Front Matter Page

IMF Country Report No. 20/121

HAITI

2019 ARTICLE IV CONSULTATION—PRESS RELEASE; STAFF REPORT; AND STATEMENT BY THE EXECUTIVE DIRECTOR FOR HAITI

April 2020

Under Article IV of the IMF’s Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. In the context of the 2019 Article IV consultation with Haiti, the following documents have been released and are included in this package:

  • A Press Release summarizing the views of the Executive Board as expressed during its January 24, 2020 consideration of the staff report that concluded the Article IV consultation with Haiti.

  • The Staff Report prepared by a staff team of the IMF for the Executive Board’s consideration January 24, 2020, following discussions that ended on November 22, 2019 with the officials of Haiti on economic developments and policies. Based on information available at the time of these discussions, the staff report was completed on December 20, 2019.

  • An Informational Annex prepared by the IMF staff.

  • A Debt Sustainability Analysis prepared by the staffs of the IMF and the World Bank.

  • A Staff Statement updating information on recent developments.

  • A Statement by the Executive Director for Haiti.

The documents listed below will be separately released.

  • Selected Issues

The IMF’s transparency policy allows for the deletion of market-sensitive information and premature disclosure of the authorities’ policy intentions in published staff reports and other documents.

Copies of this report are available to the public from

International Monetary Fund • Publication Services

PO Box 92780 • Washington, D.C. 20090

Telephone: (202) 623–7430 • Fax: (202) 623–7201

E-mail: publications@imf.org Web: http://www.imf.org

Price: $18.00 per printed copy

International Monetary Fund

Washington, D.C.

© 2020 International Monetary Fund

Front Matter Page

HAITI

STAFF REPORT FOR THE 2019 ARTICLE IV CONSULTATION

December 20, 2019

Staff Report prepared by a staff team of the IMF for the Executive Board’s consideration on January 24, 2020. The staff report reflects discussions with the Haiti authorities in November 2019 and is based on the information available as of December 20, 2019. It focuses on Haiti near and medium-term challenges and policy priorities and was prepared before COVID-19 became a global pandemic and resulted in unprecedented strains in global trade, commodity and financial markets. It, therefore, does not reflect the implications of these developments and related policy priorities. The outbreak has greatly amplified uncertainty and downside risks around the outlook. Staff is closely monitoring the situation and will continue to work on assessing its impact and the related policy response in Haiti and globally.

Key Issues

  • Context: Driven by popular frustration with high levels of corruption and inequality, Haiti has been experiencing a protracted political crisis and prolonged civil unrest. The crisis has taken a toll on the economy and an already vulnerable population: output contracted by an estimated 1.2 percent and the currency depreciated by 25 percent against the U.S. dollar during fiscal year 2019 while inflation exceeded 20 percent (y/y) in September. With activity weak, the external current account deficit is estimated to have shrunk to 2.0 percent of GDP while foreign capital inflows have dried up. The fiscal deficit worsened to 3.8 percent of GDP and domestic arrears rose.

  • Outlook and risks: The baseline scenario assumes some stabilization in the political situation by early-2020 but no major political or economic reforms. This would allow growth to recover only gradually and in the absence of sustained implementation of good policies and structural reforms, potential growth would remain low at about 1.4 percent over the medium term. Downside risks, both domestic and external, remain elevated. A prolongation of political instability, extreme natural disaster, drop in remittances, and/or a contraction in exports because of trade tensions would worsen the outlook, particularly given the absence of buffers and fragile social conditions. On the other hand, political resolution and an appointed government able to implement fundamental reforms could attract international support and lead to higher investment and potential growth.

  • Main policy recommendations: The challenge is to stabilize the macroeconomic situation in an unstable political context. Staff encourage the authorities to continue their efforts to contain the fiscal deficit and its monetary financing by the central bank. Improving domestic revenue collection and redirecting current spending would help create space for much needed social and capital expenditures. Together with steps to strengthen the central bank’s autonomy and legal framework, this would help reduce fiscal dominance. Other policy priorities include strengthening the social safety net, medium-term energy sector reform, and steps to tackle corruption and improve governance. Capacity development, enhanced cooperation with other development partners, and outreach with non-government stakeholders in Haiti would help raise ownership and support the implementation of staff’s main recommendations.

