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IMF Country Report No. 23/80

HAITI

REQUEST FOR DISBURSEMENT UNDER THE RAPID CREDIT FACILITY—PRESS RELEASE; STAFF REPORT; AND STATEMENT BY THE EXECUTIVE DIRECTOR FOR HAITI

February 2023

In the context of the Request for Disbursement Under the Rapid Credit Facility, the following documents have been released and are included in this package:

• A Press Release including a statement by the Chair of the Executive Board.

• The Staff Report prepared by a staff team of the IMF for the Executive Board’s consideration on January 23, 2023, following discussions that ended on December 8, 2022, with the officials of Haiti on economic developments and policies underpinning the IMF arrangement under the Rapid Credit Facility. Based on information available at the time of these discussions, the staff report was completed on January 6, 2023.

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

• A Statement by the Executive Director for Haiti.

The documents listed below have been or will be separately released.

• Letter of Intent sent to the IMF by the authorities of Haiti*

• *Also included in the 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

International Monetary Fund • Publication Services

PO Box 92780 • Washington, D.C. 20090

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International Monetary Fund

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© 2023 International Monetary Fund

Press Release

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PR23/12

IMF Executive Board Approves US$105 Million Food Shock Window to Haiti

FOR IMMEDIATE RELEASE

• The Executive Board of the International Monetary Fund (IMF) approved today a disbursement of SDR 81.9 million (US$105 million) to Haiti under the Food Shock Window of the Rapid Credit Facility.

• While Haiti’s population was already suffering severe malnutrition and food insecurity before the war in Ukraine, especially its suffering has been compounded by the surge in food commodity prices

Washington, DC – January 23, 2023: The Executive Board of the International Monetary Fund (IMF) approved today a disbursement of SDR 81.9 million (US$105 million) to Haiti under the Food Shock Window of the Rapid Credit Facility¹ to help Haiti address urgent balance of payment needs related to the global food crisis.

Haiti has been hit hard by the global food price shock. Record price inflation has worsened Haiti’s fragility given the high pass through from global to domestic food prices and shortages in food supplies. With more than half the population already below the poverty line, Haiti faces a dire humanitarian crisis, with an expected financing gap in FY2023 of at least US$105 million (0.5 percent of GDP), assuming import compression and pending additional external financing from development partners. This shock compounds the hardships of an already highly fragile country—also suffering a public health emergency (cholera) and serious security risks.

Following the Executive Board’s discussion, Ms. Antoinette Sayeh, Deputy Managing Director and Acting Chair, issued the following statement:

“Haiti is facing a dire humanitarian crisis and was hit hard by the economic spillovers from Russia’s invasion of Ukraine. These spillovers included record price inflation that worsened Haiti’s fragility and compounded the suffering of Haiti’s population already affected by a severe malnutrition. Measures are being taken by the government to cushion the impact of the food price shocks on the population and to expand the social safety nets.

“IMF emergency support under the food shock window of the Rapid Credit Facility will help fill the balance of payment gap and support those most affected by food price rises through feeding programs and cash and in-kind transfers to vulnerable households, waives school fees and other measures.

“To address the crisis, budgetary resources will need to be allocated toward priority spending on food programs and to increase social assistance toward the most vulnerable. To ensure the appropriate use of emergency financing, which will be vital for catalyzing further donor support and mitigate risks to debt sustainability, the authorities should carefully control, track, record, and publish all spending related to the emergency response. Supported by close Fund engagement, they should undertake internal expenditure audits by all the line ministries involved in the use of emergency resources provided under the food shock window through the General Inspectorate of Finance and communicate these internal audits to the Supreme Audit Court in a timely way.

“The combination of appropriate macroeconomic and structural policies under the Staff-Monitored Program (SMP) provides additional safeguards for the Fund’s outstanding obligations. While providing adequate liquidity support to the financial sector, the central bank should reduce monetary financing of the deficit and limit foreign exchange interventions to smoothing volatility.

“The SMP is also catalytic to donor support. A successful implementation of Haiti’s SMP would be key in the process of restoring macroeconomic stability and sustainability, strengthening the social safety net, and tackling governance weaknesses and corruption.”

