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Haiti: Staff Report for the 2001 Article IV Consultation
Author: International Monetary Fund
Publication Date:
08 Feb 2002
ISBN:
9781451817553
Language:
English
Keywords:
ISCR; CR; deficit; staff appraisal; arrears to the IDB; IDB's disbursement; regime; Haitian authorities; central bank financing; wage bill; authorities target; authorities' budget; Western Hemisphere; Caribbean
Download PDF (1.6 MB)

This 2001 Article IV Consultation highlights that Haiti’s performance under the Staff-Monitored Program (SMP) during FY2000/01 was weak. Real GDP is estimated to have declined by about 2 percent, reflecting tight monetary conditions and the negative expectations raised by the continuing high fiscal imbalance and central bank financing; inflation remained broadly unchanged at about 16 percent during most of the year. Tight monetary conditions and crowding out by the public sector combined with the weak economy and continuing political uncertainty all contributed to a sharp decline in credit to the private sector.

Abstract

This 2001 Article IV Consultation highlights that Haiti’s performance under the Staff-Monitored Program (SMP) during FY2000/01 was weak. Real GDP is estimated to have declined by about 2 percent, reflecting tight monetary conditions and the negative expectations raised by the continuing high fiscal imbalance and central bank financing; inflation remained broadly unchanged at about 16 percent during most of the year. Tight monetary conditions and crowding out by the public sector combined with the weak economy and continuing political uncertainty all contributed to a sharp decline in credit to the private sector.

I. Introduction

1. Discussions for the 2001 Article IV consultation with Haiti were held in Port-au-Prince during September 5–19, 2001 and in Washington on October 2, 2001.1 The mission met with Economy and Finance Minister Gustave, Central Bank Governor Joseph, other senior officials, various political and private sector representatives as well as representatives of international organizations and bilateral donors.

2. Haiti has experienced political instability during the past four and a half years with adverse economic consequences. A new parliament was installed in August 2000, but opposition political parties have questioned the legitimacy of the elections. The election of President Aristide in November 2000, which the opposition boycotted, added to the political tension. While still channeling humanitarian assistance through NGOs, the main bilateral and multilateral donors suspended budgetary aid pending the resolution of the political crisis; though some progress has been made under the auspices of OAS/CARICOM missions, the crisis essentially remains unresolved so far.

3. At the conclusion of the last Article IV consultation in November 2000, Directors expressed concern about the effects of the prolonged political impasse on the economic situation. While welcoming the increase in domestic petroleum product prices in September 2000 designed to bolster fiscal revenues, Directors noted the authorities’ intention to adjust these prices regularly in line with the changes in world prices and the exchange rate. They called on the authorities to control budgetary expenditures, restrict the use of ministerial discretionary accounts and contain wage increases. They indicated that a track record of good performance under the staff-monitored program (SMP) during FY 2000/01 (year ending September 30) would be one precondition for beginning formal discussions on a Poverty Reduction and Growth Facility (PRGF) arrangement.

4. Economic and financial statistics are made available to Fund staff as they become available in Haiti. Improvements in the past two years have been achieved in some real sector statistics, particularly in the coverage of the national accounts (Appendix Box 1), and in balance of payments statistics. However, data problems remain in the public sector accounts and the balance of payments that affect surveillance, and program design and monitoring. Statistical issues are discussed in more detail in Appendix IV.

5. Regarding Haiti’s consent to its quota increase under the Eleventh General Review of Quotas and the status of Haiti’s acceptance of the Fourth Amendment to the Fund’s Articles of Agreement (a special allocation of SDRs), the authorities indicated that parliamentary approval of these matters is required; they preferred to defer the proposals in view of the heavy agenda for the parliament.

6. Haiti has accepted the obligations of Article VIII, Sections 2, 3, and 4. Relations with the Fund are described in Appendix I. Relations with the World Bank and the IDB are described in Appendices II and III.

II. Background and Developments During FY 2000/01

7. The authorities’ economic program for FY 2000/01, which was supported by an SMP, was predicated on a modest rebound in real GDP growth on the assumption that the presidential elections would give rise to increased private sector confidence and an improvement in external capital flows. The central government deficit was to be reduced to 1.3 percent of GDP, by way of a strong recovery in revenue and some curtailment of expenditure. Monetary policy was to be kept tight until the reduction in the fiscal deficit took hold and inflation was clearly on a downward path.

8. Performance under the SMP during FY 2000/01 was weak (Table 1). In the face of political instability and a decline in foreign financing, real GDP is estimated to have declined by around 2 percent (Table 2). Inflation (12-month) remained at around 16 percent during most of the year before decelerating during the last quarter to 12 percent in September 2001.2

Table 1.

Haiti: Quantitative Benchmarks and Actual Outcomes under the SMP 1/

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Sources: Ministry of Finance; Central Bank of Haiti; and Fund staff estimates.

Refer to technical memorandum for definitions of quantitative benchmarks and adjusters.

Not benchmarks.

Wage arrears reported by the authorities.

Table 2.

Haiti: Selected Economic and Financial Indicators

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Sources: Ministry of Economy and finance; Bank of the Republic of Haiti; and Fund staff estimates.

Adjustment scenario proposed by staff (October 2001–September 2002).

Revised data from the central bank.

Excluding grants.

In relation to broad money at the beginning of the period.

9. Fiscal performance deteriorated. The overall central government deficit in FY 2000/01 rose to an estimated 2.7 percent of GDP, against 2.5 percent of GDP in FY 1999/20003 (Table 3). Central government revenue declined to an estimated 7.3 percent of GDP (8.1 percent of GDP in FY 1999/2000), in part because petroleum product prices were not adjusted in line with increased landed costs, as envisaged under the SMP. Total budgetary spending was held at an estimated 9.8 percent of GDP, against 10.1 percent of GDP in FY 1999/2000. While the wage bill was below program limits, outlays on nonwage current goods and services were well above target; capital outlays were substantially compressed. Major problems regarding transparency and accountability in budget execution were not addressed, as had been envisaged under the SMP, and no budget was approved by parliament.4 The deficit was financed mostly by the central bank (2.5 percent of GDP) as well as through arrears accumulation, including debt service arrears to the World Bank and the IDB.

Table 3.

Haiti: Central Government Operations 1/

(In percent of GDP)

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

Does not include most expenditures on projects and technical assistance financed with concessional loans and grants.

Staff-monitored program (October 2000–September 2001).

The ratios are not strictly comparable with program as the estimate of GDP was revised.

Adjustment scenario proposed by staff (October 2001–September 2002).

Includes external arrears and exceptional financing.

Includes domestic arrears.

10. Administrative measures implemented by the new government in the second-half year, including the collection of back taxes, led to some increase in internal and custom revenue during the last quarter. There was also some compression of expenditures other than on goods and services as well as the tailing-off of elections costs. As a result, the budgetary deficit and central bank financing in the second semester were less than in the first semester.

