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IMF Executive Board Approves Three-Year US$69.7 Million Under ECF for Haiti

Author(s):
International Monetary Fund. Western Hemisphere Dept.
Published Date:
June 2015
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The Executive Board of the International Monetary Fund (IMF) Monday approved a three-year SDR 49.14 million (about US$69.7 million, 60 percent of quota) arrangement under the Extended Credit Facility (ECF) for Haiti. The approval enables the immediate disbursement of an amount equivalent to SDR 7.02 million (about US$10 million), while the remaining amount will be phased over the duration of the arrangement, subject to semi-annual program reviews.

The authorities’ ECF-supported program aims to raise Haiti’s growth potential and reduce vulnerabilities to shocks, while entrenching macroeconomic stability.

Following the Executive Board’s discussion on Haiti, Mr. Min Zhu, Deputy Managing Director, and Acting Chair, made the following statement:

“Haiti’s pursuit of macroeconomic stability in the aftermath of the 2010 earthquake is commendable—growth has been positive, inflation has remained moderate, and international reserve levels adequate. Going forward, continued efforts are needed to support sustained and inclusive growth, strengthen institutions and the policy framework, and maintain adequate buffers to absorb shocks.

“The new three-year program supported by the Fund’s Extended Credit Facility (ECF) seeks to entrench macroeconomic stability, improve competitiveness to spur inclusive growth, and preserve buffers, through streamlined policies that have full country ownership. Donor support ensures the full financing of the program.

“The program targets a reduction of the non-financial public sector deficit from 7.5 percent in FY2014 to 3.25 percent of GDP in FY2015 and 2.5 percent in the medium term to preserve sustainability. Lower oil prices will facilitate fiscal consolidation (allowing the government to raise fuel taxes and lower electricity subsidies), while preserving pro-poor spending. The adoption of an automatic fuel pricing mechanism will safeguard fuel taxes if oil prices rebound.

“The program aims to preserve price stability. Accordingly, the monetary policy stance will remain tight as needed until fiscal consolidation proceeds to anchor exchange rate expectations. The policy mix seeks to keep international reserves at an appropriate level to ensure adequate buffers.

“The program’s structural reform agenda focuses on strengthening competitiveness to foster growth. It tackles deep-seated problems in the electricity sector; supports the authorities’ efforts to strengthen property rights; and includes actions to increase policy effectiveness through reforms in tax administration, tax policy and public financial management, as well as improvements in the monetary framework and economic statistics.”

Annex

Recent Economic Developments

In December 2014, Haiti completed the arrangement under the Extended Credit Facility (ECF), which helped support positive economic growth and maintain macroeconomic stability after the 2010 earthquake. However, while per capita growth has been positive, it has been insufficient to significantly reduce poverty. Fiscal and external deficits rose to high levels, increasing Haiti’s vulnerabilities. Due partly to a difficult socio-political environment, progress on structural reform was limited.

Main Program Objectives

The program aims at entrenching macroeconomic stability and at deepening structural reforms, to support sustained and shared growth. The program seeks to maintain buffers in the form of foreign reserves and bank deposits to reduce Haiti’s vulnerability to shocks, and to avoid stop-and-go policies. Real GDP is projected to growth by 3-4 percent over the medium term helped by the implementation of structural and institutional reforms addressing bottlenecks to growth and job creation, including improvements in the business environment and property rights, financial inclusion, and access to available and cheap electricity. Inflation is expected to be contained in the mid-single digits, reflecting prudent fiscal and monetary policies, while gross international reserves would cover more than 4.5 months of imports.

Fiscal policy aims at placing public debt on a sustainable path and preserving buffers against downside risks. It targets a reduction in the deficit of the non financial public sector to 2.5 percent of GDP in the medium term, while preserving poverty-reducing spending. Fiscal consolidation will result from the elimination of regressive fuel subsidies, the adjustment of investment spending to sustainable levels, and the reduction of quasi-fiscal losses in the electricity sector. In this regard, the revised FY2015 budget includes a strong fiscal adjustment that takes advantage of the low international oil prices. To prevent a reemergence of fuel subsidies if international prices rebound, the authorities have adopted an automatic pricing mechanism for petroleum products, which will reflect international oil prices into domestic fuel prices, while protecting the most vulnerable.

Additional Background

Haiti, which became of member of the IMF on September 8, 1953, has an IMF quota of SDR 81.90 million.

For additional background on the IMF and Haiti, see: http://www.imf.org/external/country/HTI/index.htm.

