Press Release: IMF Executive Board approves First Review Under Haiti's PRGF agreement and approves US$ 11.7 million disbursement
July 24, 2007
The Executive Board of the International Monetary Fund completed on July 23rd the first review of Haiti's economic program under the Poverty Reduction and Growth Facility (PRGF) arrangement. Completion of the review makes SDR7.6 million (US$ 11.7 million) immediately available for disbursement. The PRGF arrangement was approved on November 20, 2006 (see Press Release No. 06/258) in the amount equivalent to SDR73.7 million (about US$ 113 million).
The Executive Board also approved Haiti's request for a program waiver for delayed observance of a performance criterion requiring submission of a new banking law to parliament, as well as a number of modifications and additions to the quantitative and structural performance criteria associated with the forthcoming second review of the program.
Following the Executive Board discussion, Mr. Murilo Portugal, Deputy Managing Director and Acting Chair, said:
"Haiti has made commendable progress on its path of economic and social stabilization. Significant economic reforms have been implemented, and the security situation has improved markedly. The government is also building on earlier efforts to improve governance, including through transparency in public sector operations and improved public financial management. A full poverty reduction strategy is being developed, based on a broad participatory process.
"Haiti's performance under the PRGF-supported program has been strong and the authorities deserve credit on achieved positive results. All performance criteria associated with the first review were met, but growth has lagged slightly behind expectations. For the remainder of the program year, a significant pick-up in the rate of budget execution will be important. For this, the authorities are putting in place measures to strengthen administrative capacity and overcome supply-side constraints. The government is finalizing a draft budget that is consistent with the indicative macroeconomic framework for the second year of the PRGF arrangement.
"Over the medium term, Haiti's main challenge will be to secure a sustained increase in growth, while consolidating low inflation, in order to reduce poverty, and promote social stability. Higher growth can be achieved provided that the conditions to overcome existing structural and institutional bottlenecks continue to improve. To address these issues, the authorities are taking steps to invigorate private sector investment, including the recent creation of a one-stop window for investors, and plans to improve the efficiency of remaining state-owned enterprises through various modalities of private participation.
"Domestic revenues will be raised from the current relatively low level to allow for a sustainable increase in priority expenditures. Enhancing and modernizing the tax and customs administrations, which the authorities are already undertaking, will contribute to this effort, as will the broadening of the tax base. Improved public financial management capacity will help ensure that additional resources are well spent, in support of poverty reduction.
"The further development of Haiti's monetary policy regime will help to consolidate a stable low-inflation environment. This will entail focusing monetary policy in the short term on money supply management, with a view of developing a more effective interest rate channel.
"To strengthen competitiveness, against the background of an appreciating real exchange rate caused by growing international transfers, the existing structural and institutional bottlenecks will need to be addressed. This will lower the high costs of doing business in Haiti and, in general, help to promote private sector activity.
"Overall, prospects are positive for an acceleration of growth over the medium term, and for continued strong implementation of the PRGF program," Mr. Portugal said.