## tarea2025039-print-pdf ## Source details **Canonical URL:** [tarea2025039-print-pdf](https://www.imf.org/-/media/files/publications/tar/2025/english/tarea2025039-print-pdf.pdf) ## Other formats - [Markdown version](/-/media/files/publications/tar/2025/english/tarea2025039-print-pdf.pdf.md) - [Structured JSON version](/-/media/files/publications/tar/2025/english/tarea2025039-print-pdf.pdf.json) --- ### Mission scope and timeline - At the request of the authorities of Haiti, a Governance Diagnostic (GD) mission was conducted by IMF staff during September-December 2023. - Inter-departmental scoping mission: September 11-15, 2023. - Main mission in two parts: - virtual mission: November 27 - December 1, 2023; - off-site mission in Panama: December 11-15, 2023. - Missions followed and complemented by extensive desk review. ### Guiding frameworks and purpose of the Governance Diagnostic - Guided by: - IMF’s 2018 Framework on Enhanced Fund Engagement on Governance (2018 Framework); - IMF’s 2022 Strategy on Fragile and Conflict-Affected States (FCS). - Purposes: - assess the severity of corruption risks; - identify macro-critical governance weaknesses in key state functions (fiscal governance, central bank governance and operations, financial sector oversight, market regulations, AML, and rule of law); - propose concrete reform measures. - GDs are forward-looking; analysis and recommendations: - do not cover individual corruption cases or allegations; - address structural policy issues and near- and longer-term reform measures. ### Mission activities and contributors - Consultations with international organizations, development partners, governmental and non-governmental stakeholders; short-term political economy experts: Dr. Robert Muggah, Professor David Carment, Ms. Alexandra Wishart. - Mission team led by Ms. Tina Burjaliani; team members listed in source. - Support from MEF coordinators and additional IMF staff acknowledged. ### Key contextual findings (Executive Summary excerpts) - Population and settlement: - Haiti has a population of approximately 11 million, about half residing in Port-au-Prince and surroundings. - Geography: - Haiti shares a 390-kilometer land border with the Dominican Republic. - Economic standing: - Haiti is currently the poorest country in the Latin American region in terms of per capita income and one of the poorest countries globally. - Demographic and environmental trends: - More than half of Haiti's population has shifted from rural to urban areas in recent years. - Forested areas now constitute only 12.6 percent of the country as of 2020. - Hazard exposure: - Over 96 percent of Haiti’s population is exposed to natural hazards, including hurricanes, floods, and earthquakes. - Service deterioration and disasters: - Access to basic services has deteriorated, especially since the 2010 earthquake and the 2016 Hurricane. - The 2021 earthquake restressed already ruptured faults. ### Security, violence, displacement, and international stabilization - Security and violence: - Violence intensified in recent years; gangs control large parts of Port-au-Prince. - Examples: June 2022 attack on the Palace of Justice; Sep-Nov 2022 Varreux terminal blockade. - February 29, 2024 violence led to prison breaks and wider insecurity. - Humanitarian statistics: - More than 2,500 people were killed or injured during January-March 2024 (UN); - Nearly 95,000 people fled Port-au-Prince during same period; - Number of Haitian refugees and asylum seekers increased to half a million by May 2024; - Some 362,000 people currently displaced in the country, up from 314,000 at the end of 2023. - International stabilization: - UN Security Council-approved Multinational Security Support (MSS) Mission led by Kenya approved in October 2023. - Deployment notes: initial schedule as early as January 2024 derailed; approximately 1,000 Kenyan police officers plus additional 2,000 personnel expected. - MSS objectives: protect state institutions and critical infrastructure, work with HNP; concerns about HNP corruption vulnerabilities undermining effectiveness. ### Political context and interim governance - Political system: presidential republic; historically unstable—of the fifty-four Presidents elected since 1806, only nine completed the full term. - Institutional disruptions: - No elections since 2016; - No sitting parliament since 2020; no President since assassination in 2021; - Prime Minister’s office governed by decree. - Transitional arrangements: - Nine-member transitional Presidential Council established April 25, 2024; serves until February 7, 2026 with rotating chair among seven voting members. - Interim Prime Minister appointed May 27, 2024; transitional government installed June 11, 2024. - General elections planned for end of December 2025 (first since 2016). ### Governance, rule of law, and corruption vulnerabilities — cross-cutting observations - Anti-corruption and AML efforts suffer from uneven enforcement due to lack of independence, insufficient capacity and resources. - Legal and institutional frameworks inadequate; impunity prevalent and worsening. - Asset declaration procedures for senior officials not fulfilled; not a single high-ranking official prosecuted for corruption offences despite multiple investigations referred by ULCC. - Sectoral weaknesses summarized below. ### Priority Recommendations (selected measures 1–7) - Measure 1: Create and operationalize an Anti-Corruption Pôle (AC Pôle). - Authority/action: PM should issue a Decree creating the AC Pôle; MEF, ULCC, UCREF, HNP, Ministry of Justice, Judiciary to participate. - Objective: Strengthen accountability for corruption. - Timeline: ST. - Measure 2: Facilitate investigation of laundering of proceeds of Haitian corruption and organized crime abroad by strengthening UNCAC alignment, publishing asset declarations, strengthening MLA framework, and concluding agreements to enhance MLA. - Authority/action: Revising legal framework requires Parliament; PM, ULCC, UCREF, MOJ, Judiciary to enforce existing framework and prepare amendments. - Objective: Strengthen accountability for corruption and ML. - Timeline: MT. - Measure 3: Develop and implement strategy to promote integrity and reduce illegal activities in customs and tax administrations based on independent corruption-risk study. - Authority/action: PM and MEF to lead. - Objective: Strengthen revenue administration and reduce corruption risks. - Timeline: ST. - Measure 4: Improve coordination, transparency, accountability and efficiency in foreign assistance management; encourage data aligned with International Aid Transparency Initiative standards. - Authority/action: PM and MEF. - Objective: Strengthen transparency, integrity and efficiency in international aid. - Timeline: ST. - Measure 5: Mandate ex ante evaluations for all internally financed projects and strengthen project selection framework. - Authority/action: MEF and Ministry of Planning and External Cooperation. - Objective: Strengthen planning and allocation in PIM. - Timeline: ST. - Measure 6: Strengthen PFM by reinstating financial controller’s prerogatives (ST); adopting a budgetary control guide (MT); adopting a renovated expenditure execution manual (MT). - Authority/action: MEF. - Objective: Strengthen transparency and accountability in PFM. - Timeline: ST/MT. - Measure 7: Strengthen governance of BRH as banking supervisor by revising decision-making structure (MT) and delegating supervisory decision-making to specialized committee as provisional measure (ST). - Authority/action: Parliamentary legal changes required; BRH Board to delegate powers by decision. - Objective: Strengthen financial sector oversight and reduce corruption risks. - Timeline: ST/MT. ### Section I — Severity of Corruption and its Impact - ALC framework: authority, legitimacy, capacity are core fragility elements. - Haiti scores 17/100 in Transparency International’s 2023 Corruption Perceptions Index (TPI). - Global Competitiveness Index and World Bank WGI score Haiti strikingly low. - PetroCaribe case (Box 1) key facts: - Haiti joined PetroCaribe in 2006; government claimed almost $4 billion raised by PetroCaribe oil between 2008 and 2016. - 2017 Parliamentary Special Commission reported widespread corruption in managing $2 billion under three governments during 2008-2016. - CSCCA reports Jan 31 and May 31, 2019 alleged misappropriation and embezzlement for PetroCaribe 2008-2018; subpoenas followed (including July 15, 2019). - August 2020 report stated more than 140 billion HTG (estimated USD $2 billion) in PetroCaribe funds had been embezzled or wasted. - Role of elites and gangs: - Economy controlled by small political and economic elites; elites influence democratic processes and may finance/arm gangs. - Gangs: estimated 200 gangs operate across Haiti, around 95 in Port-au-Prince; before Feb-Mar 2024 security melt-down more than 60 percent of Port-au-Prince estimated under gang control. - Gangs drew revenue from customs, public markets, water/electricity networks, public transport; imposed tariffs and extorted. - Corruption and money laundering: - Ports and land crossings are targeted; IMF report found 2016 formal exports from Dominican Republic to Haiti approximately $800 million vs declared imports around $400 million (difference of 50 percent). - Corruption among highest proceeds-generating crimes linked with ML in Haiti; laundering risks very significant. - No available strategic analyses identifying sectors vulnerable to laundering of proceeds of domestic corruption. - UCREF annual reports identify general ML schemes but lack specificity; UCREF lacks tools to identify PEPs, family members, associates. ### Sanctions and cross-border laundering (Box 3) - UN Security Council: resolution 2653 on 21 October; six gang leaders sanctioned as of February 2024. - US: over 80 sanctions and visa restrictions on Haitians since 2020; State Department issued visa restrictions on 8 Haitians; amended Haiti Criminal Collusion Transparency Act (HR1684) passed July 2023. - Canada: at least 28 sanctions on Haitians since 2022. - Domestic proceeds of corruption frequently laundered outside Haiti; Pandora papers and other investigations cited. - Example: September 2023 Canadian sanctions on a main shareholder/former manager of Haiti’s largest bank led to resignation and sale of shares. ### International aid, incentives, and pathways out of fragility - Donor pledges and disbursements: - Bilateral and multilateral donors pledged $12.21 billion in humanitarian aid and recovery funding; 46.1 percent, $5.63 billion, was disbursed. - After 2010 earthquake, 99 percent of aid disbursed in 2010-2011 went to NGOs/private contractors; less than 1 percent went to government. - Policy implications: - Prioritize institution-building, transparency, accountability; coordinate aid with systemic change agenda. - Leverage diaspora (World Bank estimate: in 2021 about a quarter of Haitian GDP came from diaspora remittances; largest diaspora in US estimated 2 million; Dominican Republic diaspora over 850,000). ### Section II — Rule of Law, Anti‑Corruption and AML Frameworks - Judicial integrity: - Severe corruption eroded rule of law; judicial system degraded by political instability and violence. - Examples: June 2022 Palais de Justice occupation; judges operate under fear and intimidation; executive interference (e.g., 2021 removal of three Supreme Court justices without following constitutional procedure). - EMA provides a merit-based route; expanding EMA’s role emphasized. - January 2023 CSPJ found 28 of 69 judges/prosecutors could not be certified on moral integrity grounds. - Conviction record: only one conviction in a corruption case over past 15 years. - Justice sector budget: less than 1 percent of national budget. - AML/AC legal framework and implementation: - Key instruments: 1987 Constitution, 2008 Law on Declaration of Assets, 2014 AC Law (criminalizes various corruption offences with sentences of 3‑15 years). - Shortcomings: gaps in AC Law criminalization (intangible benefits, bribery in private sector, embezzlement coverage). - 2023 Decrees: April 30, 2023 Decree on ML/Terrorism Financing aligns AML framework with most FATF 40 recommendations; September 2023 Decree reinforced UCREF operational autonomy. - CFATF 2019 mutual evaluation identified significant deficiencies; Haiti placed under FATF increased monitoring in June 2021; action plan expired September 2023 with 13 out of 18 action items unaddressed or only partly addressed. - Operational constraints: - ULCC and UCREF lack guarantees of independence and operational autonomy; heads often appointed at President’s discretion. - Since ULCC creation in 2004 to end-2023: ULCC submitted 87 cases to prosecution; 9 cases sent in 2023. - UCREF receives several hundred STRs each year (none from DNFBPs) and hundreds of thousands of CTRs; cash transaction reporting threshold: 1,1 million gourdes (about 8,000 USD). - UCREF analyses led to between three and ten disseminations per year; none led to an ML conviction to date. - Cooperation between ULCC and UCREF minimal; UCREF preparing draft MOU to formalize cooperation. ### Section II.A) — Anti‑Corruption Pôle (AC Pôle) proposal - Rationale and scope: - AC Pôle proposed as a temporary, Haitian-driven mechanism to investigate and prosecute significant corruption, organized crime and ML cases; does not replace structural reforms. - Proposed structure (Box 4): - Legal basis: created by Prime Ministerial decree. - Institutional basis: composed of officials from ULCC, UCREF, HNP, prosecutors and judges; size and ranks to be determined by PM’s decree. - Jurisdiction: focuses on most important corruption, organized crime and ML cases as specified in PM’s decree. - Selection, integrity, management: - Selection Commission (formed by PM Decree): six members — two CSOs, two members of academia, two international anti-corruption experts nominated by development partners. - Selection Commission conducts integrity and capacity assessments and proposes two nominees per position; PM assigns officials from list. - AC Pôle to comply with UNCAC and Jakarta Principles; publish bi-annual activity report with statistics. - Daily operation managed by a Secretary selected by Selection Commission; small secretariat to support operations. - International advisors may assist. - Capacity, resources, international cooperation: - Significant international financial, organizational and capacity support required. - Leverage UNODC and other partners; MSS deployment noted as potential security support. - UCREF encouraged to pursue Egmont Group membership; MOUs with regional counterparts exist (Turks and Caicos Islands 2022, Guyana 2022, Guatemala April 2023, Mexico August 2023, Trinidad and Tobago 2023; earlier MOUs with Dominican Republic April 2018 and Lebanon). - Key recommended actions: - Create AC Pôle by PM decree; establish Selection Commission; appoint Secretary and secretariat; ensure UNCAC/Jakarta compliance; provide targeted capacity, security, infrastructure, IT; strengthen UCREF independence and pursue Egmont membership; enhance MLA and international cooperation. ### Section III — Governance Weaknesses linked with Corruption Vulnerabilities in Fiscal Governance — A. REVENUE ADMINISTRATION - Corruption forms and drivers: - Petty corruption, institutionalized corruption affecting large/medium enterprises, customs-specific practices (under-invoicing, under-valuation, misclassification, bribery, smuggling). - Power imbalances: powerful businesses influence customs officials; smaller importers pay bribes. - Institutional drivers: lack of collaboration among DGI, AGD, ULCC; ambiguous role of Tax Inspection Directorate (DIF); limited role of IGF; lack of national digitalization strategy; archaic institutional arrangements; limited autonomy of administrations. - Tax burden and performance: - Very low tax burden: estimated at only 5.9 percent of nominal GDP during the past five years. - DGI revenue table (selected totals preserved exactly as in source): - Total tax revenue: 39 — 36.288 — 51.569 — 56.047 (values presented in Table 2 as in source). - Tax Code and Customs Code shortcomings: - New Tax Code (Decree of January 20, 2023) compiles various texts; includes 39 types of taxes, fees, and duties, only 19 of which generate 99 percent of total tax revenue collected by the DGI. - New Tax Code entering into force in October 2024. - Customs HS nomenclature not harmonized with HS 2022. - AGD collects at least seven duties/fees on Customs Declaration Form (FDU). - Specific container tax (TC) rates: USD 40 per container by sea and HTG 5,000 per container by land. - Tax expenditures and special regimes: - Plan to reduce tax expenditure to 2 percent of GDP by 2025 (Circular DEE/BM/202-Juin 20 of June 25, 2020). - New Tax Code Part Four (Articles 298 to 410) covers investment tax benefits, free trade areas, industrial parks. - Management by different agencies (CII, CNZF, SEN) increases overlap risk. - Administrative powers and user rights imbalances: - Multiple discretionary provisions in Tax and Customs Codes (examples with Article references preserved in source). - Administrative timeframes often long, creating opportunities for negotiation and corruption. - Appeals and remedies: - Separation of collections and assessment disputes; filing within 30 days; administration decision timeframes: three months for collections, six months for assessments (extendable to nine months). - Absence of timely administrative response equates to implicit rejection (Article 626-5). - Organizational design principles recommended: - Separation between steering and operational tasks; staffing aligned with workload; HQ functions for uniform procedures; operational structures by financial stakes and taxpayer size; internal audit and prevention units. - Policy recommendations (selected): - Publish decisions on tax forgiveness and settlements (Article 644); - Establish independent Customs Appeals Commission modeled on Tax Appeal Commission and consistent with Standard 10.5 of Chapter 10 of Revised Kyoto Convention; - Enable AGD to monitor land border and private/secondary ports; deploy modern surveillance (drones, cameras, satellite images); - Abolish issuance of payment authorizations in periodic tax return procedure for DGI; apply simplified customs procedure in Article 