## _cr09288 ## Source details **Canonical URL:** [_cr09288](https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2009/_cr09288.pdf) ## Other formats - [Markdown version](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2009/_cr09288.pdf.md) - [Structured JSON version](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2009/_cr09288.pdf.json) --- ### Executive Summary — Key findings and recommendation - Decision point reached in November 2006; amount of debt relief committed at decision point: US$140.3 million in end-September 2005 NPV terms (US$212.9 million in nominal terms) to bring NPV of debt to 150 percent of exports; common reduction factor: 15.1 percent for all creditors. - Staff recommendation: Executive Directors of IDA and the IMF approve the completion point for Haiti under the Enhanced HIPC Initiative. - Completion-point trigger implementation: 11 out of 15 triggers implemented; waivers requested for remaining four based on progress achieved. - Creditor participation: creditors accounting for 96 percent of total HIPC assistance in NPV terms have given satisfactory assurances of participation. - MDRI eligibility upon completion point: MDRI relief covers remaining debt service obligations to IDA and IADB; MDRI (net of HIPC) implies nominal reductions in stocks owed to IDA of US$446 million and to IADB of US$395 million. - Staffs' view on topping-up: Haiti does not meet requirements for exceptional topping-up under Enhanced HIPC. - Overall assessment: satisfactory progress despite 2008 shocks; IMF staff to recommend completion of the fifth PRGF review in conjunction with HIPC completion point consideration. ### Progress on completion-point triggers — implemented and pending - Implemented triggers (selection): - Preparation of a full PRSP (DSNCRP) and submission of first APR on April 23, 2009. - Maintenance of macroeconomic stability under the PRGF-supported program. - Tracking poverty-reducing spending and publishing quarterly reports. - Alignment of public spending with PRSP priorities. - Enactment and reporting on implementation of an asset declaration law (effective since February 2008; first-year report April 24, 2009; 283 officials submitted declarations). - Strengthened tax and customs administration (ASYCUDA World operational; central taxpayer file operational). - Improved debt management and reporting (DMFAS installed; quarterly external debt reports published). - Establishment of financing mechanism to allow 50,000 additional children to attend school (school fee subsidy supports estimated 80,000 children). - Approval of an HIV/AIDS prevention and treatment plan (approved January 15, 2007). - Triggers not fully implemented (waivers requested): - Submission and publication of audited government accounts (FY 2006 and FY 2007 audited and submitted January 10, 2009; to be published after Parliamentary review). - Implementation of a new procurement law (Parliament passed law in June 2009; prior CNMP actions, standard bidding documents, manuals). - Education spending target narrowly missed (education recurrent expenditures: 19.4 percent for FY 2007; FY 2008 budget allocation 20.3 percent vs. target "at least 21 percent"); approximately 2,500 student-teachers enrolled expected to graduate in 2010. - Health: immunization rates improved for DPT3 (47 percent in 2005-06 to 68 percent in 2007) and measles (45 percent to 54 percent); BCG remained around 70 percent in 2007 (73 percent in 2005–06). ### Creditor participation, HIPC assistance, and MDRI - HIPC assistance amount at completion point: remain US$140.3 million in NPV terms (staff do not propose downward revision despite minor database and export revisions). - Creditor assurances: - Creditors representing 96 percent of NPV of HIPC assistance provided financing assurances. - All Paris Club and multilateral creditors confirmed participation. - Staffs encouraged agreements with two remaining bilateral creditors. - Multilateral HIPC commitments (decision point): - Total multilateral HIPC assistance: US$120.0 million in NPV terms (85.5 percent of total assistance). - IDA: US$52.8 million in NPV terms (interim delivery and remaining US$9.9 million in NPV via 51.6 percent reduction of debt service through July 2010). - IMF: US$3.1 million in NPV terms (SDR 2.10 million); interim assistance ~SDR 0.3 million delivered; remaining stock-of-debt operation estimated SDR 2 million (~US$3 million nominal) scheduled June 2009. - IADB: US$60.4 million in NPV terms (remaining US$23.5 million in NPV to be delivered at completion point). - MDRI impacts (contingent on completion point approval): - MDRI debt relief (net of HIPC) implies stock-of-debt