Press Release No. 06/258

Press Release: IMF Executive Board Approves US$109.5 Million PRGF Arrangement for Haiti

November 20, 2006

The Executive Board of the International Monetary Fund (IMF) approved today a three-year arrangement for Haiti under the Poverty Reduction and Growth Facility (PRGF) in a total amount equivalent to SDR73.7 million (about US$109.5 million) to support the government's economic program. An initial disbursement of SDR 28.1 million (about US$41.7 million) will become available immediately. The Haitian authorities announced their intention to use SDR20.5 million (about US$30.4 million) of the first disbursement to repay outstanding credit drawn under the Fund's Emergency Post-Conflict Assistance (see Press Release 05/234).

Following the Executive Board discussion, Mr. Takatoshi Kato, Deputy Managing Director and Acting Chair, said:

"Haiti has made an important start in its transition away from political and economic instability. Under two successive programs supported by the Fund's Emergency Post-Conflict Assistance, the authorities were able to restore macroeconomic stability through fiscal discipline and improved economic governance. As a result, economic growth resumed, the currency stabilized, inflation was halved, and international reserves were significantly increased. Following successful presidential and parliamentary elections in the first half of this year, the new authorities have made concerted efforts to maintain macroeconomic stability, improve security, and develop home-grown strategies to increase growth and improve living conditions for the poor.

"The new PRGF-supported program will focus on consolidating these gains through actions to increase fiscal revenues, improve public financial management, make public enterprise operations more transparent, and reform the financial sector. An anchor of macroeconomic stability is the pledge to continue zero central bank financing of the budget. The FY2007 budget allows for a significant reorientation of spending to social services and domestically-financed public investment.

"The program calls for a further reduction in inflation and continued steady increase of international reserves. To achieve this, the authorities' program targets growth in base money to a rate lower than that of nominal GDP, and the central bank (BRH) will maintain its key policy interest rate positive in real terms. The steps taken by the BRH to stabilize weak banks should facilitate further efforts to strengthen the banking sector.

"The recently prepared Interim Poverty Reduction Strategy Paper (I-PRSP) is comprehensive and ambitious, yet realistic. Implementation of the I-PRSP and the PRGF-supported macroeconomic program should provide Haiti a basis for sustained investment-led growth, and increased poverty-related spending. Especially important, however, will be the continued involvement of the international community in providing predictable aid, which should be well coordinated with national budget priorities, in support of Haiti's development strategy.

"A final decision on Haiti's debt relief under the enhanced HIPC Initiative is pending action this week by the World Bank's Executive Board. A press release will be issued jointly with the Bank following those deliberations," Mr. Kato said.