of the Fiscal Balance Central Government Debt (Percent of GDP) (Percent of GDP) MBRH financing SExternal financing Domestic Other domestic financing - External Fiscalt Ibalance Total debt min 2018 2019 2020 2021 2022 2023 2024 Q1 Sources: Ministry of Finance, Reserve Bank of Haiti, and IMF staff calculations. Notes: Social spending for 2024 is through June. Central government debt data for Q1 2024 refers to calendar year. INTERNATIONAL MONETARY FUND 33 --- Page 38 --- HAITI Figure 6. Haiti: Monetary and Financial Sectors Developments, 2017-24 The BRH financing of the fiscal deficit has been .with net domestic assets declining. negative since FY2024 Net Domestic Assets (NDA) off the Centrall Bank Central Bank Financing to Government (Billions of gourdes) Finance, Reserve Bank of Haiti, and IMF staff calculations. Notes: Social spending for 2024 is through June. Central government debt data for Q1 2024 refers to calendar year. INTERNATIONAL MONETARY FUND 33 --- Page 38 --- HAITI Figure 6. Haiti: Monetary and Financial Sectors Developments, 2017-24 The BRH financing of the fiscal deficit has been .with net domestic assets declining. negative since FY2024 Net Domestic Assets (NDA) off the Centrall Bank Central Bank Financing to Government (Billions of gourdes) 250 - Liabilities to commercial banks 200 - Net credit to the government 150 NDA -50 I"I 0 -150 BRH financing (cumiw since Oct. 1), billions WH -10 -200 gourdes (right scale) -250 Inflation (y/y), perc rcent change -20 U 1a do R R 2 a LE 10 10 R R a 2 N 3 a 2 S $ 2 2 E A Monetary transmission has been weak, with market Private sector credit has collapsed since early 2023. rates not responding to policy rates Nominal Interest Rates Private Sector Credit (Percent) - In gourdes (percent of GDP) - In foreign exchange (percent ofGDP) Total (percent of GDP) Total growth (yly. right scale) Short- term interest rates (91 day central bank bonds) -20 Lending rate - 18 10 16 R 2 - N E 1a 9 a 2 a a a 8 3 a 0 E 8 3 8 5 S 8 iS a FX deposits and loans have been stable since August While excess structural liquidity is rising in the 2020, after the central bank revalued the gourde.. banking system'. Structural Liquidity Excess of Banking System Dollarization (Billions of gourdes) 0.6 Excess reserves 0.4 Reserve requirements - Changei in reservereq. ratio Structural excess reserv ves 0.2 Bond holdings 0.0 FX deposits FX credits -0.2 FX deposits (end- Aug- -20 gourdes/US dollar) FX cred dit en Aug 20 gourdes/US dollar) -0.4 0.6 -50 A 10 d6 R 8 a N 2 a E 8 3 de la 8 3 A a O Sources: Bank of the Republic of Haiti and IMF staff calculations. 1/ Excess reserves are reserves above requirement ratios on deposits; structural excess reserves include excess reserves plus other bank deposits at the BRH minus reserves banks obtain under BRH facilities. 34 INTERNATIONAL MONETARY FUND --- Page 39 --- HAITI Figure 7. Haiti: External Sector Developments, 2017-24 Remittances (in dollar terms) are above pre- pandemic Haiti continues to have structural trade deficits. trend. Exports and Imports Remittances (net) (Percent of GDP) 4,000 - J IIn percent of GDP In millions of US dollars (right scale) 3,500 3,000 2,500 2,000 -10 1,500 -20 1,000 Exports of goods -30 MA Imports of goods Trade balance -40 2017 2018 2019 2020 2021 2022 2023 2017 2018 2019 2020 2021 2022 2023 FDI has declined in recent years... .As have donor flows. Composition of Capital and Financial Account Official Assistance (Percent of GDP) Petrocaribe Project loans Grants - 400 In percent of GDP (right scale) = S 300 of 2 in Jather items Net FDI -2 Public sector capital flows (nèt E 100 Current account balance Capital and financial account balance 4 2017 2018 2019 2020 2021 2022 2023 2017 2018 2019 2020 2021 2022 2023 .And net international reserves jumped to almost US$1 The REER has appreciated during 2023- -24... billion. Real and Nominal Effective Exchange Rates International Reserves (Millions of US dollars) (Index) 3,500 - GIR, months of imports (right scale) 8 NIR 3,000 NFA Current account balance Capital and financial account balance 4 2017 2018 2019 2020 2021 2022 2023 2017 2018 2019 2020 2021 2022 2023 .And net international reserves jumped to almost US$1 The REER has appreciated during 2023- -24... billion. Real and Nominal Effective Exchange Rates International Reserves (Millions of US dollars) (Index) 3,500 - GIR, months of imports (right scale) 8 NIR 3,000 NFA 2,500 - 2,000 1,500 1,000 NEER REER R a a a N - 1o 1o R 8 a N E S E 2 2 2 5 Sources: Bank of the Republic of Haiti and IMF staff calculations. Notes: REER=real effective exchange rate; NEER=nominal effective exchange rate; GIR=gross international reserves; NIR=net international reserves; NFA=net foreign assets. INTERNATIONAL MONETARY FUND 35 --- Page 40 --- HAITI Table 2. Haiti: Selected Economic and Financial Indicators, 2021-29 (Fiscal year ending September 30) Nominal GDP (2023): US$21.5 billion Population (2021): 11.9 million GDP per capita (2021): US$1,765 Percent of population below poverty line (2021): 52.3 FY2021 FY2022 FY2023 FY2024 FY2025 FY2026 FY2027 FY2028 FY2029 Proj. Proj. Proj. Proj. Proj. Proj. (Change over previous year; unless otherwise indicated) National Income and Prices GDP at constant prices -1.8 -1.7 -1.9 -4.0 1.0 1.5 1.5 1.5 1.5 GDP deflator 19.3 29.8 31.5 29.1 23.2 17.6 10.4 9.7 Consumer prices (period average) 15.9 27.6 44.1 25.9 19.8 15.4 9.1 Consumer prices (end- of- period) 10.6 7.9 7.4 13.1 38.7 31.8 27.9 18.7 12.2 9.3 7.4 7.0 External Sector Exports (goods, valued in U.S. 31.5 29.1 23.2 17.6 10.4 9.7 Consumer prices (period average) 15.9 27.6 44.1 25.9 19.8 15.4 9.1 Consumer prices (end- of- period) 10.6 7.9 7.4 13.1 38.7 31.8 27.9 18.7 12.2 9.3 7.4 7.0 External Sector Exports (goods, valued in U.S. dollars, f.o.b.) 27.7 13.5 -25.5 20.0 10.0 14.4 13.6 Imports (goods, valued in U.S. dollars, f.o.b.) 19.8 7.8 -1.0 10.9 11.3 Remittances -9.0 11.0 6.0 5.5 5.0 4.5 (valued in U.S. dollars) 22.5 -7.3 0.1 11.0 5.0 5.0 Real effective exchange rate (eop; appreciation) 1/ -5.0 13.8 10.9 5.5 4.5 4.0 33.0 Money and Credit (valued in gourdes) Credit to private sector 15.2 17.4 -6.2 -5.3 21.1 14.7 Base money 12.0 10.1 9.4 Broad money 21.5 23.1 3.1 10.0 13.5 11.5 10.0 9.0 8.0 38.2 21.1 4.6 4.1 15.5 11.5 11.0 10.5 9.0 (In percent of GDP; unless otherwise indicated) Central Government Overall balance (including grants) -2.3 -1.8 0.9 7.2 -0.1 -1.4 -1.5 Domestic revenue -1.6 -1.7 Grants 5,9 5.3 6.4 4.9 5.0 5.3 5.7 5.9 6.1 1.0 1.3 0.9 6.8 1.2 0.7 0.3 Expenditures 0.3 0.3 Current 9.3 8.3 6.4 4.5 6.2 7.4 7.4 7.8 8.1 expenditures 7.4 6.8 4.9 3.4 4.2 4.2 4.3 4.5 Capital expenditures 1.9 1.6 1.5 1.1 2.1 3.2 3.1 3.3 4.6 Overall balance of the nonfinancial public sector 2/ 2.2 1.7 0.0 6.6 -0.1 3.5 -1.4 1.5 -1.6 -1.7 Savings and Investment Gross investment 18.0 15.9 13.9 6.1 7.8 10.7 14.2 19.1 Of which: public investment 1.9 1.6 1.5 1.1 2.1 3.2 3.1 23.2 Gross national savings 18.5 3.3 3.5 13.5 10.4 5.5 7.2 9.8 13.0 18.0 External current account balance (incl. Investment Gross investment 18.0 15.9 13.9 6.1 7.8 10.7 14.2 19.1 Of which: public investment 1.9 1.6 1.5 1.1 2.1 3.2 3.1 23.2 Gross national savings 18.5 3.3 3.5 13.5 10.4 5.5 7.2 9.8 13.0 18.0 External current account balance (incl. official grants) 0.4 -2.3 -3.5 -0.5 -0.6 22.2 Net fuel exports -0.9 -1.2 -1,1 1.0 -3.1 -4.5 -3.6 -2.4 -2.3 2.3 -2.3 -2.4 -2.3 Public Debt External public debt (medium and long- term, eop) 12.9 12.3 12.9 1.5 1.4 2.7 Total public sector debt (end of- period) 28.9 29.5 4.1 5.3 6.4 External 28.5 13.9 11.4 10.9 11.4 11.9 public debt service 3/ 9.4 8.1 11.8 13.5 3.3 4.7 4.6 12.5 5.9 6.7 M emorandum Items: (In millions of dollars, unless otherwise indicated) Net international reserves 4/ 456 119 391 960 1,159 1,341 1,501 Gross international reserves 2,534 2,067 2,346 2,496 2,621 1,658 1,811 In months of imports of the following year 5.6 4.7 5.3 5.6 2,771 2,921 3,081 3,241 Nominal GDP (millions of gourdes) 5.6 5.6 5.6 5.6 5.7 1,699,208 2,168,223 2,798,324 3,468,166 4,315,508 5,151,163 5,772,370 6,429,161 7,119,428 Sources: Ministry of Economy and Finance; Bank of the Republic of Haiti; World Bank; Fund staff estimates and projections. .6 2,771 2,921 3,081 3,241 Nominal GDP (millions of gourdes) 5.6 5.6 5.6 5.6 5.7 1,699,208 2,168,223 2,798,324 3,468,166 4,315,508 5,151,163 5,772,370 6,429,161 7,119,428 Sources: Ministry of Economy and Finance; Bank of the Republic of Haiti; World Bank; Fund staff estimates and projections. 1/1 The real effective exchange rate for FY2024 reflects August 2024 data. 2/1 Includes transfers to the state- owned electricity company (EDH), and unsettled payment obligations. 3/Inp percent of exports of goods and nonfactor services. Includes debt relief. 4/ Excludes banks' FX deposits, Venezuela escrow accou IMF liabi pilities (except Food Shock Window), and swaps. 36 INTERNATIONAL MONETARY FUND --- Page 41 --- Table 3a. Haiti: Non-Financial Public Sector Operations, 2021-29 (Fiscal year ending September 30; in millions of gourdes) FY2021 FY2022 FY2023 FY2024 1204 FY2024Q1 FY2024Q2 FY202403 FY2024 FY2025 FY2025 FY2026 FY2027 FY2028 FY2029 Total Revenue and Grants 118,340 142,478 Budget Budget Est Est. Est. Proj. Budget Proj_ Proj. Proj. Proj. Proj Domestic revenue 100,635 204,261 257,980 238,647 48,988 34,733 41,291 405,702 302.860 264,283 311,425 344,163 114,919 178,483 196,545 172,678 48,988 34,733 398,985 455,512 Domestict taxes 74.012 82,525 111.881 72,018 60.692 31,094 22,134 41,291 171,493 227,739 213,618 275,188 327,263 380,958 436,525 Customso duties 22,613 27,341 60,103 107,095 101,125 17,825 12,591 26,875 107,036 99,575 132,075 174,970 211,727 248,676 286,054 Of which: fueltaxes 0 0 20,312 19,360 20,480 14,261 60,007 100,809 75,747 92.990 107,090 122,490 139,201 Other current reve 4,009 5,053 6,498 17,431 10,862 6,756 6,024 8,879 23,836 23,848 28,974 34,584 38,755 43,165 47, .799 Grants 17,706 27,559 25,779 61,435 65,969 68 9 155 4450 27,355 5,796 7,227 8,445 9,792 11.270 Budget support 1/ 5,754 8,957 0 7,995 234,209 75,121 50,665 36,237 16.901 18,027 Project grants 11.951 18,602 25,779 53,440 65,969 0 0 0 5,557 2,851 0 0 18.986 0 Capitaltransfer: 2/ 9 155 4450 27,355 5,796 7,227 8,445 9,792 11.270 Budget support 1/ 5,754 8,957 0 7,995 234,209 75,121 50,665 36,237 16.901 18,027 Project grants 11.951 18,602 25,779 53,440 65,969 0 0 0 5,557 2,851 0 0 18.986 0 Capitaltransfer: 2/ 28,370 75,121 45,108 33,386 16,901 18,027 18,986 Total Expenditure 31 205,839 0 Current expenditure 158,220 180,515 179,017 273,028 232,913 35,125 30,404 30,025 156,025 301,065 268,953 381,944 Wages and's salaries 126,058 146,603 135,913 162,964 1,019 33,943 29,698 28,071 119,043 175,498 179,568 218,131 428,977 249,988 500,116 287,671 573,960 Goods and services 55,130 63,030 73,846 81,883 0, ,549 20,369 16,624 16.529 71,079 92,530 96,845 118,174 135,311 327,864 Interest payments 35,472 32,504 39,029 49,901 697 8,146 8,557 7,485 33,507 51,912 51,912 64,539 75,209 153,922 174,007 Transfers ands subsidies 6,014 6,596 7,975 2,932 1,701 .178 2,084 1,781 7,574 1,228 1,763 9,051 1,309 86,981 99,879 Ofv which: Transfers to EDH 28,843 9,111 44,474 15,063 22,098 3,122 3,249 2.433 2.276 6,882 24, 109 24,078 26,3 366 28,159 14,623 32, 146 37,377 16,601 Ofwhich: Fueld directs subsidiest to oil comp 10.682 31,242 7,412 8,038 8,642 3,130 11,1 131 9,625 7,956 3,215 3,560 Exceptional expenditu res 0 6,150 950 3,122 3,249 2.433 2.276 6,882 24, 109 24,078 26,3 366 28,159 14,623 32, 146 37,377 16,601 Ofwhich: Fueld directs subsidiest to oil comp 10.682 31,242 7,412 8,038 8,642 3,130 11,1 131 9,625 7,956 3,215 3,560 Exceptional expenditu res 0 6,150 950 Capital expenditure 32,161 33,913 43,104 110,064 91,894 181 5,720 4,970 Domestically financed 15,359 11,861 17,326 1,478 16,774 706 1,954 36,982 125,567 89,386 163,813 178,989 212,445 246,096 Foreign- financed 16,802 22,052 25,779 68,586 75, 120 81 706 1,954 8,612 46,065 39,962 53,160 75,503 97 980 120,318 Central government balance incl. grants -39,879 -38,037 28,370 79,502 49,424 110,653 103,486 114,464 125,778 Excluding.grants. and externallyt financed projects 783 43 3,544 25,244 25,244 15,049 7,897 14,885 5,734 13,863 329 11,266 249,677 1,795 -4,670 -70,519 84,814 -101,131 118,448 Primary Balance of NFPS, incl, grants and other transfers to EDH 3,865 31,442 33,219 12,117 7,435 16,042 13,863 5,413 329 11,266 43,837 1,795 5,912 3,897 1,772 4,694 1,657 Abtresteontiesparmet obligations 2,031 256 25,213 13,384 13,048 257,251 3,023 2,907 61 1,468 73,505 86,508 101,848 Overall Balance of NFPS, including grants 7,849 -37,7 781 31 -15,049 5,734 3,643 7,070 20,924 0 480 7,973 4,196 228,753 1,795 Overall Balance of NFPS, including grants excl capital transfer) 5/ 37 7,849 37 781 31 15,049 5,734 4,670 70,519 -84, ,814 101,131 118,448 480 7,973 196 22,914 1,795 ,670 70,519 -84,814 101, ,131 118,448 Financing. External net NFPS financing ,848 37,780 31 15,049 -5,734 -480 -7,973 196 228,753 1,795 4,670 70,519 84,814 Loans( (net) 5,865 468 9,400 -640 2.257 -420 240 323 205,943 1,011 2,572 75,414 84,622 101, 131 118,448 Disburser mer nts 2,640 4,851 5,822 9.400 -640 2.257 -420 240 323 205, ,943 1,011 572 93,266 103,536 3,450 15, ,146 9,151 75,414 84,622 93,266 103,536 Amortization 7,491 272 9,400 15,786 -6,894 381 16 77,267 86,586 96,437 106,791 Arre ears (net) 3,225 354 420 240 -323 -205,9 .943 370 1,854 1,964 3,171 3,256 Internal net financin ng 43 3,714 39,249 9,368 15, ,146 9,151 75,414 84,622 93,266 103,536 Amortization 7,491 272 9,400 15,786 -6,894 381 16 77,267 86,586 96,437 106,791 Arre ears (net) 3,225 354 420 240 -323 -205,9 .943 370 1,854 1,964 3,171 3,256 Internal net financin ng 43 3,714 39,249 9,368 Bankings system 50,483 52,437 27,690 36,000 15,689 7,991 59 6, 733 3,873 22,810 2,806 2,098 4,894 192 7,865 14 ,913 BRH (includest the FSW)6/ 46,731 41,274 26,709 24,000 7,022 838 -2,384 1,094 4, 196 204 21 108 9,774 482 23,865 14,913 Commercialbanks 3,049 -5.978 4,491 196 Nonbankf financing 7/ 3,752 -6,769 13,188 11,163 981 12,000 3,887 3,594 397 16,204 21 108 9,774 482 23,865 3,321 20,311 15,013 897 48 4,968 18,614 19,010 19,010 14,669 16,290 16,000 14,913 Memora andum Items Forgone fuel taxes and fuel direct subsidies 31,984 62,553 11,657 o/wF Forgonef fueltaxes 21,302 31,311 11,657 3,240 4,431 5,514 6,581 7.375 8,214 9,096 o/wF Fuel direct subsidies to oilc companies 10,682 31,242 3,240 4431 5514 6,581 7,375 8,214 9,096 Health, education. nd agricultures spending 28,173 33,117 37,810 Nominal GDP 1,699,208 2.168,223 2,798,324 3,672.147 3,468,1 166 62,427 79,837 97,872 109,675 122, .154 135,269 3,468,166 4,315,508 4,315,508 5,151 163 5,772,3 370 6.429,161 119,428 Sources Ministry off Finance and Economy. andFund's staff estimates and projections /Includes previouty progr rammed multilateral budget support tcould bed delayed, CCRT debt 2/ ForFY2024, includes debtf fergwenensg granted by Venezuela 3/Commitmentbass except tfordomenicaty financed spending. whichic reported the basis ofproje ep nts Includes expenditures for electorala activites and supporttop political partes 5/ Excludesa aone off capital transfer owing to the repaymentoft the debtto Venezuela /Includes Amounts the include thef fullt two year debt-relefu under the CCRT for FY2021- 22. andthe FSW disbursement for FY2023. enetchangeir inthe stock of goven ent securities held by non- banks, of chucks that arer not yet cashed, of upp plier credits and of rre 4a # whichic reported the basis ofproje ep nts Includes expenditures for electorala activites and supporttop political partes 5/ Excludesa aone off capital transfer owing to the repaymentoft the debtto Venezuela /Includes Amounts the include thef fullt two year debt-relefu under the CCRT for FY2021- 22. andthe FSW disbursement for FY2023. enetchangeir inthe stock of goven ent securities held by non- banks, of chucks that arer not yet cashed, of upp plier credits and of rre 4a # --- Page 42 --- Table 3b. Haiti: Non-Financial Public Sector Operations, 2021-29 (Fiscal year ending September 30; in percent of GDP) FY2021 FY2022 FY2023 FY2024 2024 FY202401 FY202402 FY202403 FY2024 FY2025 FY2025 FY2026 FY2027 FY2028 FY2029 Total Revenue and Grants 7.0 6.0 6.2 Domestic revenue 5.0 5.7 Domestic taxes 09 0.6 Customs duties 29 0.5 4 04 Ofv which: fuelt taxes 06 02 02 0.3 6 0.7 0.7 0.7 0.7 Other cur nt revent 0.2 5 03 00 00 00 0.2 0.2 Grants 0.9 18 1.9 0.3 ).3 Budget support 0.0 00 00 00 00 Projecto grants Capital transfer 0.0 Total Expenditure 3/ .0 .9 Currentespenditure 4.3 5 4.6 Wages ands salanes 2.3 Goods andservices interestp payments Transfersa and subsidies 0.5 Ofv which: Transfers to EDH 0.1 Ofy which: Fuel direct subsidies to oil.companic es 0.0 .0 0.0 Exceptional expenditures 0.0 Capital expenditure Domestica ally finance ed Foreig gn- financed Central government balance incl. grants 0.9 Excludi g grants and externally financed projects Primary Balance of NFPS, incl. grants and other tra ansfers to EDH -2.0 0.3 0.2 0.5 0.2 Adjustment (unsettled paymento oblig ligations 0. Overall Balance of NFPS, including grants -2.2 0.2 0.0 0.2 Ov Bal nce OfNFPS, including grants(excl. capital tran nsfer) Financing. NFPS Externalr netf fin and 9 1.5 Loans s(net) 1,5 Disburseme ts 0.0 1.5 Amortization 0.3 .0 0.0 Arrears (net) 0.0 0.0 Internal et ancing Ban nking system 0.2 BRH(includes thef FSW) 6/ 0.0 Commercialb banks Nonbank financing7 71 Memora andum Items Forgone uel taxes and fuel dire ect subsidies o/w Forgane fuel taxes 00 00 0.1 o/w Fuel direct subadies to compani 00 0.0 0.0 Health, education and agnicultures spending 03 02 Nomin nal GDP (millions of gourdes) 1,699, 208 68 223 98 24 58, 66 3.46 68, 166 Sources Ministry off Finan nce and Economy. andfunds staff estimates and projections 1/indludes previously- pro rogr an mmnedimubuseraibulyets tsupportshatcouldt be delayed, 2/Forf FY2024. includes debt forgiveness granted by Venezuela 3/C Commitment basis. except for domestic ally financed spendng. which ep 4/ Includes expenditures for electoral. activities ands supportto polticalpartes 5/ Excludes aone offe capitaltransfer owing tother repaymente toft thed debtto Venezuela Amounts include the fullt two year debt relet under the CCR1 Tforfy2021 22. andt the FSW disburseme nent tor FY2023 des the net change jov vern nt secu Res heldby on bar nks, of hecks are ot yet ashe ned debt forgiveness granted by Venezuela 3/C Commitment basis. except for domestic ally financed spendng. which ep 4/ Includes expenditures for electoral. activities ands supportto polticalpartes 5/ Excludes aone offe capitaltransfer owing tother repaymente toft thed debtto Venezuela Amounts include the fullt two year debt relet under the CCR1 Tforfy2021 22. andt the FSW disburseme nent tor FY2023 des the net change jov vern nt secu Res heldby on bar nks, of hecks are ot yet ashe ned --- Page 43 --- HAITI Table 4a. Haiti: Balance of Payments, 2021-29 (In millions of U.S. dollars on a fiscal year basis; unless otherwise indicated) FY2021 FY2022 FY2023 FY2024 FY2025 FY2026 FY2027 FY2028 FY2029 Proj. Proj. Proj. Proj. Proj. Proj. Current Account (Including Grants) 88 -464 -683 -141 -187 -315 -409 Current Account (Excluding Grants) -77 -399 -370 -653 -863 -356 -547 -548 -509 -499 -470 Goods (net) -3,286 3,480 3,759 -3,526 -3,921 4,086 4,233 -4,380 Exports of goods 1,130 1,282 956 765 841 962 1,093 -4,494 Of which: Assembly industry 1,213 1,350 1,066 1,191 870 734 774 885 1,006 1,116 Imports of goods -4,416 4,762 4,715 -4,291 1,242 Of which: Fossil fuels -4,762 5,048 -5,326 5,592 -5,844 -643 -890 -707 -644 714 -757 799 -839 -877 Services (net) -490 587 449 -424 451 479 503 -528 Exports of services 142 101 139 111 -554 122 128 135 Imports of services 142 149 -632 689 -588 -535 -573 -607 638 -669 -703 Primary Income (net) -10 -10 -10 -21 -31 -41 Secondary Income (net) 3,840 3,580 3,522 3,819 4,195 4,260 4,347 Official transfers (net) 4,540 4,720 164 189 181 215 359 233 100 Private transfers (net) 3,316 3,072 3,076 3,414 3,585 Other transfers (net) 3,764 3,971 4,150 4,316 360 318 265 190 250 263 276 289 304 Capital and Financial Accounts -72 85 109 717 323 495 585 Capital transfers 1/ 591 573 57 1,527 Public sector capital flows (net) -35 -66 -94 -1,547 18 486 501 517 Foreign direct investment (net) Banks (net) 2/ 71 111 20 -70 -60 -70 -60 Other items (net). 3/ -80 -80 12 102 790 296 -60 Errors and Omissions -241 162 660 Overall Balance -225 -216 86 577 135 180 176 193 204 Financing 225 216 -86 -577 -135 -180 -176 -193 -204 Change in gross reserves (+ is decrease) -91 117 -284 -150 -125 Changei in IMF credit and loans (+ isi increase) -5 -3 -150 -150 160 -160 Exceptional financing -11 -10 -30 -26 -33 -44 o/w 101 103 99 416 -241 162 660 Overall Balance -225 -216 86 577 135 180 176 193 204 Financing 225 216 -86 -577 -135 -180 -176 -193 -204 Change in gross reserves (+ is decrease) -91 117 -284 -150 -125 Changei in IMF credit and loans (+ isi increase) -5 -3 -150 -150 160 -160 Exceptional financing -11 -10 -30 -26 -33 -44 o/w 101 103 99 416 Changes in arrears 4/ 97 -642 o/w Debt rescheduling and debt relief 5/ Memorandum Items: Change in US$ denom. reserve deposits at BRH (+ IS decrease) -7 -18 Change in NIR (statistical definition) (+ is decrease) 223 337 -272 -569 -25 -29 Exports of goods, f.o.b (percent change) 199 -182 -160 -157 -153 27.7 13.5 -25.5 -20.0 10.0 14.4 13.6 10.9 11.3 Imports of goods, f.o.b (percent change) 19.8 7.8 1.0 -9.0 11.0 6.0 5.5 Projected. average oil price (U.S. dollars per barrel, APSP) 69.2 96.4 80.6 81.3 5.0 4.5 Debt service (in percent of exports of goods and services) 9.4 72.8 70.2 68.6 67.6 0.0 8.1 11.8 13.5 3.3 4.7 4.6 Gross international reserves (in millions of U.S. dollars) 2,534 2,067 2,346 5.9 6.7 (in months of next of 2,496 2,621 2,771 2,921 3,081 3,241 year's imports goods and services) 5.6 4.7 5.3 5.6 5.6 Nominal GDP (millions ofU.S. dollars) 21,017 19,826 5.6 5.6 5.6 5.7 19,603 26,283 30,614 33,173 34,155 35,664 37,497 Sources: Bank of the Republic of Haiti; and Fund staff estimates and projections. 1/For FY2024, includes debt forgiveness granted by Venezuela. 2/ Change in net foreign assets of commercial banks. 3/1 Includes arrears on oil imports. 4/Up to FY2023, reflects accumulation of arrears toward Venez uela. For FY2024, reflects cancellation of arrea ars due to Venezuela, financed partly from partly by debt forgiveness granted by Venezuela. by payment Haiti (US$500 million) and 5/ For FY2021 to FY2022, includes CCRT debt relief. For FY2024, includes debt forgiveness granted by Venezuela. INTERNATIONAL MONETARY FUND 39 , includes debt forgiveness granted by Venezuela. 2/ Change in net foreign assets of commercial banks. 3/1 Includes arrears on oil imports. 4/Up to FY2023, reflects accumulation of arrears toward Venez uela. For FY2024, reflects cancellation of arrea ars due to Venezuela, financed partly from partly by debt forgiveness granted by Venezuela. by payment Haiti (US$500 million) and 5/ For FY2021 to FY2022, includes CCRT debt relief. For FY2024, includes debt forgiveness granted by Venezuela. INTERNATIONAL MONETARY FUND 39 --- Page 44 --- HAITI Table 4b. Haiti: Balance of Payments, 2021-29 (In percent of GDP on a fiscal year basis; unless otherwise indicated) FY2021 FY2022 FY2023 FY2024 FY2025 FY2026 FY2027 FY2028 FY2029 Proj Proj. Proj. Proj. Proj. Proj. 0.4 -2.3 -3.5 -0.5 -0.6 -0.9 -1.2 -1.1 -1.0 Current Account (Including Grants) -1.4 -1.8 -1.7 -1.5 -1.4 -1.3 Current Account (Excluding Grants) -0.4 -3.3 -4.4 -15.6 -17.6 -19.2 -13.4 12.8 -12.3 -12.4 -12.3 -12.0 Trade balance 5.4 6.5 4.9 2.9 2.7 2.9 3.2 3.4 3.6 Exports of goods 5.1 6.0 4.4 2.8 2.5 2.7 2.9 3.1 3.3 Of which: Assembly industry -24.1 16.3 15.6 -15.2 15.6 -15.7 -15.6 Imports of goods -21.0 -24.0 -3.1 -4.5 -3.6 -2.4 -2.3 -2.3 -2.3 2.4 -2.3 Of which: Fossil fuels -1.5 -1.5 -2.3 -3.0 -2.3 -1.6 -1.5 -1.4 -1.5 Services (net) 0.7 0.5 0.7 04 0.4 0.4 0.4 0.4 0.4 Receipts -3.0 3.5 -3.0 -2.0 -1.9 -1.8 -1.9 -1.9 -1.9 Payments 0.1 0.1 0.0 0.0 0.0 0.0 0.1 -0.1 -0.1 Income (net) 18.3 18.1 18.0 14.5 13.7 12.8 12.7 12.7 12.6 Current transfers (net) 0.8 1.2 0.7 0.3 0.3 0.3 Official transfers (net) 0.8 1.0 0.9 15.8 15.5 15.7 13.0 11.7 11.3 11.6 11.6 11.5 Private transfers (net) 1.6 1.4 0.7 0.8 0.8 0.8 0.8 0.8 Other transfers (net) 1.7 Accounts -0.3 0.4 0.6 2.7 1.1 1.5 1.7 1.7 1.5 Capital and Financial 0.3 0.3 0.3 5.8 0.2 0.2 0.2 0.2 0.2 Capital transfers 1/ -0.2 0.3 -0.5 -5.9 0.1 1.5 1.5 1.5 1.5 Public sector capital flows (net) 0.1 1.5 1.5 1.5 1.5 0.3 0.2 0.0 0.0 Loan disbursements -5.9 0.0 0.0 0.0 0.0 0.0 Amortization -0.5 -0.5 -0.5 0.2 0.2 0.1 0.1 0.1 0.1 0.1 0.2 0.3 Foreign direct investment (net) -0.2 -0.2 -0.2 0.2 -0.2 -0.8 0.2 0.1 -0.3 Banks (net) 2/ 0.1 0.1 0.5 3.0 1.0 0.0 0.1 0.1 -0.2 Other items (net) 3/ 0.0 0.0 0.0 0.0 0.0 -1.1 0.8 3.4 0.0 Errors and Omissions -1.1 -1.1 0.4 2.2 0.4 8 0.2 0.1 -0.3 Banks (net) 2/ 0.1 0.1 0.5 3.0 1.0 0.0 0.1 0.1 -0.2 Other items (net) 3/ 0.0 0.0 0.0 0.0 0.0 -1.1 0.8 3.4 0.0 Errors and Omissions -1.1 -1.1 0.4 2.2 0.4 0.5 0.5 0.5 0.5 Overall Balance 1.1 1.1 -0.4 -2.2 -0.4 -0.5 -0.5 -0.5 -0.5 Financing -0.4 0.6 -1.4 -0.6 -0.4 -0.5 -0.4 -0.4 -0.4 Change in net foreign assets (+ is decrease) -0.1 -0.1 0.0 0.0 0.5 0.0 0.0 -0.1 -0.1 Change in IMF credit and loans (+ isi increase) 0.5 0.5 0.5 -1.6 0.0 0.0 0.0 0.0 0.0 Exceptional financing 0.4 0.5 0.5 -2.4 0.0 0.0 0.0 0.0 0.0 o/w Changes in arrears 4/ debt relief 5/ 0.0 0.0 0.0 0.9 0.0 0.0 0.0 0.0 0.0 o/w Debt rescheduling and Memorandum Items: 27.7 13.5 -25.5 -20.0 10.0 14.4 13.6 10.9 11.3 Exports of goods, f.o.b (percent change) 6.0 5.5 5.0 4.5 Imports of goods, f.o.b (percent change) 19.8 7.8 -1.0 -9.0 11.0 dollars barrel, APSP) 69.2 96.4 80.6 81.3 72.8 70.2 68.6 67.6 0.0 Projected average oil price (U.S. per 3.3 4.7 4.6 5.9 6.7 Debt service (in percent of exports of goods and services) 9.4 8.1 11.8 13.5 Nominal exchange rate 80.9 109.4 142.7 millions of U.S. dollars) 2,534 2,067 2,346 2,496 2,621 2,771 2,921 3,081 3,241 Gross international reserves (in 5.3 5.6 5.6 5.6 5.6 5.6 5.7 (in months of next year's imports of goods and services) 5.6 4.7 34,155 35,664 37,497 21,017 19,826 19,603 26,283 30,614 33,173 Nominal GDP (millions of U.S. dollars) Sources: Bank of the Republic of Haiti; and Fund staff estimates and projections. 1/For FY2024, includes debt forgiveness granted by Venezuela. 2/ Change in net foreign assets of commercial banks. 3/1 Includes arrears on oil imports. financed from Haiti 4/Up to FY2023, reflects accumulation of arrears toward Venezuela For FY2024, reflects cancellation of arrears due to Venezuela, partly by payment (US$500 million) and partly by debt forgiveness granted by Venezuela. 5/ For FY2021 to FY2022, includes CCRT debt relief. : Bank of the Republic of Haiti; and Fund staff estimates and projections. 1/For FY2024, includes debt forgiveness granted by Venezuela. 2/ Change in net foreign assets of commercial banks. 3/1 Includes arrears on oil imports. financed from Haiti 4/Up to FY2023, reflects accumulation of arrears toward Venezuela For FY2024, reflects cancellation of arrears due to Venezuela, partly by payment (US$500 million) and partly by debt forgiveness granted by Venezuela. 5/ For FY2021 to FY2022, includes CCRT debt relief. For FY2024, includes debt forgiveness granted by Venezuela. 40 INTERNATIONAL MONETARY FUND --- Page 45 --- HAITI Table 5. Haiti: Summary Accounts of the Banking System, 2021-29 FY2021 FY2022 FY2023 FY2024 FY2025 FY2026 FY2027 FY2028 FY2029 Proj. Proj. Proj. Proj. Proj. Proj. I.Central bank Net Foreign Assets 146,005 131,774 185,645 258,989 317,130 376,945 438,221 496,603 (In millions ofU.S. dollars) 557,263 1,499 1,120 1,383 1,970 2,165 2,346 2,517 2,699 Ofv which: Gross International Reserves (US$ Mil) 2,534 2,067 2,346 2,496 2,881 Ofv which: Net Intl. Reserves (nonresidents) (US$ Mil.) 2,621 2,771 2,921 3,081 3,241 1,969 1,526 1,796 2,383 2,579 2,759 Ofwhich: Net international reserves (USS Mil.) (Res FX+Nonres) 1/ 456 119 391 2,930 3,112 3,294 Ofwhich: Commercial bank forex deposits (in millions of U.S. dollars) 1,324 960 1,159 1,341 1,501 1,658 1,811 1,255 1,262 1,280 1,276 1,275 1,287 1,312 1,341 Net Domestic Assets Net credit to ther nonfinancial public sector 42,096 99,713 53,094 3,712 18,881 -44,505 72,670 -98,233 -126,878 Of which: Net credit to the central government 2/ 166,625 237,927 252,466 237,270 237,270 237,270 237,270 237,270 237,270 168,899 242,311 261,540 246,344 246,344 Claims on central government 207,676 292,786 246,344 246,344 246,344 246,344 Central government deposits 328,498 344,302 344,302 344,302 344,302 344,302 344,302 38,777 50,475 66,958 97,958 97,958 97,958 Ofwhich: IMF CCRT debt relief 97,958 97,958 97,958 2,634 -2,087 -2,198 -3,037 Liabilities to commercial banks (excl. government 207,676 292,786 246,344 246,344 246,344 246,344 Central government deposits 328,498 344,302 344,302 344,302 344,302 344,302 344,302 38,777 50,475 66,958 97,958 97,958 97,958 Ofwhich: IMF CCRT debt relief 97,958 97,958 97,958 2,634 -2,087 -2,198 -3,037 Liabilities to commercial banks (excl. gourde deposits) 138,460 157,539 3,877 -3,877 -3,877 -3,877 -3,877 BRH bonds/Open market operations 178,422 197,307 215,903 233,854 253,042 270,307 288,342 3,525 2,630 4,555 24,555 24,555 Commercial bank forex deposits 134,935 24,555 24,555 24,555 24,555 154,909 173,868 172,753 Other 191,348 209,299 228,487 245,752 263,787 -18,134 -11,484 -44,259 -52,209 65,327 78,264 87,881 -98,049 -108,735 Base Money 188,101 231,487 238,738 262,701 Currency in circulation 298,249 332,441 365,550 398,370 430,385 108,670 133,411 146,758 157,085 Commercial bank gourde deposits 178,342 197,896 215,626 232,829 249,212 79,431 98,077 91,980 105,615 119,907 134,545 149,924 165,541 181,173 II. 108,735 Base Money 188,101 231,487 238,738 262,701 Currency in circulation 298,249 332,441 365,550 398,370 430,385 108,670 133,411 146,758 157,085 Commercial bank gourde deposits 178,342 197,896 215,626 232,829 249,212 79,431 98,077 91,980 105,615 119,907 134,545 149,924 165,541 181,173 II. I.Consolidated banking system Net Foreign Assets 205,868 203,605 257,043 338,111 414,060 (In millions ofU.S. dollars) 494,553 576,099 655,185 739,434 Ofv which: Commercial banks NFA (in millions of U.S. dollars) 2,114 1,730 1,915 2,572 2,827 3,077 3,308 3,561 3,823 615 610 532 602 662 732 792 862 Net Domestic Assets 305,095 415,028 390,066 Credit to the nonfinancial public sector 335,716 364,430 373,184 387,089 409,137 420,677 206,497 296,664 318,252 303,056 Ofv which: Net credit to the central government 2/ 324,164 333,939 350,421 374,286 389,199 Claims 202,659 293,987 316,372 301,176 322,284 332,058 348,540 on central government 259,300 362,559 401,598 372,405 387,318 Central government deposits 417,402 438,510 338,734 355,216 379,081 393,994 Credit to the private sector 56,641 68,572 85,226 116,226 116,226 6,675 6,675 6,675 6,675 138,572 161,957 152,445 144,632 174,022 198,872 In gourdes 222,045 244,013 266,462 Inf foreigncurrency 72,552 77,196 69,435 66,173 81,835 95,836 109,485 122,977 137,161 Other 60,926 79,521 77,520 72,969 86,697 97,546 107,070 11 15,546 123,811 66,770 -75,172 -116,022 -147,057 -168,841 -194,711 220,462 -244,245 Broad -270,068 Money 510,963 618,634 647,109 673,828 778,490 Currency in circulation 867,736 963,187 1,064,322 1,160,111 98,150 123,511 124,113 134,440 155,697 Gourde deposits 175,251 192,981 210,184 226,567 Foreign currency deposits 134,373 157,617 166,705 177,464 213,534 234,724 263,364 305,545 344,384 270,986 329,793 348,280 353,272 (Inr millions of U.S. Currency in circulation 867,736 963,187 1,064,322 1,160,111 98,150 123,511 124,113 134,440 155,697 Gourde deposits 175,251 192,981 210,184 226,567 Foreign currency deposits 134,373 157,617 166,705 177,464 213,534 234,724 263,364 305,545 344,384 270,986 329,793 348,280 353,272 (Inr millions of U.S. dollars) 400,616 448,653 496,138 536,756 576,841 2,782 2,802 2,594 2,670 2,735 2,792 2,849 2,917 2,982 (12- month percentage change) Currency in circulation 14.9 25.8 0.5 8.3 15.8 Base money 12.6 10.1 8.9 7.8 21.5 23.1 3.1 13.5 Broad money (M3) 10.0 11.5 10.0 9.0 8.0 38.2 21.1 4.6 4.1 15.5 11.5 11.0 10.5 9.0 Gourde deposits 17.3 17.3 5.8 6.5 20.3 9.9 12.2 16.0 Foreign currency deposits 64.0 21.7 5.6 1.4 13.4 12.0 12.7 10.6 8.2 7.5 Credit to the private sector 15.2 17.4 -6.2 -5.3 Credit ingourdes 21.1 14.7 12.0 10.1 9.4 Credit 3.1 6.4 -10.1 -4.7 23.7 17.1 in foreign currency 33.9 30.5 -2.5 5.9 14.2 12.3 11.5 18.8 12.5 9.8 7.9 7.2 Memorandum Items: Foreign currency deposits (% of total private deposits) 67.4 68.3 69.4 66.5 65.2 Foreign curr. credit to priv. sector (% oft total) 45.5 50.5 65.6 65.3 63.7 62.6 524 52.4 51.4 49.4 Commercial banks' credit to private sector (% of GDP) 7.9 7.2 50.4 48.4 47.4 Real private credit sector growth 5.3 4.0 3.9 3.8 3.8 3.7 3.7 2.2 -21.2 -38.1 -33.2 2.4 2.5 2.7 2.7 2.4 Sources: Bank of the Republic of Haiti; and Fund staff estimates and projections. .4 51.4 49.4 Commercial banks' credit to private sector (% of GDP) 7.9 7.2 50.4 48.4 47.4 Real private credit sector growth 5.3 4.0 3.9 3.8 3.8 3.7 3.7 2.2 -21.2 -38.1 -33.2 2.4 2.5 2.7 2.7 2.4 Sources: Bank of the Republic of Haiti; and Fund staff estimates and projections. 1/ In statistical definition. Excludes banks' FX deposits, Venezuela escrow account, IMF liab bilities (except Food Shock Window w), and swaps. 2/ Changes in stocks of net claims on government differ from do omestic financing data inl Table 2a due to differences in revaluations of positions denominated in foreign exchange. accounting practices (cash VS. accrual) and in the recording of INTERNATIONAL MONETARY FUND 41 --- Page 46 --- HAITI Table 6. Haiti: External Financing Requirements and Sources, 2021-29 (In millions of US$ on a fiscal year basis; unless otherwise indicated) 1/ FY2021 FY2022 FY2023 FY2024 FY2025 FY2026 FY2027 FY2028 FY2029 Proj. Proj. Proj. Proj. Proj. Proj. 509 752 1,241 2,706 695 740 697 709 690 Requirements official transfers 77 653 863 356 547 548 509 499 470 Current account, excluding 95 96 94 1,547 12 12 12 18 17 Government debt amortization (non- IMF) 5 3 0 11 10 30 26 33 44 Net repayments to the IMF 91 0 284 150 125 150 150 160 160 Increase in reserve assets 0 642 0 0 0 0 Clearance of arrears 241 0 0 0 0 0 Errors and omissions 509 752 1,241 2,706 695 740 697 709 690 Sources 164 189 181 215 359 233 100 100 100 Official current transfers 148 170 181 215 320 215 100 100 100 Current project grants 16 19 0 0 39 18 0 0 0 Budget support 65 70 60 1,753 50 50 51 54 57 Official capital transfers 55 63 57 60 50 50 51 54 57 Capital project grants 0 0 0 0 Debt forgiveness (capital account) 0 0 0 1,467 0 10 7 3 226 0 0 0 0 0 Debt forgiveness (exceptional financing) 51 39 24 17 19 30 46 71 111 Foreign direct investment banks, other) 143 49 123 720 236 -70 -13 -51 -140 Other investment (central bank, non-banks, 60 30 0 0 31 498 512 535 562 Loan disbursements to the government 0 0 99 0 0 0 0 0 0 Net IMF financing 0 0 221 1 0 0 0 SDR allocation 0 117 0 0 0 0 0 0 Reserve assets drawdown 90 96 97 0 0 0 0 0 0 Incurrence of arrears 0 162 660 0 0 0 0 0 Errors and omissions Memorandum Items: 2,534 2,067 2,346 2,496 2,621 2,771 2,921 3,081 3,241 Gross international reserves and services) 5.6 4.7 5.3 5.6 5.6 5.6 5.6 5.6 5.7 (in months of next year's imports of goods Sources: Bank of the Republic of Haiti; and Fund staff estimates and projections. 42 INTERNATIONAL MONETARY FUND 0 0 Errors and omissions Memorandum Items: 2,534 2,067 2,346 2,496 2,621 2,771 2,921 3,081 3,241 Gross international reserves and services) 5.6 4.7 5.3 5.6 5.6 5.6 5.6 5.6 5.7 (in months of next year's imports of goods Sources: Bank of the Republic of Haiti; and Fund staff estimates and projections. 42 INTERNATIONAL MONETARY FUND --- Page 47 --- HAITI Table 7. Haiti: Financial Soundness Indicators, June 2021-June 2024 (In percent; unless otherwise stated) Sep-21 Dec-21 Mar- 22 Jun-22 Sep-22 Dec-22 Mar-23 Jun-23 Sep-23 Dec-23 Mar-24 Jun-24 Size and Growth 4,591 4,686 4,718 4,780 4,885 4,879 Asset volume (in USS millions ) 5,341 5,320 5,268 5,216 5,239 4,771 3,868 3,944 3,985 Deposit volume (in USS millions ) 4,352 4,327 4,276 4,304 4,294 3,942 3,784 3,833 3,849 -0.3 38.8 32.2 23.7 20.6 17.3 28.2 27.4 10.2 4.2 -7.6 -7.5 Asset growth (in gourde terms), yly 14.6 23.3 16.9 2.7 9.6 -22.4 -22.5 -18.8 Credit growth (net, in gourde terms), yly 21.2 20.6 18.8 12.1 Capital Adequacy 21.4 18.2 20.3 19.6 19.4 20.4 20.3 20.3 21.4 Regulatory capital to risk- -weighted assets 22.3 20.8 20.7 6.8 6.7 7.0 7.0 7.0 7.4 7.9 7.6 7.5 7.2 6.5 7.0 Regulatory capital to assets Asset Quality and Composition 23.8 22.8 22.5 21.3 20.0 19.1 18.3 Loans (net) to assets 25.1 24.8 24.8 24.2 24.5 8.8 12.0 5.6 6.3 7.8 8.7 6.7 10.9 11.1 10.5 8.5 12.8 NPLS to gross loans 77.8 71.3 89.5 57.2 59.6 65.1 79.4 84.7 59.5 66.1 Provisions to gross NPLS 103.1 96.5 Earnings and Profitability Cumulative since beginning of calendar year 2.4 1.7 2.6 2.1 1.0 1.4 1.5 1.1 0.8 Return on assets (ROA) 2.1 2.0 1.9 10.3 14.4 10.9 7.7 (ROE) 23.2 21.5 21.2 26.1 21.2 30.5 23.9 15.0 Return on equity 51.1 51.6 51.4 45.6 53.5 49.5 53.2 61.6 61.0 59.8 61.6 64.1 Neti interest income to gross income 50.8 72.3 65.0 65.2 70.9 74.0 Operating expenses to net profits 58.6 59.4 62.9 56.1 60.5 58.5 Efficiency 9.4 9.1 9.0 8.8 9.9 9.1 9.2 9.9 12.9 11.4 10.5 10.7 Interestrate spread 1/ Liquidity 48.5 48.2 47.5 47.4 48.4 48.7 48.5 48.0 48.3 49.3 Liquid assets to total assets 2/ 50.3 47.8 59.6 59.3 59.9 60.3 61.8 59.6 58.8 58.4 57.9 57.3 58.7 59.4 Liquid assets to deposits 2/ Dollarization 44.9 47.2 47.7 52.2 50.5 55. .5 47.4 48.4 48.7 48.5 48.0 48.3 49.3 Liquid assets to total assets 2/ 50.3 47.8 59.6 59.3 59.9 60.3 61.8 59.6 58.8 58.4 57.9 57.3 58.7 59.4 Liquid assets to deposits 2/ Dollarization 44.9 47.2 47.7 52.2 50.5 55. 9 58.1 54.0 54.1 53.5 56.5 58.1 Foreign currency loans to total loans (net) 72.7 68.7 67.7 68.5 68.8 Foreign currency deposits to total deposits 66.1 66.5 66.3 66.9 67.3 71.7 69.5 19.5 19.0 20.9 21.6 22.0 22.8 22.4 22.5 22.1 21.4 20.5 19.5 Foreign currency loans to foreign currency deposits Financial andIMF staff calculations. loans to total loans (net) 72.7 68.7 67.7 68.5 68.8 Foreign currency deposits to total deposits 66.1 66.5 66.3 66.9 67.3 71.7 69.5 19.5 19.0 20.9 21.6 22.0 22.8 22.4 22.5 22.1 21.4 20.5 19.5 Foreign currency loans to foreign currency deposits Financial andIMF staff calculations. Thesei indicators reflect the aggregated results of the eight licensedt banks in operationi in Haiti; thus figures in thist table may Source: BRHE Banking System Summary not exactly match thei information in Table 4, which reflect the con solidated banking system. 1/ Defined as the differe ence betwee en averagel lending rate anda averagef fixed deposit ratei in the banking system. 2/1 Liquid assets comprise cash and central bank bonds. INTERNATIONAL MONETARY FUND 43 --- Page 48 --- HAITI Engagement Strategy Annex I. Country (CES) updated the pilot CES endorsed by the This Country Engagement Strategy to the 1. Framing. in Haiti since then have continued compound Executive Board in January 2020. Developments trap. Despite weaknesses, since 2022 problems, leaving it stuck potentially in a fragility exhibited some resilience, partly country's in several key areas. The country Haiti had made notable progress public financial management, and the result of reform measures aimed at improving governance, revenue mobilization (a pre-condition for the Annex I. Figure 1. Acute Food Insecurity to function and to provide basic services to government were anchored by the population). These improvements of the the 2022 SMP and were bolstered by the support community. But efforts on the structural international front did not lift economic growth, owing to and macro and the impact of a series of the escalation of crime shocks. Progress in revenue mobilization had during the recent episodes of gang violence evaporated with through June 2024 and started again, although challenges, as the new transitional government many and security started slowly to Source: Integrated Food Security Phase Classification. began its mandate flow of remittances to Haiti improve. Although the large supporting consumption, it cannot substitute source of temporary resilience has been an important business environment) in supporting potential growth. for FDI (which are virtually nil given the poor the most fragile states in the world. Half its 2. Sources of fragility. Haiti is one among are multiple: weak institutions the line. 1 The sources of fragility population lives below poverty and rule of law); exposure to natural disasters and (pervasive corruption and weak governance and capacity constraints, including low access climate shocks; gender gaps in economic opportunity; brain drain spurred by the loss of jobs and to basic education (especially for girls) and record-high endured a series of crises, Compounding these weaknesses, Haiti has recently of its President in opportunities. earthquake in 2021, political assassination including the pandemic, a devastating cholera outbreak, a food crisis causing acute political instability, an ongoing of 2021 and consequent gang violence. The deterioration hunger (Annex I Figure 1), and, more recently, unprecedented in the recent security crisis, has led to a the security situation over the last four years, culminating brain drain and capacity constraints in the number of displaced people, further worsening surge Social indicators are distressingly low. (Annex I Figure 2). crisis. While Haitians, especially children, were already 3. Haiti now faces a dire humanitarian due to the spillovers of war in Ukraine, suffering suffering severe malnutrition and food insecurity As more than half of household in 2024 by the surge in criminal activity. crisis. The latest was compounded the resurge of inflation has caused a hunger consumption spending is on food, inflation pressures, owing to a drastic drop in security crisis lockdown has worsened supply-side show that in 2023, poverty likely increase to 29.2 remains The World Bank estimations 1 Poverty in Haiti very high. poverty line) and 58.0 percent ($3.65/day). percent ($2.15/day international 44 INTERNATIONAL MONETARY FUND As more than half of household in 2024 by the surge in criminal activity. crisis. The latest was compounded the resurge of inflation has caused a hunger consumption spending is on food, inflation pressures, owing to a drastic drop in security crisis lockdown has worsened supply-side show that in 2023, poverty likely increase to 29.2 remains The World Bank estimations 1 Poverty in Haiti very high. poverty line) and 58.0 percent ($3.65/day). percent ($2.15/day international 44 INTERNATIONAL MONETARY FUND --- Page 49 --- HAITI in the country in Port-au Prince through mid-July. took control of the main port March imports as gangs of goods and gang control prevented (in handled 85 percent imported That port typically the distribution of fuel in the country. and April) or hindered (in May and June) The many causes of the deep-rooted fragility Macroeconomic implications of fragility. and These 4. fiscal frameworks (Annexes VI VII). have weakened Haiti's monetary and policy upturns and contractionary during (i.e., expansionary during frameworks tend to be pro-cyclical constrained tax collection (tax revenue as a downturns). Pervasive criminal activity by gangs has fiscal dominance and large monetary which resulted in the past in and percent of GDP is 5 percent), spending to the most vulnerable; poor quality financing of the budget; low capacity to target of public funds; poor data quality; transparency of public spending; risk of misappropriation development partners owing to weak investment needs; lack of budget support by and encouraged enormous that had helped concentrate economic power governance; a weak judiciary system and rent seeking behaviors are reflected rent-seeking activities by public officials. The weak judiciary areas (Annex I Figure 3) and record in the World Governance indictors in many in Haiti's low ratings low FDI. over the last few years. endured a degree of political uncertainty 5. Haiti has long great in Haiti have deteriorated, with no effective 2020, democratic institutions of government 2021 further Since early of President Moïse in July apparatus to enforce the rule of law. The assassination Henry then chaired an interim government instability. Former Prime Minister December aggravated the political decree with the aim of holding new elections by seeking to approve structural reforms by questioning his legitimacy. In several months of widespread protests main oil 2023 but encountered ground to a halt as gangs took control of the September-October 2022, the economy of fuel in the country. A new agreement was signed terminal at Varreux and blocked the distribution and the private sector and NGOS 21, 2022, with representatives of all political parties, II The on December transition and transparent elections. agreement consensus for an inclusive a called a "national by February 7, 2024, and it established included a timetable for installing an elected government action to enhance the the Transition and a Body for the control of government elected High Council for But the country has been without government's accountability and fight corruption. most of the capital and the national representatives since January 2023. With gangs controlling violence, the UN Security understaffed and ill-equipped to address the escalating mission (MSS) for police severely multi-country security support Council approved in October 2023 a Kenya-led 2024. Other countries inside and outside slow at the end of June Haiti, which began a deployment the MSS in the months ahead. the region have pledged personnel to join government has a the newly appointed 6. After many years of political turbulence, necessary reforms, which for change. This would entail implementing The first window of opportunity with the support of developing partners. could help Haiti exit fragility over the long term, for improving the well-being of is to restore some degree of security, a precondition priority Haitians and also for macro stability. INTERNATIONAL MONETARY FUND 45 and outside slow at the end of June Haiti, which began a deployment the MSS in the months ahead. the region have pledged personnel to join government has a the newly appointed 6. After many years of political turbulence, necessary reforms, which for change. This would entail implementing The first window of opportunity with the support of developing partners. could help Haiti exit fragility over the long term, for improving the well-being of is to restore some degree of security, a precondition priority Haitians and also for macro stability. INTERNATIONAL MONETARY FUND 45 --- Page 50 --- HAITI Haiti: The Role of the Fund Strategy to Support A. A Multi-layered by the has in the last few years-supported with Haiti strengthened 7. The Fund's engagement Affected States. Staff's recent engagement has been new IMF Strategy for Fragile and Conflict by capacity development in close pillars which have been all supported guided by the following to enhance complementarities: collaboration with development partners countries with delayed Article IV consultation, with The Article IV Consultation. Haiti is among 2020. This 2024 Article IV consultation the last one discussed at the Board in January In addition to staff analysis, it also incorporates both short- and medium-term perspectives. partners, including the need to retain policy priorities of the government to development by signals debt sustainability analysis jointly prepared grants in the context of the accompanying with the authorities, points to the work by staff, in agreement IMF/WBG. The analytical prepared in the medium term and strengthen policy need of policies to support potential growth focus on the impact of rising crime on frameworks. Annex II as well as Box 1 of the Staff report also reveal the strong They quantify the impact on Haiti's real GDP. They on economic activity. which partly explain the fragility trap. Two annexes scarring effects of crime on growth, to boost potential growth. Given the gender point to the importance of closing gender gaps detail how to make fiscal and and fiscal frameworks, three analytical annexes weak monetary The Annex on GovTech indicates that strengthening monetary policy more countercyclical. limiting the impact of trade fraud could generate additional tax revenue by digital infrastructure The note on macro-financial and tariffs on imported goods or of smuggling. recession. on the value, origin, in the financial sector after six years of consecutive linkages highlights vulnerabilities strategy to enhance ex-ante and exclimate stresses the importance of a multi-pillar inflation A note on started implementing. The annex on resilience which the authorities have already post to both demand and supply side factors. dynamics points finalized, building on previous efforts, seeks to A new SMP. A new SMP, which is still being achieved under recent and lock in the progress enhance governance, help fight corruption, SMPS. assessment. This diagnostic is intended to diagnostic The forthcoming governance (over the short, medium, and long term). operationalize actions aimed at fighting corruption essential for Haiti's exit from fragility. Strengthening governance and reducing corruption are once it is finalized later in 2024. have indicated the wish to publish the report The authorities 46 INTERNATIONAL MONETARY FUND finalized, building on previous efforts, seeks to A new SMP. A new SMP, which is still being achieved under recent and lock in the progress enhance governance, help fight corruption, SMPS. assessment. This diagnostic is intended to diagnostic The forthcoming governance (over the short, medium, and long term). operationalize actions aimed at fighting corruption essential for Haiti's exit from fragility. Strengthening governance and reducing corruption are once it is finalized later in 2024. have indicated the wish to publish the report The authorities 46 INTERNATIONAL MONETARY FUND --- Page 51 --- HAITI Annex I. Figure 2. Sources and Indicators of Fragility Violence has taken a heavy toll on Haitians. and in progress reducing poverty was reversed. Fraction of the Population Internally Displaced by Violence Poverty Rates 3.0 (Percent) 2.5 Burundi 2.0 Haiti Papua New Guinea 1.5 Lebanon 1.0 0.5 International poverty rate ($1. 