## Haiti: Interim Poverty Reduction Strategy Paper—Joint Staff Advisory Note (JSAN)

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### I. Introduction
- The document is the joint advice of the staffs of the World Bank and the International Monetary Fund on the Interim Poverty Reduction Strategy Paper (I-PRSP) submitted by the Government of Haiti on September 29, 2006.
- Purpose of the JSAN: provide focused, frank, and constructive feedback to the country on progress in implementing its Poverty Reduction Strategy (PRS).
- The full PRSP is expected to:
  - build on the I-PRSP with a comprehensive medium- and long-term strategy and implementation agenda;
  - prioritize public expenditures and strengthen policy focus, including the link between policy and resource use;
  - elaborate a clear framework for coordination and monitoring of the strategy;
  - define actions to enhance public sector program and project implementation capacity;
  - identify operational plans and monitorable targets, the cost of programs, and the links with the budget.

### II. Background
- From mid-2004 to mid-2006, recovery and structural reforms were supported under an Interim Cooperation Framework (ICF) presented at a July 2004 Donor Conference.
- Achievements under the ICF include:
  - creation of conditions for free and fair elections;
  - strengthened economic governance institutions and practices;
  - reversal of protracted economic decline.
- Less progress was made in improving access to basic services, notably electricity and water.
- Following early 2006 elections, the Government presented an extended and revised one-year ICF at a Donor Conference on July 25, 2006, covering July 2006–September 2007; the I-PRSP reflects that development agenda and outlines the process for preparing the full PRSP.

### III. The Interim PRSP — Overview and Assessment
- The I-PRSP emphasizes: private sector led growth; enhanced physical infrastructure; expanded access to social services; support for productive sectors (agriculture, industry and tourism); improved economic governance; strengthened public institutions.
- Staffs view the emphasis on these areas as appropriate given past deficiencies.
- The I-PRSP:
  - makes reasonably good use of existing poverty data;
  - highlights the role of budgetary discipline and economic governance for development outcomes;
  - describes the process for preparing the full PRS.

A. Poverty Analysis
- The I-PRSP presents a diagnostic based on: a living conditions survey (2001); a poverty perceptions survey (2003); poverty maps (2000, 2002, and 2004); a household budget and consumption survey (2000); and a population census (2003).
- Key poverty statistics:
  - Over 50 percent of the population live below the US$1 a day poverty line.
  - 76 percent live below US$2 a day poverty line.
  - Poverty is largely rural: incidence in rural areas is 69 percent for the US$1 a day poverty line and 86 percent for the US$2 a day poverty line.
- Data gaps and ongoing surveys:
  - Data collection for an updated demographic and health survey (including household expenditure questions) will be completed in 2006.
  - A new household budget and consumption survey is being conducted; results expected in 2007.
- Recommendation: complete ongoing surveys in a timely manner and use results to target PRSP policies and measure progress toward the Millennium Development Goals (MDGs).

B. Macroeconomic Framework
- The I-PRSP covers macroeconomic objectives and broad measures; staffs recommend the PRSP provide more information on sequencing and timing of key structural reforms consistent with the Government’s three-year macroeconomic program supported by the PRGF arrangement with the IMF.
- Suggested key objectives of the macroeconomic program to be highlighted in the PRSP:
  - raise growth to over 4–5 percent over the medium term;
  - reduce inflation, which levies a disproportionate tax on the poor and impedes sustainable growth;
  - increase revenues to sustain higher social and infrastructure expenditures and reduce reliance on external financing;
  - improve public expenditure management to increase governance and transparency of public expenditures;
  - strengthen the financial sector, including microfinance institutions, to maintain macroeconomic stability and promote private sector investment.
- Institutional framework for local governments:
  - PRSP should define the framework clarifying central-local relations and financing modalities to avoid fiscal instability from establishing local governments without clear arrangements.
- Debt sustainability:
  - PRSP should emphasize maintaining debt sustainability after debt relief and improving external debt management.
  - External financing needs should be met in the form of grants or highly concessional loans to ensure sustainability after debt relief.
  - PRSP should identify improvements such as centralization of debt information, better coordination between government entities, and strengthening the legal framework.

