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Haiti: Sixth Review Under the Extended Credit Facility, Request for Waiver of Performance Criterion and Augmentation of Access Informational Annex

Author(s):
International Monetary Fund
Published Date:
February 2010
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Annex I. Fund Relations

(As of December 31, 2009)

I. Membership Status:

Joined: September 08, 1953; Article VIII member

II. General Resources Account:

SDR Million%Quota
Quota81.90100.00
Fund holdings of currency81.8399.92
Reserve Position0.070.08
Holdings Exchange Rate

III. SDR Department:

SDR Million%Allocation
Net cumulative allocation78.51100.00
Holdings68.9287.79

IV. Outstanding Purchases and Loans:

SDR Million%Quota
ECF Arrangements105.00128.21

V. Latest Financial Arrangements:

TypeDate of ArrangementExpiration DateAmount Approved (SDR Million)Amount Drawn (SDR Million)
ECFNov 20, 2006Jan 31, 2010114.66107.05
PRGFOct 18, 1996Oct 17, 199991.0515.18
Stand-ByMar 08, 1995Mar 07, 199620.0016.40

VI. Projected Payments to Fund (without HIPC Assistance)1/ (SDR Million; based on existing use of resources and present holdings of SDRs):

Forthcoming
20102011201220132014
Principal3.5710.3015.85
Charges/Interest0.550.550.550.520.45
Total0.550.554.1210.8216.31

When a member has overdue financial obligations outstanding for more than three months, the amount of such arrears will be shown in this section.

When a member has overdue financial obligations outstanding for more than three months, the amount of such arrears will be shown in this section.

VII. Implementation of HIPC Initiative:

I. Commitment of HIPC assistanceEnhanced Framework
Decision point dateNov 2006
Assistance committed by all creditors (US$ Million)1/140.30
Of which: IMF assistance (US$ million)3.12
(SDR equivalent in millions)2.10
Completion point dateJune 2009
II. Disbursement of IMF assistance (SDR Million)
Assistance disbursed to the member2.10
Interim assistance0.29
Completion point balance1.81
Additional disbursement of interest income2/0.23
Total disbursements2.34

Assistance committed under the original framework is expressed in net present value (NPV) terms at the completion point, and assistance committed under the enhanced framework is expressed in NPV terms at the decision point. Hence these two amounts can not be added.

Under the enhanced framework, an additional disbursement is made at the completion point corresponding to interest income earned on the amount committed at the decision point but not disbursed during the interim period.

Assistance committed under the original framework is expressed in net present value (NPV) terms at the completion point, and assistance committed under the enhanced framework is expressed in NPV terms at the decision point. Hence these two amounts can not be added.

Under the enhanced framework, an additional disbursement is made at the completion point corresponding to interest income earned on the amount committed at the decision point but not disbursed during the interim period.

VIII. Implementation of Multilateral Debt Relief Initiative (MDRI): Not Applicable

IX. Exchange Arrangement

Although the de jure exchange regime remains a managed float with no predetermined path for the exchange rate, Haiti has been reclassified as a “crawl-like” arrangement as the Gourde has remained within a narrow band relative to an identifiable depreciation trend against the U.S. dollar since April 1, 2008. The previous change in classification from a fixed to managed floating regime took place in January 1990. Haiti’s exchange system is free of restrictions on the making of payments and transfers for current international transactions. Since September 1991, all transactions have taken place at the free (interbank) market rate.

X. Safeguards Assessment

The update assessment of the Banque de la République d’Haiti (BRH) was concluded in September 2008. The authorities have made progress in implementing safeguards recommendations, but improvements are still needed in a number of areas. The qualitative analysis of the main differences between currently used accounting principles and IFRS did not reveal major differences and suggests that a gradual adoption of IFRS by the BRH is feasible. Another significant step was the adoption of the Audit Committee Charter in March 2007, followed by its constitution in February 2008. However, the capacity of this Committee needs to be strengthened. Vulnerabilities remain in the areas of foreign reserves management, the timely conduct of external audits, and timely production of audited financial statements. Since the update assessment in the context of the second augmentation was recently concluded, the conclusions of that assessment continue to be valid for the third augmentation of access.

XI. Article IV Consultation

The last Article IV consultation was concluded by the Executive Board on July 9, 2007. Haiti is on a 24-month cycle. Conclusion of the 2009 Article IV is being postponed in the wake of the January 12, 2010 earthquake until estimates of damages and balance of payment needs are firmed up.