11. In June 2001, the central bank (BRH) modified the required reserves system including raising the ratio of required reserves on dollar deposits from 21 percent to 31 percent, the level prevailing on gourdes deposits (Box 1). However, the changes in the reserves system resulted in a net increase in the liquidity in gourdes, that was largely mopped up by a marked increase in the issuance of BRH bonds, at a substantial cost to the central bank (see Box 1, Appendix Box 2, and Figure 1). The BRH maintained interest rates on its 91-day bonds at 26.7 percent from August 20005 to September 2001. In October 2001, the BRH lowered interest rates on its bonds to 21 percent, associated with the deceleration of inflation during the last quarter of FY 2000/01, the decline in dollar interest rates, and the BRH’s concern about the health of the banking system and its increasing quasi-fiscal deficit.

Figure 1:
Figure 1:

Outstanding BRH Stock (OBS), Credit to the Central Government (CCG), and Reserves Requirements (RR)

(in millions of gourdes)

Citation: IMF Staff Country Reports 2002, 017; 10.5089/9781451817553.002.A001

12. The high interest rates on loans (an average of 32 percent for gourde loans, and 14 percent for dollar loans at the end of September 2001), reflected crowding out by the public sector and continuing political uncertainty. This has contributed to a sharp decline in credit to the private sector, which decreased by 13.3 percent6 in real terms in the 12 months ending September 2001; broad money in real terms declined by 2.7 percent during the same period (Table 4).7

Table 4.

Haiti: Summary Accounts of the Banking System

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Sources: Bank of the Republic of Haiti; and Fund staff estimates.

Adjustment scenario proposed by staff (October 2001—September 2002).

Includes commercial banks’ foreign currency deposits. For program monitoring, they are excluded from net international reserves.

Excludes special accounts.

91-day bonds.

Reserves Requirement, Gourdes Liquidity, and Banks’ Profitability

The portion of the reserve requirement (RR) on U.S. dollar liabilities of the banking system to be held in gourdes was decreased from 70 percent in March 2001 to 30 percent in June 2001, with a view to allowing banks to better match their dollar assets and liabilities. Also, the ratio of required reserves on dollar liabilities was increased to 31 percent in June 2001 (previously 21 percent, the level prevailing since September 2000 on gourde deposits).

The commercial banks invested the gourde liquidity released by the change in RR regulation in BRH bonds. They satisfied the increase in dollar RRs on dollar liabilities by liquidating some of their foreign assets.

The change in the composition of and the increase in RRs on dollar liabilities produced a negative net impact on central bank profits, while they enhanced commercial bank revenues. As RRs are not remunerated, the commercial banks lost interest income on foreign assets repatriated to Haiti in order to meet the additional required dollar deposits with the central bank. However, investing the gourde liquidity released by the change in the composition of RR in BRH bonds enhanced their profitability. These measures, on the other hand, reduced the central bank’s profit, because interest income derived from investing unremunerated RRs in dollar assets was lower than interest payments on additional bonds issued to mop up the increase in gourde liquidity.

13. The central bank continued to strengthen its supervisory capacity and the regulatory framework during FY 2000/01. Banks now generally follow internationally accepted practices regarding loan classification, provisioning, and disclosure of information.8 Work on a new banking law (to bring the banking system in conformity with international standards, including the extension of the central bank’s supervisory authority to nonbank financial institutions) and central bank law (to give it independence in the conduct of monetary policy) is in progress.

14. Available data suggests that the banking system is being affected negatively by the high interest rates and weak domestic demand. Nonperforming loans as a proportion of total loans rose from 6.8 percent in September 2000 to 8.9 percent in June 2001. Banks have increased provisions for nonperforming loans from 63 percent in September 2000 to 65 percent in June 2001 (Table 5). Indicators of profitability show a deterioration in June 2001 relative to September 2000.

Table 5.

Haiti: Summary Indicators of Commercial Banking Sector Soundness

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Sources: Bank of the Republic of Haiti; and Fund staff estimates.

Criteria for loan classification were tightened in March 1998.

Denominated in gourdes and in foreign exchange.

Foreign exchange operations of the private sector only.

15. During FY 2000/01 little progress was made toward privatizing the state-owned Banque Nationale de Credit (BNC) as envisaged under the SMP (BNC accounts for 7 percent of banks deposits). BNC credit to the private sector continued to be limited to the rolling over of maturing credit lines. BNC’s financial situation remains fragile, based almost entirely on earnings from its portfolio of BRH bonds. The second state-owned bank, Banque Populaire d’Haiti (BPH), accounting for about 2 percent of banking system deposits, has continued to experience losses.

16. Parliament approved laws against money laundering and drug trafficking in February and August 2001. Haiti acceded to membership of the Caribbean Financial Action Task Force (CFATF) at the end of 2001. The ministry of justice has set up a Financial Intelligence Unit in charge of tracking illegal transactions.

17. The current account deficit (before grants) of the balance of payments is estimated to have declined in FY 2000/01 to about 4.8 percent of GDP (from 6.4 percent of GDP in FY 1999/2000) (Table 6). Exports declined by 3 percent in U.S. dollar terms. Exports of the light assembly sector (which represents 83 percent of total exports) grew only slightly as they were affected by the slowdown in orders from the U.S. market, while traditional exports shrank owing to the low international prices of cocoa and coffee. Imports declined by 3 percent in U.S. dollar terms, with a small increase in imports of petroleum products and inputs for the assembly industries more than offset by decreased imports of other products, largely on account of weakening economic activity. Private transfers are estimated to have continued their rising trend.

Table 6.

Haiti: Balance of Payments

(In millions of U.S. dollars; unless otherwise indicated)

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Sources: Data provided by the central bank; and Fund staff estimates.

Based on remittances transferred through authorized “transfer houses” and central bank, estimates of such transfers channeled through other means.

World bank survey of donor-provided external financing, and staff estimates.

Includes short-term capital and errors and omissions.

Crude oil prices from the World Economic Outlook. Petroleum prices for Haiti are higher as Haiti imports only refined products.

18. The capital and financial account of the balance of payments posted a small surplus in FY 2000/01, following a deficit in FY 1999/2000, reflecting mainly the repatriation of foreign assets by commercial banks to comply with the change in reserve requirements. The public sector net balance was almost nil, reflecting mainly the sharp reduction in loan disbursements from the IDB and World Bank. Net official reserves, excluding commercial banks’ dollar deposits at the central bank, are estimated to have declined by about US$50 million to US$113 million (equivalent to 1 month of imports of goods and services and 22 percent of the monetary base).9

19. Haiti started to accumulate external arrears during FY 2000/01, rising to US$17.8 million by end-September 2001. About half of the accumulated arrears were with the World Bank and the IDB10 (Table 7). As a result of the arrears accumulation, the IDB withheld new disbursements in July 2001. In the same month, the World Bank cancelled its outstanding loans due to the negative impact of the arrears-related suspension of the portfolio on project implementation, and in order to save the government commitment fees for these inactive projects. At the end of FY 2000/01, Haiti’s public external debt amounted to US$1.2 billion, or about 30 percent of GDP and around 250 percent of exports of goods and services. The bulk of the debt is on concessional terms. In view of its low debt indicators relative to other low-income countries, Haiti is currently not eligible for HIPC debt relief.11

Table 7.