108 of Customs Code; - Intensively use technologies to reduce face-to-face interactions; implement tax payments initially by mobile telephone and subsequently by bank transfer; - Develop and disseminate codes of ethics and conduct; establish internal affairs units; strengthen collaboration with ULCC; publish annual plans and reports. ### Public Financial Management (PFM): systemic weaknesses and recent advances - Advances: - Presentation in 2023/24 budget of MTBF and central MTEF. - Rationalization of public investment projects: portfolio reduced from 416 in 2022/23 to around 360 in 2023/24. - Development of cash management tools (PPM, DPD, PT) and gradual consolidation of TSA at BRH. - Implementation of payroll monitoring via SYSPAYE; publication of procurement and monthly TOFE and TERADA. - Production of State general accounts (CGE) and discharge draft laws up to 2021/22; publication of internal audit and IGF follow-up reports; CSCCA published Petro-Caribe and Covid-19 audit reports. - Budget preparation and execution weaknesses: - Incremental and late budget preparation; absence of execution review; late adoption of budget laws (except 2023/24); last five budget laws adopted by decree. - ELABU not deployed at ministries; SIGFiP deployed in 17 ministries with potential if fully integrated. - MEF Directorate General of Budget (DGB) poorly structured for reform implementation. - Public investment management risks and PIMA/CPIMA recommendations (Box 5): - Introduction of multi-year commitment authorizations (AE) for PI expenditure without budgeting for O&M. - One in five internally financed projects in 2023-2024 budget lack Identification and Operation Sheets. - Priority recommendations: make ex ante evaluations effective, incorporate annual PIP into three-year rolling plan, reinforce protection of ongoing projects, present large projects in streamlined PIP, accelerate PI cycle management module, establish legal framework covering PI lifecycle including climate. - Budget transparency and classification issues: - "Public interventions" ~11 percent of total expenditure in 2023-2024 budget. - "Other public expenditure" ~24 percent of total expenditure in 2023-2024 budget. - Cash management and TSA issues: - Cash management tools not coordinated or regularly updated. - TSA progress hindered by 2023 BRH cyberattack; Treasury lost access to BRH web portal. - Four special Treasury accounts repatriated to TSA; two remaining accounts under discussion. - Bank accounts for externally funded projects remain outside TSA. - Payroll and asset monitoring: - SYSPAYE functions suggested: retirement alert and automatic separation mechanisms. - Asset registers incomplete; 2012 OMRH manual not applied; State accounts do not show value of non-financial assets. - Reporting and accounting: - Monthly TEREDA tables lack analysis; publication delays documented (e.g., TEREDA Oct-Nov 2023 made public in second half of December 2023). - Draft PCEH for October 2023 including IPSAS-compliant standards being validated; accounts kept on modified cash basis. - Last State general account (2021-2022) transmitted to CSCCA in December 2023, a delay of 9 months. ### Public procurement and oversight institutions - Procurement system: - Renewal of legal/institutional framework delayed; recent instruments include Presidential order Feb 12, 2020 and Decree Nov 9, 2021. - In 2021-2022, just under 40 percent of major projects awarded through open tendering. - CNMP communication platform provides access to nine of required 19 types of information; reporting delays persist. - CRD dispute mechanism underused; contentious appeals complex given CSCCA position. - Internal audit — IGF: - IGF: staff of twenty-five (25) financial inspectors; produced ten reports over past two years. - IGF reports intended for MEF; not obliged to forward to CSCCA; annual activity and follow-up reports not published. - External audit — CSCCA: - CSCCA produced Petro-Caribe and Covid-19 audit reports. - Magistrates have passed end of ten (10)-year term; replacements blocked by absence of Parliament. - CSCCA does not produce/publish annual activity and follow-up reports; operational capacity constrained. ### Financial sector oversight — governance and supervision (selected findings) - Financial sector structure (as of June 30, 2023): - Banking system dominated by eight banks; total balance sheet US$4.7 billion, just under 25 percent of GDP. - 75 cooperative funds (55 federated) total balance sheet US$200 million. - Three private microfinance companies totaling US$80 million. - 16 specialized non-deposit institutions. - Macro-financial deterioration since 2018: - GDP decline of 10 percent since 2018, inflation exceeding 210 percent, halving of gourde exchange rate vs USD. - Solvency: - Average solvency ratio 19.37 percent (minimum requirement 12 percent; total 14.5 percent including conservation buffer 2.5 percent). - Banque Populaire Haïtienne (BPH) insolvency since 2016; under BRH on-site supervision. - BRH governance and supervision: - Responsibilities largely align with BCP 1 and 2; powers include licensing, supervision, penalties. - Need to revise Charter of Central Bank to improve board composition and create Executive Committee. - Interim measure: delegate supervisory decision-making powers to specialized committee pending legal amendments. - BRH annual report not published on website since 2018. - Operational capacity: - DSBIF and DIGCP face staffing shortages exacerbated by emigration and security context despite DSBIF workforce doubling in 2022. - On-site inspection continued; AML/CFT capacity development prioritized. - Prudential regulation: - New regulations on capital adequacy, internal supervision, IT security, consolidated supervision, credit risk. - Governance gaps: no compulsory qualified nonexecutive board members, no whistleblower protection, no process for reviewing dismissals/resignations of senior staff. - Implementation delays: beneficial owner identification not in place; exposure limit reductions phased in over two to two and a half years at banks' request. - DSBIF risk assessment and rating matrix with governance module planned for operationalization in 2024. ### Annex 1 — Anti‑Corruption Institutions (National Integrity System Pillars) - Pillars listed: - Superior Court of Auditors and Administrative Disputes (CSC-CA/CSCCA); - Anticorruption Unit (ULCC); - National Public Procurement Commission (CNMP); - General Finance Inspectorate (IGF); - Central Financial Intelligence Unit (UCREF); - Superior Council of the Judiciary (CSPJ); - Parliament. - Roles and mandates (high-level): - CSCCA: judge acts of government and accounts of authorizing officers; a priori supervision on draft contracts. - ULCC: created Sep 8, 2004; prevent corruption, investigate and refer cases to judiciary; placed under MEF oversight but autonomous. - CNMP: regulate and supervise public procurement. - IGF: internal administrative supervision under MEF. - UCREF: FIU receiving STRs and CTRs, conducting operational and strategic analysis, cooperating domestically and internationally; reorganized by Decree of 21 November 2023. - CSPJ: supervision, discipline and deliberation of Judiciary; formulates opinions on appointments. - Parliament: supervises government policy, approves budget, a posteriori supervision of budget execution. ### Selected measures from the Economic Governance Reform Plan (Table 3) — highlights - I. Rebuilding Rule of Law, Anti-Corruption and AML/CFT - 1. Maintain reliable statistics on all STRs and FIU analyses (immediate). Authority: UCREF. - 2. Improve volume/quality of STRs by FIs and covered entities; provide feedback and guidance (MT). Authority: UCREF. - 3. Reform judge selection and appointment system, strengthen CSPJ and EMA (LT). Authority: Judiciary, MOJ. - II. Fiscal Governance — Strengthen PFM - 4. Adopt and implement draft multi-year budget programming guide and timetable (ST). Authority: MEF. - 5. Limit unspecified expenditure to around 3-5% of total government expenditure (ST). Authority: MEF. - 6. Implement PIMA/CPIMA priority actions for PI programming and budgeting (ST/MT). Authority: MEF. - 7. Adopt main text implementing LEELF (LT). Authority: MEF. - 8. Reinstate financial controller’s prerogatives and adopt control guide and execution manual (MT). Authority: MEF. - 9. Update public procurement assessment and revise procurement law (MT). Authority: Public Procurement Authority. - 10. Improve reliability of State General Account via NBE harmonization with PCEH and SIGFiP accounting module (MT). Authority: MEF. - II.B Strengthen Audit Functions - 11. Address deadlock for audit magistrates whose terms ended (ST). Authority: CSCCA. - 12. CSCCA to produce and publish annual activity and follow-up reports (MT). Authority: CSCCA. - 13. Review CSCCA Act and constitutional provisions (LT). Authority: CSCCA. - II.C Strengthen Revenue Administration - 14. Establish Commission of Independent Customs Expertise for appeals on sort/origin/value (ST). Authority: AGD. - 15. Publish monthly statistics of top 30 most imported products (ST). Authority: AGD. - 16. Systematically publish legal and ad hoc exemptions (ST). Authority: MEF. - 17. Systematically publish all decisions on remission, moderation, transaction and relief (ST). Authority: MEF, DGI, ADG. - 18. Operationalize Tax Appeal Board and publish decisions online (CT). Authority: DGI. - 19. Revise Book of Tax Procedures to harmonize time limits (MT). Authority: DGI. - 20. Reorganize AGD and DGI along functional lines and separate HQ/local roles (ST). Authority: MEF. - 21. Define and publish operational guidelines and update AGD Code of Ethics (ST). Authority: DGI, ADG. - 22. Adopt declarative system by removing authorization for payment prior to declaration (MT). Authority: DGI. - 23. Remove special duty collected by AGD and ad valorem special duty collected by DGI and slightly increase TCA rate (MT). Authority: DGI, ADG. - 24. Enforce simplified customs clearance procedure in Article 108 (MT). Authority: ADG. - III. Financial Sector Oversight (selected) - 25. Revise decision-making in banking supervision; adopt draft BRH organic law; organize resolution/sanctions committee (MT). Authority: BRH. - 26. Improve BRH transparency: resume annual report publication and update supervision framework (ST). Authority: BRH. - 27. Strengthen supervision capacities: provide DSBIF and DIGCP human resources and prioritize licensing/off-site control (MT). Authority: BRH. - 28. Exercise resolution measures towards Banque Populaire Haïtienne per banking law (MT). Authority: BRH. - 29. Complete governance regulations with APB: require experienced non-executive board members and implement examination process for dismissals (MT). Authority: BRH. - 30. Finalize and operationalize DSBIF risk assessment and rating matrix for FIs (ST). Authority: BRH. *IMF | Technical Assistance Report – Haiti Governance Diagnostic Report (excerpts).* ### PREFACE _______________________________________________________________________________________ 5 ### tarea2025039-print-pdf - PREFACE ### Mission scope and timeline - At the request of the authorities of Haiti, a Governance Diagnostic (GD) mission was conducted by IMF staff during September-December 2023. - An inter-departmental scoping mission was held on September 11-15, 2023. - The main mission was conducted in two parts: - a virtual mission on November 27 - December 1, 2023; - an off-site mission in Panama on December 11-15, 2023. - The missions were followed and complemented by extensive desk review of available reports and studies. ### Guiding frameworks and purpose of the Governance Diagnostic - The mission was guided by: - IMF’s 2018 Framework on Enhanced Fund Engagement on Governance (2018 Framework); - IMF’s 2022 Strategy on Fragile and Conflict-Affected States (FCS). - Purposes of the GD: - assess the severity of corruption risks; - identify macro-critical governance weaknesses associated with corruption vulnerabilities in key state functions identified by the 2018 Framework; - propose concrete reform measures. - The 2018 Framework identifies the following key state functions: fiscal governance, central bank governance and operations, financial sector oversight, market regulations, anti-money laundering (AML), and rule of law (judicial integrity, enforcement of contracts and protection of property rights). - GDs are forward-looking, focused on strengthening governance and integrity to support strong, stable, and inclusive economic development. - GD analysis and recommendations: - do not cover individual corruption cases or allegations; - address structural policy issues and near- and longer-term reform measures. ### Mission activities and contributors - The mission benefited from discussions with international organizations and development partners of Haiti, governmental and non-governmental stakeholders, and advice of short-term experts on political economy of corruption in Haiti. - Short-term political economy experts assisting the mission included Dr. Robert Muggah, Professor David Carment, and Ms. Alexandra Wishart. - The mission was led by Ms. Tina Burjaliani and comprised Ms. Ivana Rossi, Ms. Paula Paixao e Silva Zarazinski, Mr. André Benjamin Kahn, Mr. Anthony Ramarozatovo, Mr. Jean Pierre Nguenang, Mr. Abdoulahi Mfombouot, and Mr. Patrick Le Clerc. - The mission appreciated support from Ms. Vanette Vincent and others at the Ministry of Economy and Finance (MEF) of Haiti who coordinated the authorities’ engagement. - Additional IMF support acknowledged: Ms. Patrizia Tumbarello (Mission Chief for Haiti, IMF), Mr. Jean Frederic Noah Ndela Ntsama (deputy Mission Chief for Haiti, IMF), Mr. Arsene Kaho (Senior Economist, WHD), Gabriel Berny Duvalsaint (Economist, IMF), and administrative coordination by Ms. Alexandra Rajs and Ms. Young Kim. ### Key contextual findings about Haiti (from Executive Summary) - Population and settlement: - Haiti has a population of approximately 11 million, about half of which resides in the capital Port-au-Prince and its surroundings. - Geography: - Haiti shares a 390-kilometer land border with the Dominican Republic. - Economic standing: - Haiti is currently the poorest country in the Latin American region in terms of per capita income and one of the poorest countries globally. - Demographic and environmental trends: - In recent years, more than half of Haiti's population has shifted from rural to urban areas. - Poverty and lack of basic services have led to large-scale deforestation, degradation, and soil erosion, with forested areas now constituting only (text truncated in source). *IMF | Technical Assistance Report – Haiti Governance Diagnostic Report (Preface and Executive Summary excerpts)* ### 12.6 percent of the country as of 2020. ### tarea2025039-print-pdf - 12.6 percent of the country as of 2020. ### Context and climate / demographic vulnerabilities - 12.6 percent of the country as of 2020. - Over 96 percent of Haiti’s population is exposed to natural hazards, including hurricanes, floods, and earthquakes. - The continued decline of arable land poses a long-term threat to Haiti’s economy due to its heavy dependence on agriculture. - Climate change-induced migration has placed increased pressure on urban areas as displaced populations seek new homes and opportunities. - Access to basic services—sanitation, clean water, healthcare, education—has been deteriorating, especially since the 2010 earthquake and the 2016 Hurricane. - The 2021 earthquake restressed already ruptured faults, compounding Haiti’s lack of preparedness to absorb such shocks. ### Security, violence, and displacement - Violence has been a major trend throughout the last few decades in Haiti and has intensified in recent years. - Diminishing security is attributed to increased violence by gangs, some reportedly affiliated with several influential members of political and economic elite. - Examples of gang actions: - In June 2022, a gang took control of Port-au-Prince’s Palace of Justice, “forced judicial officials out, injured a prosecutor, and stole computers, desks, and other assets.” - Between September and November 2022, another gang took control of the Varreux terminal–a key fuel depot in Haiti–and imposed a two-month fuel blockade in response to a decree which cut fuel subsidies. - February 29, 2024 violence in Port-au-Prince led to prison breaks and wider insecurity. - Humanitarian and displacement statistics: - More than 2,500 people were killed or injured during January-March 2024, according to the UN. - Nearly 95,000 people have fled Port-au-Prince during the same period. - The number of Haitian refugees and asylum seekers had increased to half a million by May 2024. - Some 362,000 people are currently displaced in the country, up from 314,000 at the end of 2023. - The country’s main port where most goods and products transit was looted; the Varreux terminal was blocked by gangs, raising concerns about fuel shortages. - The violence disrupted economic activities across the city and destabilized already fragile basic services delivery. - Creating security conditions conducive to an inclusive political process and free and fair elections remains a priority. ### International stabilization efforts and operational concerns - The UN Security Council-approved Multinational Security Support (MSS) Mission, led by Kenya, creates momentum for stabilization; the mission was approved in October 2023. - Deployment notes: - The MSS mission was initially scheduled for deployment as early as January 2024 but was derailed due to the sharp deterioration of the security situation and the resignation of the Prime Minister in February 2024. - Approximately 1,000 Kenyan police officers along with additional 2,000 personnel from other countries will operate in coordination with the Government of Haiti, with financial support from voluntary donations managed by a UN trust fund. - Mission objectives and caveats: - The mission was requested as an urgent temporary measure in response to increasing violence, criminal activities, and human rights violations. - The MSS Mission is expected to protect state institutions as well as critical infrastructure and transport hubs, and work with the Haitian National Police (HNP) to deter gangs. - Further clarity over the mission’s goals and rules of engagement, establishment of robust