Statement by Paulo Nogueira Batista, Executive Director for Haiti, Oliveira Lima, Alternate Executive Director, and Ketleen Florestal, Advisor to the Executive Director, May 18, 2015

Haiti’s recently completed arrangement under the Extended Credit Facility (ECF) helped to maintain macroeconomic stability after the 2010 earthquake. While Haiti has seen four consecutive years of growth, reducing poverty requires higher and sustained growth rates.


Haiti’s recently completed arrangement under the Extended Credit Facility (ECF) helped to maintain macroeconomic stability after the 2010 earthquake. While Haiti has seen four consecutive years of growth, reducing poverty requires higher and sustained growth rates.

1. On behalf of our authorities, we would like to thank management and staff for the continued engagement with Haiti.

Recent Developments

2. At the time of the Executive Board’s discussion of the eighth review of the last Extended Credit Facility (ECF) this past December, the Government of Haiti had already indicated that it would want a successor arrangement with the Fund and specified the priority areas for the new program. Negotiations with staff were initiated in March 2015, less than two months after a new Government took office. Concurrently, the authorities were confronted with significant challenges, including the shrinking budget funding from PetroCaribe, given its link to petroleum prices that had fallen rapidly. Repeated strikes were called from different sectors. Some of those, convened by unions in the transportation sector to press the Government to reduce petroleum prices at the pump, became violent and complicated the social and economic situation.

3. The Haitian authorities continued to press ahead with politically-sensitive reforms, despite the fact that 2015 is an electoral year with elections on all levels –including presidential. The reforms seek to enhance the transparency and efficiency of public expenditure management, in particular with the full implementation of the single treasury account, to improve the performance of the electricity sector and to phase-out fuel subsidies. The authorities’ commitment to fiscal sustainability was exemplified by the completion of two key prior actions: (i) the adoption of an automatic price mechanism for refined oil products with regular price adjustments starting in June 2015; and (ii) the adoption by the board of the public electricity company (Electricité d’Haiti – EDH) of a revised budget with substantial programmed savings.

4. The Government’s program lays the basis for a significant transformation of the Haitian economy by enhancing its growth potential and reducing its vulnerability to external shocks. Key program targets are to remove bottlenecks to growth and strengthen the fiscal policy framework. The authorities are also committed to pursue tax and fiscal administration reforms as a way to build sustainable fiscal conditions. The authorities’ reform package is ambitious and comprehensive. Besides phasing out untargeted fuel price subsidies and upgrading the performance of EDH, the program seeks to improve tax compliance and collection, to strengthen the legal framework and the functioning of the cadastre, and to enhance access to credit.

Electricity Sector Reforms

5. The authorities consider that there is a small window of opportunity to jumpstart the reforms in the electricity sector, with the support of the IMF and several donors. As stated in the MEFP, the electricity sector has been both a key bottleneck to growth and a significant fiscal drain. The staff report and the selected issues paper have underscored how the weak performance of the electricity sector is affecting several aspects of economic life and social well-being. The sources of losses and inefficiencies at EDH are also highlighted. These include onerous contracts with independent power producers and, until recently, weak coordination among donors and within public entities.

6. Our authorities wish to reiterate their determination to achieve a complete overhaul in the electricity sector. However, as staff indicated, the reforms jeopardize vested interests and the authorities know they will continue to face strong resistance both domestically and externally. They are confident that with political will and domestic ownership positive results can be achieved. The authorities also look forward to better coordination among donors and an enhanced level of accountability by domestic and external stakeholders.

7. As for the pricing of petroleum at the pump, the authorities are committed to depoliticize the system and to ensure that subsidies are better targeted. The Government has sought technical support from the World Bank to design a program that would shelter the vulnerable segments of the population from significant price increases in public transportation.

Monetary and Exchange Rate Policy

8. The Haitian authorities place great emphasis on adhering to their commitments under the ECF program with the Fund. Because of that, they have expressed concerns regarding the performance criterion (PC) on net international reserves (NIRs). The concerns of the Haitian authorities are reinforced by the rapid increase in petroleum prices since the close of negotiations about six weeks ago, from US$50 to US$65 per barrel; by expectations of an increase in food imports due to a recent drought; and by the prospects of a decrease in travel inflows linked to uncertainties related to the upcoming elections.

9. The authorities are also concerned about the limit the adjusters may impose on their capacity to take advantage of additional external support. The program takes into account assistance that was confirmed at the time of negotiation and sets up caps to the amount of additional external financing that can be freely used. Beyond those caps, external financing will entail a reduction in the amount of net domestic financing to the central government allowed in the program.

On the debt sustainability analysis

10. According to staff’s assessment, Haiti is considered this year to be at moderate risk of debt distress. However, staff warns that the change in classification from high to moderate is mostly due to the fall in oil prices and ensuing improvement in the terms of trade. Hence, staff recommends caution as the oil price decrease could be temporary. Our authorities share the view that continued prudence is warranted in contracting debt. However, they find staff’s considerations on the DSA unbalanced, because the potential upside risk from the increased economic activity in the United States, which would impact Haiti particularly through remittances, does not seem to have been considered.


11. The Fund should support the authorities’ efforts to undertake difficult reforms in an electoral year. At the time of the last Board discussion, Directors advised that future Fund engagements with Haiti be guided by the recommendations of the Ex Post Assessment of Longer-Term Program Engagement, including the need for a more realistic policy framework and greater ownership. As we have underlined on several occasions, full domestic ownership of an arrangement with the IMF requires that the authorities remain in the driver’s seat while the Fund helps them marshal support for the program.

12. Haiti is a country in a fragile situation, member of the g7+ grouping. We believe that this is one of the instances in which the Fund could showcase its willingness to cater appropriately to the needs of this segment of the membership. With the reduction of PetroCaribe flows expected to be of about 50 percent, there is also a pressing need to develop innovative lending mechanisms that would ease the current financing constraints and allow Haiti to invest in a better future.