Haiti: Request for Disbursement Under the Rapid Credit Facility—Press Release; Staff Report; and Statement by the Executive Director for Haiti
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International Monetary Fund. Western Hemisphere Dept.
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Publication Date:
07 Feb 2023
eISBN:
9798400234156
ISBN:
9798400234156
Language:
English
Keywords:
record price inflation; fuel price rise; import bill; budget framework; price inflation; Food security; Commodity price shocks; Credit; Commercial banks; Global
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1. Haiti is facing a dire humanitarian crisis. The country was hit hard by the economic spillovers of Russia’s invasion of Ukraine. These spillovers included record price inflation that worsened Haiti’s fragility given the high pass through from global to domestic food prices and shortages in food supplies. While Haiti’s population was already suffering severe malnutrition and food insecurity before the war in Ukraine, especially children—with at least half the population assessed by the World Bank to be living below the poverty line—its suffering has been compounded by the surge in food commodity prices. As more than half of household consumption spending is on food, inflation is causing a hunger crisis.

Abstract

1. Haiti is facing a dire humanitarian crisis. The country was hit hard by the economic spillovers of Russia’s invasion of Ukraine. These spillovers included record price inflation that worsened Haiti’s fragility given the high pass through from global to domestic food prices and shortages in food supplies. While Haiti’s population was already suffering severe malnutrition and food insecurity before the war in Ukraine, especially children—with at least half the population assessed by the World Bank to be living below the poverty line—its suffering has been compounded by the surge in food commodity prices. As more than half of household consumption spending is on food, inflation is causing a hunger crisis.

Context and Recent Developments

1. Haiti is facing a dire humanitarian crisis. The country was hit hard by the economic spillovers of Russia’s invasion of Ukraine. These spillovers included record price inflation that worsened Haiti’s fragility given the high pass through from global to domestic food prices and shortages in food supplies. While Haiti’s population was already suffering severe malnutrition and food insecurity before the war in Ukraine, especially children—with at least half the population assessed by the World Bank to be living below the poverty line—its suffering has been compounded by the surge in food commodity prices. As more than half of household consumption spending is on food, inflation is causing a hunger crisis.

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Acute Food Insecurity Situation

Citation: IMF Staff Country Reports 2023, 080; 10.5089/9798400234156.002.A001

Source: Integrated Food Security Classification (IPC).

2. The food price shock comes at a difficult juncture.

  • Political uncertainty persists. Prime Minister Henry, who has faced several months of increasingly violent protests, has pledged to hold elections as soon as it is safe to do so. Violence has escalated sharply in recent months with a surge of internal displacement of thousands of Haitians. Protests were further inflamed by the announcement of fuel price increases on September 14. Armed gangs have grown in power over the last year and have increased their control of the capital, blocking access to the main fuel terminal of Varreux and paralyzing most of the activities until end of October, aggravating widespread fuel shortages, forcing temporary hospital and school closures, disrupting food and water distribution, and further hampering efforts to control the recent cholera outbreak. With the police regaining control of the fuel terminal beginning of November, fuel distribution has resumed, and economic activity has slowly restarted. The UN Security Council unanimously approved a sanction regime targeting gang leaders and those who finance them, followed by the Central Bank of Haiti’s instructions to financial institutions, issued in November, to support its implementation.

  • Macroeconomic conditions. Real GDP likely contracted for the fourth consecutive year in fiscal year 2022, ending in September, at about -1.5 percent. Inflation reached 38.7 percent (y/y) in September 2022, driven by high international food and import prices, drought-related supply disruptions, and monetary financing of the budget deficit (Table 1). To tackle inflation and prevent further depreciation of the gourde, the Banque de la Republique d’Haïti (BRH) raised short-term interest rates to 11.5 percent in August (from 10 percent since March 2020); boosted mandatory reserve requirements on liabilities, in US dollar terms, to 53 percent; and increased interest rates on credit lines. The non-financial public sector (NFPS) fiscal deficit for FY2022 (including grants) is estimated at 2.2 percent of GDP, about 0.7 percent of GDP larger than projected at the time of the SMP approval in June 2022, reflecting higher costs of petroleum product subsidies, before the price increase in September. Despite the riots in September, domestic revenues held up relatively well for the overall year and reached about 90 percent of the value expected in June. The current account deficit is estimated at 2.4 percent of GDP in FY2022. The gourde and the foreign exchange market came under pressure in the summer, partly because of a temporary slowing in remittance inflows, which aggravated the shortage of foreign exchange. Gross international reserves are still estimated at 4.6 months of projected imports, but net international reserves have been declining, by about US$240 million since the end of FY2021.