oversight mechanisms, and a detailed handover plan will be critical to ensuring effectiveness. - A major concern is entrenched corruption vulnerabilities within the HNP, which may severely undermine the effectiveness of the MSS and other stabilization efforts. ### Political context and interim governance - Haiti’s political system: presidential republic with national elections; historically unstable with short presidencies (of the fifty-four Presidents elected since 1806, only nine completed the full term). - Institutional disruptions: - There have been no elections in Haiti since 2016. - The country has had no sitting parliament since 2020 and no President since the assassination of President Moïse in 2021. - The Prime Minister’s office has governed by decree. - Elections scheduled for February 2024 were postponed on grounds that conditions were not safe enough. - Transitional arrangements: - A nine-member transitional Presidential Council (seven members of which have voting rights) was officially established on April 25, 2024, with support from the Caribbean Community; the Council will serve as the country’s presidency until February 7, 2026, with the chair rotating among the seven members. - A new interim Prime Minister was appointed on May 27, 2024 and the transitional government was installed on June 11, 2024. - The interim government is expected to remain in power until February 7, 2026, with the mandate to restore security and implement constitutional reforms. - General elections are planned for the end of December 2025, marking the first elections since 2016. ### Governance, rule of law, and corruption vulnerabilities - The Governance Diagnostic (GD) analyzes critical governance weaknesses and corruption vulnerabilities and proposes reforms, focusing on fiscal governance and financial sector oversight (central bank governance and operations are not covered by the GD). - Key cross-cutting observations: - Anti-corruption and anti-money laundering efforts suffer from uneven enforcement due to lack of independence from elite interferences, insufficient capacity and resources. - Legal and institutional frameworks are inadequate to address existing risks and vulnerabilities; impunity is prevalent and has worsened. - Constitutional procedures such as declaration of assets by senior public officials have never been fulfilled; not a single high-ranking official has been prosecuted for corruption offences despite multiple investigations referred to the judiciary by the anti-corruption unit (ULCC). - Specific sectoral weaknesses: - Public Financial Management (PFM): - Despite progress (publication of multi-year fiscal and budget frameworks, preparation of cash management tools, consolidation of the treasury single account), major governance weaknesses and corruption vulnerabilities remain in: (i) budget preparation/programming and public investments (PI) budgeting, (ii) budget execution and cash management, (iii) public procurement, (iv) fiscal reporting, and (v) internal and external audit. - Tax and Customs: - Despite recent reforms (new Tax and Customs Code), administrations remain vulnerable to arbitrariness and corruption due to complexity, inequitable processes, and low level of digitalization; lack of transparency, weak integrity standards and oversight mechanisms leave officials exposed to corruption risks. - Financial Sector Oversight: - Legal and institutional frameworks largely align with international standards (Basel Core Principles for Effective Banking Supervision 1 and 2), but implementation has been severely affected by deteriorated security and staff departures. - Finalization of prudential regulations and projects (e.g., risk-based supervision) slowed but not abandoned. - Anti-Money Laundering (AML): - AML framework recently upgraded but effectiveness not yet demonstrated. - September 2023 Decree aimed to reinforce operational autonomy and independence of UCREF (Unité Centrale de Renseignements Financiers) and provide clear mandate for operational and strategic analyses on ML and predicate crimes. - April 2023 Decree overhauled broader AML/CFT framework, giving tools to prosecutors and investigative judges, mandating preventive measures regarding politically exposed persons (PEPs) and enhancing transparency of beneficial ownership (BO) of legal persons. - Central Bank issued circulars and guidance to foster AML preventive measures; a new supervision unit for microfinance created; on-site inspections of two banks carried out since September 2023. - Factors limiting AML effectiveness: corruption, human resources constraints, insufficient training, and degraded security situation impacting UCREF, the judiciary and, to a lesser extent, the Central Bank. - Rule of Law and Judicial Integrity: - Legal framework for judicial appointments and promotions allows influence by political connections and patronage, undermining merit-based selection. - Absence of a robust professional ethical culture among judges, court staff, and law enforcement; low salaries and poor working conditions increase bribery risk. - Low public trust and loss of confidence in judiciary’s ability to deliver impartial justice; prosecutions of corruption by influential individuals virtually always fail, with cases frequently prematurely closed, delayed or blocked. ### Strategic priorities and reform sequencing - Strengthening governance and reducing corruption vulnerabilities are essential for Haiti to exit fragility; building basic institutional capabilities can help raise public confidence and legitimacy. - The IMF’s FCS Strategy calls for a tailored approach and careful prioritization based on country context, institutional constraints, distribution of corruption rents, and political economy considerations. - Improved security and a political settlement leading to a legitimately elected government are necessary conditions for sustainability of proposed reforms. - The mission encourages authorities to restore security and build political stability in accordance with the Constitution of Haiti and UN SC Resolution 2699. - Strategic international engagement should focus on institution-building through country-tailored, carefully prioritized reforms. ### Priority Recommendations (Table 1 — selected measures 1–7) - Measure 1: Create and operationalize an Anti-Corruption Pôle — an ad hoc mechanism to investigate and prosecute the most significant corruption, organized crime and money laundering cases, including those involving PEPs. - Authority/action: The PM should issue a Decree creating the AC Pôle. Other relevant agencies (MEF, ULCC, UCREF, HNP, Ministry of Justice, Judiciary and Prosecution) should participate. - Objective: Strengthen accountability for corruption - Timeline: ST - Measure 2: Facilitate investigation of laundering of proceeds of Haitian corruption and organized crime abroad by: - Strengthening legal framework to align domestic legislation on criminalization of corruption and related offenses with the UNCAC; - Collecting and publishing online asset declarations of all senior officials including in the judiciary and law enforcement, as well as candidates for senior public offices; mandate disclosure of assets and interests (including bank accounts) held directly and through beneficial ownership abroad; - Strengthening the legal and institutional framework for MLA in respect to all offenses established in accordance with UNCAC; - Concluding agreements to enhance legal basis for MLA in all offenses established in accordance with UNCAC and enhance implementation capacity of judicial officials. - Authority/action: Revising the legal framework requires Parliament’s action. Meanwhile, PM, ULCC, UCREF, MOJ, Judiciary are advised to take all necessary measures to enforce existing legal framework, and prepare necessary amendments. - Objective: Strengthen accountability for corruption and ML - Timeline: MT - Measure 3: Based on corruption risks identified in customs and tax administrations, develop, implement and monitor a strategy to promote integrity and reduce illegal activities through customs and tax administrations. - Authority/action: PM and MEF should lead the process based on an independent, reputable study of corruption risks. - Objective: Strengthen revenue administration and reduce risks of corruption - Timeline: ST - Measure 4: Work with international development partners, civil society organizations and private companies to ensure greater coordination, transparency, accountability and efficiency in foreign assistance management; encourage all implementing partners to produce data in line with the International Aid Transparency Initiative standards and make the information public. - Authority/action: PM and MEF - Objective: Strengthen transparency, integrity and efficiency in international aid - Timeline: ST - Measure 5: Mandate ex ante evaluations for all internally financed projects and make them public, while strengthening the project selection framework. - Authority/action: MEF and Ministry of Planning and External Cooperation - Objective: Strengthen planning and allocation in PIM - Timeline: ST - Measure 6: Strengthen public financial management by: - Reinstating the financial controller’s prerogatives about a priori control of public investment expenditure (ST); - Adopting a budgetary control guide (MT); - Adopting a renovated expenditure execution manual (MT). - Authority/action: MEF - Objective: Strengthen transparency and accountability in PFM - Timeline: ST/MT - Measure 7: Strengthen the governance of the BRH as banking supervisor by: - Revising the decision-making structure and process related to banking supervision to ensure independence and transparency (MT); - Meanwhile, as a provisional measure pending legal amendments, delegate supervisory decision-making powers to a specialized committee of the BRH Council (ST). - Authority/action: Revising the legal framework requires Parliament’s action. Meanwhile, BRH Board should delegate the power by a Board decision. - Objective: Strengthen financial sector oversight and reduce corruption risks - Timeline: ST/MT *IMF | Technical Assistance Report – Haiti Governance Diagnostic Report* ### Section I. Severity of Corruption and its Impact ### Section I. Severity of Corruption and its Impact on Haiti’s Fragility ### ALC framework and fragility overview - The core structural elements of fragility are authority, legitimacy, and capacity (ALC). - Fragile countries typically display low levels of administrative capacity, limited provision of rule of law and basic services, and high levels of social polarization. - Uneven delivery of public goods, elite capture, or corruption erodes public trust and legitimacy and is a key driver of fragility in many FCS. - Corruption is named as a major contributor to poor capacity of state institutions in Haiti, affecting both authority and legitimacy and thereby contributing to fragility. ### Analysis of severity of corruption - Governance weaknesses and corruption vulnerabilities permeate most parts of the Haitian public sector and economy. - Haiti scores 17/100 in the Transparency International’s 2023 Corruption Perceptions Index (TPI). - The TPI score has remained largely unchanged over the last decade, except for spikes in 2017 and 2021 which quickly backslid. - The Global Competitiveness Index and the World Bank’s Worldwide Governance Indicators (WGI) both score Haiti strikingly low. - The severity of corruption is illustrated in national reports such as those by the Court of Accounts and Administrative Disputes (see PetroCaribe case). ### Box 1 — The PetroCaribe case (summary of key facts) - Haiti joined PetroCaribe in 2006; the agreement allowed deferred payment on (% variable from 5% to 70% depending on the price of oil) for up to 25 years, charging a low rate of interest for the debt. - The government of Haiti claimed to have funded social projects using almost $4 billion dollars raised by PetroCaribe oil between 2008 and 2016. - In 2017, a Parliamentary Special Commission reported widespread corruption in managing $2 billion under three successive governments during 2008-2016. - On January 31 and May 31, 2019, the Superior Court of Auditors and Administrative Disputes issued reports alleging misappropriation, overbilling, collusion, favoritism, and embezzlement for PetroCaribe spending between 2008 and 2018; prosecutions and subpoenas followed (including subpoenas on July 15, 2019). - In August 2020, a third report stated more than 140 billion Haitian gourdes (HTG) (estimated USD $2 billion) in PetroCaribe funds had been embezzled or wasted in “worthless” projects. ### Interconnection of politics, economics, and organized crime - Haiti’s economy is largely controlled by a small group of political and economic elites incentivized to preserve collective political and economic interests. - Elites can influence and sabotage democratic processes and defend interests through means including distribution of guns and bribes to gangs, assassinations, intimidation, cronyism, and capitalizing on international aid. - Allegations of corruption between political rivals are commonplace and contribute to limited public trust in institutions. ### Role and influence of gangs - Gangs have been increasingly important actors in Haiti: - Before the February-March 2024 security melt-down, it was estimated that more than 60 percent of Port-au-Prince, including key economic areas, was controlled by gangs. - Gangs drew revenue from customs, public markets, water and electricity distribution networks, and public-transport stations. - Gangs impose tariffs, extort police stations, and have been reported using police-owned equipment such as armored vehicles. - Several prominent gangs have set up ‘courts’ in their territories to punish civilians. - Gangs often present themselves as “benefactors” and develop “social foundations” to seek legitimacy. - In strategic areas such as ports and oil terminals, businesses are forced to deal with gangs, making these areas highly lucrative. - Politically exposed persons (PEPs) have a history of financing and arming gangs in exchange for votes and protection. - The relationship between gangs and political/economic elites is complex; multiple reports document mutual benefit. - The UN Security Council established a sanctions regime for Haiti in 2002; individuals affiliated with gangs have been sanctioned since then. Unilateral sanctions have also been imposed (examples cited from November 2022). ### Box 2 — Key political economy actors (summarized) - Political elites: - Composed of current and former politicians across dozens of parties; last Parliament was made up of over 20 parties. - Many parties form around clan chiefs and have used gangs to sway elections; campaigns involve handouts, promises of patronage, and economic elite support in exchange for anticipated rewards. - Economic elites: - A relatively small community with significant influence over politicians. - Some employ gangs for protection, recruit police as mercenaries, use intermediaries to bribe police and customs officials, and may work with criminal organizations. - Economic elites reportedly exploit aid programs to accumulate wealth at the expense of the population. - Gangs: - An estimated 200 gangs operate across Haiti, with around 95 in Port-au-Prince alone. - Many gangs cooperate with elites through kidnapping, murder, and intimidation. - Private sector, civil society, and international community: - These actors have substituted for the state across sectors with minimum oversight, coordination, and regulation. - Before the 2010 earthquake, reportedly 70 percent of healthcare and 85 percent of education was provided by NGOs. - Diaspora: - Large diaspora (largest in the United States with an estimated 2 million people; Dominican Republic diaspora over 850,000). - The World Bank estimates that in 2021 about a quarter of Haitian GDP came from diaspora remittances. ### Corruption risks, fiscal governance, and money laundering - Underlying corruption risks include endemic misappropriation of public funds. - A recent UN report described corruption as “one of the primary drivers of violence and a threat to peace, security and stability” in Haiti. - The World Bank characterizes the formal state structure as captured by elites penetrating deep into society and the economy; state capture, rent-seeking and clientelism have ‘hollowed out’ the state. - Significant fiscal governance weaknesses (discussed in Section III) create opportunities for rent-seeking. - Ports and land crossing points are targeted by criminal groups and associated corrupt networks. - An IMF report found that in 2016 total formal exports from the Dominican Republic to Haiti were approximately $800 million as compared to around $400 million of declared imports by Haiti from the Dominican Republic. - These differences of 50 percent cannot be explained by freight charges or free-on-board adjustments alone; there is significant unregulated and illegal trade via ports. - Port-au-Prince has three primary ports handling most cargo: APN Port, Terminal Varreux, and Port Latifo, plus two dedicated fuel terminals. - Customs officers are vulnerable to undue influence and pressure by powerful business and political elites. - Corruption is among the highest proceeds-generating crimes linked with money laundering in Haiti; laundering risks are very significant and generally acknowledged. - There are no available strategic analyses or typological studies identifying sectors vulnerable to laundering of proceeds of domestic corruption. - UCREF annual reports identify general ML schemes (e.g., smurfing, use of legal persons) but lack specificity and fail to identify particular sectors or evolving trends. - UCREF lacks tools to identify PEPs, their family members, and associates; lack of granular analysis hinders prioritization and investigation of suspected corruption-related ML. *IMF | Technical Assistance Report – Haiti Governance Diagnostic Report | Section I. Severity of Corruption and its Impact* ### Box 3: Multilateral and Unilateral Sanctions ### Box 3: Multilateral and Unilateral Sanctions ### Multilateral and unilateral sanctions applied to Haiti - The UN Security Council has issued a small number of sanctions since 2022, with a focus on gang leaders. - The most prominent resolution is UN Security Resolution 2653 on 21 October