Press Release No. 09/34

Press Release: IMF Executive Board Completes Fourth Review under PRGF Arrangement with Haiti and Approves US$36.6 Million Augmentation and US$35.8 Million Disbursement

February 13, 2009

The Executive Board of the International Monetary Fund (IMF) has completed the fourth review of Haiti's economic performance under the Poverty Reduction and Growth Facility, and approved an increase in financial assistance of an amount equivalent to SDR 24.57 million (about US$36.6 million) to mitigate the negative effects caused by a series of hurricanes in 2008 as well as the global downturn. The completion of the review enables Haiti to receive an immediate disbursement of an amount equivalent to SDR 23.98 million (about US$35.8 million), bringing total disbursements to SDR 91.3 million (about US$136.1 million). The Executive Board also granted a waiver for the non-observance of a September 2008 quantitative performance criterion related to a minor deviation of net central bank credit to the nonfinancial public sector.

The three-year PRGF arrangement was approved in November 2006 in an original amount of SDR 73.71 million (about US$109.9 million) (see Press Release No. 06/258). At the same time, the IMF and the World Bank determined that Haiti qualified for debt relief under the enhanced Heavily Indebted Poor Countries Initiative (HIPC) (see Press Release No. 06/261). In June 2008, the Executive Board approved the first augmentation under the PRGF arrangement in an amount equivalent to SDR 16.38 million (about US$24.4 million; see Press Release No. 08/145) to help Haiti cope with the impact of high international food and fuel prices.

Following the Executive Board discussion, Mr Takatoshi Kato, Deputy Managing Director and Acting Chair, issued the following statement:

"The Haitian authorities are to be commended for maintaining macroeconomic stability and advancing with structural reforms during 2008, in spite of a succession of severe shocks to the economy. Higher food and fuel prices and resulting political disturbances severely constrained government operations, while a series of hurricanes and tropical storms caused unprecedented economic losses.

"The authorities remain firmly committed to their economic program, which seeks to strike a balance between safeguarding macroeconomic stability and pursuing economic and social development. In view of the large spending needs related to infrastructure reconstruction and poverty-reduction priorities, further efforts to raise domestic revenue are needed. However, the support of the international community will be crucial, and the authorities are encouraged to continue to work closely with donors to mobilize additional aid.

"Provided remaining HIPC completion point triggers are implemented in a timely manner, Haiti should benefit from HIPC/MDRI debt relief by mid-2009. Going forward, maintaining debt sustainability will hinge on a cautious approach to new borrowing and the implementation of policies to promote economic growth and export diversification.

"Haiti will continue to face difficult challenges in the period ahead. The political and social situation remains fragile, the impact of weather-related shocks lingers on, and the global downturn is expected to negatively affect remittances and exports. The authorities' impressive performance and firm commitment to the program provide a strong basis for support from the Fund and the international community. Timely and adequate donor support will be crucial to preserve Haiti's hard-won gains of recent years, implement its poverty reduction strategy, and boost economic growth," Mr. Kato said.

The PRGF is the IMF's concessional facility for low-income countries. PRGF-supported programs are based on country-owned poverty reduction strategies adopted in a participatory process involving civil society and development partners and articulated in the country's Poverty Reduction Strategy Paper. This is intended to ensure that PRGF-supported programs are consistent with a comprehensive framework for macroeconomic, structural, and social policies to foster growth and reduce poverty. PRGF loans carry an annual interest rate of 0.5 percent and are repayable over 10 years with a 5½ -year grace period on principal payments.