Press Release: IMF Executive Board Approves Second Review Under the PRGF Arrangement with Haiti and Approves US$12.2 Million Disbursement
March 4, 2008Press Release No.08/40
The Executive Board of the International Monetary Fund (IMF) completed on February 29, 2008 the second review of Haiti's economic program under the Poverty Reduction and Growth Facility (PRGF) arrangement. The completion of the review allows for an immediate disbursement of SDR7.6 million (about US$12.2 million).
The Executive Board also approved Haiti's request for a waiver for non-observance of two end-September 2007 performance criteria related to the implementation of International Financial Reporting Standards by the central bank and the assessment of possible recapitalization and restructuring needs of state bank BNC. The authorities implemented both performance criteria prior to the Executive Board's consideration of the review.
The PRGF arrangement was approved on November 20, 2006 (see Press Release No. 06/258) in the amount equivalent to SDR73.7 million (currently about US$118.1 million).
Following the Executive Board discussion, Mr. Takatoshi Kato, Deputy Managing Director and Acting Chair, said:
"Haiti has continued to perform remarkably well under its PRGF-supported program despite numerous challenges, including the devastating effects of Hurricane Noel late last year. During fiscal year 2007, growth accelerated for the third year in a row and inflation declined. The authorities are also to be commended for implementing the program's ambitious structural conditionality, and developing a poverty reduction and growth strategy that prioritizes needed reforms, with a focus on restoring basic public goods and services, targeting sectors for growth, and repairing infrastructure.
"Consistent with the authorities' strategy, the key goals for the second year of the PRGF-supported program are to create conditions for higher growth and to consolidate the stabilization gains achieved so far. One key element of the program is to accelerate the execution of public expenditures needed to improve the provision of public goods and services, as well as to upgrade infrastructure, while preserving the quality of spending. The planned improvements in revenue mobilization should be firmly pursued to help ensure a sufficient resource flow for accelerated spending. A strong focus on implementing the agreed policy actions will be important to achieve the Heavily Indebted Poor Countries Initiative completion point as soon as possible.
"Prudent monetary policy will remain important, in light of inflationary pressure from high international oil and food prices. The program's monetary targets will allow some accommodation of first-round effects of the commodity price increases, but the objective is to keep inflation in single digits. An ambitious plan to recapitalize the central bank is being embarked upon, in order to ensure the independence of monetary policy.
"The authorities' plans to foster financial sector stability and development will help support higher growth through increased intermediation. A recent joint IMF-World Bank Financial Sector Assessment found that indicators of bank soundness are relatively favorable, but suggested several important reforms, including: improving regulation and supervision; passage of a new banking law; and strengthening of insolvency and creditor rights, audit and accounting, and the payments system. The authorities have welcomed the assessment and are planning to implement most of its recommendations.
"Despite the many remaining challenges, the prospects for a further acceleration of growth and continued strong implementation of the PRGF-supported program are favorable. Haiti's resource and capacity constraints and the authorities' strong commitment to reform warrant continued technical and financial assistance from the international community," Mr. Kato said.