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IMF Country Report No. 22/207
HAITI
STAFF-MONITORED PROGRAM—PRESS RELEASE; AND STAFF REPORT
July 2022
In the context of the Staff-Monitored Program, the following documents have been released and are included in this package:
A Press Release
The Staff Report prepared by a staff team of the IMF for the Executive Board’s information, following discussions that ended in early-May 2022, with the officials of Haiti on economic developments and policies underpinning the IMF arrangement under the Staff-Monitored Program. Based on information available at the time of these discussions, the staff report was completed on June 8 and approved on June 17, 2022.
The documents listed below have been or will be separately released:
Letter of Intent sent to the IMF by the authorities of Haiti*
Memorandum of Economic and Financial Policies by the authorities of Haiti*
Technical Memorandum of Understanding*
*Also included in Staff Report
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
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© 2022 International Monetary Fund
Press Release
PR22/235
IMF Management Approves a Staff-Monitored Program for Haiti
FOR IMMEDIATE RELEASE
Staff Monitored Programs (SMPs) are informal agreements between national authorities and IMF staff to monitor the authorities’ economic program. As such, they do not entail endorsement by the IMF Executive Board (with the exception of SMPs under the Heavily Indebted Poor Countries process). SMP staff reports are issued to the Board for information.
The Staff-Monitored Program (SMP) aims to help the government restore macroeconomic stability and lower inflation—a key goal given the heavy burden of high inflation on the poor.
Efforts to enhance governance in the public sector, mobilize domestic revenues, build capacity, and boost social spending are important elements of the SMP.
The program comprises realistic measures suited to Haiti’s fragility and, if implemented, could pave the way to an upper credit tranche IMF-supported program.
Washington, DC – June 29, 2022: Management of the International Monetary Fund (IMF) has approved a Staff-Monitored Program (SMP) for Haiti after discussions from March-May, 2022. The SMP was approved on June 17, 2022 and runs through May 31, 2023. The SMP was designed by IMF staff and the Haitian authorities, keeping in mind Haiti’s fragility and capacity constraints while supporting the authorities’ economic policy objectives. With timely implementation of the program, the SMP would help the authorities establish a track record of policy implementation, possibly paving the way to an IMF-supported upper credit tranche program.
SMPs are arrangements between country authorities and the IMF to monitor the implementation of the authorities’ economic program but are not accompanied by financial assistance.
In recent years, Haiti has experienced a protracted political crisis and assassination of its president, lockdowns, the global pandemic, a surge in gang-related violence, and an earthquake. These shocks have weakened economic and institutional frameworks and adversely affected administrative capacity, while socioeconomic and security conditions have deteriorated to a distressing level.
After three years of economic contraction, IMF staff expect growth to turn positive in FY2022, supported by an increase in investment, and to recover further to 1.4 percent the next year with continued flows of remittances amidst modest improvements in socio-political stability.
In this difficult context, the authorities have committed to implementing policies that would begin to restore macroeconomic stability and growth, strengthen governance, and start to provide poverty relief. With a strong focus on governance, the SMP is geared to increasing accountability and raising ownership of the reform agenda across the country, placing emphasis on strengthening public finance management, revenue administration, transparency, and anti-corruption measures.
The SMP also aims to raise domestic revenues, which have collapsed in recent years under the strain of social unrest, collection problems, and the security crisis. The authorities have committed to implementing a series of administrative measures, including strengthening the use of the tax identification number and cleaning up taxpayers' portfolios, revise special tax regimes in a new Tax Code, including by eliminating some exemptions, and finalize and publish the new Tax Code, Customs Code and the Customs tariff. This will simplify the tax system, making it more transparent and thus less prone to governance abuses.
Central bank financing of the fiscal deficit has fueled inflation, putting pressure on the exchange rate and leading to a vicious circle of higher fuel subsidy costs, further monetary financing of the deficit and higher inflation. The program thus aims to raise resources for productive spending and reduce monetary financing of the fiscal deficit to reduce inflation. This is critical for the population given the heavy burden placed on the poor from the high increase in prices.
Fuel subsidies have been absorbing at least one third of domestic revenues and crowding out productive spending on investment, health and education. They are also highly inequitable, with over 90 percent of the benefits going to the top 10-20 percent of the income ladder in Haiti. In this light, the authorities plan to prepare the groundwork to eventually tackle this issue. As a first step, they launched in April several social programs under the Programme d’urgence targeted to the groups affected by earlier fuel price adjustments.
The Haitian authorities will also strengthen the monetary policy framework and limit foreign exchange interventions to smooth excessive volatility to gradually eliminate the spread with the parallel market. Key steps are also planned to improve the financial regulatory framework and update regulations on anti-money laundering (AML/CFT) to meet international standards.