XII. Technical Assistance

Haiti has benefited from the following IMF technical assistance missions since 2005:

DepartmentDatesPurpose
FADApril 2005Public expenditure management
May 2005Tax policy and revenue administration
November 2006Public expenditure management
September 2009Public financial management
November 2009Tax and Customs administrations
CARTACApril 2008Customs administration
November 2009National accounts statistics
MCMMarch 2005Monetary operations
November 2005Implementation of a bond auction mechanism
May 2006Accounting of the central bank
March 2007Banking law (jointly with LEG)
November 2007BRH recapitalization plan
March 2008FSAP and ROSC on Banking Supervision
November 2009Insurance sector
December 2009Development of domestic debt market
STANovember 2005 and May 2006Multisector statistics
May, October and December 2006,Monetary and financial statistics, Government Finance statistics
April-May and November 2007GDDS workshop
LEGMarch 2007Banking law

XIII. Resident Representative

Mr. Graeme Justice has been the Fund’s Resident Representative since July 1, 2009.

Annex II. Relations With The Inter-American Development Bank

(As of January 15, 2010)

The IDB is Haiti’s largest multilateral donor. It has an uninterrupted presence of 50 years in Haiti and remained strongly committed to the Government of Haiti (GOH) and its people. In light of this, the IDB is mobilizing financial and human resources to address the multiple needs of the country after the earthquake of January 12, 2010. The Bank intends to be an important contributor to the humanitarian relief efforts, reconstruction and rehabilitation activities, and delivery of basic social services in the aftermath of the shock.

The IDB, in collaboration with the WB, UN, and ECLAC, has started to work on the strategic plan for a Post-Disaster Needs Assessments (PDNA). The Bank’s priority is to analyze ways of securing maximum resources for basic infrastructure reconstruction and rehabilitation. Undisbursed resources of existing commitments will be redirected to urgent works, particularly in the areas of housing, water and sanitation, electricity, social infrastructure reconstruction, and transport. The resources readily available from the existing portfolio are about US$90 million. The 2010 grant allocation for Haiti, of US$128 million will be made available to finance reconstruction activities in line with the PDNA. In addition, the Bank is seeking to leverage additional resources from other donors’ fund that it manages in agreement with the co financiers to utilize already committed funds for vital activities.

Given its experience in infrastructure and its extensive exposure and presence in that sector in Haiti, the IDB is prepared to play a key role in establishing a reconstruction fund channeling both private and public resources to finance priority reconstruction works. This fund could become an integral part of a framework for long-term disaster risk management in Haiti.

Beyond the approval of grant resources for emergency assistance, the IDB is ready to provide substantial technical support to the GOH including experts in project management. This would help to support the reduced capacity of public sector managers in the short term and to advance on post-disaster work as well as ensure funded investment projects continue outside Port au Prince while leveraging the multitude of offers of assistance including from Latin American and Caribbean countries.

Key Developments in 2009

In the first quarter of 2009, the Board of Governors increased grants for Haiti to US$250 million for 2009-10, almost tripling the original amount established in the Country Strategy. After a careful examination of the most critical issue-areas for which Haiti required support and after several consultations with Government, it was agreed that the additional grants would be used to finance reconstruction works and investment projects in key programmatic areas such as social infrastructure, urban drainage and sanitation, access to potable water in urban areas, and nutrition.

In 2009, the IDB approved six major operations for a total of US$122 million from the Grant Facility, including US$25 million in budget support. Similarly, the Bank maximized the use of technical cooperation to support the operational program. Resources in the order of US$2 million were approved during the year, bringing the total size of the active technical cooperation portfolio to roughly US$22 million.

The close collaboration of the IDB’s enhanced field presence with Haitian executing agencies has improved absorptive capacity. In 2009, disbursements reached US$127 million, doubling the levels of 2005-06.

The IDB has active investment projects in four key areas: a total of US$105 million or 15 percent of its active portfolio for state modernization, governance, and local development; US$302 million or 42 percent for infrastructure (energy and transport); and US$145 million or 19 percent for agriculture and the environment, and US$224 million or 29 per cent for access to basic services (water, urban rehabilitation, nutrition and education).