1.9i in 2011 PPP) Lower middle- income poverty rate ($3.2in2011 PPP) 0.0 Upper middle- income poverty rate ($5.5in 2011 1PPP) 2011 2013 2015 2017 2019 2021 2023 2011 2013 2015 2017 2019 2021 2023 The number of people undernourished has increased steeply. Haiti is very prone to natural disasters. Number of People Undernourished (Millions, 3-year average) Deadliest Earthquakes Since 1900 6.0 5.5 Port- -au- Prince (Hait 2010) 316,000 Haiyuan (China, 1920) 273,400 5.0 Tangshan (China, 1976) 242,800 4.5 Sumatra (Indonesia, 2004) 227,900 4.0 Kanto (Japan, 1923) 142,800 3.5 Messina (Italy, 1908) 123,000 3.0 Ashgabat (Turl urkmenistan, 1948) 110,000 Sichuan (China, 2008) 87.600 Muzaffarabad (Pakistan, 2005) 87,400 Ancash (Peru, 1970) 70,000 Sources: International Organization for Migration (IOM), Fed, World Bank, Disaster Risk Management Knowledge Centre INFORM Risk Index; the United States Geological survey, and Fund staff estimates. (DRMKC); B. Capacity Development Focused on Enhancing Governance and Transparency Mapping Structural Benchmarks with Capacity Developmnet 8. Fund's Structural benchmarks capacity (SBs) under 2022 SMP CD Purpose CDC Outcomes development (CD) has increased in recent Its SB 1: Publish procurement contracts Published public procurement years. SB 2: Expand Treasury Single Accountto Improve governance and contracts; include main central Ibudgetary units transparency in Mostextrabudgetaryt funds are now delivery was also embedded by SB: 3: Adopt Medium- Term Fiscal public procurement and public onbudget: Framework - - spending a Prepared.ar framework with medium- NFPS termf as fiscal the 2022 and 2023 Staff SB 4: Publish main donor fund (FAES) Enhance social protection anchor; quarterly reports Approvedt ther revisions to the Monitored Programs (SMPs). SB 5: Draft trevisions to the AMUCFT law - Address FATF deficiencies identifiedi in AMLICFT framework; Action Plan Each structural benchmark SB 6: Approve new tax code SB 7: Publish customs codes andt tariffs mobilization Boost domestic revenue Published reports on the quarterly operations and annual and under recent SMPs has been SB 8: Make Tax Identification Number - a - finances of the main donor funds compulsory andp publish database Buildi institutions to reduce (FAES); supported by ongoing CD SB 9: Amend central bank law monetary financing oft the deficit, Approvedt tax code; published codes SB 10: Complete the fina ancial audit of the enhance bank safeguards and central and tariffs related'to customs; tailored to Haiti's specific central bank - governance Safeguards andr revisionsof CB framework. circumstances. INTERNATIONAL MONETARY FUND 47 8: Make Tax Identification Number - a - finances of the main donor funds compulsory andp publish database Buildi institutions to reduce (FAES); supported by ongoing CD SB 9: Amend central bank law monetary financing oft the deficit, Approvedt tax code; published codes SB 10: Complete the fina ancial audit of the enhance bank safeguards and central and tariffs related'to customs; tailored to Haiti's specific central bank - governance Safeguards andr revisionsof CB framework. circumstances. INTERNATIONAL MONETARY FUND 47 --- Page 52 --- HAITI Annex I. Figure 3. Selected Governance Indicators Control of Corruption (0-1 100, lower score means more corrupt) Government Effectiveness (0- 100, lower score means less effective) Haiti LIC EMDE LAC - Haiti LIC EMDE LAC 2016 2017 2018 2019 2020 2021 2022 2016 2017 2018 2019 2020 2021 2022 Political Stability and Absence of Violence/Terrorism Rule of Law (0-100, lower score means less stable) (0-100, lower score means weaker rule of law) - Haiti LIC - Haiti LIC EMDE - LAC EMDE LAC T 2016 2017 2018 2019 2020 2021 2022 2016 2017 2018 2019 2020 2021 2022 Sources: Worldwide Governance Indicators, D. Kaufmann, and A. Kraay, 2023 Update, and IMF staff estimates. 9. Outcomes of CD on tax reforms, PFM, AML/CFT have been encouraging, owing to the authorities' commitment and to long-term CD. While progress has been non-linear, it has gained momentum. In particular timely publication of monthly execution budget data has greatly improved over the last two years. Looking ahead, the implementation of the new tax code remains a top CD priority for raising much-needed tax revenue to finance the country's large development needs. 10. The ability of the central bank to carry out risk-based supervision has been enhanced through extensive CD provided by staff which is still ongoing. Topics covered by the TA program include assessing banks' risk profile, developing supervisory manuals, and providing training to supervisors to align practices with the Basel standards. 48 INTERNATIONAL MONETARY FUND -linear, it has gained momentum. In particular timely publication of monthly execution budget data has greatly improved over the last two years. Looking ahead, the implementation of the new tax code remains a top CD priority for raising much-needed tax revenue to finance the country's large development needs. 10. The ability of the central bank to carry out risk-based supervision has been enhanced through extensive CD provided by staff which is still ongoing. Topics covered by the TA program include assessing banks' risk profile, developing supervisory manuals, and providing training to supervisors to align practices with the Basel standards. 48 INTERNATIONAL MONETARY FUND --- Page 53 --- HAITI between Capacity Development and SMPS Annex I. Box 1. Integration the authorities through the following CD agenda. the SMP objectives, the Fund has supported and customs administration In achieving collaborated with development partners on governance Furthermore, staff has issues. expected to be published in late 2024. Governance diagnostic assessment; supervision to support central bank' 'S efforts. Risk-based Revision of the excise chapter of the new tax code; ongoing. reform: to facilitate and ensure a timely and appropriate code; Revenue administration and customs General Tax Code and strengthen the customs procedures implementation of the recently approved ongoing. issues also related to annual GDP. Production of quarterly GDP data to address compilation starting the and of balance of payments statistics, including Improvement in the timeliness quality compilation of the reserve template (ongoing). supervisors for of legal persons, or designation of AML/CFT Transparency of beneficial ownership Professions. Non-Financial Businesses and Designated Revenues and Enhancing Transparency CD Priorities: Raising reforms Debti and Cash PFM Tax policy Exciser revision Management (FAD) (FADILEG) Implementation of Taxcode Fuelretail the PFMS safeguards pricing related toFSW Customcode andi tariff Medium-termt framework fiscal Treasury Single Tac relistedtothe regulations Transparency Account implemantation Governance Govemance (diagnostics) Extemal sector of thet tax code. statistics(IP) Revenue administration Implementation of the tax code SMP provision Data and Rebasing GDP (STA) Data (FADILEG) Governance transparency Customsr reforms transparency (diagnostics) Quarterly GDP Tax Data e-GDDS admanistiration Transparency reforms Transparency; Govemmance governance (diagnostics) Riskl based bank AMLICFT lawin (diagnostics) supervision regulation and line withFATF Central Framework bank CBDC Financial Intelligence Safeguards Unit law Centrall Chart Bankl of Accounts Banking Central bank AMLICFT (LEGIMCMIFINITD) (LEGIMCM) Partners Partnerships with Development C. Leveraging partnerships is necessary to remain In line with the Fund's Strategy on FCS, leveraging matrix, with key 11. Fund country team launched a joint governance focused. Since October 2022, the coordination efforts and better support the partners, on governance/PFM to improve development INTERNATIONAL MONETARY FUND 49 --- Page 54 --- HAITI authorities (Appendix I). IMF staff has continued to collaborate closely with Composition (Number of CD Delivery by Workstream Haiti's development of activities) partners. Extensive Revenue 10 20 30 40 50 60 collaboration with Administration was also development partners Public Financial Management instrumental in the design of the Tax Policy Fiscal andi Legal structural benchmark and quantitative National Accounts targets of the recent SMPs. Our Extemal Sector Data multilateral partners include the World Government tFinance - Bank, IADB, EU, the United Nations Financial Supervision and Regulation Payments Systems and infrastructure Financials sector, (including meeting periodically with UN AMI/CFT Legal, ITD Ad Hoc Advisory Group on Haiti, chaired Governance Legal, MCM, FAD by Canada), and the World Food Climate, Gender, and Digital of the Tax Policy Fiscal andi Legal structural benchmark and quantitative National Accounts targets of the recent SMPs. Our Extemal Sector Data multilateral partners include the World Government tFinance - Bank, IADB, EU, the United Nations Financial Supervision and Regulation Payments Systems and infrastructure Financials sector, (including meeting periodically with UN AMI/CFT Legal, ITD Ad Hoc Advisory Group on Haiti, chaired Governance Legal, MCM, FAD by Canada), and the World Food Climate, Gender, and Digital Program (WFP), while the main bilateral Emerging topics include the U.S., Brazil, partners FY22 BFY23 FY24 Canada, and France, In has leveraged its comparative advantage collaborating with development partners, Fund staff stepping up capacity expertise in macroeconomic and financial development, reinforcing the capacity and policies, by eventually increase the Fund's footprint in the field resources of the Haiti team, and when security conditions permit. 12. Going forward, it will be with Haiti's key development important to continue ensuring a strong strategic partners. partnership will be essential for: Partnerships Maln areas of collaboration Partners with Development building sufficient momentum Govern ML ance (audt) and support for the government's S efforts to achieve macroeconomic WB stability and set Haiti on a sustainable and inclusive Gover growth path; USAID IADB catalyzing donor support (strategic partnerships); -GovemancePpy zens udg and building institutional AML EU ECOSOC JN(WPF oven fety Jets capacity in collaboration with other partners (technical partnerships). 13. The Rapid Crisis Impact Assessment preliminary RCIA prepared (RCIA). The between July and October 2024 General Government Revenue by the World Bank, the InterAmerican (Percent of GDP) the European Union, and the Development Bank, with the United Nations in partnership - Haiti LIC EMDE LAC government of Haiti provides an initial of the current crisis, which is still assessment recovery framework ongoing, and provides a and an investment plan for next two fiscal years. 14. Re-establishing political stability and 2017 2018 2019 2020 2021 2022 2023 fundamental to Haiti's security are Sources: World Economic Outlook Database economic and social would be impossible to improve the business development. Without the return of law and order, it capital formation, essential climate and promote private investment and human pre-conditions for inclusive and sustainable growth and development. 50 INTERNATIONAL MONETARY FUND --- Page 55 --- HAITI 15. Economic reform priorities over the near-term are many and varied. The reform strategy would focus on four key objectives: (i) maintaining macroeconomic stability and raising growth, with domestic resource mobilization being the first priority; (ii) strengthening governance and transparency, particularly with regard to public finances and procurement; (ii) building a social safety net; and (iv) preparing and implementing a comprehensive package of mitigating measures to accompany fuel adjustments while ensuring that domestic fuel prices are in line international prices. Domestic revenues are among the lowest in the world as a share of GDP and must be increased. Indeed, use of additional government revenues to strengthen the social safety net, enhancing the health and education systems, pay police salaries and improve law and order and defense, and develop key infrastructure will be crucial for garnering public support for the authorities' reform program. The Fund has already provided a large amount of TA in the areas of its comparative advantage and, if the TA recommendations are implemented, these objectives could be achieved. 16. Outreach. Strategic communication will be necessary to advance the strategy and raise awareness and understanding of key issues. Outreach should focus on progress achieved by Haiti, especially on issues related to macroeconomic stability and governance in close collaboration with development partner. INTERNATIONAL MONETARY FUND 51 salaries and improve law and order and defense, and develop key infrastructure will be crucial for garnering public support for the authorities' reform program. The Fund has already provided a large amount of TA in the areas of its comparative advantage and, if the TA recommendations are implemented, these objectives could be achieved. 16. Outreach. Strategic communication will be necessary to advance the strategy and raise awareness and understanding of key issues. Outreach should focus on progress achieved by Haiti, especially on issues related to macroeconomic stability and governance in close collaboration with development partner. INTERNATIONAL MONETARY FUND 51 --- Page 56 --- HAITI of Crime on Economic Activity Annex II. Impact and months. 1 After the situation has deteriorated in recent years control 1. Haiti's security crime and gang warfare spiked, and gangs now assassination of President Moïse in 2021, skyrocketed in 2023 and even Homicides and kidnappings more than 80 percent of Port-au-Prince. displacements and a contraction of in 2024. The surge in gang violence caused greater to the worst more SO multiple channels. It also contributed economic activity across all key sectors through crisis. Although crime in Haiti has deep food crisis of recent years and to the prolonged inflation the intensified gang activity has corruption, and systemic fragility, roots in extreme poverty, deepened the challenges posed by crime. of the rise in crime on Haiti's real GDP in the 2. This analysis quantifies the impact reduce economic growth. 2 Should crime medium term and shows that crime significantly could rise by as much as homicide rate) be reduced to its pre-pandemic level, growth the of (proxied by 2024-28. Two scenarios are used to illustrate impact 1.9 percentage points a year during by the homicide rate stays high between Haiti's GDP. In the first scenario, crime measured same crime on rate falls to levels for the second scenario, the crime pre-pandemic 2024 and 2028. In the average annual real GDP growth contrasts sharply in the two scenarios: One caveat period. Real GDP growth but expands by 0.2 percent in the latter. contracts by 1.6 percent in the former scenario drivers of growth and, hence, these numbers simulation exercises do not consider other is that the should not be interpreted as GDP projections. Haiti: Real GDP under Different Scenarios Haiti: Homicide Rate under Different Scenarios (Number of victims per 100,000) , the crime pre-pandemic 2024 and 2028. In the average annual real GDP growth contrasts sharply in the two scenarios: One caveat period. Real GDP growth but expands by 0.2 percent in the latter. contracts by 1.6 percent in the former scenario drivers of growth and, hence, these numbers simulation exercises do not consider other is that the should not be interpreted as GDP projections. Haiti: Real GDP under Different Scenarios Haiti: Homicide Rate under Different Scenarios (Number of victims per 100,000) 94 Elevated crime rate 92 - -In- -Crime -between back case to pre- -pandemic 10 Elevated crime rate 5 -In- between case 2026 2027 2028 2029 Crime back to pre- -pandemic 2022 2023 2024 2025 2022 2023 2024 2025 2026 2027 2028 Sources: World Bank Indicators, and the World Economic Outlook database Sources: World Bank Indicators, andt the World Economic Outlook database effects of crime. A closer look at the dynamic 3. The analysis reveals the strong scarring that, based on the average of crime and real GDP to a shock in crime suggests medium term, without response would not recover fully, even over the international experience, the economy the level persistently even five The real homicide rate will exceed pre-shock the is additional measures. the level. The size of impact the shock, and real GDP will stay below pre-shock years after 1 Prepared by Weicheng Lian (WHD). of 1992-2021. Homicide rate is used as a of 166 countries over the period and its 2 The model is based on a global sample in the literature (See IMF REO, online Annex 4. Crime measure of crime, following a standard Latin practice America and the Caribbean). Macroeconomic Consequences in INTERNATIONAL MONETARY FUND --- Page 57 --- HAITI large: for a 50 percent increase in the homicide rate, real GDP would remain below the pre-shock level by 1/2 percent of GDP five years after the shock. This is because crime and insecurity affect negatively productivity, capital accumulation and give rise to brain drain and displacements. The uncertainty regarding the evolution of the security crisis amplifies the adverse economic effects of crime through persistent scarring. Persistently Higher Homicide Rate 5 Years Post Shock Impact of 50% Increase in Homicide Rate on Real Output 0.6 100.2 1.2 Growth rate 100.0 0.4 -90 confidence band 1.0 Level ofr real output (RHS, period 100) 99.8 0.2 99.6 0.8 Impulse response 0.0 99.4 90 percent confidence band 0.2 99.2 0.6 99.0 -0.4 0.4 98.8 -0.6 98.6 0.2 -0.8 98.4 0.0 -1.0 98.2 Sources: World Bank Indicators, and the World Economic Outlook database. 4. The analysis also assesses the impact of crime on investment. Crime affects growth through two channels, namely, i) its negative impact on investment and ii) its negative impact on consumption, employment, and production efficiency. We run two scenarios, one where the homicide-rate remains elevated in 2024-28 and one where it returns to its-pre-pandemic level. In the first scenario, GDP growth (per year) is 1.9 percentage points lower than in the second scenario, largely on account of the lower investment path (explaining 1.1 percentage points of the overall difference). INTERNATIONAL MONETARY FUND 53 . Crime affects growth through two channels, namely, i) its negative impact on investment and ii) its negative impact on consumption, employment, and production efficiency. We run two scenarios, one where the homicide-rate remains elevated in 2024-28 and one where it returns to its-pre-pandemic level. In the first scenario, GDP growth (per year) is 1.9 percentage points lower than in the second scenario, largely on account of the lower investment path (explaining 1.1 percentage points of the overall difference). INTERNATIONAL MONETARY FUND 53 --- Page 58 --- HAITI Annex III A. Closing Gender Gaps could increase Haiti's show that closing the gender gap in labor force participation in Staffs estimates term. We also take stock of the existing gender gaps GDP by between 5 and 15 percent in the long countries, fragile and conflict-affected. states, and Haiti comparing Haiti to peer countres-low-income economic outcomes. Finally, we examine the Caribbean countries and how they constrain the country's particularly in the labor market, to reap and reforms that could help reduce gender disparities, policies large growth gains. 1 A. Introduction in various dimensions-indluding studies have underscored how gender gaps -can 1. Many access to resources, and political representationof education, labor force participation, growth. Countries with higher levels and financial outcomes, especially female education not affect macroeconomic income levels (Figure 1). Investing in development tend to have higher effects on gender but also has positive intergenerational only increases women's economic opportunities the gender gap in education can also children's health and education (Schultz 2002). Closing (Duflo 2012). Likewise, of skilled workers and boost innovation and productivity and fuel increase the pool can lead to job creation and innovation encouraging and supporting female entrepreneurs unequal access to financial services, economic growth (Kochhar and others 2017). Conversely, (Aslan and others 2017) and can hinder including credit and savings, increases income inequality rights that empower women are key Legal reforms and property women's economic empowerment. economic development and convergence (World in reducing gender disparities and supporting violence can also boost economic growth Bank 2012, 2019; Server 2022). Reducing gender-based reduce fragility. (Ouedraogo and Stenzel 2021) and help substantially Annex III A. Figure 2. Gender Development Annex III A. Figure 1. Gender Index Development Index and GDP per Capita 1.2 1.0 C 12 0.8 0.6 a 0.4 property women's economic empowerment. economic development and convergence (World in reducing gender disparities and supporting violence can also boost economic growth Bank 2012, 2019; Server 2022). Reducing gender-based reduce fragility. (Ouedraogo and Stenzel 2021) and help substantially Annex III A. Figure 2. Gender Development Annex III A. Figure 1. Gender Index Development Index and GDP per Capita 1.2 1.0 C 12 0.8 0.6 a 0.4 g Haiti 0.2 J 6 0.0 n World LICS FCS Caribbean Haiti 0.9 1.0 1.1 Programme and IMF staff 0.6 0.7 0.8 Sources: United Nations Development GDI Programme World Bank, calculations, 2021 data. Sources: United Nations Development and IMF staff calculations, 2021 data. 1 Prepared by Arsène Kaho (WHD). 54 INTERNATIONAL MONETARY FUND --- Page 59 --- HAITI B. Gender Gap Trends in Haiti by the United Nations Development Gender development in Haiti, as measured in the world. This 2. Index (GDI), is one of the lowest Programme (UNDP) Gender Development of human development: i) health, measured gender inequalities in three dimensions of index measures education, measured by expected years life expectancy at birth for women and men; ii) for female and male adults 25 by for female and male children and mean years of schooling female and male schooling resources, measured by and older; and iii) command over economic in 2016, stood at 0.898 in 2021, years earned income. Haiti's GDI, on a downward trend starting for other FCS, but well estimated worldwide. It remains slightly above the median also falling in the first quartile countries (Figure 2). The country's performance is below the median for LICS and Caribbean components in the index-for both lagging peer FCS and LICS with regard to education-related however, remains higher than men's children and adults (Figure 3). Women's life expectancy, female the median for women in LICS and FCS. in Haiti and also above Annex III A. Figure 3: Haiti: Gender Development Indicators Mean Years of Schooling Expected Years of Schooling Life Expectancy at Birth 12 10 90 80 e 15 - E L 9 70 E de de a de 1 3 de $ 3 1 3 0 de 3 I 3 1 1 I e 3 e 3 E I Haiti World LICS FCS Caribbe an Haiti World LICS FCS Caribbear World LICS FCS Caribbean, Haiti Programme and IMF staff calculations. data. Sources: United Nations Development and conflict-affected. states, 2021 Note: LICs-Low-income countries and FCS=Fragile relatively limited opportunities for women. 3. Weak gender development in Haiti reflects women have less access to financial addition to their lower levels of education relative to men, The country's In in starting and running businesses (Figure 4). services and face greater constraints worldwide and well above the median in the fourth quartile high rate of maternal mortality-falling violence (Figure 5) are additional major impediments for LICS and FCSs-and elevated gender-based and development. to women's empowerment in Haiti mean they experience for women's empowerment 4. The limited opportunities women's labor force participation appears unfavorable economic conditions. Even though it remains more than 8 percentage high-slightly above the third quartile worldwiderate, in relatively 6). In addition, Haitian women's unemployment points lower than Haitian men (Figure among the highest in the world. general-and especially for women with basic education-remains. with the latter being four times rate is above the third quartile worldwide, when Their unemployment times than the median of FCSs. Also, higher than the median of LICS and three higher men's (Figure 3) and women's jobs are women's income averages one quarter below employed, more likely to be vulnerable (Figure 6). INTERNATIONAL MONETARY FUND 55 relatively 6). In addition, Haitian women's unemployment points lower than Haitian men (Figure among the highest in the world. general-and especially for women with basic education-remains. with the latter being four times rate is above the third quartile worldwide, when Their unemployment times than the median of FCSs. Also, higher than the median of LICS and three higher men's (Figure 3) and women's jobs are women's income averages one quarter below employed, more likely to be vulnerable (Figure 6). INTERNATIONAL MONETARY FUND 55 --- Page 60 --- HAITI Annex III A. Figure 4: Selected Gender Opportunity Indicators Literacy Rate: Adult Female Literacy Rate: Youth (Percent off females aged 15 and above) (Gender Parity Index, aged 15-24) 1.02 1.00 0.98 0.96 0.94 0.92 0.90 0.88 World LICS FCS Caribbean Haiti World LICS FCS Caribbean Haiti Share of Population with Some Years of Maternal Mortality Ratio Secondary Education (Per 100,000 live births) 1,400 1,200 1,000 E World LICS FCS Caribbean Haiti World LICS FCS Caribbean Hait Women, Business, and the Law Index: Financial Institution Account Entrepreneurship Indicator (Percentage, aged 15+) (Scale 1-100) World LICS FCS Caribbean Haiti World LICs FCS Caribbean Haiti Sources: United Nations Development Programme, World Bank World Development Indicators and Women, Business, and the Law Index, and IMF staff calculations. Note: LICS=Low-income countries and FCS=Fragile and conflict- affected states 56 INTERNATIONAL MONETARY FUND --- Page 61 --- HAITI Annex III A. Figure 5: Selected Gender Based Violence Indicators Physical or Sexual Violence Committed by Partner Women Subjected to Violence in the Last 12 Months (Percent of women aged 15-49) (Percent of women with partners aged 15-49) Guatemala Dominican Republic 20.4 Honduras 21.6 Haiti 23.5 37.2 Peru 37. 4 Colombia World LICS FCS Caribbean Haiti Sources: The United Nations Office on Drugs and Crime's International Homicide Statistics database and on Violence Working Group Against Women, World Health Organization, Global Health Observatory Data Inter-Agency and IMF staff calculations. Repository, Note: LICs=Low-income countries and FCS=Fragile and conflict- affected states. 5. The representation of women at the parliamentary level has been very low (see Annex III B, Figure 2). Women accounted for less than 3 percent of members in the latest parliamentary elections, one of the lowest rates of parliamentary representation in the world. Annex III A. Figure 6: Selected Gender Outcomes Indicators Labor Force Participation Vulnerable Employment (Percent of employment by gender) - B 40 a a de da DE S 3 : No LICS FCS arib bb Haiti World LICS FCS Haiti (Percent Unemployment of labor force by Unemployment with Basic Education gender) (Percent of labor force with basic education by gender) E 2 E E E E J de 1 de de 2 1 I I I : I 1 le World LICS FCS Caribbe an Haiti World LICS FCS ait Sources: International Labour Organization and IMF staff calculations. Note: LICs-Low-income countries and FCS=Fragile and conflict affected states. INTERNATIONAL MONETARY FUND 57 arib bb Haiti World LICS FCS Haiti (Percent Unemployment of labor force by Unemployment with Basic Education gender) (Percent of labor force with basic education by gender) E 2 E E E E J de 1 de de 2 1 I I I : I 1 le World LICS FCS Caribbe an Haiti World LICS FCS ait Sources: International Labour Organization and IMF staff calculations. Note: LICs-Low-income countries and FCS=Fragile and conflict affected states. INTERNATIONAL MONETARY FUND 57 --- Page 62 --- HAITI Gender Gaps in Labor Market Participation C. Potential Gains from Closing from reducing the gender gap in labor market We estimate the GDP gains that would accrue 6. between 5 to Annex III A. Figure 7: Labor Force Participation participation would be sizable, ranging Rate this gender gap has narrowed 1.4 15 percent. Although elevated 100 over the past 30 years, it remains considerably 1.2 further in 2019 and 2020 (Figures 7), and it widened situation and 1.0 owing to the deteriorating security of the 60 0.8 political instability in the country. The narrowing Men is also attributable mainly to the decline in the Women 0.6 gap rate rather than to the modest Gap (Right) 0.4 male participation this would be increase in the female rate. Closing gap new 5 2 2 0 2 0 2 I 0 a beneficial but also economically as women bring and IMF staff calculations. that could boost Sources: International Labor Organization skills and ideas to the workplace overall productivity. diversity in the used to estimate GDP gains from greater gender 7. The methodology (2018). The authors distinguish between labor force draws on Ostry, Alvarez, and Papageorgiou estimate the elasticity of substitution between female and male labor in the production function and substitution (about 2) implies that female factors. The estimated elasticity of increases these two production Hence, greater female labor force participation and male labor forces are complementary. because of the complementarity the labor force rises and this increase is compounded the GDP as the complementary relationship, the greater between women and men. Thus, the stronger positive effect on growth. Gender Gaps in Labor Market Access D. Policies to Close the authorities' efforts to address the approach is needed to support of 8. A multipronged in the labor market. Implementation obstacles to boosting women's participation an over the medium to many as most of them will only have impact these policies must be accelerated, and a stable institutional framework. The policies long term. This requires sustained investment would include the following: research has confirmed (Fabrizio and others tax system. As recent to work. Tailoring a gender-friendly tax reforms can help reduce women's disincentives 2020 and Coelho and others 2022), would have the largest impact on gender inequality, Reforms to the taxation of labor income contributing the most to reducing gender and individualized systems with more progressive gaps in the labor market and employment. maternal mortality. This will require not only Improving women's health and reducing health facilities and the upgrading of existing increasing investment in the construction of new and improving the quality of staff skills, but also reducing access costs ones, while enhancing services offered to women. 58 INTERNATIONAL MONETARY FUND women's disincentives 2020 and Coelho and others 2022), would have the largest impact on gender inequality, Reforms to the taxation of labor income contributing the most to reducing gender and individualized systems with more progressive gaps in the labor market and employment. maternal mortality. This will require not only Improving women's health and reducing health facilities and the upgrading of existing increasing investment in the construction of new and improving the quality of staff skills, but also reducing access costs ones, while enhancing services offered to women. 58 INTERNATIONAL MONETARY FUND --- Page 63 --- HAITI Raising women's level of education and job skills. As in the health sector, sustained investment is needed to increase girls' access to quality education and vocational training. More urgently, efforts must be made to reduce the gender gap in terms of mean years of schooling, school attendance, and educational achievement by tackling the social and economic drivers of these disparities. Ramping up social programs targeting vulnerable and poor women. The scaling up of existing social safety net programs, including by better targeting women most in need, should help address barriers to women's access to the healthcare system and improve girls' educational outcomes. Increasing women's financial inclusion. Harnessing the potential of fintech could foster women's access to finance and accelerate their empowerment. This requires strengthening the country's existing digital infrastructure (see Note on Reaping the Benefits of Digitalization in Haiti), including Internet access, and conducting awareness raising campaigns to increase women's digital literacy. Stepping up the fight against gender-based violence. This demands stronger prevention, warning, and education tools for communities, as well as victim-support and grievance mechanisms, including strong support by the judicial system. 9. To enhance the accountability and effectiveness of policies aimed at improving gender equality, the authorities could consider implementing gender-responsive budgeting. This would allow closer monitoring and evaluation of government gender policy budget commitments to ensure they are met. INTERNATIONAL MONETARY FUND 59 --- Page 64 --- HAITI References Coelho, Maria, Aieshwarya Davis, Alexander Klemm, and Carolina Osorio Buitron (2022), Gendered Taxes: The Interaction of Tax Policy with Gender Equalit, IMF Working Paper 22/26. Duflo, Esther (2012), Women Empowerment and Economic Development, Journal of Economic Literature, 50(4), 1051-1079. Fabrizio Stefania, Anna Fruttero, Daniel Gurara, Lisa Kolovich, Vivian Malta, Marina M. Tavares, and Nino Tchelishvili (2020), Women in the Labor Force: The Role of Fiscal Policies, SDN/20/03. Goksu Aslan, Deléchat Corinne, Newiak Monique, and Fan Yang (2017), Inequality in Financial Inclusion and Income Inequality, IMF Working Paper 17/236. Kochhar, Kalpana, Sonali Jain-Chandra, and Monique Newiak, eds (2017, Women, Work, and Economic Growth, International Monetary Fund. Ostry Jonathan D., Alvarez Jorge, Espinoza Raphael, and Papageorgiou Chris (2018), Economic Gains from Gender Inclusion: New Mechanisms, New Evidence, IMF Staff Discussion Note. Ouedraogo Rasmane and David Stenzel (2021), The Heavy Economic Toll of Gender-based Violence: Evidence from Sub- Saharan Africa. Schultz, T. Paul (2002), Why Governments Should Invest More to Educate Girls, World Development, Vol. 30, No. 2, pp. 207-225. Sever Can (2022), Legal Gender Equality as a Catalyst for Convergence, IMF Working Paper 2022/155. World Bank (2012), World Development Report: Gender Equality and Development, World Bank Group. 60 INTERNATIONAL MONETARY FUND Note. Ouedraogo Rasmane and David Stenzel (2021), The Heavy Economic Toll of Gender-based Violence: Evidence from Sub- Saharan Africa. Schultz, T. Paul (2002), Why Governments Should Invest More to Educate Girls, World Development, Vol. 30, No. 2, pp. 207-225. Sever Can (2022), Legal Gender Equality as a Catalyst for Convergence, IMF Working Paper 2022/155. World Bank (2012), World Development Report: Gender Equality and Development, World Bank Group. 60 INTERNATIONAL MONETARY FUND --- Page 65 --- HAITI Gender Gaps: The Case of Haiti Annex III B. Macro-Critical stable and continues to be higher than inequality in Haiti has remained indicators' of 1. Overall, gender countries (Figure 1), according to composite in most Latin American and Caribbean Index and the Gender Development Index that inequality-such: as the Gender Inequality and representation? gender of opportunity, outcomes different dimensions of gender equality measure Indicators of Gender Inequality relative Annex III B. Figure 1: Composite and the level of inequality remains elevated There has been little change in overall indicators of to . regional peers. gender inequality in Haiti over the past decade... GDP per Capita and Gender Inequality Composite Gender Indices 1.0 (Index, 0-1; Gll: higher value, lower equality; Haiti GDI: higher values, higher equality) - 0.8 0 Caribbean 1.0 Latin America andt the 0.6 - 20 0.8 de 0.4 D( et 3 0.2 0.6 a % Gender Development Index (GDI) 0.0 0 50,000 100,000 150,000 0.4 - Gender Inequality Index (GII) GDP per Capita, Average 2- 15- US 2022 dollar) (PPP Constant 2017 Internationall 0.2 2001 2006 2011 2016 2021 World Bank World Development Indicators, Sources: United Nations Development Programme I World Economic Forum and IMF staff calculations. remains an issue (Figure 2). The gap between of outcomes and representation of held women 2. Inequality has but the share seats by and male labor force participation rates declined, and salaried female Women are less likely to be wage in national parliaments lags regional comparators. workers. in its legal system over the past Haiti has made limited progress in gender equality Bank' 's Women Business 3. (Figure 3). The World decades. Several areas call for further improvement of 52.5 (out of 100) for Haiti, below the (2024) highlights an overall legal score and the Law Report Caribbean. Gaps persist in the areas of safety, marriage, average for Latin America and the leave for fathers), childcare services, and availability of maternity leave, paid parenthood (e.g., entrepreneurship. of 1 Prepared by Jiajia Gu, SPR. at birth), education (female and male expected years 2 The GDI captures health (female and male life expectancy for adults), and female and male estimated earned for children; female and male mean years of schooling fertility), empowerment (education, schooling reproductive health (maternal mortality, adolescent income. The GII captures and gender gaps in labor force participation. political representation), INTERNATIONAL MONETARY FUND 61 for fathers), childcare services, and availability of maternity leave, paid parenthood (e.g., entrepreneurship. of 1 Prepared by Jiajia Gu, SPR. at birth), education (female and male expected years 2 The GDI captures health (female and male life expectancy for adults), and female and male estimated earned for children; female and male mean years of schooling fertility), empowerment (education, schooling reproductive health (maternal mortality, adolescent income. The GII captures and gender gaps in labor force participation. political representation), INTERNATIONAL MONETARY FUND 61 --- Page 66 --- HAITI Annex III B. Figure 2: Outcomes and Representation The gender gap in labor force participation has Female representation in national below declined over the past decades but gap remains... regional parliament is comparators.. Labor Force Participation Rate (Percent of population aged 15+) Proportion of Seats Held by Women in National Parliaments -Haiti Latin America and Caribbean (excl. high income) 30 Low- income countries Female Male Source: World Bank Gender Data Portal. 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 Sources: World Bank, World Development Indicators and IMF staff estimates. Annex III B. Figure 3: Legal Rights Haiti has made limited progress in legal rights over the with several gaps still existing in between past decades... legal equity women and men. Legal Rights Index (Index 0- -100, higher values higher equality) Legal Equity (World Bank 2.0Legal Framework Score; Pension 100=highest) Assets Entrepreneurship Childcare 0 Parenthood Haiti Suriname Honduras Marriage Jamaica Dominica Pay Workplace Mobility 8 8 à a 5 0 00 1a Safety 0 9 - - 3 R 00 E 10 2 Total 52.5 Source: World Bank, Women Business and the Law. Sources: World Bank, Women Business and the Law (2024). 4. Haiti has made progress in financial inclusion, but gender in gaps persist some areas. In 2017, 13 percent of women had savings in financial institutions, to 11 compared percent of men. While account ownership rates for both genders increased from 2011 to 2017, a 2-percentage points gender gap remains, and financial access for both men and women are lower than for regional comparators. In 2019, 47 percent of women and 45 percent of men remained completely excluded from the formal financial system. Women are in underrepresented access to credit, with 64 percent of credit allocated to men and 36 percent to women in 2023. This imbalance could negatively impact women's entrepreneurial activities and overall economic growth. As noted in the Central Bank's National Strategy for Financial Inclusion, these gaps highlight the importance of designing policies to support the needs of targeted groups. 62 INTERNATIONAL MONETARY FUND men and women are lower than for regional comparators. In 2019, 47 percent of women and 45 percent of men remained completely excluded from the formal financial system. Women are in underrepresented access to credit, with 64 percent of credit allocated to men and 36 percent to women in 2023. This imbalance could negatively impact women's entrepreneurial activities and overall economic growth. As noted in the Central Bank's National Strategy for Financial Inclusion, these gaps highlight the importance of designing policies to support the needs of targeted groups. 62 INTERNATIONAL MONETARY FUND --- Page 67 --- HAITI Annex III B. Figure 4: Opportunities and other Issues Account Ownership Mobile age 15+) Money Account Made or Received A Digital 2011 2017 16 Female OMale (% 35 age 15+) Payment 12 14 30 mFemale SMale female male female male female male Caribbean Latin America (excl. and high Lower middle income Haiti Sources: Bank income) ofthe Republic of Haiti, World Bank World Sources: World Bank Global Findex database. 2017 Developmer ent Indic ato Sources: World Bank. 2014 Global Findex database. 2017 5. Child marriage remains Haiti (Figure 5). About 22 percent significant of in Annex III B. Figure 5: Child married by the age of 18. women are (Percent 90 of Women aged 20- 24 first married Marriage by age 15 or 18) High rates of child marriage could lead to high rates of 10 70 (and risky) adolescent of 60 pregnangy-incressing the risk of $ maternal death and putting à 50 health pressure on the bs 40 sector. Additionally, they also result in 2 30 lower secondary enrollment rates for girls. : 20 a According to the IMF's Child 10 a Haiti Marriage Toolkit, eliminating child marriage in Haiti could 0 5 10 15 20 25 30 potentially increase per capital growth by 0.9 Source: United Nations Population Married by Fund the age (UNFPA), of 15 percentage point 6. Haiti has high levels of Gender-based Based Violence Country Profile, physical violence. According to the World Bank' S Gender country. In 45 percent of cases, the act of violence affects 28 percent of women ages 20 to 45 in the the proliferation of gang violence is perpetrated by the intimate attacks, kidnappings, political and partner. In Haiti, against women. Gender economic upheaval inequalities, a root cause of increases violence one of the drivers of fragility, conflict gender-based violence, is now and violence. understood as the share of women who experience According to IMF research, a one ppt increase in economic intimate partner violence is associated with decrease in activity. an 8-9 percent 7. Investing in infrastructure and services could economic activity. Access to electricity has disproportionately increase women's between rural and urban improved in Haiti, but a significant areas. These gaps gap remains typically undertake unpaid work, including disproportionately burden women's time as they household chores. fetching water, cooking, laundry, and Improving such infrastructure could cleaning, other women's time and their economic therefore have a disproportionate activity. There is also a impact on contraception by women in Haiti, significant unmet demand for according to the latest data. INTERNATIONAL MONETARY FUND 63 activity. Access to electricity has disproportionately increase women's between rural and urban improved in Haiti, but a significant areas. These gaps gap remains typically undertake unpaid work, including disproportionately burden women's time as they household chores. fetching water, cooking, laundry, and Improving such infrastructure could cleaning, other women's time and their economic therefore have a disproportionate activity. There is also a impact on contraception by women in Haiti, significant unmet demand for according to the latest data. INTERNATIONAL MONETARY FUND 63 --- Page 68 --- HAITI 8. Table 1 highlights other potential macrocritical gender inequalities for Haiti, while Table 2 shows the data availability on macrocritical gender gaps. In particular, gender disaggregated data on school enrollment, literacy, STEM education, informal employment and gender wage gap could be collected or updated, including as part of general efforts to strengthen data collection. 64 INTERNATIONAL MONETARY FUND --- Page 69 --- Table 1. Haiti: Selected Indicators of Gender Inequality Latin Americaa and theCaribbean 11 2017 2018 2019 2020 2021 2022 Latestyeara available 25thPercentile 75th Percentile Median Average Composite Genderl Indices 0.46 0.46 0.46 2020 0.53 0.62 0.59 0.57 0.99 Female Human Capitalindex (MCI2 2/ 0.92 0.92 0.93 0.93 0.93 0.93 2022 0.97 0.33 1.00 0.42 0.99 0.39 0.38 Gender Development Index (GDI 0.63 0.63 0.62 0.62 0.62 0.62 2022 0.71 0.75 0.74 0.73 Gender Inequalityl Index (GII) 3/ 2022 74.3 38 87.81 80.94 80.55 Global Gender Gapl Index 21 61.25 61.25 61.25 61.25 61.25 61.25 Women Business andthel Lawl Index (WBL) 4/ Labor andincome -10.25 10.11 10.39 10.26 .9.65 -12.25 2022 -21.52 -22.52 -24.44 -23.83 Gender Gap p(F-Min Employmentt to-F -Population Ratio, Modeled ILO Estin ate (15- -64y yrs) Gender Gender Gap Wage Gap Mini 5/ Informal Employment Rate -7.58 9.7 79 2022 -23.24 -19.07 -25: 34 -23.83 Gender Gap M)i inl Labor Force Participation Rate, Modeled ILOE Estimate (15-64) yrs) 5.65 5.73 5.85 5.94 5.99 2022 1.54 3.74 298 2.74 Genderd Gap(F FMinUnemplormenti Rate, Modeledi ILOI Estimate 15- -64) yrs) Gender Gapi in Gross Pension Replacement Rate (as share of average worker earnings) Leadershipa and Social 2.54 2.54 54 2022 19.38 35.48 28.23 29.40 Proportion ofSeats Held 1By Women in National Parliam ments 21.00 28.00 24.00 24.88 Proportio on ofv Womeni in Managerial Positions 23.00 Prevalence of Intimate Partner Violence among Ever- -partneredWomen (in percent) 3/ Access to Ratio: Finance Number of Household Loan Accounts with Commercialt Banks (Females' Accounts for 1,000F Female Adults Males" Accounts per 1,000M 1,000 Male Male Adults) Adults) Ratio: Number of Household Depost Accounts with Commercials Banks (Females' Accounts per 1,000Female Adults/ Males Accounts per 2021 1.6 -10.1 Gap in Aduitsy Who Borrowed From af Financiall institution (Shared of Female- Share ofMale percentage points) 2021 -3.84 2.27 Gap in Adults Who Own afinanciall Institution Account (Share of Female- Share of Male percentages points) 201 -2.4 65 86 Mobile Account (Share Share of Male. 1,000 Male Male Adults) Adults) Ratio: Number of Household Depost Accounts with Commercials Banks (Females' Accounts per 1,000Female Adults/ Males Accounts per 2021 1.6 -10.1 Gap in Aduitsy Who Borrowed From af Financiall institution (Shared of Female- Share ofMale percentage points) 2021 -3.84 2.27 Gap in Adults Who Own afinanciall Institution Account (Share of Female- Share of Male percentages points) 201 -2.4 65 86 Mobile Account (Share Share of Male. percentagep points) -5.05 E Gender Gapi in Adultsy with Money ofFemale. (Share Share of Male, percentage points) Gender Gap in Adults Who Made or Received Digital Payments inthe Pasty Year ofFemaleEducation Gender (F-I M)in Adult Uiteracy Rate 1.37 1.25 0.78 Gender e Mink Meany Years of Schooling 3.03 6.7 71 Gender Gap (F- MinP Primary Gross Enrollment Rate Gender Gap (F- M)in Secondary Gross Enrollment Rate Gender Gap (F- Mjir in Tertiary Gross Enrollment Rate Health -95.51 96.25 102.58 102. 38 2021 -76.5 56 -104.A 49 96.5 55 92. 6.32 2.54 Gender Gap (F- M)in Adult Mortality Rate per 1,000 Adults 5.65 5.69 6.01 5.99 5.72 2021 43.00 6.34 96.00 5.81 71.5 6.04 50 82.87 Gender Gap (F- FMinufet Expectancy at Birth 351. 