Table 1.

Haiti: Selected Economic and Financial Indicators, FY2019–25

(Fiscal year ending September 30)

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Sources: Ministry of Economy and Finance; Bank of the Republic of Haiti; World Bank; Fund staff estimates and projections.

Includes transfers to the state-owned electricity company (EDH), and unsettled payment obligations.

In percent of exports of goods and nonfactor services. Includes debt relief.

Impact of Food Price Shock

3. The impact of the global shock on food prices has been broad based. Food inflation reached nearly 44 percent (y/y) in September 2022 and 8 percent (m/m), with rice and milk powder surging to 70 and 60 percent (y/y). The war in Ukraine has worsened a difficult situation by causing record inflation on imported products (52 percent y/y in September), increasing costs for fertilizers, and shortages in food supplies, particularly cereals. Substantial risks weigh on the outlook for international prices for rice, widely consumed in Haiti and mostly imported. Moreover, pressures remain on the supply side. The decline in cereal production is highly likely to continue into 2023 and lack of availability and access to food could become even more serious (Figure 1).

Figure 1.
Figure 1.

Haiti: Food Prices and Social Indicators

Citation: IMF Staff Country Reports 2023, 080; 10.5089/9798400234156.002.A001

Sources: International Organization for Migration (IOM) Displacement Tracking Matrix, FAO, United States Department of Agriculture – Foreign Agricultural Service, World Bank, World Development Indicators, and Fund staff calculations.1/ Data was extracted from the World Bank, Macro Poverty Outlook – October 2022. Data is not available from 2013–17.2/ Data for Haiti for 2022 is an estimate by IOM as of September 2022. The estimates for 2022 for other countries are not available.

4. The food price shock has contributed to an urgent balance-of-payments need in FY2023. With elevated food prices and a humanitarian crisis unfolding, Haiti is expected to see a large rise in its import bill in FY2023 (Box 1). This will widen the current account deficit relative to the projections in the June 2022 SMP, resulting in a balance of payments financing gap of at least US$105 million (Text Table 1), although projections are subject to substantial uncertainty. The key assumptions behind these estimates are:

  • lower remittance flows, a key channel to smooth consumption, lowered foreign exchange income making even more difficult for households to pay higher food prices;

  • exports will remain subdued, partly because of a 2 percent of GDP decline in textile exports;

  • weak Foreign Direct Investment (FDI), at still 0.4 percent of GDP in FY2023;

  • import compression pending additional forthcoming external financing; and

  • declining Net International Reserves (NIR).

Text Table 1.

Haiti: Recent Developments in the Balance of Payments 1/

(In millions of US$ on a fiscal year basis; unless otherwise indicated)

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Sources: Authorities’ data; and Fund staff estimates and projections.

The 2022 Staff Monitored Program (SMP) was approved in June 2022.

The fiscal deficit also contributes to sizable BOP needs, including because critical current public sector spending has a large import component. On the fiscal front, the emergency financing would be used to support poor households through cash transfers and dry food rations (Text Table 2).

Text Table 2.

Haiti: Additional Expenditures Related to Food Price Shock

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Sources: Authorities’ data; and Fund staff estimates and projections.

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

Haiti’s import bill surged amid higher global food and commodity prices. During FY2020–22, the import bill, in dollar terms, expanded nearly 40 percent—from about $3.7 billion in FY2020 to some $5.1 billion in FY2022, of which nearly half is for fossil fuels and food. During this period, the fossil fuel bill grew 44 percent and the food import bill 40 percent, with the latter increasing in line with the surge in food prices (chart).

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Sources: BRH, Word Economic Outlook and Fund staff estimates and projections from 2022 onwards.

Haiti’s emergency economic situation is closely linked with the global food shock. Haiti has an urgent BOP need associated with acute food insecurity that is inflicting serious economic disruption on the country. The World Food Programme and Food and Agriculture Organization rank Haiti at a catastrophic level on the Integrated Food Security Phase Classification index.1 Food insecurity is particularly acute among the most vulnerable and poorest citizens. Services exports—mainly tourism revenues—are at only 20 percent of pre-pandemic levels and are not expected to recover until the current food and security situations improve.

Balance of payments support from the RCF at 50 percent of quota will be critical given Haiti’s limited net external buffers. Although gross foreign exchange reserves remain sufficient to cover nearly five months of imports, net international reserves of the BRH have been declining as a result of rising external liabilities to banks. Haiti could be exposed to external sustainability risks if it is unable to roll over its reserve-related liabilities. The BRH will limit its foreign exchange intervention only to smoothing excess volatility (LOI ¶8). Fund engagement via the SMP is likely to catalyze donor funds, further helping the authorities close their BOP gap within a year.