and six gang leaders have been sanctioned as of February 2024. - The US has initiated over 80 sanctions and visa restrictions on Haitians since 2020. - The State Department issued visa restrictions on 8 Haitians, including 2 former prime ministers, politicians, business leaders, and gang members. - Another 50 or so Haitians have had visa bans and economic sanctions for drug trafficking, money laundering, and other crimes. - In July 2023, the US government passed an amended Haiti Criminal Collusion Transparency Act (HR1684) to identify and penalize ties between Haitian political and economic elites and criminal gangs. - Sanctions are also continuously imposed pursuant to Section 7031 of the annual foreign operations appropriations and Section 1263 of the Global Magnitsky Human Rights Accountability Act. - Canada has issued at least 28 sanctions on Haitians since 2022, including under the Special Economic Measures Act and the United Nations Act. - The UK and EU have also added gang leaders and several others to their sanctions lists. ### Domestic proceeds of corruption and laundering - Most of the domestic proceeds of corruption are laundered outside Haiti. - It is difficult to quantify the amount or proportion transferred abroad, but anecdotal evidence suggests significant sums are laundered abroad. - An investigation by the International Consortium of Investigative Journalists (Pandora papers) revealed that two Haitians recently sanctioned by Canada for corruption, money laundering, and collusion with gangs, described as members of Haiti’s economic elite, owned offshore companies in tax havens as well as luxury real estate in the United States. - Despite due diligence norms claimed by banks, the domestic financial system cannot be considered to be absolutely immune to corruption. - In September 2023 Canada sanctioned a main shareholder and former manager of the Haitian largest bank for alleged involvement in acts of corruption and support for violence perpetrated by armed criminal gangs in Haiti. As a result, he resigned and sold his shares. ### Corruption’s relationship to fragility in Haiti - Corruption has a profound impact on Haiti’s fragility by limiting the authority, legitimacy and capacity of state institutions over time. - The World Bank identifies continuous weakening of democratic institutions, persistence of political and economic elite capture, and the inability of the state to guarantee security and the rule of law as primary contributors to Haiti’s fragility. - Haiti’s democratic institutions have been at best unstable and volatile. Frequent changes of government, often accompanied with violence, have created opportunities for political vacuum, legitimacy crises and instabilities. - Gang violence is a pressing problem: gangs compete for territorial control and resources, terrorize civilian populations and severely disrupt economic activities. - Haiti has long been in a capability trap, despite some promising signs of stability and increasing capacity of state institutions in early 2000s. - Lack of security has had an undoubted negative impact on institution-building, and weak institutions have contributed to a vicious cycle of insecurity, lack of capacity and inability to establish legitimacy through functional democratic institutions and processes. - Vulnerability to natural disasters, climate change and pandemics increases fragility but is not considered a root cause; resilience is largely determined by institutional foundations (capability and legitimacy). - Exiting fragility is extremely difficult and a longer-term project; the process of state building (how effective and legitimate states are formed) should be the main mechanism to overcome fragility. - The role of state legitimacy (the relationship between the state and society) is critically important in Haiti because its absence strongly correlates with weaknesses in institutional processes that determine economic performance, and a lack of legitimacy is a key driver of instability and stagnation. ### International aid, incentives, and pathways out of fragility - International humanitarian aid has been crucial in providing basic services but has not helped Haiti exit the fragility trap. - From 1979 to 2009 fragility levels of the bottom 35 countries had not improved despite generous aid programs. - Bilateral and multilateral donors pledged $12.21 billion in humanitarian aid and recovery funding; out of these pledges, 46.1 percent, $5.63 billion was disbursed. - After the 2010 earthquake, pledges for building democratic institutions fell short, while other areas such as transportation exceeded the request by 510 percent. - A study shows that 99 percent of aid disbursed in 2010-2011 went to NGOs, private contractors and non-state service providers, and less than 1 percent went to the government. - Such assistance reduced pressure on authorities to prioritize public financing, which in turn reduces effectiveness and sustainability of development aid. - Careful prioritization of aid, better coordination among aid providers, and investment in institution-building with accompanying transparency and accountability can contribute to breaking fragility. - Aid focused on poor property rights enforcement, corruption, insecurity and violence is needed to propel states stuck in the fragility trap toward better economic outcomes. - Such policy options succeed when elites in trapped states have sufficient incentive to embrace reforms that might affect their personal interests. - The balance between addressing emergency needs through humanitarian assistance and providing sustained long-term support to exit fragility should be improved in Haiti. - Historically, development aid for Haiti has not been accompanied by a systemic change agenda for poverty reduction and state-building. Large influxes of aid followed major disasters and declined quickly; aid was often perceived as a reward or punishment for political leaders rather than support for long-term development goals. - Periods of increased foreign aid were associated with increased school enrollment, better healthcare (e.g., higher vaccination rate) and waves of judicial and public sector reforms, but progress was offset when aid was suspended. - International support directed to structural problems related to state authority, legitimacy and capacity can help Haitian people, including diaspora and civil society, create viable solutions against economic misallocation and associated calamities. - Studies support the hypothesis that larger, more geographically concentrated diasporas located in high-income, democratic host states typically have a stabilizing effect on fragile home communities. - Haitian diaspora can be more effectively leveraged in joint efforts to help the country exit the fragility trap. - Possible contribution of the diaspora in anti-corruption measures, including in the creation and operation of the proposed Anti-Corruption Pôle, should be given due consideration. *Source: Compiled by IMF staff based on the information published by the UN SC, US State Department, Government of Canada, EU and UK* ### Section II. Rule of Law, Anti-Corruption and ### Section II. Rule of Law, Anti-Corruption and Anti-Money Laundering Frameworks ### A. Impact of Corruption on the Rule of Law: Judicial Integrity - Severe corruption has eroded the rule of law, especially judicial integrity, rendering anti‑corruption and anti‑money laundering frameworks ineffective. - Political instability and escalating violence have degraded an already fragile justice system; politically sensitive cases are reported to be assigned to judges with political ties and some prosecutions prioritized while others frozen for political reasons. - Low salaries and poor working conditions in the justice system lead to low morale and high vulnerability to manipulation and corruption. - Gang-related violence has directly impaired judicial infrastructure and operations: - In June 2022 a heavily armed gang invaded and occupied the Palais de Justice (Supreme Court) for more than a week; judicial staff escaped; criminal evidence and confiscated drugs, weapons, and money were stolen. - Judicial offices are frequently ransacked and many court facilities in the capital and other departments are inaccessible; continued occupation since June 2022 of the Court of First Instance in Port‑au‑Prince underscores the threat. - Since 2021 gang members have entered court facilities seeking to liberate or target suspects and witnesses. - Judges, prosecutors, and lawyers operate under fear and intimidation; several major justice figures were arrested in 2023 for alleged participation in a coup attempt, and the assassination of the President of the Port‑au‑Prince Bar Association and threats to judges handling sensitive cases are reported. - Executive interference undermines judicial independence: - The High Judicial Council (Conseil Superieur du Pouvoir Judiciaire or “CSPJ”), established in 2007, has struggled to protect judicial independence due partially to executive pressure. - In 2021 President Jovenel Moise removed three Supreme Court justices without following constitutional procedure. - Eight new Supreme Court judges were appointed by government decree in February 2023, bringing the Supreme Court number to 11 out of 12 judges. - Several judicial vacancies remain unfilled; more mandates are due to expire which will significantly reduce judicial seats. - Under Article 175 of the Haitian constitution, the president appoints judges according to lists of candidates submitted by the Senate and regional and local assemblies; CSPJ recommendations are frequently disregarded. - Prosecutors are direct employees of the Ministry of Justice and Public Safety and can be transferred or suspended by the executive branch at any time. - École Nationale de la Magistrature (EMA) provides a merit‑based route to the judiciary: - EMA was established in 1996, organizes a competitive merit‑based entrance exam and provides 16 months of initial training; appointments usually happen after graduation depending on available judicial seats. - Expanding EMA’s role in training, selecting, and appointing judges is emphasized as paramount to strengthening judicial independence. - Certification and security of tenure concerns: - In January 2023, the CSPJ found that 28 of 69 judges and prosecutors could not be certified on grounds of moral integrity (allegations including abuse of authority, invalid credentials, unlawful release of dangerous criminals). - Uncertified judges were not provided an avenue for recourse, raising due process and security of tenure concerns; the National Ombudsman urged CSPJ to provide an avenue for appeal citing the American Convention on Human Rights. - At least one affected magistrate has filed an appeal before the Inter‑American Court of Human Rights. - Capacity constraints and performance metrics: - Haitian judges and prosecutors have limited expertise and experience with corruption and organized crime cases. - The overall conviction rate in the criminal justice system remains extremely low. - Despite multiple national anti‑corruption strategies and the creation of an anti‑corruption mechanism (ULCC), there has been only one conviction in a corruption case over the past 15 years. - There is just one forensic expert in the country. - About 200 criminal trials were held from October 2021 through September 2022. - In some jurisdictions no hearings on criminal cases had been held for three years (OHCHR). - Between 2016 and 2020 courts throughout the country only managed to open for a total of 205 days. - The Court of First Instance in Port‑au‑Prince has not been operational for more than a year. - The budget allocated to the justice sector is less than 1 percent of the national budget. - Judges and prosecutors went on strike earlier in the year demanding higher salaries and better working conditions. - International support has yielded mixed results due to short‑term projects, lack of coordination, and a political environment that undermines sustainability; nevertheless, reforms offer some hope: - International sanctions against influential individuals and the establishment of the High Transition Council (HTC) create momentum for reform. - The HTC is overseeing a roadmap for upcoming elections, constitutional review, and proposed judicial reforms. - The decade‑long reform of criminal laws produced a new penal code and criminal procedure code expected to enter into force in June 2024, widely seen as facilitating the fight against complex crimes such as corruption. - Civil society asserts that some ad hoc appointment procedures violated article 175 of the Constitution. ### B. Effectiveness of Anti‑Corruption and Anti‑Money Laundering Frameworks - Legal framework overview: - Key instruments include the 1987 Constitution, the 2008 Law on Declaration of Assets by Certain Categories of Public Officials, and the 2014 Law on the Prevention and Suppression of Corruption (AC Law). - The 2014 AC Law criminalizes, to a certain extent, illicit enrichment, bribery, embezzlement, illegal procurement, insider trading, influence peddling, and nepotism; it imposes sentences of 3‑15 years imprisonment and gives legal authority to the ULCC and the UCREF to launch corruption investigations. - Significant criminalization gaps and shortcomings: - UNODC 2015 analysis identified missing elements in the AC Law; stakeholders confirm many issues remain unaddressed. - Articles 14, 11 and 5 of the AC Law criminalize bribery by domestic public officials, but none cover promising, receiving or soliciting intangible benefits, benefits for third parties, inaction in exchange for a bribe or indirect corruption. - Trading in influence (art. 5.9 of the AC Law) lacks coverage of intangible advantage and third‑party interest elements. - Bribery in the private sector is not criminalized, contrary to Art. 21 of UNCAC. - Embezzlement and misappropriation provisions do not apply to officials who perform public functions (art. 17 of the AC Law). - Asset disclosure system weaknesses: - Basic legal framework exists for asset disclosure but has not been implemented. - ULCC’s analysis of the 2008 Law identifies serious weaknesses, including prohibition of publication of asset declarations of top officials; international practice suggests publication is a low‑cost effective transparency measure. - AML framework developments and limits: - AML framework has been largely brought in line with international standards by the Decree of April 30, 2023 on Sanctioning Money Laundering, Terrorism Financing and Financing the Proliferation of Weapons of Mass Destruction. - The April 30, 2023 Decree covers most of the FATF 40 recommendations and provides tools to conduct financial investigations; it updates severely outdated criminal law. - The BRH has issued circulars and guidance to foster preventive measures by Financial Institutions (FIs), including with respect to PEPs. - However, implementation remains severely limited despite noticeable technical progress. - The 2019 CFATF mutual evaluation identified significant deficiencies; Haiti was placed under FATF increased monitoring (“grey list”) in June 2021. The action plan expired in September 2023 with 13 out of 18 action items remaining unaddressed or only partly addressed. - Operational constraints of anti‑corruption and AML institutions: - Key institutions (ULCC, UCREF) face overwhelming obstacles and lack guarantees of independence and operational autonomy; most heads are appointed at the President’s discretion. - The Director General of the ULCC is appointed by Presidential decree upon nomination by the Council of Ministers and lacks a mandate guaranteeing removability protections. - Excessive immunity of top officials and a cumbersome process for lifting immunity are identified as legal obstacles to investigation and prosecution. - Implementation outcomes and statistics: - Since ULCC creation in 2004 till the end of 2023 (9 cases were sent in 2023), the ULCC submitted 87 cases to the prosecution. - UCREF receives on average several hundred STRs each year from FIs (but none from DNFBPs), and hundreds of thousands of automatic cash transaction reports (CTRs); under Article 17 of the AML/CFT decree of 2023 FIs must submit declarations to UCREF for all cash transactions above a threshold specified by the BRH, currently of 1,1 million gourdes (about 8,000 USD). - UCREF analyses have led to between three and ten disseminations per year to judicial authorities, none of which has led to an ML conviction to date. - No file was opened based on CTR declarations during the 2021‑22 exercise, for instance. - Limited cooperation and synergies: - Legal framework allows AML and AC authorities to share information with few restrictions, but practical cooperation is minimal. - UCREF has stronger cooperation with domestic authorities such as the BAFE (PNH Financial Crimes Unit); UCREF received 61 investigation requests from the BAFE over the 2020‑21 exercise and 80 in 2021‑22, but none from the ULCC in either year. - Previously ULCC intermediation with UCREF was used to request information from FIs and DNFBPs, but that practice is reported to have diminished despite AC Law powers allowing ULCC to request such information directly. - UCREF is preparing a draft MOU to formalize cooperation with ULCC and to allow UCREF staff to conduct joint investigations with ULCC sworn officers. - Judicial weaknesses undermine prosecutions and convictions: - The judiciary is perceived as vulnerable to external influence; there is a widespread perception of impunity and lack of integrity. - Despite ULCC and UCREF investigations, there has been just one conviction for corruption in the last 15 years and none for money laundering. - Kidnappings and gang‑related crimes rarely lead to prosecutions or convictions, plausibly due to complicity or intimidation. - CSPJ actions in 2023: annulled certification of 28 magistrates (out of 69 under review) including the chief government prosecutor and investigative judges for PetroCaribe cases; in October 2023 removed four other judges for lack of moral integrity and requesting bribes, while certifying 16 others and admitting 14 new judiciary school graduates. - CSPJ has been criticized for vulnerability to political interference and due process concerns related to decertification. - Conclusion: urgent, coordinated reforms required - Decisive action led by relevant Haitian institutions (Prime Minister, Ministries, judiciary, anti‑corruption and oversight institutions) and civil society, with international partner support, is needed to strengthen governance, rule of law, and reduce corruption. - Measures must provide immediate relief and lay foundations for comprehensive institutional reforms to equip anti‑corruption, AML, judicial, and law enforcement institutions with autonomy, independence, and resources to fulfill mandates effectively. *IMF | Technical Assistance Report – Haiti Governance Diagnostic Report — Section II.