1.00 359.00 349.00 350.00 82 1.86 Maternal Mortality Ratio per 100,000LNEE Births, Modele led Estimate (15-49y yrs)/3 3.02 2.96 2.92 2.81 2021 1.58 32 Total Fertility Rate (Births Per Woman) Souct GeEOLAA a Group aggregates are culated vhere data are swada lablefor atleasts per ent counties for agivenin indi vtor and for veighted ver xages, she eights allable. Dat valat Thisin indesis scoredons ascale 0f01 with highers core outcomesior romen scoredona ascaleo 0f01 where shéghes qui ity value indica sorresponds vorse Me a For esamgle teGenders hnequalityhndsics cenr C Lwwhndeisie sreportedons ascaleo of0 100. vith aNigers score better outcomestorvomen earings men latedbyth The tal 51 Vage Gapis sthe difference betven average ewnngt sofmen anda average arnings Ca of negresseda datapercenageol wenragee repetition the becauseolewlyorlaes entrants, andgrade E GGross enrolments rateso cane raceed 10x duetot cisionolover agedandunon agedpuptetitudenest avalue Thisi those vhohwer 5vad belore sching 3age60(showmp per 1000 persons) nother words, a oe olds. ssumingno raiatens and ECE aSee DkaHe metadatafor originale adaasourcers CATIEETT - EE - A - a E --- Page 70 --- HAITI Table 2. Haiti: Availability of Gender Disaggregated Data Country Name Area Dept N. missings Enroll Literacy LFP Employment Informal Wage WBL Account Credit Mat Second Empl Gap Mortality Aruba WHD Dominica WHD St Kitts and Nevis WHD Antigua and Barbuda WHD Grenada WHD Bahamas, The WHD Barbados WHD St. CATIEETT - EE - A - a E --- Page 70 --- HAITI Table 2. Haiti: Availability of Gender Disaggregated Data Country Name Area Dept N. missings Enroll Literacy LFP Employment Informal Wage WBL Account Credit Mat Second Empl Gap Mortality Aruba WHD Dominica WHD St Kitts and Nevis WHD Antigua and Barbuda WHD Grenada WHD Bahamas, The WHD Barbados WHD St. Vincent and the WHD Grenadines Belize WHD Haiti WHD Nicaragua WHD Puerto Rico WHD St Lucia WHD Suriname WHD Trinidad and Tobago WHD Canada WHD Guyana WHD Jamaica WHD United States WHD - V Argentina WHD - V Colombia WHD V - - Guatemala WHD 0 - - - V V V e Honduras WHD V 0 = Uruguay WHD V V Bolivia WHD i WHD Nicaragua WHD Puerto Rico WHD St Lucia WHD Suriname WHD Trinidad and Tobago WHD Canada WHD Guyana WHD Jamaica WHD United States WHD - V Argentina WHD - V Colombia WHD V - - Guatemala WHD 0 - - - V V V e Honduras WHD V 0 = Uruguay WHD V V Bolivia WHD V V Brazil WHD V V : Chile WHD V V Costa Rica WHD V Dominican Republic WHD Ecuador WHD El Salvador WHD Mexico WHD Panama WHD Paraguay WHD Peru WHD Total 15 19 Source: IMF, Gender Data Hub. Note: LFP = labor force participation rate; WBL = women, business, and the law index. 66 INTERNATIONAL MONETARY FUND --- Page 71 --- HAITI Assessment Matrix Annex IV. Risk Policy Response Impact Source and Relative Likelihood Global Risks High ST/MT Protect the vulnerable through High fiscal measures. Continue price volatility. Supply and Persistent inflationary targeted fuel subsidy reform to ensure Commodity fluctuations (e.9. due to conflicts, pressures. Eroding real the fiscal sustainability. demand restrictions and OPEC+ decisions) incomes. Worsening long-term export recurrent commodity price volatility, fiscal and external balances. cause and fiscal pressures, and food external in EMDES, cross-! border spillovers, insecurity social and economici instability. High ST/MT Protect the vulnerable through and Medium the fiscal measures. Monitor slowdown. Growth slowdown Lower remittances from targeted risks closely and strengthen Global growth including due to supply United States, creating large financial in major economies, monetary policy, rising adverse spillovers to the banking supervision. disruptions. tight or a deeper-than- broad economy. Worsening corporate bankruptcies. real estate sector contraction, with fiscal and external balances. envisaged through trade and financial adverse spillovers sudden stops in some channels, triggering High ST/MT through EMDES. Improve competitiveness High structural reforms. fragmentation. Cancellation of HOPE/HELP Deepening geoeconomic inward- -oriented policies and trade preferences. Lower FDI Broader conflicts cooperation resulti in weakened international of trade and FDI, inflows. a less efficient configuration protectionism, policy supply disruptions. technological and payments uncertainty, rising shipping and systems fragmentation. instability, a fracturing of input costs, financial systems, and lower international monetary High MT/LT donor financing to build ex growth. Medium Seek and financial Extreme climate events Lower long-term growth and ante structural and enhance post- disaster Climate change. cause loss of resilience driven by rising temperatures food insecurity, FDI inflows. response. life, damage to infrastructure. and supply disruptions, lower disorderly growth, transition to financial instability. A uncertainty net-zero emissions and regulatory and low investment. Domestic Risks with lead to stranded assets Continue to coordinate and closely intensify High ST/MT of development partners support to High Further displacements flow of request for international security and political restrictions to enhance security. Prioritize Worsening Interruptions or delays in the people, people and supply chaîn spending, ensure instability. fuel government of the Multinational of (including financial institutions, full deployment Mission. Intensification disruption lower FDI inflows sound governance. including Security Support activity. A delay in planned shortages), growth. strengthen timely and gang criminal insecurity. and long-term AML/CFT publishing to reassure markets elections due to persistenti accurate data and donors. MONETARY FUND 67 INTERNATIONALI . Prioritize Worsening Interruptions or delays in the people, people and supply chaîn spending, ensure instability. fuel government of the Multinational of (including financial institutions, full deployment Mission. Intensification disruption lower FDI inflows sound governance. including Security Support activity. A delay in planned shortages), growth. strengthen timely and gang criminal insecurity. and long-term AML/CFT publishing to reassure markets elections due to persistenti accurate data and donors. MONETARY FUND 67 INTERNATIONALI --- Page 72 --- HAITI Domestic Risks High High ST/MT Seek donor financing to build Natural disasters. Hurricanes, Disruption in economic activity, structural resilience and enhance heavy rains, earthquakes, and lower FDI inflows and long-term post-disaster response. droughts. growth. High High ST/MT Increase the health Infectious diseases. Depleted Disruption of economic activities targeted at infectious spending diseases. Seek sanitation and health infrastructure and lower long term growth. international donor for leads to outbreaks of communicable Increased pressure on public health building resilience and support diseases (e.g., cholera, tuberculosis). system, addressing emergencies. Medium High ST/MT Insufficient international support. Persistence of insecurity, Intensify outreach to donors. Financial support is delayed and impediments to economic activity, Increase international insufficient to address short-term and worsening of the humanitarian communication on financing needs. security and humanitarian needs, crisis. Increased pressure on fiscal and to support the medium-term resources. reconstruction and institutional needs. 68 INTERNATIONAL MONETARY FUND to outbreaks of communicable Increased pressure on public health building resilience and support diseases (e.g., cholera, tuberculosis). system, addressing emergencies. Medium High ST/MT Insufficient international support. Persistence of insecurity, Intensify outreach to donors. Financial support is delayed and impediments to economic activity, Increase international insufficient to address short-term and worsening of the humanitarian communication on financing needs. security and humanitarian needs, crisis. Increased pressure on fiscal and to support the medium-term resources. reconstruction and institutional needs. 68 INTERNATIONAL MONETARY FUND --- Page 73 --- HAITI Mobilization: Reaping the Benefits Annex V. Domestic Revenue Through GovTech of Digitalization Introduction and Main Messages A. countries' economies and is a strong lever to transform developing Haiti's in 1. Digitalization sector efficiency. In this note, we assess progress improve governance and public for closing the country's digital administration and offer recommendations from digitalization in public model, we estimate the revenue gains countries. Using an econometric gap with benchmark administration, which would reduce strengthening the digital infrastructure of customs could range We estimate that the tax revenue generated opportunities for fraud and smuggling. 0.6 and 0.9 percent of GDP.' between US$129 and US$189.3 million, or between with increased digitalization of the realize gains in tax revenue as 2. Haiti can potential in public sector digital transformation sector. The next session reviews Haiti's progress is benchmarked public Bank Govtech Maturity Index (GTMI). Haiti's performance measured by the World Low-Income countries (LICS), Fragile and Conflictagainst comparable country groups, including In the third section, we estimate the tax Affected States (FCS), and Caribbean countries (Car). which could be achieved by that could result from reduced fraud and smuggling, Générale des revenue gains systems of the customs shnsnaration-domauseos tax strengthening the digital initiatives to accelerate digitalization of the Douanes (AGD). Finally, we take stock of current AGD discusses additional measures to adminsraton-Diection Générale des Impôts (DGI)--and the benefits of GoveTech is presented efforts. A box on the review of the literature on support these at the end. B. Assessing Progress in Public-Sector Annex V. Figure 1: GovTech Maturity Index Digitalization 1.0 in the digitalization of the public 0.8 3. Progress using the World Bank 0.6 sector in Haiti is assessed Govtech Maturity Index (2022). This index 0.4 a scale of 0 to 1-the maturity of 0.2 measures-on countries in terms of digital transformation of public 0.0 LICS FCS Caribbean Haiti World administrations in four areas: (i) core government Sources: World Bank GovTech database and IMF staff calculations. shared digital platforms, (ii) online service Note: LICS-Low-income countries and FCS=Fragile and conflictsystems and and (iv) affected states. delivery, (ii) digital citizen engagement, GovTech enablers (further details on this index are from 0.272 in 2020, placing the country in here). Haiti's GTMI score fell to 0.202 in 2022 provided 1 Prepared by Arsène Kaho (WHD). INTERNATIONAL MONETARY FUND 69 ) core government Sources: World Bank GovTech database and IMF staff calculations. shared digital platforms, (ii) online service Note: LICS-Low-income countries and FCS=Fragile and conflictsystems and and (iv) affected states. delivery, (ii) digital citizen engagement, GovTech enablers (further details on this index are from 0.272 in 2020, placing the country in here). Haiti's GTMI score fell to 0.202 in 2022 provided 1 Prepared by Arsène Kaho (WHD). INTERNATIONAL MONETARY FUND 69 --- Page 74 --- HAITI development. Haiti's score is well with a low or minimal focus on GovTech Group D2 countries FCSs, and other Caribbean countries (Figure 1). below the global median and those of LICS, mainly to a poorer performance on Haiti's weak overall GTMI score is attributable the Core Government 4. this index (Figure 2). These include three of the four indices that constitute to government digital architecture and Systems Index (CGSI--assessing the integrated approach framework); the Public Service Delivery Index systems, including government cloud interoperability with a focus on citizen-centric measuring the maturity of online public service portals, strategy, (PSDIand the GovTech Enablers Index (GTEI-capturing to design and universal accessibility); skills and innovation policies and programs institutions, laws, and regulations, as well as digital Index (DCEI-measuring aspects As to the fourth index, Digital Citizen Engagement foster GovTech). feedback mechanisms, open data, and open government of public participation platforms, citizen and Caribbean countries and close to the median Haiti's score is above the median for FCSS portals), for LICS. identified by the GTMI The deficiencies in Haiti's public-sector digital environment with respect to 5. wide of areas. These include the following, survey are multiple and cover a range the four areas covered by the GTMI: 1. Core government systems: available for all government entities. The lack of a shared cloud platform administration information systems, including tax The lack of interface between public finance and customs administrations. for Information System self-service portal The lack of a Human Resources Management employees and managers. The lack of a public investment management system. which does not allow e-tendering and eThe limited capabilities of the e-procurement portal, Data Standards and does not comply with the Open Contracting contracting information systems of the operations of most government The need to strengthen governance security, and auditing. DGI, and AGD) in terms of, for example, compliance, (notably Treasury, 2. Electronic delivery of public services: services portal and a mobile application enabling The lack of a one-stop shop online public users to access public services. The lack of e-payment services. St. Kitts and Nevis, with a GTMI score of 0.236 and countries in category D are 2 Other Western Hemisphere Suriname with a score of 0.152. 70 INTERNATIONAL MONETARY FUND systems of the operations of most government The need to strengthen governance security, and auditing. DGI, and AGD) in terms of, for example, compliance, (notably Treasury, 2. Electronic delivery of public services: services portal and a mobile application enabling The lack of a one-stop shop online public users to access public services. The lack of e-payment services. St. Kitts and Nevis, with a GTMI score of 0.236 and countries in category D are 2 Other Western Hemisphere Suriname with a score of 0.152. 70 INTERNATIONAL MONETARY FUND --- Page 75 --- HAITI but does not offer online transactional services or DGI has an online tax services portal electronic invoicing. declarations but only for a limited offers electronic filing of tax and customs The DGI portal number of taxes. social insurance, and pensions. The lack of online service portals for customs, of citizens: 3. Digital engagement for citizens to has been created, there is no national platform Although an open data portal feedback on the delivery of public services. participate in policymaking or to provide 4. GovTech enablers : includes a section on e-governance that could The 2018-23 State Modernization Program government entity dedicated to its strategy, but there is no specific constitute a national digital implementation. the conditions for making data and laws governing There are no right-to-information form. available to the public online or in digital information of personal data and for management framework to protect There is no legal or institutional digital risks. Fiscal Gains from Enhanced Digitalization C. Potential administration will increase infrastructure of the customs 6. Strengthening the digital share of Haiti's government revenue (Figure 3). Customs revenue accounts for a sizable 36.3 of revenue. until 2022, since peaking in 2010 at percent This revenue has been trending downward domestic revenues and 2.4 percent of GDP -even 3: Customs Duties and continued to grow until Annex V. Figure though overall imports Imports 3.0 2019. The decline in customs revenue through attributable to several variables, including 2.5 2022 is the limited control of the tax base and pervasive 30 2.0 corruption. 1.5 used to 1.0 7. The methodological approach estimate customs revenue gains resulting from 10 Customs duties (percent of domestic revenue) 0.5 digitalization draws on the trade Imports (percent of GDP) of GDP, right scale) enhanced Cutoms duties (percent 0.0 model developed in the IMF Fiscal 2020 2023 gravity estimates the level of 2002 2005 2008 2011 2014 2017 Monitor (2018). This model of Haiti and IMF staff calculations. misreporting of imports value using Sources: Bank of the Republic aggregate the following equation: INTERNATIONAL MONETARY FUND 71 s duties (percent of domestic revenue) 0.5 digitalization draws on the trade Imports (percent of GDP) of GDP, right scale) enhanced Cutoms duties (percent 0.0 model developed in the IMF Fiscal 2020 2023 gravity estimates the level of 2002 2005 2008 2011 2014 2017 Monitor (2018). This model of Haiti and IMF staff calculations. misreporting of imports value using Sources: Bank of the Republic aggregate the following equation: INTERNATIONAL MONETARY FUND 71 --- Page 76 --- HAITI Annex V. Figure 2: GovTech Maturity Indicators Core Government Systems Index Public Service Delivery Index 1.0 1.0 0.8 0.8 0.6 0.6 0.4 0.4 0.2 0.2 0.0 World LICS FCS Caribbean Haiti 0.0 World LICS FCS Caribbean Haiti Digital Citizen Engagement Index GovTech Enablers Index 1.0 1.0 0.8 0.8 0.6 0.6 0.4 0.4 0.2 0.2 0.0 0.0 World LICS FCS Caribbean Haiti World LICS FCS Caribbean Haiti Sources: World Bank GovTech database and IMF staff calculations. Note: LICS=Low-income countries and FCS=Fragile and conflict-affected states. Viht-Vimt = Bo + BiZamt + Ba2Ent + Bslimt +at + axm + Emt (1) (VEhe+V3m)/2 where VEt is the total annual value of exports of goods from country X to country m, as declared by importing country m, and VEnt the value of the same trade flow as declared by exporting country X. The dependent variable, defined as the trade Annex V. Figure 4: Trade Gap gap, is the difference between these two values (Percent) normalized by the declared average bilateral -10 trade flow. Figure 4 illustrates the evolution of -20 the trade gap for Haiti since 2001. The matrix -30 -40 Zamt includes a set of independent variables -50 approximating the cost, insurance, and freight -60 associated with bilateral trade, as well as the -70 distance. The existence of common borders and -80 -90 languages. ZNmt and Zimt are matrices that -100 include variables reflecting the specific 2002 2006 2010 2014 2018 2022 Sources: IMF Direction of Trade Statistics and IMF staff characteristics of importing and exporting calculations. 72 INTERNATIONAL MONETARY FUND matrix -30 -40 Zamt includes a set of independent variables -50 approximating the cost, insurance, and freight -60 associated with bilateral trade, as well as the -70 distance. The existence of common borders and -80 -90 languages. ZNmt and Zimt are matrices that -100 include variables reflecting the specific 2002 2006 2010 2014 2018 2022 Sources: IMF Direction of Trade Statistics and IMF staff characteristics of importing and exporting calculations. 72 INTERNATIONAL MONETARY FUND --- Page 77 --- HAITI indirect tax rate), weighted the trade gap, such as the VAT rate (or equivalent in or countries influencing inflation, exchange rate, and participation regional average tariff, GDP and GDP per capita, include the United Nations e-Services IndexThese matrices also international trade agreements. and quality of online public-sector services, normalized between 0 and 1-measuring the scope variables at and axm, respectively, online tax filing and business registration. The dummy the cost of bilateral trade. including fixed effects that influence capture year-specific and country peer-specific and the data sources are provided in Annex V The detailed list of variables used to estimate (1) Tables 1 and 2. the reduction in trade fraud is derived from equation 8. Revenue gains resulting from the estimated coefficient of the digitalization (1), holding other factors constant and using as the aggregate value of bilateral We also define = E.(V) and Vfotal 1 Ea(VE) and assume index. VPotat m and X, respectively, level of importing country m as declared by country not affect trade at the country increases only VPharand does in digitalization in the importing that progress therefore estimated as follows: Vfotal Revenue gains are (2) Revenue Gain; I Trate : A(VPear Vrotat), Equation (2) can then be rearranged to is the average tax rate of interest (VAT or tariff). impact where Trate digitalization index Azm and its estimated include the change in the importing country's Bligus Azm (3) Revenue Gain; iI Trate. 0Vpur + Vrotal)-Blat estimation of equation (1) presented in the Annex 9. The results of the econometric index is positively and significantly show that the importing country's digitalization for Haiti resulting from halving the country's associated with its trade gap. Customs revenue gains into equation (3) could therefore be derived by incorporating distance to the digital border (Azm)3 data (free on board and cost, estimated coefficient of the digitalization index, imports Annual revenue the average tariff for the same year. insurance, and freight) for 2021, and the weighted increases of between 0.6 and between US$129 and US$189.3 million, or revenue gains are estimated 0.9 percent of GDP. Public Administration Digitalization D. Policies to Foster and institutional framework to foster authorities have put in place a legal 10. The Haitian and strengthened. Two laws, on electronic but it should be updated had been public sector digitalization, in 2017. Previously, regulatory texts signatures and electronic exchanges were passed at 0.0865 in 2022, halving it from the frontier (the index's 3 With the Online Services Index for Haiti standing the level of the index for such countries as Barbados maximum value, set at 1) would bring it to 0.5432, roughly Grenada (0.5507), and Montenegro (0.5528). (0.5388), Guatemala (0.5409), Côte d'lvoire (0.5467), the (1.181 and 1.733), which are of the two TSLS estimates presented in Appendix 4 The coefficients used are those of revenue gains resulting from digitization. used to determine the lower and upper ranges INTERNATIONAL MONETARY FUND 73 the index for such countries as Barbados maximum value, set at 1) would bring it to 0.5432, roughly Grenada (0.5507), and Montenegro (0.5528). (0.5388), Guatemala (0.5409), Côte d'lvoire (0.5467), the (1.181 and 1.733), which are of the two TSLS estimates presented in Appendix 4 The coefficients used are those of revenue gains resulting from digitization. used to determine the lower and upper ranges INTERNATIONAL MONETARY FUND 73 --- Page 78 --- HAITI of all citizens to engage with the public administration through issued to recognize the right emails, domain names, and websites. However, electronic devices and to govern the use of business the existing digital policy and progress in implementing Haiti is lacking a national digitalization because of the absence of a national entity set to expire this year, has been limited, partly the sector's legal and strategy, has yet to be passed to strengthen digital to steer its execution. Key legislation relating to the right to digital information, cybercrime institutional framework. These include texts data- -as well as creation of an institution other and the protection of personal and cyber-risks, of personal data. responsible for ensuring the privacy measures are needed to strengthen the underlying 11. Additional cross-cutting Haiti in order to ensure effective public administration infrastructure and human capital in network accessible to most of the Access to internet and a reliable electricity administration tools digitalization. the of, and access to, digital public population is a prerequisite for operation that less than half the Haitian population has access and services. The latest available data indicate Increased investment to extend electricity and only 39 percent have access to internet. services. Additional to electricity to ensure user access to public digital access should therefore remain a priority administrations" data storage and management investment will also be needed to develop public in charge of designing, Enhancing the technical skills of public sector personnel services is also necessary to capacities. administrations" digital tools and operating, and maintaining the public campaigns and training service quality. Also important are awareness-raising services to take ensure improved system- to enable users of public at level the education programs-including tools available to them. better advantage of the new digital infrastructure of tax and customs the upgrade of the current digital Priority 12. Accelerating revenue dividends of digitalization. administrations is essential to reap the potential measures include: system, including mobile payments, enabling The introduction of an electronic payment their tax obligations remotely. (individuals and companies) to discharge taxpayers Department and at DGI's Large Taxpayers Digitalization of declaration and payment procedures Medium Taxpayers Department. efficiency and reduce vulnerability to automation of customs procedures to improve modules dedicated Integral of AGD information system (ASYCUDA), plus corruption and reinforcement automatized risks analysis and customs' and customs duties' incentives and exemptions, to tax litigation. goods- --to avoid arbitrary value databases at the AGD for imported the The creation of customs' convention on transactional value, improve assessment, comply with the Kyoto revised and exporters' customs filings. authenticity and accuracy of importers' transparency to ASYCUDA of all customs posts. Computerization and connection 74 INTERNATIONAL MONETARY FUND of customs procedures to improve modules dedicated Integral of AGD information system (ASYCUDA), plus corruption and reinforcement automatized risks analysis and customs' and customs duties' incentives and exemptions, to tax litigation. goods- --to avoid arbitrary value databases at the AGD for imported the The creation of customs' convention on transactional value, improve assessment, comply with the Kyoto revised and exporters' customs filings. authenticity and accuracy of importers' transparency to ASYCUDA of all customs posts. Computerization and connection 74 INTERNATIONAL MONETARY FUND --- Page 79 --- HAITI Complete interfacing between DGI and AGD information systems to facilitate information sharing, enhance the protection of the tax base, and optimize domestic revenue collection. Interconnecting DGI and AGD information systems with the Trésor Public information system to secure and improve the traceability of tax collection and accounting in the TSA. Box 1. Benefit of GovTech: Review of the Literature The benefits of digitalizing the public sector, mainly in terms of improvement in efficiency and of public administrations, are well documented in the literature. These benefits are also reflected governance in finances, contributing to increase domestic revenue mobilization, improve the quality and efficiency public of public spending, and strengthen governance and budget transparency. The automation of tax procedures through digitalization could help increase tax revenue collection through improved tax compliance and enforcement, as well as increased formalization of the economy (Amaglobeli et al, 2023; Bellon et al, 2022; Okunogbe and Santoro, 2022; Mascagni et al, 2021; Slemrod, 2019; Pomeranz, 2015; Yilmaz and Coolidge, 2013). On the public spending side, enhanced identification and authentication systems, such as biometric technology, as well as mobile phone-backed applications, could help improve the targeting of social beneficiaries, minimize both leakage and the cost of social services delivery, and reduce social programs inequalities (Aiken et al, 2023; Aker et al, Nose, 2023; 2016; Muralidharan, Niehaus, and Sukhtankar, 2016; Aker and Blumenstock, 2014). Enhancing public finances digitalization could also strengthen governance and budget curtail vulnerabilities to transparency. It could foster greater transparency in public procurement procedures, corruption (Ouedraogo and Sy, 2020) and reduce bias against small businesses (especially women-led SMES) through electronic procurement platforms, thus generating positive effects on growth and reducing inequality (Pijoan-Mas et al., 2022). Digitalization could also elicit greater public awareness and closer citizen control of budget preparation and implementation, ensuring more inclusive budgeting process (Zouhar et al, 2021). Annex V. Table 1. Haiti: Data Sources Variable Data Source IMF: Direction of Trade Statistics Bilateral exports IMF: Direction of Trade Statistics Bilateral imports CEPII: Gravity Dataset Common currency Common official/primary language CEPII: Gravity Dataset CEPII: Gravity Dataset Common religion CEPII: Gravity Dataset Contiguity Control of corruption WB: World Governance Indicators Digital Adoption Index WB: World Development Report 2016 E-Government Index UN: E-Government Survey 2016 Exchange rate WB: World Development Indicators IMF: World Economic Outlook GDP IMF: World Economic Outlook GDP per capita and Worldwide Governance Indicators, D. Kaufmann, Government effectiveness A. Kraay, 2023 Update Government success in ICT promotion WEF: The Global Information Technology Report 2016 INTERNATIONAL MONETARY FUND 75 Contiguity Control of corruption WB: World Governance Indicators Digital Adoption Index WB: World Development Report 2016 E-Government Index UN: E-Government Survey 2016 Exchange rate WB: World Development Indicators IMF: World Economic Outlook GDP IMF: World Economic Outlook GDP per capita and Worldwide Governance Indicators, D. Kaufmann, Government effectiveness A. Kraay, 2023 Update Government success in ICT promotion WEF: The Global Information Technology Report 2016 INTERNATIONAL MONETARY FUND 75 --- Page 80 --- HAITI Inflation rate WB: World Development Indicators Online Service Index United Nations: E- Government Survey 2016 Origin is GATT/WTO member CEPII: Gravity Dataset Patents filed by residents WB: World Development Indicators Population-weighted distance CEPII: Gravity Dataset R&D expenditure (percent of GDP) WB: World Development Indicators Regional trade agreement CEPII: Gravity Dataset Rule of law WB: World Development Indicators Tariff rate (weighted mean) WB: World Development Indicators VAT rate IMF: Tax Rate Database Note: CEPII = Centre d'Etudes Prospectives et d'Informations Internationales; GATT/WTO = General in Tariffs and Trade/World Trade Organization; ICT = information and communication Agreement technology; R&D = research and development; VAT = value-added tax; WEF = World Economic Forum. 76 INTERNATIONAL MONETARY FUND Development Indicators Regional trade agreement CEPII: Gravity Dataset Rule of law WB: World Development Indicators Tariff rate (weighted mean) WB: World Development Indicators VAT rate IMF: Tax Rate Database Note: CEPII = Centre d'Etudes Prospectives et d'Informations Internationales; GATT/WTO = General in Tariffs and Trade/World Trade Organization; ICT = information and communication Agreement technology; R&D = research and development; VAT = value-added tax; WEF = World Economic Forum. 76 INTERNATIONAL MONETARY FUND --- Page 81 --- HAITI Annex V. Table 2. Haiti: Data Sources Specification (1) (2) (3) Regressors/estimator OLS TSLS-1 TSLS-2 Im.Digitalization Index -0.069* 1.181** 1.733* 1.733* (0.575) (0.937) Ex.Digitalization Index 0.066* 0.054 -0.982 (0.038) (0.701) (0.927) log Im.GDP -0.370*** -0.831*** -0.861** (0.114) (0.191) (0.221) log Ex.GDP 0.947*** 1.475** 1.436*** (0.107) (0.194) (0.225) log Im.GDP per capita 0.334*** 0.671*** 0.643** (0.12) (0.194) (0.241) log Ex.GDP per capita -0.824*** -1.380*** -1.243** (0.111) (0.203) (0.25) log Im.inflation rate 0.189* -0.770** -1.108** (0.112) (0.313) (0.56) log Ex.inflation rate -0.157 -0.104 0.502 (0.098) (0.343) (0.525) log Im.exchange rate 0.077** 0.184* 0.339* (0.035) (0.094) (0.177) log Exiexchange rate -0.004 -0.052 -0.251 (0.033) (0.103) (0.168) Import VAT rate 0.005 0.003 0.004 (0.004) (0.007) (0.009) Export VAT rate -0.011*** -0.001 -0.012 (0.004) (0.008) (0.009) Import tariff rate -0.005** 0.003 0.005 (0.002) (0.004) (0.006) Export tariff rate -0.011** -0.013*** -0.010* (0.002) (0.004) (0.005) Import corruption control -0.063** -0.103* -0.141* (0.03) (0.056) (0.075) Export corruption control 0.121*** 0.155*** 0.166** (0.029) (0.059) Im.Rule of Law (0.071) 0.070* 0.162** 0.224** (0.036) (0.077) Ex.Rule of Law (0.114) -0.107*** -0.127 -0.249** (0.033) (0.081) (0.104) Im.GATT/WTO Member -0.158*** -0.419** -0.548** (0.04) (0.163) (0.248) Ex.GATT/WTO Member -0.019 0.066 0.269 (0.036) (0.178) Number of observations (0.232) 36,626 13,318 10,944 R2 0.013 F-stat (first stage) 16.34 17.24 Source: IMF staff calculations. Note: Robust standard errors in parentheses, * ** ** denote statistical significance at the 10, 5, and 1 percent levels, respectively. Controls include country fixed effects, year fixed effects, and time trends (linear and omitted for reasons of parsimony. "Im." refers to importer and "Ex." refers to exporter. TSLS-1 and quadratic) instrumental variables R&D in percent of GDP and the logarithm of patents over R&D TSLS-2 use as intensity, GATT/WTO = General Agreement on Tariffs and Trade/World Trade Organization; OLS = ordinary respectively; least R&D = research and development; TSLS = two-stage least squares; VAT = value-added tax. squares; INTERNATIONAL MONETARY FUND 77 , year fixed effects, and time trends (linear and omitted for reasons of parsimony. "Im." refers to importer and "Ex." refers to exporter. TSLS-1 and quadratic) instrumental variables R&D in percent of GDP and the logarithm of patents over R&D TSLS-2 use as intensity, GATT/WTO = General Agreement on Tariffs and Trade/World Trade Organization; OLS = ordinary respectively; least R&D = research and development; TSLS = two-stage least squares; VAT = value-added tax. squares; INTERNATIONAL MONETARY FUND 77 --- Page 82 --- HAITI References E. Blumenstock, and Aidan Coville (2023), Program Aiken, Emily L., Guadalupe Bedoya, Joshua data: Evidence from an anti-poverty intervention in with machine learning and cell phone targeting Economics, 161 (2023): 103016. Afghanistan, Journal of Development impacts of new technologies in C., and Joshua E. Blumenstock (2014), The economic Aker, Jenny Handbook of Africa and Economics, 2, 354-371. Africa, The Oxford and Niall Tierney (2016), Payment C., Rachid Boumnijel, Amanda McClelland, transfer experiment in Aker, Jenny Evidence from a mobile money cash mechanisms and antipoverty programs: 65(1), 1-37. Economic Development and Cultural Change, Soheib Niger, Mariano Moszoro, Manabu Nose, Amaglobeli, David, Ruud de Mooij Andualem Mengistu, Solomon, Rebecca Sparkman, Lorena Rivero del Paso, Frankosiligi IMF Staff Nunhuck, Sailendra Pattanayak, Public Finance Through GovTech, Herve Tourpe, and Gerardo Una (2023), Transforming Discussion Note, forthcoming. Juan Carlos, Chang Jillie, and Villena Pilar Dabla-Norris Era, Khalid Salma, Paliza Reform in Bellon Matthieu, Spillovers Evidence from a VAT e-Invoicing (2022), Digitalization and Tax Compliance Peru. IMF Working Paper, WP/20/57. Good Times. Fund (2018), Fiscal Monitor: Capitalizing on International Monetary (2021). Can ICTS increase tax Giulia, Andualem T Mengistu, and Firew B Woldeyes in Ethiopia," Journal of Mascagni, responses to technological innovation compliance? Evidence on taxpayer Economic Behavior & Organization, 189, 172-193. state capacity: Evidence and Sandip Sukhtankar (2016), Building Muralidharan, Karthik, Paul Niehaus, Economic Review, 106(10), 2895-2929. from biometric smartcards in India, American Public Service GovTech: Enhancing Efficiency and Equity Through Nose, M., 2023, Inclusive Digitalization IMF Working Paper 2023/226. of Information Fabrizio Santoro (2022), The Promise and Limitations Okunogbe, Oyebola, and Bank Research Observer. Technology for Tax Mobilization, The World Deter Corruption in Africa? and Amadou N. Sy (2020), Can Digitalization Help Ouedraogo, Rasmané, IMF Working Papers, WP/20/68. and Julian di Giovanni (2022), Manuel Garcia-Santana, Enrique Moral-Benito, Pijoan-Mas, Josep, Outcomes, VoXEU article. Government Procurement and Macroeconomic in the without Information: Deterrence and Self-Enforcement Pomeranz, Dina (2015), No Taxation 105 (8), 2539-2569. Value Added Tax, American Economic Review, Economic Literature, 57 (4). and Enforcement, Journal of Slemrod, Joel (2019), Tax Compliance Bank. (2022), GovTech Maturity Index: 2022 Update. World reduce tax compliance costs in developing Fatih and Jacqueline Coolidge (2013), Can e-filing Yilmaz, Technical Report, World Bank. countries? Trabelsi (2021), Public Expenditure, in Zouhar, Younes, Jon Jellema, Nora Lustig, and Mohamed Growth (Oxford, 2021; online edition, Valerie Cerra and others (eds), How to Achieve Inclusive Oxford Academic). 78 INTERNATIONAL MONETARY FUND ), Tax Compliance Bank. (2022), GovTech Maturity Index: 2022 Update. World reduce tax compliance costs in developing Fatih and Jacqueline Coolidge (2013), Can e-filing Yilmaz, Technical Report, World Bank. countries? Trabelsi (2021), Public Expenditure, in Zouhar, Younes, Jon Jellema, Nora Lustig, and Mohamed Growth (Oxford, 2021; online edition, Valerie Cerra and others (eds), How to Achieve Inclusive Oxford Academic). 78 INTERNATIONAL MONETARY FUND --- Page 83 --- HAITI the Fiscal Policy Stance Annex VI A. Assessing in Haiti. In the absence of implemented reforms, In this annex, staff assess the cyclicality of fiscal policy stabilizers rather than the multiplier effects of estimates for Haiti capture mainly the role of economic and an econometric model (i.e., fiscal reforms). We employ an event analysis in Haiti is, discretionary fiscal policy stabilizers. The results show that fiscal policy the effectiveness of Haiti's automatic the to gauge eventual adoption of the New Tax Code could strengthen counter-cyclical The and at best, weakly the retail price-setting mechanism of fuel products stabilizing role of direct taxes, just as reforming side (Annex VI B).1 social safety net would ease rigidities on the expenditure strengthening the economic stabilization is increasingly 1. In Haiti, the role of fiscal policy in supporting various shocks, mainly of a supply-side In recent years, the country has been hit by social unrest linked to important. nationwide shutdowns caused by nature, including the 2010 earthquake, and inflationary pressures associated with economic policies or political events, the pandemic, of recession and historically high invasion of Ukraine. They have led to consecutive years curbing Russia's policy should be geared primarily toward inflation. Against this backdrop, monetary economic fluctuations. while fiscal policy should take the lead in stabilizing inflation, should be countercyclical. To support fiscal policy should 2. From a normative perspective, spending as a share of GDP demand during a cyclical downturn, total government fall, in a smaller primary aggregate revenue-to-GDP ratio should resulting fiscal increase while the government booms. Discretionary share of GDP.2 The opposite would occur during cyclical to tax rates balance as a business without modifications should ideally remain constant over the cycle, follow these rules, all measures (Alesina, Tabelllini Campante, 2008). If governments in taxes and or government spending should be positively correlated with changes else being equal, cyclical fluctuations -SO called countercyclical fiscal policy. correlated with changes in public spendingnegatively ineffective fiscal policy may not be countercyclical, reflecting 3. In practice, however, and/or structural factors. automatic stabilizers, discretionary measures, the fiscal policy reaction function, represent built-in Automatic stabilizers, also known as business cycle fluctuations. Their main system that mitigate mechanisms in the tax-and-transfer action and can thus deliver a timely counteradvantage is that they do not require legislative automatic stabilizers reduce response. For example, during an economic downturn, and firms- and cyclical that ease financial constraints on individuals taxes-through lower tax liabilities increase the share of people eligible for social raise spending as lower incomes often in-kind benefits. Effective automatic stabilizers protection programs, such as cash transfers or economic activity to fall or rise. But must be precipitated by a shock that causes aggregate offset a shock if it fails to hinder this effect. Fiscal policy cannot automatically design failures can 1 Prepared by Carolina Osorio- Buitron (RES). of the fiscal stance since countries may have little 2 The primary balance is a better measure to gauge developing the cyclicality economies, control over their debt-service obligations, notably INTERNATIONAL MONETARY FUND 79 for social raise spending as lower incomes often in-kind benefits. Effective automatic stabilizers protection programs, such as cash transfers or economic activity to fall or rise. But must be precipitated by a shock that causes aggregate offset a shock if it fails to hinder this effect. Fiscal policy cannot automatically design failures can 1 Prepared by Carolina Osorio- Buitron (RES). of the fiscal stance since countries may have little 2 The primary balance is a better measure to gauge developing the cyclicality economies, control over their debt-service obligations, notably INTERNATIONAL MONETARY FUND 79 --- Page 84 --- HAITI spending. Effective automatic demand without changing government with changes in affect aggregate in disposable income are positively correlated stabilizers operate when changes in disposable income brought about by consumption. The latter depends on the changes individuals have a higher private distribution of disposable income. Poorer lead the system, as well as the financial and constraints, SO their behavior can to propensity to consume, reflecting binding changes in aggregate demand (Auerbach 2000). larger changes, which can either counteract deliberate Discretionary policy. These measures represent entail such reforms as changes in the the business cycle. On the revenue side, they with changes or intensify the side, they are associated for while on expenditure tax rate structure, example, and its composition. in the level of spending (relative to GDP) economies could arise The of fiscal policy in developing Structural factors. procyclicality during recessions, when the government because of binding credit constraints (for example to lack of access to international would like to borrow but it cannot, owing, for example, problem, whereby fiscal It could also be explained by a political agency of financial markets). political corruption, where appropriation prevails in countries with widespread procyclicality in good times (Alesina and others, 2008). rents is more pronounced measures, on both the revenue and 4. In Haiti, the implementation of discretionary tax code is expected to be introduced only sides, have been constrained. The new with institutional and expenditure side, reform constraints are associated late in 2025. On the expenditure low tax rate. At 5 percent of GDP, considerations, as well as Haiti's structurally estimated at political economy below the level necessary to exercise state capacity Haiti's tax-to-GDP ratio is well resources to finance core activities as well as of GDP-which ensures the government and percent (Besley and Persson, 2014a and 2014b; Gaspar programs to sustain growth and development measures, automatic stabilizers have and others 2016). With limited scope SO far for discretionary in Haiti. Their effectiveness is thus been the main channel through which fiscal policy operates downturns and building buffers in good times. essential for smoothing out the effects of economic of automatic stabilizers as robustly as 5. In this context, we gauge the effectiveness of fiscal policy and output fluctuations in countries, the analysis possible. As in most developing challenges, as well as data limitations. Different Haiti must address conceptual and methodological each presenting advantages and approaches are proposed to deal with these shortcomings, the qualitative results and policy While the results differ somewhat quantitatively, behind each disadvantages. across methodologies. The main challenges implications are broadly consistent method are discussed below. economies, the substantial volatility of trend Two different approaches. In developing the cycle and the trend barely distinguishable growth-as is arguably the case in Haiti-makes fiscal policy response 2007) and the identification of the appropriate (Aguiar and Gopinath downturns, but not if there is a cyclical complex. Fiscal stimulus is warranted during cyclical is addressed in two ways. including because of lower trend growth. This limitation countries. This is useful expansion, fiscal response at the onset of the pandemic across First, we examine the 80 INTERNATIONAL MONETARY FUND volatility of trend Two different approaches. In developing the cycle and the trend barely distinguishable growth-as is arguably the case in Haiti-makes fiscal policy response 2007) and the identification of the appropriate (Aguiar and Gopinath downturns, but not if there is a cyclical complex. Fiscal stimulus is warranted during cyclical is addressed in two ways. including because of lower trend growth. This limitation countries. This is useful expansion, fiscal response at the onset of the pandemic across First, we examine the 80 INTERNATIONAL MONETARY FUND --- Page 85 --- HAITI undeniable that demand collapsed when the because, despite measurement problems, it is option. In the second exercise, we pandemic began, and fiscal stimulus was the only appropriate for the cyclical position. This econometric analyses using real GDP growth as a proxy reflect an conduct negative growth rates arguably accurately captures downturns, as annualized economic recession. of automatic stabilizers should ideally rely limitations. Rigorous measurement and analysis assistance. Data units and individuals eligible for social data-for example, tax filing during on granular information on discretionary fiscal policies introduced Another requirement is accurate effects those measures would have on the period of analysis, as well as an estimate of the from the automatic stabilizer demand, since these effects must be extracted undermining the power of aggregate In Haiti, data constraints are meaningful, and the estimation (see below),3 fiscal data are available, they are highly aggregated, statistical analyses. While monthly two econometric techniques to overcome GDP figures are only reported annually. We explore model with annual data, using techniques these limitations. We estimate a cross-country panel (within-country analysis) and both describe the average developing country experience and that can countries, notably between fragile non-fragile shed light on differences among developing techniques to exploit the information states. The second approach uses temporal disaggregation inflation and the Haiti economic conjunctural contained in high-frequency indicators, such as series for Haiti. The latter yields enough activity index (ICAE), to construct a quarterly GDP statistical power. model, with sufficient observations to estimate a Haiti-specific notably those associated with Endogeneity concerns. Addressing endogeneity concerns, is paramount 4 Gauging the that creates meaningful biases in estimation, ratios reverse causality entails identifying how tax and spending-to-GDP effectiveness of automatic stabilizers reaction function. But, as predicted by the respond to cyclical changes, capturing the policy notably with discretionary models, fiscal policy also affects income, A standard new-Keynesian behavior through fiscal multipliers. common measures that influence economic agents' in a panel setting is a system-GMM estimator approach to addressing this endogeneity problem but such models are designed for microKlemm 2015 and Dabla-Norris and others 2017), series For (e.g., cross-section and short-time dimension). econometric panels (with a very large and time-series dimensions), the mean analysis (with large cross-section of macro-econometric In the case Haiti-specific estimator used in this analysis is more appropriate. not discretionary group is not worrisome since the country did implement regressions, reverse causality fiscal measures during the period of analysis (2008-22). others 2000, Alesina and others 2008, and Klemm 2015. 3 See, Auerbach and and omitted variables. The main risk of measurement 4 Endogeneity can also arise because of measurement discussed errors earlier. The potential for omitted variables is particularly error relates to the cyclical-position which variable latent factors capturing time-variant heterogeneity and cross-section with commonrelevant in the panel estimation, in This is addressed by using a mean-group estimator dependence are often ignored in the literature. correlated effects discussed in the next section. INTERNATIONAL MONETARY FUND 81 ). others 2000, Alesina and others 2008, and Klemm 2015. 3 See, Auerbach and and omitted variables. The main risk of measurement 4 Endogeneity can also arise because of measurement discussed errors earlier. The potential for omitted variables is particularly error relates to the cyclical-position which variable latent factors capturing time-variant heterogeneity and cross-section with commonrelevant in the panel estimation, in This is addressed by using a mean-group estimator dependence are often ignored in the literature. correlated effects discussed in the next section. INTERNATIONAL MONETARY FUND 81 --- Page 86 --- HAITI Countries at The Onset of The A. The Fiscal Response of low-Income Pandemic of the pandemic, warranting an expansionary Demand collapsed in the initial stages in the fiscal 6. examining the cross-country variation fiscal policy reaction. Against this backdrop, effectiveness of automatic stabilizers in Haiti. during 2019-20 can shed some light on the between impulse similar of development as Haiti, differentiating The analysis focuses on countries at a stage and fragile state category)5 The top-left states (Haiti is in the low-income fragile and non-fragile LICS, that primary deficits were larger where output chart shows, among the non-fragile states the fiscal impulse seems completely uncorrelated declined the most. Meanwhile, for fragile states, with the degree of economic hardship. reaction at the onset of the pandemic was states, Haiti's fiscal policy 7. Like other fragile The policy reaction can be approximated by weakly countercyclical, given expenditure rigidities. The calculation for Haiti is then compared normalizing changes in fiscal variables by the growth rate. well as non-fragile countries (topranges of other fragile states as the with the median and interquartile results indicate that the fiscal policy reaction during right and bottom charts in Figure 8).5 The non-fragile countries, with government in lower-income pandemic was primarily countercyclical direction as GDP, thus contributing revenues/spending to GDP ratios moving in the same/opposite In contrast, the experience between the primary balance and GDP growth. to the positive correlation states the fiscal policy reaction was weakly states is mixed. In Haiti and most fragile t-to-GDP ratios. in fragile decline in tax-to-GDP ratios and stable governmentcountercyclical, reflecting a small often faced by poor and fragile states during recessions. The latter could reflect financial constraints in these calculations as they also The size of automatic stabilizers may be overstated most countries." In 8. fiscal stimulus deployed by capture the multiplier effect of discretionary extraordinary tax relief. Although government did not introduce Haiti-unlike most countries-the and expand health care and security Haitian authorities intended to boost social programs not to cover the transfers to individuals and business), they did manage spending (including through COVID-related needs. 