Haiti: Stock of External Arrears and Projected Debt Service

(In millions of U.S. dollars)

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Sources: Bank of the Republic of Haiti; World Bank; and Fund staff estimates.

Projections.

20. The authorities have maintained a managed floating exchange rate regime. While abstaining from intervening directly in the foreign exchange market, the central bank has intervened indirectly by selling U.S. dollars to petroleum importers at market rates (as well as by drawing down reserves to finance the construction of a new central bank headquarters and the printing abroad of bank bills meeting higher security standards). During the year, the gourde remained broadly stable relative to the U.S. dollar and the real effective exchange rate appreciated by about 6 percent between September 2000 and September 2001 (Figure 2), reflecting mainly the relatively high inflation in Haiti.

Figure 2.
Figure 2.

Haiti: Exchange Rate Developments

(Index 1990=100)

Citation: IMF Staff Country Reports 2002, 017; 10.5089/9781451817553.002.A001

21. No progress was achieved during FY 2000/01 toward restructuring/privatizing key public enterprises, including Electricité d’Haiti (EDH). The economic situation of EDH however is worrisome, with a deficit of 0.4 percent of GDP projected for FY 2001/02. Plans for privatizing the operations of the port, airport, and water company are on hold (Table 8).

Table 8.

Haiti: Structural Benchmarks, October 2000–September 2001

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Sources: Ministry of Economy and Finance (MEF); and Bank of the Republic of Haiti (BRH).
Table 9.

Haiti: Projection of the Impact on Prices and Revenues of Alternative Petroleum Pricing Policies for 2002

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Source: Fund staff estimates.

Prices per gallon in gourdes.

The law defines the level of the variable excise to be set at 6.8 gourdes for gasoline; 4 gourdes for gasoil; and 0.44 gourdes for kerosene. Domestic prices are adjusted when there is a 5 percent variation in the cost.

In million of gourdes.

Note: This table shows that under present trends in future oil prices, the authorities would benefit from the implementation of the 1995 law without significant impact on domestic prices. Under the present pricing policy, petroleum prices at the pump in gourdes are set by the government at the level described in the table, with taxation per gallon fluctuating depending on dollar CIF costs and the exchange rate (assumed in this table to be constant at G26/US$). Under the 1995 law, prices at the pump are to be adjusted flexibly taking into account variations in dollar CIF costs and the exchange rate. Revenues were estimated under two different future oil prices, those as of November 30, 2001 (Case I) and those as of September 10, 2001 (Case II). The main conclusions are as follows:(i) Prices would have changed little had the law been applied in November 2001 (on average, prices would have decreased by 3 percent). Would the law have been applied in September 2001, prices would have increased by 16 percent on average with a significant increase in the price of kerosene (25 percent).(ii) The decline in international oil prices between mid-September and end-November has enhanced the estimated revenue of petroleum taxation by almost G500 million (0.5 percent of GDP) under the present pricing policy. The application of the 1995 law would have decreased revenues only marginally (by 2 percent) but eliminated the uncertainty on government revenues from petroleum taxation, that exists under the present pricing policy.

III. Policy Discussions

22. The policy discussions centered on the need for a strong fiscal adjustment in the context of a scarce budgetary aid, without which an unsustainably large central bank financing would jeopardize macroeconomic stability. There was agreement that fiscal adjustment would relieve the burden on monetary policy, reducing pressures on interest rates, and, in the context of an improved political climate, relieving growing strains on the private sector and the banking sector. However, agreement was not reached on fiscal and monetary policies consistent with these macroeconomic objectives. As a result, discussions on a possible new staff-monitored program could not be concluded. The staff encouraged the authorities to carry out economic policy and formalize their macroeconomic framework along the lines recommended by the mission, and will continue to monitor closely economic developments in Haiti.

23. Staff explained that an appropriate fiscal strategy and the supporting monetary and external sector policies could form the basis for discussions on a new staff monitored program for FY 2001/02. It also emphasized that demonstrating strong commitment to sound policies, through establishing a track record of good performance under a new SMP and assurances that donor financing is available following a political settlement, would be prerequisites for an eventual PRGF-supported program. However, staff recognized that the political situation was difficult, and a return to normalcy may take some time.

24. Staff recommended a macroeconomic adjustment scenario (discussed below) based on a real GDP projection of no growth, a moderate decline in inflation and a small increase in net international reserves (NIR). The proposed scenario included modest improvements in central government revenue performance and enhanced control over expenditure. During the discussions on the budget for FY 2001/02, the authorities broadly agreed with the staff’s underlying macroeconomic assumptions and indicated their intention to reduce central bank financing through fiscal adjustment. However, they did not agree to cut back outlays for current operations from their present historically high level, and indicated that it would be difficult to take significant revenue measures in the present weak economic environment and tense political situation. Moreover, the authorities stressed the need to substantially raise capital outlays. Staff stressed the high risks involved in the authorities’ strategy, noting that the attainment of the deficit reduction objective recommended by staff would require more determined fiscal measures than contemplated by the authorities.

A. Fiscal Policy

25. The budgetary framework recommended by staff would target a decline in the central government deficit to 1.4 percent of GDP in FY 2001/02 from 2.7 percent of GDP in FY 2000/01, consistent with central bank financing to the central government of 1.2 percent of GDP and expected net foreign financing of 0.3 percent of GDP.12 Revenue would be targeted to increase by 0.6 percentage point of GDP to 7.9 percent of GDP in FY 2000/01, while a rigorous prioritization of expenditure would cut nonpriority outlays by about 1 percentage point of GDP (to 9 percent of GDP, excluding elections costs that are expected to be foreign-financed). Staff recommended that total spending and the overall central government deficit be allowed to increase in case external budgetary aid would be larger than assumed in the program.

26. Staff recommended a basket of revenue measures, including the widening of the tax base of the turnover tax (TCA) and the increase of the withholding tax at customs from 2 percent to 5 percent (acompte). As the withholding tax is deductible against income tax, this would provide an incentive for a larger share of the informal sector to be registered as part of the tax system. Moreover, tax and customs administration should be improved, including through a strengthening of the recording and collection of taxes on petroleum. In addition, the staff urged the adoption of a flexible pricing mechanism for petroleum products as earlier recommended and as provided in the 1995 law on petroleum products, under which prices would be adjusted regularly in line with the changes in the gourde-converted landed cost. Kerosene—which is widely used for cooking by the poorest categories of the population—would, however, remain subsidized for social and environmental reasons.

27. The staff emphasized that, while keeping tight control over total budgetary expenditures, the composition of spending should be reoriented away from current expenditures on goods and services to capital expenditure. This would include raising public sector wages in line with targeted inflation and reducing outlays for goods and services to 2 percent of GDP (from an estimated 3 percent of GDP in FY 2000/01) by way of improved prioritization and reduced waste; also, some increase in capital spending to 2 percent of GDP would be warranted, mainly on basic infrastructure. Staff stressed that the government should make interest payments on the government’s outstanding debt to the BRH, thus avoiding an increase in the quasi-fiscal deficit of the central bank.

