IMF Executive Board Concludes 2019 Article IV Consultation with Haiti

January 28, 2020

On January 24, 2020, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV 2019 consultation with Haiti. [1]

Since March 2019, Haiti has been experiencing a protracted political crisis and prolonged civil unrest that has at times shut down most economic activity in the country. The crisis has taken a toll on the economy and the already vulnerable population: inflation exceeded 20 percent year-on-year in September, output is estimated to have contracted by an estimated 1.2 percent in fiscal year 2019 (ending September 30), and the exchange rate depreciated by 25 percent over the same period. As fiscal revenues have plummeted and the cost of energy subsidies increased, the fiscal deficit widened to 3.8 percent of GDP in FY2019 and domestic arrears rose sharply. The public debt-to-GDP ratio jumped from 40 percent to 47 percent over the fiscal year.

The authorities are making considerable efforts to limit the deterioration. The ministry of finance is implementing measures to improve revenue collection and better control spending and, in November, signed a new agreement with the central bank to strengthen fiscal discipline and limit monetary financing of the government. The central bank has been adjusting its interest rates to contain inflation while at the same time trying to support the private sector through the recession.

Absent sustained implementation of good policies and comprehensive reforms, the outlook remains grim. Under the baseline assumption of some political stabilization in 2020 without major political or economic reforms, growth would improve but remain negative this year and below 1.5 percent over the medium term. Inflation is expected to decline slightly before eventually falling to below 10 percent by 2025. Risks to the outlook are primarily on the downside but political stability could bring important upsides. A resolution of the current crisis, appointment of a new government committed and able to implement reforms, and return of support from the international community could lead to higher investment and potential growth.

Executive Board Assessment [2]

Executive Directors agreed with the thrust of the staff appraisal. They expressed concern about the socio‑political crisis in Haiti and stressed the urgency of restoring political and macroeconomic stability, addressing poverty and inequality, and tackling corruption. They called on all stakeholders to work toward a broad‑based national dialogue to address the country’s daunting challenges and realize the potential scope for much stronger and more inclusive growth. Directors encouraged continued close cooperation with donors and the Fund, including through technical assistance, and welcomed the Country Engagement Strategy as a basis for future Fund engagement.

Directors stressed that severe fiscal constraints necessitate shifting scarce resources away from non‑priority spending toward social programs and investment. They underscored the importance of limiting monetary financing of fiscal deficits and preparing a notional budget for FY2020. Directors encouraged the authorities to focus on measures to boost domestic revenues and reduce exemptions in the near term, while working to strengthen tax administration, prepare a resolution plan for budget arrears, and bolster public financial management. Directors commended the authorities for progress on the new national plan for social protection, and stressed the need to advance its approval and focus on a limited number of cash transfer programs.

Directors underscored the urgency of updating the anti‑corruption policy priorities, including setting up the steering committee envisioned in the 2009 anti‑corruption strategy. They also stressed the need to enforce the asset declaration system and conduct regular audits of state‑owned enterprises and other public entities.

Directors encouraged the authorities to allow the exchange rate to adjust in an orderly fashion. Looking ahead, they recommended setting a quantitative monetary target, and encouraged the monetary authorities to advance other institutional reforms. Directors supported the central bank’s efforts to continue deepening financial intermediation and inclusion, including via fintech.

Directors emphasized that well‑sequenced reform of the energy sector will be crucial for fiscal sustainability and higher growth and must be accompanied by clear communications and measures to offset the impact on vulnerable groups. They encouraged the authorities to overhaul the management and performance of EDH, work with stakeholders to reduce electricity costs, improve the reliability and efficiency of energy supply, and lower the related fiscal burden. Broader structural reforms are needed to improve the economy’s competitiveness, including efforts to streamline regulations, remove infrastructure bottlenecks, strengthen property rights, and enhance governance. Building resilience to natural disasters is also a priority.

Directors urged the authorities to take steps to improve the quality and timeliness of economic data, with the help of further Fund technical assistance.


Haiti: Selected Economic and Financial Indicators 1/

Nominal GDP (2018): US$9.7 billion

GDP per capita (2018): $890

Population (2016): 10.847 million

Percent of population below poverty line (2012): 58

Estimated

Projections

2017

2018

2019

2020

2021

Output

Real GDP growth (%)

1.2

1.5

-1.2

-0.4

0.9

Employment

Unemployment (%)

…

…

…

…

…

Prices

Inflation, (end of period) (%)

15.4

13.3

20.1

17.5

14.5

Central Government Finances

(In percent of GDP; unless otherwise indicated)

Revenue and grants

17.7

17.3

13.6

13.4

14.2

Domestic Revenue

14.0

13.0

10.8

10.0

11.1

Grants

3.7

4.3

2.8

3.4

3.0

Expenditures

17.5

19.0

16.1

15.6

16.2

Current expenditures

12.2

12.7

12.5

11.5

11.4

Capital expenditures

5.3

6.2

3.6

4.1

4.8

Overall balance of the nonfinancial public sector, incl. grants2

-0.9

-2.9

-3.8

-3.4

-3.1

Total public sector debt

38.3

39.9

47.0

46.1

44.9

Money and Credit

Broad money (% change)

12.9

13.7

18.9

18.6

17.0

Credit to private sector (% change)

4.5

12.5

9.9

14.6

17.0

3-month BRH bond interest rate (%)

12.0

12.0

22.0

19.4

16.4

Balance of Payments

(In percent of GDP; unless otherwise indicated)

External current account balance (incl. official grants)

-1.0

-3.9

-2.0

-0.9

-1.1

External current account balance (excl. official grants)

-5.6

-7.9

-4.8

-3.2

-4.1

Foreign direct investment (FDI)

4.5

1.1

0.9

0.9

1.3

Reserves (in months of imports of the following year)

4.4

4.7

4.9

4.8

4.8

External public debt

24.2

23.5

27.4

25.4

24. 2

Exchange Rate

Real effective exchange rate (% change) (+ appreciation)

12.7

2.8

-10.8

…

…

Nominal GDP (millions of gourdes)

551,911

631,829

732,545

868,582

1,015,809

Nominal GDP (millions of U.S. dollars)

8,409

9,658

8,708

8,533

8,842

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

1/ Fiscal years ending September 30.

2/ Includes transfers to the state-owned electricity company (EDH).


[1] Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country's economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board.

[2] At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country's authorities. An explanation of any qualifiers used in summing ups can be found here: http://www.imf.org/external/np/sec/misc/qualifiers.htm.

IMF Communications Department
MEDIA RELATIONS

PRESS OFFICER: Randa Elnagar

Phone: +1 202 623-7100Email: MEDIA@IMF.org

@IMFSpokesperson