8 anticipated low-income and lower-middle income in the Appendix. as 5 This analysis focuses on the countries listed as excluded from the median and interquartile range calculation, 6 Countries that experienced growth in 2020 are terms-of trade shock not controlled for, or strong trend growth those could be economies experiencing a positive based on filtering techniques could me more appropriate. in which a measure of the cyclical position pre-pandemic. fiscal policies during the pandemic: dataset of discretionary 7 IMF (2021) gives a comprehensive CODAULA2EEEAOOS COTEFF 8 See - 82 INTERNATIONAL MONETARY FUND -middle income in the Appendix. as 5 This analysis focuses on the countries listed as excluded from the median and interquartile range calculation, 6 Countries that experienced growth in 2020 are terms-of trade shock not controlled for, or strong trend growth those could be economies experiencing a positive based on filtering techniques could me more appropriate. in which a measure of the cyclical position pre-pandemic. fiscal policies during the pandemic: dataset of discretionary 7 IMF (2021) gives a comprehensive CODAULA2EEEAOOS COTEFF 8 See - 82 INTERNATIONAL MONETARY FUND --- Page 87 --- HAITI Annex VI A. Figure 1: Change in Fiscal Positions at the Onset of the Pandemic in Low-Income Countries: Event Analysis (Percentage point difference in fiscal variable per 1 percent decline in real GDP, unless otherwise specified) Fiscal Impulse Change in Primary Fiscal Balance and Growth 1.5 & o Non-fragile states Fragile states 1.0 HTI 0.5 y 0.08x 1.71 R2 0.01 3 o Haiti - 0.0 -8 y 0.26x- 2.5 R- 0.18 -0.5 Non-fragile states Fragile states 20 -15 10 -5 0 5 10 Change in real GDP (percent) Tax Revenues Government Spending 0.2 0.4 0.0 0.3 -0.2 0.2 -0.4 -0.6 0.1 -0.8 0.0 -1.0 -0.1 Non-fragile states Fragile states Non- fragile states Fragile states Sources: World Economic Outlook, and IMF staff calculations. Note: Fiscal impulse refers to the year difference in the primary balance to GDP ratio over in the 2019-20 The box plots depict the interquartile range and the line inside it corresponds to the median. The red diamond period. represents Haiti. The sample covers low-income countries only (fragile and non-fragile). B. Econometric Analysis 9. The econometric model uses a standard specification. The econometric model relies on the approach commonly used in the literature, estimating a version of the equation below for both the cross-country panel and Haiti-specific exercises. Fis a fiscal variable- primary balance, tax revenues aggregated or disaggregated by type of tax, and government spending, aggregated or disaggregated between consumption and gross fixed capital formation. Xis a vector of controls, which includes inflation. Real GDP growth is denoted by 3, SO the parameter of interest is B. Countercyclical fiscal policy would be characterized by B>0, in the case of primary balance and taxto-GDP ratios, and B<O for spending. INTERNATIONAL MONETARY FUND 83 version of the equation below for both the cross-country panel and Haiti-specific exercises. Fis a fiscal variable- primary balance, tax revenues aggregated or disaggregated by type of tax, and government spending, aggregated or disaggregated between consumption and gross fixed capital formation. Xis a vector of controls, which includes inflation. Real GDP growth is denoted by 3, SO the parameter of interest is B. Countercyclical fiscal policy would be characterized by B>0, in the case of primary balance and taxto-GDP ratios, and B<O for spending. INTERNATIONAL MONETARY FUND 83 --- Page 88 --- HAITI =a+ Byit + (É) +1 yXit + Eit (1) A(7) heterogeneity in the relation framework explores potential cross-country to 10. The panel of macroeconomic panel data tends rely growth and fiscal policy. The analysis between output exercises, where the assumption of parameter on models developed for microeconomic or firms-is reasonable and average across units of observation-such as individuals however, it homogeneity interpretation.? In a macroeconomic setup, (within) estimates have a straightforward assumption, since different structural forces be important to relax the homogenous parameter variables, may relationship among macroeconomic across countries could shape the (short-term) Hence, the proposed framework uses panel those of economic growth and fiscal policy. while information including allow coefficients to differ across countries, exploiting time-series methods that number of countries and long-time series). Specifically, from the large dimension of the data (large model proposed by Pesaran (2006) is effects mean group (CCEMG) the common-correlated equation (1) as follows: estimated. The latter implies modifying A(7) = Byu + PZi2tEw (2) where Zi2 = M.CFMu-) and Eit = a1i + O1iFt +8 Eit yit = a2i +6 02iFt + 0219t + pie Zit 1= a31 + 03F + 6319t + pit for (1). Note that the model allows country11. All variables are defined as in equation observable variables. The error term in equation specific slope coefficients on (it Zit), which are the fixed effects (aj), which capture are assumed to be a function of group with (2) as well as all regressors, as well as an unobserved common factor F. time-invariant heterogeneity across groups, heterogeneity (local spillover effects) and heterogeneous factor loadings (0,), capturing time-variant added to ensure stationarity, since dependence (global shocks). 10 Meanwhile, 9t is F. which also cross-section nonlinear trends. Bi is not identified with unobserved could display the model with some regressors solves this problem by augmenting needs to be estimated. 11 The CCEMG estimator variables A(F/Y), Sulu in the averages of the dependent and independent 12 The mean the cross-section for the unobserved common factors. country-level regressions, which can account Arellano and Bond (1991) and Blundell and Bond (GMM) estimators developed by 9 Namely, the dynamic panel-data (1998). and Tosetti 2011; Pesaran and Tosetti 2011. 10 See Chudik, Pesaran, (2006) and Eberhardt and Teal (2011). 11 See Coakley, Fuertes, and Smith These cross-country averages effectively incorporate the 12 See Eberhardt, Helmers, and Strauss for a discussion. which is to instrument the cyclical position with approach commonly used in the literature to addresses and endogeneity, the US real interest rate. the export-weighted growth rate of trading partners 84 INTERNATIONAL MONETARY FUND -data (1998). and Tosetti 2011; Pesaran and Tosetti 2011. 10 See Chudik, Pesaran, (2006) and Eberhardt and Teal (2011). 11 See Coakley, Fuertes, and Smith These cross-country averages effectively incorporate the 12 See Eberhardt, Helmers, and Strauss for a discussion. which is to instrument the cyclical position with approach commonly used in the literature to addresses and endogeneity, the US real interest rate. the export-weighted growth rate of trading partners 84 INTERNATIONAL MONETARY FUND --- Page 89 --- HAITI estimated across countries (B). estimator corresponds to the average of the parameters the mean group group 2-4, where the dark blue markers represent The results are reported in Figures economies and the sub-sample of low-income and estimates for the full sample of developing fragile states. GDP series is accurate, the Haiti-specific 12. To the extent that the estimated quarterly fiscal reaction function. Fitting a model of the country's model provides a good approximation GDP and fiscal figures not subject to for Haiti cannot be done with the available data, as GDP is published only at an annual changes are only available since 2008. with sufficient methodological of observations too small (15) to conduct analysis frequency, rendering the number for Haiti from the CCEMG model tend to This may explain why the standard errors statistical power. GDP series is constructed with the temporal have such large standard errors. A quarterly quarterly inflation rates and the ICAE as technique developed by Chowlin, using to estimate equation disaggregation frequency, the number of observations is appropriate we use predictors. At a quarterly for serial autocorrelation, which is why (1) for Haiti.14 In this set-up, it is important to account which considers the possibility of serial the Prais-Winsten and Cochrane-Orcutt GLS approach, from this model are represented by the autocorrelation in the residuals. (In Figures 2-4, the results red markers.) that confirms the findings of the event analysis, suggesting 13. The econometric analysis Figure 2 reports the results for the primary Haiti's fiscal policy is, at best, weakly counter-cyclical. response, unlike the stance in Haiti does not exhibit a clear countercyclical (for balance. The fiscal (EMDE) and fragile and low-income country emerging market and developing economy in the average with an increase primanybalance-to.GDP increase in real GDP is associated which a 1 percent ratio of about 0.15 percentage points). in fiscal policy. Figures 3 shows the Revenues contribute to a countercyclical pattern for Haiti are in line 14. as the two broadest tax categories. Estimates results for total revenues, as well low-income country, albeit more uncertain. Taxes with those of the average EMDE and fragile and taxes include revenue from capture PIT and CIT revenues, while consumption of on income and profits taxes contribute to the countercyclical response the general sales tax and excises. Consumption a-cyclical. 15, The a-cyclicality of direct taxes in the overall tax system, whereas income taxes appear which in turn, result from political agency reflect their narrow tax bases, may, EMDE countries may tend to rely excessively on distortionary tax incentives. issues as corrupt and inefficient governments automatic- stabilizing role of direct taxes could In Haiti, once the new tax code is implemented, the averages) are not interpretable in a meaningful taken way, into 13 The coefficients on the common factors (the cross-sectional if unobservable common factors are not been introduced to address the bias that would emerge the unobservable factor has but they are focused on estimating cross-country production The functions, factors may be associated with account. In applications (Eberhardt and Teal 2011). common requires further argued to represent total factor productivity of fiscal institutions but substantiating this claim political economy variables, including the quality research. adjusted using the Census X-13 algorithm. 14 The ICAE indicator and the fiscal quarterly figures are seasonally where the direct taxes represent 60 percent of the 15 This contrasts with the findings for advanced economies, system (OECD 2020). stabilizing effect in the overall tax-and-transfer INTERNATIONAL MONETARY FUND 85 production The functions, factors may be associated with account. In applications (Eberhardt and Teal 2011). common requires further argued to represent total factor productivity of fiscal institutions but substantiating this claim political economy variables, including the quality research. adjusted using the Census X-13 algorithm. 14 The ICAE indicator and the fiscal quarterly figures are seasonally where the direct taxes represent 60 percent of the 15 This contrasts with the findings for advanced economies, system (OECD 2020). stabilizing effect in the overall tax-and-transfer INTERNATIONAL MONETARY FUND 85 --- Page 90 --- HAITI be strengthened, since the reform precludes the extension or granting of new tax agreements, while preserving the current tax rate structure. Annex VI A. Figure 2: Primary Fiscal Balance and Tax Revenue (Percentage points change associated with a 1 percent increase in real GDP) Primary balance Tax revenues 0.3 0.3 0.2 0.2 0.1 0.0 0.1 0.1 -0.2 Average Average Haiti Haiti -0.1 -0.2 All EMDES Fragile and low- (quarterly) Average Average Haiti Haiti income countries All EMDES Fragile and low-income (quarterly) Cross-country panel estimates countries Cross-country panel estimates Taxes on Consumption 0.3 Taxes on income and profits 0.3 0.2 0.2 0.1 0.1 * e -0.1 -0.1 -0.2 Haiti Haiti Average Average Haiti Haiti Average Average All EMDES Fragile and low-income (quarterly) All EMDES Fragile and low- (quarterly) countries income countries Cross-country panel estimates Cross-country panel estimates Source and note: IMF Staff estimates. The dark blue markers correspond to the average cross-country analysis for the average EMDES and the average low-income and fragile state country. The Haiti-specific estimate from the cross-country model is in light blue. The dark red marker is the estimate of the Haiti specific model estimated with quarterly data. The vertical lines with line markers denote the confidence interval given by +/- 2 standard errors. 86 INTERNATIONAL MONETARY FUND --- Page 91 --- HAITI Annex VI A. Figure 3: Expenditures (Percentage point change associated with a 1 percent increase in real GDP) Expenditure 0.3 0.2 0.1 -0.1 Average Average Haiti Haiti All EMDES Fragile and low- (quarterly) income countries Cross-country panel estimates Current Spending 0.2 Public Investment 0.1 0.3 0.2 0.1 -0.1 * -0.2 -0.1 Average Average Haiti Haiti -0.2 Average Average Haiti Haiti All EMDES Fragile and low- (quarterly) income countries All EMDES Fragile and low- (quarterly) income countries Cross-country panel estimates Cross-country panel estimates Note: The dark blue markers correspond to the average cross-country analysis for the average EMDES and the average low-income and fragile state country. The Haiti-specific estimate from the cross-country model is in blue. The dark red marker is the estimate of the Haiti specific model estimated with quarterly data. The vertical light lines with line markers denote the confidence interval given by +/- 2 standard errors. 15. All estimates suggest that government spending is acyclical. In the average EMDE, current spending is negatively associated with output growth--contributing to a countercyclical fiscal policy-whereas public investment is acyclical, which could help support long-term growth. The results for the average fragile state, including Haiti, indicate that current and productive spending are acyclical for them too. The large standard errors of the mean group estimates among fragile states reflect wide cross-country heterogeneity, while for the Haiti annual model estimate, the wide errors are likely associated with the small sample size. The results from the quarterly model, INTERNATIONAL MONETARY FUND 87 EMDE, current spending is negatively associated with output growth--contributing to a countercyclical fiscal policy-whereas public investment is acyclical, which could help support long-term growth. The results for the average fragile state, including Haiti, indicate that current and productive spending are acyclical for them too. The large standard errors of the mean group estimates among fragile states reflect wide cross-country heterogeneity, while for the Haiti annual model estimate, the wide errors are likely associated with the small sample size. The results from the quarterly model, INTERNATIONAL MONETARY FUND 87 --- Page 92 --- HAITI however, confirm that hypothesis of acyclical current spending - -which captures public wages and fuel subsidies- -cannot be rejected at a high confidence level. Meanwhile investment spendingdomestically financed public spending on capital goods, other goods, and services- reacts positively to economic growth, contributing to a pro-cyclical policy stance. These results imply that, during an economic downturn, the government prioritizes current spending (such as public wages and transfers to the fuel sector) compounding rather than mitigating the fluctuations of aggregate demand. C. Conclusion and Policy Recommendations 16. The empirical analysis suggests that Haiti has wider scope to enhance the stabilizing role of fiscal policy, making fiscal policy more countercyclical. On the revenue side, the eventual adoption of the New Tax Code could strengthen the stabilizing role of direct taxes, broaden the tax base, and address potential political agency problems in providing discretionary tax incentives. On the expenditure side, a recalibration of the expenditure mix can enhance the effectiveness of automatic stabilizers by eliminating inefficient rigidities. Reforming the fuel subsidy regime (by implementing the amendment to the 95 Law) to allow retail fuel prices to (at least partly) adjust to international market conditions would reduce budgetary pressures, freeing resources for the social safety net. The government should work toward expanding programs that target vulnerable individuals (before, during and after the fuel subsidy reform), as their higher propensity to consume would help smooth out fluctuations in aggregate demand more efficiently. Social assistance programs targeting lower-income households, such as the cash transfers program (PSARA), can enhance the effectiveness of automatic stabilizers if designed to support the poor and unemployed. 88 INTERNATIONAL MONETARY FUND the amendment to the 95 Law) to allow retail fuel prices to (at least partly) adjust to international market conditions would reduce budgetary pressures, freeing resources for the social safety net. The government should work toward expanding programs that target vulnerable individuals (before, during and after the fuel subsidy reform), as their higher propensity to consume would help smooth out fluctuations in aggregate demand more efficiently. Social assistance programs targeting lower-income households, such as the cash transfers program (PSARA), can enhance the effectiveness of automatic stabilizers if designed to support the poor and unemployed. 88 INTERNATIONAL MONETARY FUND --- Page 93 --- HAITI Fiscal Framework by Revising the the Annex VI B. Strengthening Fuel Subsidy Regime subsidy regime that passes on (at least quantifies the benefits of implementing a fuel based on This analysis international fuel prices. The analysis uses simulations partly) to consumers changes in markets in 2020 and 2022 that affected the domestic recent episodes of steep increase in international what the price at the pump, as well as the net-revenue price of gasoline. The simulation analysis shows allowed retail prices to fluctuate with global prices, up impact, would have been if the authorities had to +/- 5 percent a month. 1 Figure 1. International Fuel Markets Increase The Haiti context. Under the current fuel August Decline: -November 2020 January- -June 2022 1. import and sell fuel 140 subsidy regime fuel companies from 120 Exchange rate at a fixed price denominated in gourdes. Apart 100 (Gourde per US dollar) margins and transaction costs, the differential in international markets and the price 60 between prices when oil prices Fuel prices at the pump works as follows: global 40 (US dollar per gallon) the government reimburses (is paid by) 20 rise (decline), oil companies in the form of positive (negative) Jan-19 Jul-19 Jan-20 Jul-20 Jan-21 Jul-21 Jan-22 Jul-22 subsidies the difference between domestic and Sources: WEOfort fuel prices, Central Bank ofHaiti andil IMF staff calculations. international prices. If global oil prices rise sharply (as in August 2022), the government's substantially and/or the exchange rate depreciates may even risk the accumulation of payments to oil companies rise substantially and the government threaten to stop exporting fuel to which in turn may lead the oil-importing companies to distorted. When arrears, in the black market, where prices are highly Haiti. Fuel shortages increase activity public finances, the government in the past international oil price rose to the point of straining become the to the price at the pump as subsidies was forced to make ad-hoc and large adjustments also emerge when the domestic price is unsustainable. Rents in favor of the illegal economy at the subsidized domestic price and below international prices, with gangs buying gas few two episodes reveal a substantially in the black market. Over the last years, reselling it at a much higher price of the gourde, the price of fuel prices. Owing to a sharp appreciation stark variation in the response of 2020. Conversely, in response to rising global of gasoline fell sharply from August to November increased markedly in the first half of 2022. and a weakening of the gourde, fuel prices fuel prices Advice has included: 1) substantial capacity assistance on this topic. 2. Staff has provided (short term); 2) deciding the frequency of price specifying the parameters of the pricing formula strategy (short term); 3) putting in place mechanism, and the phasing-in adjustment, the smoothing (i.e., defining institutional institutional arrangements to support implementation for the required short term, the regulator could be responsible responsibilities for setting prices); In the of fuel price regulation should the price adjustment mechanism, while the independence on fuel product cost and managing and 4) carrying out a detailed market study be strengthened afterward; 1 Prepared by Carolina Osorio-Buitron (RES). INTERNATIONAL MONETARY FUND 89 of the pricing formula strategy (short term); 3) putting in place mechanism, and the phasing-in adjustment, the smoothing (i.e., defining institutional institutional arrangements to support implementation for the required short term, the regulator could be responsible responsibilities for setting prices); In the of fuel price regulation should the price adjustment mechanism, while the independence on fuel product cost and managing and 4) carrying out a detailed market study be strengthened afterward; 1 Prepared by Carolina Osorio-Buitron (RES). INTERNATIONAL MONETARY FUND 89 --- Page 94 --- HAITI the formula in a way that promotes efficient and reference prices to revise pricing margins operations (medium term). by FAD reduces the volatility of both Analysis. The regime recommended mechanism 3. Quantitative 2). A reform to the retail price-setting retail prices and fiscal net revenues (Figure Prices Fluctuate Sharply "with reform" in red) would Figure: 2. Actual and Counterfactual Outcomes when International (denoted by Scenariol: International prices fell (2020) deliver important benefits over the Annualized-g gasoliner net revenue Price ourde att the per Pump gallon) "status (percent of 2020GDP) current regime (denoted by 0.5 quo"i in blue). Specifically: Scenario 1: When international market conditions lowered gasoline prices in 2020, the proposed fuel Reform 180 Jul-20 Aug-20 Sep-20 Oct-20 Nov- 20 would have reduced Status quo Status quo Reform price regime annualized net revenues from 0.25 Scenario 2: International Priceatthe prices rose Pump (2022) of GDP (top-left An nualized Gasoline Net Revenues rde per gallon) to 0.18 percent Meanwhile retail prices at Figure 2). 0.2 the pump would have adjusted 0.4 downward gradually, at a pace of 5 0.6 percent a month. Economic agents 0.8 would have been able to anticipate Reform downward adjustment in a Status quo 200 Dec- 21 Feb-22 Apr this Status rules-based system, rather than face adjustment of 10 Source: IMF staff estimates and calculation. a discretionary percent (top-right chart). boosted gasoline prices, the proposed fuel Scenario 2: When international market conditions a decline in annualized energy would have reduced net gas payouts by 25 percent, status (bottom-left price regime relative to 1 percent of GDP under the quo subsidies to 0.75 percent of GDP have implied a gradual 5 percent increase of the proposed mechanism would increase chart). In this case, have been preferable to the 130 percent prices each month. This would retail gasoline 2022 (bottom-right chart). the authorities announced in September mechanism for fuel products promotes stability, 4. The proposed retail price-setting conditions. The analysis shows that introducing a enhance macroeconomic can would which greatly markets to be partly passed on to consumers regime that allows changes in international Moreover, since the proposed pricing of fuel net revenues and retail prices. reduce the volatility economic agents will not be subject to discretionary mechanism caps monthly price changes, To minimize the risks of shocks-which have increased economic and social instability. to the public in adjustment this reform should be communicated social unrest, especially for vulnerable groups, by the steady strengthening and it should be preceded and accompanied a timely and clear manner, of the social safety net. INTERNATIONAL MONETARY FUND --- Page 95 --- HAITI Monetary and Exchange Annex VII. Options to Further Strengthen Rate Policy framework over the last year, although the IT attack Haiti has greatly strengthened its monetary policy data. The BRH should continue to lower June 2023 has taken a toll on the production of monetary on markets. For this, a recommended credit, and deepen financial inflation, increase private-sector continuing keeping the monetary financing of strategy should combine several components: at a fixed rate monetary conducting short-term liquidity operations public sector deficit to zero; reserve requirement the non-financial liquidity; raising the policy rate; reducing with full allotment to manage excess rule with pre-defined targets 1 ratios; and adopting an FX market intervention A. Introduction Programs (SMP) key reforms under the Staff-Monitored 1. Since 2022, Haiti has initiated fiscal dominance. recommended credit, and deepen financial inflation, increase private-sector continuing keeping the monetary financing of strategy should combine several components: at a fixed rate monetary conducting short-term liquidity operations public sector deficit to zero; reserve requirement the non-financial liquidity; raising the policy rate; reducing with full allotment to manage excess rule with pre-defined targets 1 ratios; and adopting an FX market intervention A. Introduction Programs (SMP) key reforms under the Staff-Monitored 1. Since 2022, Haiti has initiated fiscal dominance. The Bank of the its monetary policy framework and reduce sector (NFPS) as to strengthen a ceiling on credit to the non-financial public Republic of Haiti (BRH) had adopted fiscal deficit to less than 1V2 in FY2022-23 and to financing of the the main anchor to limit monetary The BRH has also committed to conducting short-term bring it to zero from FY2023-24 onward. (including at seven days) to manage excess liquidity operations at a fixed rate with full allotments transmission. And the BRH has committed to liquidity in the banking system and strengthen policy volatility of the exchange rate and to interventions in the FX market to smooth excessive limiting the framework for FX interventions. had reviewing during the last year. The BRH policy effectiveness has further improved GDP in FY2022-23 from 3 2. Monetary financing to the NFPS below 0.9 percent of the already reduced the monetary exchange rate adjustment since The BRH has also managed an orderly to percent in FY2021-22. rate in the second half of 2020. It has intervened only sharp appreciation in the gourde/dollar of a demand for (or supply of) foreign in the FX market in the presence large reserve calm pressures transactions while using prudential measures, including currencies for current account risk. These results are even more requirements, to limit banks' vulnerability to FX liquidity timely data compilation and the temporary setback in some operations (e.g. meaningful given of June 2023. dissemination) due to the cyberattack and wellshould continue as part of a comprehensive 3. The reforms in the pipeline should be fully aware of : (i) the optimal strategy. Specifically, the monetary authorities and does not raise designed bank credit to the NFPS (i.e., a level that is non-inflationary level of the central welfare of households); and (ii) the speed of convergence long-term inflation while maximizing the (i.e., the optimal level of level of central bank credit to the government financing to that non-inflationary NFPS each period). to the cyberattack and wellshould continue as part of a comprehensive 3. The reforms in the pipeline should be fully aware of : (i) the optimal strategy. Specifically, the monetary authorities and does not raise designed bank credit to the NFPS (i.e., a level that is non-inflationary level of the central welfare of households); and (ii) the speed of convergence long-term inflation while maximizing the (i.e., the optimal level of level of central bank credit to the government financing to that non-inflationary NFPS each period). Adopting a ceiling on monetary monetary financing to provide to the policy raises a few additional considerations of the deficit at zero as the main anchor of monetary should be well aware of the implications for central bank instruments. Specifically, the BRH about 1 Prepared by Jean Frederic Noah Ndela (WHD). INTERNATIONAL MONETARY FUND 91 --- Page 96 --- HAITI transmission channel is weak, and for reserve the short-term rate ("policy rate"), for which the the BRH should consider the ratios, which are currently set at a high level. Finally, in the foreign exchange requirement including with regard to interventions implications for exchange rate policy, market. of monetary policy in Haiti by providing 4. This analysis aims to enhance understanding of the fiscal deficit, the effects on the of monetary financing insights into the speed adjusting rate policy. We build a dynamic general interest rate, and key considerations for exchange (and applicable to similar fragile and equilibrium model adapted to Haiti's specific circumstances level of central bank credit to The model allows us to quantify the optimal cited conflict affected states). to that level and capture all key dimensions the government and the speed of convergence interest rate (policy rate) and reserve requirement the adjustments of short-term and above regarding shocks, particularly on money growth ratios. An extension of the model to include exogenous rate response to shocks, including also provides forward guidance on the exchange The model productivity, interventions can help reduce exchange rate volatility. how foreign exchange (FX) FX market intervention rule with pre-defined targets extension also recognizes the importance of an banks to manage their liquidity in a of interventions and encourage to enhance the transparency more forward-looking way. Framework Features of Haiti's Monetary B. Key conducted in the context of fiscal dominance. 5. Until 2022-23, monetary policy was 10.4 of GDP in FY2022, then reduced BRH's net credit to the government was equivalent to percent needs declined amid domestic and in FY2023. As the government's gross financing fell drastically to to 8.5 percent inflation, monetary financing of the deficit external financing constraints and high A "Pacte" between the BRH and the of GDP in FY2023, from 3 percent in FY2021. into securities 0.9 percent central bank advances, currently unremunerated, Ministry of Finance helps to convert end of each fiscal year. Annual inflation has been at low interest rates and long maturities at the in FY2023, but it has eased substantially in upward since FY2017, reaching 44.1 percent of monetary financing of trending in December 2023. The inflationary impact recent months-to 22.1 percent of at about 69.4 percent of total the deficit is magnified by the relatively high level dollarization, credit is also high credit to total private-sector deposits in FY2023. The ratio of foreign-currency to CPI estimated at about 0.30, in FY2023). With the exchange rate pass-through (52.4 percent the large swings in the exchange rate. inflation reflects, with a lag, stability, reduce to zero the objective of the BRH is to keep price the 2022 6. The main operating liquidity in the banking system. Under monetary financing of the deficit, and manage to serve as the main anchor to the BRH has agreed to: (i) a ceiling on credit to government rate flexibility, and SMP, financing of the fiscal deficit in a context of greater exchange at seven limiting monetary at a fixed rate with full allotment (including (ii) conducting short-term liquidity operations and strengthen policy transmission. Current excess liquidity in the banking system to influence days) to manage through open market operations (designed monetary policy operations are not geared eligible commercial banks) to achieve an interest rate on the trading of funds between BRH has not an overnight relative to the demand. At 11.5 percent, the appropriate supply of bank reserves 92 INTERNATIONAL MONETARY FUND of the fiscal deficit in a context of greater exchange at seven limiting monetary at a fixed rate with full allotment (including (ii) conducting short-term liquidity operations and strengthen policy transmission. Current excess liquidity in the banking system to influence days) to manage through open market operations (designed monetary policy operations are not geared eligible commercial banks) to achieve an interest rate on the trading of funds between BRH has not an overnight relative to the demand. At 11.5 percent, the appropriate supply of bank reserves 92 INTERNATIONAL MONETARY FUND --- Page 97 --- HAITI 2022 and the transmission to lending rates- the adjusted short-term interest rates since August weak in view of the shallow government bond main pricing benchmark of the banking system-is bills, which are in weak demand. An bank is the main buyer of BRH's The market. One commercial limited to a few depository institutions. interbank money market is thin, with participation BRH bills. These short-term interbank rates are formal "interbank rates" exceed the interest rate on decisions are transmitted to the economy, which BRH monetary policy one of the channels through since real interest rates are negative. but this interest rate channel is also weak liquidity. ratios to manage The BRH has made extensively use of reserve-requirement are satisfied holding 7. institutions, which by The BRH imposes reserve requirements on depository apply to transferable deposits in gourdes, at the central bank. These reserve requirements in US dollars. reserves accounts in gourdes, and savings accounts transferable deposits in US dollars, savings in response to the the ratios were 0.265, 0.125, 0.165, and 0.16, respectively, 0.53, In September 1996, the last time in August 2022 to 0.45, in inflation. They have been adjusted frequentlyinstitutions, including upturn ratios, depository Despite high reserve-requirement 0.34, and 0.4, respectively. levels of balances in excess of requirements as a precautionary relatively large banks, hold increasing because these depository institutions do not of liquidity to meet contingencies. This is partly As a result, source available funds through a deeper interbank market. have access to immediately The BRH does not provide its counterparties structural excess reserves prevail in the banking system. which could have set a facilities, neither for providing nor for draining reserves, FX are an with standing Reserve requirements, particularly on deposits, corridor for the interest rate fluctuations. a key source of its gross of the BRH monetary framework as they constitute important component foreign reserves. Ratios Short-term Rate, and Reserve Requirement C. Monetary Financing, to match Haiti's general equilibrium model has been tailored central bank in 8. A dynamic the financing of the fiscal deficit by the circumstances. The model is built to analyze by many fragile and conflict-affected dominance. Fiscal dominance is experienced a context of fiscal domestically and externally owing to underdeveloped states that face limited financing options financial markets. The framework follows the financial markets and lack of access to international money into the neoclassical growth (Sidrauski 1967) by integrating uses that money in the utility approach and Koopmans (1965). The framework model attributable to Ramsey (1928), Cass (1965), and the speed of level of central bank credit to the government model to quantify the optimal of financing of the fiscal deficit and convergence to that level, thus, the appropriate level monetary ratios. 2 A sensitivity analysis for short-term interest rate and reserve-requirement and the implications production sector gang frictions of Haiti's fragility-such as an oligopolistic factors relative that reflects key above the earnings of production activities that raise marginal costs and premiums further capture the fragility of Haiti's economy, the model to to their marginal productivity-allows especially its market structures. Financing of the Fiscal Deficit, A Model Approach for "The Optimal Level of Monetary 2 Forthcoming Working Paper: Haiti." INTERNATIONAL MONETARY FUND 93 2 A sensitivity analysis for short-term interest rate and reserve-requirement and the implications production sector gang frictions of Haiti's fragility-such as an oligopolistic factors relative that reflects key above the earnings of production activities that raise marginal costs and premiums further capture the fragility of Haiti's economy, the model to to their marginal productivity-allows especially its market structures. Financing of the Fiscal Deficit, A Model Approach for "The Optimal Level of Monetary 2 Forthcoming Working Paper: Haiti." INTERNATIONAL MONETARY FUND 93 --- Page 98 --- HAITI level of monetary financing of the allows a of the optimal 9. The model quantification The model implies that, in the vicinity deficit and simulation of a broad range of scenarios. as m(t), can fiscal NFPS unit of effective labor, denoted balanced growth path, net credit to the per its distance from m". of the optimal level m* at a speed proportional to converge toward a non-inflationary to m" at the initial period (to), the m(0) the initial value, m(0) - m" the distance rate of That is, defining by m(t) - m* a e -1t( (m(0) - m"), where the growth path of m(t) - m" is therefore given rate (-1) corresponds to the speed of and equals -1. This growth m(t) - m" is constant optimal level m" and depends on key structural convergence toward the non-inflationary of money demand, the discount the interest elasticity shift parameters of the economy-specifically household willingness to the coefficient of relative risk aversion that determines the rate of capital, factor, periods, the marginal productivity of capital, depreciation to see consumption between We apply these parameters to Haiti's economy long-term growth, and population growth. balanced growth path. The results show that the how net credit to the NFPS is likely to approach a to monetary financing of about could be about 16.7 percent, which corresponds GDP. growth rate (-1) of net credit to the government of 10.4 percent of of GDP for an initial value zero percent of a recommended monetary strategy. simulations help inform the design anchor 10. The above on credit to government as the main could benefit Haiti by allowing for: i) a ceiling and ii) shortFirst, they deficit along with greater exchange rate flexibility, to limit monetary financing of the in the banking system. Second, the monetary term liquidity operations to manage excess liquidity additional short-term interest rates and policy strategy could be comprehensive and combine financing of the fiscal deficit to zero puts reserve-requirement ratios: (i) keeping the monetary (ii) higher interest the short-term interest rate, requiring some adjustments; upward pressure on and if combined with short-term liquidity rates could reduce the negative real interest rate, would help drain excess liquidity from excess liquidity in the banking system, while operations to manage for reducing reserve-requirements ratios, system. This, in turn, would create scope Finally, liquidity the banking channel and the transmission of monetary policy. strengthening the interest-rate outright purchases, or sales of fixed-term operations can take the form of reverse operations, swaps, bilateral procedures, collateral, and through tenders. But the possibility of using deposits, executed transactions should not be excluded. reverse D. Exchange Rate Policy stochastic general equilibrium used above has been expanded to a dynamic of 11. The model of business cycles in Haiti.3 First, the extension (DSGE) model to capture the salient features after the model calibration version permits closer study of business cycles with the the model to a stochastic structural parameters consistent estimation. The calibration of the model provides Haiti quarterly and While the estimation of the DSGE model-using economy's long-run movements. exchange rates, and central bank credit to NFPSinflation, short-term interest rates, data on ICAE, Haiti's economy along its long-run and short-run infers structural parameters that characterize of a speed of convergence of monetary behaviors and properties, which permits a computation of Haiti's economy. Second, the DSGE of the fiscal deficit consistent with the behavior financing "Assessing the Business Cycle in Haiti, A DSGE Approach." 3 Forthcoming Working Paper: 94 INTERNATIONAL MONETARY FUND DSGE model-using economy's long-run movements. exchange rates, and central bank credit to NFPSinflation, short-term interest rates, data on ICAE, Haiti's economy along its long-run and short-run infers structural parameters that characterize of a speed of convergence of monetary behaviors and properties, which permits a computation of Haiti's economy. Second, the DSGE of the fiscal deficit consistent with the behavior financing "Assessing the Business Cycle in Haiti, A DSGE Approach." 3 Forthcoming Working Paper: 94 INTERNATIONAL MONETARY FUND --- Page 99 --- HAITI growth and productivity shocks-that are model incorporates a few shocks -especially money useful insights into Haitian business for Haiti. The simulations of this DSGE model provide relevant to various exogenous shocks. This impulse response cycles and the responses of the economy variables of interest (e.g., the also sheds light on the dynamic properties of macroeconomic analysis formulate some useful policy recommendations. exchange rate) and allows us to minor on the shock would have only a impact 12. An unanticipated money growth that the interest elasticity of It would increase the money supply, given the exchange rate (Figure 1). interest rates and boosts inflation in demand puts downward pressure on short-term of 0.001 percent in longmoney shock could generate an increase near term. An unexpected money growth interest rate. The impact on output is inflation and a decrease of 0.005 percent in short-term rate run unaffected. This suggests forward guidance for exchange mixed. The exchange rate appears neglect" approach vis-à-vis the impact of polioy-specifically, that the BRH might adopt a "benign monetary financing of the rate as it leads to non-inflationary money growth shocks on the exchange fiscal deficit. which raises inflation in the short shock would boost domestic output, term 13. A productivity its equilibrium level in the short (Figure term and forces the exchange rate to overshoot state may result from several unanticipated A shock in a fragile and conflict-affected and new and 2). productivity through knowledge technologies developments, including improved labor productivity business climate, institutions, in other determinants of total factor productivity (e.g. would raise output improvements shock to productivity (1 standard deviation) and the security situation). A positive would increase by 0.04 percent following a by more than 0.5 percent. However, inflation medium term. This response of inflation depends productivity shock, then decline to near zero in the affected the increased labor (tradable versus non-tradable) are by on which types of goods to be exported, this puts pressure on inflation. Figure productivity. As tradable goods are most likely shock: in the short run, the rate's transition under a productivity The 2 also shows the exchange then adjusts gradually toward equilibrium. exchange rate overshoots by about 0.3 percent, shocks, essentially an asymmetric rate response to money growth and productivity exchange forward guidance on exchange rate policy. response, offers additional excessive in the FX market to smoothing 14. The BRH policy to limit interventions in the gourde/dollar exchange rate volatility is appropriate. Sharp apprcoaionuidéoreciaties shock. In this regard, the BRH shock, including a productivity rate can result from an exogenous and intervene to calm market pressures when the should adjust the exchange rate in an orderly way the exchange rate to serve primarily demand/supply of foreign currencies is large, thereby allowing would also help narrow the parallel shock absorber when necessary. Such FX interventions as a market premium. shock has proven to be high with Haiti data, reflecting all 4 The estimate of the standard deviation of productivity violence and gang activities. constraints that hamper economic activity, including INTERNATIONAL MONETARY FUND 95 regard, the BRH shock, including a productivity rate can result from an exogenous and intervene to calm market pressures when the should adjust the exchange rate in an orderly way the exchange rate to serve primarily demand/supply of foreign currencies is large, thereby allowing would also help narrow the parallel shock absorber when necessary. Such FX interventions as a market premium. shock has proven to be high with Haiti data, reflecting all 4 The estimate of the standard deviation of productivity violence and gang activities. constraints that hamper economic activity, including INTERNATIONAL MONETARY FUND 95 --- Page 100 --- HAITI Annex VII. Figure 1: Transition Path and Responses to a Money Growth Rate Shock (In percent) output X 103 inflation exchange rate 0.2 0.02 0.1 -5 -101 -15 -0.02L 10 20 30 40 10 20 30 40 10 20 30 40 x103 CB interest rate nominal reserve money 0.4 0.2 -0.2 -10' 10 20 30 40 10 20 30 40 Annex VII. Figure 2: Transition Path and Responses to Productivity Shock (In percent) output inflation exchange rate 0.05 0.5 0.3 A 0.2 0.5 -0.05 0.1 -1 -0.1L 10 20 30 40 10 20 30 40 10 20 30 40 X 104 CB interest rate -5 10 20 30 40 E. Financial Sector Reforms 15. Haiti would benefit from reforms that strengthen the functioning of the FX market. Under the 2022 SMP, the authorities have adopted a floor on net international reserves (NIR) and committed to establishing an FX market intervention rule. A rule that follows the above forward 96 INTERNATIONAL MONETARY FUND --- Page 101 --- HAITI guidance, with pre-defined targets, could enhance the transparency of the BRH's FX interventions and encourage banks to manage their liquidity in a more forward-looking way. The BRH could put in place, in consultation with IMF experts, an FX intervention rule based on an appropriate mechanism for FX interventions, such as well-designed weekly FX auctions in lieu of the foreign exchange allocation system. The BRH can also review limits on banks' net open FX positions to render the FX market deeper. Limits on the net open FX positions can encourage greater participation in FX markets, as banks will have to take active measures to avoid unbalanced positions. 16. The authorities are working to deepen the financial markets. The BRH has initiated reforms to deepen the government securities market; develop the inter-bank money market with new facilities, including overnight lending facilities, open market operations, repos, and reverse and enhance domestic saving instruments. Deepening the securities market will provide an repos; alternative source of funding to the treasury and a more effective conduit for monetary policy. While facilities could help the BRH manage liquidity, the design and use of new money-market standing these instruments (such as collateral policies and liquidity forecasts) would benefit from in-depth discussions with Fund TA experts to ensure that they do not undermine the incentives for banks to their risks; expose the central bank balance sheet to credit, market and liquidity risks; or manage create impediments to the functioning of the money market. INTERNATIONAL MONETARY FUND 97 --- Page 102 --- HAITI References Cass, David. 1965, "Optimum Growth in an Aggregate Model of Capital Accumulation, Review of Economic Studies 32 (July): 233-240. Koopmans, Tjalling C. 1965, "On the Concept of Optimal Economic Growth,' In the Economic Approach to Development Planning, Amsterdam: North-Holland, Ramsey, F. P. 1928, "A Mathematical Theory of Saving, Economic Journal 38 (December): 543-559. Reprinted in Stiglitz and Uzawa (1969). Sidrauski, M., 1967, "Rational Choice and Patterns of Growth in a Monetary Economy, American Economic Review 57 (May): 534-544. Stiglitz, Joseph E., and Uzawa, Hirofumi, editors, 1969, Readings in the Modern Theory of Economic Growth, Cambridge: MIT Press. 