28. The draft budget submitted to the lower house13 at end-December 2001 set ambitious targets, with increased revenue collection (to 9.7 percent of GDP) and expenditure (to 13.0 percent of GDP, including an unrealistically high capital expenditure of about 5 percent of GDP). Central bank financing would be only slightly reduced to 2.0 percent of GDP. However, the authorities’ budget does not include measures consistent with the ambitious revenue collection target. Increased revenue would be sought mainly through reducing the scope for exonerations of taxes and the expansion of the computerized monitoring systems, and enhanced auditing of tax returns.14

29. Staff expressed concern that the authorities’ intended administrative revenue measures appear limited and of uncertain yield. In addition, it noted that any reversal in the recent downward trend of the international price of oil or a depreciation of the currency would lower revenue unless domestic oil prices are adjusted flexibly.15 On the expenditure side, staff expressed concern that the authorities’ budget does not control well outlays for operations or allocate sufficient funds to cover interest payments to the BRH, and seems to underestimate the amount of the subsidies that the central government would realistically need to grant to public enterprises (in particular in the ailing electricity sector). Staff also expressed doubts about the realism and the affordability of the large budgeted capital spending. Staff stressed that the authorities’ cash management system (under which actual outlays are limited to revenue collected and the ceiling on central bank financing) could, in principle, be instrumental in containing the deficit in the face of weak revenue. However, the staff expressed concern about past practices whereby the cash management system enabled excessive central bank financing and arrears accumulation.

30. Staff noted that progress in governance was critical for macroeconomic performance and the resumption of growth. By international standards the ratio of budgetary revenue and expenditure to GDP is low, owing to weak institutional capacity, large tax evasion and leakage of revenue. The staff urged the authorities to enhance governance through increased transparency and accountability in budget execution, as this would enhance donors’ confidence in budgetary mechanisms and the confidence of the public. The authorities emphasized that the draft budget for FY 2001/02 would be the first official budget since 1996, presenting the opportunity to greatly enhance control and transparency in budget execution. In this regard, they indicated that they intend to restrict the use of discretionary ministerial accounts to emergency outlays, and will make detailed data on budget execution available on the web on a monthly basis. While welcoming these positive immediate steps, staff indicated that increased fiscal accountability is a long-term goal that would require a sustained and coordinated effort, possibly starting with the overhaul of budgetary control and procedures in a large pilot ministry with donor technical assistance.

B. Monetary Policy

31. Staff presented a monetary framework for FY 2001/02 that assumes a constant broad money to GDP ratio, consistent with an average inflation rate of about 11 percent (compared to around 16 percent in FY 2000/01), as well as the fiscal framework and targeted NIR recommended by staff.

32. In this context, staff discussed with the authorities targets for the central bank’s net domestic assets to be attained mainly through the placement of central bank bonds at market rates of interest. However, while agreeing to the targeted decline in inflation, the authorities stressed the need to further relax monetary policy in the course of FY 2001/02, by way of a further lowering of interest rates on BRH bonds. The staff stressed that interest rates should be lowered further only if inflation continues to decline, in the context of a broadly stable exchange rate and reduced budget deficit. The authorities also indicated that no change was likely to be made during the course of FY 2001/02 to the present reserves requirement system. Staff concurred that any change in the required reserves system should be carefully assessed in the context of the evolution of banks’ liquidity, but noted that excessively high reserve requirements impose a heavy tax on commercial banks and should be addressed as conditions permit.

33. The authorities indicated their intention to further strengthen the banking system during FY 2001/02, supported by technical assistance from the Fund. They expect that the Financial Intelligence Unit would become operational in the first quarter of FY 2001/02. They also indicated that a new banking law, as well as a new organic law of the central bank should be finalized in the course of FY 2001/02 with technical assistance from the Fund. Pending the restructuring of the government-owned commercial banks (BNC and BPH), staff cautioned the authorities against authorizing the resumption of new lending by these banks.

C. External Sector Policies

34. The external current account deficit (before grants), is projected to remain at about US$178 million in FY 2001/02 (US$18 million including grants), equivalent to 4.6 percent of GDP (0.5 percent including grants). Exports are projected to increase slightly, while imports would pick up a little. Assuming the dollar price of oil stabilizes somewhat below US$20 a barrel (in line with the latest WEO assumptions), imports of petroleum products are projected to decline by about US$40 million. The growth of remittances would decelerate in line with the expected weaker U.S. economic activity. The capital account surplus would increase to about US$39 million, assuming further net commercial bank inflows. Net public sector flows are estimated at about US$10 million including US$18 million from the IDB, assuming that the IDB resumes disbursements on existing project loans following the payment of arrears.16 The staff advised the authorities to clear arrears to the international financial institutions to the extent possible and to seek exceptional financing for the overdue outstanding obligations and debt service to the main bilateral creditors (see Table 7).

35. The staff has made a preliminary analysis of the implications of a worse-case scenario for FY 2000/02, where remittances fall by 6 percent relative to FY 2000/01 (compared with an increase of 3 percent in the baseline scenario), petroleum imports increase by 3 percent (compared with a decline of 28 percent in the baseline scenario), and exports decline by 2 percent (against an increase of 4 percent in the baseline scenario).17 The combined effect of these external shocks are estimated to widen the current account deficit to 6 percent of GDP, resulting in a financing gap of around US$50 million (1.5 percent of GDP), compared to no gap in the baseline scenario, which would put strong pressure on the exchange rate (see Table 6).

36. The staff urged the authorities to maintain the floating exchange rate regime. Although temporary pressures in the foreign exchange market may arise, the central bank should discontinue the practice of intervening (directly or indirectly) to support the gourde and, given its low level of reserves, give priority to strengthening its net reserve position. The authorities concurred that implementing sound financial policies would provide support to the currency. The appreciation of the real exchange rate since the lifting of the embargo in 1995 had little impact on export growth, owing to the large shift in the composition of exports away from traditional agricultural products to light manufacturing industries that were attracted to Haiti by the low wages and increasing labor productivity (data limitations do not allow these factors to be included in the calculation of the real effective exchange rate). Additional efforts to enhance competitiveness should be stepped up through structural reforms aimed at reducing domestic production costs and increasing productivity.

37. The authorities reaffirmed their intention to maintain Haiti’s open trade policy.18 Haiti’s trade regime is among the most open in the Western Hemisphere, with a simple average tariff rate of about 5 percent and no nontariff barriers.19 Tariffs are generally lower than the current tariff rates under the common external tariff (CET) of the Caribbean Community and Common market (CARICOM), of which Haiti is a member.20 The Haitian authorities have negotiated a large number of suspensions of the CET to avoid tariff increases. These waivers are valid until 2005 and are renewable.