1 See (United Nations, 2022).

Outlook, Risks, and Debt Sustainability

5. The outlook remains challenging. The economy is expected to recover slowly, assuming an improvement in security, and inflation to decline over the medium term, contingent upon adequate macroeconomic policies and continued implementation of structural reforms. Staff assesses a financing gap only in FY2023. Growth is projected to turn positive in FY2023 at 0.3 percent, but weaker than 1.4 percent forecast at the time of the SMP approval in June 2022, reflecting mainly the downward revision of the global outlook. A marginal recovery would be driven by a modest security improvement and a small pick-up in key sectors, particularly agriculture (after the recent drought that has lowered harvests); and reach 1.5 percent over the medium term. After surging in 2022, inflation would decline to 21 percent by end-FY2023. A worsening security situation and fuel price increases would keep inflationary pressures high in the first quarter of FY2023, but inflation would moderate gradually as the impact of lower monetary financing of the fiscal deficit comes into effect and world market prices for food and fuel stabilize. The fiscal deficit of the NFPS is projected at 2 percent of GDP in FY2023, 0.3 percentage point lower than envisaged at the time of the SMP approval. Spending would increase due to higher outlays on transfers to provide food to vulnerable households and health expenditure to address the cholera outbreak. The deficit would increase slightly to around 2.7–2.8 percent of GDP over the medium term, driven primarily by capital spending. The current account deficit is expected to narrow to 0.8 percent of GDP in FY2023 as a result of the food price shock and would narrow further to 0.6 percent of GDP in the medium term.

6. The balance of risks is tilted to the downside. Domestic risks include intensified political instability, gang-related disruptions to activity, public health emergency (further spreading of cholera), and natural disasters. Externally, Haiti is vulnerable to volatile remittance flows, lower-than-expected external financing as well as renewed surges in global food and energy prices. However, the reduction in fuel subsidies is expected to provide some fiscal relief. Should the authorities move to regular adjustments that follow global market conditions, the fiscal outlook would improve, permitting higher public investment and raising growth, while reducing pressures on the public finances. Further normalization of the security situation would also improve the outlook.

7. Public debt is sustainable with “high risk of distress” and debt carrying capacity is rated “medium.” The DSA (See DSA Supplement) updates the analysis conducted at the time of the SMP approval in June 2022, with the overall analysis remaining largely unchanged. More broadly, slightly higher primary deficits over the medium term, funded by a gradual increase in external concessional financing against the background of subdued export growth, brings the present value of public and publicly guaranteed external debt as a share of exports into the “high” range of debt distress thresholds in the joint IMF-World Bank DSA. Debt carrying capacity is unchanged at “medium” and the debt outlook remains subject to risks.

Policy Discussions

Discussions focused on the immediate policies to contain the food price shock and protect the poor.

8. The authorities are taking steps to cushion the impact of the shocks on the population. The Ministry of Social Affairs and Labor and the Ministry of Economy and Finance have prepared a very detailed strategy to tackle food insecurity and strengthen the social safety (see text Table 3), also leveraging ongoing programs. The plan aims to expand programs that improve living conditions and enhance social inclusion, focusing on the most vulnerable groups (children, pregnant women, the disabled, and the elderly). The BRH has moved to ease loan repayment obligations— extending them for three months for households and six months for corporates. The ministry of finance is planning to support workers in several sectors (including textile) and to increase cash transfers and food rations for households. The authorities have begun making cash transfers to about 50,000 of the most vulnerable households. They have also begun school feeding programs and providing hot meals for vulnerable households and community restaurants. They also plan to waive school fees. They are considering leveraging digital tools for cash transfers, thanks to support from the Word Bank and Inter-American Development Bank. Staff welcome these measures which are in line with Fund advice.

Text Table 3.

Haiti: Measures to Support Vulnerable Households in FY2023

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Sources: Ministry of Economy and Finance and Ministry of Social Affairs and Labor.