reduction of US$841.0 million in nominal terms and would save Haiti US$972.7 million in debt service through 2037 (IDA) and 2044 (IADB Group). - IDA MDRI: reduces Haiti’s debt stock to IDA by US$446.5 million; average debt service savings net of HIPC ~US$16.8 million per year through 2037. - IADB MDRI: reduces debt stock by over US$395 million and reduces debt service by more than US$486 million in nominal terms. ### Debt stock revisions and composition - Nominal external debt stock at end-September 2005 revised from US$1,336.3 million to US$1,337.2 million. - NPV of debt after traditional relief at end-September 2005 increased by US$0.5 million to US$928.8 million. - Three-year average of exports used at decision point revised from US$525.3 million to US$531.1 million at completion point. - End-September 2008 nominal external debt stock: US$1,884.4 million. - End-September 2008 NPV of debt after full HIPC delivery: US$1,199.7 million = 155.8 percent of exports (owed to multilaterals US$948 million; Paris Club US$69 million; other bilateral creditors US$183 million). - End-September-2008 creditor shares: multilateral creditors 75 percent of debt (largest creditors: IADB Group 43 percent, IDA 24 percent, IMF 6 percent, República Bolivariana de Venezuela 8 percent). ### Debt sustainability outlook, projections, and key ratios - Immediate DSA impacts (full delivery of Enhanced HIPC, additional bilateral relief, and MDRI): - Reduce NPV stock of debt from US$1,320 million at end-September 2008 to US$641 million at end-September 2009. - Nominal debt service relief as of FY 2009: US$1,237.5 million (MDRI contributes US$972.7 million). - NPV debt-to-exports ratio after HIPC and MDRI: 79 percent in FY 2009 (from 169 percent taking only traditional relief into account); ratio rises to 111 percent in FY 2014 then declines thereafter. - After additional bilateral relief NPV debt-to-exports ratio would be 146.8 percent (below 150 percent HIPC threshold). - NPV debt-to-GDP ratio: 9 percent at end-September 2009; average about 13 percent over projection period. - NPV debt-to-revenue ratio: declines from 188 percent in FY 2008 to 90 percent in FY 2009; rises to 109 percent in FY 2013, then falls to 96 percent in FY 2028. - Average debt service-to-exports and debt service-to-revenue ratios roughly halved for the FY 2009 – 2008 period (5 percent vs. 10 percent following traditional relief only). - Longer term average debt service savings about 2 percentage points relative to both exports and revenue for FY 2019 – 2028. ### Macroeconomic assumptions used in completion point DSA (selected) - Real GDP growth: 2.0 percent in FY 2009; 2.4 percent in FY 2010; rising gradually to 4.5 percent by 2017. - Inflation: reaches 5 percent by FY 2011. - Revenue: about 10 percent of GDP in FY 2009; expected to grow to about 15 percent of GDP by end of projection period. - Primary spending: projected near 20 percent of GDP; fiscal deficit falls to about 2.3 percent of GDP by end of period and averages 2.6 percent of GDP. - Grants: near-term increase for hurricane reconstruction; long-term U.S. dollar value of grants assumed to grow by 2 percent annually. - External borrowing: Haiti assumed eligible for concessional assistance from IDA and IADB covering 80 percent of external borrowing needs; assumed grant element of new external borrowing: 47 percent. - Exports: fall about 3 percent in FY 2009, rebound 7 percent in FY 2010 to just under 12 percent of GDP, and rise to about 16 percent of GDP by end of projection period. - Selected numerical projections (Text Table 3 highlights): - GDP at constant prices: 2009 2.0; 2010 2.4; 2011 3.2; 2012 3.3; 2013 3.4; 2014 3.7; 2019 4.5; 2029 4.5. - GDP deflator: 2009 6.3; 2010 8.3; 2011 5.5; 2017 5.0; 2029 5.0. - Exports growth: 2009 −2.7; 2010 7.0; 2011 8.2; 2019 6.8; 2029 8.0. - Central government revenue (percent of GDP, excluding grants): 2009 8.2; 2010 20.3; 2011 10.8; 2019 12.2; 2029 11.4. - Total revenue and grants (percent of GDP): 2009 29.4; 2010 19.9; 2011 20.1; 2019 17.7; 2029 18.1. - Liquid gross reserves (months of imports): 2009 3.0; 2010 3.0; 2011 2.8; 2019 3.0; 2029 2.9. ### Sensitivity analysis — scenarios and outcomes - Purpose: test sustainability of external debt after full delivery of enhanced HIPC, additional bilateral assistance, and MDRI. - Scenario 1 — Less concessional borrowing: - Assumption: interest rates 100 basis points higher than baseline. - Outcome: NPV debt-to-exports ratio higher by 27 percentage points relative to baseline by FY 2028, leaving ratio at about 129 percent in FY 2028. - Scenario 2 — Lower export growth: - Assumption: exports grow at 4.6 percent (average reduction of 2.5 percentage points vs. baseline). - Outcome: NPV debt-to-exports crosses HIPC threshold in FY 2019, reaches 206 percent in FY 2028 (deterioration ~104 percentage points vs. baseline). - Scenario 3 — Lower GDP growth: - Assumption: GDP growth 2 percentage points lower on average than baseline. - Outcome: NPV debt-to-exports breaches HIPC threshold in FY 2018, reaching 255 percent in FY 2028 (increase of 153 percentage points vs. baseline). - Key policy implications from sensitivity analysis: - Maximize grant assistance. - Borrow only on highly concessional terms. - Undertake reforms to achieve higher output and export growth. - Maintain security and invest in transportation infrastructure, power reliability, port efficiency, disaster resilience, and human capital to catalyze investment and export industries. ### Macroeconomic stability and PRGF program performance - PRGF-supported program on track; fourth review completed February 11, 2009; IMF staff to recommend fifth review be completed with HIPC completion point discussion. - Growth and inflation: - Real GDP growth: positive in FY 2005; 3.4 percent in FY 2007; just over 1 percent in FY 2008. - Growth projections: 2.0 percent in FY 2009; 2.4 percent in FY 2010. - Inflation expected in low single digits for FY 2009 after rising in 2008. - Per capita income (U.S. dollar): rose from about $500 in FY 2005 to above $700 in FY 2008. - External sector and reserves: - Current account deficit (including grants) widened to more than 4 percent of GDP in FY 2008. - International reserve coverage rose from 1.4 months of imports in FY 2005 to 3 months by FY 2008. - Fiscal management: - Government revenue: fell to 8.9 percent of GDP in FY 2004, reached 10 percent of GDP by FY 2006 and maintained near that level. - Grants: increased from about 3 percent of GDP in FY 2006 to about 4 percent in FY 2008. - Some recourse to central bank financing in FY 2009 due to exceptional hurricane-related needs. ### Public expenditure management, procurement, and public financial reforms - Budget preparation and execution: - FY 2008 budget submitted before start of fiscal year; FY 2009 budget delayed by five-month political stalemate and 2008 shocks; FY 2010 budget committed to be presented by end-June 2009. - Deployment of 34 public accountants and budget controllers to key line ministries; SYSDEP extended to line ministries and tracks all current spending. - Emergency hurricane spending (~3 percent of GDP) recorded using normal budget classification and published. - Procurement reforms: - Draft Procurement Law passed June 2009; CNMP created; estimated decline in noncompetitive procurement from 85 percent in 2004 (estimated) to 59 percent in 2006 (estimated). - Implementing regulations ready; CNMP estimates six months after law effectiveness to broaden compliance to audit-ready levels. - Public accounts and audits: - FY 2004 and FY 2005 treasury accounts audited and published April 20, 2009; FY 2006 and FY 2007 accounts audited and submitted to Parliament January 10, 2009. ### Social sectors — education, health, and HIV/AIDS (selected outcomes) - Education: - School fee subsidy mechanism supports estimated 80,000 children; verified transfers for over 50,000 children (preliminary audit mid-June 2009). - Education recurrent expenditure: 19.4 percent for FY 2007; FY 2008 allocation 20.3 percent (target at least 21 percent narrowly missed). - Basic education accounted for 50 percent of education spending. - Teacher training: ~2,500 student-teachers enrolled (expected graduation Spring 2010); Ministry doubled number of inspectors. - Health and immunization: - DPT3: 47 percent in 2005-06 → 68 percent in 2007. - Measles: 45 percent in 2005-06 → 54 percent in 2007. - BCG: ~70 percent in 2007 vs. 73 percent in 2005–06. - SOG program covers 50 institutions, ~60,000 newborns (about one-third of total newborns); SOG started in 2008 and runs through 2011. - HIV/AIDS: - Estimated people living with HIV/AIDS: 120,000. - Estimated number on ART: 15,000. - Estimated deaths from HIV in 2008: approximately 7,500. - Global Fund funding secured: US$67 million. - ART sites: 33 in 2006 → 46 in 2007; PMTCT sites: 88 in 2006 → 92 in 2007. ### Debt management institution-building and reporting - DMFAS (UNCTAD) installed; centralized database for external and domestic foreign currency debt; MEF and BRH have access; completeness and accuracy verified through end-September 2008. - Quarterly external debt reports produced: quarter ending December 2008 published April 2009; quarter ending March 2009 published June 2009. - Authorities preparing a detailed statistical bulletin on external