C. Structural Reforms
- Existing sectoral studies and strategies can inform structural reform agenda.
- Observation: linkages between specific development problems, poverty reduction objectives, and envisaged structural reforms could be better articulated.
- Recommendation: make structural reforms operational and monitorable within sectoral action programs (examples noted):
  - Education: implement Education For All program and expand the school feeding program.
  - Security and governance: address political instability and violence through reforms of the judiciary and the police.
  - Incorporate the Government’s Program d’Apaisement Social (PAS) into the PRSP to address urgent social and economic needs in disadvantaged and conflict-prone areas.
- Economic governance and public sector modernization:
  - I-PRSP describes recent reforms and planned measures to improve public financial management and revenue mobilization.
  - Policy matrix includes actions to ensure accountability and oversight of government and public enterprise accounts; expand computerized financial management systems to all public institutions; strengthen procurement procedures; and establish customs control in the provinces.
  - PRSP could emphasize procedural and legal reforms to increase the tax base.
- Service delivery mechanisms:
  - PRSP should develop roles and complementarities of local government, partner NGOs, and the private sector, particularly for health and education service provision.
  - Example to highlight: establishment of a new National Partnership Office to coordinate public and private actors in the education sector.
- Implementation capacity and prioritization:
  - Given existing capacity constraints, PRSP should focus on selected actions in priority areas and prioritize related investment projects in the public investment program, particularly social sectors and physical infrastructure rehabilitation.
  - PRSP should outline efforts to strengthen institutional capacity in key public sector agencies and include a comprehensive list of technical assistance requirements with potential donor identification.
- Local government capacity:
  - I-PRSP highlights significant differences in poverty indicators and service provision between Port-au-Prince and the rest of the country; welfare indicators and service access are particularly worrisome in rural areas.
  - Recommendation: assess local public agency implementation capacity and identify measures to strengthen it in the PRSP.

### IV. Participation, Coordination and Monitoring
- Public consultations:
  - Broad and meaningful consultations can build ownership and sustainability.
  - Main objectives of the Government’s program for July 2006–September 2007 were communicated at the July 25, 2006 conference with broad stakeholder participation; proceedings were broadcast via radio and television.
  - I-PRSP summarizes the consultative process and provides a program and calendar for national and local consultations.
  - Staffs welcome the representative, well-structured, and decentralized process and encourage building on lessons from other countries.
  - Recommendation: seek technical and financial assistance from donors to support participatory processes and strengthen statistical and monitoring capacity; define objectives focused on listening to a wide range of voices and identifying priorities within constrained budgets.
- Donor coordination:
  - PRSP can enhance donor coordination and provide a framework to ensure donor assistance for critical priorities (notably security) is aligned with the country’s strategy.
  - Staffs recommend continuing regular consultations with the donor community to increase coordination in program design and implementation.
- Monitoring and evaluation:
  - I-PRSP contains a comprehensive matrix of strategic measures.
  - The full PRSP should define follow-up monitoring and evaluation mechanisms, including:
    - identifying a few key objectively verifiable indicators central to strategic goals and MDGs;
    - establishing the institutional framework for monitoring PRSP implementation;
    - incorporating participation elements by civil society.
  - Recommendation: mobilize technical assistance from donors and other sources to improve statistical capacity in key monitoring areas.

### V. Preparation of the PRSP
- Costing and prioritization:
  - PRSP should cost proposed programs and projects, assess policy effectiveness, and prioritize them given existing financial resources (domestic and external) and absorption capacity.
  - Objective: ensure the PRS is realistic and aligned to the budget cycle.
- Results orientation and benchmarks:
  - PRSP should be results-oriented and establish well-publicized benchmarks to coordinate and report progress on the medium-term development agenda.
  - Required elements:
    - establish efficient mechanisms and easy-to-monitor indicators for progress, including MDGs;
    - refine the structural reform agenda and provide more detailed, focused sector strategies;
    - clearly define priority expenditures within a strengthened public sector investment program;
    - enhance public sector program and project implementation capacity.

### VI. Risks and Challenges
- Major risks to Haiti’s economy:
  - political instability;
  - recurring insecurity;
  - natural disasters;
  - vulnerability to shocks from high energy costs and loss of donor support (the largest part of the public investment program is financed by external grants).
- Constraints in fragile states:
  - many pressing priorities, high citizen expectations, and capacity constraints.
- Recommendation: the full PRSP should recognize these risks and outline ongoing and planned Government actions to mitigate them.

### VII. Issues for Discussion
- Do Directors agree with staffs’ conclusions regarding:
  - (i) priority areas for strengthening the poverty reduction strategy to be formulated in the PRSP; and
  - (ii) areas in which further analysis or adjustments to the strategy are needed for the PRSP to provide a framework for future Bank and Fund assistance.

*Joint Staff Advisory Note (JSAN) on the Interim Poverty Reduction Strategy Paper for Haiti, prepared by IMF and IDA staffs, November 6, 2006.*

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