Press Release No. 15/231

Press Release: IMF Executive Board Approves Three-Year US$69.7 Million Under ECF for Haiti

May 20, 2015

The Executive Board of the International Monetary Fund (IMF) approved a three-year SDR 49.14 million (about US$69.7 million, 60 percent of quota) arrangement under the Extended Credit Facility (ECF) for Haiti on Monday, May 18, 2015. The approval enables the immediate disbursement of an amount equivalent to SDR 7.02 million (about US$10 million), while the remaining amount will be phased over the duration of the arrangement, subject to semi-annual program reviews.

The authorities’ ECF-supported program aims to raise Haiti’s growth potential and reduce vulnerabilities to shocks, while entrenching macroeconomic stability.

Following the Executive Board’s discussion on Haiti, Mr. Min Zhu, Deputy Managing Director, and Acting Chair, made the following statement:

“Haiti’s pursuit of macroeconomic stability in the aftermath of the 2010 earthquake is commendable—growth has been positive, inflation has remained moderate, and international reserve levels adequate. Going forward, continued efforts are needed to support sustained and inclusive growth, strengthen institutions and the policy framework, and maintain adequate buffers to absorb shocks.

“The new three-year program supported by the Fund’s Extended Credit Facility (ECF) seeks to entrench macroeconomic stability, improve competitiveness to spur inclusive growth, and preserve buffers, through streamlined policies that have full country ownership. Donor support ensures the full financing of the program.

“The program targets a reduction of the non-financial public sector deficit from 7.5 percent in FY2014 to 3.25 percent of GDP in FY2015 and 2.5 percent in the medium term to preserve sustainability. Lower oil prices will facilitate fiscal consolidation (allowing the government to raise fuel taxes and lower electricity subsidies), while preserving pro-poor spending. The adoption of an automatic fuel pricing mechanism will safeguard fuel taxes if oil prices rebound.

“The program aims to preserve price stability. Accordingly, the monetary policy stance will remain tight as needed until fiscal consolidation proceeds to anchor exchange rate expectations. The policy mix seeks to keep international reserves at an appropriate level to ensure adequate buffers.

“The program’s structural reform agenda focuses on strengthening competitiveness to foster growth. It tackles deep-seated problems in the electricity sector; supports the authorities’ efforts to strengthen property rights; and includes actions to increase policy effectiveness through reforms in tax administration, tax policy and public financial management, as well as improvements in the monetary framework and economic statistics.”

ANNEX

Recent Economic Developments

In December 2014, Haiti completed the arrangement under the Extended Credit Facility (ECF), which helped support positive economic growth and maintain macroeconomic stability after the 2010 earthquake. However, while per capita growth has been positive, it has been insufficient to significantly reduce poverty. Fiscal and external deficits rose to high levels, increasing Haiti’s vulnerabilities. Due partly to a difficult socio-political environment, progress on structural reform was limited.

Main Program Objectives

The program aims at entrenching macroeconomic stability and at deepening structural reforms, to support sustained and shared growth. The program seeks to maintain buffers in the form of foreign reserves and bank deposits to reduce Haiti’s vulnerability to shocks, and to avoid stop-and-go growth dynamics. Real GDP is projected at 3-4 percent over the medium term helped by the implementation of structural and institutional reforms addressing bottlenecks to growth and job creation, including improvements in the business environment and property rights, financial inclusion, and access to available and cheap electricity. Inflation is expected to be contained in the mid-single digits, reflecting prudent fiscal and monetary policies, while gross international reserves would cover between 4 - 5 months of imports.

Fiscal policy aims at placing public debt on a sustainable path and preserving buffers against downside risks. It targets a reduction in the deficit of the non financial public sector to 2.5 percent of GDP in the medium term, while preserving poverty-reducing spending. Fiscal consolidation will result from the elimination of regressive fuel subsidies, the adjustment of investment spending to sustainable levels, and the reduction of quasi-fiscal losses in the electricity sector. In this regard, the revised FY2015 budget includes a strong fiscal adjustment that takes advantage of the low international oil prices. To prevent a reemergence of fuel subsidies if international prices rebound, the authorities have adopted an automatic pricing mechanism for petroleum products, which will reflect international oil prices into domestic fuel prices, while protecting the most vulnerable.

Additional Background

Haiti, which became of member of the IMF on September 8, 1953, has an IMF quota of SDR 81.90 million.

For additional background on the IMF and Haiti, see: http://www.imf.org/external/country/HTI/index.htm .