Title page

HAITI

REQUEST FOR DISBURSEMENT UNDER THE RAPID CREDIT FACILITY

January 6, 2023

EXECUTIVE SUMMARY

Context. Haiti has been hit hard by the global food price shock. In September 2022, food inflation reached 44 percent, with rice inflation nearly 70 percent. With more than half the population already below the poverty line, Haiti faces a dire humanitarian crisis, with an expected financing gap in FY2023 of at least US$105 million (0.5 percent of GDP), assuming import compression and pending additional external financing from development partners. This shock compounds the hardships of an already highly fragile country—also suffering a public health emergency (cholera) and serious security risks. In line with global trends and also due to an escalation of violence, the macroeconomic situation has been more challenging relative to the outlook in June 2022, at the time of the approval of the Staff Monitored Program (SMP). That said, recent data suggest that the authorities are making meaningful efforts to overcome the multiple challenges facing the country and the First Review of the SMP was approved by IMF Management on December 21, 2022.

Food Shock Window Request. The Haitian authorities have requested support—under the Rapid Credit Facility (RCF) through the Food Shock Window (FSW)—to address urgent balance of payments (BOP) needs attributable to acute food insecurity and higher food import costs that exceed the last five-year average. These needs, if not addressed, could result in an immediate and severe economic disruption. Staff supports this request, with access proposed at SDR 81.9 million (about US$105 million), equivalent to 50 percent of quota, or to the estimated BOP gap in FY2023.

Safeguards and risk mitigation. To ensure transparency and accountability in the spending of emergency resources for the most vulnerable households, and to protect against misappropriation, the authorities have committed to carefully control, track, record, and publish all spending related to the emergency response. They have also committed to conduct internal expenditure audits by all the line ministries involved in the use of emergency resources provided under the Food Shock Window through the General Inspectorate of Finance and to communicate the internal audits to the Supreme Audit Court (la Cour Superieure des Comptes et du Contentieux Administratif or CSCCA) in a timely way. The CSCCA will conduct compliance audits related to the authorities’ measures to address food insecurity measures bi-annually and publish the audit findings. The authorities published on June 9, 2022, the financial and operational audit on COVID-related spending agreed under the 2020 RCF arrangement, with the auditor flagging the lack of supporting documentation that impeded the rendering of a full audit opinion. Nonetheless, the audit quality was adequate, reflecting the willingness of the government to expose weaknesses and highlighting PFM issues needing improvement. In this context, the authorities’ commitment to continuing to advance governance and anticorruption reforms in the context of the SMP has been encouraging. The recent consolidation of central budgetary units into one Treasury Single Account (TSA) at the central bank, with the Fund’s technical assistance, will help improve control and reporting of resources. The authorities also agreed to continue implementing the 2019 safeguards assessment recommendations.

Economic policies. The authorities conveyed in their Letter of Intent (LOI) their strong commitment to advancing policies that will ensure continued macroeconomic stability. The authorities have adopted a detailed strategy for enhancing social safety nets. The authorities will use emergency financing to support spending allocated in the budget for mitigating the impact of the food price shock on the population. Measures, among others, include: the increase in cash transfers and food rations for poor households; begin school feeding programs and provide hot meals for vulnerable households and community restaurants; and waive school fees.

Approved By

Patricia Alonso-Gamo (WHD) and Andrea Schaechter (SPR)

Contents

• CONTEXT AND RECENT DEVELOPMENTS

• IMPACT OF FOOD PRICE SHOCK

• OUTLOOK, RISKS, AND DEBT SUSTAINABILITY

• POLICY DISCUSSIONS

• MODALITIES OF FINANCIAL SUPPORT, SAFEGUARDS, AND CAPACITY TO REPAY STAFF APPRAISAL

• BOX

• 1. Impact of the Global Food Crisis on Haiti’s Balance of Payments

• FIGURE

• 1. Food Prices and Social Indicators

• TABLES

• 1. Selected Economic and Financial Indicators, FY2019–25

• 2a. Non-Financial Public Sector Operations, FY2019–25 (In millions of gourdes)

• 2b. Non-Financial Public Sector Operations, FY2019–25 (In percent of GDP)

• 3. Summary Accounts of the Banking System, FY2019–25

• 4a. Balance of Payments, FY2019–25 (in millions of US$)

• 4b. Balance of Payments, FY2019–25 (in percent of GDP)

• 5. Indicators of Capacity to Repay the Fund (Existing and Proposed Credit), FY2019–27

• 6. External Financing Requirements and Sources, FY2019–25

• 7. Financial Soundness Indicators, June 2020 – March 2022

• ANNEX

• I. Social Safety Net

• APPENDIX

• I. letter of Intent