9. To monitor implementation of these programs and strengthen transparency and accountability, the authorities committed to follow PFM guidelines, in line with recent technical assistance from the Fund. In particular, all spending related to the new resources, including social spending, are included in the budget and the associated financing recorded in the Treasury Single Account at the central bank, while abiding by proper procurement procedures. Strengthening the social safety net will continue to be supported by financing from development partners (Annex I). Additional efforts to enhance transparency by the authorities include continued regular publication of the financial operations of the Economic and Social Assistance Fund (FAES), using a template of financial statements for public institutions, a key objective of the SMP program. Similarly, the authorities plan an institutional reform as part of the national policy for social protection and promotion (PNPPS), which will centralize social spending initiatives and their execution under the ministry of social affairs and labor, in line with IMF recommendations (IMF 2020), with a view to enhancing transparency. In particular, the authorities aim to enhance their collaboration with the UN World Food Program (WFP) and expand the partial registry, called SIMAST (national vulnerability database, in which about 420,000 Haitian poor households, or 2,500,000 people, are registered). Staff will continue to engage with other development partners, such as the EU, IADB, the UN WFP, and the World Bank, in order to support the government in effectively and transparently deploying the measures to protect the most vulnerable.

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Estimates of Fiscal Space Under Different Fuel Price Adjustment Scenarios

(Percent of GDP)

Citation: IMF Staff Country Reports 2023, 080; 10.5089/9798400234156.002.A001

Sources: Ministry of Finance, GAS and Fund staff estimates and projections.

10. The authorities made efforts to sustain revenue collection and should continue to do so. Recent reforms include amendments to the tax code and tax procedure code.1 Next steps would entail following through with implementation the tax code (and the tax procedure code) and customs and tax administration reforms. At the end of June 2022, weaker-than-expected revenue collection prompted the implementation of administrative measures, including replacing management at the revenue agency. These measures boosted domestic revenues to a monthly average of 6.4 billion gourdes, from average of 2.2 billion gourdes in April-June—and to 3.4 billion gourdes in July-August. Despite the authorities’ meaningful efforts, worsening security undermined the revenue agency’s capacity to collect taxes in September-October. Relative to the June 2022 outlook, staff estimated a shortfall of 5 billion gourdes in domestic revenue in FY2022. As a result, monetary financing increased to 2.3 percent of GDP (49.5 billion gourdes)—0.1 percent more than expected.

11. The authorities have approved a credible budget framework for FY2023 and over the medium term. The 2023 budget, approved on December 19, aims for a budget deficit of about 1.5 percent of GDP, slightly lower the one projected by staff of 2 percent of GDP. The fuel price rise announced in September was reflected in prices at the pump in November, but fuel imports fell sharply because of the security situation. As a result, net fuel revenues are projected at 1.1 percent of GDP in FY2023 (vs. -1.5 percent in FY2022). This assumes that prices at the pump remain near their cost and global oil prices moderate in line with WEO projections (Text Tables 4–5 and Chart). The additional budget space is expected to raise non-fuel transfers to 1.2 percent of GDP and pro-growth capital spending to 3.5 percent of GDP (1.4 percent domestically funded). The authorities intend to use the freed-up resources to compensate those most affected by food price rises, including through their Programme d’urgence, which they aim to roll out soon.

Text Table 4.

Haiti: FSW and Reallocation of Fuel Subsidies Toward Priority Spending

(In billions of gourdes and percent of GDP)

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Source: Authorities’ data; and IMF staff estimates and projections.
Text Table 5.

Haiti: Impact of Fuel Price Adjustments

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Sources: Authorities’ data and Fund Staff estimates and projections.
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Sources: National authorities and Fund staff calculations.1/ Non-energy transfers financed from resources from the requested Food Shock Window are estimated at about 0.5 percent of GDP in FY2023.

12. Meaningful progress has been achieved on revenue mobilization and on PFM to increase the transparency of public spending and improve the quality of spending. The authorities finalized the new customs tariffs with help from Fund technical assistance which will be published later in December. Work toward consolidating in the Treasury Single Account (TSA) all bank accounts of the central budgetary units has been also completed and the medium-term budget framework, with the non-financial public sector (NFPS) deficit as the main anchor, was approved on December 19. These policy reform priorities are meant to simplify the tax and customs systems and enhance transparency, accountability, and audit capacity.

13. The authorities had already taken steps to strengthen monetary and exchange policy frameworks and staff urged them to continue these important efforts. Central bank lending to the non-financial-public-sector (NFPS) was below the end-June target, although has increased in September as the revenue collection was under strain. The authorities committed to limiting monetary financing to 1.5 percent of GDP—in FY2023 which staff assesses as non-inflationary. Any excess reserves will be sterilized by liquidity absorption. A further increase in short-term interest rates would help to initiate disinflation, given the large negative real rate (about 15 percent). Additional financing needs in FY2023 could be covered by domestic borrowing since public debt is sustainable (Text Table 6). The BRH will limit its foreign exchange intervention only to smoothing excess volatility (LOI ¶8).

