## HAITI STAFF-MONITORED PROGRAM (SMP) — content unit 1htiea2022001 ## Source details **Canonical URL:** [HAITI STAFF-MONITORED PROGRAM (SMP) — content unit 1htiea2022001](https://www.imf.org/-/media/files/publications/cr/2022/english/1htiea2022001.pdf) ## Other formats - [Markdown version](/-/media/files/publications/cr/2022/english/1htiea2022001.pdf.md) - [Structured JSON version](/-/media/files/publications/cr/2022/english/1htiea2022001.pdf.json) --- ### Background and recent developments - SMP approved on June 17, 2022 and runs through May 31, 2023. - Designed by IMF staff and Haitian authorities mindful of Haiti’s fragility and capacity constraints. - Recent shocks since 2018–2021: - Protracted political crisis, repeated country lockdowns (Peyi-Lok), civil unrest, assassination of the president, the global pandemic, surge in gang-related violence, and an earthquake (direct costs estimated at 11 percent of 2021 GDP). - Weakened economic and institutional frameworks, reduced administrative capacity, and worsened socioeconomic and security conditions. - IMF engagement and financing since 2019: - Financial assistance without ex post conditionality equivalent to about US$360 million in total since 2020. - Disbursement under the Rapid Credit Facility in April 2020 (SDR 81.9 million, equivalent to 50 percent of Haiti’s quota). - Relief on debt service due to the IMF during 2020 and 2021 under the CCRT for a cumulative amount of about SDR 15 million. - Haiti received about SDR 157 million under the general SDR allocation in 2021. - Governance/capacity: an SMP agreed “ad referendum” in mid-2020 was not approved because of procurement-related governance issues; steps in 2021 to strengthen governance safeguards (supported by Fund TA) enabled re-start of SMP discussions. - Political: Prime Minister Ariel Henry formed a new government in November (appointed earlier by President Moïse); political accords (Accord politique pour une gouvernance apaisée; Accord de Montana) aim to establish a transitional government and hold elections; no election timetable yet. ### Outlook and risks - Baseline assumptions: - Normative policy implementation under the SMP accompanied by an increase in international assistance. - Reform implementation after the SMP assumed to be modest given uncertainties regarding policy commitment beyond 2023. - Spillovers from the war in Ukraine expected to raise inflation and affect the balance of payments via higher commodity and food prices. - Growth and inflation projections: - After three years of contraction, growth expected to turn positive in FY2022 supported by investment. - Outlook box: growth expected to pick up to 0.3 percent in FY2022. - Staff earlier text: growth to recover to 1.4 percent in the next year with continued remittances. - Medium term: growth would reach 1.5 percent with modest improvements in credit supply and security. - Inflation projected at 27.5 percent (y/y) at end-FY2022, falling to 14 percent by end-FY2023. - External and fiscal balances: - Current account expected to remain in surplus in FY2022 due to weak imports; small deficit projected over medium term supported by remittances, modest export resumption, and higher official transfers in FY2022-FY2023. - NFPS deficit: decline to 1.5 percent of GDP in FY2022, widen to 2.3 percent in FY2023, stabilize around 2.8 percent thereafter. - Risks (primarily downside): - Internal: failure to implement SMP policies; worsening governance and corruption; political instability; social unrest; gang-related disruptions; natural disasters; surge in COVID cases. - External: higher-than-anticipated world fuel prices and/or lower-than-expected remittance and external financing flows. - Upside: lower fuel prices would reduce Haiti’s energy import bill. - Scenarios: - Without improved policies and revenue mobilization, medium-term outlook would mirror recent low/negative growth and high poverty equilibrium. - Improvements under the SMP could build momentum for a UCT-supported program raising medium-term growth. ### SMP objectives, structure, and sequencing - Purpose and character: - SMPs monitor implementation of authorities’ economic program and are not accompanied by financial assistance. - Proposed SMP (ending May 31, 2023) aims to build capacity, reduce inflation, raise growth, strengthen fiscal and monetary frameworks, address governance weaknesses, combat corruption, and strengthen social assistance. - Successful SMP intended to build a track record to improve prospects for an IMF-supported upper credit tranche (UCT) program. - Design considerations: - Tailored to Haiti’s fragility and capacity constraints; strong focus on governance, accountability, and ownership. - Underpinned by ongoing IMF technical assistance and capacity building. - First review expected in September; SMPs subject to formal IMF management review; satisfactory performance could lead to an Executive Board-approved multi-year UCT program. ### Fiscal framework, revenue measures, and financing constraints - Core objectives: - Raise domestic revenues (collapsed in recent years). - Reduce central bank financing of the fiscal deficit to lower inflation and exchange rate pressure. - Raise resources for productive spending and reduce crowding out of investment, health and education. - Key fiscal metrics and adjustments: - Tax-to-GDP ratio: only 5.8 percent in FY2022. - Higher-than-expected domestic amortization of 0.8 percent of GDP. - Combined cuts in non-subsidy-related current spending and domestically-funded capital expenditures by 1.2 percent of GDP to contain gross fiscal financing needs. - Fuel subsidy costs expected to rise by about 0.5 percent of GDP in FY2022 due to higher world prices. - Projected deficit reduced to 1.5 percent of GDP in FY2022 from 2.4 percent of GDP in FY2021 due to non-subsidy spending cuts. - Space created to allocate funds equivalent to 0.15 percent of GDP on social programs to mitigate December 2021 fuel price increases. - Gross financing needs estimated at 2.9 percent of GDP in FY2022 compared to 3.4 percent in FY2021. - Financing composition and central bank involvement: - About 0.8 percent of GDP covered by domestic borrowing and project loans. - BRH financing estimated at about 2.2 percent of GDP in FY2022, of which 0.7 percent of GDP will be fully sterilized if needed. - BRH financing of government contained at 1.5 percent of GDP (level consistent with staff estimates of non-inflationary monetary financing). - In FY2023 and later, central bank financing projected to stabilize around 2 percent of GDP. - Program includes adjustors on quantitative targets if projected external budget support shortfalls occur. ### Revenue mobilization and tax reforms (priority FY2022) - Policy measures: - Apply gradual fuel excises and increase excises on tobacco, alcohol and other goods as proposed in draft Tax Code to be finalized by September. - Strengthen use of tax identification number (TIN) and clean up taxpayers' portfolios. - Finalize and publish new Tax Code, Customs Code and Customs tariff. - Higher tobacco, alcohol, and car excises; expansion and simplification of tax base. - Constraints and reforms: - Revenue-raising constrained by narrow tax base concentrated in few large taxpayers and imports transiting through the capital’s port and airport. - Special regimes to be revised; some incentives likely grandfathered; removing large-scale exemptions on necessities difficult. - Structural benchmarks (SB): - Proceed with stakeholder consultations and finalize draft Tax Code and Tax Procedure Code (end-September 2022 SB). - Finalize and publish Customs Code and tariffs (end-September SB). - Systematize use of TIN among financial agencies (end-September SB). ### Fuel market reform, social assistance, and poverty mitigation - Rationale: - Central bank financing of fiscal deficit has fueled inflation and exchange rate pressure, increasing fuel subsidy costs and further monetary financing. - Reducing monetary financing is critical given burden on the poor from higher prices. - Recent price actions and policy: - Government resumed 1995 law allowing petroleum product prices to adjust regularly in December 2021: - Kerosene price: from 163 HTG per gallon to 352 HTG per gallon. - Diesel price: from 169 HTG per gallon to 353 HTG per gallon. - Gasoline price increased by 25 percent from 201 HTG to 250 HTG (US$2,50) per gallon. - Authorities indicated unable to adjust prices further for foreseeable future; SMP baseline does not assume further fuel price changes. - BMPAD fuel import monopoly withdrawn; imports allocated via competitive bidding managed by MEF. - Authorities intend to eventually eliminate fuel subsidies when conditions permit. - Social mitigation measures: - Allocate resources equivalent to 0.15 percent of GDP over four months under Programme d’urgence: - Distribution of hot meals. - Expansion of the school canteen program. - School bonds for 50,000 low-income parents. - Acquisition of 100 new school buses. - Fuel vouchers for vehicles on main transport routes (reimbursed to distributors). - Some measures may continue after September. - PNPPS: prepare action plan for implementation this year; identify on-budget all public spending on social programs including off-budget FAES. - QT floor for budget allocations for social spending; expand SIMAST beneficiary database (WFP and World Bank support); projects Klere Chimen and BSEIPH to finance monetary transfers. - FAES transparency measures and SBs: - Provide quarterly and annual financial statements of FAES and reconvene governing board before June 2022 and meet quarterly thereafter (quarterly SB). - All domestically funded social program resources to be transferred back to MAST in 2023 budget (end-September SB). - All externally funded resources of FAES to be included in budget medium-term. ### Monetary policy, exchange rate policy, and FX market reform - Monetary policy objectives: - Strengthen monetary policy framework; limit FX interventions to smoothing excessive volatility; gradually eliminate spread with parallel market. - Clarify objectives and modalities for liquidity and FX operations. - Adopt ceiling on credit to the NFPS as main anchor: limit monetary financing to 1.5 percent of GDP in FY2022 and about 2.0 percent of GDP thereafter. - Conduct short-term liquidity operations at a fixed rate with full allotment, including seven-day operations. - FX market measures and roadmap: - Adopt a floor on net international reserves (NIR) with asymmetric adjustor only if external budget support shortfall. - Prepare roadmap to: - Put in place mechanisms for FX interventions (e.g., well-designed weekly FX auctions). - Review limits on banks' net open FX positions. - Revise FX regulations and phase out FX surrender requirements over medium term, including Circular 114-2. - Circular 114-2 (Sept 2020) mandated remittances be exchanged into gourdes at BRH reference rate, required money transfer companies to sell portions to BRH and banks, and limited banks’ net open FX position. - Staff examine whether FX regulations amount to exchange restrictions or multiple currency practices (MCPs). - Authorities committed not to impose/intensify restrictions on payments and transfers for current international transactions and not to introduce/modify MCPs. - BRH operational commitments: - Floor on NIR and ceiling on BRH net credit to NFPS among QTs. - Any monetary financing above agreed levels to be sterilized, including via FX interventions if necessary. - Staff recommended revising the Pacte between Ministry of Finance and BRH to reflect program targets and reduce fiscal dominance. ### Financial sector, AML/CFT, CBDC, and supervision - Banking sector and supervision: - Banking supervision to transition to risk-based framework; seven draft banking regulations adopted on January 13 (consolidated supervision, licensing, minimum capital, reporting, IT Security); additional regulations on credit classification/provisioning, credit risk concentration, charts of account expected. - Capital Adequacy Ratio (CAR): 20.8 percent (Dec-21). - NPLs to gross loans: 6.3 percent (Dec-21); NPLs reported 7.7 percent in Feb-2022 in text. - Provisions to gross loans: 6.1 percent (Dec-21). - ROE cumulative (Dec-21): 16.7 percent. - Foreign currency deposits to total deposits (Dec-21): 66.5 percent. - Foreign currency loans to total loans (net) (Dec-21): 47.2 percent. - Digital money and CBDC: - Mobile money operators must partner with supervised banks; BRH requested Fund assistance to explore a retail CBDC and modernize messaging standards, interoperability, financial integrity, privacy, and cyber-crime laws. - Staff advised a cautious approach given internal oversight gaps at BRH. - AML/CFT: - CFATF identified widespread deficiencies; FATF placed Haiti on grey list. - With IMF TA, BRH will bring AML/CFT law into compliance with FATF international standards for approval by end-March 2023 (end-March SB). - Legislative revisions should be part of a broader plan to address legal and institutional AML/CFT deficiencies. ### Governance, safeguards, capacity building, and technical assistance - Governance priorities: - Strengthen public finance management, revenue administration, transparency, anti-corruption. - Emphasis on procurement transparency (monthly SB to publish awarded public procurement contracts and beneficial owners). - Safeguards actions include approval of BRH law amendments (end-Sept. 2022 SB) and completion/publication of BRH external audit and financial statements for 2021 (end-June SB). - Capacity building and TA: - Ongoing IMF TA across FAD, MCM, STA, LEG, FIN, CARTAC on tax, customs, PFM, banking supervision, statistics, AML/CFT, and safeguards. - TA priorities: tax and customs administration, TSA and MTBF reforms, central bank governance and IFRS transition, FX market development, anti-corruption legislation, and monetary statistics quality improvement. - Recommendations to deploy resident long-term experts and prepare roadmaps to improve ownership. - Implementation risks: - Ubiquitous governance weaknesses and corruption vulnerabilities; unresolved political crisis and grave security conditions make risks very high. ### Program monitoring, quantitative targets, and structural benchmarks - Monitoring and timeline: - SMP approved June 17, 2022; first review expected in September. - Program-monitoring committee set up to meet at least quarterly. - QTs test dates: end-June and end-December 2022; ITs: end-September 2022 and March 2023. - Selected QTs and ITs (June 2022–March 2023) — selected entries (in thousands/millions as in source): - Net international reserves of central bank (US$) — floor: - Dec. 2021 Actual: 413.92 - Sept. 2022 Indicative target: 27 - Dec. 2022 Quantitative target: 30 - Mar. 2023 Indicative target: 40 - End-Sept. 2022 Actual stock at end-Sep. 2021 (program note): 8 - End-Dec. 2022 Quantitative target (memorandum): 18 - Primary balance of the NFPS — floor (millions of gourdes): - Dec. 2021 Actual: -8,813 - Sept. 2022 Indicative target: -20,317 - Dec. 2022 Quantitative target: -28,860 - Mar. 2023 Indicative target: -13,242 - Dec. 2022 Memorandum target: -26,484 - Net BRH credit to NFPS — ceiling (in gourdes): - Dec. 2021 Actual: 160,047 - Sept. 2022 Indicative target: 20,922 - Dec. 2022 Quantitative target: 36,096 - Mar. 2023 Indicative target: 46,533 - Dec. 2022 Memorandum: 12,795; Mar. 2023 Memorandum: 25,590 - Budget allocation to MAST for social expenditure — floor: - Sept. 2022 Indicative target: 3,000 - Dec. 2022 Quantitative target: 3,300 - Mar. 2023 Indicative target: 3,300 - Cumulative (June 2022): 6,600 - Continuous QTs (selected): - Domestic arrears accumulation of central government: 0 (continuous) - Public sector external arrears accumulation (US$): 0 (continuous) - New contracting or guaranteeing of nonconcessional external debt (US$) — ceiling: 0 (continuous) - Indicative target — Central government fiscal revenue, excluding grants — floor (gourdes): - Dec. 2021 Actual: 27,632 - Sept. 2022 Indicative target: 93,731 - Dec. 2022 Quantitative target: 125,552 - Mar. 2023 Indicative target: 41,093 - Mar. 2023 Memorandum: 82,187 - Selected proposed prior actions: - Complete and publish financial and operational audit on COVID-related spending. - Adopt and publish a budget for FY2022 consistent with agreed SMP targets. - Structural benchmarks (selected timing highlights): - Expand TSA to include all central budgetary unit accounts, including emergency funds (end-Sept. 2022 SB). - Prepare and adopt MTBF for FY2023–FY2025 with NFPS deficit as anchor (end-Sept. 2022 SB). - Issue decree making use of TIN compulsory and publish TIN database (end-Dec. 2022 SB). - Complete FY2021 financial audit of BRH and publish audited financial statements (end-June 2022 SB). ### Debt outlook and sustainability - GDP rebasing lowered debt-to-GDP ratio by almost half. - Composite Indicator (CI) for debt carrying capacity: 2.78 → classified as "medium". - Public debt assessed sustainable with “high risk of distress”. - Present value of external debt indicators (selected): - PV debt-to-exports starts around 112.4 percent in FY2022, reaches 186.6 percent in FY2033, breaches 180 percent threshold, and rises to 323.3 percent in FY2043. - PV external debt-to-GDP projected from 7.4 percent in FY2022 to 13.3 percent by FY2033 and 20.8 percent in FY2043. - Debt service ratios: - Debt service-to-exports remains below 18 percent threshold until FY2038, exceeds it by FY2039 and reaches 24.1 percent by FY2043. - Debt service-to-revenue breaches threshold in FY2041. - Public sector debt trajectory: - Total public debt projected around 27 percent of GDP until 2027, rising to 50.2 percent by FY2043. - PV public debt reaches maximum of 43.6 percent of GDP in FY2043. - Stress tests and scenarios: - Natural disaster shock (damages of 25 percent of GDP) significantly worsens external debt trajectory and can push PV public debt-to-GDP near/beyond thresholds in medium term. - Shock to non-debt-creating flows (decline in transfers/FDI by one standard deviation) would breach PV external debt thresholds earlier (2025) and raise debt-service ratios above thresholds after seven years (2029). - Drop in remittances would be severe. - Policy implications: - Strengthen revenue mobilization, raise investment and growth, increase concessional external financing, deepen government