Over the course of this SMP, IMF staff will work closely with the authorities to support implementation of their program and help them build public support. Indeed, most elements of the authorities’ program are underpinned by ongoing IMF technical assistance and capacity building. The Fund will also continue to coordinate closely with Haiti’s other development partners to leverage efforts in support of common objectives. The first review of the SMP is expected in September. Satisfactory performance under the SMP could lead to an IMF-supported program under a multi-year arrangement that would require approval of the IMF’s Executive Board. SMP are only subject to formal IMF management review.
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HAITI
STAFF-MONITORED PROGRAM
June 17, 2022
EXECUTIVE SUMMARY
Context: Since 2018, Haiti has experienced a protracted political crisis, repeated country lock-downs and civil unrest, an earthquake, the assassination of its president and a deep recession. Policymakers face economic imbalances, a surge in gang violence, worsening poverty conditions, and dire social challenges aggravated by years of political instability.
Staff-monitored program (SMP). It is not feasible for Haiti to implement an upper credit tranche (UCT) Fund-supported program at this time due to the weakened policy frameworks and erosion in administrative capacity during the protracted cris is. The proposed SMP ending May 31, 2023 would help build capacity, support efforts to reduce inflation and raise growth, strengthen fiscal and monetary policy frameworks, address governance weaknesses and combat corruption, and take concrete steps to strengthen social assistance. A successful SMP is needed to build a track record of policy implementation that would improve Haiti’s prospects for a UCT program.
SMP policy recommendations:
Adopt a FY2022 budget with measures consistent with agreed targets.
Reduce central bank financing of the deficit and limit foreign exchange (FX) intervention to smoothing excess volatility.
Mobilize revenues and strengthen public finance management (PFM), notably with higher tobacco, alcohol, and car excises, expansion and simplification of the tax base, and measures to strengthen expenditure management and controls.
Require a minimum budget allocation to the ministry of social affairs (MAST) and prepare an action plan to implement the national plan for social protection (PNPPS).
Strengthen the framework for monetary and exchange rate policies by clarifying the objectives and modalities for liquidity and foreign exchange rate operations.
Advance governance reforms with technical assistance (TA), including governance of the central bank, revenue administration, and public finance management.
Approved By
Patricia Alonso-Gamo (WHD); Wes McGrew and Andrea Schaechter (both SPR)
Discussions took place remotely from Washington during a virtual mission from March 4–16, and continued until May 9, 2022. The team comprised Nicole Laframboise (head), Noah Ndela Ntsama, Rina Bhattacharya, Jean Francois Clevy, and Paola Aliperti (all WHD), Patrick Petit (FAD), Neil Shenai (SPR) pre-mission, and Gabriel Duvalsaint (local economist). Experts from FAD, FIN, LEG, and STA who are providing relevant technical assistance participated in some of the meetings. Langy Duverger (local office) and Grey Ramos (WHD) assisted the team with logistics and document preparation. Mr. Saraiva and Ms. Florestal (OED) participated in the discussions.
Contents
BACKGROUND AND RECENT DEVELOPMENTS
OUTLOOK AND RISKS
STAFF-MONITORED PROGRAM
A. Fiscal Framework and Short-Term Strategy
B. Fuel Market Reform and Social Assistance
C. Monetary and Exchange Rate Policy
D. Financial Sector Policies
E. Governance
F. Climate Change and Poverty Reduction
G. Program Monitoring
STAFF APPRAISAL
BOX
1. GDP Rebasing
FIGURES
1. Real Sector Developments, 2015–22
2. Fiscal Sector Developments, 2015–22
3. Monetary Sector Developments, 2015–22
4. Financial Sector Indicators, 2015–21
5. External Sector Development, 2015–22
6. Social Indicators
TABLES
1. Quantitative and Indicative Targets, June 2022–March 2023
2. Proposed Prior Actions for SMP
3. Proposed Structural Benchmarks for SMP
4. Selected Economic and Financial Indicators, FY2019–25
5a. Non-Financial Public Sector Operations, FY2019–25 (Millions of Gourdes)
5b. Non-Financial Public Sector Operations, FY2019–25 (Percent of GDP)
6. Summary Accounts of the Banking System, FY2019–25
7a. Balance of Payments, FY2019–25 (Millions of US$)
7b. Balance of Payments, FY2019–25 (Percent of GDP)
8. External Financing Requirements and Sources, FY 2019–25
9. Financial Soundness Indicators, June 2020–December 2021
ANNEXES
I. Recent Political History
II. Public Debt Sustainability Analysis
III. External Sector Assessment
APPENDICES
I. Capacity Development Strategy
II. Letter of Intent
Attachment I. Memorandum on Economic and Financial Policies
Attachment II. Technical Memorandum of Understanding