Text Table 6.

Haiti: Financing of the Fiscal Deficit

(In billions of gourdes and percent of GDP)

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Source: Authorities’ data; and IMF staff estimates and projections.
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Sources: BHR and Fund staff calculations.

14. The BRH is advancing reforms to enhance supervision and strengthen the AML/CFT framework. With technical assistance, the BRH has been strengthening banking supervision to upgrade the regulatory framework and move to risk-based supervision. The BRH has also heightened risk-based supervision and advanced reforms on anti-money laundering by issuing in November detailed instruction to financial institutions to support the implementation of a sanction regime against gangs and criminal activities. The authorities should accelerate progress in addressing the items on the FATF recommendations in order to meet the deadlines of the action plan. The BRH is working to address the deficiencies in AML/CFT preventative measures applicable to entities under its supervision.

Modalities of Financial Support, Safeguards, and Capacity to Repay

15. Haiti qualifies for emergency financing under the new Food Shock Window (FSW) of the RCF. The authorities have requested access under the RCF of 50 percent of quota (SDR 81.9 million) through the new FSW.2 Haiti has an urgent BOP need, attributable to acute food insecurity and increase in food import costs that exceed a certain threshold equivalent in the case of Haiti to the last five-year average. If not addressed, the external payments need will seriously disrupt the economy and aggravate the current humanitarian crisis. 3 Haiti is unable to implement an Upper-Credit-Tranche (UCT)-quality program, owing to its limited implementation capacity. The proposed access is within the applicable overall access limits under the PRGT and the sub-limits under emergency financing instruments. The financing under the FSW will be disbursed to the central bank and is expected to be on-lent to the government for budget support. This will help the government finance its response to the food price shock, including through purchases of food and cash transfers to the most vulnerable households. In their LOI, the authorities confirm that they have established a Memorandum of Understanding between the ministry of economy and finance and the central bank agreeing to the terms of the on-lending arrangement and clarifying their respective roles and responsibilities for timely servicing of the financial obligations to the Fund. They indicate also their commitment to cooperate with the Fund and to pursue economic policies supporting macro stability, in line with the current SMP.

16. Haiti’s capacity to repay its obligation to the Fund is adequate, but subject to risks. Haiti’s debt is considered sustainable, although at high risk of debt distress (See DSA Supplement). The Fund’s exposure to Haiti will increase to 115.2 percent of quota or 1.1 percent of GDP and future debt service to the Fund is expected to reach 2.6 percent of exports of goods and services and almost 2 percent of gross international reserves, which are higher than PRGT comparators. The country’s high fragility and institutional weakness, as well as high risk of debt distress, add to risks. However, risks are expected to be mitigated by the authorities’ strong commitment to maintaining a close engagement with the Fund, as demonstrated by weekly meetings and by pursuing structural reforms in line with Fund’s advice, their commitment to continuing achieving macro stability and undertaking reforms to strengthen governance.

17. Risk mitigation and safeguards. The authorities initiated several additional measures to ensure transparency and accountability in spending emergency resources on the most vulnerable households. They committed to carefully track, record, and publish all expenditures related to the emergency response. Accurate and transparent recording and accountability, with respect to the allocation of financing, is important for catalyzing further donor support (e.g., expected budget support from the EU). The authorities’ commitment to continuing to advance governance and anticorruption reforms in the context of the SMP has been encouraging. They have, for example, completed publication of the financial and operational audit on COVID-related spending, which was agreed at the time of the previous RCF disbursement, even if it exposed the government to the need of further improve PFM systems. Moreover, governance and PFM reforms have proceeded steadily. These include publication of all public procurement contracts awarded since November 2021— including regular (monthly) information on the beneficiaries of the successful bidders and the consolidation into one Single Treasury Account at the BRH (including central budgetary units, thanks to FAD technical assistance). To further strengthen PFM and mitigate fraud and corruption risks, the authorities will enforce compliance with proper expenditure execution procedures and controls; publish related comprehensive monthly budget execution reports, no later than 45 days after the end of each month; and 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. They will ensure that these internal expenditure audits will be communicated to the Supreme Audit Court (La Cour Superieure des Comptes et du Contentieux Administratif or CSCCA) in a timely manner. They will also provide adequate resources to the CSCCA to conduct compliance audits related to these measures on a bi-annual basis, starting for the period July-December 2022. These compliance audits are to be completed and published within six months of the end of the audit period (LOI ¶5). The authorities committed to provide staff access to its central bank’s most recently completed external audit reports and authorize its external auditors to hold discussions with staff.