securities market, limit central bank advances toward stable level (around 2.0 percent of GDP). ### External sector assessment and reserves - External position FY2021 assessed broadly in line with medium-term fundamentals. - Remittances high: about 17 percent of GDP in FY2021. - Gross international reserves (GIR) and NIR projections: - GIR projected: 2,574 (FY2022), 2,604 (FY2023), 2,629 (FY2024), 2,654 (FY2025) (millions of US$). - NIR (program definition) projected: 492 (FY2022), 498 (FY2023), 504 (FY2024), 515 (FY2025) (millions of US$). - Balance of payments selected projections (US$ millions): - Current account (including grants): FY2019 -169; FY2020 158; FY2021 98; FY2022 154; FY2023 -108; FY2024 -114; FY2025 -132. - GIR coverage (months of next year's imports): FY2019 6.0; FY2020 5.7; FY2021 5.8; FY2022 5.0; FY2023 4.8; FY2024 4.7; FY2025 4.6. - Parallel market premium path: - Estimated 25 percent in March 2021. - About 4 percent at end-2021. - Estimated 12 percent by end-March (year implied by context). ### Real sector, banking, and social indicators (selected statistics) - Real GDP growth (baseline projections, percent): - FY2021: -1.8 - FY2022: 0.3 - FY2023: 1.4 - FY2024: 1.5 - FY2025: 1.5 - Price dynamics: - GDP deflator (percent change): - FY2022: 26.1 - FY2023: 17.5 - FY2024: 13.4 - FY2025: 12.9 - Consumer prices (period average): - FY2022: 26.1 - FY2023: 17.5 - FY2024: 13.4 - FY2025: 12.9 - Consumer prices (end-of-period): - FY2022: 27.5 - FY2023: 14.0 - FY2024: 13.4 - FY2025: 12.4 - Fiscal aggregates (NFPS, selected levels in millions of gourdes): - Total revenue and grants: - FY2019: 99,665 - FY2020: 108,524 - FY2021: 141,178 - FY2022: 184,082 - FY2023: 224,842 - Domestic revenue: - FY2019: 79,071 - FY2020: 90,046 - FY2021: 100,635 - FY2022: 125,552 - FY2023: 164,374 - Central government balance including grants (percent of GDP): - FY2019: -2.1 - FY2020: -2.4 - FY2021: -2.5 - FY2022: -1.5 - FY2023: -2.3 - FY2024: -2.7 - FY2025: -2.8 - Banking system levels (selected): - Net international reserves (program definition, US$ millions): - FY2019: 732 - FY2020: 677 - FY2021: 452 - FY2022: 492 - FY2023: 498 - Broad money (M3, millions of gourdes): - FY2019: 370,830 - FY2020: 369,728 - FY2021: 510,963 - FY2022: 617,036 - FY2023: 721,009 - FY2024: 829,712 - FY2025: 942,584 - Social indicators: - Number of people undernourished reached 5.3 million people (2018–2020). - More than one third of population registered as ‘food insecure’ in 2021; about 4.3 million people considered ‘food insecure’ in 2021 (UN). ### Staff appraisal and program support - Fund staff support authorities’ request for an SMP; authorities implemented two prior actions. - SMP incorporates CES findings and ongoing TA projects (budget formulation, tax reform, central bank governance). - Downside risks emphasized: political fragility and difficult security conditions that impede economic activity. - Staff urged authorities to communicate program objectives to build ownership and public support. - Directors viewed staff’s baseline as realistic but noted possible upside risks to tax revenue mobilization and exports if political stability improves. ### Annex I — Recent political history (selected timeline highlights) - Key dates/events: - October 15, 2015: First round of elections (annulled); new elections held November 20, 2016. - November 20, 2016: Moïse won Presidential elections with almost 56 percent; turnout 21 percent. - February 7, 2017: Moïse inaugurated. - July 2018: Government eliminated fuel subsidies without mitigating measures; riots followed and policy reversed. - January 13, 2020: Mandates for lower house deputies and two thirds of the senate declared expired; Moïse governed by decree until his death. - July 7, 2021: President Moïse assassinated. - July 20, 2021: Ariel Henry took office as PM. - September 17, 2021: “Accord politique pour une gouvernance apaisée” signed by PM Henry with some opposition groups. - November 24, 2021: PM Ariel Henry inaugurated a new government implementing the Political Accord. - Political impacts: - Frequent changes in executive leadership: five prime ministers in three years (2018–2021). - Corruption allegations: PetroCaribe investigations and CSCCA reports alleging embezzlement tied to US$2 billion in PetroCaribe loans. *Source: HAITI STAFF-MONITORED PROGRAM (SMP), approved June 17, 2022, covering June 17, 2022–May 31, 2023.* ### 2022. The SMP was approved on June 17, 2022 and runs through May 31, 2023. The SMP ### HAITI STAFF-MONITORED PROGRAM ### Background and recent developments - The SMP was approved on June 17, 2022 and runs through May 31, 2023. - The SMP was designed by IMF staff and the Haitian authorities, keeping in mind Haiti’s fragility and capacity constraints while supporting the authorities’ economic policy objectives. - Recent shocks since 2018–2021: - Protracted political crisis, repeated country lockdowns (Peyi-Lok), civil unrest, assassination of the president, the global pandemic, surge in gang-related violence, and an earthquake (direct costs estimated at 11 percent of 2021 GDP). - These shocks weakened economic and institutional frameworks, reduced administrative capacity, and worsened socioeconomic and security conditions. - IMF engagement and financing since 2019: - The Fund provided financial assistance without ex post conditionality to Haiti equivalent to about US$360 million in total since 2020. - Disbursement under the Rapid Credit Facility in April 2020 (SDR 81.9 million, equivalent to 50 percent of Haiti’s quota). - Relief on debt service due to the IMF during 2020 and 2021 under the CCRT for a cumulative amount of about SDR 15 million. - Haiti also received about SDR 157 million under the general SDR allocation in 2021. - Governance and capacity developments: - An SMP agreed “ad referendum” in mid-2020 was not approved because of procurement-related governance issues; after steps in 2021 to strengthen basic governance safeguards (supported by Fund TA), SMP discussions re-started. - Political developments: - Prime Minister Ariel Henry formed a new government in November (appointed earlier by President Moïse) including eight members from opposition groups and extended the term of one third of the Senate in early-2022. - Political accords (Accord politique pour une gouvernance apaisée; Accord de Montana) aim to establish a transitional government and hold elections; no election timetable yet. ### Outlook and risks - Baseline assumptions: - The outlook is based on normative policy implementation under the SMP accompanied by an increase in international assistance. - Reform implementation after the SMP is assumed to be modest under the baseline given uncertainties regarding policy commitment beyond 2023. - Spillovers from the war in Ukraine are expected to raise inflation and affect the balance of payments via higher commodity and food prices. - Growth projections and inflation: - After three years of economic contraction, IMF staff expect growth to turn positive in FY2022, supported by an increase in investment. - Earlier staff text: growth to recover further to 1.4 percent the next year with continued flows of remittances amidst modest improvements in socio-political stability. - Outlook box: Growth is expected to pick up modestly to 0.3 percent in FY2022, supported by higher investment. - Assuming some political stability and implementation of reforms, growth would reach 1.5 percent over the medium term with a moderately high supply of credit and some improvement in the security situation. - Inflation is projected at 27.5 percent (y/y) at end-FY2022, falling to 14 percent by end-FY2023. - External and fiscal balances: - The current account is expected to remain in surplus in FY2022 due to weak imports, and is projected to show a small deficit over the medium term supported by remittances, modest export resumption, and higher official transfers in FY2022-FY2023. - As a percent of GDP, the deficit of the nonfinancial public sector (NFPS) is expected to decline to 1.5 percent in FY2022 and widen to 2.3 percent in FY2023 before stabilizing at around 2.8 percent. - The near-term fiscal stance is driven by financing availability and reflects assumption of continued administered fuel prices. - Risks (primarily downside): - Internal: failure to implement SMP policies, worsening governance and corruption, heightened political instability and resumption of social unrest, gang-related disruptions, natural disasters, surge in COVID cases. - External: higher-than-anticipated world fuel prices and/or lower-than-expected remittance and external financing flows. - Upside: lower fuel prices would reduce Haiti’s energy import bill. - Scenarios: - Without improved policies, revenue mobilization, and strengthened governance, the medium-term outlook would mirror recent low or negative growth and high poverty equilibrium. - Improvements under the SMP could build momentum for a UCT-supported program that could raise medium-term growth to higher levels. ### SMP objectives, structure, and sequencing - Purpose and character of the SMP: - SMPs are arrangements between country authorities and the IMF to monitor the implementation of the authorities’ economic program but are not accompanied by financial assistance. - The proposed SMP ending May 31, 2023 would help build capacity, support efforts to reduce inflation and raise growth, strengthen fiscal and monetary policy frameworks, address governance weaknesses and combat corruption, and take concrete steps to strengthen social assistance. - A successful SMP is intended to build a track record of policy implementation that would improve Haiti’s prospects for an IMF-supported upper credit tranche (UCT) program. - Program design considerations: - The SMP was tailored to Haiti’s fragility and capacity constraints and places strong focus on governance, accountability, and raising ownership of the reform agenda across the country. - Most elements of the authorities’ program are underpinned by ongoing IMF technical assistance and capacity building. - The Fund will continue to coordinate closely with Haiti’s other development partners to leverage efforts in support of common objectives. - The first review of the SMP is expected in September. Satisfactory performance under the SMP could lead to an IMF-supported program under a multi-year arrangement that would require approval of the IMF’s Executive Board. SMPs are only subject to formal IMF management review. ### Fiscal framework and revenue measures - Core fiscal objectives and short-term strategy: - Raise domestic revenues that have collapsed in recent years due to social unrest, collection problems, and the security crisis. - Reduce central bank financing of the fiscal deficit to reduce inflation and pressure on the exchange rate. - Raise resources for productive spending and reduce crowding out of investment, health and education. - Specific revenue and PFM measures committed by authorities: - Strengthen the use of the tax identification number and clean up taxpayers' portfolios. - Revise special tax regimes in a new Tax Code, including by eliminating some exemptions. - Finalize and publish the new Tax Code, Customs Code and the Customs tariff. - Higher tobacco, alcohol, and car excises; expansion and simplification of the tax base. - Measures to strengthen expenditure management and controls. - Require a minimum budget allocation to the ministry of social affairs (MAST) and prepare an action plan to implement the national plan for social protection (PNPPS). - Fiscal statistics and historical context: - Fuel subsidies have been absorbing at least one third of domestic revenues and crowding out productive spending on investment, health and education. - Fuel subsidies are highly inequitable, with over 90 percent of the benefits going to the top 10-20 percent of the income ladder in Haiti. - Program quantitative targets and monitoring: - The SMP includes quantitative and indicative targets, proposed prior actions, and proposed structural benchmarks (listed in the program tables and annexes). ### Fuel market reform, social assistance, and poverty mitigation - Rationale: - Central bank financing of the fiscal deficit has fueled inflation, putting pressure on the exchange rate and creating a vicious circle of higher fuel subsidy costs, further monetary financing, and higher inflation. - Reducing monetary financing is critical given the heavy burden placed on the poor from the high increase in prices. - Policy steps and sequencing: - Authorities plan to prepare the groundwork to eventually tackle fuel subsidy reform. - As a first step, in April the authorities launched several social programs under the Programme d’urgence targeted to the groups affected by earlier fuel price adjustments. - By lowering inflation and providing social assistance, the program aims to build public support for reform, including of fuel prices. ### Monetary and exchange rate policy, financial sector and AML/CFT - Monetary policy and exchange rate objectives: - Strengthen the monetary policy framework and limit foreign exchange interventions to smooth excessive volatility to gradually eliminate the spread with the parallel market. - Clarify objectives and modalities for liquidity and foreign exchange rate operations. - Financial sector measures: - Key steps are planned to improve the financial regulatory framework. - Update regulations on anti-money laundering (AML/CFT) to meet international standards. - Governance of central bank: - Advance governance reforms with technical assistance, including governance of the central bank, revenue administration, and public finance management. ### Governance, capacity building, and technical assistance - Governance priorities: - Strong emphasis on strengthening public finance management, revenue administration, transparency, and anti-corruption measures. - Program geared to increasing accountability and raising ownership of the reform agenda across the country. - Capacity building and TA: - Most elements of the authorities’ program are underpinned by ongoing IMF technical assistance and capacity building. - IMF staff will work closely with the authorities to support implementation and help build public support. - The Fund will continue to coordinate closely with other development partners. - Implementation risks: - Ubiquitous governance weaknesses and corruption vulnerabilities are likely to influence implementation. - Together with unresolved political crisis and grave security conditions, risks to the program are very high. ### Program monitoring, timelines, and institutional details - SMP timeline and reviews: - The SMP was approved on June 17, 2022 and runs through May 31, 2023. - The first review of the SMP is expected in September. - Approval and administrative details: - SMPs are only subject to formal IMF management review; satisfactory performance could lead to an IMF-supported multi-year UCT program requiring IMF Executive Board approval. - Documents and annexes included in the SMP package (referenced in the source): - Quantitative and Indicative Targets, Proposed Prior Actions, Proposed Structural Benchmarks, Selected Economic and Financial Indicators, Non-Financial Public Sector Operations, Banking System Accounts, Balance of Payments, External Financing Requirements, Financial Soundness Indicators, Annexes on political history, public debt sustainability, external sector assessment, and appendices including Capacity Development Strategy, Letter of Intent, Memorandum on Economic and Financial Policies, and Technical Memorandum of Understanding. *Source: HAITI STAFF-MONITORED PROGRAM (SMP), approved June 17, 2022, covering June 17, 2022–May 31, 2023.