Statement by the IMF Staff Representative

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.

1. The following information has become available since the staff report (SM/02/7) was circulated to Executive Directors and does not change the thrust of the staff appraisal.

2. An attack on the presidential palace on December 17, 2001 and the ensuing burning down of the opposition parties’ offices have exacerbated a climate of insecurity and mutual mistrust between the government and the opposition parties and severely retarded the process of political negotiations. The Organization of American States (OAS) nonetheless has continued its efforts to help resolve the political crisis and called a special plenary session on January 15, 2002, to discuss the Haitian situation. CARICOM decided to urgently dispatch to Haiti a special high-level mission to evaluate the situation.

3. The Haitian Institute of Statistics published preliminary national accounts estimates for FY 2000/01 (FY starting October 1), that confirm earlier projections of a decline in real GDP of more than 1 percent, the first decline since 1995. The 12-month inflation rate (CPI) slowed to 8.6 percent in November 2001, reflecting continued weak economic activity.

4. Preliminary fiscal data for the first quarter of FY 2001/02 show that central bank financing of the central government was contained at 0.3 percent of annual GDP (against 0.9 percent of GDP in the first quarter of FY 2000/01). While revenue collection, at about 1.9 percent of GDP, continued to be weak, budgetary expenditure appears to have been compressed to an estimated 2.4 percent of GDP (against 3 percent in the first quarter of FY 2000/01). New arrears, mainly external, amounted to an estimated 0.2 percent of GDP (see below). The draft budget law for FY 2001/02 was sent to the senate on January 9, 2002.

5. The interest rate on 91-day BRH bonds was further lowered to about 18 percent in early January 2002. While the banks’ average rate on gourde time deposits was reduced from about 14 percent in September 2001 to 11 percent in November 2001, the banks’ lending rate (for domestic currency loans) fell from an average of about 32 percent to 30 percent during the same period. Despite the decline in nominal interest rates, real rates appear to have increased somewhat.

6. The government made a partial payment of arrears to the IDB in November 2001, thereby allowing IDB’s disbursements on existing loans to resume. It is expected that the remaining amounts on existing loans will be fully disbursed by February–March 2002. Taking into account the payment to the IDB, the government’s overdue external financial obligations to IFIS (mainly the IDB and the World Bank) and to bilateral creditors (mainly the French Development Agency) increased from US$17.8 million at end-September 2001 to US$26.2 million at end-November 2001, while net international reserves declined by US$10 million to US$103 million. The gourde depreciated by 3 percent between end-September 2001 and early January 2002.

Haiti: Staff Report for the 2001 Article IV Consultation
Author: International Monetary Fund