* ### Section II.A) ### Section II.A) ### Rationale and scope - A specialized Anti-Corruption Pôle (AC Pôle) can help address impunity and restore public trust in the state’s ability to combat corruption, organized crime and ML. - In countries with severe corruption vulnerabilities, special measures are warranted to reduce real or perceived external influence over the anti-corruption enforcement efforts. - In the context of Haiti, creation of a new AC Pôle is proposed as a temporary solution that can make impact in limited time. - The AC Pôle would not replace structural reforms necessary to upgrade the legal framework and strengthen institutional independence, autonomy and capacity. - Operations of the AC Pôle are expected to be governed by existing laws and procedures; investigative and judicial powers over corruption, organized crime and related ML cases remain vested in the law enforcement and judicial officials assigned to the AC Pôle. - There is consensus among anti-corruption and AML institutions in Haiti that most domestic proceeds of corruption are laundered outside Haiti; the MER found that authorities’ failure to seek mutual legal assistance with regards to ML and associated predicate offenses, including corruption, with transnational elements, was inconsistent with Haiti’s exposure to transnational ML. ### Proposed structure of the AC Pôle (Box 4) - Legal basis: - The AC Pôle is created by a decree of the Prime Minister of Haiti. - Institutional basis: - The AC Pôle is created on the basis of existing institutions and is composed of officials of ULCC, UCREF, HNP, prosecutors and judges. - The number and ranks of police officers, ULCC officials, UCREF officials, prosecutors, judges will be determined in the PM’s Decree, based on the need identified in consultation with anti-corruption and AML institutions of Haiti. - Determining a right size for AC Pôle would be important for its effectiveness and efficiency. - Jurisdiction: - The AC Pôle focuses on the most important corruption, organized crime and money laundering cases, as further specified in the PM’s decree. ### Selection, integrity, management, and international advisers - Selection of members: - Officials from the participating institutions who will serve in the AC Pôle should be selected by a special Selection Commission. - The Selection Commission is formed by a Prime Ministerial Decree and is composed of six members: two CSOs, two members of academia, two anti-corruption experts with international experience nominated by international development partners working in Haiti. - The Selection Commission should conduct an integrity and capacity assessment of all applicants from participating institutions and propose, if possible, two nominees for each position to the PM. - From the list of candidates submitted by the Selection Committee, the PM assigns officials to the AC Pôle. - Integrity: - The AC Pôle should comply with the highest standards of integrity in line with the United Nations Convention against Corruption and Jakarta Principles for Anti-Corruption Agencies. - It should prepare and publish bi-annual activity report with statistical information. - Management: - Daily operation of the AC Pôle is managed by its Secretary, who is selected by the Selection Commission through the transparent, merit-based and participatory process. - A small secretariat, selected by the Selection Commission through the same process shall be created to support the operations. - International Advisors: - The AC Pôle may be advised by external experts with international experience in investigation and prosecution of complex corruption, organized crime and ML cases. ### Capacity, resources, and operational support - Haiti will require significant financial, organization and capacity development support from the international community to set-up and operationalize the AC Pôle. - The AC Pôle is a Haitian driven effort which requires support from partners; the international community is invited to provide all necessary resources, including security, infrastructure, IT support, for the establishment and operationalization of the AC Pôle. - The mission notes ongoing capacity development support provided by UNODC to several Haitian anti-corruption, law enforcement and judicial institutions to investigate and prosecute corruption cases effectively; the work done by UNODC, and other development partners can be leveraged for creation of the AC Pôle. - The mission also notes deployment of the first contingent of the MSS mission in June 2024, which can provide necessary security to the AC Pôle. - Capacity and resources: - The AC Pôle will receive targeted capacity development support. - It should also receive all necessary security details, including through the MSS. ### International cooperation and institutional improvements - Competent authorities should take all necessary measures to improve international cooperation. - UCREF and the judiciary are the key institutions for international cooperation in anti-corruption and AML matters. - UCREF has recently signed MOUs with counterparts in six countries in the region and should enhance its cooperation with other FIUs and anti-corruption institutions, with focus on countries with higher risk of laundering of corruption proceeds emanating from Haiti. - The MOUs were signed with the Turks and Caicos Islands (2022), Guyana (2022), Guatemala (April 2023), Mexico (August 2023) and Trinidad and Tobago (2023). Earlier, the MOUs were signed with Dominical republic (April 2018) and Lebanon. - As of June 2023, the UCREF was engaged in discussions toward signing MOUs with the FIUs of Mexico, Bahamas, Jamaica, St Kitts and Nevis, Montserrat and Guatemala. - For instance, membership to the EGMONT Group would allow exchange of intelligence information on ML related to PEPs, which can help anti-corruption and AML enforcement. - To achieve effective international cooperation, efforts to improve UCREF’s independence and autonomy should continue. - The UCREF should fully engage in the application process to the Egmont Group, including by submitting an unconditional application for membership. - Judicial authorities should increase efforts to prosecute cross-border ML and confiscate corruption proceeds transferred abroad, including by requesting and providing mutual legal assistance and pursuing other forms of international cooperation as appropriate. ### Key recommendations / actions implied by the text - Create the AC Pôle by Prime Ministerial decree, defining size, composition, and jurisdiction in consultation with anti-corruption and AML institutions. - Establish a Selection Commission (six members: two CSOs, two academia, two international anti-corruption experts) to run a transparent, merit-based selection and to assess integrity and capacity of candidates. - Appoint a Secretary and small secretariat selected by the Selection Commission to manage daily operations. - Ensure AC Pôle compliance with United Nations Convention against Corruption and Jakarta Principles; publish bi-annual activity reports with statistical information. - Provide targeted capacity development, security (including MSS support), infrastructure, and IT resources from international partners. - Leverage ongoing UNODC and other development partner support to operationalize the AC Pôle. - Strengthen UCREF independence and autonomy; pursue Egmont Group membership by submitting an unconditional application. - Enhance mutual legal assistance and international cooperation to detect, investigate, prosecute, and confiscate corruption proceeds laundered abroad. *IMF | Technical Assistance Report – Haiti Governance Diagnostic Report | Section II.A)* ### Section III. Governance Weaknesses linked with ### Section III. Governance Weaknesses linked with Corruption Vulnerabilities in Fiscal Governance — A. REVENUE ADMINISTRATION ### Overview - Corruption vulnerabilities in the tax and customs duties revenue collection impede private sector development and negatively impact day-to-day life. - The ULCC investigation accused senior leadership of the AGD, including a former DG and multiple officials, of corruption and money laundering. - Corruption manifests across multiple forms and at different taxpayer levels, and options for recourse are very limited in an environment that is still largely nondigitized. ### Forms of corruption and common practices - Petty corruption: ordinary citizens forced to negotiate with officers to avoid lengthy, costly administrative procedures (e.g., payments for stamps, the issue of certificates). - Institutionalized corruption: large and medium-sized enterprises affected by unscrupulous strategies of dishonest officials and agents who arbitrarily interpret and apply unclear, complex, and insufficiently transparent legal provisions. - Customs-specific practices: under-invoicing, under-valuation of imported goods, lowering tariff payments, misclassification, bribery of customs officials, smuggling, and arbitrary valuations during customs clearance. - Power imbalances: powerful businesses can exert influence over senior and middle-level customs officials; smaller importers often pay bribes as the cost of doing business. ### Institutional and structural drivers of corruption - Lack of collaboration between DGI, AGD, and the ULCC, contributing to absence of clear, targeted anti-corruption strategies. - Ambiguous role of the Tax Inspection Directorate (DIF) within the MEF; DIF supervises and oversees certain activities while also holding operational functions. - Very limited role of the General Finance Inspectorate (IGF), often limited to auditing taxes and collection mechanisms without addressing systemic challenges. - Lack of a clear national strategy for digitalization, preventing tax and customs administrations from prioritizing digital transformation despite available Internet and GSM networks. - Archaic institutional arrangements and limited autonomy of tax and customs administrations in management of human resources and overheads. - Insufficient culture of transparency within tax and customs administrations. - Lack of effective partnership and collaboration between the two administrations, the private sector, and civil society. - Scattered supervision functions across multiple agencies (anti-fraud divisions within DGI and AGD, DIF at MEF, and DZF), complicating user relations and increasing compliance costs. ### Tax system performance and key statistics - Long-standing situation has led to a very low level of tax burden, estimated at only 5.9 percent of nominal GDP during the past five years. - The tax system is characterized by: - Inefficiency: inequitable, complex, non-neutral, with many tax and customs exemptions. - Narrow tax base: reluctance of transactors to become formally established due to costs. - Very low tax compliance rates among large and medium-sized taxpayers due to a deficient, still manual monitoring system. - Various forms of fraud and smuggling to avoid red tape and arbitrary valuations. - Lack of traceability in systems for tax and customs revenue consolidation and accounting by the public treasury, resulting in leakage. - Table 2. DGI. Number of Taxes and Share of Tax Revenue Collected (In millions of gourdes) - Taxes: Number — 2019–2020 — 2020–2021 — 2021–2022 - Individual income tax: 1 — 13.463 — 37.1% — 19.133 — 37.1% — 21.644 — 38.6% - Turnover tax: 1 — 9.361 — 25.8% — 13.303 — 25.8% — 13.815 — 24.6% - Income tax on legal entities: 4 — 8.184 — 22.6% — 11.630 — 22.6% — 12.885 — 23.0% - Other taxes on goods and services: 3 — 2.327 — 6.4% — 3.307 — 6.4% — 3.470 — 6.2% - Stamp duty: 1 — 697 — 1.9% — 990 — 1.9% — 1.056 — 1.9% - Payroll tax: 1 — 671 — 1.8% — 954 — 1.8% — 1.015 — 1.8% - Domestic excise duty: 1 — 664 — 1.8% — 943 — 1.8% — 978 — 1.7% - Registration fees: 7 — 494 — 1.4% — 703 — 1.4% — 499 — 0.9% - Other direct taxes: 12 — 230 — 0.6% — 327 — 0.6% — 383 — 0.7% - Personal ID number: 1 — 112 — 0.3% — 160 — 0.3% — 172 — 0.3% - Other miscellaneous revenue: 7 — 84 — 0.2% — 120 — 0.2% — 130 — 0.2% - Total tax revenue: 39 — 36.288 — 51.569 — 56.047 ### Tax code, customs code, and operational shortcomings - New Tax Code (Decree of January 20, 2023) and new Customs Code adoption have not fully addressed readability, simplification, or rationalization. - New Tax Code (entering into force in October 2024) compiles various tax texts and includes 39 types of taxes, fees, and duties, only 19 of which generate 99 percent of total tax revenue collected by the DGI. - Current customs product clearance nomenclature (HS 2017) has not been harmonized with HS 2022, hindering correct tariff classification and proper implementation of customs duties (DD). - AGD collects at least seven duties and taxes imposed by various texts on the Customs Declaration Form (FDU), including: - Turnover tax (TCA) - Excise duty (DA) - Estimated income tax - Contribution to the Local Authorities Management and Development Fund (CFGDCT) - IT charge (RDI) - Inspection fee (FV) - Special duty (SD) - Some service fees (FV and SD) are levied on an ad valorem basis despite being intended to cover identifiable service costs. - Outdated practice of payment slips [bordereau] increases tax burden: Special duty (1 percent) and Special ad valorem tax (2 per thousand) charged on declared values via slips. - Specific container tax (TC) assessed and collected by transportation or import agencies, remitted on a special form to AGD; TC rates stated in law: - TC at the rate of USD 40 per container by sea and HTG 5,000 per container by land. - AGD observed shortfalls in remittances of TC since 2018 and asked agencies in August 2023 to comply with law provisions. ### Tax expenditures, special regimes, and governance risks - Plan to rationalize tax expenditure (Circular DEE/BM/202-Juin 20 of June 25, 2020) aims to reduce tax expenditure to 2 percent of GDP by 2025; implementation must be accelerated and better managed. - Haitian tax system characterized by generous, inefficient tax benefits provided by at least four texts and managed by multiple agencies. - New Tax Code devotes an entire section to three main tax incentive schemes (Part Four: Special regimes. Articles 298 to 410 of the new Tax Code): - (i) investment tax benefits; - (ii) free trade areas; - (iii) industrial parks. - These three regimes are managed by different agencies that do not systematically communicate, increasing risk of overlap and competition: - Inter-ministerial Investment Commission (CII) — Articles 316 to 319 of the Decree of January 20, 2023 on the Tax Code. - National Council of Free Trade Areas (CNZF) — Articles 14 to 16 of the Law of August 2, 2022 on free trade areas. - National Equipment Corporation (SEN) — established in early 1970s. - Industrial park regime in the new Tax Code is more attractive than other special regimes, risking investor migration between regimes. - Differences in management and appeal mechanisms across regimes: investment tax incentive regime lacks an appeals mechanism (Article 336), while free trade area regime contains such provisions (Article 376). ### Imbalance of administrative powers and user rights - New Tax Code and Customs Code grant broad discretionary powers to key managers and officers; implementation often limited by conditions left to officer discretion. - Examples of discretionary provisions: - Deadline for extending recovery period (Article 470 of the Tax Code). - Spontaneous regularization during inspections assessed on merit (Article 549-3). - Broad criteria for flagrant tax fraud (Article 504). - Accounting review period of six months (Article 533), extendable to up to nine months for large taxpayers. - Absence of formal time limits between interventions and notices. - Decision to apply a tax penalty may be made by tax officers (Article 584-1). - Administrative time frames create imbalance: administrations allow themselves lengthy response and collection deadlines that create opportunities for direct negotiation and corruption. - Collection process timing examples (Article references): - Debt due 30 days after payment authorization (Article 417). - Deadline for payment of collection notices (AMR): 30 days after the first reminder. - Issue of third-party holder notices (ATD): 30 days (Article 437) after the collection notice. - Precautionary seizure of vehicles: 30 days after the first ATD has been issued (Article 440). - Division of responsibilities among public accountants increases number of interlocutors for taxpayers and dilutes officers' responsibilities in granting and monitoring instalment payments. ### Complaints, appeals, and access to remedies - Right to appeal is under-utilized due to complexity and long delays. - New Tax Code separates collections and assessment disputes; both must be filed within 30 days, but administration has differing decision timeframes: - Administration has three months to issue decisions on collections. - Administration has six months to issue decisions on assessments, subject to extension up to nine months at the Director General's discretion. - Absence of timely administrative response is equivalent to an implicit rejection and does not need to be justified (Article 626-5). - Separation of collections and assessment dispute processes forces taxpayers to interact with multiple officials and concentrates final decision-making at the Director General of the DGI for all disputes, contrary to best practices. - No time limit for submissions of amicable settlements (Article 639-2), potentially encouraging prolonged negotiation and discretion. ### Organizational design and recommended structural principles - Organizational arrangements must align with risks and available resources to fight corruption (insecurity, flows