* ### 7. Financing constraints and weak revenue mobilization drive the fiscal stance. With the ### 7. Financing constraints and weak revenue mobilization drive the fiscal stance. ### Fiscal stance, financing needs, and spending adjustments - Tax-to-GDP ratio of only 5.8 percent in FY2022. - Higher-than-expected domestic amortization of 0.8 percent of GDP. - Combined cuts in non-subsidy-related current spending and domestically-funded capital expenditures by 1.2 percent of GDP to contain gross fiscal financing needs. - Fuel subsidy costs expected to rise by about 0.5 percent of GDP in FY2022 due to higher world prices. - Projected deficit reduced to 1.5 percent of GDP in FY2022 from 2.4 percent of GDP in FY2021 due to non-subsidy spending cuts. - Space created to allocate funds equivalent to 0.15 percent of GDP on social programs to mitigate the impact of the December 2021 fuel price increases on vulnerable groups. - Modest rise in revenue collection would allow domestically-funded capital spending to rise to 1.5 percent of GDP by FY2025. - Medium-term domestically-funded capital spending projected at about 2.8 percent of GDP. - Program includes adjustors on quantitative targets in the event of a shortfall in projected external budget support. ### Financing composition and central bank involvement - Gross financing needs estimated at 2.9 percent of GDP in FY2022 compared to 3.4 percent of GDP in FY2021. - About 0.8 percent of GDP covered by domestic borrowing and project loans. - BRH financing estimated at about 2.2 percent of GDP in FY2022, of which 0.7 percent of GDP will be fully sterilized by issuance of central bank bills or sales of foreign exchange (FX), if needed. - BRH financing of the government in FY2022 contained at 1.5 percent of GDP (level consistent with staff estimates of non-inflationary monetary financing). - In FY2023 and later years, central bank financing projected to stabilize around 2 percent of GDP. - Contingency: in the event of an adverse shock, authorities would need to take contingency measures, including mobilizing additional external support. ### Debt outlook and sustainability - GDP rebasing lowered by almost half the debt-to-GDP ratio. - Slightly higher primary deficits over the medium term and gradual increase in external concessional financing bring the present value of public and publicly guaranteed external debt as a share of exports into the “high” range of debt distress thresholds in the joint IMF-World Bank DSA. - Debt carrying capacity rated “medium”. - Public debt assessed as sustainable with “high risk of distress”. - Improved debt dynamics supported by a low primary deficit, dampened by the real interest rate/growth differential, and slower exchange rate depreciation. ### Revenue mobilization and tax reforms (priority for FY2022) - Authorities will apply gradual fuel excises and increase excises on tobacco, alcohol and other goods as proposed in a draft Tax Code to be finalized by September. - Administrative measures to be implemented: strengthening use of the tax identification number (TIN) and cleaning up taxpayers' portfolios. - Revenue-raising constrained by narrow tax base concentrated in a few large taxpayers and imports transiting through the capital’s port and airport; raising revenue will depend on the security situation and longer-term efforts to broaden the tax base. - Special regimes to be revised in the new Tax Code, including eliminating some exemptions, but a few existing incentives likely to be grandfathered; removing large scale exemptions on necessities will remain difficult. - Limited short-term revenue potential through removal of exemptions. ### Structural fiscal and public financial management reforms - Structural benchmarks (SB) under the program: - Proceed with stakeholder consultations on a new draft Tax Code (Code général des impôts) and Tax Procedure Code (Livre de procédure fiscale) and finalize them (end-September 2022 SB). - Finalize and publish the Customs Code and tariffs (end-September SB). - Systematize the use of tax identification numbers among financial agencies, including the tax, customs and treasury departments (end-September SB). - Medium-term reforms: adopt a medium-term reform plan to modernize tax and customs agencies, strengthen core tax and customs functions, and make intensive use of technology and data matching (payoffs expected only in the longer-term). - Treasury single account (TSA) will be broadened to include all bank accounts of the central budgetary units, including emergency funds (end-September SB). - Foreign-financed resources should be brought into the TSA over the medium-term. - Prepare a medium-term budget framework (MTBF) for FY2023–2025, with the NFPS deficit target the main anchor (end-September SB); the MTBF will be an annex to the FY2023 budget. - Fund TA will continue to support TSA and MTBF reforms until at least September. ### Transparency, audits, and SDR reporting - Government published the audit on COVID-19 spending on June 9, 2022; the Superior Court of Accounts and Administrative Disputes (CSCCA) flagged lack of supporting documentation that impeded a full opinion, but audit quality was adequate and highlighted PFM issues. - Authorities should indicate what and when they intend to address the Court’s questions and recommendations; staff will review these issues at the time of the first review. - Authorities agreed to report transparently on the use of the SDR allocation; BRH and Ministry of Finance signed a memorandum of understanding clarifying obligations from SDR use for fiscal purposes. ### Fuel market reform, price adjustments, and social mitigation - Government resumed the 1995 law allowing petroleum product prices to adjust regularly to changing world prices in December 2021: - Kerosene price rose from 163 HTG per gallon to 352 HTG per gallon. - Diesel price rose from 169 HTG per gallon to 353 HTG per gallon. - Gasoline price raised by 25 percent from 201 HTG to 250 HTG (US$2,50) per gallon. - The 1995 law did not include a price smoothing mechanism; subsequent large world price increases were not passed on. - Authorities indicated they are not able to adjust prices for the foreseeable future given additional hardship from higher imported food prices and the difficult security situation; SMP baseline does not assume any further changes in fuel price policy. - BMPAD fuel import monopoly was withdrawn; imports allocated through a competitive bidding process managed by the Ministry of Economy and Finance (MEF). - Authorities intend to eventually eliminate fuel subsidies when conditions permit. ### Social assistance measures and PNPPS implementation - Measures to mitigate December fuel price reforms allocate resources equivalent to 0.15 percent of GDP over the next four months to social benefits under the Programme d’urgence: - Distribution of hot meals. - Expansion of the school canteen program. - School bonds for 50,000 low-income parents. - Acquisition of 100 new school buses. - Fuel vouchers for vehicles registered on main transport routes (voucher system reimbursed to fuel distributors by the government). - Some mitigating measures may be continued after September. - Government prepared the Politique Nationale de Protection et de Promotion Sociale (PNPPS) and committed to preparing an action plan for its implementation this year. - Under the SMP, authorities identified on-budget all public spending on social programs, including off-budget Fonds d'Assistance Economique et Social (FAES). - Program includes a QT floor for budget allocations for social spending purposes based on currently identified programs. - Expansion of the SIMAST database of beneficiaries supported by WFP and World Bank; projects Klere Chimen and BSEIPH supported by World Bank to finance monetary transfers and support measures. - FAES transparency measures and benchmarks: - Provide quarterly and annual financial statements of FAES and reconvene the governing board before June 2022 and meet regularly thereafter (quarterly SB). - All domestically funded social program resources to be transferred back to the MAST in the 2023 budget (end-September SB). - All externally funded resources of FAES should be included in the budget in the medium term. ### Monetary policy framework and financial market development - BRH commitments to anchor monetary policy: - Adopt a ceiling on credit to the NFPS as the main anchor to limit monetary financing of the deficit to 1.5 percent of GDP in FY2022 and about 2.0 percent of GDP thereafter. - Conduct short term liquidity operations at a fixed rate with full allotment, including at seven-days, to manage excess liquidity in the banking system and strengthen policy transmission. - The ceiling for BRH financing does not include an adjustor for shortfalls in external budget support; authorities will need to raise financing from other domestic sources or externally on concessional terms if needed. - Any monetary financing above agreed levels (1.5 percent of GDP in FY2022 and 2.0 percent of GDP thereafter) would be sterilized, including through FX interventions if necessary. - Staff recommended revising the Pacte between the ministry of finance and BRH to reflect program targets to reduce fiscal dominance. - BRH reforms to deepen financial markets: - Deepen the government securities market. - Develop the inter-bank money market with new facilities, including overnight lending facilities, open market operations, repos, and reverse repos. - Enhance domestic savings instruments. - Staff cautioned that design and use of new money market instruments should be discussed with Fund TA experts to avoid undermining bank risk management incentives, exposing the central bank balance sheet to credit/market/liquidity risks, or impeding money market functioning. - Authorities agreed to continue implementing TA recommendations on strengthening the quality of monetary statistics; staff stressed need for more timely transmission of monetary data for program monitoring. *Source: National Authorities and IMF staff calculations.* ### 23. The BRH should limit interventions in the FX market to smoothing excessive volatility ### 23. The BRH should limit interventions in the FX market to smoothing excessive volatility ### Exchange rate stance and recent developments - Haiti’s external position is assessed to be broadly in line with medium-term fundamentals and desired macroeconomic policies (Annex III). - Since the sharp appreciation in the gourde/dollar rate in the second half of 2020, the BRH has managed an orderly exchange rate adjustment, intervening to calm market pressures when there were large current account transactions while using prudential measures, including reserve requirements, to limit banks’ vulnerability to FX liquidity risk. - Parallel market premium path: - Estimated 25 percent in March 2021. - About 4 percent at end-2021. - Estimated 12 percent by end-March (year implied by context). - Under the SMP, the BRH will: - Adopt a floor on net international reserves (NIR) (with an asymmetric adjustor only in the event of a shortfall in external budget support). - Limit FX interventions to smoothing volatility, thereby allowing the exchange rate to serve primarily as a shock absorber. - Authorities and staff agreed that an FX market intervention rule, with pre-defined targets, could enhance transparency of interventions and encourage banks to manage liquidity more forward-looking. ### FX market reform roadmap (commitments under the SMP) - The BRH will prepare a roadmap of FX market reforms to: - Put in place appropriate mechanisms for FX interventions such as well-designed weekly FX auctions in lieu of the foreign exchange allocation system. - Review limits on banks' net open FX positions. - Revise FX regulations and phase out FX surrender requirements over the medium term, including those introduced by Circular 114-2. - The roadmap aims to facilitate management of a market-determined flexible exchange rate, help gradually eliminate the spread with the parallel market, and promote external competitiveness. - Staff are examining if the FX regulations give rise to exchange restrictions or multiple currency practices (MCPs). - The authorities committed to: - Not impose or intensify restrictions on the making of payments and transfers for current international transactions. - Not introduce or modify MCPs. ### Circular 114-2 (as described in the source) - Circular 114-2 issued in September 2020 mandated banks and money transfer companies to: - Exchange dollar remittances into gourdes for persons not holding US dollar bank accounts. - Convert all dollar remittances into gourdes at the BRH reference rate (a less favorable rate). - For money transfer companies, sell 30 percent of FX purchased to the BRH and 40 percent to banks―which themselves were/are not allowed to keep a net open FX position above 0.5 percent of equity. - BRH interventions on the FX market are based on foreign exchange allocation techniques, used to provide FX for strategic imports, such as oil or food, when FX reserves are scarce, with BRH reference rate a weighted average of the interbank market rate (60 percent) and the informal market rate (40 percent). ### Financial sector policies linked to FX and stability - Continued importance of monitoring banks’ financial situation; banking sector remains small and population largely unbanked, while small non-bank financial institutions have been expanding. - Over the next twelve months, the program includes: - Banking supervision: - On January 13, the BRH adopted seven new draft banking regulations—covering consolidated supervision, licensing rules, authorizations of changes in the status of financial institutions, minimum capital requirements, reporting obligations of financial institutions, and IT Security. - Three additional draft regulations related to credit classification and provisioning, credit risk concentration, and institutions’ charts of account are expected after consultations. - The BRH committed to implementing these regulations while continuing to establish a risk-based supervision framework. - Digital money: - Mobile money operators must partner with a supervised bank to offer services and are not subject to specific guidelines. - BRH requested Fund assistance on exploring a retail central bank digital currency (CBDC) and is receiving support to modernize messaging standards, interoperability, financial integrity, privacy protections, and cyber-crime laws. - Staff advised a cautious approach given internal oversight gaps at the BRH. - Anti-money laundering (AML/CFT): - The Caribbean Financial Action Task Force identified widespread deficiencies; FATF added Haiti to its grey list. - With IMF TA, the BRH will bring AML/CFT law into compliance with FATF international standards for approval by end-March 2023 (end-March SB). - Legislative revisions should be part of a larger plan to address legal and institutional AML/CFT deficiencies. ### Governance and central bank reforms related to FX credibility - SMP emphasizes governance and anti-corruption measures, including transparency in public procurement and ensuring CSCCA law guarantees functioning of the court per international standards. - In line with the 2019 safeguards assessment, SMP includes: - Approval by the BRH Board of draft amendments to the central bank law prepared with Fund staff (end-September SB). - Completion and publication of the BRH external audit and financial statements for 2021 (end-June SB). - Transition to International Financial Reporting Standards and strengthening internal audit and control functions. - Reestablishment of the Audit Committee of the BRH Board and implementation of measures to strengthen governance of foreign reserves management. ### Climate change, poverty, and social protection linkages - Haiti is vulnerable to natural disasters and climate change; authorities hope to initiate a diagnosis of climate hazards and risks with World Bank and IMF assistance to better integrate climate policies into macro frameworks. - SMP immediate priorities to restore macro stability and raise revenues are necessary to launch a climate resilience and recovery plan. - The program is focused on building social and macroeconomic stability and restoring growth to raise resources needed to reduce poverty. - Authorities committed to better coordinate aid and strengthen effectiveness in reducing poverty by increasing capacity at MAST and starting to build a cohesive social safety net. ### Program monitoring: quantitative and structural benchmarks - Quantitative targets (QTs) include: - A floor on the NFPS primary balance. - A ceiling on BRH net credit to the NFPS. - A floor on NIR. - A floor on budget allocations to MAST for social expenditure. - Continuous QTs of a zero ceiling on non-concessional external borrowing and on domestic and external arrears accumulation. - An indicative target (IT) on central government fiscal revenue. - An asymmetric adjuster on the NFPS primary balance and NIR for shortfalls in expected external budget support (no adjustor on BRH net credit to the NFPS). - Test dates: end-June and end-December 2022. ITs apply to September 2022 and March 2023. - Structural benchmarks (SBs) and two prior actions identified; SBs are designed as stepping-stones toward deeper reforms in a UCT-level program and reflect capacity and political constraints. ### Staff appraisal: rationale and expected outcomes - Political and economic conditions have been extremely difficult, but authorities aim to advance stability and reform, increase transparency and governance in public procurement and the fuel sector, and address fuel subsidy distortions. - The SMP aims to: - Launch a virtuous cycle through reforms to raise revenues and improve public resource management while allowing spending on health, education, social assistance, infrastructure and security. - Compensate vulnerable groups to help adjust to recent fuel price increases. - Start boosting tax and customs collection and improving productivity of current spending, supported moderately by development partners. - Meeting program objectives—reducing BRH credit to the NFPS, maintaining NIR levels, and bringing inflation down—are seen as major first steps toward macro stability, monetary policy independence, and improved purchasing power for the poor. - Governance and anti-corruption measures are central to building public trust and confidence of development partners. - Restoring law and order and reducing social, political, and economic uncertainty are necessary to improve the business environment and promote private sector growth. *Source: IMF staff and BRH materials as presented in the provided content.