D. Structural Reform and Poverty

38. Technical work has been completed for the restructuring of five large public enterprises (airport, port, and the electricity, telephone, and water companies). However, the final steps toward privatization have been delayed, in part because of the existing political uncertainties. Negotiations with Trade Unions in connection with the privatization of the harbor of Port-au-Prince have come to a standstill while the planned reduction of the harbor’s workforce has not taken place.

39. With a per capita GDP of about US$500, Haiti is the poorest country in the Western Hemisphere. More than 80 percent of the population in rural areas live in deep poverty. Social programs aimed at reducing poverty by improving basic education and health and infrastructure are mainly funded by donors and implemented directly by nongovernmental organizations. It is encouraging that there seems to have been some progress in reducing poverty during the past decade (Box 2); however, social indicators worsened again in the past year as a result of the continued economic deterioration. The Government will need to identify and monitor poverty indicators to measure the progress resulting from the implementation of an eventual Poverty Reduction Strategy (Appendix Box 3).

40. The Fund has continued to provide technical assistance to Haiti during FY 2000/01, mainly in the form of missions, short-term visits of experts and the resident representative office.21 The staff commended the authorities for their efforts to implement the recommendations of Fund technical assistance in real sector statistics and the balance of payments, notwithstanding weaknesses in human resources. It encouraged the authorities to make full use of the resources that will become available through the recently established Caribbean Center for Technical Assistance (CARTAC), of which Haiti is a member. The staff welcomed the start of the publication of the results of the new household survey by the statistical institute, as well as the publication of a health survey (see Appendix Box 3).

IV. Medium-Term Outlook

41. The medium-term scenario prepared by staff assumes a satisfactory resolution of the current political difficulties, as well as a track record of sound macroeconomic management in FY 2001/02, paving the way for the implementation of a poverty reduction strategy supported by a PRGF beginning in FY 2002/03. This would entail an accelerated implementation of structural reforms with a substantial increase in external support, raising productivity, enhancing external competitiveness and increasing domestic investment. As a result, output growth would reach around 6 percent a year with a sizeable increase in employment (Table 10). A steady strengthening of public sector saving, combined with a prudent monetary policy, would allow for the gradual reduction of inflation to industrial country levels. The alternative scenario consistent with the current political stalemate would entail a continued contraction of the economy, accelerating inflation, a further deterioration of economic and social infrastructure and a deepening of poverty.

Table 10.

Haiti: Medium-Term Scenario

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Sources: Haitian authorities; and Fund staff estimates.

Adjustement scenario proposed by staff (October 2001–September 2002).

Assumes a PRGF-supported program starting in 2003.

Includes public enterprises and foreign-financed projects and technical assistance.

Includes expenditure for structural measures, hurricane relief, and elections.

Recent Health Indicators

General Social Characteristics of the Population

A survey conducted in 2000 on Mortality, Morbidity and Utilization of Services (EMMUS-III)) reveals among others that: about 34 percent of the households have electricity; 44 percent have access to potable water (faucet or well water); approximately 47 percent have a radio and 23 percent have television; only 4 percent own a car. About 29 percent of women and 17 percent of men aged 15 to 49 have no education; the school enrollment rate is 87 percent for women and for men. All these indicators showed improvements relative to 1994/95, for example, the access to electricity increased by 3 percentage points; access to potable water increased by 19 percentage points; and school enrollment rate increased by 13 percentage points for women and for men.

Health Indicators

Vaccination

Only 30 percent of children aged 12–23 months have received the complete series of vaccinations recommended by the World Health Organization. While full immunization remained constant relative to 1994/95, the proportion of children under the age of 12, that have not received any of the recommended vaccination decreased by 20 percentage points. Three factors are established as hindering access to health care facilities: financial constraints, low level of education and the distance involved in visiting an health establishment.

Nutritional status of the children

Nearly 23 percent of the children under five suffer from chronic malnutrition and 8 percent are experiencing severe chronic malnutrition. About 17 percent of the children are underweight and 4 percent are severely underweight. Approximately 5 percent of children under the age of five suffer from acute undernutrition (these children are too thin for their height). There is evidence to some improvement in the nutritional status of children since 1994/95, as child malnutrition declined by 1 percentage point, the percentage of underweight children declined by 11 percentage points and acute undernutrition declined by 3 percentage points.

Childhood mortality and causes of death

In the five years preceding the survey, 80 of every 1,000 children born live died before their first birthday and 42 per 1,000 who were alive at their first birthday died before they reached the age of five. The under-five mortality rate in Haiti is 119 per 1,000 live births, which is the highest in the Western Hemisphere. Broadly speaking, these indicators point to improvement, as they showed significant decline compared with their levels in 1994/95.

42. Under the baseline scenario, tax measures (widening the tax base, reducing exemptions, tightening tax administration) and improved governance would be implemented to raise central government revenue by 3 percentage points of GDP by FY 2005/06. Investment would rise strongly as private investment responds to privatization. Increased fiscal revenue, external financing, and the elimination of subsidies to public enterprises would allow the government to increase investment in infrastructure and social services. At the same time, a reduction in credit to the public sector would open up room for expanding credit to the private sector. Higher private savings would result from increased income and output growth led by private sector investment and exports and improvements in financial intermediation.

43. After an initial increase owing to the resumption of growth, the external current account deficit as a ratio to GDP would narrow gradually as exports and remittances expand (Table 11). Import growth would reflect the expansion of investment and output. Larger net public sector capital inflows, grants and foreign direct investment would finance the current account deficit while allowing for a buildup of net international reserves. The ratio of total public debt to GDP would decline to around 25 percent of GDP by FY 2005/06. Nevertheless, significant improvement in the level of per capita GDP would require sustained economic growth over the decade.

Table 11.

Haiti: Medium-Term Balance of Payments

(In millions of U.S. dollars; unless otherwise indicated)

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Sources: Data provided by the central bank; and Fund staff estimates.

Adjustment scenario proposed by staff (October 2001–September 2002).

Based on remittances transferred through authorized “transfer houses” and central bank, estimates of such transfers channeled through other means.

World bank survey of donor-provided external financing, and staff estimates.

Includes short-term capital and errors and omissions.

Program definition, excluding dollar commercial banks deposits at the BRH.

Crude oil prices from the World Economic Outlook. Petroleum prices for Haiti are higher as Haiti imports only refined products.

V. Staff Appraisal

44. Haiti continues to be in a very difficult economic situation: the political crisis has not been resolved, confidence has not returned, and foreign financing remains constrained. The fiscal deficit has widened, financed by central bank borrowing and external arrears accumulation, worsening the already negative investment climate. With a tight monetary policy, real interest rates are high, economic activity is weak, and the inflation rate has increased. Per capita GDP has further declined in a country that is already the poorest in the Western Hemisphere. There is general agreement that a political settlement acceptable to all interested parties is a pre-condition for restoring the momentum of economic development and poverty reduction, with strong support from the international community.