As part of the Enhanced HIPC and MDRI initiatives, in 2009 the IDB granted some US$511 million in debt relief, clearing the way for the Government to undertake vital public investments. The total nominal reduction in Haiti’s debt stock totaled US$1 billion with annual savings from debt service of US$50 million through 2019. Annual savings on debt servicing payments to the IDB are estimated to be over US$20 million through 2022.

The IDB facilitated the renewal of Haiti’s partnership with the international donor community by hosting the Donors Conference in April. The event brought together Haiti’s major development partners in an effort to align existing and future aid with the Haitian government’s two-year program launched during the Conference. The meeting also helped to enhance coordination between major stakeholders, including NGOs, in order to increase the efficiency and effectiveness of foreign assistance to Haiti. Donors pledged to provide US$353 million in additional aid to Haiti over the next two years. Supplementary commitments in the order of US$ 70 million subsequently followed.

Portfolio Indicators

As of December 31st, 2009, the IDB’s active portfolio consisted of 27 investment operations for a total of US$797 million. The available balance, US$341 million, represents 42 percent of the total portfolio amount.

IDB Main Portfolio Indicators as of December 31st, 2010
ProjectsMIFCo-financing/Donor-funded OperationsTechnical Cooperation Operations in Execution
Number27211244
Approved Amount (US $million)7978.314022
Available Balance (US $million)3413.811211
Note: Approved amount includes a budget support allocation of US$25 million.
Note: Approved amount includes a budget support allocation of US$25 million.

The IDB administers a total of US$140 million from other donors. This figure includes over US$20 million in soft loans from OFID for different projects in the education, transport and water and sanitation sectors. An US$8 million grant from the EU for vocational training and agricultural health initiatives, and over US$80 million from CIDA for primary road construction and rehabilitation projects. In 2010 the IDB will continue to leverage funds from its main partners to support existing and programmed operations, particularly electricity, vocational training, and budget support. Agreements in the order of US$45 million have already been sealed with OFID, KFW, and the CDB and should operationalize in the course of the year.

Annex III. Relations With The World Bank Group

(As of January 2010)

The World Bank stepped up its engagement in Haiti in March 2004, as part of a broader partnership between the transitional government and donors to address Haiti’s social, economic and institutional needs under the Interim Cooperation Framework (ICF).

For FY 2009-12, the World Bank and the IFC have jointly prepared a Country Assistance Strategy (CAS) to align their assistance with the country’s National Growth and Poverty Reduction Strategy Paper (the DSNCRP). The CAS was approved by the Bank’s Board on June 2, 2009. The strategy has three main pillars: (i) promoting growth and local development; (ii) investing in human capital; and (iii) reducing vulnerability to disasters. Cutting across the CAS is an emphasis on longer-term institution building and support for the Government in the delivery of quick, visible results. The CAS also reflects the strategic imperatives of recovery, reconstruction, and risk mitigation, in the aftermath of the devastating 2008 hurricane season.

Since 2005 the Bank has approved US$283 million of IDA resources for Haiti, and more than US$55 million from trust funds (US$22 million from the Education for All Fast-Track Initiative Catalytic Fund). The total envelope of International Development Association (IDA) resources for the new four-year CAS period is around US$121 million. Normal IDA allocations were supplemented by US$40 million of post-disaster assistance following the catastrophic 2008 hurricane season. The Bank will provide an additional $US100 million as part of the response to the earthquake that devastated Haiti. In addition to new initiatives, the Bank expects to utilize the capacity of existing projects, including those that focus on education and community-driven development, to provide assistance quickly and effectively. The Bank is sending experts to work with the Government and its international partners to assess needs and losses and plan for recovery and reconstruction. Going forward, the World Bank plans to provide seed resources to establish a multi-donor trust fund, the Haiti Reconstruction Fund, to mobilize international support for recovery and reconstruction process. All current IDA and trust fund assistance is in the form of grant.