* ### 38. Fund staff support the authorities’ request for an SMP but downside risks are very ### 38. Fund staff support the authorities’ request for an SMP but downside risks are very high. ### Program support and risks - Fund staff support the authorities’ request for an SMP; the authorities implemented the two prior actions, reinforcing a commitment to reform. - The program: - Takes account of sources of Haiti’s fragility identified in the first CES and integrates these constraints into realistic and tailored measures to deliver quick wins. - Incorporates ongoing TA projects synced with program goals: TA on budget formulation, tax reform and central bank governance. - Reflects extensive collaboration with development partners to leverage efforts, including in the design and focus of social policy recommendations. - Downside risks are significant, particularly: - Political fragility. - Difficult security conditions that impede economic activity. - Staff recommendation: - Staff urge the authorities to communicate and raise awareness about the objectives of their economic program to build ownership and public support and raise the probability of its success. ### Quantitative and indicative targets (June 2022–March 2023) — selected entries from Table 1 (in millions of Gourdes, unless otherwise indicated) - Net international reserves of central bank (in millions of U.S. dollars) - floor: - Dec. 2021 Actual: 413.92 - Sept. 2022 Indicative target: 27 - Dec. 2022 Quantitative target: 30 - Mar. 2023 Indicative target: 40 - End-Sept. 2022 Actual stock at end-Sep. 2021 (program monitoring note): 8 - End-Dec. 2022 Quantitative target (memorandum): 18 - Primary balance of the non-financial public sector - floor: - Dec. 2021 Actual: -8,813 - Sept. 2022 Indicative target: -20,317 - Dec. 2022 Quantitative target: -28,860 - Mar. 2023 Indicative target: -13,242 - Dec. 2022 Memorandum target: -26,484 - Net central bank credit to the non-financial public sector - ceiling: - Dec. 2021 Actual: 160,047 - Sept. 2022 Indicative target: 20,922 - Dec. 2022 Quantitative target: 36,096 - Mar. 2023 Indicative target: 46,533 - Dec. 2022 Memorandum: 12,795; Mar. 2023 Memorandum: 25,590 - Budget allocation to MAST for social expenditure - floor: - Sept. 2022 Indicative target: 3,000 - Dec. 2022 Quantitative target: 3,300 - Mar. 2023 Indicative target: 3,300 - Cumulative (June 2022): 6,600 (and other columns show 0.00 / 0) - Continuous quantitative targets (selected): - Domestic arrears accumulation of the central government: 0 (continuous) - Public sector external arrears accumulation (in millions of U.S. dollars): 0 (continuous) - New contracting or guaranteeing by the public sector of nonconcessional external debt (in millions of U.S. dollars) - ceiling: 0 (continuous) - Indicative target — Central government fiscal revenue, excluding grants - floor: - Dec. 2021 Actual: 27,632 - Sept. 2022 Indicative target: 93,731 - Dec. 2022 Quantitative target: 125,552 - Mar. 2023 Indicative target: 41,093 - Mar. 2023 Memorandum: 82,187 - Memorandum items (program exchange rate): - For program monitoring, the program exchange rate for May 2022 to May 2023 is HTG/US$ 100.0123 (BRH reference rate on December 16, 2021). ### Proposed prior actions and structural benchmarks (selected) - Proposed Prior Actions for SMP (Table 2): - Prior action: Complete and publish the financial and operational audit on COVID-related spending agreed at the time of the RCF disbursement. - Prior action: Adopt and publish a budget for FY2022 consistent with agreed targets and fiscal measures under the SMP. - Proposed Structural Benchmarks for SMP (Table 3) — Timing highlights: - Governance: - Publish all public procurement contracts awarded since publication of the November 2021 procurement decree No. 52, including information on the beneficial owners of successful bidders: monthly. - Approval by the BRH Board of Directors of draft amendments of the BRH law (prepared with IMF staff) to clarify objectives, strengthen autonomy, enhance governance, and improve accountability and transparency: end-Sept. 2022. - Approval by the Council of Ministers of revisions to the AML/CFT law prepared with Fund TA to address technical deficiencies identified in Haiti’s FATF Action Plan and bring it into line with FATF international standards: end-March 2023. - Public Finance Management / Governance: - Expand the Treasury Single Account (TSA) at the central bank to include all the central budgetary units, including the emergency fund: end-Sept. 2022. - Prepare and adopt a medium-term budget framework for FY2023, FY2024, and FY2025 with the NFPS deficit as the main anchor: end-Sept. 2022. - Publish quarterly and annual reports on the operations and finances of Fonds d'assistance économiques et sociale (FAES) and reactivate the Governing Board of FAES with quarterly meetings thereafter: Quarterly. - Tax Policy and Tax/Customs Administration: - Conclude public consultations on the tax code and tax procedures code and finalize codes: end-Sept. 2022. - Publish all codes and tariffs relating to customs: end-Sept. 2022. - Issue decree making use of TIN compulsory for all finance departments, with sanctions for fraudulent or non-use, and publish TIN database and file of active taxpayers: end-Dec. 2022. - Safeguards: - Complete FY2021 financial audit of BRH and publish the audited financial statements: end-June 2022. ### Real sector developments (Figure 1) — selected findings - Real GDP: - Real GDP contracted for the third consecutive year in FY2021, declining by 1.8 percent. - Investment declined by over 21 percent. - Negative growth in all key sectors, particularly in agriculture. - Sharp widening in the output gap (to 1.8 percent of potential) and increase in unemployment (modeled ILO estimate reported). - Inflation: - Inflation rose sharply in late-2021 and early-2022, recording 1.6 percent (m/m) and 25.9 percent (y/y) in March (year indicated in the figure text). ### Fiscal sector developments (Figure 2) — selected findings - Tax revenue collapsed and remains one of the lowest in the world as a share of GDP. - Expenditures are hard to cut further without jeopardizing basic state functions. - The deficit has been driven by inequitable and unproductive fuel subsidies. - Financing pressures: - Central bank covered most of the financing need, putting pressure on inflation, exchange rate, and domestic debt. - Fuel price developments: - Fuel price hike in December provided short-lived fiscal relief. ### Monetary sector developments (Figure 3) — selected findings - BRH financing of the government rose in FY2021, pushing up inflation. - Liquidity from the banking system stabilized; private sector credit picked up while lending in gourdes retreated. - Lending rates are volatile and periodically decouple from the BRH policy rate. - Dollarization of deposits and credit has been stable in terms of the constant exchange rate. - Structural liquidity excess of the banking system is rising somewhat. ### Financial sector indicators (Figure 4 and Table 9) — selected metrics - Banking system capital: - Capital Adequacy Ratio (CAR) remained above regulatory minimums in the series shown. - Asset quality: - NPLs and related provisions are relatively high. - Profitability: - Profitability recovered since the August 2020 exchange rate shock and has been stable. - Liquidity: - Liquid assets to total assets remained favorable. - Financial Soundness Indicators (selected, Table 9): - NPLs to gross loans (Dec-21): 6.3 percent. - Provisions to gross loans (Dec-21): 6.1 percent. - Regulatory capital to risk-weighted assets (Dec-21): 20.8 percent. - Return on equity (ROE) cumulative since beginning of the fiscal year (Dec-21): 16.7 percent. - Foreign currency deposits to total deposits (Dec-21): 66.5 percent. - Foreign currency loans to total loans (net) (Dec-21): 47.2 percent. ### External sector developments (Figure 5 and Tables 7a/7b/8) — selected findings and projections - Trade and current account: - Trade deficit declined somewhat as a percent of GDP in 2020–2021 as imports weakened. - Remittances (in percent of GDP) returned to pre-pandemic levels and remain strong. - Current account weakened due to lower FDI and declining official assistance (donor support jumped following the August earthquake). - Reserves and REER: - REER depreciated after its sharp appreciation in September 2020; recently trended upward. - Gross international reserves (GIR, in millions of U.S. dollars) projected in Table 7a: 2,574 (FY2022), 2,604 (FY2023), 2,629 (FY2024), 2,654 (FY2025). - Net international reserves (program definition) projected in Table 4 / Table 6: 492 (FY2022), 498 (FY2023), 504 (FY2024), 515 (FY2025) (in millions of U.S. dollars). - Balance of payments projections (Table 7a, selected lines in millions of US$): - Current account (including grants): FY2019 -169; FY2020 158; FY2021 98; FY2022 154; FY2023 -108; FY2024 -114; FY2025 -132. - Gross international reserves (in months of next year's imports): FY2019 6.0; FY2020 5.7; FY2021 5.8; FY2022 5.0; FY2023 4.8; FY2024 4.7; FY2025 4.6. - External financing requirements and sources (Table 8, in millions of US$): - Requirements (selected): FY2019 445; FY2020 66; FY2021 163; FY2022 400; FY2023 715; FY2024 718; FY2025 615. - Sources (selected): Official disbursements, excluding budget support (FY2022): 560; IMF disbursement under RCF (FY2020): 111 (listed under Additional Financing). - Change in central bank's NFA (+ is decrease): FY2019 123; FY2020 -350; FY2021 -91; FY2022 -40; FY2023 -30; FY2024 -25; FY2025 -25. ### Social indicators (Figure 6) — selected findings - Political instability and security problems have taken a heavy toll on Haitian society. - Poverty and undernourishment: - Progress made at reducing poverty reversed since 2018. - Number of people undernourished reached historic highs: 5.3 million people (2018–2020) noted in figure text. - Basic services: - Sanitation rates are well below those for FCS states. - Youth literacy (ages 15–24) is significantly above the FCS average and close to the world average. - Displacement: - Total displaced persons by violence has risen, with series shown comparing Haiti to other countries. ### Projections and key macroeconomic indicators (Table 4 and Tables 5a/5b) - Baseline projections (FY2022–FY2025) — selected macro aggregates (Table 4): - Real GDP growth: - FY2021: -1.8 - FY2022: 0.3 - FY2023: 1.4 - FY2024: 1.5 - FY2025: 1.5 - GDP deflator (percent change): - FY2022: 26.1 - FY2023: 17.5 - FY2024: 13.4 - FY2025: 12.9 - Consumer prices (period average): - FY2022: 26.1 - FY2023: 17.5 - FY2024: 13.4 - FY2025: 12.9 - Consumer prices (end-of-period): - FY2022: 27.5 - FY2023: 14.0 - FY2024: 13.4 - FY2025: 12.4 - Fiscal sector (Non-Financial Public Sector, Tables 5a/5b, selected levels and shares of GDP): - Total revenue and grants (millions of Gourdes): - FY2019: 99,665 - FY2020: 108,524 - FY2021: 141,178 - FY2022: 184,082 - FY2023: 224,842 - Domestic revenue (millions of Gourdes): - FY2019: 79,071 - FY2020: 90,046 - FY2021: 100,635 - FY2022: 125,552 - FY2023: 164,374 - Central government balance including grants (percent of GDP, Table 5b): - FY2019: -2.1 - FY2020: -2.4 - FY2021: -2.5 - FY2022: -1.5 - FY2023: -2.3 - FY2024: -2.7 - FY2025: -2.8 - Primary balance of NFPS, incl. grants and other transfers to EDH (millions of Gourdes): - FY2019: -22,888 - FY2020: -31,138 - FY2021: -36,972 - FY2022: -28,860 - FY2023: -52,967 - Public debt and external debt service (Table 4): - External public debt (medium and long-term, eop, percent of GDP): - FY2019: 16.1 - FY2020: 9.8 - FY2021: 11.6 - FY2022: 11.2 - FY2023: 10.8 - Total public sector debt (end-of-period, percent of GDP): - FY2019: 26.9 - FY2020: 22.7 - FY2021: 27.1 - FY2022: 27.3 - FY2023: 26.1 - External public debt service (in percent of exports of goods and nonfactor services): - FY2019: 6.6 - FY2020: 11.7 - FY2021: 9.9 - FY2022: 9.3 - FY2023: 8.9 - FY2024: 8.4 - FY2025: 7.9 - Banking system (Table 6, selected level items in millions of gourdes and U.S. dollars): - Net international reserves (program definition, in millions of U.S. dollars): - FY2019: 732 - FY2020: 677 - FY2021: 452 - FY2022: 492 - FY2023: 498 - FY2024: 504 - FY2025: 515 - Broad money (M3, millions of gourdes): - FY2019: 370,830 - FY2020: 369,728 - FY2021: 510,963 - FY2022: 617,036 - FY2023: 721,009 - FY2024: 829,712 - FY2025: 942,584 *Source: IMF staff report (content unit: 1htiea2022001 - 38. Fund staff support the authorities’ request for an SMP but downside risks are very high).* ### Annex I. Recent Political History ### Annex I. Recent Political History ### Timeline of major political events - October 15, 2015: First round of elections in which Jovenel Moïse, allegedly a protégé of outgoing president Martelly, received 33 percent of the vote and qualified for a runoff. These results were contested, and the ballot was ultimately annulled in June 2016 following street protests. New elections were held on November 20, 2016. - November 20, 2016: Moïse won Haiti’s Presidential elections with almost 56 percent of the vote and a voter turnout of only 21 percent. - February 7, 2017: Moïse inaugurated as President. - October 2017: The United Nations ends MINUSTAH; succeeded by MINUJUSTH focusing on strengthening judicial institutions and protecting human rights. - November 2017: Haitian Senate’s Special Commission of Investigation issued a 656-page report detailing alleged embezzlement and fraud by officials managing US$2 billion in PetroCaribe loans from 2008 to 2016; public pressure reportedly led Moïse to fire two high-ranking officials. - July 2018: Government eliminated fuel subsidies without pre-implemented mitigating measures; riots followed and the decision was immediately reversed. - September 17, 2018: PM Jean Guy Lafontant resigned following protests and riots over fuel price increases and general political discontent; replaced by PM Jean-Henry Céant. - March 21, 2019: PM Jean-Henry Céant resigned and was replaced by PM Jean-Michel Lapin, immediately following agreement in principle with IMF staff on a three year ECF. - May 2019: CSCCA follow-up report on PetroCaribe alleges President Moïse (and former president Martelly) and other officials embezzled millions of dollars; alleges Martelly administration contracted a company then led by Moïse for infrastructure projects never built or completed. - January 13, 2020: President Moïse announced that the mandates for the lower house deputies and two thirds of the senate had expired, leaving Haiti with no legislative branch; Moïse then governed by decree until his death. During 2020 Moïse removed several judges from the Superior Audit Court and reduced its independence via presidential decrees. - March 4, 2020: PM Jean-Michel Lapin replaced by PM Joseph Jouthe. - April 14, 2021: PM Joseph Jouthe replaced by PM Claude Joseph, the fifth in three years. - July 7, 2021: President Moïse assassinated at his private residence; acting Prime Minister Joseph announces control but Ariel Henry, appointed PM by President Moïse two days prior to his assassination, contends. - July 20, 2021: Ariel Henry took office as PM. Of the 18 cabinet positions, 10 were part of the previous Moïse cabinet or administration. - September 17, 2021: Prime Minister Henry signed the "Accord politique pour une gouvernance apaisée" with some opposition groups and civil society establishing mechanisms including: (i) the Autorité de Contrôle et de Suivi to validate decrees; (ii) the Assemblée Nationale Constituante of 33 civil society members tasked with producing a draft constitution within three months; and (iii) the new Conseil Electorale Provisoire responsible for organizing elections some time before end-2022. - November 24, 2021: Prime Minister Ariel Henry inaugurated a new government implementing the Political Accord for Peaceful Governance; main objectives include establishing a transitional government, holding elections, and drafting a new constitution. - January, 2022: Prime Minister Ariel Henry flees the celebration of Haiti’s 218 years of independence in Gonaïves under gunfire from gangs protesting his presence; Prime Minister Henry extends the term of the remaining one third of the Senate. ### Political crises, governance, and institutional impacts - Legislative vacuum and executive consolidation: - January 13, 2020: Mandates for the lower house deputies and two thirds of the senate declared expired by President Moïse, leaving no legislative branch and leading to governance by decree until Moïse’s assassination. - During 2020: Several judges removed from the Superior Audit Court and its independence reduced via presidential decrees. - Frequent changes in executive leadership: - Five prime ministers in three years (2018–2021) reflect political instability: Jean Guy Lafontant (resigned September 17, 2018), Jean-Henry Céant (resigned March 21, 2019), Jean-Michel Lapin (replaced March 4, 2020), Joseph Jouthe (replaced April 14, 2021), Claude Joseph, then Ariel Henry (assumed July 20, 2021). - Corruption and PetroCaribe investigations: - November 2017 Senate report and May 2019 CSCCA follow-up allege large-scale embezzlement tied to US$2 billion in PetroCaribe loans; specific allegations include contracts to a company led by Moïse for uncompleted infrastructure projects. ### Political accords, transition efforts, and elections - "Accord politique pour une gouvernance apaisée" (September 17, 2021): - Created mechanisms involving opposition groups and civil society: Autorité de Contrôle et de Suivi; Assemblée Nationale Constituante (33 members, three-month mandate to draft constitution); Conseil Electorale Provisoire (organize elections before end-2022). - Bars the Prime Minister, Ministers, and other senior officials from participating in the election. - Does not specify timing for a constitutional referendum. - Some opposition groups did not sign the accord, limiting consensus and raising challenges to Prime Minister Henry’s legitimacy. - Status of elections and referendums: - No date set for next Presidential Election or for a constitutional referendum. - At least one other political accord led by civil society remains active (Accord de Montana). ### Security environment and public order - Civil unrest related to economic measures: - July 2018 fuel subsidy removal triggered riots and immediate policy reversal. - September 17, 2018 resignation of PM Lafontant followed protests over fuel price increases. - Assassination and aftermath: - July 7, 2021 assassination of President Moïse created a major political vacuum and uncertainty; competing claims to authority followed. - Continued insecurity and gang activity: - January, 2022: Gunfire by gangs in Gonaïves targeted Prime Minister Henry’s presence, forcing him to flee and prompting extension of the remaining one third of the Senate. *Source: Annex I. Recent Political History (content unit 1htiea2022001).