18. The authorities will continue to move forward in implementing the 2019 safeguards assessment recommendations. The central bank external audit, conducted by KPMG, was completed and published on June 30, 2022. The BRH also progressed towards an agreement with the MEF on consolidating government debt and the internal audit function plans to verify program monetary data at program test dates, as recommended. The BRH also recently submitted drafting amendments to its organic act. While these would improve the Act in some respects, some areas, including on governance arrangements, mandate, and autonomy safeguards, need further strengthening. Work on these amendments is continuing in consultation with IMF staff. Other priority recommendations, such as the adoption of International Financial Reporting Standards and development of a medium-term plan to phase-out BRH’s involvement in development activities, as well as the alignment of the foreign investment strategy with best practices, remain in progress. Staff will continue to monitor the implementation of recommendations.

Staff Appraisal

19. Staff supports the authorities’ request for Fund emergency financing of 50 percent of quota under the Food Shock Window under the Rapid Credit Facility. Staff assesses that Haiti qualifies for support as it faces an urgent balance of payments need that, if not addressed, would cause severe economic disruption. Staff considers the proposed access to be appropriate, given Haiti’s large and urgent financing needs of at least US$105 million in FY2023, its debt sustainability, its adequate capacity to repay the Fund at the proposed level of access, given the strength of the authorities’ policies under the SMP. Haiti’s urgent BOP need is attributed to acute food insecurity and to an increase in food import costs that exceed a certain threshold (equivalent, in Haiti’s case, to the last five-year average). The proposed disbursement would provide critical and timely support to help the government finance its response to the food price shock, including through purchases of food and cash transfers to the most vulnerable households, while acting as a catalyst to official multilateral and bilateral financial assistance. Staff considers that the authorities’ commitments in their Letter of Intent (see appendix) are appropriate to ensure macroeconomic stability.

20. The authorities are committed to advancing policies that will ensure continued macroeconomic stability and support the poor and have shared a detailed strategy to enhance social safety nets. They remain in close consultation with staff to implement policies under the SMP that will promote macroeconomic and financial stability, foster domestic resource mobilization, and ensure continued donor support—with the aim of paving the way for an eventual full-fledged Fund Upper-Credit-Tranche (UCT)-quality program. The authorities’ LOI makes it clear that the emergency financing will be used to support spending allocated in the budget on food and cash transfers in order to mitigate the impact of the food price shock on the population.

Table 2a.

Haiti: Non-Financial Public Sector Operations, FY2019–25

(Fiscal year ending September 30; In millions of gourdes)

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Sources: Ministry of Finance and Economy; and Fund staff estimates and projections.

Includes previously-programmed multilateral budget support that could be delayed, as well as CCRT debt relief.

Commitment basis, except for domestically financed spending, which is reported on the basis of project account replenishments.

Includes all COVID-related expenditures for FY2020 and FY2021.

Amounts include RCF financing for FY2020 and the full two-year debt-relief under the CCRT and for FY2021 half of the SDR allocation.

Includes the net change in the stock of government securities held by non-banks, of checks that are not yet cashed, of supplier credits and of domestic arrears.

Table 2b.

Haiti: Non-Financial Public Sector Operations, FY2019–25

(Fiscal year ending September 30; percent of GDP)

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Sources: Ministry of Finance and Economy; and Fund staff estimates and projections.

Includes previously-programmed multilateral budget support that could be delayed, as well as CCRT debt relief.

Commitment basis, except for domestically financed spending, which is reported on the basis of project account replenishments.

Includes all COVID-related expenditures for FY2020 and FY2021.

Amounts include RCF financing for FY2020 and the full two-year debt-relief under the CCRT and for FY2021 half of the SDR allocation.

Includes the net change in the stock of government securities held by non-banks, of checks that are not yet cashed, of supplier credits and of domestic arrears.

Table 3.

Haiti: Summary Accounts of the Banking System, FY2019–25

(Fiscal year ending September 30; in millions of gourdes, unless otherwise indicated)

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Sources: Bank of the Republic of Haiti; and Fund staff estimates and projections.

Program definition. Excludes commercial bank forex deposits, letters of credit, guarantees, earmarked project accounts and US$ denominated bank reserves. A portion of SDR allocation is in NIR

Table 4a.

Haiti: Balance of Payments, FY2019–25

(In millions of US$ on a fiscal year basis; unless otherwise indicated)

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Sources: Bank of the Republic of Haiti; and Fund staff estimates and projections.

Change in net foreign assets of commercial banks.

Includes arrears on oil imports.

Includes debt to Venezuela for oil shipments already paid by the GOH in local currency but not yet cleared in U.S. dollars.