45. Pending the resolution of the political impasse, the macroeconomic adjustment scenario proposed by staff for FY 2001/02, that could form the basis for discussions of anew SMP, would be a holding operation to contain the deterioration of the economy. With foreign financing expected to remain tight, the strategy would focus on reducing the fiscal deficit and the recourse to central bank financing, containing inflation and stemming the loss in reserves. This could allow for a prudent lowering of interest rates. Although a strong response by the private sector to lower interest rates is unlikely until the political situation clears up and confidence returns, the staff is of the view that a more balanced policy mix would help prevent a further deterioration of the economy. However, discussions on a new SMP were not concluded as the authorities could not commit to a macroeconomic framework and policies consistent with its objectives.

46. The resumption of growth over the medium term would depend critically on heightened private sector confidence and investment, as well as on increased public sector capital inflows following the resolution of the current political impasse. The instrument for achieving higher growth would be a medium-term comprehensive program supported by a PRGF. Satisfactory performance under a new SMP would be a precondition to initiate discussions on an eventual PRGF arrangement.

47. The recommended fiscal program includes measures to increase central government revenue in FY 2001/02 while cutting nonpriority outlays. Revenue measures could include improving tax and customs administration, improving the recording and collection of petroleum-based revenue, widening the base of the turnover tax and including a larger part of the informal sector in the tax system. Moreover, the staff strongly recommends the adoption of an automatic price adjustment mechanism for petroleum products, with a view to shielding this important source of tax revenue from fluctuations on the international oil market. Regarding expenditure, the staff recommends raising public sector wages in line with targeted inflation and containing outlays on goods and services through enhanced prioritization, while raising capital spending somewhat, mainly on basic infrastructure.

48. The authorities submitted their budget for FY 2001/02 to the lower house at end-December 2001. The preparation of the official budget for FY 2001/02, the first operational budget since 1996, is a positive development. However, while the small budgeted reduction in domestic financing of the fiscal deficit is a step in the right direction, it falls short of what is required to stabilize the economy. Moreover, it would not be realistically attained without taking determined revenue measures. In particular, the authorities’ proposed administrative measures at customs and at the directorate of domestic taxes would need to be substantially strengthened, as they appear limited and of uncertain yield. In addition, staff has strong doubts about the realism and affordability of the significantly larger capital budget than recommended by staff.

49. Staff urges the authorities to enforce a strong cash management system. In the staff’s view, the system does not carry strong credibility in the absence of determined revenue efforts, as it has enabled excessive central bank financing and arrears accumulation in recent years. Further, staff is concerned that efforts to contain the budget deficit would be through an ad hoc compression of outlays with long-run economic costs, and that insufficient interest payments would be made by the central government on its outstanding debt to the central bank. In addition, budgeted subsidies to public enterprises seem underestimated, in particular in the ailing electricity sector.

50. The staff welcomes the authorities’ intention to improve governance by way of enhancing transparency and accountability in budget execution, in particular through restricting the use of discretionary ministerial accounts for only emergency outlays and by reducing the discretionary element in and leakage from revenue collection. This would improve the confidence of donors and the public in government operations. Expenditure management, control, and reporting in ministries should be enhanced, and detailed fiscal data should be published on a monthly basis, with the aim of increasing transparency in budget execution. The staff urges increased fiscal accountability, requiring a sustained coordinated effort by the authorities, supplemented by donor’s assistance.

51. Credit policy should continue to be restrained to facilitate attaining the inflation and the net international reserves targets. If the fiscal deficit were to be reduced as recommended by the staff, there could be some room for a further reduction in interest rates during the course of the year. This, together with a recovery of confidence, would help relieve strains that began to emerge in the banking system. The staff noted the risks for inflation and the exchange rate from a premature further loosening of monetary policy.

52. The staff welcomes the measures that have been taken during the past year to improve the supervision and health of the banking system, supported by technical assistance from the Fund. The authorities should continue phasing in financial sector regulations and continue with comprehensive audits of individual banks. Priority should be given to completing the draft texts for a new banking law and a new central bank law to bring them into conformity with international standards. Pending the adoption of a privatization plan for Banque Nationale de Credit, the current policy of putting a freeze on new lending by the bank should be maintained. It will be important that the authorities continue their efforts to combat money laundering and drug trafficking by making the recently created Financial Intelligence Unit operational.

53. The authorities’ intention to maintain the floating exchange rate regime is welcome. Given the low level of reserves, the authorities are advised to refrain from foreign exchange intervention and allow the rate to be determined by market forces. Implementing sound fiscal and monetary policies would help reduce inflation, while stepping up structural reforms aimed at reducing domestic production costs and increasing productivity would strengthen competitiveness. Taking into consideration the shrinking net capital flows, the staff encourages the authorities to clear overdue financial obligations to the international financial institutions and service the debt to the extent possible, and to seek exceptional financing of overdue obligations and debt service to bilateral creditors in FY 2001/02.

54. Recent improvements in statistical data notwithstanding, Haiti’s data problems in the public sector accounts and the balance of payments continue to hinder surveillance and program design and implementation. The authorities should continue the efforts underway to improve real sector statistics, to strengthen the technical and managerial capacity of the National Statistics Institute, and to improve external and public sector statistics. Further technical assistance from bilateral and multilateral agencies, including directly from the Fund and through Caribbean Technical Assistance Center, will be required to complement the efforts of the authorities to improve macroeconomic, fiscal and social sector data.

55. It is recommended that the next Article IV consultation be held on the standard 12-month cycle.

ATTACHMENT I Haiti: Fund Relations

As of September 30, 2001

I. Membership status: Joined September 8, 1953; Article VIII.

II. General resources account

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III. SDR department:

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IV. Outstanding purchases and loans:

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V. Financial arrangements:

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VI. Projected obligations to the Fund: (SDR million; based on existing use of resources and present holdings of SDRs):

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VII. Exchange Arrangements:

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.

VIII. Article IV Consultation

The last Article TV consultation was concluded by the Executive Board on November 8 2000. Haiti is on the standard 12-month cycle.

IX. Technical assistance: A long-term macroeconomic advisor worked in the president’s office from May 1999 to February 2001.

Technical assistance missions since 1997:

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X. Resident representative: Mr. Jerome La Pittus since December 2000.

ATTACHMENT II

Haiti: Relations with the World Bank Group

(As of November 20, 2001; in millions of U.S. dollars)

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Source: IBRD.

IDA commitments/disbursements are calculated in Special Drawing Rights (SDRs) and converted to US$ at varying exchange rates. This accounts for disbursed and undisbursed amounts exceeding or falling short of commitments.

Original credit principal was equivalent to US$50 million; undisbursed amount represents equivalent of US$20.45 million cancelled (US$8.16 million cancelled on 1/28/99 and US$12.29 million cancelled on 6/29/01), and US$.98 remaining in account.

Original credit principal was US$12 million. TAP II was approved by the Board on September 17, 1996, but was terminated on June 30, 1998 due to lack of approval by the Haitian parliament.

All years are World Bank fiscal years (ending June 30). No transfer took place in FY 1994.