* ### 27.5 percent (y/y) at end-FY2022, with 12-month period-average rate of 26.1 percent, and is ### 1htiea2022001 - 27.5 percent (y/y) at end-FY2022, with 12-month period-average rate of 26.1 percent, and is ### Macroeconomic and exchange rate assumptions - Inflation: "27.5 percent (y/y) at end-FY2022, with 12-month period-average rate of 26.1 percent, and is expected to decline slowly over time under the moderate growth baseline." - Exchange rate: "A stable real exchange rate vis-à-vis the U.S. dollar is assumed over the medium-term following the gradual depreciation in FY2021, with the nominal bilateral rate being driven by the inflation differential vis-à-vis the U.S." ### Fiscal outlook and NFPS (nonfinancial public sector) - NFPS deficit trajectory: - "The deficit of the NFPS is projected to decline to 1.5 percent of GDP in FY2022 from 2.4 percent of GDP in FY2021." - "The deficit is expected to increase to around 2.8 percent of GDP in FY2025." - "Over the long term, the deficit is expected to increase gradually to reach about 3.3 percent of GDP on average." - Drivers and financing: - "Current spending other than energy subsidies is compressed to make room for large domestic debt reimbursement." - Baseline assumes "no changes in fuel price policy," leading to "higher forgone fuel taxes, thus, lower tax revenues." - Financing mix for the projected deficit increase: "external financing, including concessional multilateral and bilateral financing, some domestic market financing, and advances from the BRH limited to around 2.0 percent of GDP." ### External current account and external sector dynamics - Current account: - "An external current account surplus of 0.8 percent of GDP is projected in FY2022 following a surplus of 0.5 percent in FY2021." - The FY2021 surplus reflected "a 21 percent surge in recorded remittances and despite a rebound in imports." - Over the medium and long term, "the current account deficit is expected to stabilize at around 0.6 percent of GDP as remittance inflows are projected to follow historical trends." - Exports and public investment: - "Export and import growth are expected to remain subdued." - "With no fuel price reform in the baseline scenario, higher fuel subsidies ... are crowding out public capital spending, including in critical infrastructure to support and promote exports, e.g., roads and ports, resulting to lower export growth." ### Gross financing needs and financing composition - Assumed funding sources: - "Mostly funded by a moderate increase in external concessional financing and domestic debt instruments while central bank lending to the government is expected to be contained." - "Central bank advances ... are expected to remain around 2 percent of GDP over the medium term, slightly above a level consistent with low inflation (1.5 percent of GDP)." - "The remaining domestic financing would come from short-term debt instruments purchased by commercial banks." - Market and external dynamics: - "The share of external financing could decrease over the long term as government increases borrowing through T-bills." - "External debt financing, contracted or guaranteed, is assumed to be mostly non-concessional and increasing moderately in relative terms." ### Credibility and realism of baseline - Realism tool outcomes: - Differences between past and projected debt dynamics arise from "the unusual FY2020 current account surplus, activity contraction the last three years, exchange rate appreciation, and for total public debt, from improved dynamics related to the real interest rate due to unremunerated advances from the BRH and a higher primary deficit." - "Under the baseline scenario, the projected factors affecting debt ratios remain broadly the same as in the past, with the exception of the real GDP growth which is projected to be positive and a gradual resumption of financing sources in an environment of modest reforms underpinned by a Fund-supported program." - Fiscal adjustment realism: - "The planned adjustment falls outside the top quartile of the distribution of past adjustments of the primary fiscal deficit, suggesting a modest yet reasonable and credible pace of adjustment given the uncertainty of fuel price reform." ### Debt carrying capacity and thresholds - Composite Indicator (CI) and classification: - "The value of the composite indicator to assess debt carrying capacity is 2.78, resulting in a 'medium' classification." - "Haiti’s debt carrying capacity would be classified as 'weak' if remittances as a share of GDP were not so high." - "Remittances-to-GDP above the 15.5 percent cut-off (on average over 2013–2021) push the index above the 2.69 cut-off value." - Applicable thresholds: - "The present value of external debt can go as high as 40 percent of GDP or 180 percent of exports of goods and services." - "The present value of public debt can reach 55 percent of GDP before the model-based risk of distress increases." - "Benchmarks for external debt service are 15 percent of exports of goods and services and 18 percent of fiscal revenues." ### External Debt Sustainability Analysis (key projections) - Present value of external debt indicators: - "The present value of debt-to-exports, which starts at around 112.4 percent in FY2022, reaches 186.6 percent in FY2033, breaching the 180 percent threshold and staying above that thereafter (323.3 percent in FY2043)." - "The present value of external debt-to-GDP ... is projected to gradually increase from 7.4 percent in FY2022 to 13.3 percent by FY2033, rising modestly to 20.8 percent in FY2043." - Debt service ratios: - "The debt service-to-exports ratio remains below the threshold of 18 percent under the baseline scenario until FY2038, which it exceeds by FY2039 to reach 24.1 percent by FY2043." - "The ratio of debt service to revenue only breaches the threshold in FY2041." - Drivers of breaches: - "Slightly higher primary deficits over the medium term, funded by a gradual increase in external concessional financing, against the background of subdued export growth" and "weaker tax revenue mobilization" contribute to threshold breaches. ### Public Sector Debt Sustainability Analysis (key projections) - Public debt levels: - "Total public debt is projected at around 27 percent of GDP until 2027, rising to 50.2 percent by FY2043." - "In present value terms, public debt would reach a maximum of 43.6 percent of GDP in FY2043, around 11 percentage points below the corresponding benchmark." - Debt profile features limiting vulnerabilities: - "Relatively long maturity to multilateral creditors." - "A relatively high share denominated in gourdes (about 57 percent)." - "The investment base comprised mostly of public agencies." - Risks from central bank advances: - "Advances from the BRH, a significant portion of public debt, are not serviced in short term, including principal and interest payments. However, repayment of these advances could raise debt service over the long run significantly, depending on conditions attached to reimbursement of those advances." ### Stress tests, natural disaster scenario, and sensitivity analyses - Natural disaster shock: - Scenario: "Damages of 25 percent of GDP, similar to those caused by Hurricane Matthew that hit Haiti in 2016." - Impact: "A natural disaster shock has a significant impact on the external debt trajectory, bringing also the external debt-to-exports ratio above its threshold." - Public debt under extreme natural disaster: "Under the most extreme natural disaster scenario, the present value of the public debt-to-GDP ratio barely exceeds 55 percent over a longer horizon (20-year) after the year of the shock." - Post-shock dynamics: "It increases by 60 percent in the aftershock to reach 44 percent in 2025 (against 23 percent in the baseline) before declining progressively, and exhibits a tail effect over a longer horizon, slightly exceeding the threshold around FY2041." - Other stress tests: - "A shock to non-debt creating flows, i.e., a decline in both current transfers and FDI inflows by one standard deviation, would bring the present value of external debt above the 180 percent-of-exports threshold much earlier in 2025 and the debt service-to-exports ratio above the 15 percent threshold after seven years (2029)." - "A drop in remittances would present a more severe shock." ### Risk rating, vulnerabilities, and policy implications - Risk rating: - "Haiti’s risk rating remains 'high' risk of debt distress." - Key vulnerabilities: - "Subdued export growth, weaker revenue mobilization, high probability of natural disasters, dependence on remittances, and fiscal financing dynamics including BRH advances." - "External debt service capacity is also vulnerable to a drop in official and private transfers and FDI." - Policy implications and recommendations: - "Stepping up efforts to strengthen revenue mobilization and reforms to raise investment and growth, as recommended by the SMP." - "The DSA highlights the importance of implementing the authorities’ economic reform program supported by the SMP and preparing for and managing the adverse effects of natural disasters." - Financing strategy suggestions implicit in analysis: increase concessional external financing, deepen government securities market, limit central bank advances toward a stable level (around 2.0 percent of GDP), and mobilize domestic market financing through short-term instruments. *Source: IMF document (content unit 1htiea2022001).* ### conclusions. They viewed staff’s baseline scenario as realistic but emphasized possible upside risks ### conclusions. They viewed staff’s baseline scenario as realistic but emphasized possible upside risks ### Overall assessment - Staff’s baseline scenario was viewed as realistic. - Executive Directors emphasized possible upside risks to: - tax revenue mobilization, and - exports forecasts, given that several important sectors of Haiti’s economy might rebound faster if the political situation stabilizes further. ### Debt and fiscal outlook - Directors took note of Haiti’s lower ratios of debt-to-GDP as a result of GDP rebasing. - They concurred that: - the country’s risk of debt distress remains classified as “high”, and - its debt-carrying capacity should remain unchanged at “medium”. - They noted that a higher level of investment is critical to raise potential growth, which could widen the current account deficit over the medium term. ### Central bank implications and accounting reforms - The BRH highlighted implications of reforms related to its governance and ongoing transition to IFRS-9, which could bring changes to the accounting of: - the central bank’s advances to the government, as well as - interest payments. ### Financial markets and monetary financing - The BRH noted that efforts to deepen financial markets, and to develop the market for government debt securities in particular, could help reduce monetary financing to the government gradually. ### Stress tests, DSAs, and indicators (figures referenced) - Figures present indicators of Public and Publicly Guaranteed (PPG) external debt and public debt under alternative scenarios for 2023–43. - The text and figures reference stress-test mechanics and outcomes, including: - “The most extreme stress test is the test that yields the highest ratio in or before 2033.” - presentation of one-off breaches (and how one-off breaches are treated for mechanical signals). - commodity price shock magnitudes based on the commodity prices outlook prepared by the IMF research department. - Selected numeric labels and parameters appearing in the figures (preserved exactly as shown in the source): - 5.0% - 5 - 29 - 1/ - 2/ - 1.6% - 0 - 5 - 10 - 15 - 20 - 25 - 30 - 2023 - 2025 - 2027 - 2029 - 2031 - 2033 - 2035 - 2037 - 2039 - 2041 - 2043 - 0 - 100 - 200 - 300 - 400 - 500 - 600 - 0 - 5 - 10 - 15 - 20 - 25 - 30 - 35 - 40 - 45 - 18%18% - 0%0% - 82%82% - 1.6%1.6% - 29 29 - 55 - 0.0%0.0% - 11 - 00 - -9.1%-9.1% - 0 - 10 - 20 - 30 - 40 - 50 - 60 - 70 - 80 - 2018 - 2019 - 2020 - 2021 - 2022 - 2024 - 2026 - 2028 - 2030 - 2032 - -4 - -2 - 2 - 4 - 5-year - 3/ - 1/ - -20 - -10 - 15 - -15 - -5 - 2017 - 2016 - 3-year - -4.5 - -4.0 - -3.5 - -3.0 - -2.5 - -2.0 - -1.5 - -1.0 - -0.5 - 0.0 - 0.5 - 1.0 - 1.5 - 2.0 - 2.5 - 3.0 - 3.5 - 4.0 - 4.5 - 5.0 - 5.5 - 6.0 - 6.5 - 7.0 - 7.5 - 8.0 *Source: IMF staff report conclusions (figures and text as presented in the source).* ### 2.5 percentage points of GDP in ### 2.5 percentage points of GDP in ### Overview of public and external debt levels (fiscal-year basis) - Total debt (US$ millions, end-2021): 4,727.2; total debt (percent of GDP): 100.0 - External debt (US$ millions, end-2021): 2,019.1; external debt (percent of GDP): 42.7 - Domestic debt (US$ millions, end-2021): 2,708.1; domestic debt (percent of GDP): 57.3 - Nominal GDP (US$ millions, reported): 21,016.8 (table note) ### Structure of external creditors (US$ millions, end-2021 breakdown) - Multilateral creditors total: 256.2 (5.4 percent of GDP) - IMF: 162.8 (3.4 percent of GDP) - OPEC: 41.4 (0.9 percent of GDP) - IFAD: 52.0 (1.1 percent of GDP) - IDA: 0.0 (0.0 percent of GDP) - Bilateral creditors total: 1,810.2 (38.3 percent of GDP) - Venezuela: 1,497.0 (31.7 percent of GDP) - PetroCaribe: 1,471.0 (31.0 percent of GDP) - BANDES: 26.0 (0.6 percent of GDP) - Taiwan, Province of China: 31.3 (0.6 percent of GDP) - Other international creditors: 7.8 (0.2 percent of GDP) - Domestic holdings: - Held by residents, total: 2,708.1 (57.3 percent of GDP) - BRH: 2,063.6 (43.7 percent of GDP) - Other creditors (incl. T-Bills): 644.6 (13.6 percent of GDP) ### External Debt Sustainability Framework (Baseline scenario, selected indicators) - External debt (nominal) as percent of GDP: - 2020: 9.8 - 2021: 11.6 - 2022: 11.2 - 2023: 10.8 - 2024: 10.9 - 2025: 11.1 - 2026: 11.3 - 2027: 11.5 - 2028: 12.5 - 2033: 18.9 - 2043: 25.7 (table shows further projection values) - Identified net debt-creating flows (2020–2023 sample): -1.0, -3.8, -0.5, 0.0 - Non-interest current account deficit (percent of GDP, 2020–2033 sample): -1.2, -0.6, -0.9, 0.4, 0.4, 0.5, 0.5, 0.7, 2.0, 1.9, 0.9, 2.1, 1.3 - Exports (percent of GDP, selected years): 7.0 (2020), 6.0 (2021), 6.6 (2022), 6.7 (2023), 6.8 (2024), 7.0 (2025), 7.2 (2026), 7.4 (2027), 7.1 (2028), 7.1 (2029) - Imports (percent of GDP, selected years): 29.0 (2020), 24.9 (2021), 28.9 (2022), 29.4 (2023), 29.6 (2024), 29.6 (2025), 29.1 (2026), 28.8 (2027), 29.6 (2028), 29.6 (2029) - Net current transfers (negative = inflow, percent of GDP): -22.9 (2020), -19.2 (2021), -22.9 (2022), -21.9 (2023), -22.0 (2024), -21.6 (2025), -21.0 (2026), -20.3 (2027), -19.9 (2028), -19.9 (2029), -20.2 (2030), -19.1 (2031), -20.6 (2032) - Endogenous debt dynamics contribution (selected): 0.4 (2020), -3.0 (2021), 0.6 (2022), -0.1 (2023), -0.1 (2024) - Residual (includes exceptional financing) (selected years): -5.3 (2020), 5.5 (2021), 0.1 (2022), -0.4 (2023), 0.2 (2024) - PV of PPG external debt-to-GDP ratio (selected projection years): 7.4, 7.3, 7.3, 7.5, 7.6, 7.8, 8.6, 13.3, 20.8, 25.7, 12.8, 13.6 (table lists multiple years) - PV of PPG external debt-to-exports ratio (selected): 112.4, 108.7, 108.1, 107.1, 106.6, 106.6, 120.6, 186.6, 323.3 - PPG debt service-to-exports ratio (selected): 11.7, 9.9, 9.3, 8.8, 8.4, 7.9, 8.8, 8.3, 8.3, 10.0, 24.1 - PPG debt service-to-revenue ratio (selected): 13.1, 10.0, 10.5, 9.2, 8.5, 7.8, 8.7, 8.2, 7.8, 9.3, 19.8 - Gross external financing need (Million of U.S. dollars, selected): -85.4, -45.1, -106.2, 130.5, 132.7, 146.8, 130.4, 81.5, 204.1, 254.2, 297.1 ### Key macroeconomic assumptions (selected) - Real GDP growth (in percent): -3.3 (2020), -1.8 (2021), 0.3 (2022), 1.3 (2023), 1.5 (2024), 1.5 (2025), 1.5 (2026), 1.5 (2027), 1.5 (2028), 1.5 (2029), 1.5 (2030), 0.8 (2031), 1.5 (2032) - GDP deflator in US dollar terms (change in percent, selected): 1.5 (2020), 47.5 (2021), -4.5 (2022), 3.7 (2023), 2.4 (2024), 2.3 (2025), 2.3 (2026), 2.0 (2027), 1.6 (2028), 2.2 (2029), 2.2 (2030), 4.1 (2031), 2.3 (2032) - Effective interest rate (percent): 0.8 (2020), 1.4 (2021), 0.8 (2022), 0.8 (2023), 0.8 (2024), 0.9 (2025), 0.9 (2026), 1.0 (2027), 1.0 (2028), 1.4 (2029), 1.8 (2030), 0.8 (2031), 1.1 (2032) - Growth of exports (US$ terms, percent, selected): -41.5 (2020), 23.8 (2021), 5.8 (2022), 6.9 (2023), 5.4 (2024), 6.6 (2025), 6.6 (2026), 6.7 (2027), 6.2 (2028) - Growth of imports (US$ terms, percent, selected): -18.5 (2020), 24.2 (2021), 11.2 (2022), 6.9 (2023), 4.8 (2024), 3.6 (2025), 2.3 (2026), 2.6 (2027), 5.7 (2028) - Government revenues (excluding grants, percent of GDP, selected): 6.2 (2020), 5.9 (2021), 5.8 (2022), 6.4 (2023), 6.7 (2024), 7.1 (2025), 7.3 (2026), 7.5 (2027), 7.5 (2028), 7.6 (2029), 7.8 (2030) - Aid flows (Million of US dollars, selected): -65,542.7 (2020), -21,38.9 (2021), -6,941.8 (2022), 615.0 (2023), 612.0 (2024), 491.9 (2025), 558.5 (2026), 572.7 (2027), 600.7 (2028), 775.9 (2029), 1,307.8 (2030) - Grant-equivalent financing (percent of GDP, selected): 2.8 (projection start), 2.7, 2.1, 2.4, 2.3, 2.6, 3.0, 3.6, ... , 2.6 - Nominal GDP (Million of US dollars, selected): 14,508 (historical), 21,017, 20,135, 21,160, 22,001, 22,835, 23,713, 24,545, 25,317, 30,267, 43,590 ### Public sector debt sustainability (baseline, selected indicators) - Public sector debt (percent of GDP, selected years): - 2020: 22.7 - 2021: 27.1 - 2022: 27.3 - 2023: 26.1 - 2024: 26.4 - 2025: 26.8 - 2026: 27.1 - 2027: 27.9 - 2028: 28.9 - 2033: 35.3 - 2043: 50.2 (table shows multiple projection values) - Of which: external debt (percent of GDP): 9.8 (2020), 11.6 (2021), 11.2 (2022), 10.8 (2023), 10.9 (2024), 11.1 (2025), 11.3 (2026), 11.5 (2027), 12.5 (2028), 18.9 (2033), 25.7 (2043) - Change in public sector debt (percent of GDP, selected): -4.2 (2020), 4.4 (2021), 0.2 (2022), -1.1 (2023), 0.3 (2024), 0.4 (2025), 0.3 (2026), 0.7 (2027), 1.0 (2028), 1.3 (2029), 1.3 (2030) - Primary deficit (percent of GDP, selected): 2.1 (2020), 2.2 (2021), 1.3 (2022), 2.1 (2023), 2.5 (2024), 2.6 (2025), 2.5 (2026), 2.6 (2027), 2.7 (2028), 2.9 (2029), 4.1 (2030), 2.0 (2031), 2.6 (2032) - Revenue and grants (percent of GDP, selected): 7.5 (2020), 8.3 (2021), 8.6 (2022), 8.8 (2023), 9.0 (2024), 8.7 (2025), 9.2 (2026), 9.3 (2027), 9.4 (2028), 9.4 (2029), 9.8 (2030), 10.6 (2031), 9.7 (2032) - Primary (noninterest) expenditure (percent of GDP, selected): 9.6 (2020), 10.5 (2021), 9.9 (2022), 10.9 (2023), 11.5 (2024), 11.3 (2025), 11.7 (2026), 11.9 (2027), 12.1 (2028), 12.7 (2029), 14.7 (2030), 11.8 (2031), 12.0 (2032) - Automatic debt dynamics (selected): -7.7 (2020), 1.1 (2021), -4.0 (2022), -3.2 (2023), -2.2 (2024), -2.2 (2025), -2.1 (2026), -1.8 (2027), -1.6 (2028), -1.5 (2029), -2.8 (2030) - PV of public debt-to-GDP ratio (selected projections): 23.9, 22.9, 23.1, 23.5, 23.7, 24.4, 25.1, 29.9, 43.6 - PV of public debt-to-revenue and grants ratio (selected): 279.6, 260.7, 257.4, 269.1, 258.5, 261.4, 266.5, 304.5, 411.8 - Debt service-to-revenue and grants ratio (selected): 12.7, 10.3, 8.1, 7.9, 25.5, 45.6, 61.4, 73.8, 87.1, 113.7, 197.6 - Gross financing need (selected): 3.1, 3.0, 2.0, 2.8, 4.8, 6.6, 8.2, 9.5, 10.9, 14.0, 25.1 ### Public debt sensitivity analysis (selected highlights, 2023–2043) - Baseline PV of debt-to-GDP ratio (percent) shows a rising path: 23 (2023), 23 (2024), 23 (2025), 24 (2026), 24 (2027), 25 (2028), 26 (2029), 27 (2030), 28 (2031), 29 (2032), 30 (2033), continuing upward to 44 (2043) in baseline table entries. - Alternative scenarios and bound tests show substantial variation: - A1 (historical averages 2023-2033) produces lower PV of debt-to-GDP outcomes in many years compared with baseline (examples: 23 in 2023 vs. 23 baseline; later-year reductions shown). - B1 (Real GDP growth shock), B2 (Primary balance shock), B3 (Exports shock), and B4 (Other flows shock) indicate materially higher PV of debt-to-GDP and debt service metrics in medium to long term (tables report multi-decade trajectories with values often breaching thresholds). - Tailored tests: - C1 (Combined contingent liabilities) and C2 (Natural disaster) generate large increases in public debt and debt service metrics (examples: Natural disaster scenario showing PV and debt service escalation into very high values in mid- and long-term projections). ### Benchmarks, thresholds, and breaches (selected) - Public debt benchmark (listed in Table 6): 55 (repeated across projection horizon) - Thresholds for sensitivity tests (examples from Table 5): - PV of debt-to-GDP ratio threshold: 40 (across projection years shown) - PV of debt-to-exports ratio threshold: 180 (table) - Debt service-to-exports ratio threshold: 15 (table) - Debt service-to-revenue ratio threshold: 15 (table) - Tables indicate bold values when a breach of the threshold occurs (tables include many such instances under alternative scenarios and tailored tests). ### Memo and methodological notes (selected) - External DSA coverage: Includes both public and private sector external debt (footnote 1). - Residual includes exceptional financing (changes in arrears and debt relief), changes in gross foreign assets, valuation adjustments, and for projections, contribution from price and exchange rate changes (footnote 3). - Effective interest rate defined as current-year interest payments divided by previous period debt stock (footnote 4). - Aid flows defined as grants, concessional loans, and debt relief (footnote 5). - Grant-equivalent financing includes grants provided directly to the government and through new borrowing (difference between face value and PV of new debt) (footnote 6). - PV of private sector debt assumed equivalent to its face value (footnote 7). - Historical averages are generally derived over the past 10 years; projections averages are over the first year of projection and the next 10 years (footnote 8). *Sources: Haitian authorities; and Fund staff estimates and projections.