Transcript of a Conference Call on the Cancellation of Haiti's Debt and Approval of a New Three-Year Extended Credit Facility Program with HaitiBy Corinne Deléchat, IMF Mission Chief for Haiti, and Ronald Baudin, Minister of Finance of Haiti*
With Andreas Adriano, Press Officer, External Relations Department
July 21, 2010
* Mr. Baudin’s interventions were translated from French.
Good afternoon. My name is Andreas Adriano. I’m from the IMF Media Relations Department and will be moderating this conference. Thanks for participating in this conference to discuss the approval, by the IMF Executive Board, of the full cancellation of Haiti’s debt and approval of a new three-year program to Support Reconstruction and Economic Growth. With us today, we have Corinne Deléchat, the Mission Chief for Haiti for the IMF, and Ronald Baudin, Finance Minister of Haiti. Both will make some initial remarks and we will then take your questions.
MS. DELÉCHAT: Thank you Andreas. My name is Corinne Deléchat, I’m the head of mission for Haiti at the IMF. Today the IMF Executive Board has approved the cancellation of Haiti’s outstanding obligations to the Fund in an amount of about $270 million and has also approved a new 3-year program under the Extended Credit Facility which aims mainly at anchoring the macroeconomic framework for the reconstruction and at supporting the authority’s efforts to rebuild Haiti and foster growth. And that will also help to catalyze donor support.
MR. ADRIANO: Thank you Corinne. Minister Baudin, would you like to make some comments?
MR. BAUDIN (translated from French): I’d like to thank the IMF’s Executive Board for the two decisions today, of cancelling Haiti’s debt and approving the new three-year program. This is an opportunity to highlight that today’s events crown Haiti’s efforts to maintain a healthy macroeconomic framework despite the difficult periods we have faced. We have always benefitted from the support of the International Monetary Fund and we have always demonstrated discipline. This program will allow to frame the country’s reconstruction program, mobilize donors and technical assistance and reinforce institutions, so as we can meet the objectives that we have set. In this program, we will carry out infrastructure investments and stimulate private investment to reach a sufficiently high rate of growth and improve living conditions. We count on donors’ help, particularly those that have been promised in New York. Fiscal and budgetary management will contribute to better focus expenditure on what is necessary to achieve the program’s objectives.
MR.ADRIANO: Thank you Mr. Minister. We can start taking your questions now.
QUESTION: How much has been approved by the IMF in this new three-year agreement?
MS. DELÉCHAT: Thank you very much. The new program is of a limited amount. It’s about $60 million over the next 3 years. I also want to underscore that the IMF money will serve a very particular purpose which is it will go to the Central Bank and will go into reserves to help the Central Bank manage the volatility that could be associated with a large disbursement of aid inflows. We understand that the IMF is not the best institution to fund the reconstruction because other donors and development institutions that can provide grants, are much better equipped for this, so that’s why the IMF money goes to a very particular purpose for which the institution was created.
MR. ADRIANO: Thank you. Next question?
QUESTION: I was wondering if there are any specific steps that the government has to take under this program. I realize that the fund is going to the—the funds are going to the Central Bank, but are there any specific policy steps that you think the government has to take? And what is its ability or capability to implement these actual steps considering, you know, the damage done from the earthquake and how that has affected the government.
MS. DELÉCHAT: Thank you very much. The program mainly provides a macroeconomic framework so the authorities are committed, as the Minister says, to implement the policies that would allow them to remain within this macroeconomic framework. But to be more specific, the program really accompanies the process of reconstruction, so all the spending that can be financed by donor money is allowed under the program. There’s no restriction on spending at all. On the contrary, the idea is to facilitate the absorption of the aid.
In terms of policies, there’s a number of measures that the authorities themselves initiated in concert with other donors providing budget support to strengthen fiscal governments and transparency, so for example, they’ve agreed to the regular posting of various types of information on the Ministry of Finance website. For example, poverty, construction spending, investment spending, transfers to public entities and so on, so that that will give us a much clearer picture of what the resources are used for and that should also provide comfort for the donors.
QUESTION: Yeah, you’ve obviously seen the issues that are raised last week regarding the fact that donors are not meeting their needs. I was wondering if you have any comment on that because I see Mr. Strauss-Kahn offer comments and urges donors to make good on their promises. I was wondering what sort of oversight will the Fund have of a lot of these resources, or is that being done by the World Bank?
MS. DELÉCHAT: Thank you very much. The oversight of the reconstruction resources rests with the interim Haiti Reconstruction Commission, which is the body that was created to oversee the whole process and track the disbursements. This is a body that’s both composed of Haitian officials and representatives of different parts of the Haitian society and donor representatives. It’s headed by Prime Minister Bellerive and former U.S. President Clinton. Ourselves, we have the oversight of everything that goes through the budget broadly speaking, so to make sure the money is spent efficiently, but it is also clear that not all the money will be disbursed through the government’s budget but through various projects and programs. So, the coordination and centralization of information on those will be with the Commission. But we are indeed concerned that the disbursement of the donor money is very slow and should be accelerated. We’re hoping that the new program will be a positive signal in this regard.