The World Bank has 14 active IDA projects, focusing on infrastructure, disaster risk management, education, economic governance, community-driven development (CDD), agriculture and avian flu. From mid-FY10 onwards, new IDA projects are envisioned in just three areas in which the Bank already has a strong program: CDD, education, and institutional strengthening (including budget support). With the limited IDA envelope, the Bank does not expect to directly finance large-scale infrastructure or agricultural investments, but will focus resources on strategic areas that tap areas of comparative advantage (such as institutional strengthening), build on the progress made by projects underway, and leverage funding from other sources. The Bank already has a close partnership in the electricity and water sectors with the Inter-American Development Bank (IDB), in education with the Canadian International Development Agency (CIDA) and the Caribbean Development Bank, and in transport with the EU, IDB, and Agence Française de Développement (AFD). Together with IFC, the Bank will also aim for key infrastructure investments that promote private sector growth and WBG synergies. The most recent Board approvals (December. 8, 2010) were: (i) a $12.5 million Development Policy Operation (the Third Economic Governance Reform Operation); and (ii) US$12 million of Additional Financing for the Transport and Territorial Development project, to cover cost overruns and post-hurricane repairs.

The Bank has completed seven major analytical works, including a Country Economic Memorandum (CEM), a Country Social Analysis, and a Social Protection Strategy, and a joint World Bank-IADB Public Expenditure Management and Financial Accountability Review (PEMFAR). The PEMFAR provides an analytical basis in support of the government’s medium and longer-term public finance reform program. The PEMFAR examines the linkages between public finance, growth and poverty with a view to helping policymakers in Haiti design the new generation of public finance reforms centered on policy actions to promote sustained and equitable growth and reduce poverty. Following the PEMFAR findings and policy recommendations, the government prepared in November 2007 its action plan, which includes priorities to advancing public finance reforms in the short and medium terms. The action plan served as a basis for the policy matrix underpinning the government’s public finance reforms. The Bank has also undertaken a Financial Sector Assessment Program (FSAP) jointly with the IMF in FY 2008.

A Poverty Reduction Strategy Paper (Rapport Annuel de la Mise en Oeuvre du Document de Stratégie Nationale pour la Croissance et la Réduction de la Pauvreté, RA-DSNCRP) was prepared by the Government of Haiti, through a participatory process consisting of consultations with civil society, government officials, and development partners. The DSNCRP was approved by the government and submitted to the International Development Association (IDA) and the International Monetary Fund (IMF) on November 30, 2007. An annual progress report was submitted to IDA and the IMF on April 27, 2009. With the HIPC completion point attainment in June 2009, the World Bank and the IMF discussed at their respective Board the Joint Staff Advisory Note (JSAN) of one year implementation of the DSNCRP.

The International Finance Corporation (IFC) has supported the government’s priorities of promoting economic growth and improving access to quality basic services, particularly for the most vulnerable groups. IFC has expanded its activities in Haiti over the past two years and established a full-time presence in the country, with three staff in its office, co-located in the World Bank office. IFC activities in Haiti have focused on four key areas: the financial sector, infrastructure, textiles, and investment climate. IFC has worked closely with IDA and the donor community to identify targeted and concrete actions that: (i) support the development of a sustainable private sector and resulting in income generating activities; and ii) help improve the business climate in infrastructure, access to finance, and SMEs.

In the financial sector, IFC addresses challenges including banks’ risk aversion through investment and advisory activities, strengthening financial institutions and improving access to finance, particularly for micro entrepreneurs and SMEs. For example, IFC is providing advisory services to Haiti’s largest bank, Sogebank, S.A., to create a dedicated SME unit. It is also providing ongoing advisory support to the central bank to establish a credit bureau.

To improve Haiti’s inadequate infrastructure, IFC focused on enhancing private sector participation, attracting foreign direct investment and “know-how,” and assisting the Government in improving capacity. IFC has two advisory mandates to: (i) assist in developing a private sector participation solution for the main airports; and (ii) structure and implement the privatization of the state-owned fixed line telecom operator TELECO. In addition, IFC has started training and capacity building for SMEs.

In FY 2006 and FY 2007, IFC provided two loans of US$15 million each to support the establishment and expansion of mobile telephone operator Digicel in the country. In FY 2009, IFC financed two financial sector projects (US$0.3million loan to Capital Bank, and $4 million equity contribution to Sogebank). In FY10, IFC committed US$16 million toward the establishment of a new private power plant by the E-Power consortium. Furthermore during 2000-10, IFC completed three advisory projects (EDH, textile companies, and Sogebank phase I), and is currently implementing six advisory operations (Business Edge training, privatization of fixed line operator TELECO, special economic zones, investment promotion, Sogebank phase II, Better Work, and Doing Business Reform).

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