ATTACHMENT III

Haiti: IDB Loan Commitments and Disbursements

(As of December, 2001. In millions of U.S. dollars)

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Source: Inter-American Development Bank.

The disbursement for 1995–96 includes previous disbursements in the life of the project.

ATTACHMENT IV Haiti—Statistical Issues

Real sector: The Haitian Institute of Statistics is publishing monthly a harmonized CPI, as recommended and facilitated by Fund technical assistance. The institute has made progress in implementing recommendations made by several Fund technical assistance mission to improve the quality of real sector statistics, and it has published national accounts for the period 1986/87 to 1999/2000 based on the interim base year 1986/87. The institute also publishes data on economic activity of the real sector on a quarterly basis, by publishing indices of industrial production, energy, construction, and domestic and external trade. The March 2000 technical assistance STA mission recommended that work start to establish a new base year for national accounts, possibly 1999/2000, and a revised CPI. Further technical assistance may be needed to address the outstanding deficiencies that continue to hinder the quality of real sector statistics.

Government finance: Haiti reports monthly and annual GFS data on a regular basis for publication in the IFS. Haiti has recently resumed (via its Central Bank) reporting of GFS data for publication in the GFS Yearbook, after 14 years of interruption. This was noticeable improvement after the disappointing follow-up of the 1995 multisector mission whose recommendations for the establishment of a system of compilation and reporting of GFS data to the Fund were not initially actively pursued, due, in particular, to the lack of human and financial resources (No additional GFS TA mission was fielded). However, those data were not published in the 2001 GFSY. Further work is required to extend coverage and breakdowns, to improve the link between the non-financial and the financial transactions as well as the outstanding of debt, and to compile a functional breakdown of expenditure, which calls for additional human and financial resources. The reporting of budgetary expenditures, especially on the ministerial discretionary accounts should be improved to increase transparency. There is a need to improve the timeliness of publication of accounts of public enterprises, as well as of the accounts of the nonfinancial public sector.

Monetary accounts: Continuous work on monetary statistics has contributed to improve the sectorization and classification of accounts in the analytical balance sheets of the Bank of the Republic of Haiti (BRH) and commercial banks. Efforts have been undertaken to strengthen reporting requirements for commercial banks so as to strengthen bank supervision, enforce reporting according to Basel Core Principles, and step up the fight against illicit transactions. This has at times affected the timeliness of compilation and reporting of money and banking statistics.

Balance of payments: Progress has been made towards improving the reliability of balance of payments data. The implementation of several technical assistance mission recommendations has contributed to an improvement in the balance of payment data. Notwithstanding the progress, there remains areas of improvements, including the methodology for compiling trade data and data collection in trade and services by making more systematic use of existing sources of data, such as customs, port and airport agencies, airlines, and oil companies.

Haiti: Core Statistical Indicators

(As of December 3, 2001)

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D-daily, W-weekly, M-monthly, Q-quarterly, A-annual, O-other.

D-daily, W-weekly, M-monthly, Q-quarterly, A-annual, V-irregularly in conjunction with staff visits, O-other irregular basis.

A-direct reporting by central bank, ministry of finance, or other official agency, N-official publication and press release.

E-electronic data transfer, C-facsimile, M-mail, V-staff visits, O-other.

A-for use by staff only, B-for use by staff and Board, C-unrestricted.

APPENDIX

Haiti’s New National Accounts

The Haitian Institute of Statistics (IHSI) published in April 2001 new national accounts with the base year 1986/87 for the period 1987/88–1999/2000. With technical assistance from STA the national accounts were compiled according to the United Nations 1993 system. The new national accounts eliminated previous inconsistencies and drew on hitherto underexploited data from certain statistical surveys (industrial survey (1983/84), population census (1982), and the household survey for 1986/87) and from fiscal, monetary and trade data sources. The IHSI is presently completing the accounts backwards from 1986/87 to 1975/76, so that the new national accounts will cover the same period as the previous ones. However, these new national accounts are an intermediate step toward the elaboration of accounts with a more recent base year, to be constructed when new statistical data from ongoing and planned surveys will become available.

The new national accounts have corrected the large underestimation of the level of nominal GDP in the old accounts, resulting in a series of GDP that is on average higher by almost 30 percent. While the average growth rate of nominal GDP over the observation period has been revised downward (from 19 percent to 16 percent), the average real GDP growth rate under the new accounts is somewhat less negative (–0.1 percent against–0.6 percent), reflecting a downward revision of the deflators. Figure 1 shows the evolution of real GDP growth rates over the last decade according to the two sets of national accounts. Owing to the sharply negative growth rates during the period of the embargo (1992–1994), followed by weak positive growth since 1996, real GDP in 2000 stood at about the same level as in 1988, implying a substantial decline in GDP per capita during the period.

The new national accounts show a Substantially revised Structure of the Haitian economy, both on the production side and on the demand side. On the supply side over the period 1988–2000 the share of the primary sector fall from 42 percent in the old national accounts to 32 percent in the new accounts, and the share of tertiary sector increased from 39 percent in the previous national accounts to 51 percent, while the share of the manufacturing sector has remained broadly unchanged at 18 percent. 1/

On the demand side, the average shares of consumption and exports are lower by 4 percentage points each, the share of investment is higher by 10 percentage points and that of imports is higher by about 3 percentage points. With respect to shares in real GDP, revisions appear in the investment and consumption series (with an upward revision of 4 percentage points), and in the exports and imports series (with a drop of 14 and 4 percentage points, respectively).

uA01fig01

Haiti: Real GDP Growth Rates in New and Old National Accounts (NA) (1989–2000)

Citation: IMF Staff Country Reports 2002, 017; 10.5089/9781451817553.002.A001

1/ Comparisons of GDP shares are in real terms.

The Operating Balance of the Banque de la Republique d’Haiti (BRH) and Interest Expenditure on BRH Bonds

The BRH manages the liquidity impact of credit allocation to the government by issuing short-term bonds. While the BRH has been quite effective in carrying out this task, the sustainability of this policy in the context of large fiscal deficits and high interest rates is a cause for concern. The net operating balance of the BRH, as a ratio of GDP, worsened from 0.1 percent in FY 1997/98 to an estimated –0.2 percent in FY 2000/01. An important element behind the deteriorating net position of the BRH was the interest cost of the BRH bonds that rose from 0.4 percent of GDP in 1997/98 to an estimated 0.5 percent in FY 2000/01 (see Table below). In the absence of a strong fiscal adjustment, the interest expenditure on the BRH bonds will continue to increase and the net operating position of the BRH will continue to deteriorate.