98 INTERNATIONAL MONETARY FUND F. P. 1928, "A Mathematical Theory of Saving, Economic Journal 38 (December): 543-559. Reprinted in Stiglitz and Uzawa (1969). Sidrauski, M., 1967, "Rational Choice and Patterns of Growth in a Monetary Economy, American Economic Review 57 (May): 534-544. Stiglitz, Joseph E., and Uzawa, Hirofumi, editors, 1969, Readings in the Modern Theory of Economic Growth, Cambridge: MIT Press. 98 INTERNATIONAL MONETARY FUND --- Page 103 --- HAITI Linkages Using a Balance Macro-financial Annex VIII. Assessing Sheet Approach and monetary sectors. It highlights the the key stylized facts of Haiti's financial This annex provides linkages using a balance sheet analysis, including main vulnerabilities arising from macro-financial corporations (NFCS) and the exposure of commercial banks to non-financial sector has been facing the heightened external funding. It shows that the financial and NFCS' reliance on government recessions. 1 headwinds after years of multiple A. Stylized Facts the central bank) equivalent to Haiti's financial system is small, with assets (excluding financial sector has been 1. GDP 1). Over the past decade, the Haitian has less than 20 percent of (Table although from a low base, and important role in the country's economy, low on the Fund's playing an increasingly 2019. In spite of this progress, Haiti ranks grown by 3 percent of GDP since Development Index (139 of the Staff report). Financial by commercial banks, with in the financial system is dominated 2. Credit provision nontrivial role. Close to 90 percent of the country's institutions playing a small but microfinance loan volume is provided by Haiti: Size and Structure of the Financial System, June 2024 commercial banks, with the Table 1. in In of Total assets percent In percent of remainder provided by millions of financial system GDP 2/ microfinance institutions. The Sector gourdes assets latter play a relevant role in 758,863 52.2 19.0 to small firms Central bank (BRH) 675,371 46.4 16.9 credit provision Other Depository Corporations 645,471 44.3 16.2 and rural customers, however, Commercial banks 520,126 35.7 13.0 whereas banks focus on larger Private banks 125,345 8.6 3.1 sizable State-owned banks 29,900 2.1 0.7 clients. Haiti has a Savings and credit cooperatives 1/ 1.4 0.5 informal financial sector, Other financial corporations 1,455,136 20,903 36.4 comprising informal savings Total financial system and rotating savings Memorandum item: central bank 696,273 17.4 groups Total financial system excluding and credit associations. The 1/Data as of March 2024. system is 2/ GDP data for 2024 are Fund staff estimates. insurance Sources: BRH and Fund staff estimates. underdeveloped. banks (out of a total with the three largest The banking sector is highly concentrated, 2), 75 3. than 80 percent of commercial bank assets (Table of eight). These three banks hold more system deposits. Despite dominating system loans and 82 percent of banking tends to be percent of banking limited role in financial inclusion as their lending the financial system, banks play a in the legal and regulatory large clients the result of vulnerabilities concentrated on specific difficulties in obtaining titles to property. These framework, a weak collateral system, and STA), Arsène Kaho (WHD) and Gonzalo Huertas (WHD). 1 Prepared by Justin Matz (former INTERNATIONAL MONETARY FUND 99 Table of eight). These three banks hold more system deposits. Despite dominating system loans and 82 percent of banking tends to be percent of banking limited role in financial inclusion as their lending the financial system, banks play a in the legal and regulatory large clients the result of vulnerabilities concentrated on specific difficulties in obtaining titles to property. These framework, a weak collateral system, and STA), Arsène Kaho (WHD) and Gonzalo Huertas (WHD). 1 Prepared by Justin Matz (former INTERNATIONAL MONETARY FUND 99 --- Page 104 --- HAITI weaknesses also reflect the structure of the economy, characterized by a few large, well-known firms and a multitude of smaller, informal firms. Savings and credit cooperatives and microfinance institutions serve mainly rural customers. 4. While the banking system is well capitalized and liquid, there is some heterogeneity Table 2. Haiti: Capital Adequacy and Liquidity Ratios, June 2024 (In percent) Bank 1 Bank 2 Bank 3 Bank 4 Bank 5 Bank 6 Bank 7 Bank 8 Capital to assets 7.9 5.9 6.3 14.0 7.4 8.7 10.7 -6.6 Regulatory capital to risk weighted assets 1/ 24.0 17.2 25.3 25.5 17.1 13.0 145.7 -24.0 Liquid assets to total assets 56.0 47.3 64.6 60.1 47.3 18.1 93.8 64.0 Liquid assets to deposits 66.0 56.5 83.7 77.6 56.5 26.9 123.9 76.0 Memorandum: Total assets (billions of gourdes) 237.6 166.3 119.8 52.0 47.5 5.0 Bank' S share of banking system assets (percent) 36.8 25.8 18.6 8.1 7.4 11.7 1.8 5.5 Bank' 's share of banking system loans (percent) 0.8 0.9 Bank' S share of banking system deposits (percent) 34.7 25.4 15.4 9.9 10.3 4.1 0.0 0.2 38.2 26.4 17.5 7.1 7.6 1.5 0.7 0.9 1/1 Data for Bank 8 as of September 2023. Sources: Reserve Bank of Haiti and Fund staff estimates. amongst individual institutions (Tables 2 and 3). All banks but one meet the minimum regulatory capital adequacy ratio of 12 percent. One of the public banks, the smallest bank by asset size, has negative equity. The bulk of bank assets are placed with the central bank, which has high reserve requirements (51 percent for foreign-currency deposits and 40 percent for gourde deposits). Banks place excess liquidity at the central bank because of the country's security situation and the lack of bankable projects with preferred clients. Table 3. Haiti: Asset Quality and Profitability Ratios, June 2024 (In percent) Bank 1 Bank 2 Bank 3 Bank 4 Bank 5 Bank 6 Bank 7 Bank 8 NPLS to total gross loans 1.1 13.5 41.6 3.4 2.9 11.3 not 92.1 Provisions for doubtful loans to gross NPLS 218.0 62.0 43.0 102.6 93.7 46.0 applicable not 91.8 NPLS net of provisions to capital -2.7 15.6 43.3 -0.2 0.7 29.6 applicable not not Return on assets 1.4 0.3 1.3 1.4 -0.2 0.7 applicable applicable Return on equity 16.0 4.4 12.9 13.0 1.7 -2.8 -3.2 7.1 18.8 -26.7 Source: BRH web site. 5. While banks are still profitable, six years of recession and the security situation have begun to take a toll (Figure 1 and Table 3). Profits are falling and levels of non-performing loans (NPLS) are rising, despite a repayment moratorium, recently extended through September 2024. Banks were well provisioned but have been drawing down on those provisions as the level of NPLS 100 INTERNATIONAL MONETARY FUND .7 -2.8 -3.2 7.1 18.8 -26.7 Source: BRH web site. 5. While banks are still profitable, six years of recession and the security situation have begun to take a toll (Figure 1 and Table 3). Profits are falling and levels of non-performing loans (NPLS) are rising, despite a repayment moratorium, recently extended through September 2024. Banks were well provisioned but have been drawing down on those provisions as the level of NPLS 100 INTERNATIONAL MONETARY FUND --- Page 105 --- HAITI has risen to 12 percent. 2 Figure 1: Haiti: Financial Soundness Indicators Capital Adequacy Ratio (CAR) Liquid Assets to Total Assets Ratio (Percent) (Percent) CAR Minimum CAR - Profitability NPLS and Provisions (Percent) (Percent) Return on equity (ROE) Provisions/gross NPL (right scale) Return on assets (ROA) (right scale) 8 VPI gross loa 10 R 2 Sources: Reserve Bank of Haiti and IMF staff calculations. Note: NPLS= Non-performing loans. 2 Haiti's bank law offers the regulator (in the case of Haiti the BRH) a few tools to address banks with and in poor financial condition: 1) put the bank on notice: as part of its supervisory powers, the BRH should negative equity (send a letter to) immediately the bank's board of directors and management of the bank's poor financial situation notify and its failure to comply with capital regulation; and urge the board and management to take measures correct the situation without further delay; 2) direct injunction to the bank to implement a restructuring necessary the BRH to will send a recommendation to the bank to take appropriate and specifics measures to restore its financial plan: soundness, improve its business model, and ensure the suitability of its activities and development The bank should comply to this injunction within a month and take all recommended adjustments; 3) special goals. regime: the BRH can put the bank under a special supervision regime with a tighter and stringent supervision; supervision 4) conservatorship: the BRH will place the bank under a provisional management/administration and appoint a provisional manager/administrators to run the bank for a period of six months. This might be accompanied with "direct intervention" from the BRH (bailout) if the bank can no longer meet its fiduciary obligations, default on its payments, or has been in a non-compliance with the injunctions of the restructuring plan during the special supervision regime; and 5) receivership: the regulator (BRH) will take over the bank and trigger a forced the bank. The process could include a court involvement, eventually lawsuits. liquidation of INTERNATIONAL MONETARY FUND 101 manager/administrators to run the bank for a period of six months. This might be accompanied with "direct intervention" from the BRH (bailout) if the bank can no longer meet its fiduciary obligations, default on its payments, or has been in a non-compliance with the injunctions of the restructuring plan during the special supervision regime; and 5) receivership: the regulator (BRH) will take over the bank and trigger a forced the bank. The process could include a court involvement, eventually lawsuits. liquidation of INTERNATIONAL MONETARY FUND 101 --- Page 106 --- HAITI in specific Figure 2: Haiti: Bank Lending by Sectors Wholesalet trade 6. Bank lending is concentrated credit (Percent) mFood Retailt and trade beverage 2). The main sectors receiving a Commercial real estate sectors (Figure the food and 21.5 232 Consumer Residentialreale credit estate are involved in wholesale, retail trade, Construction Other sectors 1/ industry, commercial and residential beverage and construction. The mortgages, consumption, banks fell from 11.6 number of borrowers at commercial 6.9 140,000 in September 2017 to 63,596 in over March 2024 following six years of economic 8.8 11.5 10.3 contraction. Sources: Reserve cover Bank 20 of Haiti items and whose Funds share staff is estimates. below 3percent of Haiti's financial 1/Other sectors 7. The concentration lead to reduced competition, higher banking assets and credit in a few large banks can The concentrated banking system and inefficiency in the market. service costs, risk concentration, formal sector, by rationing new credit to outsiders could hinder competition for credit in the services. The sector constrain the informal sector's access to financial and new market entrants and customers can lead to large NPLS due to concentration of bank credit to their known and preferred of the large banks can lead to The significant market power If high degrees of interconnectedness. reduced innovation in financial products and services. higher fees, larger net interest margins, and risk to the entire financial system. these banks come under stress, this can pose a systemic reforms, policies to promote vulnerabilities requires a combination of regulatory financial Addressing these diversity and inclusiveness in the and measures to promote competition and new entrants, sector. since the start of the security crisis ratio has been declining steadily of the 8. The credit-to-GDP citizens leave Haiti and businesses close because and is now well below potential. As and fewer credit opportunities. Due to the security crisis, banks have fewer well-known customers banks have greatly reduced lending overall deterioration in security and declining economic activity, the March 2024. A credit gap analysis sector, by almost 21 percent year-on-year by well below to the private that private-sector borrowing is reveals a gap for June 2024 of 22 percent-implying the loan/deposit ratio is and high reserve requirements, potential. With few credit opportunities bulk of bank funding, amounting to around 80 under 30 percent. Total deposits account for the percent of total assets. at of total broad money remains elevated, Overall deposit dollarization as a percent of policy 9. challenges to the conduct monetary about 55 percent for the past year which poses 2020 when the local currency dollarization dropped in September (Figure 3, first panel). Deposit returned to historical levels as the gourde then against the US dollar, it but has appreciated depreciated again. since 2016 and exchange position has been deteriorating 10. The central bank net foreign This means that the Banque de la since end-2020 (Figure 3, second panel). its has become negative foreign exchange assets to pay off foreign République d'Haiti (BRH) does not have enough markets or developing countries denominated liabilities. This is uncommon in emerging exchange and underscores Haiti's fragility. 102 INTERNATIONAL MONETARY FUND the gourde then against the US dollar, it but has appreciated depreciated again. since 2016 and exchange position has been deteriorating 10. The central bank net foreign This means that the Banque de la since end-2020 (Figure 3, second panel). its has become negative foreign exchange assets to pay off foreign République d'Haiti (BRH) does not have enough markets or developing countries denominated liabilities. This is uncommon in emerging exchange and underscores Haiti's fragility. 102 INTERNATIONAL MONETARY FUND --- Page 107 --- HAITI 11. In contrast, commercial bank balance sheets are well hedged overall with foreign assets matching liabilities (Figure 3, third panel). Banks have low net open positions in foreign exchange to capital, which is one percent. Three banks regularly have ratios higher than the limit, but these ratios rarely exceed 3 percent. A mismatch persists in the short term regulatory (Figure 3, fourth panel) with short-term foreign currency liabilities exceeding short-term foreign currency denominated assets. Figure 3. Currency Substitution in the Monetary Sector Foreign Currency Position of the Central Bank (Percent of GDP) Foreign Currency Proportion of Broad Money (Percent) a F -10 HHH Gross foreign.currency liabilitr -20 Gross foreign currency assets Netf foreign currency position Foreign urren nt of broad one 2017 2018 2019 2020 2021 2022 2023 2024 Currency Assets and Liabilities of Banks 1/ Banks' Short-term Forex Claims and Funding 1/ 2/ Foreign (Percent of GDP) (Percent of GDP) Forex liabilities (deposits and securities) Forex claims (deposits ands securities) Netf forex deposits and's securiti 1n - HH H -10 H -10 - -20 -20 Gross foreign.currency liabilities Gross foreign currency assets -30 -30 Net foreign currency position 2017 2018 2019 2020 2021 2023 2024 2017 2018 2019 2020 2021 2022 2023 2024 Sources: Reserve Bank of Haiti and IMF staff calculations. (ODCs). ODCS consist of financial corporations (other than the central 1/ "Banks" refers to Other Depository Corporations in financial intermediation and issue liabilities included in the definition of broad money. bank) that are mainly engaged societies, This includes commercial banks and money market funds as well as merchant banks, savings banks, building and credit unions. 2/ Short-term assets and liabilities of banks are defined as deposits and debt securities. Actual maturity details are unknown and there are potentially longer-term positions included here while short-term positions in other financial instruments (i.e. loans) are excluded). INTERNATIONAL MONETARY FUND 103 --- Page 108 --- HAITI Linkages B. Macro-Financial the Balance Sheet Analysis (BSA) linkages in Haiti using 12. Looking at macro-financial of each sector of the economy and net balance sheet positions provides an overview of the gross allows the assessment of exposures and other resident and non-resident sectors. It thus The BSA (Table 4 and Table 5) against sectors, as well as cross-sectoral linkages. vulnerabilities in individual bank; (ii) other depository corporations (ODCS, sectors: (i) (ii) central (NFCS); includes seven government; (OFCS); (v) nonfinancial corporations commercial banks); (iv) other financial corporations ie, (vi) households; and (vii) external. Table 4. Balance Sheet Approach Matrix, 2020 (Percent of GDP) Nonfinancial Households External Total Government Central Bank Other Depository Other Corporations Financial Corporations Corporations Assets Liabilites Assets Liabilit tie Assets Liabilities Liabilit Assets Liabilities Assets OFCS Liabilite ties (GFS/MFS Assets estimation) Liabilites (GFS/MFS estimation) Source: IIP Assets Liabilities Assets Source: CB Source: ODCS Source: Government ); (iv) other financial corporations ie, (vi) households; and (vii) external. Table 4. Balance Sheet Approach Matrix, 2020 (Percent of GDP) Nonfinancial Households External Total Government Central Bank Other Depository Other Corporations Financial Corporations Corporations Assets Liabilites Assets Liabilit tie Assets Liabilities Liabilit Assets Liabilities Assets OFCS Liabilite ties (GFS/MFS Assets estimation) Liabilites (GFS/MFS estimation) Source: IIP Assets Liabilities Assets Source: CB Source: ODCS Source: Government Total Indomestic currency Source: CB Source: CB Source: CB Source: CB Central Inforeign.currency Bank Source: CB Source: 12 CB Total Source: ODCS Indomestic currency Source: ODCS Source: ODCS Source: ODCS Source: 19 ODCS Oth. Inforeigncurrency Dep. Corporations Source: ODCS Source: CB Total Source: OFCS Indomestic currency Source: ODCS Source: OFCS Source: OFCS Source: OFCS Oth. Inforeign.currency Fin Corporations Source: OFCS Source: CB Indomestic Total currency Source: OFCS (No sectoral data) Source: 10 IIP Inforeign.e currency Corporation (GFS/MFS estimation) Source: CB Source: ODCS Nonfinancial Total Indomestic currency Source: OFCs (No sectoral data) Source: IIP Inforeign.currency (GFS/MFS estimation) Source: CB Source: ODCS 19 Households Total Ind domestic currency 10 Source: OFCS Source: IIP Source: IIP Inforeign currency Source: IIP Source: CB Source: ODCS External Total CHECK CHECK Infbreigncumency Indomestic currency 28 28 29 25 15 Total Indomestic currency 13 15 14 Inforeign.currency Haiti Statistical Institute, and IMF staff calculations. Sources: Reserve Bank of Haiti, for Haiti. The banking several areas of vulnerability 13. The BSA matrix results suggest shock to NFC balance sheets (e.g., to NFCS and thus vulnerable to a direct this sector is mostly exposed under a repayment moratorium), although loans, many of which are from household high nonperforming 2020 to 2022. Bank funding comes mainly exposure decreased slightly from them sensitive to remittance levels, as from remittances. This makes deposits, which are generated balances in periods with lower remittances from households may need to draw down their deposit half of which they amount of foreign exchange, abroad. It also provides banks with a significant crisis has tended to ensure that reserves. The current keep with the central bank as required families. Commercial must Haitians provide support to their remittance levels remain high as overseas 2020 and 2022, albeit remaining to government picked up between banks' direct exposure which exposes them to the risk of currency moderate. NFCS rely largely on external financing, entirely of foreign direct investment, of NFCS takes the form almost mismatches. External funding 104 INTERNATIONAL MONETARY FUND --- Page 109 --- HAITI from external creditors. Without many limits the risk to a sudden withdrawal of funding are exposed to the which commercial banks and with high reserve requirements, considerably bankable opportunities to the government, which grew BRH. The BRH in turn has a relatively high exposure during the crisis from 2020 to 2022. Balance Sheet Approach Matrix, 2023 Table 5. (Percent of GDP) Nonfinancial Households External Total Government CentralB Bank Other Depository OtherF Corporations Financial Corporations Corporations Assets Liabilities Assets Liabili liti Assets Liabilities Assets Liabil Assets Liabilitie Assets Liabilities (GFS/MFS Assets estimation) Liabilities (GFS/MFS estimation) Source: IIP Assets Liabilitie Source: CB Source: ODCS Source: OFCS H in turn has a relatively high exposure during the crisis from 2020 to 2022. Balance Sheet Approach Matrix, 2023 Table 5. (Percent of GDP) Nonfinancial Households External Total Government CentralB Bank Other Depository OtherF Corporations Financial Corporations Corporations Assets Liabilities Assets Liabili liti Assets Liabilities Assets Liabil Assets Liabilitie Assets Liabilities (GFS/MFS Assets estimation) Liabilities (GFS/MFS estimation) Source: IIP Assets Liabilitie Source: CB Source: ODCS Source: OFCS Government Total Source: CB Indomestic currenc cy Source: CB Source: CB Source: CB Source: CB 12 25 12 Central Inforeigncurrency Bank Source: CB 11 (0) Totol Ind domestic currency Source: ODCS Source: ODCS Source: ODCS Source: ODCS In nforeign currency Source: ODCS Source: CB Source: ODCS oth. Dep. Corporations (2) Total (1) Source: OFCS Ind domestic currency (1) Source: OFCS Source: OFCS Source: OFCS Inforeigncurrency Source: OFCS Source: CB Source: ODCS Oth. Fin Corporations Total Indomestic currency (Nos sectoral data) Source: IIP Inforeigncumency (GFS/MFS estimation) Source: CB Source: ODCS Source: OFCS Nonfinanciald Corporation Total Source: IIP Indomestic currency Source: ODCS Source: OFCS (No sectoral data) Inforeigncurrency (GFS/MFS estimation) Source: CB Households Indomestic Total currency (0) Source: OFCS Source: IIP Source: IIP Inforeign currency Source: IIP Source: CB Source: ODCS External Total CHECK CHECK Indomestic currency Inforeigncumrency Total in domestic currency Inforeign currency Haiti Statistical Institute, and IMF staff calculations. Sources: Reserve Bank of Haiti, BSA matrix. They can be used to presentation of the Network maps provide a graphical and 4 show gross 14. sectors over time. (Figures 3 the evolution of financial exposures among of the arrow visualize dimensions in 2020 and 2023.) The thickness cross-sectoral exposures along different of the nodes distinguishes net creditors while the color indicates the magnitude of gross exposure, that: The maps for Haiti indicate (green) from net debtors (red). financial sector has built up a large exposure other countries in the Caribbean, the Haitian to the role of its Like transmission channel is unique, due over the years. Haiti's banks to the government to develop capital markets, providing central bank. Other countries have been working In Haiti's case, banks are instruments in which to invest and earn interest. bank (as banks with financial indirectly, via the central from households to the government channeling savings their reserves at the central bank). park maintain high levels of market central banks often The central bank is a net debtor. Emerging but in Haiti's case, this is offset by foreign (claims on rest of the world), international reserves mobilizes funding by issuing currency liabilities to banks. The central bank primarily to invest overseas exchange primarily in FX. It has used these funds and holding bankers' deposits, INTERNATIONAL MONETARY FUND 105 (as banks with financial indirectly, via the central from households to the government channeling savings their reserves at the central bank). park maintain high levels of market central banks often The central bank is a net debtor. Emerging but in Haiti's case, this is offset by foreign (claims on rest of the world), international reserves mobilizes funding by issuing currency liabilities to banks. The central bank primarily to invest overseas exchange primarily in FX. It has used these funds and holding bankers' deposits, INTERNATIONAL MONETARY FUND 105 --- Page 110 --- HAITI (international reserves) and to lend to the government. The debtor position of the central bank reflects vulnerabilities due to the low level of equity. Banks source their funds from the private sector, but do not really provide much credit back in the form of loans or investments in private sector debt. Rather, they deposit these savings at the central bank. The lack of domestic credit from banks forces nonfinancial corporates to rely on foreign direct investment from offshore. Figure 3. Balance Sheet Matrix in Network Map Form, 2020 In percent of GDP Other Depository Corporations: 0.26 Central Bank: -0.54 Other Financial Corporations: -0.73 Government: 18.81 A Nonfinancial Corporations: 9.53 Households: 22.66 Rest of the World: 7.21 Figure 4. Balance Sheet Matrix in Network Map Form, 2023 In percent of GDP Other Depository Corporations: 1.54 Central Bank: -0.42 Other Financial Corporations: -0.50 Government: 20.98 A Nonfinancial Corporations: -8.51 Households: 17.89 Rest of the World: 10.97 Sources: Reserve Bank of Haiti, Haiti Statistical Institute, and IMF staff calculations and IMF staff calculations. 106 INTERNATIONAL MONETARY FUND --- Page 111 --- HAITI Annex IX. Data Issues Table 1. Haiti: Data Adequacy Assessment for Surveillance 1. Data Adequacy Assessment Rating 1/ C Questionnaire Results2/ Monetary and National Government External Sector Financial Inter sectoral Median Rating Prices Statistics Consistency Assessment Accounts Finance Statistics Statistics C B B C C C C Detailed Questionnaire Results Data Quality Characteristics B B C B A Coverage C B C C Granularity 3/ C B B D C Consistency Frequency and Timeliness C A B C C Note: When the questionnairedoesr noti include question on specific dimension of data quality fora asector, the corresponding cellis and blank policy advice, and takes into consider ation country1/1 The overall data adequacy assessment is based on staff's assessment of the adequacy of the country's data for conducting analysis formulating specific characteristics. assessments for individual sectors reportedin the heatmapa are based on standardized questionnain ire ands scoring system (see IMF Review ofthe 2/T The overall questionnaire assessment andthe Framework for Data Adequacy Assessment for Surveillance. January shows 2024, Appendixl toft the granularity of the reported govern nment operations data, while the! bottom cell shows that of public debt 3/T Thet top cell for "Granularity" of Government Finance Statistics staffs assessment ssment off oft ther Monetary and Financial Statistics data, while thel bottom cell shows statistics. The top.cellf for "Granularity" of Monetary and Financial Statistics shows staff's Psassess the granularity reported that toft the Financial Soundnessi indicators. A Thedata providedt tot the Fundis adequatef for surveillance. B Thed data provided tot the Fund has some shortcomings buti IS broadly adequate for surveillance. C The data provided to the Fundhass some shortcomings that somewhat hamper surveillance. D Thed data providedt to the Fundhass serious shortcomings that significantly hamper surveillance. Rationale for staff assessment. Monetary and external sector statistics arep provided to the Fund with long delays since thel IT attack in June 2023, reducing their usefulness for surveillance; however, the timeliness of the data submission has improved recently. Data quality issues are revealed throughf frequent revisions to liker money, credit and international reserves. ed data provided tot the Fund has some shortcomings buti IS broadly adequate for surveillance. C The data provided to the Fundhass some shortcomings that somewhat hamper surveillance. D Thed data providedt to the Fundhass serious shortcomings that significantly hamper surveillance. Rationale for staff assessment. Monetary and external sector statistics arep provided to the Fund with long delays since thel IT attack in June 2023, reducing their usefulness for surveillance; however, the timeliness of the data submission has improved recently. Data quality issues are revealed throughf frequent revisions to liker money, credit and international reserves. Surveillance could be more effective with expanded public sector debt key macroeconomic aggregates, aggregates, contingent liabilities of general government and SOE debt. Unexplained large personal transfers, incomplete information oni investment coverage, including limit of the external sector. The Haitian Institute of Statistics and Information (IHSI) compiles and publishes income, and stock flow inconsistencies timely analysis base current price and constant price (2012/2013 base year) annual estimates of Gross Domestic Product by production activities (GDP- -P). The 2012/2013 year, and not reflect the current structure of the economy and/or the impact of several shocks since 2019 on the level of GDP. however, IS outdated may adequately Changes since the last Article IV consultation. GDP data from the demand side was compiled. Timeliness in the reporting of monetary, national accounts and well finance statistics has considerably improved since 2019 until the IT cyber- attack incident att the central bank in. June 2024. real sector data as as government has Asar result, earlier improvements in timeliness of monetary and reserve data statistics were not consistently maintained. Since mid 2024 strong progress been madet to revert to previous achievements. Publication of central government finance data has greatly improved since 2019 Articlel IV. Corrective actions and capacity development priorities. 1)1 There is significant scope to improve thes source data and compilation methodology and rebase the GDP estimates to ar more recent base year. In due course, the forthcoming quarterly GDP calculations should also be aligned with the updated base year; 2) Address misclassification issues in tax revenue data included in the Central Government Operations Table (TOFE); 3) Expand coverage of public sector debt to and 4) Ensure the timely implementation of the plan to enhance the quality of include extrabudgetary units, state-owned enterprises, government guarantees; Reserves reserves, by technical assistance (TA). Compilation of Reserve Data Template on International external sector statistics, including international supported and Foreign Currency Liquidity IS in progress, supported by TA; 5) Implement the eGDDS framework toi improve transparency. different from official statistics in the Article IV consultation. Thet team IS using official data, unless clearly specifiedi in Use of data and/or estimates selected charts. sector data, by gender could ber more timely: eg. financial access survey (FAS) datal last observation is Other data gaps. Financial and digitalization including 2020. 2. Haiti: Data Standards Initiatives in Enhanced General Data Dissemination System (e- -GDDS) by only posting metadata (not data) since December 2009. Haiti hasy yet to Haiti participates the disseminate data recommendedi under the e-GDDS on a National Summary Data Page, andi it does not use an SDMX technology. INTERNATIONAL MONETARY FUND 107 --- Page 112 --- HAITI Table 2. Table of Common Indicators Required for Surveillance As of October, 2024 Publication under the Data Standards Initiatives through the Data Provision to thel Fund National Summary Data Page Date of Latest Frequency of Frequency of Expected Haiti Expected Haiti Date Received Data? Reporting" Frequencys7 Timeliness? Observation Rates 10/7/2024 10/8/2024 D D D Exchange International Reserve Assets and Reservel Liabilities of Aug- 24 Oct-24 M M M 1M the Monetary Authorities' Oct-24 M M M M 2M 15D Re eserve/Basel Money Aug- 24 Jul-24 M M M M 1Q 22D Broad Money Sep24 M M M M 2M 15D Central Bank Balance Sheet AugOct-24 Jul-24 M M M M 1Q 22D Consol lidated Balance Sheet oft the Banking System SepSep- 24 Sep- 24 D D M Interest Rates" Authorities' Oct-24 M M M M 2M 15D Re eserve/Basel Money Aug- 24 Jul-24 M M M M 1Q 22D Broad Money Sep24 M M M M 2M 15D Central Bank Balance Sheet AugOct-24 Jul-24 M M M M 1Q 22D Consol lidated Balance Sheet oft the Banking System SepSep- 24 Sep- 24 D D M Interest Rates" M M M M 2M 21D Consumer Price Index AugSepRevenue, Expenditure, Balance and Composition of M M A M 3Q 5D Aug- 24 SepFinancing' 7-General Government* Revenue, Expenditure, Balance and Composition of Aug 24 Sep 24 M M M 1Q 10D Financing" -Central Government Stocks of Central Government and Central Government Sep- 22 Aug- -23 M M Q 2Q Guaranteed Debt Q Q Q 1Q 45D External Current. Account Balance Jun-2 Sep-24 Exports andl Imports of Goods and Services Jun- 24 Jul-24 M M M A 12W Sep- 23 Dec- 23 A Q A 1Q 6M GDP/GNP M M Q M 2Q 6D Gross External Debt Jul-24 Sep-2 A A A 3Q 6M Int ernational Investment Position Sep-23 SepIncludes reserve assets pledgedor otherwi se encumbered, as well as net derivative positions. Both market- -based andofficially determinedi including disc scount rat tes, money arketr rates, rates on treasury bills, notes and bonds Foreign. domestic bank and domestic nonbank financing. *Theg general government consists oft the central government (budgetary funds, extra budgetary funds, and social security funds) and state andlocalg governments. 51 Including currency andr maturity composition. one week after the reference date; ("M) monthly or with no more than oner month after the reference date; (Q) )quarterly or with lag of nor more *Frequency andt timeliness: (D") daily, (W) weekly or with lagofn nor more ethan lagofn thanone quarter after ther refer ence date; ("A) annual; (T )irregular, and( NA notavailable. the SDDS andSDDS Plus. Any flexibility options or transition plans used under the Recommendedt frequency of data andtimeliness of freporting under thee GDDS and required frequency of data andt timeliness ofr reporting under SDDS or SDDS Plus are not reflected. 108 INTERNATIONAL MONETARY FUND with lag of nor more *Frequency andt timeliness: (D") daily, (W) weekly or with lagofn nor more ethan lagofn thanone quarter after ther refer ence date; ("A) annual; (T )irregular, and( NA notavailable. the SDDS andSDDS Plus. Any flexibility options or transition plans used under the Recommendedt frequency of data andtimeliness of freporting under thee GDDS and required frequency of data andt timeliness ofr reporting under SDDS or SDDS Plus are not reflected. 108 INTERNATIONAL MONETARY FUND --- Page 113 --- HAITI X. External Sector Assessment Annex Haiti in FY2023 was weaker than the level implied by Overall Assessment. The external position of on FY2024 points to a continued real fundamentals and desirable policies. Preliminary information economic activity. appreciation of the gourde, amid strong real-side restraints on Haiti's security situation and business Potential Policy Responses. Continued reforms and addressing Haiti's external position. The BRH should vulnerabilities and strengthen climate remain critical to address FX market to smoothing excessive volatility, increase maintain its policy of limiting interventions in the of the exchange market. and advance on the formalization transparency in FX interventions, Assets and Liabilities: Position and Trajectory at Foreign investment position (NIIP) was negative Background. At the end of FY 2023, Haiti's net international 18.6 percent of GDP and are composed of GDP. Gross assets represented the US$1V2 billion, or 7.7 percent of GDP) and other investment assets from banking mostly of gross international reserves (12.1 percent of GDP, stemming mostly from direct of GDP). Gross liabilities represented 26.3 percent of which owed to sector (4.9 percent debt (12 percent of GDP, the majority investment (10V2 percent of GDP) and public Venezuela). of GDP) and limited financing, the net IIP the sizable current account deficit in FY 2023 (3V2 percent errors and omissions in the Despite compared to FY 2022, in view of high improved by 0.6 percentage point balance of payments (3.4 percent of GDP). 2010s, the net IIP has been relatively stable horizon, following a sharp deterioration in early FY 2016-23, the Over a longer minus 5V2 and minus 872 percent of GDP. Between since FY 2016, hovering between of GDP) have been absorbed by capital transfers account deficits (on average around 1V2 percent and the denominator effect current and omissions (around 0.7 percent of GDP), (around 12 percent of GDP), errors in the GDP in U.S. dollar terms. nominal growth of 3V2 percent per year from an average given the fraught security and institutional IIP performance is satisfactory, in Assessment. In the near-term, is expected to have improved the IIP substantially situation. The debt forgiveness from Venezuela elevated current account deficits persist, they would possibly bringing it close to zero. However, if FY2024, a risk to the IIP in the medium term. eventually pose Gross liabilities: Debt liabilities: -7.7 Gross assets: 18.6 Debt assets: 6.5 26.3 14.2 2023 (% GDP) NIIP: Current Account of 2.3 percent of GDP in FY 2022 (about Haiti's current account deteriorated from a deficit The overall picture is still of a net Background. of GDP in FY 2023 (about US$700 million). US$450 million) to 3V2 percent of GDP) partially offset by net current transfers trade deficit in goods and services (about 21V2 percent was a collapse in exports of goods from of GDP). The main development in FY 2023 the lowest ratio (about 18 percent the goods exports/GDP ratio to 4.9 percent, US$1.28 billion to US$0.96 billion, bringing in nominal terms (about US$ 4.7 billion), standing at since FY 2010. Imports of goods remained constant of around 2 percent of GDP from manufactured around 24 percent of GDP, with a composition shift products and fuel toward food products. 1 Prepared by Henrique Chociay (SPR). INTERNATIONAL MONETARY FUND 109 of GDP). The main development in FY 2023 the lowest ratio (about 18 percent the goods exports/GDP ratio to 4.9 percent, US$1.28 billion to US$0.96 billion, bringing in nominal terms (about US$ 4.7 billion), standing at since FY 2010. Imports of goods remained constant of around 2 percent of GDP from manufactured around 24 percent of GDP, with a composition shift products and fuel toward food products. 1 Prepared by Henrique Chociay (SPR). INTERNATIONAL MONETARY FUND 109 --- Page 114 --- HAITI Preliminary data for FY2024 points to a contraction in exports of around 20 percent, and in imports of around 10 percent, as economic activity withdrew in the face of worsening security. Given sustained support from remittances (about 10 percent increase), the current account balance is expected to improve to a deficit of around V2 percent of GDP. The security situation remains the main obstacle to economic activity and international trade. Other structural impediments include poor port and road infrastructure; limited availability of credit, and electricity, water; and Haiti's inadequate legal and regulatory environment. Haiti's structural challenges are compounded by the concentration, of its export base both in product lines and destinations (apparels account for more than three-quarters of goods exports, about 70 percent of which go to the United States); by its dependence on imports of essential products and remittances; and by its proneness to natural disasters. Assessment. The EBA-lite (External Balance Assessment) current account (CA) model indicates that Haiti's FY 2023 balance is weaker than its medium-term fundamentals and desirable policies would suggest. The CA model identifies a gap of minus 2.9 percent of GDP between the cyclically adjusted current account deficit of 4.0 percent of GDP and a model-based current account deficit norm of -1.1 percent of GDP. Data limitations in FY 2023 cast significant uncertainty around this assessment, as errors and omissions (3.4 percent of GDP) were of similar magnitude to the current account balance. Haiti's policies were relatively supportive of the current account in FY 2023. If policy gaps had been comparable to the rest of the world, the current account deficit could have been 6.3 percent of GDP wider. Fiscal consolidation is still warranted to support current account balance, but the focus should be on increasing productivity, diversifying exports, and lowering private precautionary saving through policies that support greater inclusion (e.g., higher spending on social assistance, education, and health, as well as measures to increase financial access). Exporters' medium-term competitiveness would also be helped by strengthening the business climate and moving toward a more market-determined exchange rate. Haiti: EBA-lite Model Results, 2023 CA model 1/ REER model 1/ (in percent of GDP) CA-Actual -3.5 Cydical contributions (from model). (-) 0.5 Natural disasters and conflicts () 0.0 Adjusted CA -4.0 CA Norm (from model). 2/ -1.1 CA Gap -2.9 -3.5 o/w Relative policy gap 6.3 Elasticity -0.1 REER Gap (inp percent) 25.1 30.3 1/ Based on the EBA-lite 3.0 methodology 2/ Cyclically adjusted, induding multilateral consistency adjustments. Real Exchange Rate Background. Between FY 2022 and FY 2023, Haiti's year-average real effective exchange rate (REER) appreciated 7 percent, the year-average nominal effective exchange rate (NEER) depreciated by 22 percent and the year-average nominal exchange rate against the U.S. dollar depreciated by 24 percent. In FY 2024, the REER appreciated further, by more than 30 percent (year-average, based on August 2024 data). The end-of-period nominal exchange rate against the U.S. dollar depreciated by 12 percent in FY 2023, as the result of a 24 percent depreciation between end September 2022 and mid-April 2023, followed by a 110 INTERNATIONAL MONETARY FUND the year-average nominal effective exchange rate (NEER) depreciated by 22 percent and the year-average nominal exchange rate against the U.S. dollar depreciated by 24 percent. In FY 2024, the REER appreciated further, by more than 30 percent (year-average, based on August 2024 data). The end-of-period nominal exchange rate against the U.S. dollar depreciated by 12 percent in FY 2023, as the result of a 24 percent depreciation between end September 2022 and mid-April 2023, followed by a 110 INTERNATIONAL MONETARY FUND --- Page 115 --- HAITI the nominal exchange rate against the 2023. In FY 2024, recovery of 15 percent through end-September 2024. 2 percent through end- September Over a U.S. dollar appreciated has been the main driver for REER appreciation. Domestic inflation above the nominal depreciation by 30 percent and the September horizon (FY2019-2023), the year-average REER appreciated NEER depreciated 49 five-year above the FY2018 average. For its turn, the year average 2023 REER was 46 percent percent in five years. of the gourde of 25-30 percent, a The EBA-lite CA and REER models suggest an overvaluation of the model-based Assessment. over the past 5 years. While the direction in figure in line with the real appreciation is difficult to ascertain given inconsistencies assessment seems correct, the magnitude of overvaluation Haiti's international trade. the BOP data and the security and structural factor affecting found in FY 2023 and could lead to in FY2024 compounds the overvaluation The further real appreciation and economic activity resumes. rate once security improves pressures on the exchange Accounts: Flows and Policy Measures Capital and Financial contribution to finance the current transfers have provided a small and declining Background. Capital of GDP in FY 2018 to 0.3 percent of GDP in FY 2023. in account deficit, from 1 percent subdued, dropping from 0.6 percent of GDP financial account, foreign direct investment has been notably On the The only other financing source is other investment, FY 2018 to 0.1 percent of GDP in FY 2023. didn't draw any loans in FY 2023 beyond the of GDP to non-banks in FY 2023. The government with SMP commitments. 0.5 percent of GDP in exceptional financing), in line IMF RCF Food Shock Window (0.5 percent its investment climate. Improving the Assessment. Haiti's ongoing security volatility greatly impairs be the most effective way to attract FDI. situation while sustaining reforms would country's security FX Intervention and Reserves Level from US$2.1 billion at end-September Background. Haiti's gross international reserves (GIR) increased of GDP) at end-September 2023. Key billion (about 5-6 months of imports or 12 percent liabilities to 2022 to US$2.35 end-FY 2023 included central bank FX-reserve-related deductions from gross to net reserves at to the MEF on the Venezuela transitory account sector (about US$1.3 billion) and a FX liability the banking (US$515 million). since January 2024 its de facto regime is a "stabilized" Haiti's de jure exchange rate regime is floating, but in the exchange rate market given its high passarrangement. The central bank tracks the developments system, and impact on growth. implications for liquidity in the banking through to domestic prices, dollars to the formal FX market, a parallel-official exchange Together with regulations that channeled more March 2021 but has since narrowed. At endexists. The gap peaked at about 25 percent in market buying and rate gap the official rate and the midpoint of the parallel September 2024, the gap between to staff survey). rates was 1.6 percent (BRH data) or 3 percent (according import coverage rule-ofselling reserves coverage is above the three-month Assessment. Gross international economies (2.6 months of imports, based metric for credit -constrained risks. thumb and the reserve adequacy FX drains are high, posing external sustainability on data through FY2023). However, potential through the accumulation of reserve-related Defending the nominal value of the gourde, including liabilities, should continue to be limited. INTERNATIONAL MONETARY FUND 111 rates was 1.6 percent (BRH data) or 3 percent (according import coverage rule-ofselling reserves coverage is above the three-month Assessment. Gross international economies (2.6 months of imports, based metric for credit -constrained risks. thumb and the reserve adequacy FX drains are high, posing external sustainability on data through FY2023). However, potential through the accumulation of reserve-related Defending the nominal value of the gourde, including liabilities, should continue to be limited. INTERNATIONAL MONETARY FUND 111 --- Page 116 --- HAITI Haiti: International Investment Position (in percent of GDP) -10 -20 -30 -40 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23 Reserve Assets - Direct Investment Other Inv. (Government) Other Inv. (Banks) Other Inv. (Non-banks) Other Inv. (Central Bank) Other Inv. (SDR allocation) Net IIP Sources: BRH and IMF staff calculations. Haiti: Current Account (Percent of GDP) Haiti: Secondary Income/Current Transfers (net) mGoods (net) mServices (net) (Percent of GDP) mPrimaryi income (net) mS Secondary income (net) 4,000 - Current account balance Official Private Other (including NGOS) 3,000 2,000 -10 1,000 -20 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23 Y2 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY 24 Sources: Bank oft the Republic of Haiti andl IMF staff calculations. Sources: Bank oft the Republic of Haiti andl IMF staff calculations. Haiti: Exchange Rates Haiti: BRH Foreign Exchange Interventions (Index, base 100 in 2010) (Millions of US dollars) 175 - RealE Effective Exchange Rate Nominal Effective Exchange Rate 150 Nominal Exchange Rate Sales F Purchases NetFX Purchases/Sales S 2a & 8 a N 16 o 0 0 8 R 8 2 2 R X S g g e 8 $ 5 % e a a % € 8 à $ a S S à S Sources: Bank oft the Republic ofH Haiti andl IMF staff calculations. Source: IMF INS database 112 INTERNATIONAL MONETARY FUND --- Page 117 --- HAITI Annex XI. Inflation Dynamics in Haiti Inflation has been historically higher than in comparable by food and energy countries, Although inflation, other factors such inflation is mainly driven and natural disasters also as monetary financing, exchange play a major role. We study rate depreciation hybrid form of the Phillips inflation using two curve that shows that the approaches: 1) we estimate a and US inflation, as well as monetary depreciation of the gourde against the US dollar long-time horizon; financing, have been major drivers 2) an event analysis covering the of inflation dynamics over a latter reveals that inflation is period since the last Article IV consultation. highly correlated with The unrest. 