* ### Annex III. External Sector Assessment ### Annex III. External Sector Assessment ### Overall assessment - The external position of Haiti in FY2021 is assessed to be broadly in line with medium-term fundamentals and desired macroeconomic policies. - Potential policy responses: - Continue moving toward a market-determined foreign exchange (FX) rate to eliminate the parallel market premium, enhance external sustainability, and improve competitiveness. - Limit intervention to smoothing excess volatility and stabilizing market expectations. - Weigh FX surrender requirements and intervention carefully against costs to exporters and remittance-dependent households. ### Foreign assets and liabilities: position and trajectory - Background facts and magnitudes (FY2021): - Net external liabilities of about 5.6 percent of GDP. - Gross external assets provisionally estimated at 15.5 percent of GDP. - Central bank international reserves about $1.8 billion or 55 percent of total gross external assets. - Gross external liabilities were 21.1 percent of GDP. - Foreign direct investment (FDI) accounted for about 45 percent of these liabilities. - About 50 percent of liabilities consisted of public external debt, most of which is on concessional terms. - Historical note: - After the 2010 earthquake, large donor grant inflows contributed to a positive net asset position during FY2010–2013; subsequently public external debt increased while foreign reserves declined, reducing NIIP. - Assessment and trajectory: - Given persistent current account deficits, Haiti’s NIIP/GDP ratio is projected to worsen moderately over the medium term. - While significant current account adjustment is not necessary immediately given development needs, moving toward a more market-determined exchange rate and enhancing competitiveness would reduce FX reserve depletion and strengthen Haiti’s NIIP and gross external assets (via a higher local currency valuation of FX reserves). ### Current account - Background magnitudes and features (FY2021): - Current account surplus halved to about 0.5 percent of GDP in FY2021 from 1.1 percent in FY2020 as imports picked up from a low FY2020 base. - Net private transfers (remittances) about 17 percent of GDP in FY2021. - Large trade deficit in goods and services worth about 19 percent of FY2021 GDP. - Imports of goods and services reached about 25 percent of GDP in FY2021. - Oil imports accounted for about 4 percent of GDP worth of total imports in FY2021. - Goods exports are low in regional comparison; apparels account for more than three-quarters of goods exports, of which the United States absorbs about 70 percent. - Vulnerabilities: export concentration (product lines and destinations), dependence on imports of essential products, natural disasters, poor port and road infrastructure, limited credit, electricity and water, and legal/regulatory constraints. - Model-based assessment (EBA-lite results for 2021): - Model-identified CA gap: 1.3 percent of 2021 GDP. - Cyclically-adjusted current account: 0.7 percent of GDP. - CA norm (from model): -0.7 percent of GDP. - Policy gaps contributed about4.4 percent of GDP to the model-estimated CA gap; remainder attributable to unidentified country-specific factors and residuals. - Staff adjusted the model-based CA-REER semi-elasticity to 0.3 from about 0.1, using a 5-year import and export elasticity measurement weighted by 2021 import and export shares of GDP. - Staff interpretation: - Both the EBA-lite CA and REER models suggest Haiti’s FY2021 external position is broadly in line with fundamentals and desirable policies. - Results should be interpreted with caution because political crisis, security and law-and-order issues, supply-side disruptions, and COVID-19 containment measures caused demand-related import compression that artificially strengthened the current account. - Policy implications to improve the CA balance over medium term: - Fiscal consolidation would help. - Increase productivity and lower private precautionary saving via policies supporting greater inclusion (e.g., SMP reforms: higher spending on social assistance, education, and health; measures to increase financial access). - Strengthen business climate, phase out FX surrender requirements, and move toward a market-determined exchange rate to help exporters and bolster competitiveness. ### Real exchange rate (REER) - Recent movements: - REER at end of period (eop) depreciated by about 4.6 percent in FY2021 compared to FY2020. - Nominal effective exchange rate depreciated by 11.2 percent over the same period. - Since end-FY2019, the REER has appreciated about 45 percent, reflecting authorities’ intervention to defend the gourde, sanctions on two commercial banks, and new regulations on international money transfers. - Model results and assessment: - EBA-lite REER model estimates the REER was overvalued by 4.5 percent (compared to an undervaluation of 4.5 percent implied by the EBA-lite CA model). - The estimated overvaluation likely reflects the nominal exchange rate appreciation episode in 2020–2021. - Policy guidance: - Phase out FX surrender requirements and limit FX intervention to smoothing excess volatility, allowing the gourde to adjust to a more market-determined level. - A phasing out of surrender requirements could lead to a slight nominal depreciation of the currency. - Monetary policy should stand ready to contain second-round inflationary impacts from relaxing these policies, while phasing out monetary financing of the deficit and intervention over time. ### Capital and financial accounts: flows and policy measures - FDI and flows: - FDI inflows have averaged about 1.0 percent per year since the 2010 earthquake, lower than the regional average. - In FY2021, FDI flows were low relative to historic averages amid global and domestic uncertainty. - It is anticipated that FDI flows will be in line with historical averages in the medium term, though relaxation of FX surrender requirements and improvements in the business climate are upside risks. - FX surrender regulations (September 2020): - Money transfer companies required to pay dollar remittances in gourdes using the BRH’s reference exchange rate. - Money transfer companies required to sell 30 percent of FX purchased from remittances to the BRH and 40 percent to banks. - Banks are not allowed to keep a net open FX position above 0.5 percent of equity. - Assessment: - Haiti’s FX surrender regime could jeopardize operations of the export sector and some domestic producers if the BRH reference rate used for surrender does not reflect market conditions, reducing competitiveness. - Gradually relaxing surrender requirements would be appropriate given Haiti’s fragile context and need for export diversification. ### FX intervention and reserves level - Reserve levels and coverage (as of end-September 2021): - Gross international reserves about $2.5 billion, around 12 percent of 2021 GDP and equivalent to roughly 5.8 months of 2021 imports. - Net international reserves (NIR) fell to about $452 million as of end-September 2021 due to the central bank’s accrual of FX reserve-related liabilities to the banking sector. - Haiti received its SDR allocation of approximately $224 million, half of which the authorities converted to freely usable currency for urgent financing needs related to an August 2021 earthquake, the security crisis, and the pandemic. - BRH intervention and transactions: - BRH on net purchased about US$117 million in FY2021 and US$16 million in the first six months of FY2022. - Parallel market premium and spreads: - A parallel-official exchange rate gap emerged in late-2020, peaking at about 25 percent in March 2021. - The premium declined to an estimated 4 percent at end-December 2021, then widened again to about 12 percent in March 2022. - Assessment of reserve adequacy and vulnerabilities: - Gross international reserves coverage is adequate to finance more than five months of imports, implying gross reserve adequacy when benchmarked against the three-month import coverage rule of thumb and the IMF’s ARA-CC metric. - Net external buffers are considerably lower; Haiti could face external sustainability risks if unable to roll over reserve-related liabilities. - Continued efforts to defend the nominal value of the gourde, including accumulation of reserve-related liabilities, would heighten vulnerabilities given limited buffers, weak export sector, high reliance on volatile remittances, and the absence of a robust macro framework to support a more fixed exchange rate. - Gradually removing FX surrender requirements and limiting FX intervention to smoothing excessive volatility would help strengthen external resilience while providing needed FX to exporters. ### Capacity development (Appendix I) — institutional constraints and priorities - Capacity constraints: - Capacity of Haiti’s institutions is low; extensive TA from FAD, MCM, STA, and CARTAC on tax administration, tax policy, public financial management, banking supervision, and statistics has had slow implementation due to capacity constraints and political instability. - Establishment of a Treasury Single Account (TSA) ongoing since June 2014 and still not complete. - Reorganization of the tax administration proposed in 2014 has seen limited progress despite follow-up missions. - Recommendations to improve TA effectiveness: - Deploy resident long-term experts and prepare roadmaps (note de cadrage and feuille de route) to improve ownership and implementation. - Near-term TA priorities (authorities’ stated preferences and staff proposals): - Authorities’ priorities: (i) reform tax policy with a new tax code; (ii) strengthen revenue collection; (iii) improve public financial management and fiscal accountability; (iv) develop and strengthen local markets for foreign exchange (FX) and government debt securities; and (v) improve data compilation and reporting (monetary, price, and national accounts statistics). - Staff propose Fund TA focus on tax and customs administration to mobilize revenues; public financial management including governance of state enterprises; reform of the energy sector and reduction in fiscal losses; expenditure policy (including social spending); central bank financial reporting transition to IFRS; amendments to the central bank law; foreign reserve management; FX market development and review of FX regulations; anti-corruption legislation; and improving timeliness and quality of Standard Reporting Forms (SRFs) for monetary statistics with FX reserves calculation consistent with IMF guidelines. *Source: Annex III. External Sector Assessment (content unit 1htiea2022001) — IMF staff calculations and Bank of the Republic of Haiti data.* ### 4. Main partners. Many donors are financing capacity development or providing TA in Haiti. ### 4. Main partners. Many donors are financing capacity development or providing TA in Haiti. ### Main financial and technical partners - Main financial partners: Canada, the E.U., and the U.S. - Main technical partners and areas of engagement: - USAID: social protection, electricity market, and oil import market. - World Bank: social protection, health, transport, AML-CFT, and resilience to natural disasters. - IDB: transport, water and sanitation. - World Food Program: social protection. - Coordination mechanism: - A partnership framework (cadre de partenariat) has been in place since May 2017 with the Haitian government and financial and technical partners in the areas of fiscal reform and public financial management. - A similar partnership is being considered in the area of social protection. ### Technical Assistance by Function — FAD (Fiscal Affairs Department) - Tax and Customs Administration - Objectives: - Strengthen core functions of DGI and AGD to meet government revenue goals. - Improve performance management and governance (leadership, data integrity, transparency, accountability). - Prepare groundwork to introduce a VAT. - Progress-to-date: No progress since 2017. Request for financing of a long-term expert by the Revenue Mobilization Trust Fund. - Risks: Weak and inadequate governance, inability to identify clear priorities and lack of political will in the absence of Fund program to implement relevant strategies. - Public Financial Management - Objectives: - Fully implement the Treasury Single Account and improve cash management. - Improve public accounting. - Improve financial control over expenditure execution. - Strengthen internal and external controls by Inspection Générale des Finances and Cour des Comptes (CSCCA) respectively. - Introduce a medium-term budget framework (MTBF). - Introduce pluriannual investment programming. - Progress-to-date: Mixed progress since departure of long-term expert in March 2018. Delays in reform implementation. Ground rules for the preparation and execution of the budget need to be improved and followed before introducing further reforms. TA missions are scheduled in June 2022 to (i) support development of a MTBF and the budget process and (ii) expand the TSA coverage, both in line with related SMP structural benchmark. - Risks: Weak capacity and political instability hinder the implementation of Fund’s recommendations. - Tax Policy - Objectives: Undertake consultations on the new tax code and Tax Procedure Code, and prepare final copies for adoption. - Progress-to-date: The draft Tax Code and Tax Procedure Code are completed and need to be submitted to parliament. Reform of the tax-related funding of the Fonds National d’Education and Fonds d’Entretien Routier to be tackled separately. TA is scheduled in June-July 2022 to support achievement of the structural benchmark on tax policy. - Risks: Given the current absence of parliament process, implementation risk is high. Internal and external review process may lead to inconsistencies or changes in policy directions. - Energy Sector Reform - Objectives: Support implementation of proposed reform of fuel prices, and extend reforms to the import market and electricity sector. - Progress-to-date: A reform of fuel prices was announced in December 2021, but is not yet fully implemented (notably on adjustment mechanism). Some more steps are needed on gasoline (Mogas95), and support should be provided to affected populations. The import market has not been reformed, and there is still no plan for the energy/electricity sector. - Risks: High risk of mismanagement, corruption and political resistance. High reputational risk for the Fund in case of failure. Strong vested interests. - Public Investment Management - Objective: Finalize and implement a public investment management assessment. - Progress-to-date: Team proposal; FAD PIMA mission underway January. - Risks: Risks to be evaluated after the PIMA is finalized. Significant implementation risks expected. - Expenditure Policy - Objectives: - Assess effectiveness of social spending. - Identify measures to rationalize spending. - Progress-to-date: Team proposal. ### Technical Assistance by Function — MCM (Monetary and Capital Markets) - Transition to IFRS - Objective: Gap analysis and preparation of a roadmap for IFRS (Safeguards recommendation). - Progress-to-date: Mission occurred, some progress. time frame now 2 years out. - Risks: Low capacity may delay implementation. Does not seem priority for BRH. - Debt Management and Market Development - Objectives: Evaluate current state of debt issuance; identify and address gaps in regulatory framework. - Progress-to-date: Request by BRH. - Risks: Political instability may hinder coordination with the ministry of finance. - Monetary Operations and Liquidity Management - Objective: Diagnostic of legal and operational frameworks. - Progress-to-date: Request by BRH. - Risks/Notes: Important complement for work on debt market and FX market development; BRH may not see as priority. - FX Market - Objective: FX market development and review of supporting FX regulations. - Progress-to-date: Request by BRH. - Banking Supervision - Objective: Transition to risk-based supervision. - Progress-to-date: Medium-term, donor-financed project. - Risks: BRH's limited capacity to absorb TA and high turnover of supervisory staff may hinder progress. - Central Bank Digital Currency (CBDC) - Objective: Provide guidance to BRH on exploration of a retail CBDC, focused on macro-economic implications, legal framework, financial integrity issues, and technological choices. - Progress-to-date: TA is underway June-September 2022 to assess BRH’s readiness and identify gaps before proceeding to test phase. Staff recommend a cautious approach. - Risks/Notes: This TA will not endorse any decision to issue a CBDC but provide guidance and highlight risks of proceeding without sufficient preparation. ### Technical