QUESTION: Can I have a follow-up? I see you’re also forecasting a 9 percent GDP growth. Is your feeling that the economy is growing—that the comeback is a lot quicker than you expected?
MS. DELÉCHAT: It’s very hard to say because the numbers on that side, national account statistics, are very weak, but we’re seeing a rebound in economic activity that’s probably in line with the projection. Typically after a large disaster, there’s a very strong rebound right after just because you start from a very low base, and what we’ve observed in trade and transport and in other sectors, is very encouraging. Textile manufacturing, for example, is catching up very quickly.
MS. WROUGHTON: So, the rebound has been pretty—as you said, it’s coming from a lower base, but what—how much of that do you see coming from—that growth do you see coming from the reconstruction effort?
MS. DELÉCHAT: It will be—I mean, that’s the thing we’re trying to say in our assessment is that, you know, we’ve seen a rebound and then a recovery in economic activity. But clearly the main driver of growth over the next few years will be the flows of international aid, so all our projections are based on the amounts coming through as planned.
MR. ADRIANO: Next question.
QUESTION: I needed a clarification on the amount of money which was mentioned for the three-year period. Was it $60 million or $600 million?
MR. ADRIANO: Sixty, Six-zero.
QUESTION: All right. My question is this, isn’t this considered a very low figure for this type of assistance?
MS. DELÉCHAT: It is low. Again, it is low access, but the purpose of the Fund program is not to provide resources for the reconstruction. Again, we’re not the best institution to do that, and also we’re just providing debt relief, so we’re not intending to pile on more debt right after. Again, the money is limited but will be very useful for the Central Bank to allow it to intervene and then avoid large and disruptive fluctuations in the exchange rate.
MR. ADRIANO: Next question?
QUESTION (translated from French): I have a question for Mr. Baudin. Can we have more details about this new program? You have said that there will be a lot of investment, especially in the infrastructure sector, can you give more details, what will be the repercussions for the Haitian population of this program?
MR. BAUDIN (translated from French): The IMF program will be a catalyzer for the other donors in the sense that they follow the programs we have with the Fund before deciding. We have very well defined objectives in this new program. In terms of growth for this year and the next, we forecast a relatively high growth rate that will be of approximately 10%. Subsequently, we will have growth rates at least of the same figure. We will then launch a vast infrastructure program which will help the population of Haiti, and we will make efforts to attract businesses to invest in Haiti. And we will take several measures to make operators more comfortable, focusing essentially on the areas in which we have a comparative advantage that is textiles and clothing. And this comparative advantage was strengthened because of the U.S. facility that provides for duty free entry of Haitian textiles and garments.
We will also be focusing on the tourism and hotel sectors because we expect that there will be a high demand there. Seventy percent of the hotel rooms in the country, of which we already had a deficit, have been destroyed, so there will be a lot of investment in the hotel sector. And we also expect a lot from the reconstruction because as you are aware, the capital Port-au-Prince was some 80 to 85 percent destroyed and many of the smaller towns were also substantially destroyed, so we expect a lot to come from reconstruction of buildings, hospitals, et cetera. So, all of this is going to be beneficial to the people of Haiti through jobs and that will help stimulate the economy as a whole. So it is very clear that this program is beneficial for the whole population.
QUESTION: Could the minister please detail the figures in the program?
MR. BAUDIN: The Fund contribution will be, under this program, 60 million U.S. dollars. And secondly, the cancellation of Haiti’s outstanding liabilities to the fund is about 178 million special drawing rights or $268 million. Obviously, over the next three years we will spend a lot more in order to carry out all the investment spending that we are planning. And we will also benefit from broad technical assistance in this program in order to strengthen our institutions.
QUESTION: I have a question for the IMF representative. It is known that the international community has promised a lot of money for Haiti during the donors’ conference, but very little of it has already arrived in Haiti. It’s therefore a very complicated situation. What is the message from the IMF to the countries that have promised disbursement to Haiti but have not done it so far?
MS. DELÉCHAT: Indeed, as I’ve just mentioned, the amounts that were promised in New York are extremely significant, around US$10 billion over five years, and around US$ 5 billion over the next 18 months. It is very slow to start at the moment. I think everybody is aware of this, including the United Nations. It is expected that the approval of the program will send a strong signal to the international community and will bring confidence and allow the disbursement to happen or to be accelerated. It has to be recognized that the international community has to some extent been waiting for the establishment of the reconstruction institutions, especially the Interim Haiti Recovery Commission and the multi-donor trust fund, which have now been set up. And here I have to say that it has not taken more time than in other similar situations. For example, after the Asian tsunami, it took around eight months to establish such institutions. Therefore, the message we now send to the international community is that everything is ready. The authorities have a plan, the reconstruction institutions have been set up. The Fund program sets a healthy macroeconomic framework. All the conditions have been set so as disbursements can start in a meaningful way.
MR. ADRIANO: Thank you Corinne. That concludes our press conference call. Thank you for your participation.