The operating balance of the BRH and the interest expenditure on its bonds in FY 2001/02 will depend on the amount in interest the treasury will pay on its outstanding debt to the BRH. From a monetary point of view, payments of interest by the treasury to the BRH represent a reduction in liquidity that entails a smaller issuance of the BRH bonds. Nonpayment of interest to the BRH by the treasury leads to an increase in liquidity, by way of additional credit to the government, or higher operating losses of the BRH, and the BRH would have to issue additional bonds to mop up this liquidity. If the treasury continues with its past policy of compensating the BRH at a rate of G25 million a month, it is estimated that the net operating balance would rise to –0.4 percent of GDP, and interest expenditures on BRH bonds would reach almost 0.7 percent of GDP. In the event the treasury decides not to cover the monthly operating balance of the BRH at all, the expected interest payment on BRH bonds would reach more than 0.7 percent of GDP, and the operating balance about –0.8 percent of GDP. The policy recommended by staff, whereby the treasury exactly compensates the BRH for its net loss would result in an interest expenditure share of GDP of about 0.6 percent.

Haiti: BRH Net Operating Income (1998–2002)

(In units as indicated)

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Sources: Bank of the Republic of Haiti; and Fund staff estimates.

The Ministry of Economy and Finance compensates the BRH at the rate of G25 million a month.

The Ministry of Economy and Finance does not compensate the BRH.

The Ministry of Economy and Finance fully compensates the BRH.

Poverty Monitoring Indicators

The Haitian Institute of Statistics (IHSI) is the main producer of population and economic data (See Table). It conducted the last Population Census in 1982 and an Income-Expenditure survey in 1986/87 (Enquete Budget Consommation des Menages, (EBCM)). In recent years, the IHSI has completed several major statistical undertakings including an EBCM in 1999/00 and a Living Condition Survey in 2001 (Enquete des Conditions de Vie en Haiti, (ECVH)), which is an on-going activity. The latter three surveys could be used to analyze poverty based on income/consumption including poverty levels, evolution and determinants of poverty, factors behind the evolution of poverty (such as growth and income distribution), poverty sensitivity to growth and the assets of the poor including labor and education. A new population census is expected to be conducted by the IHSI in late 2001.

The Institut Haitien de l’Enfance (IHE) with foreign technical assistance recently published the results of the “Enquete Mortalité, Morbidité et Utilisation des Services” (EMMUS-III). This survey based on the master sample recently developed by the IHSI is a comprehensive demographic and health survey. EMMUS-III could be used together with previous similar surveys (EMMUS-I, 1987/88 and EMMUS-II, 1994/95) to analyze the determinants and evolution of social indicators like education, health and access to basic infrastructure services.

Table: Census and Recent Household Surveys

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1

The staff team comprised Mr. Kalter (Head), Messrs. Verreydt (mission leader in Port-au-Prince), Melhado, and Adedeji, and Ms. Vera-Martin (all WHD). Mr. Auffret (World Bank) joined the mission for one week. The mission was assisted by Mr. La Pittus, the resident representative.

2

The relatively high average 12-month inflation rate in the FY 2000/01 reflects the cumulative impact of the large monthly inflation rates in September and October 2000 in the wake of the increase in petroleum prices.

3

The level of revised nominal GDP produced by the new national accounts is somewhat lower than the estimates of GDP previously used by staff (staff did not use the underestimated GDP series under the old accounts), and thus fiscal data relative to GDP are higher than in previous reports.

4

A large portion of budgetary expenditure was channeled through mechanisms that should in principle be limited to unforeseen emergency outlays, hindering control by the Budget Auditing Office.

5

The interest rates on 91-day BRH bonds was 10.3 percent at end-September 1999, and was gradually increased in the course of the FY 1999/2000.

6

U.S. dollar loans and deposits are measured at a constant exchange rate.

7

See Selected Economic Issues chapter on the Evolution of Credit to the Private Sector for more details.

8

The BRH issued on August 1, 2000 a circular, to the effect that banks and nonbank financial institutions must have their customers fill out a declaration of source of funds form for any cash transaction in an amount equal to or exceeding US$ 10,000.

9

The NIR under the program definition excludes deposits of commercial banks in the central bank. Including these deposits, reserves increased by US$8 million.

10

There are no overdue obligations with the IMF. The arrears result from governmental debt and do not evidence exchange restrictions.

11

The ratio of the net present value of external debt to exports of goods and nonfactor services (three-year average) was estimated at about 140 percent at end-September 2001, below the 150 percent established under the enhanced HIPC initiative.

12

Including exceptional financing of about 0.4 percent of GDP (see the section on external sector policies).

13

The draft budget was submitted to the Chamber of Deputies pending submission to the Senate.

14

Even though the drop in the dollar price of oil between September and November 2001 afforded the authorities an opportunity to introduce a flexible pricing scheme without raising domestic petroleum product prices, while maintaining about the same projected level of oil-based revenue, the authorities did not include this measure in the budget (Table 9).

15

See chapter on “Petroleum Taxation” in the Selected Issues paper.

16

Project loan disbursements from the IDB could potentially exceed the projected amount. There are four project loans recently ratified by parliament (for a total amount of US$145 million). Moreover, budget support could be provided under the Investment Sectoral Loan of US$50 million to be disbursed in two tranches in the framework of the SMP. In addition, it is estimated that more than US$500 million in medium-term foreign aid from the IDB and the European Union were put on hold owing to the political impasse.

17

The net impact of the September 11 events (which are included as part of the baseline scenario) on Haiti’s external sector is projected to be small, as Haiti does not have a well-developed tourism sector and foreign direct investment is very low. According to staff’s projections, the lower oil imports bill during FY 2001/02, resulting from the substantial decline in dollar oil prices, would be offset by a slowing down of remittances and exports, owing to the recession in the United States.

18

A plan to increase tariff rates on some items particularly vehicles was under discussion at the time of the Art. IV consultations. Staff expressed concern that raising tariffs may be contrary to commitments made to the WTO and CARICOM. The authorities subsequently withdrew this option.

19

The exceptions are gasoline (57.8 percent) and rice and cement (3 percent) and a 4 percent verification fee is levied by customs on all imports.

20

Haiti acceded to membership in the Caribbean Common Market in July 1999.

21

See Attachment I for a more complete listing of technical assistance provided in recent years.

Same Series

Other IMF Content

Other Publishers

Cover IMF Staff Country Reports
Haiti: Staff Report for the 2001 Article IV Consultation
Author: International Monetary Fund
Volume/Issue:
Volume 2002: Issue 017
Publisher:
International Monetary Fund
ISBN:
9781451817553
ISSN:
1934-7685
Pages:
49
DOI:
https://doi.org/10.5089/9781451817553.002
  • View in gallery

    Outstanding BRH Stock (OBS), Credit to the Central Government (CCG), and Reserves Requirements (RR)

    (in millions of gourdes)

  • View in gallery

    Haiti: Exchange Rate Developments

    (Index 1990=100)

  • View in gallery

    Haiti: Real GDP Growth Rates in New and Old National Accounts (NA) (1989–2000)

Outstanding BRH Stock (OBS), Credit to the Central Government (CCG), and Reserves Requirements (RR)

(in millions of gourdes)

Haiti: Exchange Rate Developments

(Index 1990=100)

Haiti: Real GDP Growth Rates in New and Old National Accounts (NA) (1989–2000)