7 supply-side shocks such as crime and social A. Inflation Dynamics in Haiti 1. Inflation has been regularly subject to 1998, high inflationary year-on-year inflation has been above 5 pressure cycles (Figure 1). Since or equal to 10 percent for percent for almost 80 percent of more than half of them. The months, and above years, between April 2009 and June longest period of low inflation lasted six year-on-year inflation 2015, with an average inflation rate of 4.1 has reached successive percent. Since then, peaks in May 2016, August and Annex 2020, XI. Figure 1: Contribution to Headline January 2023, at 60 (Percent) Inflation Annex XI. Figure 2A: Haiti and Low-Income mOthers (Percent) Countries mEducation mLeisure mRestaurants months, and above years, between April 2009 and June longest period of low inflation lasted six year-on-year inflation 2015, with an average inflation rate of 4.1 has reached successive percent. Since then, peaks in May 2016, August and Annex 2020, XI. Figure 1: Contribution to Headline January 2023, at 60 (Percent) Inflation Annex XI. Figure 2A: Haiti and Low-Income mOthers (Percent) Countries mEducation mLeisure mRestaurants mCommunication mHealth mTransport ILOw-i Low- -income countries (interquartile range) mHousing mClothing mFurniture Haiti -income countries (median) mBeverages. Overall inflation tobacco mFood S E 8 08 A E 2 Sources: Haitian Ins stitute of Statistics and Informatics (IHSI) and IMF staff lcula & ation Sources: Haitian Instit tute of Statistics and Informatics (IHSI) and IMF staff calculations Annex XI. Figure 2B: Haiti and Fragile and ConflictAnnex XI. Figure 2C: Haiti and Affected States Countries Other Caribbean (Percent) (Percent) IFCS (interquartile range) -FCS (median) Haiti Caribbean countries (interquartile range) -Caribbean countries (median) Haiti pomm MeA W 8 E 8 2 a de e 8 g dS 3 8 8 X 0 W 13 J 15 6 A 8 & a N Q -10 $ 3 5 S 1 8 E g la 2 à à - 8 2 g 8 8 0 8 08 Sources: Haitian Institute of Statistics and 6 00 8 0 E 13 J 15 16 a Informatic ICS (IHSI) and IMF staff calculatio E 2 A $ S 3 S 3 8 2 % E 2 la de 13.2, 27.8 and 49.3 sources: Haitian Institute of Statistics and Informatics (IHSI) N and IMF staff percent, respectively. calculations. Prepared by Arsène Kaho (WHD). The event analysis was prepared by Juan Passadore (WHD). INTERNATIONAL MONETARY FUND 113 00 8 0 E 13 J 15 16 a Informatic ICS (IHSI) and IMF staff calculatio E 2 A $ S 3 S 3 8 2 % E 2 la de 13.2, 27.8 and 49.3 sources: Haitian Institute of Statistics and Informatics (IHSI) N and IMF staff percent, respectively. calculations. Prepared by Arsène Kaho (WHD). The event analysis was prepared by Juan Passadore (WHD). INTERNATIONAL MONETARY FUND 113 --- Page 118 --- HAITI low-income, fragile and conflict-affected countries, Inflation in Haiti also remains higher than in peer since 2015. the Caribbean (Figures 2)-with a widening divergence as well as in Its main driver of inflation over the past two decades. 2. Food inflation has been the 2015, culminating at 58.1 percent on inflation has been increasing since contribution to headline drivers of food inflation are cereals, dry peas, between 2020 and 20232 (Figure 3). The main but to a lesser extent, average other items that contribute most to inflation, and edible oil. Besides food, the However, the contribution of electricity, and other fuels, as well as transport. a less are housing, water, gas, than a decade, although they have displayed these items has been trendily declining for more trend since the Covid-19 crisis. homogeneous Contribution to Inflation, Annex XI. Figure 3B: Average Contribution to Inflation: Annex XI. Figure 3A: Average Food, Housing, and Transport Contribution 2020-23 (Percentage points) (Percentage points) 58.1 Food Housing - 11.9 Transport 72 Clothing - 6.1 Furniture - 4.8 Food Others - 4.2 -15 0 Housing Health - 3.9 Transport Education Leisure 1.2 - 1.1 -45 a a a 0 R 2 Beverages, tobacco 10.6 a a E 8 a Restaurants 10.6 3 2 E g 3 8 £ 2 S Communication 10.4 40 50 60 70 Sources: Ha ait tian Institute of Statistics and Informa ICS (IH SI) nd IMF staff calculations 10 20 30 Haitian Institute of Statistics and Informatics (IHSI) and IMF staff calculations. Sources: driver of headline inflation goods inflation is also a major 3. Pressure from imported to that of imported inflation. The contribution Overall inflation trend is closely correlated culminating (Figure 4). been trendily increasing since early 2014, goods to headline inflation have the combine effects of of imported end of the Covid-19 pandemic due to in June 2022 at the at 51.9 percent receding afterwards. international oil and food prices-before rising Inflation Annex XI. Figure 4B: Contribution of Domestic and Imported Inflation Annex XI. Figure 4A: Headline and Imported (Percent) (Percent) inflation Headlinei inflation -Importedi Infl atio Imported Inflatic a a 8 a a a 8 & 0 a 8 8 8 8 00 a E 8 a E E a à 2 - 8 3 a 3 $ 2 a a 5 $ 8 $ 8 E 8 8 a S E 3 S a à E 3 3 3 E E à E 3 3 5 a e N le S 2 $ and Informatics (IHSI) and IMF staff calculations. of Statistics and Informatics (IHSI) and IMF staff calculations. Sources Haitia Institu ute of Statistics Sources: Haitian Institute consumer price index basket is 48.5 percent. 2 The weight of food items in the rebased 2017-2018 114 INTERNATIONAL MONETARY FUND a 5 $ 8 $ 8 E 8 8 a S E 3 S a à E 3 3 3 E E à E 3 3 5 a e N le S 2 $ and Informatics (IHSI) and IMF staff calculations. of Statistics and Informatics (IHSI) and IMF staff calculations. Sources Haitia Institu ute of Statistics Sources: Haitian Institute consumer price index basket is 48.5 percent. 2 The weight of food items in the rebased 2017-2018 114 INTERNATIONAL MONETARY FUND --- Page 119 --- HAITI 4. Underlying and often overlapping Annex XI. Figure 5: Domestic and International Food factors related to the country's exposure to Prices Inflation natural disasters and external shocks, as well 60 (Percent) 50 Domestic food inflation as public policies, have also driven inflation 40 International food inflation dynamics in Haiti. The natural disasters that affected the country have often been the cause of 10 inflationary surges, including the series of hurricanes between August and September 2008 -30 -20 which contributed to the peak in inflation observed in October 2008. The 2010 A 5 3 A earthquake was also followed by an acceleration in Sources: Haitian Institute of Statistics and Informatics (IHSI), Bank of the Republic of inflation, Haiti and IMF staff calculations. albeit at a slower pace- -most likely due to the prompt and massive international aid the country had received. External shocks associated with rising international food prices, in 2008, 2011 and 2021-22 (Figure 5) and oil prices, in 2003 and more recently in 2021-22 (Figure 6), as well as the Covid-19 pandemic and the subsequent disruption of international supply chains, had also major Annex XI. Figure 6A: Contribution to Headline Inflation (Percent) Annex XI. Figure 6B: Domestic Petroleum Products and Inflation mOthers mRestaurants 50 mEducation EL Leisure 350 (Percent) mCommunication mTransport Kerosene 40 mHealth mFurniture Gasoline and diesel mHousing mClothing -Inflation (right scale) 30 mBeverages, tobacco - Non- foodi inflation -50 8 9 3 & 8 E E 3 E 3 8 E a a 8 a a E 3 N E 5 2 de $ 2 3 3 $ S É S S a @ Sources: Haitian Institute of Statistic ICS and nformatics (IHSI) and IMF staff alculation: Sources: Haitia lan Institute of Statistics and Informatics (IHSI) and IMF staff cal Iculations spillover effects on inflation in Haiti. The deteriorating security situation and increased Annex XI. Figure 7: Exchange Rate and Monetary gang Financing activity, which are hampering domestic supply Exchange rate (gourde per US dollar, year on year) Inflation chains, are also currently fueling inflation. Policy Monetary financing (percent of GDP, rights scale) measures such as the liberalization of petroleum product prices in 2001 and the removal of subsidies on these products in 2003 were responsible for the spikes in inflation during these respective years. More recently, the buildup in -20 monetary financing of 0 a the fiscal deficit and ensuing depreciation of the E is 2 R R R V 0 2 a local Sources: Haitian Institute of Statistics and Informatics (IHSI), Bank of the Republic of currency have contributed significantly to the Haiti and IMF staff calculations. country's strongest inflationary surge in 20 years (Figure 7). INTERNATIONAL MONETARY FUND 115 and the removal of subsidies on these products in 2003 were responsible for the spikes in inflation during these respective years. More recently, the buildup in -20 monetary financing of 0 a the fiscal deficit and ensuing depreciation of the E is 2 R R R V 0 2 a local Sources: Haitian Institute of Statistics and Informatics (IHSI), Bank of the Republic of currency have contributed significantly to the Haiti and IMF staff calculations. country's strongest inflationary surge in 20 years (Figure 7). INTERNATIONAL MONETARY FUND 115 --- Page 120 --- HAITI remains high and could decline in the recent period, inflation persistence 5. Despite a of monetary policy. Inflation persistence is challenge to the effectiveness which also pose an additional model of month-to-month inflation (Tr), estimated using the following simple AR(1) change of the Haitian gourde exchange variable the lagged percentage an inflation includes as explanatory The estimated coefficient of lagged the US dollar (e): Tt = pTt-1 + aet-1 + Et. 2 months. The rate against gradually with a half-life of about indicating that inflation shocks dissipate the evolution of is 0.6, with a 60-month rolling window to capture above AR (1) model is also estimated for food and non-food inflation as well. Overall, time. This estimation is carried out persistence over 8) show that, Annex XI. Figure 8: Inflation Persistence the results of the estimates (Figure (Percent) slightly for a decade, inflation 1.2 Headline inflation after declining along with the 1.0 Food Non- food inflation inflation increased considerably persistence that began in 2015, driven 0.8 strong inflationary surge 0.6 mainly by food prices. However, inflation persistence 0.4 again since the start of the Covid-19 0.2 has declined than the average for the 0.0 crisis but remains higher while the -0.2 period. Over the recent period, 2 2 R a pre-2015 S 3 a of food inflation has receded, dragging S de 5 a 2 0 of persistence in contrast, the Sources: Haitian Institute of Statistics and Informatics (IHSI), Bank of the Republic down headline inflation persistence, Haiti, and IMF staff calc culations. of non-food inflation has increased. persistence to food inflation tend to spread to non-food this recent trend, overall, shocks 6. Despite of a two-equation vector autoregression the results of an estimation inflation. This is evidence by variable the lagged percentage for food and non-food inflation, including as an exogenous The estimation results show a (VAR) against the US dollar. change in the exchange rate of the gourde inflation. Shocks to non-food impact of lagged food inflation on non-food positive and significant but to a lesser extent (figure 9). inflation also affect food inflation, 9A: Response of Non-Food Inflation to 9B: Response of Food Inflation to NonAnnex XI. Figure Annex XI. Figure Food Inflation Shock Food Inflation Shock 0.7 0.18 0.15 0.6 0.12 0.5 0.09 0.4 0.06 0.3 0.03 0.00 0.2 -0.03 0.1 -0.06 significant but to a lesser extent (figure 9). inflation also affect food inflation, 9A: Response of Non-Food Inflation to 9B: Response of Food Inflation to NonAnnex XI. Figure Annex XI. Figure Food Inflation Shock Food Inflation Shock 0.7 0.18 0.15 0.6 0.12 0.5 0.09 0.4 0.06 0.3 0.03 0.00 0.2 -0.03 0.1 -0.06 1 2 3 different sectors is assessed using a simple effect of inflation across sector 7. The contagion and due to the high share of the informal diffusion index- in the absence of data on wages second-round effects, including limitations prevent an in-depth analysis of potential in Haiti. These 116 INTERNATIONAL MONETARY FUND --- Page 121 --- HAITI mechanisms, and the wageof inflation on wage and price setting an analysis of the pass-through the proportion of sectors whose However, the diffusion index helps capture price spiral process. threshold. Several Annex XI. Figure 10: Inflation Diffusion Index inflation is above a certain (Percent) CPI Items between 5-1 10percent thresholds are considered and illustrated in Figure CPiitemst CPIT Items below between3 3percent 3-5 percent CPI Items above 10 percent 10. It shows that inflation tends to be particularly 100 90 broad-based in periods of high inflation. During 80 70 the peak inflation periods of February 2001, 60 50 October 2003 and January 2023, the inflation rate 40 30 for almost all sectors exceeded 10 percent. The 20 10 where a larger share of items in the CPI 0 & 8 00 a a a a periods 40 and 50 percent) have an 0o E S 3 U 6 E & basket (between are very a € A and Informatics (IHSI), Bank of the Republic of inflation rate equal or below percent Sources: Haitian Institute of Statistics Haiti, and IMF staff calculations. limited and short. B. Empirical Estimates curve to estimate to estimate the hybrid form of the Phillips 8. We use the following dynamics of inflation in Haiti: + BZ + ydummyl + 8dummy2 + £1 (1) Tt = pTt-1 + aXt-1 inflation derived from the consumer price a quarterly measure of year-on-year deviation of Where Tt represents with one lag. It is calculated as the percent index (CPI). aXt-1 is a measure of GDP gap filter. As Haiti real GDP data is only real GDP from its trend derived from the Hodrick-Prescott match method. Zt captures the series using the quadratic available on annual basis, we interpolate domestic inflation. They include United States external and domestic structural factors impacting these countries are the main trading Dominican Republic inflation and exchange rate as claims of the Central and gasoline and diesel inflation, and net partners of Haiti- domestic kerosene, All variables are used on a quarterly basis. central as a percent of GDP. and Bank on the government the effects of the 2010 (dummy1) (1) also includes two dummy variables to capture 1998Q1-2023Q4 based on Equation It is estimated over the period 2018 (dummy2) earthquakes on inflation. variables that could have served As the time series of available Haiti fiscal year ending in September. on inflation (such as the number of the supply shock caused by insecurity as proxies to illustrate number of fatalities) are very short, they tanker arrivals at the port of Port-au-Prince, or the cargo or could not be included in the regressions. are shown in estimates with alternative specifications 9. The results of the econometric the exchange rate between the gourde and the estimates indicate that US inflation, of inflation Table 1. Overall, kerosene inflation are significant determinants financing, and inflation the US dollar, monetary inflation. In contrast, the Dominican Republic dynamics, in addition to one-period lagged Dominican peso are not significant rate between the gourde and the and diesel and the exchange of 2010 and 2018 and gasoline determinants of inflation in Haiti, nor are the earthquakes the expected positive sign. The although the coefficients of all these variables display the positive sign. inflation, either and does not have expected coefficient of the output gap is not significant INTERNATIONAL MONETARY FUND 117 inflation the US dollar, monetary inflation. In contrast, the Dominican Republic dynamics, in addition to one-period lagged Dominican peso are not significant rate between the gourde and the and diesel and the exchange of 2010 and 2018 and gasoline determinants of inflation in Haiti, nor are the earthquakes the expected positive sign. The although the coefficients of all these variables display the positive sign. inflation, either and does not have expected coefficient of the output gap is not significant INTERNATIONAL MONETARY FUND 117 --- Page 122 --- HAITI Table 1. Haiti: Inflation Estimation Results (1) (2) (3) (4) (5) Regressors Inflation Inflation Inflation Inflation Inflation Lag CPI inflation 0.7029*** 0.7039*** 0.7099*** 0.6992*** 0.6666** (0.0329) (0.0296) (0.0334) (0.0327) (0.0355) -0.2268 -0.2237 -0.1189 Lag output gap (0.1696) (0.1714) (0.1653) US inflation 0.6715*** 0.6668** 0.6440*** 0.6648*** 0.5161** (0.1483) (0.1322) (0.1485) (0.1488) (0.1488) DR inflation 0.0035 0.0025 0.0059 0.0597* (0.0319) (0.0318) (0.0316) (0.0339) Percentage change gourde/USS 0.0737*** 0.0830*** 0.0712** 0.0743*** 0.0959** (0.0252) (0.0179) (0.0252) (0.0253) (0.0231) Percentage change gourde/DOP 0.0100 0.0127 0.0096 0.0088 (0.0213) (0.0213) (0.0214) (0.0204) Kerosene inflation 0.0260** 0.0257** 0.0288** 0.0259** 0.0213* (0.0120) (0.0100) (0.0121) (0.0120) (0.0118) Gasoline and diesel inflation 0.0070 0.0065 0.0032 0.0076 0.0102 (0.0156) (0.0139) (0.0159) (0.0156) (0.0155) Monetary financing 0.2035*** 0.1999*** 0.1971*** 0.2105** 0.1183** (0.0617) (0.0610) (0.0616) (0.0622) (0.0278) Dummy1 3.5680 3.5447 3.7791 (2.4088) (2.4872) (2.3679) Dummy2 2.3411 2.1772 2.4073 (2.3764) (2.3926) (2.3199) Output gap -0.2262 -0.1940 (0.1694) (0.1721) Number of observations 7) (0.0610) (0.0616) (0.0622) (0.0278) Dummy1 3.5680 3.5447 3.7791 (2.4088) (2.4872) (2.3679) Dummy2 2.3411 2.1772 2.4073 (2.3764) (2.3926) (2.3199) Output gap -0.2262 -0.1940 (0.1694) (0.1721) Number of observations R-squared 0.9506 0.9521 0.9521 0.9505 0.9554 Source: IMF staff calculations. Note: Robust standard errors in parentheses, * ** denote statistical significance at the 10, 5, and 1 percent levels, respectively. 118 INTERNATIONAL MONETARY FUND --- Page 123 --- HAITI Event Study Analysis: Impact of Supply-Side Factors on Inflation Dynamics 10. In addition to demand factors on inflation, supply-side factors have an important effect on inflation dynamics in Haiti. To study their effect, we perform an event study analysis, focusing on the impact of natural disasters and crime on overall inflation and food inflation. We study four events: the January 2010 earthquake, the assassination of President Moïse and the associated increase in violence, the nationwide unrest following the increase in fuel prices in August 2022, and the increase in gang violence in March 2024. In Figures 11 and 12, we observe monthly inflation rates six months before and six months after the shock and note that all of the events implied a marked increase in overall and food inflation levels. For example, the 2010 earthquake implied an increase in the monthly inflation rate from V2 percent before the shock to 3 percent on the month of the shock. The liberalization of fuel prices and the following social unrest implied an increase in overall inflation and food inflation of 11 and 13 percent, respectively. Annex XI. Figure 11: Event Analysis: Inflation Impulse Annex XI. Figure 12: Event Analysis: Food Inflation Response Impulse Response (Percent) 15 (Percent) 14 January 2010: earthquake -January 2010: earthquake 12 -July 2021: President assassination. andi its aftermath 12 -July 2021 President assassination. andits aftermath 10 September 2022: widespread unrest A September 2022: March 2024: gang violence intensification widespread unrest March 2024: gang violence intensification t-6 t-5 t-4 t-3 t-2 -1 t-0 t+1 t+2 t+3 t+4 t+5 t+6 t-6 t-5 t-4 t-3 t-2 t-1 t-0 t+1 t+2 t+3 t+4 t+5 t+6 Sources: Haitian Institute of Statististics and Informatics (IHSI), Bank of the Republic of Sources: Haiti and Haitian IMF Institute staff of Statististics and Informatics (IHSI), Bank of the Republic of Haiti and IMF staff calculations. Note: Monthly inflation calculations. rate. Note: Monthly inflation rate. INTERNATIONAL MONETARY FUND 119 +4 t+5 t+6 t-6 t-5 t-4 t-3 t-2 t-1 t-0 t+1 t+2 t+3 t+4 t+5 t+6 Sources: Haitian Institute of Statististics and Informatics (IHSI), Bank of the Republic of Sources: Haiti and Haitian IMF Institute staff of Statististics and Informatics (IHSI), Bank of the Republic of Haiti and IMF staff calculations. Note: Monthly inflation calculations. rate. Note: Monthly inflation rate. INTERNATIONAL MONETARY FUND 119 --- Page 124 --- HAITI and Structural Reforms Haiti- Climate Policy Annex XII. Greening emissions are low and renewable energy provides 1. Haiti's per capita greenhouse gas Haiti: Electricity Generation by Source Haiti with the opportunity to reduce its (Terawatt hours) from petroleum imports. In 2022, 1.2 dependence 86.5 percent of electricity was generated using 1.0 Hydro petroleum products (with the rest coming 0.8 Petroleum based products imported the country to volatile from hydropower), exposing the 0.6 international energy prices. In a recent report, 0.4 World Bank emphasizes that for most Island 0.2 Developing States solar energy is the least costly 0.0 a a generation (ESMAP 2024). The a a a 8 a 8 8 a a E E E a a E a E a E E a option for electricity share of solar and wind energy in total electricity Source: Ember Electricity Data Explorer. in Jamaica has reached 9.2 percent in generation one of the leaders in the Electricity Generation: Wind and Solar 2022, with Jamaica being (In percent oft total electricity production) of solar and wind energy in the Caribbean.' use Dominican Jamaica Republic Haiti has already started to reduce 10 12 -Haiti Latin America and Caribbean 2. products. In FY2022 World subsidies on petroleum-based (ending in September 2022), the transfers and subsidies related to fossil fuels amounted to 2.1 percent of GDP, while the following year they fell to 00 2 3 08 2 g a 2 a 8 8 E a 12 percent of GDP. Source: Ember database. Ensuring access to clean cooking fuel disasters. Forest 3. deforestation in Haiti and diminish the risks of natural land area would help reduce and amounted to just 12.5 percent of in Haiti has contracted steadily in recent years is the use of trees cover for Caribbean islands. A key driver of deforestation in 2021, which is unusually low 2022). Providing access to modern cooking fuel cooking charcoal (François and others and help reduce for producing cleaner electricity, would mitigate deforestation and clean cookstoves, powered by (Jean Louis and others 2024). the risk of flooding and landslides in Cap-Haitien disasters and climate change entails a government-led 4. Enhancing resilience to natural development partners, including IFIs multi-pillar strategy, involving also the private sector, Haiti's risk management capacity. is developing. It also requires enhancing which the government include: The key pillars of disaster risk management ex-ante resilience entails identifying at the national level, building undertaking a risk assessment; frameworks and budget planning. This should integrating them into the fiscal risks and explicitly fiscal costs of climate change and natural disasters be achieved by incorporating the projected into annual budgets within a medium-term framework. Schwerhoff (RES) and Gonzalo Huertas (WHD). 1 Prepared by Gregor 120 INTERNATIONAL MONETARY FUND sector, Haiti's risk management capacity. is developing. It also requires enhancing which the government include: The key pillars of disaster risk management ex-ante resilience entails identifying at the national level, building undertaking a risk assessment; frameworks and budget planning. This should integrating them into the fiscal risks and explicitly fiscal costs of climate change and natural disasters be achieved by incorporating the projected into annual budgets within a medium-term framework. Schwerhoff (RES) and Gonzalo Huertas (WHD). 1 Prepared by Gregor 120 INTERNATIONAL MONETARY FUND --- Page 125 --- HAITI providing self-insurance by building policy and financial buffers to enhance resilience to shocks. Although the current level of macroeconomic buffers is adequate, some allocation can be put aside in future budgets for natural disasters purposes only. reducing risks by enhancing preparedness, including by investing in 'smart" infrastructure that can better cope with climate change and natural hazards and by enhancing debt-management capacity. And transferring risk, either through catastrophic sovereign insurance or other subregional schemes (parametric insurance). 5. Ex-post disaster risk management includes strategies to manage the impact of a disaster and facilitate a rapid recovery. At the national level, the main actions include emergency response and reconstruction efforts. A sound reconstruction program should consist of measures to reduce such risks through climate resilience infrastructure investment. Reconstruction can serve to accelerate broader growth-enhancing structural reforms. Donor financing will remain important in enhancing the ability to cope as costs may be too high to be fully internalized by building buffers. INTERNATIONAL MONETARY FUND 121 --- Page 126 --- HAITI References ESMAP, 2024, "Empowering Small Island Developing States: Scaling Up Renewable Energy for Resilient Economic Growth, Washington, DC: World Bank. hitp/hdihandlenet/10986/41678 François, Mathurin, Ronald Petit-Homme, Eduardo Mariano-Neto, Marc Arthur Petit-Homme, and Terencio Rebello de Aguiar Junior, 2022, "Causes for Reforestation Failure in Haiti and Residents' Willingness to Pay for Cleaner Cookstoves." AQUA Water Infrastructure, Ecosystems and Society 71 (9): 1028-38. https//doiorg/10.216/aqua.202.058. Jean Louis, Madoche, Alessandra Crosato, Erik Mosselman, and Shreedhar Maskey. 2024, "Effects of Journal Flood Urbanization and Deforestation on Flooding: Case Study of Cap-Haîtien City, Haiti," of Risk Management n/a (n/a): e13020. https//doi.org/10.111/#3.13020. 122 INTERNATIONAL MONETARY FUND AQUA Water Infrastructure, Ecosystems and Society 71 (9): 1028-38. https//doiorg/10.216/aqua.202.058. Jean Louis, Madoche, Alessandra Crosato, Erik Mosselman, and Shreedhar Maskey. 2024, "Effects of Journal Flood Urbanization and Deforestation on Flooding: Case Study of Cap-Haîtien City, Haiti," of Risk Management n/a (n/a): e13020. https//doi.org/10.111/#3.13020. 122 INTERNATIONAL MONETARY FUND --- Page 127 --- HAITI Annex XIII. Past IMF Recommendations and Implementation Status Past IMF Recommendations Implementation Status Fiscal Policy Increasing domestic revenue collection, Domestic revenue is still low at 5 percent of GDP. strengthening the capacity of tax Tax revenue performance had improved in FY2023, administration offices and modernizing tax before collapsing due to an escalation of violence and customs operations. which disrupted economic activity. The government has passed important reforms aimed at raising domestic revenue over the medium term: a new tax code in December 2022 (pending implementation), the publication of customs tariffs, and a new customs code adopted in March 2023. Establishing a deficit target for the NFPS of The deficit of the NFPS has been maintained well 2.0 percent over the medium term. below 2 percent of GDP since FY2022. The authorities have passed the FY2025 budget with an overall balance of the NFPS at around 0 percent of GDP. Reallocating current expenditures towards Budget allocations for social spending have been capital and social spending. established and were monitored as part of recent SMPs. Monetary and Exchange Rate Policies of the deficit has been brought Establishing a quantitative monetary target Monetary financing to limit the scale of fiscal dominance. down to 1 percent of GDP in 2023 and zero in 2024 from 3 percent in 2020. Limiting foreign exchange interventions to The BRH has gradually taken steps to enhance the instances of disorderly market conditions. flexibility of the exchange rate, including by discontinuing discretionary sales of reserves to importers. Transitioning to International Financial Progress has been made with support of staff Reporting Standards (IFRS). technical assistance. Financial Sector Policy Fostering financial inclusion by investing in 1) The BRH has launched in June 2020 a national infrastructure connectivity and supporting plan in late on financial literacy; 2) in February 2022, the BRH has launched a fund dedicated to support fintech and mobile banking. data for 2022-23 women entrepreneurs. BRH suggests that only 36 percent of bank credit is accessed by women (and 64 percent by men) indicating still a strong disparity; 3) a draft law to protect consumers subject to fraud and abuse by the financial sectors is under consideration; and 4) in December 2021, the Circular 121 established the INTERNATIONAL MONETARY FUND 123 --- Page 128 --- HAITI regulation of Fintech activities. The World Bank is actively supporting the country in developing the digital ecosystem. Governance and Transparency Enhancing anti-corruption measures, The authorities have revised the AML/CFT including anti-money laundering initiatives. framework with the support of capacity development. The Council of Ministers has adopted a new Decree Reorganizing the Unité Centrale de Renseignement Financier (UCREF) to replace the Financial Intelligence Unit (FIU) organic law Structural and Climate Policies Enhancing management and oversight of In 2020, EDH started replacing traditional post-paid the national power utility (EDH). meters with prepaid meters to reduce electricity theft and address the accumulation of unpaid bills, which has long affected EDH's financial health. The goal was to install 70,000 prepaid meters, improving billing accuracy and enhancing financial accountability. Haiti energy regulator (the National Energy Sector Regulatory Authority or ANARSE) led efforts to involve the private sector in managing regional electricity grids in order to attract investment and improve the efficiency of electricity generation and distribution. Under this initiative, private companies would handle operations, while EDH retained oversight. In 2023 EDH implemented a tariff increase aimed at improving financial sustainability and reducing dependency on government subsidies. Initiating gradual energy subsidy reform. A large price adjustment for fuel subsidies was implemented in August 2022 and a smaller adjustment in July 2023. 124 INTERNATIONAL MONETARY FUND Regulatory Authority or ANARSE) led efforts to involve the private sector in managing regional electricity grids in order to attract investment and improve the efficiency of electricity generation and distribution. Under this initiative, private companies would handle operations, while EDH retained oversight. In 2023 EDH implemented a tariff increase aimed at improving financial sustainability and reducing dependency on government subsidies. Initiating gradual energy subsidy reform. A large price adjustment for fuel subsidies was implemented in August 2022 and a smaller adjustment in July 2023. 124 INTERNATIONAL MONETARY FUND --- Page 129 --- Appendix I. Joint Governance Matrix on Recent, Development by the Ongoing, and (It includes IMF and Forthcoming customs, revenue Development Capacity administration, public Partners Project Delivering Beneficiary financial management risk CARTAC Customs Institution Institution Sector supervision, and data), as of IMF Workstream October 2024 Administration - FY19 Ministry of Fiscal Objective Finance Revenue Status Start Building a Risk Based IMF Administration Strengthened revenue Date End Date Banking Supervision Central Bank Financial administration management and Active Aug 2020 Framework Financial Supervision governance arrangements Aug- -2024 and Regulation To implement a risk- based Support consultations IMF supervision (RBS) and Active on the Tax Code and Ministry of upgrade other system Aug 2020 Oct 2024 Tax Procedure Code Finance Fiscal Tax Policy processes supervisory Public Financial policy Improved (SDG tax and non- tax revenue Active IMF 17.1) Jan 2021 Management (Budget Ministry of Fiscal Aug- 2024 Preparation) FY25 Finance Public Financial Management Comprehensive, credible, and Macroeconomic policy-based Active IMF budget preparation Jan 2021 Frameworks TAMinistry of MacroJan 2025 Ministry of Finance Finance economics General Macroeconomic Strengthen macroeconomic Analysis forecasting the and policy analysis at Active Feb 2021 PFM Management Ministoy/central bank / or Dec-2026 (Asset and Liability IMF Ministry of Fiscal governmental the agency(ies) feeds other into Management) Finance Public Financial economic policymaking process Public Financial IMF Management Improved asset and liability Management (Budget Ministry of Fiscal management Active May 2021 Execution) Finance Public Financial Mar-2025 Public Investment IMF Management Improved fiscal coverage and quality of Management Climate and Ministry of Fiscal reporting Active May 2021 Change Finance Public Financial Nov-2026 Management Improved public investment management Active Sep 2021 May-2025 A al the agency(ies) feeds other into Management) Finance Public Financial economic policymaking process Public Financial IMF Management Improved asset and liability Management (Budget Ministry of Fiscal management Active May 2021 Execution) Finance Public Financial Mar-2025 Public Investment IMF Management Improved fiscal coverage and quality of Management Climate and Ministry of Fiscal reporting Active May 2021 Change Finance Public Financial Nov-2026 Management Improved public investment management Active Sep 2021 May-2025 A --- Page 130 --- Project Delivering Beneficiary AML/CFT Institution Institution Sector IMF Workstream Ministry of Objective Revenue IMF Finance Governance AML/CFT Status Start Administration Ministry of Fiscal Strengthen the legal and Date End Date Governance Diagnostic Finance Revenue institutional framework for AML/CFT Complete Feb - 2022 IMF Ministry of Administration Strengthened core tax Nov-2023 Finance Governance Governance and Anti- administration functions (SDG 17.1) Active May Jul-2024 Financial Supervision IMF Corruption Strengthen the legal and and Regulation Central Bank Financial institutional frameworks to combat Active Jan 2023 Financial Supervision corruption Dec-2024 Government Finance IMF and Regulation Develop/strengthent banks' Ministry of Statistics frameworks regulation and supervision Active Feb 2023 Feb Finance Government Finance BRS External Sector- -BOP IMF Strengthen compilation and Central Bank dissemination of Active Real Sector National Statistics External Sector Finance Statistics Government May Apr 2026 Accounts IMF (GFS) Ministry of Statistics Strengthen compilation and Planning Real Sector National dissemination of BOP/IIP Active May Accounts Strengthen compilation and Apr 2026 External Sector IMF dissemination of National Active May Central Bank Statistics Production, Income and Apr 2026 Revenue IMF External Sector Expenditure Accounts Administration Ministry of Fiscal Strengthen compilation and Finance Revenue dissemination of reserve template Active Jan 2024 Expenditure Policy IMF Administration Strengthen revenue administration Apr-2027 Ministry of Fiscal management and Active Feb 2024 Public Financial Finance Expenditure arrangements (SDG governance Apr 2027 Management IMF Ministry of Policy Desk support to Haiti 17.1) in the Finance Fiscal Public Financial social spending area of Active July 2024 Management fiscal Improved coverage and quality of Aug- 2024 reporting FRP Pipeline Jul 2024 2024 Expenditure Policy IMF Administration Strengthen revenue administration Apr-2027 Ministry of Fiscal management and Active Feb 2024 Public Financial Finance Expenditure arrangements (SDG governance Apr 2027 Management IMF Ministry of Policy Desk support to Haiti 17.1) in the Finance Fiscal Public Financial social spending area of Active July 2024 Management fiscal Improved coverage and quality of Aug- 2024 reporting FRP Pipeline Jul 2024 --- Page 131 --- Status Start Date End Date Workstream Objective Active June 2019 Activity 1 Beneficiary Sector and and 3 end Delivering Institution 1) Enhance the prevention of the 140 in April Project Institution of Governance Emergency Prevention and response capacity of the Civil 2025. Disaster WBG Ministry Affairs Communal Committees Strengthening Domestic Response Protection (CCPC) Risk Management and and Local 2) Enhance the shelter management Activity ends April Climate Resilience Authorities capacity in at least 20 shelter of the 2026 - Project (P165870) managément Directorate commites of the Civil estimated General Protection (DGPC) in 5 departments coordination, 3) Strengthen and response capacity preparedness from the national to the of the DGPC departmental level of the Support the development Early Warning National Multi-Hazard Multi-Hazard Early System National March 2017 Dec Warning System for the Active (a) Assist in the preparation Census Governance Statistical Capacity Fifth Population and Housing WBG Ministry of Building and and Improving Hait's Finance, National Public Financial (b) Improve budget management and Public Financial Institute of Management and oversight through timely Management and statistics (IHSI), more comprehensiver reporting and Statistical Information Oversight which include the deployment IFMIS for Project institutions operationalization of an (CSCCA. CNMP, effective and transparent budget of ULCC, CSO, management. and strengthening their COCIP), IGF) oversighti institutions in fulfilling mandate to ensure in the greater use of public accountability April 2024 Dec 2025 resources of National Active AML-CFT Support for preparation (NRA) for money Governance Risk Assessment financing WBG BRH laundering and terrorist E a --- Page 132 --- Start Date End Date Status Workstream Objective Feb 2021 June 2027 Delivering Beneficiary Sector and/or update more Active E Project Institution Institution Social Safety Net 1) than Register 200,000 new households in the Ministry of Fiscal registry SIMAST countrySocial WBG/IADB/ Social Affairs national the MAST in WBG Adaptive USAID/WFP wide; 2) Support to Protection for and Labor paying monthly cash transfers Increased Resilience more than 22,000 vulnerable Anse Project households in the Grande the current Department: 3) Enhance to facilitate digital payment system money transfers (Management Information System to support operations and delivery process) and implement a Social 4) Adopt Policy action plan (as a Protection mechanisms S set of social protection 2023-25); 5) Establish in the period and the design, parameters sources for potential financing social protection in emergencies the (shock- -response), 6) Support law. Dec 2027 review of MAST organic Strengthening Public Management Public Financial Service Delivery Oct-2024 Ministry of Fiscal Management to Improve of Economy IADB Finance of 1) Support the Ministry of the Republic of Fiscal Fiscal Management and Finance (MEF) their IADB Ministry SOES of Haiti in strengthening for the Finance capabilities and knowledge of State-Owned fiscal management Enterprises (SOES); and of 2) improve the overall diagnostics their investment SOES' governance. frameworks, and the fiscal management of their productive activities. ngthening Public Management Public Financial Service Delivery Oct-2024 Ministry of Fiscal Management to Improve of Economy IADB Finance of 1) Support the Ministry of the Republic of Fiscal Fiscal Management and Finance (MEF) their IADB Ministry SOES of Haiti in strengthening for the Finance capabilities and knowledge of State-Owned fiscal management Enterprises (SOES); and of 2) improve the overall diagnostics their investment SOES' governance. frameworks, and the fiscal management of their productive activities. --- Page 133 --- Project Delivering Institution Beneficiary Program to Institution Sector Safety Nets Strengthen for IADB FAES Workstream Vulnerable Populations Social Social Safety Net Objective Status Start Date Objective: Contribute to End Date food insecurity and reducing Ongoing November medium- and long- -term increasing resilience the November of vulnerable Main expected populations in Haiti 1) 200 000 people results: unconditional cash receiving transfers for improved food security. 2) 60 000 people receiving conditional cash transfers for their participation in cash-f for- -work projects. 3) 170 small community be implemented under the prajects will for Work" framework. "Cash 4) 110 000 people transfers and a package receiving of cash complementary 5) Protocol social services. for the and operational guide management of Tackling Food persons drafted and repatriated Insecurity and IADB FAES 6) 92 000 new households adapted. Fostering Resilience Social Social Safety Net registered in SIMAST registry, through Safety Net for Objective: to address food Vulnerable Populations insecurity among vulnerable Ongoing November populations in Haiti by November access to food and improving use of preventive and increasing the health services. essential Main expected results: 1) 16 000 beneficiaries will receive cash transfers for their in cash-for-workp participation 2) 18 000 beneficiary projects. receive transfers patients will compliance with conditional to the treatment healthcare preventive and 3)70 000 new services. And households will be registered in SIMAST registry. È --- Page 134 --- Start Date End Date Status Workstream Objective June 2024 June 2028 Delivering Beneficiary Sector to foster human security Ongoing X Project Institution Institution Social Safety Net and Objective: Haiti by addressing the FAES Social Health in related to food security, Community-ibased IADB needs health, and children and youth program to foster inclusion of vulnerable population. human security in Main expected results: Haiti 1) 165 000 people will transfers receive for unconditional cash improved food security. will receive 2)74 400 beneficiaries cash transfers for their participation in cash-for-work projects. will receive at 3) 370 770 people of the Essential least one service their Care Package through network. community-based 000 children 6 to 36 months will 4) 2 enrolled in the Reach Up and be Learn 000 program. youths will be enrolled 5)20 into the safe spaces for youth activities. Health Districts (UAS) will 6) 12 strengthening plan with conclude PAHO support. households will be 7)56 000 new in SIMAST registry. Feb 2018 April-2027 registered of the MPEC Matrix of Active Elaboration Actions for of Fiscal Planning, and Priority and Strategic for the EU Ministry programming, 2023-2025 Support SBC-II Planning and budgeting evaluation of the PSDH Support External for strengthening public policy Cooperation framework (PME monitoring for (MPEC) Support PSDNLPOEEPNPPSI of Ministry sector the development in the context of the plans implementation of Program Budgets Support for the in SIMAST registry. Feb 2018 April-2027 registered of the MPEC Matrix of Active Elaboration Actions for of Fiscal Planning, and Priority and Strategic for the EU Ministry programming, 2023-2025 Support SBC-II Planning and budgeting evaluation of the PSDH Support External for strengthening public policy Cooperation framework (PME monitoring for (MPEC) Support PSDNLPOEEPNPPSI of Ministry sector the development in the context of the plans implementation of Program Budgets Support for the --- Page 135 --- Project Delivering Beneficiary Institution Institution Sector Workstream Objective Status Start Date End development of the sectoral Date SBC II of the Ministries plans EU as part of the Office of Governance implementation of Program Management State modernization Budgets. and Human plan Evaluation of the State Resource Modernization Plan (2018-23) and Active Feb 2018 SBC-II (OMRH) formulation of a April-2027 EU the elaboration concept note for Ministry of Fiscal of the new plan Finance Public Finance Management Support for the revision and External Control harmonization of the of the Organic Laws Active Feb 2018 ULCC, CNMP and CSCCA April-2027 Monitoring of the regular SBC-II publication of EU Ministry accordance with Public Contracts in of Fiscal legal and Finance Public Finance regulatory provisions Management Public Support for capacity building of the Finance Reform Commission Active Feb 2018 Support for the April-2027 TAP 2020-22 and preparation 2024- -26 of the being finalized) (currently SBC- II preparation of Support for the EU on the monitoring reports Ministry of Fiscal finance implementation of public Finance State Treasury reforms. management Diagnostic study of the DGTCP's capacity to monitor revenues and Active Feb 2018 manage the State treasury and April-2027 public debt Feasibility study for SBC-II EU strengthening the DGTCP'SIT Ministry of MacroCommittee capacity Support for the Treasury Finance Macroeconomic economy management Strengthening DEE/MEF'S analytical of capacities: the support for the revision Active Feb 2018 April-2027 macroeconomic model support for forecasting capacity building management support for --- Page 136 --- Project Delivering Beneficiary Institution Institution Sector Workstream Objective Status Start strengthening analytical Date End Date SBC II support for the notes - EU Economic, development of the Ministry of Fiscal Database. Financial and Social Finance Revenue Mobilization Strengthen revenue and administration Active Administration, improved governance of Tax Jul - 2018 April-2027 SBC- Il Administration, local Customs EU AML/CFT and Education Ministry municipalities, Coordination Governance AML/CFT management) (financial Committee Technical assistance on anti-money (MEF-MJSof laundering for the implementation Feb 2018 BRH-UCREF) regulations in line with April-2027 international standards and Support For Trade, Expertise presentation of the case of Revenues, France/AFD/ General Governance the Mauritius FATF to help remove Haiti from Equipment USAID/EU Customs Governance and Anti- The grey list. Acquisition, and Administration Corruption and is to overall objective of the activity Modernization of the (AGD)/ Revenue strengthen the General Active Sep 2024 General Customs Ministry of AdmmarationvReren Customs Administration of Haiti Sept-2028 Administration Economy and ue Mobilization (Administration Générale des (STREAM) Finance (MEF) Douanes d'Haiti Or "AGD") to increase the mobilization of and domestic facilitate resources and to secure Haiti. A core international trade in STREAM component of the and digital program is the automation customs transformation of includes operations (SYDONIA), This digitizing customs declarations, clearance payments, and processes to expedite imports and simplify for private businesses. transactions the program aims to improve Additionally, Sept-2028 Administration Economy and ue Mobilization (Administration Générale des (STREAM) Finance (MEF) Douanes d'Haiti Or "AGD") to increase the mobilization of and domestic facilitate resources and to secure Haiti. A core international trade in STREAM component of the and digital program is the automation customs transformation of includes operations (SYDONIA), This digitizing customs declarations, clearance payments, and processes to expedite imports and simplify for private businesses. transactions the program aims to improve Additionally, --- Page 137 --- Project Delivering Beneficiary Institution Institution Sector Workstream Objective customs governance Status Start Date End Date by strengthening anti-corruption measures, enhancing human resources management and Support and promoting gender strengthening USAID, UNDP, Government the AGD, with a equality within institutions and Canada of Haiti Governance female representation target of 35 percent The main objectives for by 2028. include: 1) strengthen the project Active Sept 2024 and transparency National ID Card gender acountability, 2) promote Program USAID and Office of equality and inclusive OAS Governance governance. National Identification This three-year activity focuses on (ONI) ensuring that all Haitians have the Active June 2023 basic right to identity and the June-2026 vote possibility while to exercise their right to technical strengthening the National capacities of the Haitian Through identification this Office (ONI), register and distribute program, USAID will ID cards. Technical over 2 million support the ONI in assistance the will issuing and registration, biometric distribution of its new cards national identification - prior to the next and educating the population election(s) civil identity and the about process. The registration C ONI's technical activity will strengthen the institution capacity and help plan that will guide prepare its a strategic through 2028. The operations activity include the objectives of the recruitment following: 1) building of ONI training, staff; and 2) capacity a nationwide ID card creation of system; 3) distribution development and - --- Page 138 --- Project Delivering Beneficiary Institution Institution Sector Workstream Objective execution of a nationwide Status Start Date End Date information campaign about public the new national ID cards, including registration and collection instructions. --- Page 139 --- MONETARY FUND INTERNATIONAL HAITI REPORT FOR THE 2024 ARTICLE IV STAFF ANNEX 5, 2024 COMBARTATOR-RIORATORS November Prepared By Western Hemisphere Department (in consultation with other departments) CONTENTS FUND RELATIONS FINANCIAL INSTITUTIONS AND RELATIONS WITH OTHER INTERNATIONAL KEY BILATERAL PARTNERS Objective execution of a nationwide Status Start Date End Date information campaign about public the new national ID cards, including registration and collection instructions. --- Page 139 --- MONETARY FUND INTERNATIONAL HAITI REPORT FOR THE 2024 ARTICLE IV STAFF ANNEX 5, 2024 COMBARTATOR-RIORATORS November Prepared By Western Hemisphere Department (in consultation with other departments) CONTENTS FUND RELATIONS FINANCIAL INSTITUTIONS AND RELATIONS WITH OTHER INTERNATIONAL KEY BILATERAL PARTNERS --- Page 140 --- HAITI FUND RELATIONS (As of September 30, 2024) Membership Status: Joined September 08, 1953; Article VIII General Resources Account: SDR Million % Quota Quota 163.80 100.00 IMF's Holdings of Currency (Holdings Rate) 143.26 87.46 Reserve Tranche Position 20.54 12.54 SDR Department: SDR Million % Allocation Net cumulative allocation 235.50 100.00 Holdings 69.42 29.48 Outstanding Purchases and Loans: SDR Million % Quota RCF Loans 179.16 109.38 ECF Arrangements 1.57 0.96 Latest Financial Commitments: Arrangements Type Date of Amount Approved Amount Drawn Expiration Date Arrangement (SDR Million) (SDR million) ECF May 18, 2015 Nov 17, 2016 49.14 7.02 ECF Jul 21, 2010 Dec 24, 2014 40.95 40.95 ECF 1/ Nov 20, 2006 Jan 29, 2010 180.18 180.18 1/ Formerly PRGF. Outright Loans Type Date of Amount Approved Amount Drawn Expiration Date Arrangement (SDR Million) (SDR million) RCF Jan 23, 2023 Jan 25, 2023 81.90 81.90 RCF Apr 17, 2020 Apr 21, 2020 81.90 81.90 RCF Nov 18, 2016 Nov 23, 2016 30.71 30.71 2 INTERNATIONAL MONETARY FUND 180.18 1/ Formerly PRGF. Outright Loans Type Date of Amount Approved