of goods, land borders, private and secondary ports, size of taxpayers, availability of trained officers, job attractiveness, accessibility of offices, resource constraints, level of digitization). - Modern organizational design characteristics: - Clear separation between steering and operational tasks. - Appropriate number of adequately trained professional staff assigned to each position based on workload. - Headquarters function to ensure uniform application of procedures countrywide. - Operational structures organized according to financial stakes, tax compliance risks, and taxpayer size. - Units for internal audit and for fighting and preventing corruption. - A tax system based on fairness, efficiency, neutrality, simplicity, and transparency reduces vulnerability to corruption by limiting discretionary interpretation, standardizing application, reducing direct interactions, and improving public confidence. *IMF | Technical Assistance Report – Haiti Governance Diagnostic Report — Section III. Governance Weaknesses linked with Corruption Vulnerabilities in Fiscal Governance, A. REVENUE ADMINISTRATION* ### introduction of false submissions long after the government's claim arose. It is important to provide ### tarea2025039-print-pdf - introduction of false submissions long after the government's claim arose. It is important to provide ### Tax and customs appeals, forgiveness decisions, and publication - Findings: - Minister of Economy and Finance and the Director General of Taxes share responsibility for issuing a decision on submissions for amicable settlements (Article 640 of the Tax Code). - Recommendation to publish all decisions on forgiveness, adjustments, settlements, or automatic reductions (Article 644 of the Tax Code) to increase accountability and restore user confidence. - Creation of a Tax Appeal Commission in the Tax Code provides a model for customs to establish an independent Customs Appeals Commission. - Articles 23 and 112 of the new Customs Code provide an appeal mechanism and the establishment of a Customs Valuation Commission as a second-level appeal body after the first appeal to the Director General of the AGD; independence from customs authorities remains to be confirmed, as recommended by Standard 10.5 of Chapter 10 of the Revised Kyoto Convention. - Policy recommendations: - Publish decisions on tax forgiveness and settlements (Article 644 of the Tax Code). - Establish an independent Customs Appeals Commission modeled on the Tax Appeal Commission and consistent with Standard 10.5 of Chapter 10 of the Revised Kyoto Convention. ### Customs operations, border control, and resources - Findings: - AGD lists four official crossing points (Annex 2) on the land border with the Dominican Republic, although there are approximately 50 clandestine crossing points revealed by customs officials. - Shift of land import traffic from Malpasse (and Anse-à-Pitre to a lesser extent) to Belladere and Ouananminthe near Haiti's northern border due to insecurity around Port-au-Prince. - Increase in values of imported products admitted under suspensive arrangements in northern offices (Annex 2). - Such shifts and multiple clandestine entry points are indicative of corruption rents that are difficult to eradicate without close surveillance. - Policy recommendations: - Enable AGD to monitor land border and private/secondary ports far from Port-au-Prince through strengthened government control and security of strategic objects. - Deploy modern surveillance resources (drones, surveillance cameras, satellite images, etc.) for offices far from the capital and along the land border. ### Simplified, transparent, standardized, and digitized procedures - Findings: - Declaration and payment procedures described as archaic, complex, and costly. - The tax reform concluded with adoption of the Tax Code in January 2023 is incomplete; the Haitian tax system remains archaic and nondeclarative. - Article 414 of the Tax Code makes any declaration of duties and taxes conditional on prior issuance of a payment authorization (delivered in person or submitted electronically). - The issuance of this authorization was subject to assessment of 2 per thousand Special ad valorem duty applied to the declared values. - In customs, collection of the 2 percent Special duty is based on the customs value declared in the single declaration form which serves as a slip. - A true declarative system promotes voluntary compliance, minimizes direct interactions, reduces compliance costs, and lowers negotiation and corruption risks. - Policy recommendations: - Abolish issuance of payment authorizations in the periodic tax return procedure for the DGI. - AGD to apply the simplified procedure recommended by Article 108 of the Customs Code as an initial step. - Intensively use technologies to: (1) increase transparency and accountability in revenue administration; (2) reduce face-to-face interactions; (3) minimize officer intrusion into users’ affairs. - Implement tax payments initially by mobile telephone (leveraging solutions developed by the two mobile phone operators), and subsequently by bank transfer. ### Transparency, accountability, codes of conduct, and relations with the private sector - Findings: - Transparency and accountability are central to governance and integrity in tax and customs administrations. - Only the AGD currently has a Code of Ethics and Conduct for customs officials; it is supplemented by Article 59 of the Customs Code prohibiting customs officers from directly or indirectly receiving any gratification, reward, or gift, but the Code does not provide administrative penalties. - Administrative penalties exist in the Decree of April 11, 2013 establishing rules of ethics for Haitian public servants and the Decree of May 2015 revising general public service regulations. - DGI is expected to finalize its draft Code of Ethics and Conduct soon. - Special regulations exist for customs officers (Law of August 20, 1966) and must be updated to reflect digitization changes; DGI will need to adopt special regulations. - Collaboration between tax/customs administrations and the ULCC is at an early stage; ULCC is unable to assert its supporting role fully. - There is little cooperation between the DGI and AGD; they focus on direct relations with judiciary authorities for rare corruption cases. - Creation of an internal affairs unit is proposed to: (1) restore collaboration with ULCC to develop integrity and anti-corruption strategy; (2) conduct investigations into corruption or noncompliance with ethical rules. - Private sector should be engaged: Memorandums of Understanding between customs/tax administrations and ULCC and other specialized bodies may be useful; codes of conduct for the private sector could outline professional standards. - Policy recommendations: - Develop and widely disseminate codes of ethics and conduct with clear, practical behavior expectations and penalties proportionate to offenses. - Update the AGD Code of Ethics to include administrative penalties; finalize DGI’s code. - Adopt special regulations for DGI and update AGD’s special regulations to reflect digitization. - Establish internal affairs units in revenue administrations and strengthen collaboration with the ULCC. - Promote transparent, regular public information on governance, processes, procedures, documents, and data of tax and customs administrations. - Generalize publication of annual plans and reports, establish quantitative and qualitative performance assessment systems, strengthen external supervision, and promote public participation including service quality and integrity assessments. ### Public Financial Management (PFM): systemic weaknesses and recent advances - Findings: - PFM in Haiti manifests weaknesses that make it vulnerable to corruption, including instability of institutions, lack of accountability, mismanagement, and irregularities. - Internal and external oversight of public finances is weakened by frequent and tolerated obstructions to control and audit missions. - Advances recognized by the mission include: - Presentation in the 2023/24 budget documentation of a medium-term budget framework (MTBF) and a central medium-term expenditure framework (MTEF). - Rationalization of public investment projects financed by the Treasury, reducing total number of projects in the portfolio from 416 in 2022/23 to around 360 in 2023/24. - Development of cash management tools (procurement plan-PPM, expenditure programming document-DPD and cash flow plan-PT) and gradual consolidation of the Treasury Single Account (TSA) at the Bank of the Republic of Haiti (BRH). - Implementation of an effective mechanism for monitoring the number of public-sector employees on payroll; controlled monitoring of salary arrears in the SYSPAYE (payroll software). - Publication of procurement; creation of procurement commissions in most ministries and public entities. - Publication of the monthly TOFE and TERADA, integrating the use of resources from the IMF’s Food Shock Window; publication of the main donor fund (FAES) quarterly reports. - Production of State general accounts (CGE) and discharge draft laws for fiscal years up to 2021/22; publication of several internal audit reports and two specific IGF follow-up reports; publication of two high-stakes audit reports on Petro-Caribe and Covid-19 resources by the Cour supérieure des comptes et du contentieux administrative (CSCCA). ### Budget preparation, programming, and public investment management - Findings: - Budgetary process and timetable undermine budgetary credibility: incremental approach, late launch of annual budget preparation, absence of execution review, contraction of negotiation stages, limited public control, weak or non-existent parliamentary control, recurrence of late adoption of budget laws (except 2023/24). - Last five budget laws were adopted by decree due to absence of Parliament. - CSCCA continues to provide opinions on draft annual budgets, but these reach the executive branch rather than Parliament, limiting impact on credibility. - Computerized budget preparation system (ELABU) has not been deployed at ministries and institutions and lacks a multi-year framework module. - Deployment of new computerized PFM system (SIGFiP) in 17 ministries has potential to improve transparency and credibility if it fully integrates innovations of the Law on the Preparation and Execution of Finance Laws (LEELF) (Law N°CL/2016-01 of May 4, 2016). - MEF’s Directorate General of Budget (DGB) remains poorly structured for reform implementation and coordination of multi-year programming; issues noted in November 2020 IMF TA report remain relevant (dualism of budgetary control between DCF and DASIP, inadequate programming capacities, lack of sectoral specialization). - Quality and programming of internally financed public investment (PI) projects remain limited; weaknesses from the 2022 PIMA/CPIMA persist, including ineffective prior assessments of internally-financed PI projects, absence of data on total cost and time for projects not contributing to gross fixed capital formation (GFCF), lack of programming and budgeting for certain donor-funded and public-private partnership projects, absence of a three-year PIP, no distinction between ongoing and new projects, and no protection for IPs. - Policy implications / recommendations: - Revise budget timetable and deploy ELABU including a multi-year module; implement the multi-year budget programming guide proposed in the 2020 IMF Technical Assistance report to improve credibility. - Ensure SIGFiP integration with LEELF innovations to enhance transparency and credibility of budget procedures. - Reorganize DGB to emphasize synthesis and sectoral specialization, strategic and analytical tasks, and strengthen programming capacities. - Improve prior assessment, cost/time data collection, and programming of internally-financed PI projects; establish a three-year PIP and distinguish ongoing versus new projects; protect investment projects (IPs) through better procedures. *IMF | Technical Assistance Report – Haiti Governance Diagnostic Report* ### introduction of multi-year commitment authorizations (AE) for PI expenditure, no budgeting for ### introduction of multi-year commitment authorizations (AE) for PI expenditure, no budgeting for ### Project selection, public investment management, and PIMA/CPIMA recommendations - Major risks from the current system: - Introduction of multi-year commitment authorizations (AE) for public investment (PI) expenditure, while no budgeting for operation and maintenance expenditure. - Inadequacies in the project selection framework based on general criteria in the absence of a prioritization, absence of a database and databanks of evaluated projects. - Risk of selecting non-mature projects for ulterior motives. - Reportedly, one in five internally financed projects in the 2023-2024 budget do not have Identification and Operation Sheets, due to a lack of prior assessment. - The recommendations of the PIMA/CPIMA reports remain valid and authorities reiterated intention to implement them (Box 5). - Box 5: Priority recommendations for programming and budgeting public investments: - Make ex ante evaluations effective for all internally financed projects, while strengthening the project selection framework. - Incorporate the annual PIP into a three-year rolling investment plan, including total project costs, in close collaboration between MEF and MPCE departments at all stages of the procedure. - Reinforce the protection of investment and ongoing projects by specifying, in a circular, provisions giving priority to ongoing projects when preparing the budget, and by setting up AE in the budget. - Present large individual projects in a streamlined PIP that differentiates between large and small projects and does not include TP projects that do not contribute to GFCF due to their reclassification as operating expenses. - Continue and accelerate work on the PI cycle management module of the integrated development system. - Establish a legal framework covering the entire life cycle of a PI project, including climate considerations. - Source of Box 5: Extract from the report entitled “Evaluation of public investment management (PIMA and PIMA Climate Change (CPIMA))”, April 2022. ### Budget transparency and classification issues - Excessive allocations to unspecified expenditure items negatively affect budget transparency: - "Public interventions" receives approximately 11 percent of total expenditure in the 2023-2024 budget. - "Other public expenditure" receives approximately 24 percent of total expenditure in the 2023-2024 budget. - Characteristics and issues: - 'Public interventions' includes goods and services, subsidies, and transfers that should be reallocated to Economic Titles II and III, and includes expenditure in favor of certain administrations not directly related to their budget appropriations. - "Other public expenditure" is a catch-all item of questionable relevance; even after clearing, these items should not be considered for expenditure execution but reallocated during execution to specific budget execution lines. - Capital expenditure partly comprises fixed asset expenditure that does not create gross fixed capital formation. - "Operating expenditure" includes capitalizable expenditure items. ### Legal framework for budget preparation and implementation - LEELF shortcomings: - LEELF does not explicitly introduce the holding of the budget orientation discussion (DOB) or the citizens' budget. - LEELF does not take into account emerging topics: fiscal risk reporting, climate-sensitive budgeting, gender-responsive budgeting. - Revision of LEELF not conceivable in short/medium term; issues could be addressed via main implementing text of LEELF and supplemented with new/updated manuals, including for public expenditure management. - Budget execution legal framework is ambivalent and incomplete: - New paradigms introduced by 2016 LEELF, but practice still largely based on Decree of February 16, 2005 (RGCP) and the 2011 expenditure execution manual. - Implementing legislation of LEELF not adopted, reducing efficacy of internal expenditure control and hindering implementation of innovations (program mode, performance approach). ### Weaknesses in expenditure process and internal controls - Process vulnerabilities: - Weaknesses in commitment, verification, authorization, and payment can undermine integrity. - Legislation allows multiyear contracts above amounts in annual budget law but no mechanism for systematic monitoring of such multiyear legal commitments (contracts) to ensure budget sustainability. - Current information system records only accounting commitments (reservation of appropriations from annual allocations). - Verification phase: procedure for acknowledging services provided entails significant fiduciary risks in the absence of technical receiving commissions with adequate expertise. - Authorizing officers do not always have required technical expertise to confirm services performed per specifications; risk of fictitious or noncompliant services remains significant. - Payment stage: absence of official time frames for payment of invoices for goods and services duly delivered makes infra-annual arrears calculation difficult. - Back-and-forth between budget controller and authorizing officer makes the process cumbersome. - Financial Controller (FC) limitations: - FCs are formally acknowledged as having general competence for all acts of financial impact on the budget of the relevant institution, but in practice: - FC is only involved with operating expenditure. - Capital expenditure is controlled first by the Public Investment Directorate (DIV) of MPCE, then by DASIP of DGB, and by the Financial Supervision Directorate. - Financial Controller continues to approve verification documents beyond the commitment phase, isolating and extending verification and authorization phases that should be concurrent. ### Non-orthodox procedures and fiduciary risks - Two significant non-orthodox procedures: - Letters of transfer (LV): exclusive prerogative of the Minister of MEF; sent to public accountant to make funds available to a manager who must subsequently regularize in terms of budget commitments and expenditure vouchers. - Other service pre-payment mechanism: all stages