Haiti: Selected Economic and Financial Indicators, 2012/13–2018/19(Fiscal year ending September 30)
Nominal GDP (2014): US$8.7 billionGDP per capita (2014): $833
Population (2014): 10.5 millionPercent of population below poverty line (2012): 58
2012/20132013/20142014/152015/162016/172017/182018/19
Act.Prov.Proj.Proj.Proj.Proj.Proj.
(Change over previous year; unless otherwise indicated)
National income and prices1/
GDP at constant prices4.22.72.0-3.03.0-3.53.5-4.03.5-4.03.5-4.0
GDP deflator6.63.86.66.45.45.05.0
Consumer prices (period average)6.83.96.66.55.45.05.0
Consumer prices (end-of-period)4.55.37.15.95.05.05.0
Exports (goods, valued in dollars, f.o.b.)18.34.25.05.46.06.77.0
Imports (goods, valued in dollars, f.o.b.)8.13.4−4.73.85.55.55.2
Real effective exchange rate (end of period; + appreciation)0.70.80.00.00.00.00.0
Money and credit (valued in gourdes)
Credit to private sector (in dollars and gourdes)16.411.24.711.49.010.411.4
Base money (currency in circulation and gourde deposits)15.10.53.07.08.18.27.1
Broad money (incl. foreign currency deposits)6.69.87.37.67.98.38.5
(In percent of GDP; unless otherwise indicated)
Central government
Overall balance (including grants)−7.2−6.4−2.7−1.9−2.2−2.0−2.0
Domestic revenue12.812.514.714.715.015.315.5
Grants 2/8.16.56.15.65.35.04.8
Expenditures28.125.423.422.222.522.322.3
Current expenditures12.012.612.512.512.512.512.5
Capital expenditures16.112.810.99.710.09.89.8
Overall Balance of Total Non-Financial Public Sector 3/−8.2−7.4−3.2−2.3−2.4−2.2−2.0
Savings and investment
Gross investment30.131.226.624.824.924.724.8
Of which: public investment16.112.810.99.710.09.89.8
Gross national savings23.724.823.121.021.121.021.2
Of which: central government savings1.91.32.92.83.03.03.0
External current account balance (including official grants) 2/−6.3−6.3−3.5−3.8−3.7−3.7−3.6
External current account balance (excluding official grants)−15.2−12.8−8.8−8.8−8.6−8.5−8.4
External Balance: Fossil Fuels−11.3−11.9−7.3−7.8−8.1−8.3−8.4
Public Debt
External public debt (medium and long-term, end-of-period)4/17.421.021.822.623.323.824.3
Total public sector debt (end-of-period) 5/19.524.125.526.427.228.228.9
External public debt service 6/1.82.43.74.65.56.16.1
(In millions of dollars, unless otherwise indicated)
Overall balance of payments−282−178−210−6133277
Net international reserves (program definition) 7/1,2191,0108608909501,0171,085
Gross International Reserves 8/2,3841,9141,7821,8081,8721,9402,010
In months of imports of the following year6.35.34.84.64.54.54.5
Nominal GDP (millions of Gourdes)364,526388,809424,832466,707510,359555,960605,653
Nominal GDP (millions of US$)8,4518,7119,0549,47510,01210,58911,199
Sources: Ministry of Economy and Finance; Bank of the Republic of Haiti; World Bank; Fund staff estimates and projections.

Staff assume a range of 2–3 percent and a point projection of 2.5 percent for FY2015; a range of 3-3.5 percent and a point projection of 3.25 percent for growth in FY2016, and a range of 3.5–4.0 percent and a point projection of 3.75 percent for FY2017-FY2019.

A new ECF would catalyze identified multilateral budget support (see Tables 4a and 4b). Until a new IMF-supported program is approved, current account projections exclude these flows.

Includes state-owned electricity company (EDH).

Debt ratios differ slightly from those in the DSA given the use of average, instead of end-of-period, exchange rates

Excludes central bank repurchase operations in FY2013.

In percent of exports of goods and nonfactor services. Includes debt relief.

Includes SDR allocation as both an asset and liability.

Includes gold; includes transactions related to BRH repurchase operations; corresponds to BPM6 definition of reserves.

Sources: Ministry of Economy and Finance; Bank of the Republic of Haiti; World Bank; Fund staff estimates and projections.

Staff assume a range of 2–3 percent and a point projection of 2.5 percent for FY2015; a range of 3-3.5 percent and a point projection of 3.25 percent for growth in FY2016, and a range of 3.5–4.0 percent and a point projection of 3.75 percent for FY2017-FY2019.

A new ECF would catalyze identified multilateral budget support (see Tables 4a and 4b). Until a new IMF-supported program is approved, current account projections exclude these flows.

Includes state-owned electricity company (EDH).

Debt ratios differ slightly from those in the DSA given the use of average, instead of end-of-period, exchange rates

Excludes central bank repurchase operations in FY2013.

In percent of exports of goods and nonfactor services. Includes debt relief.

Includes SDR allocation as both an asset and liability.

Includes gold; includes transactions related to BRH repurchase operations; corresponds to BPM6 definition of reserves.

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