Amount Drawn Expiration Date Arrangement (SDR Million) (SDR million) RCF Jan 23, 2023 Jan 25, 2023 81.90 81.90 RCF Apr 17, 2020 Apr 21, 2020 81.90 81.90 RCF Nov 18, 2016 Nov 23, 2016 30.71 30.71 2 INTERNATIONAL MONETARY FUND --- Page 141 --- HAITI Projected Payments to Fund: use of resources and present holdings of SDRs) (SDR Million; based on existing 16.38 24.57 3.94 15.03 22.52 5.87 Principal 5.86 5.87 5.87 Charges/Interest 1.54 28.39 22.25 30.44 5.48 20.9 Total and Exchange Restrictions: Exchange Rate Arrangement rate regime is floating. The de facto exchange Haiti's currency is the gourde. The de jure exchange rate arrangement is stabilized. Sections 2(a), 3, and 4 of the IMF's Articles of has the obligations of Article VIII, and restrictions Haiti accepted system free of multiple currency practices Agreement, and maintains an exchange international transactions. of payments and transfers for current on the making Safeguards Assessment: with the in August 2019 in connection assessment of the BRH was completed risks at The last safeguards The assessment concluded that safeguards request for an RCF arrangement in early-2019. to: complete amendments to the BRH Law the BRH remained high and made the recommendations transparency and decision the central bank' S autonomy, enhance its accountability, and to strengthen oversight by the Board; reinforce membership making structure, and establish independent financial reporting practices by operational modalities of the Audit Committee; strengthen modernization of the internal audit function; implementing IFRS with IMF TA support; complete the including arrangements in reserve management, strengthen governance and accountability and strict segregation of operational regarding the Investment Committee composition the BRH investment policy and and prepare a medium-term plan for updating with the principles of responsibilities; allocation and portfolios that are consistent transitioning to strategic asset bank. safety and liquidity incumbent upon a central conducted in March 2024, triggered by concerns safeguards monitoring mission was The A targeted on the Central Bank of Haiti's (BRH)'s operations. over the impact of a June 2023 impact program monetary data, included cybersecurity, foreign reserves management, that on mission's scope financial reporting. The mission concluded progress banking operations, external audit, and had been slow and most of the implementation of the 2019 safeguards recommendations recommendations remained outstanding. INTERNATIONAL MONETARY FUND 3 bank. safety and liquidity incumbent upon a central conducted in March 2024, triggered by concerns safeguards monitoring mission was The A targeted on the Central Bank of Haiti's (BRH)'s operations. over the impact of a June 2023 impact program monetary data, included cybersecurity, foreign reserves management, that on mission's scope financial reporting. The mission concluded progress banking operations, external audit, and had been slow and most of the implementation of the 2019 safeguards recommendations recommendations remained outstanding. INTERNATIONAL MONETARY FUND 3 --- Page 142 --- HAITI Article IV Consultations: The last Article IV consultation was concluded on January 24, 2020 (IMF Country Report No. 20/121, available at: tuechewsuntosknnsscatiensictiwiencehwvea00a0g0ns32012A10ERC Comsbinetultseosrtantsusememtbphelendine.heeisnmoaeisr.oo) Technical Assistance (since last Article IV consultation): Department Date Purpose STA 02 Sep 2024 13 Sep 2024 TA HFE Mission 3.2 MCM 26 Aug 2024 31 Oct 2024 (Virtual) CARTAC FY25 August to Oct- Banking Supervision Regulatory Framework and RBS FAD 29. Jul 2024 09 Aug 2024 CISTX/fCS/Enforcement Strengthening Valuation risks- -based Controls - Input 3. FAD 14 Jul 2024 20 Jul 2024 T/ Off site Mission - Tax code New LEG 01 Jul 2024 30 Sep 2024 Haiti GDA - Political Analysis Desk Work FY25 FAD 10. Jun 2024 - 21 Jun 2024 FAD STX HYBRID MISSION Cash management Fiscal reporting FY25 MCM 03 Jun 2024 - 31Jul 2024 Banking Supervision Regulatory Framework and RBS FAD 24. Apr 2024 30 Apr 2024 (Virtual) Support to the drafting of the application laws of the new tax code FAD 13 Mar 2024 - 16 Mar 2024 FAD STX Follow-Up TSA FY24 STA 04 Mar 2024 15 Mar 2024 TA - (Reserve Assets) Template MCM 20 Feb 2024 30 Apr 2024 (Virtual) FY24 Feb-Apr Banking Supervision Regulatory Framework and RBS virtual STA 22 Jan 2024 - 02 Feb 2024 TA NAC - Improving GDP FY24 Mission 2 MCM 11 Dec 2023 15 Dec 2023 Haiti GDA - Main Mission Field MCM 04 Dec 2023 - 15 Dec 2023 STX Mission - Developing Robust Valuation Systems MCM 04 Dec 2023 15 Dec 2023 (Virtual) STX Mission - Developing Robust Valuation Systems Additional Resources LEG 27 Nov 2023 19 Dec 2023 (Virtual) GDA Main Mission FY24 FAD 27 Nov 2023 01 Dec 2023 (Virtual) FAD Virtual Mission MCM 06 Nov 2023 - 26 Jan 2024 FY24 Oct 2023 Banking Supervision Regulatory Framework and RBS LEG 31 Oct 2023 - 01 Mar 2024 GDA - Political Analysis II LEG 31 Oct 2023 01 Mar 2024 GDA - Political Analysis I STA 30 Oct 2023 - 10 Nov 2023 TA BOP/IIP Address data gaps LEG 26 Oct 2023 30 Apr 2024 GDA - Political Analysis FAD 15 Oct 2023 21 Oct 2023 HQ Diagnostic Off site Mission MCM 10 Oct 2023 - 12 Oct 2023 (Virtual) Oct FY24 Follow-up: Finalization of Charter of Accounts for Banks LEG 11 Sep 2023 - 18 Sep 2023 (Virtual) GDA - Scoping Mission LEG 11 Sep 2023 - 18 Sep 2023 (Virtual) GDA Scoping Mission FID participation MCM 24. Jul 2023 - 29 Sep 2023 Jul FY24 Basel II-III Implementation Regulatory Framework and RBS FAD 20 Jun 2023 22 Jun 2023 (Virtual) HQ Remote Mission FAD 01 May 2023 28 Jul 2023 (Virtual) STX Activity Follow- -up Tax Code and Fuel Subsidy reform MCM 18 Apr 2023 - 21 Apr 2023 (Virtual) Apr FY23 Follow-up mission on the chart of accounts 4 INTERNATIONAL MONETARY FUND oping Mission FID participation MCM 24. Jul 2023 - 29 Sep 2023 Jul FY24 Basel II-III Implementation Regulatory Framework and RBS FAD 20 Jun 2023 22 Jun 2023 (Virtual) HQ Remote Mission FAD 01 May 2023 28 Jul 2023 (Virtual) STX Activity Follow- -up Tax Code and Fuel Subsidy reform MCM 18 Apr 2023 - 21 Apr 2023 (Virtual) Apr FY23 Follow-up mission on the chart of accounts 4 INTERNATIONAL MONETARY FUND --- Page 143 --- HAITI MCM 01 Mar 2023 28 Apr 2023 Mission LTX/STX Improvements in Cash Management (Training) LEG 11 Jan 2023 - 13 Jan 2023 Mission on First Draft MCM 01 Jan 2023 30 Apr 2023 (Virtual) Jan FY23 Building RBS Framework Peripatetic Advisor Work FAD 06 Dec 2022 - 13 Dec 2022 STX Activity Follow-up on the Tax Code Revisions STA 26 Oct 2022 - 04 Nov 2022 (Virtual) TA-E BOP/IIP-Address Data Gaps STA 06 Sep 2022 19 Sep 2022 (Virtual) TA - GDP - FY23 Developing QGDP (DS) FAD 05 Aug 2022 27 Jan 2023 (Virtual) Pre-scoping work FAD 01 Aug 2022 30 Sep 2022 (Virtual) STX Activity Additional support towards completion in September 2022 (Extra) FAD 19. Jul 2022 22 Jul 2022 (Virtual) Scoping Mission FAD 20 Jun 2022 - 08. Jul 2022 FAD STX Follow-Up TSA FY23 ESP FAD 15. Jun 2022 - 01 Jul 2022 HQ Follow Up MTBF FAD 15 Jun 2022 - 04 Jul 2022 (Virtual) HQ Follow Up MTBF FAD 13 Jun 2022 30 Sep 2022 (Virtual) STX Activity Additional support towards completion in September MCM 08 Jun 2022 08. Jun 2022 FY22 Carryover Charge MCM 06 Jun 2022 08 Nov 2022 (Virtual) May FY23 Central Bank Digital Currency (Virtual) STA 17 May 2022 30 May 2022 (Virtual) WHD - TA - GFS D4D LEG 12 May 2022 - 27 May 2022 May FY23 Translation MCM 01 May 2022 - 31 Dec 2022 (Virtual) May FY23 Building RBS Framework Peripatetic Advisor Work MCM 01 Feb 2022 30 Apr 2022 Feb FY22 Building RBS Framework Peripatetic Advisor Work FAD 11 Jan 2022 31 Jan 2022 PIMA and C- PIMA Mission LEG 01 Dec 2021 - 31 Jan 2022 Peripatetic Advisor Work II LEG 08 Jun 2021 - 29 Apr 2022 Desk- Based Review FY21 LEG 01 May 2021 - 31 Oct 2021 Peripatetic Advisor Work I LEG 01 May 2021 - 30 Apr 2022 LTX Desk Work STA 15 Mar 2021 24 Mar 2021 (Virtual) (Remote TA) CARTAC: BPM6 Implementation and Develop QEDS FAD 25 Jan 2021 07 Feb 2021 (Virtual) Tax and customs administration FAD 20. Jan 2021 - 29 Apr 2022 (Virtual) STX STA 23 Nov 2020 02 Dec 2020 (Virtual) (Remote TA) Government Finance Statistics (D4D) FAD 21 Oct 2020 09 Nov 2020 (Virtual) MTBF [Remote] FAD 21 Oct 2020 - 04 Nov 2020 (Virtual) Budget classifications under COVID-19 [Remote] FAD 25 July 2020 - 15 Oct 2020 (Virtual) Follow up and finalization of the Tax Procedure Code [remote] FAD 20 Jul 2020 - 30 Nov 2020 (Virtual) Fuel Pricing Mechanism [remote FAD 15. Jul 2020 31 Jul 2020 (Virtual) Cash Management and Expenditure Plans [Remote] FAD 11 Jun 2020 12. Aug 2020 (Virtual) Reforming Fuel Price Subsidies [remote] LEG 06 May 2020 - 15 May 2020 (Virtual) TA Amendment of the Central Bank Law STA 29 Apr 2020 - 12 May 2020 (Virtual) Monetary and Financial Statistics (FSSF) (Remote TA) FAD 19 Feb 2020 - 13 March 2020 Tax Procedure Code STA 03 Feb 2020 - 14 Feb 2020 CARTAC: BOP/IIP Implement BPM6 (Offsite to Haiti) INTERNATIONAL MONETARY FUND 5 (Virtual) Reforming Fuel Price Subsidies [remote] LEG 06 May 2020 - 15 May 2020 (Virtual) TA Amendment of the Central Bank Law STA 29 Apr 2020 - 12 May 2020 (Virtual) Monetary and Financial Statistics (FSSF) (Remote TA) FAD 19 Feb 2020 - 13 March 2020 Tax Procedure Code STA 03 Feb 2020 - 14 Feb 2020 CARTAC: BOP/IIP Implement BPM6 (Offsite to Haiti) INTERNATIONAL MONETARY FUND 5 --- Page 144 --- HAITI RELATIONS WITH OTHER INTERNATIONAL FINANCIAL INSTITUTIONS AND KEY BILATERAL PARTNERS World Bank: hitip/Aowsworidbank.org/en/countiy/haiti Inter American Development Bank: htps/bwociadborg.encseo-wecseekounty-offceschail World Food Program: Haiti World Food Programme EU Delegation of the European Union to Haiti L EEAS USAID: Haiti I + U.S. Agency for International Development Caribbean Development Bank: Mtp.bnwaebsankegikonkegitountrics.andmenbesboronining. members/haiti 6 INTERNATIONAL MONETARY FUND --- Page 145 --- MONETARY FUND INTERNATIONAL HAITI REPORT FOR THE 2024 ARTICLE IV STAFF ANALYSIS SUSTAINABILITY CONSULTATION-DEBT November 6, 2024 Monetary Fund and Prepared by staff of the International Approved By Alonso-Gamo the World Bank. Patricia (WHD) and Peter Dohlman (SPR); Manuela Francisco and Oscar Calvo-Gonzalez (IDA World Bank). Haiti: Joint Bank-Fund Debt Sustainability Analysis Risk of external debt distress High' Overall risk of debt distress High in the risk rating Debt is sustainable threshold Granularity Yes: High probability of protracted Application of judgment breaches on external debt over a 20-year horizon from FY2037 and important risks and vulnerabilities to debt outlook. conducted at the time of the Request for a Disbursement under This DSA updates the analysis in January 2023, with the Food Shock Window of the Rapid Credit Facility (RCF) approved and the Haiti's risk of debt distress is assessed as "high" overall assessment largely unchanged. debt relief received from Venezuela which has overall public debt remains sustainable despite the risk of external debt distress rating arises improved key debt indicators significantly. The high indicators breach their respective indicative from the fact that both exports-related external debt breaches occur beyond the 10-year threshold under the baseline scenario. Although the distress is deemed high due to the judgement is applied and the risk of debt projection period, and export base, accelerated by the ongoing security continued narrowing of Haiti's production the fact trend of The risk of overall debt distress rating arises from steady-upward debt and the crisis. high the now low level of public ratio. Nevertheless, public debt servrice-to-revenue and is based on the World Bank' 's 2023 CPIA and the is estimated at 2.642 DSA. 1 The current Composite Index (CI) capacity remains "medium" as in the previous October 2023 WEO. Haiti's debt-carrying projection period, and export base, accelerated by the ongoing security continued narrowing of Haiti's production the fact trend of The risk of overall debt distress rating arises from steady-upward debt and the crisis. high the now low level of public ratio. Nevertheless, public debt servrice-to-revenue and is based on the World Bank' 's 2023 CPIA and the is estimated at 2.642 DSA. 1 The current Composite Index (CI) capacity remains "medium" as in the previous October 2023 WEO. Haiti's debt-carrying --- Page 146 --- HAITI the SMP baseline scenario, reforms to boost growth under to major downside risks, of some structural remains however subject implementation public debt. The outlook due to deteriorating point to a sustainable in Haiti debt carrying capacity and institutional a potential downgrade serious economic, policy, to debt including Haiti continues to face with regard and as brain drain and, specifically natural fundamentals, vulnerabilities, exposure to governance well as heightened of the fragities-induding debt data limitations-as debt hinges on the ability management, persisting of overall hazards and climate change. The sustainability the short to medium term. donor financing in authorities to secure A. Public Debt Coverage local this DSA covers the central govemment, debt used for electricity company Coverage. Gross public the state-owned (BRH) to 1. autonomous organisms, Banque de la République d'Haiti govemnments. extrabudgetary and advances by the central bank- the BRH and include debt to Electricité d'Haiti (EDH), External debt data come from as an estimate of (Text Table 1). oil companies, as well the government bilateral creditors, including foreign basis. No data are available on multilateral and debt is defined on a residency and SOE debt. liabilities. External enterprises (SOES), non-guaranteed contingent to other state-owned guaranteed debt, including Haiti: Public Debt Coverage Check box Text Table 1. X Subsectors of the public sector X 1 Central government 2 State and local government X elementsi in the general government 3 Other fund o/w: Social security funds (EBFS) sector, including to SOES) 5 o/wr Extra budgetary other entities in the public and private 6 Guarantees (to on behalf of the government) 7 Central bank (borrowed debt Ressons ford deviations from the odsututine 8 Non-gusanteeds SOE Default Unndfo.h the analynts Thec try'scove ondipaisoet nt not 11 percent erc ercer ent ofPPP SIGOP stock IEae debrig (guar oltheg ame (PPP) uar yth Semeneto SFinane PubICP cia Private Partnership et the defaul alue GOP) DP ubl The Teaoeinaosidn cludes defauit ne stim ock ate 12 tern G GDP sabiliti including to SOES. the debt coverage, is committed to expanding and the preparation and public 2. The governmenti debt data collection Under the Sustainable efforts are aimed at improving by the' World Bank. Ongoing review are supported has successfully implemented disclosure of the debt portfolio the Government of Haiti (GoH) In order to strengthen Development Finance Policy (SDFP), (PPAS) over the past three fiscal years. debt was and policy actions (PPG) non-concessional of several performance external public or publicly guaranteed was enhanced by the Ministry debt sustainability, new FY2023, and FY2024. Debt transparency Review starting in FY2022, limited to zero in FY2022, publication of quarterly Debt Portfolio by a tax expenditure Economy and Finance (MEF) Fiscal sustainability was improved of an technical assistance and training. PPA in FY2024 targeted enforcement following in FY2023. A follow-on fiscal rationalization plan MONETARY FUND 2 INTERNATIONAL and policy actions (PPG) non-concessional of several performance external public or publicly guaranteed was enhanced by the Ministry debt sustainability, new FY2023, and FY2024. Debt transparency Review starting in FY2022, limited to zero in FY2022, publication of quarterly Debt Portfolio by a tax expenditure Economy and Finance (MEF) Fiscal sustainability was improved of an technical assistance and training. PPA in FY2024 targeted enforcement following in FY2023. A follow-on fiscal rationalization plan MONETARY FUND 2 INTERNATIONAL --- Page 147 --- HAITI for customs, to level the playing field for importers and automated vehicle management module implementation remains incomplete, as civil strengthen domestic resource mobilization. However, offices. In the context of deepening institutional disturbances resulted in damage to several customs waived the implementation of the customs and insecurity, the World Bank SDFP Committee fragilities Haiti from preparing PPAS for FY2025. PPA for FY2024 and exempted as the sum of claims of the overall banking Gross domestic public debt is calculated credits and 3. public sector (NFPS) plus suppliers' sector (including the BRH) to the non-financial sector's claims data come from the the authorities. The banking domestic arrears as reported by by the BRH to the Fund. The Standardized Report Forms 1SR and 2SR Tables reported and social Fund's Spécial de Gratuité de l'Education (PROSGATE), accounts of the education fund, Programme ONA, are consolidated with funds, Pension civile and Office Nationale dAsurance-Vieilese debt does not include security absence of data, the calculation of domestic public the rest of the NFPS. In the sector, which are understood to be negligible. Treasury bills and bonds held outside the banking and salaries, or goods and services, are related to current spending on wages in the current Overdue payments year's budget and typically processed (paid) effectively recorded in the subsequent due to oil distribution companies 2 This happened mostly in recent years with payments fiscal year. payments in salary and diplomatic representations which had been cleared, though, some delayed of the security in September 2022. in FY2022 following the deterioration were observed B. Background on Debt following the debt relief from the 2010 earthquake. 4. Public debt increased in the years international creditors after the 2010 Haiti received debt relief of about US$1.0 billion from Debt Relief Trust US$268 million from the Fund under the Post-Catastrophel from 19 earthquake, including the World Bank 3 As a result, external public debt fell Fund (CCRT) and US$36 million from in FY2011 (both using old GDP series). percent of GDP at end-FY2009 to less than 9 percent disbursements related to the until FY2020, mostly driven by Afterwards, debt rose steadily external side, and by unremunerated advances from PetroCaribe agreement with Venezuela on the from domestic nonside. The government obtained some financing the BRH on the domestic a loan with Taiwan Province of China (for (US$123 million) in FY2018 and signed the IMF financial companies the latter was disbursed in tranches." In April 2020, US$150 million) in January 2019, although (SDR 81.9 million) under the RCF to help cover a disbursement of US$111.6 million Board approved orders created by a public entity responsible for on are defined as all payment Since the 2 Payment arrears expenditures but not paid 90 days after the Treasury authorizes are payment. not accounted as authorizing expenditure payments does not extend beyond the 90-day deadline, they maturity of overdue payments payment arrears. financing from the IDA Crisis Response Window 3 The World Bank also provided US$508 million and in grant long-term restoration of capacity. (CRW) to support the country's reconstruction of Taiwan Province of China to compensate 4 The loan package, which includes grants from the government higher variable rate applicable to the loan, is the difference between a low fixed rate and the current disbursed SO far, plus US$30 million in for Of this loan, US$82.5 million has been assessed to be concessional. US$37.5 million to be disbursed later. FY2022, with the remaining INTERNATIONAL MONETARY FUND 3 provided US$508 million and in grant long-term restoration of capacity. (CRW) to support the country's reconstruction of Taiwan Province of China to compensate 4 The loan package, which includes grants from the government higher variable rate applicable to the loan, is the difference between a low fixed rate and the current disbursed SO far, plus US$30 million in for Of this loan, US$82.5 million has been assessed to be concessional. US$37.5 million to be disbursed later. FY2022, with the remaining INTERNATIONAL MONETARY FUND 3 --- Page 148 --- HAITI also debt relief worth US$22.6 million needs related to the COVID-19 pandemic. Haiti was granted debt service to the IMF million) in April 2021 under the Fund's updated CCRT covering of (SDR 15.21 2022.5 Haiti also benefited from an SDR allocation falling due from April 14, 2020, to April 13, was on-lent by the central bank to the 157 million) in August 2021, half of which 6 The US$224 million (SDR from the 2021 earthquake government for emergency spending, including recovery spending Food Shock Window (FSW) of the (about US$110 million) under the IMF provided a disbursement 2023 to address urgent balance of payments needs Rapid Credit Facility (RCF) through in January food insecurity and higher import food price. related to acute does not trigger an "in debt distress" rating for 5. Central bank financing to the treasury GDP in FY2023, is not serviced but the July 2022 Haiti. Government debt to BRH, at 12.3 percent of MEF imputed accrued interest (MoU) between the BRH and in Memorandum ofl Understanding securities held by the BRH; resulting in an increase government debt payment on non-negotiable starting with the October 2021 balance the stock of the BRH's net claims on central government liabilities into negotiable securities bearing recommends converting most of these of 10 sheet. The MoU over a fifty-year period with a grace period interest rate of 7.57 percent per annum and payable the 2019 safeguards In addition, the MoU supports BRH's efforts to implement of IFRS will enable years. Financial Reporting Standards (IFRS). Adoption recommendations on International of financial information, to be in line with and communication BRH to improve transparency and to better understand how its financial position may international best accounting practices, transmission channels, while harmonizing the impact the implementation of monetary policy and BRH on behalf of the Haitian state. of operations carried out by treasury and the accounting reduced Haiti's public-debt-toThe revision to the national accounts in 2020 markedly (IHSI) 6. assistance (TA), the Haitian Statistics Institute GDP ratio. After several years of technical national accounts that led to a 65 percent released in October 2020 re-based and re-benchmarked inclusion of the informal sector. revision in nominal GDP (FY2019), owing in part to the of GDP in FY2020 upward Public debt fell to 22.7 percent These revisions lowered debt ratios substantially. DSA under the RCF-and to 28.9 percent in in the 2020 from 51.9 percent as previously projected sharply as a result of the rebasing but FY2021. At the same time domestic revenue ratios dropped the authorities are now addressing by also because of a real decline in revenue collection, which Program (SMP). As a by the Staff-Monitored implementing a structural reform agenda supported in FY2021 from 6.4 percent in FY2019of GDP, domestic revenue fell to 5.9 percent revenue collection percent under the old GDP series. While still low, domestic compared with 10.7 percent 5.3 percent of GDP in FY2022), thanks to tighter improved in FY2023 to 6.4 percent of GDP (from exchange receipts from exports of goods control at customs and increased oil tax revenue. Foreign from 11.7 percent in FY2019 or 5.6 percent of GDP in FY2023 and services also fell to an estimated 5 See Catastrophe Containment and Relief Trust, 2021. when holdings fall below to public debt directly, when SDRS are used (i.e., debt in the gross 6 While not contributing gross for instance) they enter the DSA as a long-term liability allocations through on-lending, and the net interest payments in the debt service. external debt statistics 7 Annual data refer to the fiscal year ending September 30. INTERNATIONAL MONETARY FUND percent in FY2019 or 5.6 percent of GDP in FY2023 and services also fell to an estimated 5 See Catastrophe Containment and Relief Trust, 2021. when holdings fall below to public debt directly, when SDRS are used (i.e., debt in the gross 6 While not contributing gross for instance) they enter the DSA as a long-term liability allocations through on-lending, and the net interest payments in the debt service. external debt statistics 7 Annual data refer to the fiscal year ending September 30. INTERNATIONAL MONETARY FUND --- Page 149 --- HAITI unfavorable domestic revenue trends and under the old series. As a result of these from 18.2 percent (Table 5). Haiti's debt service capacity has not improved ratios, Haiti's stock of Text Table 2. Haiti: Structure of Public Debt at end- -2023 7. At the end of FY2023, (Fiscal-year basis) in percent of public sector debt totaled US$5.9 billion (28.5 USS millions total debt GDP percent of GDP). 8 External public debt accounted Total External Debt 2699.0 45.5 12.9 45.5 of total public debt (12.9 percent of Multilateral creditors 321.0 5.4 4.2 1.5 1.2 for percent from oil o/w! IMF 248.4 0.6 0.2 GDP), 81.1 percent of which was generated o/w OPEC 35.4 37.2 0.6 0.2 financed by Venezuela's Petrocaribe o/wl o/w IFAD IDA 0.0 0.0 0.0 imports Table 2). The remainder was largely Bilateral creditors 2377.8 40.1 37.4 11.4 10.6 program (Text creditors, Venezuela 1/ 2216.1 2189.3 36.9 10.5 concessional debt from multilateral o/wl PetroCaribe BANDES 26.8 0.5 0.1 from the International Fund for Taiwan, o/w Province of China 161.7 2.7 0.8 including (IFAD) and the IMF. After Other borrowing 0.0 0.0 0.0 Agricultural Development between Haitian and Debt 3233.7 54.5 15.5 a debt reconciliation to Total Domestic 2564.5 43.2 12.3 authorities, Haiti's outstanding debt BRH 669.2 11.3 3.2 Venezuelan Other creditors Venezuela was assessed at US$2.2 billion (against Totalt Debt 5932.7 100.0 28.5 US$1.85 billion in the previous DSA), of which Sources: Haitian authorities, and Fund staff estimates. US$242.45 million accounted for unpaid interest. 1/"Technical Arrears" due to Venezuela were estimateda 242.45r million at about represented US$ 642.1 arrears" due to Venezuela milliona at end- September 2023, of which USS Total external "technical unpaidi interest. were estimated at US$642.1 million, about 3.2 external debt is unavailable. 30, 2023). Public information on private in FY2022. percent of GDP (September FY2023 to US$3.2 billion from US$3.05 billion Domestic public debt picked up slightly in attenuated by a valuation effect due to increase in domestic debt in US dollars has been partially of domestic This against the dollar in FY2023. Nearly 80 percent a 12 percent depreciation of the gourde Government debt to BRH slightly in the form of central bank advances to the government. to lower debt was from 12.2 percent of GDP in FY2021, thanks increased to 12.3 percent of GDP in FY2023, 1.9 percent of GDP in FY2022, of the fiscal deficit (2.8 percent of GDP in FY2021, monetary financing and 1.0 percent of GDP in FY2023). Venezuelan authorities finalized in January with Venezuela. Haitian and 8. 80 percent a 12 percent depreciation of the gourde Government debt to BRH slightly in the form of central bank advances to the government. to lower debt was from 12.2 percent of GDP in FY2021, thanks increased to 12.3 percent of GDP in FY2023, 1.9 percent of GDP in FY2022, of the fiscal deficit (2.8 percent of GDP in FY2021, monetary financing and 1.0 percent of GDP in FY2023). Venezuelan authorities finalized in January with Venezuela. Haitian and 8. Debt restructuring sum of US$500 million to Venezuela (as a through which Haiti paid a lump debt 2024 an agreement of which Venezuela granted forgiveness of external "technical arrears" due), in exchange DSAS), Haiti had portion debt. As indicated above (and in previous of US$1.69 billion on the remaining for debts incurred under the Petrocaribe agreement difficulties processing payments to Venezuela which led the government to place due to issues related to international sanctions on Venezuela, Therefore, the payment of the lump into an escrow account held at the BRH. was debt service payments financing requirements since it of US$500 million did not affect the government's gross sum Venezuela for debts incurred under the Petrocaribe agreement 8 Haiti had difficulties processing payments to Debt service payments to Venezuela made by the owing to issues related to international sanctions. account held at the BRH, recorded in U.S. dollars after proceeds had been placed in an escrow government into US dollars. received in gourdes were converted unless otherwise indicated. 9 All debt figures cited in this report are in US dollars INTERNATIONAL MONETARY FUND 5 debt service payments financing requirements since it of US$500 million did not affect the government's gross sum Venezuela for debts incurred under the Petrocaribe agreement 8 Haiti had difficulties processing payments to Debt service payments to Venezuela made by the owing to issues related to international sanctions. account held at the BRH, recorded in U.S. dollars after proceeds had been placed in an escrow government into US dollars. received in gourdes were converted unless otherwise indicated. 9 All debt figures cited in this report are in US dollars INTERNATIONAL MONETARY FUND 5 --- Page 150 --- HAITI through a combination of an increase in made by the central bank (fiscal agent of the government) 10 As a result of this debt restructuring, liabilities and drawdown in its foreign reserves. from its short-term debt-to-GDP ratios are now projected to decline sharply, the debt-to-GDP ratio and external in FY2024 and from 12.9 percent of GDP in of GDP in FY2023 to 14.1 percent of GDP US$95 million 28.5 percent Haiti will also be saving annually FY2023 to 1V2 percent of GDP in FY2024, respectively. which can be reallocated toward pro12.5 billion gourdes) from the debt service to Venezuela, (or poor and growth-enhancing expenditures. Forecasts on Macroeconomic C. Background under a new StaffThe baseline assumes a normative policy implementation 9. stability and growth. Nonetheless, Monitored Program (SMP) to restore macroeconomic and term and the outlook depicts a over the medium long growth projections are very conservative boost growth, and the sustained modest recovery. Restoring security could significantly structural reforms could help macroeconomic policies and appropriate implementation of sound and FDI, thereby fostering investment, growth, restore stability and attract more external financing the foundation for an eventual upper-creditreal incomes. While the SMP aims to lay the and higher after the SMP is assumed to be modest given tranche arrangement, reform implementation current challenging security. FY2024 4 percent, a six-year decline in a row, Real GDP is projected to contract in by worsened since January of the security situation that dramatically against the backdrop of the Multilateral Security Support mission 2024 (Text Table 3). The phased deployment environment and foster a recovery in should help to gradually improve the security the heightened uncertainties economic activity and growth by 2025. However, given disasters, the baseline scenario including those related to natural surrounding the outlook, over the medium term."1 assumes a modest growth of 1/2 percent remain elevated in FY2024 at 27.9 percent, reflecting Year-on-year inflation is expected to observed in FY2023 (31.8 percent) after the a sharp slowdown in the pace of deceleration of supply chains for goods reached in FY2022 (38.7 percent) due to the disruption peak violence. In the medium to long term, inflationary pressures and services caused by gang in the security situation and the should gradually ease with the expected improvement deficit. A stable real exchange rate reduction in monetary financing of the budget further over the medium term, following the gradual vis-à-vis the U.S. dollar is assumed in this DSA does not include the central bank. 10 The coverage of public sector exercise, using a neoclassical growth projection is based on a growth accounting for and UN 11 The 1V2 percent long-term share of 35 percent, based on staff projections investment 2024-29 at the production function with a labor and assuming that TFP grows during the projection period 0.1 above the projections for labor force growth, for 2013-19. Growth of 1V2 percent is percent same rate (1.2 percent) as the estimated average when Haiti recorded about 77 natural disasters. average observed real rate during 2013-19, MONETARY FUND 6 INTERNATIONAL growth projection is based on a growth accounting for and UN 11 The 1V2 percent long-term share of 35 percent, based on staff projections investment 2024-29 at the production function with a labor and assuming that TFP grows during the projection period 0.1 above the projections for labor force growth, for 2013-19. Growth of 1V2 percent is percent same rate (1.2 percent) as the estimated average when Haiti recorded about 77 natural disasters. average observed real rate during 2013-19, MONETARY FUND 6 INTERNATIONAL --- Page 151 --- HAITI bilateral rate being driven by inflation differential depreciation in FY2023, with the nominal vis-à-vis the U.S. Assumptions Compared to the The overall Text Table 3. Haiti: Macroeconomic balance of Previous DSA 1/ 2025-2 -29 Avg 2030-39 Avg the NFPS is Previous 2024 Current Previous Current Previous DSA Current DSA DSA DSA DSA DSA projected (annual percentage change, unless otherwise -4.0 indicated) 1.5 1.4 1.5 1.5 to post a GDP 1.2 10.7 12.2 9.7 7.2 of Real average) 14.0 25.9 surplus Consumer prices (period (in percent of GDP, unless otherwise indicated) 6.1 10.6 7.0 6.6 percent 9.4 11.7 10.0 5.6 8.1 7.0 of GDP in Total revenue and grants 7.1 4.9 7.8 7.4 13.9 8.0 Of which: Revenue 11.9 4.5 12.8 3.0 5.4 2.81 FY2024, Total expenditure 4.1 1.1 4.6 -3.3 -1.0 mainly due Of which: Capital expenditure -2.5 6.6 -2.8 -1.2 -1.0 -3.0 -0.9 Overall balance -0.5 -0.5 -1.8 3.6 6.4 4.4 to a capital Current account balance 6.3 3.3 6.5 17.3 Exports of goods and services 24.7 18.4 20.6 17.4 20.4 transfer of Imports of goods and services 5.9 percent Sources: Haitian authorities; and Fund staff estimates and projections. for a Disbursement under the Food Shock 1/ The previous DSA was conducted at the time of the Request of GDP Window in January 2023. received A small fiscal deficit of 0.1 percent of GDP is from the debt relief granted by Venezuela. realistic levels and the baseline FY2025. Current spending will revert to more projected in -given the high uncertainty surrounding scenario assumes no change in fuel price policy- reform. The fiscal deficit is expected likelihood and timing of a fully-fledged fuel price GDP in the long the medium term and reach nearly 1.0 percent of to widen gradually over the scaled to address the countries' investment and social spendings are up term as public deficit is expected to be financed with external daunting development needs. The and domestic market financing. financing, both concessional multilateral and bilateral, the medium term owing to is to keep strengthening in Domestic revenue projected mobilization reform agenda, including meaningful progress on the domestic revenue transparency, accountability, the tax and customs regimes and enhance efforts to simplify the tax base. and audit capacity, while broadening substantially to 0.5 percent of GDP in The current account deficit is projected to narrow violence which has slowed from 3.5 in FY2023 due to the intensification of gang FY2024 at the port in the capital Port-au-Prince, down-and even paralyzed at times- operations international trade passes. With the through which over 80 percent of the country's activity expected next year, restoration of security and the recovery of economic 1.0 of gradual forecast to widen before stabilizing at nearly percent the current account deficit is to follow historical trends. with remittance inflows projected GDP in the long term, needs is assumed to continue to prioritize external 10. Funding of future gross financing maturities, reducing rollshort and medium term with a view to extending financing in the bank lending to the private sector while increasing over risk, and creating more space for The SMP is expected to catalyze some external market contribution in the long term. domestic INTERNATIONAL MONETARY FUND 7 0 of gradual forecast to widen before stabilizing at nearly percent the current account deficit is to follow historical trends. with remittance inflows projected GDP in the long term, needs is assumed to continue to prioritize external 10. Funding of future gross financing maturities, reducing rollshort and medium term with a view to extending financing in the bank lending to the private sector while increasing over risk, and creating more space for The SMP is expected to catalyze some external market contribution in the long term. domestic INTERNATIONAL MONETARY FUND 7 --- Page 152 --- HAITI donor concessional financing (including financing to fund more capital expenditures as securing maintain debt sustainability. Nonetheless, in both short and medium terms, will be critical to to fall over the long grants), needs, the share of external financing is projected in percent of gross financing Treasury bills and Treasury bonds. Central bank term as government steps up borrowing through to be waived over the projection period, with financing, currently unremunerated, 12 is expected in the short and medium term while bills accounting for the bulk of domestic financing authorities deepen the Treasury are phased in in the longer term as the longer maturity debt instruments for commercial banks to securities, and given only modest opportunities or market for government dominance. 13 External debt financing, contracted diversify their portfolios in a context of fiscal only moderately in relative terms, is assumed to remain concessional and growing guaranteed, results of domestic revenue mobilization reforms. thanks to the expected of DSA toolbox for assessing the realism assumptions are credible as the 11. The baseline inconsistencies with historical trends and macroeconomict forecasts does not raise any major comparisons with peers. 3). The main drivers of public debt dynamics are Drivers of debt dynamics (Figure five years, with the exception of the expected to remain broadly the same as over the past is set to be muted. In addition, the real GDP growth rate and residual whose contribution is to be mainly debt-to-GDP ratio over the next five years projected change in public Venezuela in FY2024 as captured by the large "other driven by the debt relief granted by chart of Figure 3, unexpected changes in flows". As shown in the lower right forecast debt creating were mostly responsible for past real interest rate, residuals, and real GDP growth account and FDI, and real GDP debt, whereas residual, the current errors in total public debt (upper right chart of Figure 3). growth drove the errors in external (Figure 4). The projected three-year fiscal Realism of planned fiscal adjustment of the distribution of past adjustment is realistic, as it falls well below the top quartile of GDP) for a sample of LICS. of the primary fiscal deficit (2 percentage points fiscal adjustments rise in domestic revenues, the projected moderate Despite an expected significant of public investment and social expenditures adjustment is mainly due to the acceleration address the pressing huge infrastructure gap and to population's to close the country's basic social needs. and growth (Figure 4). Growth trajectory is Consistency between fiscal adjustment marked successively by an with fiscal adjustments in FY2024 and FY2025, fall in consistent in the fiscal balance. After the projected 4 percent improvement and deterioration territory in FY2025 and stabilize at 1.5 FY2024, growth is expected to return to positive activity predicates an in the medium to long term. The resumption of economic percent situation, thanks to the deployment of the Kenya-led improvement in the security debt shown in Table 3 reflect unremunerated central bank financing. 12 Real interest rates on domestic is assumed to be exclusively in domestic currency. 13 Projected internal financing MONETARY FUND 8 INTERNATIONAL in the fiscal balance. After the projected 4 percent improvement and deterioration territory in FY2025 and stabilize at 1.5 FY2024, growth is expected to return to positive activity predicates an in the medium to long term. The resumption of economic percent situation, thanks to the deployment of the Kenya-led improvement in the security debt shown in Table 3 reflect unremunerated central bank financing. 12 Real interest rates on domestic is assumed to be exclusively in domestic currency. 13 Projected internal financing MONETARY FUND 8 INTERNATIONAL --- Page 153 --- HAITI moderate long-term growth rate Multinational Security Support mission. The projected adverse effects of the crisis on GDP growth rate resulting from the reflects lower potential human and physical capital. and growth (Figure 4). The tool shows a Consistency between public investment in the and the current DSAS, divergence in share of public investment in GDP previous and medium term) and the impact of the crisis (in the short reflecting the lingering revenues and external financing (in the long expected improvement in domestic public scale over the projected years. Private investment is also expected to up term). Classification and Stress Tests D. Country remains rated "medium" as in the two previous DSA 12. Haiti's debt-carrying capacity debt-carrying from "medium" to of the Composite Indicator (CI) to assess to the despite the downgrade 2.64 1),14. The CI decrease is due mainly "weak" as a result of the decline of the CI to (Table DSA), and a lower import CPIA index (2.687 against 2.749 in previous deterioration in the country in DSA) due to the drop in gross against 44 percent previous coverage of reserves (40.5 percent (11.7 percent) also fell below of months imports in FY2022. Remitances-to-GDP based on the two reserves coverage during 2013-21). Since the classification the 15.5 percent cut-off value (on average capacity is maintained at "medium". vintages was "medium", Haiti's debt carrying previous considers the effects on debt of a In addition to the standard stress tests, the analysis The shock 13. Haiti's history of frequent major disasters. one-off major natural disaster, given similar to that caused by Hurricane Matthew in equivalent to 25 percent of GDP, at 120 percent assumes damage the 2010 earthquake were estimated 2016. Although the damage and losses following frequent as hurricanes and is thus of FY2009 GDP, this type of disaster is not as statistically liabilities on external and considered a tail risk event. 15 The stress test on combined contingent domestic debt was updated to reflect available data. 2.64 and is based on the World Bank' 's 2023 CPIA and the 14 The current Composite Index (CI) is estimated at remains "medium." October 2023 WEO. Haiti's debt-carrying capacity Role for the IMF," " IMF, December 15 "Small States' Resilience to Natural Disasters and Climate Change See 2016. INTERNATIONAL MONETARY FUND 9 is not as statistically liabilities on external and considered a tail risk event. 