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Economic Activity Revives in Haiti Two Years After Earthquake

Reconstruction of buildings in Port-au-Prince, Haiti. Many Haitians have moved out of refugee camps into new houses (photo: Asael/Corbis)

POSTDISASTER RELIEF

Economic Activity Revives in Haiti Two Years After Earthquake

IMF Survey

August 14, 2012

  • Recovery, reconstruction are ongoing, but at slower pace
  • More than half of population displaced by earthquake now back in housing
  • Lack of economic capacity still remains a big challenge for the country

Despite a period of political instability, economic activity is reviving in Haiti two years after a devastating earthquake, says the International Monetary Fund (IMF).

The international community responded to the disaster with pledges of over $10 billion in aid. For its part, the IMF forgave around $270 million in debt and also offered Haiti a line of credit under the Extended Credit Facility arrangement (ECF).

The IMF recently took stock of its dealings with Haiti during the fourth review of the country’s ECF. The IMF’s Executive Board approved a $7.4 million disbursement to support the country’s long-term economic reconstruction plans.

In an interview with IMF Survey, the IMF’s mission chief for Haiti, Boileau Loko, shared his insights on the country’s recovery and its economic prospects.

IMF Survey: Two years on from the Haitian earthquake, is life better for the Haitian people?

Loko: The recovery and the reconstruction are ongoing, but at a slower pace than we all thought. However, we can still see that more than half of the 1.3 million people living in camps have now found new houses.

The downside is that there are still about 500,000 people living in tents. But, the government is working to see how these people could be moved back to decent housing.

IMF Survey: Can you point to something which tells you that the lives of ordinary Haitians have improved?

Loko: In Port-au-Prince, many camps have disappeared and there is also some economic activity. This has translated into a positive GDP growth rate.

Since then, new schools have been built, social health facilities have been restored, and the government is functioning.

So the recovery is slow and we all want it to be faster. But we have to remember that this was a huge earthquake. We expect that everything will go quicker in the future and that the 500,000 people staying in tents will go back to decent housing.

IMF Survey: What was the growth rate last year? What do you expect it to be this year and for the coming year?

Loko: Before the earthquake, the average growth rate was about 3.5 percent. After the earthquake in 2010, we had a negative growth of about 5 percent.

We have come back to a growth rate of about 5 or 6 percent and we expect the growth rate to be about 5.5 percent in this year, knowing that the population growth rate is 2 percent.

This means that per capita GDP will increase. We expect it to increase at least by 3 to 4 percent in the coming year.

IMF Survey: Haiti has had a lot of outside assistance, especially in the aftermath of the earthquake, but has it received enough?

Loko: The international community has done a lot. In total, donors have pledged about $10 billion and about 50 percent of the pledges have been disbursed, so we’re talking about $4-5 billion. A part of that is also debt relief from the IMF and other country institutions.

IMF Survey: Does Haiti have the capacity of using all these big amounts of money coming in?

Loko: This is the key issue in Haiti. $5 billion has been disbursed, but capacity is weak. Because of that, some donors, even if the disbursement is there, are not able to execute the projects.

A small percentage of the amount disbursed has been used, not because the authorities do not want to use it, or because they do not want to accelerate the reconstruction, but because capacity is low and they need to mobilize capacity to be able to use the amount disbursed by donors.

IMF Survey: Recently Haiti went through a difficult period on the domestic political scene: the sudden resignation of the prime minister. There was a hiatus before the appointment of a replacement prime minister. How much has this slowed down development?

Loko: The 2012 presidential elections took almost one year to be completed, and the president took office only eight or nine months later. Afterwards, there was a three- to four-month gap before the new prime minister was sworn in.

After two months in office, the new prime minister resigned and it took an additional two or three months to replace him. So we can say that about 15 months have been used only for the political electoral process.

This is a big problem in a country like Haiti, where we really need everybody to work together to make the reconstruction quicker. So, yes, part of the slow reconstruction is due to this political instability.

We all hope that with the new prime minister, and the new government, we will have some political stability, and accelerate the reconstruction.

IMF Survey: Let us turn to the role of nongovernmental organizations (NGOs). They have played a big role postdisaster. There are more than 10,000 of them working in Haiti. That must create a lot of overlap and inefficiencies. What is being done to overcome these inefficiencies and this overlap?

Loko: Indeed, there are more than 10,000 NGOs, and I think they have helped a lot in the reconstruction process.

However, two years after the earthquake, we think it is important for the NGOs to now work more closely with the government, and make sure that what they are doing is consistent with the government’s objectives.

For instance, NGOs are building schools, but the government probably has a strategy in the education sector about where they want the schools to be built, and where the kids need schools. The NGOs must make sure that the schools they build are exactly where the authorities need them to be.

IMF Survey: Is this coordination actually happening?

Loko: It is not yet, but the government is taking some measures to ensure that we work together with NGOs. Going forward, we hope there will better coordination between NGOs, donors, and the government, to make sure that they implement the measures, and then meet their objectives.

IMF Survey: Up to now, we have been talking about all the hurdles and challenges that Haiti is facing. So, what do you see as the medium-term outlook for the country then?

Loko: The outlook is positive. But, of course, as I said, there are issues. The first one is the lack of capacity; the second issue is about governance.

The country needs to have political stability, better governance, transparency, and better coordination with donors. It needs to make sure that all the parties can work together in a consistent way to achieve their objectives.

IMF Survey: You have not been mission chief for Haiti for very long. In fact, you were appointed after the earthquake. When you visit the country, do you feel optimistic or pessimistic about its prospects?

Loko: I am optimistic about it because when I go to Haiti I see that the population wants to move forward. Their willingness is there.

As I said, there is a lack of capacity. But the donors and the authorities are trying to improve this issue of capacity. They are looking into how to make the business environment friendlier, and how to attract investors in Haiti.

Beyond that, many things are going on positively. For instance, one achievement since the earthquake is in terms of domestic revenue.

By domestic revenue, I mean taxes and custom duties. Haiti had one of the lowest levels of domestic revenue in the world and we are working with the authorities to increase it.

The objective is for Haiti to be less dependent on foreign aid and also show that they have enough resources for poverty-related spending, and for infrastructure.

We were able to increase domestic revenue from about 10 percent of GDP to 13 percent, even 13.5 percent of GDP in three years.

So, there is progress. The challenges are huge, but I am optimistic. I think that with the help of the donors and NGOs, Haiti can make it.