Assistance by Function — STA (Statistics) - Real Sector Statistics - Objective: GDP and price index rebasing. - Progress-to-date: Rebased CPI was published in November 2018. May 2020 TA mission (CARTAC/World Bank) supported IHSI to update the base year for national accounts from 1987 to 2012 and backcast GDP series for FY 2001–19. - Monetary Statistics - Objectives: Reconcile monetary statistics sent to the IMF for surveillance with information in standardized reporting forms; review computation of gross and net foreign reserves. - Progress-to-date: Successful mission occurred mid-2020. Still excessive lag in Standardized Report Form reporting. - Policy note: Improving timeliness and quality of Standardized Report Forms should be a prerequisite for approval of a new program. - Government Finance Statistics - Objective: Improve fiscal statistics compilation and dissemination with respect to classifications, and coverage and scope of data. - Progress-to-date: Missions occurred in 2018 and 2020, but little progress so far with respect to comprehensive coverage of all revenue, expenditure, and financing in disseminated fiscal statistics (TOFE). - Risks: Lack of traction with the authorities and availability of timely and detailed source data. ### Technical Assistance by Function — LEG and FIN (Legal and Financial) - Anti-corruption - Objective: Provide advice on draft new anti-corruption legislation and its compliance with the UN Anti-Corruption Convention. - Progress-to-date: Comments sent by LEG on the draft law. - Risks: Lack of traction with the authorities. - AML-CFT - Objectives: - Clarify roles and objectives of each actor of the AML regime. - Prepare law on countering financing of terrorism. - Progress-to-date: CATF Mutual Evaluation report prepared by the World Bank was published in June 2018. Haiti placed on FATF Grey List in 2021. Offer made for TA in drafting laws to meet FATF standards and comply with FATF Action Plan. No formal response/acceptance received. - Risks: Lack of traction with the authorities, lack of technical capacity and effectiveness of legislative processes due to non-functioning Parliament. - Safeguards - Objective: Follow through on recommendations of the 2019 Safeguards Assessment. - Note: Necessary for future Fund financing. ### Technical Assistance by Function — CARTAC - External Sector Statistics - Objective: Strengthen compilation and dissemination of Haiti’s balance of payments data; improve quality and accuracy of data. - Progress-to-date: CARTAC report published in July 2021. - Risks: Lack of traction with the authorities and availability of timely and detailed source data. ### Key macroeconomic context, objectives, and projections (from Letter of Intent and MEFP) - Shocks and social impact: - Since 2018: protracted socio-political crisis, 2021 earthquake and tremors, a hurricane, upsurge in violence, assassination of the President in July 2021, COVID-19 effects, and spillovers from the geopolitical crisis in Eastern Europe. - More than one third of the population registered as ‘food insecure’ in 2021. - About 4.3 million people considered ‘food insecure’ in 2021 (UN). - IMF engagement and financing since 2019: - Financial assistance equivalent to around US$360 million related with: - Disbursement of SDR 81.9 million (US$111.6 million) under the Rapid Credit Facility. - Debt relief of SDR 15.2 million (US$22.6 million) under the Catastrophe Containment and Relief Trust (CCRT). - The 2021 SDR allocation (US$224 million). - FY2021 outcomes and FY2022 projections: - Real GDP declined by 1.8 percent in FY2021 (ending September 30). - Formal unemployment estimated at 15.5 percent in 2020 (ILO). - Inflation reached 25.9 percent (y/y) in March 2022, driven by supply disruptions, high monetary financing of the budget deficit, and higher food import prices. - Economic activity expected to rebound modestly in FY2022 with real GDP growth expected at 0.3 percent. - Inflation projected at 27 percent (y/y) at end-September or 26 percent on average for FY2022. - SMP objectives and policy commitments: - Request for a 12-month Staff-Monitored Program (SMP) ending May 2023 to: - Restore macroeconomic stability and growth, strengthen governance, and advance social protection. - Act as catalyst to signal commitment to donors and pave way for a subsequent Fund-supported arrangement. - Fiscal policy commitments: - Finalize budget for FY2022 in line with program objectives. - Adopt and publish budget for fiscal year 2022-2023 consistent with SMP objectives. - Commitments to not contract or guarantee any non-concessional external borrowing and not accumulate new external payment arrears. - Monetary policy commitments: - Reduce monetary financing of the budget deficit. - Maintain a floor for an adequate level of net international reserves. - Foreign exchange interventions aimed only at limiting excessive volatility. - BRH to address safeguard risks: revise central bank law, complete external audit for FY2021, and possibly finalize transition to IFRS. - Continue to monitor soundness of financial institutions and finalize regulatory texts related to risk-based banking supervision and cybercrime. - Social protection commitments: - Strengthen implementation of the “National Policy of Social Protection and Promotion” (PNPPS). - Expand coverage of money transfers based on SIMAST registry. - Increase budget allocation of the Ministry of Social Affairs while limiting the primary deficit of the nonfinancial public sector for FY2022. *Source: 1htiea2022001 - 4. Main partners. Many donors are financing capacity development or providing TA in Haiti.* ### 7. Public finances have been under pressure for several years. Tax revenues fell to 5.8 percent ### 7. Public finances have been under pressure for several years. Tax revenues fell to 5.8 percent ### Fiscal developments and budget outcomes - Tax revenues fell to 5.8 percent of GDP in FY2021. - Petroleum product subsidies accounted for one third of tax revenues in FY2021. - The government reduced expenditures in FY2021 to contain the NFPS deficit to 2.4 percent of GDP (compared to 3.2 percent of GDP in FY2020). - Diesel and kerosene retail prices were adjusted in December under the 1995 Law; increases exceeded 100 percent in December, bringing the price per gallon of these two products to the level prescribed by the retail price formula at that time. - The price of gasoline was increased by 24.4 percent in December. - Despite high domestic debt amortization and some new social spending, the authorities project to keep the NFPS budget deficit at 1.5 percent of GDP. ### Financing and use of SDRs - The BRH contributed about 85 percent of the gross financing needs of the NFPS in FY2021. - External grants and project financing increased in FY2021 in part related to the August 2021 earthquake. - The government used half of the allocation of Special Drawing Rights (SDRs) for emergency expenditures, including humanitarian assistance after the earthquake. - The government will report on use of the SDR allocation and established a Memorandum of Understanding between the BRH and the Ministry of Economy and Finance governing use of the SDR allocation for budgetary purposes. - During FY2021, some SDR resources financed emergency spending related to the earthquake, social spending, and the National Police. ### Monetary policy, BRH financing, and inflation - Net credit to the government by the BRH increased by 44.6 percent in FY2021 compared to the previous year. - Monthly inflation reached 4.1 percent (m/m) in November 2021 before dropping to 1.6 percent (m/m) in March 2022. - The BRH has maintained the interest rate on its 91-day bills at 10 percent since March 2020. - Transmission to lending rates remains weak, partly due to the shallow government securities market. - The government intends to significantly reduce monetary financing: BRH financing will be capped at 2.2 percent of GDP in FY2022 (QT) versus BRH financing of 2.9 percent of GDP in FY2021. - BRH financing equivalent to 1.5 percent of GDP is estimated to be non-inflationary; the remaining 0.7 percent of GDP will be sterilized by liquidity absorption operations and, if necessary, FX interventions. - Residual financing needs of 0.7 percent of GDP will be covered by domestic borrowing and external concessional financing. - If necessary, additional use of a portion of the 2021 SDR allocation would contribute to government financing. ### External sector and reserves - The external current account surplus is estimated at 0.5 percent of GDP in FY2021, down from 1.1 percent of GDP in FY2020. - Gross international reserves stabilized at 5.8 months of projected imports (with the additional contribution of the SDR allocation). - The current account surplus is projected at around 0.8 percent of GDP in FY2022, supported by remittance flows, a modest recovery in exports, and higher official transfers. - The surplus will help finance part of the capital account deficit driven by modest FDI inflows and an increase in banks’ net foreign assets. ### Exchange rate, FX market, and BRH interventions - After BRH measures in 2020, the gourde/US dollar rate appreciated from 121 to 63 in September 2020 (about 48 percent). - In early 2021, a spread emerged between the formal rate and the parallel market rate estimated at about 25 percent; the spread decreased to around 5 percent in late-2021 but widened since to between 10-15 percent. - With domestic instability in FY2021 and gross NFPS financing needs of 3.4 percent of GDP, the BRH smoothed exchange rate fluctuations while minimizing banking sector volatility and maintaining stable gross international reserves. - The BRH will limit FX interventions to smoothing excessive exchange rate fluctuations and adopt a floor on net international reserves (QT) and an FX market intervention rule. - The BRH will prepare a roadmap for FX market reform, including: (i) an appropriate mechanism for FX intervention; (ii) revised limits on banks’ net open foreign exchange positions; and (iii) finalizing revision of Circular 114-2 by the end of the SMP (May 2023). - Commitment: not to impose or intensify restrictions on payments and transfers for current international transactions, nor to introduce or modify multiple currency practices. ### Financial sector stability and banking metrics - Capital adequacy ratio at end-December 2021 was 20.8 percent. - Non-performing loans (NPLs) increased slightly to 7.7 percent of total loans in February 2022. - Bank profitability recovered in FY2021, with stronger growth in credit and profits from foreign exchange transactions. - Bank liquidity remains high, with deposit growth an important source of funding. - BRH will continue close monitoring of the banking sector given macroeconomic deterioration. ### Fiscal policy stance and short-term strategy (FY2022 and medium-term) - Fiscal stance in FY2022 aims to reduce monetary financing by the BRH and keep a floor for the NFPS primary balance at a deficit of 1.5 percent of GDP (quantitative target - QT), notwithstanding a large output gap. - FY2022 gross financing needs are estimated at 2.9 percent of GDP versus 3.4 percent of GDP in FY2021. - Despite net subsidy spending on petroleum products of 1.1 percent of GDP in FY2022 (0.6 percent of GDP in FY2021), the government intends to contain other current expenditures to preserve fiscal space for higher social spending. - The modest mobilization of revenues together with moderately higher budget support will allow a small increase in domestically-financed capital expenditures. - In the medium term, the government will stabilize the budget deficit at around 2.8 percent of GDP. - The program includes an asymmetric adjustor to the floor of the NFPS primary balance and to net international reserves (NIR) if external budget support is lower than projected (see Technical Memorandum of Understanding, Annex II). ### Revenue mobilization and public finance management reforms - The draft General Tax Code (CGI) and draft Tax Procedure Codes will be finalized by end-September 2022 (SB). - Measures include aligning excise taxes (alcohol, tobacco, soft drinks) with the draft General Tax Code, eliminating customs exemptions, correcting delays in collecting registration duties, and strengthening controls to increase revenues modestly. - The authorities adopted and published a budget for FY2022 in line with SMP objectives (prior action). - Consolidation of bank accounts into a Treasury Single Account (TSA) at the central bank will be completed in 2022-2023. - FY2023 budget will be adopted and published by September 30, 2022 in line with SMP objectives. - A medium-term budgetary framework for FY2023, 2024, and 2025 will be developed with the NFPS deficit as the main anchor. - Ongoing TA on public investment management will improve project planning and implementation. - The publication on June 9 of the audit of COVID-related spending prepared by the Supreme Court of Auditors and Administrative Litigation (CSCCA) was a prior action for launching the SMP. ### Petroleum product market reform and social protection measures - December 2021 decision: start adjusting petroleum product prices by eliminating subsidies on diesel and kerosene; further adjustments paused due to hardship from higher imported food prices and security concerns. - The FY2022 budget and medium-term outlook conservatively do not assume elimination of fuel subsidies. - BMPAD had been reinstated as monopoly importer by mid-2020; in November 2021 its role in actual supply was reduced. BMPAD now organizes tenders every two months to determine the premium for direct importation by petroleum companies. - The government intends to eliminate BMPAD involvement in imports by amending legal provisions, establish a regulatory framework for the petroleum sector, and strengthen related regulatory institutions. - Compensating measures adopted on April 20, 2022 for remainder of FY2022: vouchers for registered public transport operators; school kits; hot meals through school canteens, mobile canteens and community restaurants; plans to modernize public transport vehicles for schoolchildren; and labor-intensive public works. - Communications plan to explain benefits of redirecting fuel subsidy expenditure (of which 93 percent of the benefit goes to the top income group representing one fifth of the population) toward growth and social protection. ### Social safety net development and FAES/MAST reforms - Steps to build a coherent national social safety net: implement PNPPS governance structure by end-2022; with donors and SIMAST prepare an action plan to implement PNPPS by end-March 2023. - Reinforce central role and budget allocation for the Ministry of Social Affairs and Labor (MAST) (excluding transfers to the population) in line with the floor set as a QT; funding covers management costs and capacity building and supports SIMAST updates and cash transfer financing (quantitative objective). - FAES accountability measures: provide consolidated quarterly financial statements from March 31, 2022; restore regular functioning of FAES board before end-June 2022 with subsequent quarterly meetings (SB). - Transfer all domestically funded social programs executed by FAES under MAST supervision from the 2023 budget year onwards and include FAES resources and activities in the medium-term budgetary framework. - Plan to integrate activities into SIMAST to allow digital cash transfers and automated payments via mobile operators or other methods. ### Monetary framework and program commitments - Adopt a ceiling on net credit to the NFPS as the main anchor to limit monetary financing of the budget deficit (QT). - Conduct short-term liquidity absorption operations to reduce inflationary pressures and strengthen monetary policy transmission. - BRH has initiated reforms to develop the government securities market, strengthen the monetary policy framework with new facilities, and review foreign exchange regulations; TA requested to support FX market reforms. - Deepening the government securities market is intended to provide alternative government financing and improve monetary policy conduct. - Continue implementing TA recommendations to enhance the quality of monetary statistics for program monitoring. *IMF staff summary based on chapter text.