of expenditure carried through to payment without delivery of service/good. - Risks associated with these procedures: - Lack of specification of expenses eligible for LVs. - Non-regulation of expenses incurred. - Use of funds for undeclared purposes. ### Government cash management and TSA - Cash management tools developed at start of 2022-2023 fiscal year: - Public procurement plans (PPM) by government institutions. - Expenditure programming paper (DPD) by DGB. - Cash flow plan (PT) prepared by DGTCP. - Coordination and updating issues: - These three tools are not coordinated and are not updated at regular intervals, making them irrelevant. - Treasury Single Account (TSA) progress and challenges: - TSA scope broadened but faces lingering challenges exacerbated by the 2023 BRH cyberattack. - Four special Treasury accounts (CST) repatriated to TSA at BRH; discussions underway for two remaining accounts (civil pensions and Fidéicommis). - Bank accounts for externally funded projects remain outside TSA coverage as donors remain reluctant. - After 2023 BRH cyberattack, Treasury no longer has access to the BRH web portal, harming rapid and reliable information-sharing about cash balance, delaying recording and reconciliations, increasing cash flow management risks. - Unimplemented key recommendations from previous IMF mission: - Revision of the 2013 TSA agreement between MEF and BRH. - Signing of a management protocol for State accounts held at Banque Nationale de Crédit (BNC). - Regular updating by DGTCP of the database tracking State entities’ bank accounts at commercial banks. - Monitoring of government's nonfinancial assets remains insufficient (see Box 6 excerpt). ### Government payroll management - Accrual and entitlement issues: - De facto practice of calculating entitlements of public servants from date of signing relevant documents instead of due date, under pretext of budget constraints—contrary to budget law principles. - Retirement dates of public servants may be extended over years pending signing of documentation, placing undue burden on wage bill. - Recommended SYSPAYE functions (best practices): - (i) Retirement alert mechanism at least one year in advance. - (ii) Automatic separation mechanism when age limit is reached. - If senior management decides to employ beyond age limit, decision should be confirmed in an official document enabling special payroll registration. ### Monitoring of nonfinancial assets (Box 6) - Asset register and accounting weaknesses: - Asset registers are neither exhaustive nor regularly updated; relevant regulations are incomplete and imprecise. - The 2012 manual by OMRH is not applied due to lack of dissemination and ownership. - Inventory statements forwarded to CSCCA are limited to incomplete lists of movable assets that are not valued and have no acquisition date. - Framework for materials accounting remains undeveloped. - State accounts and accrual/accounting reform status: - State’s financial accounts do not show value of non-financial assets. - Implementing texts of LEELF on accrual and asset-based accounting (CDCP), general regulations on public accounting, State chart of accounts, and reference frameworks/compilations of accounting standards have not yet been adopted. - According to CSCCA, State accounting is currently reduced to a statement of budget appropriations execution; the only component of the State’s general account provided for in article 56 of LEELF is the trial balance, which only records annual acquisition of assets resulting from public investment. ### Reporting for fiscal and accounting purposes - Infra-annual budget execution reports quality and timeliness: - Monthly TEREDA tables rarely accompanied by analysis of actual results; limited to authorized appropriations and expenditure authorizations without highlighting commitments, settlements, or payments. - Presentation is difficult to read and mentions debt amortization as a component of capital expenditure. - The latest report on execution of State budget from October 2022 to end of June 2023 does not provide analysis by ministry/institution, nor specify expenditure stages (commitment, liquidation, payments), nor procedures used (normal, letters of transfer, prior to authorization), nor execution of donor grants and project aid, completeness of source of funding, factors justifying under/over-execution, nor outlook. - Reports are produced and published with delays: - Last TEREDA table covering October to November 2023 made public in second half of December 2023. - Last budget execution report covering period to end of June 2023 was published in December 2023, i.e. with almost five (5) months delay. - Execution report covering 4th quarter of 2022-2023 fiscal year was not made available three months after end of fiscal year. - These delays are contrary to the 15-day deadline stipulated in article 96 of the LEELF. - Intermediate deadlines, sources and format of necessary data, actors involved, and structure of quarterly budget execution reports are not defined by law. - Accounting framework and systems: - LEELF introduced new budget classifications and a new accounting framework, but implementing regulations not yet adopted. - Budgetary nomenclature (NBE) dating from 2001 is obsolete; chart of accounts of Haitian State (PCEH) in use pending adoption of IMF-supported versions. - Draft PCEH for October 2023, including IPSAS-compliant accounting standards, is being validated; accounts continue to be kept on modified cash basis. - Draft decree on management accounts validated but neither published nor applied. - Production of trial balance is slow and unreliable: - Computerized General Ledger tool at centralizing accounting office does not ensure data reliability; some accounting info re-entered manually. - Last State general account transmitted to CSCCA (for 2021-2022) was sent in December 2023, a delay of 9 months. - Accounting reform with SIGFiP underway; will cover all accounting operations and improve reliability and production times in medium term, including digitizing archiving of supporting documents. - Readability of accounting and financial data inadequate; some account balances excessive and abnormal: - "Other unallocated public expenditure" account accounts for around 45% of total debits in the 2021-2022 trial balance, reflecting budget allocation discipline and transparency problems. - Absence of authorizing officers' administrative accounts and senior accountants’ management accounts undermines accounting quality and accountability; none of these accounts are produced. - CSCCA has not provided feedback to MEF on State's general accounts and settlement bills since [2017-2018]; CSCCA cites political and institutional instability and lack of text defining content and deadline for examining management accounts of accountants. ### Public procurement - Persistent shortcomings relative to transparency and competitiveness standards: - Shortcomings identified by 2022 PIMA/CPIMA largely remain valid. - Additional weaknesses: absence of specialized public procurement commissions at certain ministerial and local levels; omnipresence of Commission Nationale des Marchés Publics (CNMP) in procurement process; less-than-efficient contract approval system; lack of confidence from economic operators in public procurement ecosystem; insufficient professionalization of public purchasing profession. - Operational consequences and risks: - Absence of specialized commissions in all units forces central-level contract awards, increasing risks of interference and delays. - CNMP's four opinions add red tape and delays. - Approval of contracts by Financial Controller occurs after contract is awarded rather than prior to bidding, contrary to good practice. - Draft contract must be submitted to MEF for final validation, causing delays of up to two months with almost zero rejection at that level. - Lack of professional status for procurement officers and lack of confidence among economic transactors compound challenges. - Timely, regular provision of relevant information on public procurement activities and transparent, objective analysis of bids and dispute settlement are critical for building an effective public procurement system. *Source: IMF | Technical Assistance Report – Haiti Governance Diagnostic Report (excerpts).* ### Box 7: Haiti – Public Procurement ### Box 7: Haiti – Public Procurement ### Legal and institutional framework renewal — status - Renewal of the legal and institutional framework of public procurement activity is substantially delayed. - Recent instruments adopted: - Presidential order of February 12, 2020 (on defense and security sector procurement arrangements). - Decree of November 9, 2021 (on the identification of the beneficial owners of public procurement arrangements). - Pending instruments: - Draft public procurement development strategy (pending adoption). - Draft organic law establishing the new legal and institutional framework for public procurement (pending adoption). - Issue raised: - Whether to withdraw the pending drafts so the assessment of the public procurement system from 2013 can first be updated and the drafts reviewed before resubmission. ### Procurement practice, transparency, and information access - Competitive approach and access to information: - In 2021-2022, just under 40 percent of major projects were awarded through open tendering. - No clear improvement was observed in 2022-2023, primarily due to delay from the systematic requirement to produce a procurement plan before launching contracting procedures. - CNMP communication platform capacity: - Provides access to nine types of information out of the required 19, sometimes with substantial delays. - Reportedly 13 types in 2023. - Blacklist and database issues: - Only one case was initially added to the blacklist of unscrupulous suppliers. - Manual processing of the public procurement database does not provide reliable, timely information for standard, comprehensive, and regular analytical reports. - Reporting: - Most recent activity report of the CNMP published on its website dates back to 2020-2021. ### Dispute settlement mechanism for public procurement - Three types of appeals provided: - Non contentious appeals to the contracting authority. - Appeals to the Dispute Settlement Committee (CRD) of the CNMP. - Contentious appeals to the CSCCA. - Implementation and usage: - The CRD was not formally established until 2020 and is still only marginally used by bidders. - Previously, noncontentious appeals were the rule, although rare in practice. - Contentious appeals implementation is complex given the position of the judge and the party in which the CSCCA is positioned. *Source: Excerpt from the Public Investment Management Assessment Report –PIMA and Climate Change PIMA, 2022.* ### Internal audit — Inspection Générale des Finances (IGF) - Mandate and role: - IGF created in 2008; important tool for the MEF and government with a very broad mandate covering the whole of the State's budgetary sphere. - Enjoys relative independence and operational autonomy. - Recent activity and resources: - Over the past two years, with a staff of twenty-five (25) financial inspectors, the IGF has produced ten reports, including two monitoring the implementation of its recommendations. - Has control and auditing guidelines, draws up an annual work program based on a 2022-2024 strategic orientation framework validated by the MEF, and generally reports on its activities in an annual report. - Weaknesses and constraints: - IGF reports are intended for the MEF, which is under no legal obligation to forward them to the CSCCA, raising doubts about sanctions taken in the absence of a formal mechanism to invoke responsibilities of authorizing officers and other public managers guilty of mismanagement. - Annual activity report, follow-up report on implementation of recommendations, and reference manuals are not published. - Audit unit exists but skills in this area are limited. - IGF is not competent to coordinate ministerial inspections or conduct internal audit within government departments. - Several audit and control missions have been obstructed; auditors lack commissions of employment enabling them to request assistance of law enforcement authorities during missions. ### External audit — Cour Supérieure des Comptes et du Contentieux Administratif (CSCCA) - Mandate and recent work: - CSCCA is Haiti's Supreme Audit Institution with general jurisdiction over control and audit of public finances under the 1987 Constitution, the 2016 LEELF, and the decree of November 23, 2005. - CSCCA also gives prior approval to all the State's legal commitments, issues opinions on the initial finance bill, and settles administrative disputes. - Produced two high-stakes audit reports (Audit report on Petro-Caribe resources and on Covid-19 funds). - Weaknesses affecting performance: - Legal framework is outdated in several respects, including conflicting operational and oversight roles; renovation requires prior amendment of the Constitution. - Current magistrates have passed the end of their ten (10)-year term; replacements cannot be recruited in the absence of Parliament. - CSCCA does not produce an annual report or a follow-up report on implementation of its recommendations; audit guidelines are not published. - Annual work program is not formalized and published. - Operational capacities limited by insufficient human and financial resources and low levels of auditing expertise. - Authorities informed the mission that they have prepared a new CSCCA bill, but the mission has never had access to it. ### Financial sector oversight — governance and supervision (overview) - Diagnostic basis: - Assessment of surveillance conditions for the financial system on governance issues using the Basel Core Principles for Effective Banking Supervision (BCP). - Diagnostic informed by IMF technical assistance to the BRH since 2017, meetings with BRH and the Professional Banking Association (APB), and participation of heads of all banks in the local market. - Structure of supervision: - Banking supervision exercised by Banque de la République d’Haïti (BRH). - Directorate for Supervision of Banks and Other Financial Institutions (DSBIF) conducts supervision except microfinance institutions, which are supervised by the General Credit Union Inspection Directorate (DIGCP). ### Financial sector — key statistics and structure (as of June 30, 2023) - Banking system: - Haiti's financial sector is dominated by eight banks. - Total balance sheet of these banks amounted to US$4.7 billion, equivalent to just under 25 percent of GDP. - Ownership: two state-owned banks, five privately owned banks, and one branch of a foreign bank. - Microfinance and other institutions: - 75 cooperative funds, 55 of which are federated into two networks, having a total balance sheet of US$200 million. - Three private microfinance companies totaling US$80 million. - 16 specialized non-deposit institutions operating in development finance (4), credit cards (2), leasing (1), transfer companies (5), exchange bureaus (3), and electronic payment services (4). ### Financial sector performance and vulnerabilities - Recent deterioration since 2018: - Economic difficulties and devaluation of the currency: a steady decline in GDP since 2018 to reach a total of 10 percent, an inflation rate exceeding 210 percent, and the halving of the exchange rate for the gourde against the U.S. dollar. - These factors amplified by local security context have negatively impacted banks; erosion of banks' capital as it is denominated in local currency. - Solvency: - Average solvency ratio is 19.37 percent, against a minimum requirement of 12 percent and a total of 14.5 percent (including an additional conservation buffer of 2.5 percent). - Individual bank distress: - Since 2016, Banque Populaire Haïtienne (BPH), one of Haiti’s state-owned banks, has been in a situation of insolvency. - BPH currently supervised by an on-site representative of the BRH (a manager from the DSBIF). - BRH should undertake resolution measures in the banking law: appoint a technical team to manage the bank temporarily, potentially leading to restructuring or court-ordered forced liquidation, sale of the bank’s assets, or absorption by other entities. ### Governance of the supervisory authority (BRH) - Alignment with Basel Principles: - Responsibilities, powers, organization, and execution of banking supervision by the BRH largely in line with BCP 1 and 2. - BRH powers include licensing, regulation, on-site and off-site supervision, preventive and corrective measures, and application of administrative and disciplinary penalties. - Authority and industry engagement: - BRH has indisputable authority; enforcement actions include a substantial financial penalty on the largest bank representing 7 percent of its capital. - Reciprocal communication through regular consultation with industry via a joint committee and systematic consultation in drafting new regulations. - Legal and governance enhancements needed: - Revision of the Charter of the Central Bank (draft organic law prepared by the BRH with IMF technical assistance and submitted to the government) would improve board composition and create an Executive Committee for routine management. - Current Charter, draft revisions, and internal texts do not regulate decision-making system in banking supervision. - Interim measure: supervisory decision-making powers can be delegated by the BRH Board to a specialized committee. - Sustainable solution: legal framework to avoid conflicts among BRH objectives (penalties, bank resolution) and strengthen transparency and defense rights in disciplinary proceedings. - Reporting and transparency gaps: - BRH has included objectives and activity reports in its annual report. - "Surveillance Framework" published on BRH website is obsolete after 2017 reorganization; plans to update once risk-based supervision is implemented. - Annual report of the BRH has not been published on the BRH website since 2018; the 2019 report is pending internal validation and subsequent reports are to be finalized. - Current institutional recipients of BRH’s annual reports are not specified; proposed amendments would submit reports to the President of the Republic and Parliament. ### Operational capacity and resourcing of supervision - Staffing and operational difficulties: - DSBIF and DIGCP face operational difficulties deriving from the Haitian security context and persistent lack and loss of qualified human resources despite doubling DSBIF workforce in 2022. - Emigration has worsened human resources shortages. - Consequences: insufficient understanding of new prudential regulations by junior staff, poor controls on implementation, slow progress in strengthening supervision system, postponement of projects to establish supervision processes. - Reporting reliability risk: difficulties at supervised institutions increase risk that reporting statements transmitted to BRH will be unreliable. - Current bank supervision staff increasingly engaged in tasks not directly related to banking supervision (examples listed in source). - On-site inspection and AML/CFT: - On-site inspection continues to be carried out by DSBIF under satisfactory conditions given overall situation. - Capacity development for AML/CFT inspectors is a priority to supplement formal compliance checks with risk-based testing of effectiveness and efficiency. ### Prudential regulation and governance of financial institutions - Regulatory reforms and alignment with Basel: - Comprehensive review of prudential regulations by BRH has strengthened governance-related requirements to align with Basel Core Principles. - New regulations include capital adequacy requirements, internal supervision, IT security, consolidated supervision, and credit risk concentration. - IMF support developing accounting plan in line with IFRS and revision of credit risk classification and provisioning rules. - Remaining governance gaps and implementation delays: - BRH Corporate Governance Regulation does not require appointment of qualified nonexecutive board members and makes their participation on internal control committees optional (BCP 14, Core Criterion 3). - No provision protecting whistleblowers in financial institutions (Corporate Governance Principles for Banks, Basel Committee, July 2015, Principle 1). - Lack of process for examining dismissal or resignation of senior staff or those responsible for internal supervision to identify potential governance issues. - Delays in implementation: - Beneficial owners of legal entities that are shareholders in financial institutions are not identified due to lack of information. - New regulation reducing overall exposure limit for related parties will be phased in over two to two and a half years at banks' request. - DSBIF should establish a monitoring system for measures taken by financial institutions to comply with regulations. - Assessment tools and supervision approach: - Risk Assessment and Rating Matrix for Financial Institutions includes a governance assessment module for ongoing supervision and on-site inspections; questionnaire sent to financial institutions with positive feedback; plans to repeat annually. - Matrix tested in on-site supervision with aim of finalizing and making operational in 2024. - A rating system for savings and loan cooperatives, including governance module, is being implemented by DIGCP and applied annually to the 20 largest institutions. - A circular on governance is being prepared for senior management. *Source: Excerpt from the Public Investment Management Assessment Report –PIMA and Climate Change PIMA, 2022.* ### ANNEX 1: ANTI-CORRUPTION INSTITUTIONS ### ANNEX 1: ANTI-CORRUPTION INSTITUTIONS ### National Integrity System (SNI) — Pillars - The Superior Court of Auditors and Administrative Disputes (CSC-CA) - The Anticorruption Unit (ULCC) - The National Public Procurement Commission (CNMP) - The General Finance Inspectorate (IGF) - The Central Financial Intelligence Unit (UCREF) - The Superior Council of the Judiciary (CSPJ) - Parliament ### Roles and mandates of key institutions - Superior Court of Auditors and Administrative Disputes (CSCCA) - Independent institution; mission includes judging acts of government and accounts of Authorizing Officers and Accountants involving public funds; assist Parliament and the Executive in supervising implementation of laws and regulations concerning the budget and public accounting (Article 2 of the Decree of November 23, 2005). - Exercises a priori supervision on compliance of draft contracts and other financial initiatives of national government bodies; can confirm, amend, or cancel acts of government officials at odds with laws and regulations (Article 5). - Responsibility includes a preventive role over public financial acts. - Anticorruption Unit (ULCC) - Created by Decree of September 8, 2004. - Mandate includes preventing corruption (Article 2, Paragraph 2; Article 4; and Article 7 of said Decree) and increasing the moral standing of the government. - Placed under oversight of the Minister of Economy and Finance; is autonomous and has legal status. - Empowered to conduct investigations into suspected corruption and refer completed investigations to judiciary authorities for legal proceedings. - National Public Procurement Commission (CNMP) - Responsible for regulating and supervising public procurement. - Role in preventing corruption is implicit in powers vested by the Law of June 10, 2009 on public procurement. - General Finance Inspectorate (IGF) - Under organizational supervision of the Minister of Economy and Finance. - Exercises internal administrative supervision over management of authorizing officers and public accountants. - Role includes verification, audit, investigation, evaluation, and budget discipline; prerogatives extend beyond authorizing officers and public accountants to other public actors. - Central Financial Intelligence Unit (UCREF) - Established in accordance with Article 3.1.1 of the Law of February 21, 2001 on money laundering (now repealed and replaced by the Decree on the Reorganization of the Central Financial Intelligence Unit of 21 November 2023). - Main mission: fight money laundering and terrorism financing by receiving and analyzing suspicious transaction reports and automatic cash transaction reports from financial institutions and DNFBPs, and disseminating financial intelligence to investigative and judicial authorities. - Tasked with conducting operational and strategic analysis of money laundering/terrorism financing trends and methods and cooperating with domestic and foreign counterparts on ML/TF and related predicate crimes. - Superior Council of the Judiciary (CSPJ) - Established by law of November 13, 2007; mission of supervision, discipline, and deliberation of the Judiciary. - Formulates opinion on appointment of judges and updates annual advancement list for all judges (Article 1). - Manages and administers operating budget allocated to courts and tribunals (Article 15). - Has reporting and recommendation powers on matters relating to the situation of the judiciary, including independence and operating mechanisms. - Parliament - Supervises government policy and can issue warnings on risks of abuse. - Supervises the Executive through the Survey of government activities submitted at opening of each session (Article 98.3, paragraph 8 of the Constitution of March 29, 1987). - Approves public expenditure by voting on the budget law. - A posteriori supervision of budget execution defined in Articles 76 and 77 of the Decree of February 16, 2005 on preparation and execution of budget laws, amended by the Law of May 4, 2016 on preparation and execution of budget laws; Articles 91 to 93 of the internal rules of procedure of November 14, 2008 of the Senate of the Republic; and Articles 194 to 206 of the Internal Rules of Procedure of the Chamber of Deputies of February 17, 2009. ### Observations on system functions - Several institutions have explicit preventive roles (CSCCA, CNMP, IGF) through a priori controls, supervision, and procurement oversight. - UCREF’s mandate ties AML/CFT activity directly to corruption-related predicate crimes, with institutional responsibilities for analysis, reporting, and international cooperation. - Judicial independence, appointment, budgeting, and discipline are centralized within CSPJ functions, affecting rule of law and integrity of the judiciary. - Parliamentary oversight mechanisms (budget approval, post-execution supervision, session reporting) provide formal tools for a posteriori scrutiny of executive actions. ### Priority policy implications drawn from institutional mandates - Strengthening institutions with preventive control powers (CSCCA, CNMP, IGF) supports early detection and mitigation of corrupt practices in public finance and procurement. - Enhancing UCREF analytical capacity and STR handling improves identification of corruption-related ML and supports investigative and prosecutorial follow-up. - Reforming judicial selection and appointment processes via CSPJ and EMA is linked to broader judicial integrity and rule-of-law outcomes. - Systematic, transparent parliamentary oversight of budget execution reinforces accountability across the public sector. --- ### Selected measures from the Economic Governance Reform Plan (Table 3) — measures relevant to anti-corruption, AML/CFT, fiscal and financial oversight ### I. Rebuilding Rule of Law, Effective Anti-Corruption and AML Frameworks - 1. Strengthen capacity to understand and mitigate corruption-related ML risks through strategic analysis based on reliable statistics. - Maintain reliable statistics on all STRs and FIU analyses, including the suspected predicate crime (immediate). - Prepare and disseminate, including through publications on the UCREF’s website such as the annual reports and occasional thematic reports, strategic analyses and typological studies on current trends and corruption-related ML schemes, based on STR analysis and other sources (immediate). - Update the May 2023 strategy document as needed based on a more granular understanding of the concrete risks of laundering of proceeds of corruption and other key predicate crimes (MT). - Authority: UCREF. Objective: Strengthen anti-corruption and AML. Timeline: Immediate/MT. - 2. Improve the volume and quality of suspicious activity reporting by financial institutions and other covered entities. - Provide regular feedback to covered entities on their reporting activity – or lack thereof. - Take steps, such as written guidance and in-person or virtual awareness-raising activities, to ensure a correct understanding of reporting requirements under the May 2023 AML/CFT decree, and UCREF’s confidentiality obligations. - Authority: UCREF. Objective: Strengthen AML. Timeline: MT. - 3. Reform the current system of selection and appointment of judges by strengthening the role of the Conseil Superieur du Pouvoir Judiciaire (CSPJ) and the École de la Magistrature (EMA) in selection and appointment of judges. - Authority: Judiciary, MOJ. Objective: Strengthen rule of law and judicial integrity. Timeline: LT. ### II. Fiscal Governance A. Strengthen Public Financial Management - 4. Adopt and effectively implement the draft multi-year budget programming guide, and the proposed budget preparation timetable. - Authority: MEF. Objective: Strengthen efficiency and accountability in PFM. Timeline: ST. - 5. Limit unspecified expenditure in the budget by bringing it down to around 3-5% of total government expenditure. - Authority: MEF. Objective: Strengthen efficiency and accountability in PFM. Timeline: ST. - 6. Implement priority actions recommended in PIMA/CPIMA to strengthen PI programming and budgeting. - Authority: MEF. Objective: Strengthen PIMA processes. Timeline: ST/MT. - 7. Adopt the main text implementing the LEELF, combining public accounting and program-based budget management. - Authority: MEF. Objective: Strengthen transparency and accountability in PFM. Timeline: LT. - 8. Reinstate the financial controller’s prerogatives with regard to a priori control of public investment expenditure; adopt budgetary control guide and renovated expenditure execution manual. - Authority: MEF. Objective: Strengthen transparency and accountability in PFM. Timeline: MT. - 9. Update public procurement system assessment and revise the procurement law accordingly. - Authority: Public Procurement Authority. Objective: Strengthen transparency and competitiveness in public procurement. Timeline: MT. - 10. Improve reliability of the State’s General Account by harmonizing NBE with PCEH and implementing the accounting module of SIGFiP. - Authority: MEF. Objective: Strengthen transparency and accountability in PFM. Timeline: MT. B. Strengthen Audit Functions - 11. Address deadlock for audit magistrates who have reached end of term by using executive acts to extend mandates or organize new recruitment. - Authority: CSCCA. Objective: Strengthen accountability through audit. Timeline: ST. - 12. Commit CSCCA to producing and publishing an annual activity report, an annual follow-up report on recommendations and a formal annual work program. - Authority: CSCCA. Objective: Strengthen accountability through audit. Timeline: MT. - 13. Initiate review of the CSCCA Act and any constitutional provisions requiring amendment, pending next opportunity to revise the Constitution. - Authority: CSCCA. Objective: Strengthen accountability through audit. Timeline: LT. C. Strengthen Revenue (Tax and Customs) Administration - 14. Establish and operationalize the Commission of Independent Customs Expertise to handle appeals related to matters of sort, origin and value of goods. - Authority: AGD. Objective: Reduce risks of arbitrariness. Timeline: ST. - 15. Publish monthly statistics (origin, sort, value, amount, regime, declarant, office, mode of transportation) of the top 30 most imported products. - Authority: AGD. Objective: Reduce fraud and smuggling & promote competition among importers. Timeline: ST. - 16. Systematically publish in the Monitor and on the MEF website the legal and ad hoc exemptions granted. - Authority: MEF. Objective: Increase transparency and accountability in granting exemptions. Timeline: ST. - 17. Systematically publish all decisions on remission, moderation, transaction and relief. - Authority: MEF, DGI, ADG. Objective: Strengthen transparency and anti-corruption in the revenue administration. Timeline: ST. - 18. Operationalize the Tax Appeal Board and publish its decisions on the tax administration website. - Authority: DGI. Objective: Strengthen transparency and anti-corruption. Timeline: CT. - 19. Revise the Book of Tax Procedures to balance rights of users and powers of the DGI, harmonizing time limits. - Authority: DGI. Objective: Strengthen transparency and efficiency. Timeline: MT. - 20. Reorganize the ADG and DGI to: - establish an organizational structure along functional lines; - separate roles/responsibilities between HQ and local branches so HQ handles standard procedures, planning and monitoring and branches handle execution. - Authority: MEF. Objective: Strengthen efficiency and good governance in the revenue administration. Timeline: ST. - 21. Define and publish operational guidelines and manuals on tax and customs procedures & update and disseminate the AGD Code of Ethics and Conduct. - Authority: DGI, ADG. Objective: Strengthen efficiency and accountability in the revenue administration. Timeline: ST. - 22. Adopt principle of a declarative system by removing authorization for payment prior to declaration and payment. - Authority: DGI. Objective: Strengthen efficiency in the revenue administration. Timeline: MT. - 23. Remove the special duty collected by the AGD and the ad valorem special duty collected by the DGI and slightly increase the TCA rate. - Authority: DGI, ADG. Objective: Strengthen efficiency in the revenue administration. Timeline: MT. - 24. Enforce simplified customs clearance procedure provided by article 108 of the Customs Code. - Authority: ADG. Objective: Strengthen efficiency in the revenue administration. Timeline: MT. ### III. Financial Sector Oversight (selected measures) - 25. Revise decision-making organization in banking supervision to ensure independence and transparency: - Complete adoption of draft revision of BRH organic law. - Formalize, by Board decision, rules, levels and decision-making powers in banking supervision. - Organize within the Board a resolution and sanctions committee and establish procedural rules guaranteeing respect of rights of defense. - Authority: BRH. Objective: Strengthen financial sector oversight. Timeline: MT. - 26. Improve transparency of BRH action in banking supervision: - Resume publication of its annual report on its website. - Update the information document on the supervision framework once risk-based supervision operationalized. - Authority: BRH. Objective: Strengthen financial sector oversight. Timeline: ST. - 27. Strengthen supervision capacities of financial institutions: - Provide DSBIF and DIGCP with adequate additional human resources based on quantified needs. - Concentrate DSBIF action on supervision of banks and relieve it of responsibilities posing conflict of objectives. - Define timed action plan to formalize DSBIF procedures, prioritizing licensing and off-site control. - Remedy difficulties in permanent control and mobilize technical assistance for AML-CFT control, remotely and on site. - Authority: BRH. Objective: Strengthen financial sector oversight. Timeline: MT. - 28. Exercise resolution measures towards Banque Populaire Haïtienne per banking law to clean up its situation by the State and normalize management or decide liquidation. - Authority: BRH. Objective: Strengthen financial sector oversight. Timeline: MT. - 29. Complete regulations relating to governance of FIs with APB: - Make compulsory appointment of experienced non-executive members in boards and internal control committees, at least for large banks. - Implement examination process at DSBIF and DIGP for reasons for dismissal or resignation of FI senior executives and heads of internal control functions. - Authority: BRH. Objective: Strengthen financial sector oversight. Timeline: MT. - 30. Finalize and operationalize DSBIF risk assessment and rating matrix of FIs to regularly assess compliance with governance rules. - Authority: BRH. Objective: Strengthen financial sector oversight. Timeline: ST. *IMF | Technical Assistance Report – Haiti Governance Diagnostic Report* --- _Source: https://www.imf.org/-/media/files/publications/tar/2025/english/tarea2025039-print-pdf.pdf_