Includes the CCRT debt relief.

Table 4b.

Haiti: Balance of Payments, FY2019–25

(In percent of GDP on a fiscal year basis; unless otherwise indicated)

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Sources: Bank of the Republic of Haiti; and Fund staff estimates and projections.

Change in net foreign assets of commercial banks.

Includes arrears on oil imports.

Includes debt to Venezuela for oil shipments already paid by the GOH in local currency but not yet cleared in U.S. dollars.

Includes the CCRT debt relief.

Table 5.

Haiti: Indicators of Capacity to Repay the Fund (Existing and Proposed Credit), FY2019–27

(Units as indicated)

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Sources: Haitian authorities; and Fund staff estimates and projections. Note: Data covers Haiti’s fiscal year, which runs from October 1 to September 30.

In billions of U.S. dollars.

Exports of goods and services.

Central government domestic revenues.

Gross liquid international reserves, end of period.

Table 6.

Haiti: External Financing Requirements and Sources, FY2019–25

(In millions of US$ on a fiscal year basis; unless otherwise indicated) 1/

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Sources: Bank of the Republic of Haiti; and Fund staff estimates and projections.

Components may not exactly match up to totals due to rounding.

Includes previously-programmed multilateral budget support that could be delayed.

Excluding exceptional financing.

Includes debt to Venezuela for oil shipments already paid by the GOH in local currency but not yet cleared in U.S. dollars.

Includes gold.

Table 7.

Haiti: Financial Soundness Indicators, June 2020 – March 2022

(In percent; unless otherwise stated)

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Sources: BRH Banking System Financial Summary and Fund staff calculations. These indicators reflect the aggregated results of the eight licensed banks in operation in Haiti; thus figures in this table may not exactly match the information in Table 3, which reflect the consolidated banking system.

Defined as the difference between average lending rate and average fixed deposit rate in the banking system.

Liquid assets comprise cash and central bank bonds.

Annex I. Social Safety Net

Table 1.

Haiti: Measures in Place to Strengthen the Social Safety Net in FY2022

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Sources: Economic and Social Assistance Fund, Ministry of Economy and Finance and Ministry of Social Affairs and Labor.

Appendix I. Letter of Intent

Port-au-Prince January 5, 2023

Ms. Kristalina Georgieva

Managing Director

International Monetary Fund

Washington, D.C., 20431

U.S.A.

Madam Managing Director:

1. We are grateful for the productive meeting during the recent IMF Annual Meetings in Washington and your support for our efforts during this challenging time for our country. Haiti is suffering greatly from the consequences of Russia’s invasion in Ukraine and has been hit hard by the global food price shock. Overall, despite challenging circumstances, we have managed to continue implementing our structural reform agenda, thanks to the resilience of our citizens and continued implementing technical assistance from the IMF, for which we are grateful.

2. The impact on food prices has been broad-based, with annualized food inflation reaching nearly 44 percent in September 2022—and rice and milk powder prices surging 60–70 percent. This shock is particularly acute for the most vulnerable Haitian households. About 4.7 million of people are suffering food insecurity. Moreover, the global food crisis comes at a difficult time, with Haiti suffering from a new public health emergency in the form of a cholera outbreak. With elevated food prices and a humanitarian crisis unfolding, Haiti’s import bill is expected to increase markedly in FY2023. This will widen the current account deficit relative to early projections, resulting in a balance-of-payments financing gap of at least US$105 million. This projection takes into account import compression, pending additional forthcoming external financing from other development partners.

3. Under these circumstances, we are requesting financial assistance from the IMF under the Food Shock Window (FSW) of the Rapid Credit Facility (RCF) in the amount equivalent to SDR 81.9 million, corresponding to 50 percent of Haiti’s quota, to be disbursed to the Treasury Single Account at the Bank of the Republic of Haiti (BRH). This IMF assistance will help us meet urgent balance-of-payments need arising from the consequences of the war in Ukraine, which, if not addressed, will result in immediate and severe economic disruption.

4. We commit to putting in place a Memorandum of Understanding between the Banque de la République d’Haïti (BRH) and the Ministry of Economy and Finance that will clarify the terms of the on-lending arrangement of the disbursement under the FSW—and our responsibility to service in a timely way our financial obligations to the IMF. In line with the IMF safeguards policy, we commit to continued implementation of the 2019 safeguards assessment recommendations, and to provide IMF staff with access to the BRH’s most recently completed external audit reports and to authorize its external auditors to hold discussion with staff. We will also undergo a new safeguards assessment as soon as feasible. We understand the safeguards assessment must be completed before the approval of any subsequent IMF arrangement with Haiti.