15 The stress test on combined contingent domestic debt was updated to reflect available data. 2.64 and is based on the World Bank' 's 2023 CPIA and the 14 The current Composite Index (CI) is estimated at remains "medium." October 2023 WEO. Haiti's debt-carrying capacity Role for the IMF," " IMF, December 15 "Small States' Resilience to Natural Disasters and Climate Change See 2016. INTERNATIONAL MONETARY FUND 9 --- Page 154 --- Table 1. Haiti: Debt Debt Carrying gCapacityand Carrying Capacity and Thresholds Threahelda Country Courtry Code Hati DeICaeng gCapacity Medium Applicable thresholds Final Classicationt based on Clasicationt Current untage thepesous bmsedon Classiationg APPUICABLE Medium vintage tropmous onsedonthe untages Weak APPLICABLE Medium 275 Medium EXTERNAL debt tburden Sresholds PVoldettins %of TOTALI public debt benchmark Exports PVottaalp putlic debtir GDP percentorcop Calculation oft the Clindex Exports Debt: servicei in' %of Revenue Componerts CPIA Coefficients (A) 10year average valuea/B) CIScore components Realgrowdhn (in percent) rate 0.385 2.687 A8)-(C) Contributonof ewf framework 1.03 components Inportcomragee (in ediresenves 0.084 39% Import percent) 0.00 coverage otresenvesrz 4.052 40.451 0% Cutoff values (in percent) 1.64 Weak Remifances (in percent) -3.990 16.363 6256 Medum CI< 2.69 0.65 Wondecomnomice (n.percent) growth 2.022 11.748 -25% Strong 269 SCIs 0.24 3.05 CIScore 2.856 9% CI> 3.05 0.39 15% CImatng 100% Reference: Weak Thresholdat by Casziciaton EMIERNALGROIE PVof debtin %of old Weak Exports Medum tro GDP Debt Exports service in %of 180 40 PVoftotal TOTAL Rublicdebi tbenchmark public Revenue caxnpmase ofGDP Neal 18 15 748 -25% Strong 269 SCIs 0.24 3.05 CIScore 2.856 9% CI> 3.05 0.39 15% CImatng 100% Reference: Weak Thresholdat by Casziciaton EMIERNALGROIE PVof debtin %of old Weak Exports Medum tro GDP Debt Exports service in %of 180 40 PVoftotal TOTAL Rublicdebi tbenchmark public Revenue caxnpmase ofGDP Neal 18 15 --- Page 155 --- HAITI E. Debt Sustainability External Debt Sustainability Analysis from 2026 onwards, due to the tight fiscal External debt is projected to increase gradually and social 14. funding to finance the government'si investment space and limited sources of domestic from 12.9 percent in FY2023 to 1.5 percent in Under the baseline scenario, after the sharp drop debt relief, the PPG external program. decline to 1.4 percent in FY2025, due to the Venezuela FY2024, and a further reaching 11.9 percent at the end of the projection debt-to-GDP ratio is expected to increase significantly, DSA (see top left of Figure 3), where However, the ratio remains lower than forecast in the previous due to the Venezuela period. end of the projection period- the gap being mainly it reached 22.7 percent at the account deficit remains the main driver of external The non-interest current of foodstuffs debt restructuring operation. and services, reflecting increased imports largely fueled by the deficit in goods debt dynamics, intermediate goods as part of the investment drive. as well as capital and to external debt indicators are projected Under the baseline scenario, Haiti's export-related below their 15. while the other indicators are expected to remain breach their indicative thresholds, of external PPG debt-to-GDP ratio is projected thresholds (Figure 1 and Table 3). The present value (PV) then rise steadily to 9.2 percent in FY2044 in FY2025 from 2.5 percent in FY2023, to decrease to percent threshold owing to gradual increase in external concessional but would remain well below the debt distress is based on a gradual resumption of external amid subdued export growth. This projection stability and financing, investment projects, against a backdrop of improved political from borrowing to finance public ratio, which is also set to decline In contrast, the PV of debt-to-exports of 180 from policy reform implementation. FY2025, is to breach its indicative threshold 44.5 percent in FY2023 to 41.7 percent in projected The debt-senvice-to-exports ratio is FY2037 onwards, but without displaying an explosive trajectory. in FY2023. However, it is expected drastically to 3.3 percent in FY2025 from 11.8 percent end of the projected to drop its indicative threshold only towards the increase steadily in the following years and to breach underline the to unfavorable trends of these two exports-related debt indicators projection period. The the country's key export sectors, notably manufacturing, challenges of strengthening and developing been eroded by the ongoing protracted base and competitiveness have severely increase thereafter whose production ratio is also projected to fall in FY2025 and security crisis. The debt-senvice-o-revenuel as fiscal revenues would recover gradually in the but would remain well below its threshold until FY2044, authorities' reform agenda to boost revenue medium term thanks to the effective implementation of the collection. of debt to lower remittances and natural disasters 16. Stress tests confirm the vulnerability would raise the present value of external debt to exports (Figure 1 and Table 5). A natural disaster shock shock also induces a breach of the threshold above the 180 percent threshold as early as FY2025. Exports flows (iie., a decline in both current indicator in FY2026, as would shocks to non-debt-creating in FY2029. These by the same deviation) in FY2027 and the primary balance transfers and FDI inflows by one standard debt-service to exports ratio, with a natural disaster shock shocks also cause a threshold breach in the A natural disaster shock same would entail a more severe shock. the most impactful. A drop in remittances ratio above being debt bringing also the extemalidebt-to-export has a sizable impact on the external trajectory, its threshold (Table 4). INTERNATIONAL MONETARY FUND 11 creating in FY2029. These by the same deviation) in FY2027 and the primary balance transfers and FDI inflows by one standard debt-service to exports ratio, with a natural disaster shock shocks also cause a threshold breach in the A natural disaster shock same would entail a more severe shock. the most impactful. A drop in remittances ratio above being debt bringing also the extemalidebt-to-export has a sizable impact on the external trajectory, its threshold (Table 4). INTERNATIONAL MONETARY FUND 11 --- Page 156 --- HAITI Public Sector Debt Sustainability Analysis scenario (Figure 2 and Table 4). Total public debt Public debt is sustainable under the baseline thanks to the debt 17. of GDP in FY2025 from 28.5 percent of GDP in FY2023 is projected to fall to 11.5 percent moderate pace thereafter- driven mainly by the received from Venezuela but is set to grow at a In relief 18.8 of GDP by the end of the projection period. accumulation of foreign debt-and reach percent of GDP in FY2025 from 17.9 percent in debt is projected to drop to 11.5 percent The present value terms, public in FY2044, below its indicative benchmark. characteristics 2023 and would peak at 16.2 percent of GDP debt, the high proportion of debt debt profile, notably the long maturity of multilateral and its orientation of the public after the debt relief of Venezuela's debt), denominated in gourdes (around 82 percent reduce its exposure to potential vulnerabilities. towards investment, horizon, but would significantly service is projected to remain moderate over a 10-year will raise it 18. Debt of short-term domestic debt (Treasury Bills) increase thereafter, until FY2044. But repayment and predominant share in the due to its higher cost, very short maturity over the long run substantially, fiscal deficit, higher domestic debt financing of the fiscal deficit. As a result, despite a moderate needs to about 1.6 percent of GDP by reimbursement over the long run would increase gross financing in FY2025. Hence, the debt FY2044, from 0.2 percent of GDP projected FY2034 and 2.9 percent of GDP by low between FY2025 and FY2034, rising service-to-revenue ratio, which is expected to remain relatively reaching 24.1 percent in FY2044. should increase considerably thereafter, from 1.3 percent to 12.2 percent, to be covered by domestic borrowing and externally However, all of these gross financing needs expected Moreover, improved tax revenue collection, financed project loans, rollover risk would likely be mitigated. banks as a result of financial deepening, increased demand for government securities by domestic and financing needs over the medium and long terms. would help fund Haiti's annual gross ratio remains largely below its benchmark 19. While the present value of public debt-to-GDP natural disasters (Figure 2 and Table 6). A for all stress test scenarios, it appears highly vulnerable to increase of the present value of the public natural disaster shock would result in a large and protracted in FY2025 and reaching 34.9 percent at the debt-to-GDP ratio, from 14.0 percent in FY2024 to 29.8 percent scenario, the present value of the public period. However, under this most extreme end of the projection benchmark of 55 percent. debt-to-GDP ratio barely approaches its indicative F. Risk Rating and Vulnerabilities and debt is deemed and overall risk of debt distress rating remains "high", - 20. Haiti's external rating arises from the fact that both exports-related sustainable. The high risk of external debt distress threshold under the baseline scenario. Although external debt indicators breach their respective indicative is applied and the risk of debt the 10-year projection period, judgement the breaches occur beyond of Haiti's production and export base, accelerated distress is deemed high due to the continued narrowing distress arises from the fact steadysecurity crisis. The high risk of overall debt rating as: (i) exportsby the ongoing ratio. Debt remains however sustainable upward trend of public debt service-to-revenuel thresholds in the distant future (in 14 and 19 years, related debt indicators will only breach their indicative (i) although the public debt service-towithout displaying a particularly explosive trajectory; respectively), 12 INTERNATIONAL MONETARY FUND , judgement the breaches occur beyond of Haiti's production and export base, accelerated distress is deemed high due to the continued narrowing distress arises from the fact steadysecurity crisis. The high risk of overall debt rating as: (i) exportsby the ongoing ratio. Debt remains however sustainable upward trend of public debt service-to-revenuel thresholds in the distant future (in 14 and 19 years, related debt indicators will only breach their indicative (i) although the public debt service-towithout displaying a particularly explosive trajectory; respectively), 12 INTERNATIONAL MONETARY FUND --- Page 157 --- HAITI term, it should remain at a sustainable level, to increase sharply in the long should revenue ratio is forecasted period; (ii) liquidity risk of servicing external debt reaching 24.1 percent at the end of the projection mainly from remittances; (iv) roll-over risks remain limited, due to the projected accumulation of reserves, needs are expected to be covered mostly would remain limited in the long term as larger gross financing medium- and long-term growth prospects are domestic debt and externally-financed project loans; (v) authorities are committed to reby from multiple shocks; and (vi) the favorable, underpinned by recovery more effectively and improve governance with the donor community and to fight corruption engage frameworks. Key indicators of Haiti's outlook for Haiti remains subject to risks and vulnerabilities. to the 21. The debt benchmarks under the baseline, thanks external debt path are projected to be below their indicative a natural disaster shock similar in However, a drop in remittances or debt relief received from Venezuela. debt ratios and breaches in some thresholds of magnitude to Hurricane Matthew would bring higher to a drop in official and private indicators. External debt service capacity is also vulnerable 4). external debt under stress scenario (Table the increase in debt-senvice-o-revenuel transfers and FDI, as illustrated by in the last two DSA. However, the downgrading in capacity remains "medium" as elevated needs Haiti's debt-carrying weak in this vintage is a source of concern given the country's Haiti's composite indicator to external financial. This calls for stepping up enhanced and social spending, which might require as recommended of growth mobilization and reforms to raise investment and growth, efforts to strengthen revenue by the 2022-23 SMPs. Authorities' Views risk of staff's assessment of an external and overall high 22. The authorities agreed with the to implementing sound debt. They reiterated their commitment debt distress and sustainable fiscal policy and a debt strategy prioritizing concessional macroeconomic policies, including a prudent debt sustainability. However, the in the short and medium term, in order to safeguard to help external financing of sufficient concessional external financing authorities expressed concerns about the availability Nevertheless, they committed to pursuing huge investment and development needs. authorities also meet the country's and ensure greater transparency. The ongoing efforts to improve public debt management for boosting economic activity and exports, with stressed the urgency of restoring security as a prerequisite narrower export base. debt vulnerabilities related to the country's a view to containing INTERNATIONAL MONETARY FUND 13 --- Page 158 --- HAITI Figure 1. Haiti: Indicators of Public and Publicly Guaranteed External Debt under Alternatives Scenarios, 2024-44 PV of Debt-to GDP Ratio PV of Debt-to-Exports Ratio 5 Mos extreme-shock IS Natural disaster ostextreme shock is Natural disaster 2024 2026 2028 2030 2032 2034 2036 2038 2040 2042 2044 0 2024 2026 2028 2030 2032 2034 2036 2038 2040 2042 2044 Debt Service-to-Exports Ratio Debt Service-to-Revenue Ratio under Alternatives Scenarios, 2024-44 PV of Debt-to GDP Ratio PV of Debt-to-Exports Ratio 5 Mos extreme-shock IS Natural disaster ostextreme shock is Natural disaster 2024 2026 2028 2030 2032 2034 2036 2038 2040 2042 2044 0 2024 2026 2028 2030 2032 2034 2036 2038 2040 2042 2044 Debt Service-to-Exports Ratio Debt Service-to-Revenue Ratio - - Mokestreme shock is Exports Most extreme shock is Natural disaster 2024 2026 2028 2030 2032 2034 2036 2038 2040 2042 2044 2024 2026 2028 2030 2032 2034 2036 2038 2040 2042 2044 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 ofr marginal debt Combined CLs Yes Avg. nominali interest rate on new borrowingi in USD 2.0% 2.0% Natural Disasters Yes No USDI Discount rate 5.0% 5.0% Commodity Prices 2/ n.a. n.a. Avg. maturity (incl. grace period) Market Financing n.a. n.a. Avg. grace period Note: "Yes" indicates any change to the size or Note: All the additional financing needs generated by the shocks under the stress tests interactions of the default settings for the stress are assumed to be covered by PPG external MLT debt in the external DSA. Default terms tests. "n.a. indicates that the stress test does not of marginal debt are based on baseline 10-year projections. apply. Sources: Country authorities; and staff estimates and projections. 1/1 The most ex treme stres S test is the test that yields the highest ratio in or before 2034. Stress tests with one off breaches any), while these one-off breaches are deemed away for mechanical signals. When a stress test with a one- -off breach are also presented (if extreme shock even after disregarding the one off breach, only that stress test (with happens to be the most a one-off breach) would be presented. 2/1 The magnitude of shocks used for the commodity price shock stress test are based on the commodity prices outlook prepared by the IMF research department. 14 INTERNATIONAL MONETARY FUND --- Page 159 --- HAITI Figure 2. Haiti: Indicators of Public Debt Under Alternatives Scenarios, PV of Debt- -to- GDP Ratio 2024-44 20 Mo t extreme shock is Natural disaster 2024 2026 2028 2030 2032 PV of Debt to- -Revenue Ratio 2034 2036 2038 2040 2042 2044 Debt Service- to- -Revenue Ratio Most extreme shock is Natural disaster Most extreme shock is Natural disaster 2024. 20262 2028 2030 2032 2034 2036 20382 20402042 2044 0 Baseline 2024 2026 2028 2030 2032 2034 2036 2038 2040 2042 2044 Public debt benchmark Most extreme shock 1/ Historical scenario Borrowing Assumptions for Stress Tests* Shares of Default User defined marginal debt External PPG medium and long- term Domestic medium and long- term 75% 75% Domestic: short-term 6% Terms of marginal debt 19% 6% External MLT debt 19% Avg. nominal interest rate on new Avg. maturity (incl. grace period) borrowing in USD 2.0% Avg. grace period 2.0% Domestic MLT debt 0 2042 2044 Public debt benchmark Most extreme shock 1/ Historical scenario Borrowing Assumptions for Stress Tests* Shares of Default User defined marginal debt External PPG medium and long- term Domestic medium and long- term 75% 75% Domestic: short-term 6% Terms of marginal debt 19% 6% External MLT debt 19% Avg. nominal interest rate on new Avg. maturity (incl. grace period) borrowing in USD 2.0% Avg. grace period 2.0% Domestic MLT debt Avg. real interest rate on new borrowing Avg. maturity (incl. grace period) 2.9% Avg. grace period 2.9% Domestic: short- term debt Avg. real interest rate *Note: The public DSA allows for domestic -4.4% shocks under the stress tests in the financing to cover the additional -4.4% projections. public DSA. Default terms of debt financing needs generated by the marginal are based on baseline 10Sources: Country authorities; and staff estimates -year and projections. 1/ The most extre eme stres eSs test is the test that one- off breach is also presented (if while yields the highest ratio in or before 2034. astress test with a one- -off breach any), the one -off breach is deemed away for The stress test with a breach, only that stress test (with happens to be the most extreme shock even after mechanical signals. When a one-off breach) would be presented. disregarding the one off INTERNATIONAL MONETARY FUND 15 --- Page 160 --- HAITI Figure 3. Haiti: Drivers of Debt Dynamics-Baseline Scenario External Debt Debt Flows Unexpected in Debt 1/ PPG Gross Nominal External Debt -creating Changes (in percent of GDP; DSA vintages) (percent of GDP) (past 5 years, percent of GDP) Current DSA Residual Previous DSA proj Interqua artile DSA 2016 range (25- 75) D Price and Contribution of exchan inge unexpected rate 10 changes Real GDP Changein PPG growth debt 31 D Nominal inte est rate - -10 Median - - a Current FDI cour -15 A Changein 5-year 5- year Distributi UCS 2/ a & - a R PPGdebt 3/ historical projected change change Public Debt Gross Nominal Public Debt Debt -creating Flows Unexpected Changes in Debt 1/ of GDP; DSA vintages) (percent of GDP) (past 5 years, percent of GDP) (in percent D Current DSA Previous DSA proj. Interquartile DSA 2016 Dother debt range (25- 75) creating gflows 20 DReal Exchange rate attiggaton Changeind debt growth - D st -20 rate -5 OP leficit -10 -40 Median debt 5-year 5-year -15 Cortibuaon Distribution across LICS 2/ N 0 8 E & & historical projected unex xpec ted a A a A A A A E 8 R R R a -20 changes change change 1/ Difference betw een anticipated and actual contributions on debt ratios. 2/1 Distribution across LICs for wh hich LICI DSAS were produced. external debt for average low -income countries, a ppt change in PPG external debt should be largely explained by the drivers 3/ Given the relatively low private of the external debt dynamics equation. 16 INTERNATIONAL MONETARY FUND on Distribution across LICS 2/ N 0 8 E & & historical projected unex xpec ted a A a A A A A E 8 R R R a -20 changes change change 1/ Difference betw een anticipated and actual contributions on debt ratios. 2/1 Distribution across LICs for wh hich LICI DSAS were produced. external debt for average low -income countries, a ppt change in PPG external debt should be largely explained by the drivers 3/ Given the relatively low private of the external debt dynamics equation. 16 INTERNATIONAL MONETARY FUND --- Page 161 --- 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/ 2.0 U Projected 3-yr adjustment 3-year PB adjustme nent greater than 0.0 25percentagep points ofGDPir in approx topquartle DE X 30 A 2018 2019 2020 2021 2022 2023 2024 2025 - A I Multiplier= =0.2 Multiplier 0.4 Baseline ---Mutiplier-06 Multiplier= 0.8 1/Data cover Fund- -supported programs for LICS s(excludinge emergency financing) approveds since 1/ Bars refer to annualp projectedf fiscal adjustment t(right-hand side scale) andl lines show 1990. Thesize of3 3-yeara adjustment tfrom program inceptionis found ont theh horizontal axis; the possibler real GDP growth paths under differentf fiscal multipliers (left-I -hand sides scale). perc ent of sampleis found on the vertical axis. Rates Contribution to Real GDP growth Public and Private Investment (percent of GDP) (percent 5-year average) 2.0 1.5 W 1.0 0.5 0.0 -0.5 1.0 1.5 2.0 2.5 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 Gov. Invest. Prev. DSA Gov. Invest Curr. DSA Contribution of other factors Priv. Invest Curr. DSA Priv. Invest. Curr. DSA Contrit ribution of government capital INTERNATIONAL MONETARY FUND 17 .5 W 1.0 0.5 0.0 -0.5 1.0 1.5 2.0 2.5 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 Gov. Invest. Prev. DSA Gov. Invest Curr. DSA Contribution of other factors Priv. Invest Curr. DSA Priv. Invest. Curr. DSA Contrit ribution of government capital INTERNATIONAL MONETARY FUND 17 --- Page 162 --- HAITI Table 2. Haiti: Structure of Public Debt and Debt Service (Fiscal-year basis) Debt (at end-2023) Debt Service In percent of 2024 2025 2026 2024 2025 2026 US$ milliontotal debt GDP US$ millions In percent of GDP Total 5932.7 100.0 28.5 118.3 32.0 51.0 0.4 0.1 0.2 External 2699.0 45.5 12.9 118.3 32.0 51.0 0.4 0.1 0.2 Multilateral creditors 321.0 5.4 1.5 25.4 24.7 44.3 0.1 0.1 0.1 IMF 248.4 4.2 1.2 17.4 16.7 36.4 0.1 0.1 0.1 OPEC 35.4 0.6 0.2 4.9 4.8 4.7 0.0 0.0 IFAD 37.2 0.6 0.2 3.1 3.1 3.1 0.0 0.0 0.0 0.0 IDA 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Bilateral creditors 2377.8 40.1 11.4 92.9 7.3 6.7 0.4 0.0 0.0 Paris Club Non-Paris Club 2377.8 40.1 11.4 92.9 7.3 6.7 0.4 0.0 0.0 Venezuela 2216.1 37.4 10.6 86.2 1.9 1.9 0.3 0.0 PetroCaribe 2189.3 36.9 10.5 84.3 0.0 0.0 0.3 0.0 BANDES 0.0 0.0 26.8 0.5 0.1 1.9 1.9 1.9 0.0 0.0 0.0 Taiwan, Province of China 161.7 2.7 0.8 6.7 5.4 4.9 0.0 0.0 Bonds 0.0 Commercial creditors Other international creditors 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Domestic 3233.7 54.5 15.5 Held by non-residents, total Held by residents, total 3233.7 54.5 15.5 Loans, total 3233.7 54.5 15.5 BRH 2564.5 43.2 12.3 Other creditors (incl.T-Bills? 669.2 11.3 3.2 Total 5932.7 100.0 28.5 118.3 32.0 51.0 0.4 0.1 Memo items 0.2 Collaterized debt Contingent liabilities External arrears 642.1 10.8 3.3 0.0 0.0 0.0 0.0 0.0 Nominal GDP (US$ millions) 19,603.5 26,283.4 30,614.3 33,172.7 0.0 Sources: Haitian authorities, and Fund staff estimates. 18 INTERNATIONAL MONETARY FUND .3 32.0 51.0 0.4 0.1 Memo items 0.2 Collaterized debt Contingent liabilities External arrears 642.1 10.8 3.3 0.0 0.0 0.0 0.0 0.0 Nominal GDP (US$ millions) 19,603.5 26,283.4 30,614.3 33,172.7 0.0 Sources: Haitian authorities, and Fund staff estimates. 18 INTERNATIONAL MONETARY FUND --- Page 163 --- Table 3. Haiti: External Debt Sustainability Framework, Baseline Scenario, 2021-2044 (In Percent of GDP, unless otherwise indicated) 2021 2022 2023 2024 2025 2026 2027 2028 2029 2034 2044 Historical Projections 11.9 13.4 5.6 Definition of external/ /domestic debt Residency- -based External debt (nominal) 1/ 12.3 12.9 2.7 2.7 2 : 2 BE 11.9 13.4 5.6 ar material difference between the No 123 12.9 B E Isthere (PPG) E ofwhich: public andpublicly guaranteed two criteria? 5 2026 2027 2028 2029 2034 2044 Historical Projections 11.9 13.4 5.6 Definition of external/ /domestic debt Residency- -based External debt (nominal) 1/ 12.3 12.9 2.7 2.7 2 : 2 BE 11.9 13.4 5.6 ar material difference between the No 123 12.9 B E Isthere (PPG) E ofwhich: public andpublicly guaranteed two criteria? 2.9 -0.6 0.6 -11.4 -0.1 1.3 13 1.2 0.5 Change inexternal debt 3.8 2.9 3.5 0.9 0.5 0.8 1.0 1.7 0.6 Identified net debt- creating flows -0.5 2.2 3.4 0.5 0.6 0.9 1.1 R S 8 0.7 2.4 0.8 Nonanteresto current accour nto deficit 18.0 20.5 21.5 15.0 14.3 13.8 13.9 13.8 13.5 12.9 12.9 20.9 13.6 Deficit balank ce of goods and services 7.0 5.6 3.3 33 3.6 3.8 4.0 44 Debt Accumulation Exports 24.0 27.5 27 18.4 17.4 17.0 17.5 17.6 17.5 17.3 17.3 1.4 Imports -18.3 18.1 18.0 13.7 -12.8 12.7 -12.7 12.6 12.2 12.2 -18.1 -12.7 Net current transfers (negative inflow) -0.8 1.0 0.9 0.8 2 0.7 0.3 -0.3 0.3 0.0 0.0 of which: official -0.2 -0.2 0.1 0.0 0.0 00 0.0 00 0.0 00 00 -0.3 0.0 1.0 Other current accountf flows (negative net inflow) -0.2 0.2 -0.1 -0.1 0.1 0.1 -0.2 0.3 .4 -0.6 -0.3 FDI (negative i inflow) 3.0 0.9 0.3 0.4 0.0 0.0 0.0 0.0 0.0 0.1 0.1 0.8 debtdynamics2/ rate 0.1 0.1 0.1 0.1 0.0 00 0.1 0.1 0.1 0.2 0.2 0.6 1 - - - EEe Contribution from nominal interestr 0.1 02 0.2 0.4 0.0 00 0.0 -0.1 -0.1 -0.1 -0.2 0.4 l Contribution from realGDP growth 32 0.5 0.1 Contribution from price and exchange rate changes -3.5 2.9 .7 0.5 0.3 0.3 0.5 1.4 -0.9 0.2 Residual3/ 6.7 -0.5 -0.5 -0.5 :123 1.6 0.0 0.0 0.0 0.0 00 0.0 0.0 ofwhich: exce eptional financing -02 Sustainability indicators 2.5 1.5 1.3 2.2 3.1 3.9 4.7 7.0 -04 PV OfPPG external debt- -to- -GDPF ratio 44.5 44.9 41.7 65.6 85.4 103.3 117.7 158.5 208 -0.6 PV of PPG external debt- to- exports ratio 9.4 8.1 11.8 13.5 3.3 4.7 4.6 5.4 6.3 8.3 16. 3.1 3.9 4.7 7.0 -04 PV OfPPG external debt- -to- -GDPF ratio 44.5 44.9 41.7 65.6 85.4 103.3 117.7 158.5 208 -0.6 PV of PPG external debt- to- exports ratio 9.4 8.1 11.8 13.5 3.3 4.7 4.6 5.4 6.3 8.3 16. 2024 2026 2028 2030 2032 2034 PPG debt service- to- exports ratio 9.6 10.7 10.3 9.1 2.1 2.9 2.9 3.5 4.1 5.3 PPG debtservice-t to-r revenuer ratio 517. 65. 227 191 327. .1 400.8 371.5 313.1 29 8.2 64 - Rate of Debt Accumulation Gross external financing ed (M illion of U.S. dollars) -39.4 Grant- -equivalent financing(% of GDP) Grant element of new borrowing (%right scale) Keyn macroeconomic assumptions 1.8 4.0 10 0.0 Real GDP growth (in percent) 47.5 0.8 39. 153 29 .6 3.8 GDP deflator inUS dollar terms (change percent) 0.5 2.1 2.1 2.0 0.8 External debt (nominal) 1/ Effectivei interest rate (percent)4 4/ 249 8.8 -20.9 0.9 -20.0 10.0 10.3 10.7 3.7 3.7 mofv which: Private Growth of exports ofG8S (US dollar terms, in percent) 20.8 8.0 2.7 9.0 10.6 5.0 4.6 3.7 3.7 Growth of imports ofG85 (US dollar terms, in percent) 30.7 30. 30.7 30. 30.7 30.7 30.7 Grant element of new public sector borrowing (in percent) 59 5.3 6.4 5.0 5.9 6.1 Governmentrevenues (excluding grants, in perc cent tof GDP) 2421 4 -5570.2 9219.1 1774.9 359.4 233.4 100.0 100.0 100.0 00 0.0 Aid flows (in Million ofUS dollars) 5/ 0.8 0.7 0.7 0.3 0.3 0.6 Grant-e -equivalent financing (in percent of GDP) 6/ 94 52.8 42.0 41.2 30.7 30.7 42.6 Grante -equivalentf financing (in percent of external financing) 6/ 21,017 19,826 19,603 26,283 30,614 33 173 34,155 664 497 45, 5,611 65,360 Nominal GDP (Millionof US dollars) 44.9 -5.7 1. 3 0.6 Grant-e -equivalent financing (in percent of GDP) 6/ 94 52.8 42.0 41.2 30.7 30.7 42.6 Grante -equivalentf financing (in percent of external financing) 6/ 21,017 19,826 19,603 26,283 30,614 33 173 34,155 664 497 45, 5,611 65,360 Nominal GDP (Millionof US dollars) 44.9 -5.7 1. 34.1 16.5 4 3.0 5.1 3.7 3.7 3.7 8.3 Nominal dollar GDP growth Memorandum items: 2.5 9 4.7 7.0 9.2 PV ofexternald debt7/ 44.5 44.9 65.6 85. 103.3 117.7 158.5 208.1 In percent ofe exports 9.4 4 6.3 8.3 16.2 Total external debt service- -to exports ratio 486.8 392.8 48 1398.2 1763.3 3181.3 5985.9 PV of PPG external debt (in Millionof US dollars) 1.0 0.7 0.4 2024 2026 2028 2030 2032 2034 (PVt-F -PVt- 1-1/GDP1-1 (in percent) -3.5 2.9 2.7 0.7 0.2 0.2 -0.2 0.2 0.6 Non- interest current account deficitt that stabilizes debt ratio Sources: Country authorities; and staff estimates and projections. 1/ Includes both public and private sector external debt with nominal interestrate: 9 realGDP growth growth rate of GDP deflator in J.S. dollar terms, E=nominala appreciation of the 2/ Derived as(r 9 p(1+g) Ea(1-01/11-gapagp)t times previous period debtr ratio, locald currency, and a= share oflocal Icurrency- -denominated external debti in total external debt. foreign assets; and valua uation adjustments. For projections also includes contribution from price nd exchange rate changes. 3/ Includes exceptionalf financing (i.e, changes in arrears and debtr relief); changes ingross 4/ Current- -year interest payments divided by previous period debt stock 5/ Defined as grants, concessional loans, and debtr relief. between the face value and the PV ofr new debt). 6/ Grant- -equivalent financing includes grants provided directly to the government and through new borrowing (difference 7/ Assumes that PV of private sector debtis equivalent toi its face value. wher over the first year of and the next 10 years. 8/ Historicala averages are generally derived over the past 10y years, subject tto data availability, as projections averages are projectiona --- Page 164 --- E Baseline Scenario, 2021-2044 Framework, Sector Debt Sustainability Table 4. Haiti: Public indicated) Percent of GDP, unless otherwise (In Average 6/ Projections Actual 2029 2034 2044 Historical Projections 2024 2025 2026 2027 2028 .8 25.2 12.8 Definition of Residency2021 2022 2023 11.1 11.6 12.1 12.7 14.3 11.9 13.4 5.6 external/domestic debt based 28.9 29.5 28.5 14.1 11.5 2.7 4.1 5.3 6.4 9.3 12.9 1.5 1.4 1/ 12.3 stheramateial Puolicsectordetr 12.9 0.5 0.6 0.4 06 difference between the two No otwhich. 6 12.1 12.7 14.3 11.9 13.4 5.6 external/domestic debt based 28.9 29.5 28.5 14.1 11.5 2.7 4.1 5.3 6.4 9.3 12.9 1.5 1.4 1/ 12.3 stheramateial Puolicsectordetr 12.9 0.5 0.6 0.4 06 difference between the two No otwhich. external debt -14.4 -2.6 0.4 04 0.6 -0.4 -1.3 6.5 0.6 1.0 1.6 0.3 1.0 0.9 0.8 1.5 0.2 criteria? -18.8 1.3 E Changei in public sector debt 3.2 -2.4 6.2 1.2 -7.4 0.1 1.2 1.3 6.4 6.9 8.4 8.9 6.9 Public debt 1/ Identified debt creating flows 2.0 1.5 6.1 6.0 6.0 6.2 0.0 0.0 sector Paimanyd deficit 7.0 6.6 7.3 11.7 6.8 1.2 0.7 03 0.3 03 7.8 7.7 9.3 10.4 7.0 of :local- -currency denominated Revenue and grants 1.0 1.3 0.9 4.3 6.2 7.2 7.2 7.6 0.2 0.2 which: of which: grants 9.0 8.0 6.1 5.5 1.7 -0.9 -0.3 0.4 0.4 -0.2 -0.2 . of which: foreign- currency denominated Primary (nonir ninterest) expenditure 1.2 3.8 5.0 -0.9 -0.5 -0.3 -0.2 -0.2 0.0 0.0 Autonuticd debtdynamics 1.4 3.4 4.1 26 -0.8 0.3 -0.1 0.0 00 -0.2 -0.3 Contributiont from interest rate/growth diferential -1.8 -3.9 -4,6 3.8 -0.2 -0.2 -0.2 -0.2 ofwhich: contribution from average real interest rate 0.4 0.5 0.6 1.2 -0.1 .0 0.0 -0.5 12 of which: contribution from real GDP growth 26 -0.4 -0.9 0.0 0.0 0.0 0.0 .0 0.0 0.0 Contribution.t from real lexchange rate depreciation 0.0 0.0 0.0 5.9 0.0 0.0 0.0 0.0 0.0 0.0 debt-creating flows 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Omeridentfiedd Privatization receipts (negative) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Recognition of contingenti tliabilities (e.9. 0.0 0.0 debt-creating flows 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Omeridentfiedd Privatization receipts (negative) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Recognition of contingenti tliabilities (e.9. bank recapitalization) 0.0 0.0 0.0 -5.9 0.0 0.0 0.0 0.0 0.0 0.0 0.7 -0.4 Debtr relief (HIPC and other) 0.0 0.0 0.0 00 0.0 1.1 0.6 0.6 0.6 0.2 0 Other debt creatingorreduing" flow (please specify) 3.4 3.0 5.1 1.6 -1.7 2026 2028 2030 2032 2034 Residual 10.7 10.8 11.1 12.1 16.2 17.9 14.0 11.5 10.7 174.2 174.8 192.5 Sustainability indicators *.. 119.7 187.0 176.3 179.2 174.7 7.2 12.2 24.1 mof cheldt by residents PV ofp public debt- -to-GDPratio 21 244.5 1.9 5.4 5.1 5.7 1.6 2.9 which: PV of public debt -to-revenue and grants ratio 11.9 12.0 11.8 5.3 02 1.5 1.6 1.7 1.9 - of which:h held by non- residents Debt service: -to-revenue and grants ratio3 3/ 2.8 22 0.3 -12.7 Gross fina an ncing need 4/ 1.5 1.5 1.5 1.5 0.0 2.1 1.0 and fiscal assumptions -1.8 1.7 -1.9 4.0 1.0 1.5 2.2 1.5 22 2.2 22 2.1 0.8 -12.4 -8.6 Keyn macroeconomica 0.8 1.0 0.5 23 24 78 -6.9 -6.4 3.1 1.2 RealGDP growth (in percent) (in percent) 0.9 -21.5 -18.7 13.5 0.6 Average nominali interestr rate on external debt -14.1 -21.6 -22.8 7.0 7.0 16.3 12.3 Average reali interest rate on domestic debt (inp percent) 25.3 -3.0 -7.7 23.2 17.6 10.4 9.7 9.1 3.1 -8.7 4.6 Reale exchange rate depreciation (in percent. (in percent) 0.9 -21.5 -18.7 13.5 0.6 Average nominali interestr rate on external debt -14.1 -21.6 -22.8 7.0 7.0 16.3 12.3 Average reali interest rate on domestic debt (inp percent) 25.3 -3.0 -7.7 23.2 17.6 10.4 9.7 9.1 3.1 -8.7 4.6 Reale exchange rate depreciation (in percent. + indicates depreciation) 19.3 29.8 31.5 29.1 46.1 18.7 1.5 5.9 5.2 0.4 3.3 0.2 -1.3 1.5 Inflation rate (GDP deflator, in percent) deflator, in percent) -10.0 -120 -25.2 -328 7.0 2.6 1.5 0.8 0.8 0.8 0.0 0.0 Growth ofr real primary spending (deflated by GDP 4.5 0.8 -0.1 0.0 0.0 0.0 0.0 0.0 2026 2028 2030 2032 2034 that stabilizes the debt- -to-GDP ratio 5/ 0.0 0.0 0.0 0.0 Primary deficitt liabilities (not included in public sector debt) PV of contingent Sources: Country authorities and'staffe estimates and projections. plus extra budgetary funds. Definition of external debt Residency-l depending based. on exchanger rates projections. 1/Coverage of debt The central state, andl local goverments DSA differs from the external DSA with the size of differences 2/1 The underlying PV of external 1debtto-GDP ratio under the public of medium andl long- -term, and short- -term debt. last period and other debt creating/reducing' flows. 3/Debt service is defined as the sum of interest and amortizationo debt service plus the stock of short- -term debt att the end of the the debt ratio onlyi in the year in question 4/ Grossf financing need is defined as the primary deficit plus to- -GDP ratio( a primary surplus), which would stabilizes the first year of projection and the next 10y years. 5/Defined as primary deficit minus achangei inthe public debt subject tto data availability, whereas projections averages are over derived over the past 10) years, 6/ Historical averages are generally --- Page 165 --- HAITI Table 5. Haiti: Sensitivity Analysis for Key Indicators of Public and Publicly Guaranteed External Debt, 2024-2044 (In Percent) Projections 1/ 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 2043 2044 PVofdebt- to GDP ratio 4 5 Baseline A. Alternatives Scenarios 19 20 21 22 23 23 24 25 A1. Key vari ables attheir histori rical ave ages 024- 203 B. BoundT Tests B1. RealGDP growth B2. Primaryt balance B3. Exports B4. Otherf flows 3/ B5. Depreciation B6. Combin nat ation ofB1- 85 C. Tailored Tests C1. Combined contingent liabilitie C2. Natural disaster C3. Commodity price C4. Market Financing Threshold Baseline A. Alteratives Scenarios 45 74 118 148 213 235 259 291 323 353 38 455 476 513 529 544 557 A1 Key var riables attheir histor cal ges 024 Bound Tests 81 RealGDP growth B2. Primary bal lance 83. Exports B4. Other flows 3/ B5. Depreciation B6. Combination 1of81- BS C. Tailored Tests - C1. Combined contingent liabilities C2 Naturald disaster C3. Commodity price C4. Market Financing 45 74 118 148 213 235 259 291 323 353 38 455 476 513 529 544 557 A1 Key var riables attheir histor cal ges 024 Bound Tests 81 RealGDP growth B2. Primary bal lance 83. Exports B4. Other flows 3/ B5. Depreciation B6. Combination 1of81- BS C. Tailored Tests - C1. Combined contingent liabilities C2 Naturald disaster C3. Commodity price C4. Market Financing Threshold 180 180 Debt service- to exports atio Baseline A. Alternative Scenarios 17 20 22 25 27 A1. Key vari iables attheir histor cal ges 024 2034 B. Bound Tests B1. Real GDP growth B2. Primary balance B3. Exports B4. Other flows 3/ B5. Depreciation B6. Combination ofB1- B5 C. Tailored Tests C1. .Combinedo contingent liabilities C2 Natural disaster C3. Commodity price C4. Market Financing Threshold Debt ratio Baseline A. Alternatives Scenarios A1 Keyv variables at their histori cal ges 2024- -2034 2/ B. Bound Tests B1. RealGDP growth B2. Primary balance B3. Exports B4. Othert flows 3/ B5. Depreciation B6. Combination B1 B5 C. Tailored Tests C1. Combined contingent liabilties C2. Natural disaster C3. Commodity yprice C4 Market Financing Threshold Sources: Country authorties. and staff and projections Abold value indicates breach ofthe DP ebt RRC 2/ Variables include real GDP growth GDP deflator (inUS. dollart terms), nte est cur 3/ Bincludes official and private transters and FDL INTERNATIONAL MONETARY FUND 21 --- Page 166 --- HAITI for Indicators of Public Debt, 2024-2044 Table 6. Haiti: Sensitivity Analysis Key 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 2043 2044 2024 2025 2026 2027 2028 2029 PV of Debt- to- -GDP Ratio 14 11 11 11 11 11 11 11 11 12 12 12 13 13 13 14 14 14 15 16 16 Baseline A. Alternative Scenarios 11 11 10 10 10 10 10 10 10 11 11 11 11 12 12 12 13 13 13 A1. Key variables at their historical averages in 2024- 2034 2/ B. Bound Tests B1. RealGDP growth B2. Primary balance B3. Exports B4. Otherf flows 3/ B5. Depreciation 12 12 13 13 13 14 14 14 15 16 16 Baseline A. Alternative Scenarios 11 11 10 10 10 10 10 10 10 11 11 11 11 12 12 12 13 13 13 A1. Key variables at their historical averages in 2024- 2034 2/ B. Bound Tests B1. RealGDP growth B2. Primary balance B3. Exports B4. Otherf flows 3/ B5. Depreciation B6. Combination ofE B1- 85 C. Tailored Tests C1. Combined contingent liabilities c2. Natural disaster C3. Commodity price C4. Market Financing 55 55 55 55 55 55 55 55 55 55 55 55 55 55 55 55 55 55 55 55 Public debt benchmark PV of Debt- to- Rev evenue Ratio 120 187 176 79 175 174 176 175 174 174 175 175 175 175 176 176 77 181 185 189 Baseline A. Alternative Scenarios 198 184 176 164 156 156 152 150 149 150 151 151 152 153 153 153 154 155 155 155 A1. Key variables at their historical ave ages in2024- -2034 2/ 120 B. Bound Tests 120 182 178 183 183 188 198 203 209 216 225 232 240 248 257 265 273 285 297 309 321 B1. RealGDP growth 120 206 205 200 191 187 189 186 184 183 184 184 184 185 186 187 189 194 199 204 09 B2. Primary balance 120 197 205 208 202 201 203 201 198 196 195 193 192 191 190 189 188 191 194 197 200 B3. Exports 120 217 235 240 232 229 232 228 223 219 216 213 210 207 205 202 201 202 204 206 207 B4. Otherf flows 3/ 120 165 139 130 119 114 109 104 100 98 96 94 92 91 90 90 93 96 99 102 B5. Depreciation 120 204 169 150 144 143 144 142 142 45 46 148 150 153 155 158 164 70 177 183 B6. Combination ofB B1-B 85 C. Tailored Tests 120 263 236 233 18 15 213 215 217 218 220 226 231 236 242 C1. Combined contingent liabilities 395 94 94 395 396 400 104 409 414 C2. Natural disaster 120 485 441 na na C3. Commodity price a na na C4. Market Financing na a Debt Se ervice to- Revenue Ratio 12 14 15 17 17 18 20 20 22 23 24 Baseline A. Alternative Scenarios 10 11 13 15 16 16 17 17 17 18 17 18 A1. Keyv variables at their historical ave rerages 2024-2 -2034 21 B. Bound Tests B1 Real IGDP growth B2. Primaryt balance B3. Exports B4. Other flows 3/ B5. Depreciation B6. Combination ofB1- -BS C. Tailored Tests C1. Combined contingent liabilities C2. Natural disaster G. Commodityp price C4. Market Financing la Sources: Country authorities: and staff estimates and projections. 1/Aboldy value indicates abreach of fthe benchmark. 2/ Variables include real GDP growth, GDP deflator andp primary deficit nt GDP 3/Includes official and private transfers and FDL 22 INTERNATIONAL MONETARY FUND B3. Exports B4. Other flows 3/ B5. Depreciation B6. Combination ofB1- -BS C. Tailored Tests C1. Combined contingent liabilities C2. Natural disaster G. Commodityp price C4. Market Financing la Sources: Country authorities: and staff estimates and projections. 1/Aboldy value indicates abreach of fthe benchmark. 2/ Variables include real GDP growth, GDP deflator andp primary deficit nt GDP 3/Includes official and private transfers and FDL 22 INTERNATIONAL MONETARY FUND --- Page 167 --- Statement by the IMF Staff Representative on Haiti November 20, 2024 This statement provides information that has become available since the staff report was finalized. This information does not alter the thrust of the staff appraisal. 1. On November 11, 2024, the Transitional Presidential Council (TPC) of Haiti designated a new Prime Minister, Mr. Alix Didier Fils-Aimé. As a result, former Prime Minister, Garry Conille, resigned. A decree listing the names of the new cabinet members (comprising 18 ministries, including eight reappointments from Mr. Conille's administration) was issued on Friday November 15. Since his appointment, the new Minister of Economy and Finance, Mr. Alfred Metellus, has already met with the IMF team, together with Central Bank Governor Gabriel. Minister Metellus has indicated his strong commitment to remain closely engaged with the Fund, which is seen as an important anchor for signaling the authorities' commitment to continue making progress toward macroeconomic stabilization and strengthen governance, and locking in macroeconomic gains accumulated over recent years, despite the many headwinds. Former Minister of Economy and Finance, Ms. Ketleen Florestal, maintains her portfolio as Minister of Planning and External Cooperation. --- Page 168 --- Executive Director for Haiti, Mr. Bruno Saraiva, Statement by Mr. Andre Roncaglia, Ludmilla Buteau Allien, Advisor Alternate Executive Director, and Ms. 20, 2024 November and staff for the authorities, we would like to thank management On behalf of our Haitian of crisis. We broadly concur with staff's during this period Fund's continuous engagement assessment of the current situation. decline in Haiti, negative shocks have frustrated After five consecutive years of GDP last fiscal year. Since the last article IV recovery in the the expectations of an economic a series of shocks ranging from assessment in 2020, the country has experienced and prices. In the meantime, the natural disasters and the spike in food energy pandemic to after the assassination of the former president, situation had deteriorated, particularly period of political security has been living through a protracted Jovenel Moise. The country humanitarian crisis, with a rising number of conflictinstability, leading more recently to a as of this week with a new set of displaced people largely over 700,000 been by criminal affected internally Different regions of the country have besieged The people fleeing their homes. functioning of institutions and businesses. hampering mobility and the normal value chains and overall supply, gangs, circulation of goods and services have disrupted under acute constrained and leaving nearly half of the population keeping inflationary pressures high continues to be severely worsened by Moreover, the country's fragility human capital. The food insecurity. social discontent, and significant loss of prolonged economic recession, few years has further weakened the brain drain that has taken place in the past substantial Haitian economy. impact on across sectors with greater conditions led to disruptions for the third Volatile security indicator of economic activity published productive activities. The quarterly dismal by the main sectors of reveals a performance quarter of the 2024 fiscal year (May-Jul) with a 3.8 percent decline y-0-y in especially agriculture and manufacturing, in December the economy, episodes of timid recovery the index. Nonetheless, the economy experienced festivities and to the reopening of the Port-au-Prince 2023 and April 2024, due to end-of-year However, the agricultural sector, whose operations had been interrupted. from the relative port and airport, climate related shocks, has not benefited which continues to suffer from quarterly dismal by the main sectors of reveals a performance quarter of the 2024 fiscal year (May-Jul) with a 3.8 percent decline y-0-y in especially agriculture and manufacturing, in December the economy, episodes of timid recovery the index. Nonetheless, the economy experienced festivities and to the reopening of the Port-au-Prince 2023 and April 2024, due to end-of-year However, the agricultural sector, whose operations had been interrupted. from the relative port and airport, climate related shocks, has not benefited which continues to suffer from --- Page 169 --- Lower-than-average rainfall, rising above-mentioned upturn in business activity periods. bottlenecks, as well as the reduction fertilizers and seeds) and labor supply the input costs (both been overtaken by armed gangs, have weakened country's in cultivated land, which has and food insecurity. production, intensifying inflationary pressures while the local economic activity, trade deficit has deteriorated, Despite the subdued in nominal terms through September 2024, currency appreciated by close to 2 percent data show a 5.8 percent widening of the driven mainly by rising remittances. Preliminary trend in imports throughout the fiscal year, trade deficit in 2024, despite the downward totaled US$732 million, down 17 reflecting the slowdown in economic activity. Exports downturn in the textile industry, which over the first 11 months of 2024, with the the meantime, the current account percent share of the country's exports. In for account for an important remittances, which rose by 11 percent year-on-year balance has been sustained by exchange market enabled the monetary FY2024. The easing of tensions on the foreign of US$470 million. Net official reserves through net purchases fiscal authorities to bolster billion US dollars at the end of the international reserves were valued at nearly one year. and the central bank (BRH) crisis, the Ministry of Finance Throughout this protracted averting even worse macroeconomic outcomes. have remained functional and active, institutional framework, the two key Despite the political instability and the crumpling been engaged with the Fund, trying to pursue economic institutions in the countries have still imbalances and ensure a reasonable level of feasible measures to contain macroeconomic second quarter this year, the acute deterioration economic functioning in the country. In the Presidential Council (TPC), which conditions, led to the creation of a Transitional elections by in security to conduct the country through general of assigned a new transitional government Prime Minister for the task and the process 2026. This week, the TPC designated a new finalized. That said, the TPC and the Prime constituting the new administration is being measures to improve security to release a joint action plan outlining Minister have committed the country to free elections. and governance, and to bring of budget in August and the timely approval An amendment to the FY2023/24 sustainable track. As of September 30, 2024, FY2024/25 budget brought fiscal policy to a in nominal terms. This drop in total collection decreased by 3 percent year-on-year resulted from the revenue of internal revenues which of revenues is owed to the underperformance activities, the temporary closure intermittent halting of the General Tax Directorate (DGI) Customs revenues showed a slight and the slowdown in economic activity. ports and airports, with the previous year, and a worse performance nominal increase of 1.5 percent compared Customs aiming at reducing contraband at new measures taken at the General of imported was averted by Administration had adopted new set of controls the Port. General Customs the fiscal year, which was reinforced by the digital merchandises during the beginning of Government spending was also halted by a verification process during the third quarter. the deterioration of the security situation. collapse in public investment spending due to small already signaling the zeroUltimately, the fiscal year 2024 was closed with a surplus, in public finances have financing for fiscal year 2025. These recent developments monetary aiming at reducing contraband at new measures taken at the General of imported was averted by Administration had adopted new set of controls the Port. General Customs the fiscal year, which was reinforced by the digital merchandises during the beginning of Government spending was also halted by a verification process during the third quarter. the deterioration of the security situation. collapse in public investment spending due to small already signaling the zeroUltimately, the fiscal year 2024 was closed with a surplus, in public finances have financing for fiscal year 2025. These recent developments monetary --- Page 170 --- monetary aggregates subdued trend keep monetary aggregates on check. That said, both credit and demand. helped with a decline in supply also reflects a sluggish economic activity, of containing inflation and stance remained focused on the objectives authorities have Monetary policy the rate. To this end, the monetary averting undue volatility of exchange 2022, against a backdrop of a wait-andthe stance adopted since August decided to maintain less inclined to invest. Furthermore, the banking see attitude on the part of economic agents through BRH bonds, in an environment continued to be absorbed amount of system's excess liquidity activities. As a result, the outstanding that was hardly conducive to intermediation ratios on gourde and while the reserve requirement for these securities increased significantly, at 40 percent and 53 percent respectively foreign currency deposits were kept unchanged for savings and housing banks. Repo commercial banks; and 28.5 percent and 41.5 percent 14 for treasury bills. With for BRH bonds and percent rates were maintained at percent financing, as well as the more stable fiscal stance and the cessation of monetary inflation on a the stronger the policy stance will help bring exchange rate, it is expected that monetary downward trajectory. from stability, the BRH adopted a range of measures In order to preserve financial the incentive programs put in place by BRH moratoria to loan restructuring. Similarly, be noted that these measures aimed to have been maintained to date. It should and since 2013 construction, hotels, agriculture facilitate the granting of credit to sectors such as private (PPDI) and free trade zones, and development projects agribusiness, real estate promotion and job creation. The BRH has also which have important impact on economic activity to the current prolonged crisis. The of the financial sector's exposure with the conducted a survey need of more in-depth analysis and assessment, preliminary results point to the will be performed with help from the IMF of the financial system's risks, which stress-testing team. on the in the business climate has impinged significantly deterioration sector, the The continuous the loss of close to 700 executives in the banking financial system. In addition to banks have disrupted their normal operations, losses and material damage incurred by these of June 30, 2024, there was an their resilience. According to data available as in banking testing income (NBI), a deterioration alarming 2.7 percent decline in net banking (from 0.94 percent) and (ROA) down to 0.64 percent profitability, with return on assets 11.13 percent). However, there have been down to 7.68 percent (from return on equity (ROE) with a decline in the arrears' ratio to 12 percent. signs of improvement in asset quality, standards in the case of money the harmonization of its regulatory of BRH has finalized and the financing of the proliferation laundering actions, the financing of terrorism, that all its regulated entities are fully destruction. In addition, to ensure weapons of mass training sessions on these standards. in force, it has organized the aware of the new regulations following its FATF evaluation, and reports As of the enhanced monitoring of Haiti identified during the said part to remedy the shortcomings NC or PC describing the strategies implemented for which it has received an evaluation, Haiti may request a review of the ratings of Justice, the MEF, and the committee composed of the Ministry rating. A coordinating ndering actions, the financing of terrorism, that all its regulated entities are fully destruction. In addition, to ensure weapons of mass training sessions on these standards. in force, it has organized the aware of the new regulations following its FATF evaluation, and reports As of the enhanced monitoring of Haiti identified during the said part to remedy the shortcomings NC or PC describing the strategies implemented for which it has received an evaluation, Haiti may request a review of the ratings of Justice, the MEF, and the committee composed of the Ministry rating. A coordinating --- Page 171 --- Haiti from the FATF "grey list." BRH has been set up to monitor the process of removing Risk Assessment (NRA) was officially of this committee, the National Under the leadership launched. reforms the authorities are committed to urgently pursue In such a challenging context, instability, violence, recession, and poverty. aimed at breaking the cycle of political intends to address the growing structural Through the 2024-2005 Budget, the government elaborated with the perspective of a real GDP vulnerabilities of the population. It has been debt level, and an increase in inflation rate, a sustainable growth of 1%, a decelerating favorable of revenue collections collection. As we anticipate a performance On governance revenue continued cessation of any monetary financing. agencies, we predict a contract standardization and important measures, such as lease procedures of reforms, some administration, are expected to lead to improved management regulation within the public and public service delivery to the population. public debt, public spending rationalization, and promoting a better integration in the employment for the younger population which is Supporting and reducing inequalities, workforce will contribute to enhancing opportunities likely to take steam from social conflicts. anchor for the Haitian authorities Engagement with the Fund has been an important circumstances. Haiti is a fragile, extremely challenging economic which are facing protracted by several of the factors that hinder conflict-affected country beleaguered under tremendous duress and have kept the development. Our Haitian authorities, who work much value the dialogue with the Fund economy afloat in most demanding situations, very to the country back on a virtuous and count on its support to their enduring efforts the bring crisis of February through April was track. A Rapid Crisis Impact Assessment following authorities and with the support of important conducted under the leadership of the oft the dire circumstances and call international partners and MDBs. The authorities are aware in order to achieve this recovery. This all development and bilateral partners' support economy at around 2 billion upon document estimates the needs to relaunch the post-conflict of the strategy and will signal the dollars. Therefore, a new SMP is an essential piece toward macroeconomic stabilization authorities' commitment to continue making progress hard-won gains accumulated over the governance, consolidating some and mobilize and strengthened build a track record for a UCT-quality program recent years. This should help continue to seek technical and financial support other development partners as the authorities plan. Fund's capacity development stabilization and development to put in place an effective constraints in this fragile and conflictcontinues to be vital to help cope with widespread continue to leave. The authorities look affected country, particularly as human resources and support, as they continue to lead forward to the Executive Directors' recommendations address the causes of fragility, in order to put stability and to efforts toward macroeconomic Haiti on a path to prosperity.