Approved By

Patricia Alonso-Gamo (WHD) and Jeromin Zettelmeyer (SPR)

Discussions were held in Washington, D.C. and in Haiti during November 8–22, 2019. The IMF team comprised Nicole Laframboise (head), Frederic Lambert, Rand Ghayad, Paola Aliperti (all WHD), Matthieu Bellon (FAD), and Chiara Fratto (SPR). Ahmed Zorome (Resident Representative) and Gabriel Duvalsaint (local economist) assisted the team and participated in discussions in Haiti. Patricia Alonso-Gamo (WHD) joined the concluding meeting. Mr. Saraiva, Ms. Florestal, and Mr. Pierre (OED) also participated in the meetings. The IMF team met with central bank Governor Dubois and Minister of Finance Jouthe, and with senior officials, representatives of the private sector, civil society, other IFIs, and academics. Madina Toshmuhamedova (WHD) assisted the team with logistics and contributed to the preparation of this report.

Contents

  • BACKGROUND—THE CHALLENGES OF A FRAGILE STATE

  • RECENT DEVELOPMENTS

  • OUTLOOK AND RISKS

  • POLICY DISCUSSIONS—MACROECONOMIC STABILITY

  • A. Fiscal Policy

  • B. Monetary, Exchange Rate, and Financial Sector Policies

  • C. Governance and Transparency

  • D. The Social Safety Net

  • E. Reform of the Energy Sector

  • F. Statistical Issues

  • STAFF APPRAISAL

  • BOXES

  • 1. Fund Relations and Policies Since the 2018 SMP

  • 2. Near-term Measures to Restore Macroeconomic Stability

  • 3. The Fiscal Cost of Energy Subsidies

  • FIGURES

  • 1. Real Sector Developments, 2013–19

  • 2. Fiscal Sector Developments, 2013–19

  • 3. Monetary Sector Developments, 2013–19

  • 4. External Sector Development, 2013–19

  • 5. Social Indicators

  • TABLES

  • 1. Selected Economic and Financial Indicators, FY2017–24

  • 2a. Non-Financial Public Sector Operations, FY2017–24 (in millions of gourdes)

  • 2b. Non-Financial Public Sector Operations, FY2017–24 (in percent of GDP)

  • 3. Summary Accounts of the Banking System, FY2017–24

  • 4a. Balance of Payments, FY2017–24 (in millions of US$)

  • 4b. Balance of Payments, FY2017–24 (in percent of GDP)

  • 5. Financial Soundness Indicators, June 2017–June 2019

  • ANNEXES

  • I. Country Engagement Strategy

  • II. Risk Assessment Matrix

  • III. External Sector Assessment

  • IV. Proposals for Governance Reform

  • V. Capacity Development Strategy

Front Matter Page

HAITI

STAFF REPORT FOR THE 2019 ARTICLE IV CONSULTATION—INFORMATIONAL ANNEX

December 20, 2019

Prepared By

Western Hemisphere Department

Contents

  • FUND RELATIONS

  • STATISTICAL ISSUES

Front Matter Page

HAITI

STAFF REPORT FOR THE 2019 ARTICLE IV CONSULTATION—DEBT SUSTAINABILITY ANALYSIS

December 20, 2019

Approved By

Patricia Alonso-Gamo, Jeromin Zettelmeyer (IMF), and Marcello Estevão (IDA)

Prepared by staffs of the International Monetary Fund and the World Bank.

Haiti: Joint Bank-Fund Debt Sustainability Analysis

article image

The Debt Sustainability Analysis (DSA) was prepared in accordance with the revised joint Bank-Fund debt sustainability framework (DSF) for low-income countries (LICs).1 Haiti’s risk of debt distress is assessed to be high, despite a model-based risk rating for both external and overall public debt of “moderate.” The application of judgement to change the rating from “moderate” to “high” is justified by the high probability of threshold breaches under the baseline scenario from FY2034, and by Haiti’s institutional fragilities and exceptional vulnerability to natural disasters. Haiti is an FCV country (that is, a country affected by fragility, conflict, and violence as defined by the World Bank) and tailored stress tests suggest that its debt risk rating over FY2019–2029 is very vulnerable to large natural disaster shocks which are statistically very frequent. Nevertheless, the moderate level of public debt and broadly stable debt trajectory over the next ten years point to a sustainable public debt.

Front Matter Page

Press Release No. 20/21

FOR IMMEDIATE RELEASE

January 28, 2020

International Monetary Fund

700 19th Street, NW

Washington, D. C. 20431 USA

Telephone 202–623–7100

Fax 202–623–6772

www.imf.org