5. To enhance governance, we strongly commit to ensuring transparency and accountability and will carefully track, record, and publish all spending related to the emergency response. We will enforce compliance with proper expenditure execution procedures and controls without exception; publish related comprehensive monthly budget execution reports, no later than 45 days after the end of each month; continue to publish all procurement contracts, including information on the beneficial owners of successful bidders; and 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. These internal expenditure audits will be communicated in a timely manner to the Supreme Audit Court (La Cour Superieure des Comptes et du Contentieux Administratif or CSCCA), in the context of the authorities’ measures to address food insecurity. We will provide adequate resources to enable the CSCCA to conduct compliance audits related to these measures bi-annually, starting with the July-December 2022 period. These compliance audits will be completed and published within six months of the end of the audit period.

6. Our priority is to cushion the impact of the shocks on the population, particularly the most vulnerable ones, in line with our poverty reduction and growth objectives The Ministry of Social Affairs and Labor and the Ministry of Economy and Finance have prepared a detailed strategy to tackle food insecurity and strengthen the social safety net, leveraging ongoing programs. We plan to expand existing programs that improve living conditions and enhance social inclusion, focusing on the most vulnerable groups (children, pregnant women, the disabled, and the elderly); support workers in the textile sector; and increase food rations for households. We have begun school feeding programs and providing hot meals for vulnerable households and community restaurants. We plan to waive school fees and boost cash transfers, already in place for about 50,000 of the most vulnerable households, and to leverage digital tools for cash transfers with support from the World Bank and Inter-American Development Bank. We will also work closely with the World Food Program.

7. Overall, despite challenging circumstances, we have managed to continue implementing our structural reform agenda supported by Staff Monitored Program (SMP), thanks to the government’s commitment, the resilience of our citizens, and continued support from the IMF, for which we are grateful. We remain even more convinced that the implementation of structural reforms and policies to restore macroeconomic stability and strengthen governance must continue in order to promote stronger and more inclusive growth, restore the population’s confidence, and reassure our development partners. We hope that our satisfactory implementation of the SMP establishes a favorable track record that will facilitate our negotiations with the Fund over a subsequent upper-credit-tranche program. We remain committed to implementing sound macroeconomic policies and improving governance in order to improve our population’s well-being. We will provide

8. timely data and continue to collaborate closely with the IMF technical teams in designing and implementing policy measures.

9. We will not introduce or intensify exchange and trade restrictions and other measures or policies that would compound Haiti ‘s balance-of-payments difficulties. We will also limit foreign exchange intervention only to smoothing excess volatility.

10. We authorize the IMF to publish this letter and the accompanying Executive Board documents immediately upon consideration by the IMF’s Executive Board of our request for a purchase under the Food Shock Window under the RCF.

Please accept, Madam Managing Director, the expression of our highest consideration.

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1

The new tax code, a primer in the country’s history, and the associated procedure code (structural benchmark completed under the SMP) entail the rationalization and simplification of the personal income tax and corporate income tax and broadening their bases by eliminating many exemptions; a new tax system for small businesses; rationalization of excises and small taxes and increase in their rates; the integration of local taxes, of the Investment Code and the Special Economic Zone Regime into the tax code.

2

See IMF Policy Paper No. 2022/042 “Proposal for a Food Shock Window Under the Rapid Financing Instrument and Rapid Credit Facility” for standard qualification criteria. A requesting member must fulfil at least one of the food shock impact criteria, i.e., it needs to experience an urgent BOP need associated with: (i) a situation of acute food insecurity or an increase in food/fertilizer costs exceeding a certain threshold or (ii) cereal export shortfall exceeding a certain threshold. Haiti qualifies based on (i).

3

The lack of additional financing gap beyond the amount of the FSW is achieved through import compression, pending additional external financing in the pipeline.

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Cover IMF Staff Country Reports
Haiti: Request for the Disbursement Under the Credit Facility-Press Release; Staff Report; and Statement by the Executive Director for Haiti
Author:
International Monetary Fund. Western Hemisphere Dept.
Volume/Issue:
Volume 2023: Issue 080
Publisher:
International Monetary Fund
ISBN:
9798400234156
ISSN:
1934-7685
Pages:
59
DOI:
https://doi.org/10.5089/9798400234156.002

Acute Food Insecurity Situation
Figure 1.

Haiti: Food Prices and Social Indicators

Estimates of Fiscal Space Under Different Fuel Price Adjustment Scenarios

(Percent of GDP)