* ### 28. We will continue reforms to strengthen banking supervision and increase financial inclusion ### 28. We will continue reforms to strengthen banking supervision and increase financial inclusion ### Banking supervision and regulation - The BRH will strengthen its banking supervision by adopting a risk-based approach, with assistance from an IMF expert. - The BRH will finalize the remaining texts on banking regulations. ### Central Bank Digital Currency (CBDC) and messaging standards - The BRH will continue to assess the feasibility of issuing a central bank digital currency (CBDC), exercising caution given risks to financial integrity and the need for robust internal supervision. - The authorities have requested TA from the IMF’s Monetary and Capital Markets Department to address risks associated with CBDC deployment. - Support has been received from specialized foreign firms and collaboration initiated with countries that have already launched a CBDC, particularly in the Caribbean. - The authorities will work on modernizing migration to new international messaging standards to promote interoperability and financial integrity. ### Anti–Money Laundering / Combating the Financing of Terrorism (AML/CFT) - The authorities commit to putting in place a robust legal framework to fight money laundering and terrorist financing (AML/CFT). - The Caribbean Financial Action Task Force (CFATF) identified many shortcomings in Haiti’s AML/CFT system and the FATF added Haiti to its “gray” list of jurisdictions under increased monitoring. - To address legal-framework shortcomings and offset risks from FATF increased-monitoring status and correspondent banking stresses, the authorities requested TA from the IMF’s Legal Department and other technical partners to prepare a draft amendment to the Anti-Money Laundering and Terrorism Financing Act. - The amendment will be approved by the Council of Ministers by December 2022 (SB). ### Governance and safeguards - With IMF TA, a decree mandating transparency requirements for public procurement (including disclosure and publication of beneficial owners of successful bidders) was drafted and published in November. - The authorities will ensure the implementation of the provisions of this decree (monthly SB) and start preparations for a comprehensive reform of the procurement law. - The authorities will ensure the law governing the Supreme Court of Auditors and Administrative Litigation (CSCCA) guarantees its functioning in accordance with standards for supreme audit institutions. - A Governance Diagnostic led by IMF staff is called for; the authorities commit to publishing the Diagnostic report and to incorporate its recommendations into the reform program during the second half of the SMP. - The authorities will finalize amendments to the anti-corruption laws to ensure effective implementation and compliance with the United Nations Convention against Corruption. - Continued implementation of the recommendations of the 2019 IMF Safeguards Assessment, including: - Approval by the BRH Board of draft amendments to the Central Bank Law prepared with IMF TA by the end of September 2022 (SB benchmark). - Completion of the external audit of the BRH for the year ending September 30, 2021 and publication of the audited financial statements by end-June 2022 (SB). - Re-establishment of the Audit Committee of the BRH Board of Directors, including the revised charter, by end-2022. - Implementation of governance measures for management of foreign reserves put in place prior to the 2020 RCF disbursement. - Acceleration of the transition to International Financial Reporting Standards (IFRS) and modernization/strengthening of the independence of internal audit and control functions. ### Climate change and poverty reduction - Short-term reform agenda focuses on maintaining social and macroeconomic stability and restoring growth to mobilize resources to reduce poverty. - Plans to build a social safety net and improve coordination of external assistance to increase impact and optimize restructuring of agencies under MAST. - Intend to initiate an analysis of climate hazards or risks with assistance from the World Bank and the IMF to better integrate climate policies into macroeconomic and policy frameworks. ### Program monitoring and communications - A program-monitoring committee comprising representatives from the Ministry of Economy and Finance and the BRH has been set up; it will meet at a minimum every quarter with the Minister of Economy and Finance and the Governor of the BRH to present progress on SMP implementation. - The program will be monitored using QTs at the end of June and December 2022, with indicative targets at the end of September 2022 and March 2023, and SBs as listed in Table 3. Specific items are defined in the attached Technical Memorandum of Understanding (Annex II), which includes the list and frequency of data to be provided. - The authorities commit to undertake internal and external communications and to engage state institutions and national actors (civil society, private sector, NGOs, media, other stakeholders) to strengthen ownership and public support for the reform agenda. - The authorities undertake to publish this Memorandum and the accompanying IMF Staff Report online on the website of the Ministry of Economy and Finance as soon as the SMP is approved by the IMF and before June 30, 2022. ### Key quantitative and program-specific figures (as reported) - Program exchange rates agreed for the program: - HTG 100.0123/US$ - US$1.133600/EUR - SDR 0.7154070/US$ - Net central bank credit to the nonfinancial public sector (components as of September 30, 2021, in millions of gourdes): - Net central bank credit to the nonfinancial public sector: 160,047,059.23 - Net credit on central government: 162,196,977.99 - Claims on central government: 200,791,090.44 - Deposits by government: 38,777,196.75 - Deposits in current accounts: 26,730,369.21 - Sight deposits (HTG): 7,073,003.48 - Sight deposits (US$): 19,657,365.73 - Securities seized UCREF: 594.75 - Sundry accounts payable: 636,307.08 - Certified checks: 329,125.56 - Certified bank checks: 25,041.45 - Foreign Debt Special Fund: 55,669.97 - Treasury special accounts: 6,762,697.60 - Civil pension – investments transaction: 375,029.84 - IMF debt relief after disaster: 2,410,591.87 - Minus: Deposits from autonomous agencies (ONA): 276,996.07 - Net credit to the rest of the nonfinancial public sector: -2,149,918.76 - Claims on the rest of the nonfinancial public sector: 610,420.96 - Deposits by the rest of the nonfinancial public sector: 2,760,339.72 - Deposits by autonomous agencies (ONA) (HTG and US$): 276,996.07 - Local government deposits (sight deposits and certified checks): 489,202.33 - Deposits by state-owned enterprises (sight deposits in gourdes and US$ and certified checks): 1,994,141.32 *Source: Excerpts from the IMF staff-monitored program documentation (Memorandum on Economic and Financial Policies and Technical Memorandum of Understanding).* ### 13. The gross international reserves of the central bank are those external assets that are ### 13. The gross international reserves of the central bank are those external assets that are ### Definition of gross international reserves - Gross international reserves of the central bank are external assets that are readily available to and controlled by monetary authorities for: - meeting balance of payments financing needs, - intervention in exchange markets to affect the exchange rate, - maintaining confidence in the currency and the economy, - serving as a basis for foreign borrowing. - Reserve assets must be foreign currency assets and assets that actually exist. All contingent assets are excluded. - Underlying concepts: "availability for use" and "control" by the monetary authorities. - The gross international reserves reported by the BRH from Standardized Report Forms 1SR or 2SR must conform to this definition. - Included in gross international reserves: monetary gold, liquid assets, holdings of Special Drawing Rights (SDRs), and IMF reserve position. - Excluded from gross international reserves: swaps in foreign currency with domestic financial institutions and pledged or otherwise encumbered reserve assets. ### Definition and calculation of net international reserves (BRH) - Net international reserves of the BRH = gross international reserves of the BRH minus the following (from Standardized Report Forms 1SR or 2SR, except IMF balances which come from the IMF Finance Department): - (i) gross external liabilities excluding allocations of special drawing rights and liabilities related to Haiti’s participation in the capital of international financial institutions, - (ii) foreign currency deposits of commercial banks at the BRH (sight deposits in US dollars and euro from BCM to BRH, and the CAM transfer), - (iii) commitments related to foreign currency swap transactions, - (iv) special foreign currency accounts, - (v) project accounts. - Calculation example (In thousands) — September 2021: - BRH gross international reserves - Gold holdings: 9,880,753.71 (gourdes) | 98,795.39 (US$) - Foreign currency: 5,998,299.64 (gourdes) | 59,975.62 (US$) - Foreign sight deposits: 24,302,710.70 (gourdes) | 242,997.22 (US$) - Investments abroad: 189,797,159.80 (gourdes) | 1,897,738.18 (US$) - SDRs holdings (according to IMF books): 13,972,219.51 (gourdes) | 139,705.01 (US$) - IMF reserve position (based on IMF books): 2,818,820.50 (gourdes) | 28,184.74 (US$) - Minus: Foreign liabilities: 70,137,904.62 (gourdes) | 701,292.79 (US$) - Of which: Foreign liabilities (excluding liabilities related to Haiti’s participation in the capital of international financial institutions): 8,518,510.82 (gourdes) | 85,174.63 (US$) - Debt service payment to PDVSA: 42,558,855.10 (gourdes) | 425,536.21 (US$) - Off-balance-sheet foreign currency liabilities: 1,460,675.36 (gourdes) | 14,604.96 (US$) - Liabilities to the IMF (based on IMF books): 17,599,863.34 (gourdes) | 175,976.99 (US$) - Minus: Deposits in foreign currency: 129,098,781.43 (gourdes) | 1,290,829.04 (US$) - Minus: Foreign currency swap transactions: 6,002,703.60 (gourdes) | 60,019.65 (US$) - Minus: Special accounts in foreign currency: 133,391.45 (gourdes) | 1,333.75 (US$) - Minus: Project accounts: 67.74 (gourdes) | 0.68 (US$) - Net international reserves of the BRH: 41,397,115.02 (gourdes) | 413,920.24 (US$) - Exchange rate used: HTG 100,0123/US$ ### Foreign exchange interventions and program adjusters - Interventions of the BRH in the foreign exchange market are defined in the Memorandum of Economic and Financial Policies. - If budgetary grants are lower than expected the floor on net international reserves will be adjusted downwards by the amount of the difference in question. - Conversely, the floor will not be adjusted upwards by the amount of budgetary grants exceeding the expected levels. ### Projected budgetary grants (In millions of US dollars) - Cumulative flows since end-September 2021 and since end-September 2022 (table entries): - Dec. 2021: - - March 2022: - - June 2022: 9.1 - Sept. 2022: 18.1 - Dec. 2022: 0.0 - March 2023: 18.8 - June 2023: - - Sept. 2023: - ### Primary balance of the Nonfinancial Public Sector (definitions and adjusters) - Definitions: - Domestic arrears of central government: expenditure accepted by the Treasury and unpaid after 90 days, despite delivery of goods and services; excludes unpaid off-budget government commitments. - Unpaid off-budget central government commitments: liabilities incurred outside the budgetary process that may give rise to contingent claims. - Net domestic financing of the NFPS = sum of: - (i) net central bank credit to the NFPS; - (ii) net credit from domestic commercial banks to the NFPS (includes changes in NFPS deposits and net issuance of Treasury bills and other NFPS securities to commercial banks); - (iii) net nonbank credit to the NFPS (includes net issuance to nonbank institutions, change in NFPS position vis-à-vis electricity sector including independent power producers, and net change in suppliers’ credit and domestic arrears of central government). - Net external financing of the NFPS = sum of: - (i) new external loan disbursements (excluding IMF loans); - (ii) net change in external arrears minus external loan amortizations. - Primary balance of the NFPS for program purposes = net domestic financing of the NFPS + net external financing of the NFPS − interest payments on public debt. - Adjuster: - If budgetary grants do not reach expected levels, the floor on the primary balance of the NFPS will be reduced by the amount of those deficits. - If external budget support exceeds projections, the floor on the primary balance will not change. ### Budget allocation to the Ministry of Social Affairs and Labor (MAST) - Definition: budget allocation to MAST for social expenditure = sum (excluding transfers to the population) of the budget allocation (or expenditure implemented if lower) for all social programs of the MAST budget, including resources allocated and implemented by: - FAES, - the Emergency Program (2022), - Klere Chimen, - activities of the Office of the State Secretary for Disability Inclusion (BSEIPH). - Other government entities may support implementation of MAST programs. - The floor on the QT applies to the sum of these allocations. ### Definitions and limits on public sector external debt and guarantees - Definition of debt (per paragraph 8 of the Guidelines on Public Debt Conditionality): - Debt = a current (not contingent) liability created under a contractual arrangement through provision of value in assets or services, requiring future payments in assets or services to discharge principal and/or interest. - Primary forms: - i. loans (including deposits, bonds, debentures, commercial loans, buyers’ credits, repurchase agreements, official swap arrangements), - ii. suppliers’ credits (supplier permits deferral of payments after delivery), - iii. leases (debt = PV at inception of lease of all lease payments expected during agreement excluding payments for operation, repair, or maintenance). - Gross public debt: debt owned by the Nonfinancial public sector and comprised the advances by the Banque de la République d’Haiti (BRH) to the government. - Debt guarantees by the public sector: explicit legal obligation to service a debt in event of borrower non-payment (in return for payment in cash or in kind). - Concessional debt: an external debt is concessional if it includes a grant element of at least 35 percent. - External public debt: debt of the public sector contracted or serviced vis-à-vis non-residents; includes, where applicable, domestically issued government debt held by non-residents. This TMU assumes non-residents do not hold domestically issued public sector debt; the stock will be adjusted if new information becomes available. - Quantitative target: the central government undertakes not to contract or guarantee any new non-concessional external debt. This target: - applies to domestic debt, - applies to any private debt guaranteed by the central government that constitutes a contingent liability, - excludes short-term (maturity < one year) import-related credits, rescheduling arrangements, borrowing from the IMF, non-resident purchases of treasury bills, and gourde-denominated BRH bills indexed to the exchange rate. - Monitoring: this quantitative target will be monitored continuously by the authorities and any non-observance will be immediately reported to the Fund. ### Arrears definitions and monitoring - Public sector external arrears: - Include all debt-service obligations (principal and interest) on loans contracted or guaranteed by the public sector that are due to non-residents but not paid on the due date per the loan contract. - Exclude those arising from obligations being renegotiated with external creditors and/or those that are litigious. - Exclude arrears resulting from non-payment due to international sanctions preventing payments to the creditor (for the purpose of assessing the quantitative target on non-accumulation of new external debt arrears). - Monitoring: monitored continuously by the authorities and any non-observance will be immediately reported to the Fund. - Domestic arrears of the central government: - Include all debt-service obligations (principal and interest) on loans contracted or guaranteed by the central government that are due to residents but not paid 90 days after due date per the loan contract. - Monitoring: monitored continuously by the authorities and any non-observance will be immediately reported to the Fund. ### Reporting of data for program monitoring - Government will provide IMF staff with information in the summary table; any data revisions will be promptly communicated. - Authorities will inform IMF staff in writing at least 10 working days (excluding public holidays in Haiti) before any change in economic and financial policies likely to affect program outcomes (examples: changes in tax or customs legislation, wage policy, support for public or private enterprises). - With respect to continuous QTs, authorities will report any non-observance to the IMF promptly. ### Summary table — selected data to be provided (frequency and reporting deadlines) - Real Sector - National accounts: Annual | Year-end + 3 months - Quarterly economic indicators (economic cycle): Quarterly | Quarter-end + 2 months - Consumer price index (including breakdowns): Monthly | Month-end + 3 weeks - Public Finances (selected entries) - Fiscal revenues (internal, external, other): Monthly | Month-end + 1 week (4 final weeks final data) - Expenditures on Cash Basis (wages and salaries, goods and services, external debt, current accounts): Monthly | Month-end + 1 week (4 final weeks final data) - Table of government financial transactions (TOFE): Monthly | Month-end + 2 weeks - Balance on current accounts and operation of projects: Monthly | Month-end + one month - Report on Revenue Collection of DGI (progress report): Monthly | Month-end + one month - Report on social protection expenditures: Quarterly | 30-day lag (final data) - Detailed revenue and expenditures of BMPAD: Quarterly | Quarter-end + one month - Dashboard of EDH showing monthly production composition by independent producers, EDH, and by region: Monthly | 30-day lag (final data) - EDH commercial data allowing calculation of billing and collection rates: Monthly | Month-end + one week - Monetary and Financial Data (selected entries) - Exchange rate: Daily | Day-end + one day - Monetary base and sources thereof and currency in circulation: Weekly | Week-end + one week - Aide Memoire Table (including stock of BRH bonds; deposits at commercial banks; credit to private sector in gourdes and U.S. dollars; details of inflows and outflows of foreign exchange reserves; volume of foreign exchange transactions; gross and net international reserves; net BRH credit to central government and NFPS; stocks and interest rates of BRH bills): Weekly | Week-end + one week - Tables of monetary statistics showing balance sheet of BRH (Table Standardized Report Form-1SR) and consolidated banking sector (Table Standardized Report Form-2SR): Monthly | Month-end + one month - Information on the composition of gross reserves: Monthly | Month-end + one month - Audited financial statements of the BRH: Annual | Year-end + 3 months - Balance of Payments - Balance of payments (first version): Quarterly | Quarter-end + 6 weeks - Revised balance of payments: Quarterly | 3 months after the first reporting - BRH FX cash flow table; quarterly projections through end of fiscal year: Quarterly | Quarter-end + one month - External Debt (selected entries) - External debt report prepared by BRH showing monthly disbursements; debt service, debt forgiveness and rescheduling, arrears, and debt stocks: Monthly | Month-end + one month - Details of any external public debt and debt guaranteed by the State: Monthly | Month-end + one month - Data on stocks, accumulation, and repayment of external arrears: Monthly | Month-end + 6 weeks - Table of complete amortization of external debt: Annual | End of financial year + 3 months - International Investment Position (IIP): Annual | Year-end + 3 months *Source: 1htiea2022001 - 13. The gross international reserves of the central bank are those external assets that are* --- _Source: https://www.imf.org/-/media/files/publications/cr/2022/english/1htiea2022001.pdf_