debt. - Institutional reforms recommended: clarify and legislate BRH/MEF roles; improve coordination and information sharing; build analytical capacity (CEMLA engagement). ### DSA findings, risks, and further steps - DSA prepared under LIC DSF methodology; HIPC and MDRI substantially reduce debt burden but PV of debt-to-exports remains above policy-dependent threshold in baseline and higher under shock scenarios. - Public debt as of end-September 2008: about 36 percent of GDP (external creditors 28 percent of GDP); composition: IADB 41 percent of external debt; World Bank 27 percent; bilateral creditors 24 percent. - Estimated nominal reduction in debt stock at completion point: US$1.1 billion; annual debt service savings of more than US$50 million for first ten years after completion point. - Key risks: - Recent and near-term borrowing requirements, weak export base, need for policy and institutional strengthening. - Sensitivity analysis shows potential for significant deterioration under adverse shocks (growth, exports, concessionality). - Policy recommendations to safeguard sustainability: - Maximize grant assistance and grant-equivalent financing. - Borrow only on highly concessional terms; pursue a prudent borrowing strategy. - Strengthen public debt management and analytical capacity. - Enhance security and infrastructure to expand export base and attract FDI. - Increase resilience to natural disasters and sustain institutional reforms. ### Key questions for Executive Directors (as presented) - Completion point: Do Directors agree that Haiti has reached the completion point under the Enhanced HIPC Initiative? - HIPC assistance: Do Directors agree that the same amount of HIPC assistance as called for at decision point (US$140.3 million NPV terms) be provided to Haiti? - IMF HIPC delivery: Do IMF Directors agree that the remaining IMF HIPC assistance of about SDR 2 million would be delivered on a stock basis to Haiti’s Umbrella Account? - Creditor participation: Do Directors agree that Haiti’s creditors have given sufficient assurances to irrevocably commit HIPC Initiative assistance to Haiti? *Source: Executive Summary and selected chapters (IMF staff report cr09288).* ### Executive Summary ...................................................................................................... ### Executive Summary ### Key findings and background - In November 2006, the Executive Boards of IDA and the IMF agreed that Haiti had met the requirements for reaching the decision point under the Enhanced Heavily Indebted Poor Countries (HIPC) Initiative. - The amount of debt relief to be committed at the decision point was US$140.3 million in end-September 2005 net present value (NPV) terms (US$212.9 million in nominal terms) in order to bring the NPV of debt to 150 percent of exports. - This relief represented a common reduction factor of 15.1 percent for all creditors. - Staffs recommend that the Executive Directors of IDA and the IMF approve the completion point for Haiti under the Enhanced HIPC Initiative. ### Progress on completion-point triggers - Overall implementation: 11 out of 15 triggers implemented; waivers requested for the remaining four triggers based on progress achieved. - Implemented triggers include: - Preparation of a full PRSP and submission of the first Annual Progress Report (APR) on April 23, 2009. - Maintenance of macroeconomic stability under the PRGF-supported program. - Tracking poverty-reducing spending and publishing quarterly reports. - Alignment of public spending with PRSP priorities. - Enactment and reporting on implementation of an asset declaration law. - Strengthened tax and customs administration. - Improved debt management and reporting. - Establishment of a financing mechanism to allow 50,000 additional children to attend school. - Approval of an HIV/AIDS prevention and treatment plan. - Triggers not fully implemented (waivers requested): - Submission and publication of audited government accounts (audited accounts have been submitted and will be published once reviewed by Parliament). - Implementation of a new procurement law (Parliament passed a new procurement law in June 2009; prior strengthening included creation of the National Commission for Public Procurement (CNMP), standard bidding documents, and manuals). - Education: increasing education spending target narrowly missed (due to emergency responses in 2008); approximately 2,500 teachers are now being trained and are expected to graduate in 2010; steps taken to increase school inspections, including a doubling of school inspectors. - Health: immunization rates for DPT3 and measles have increased; BCG rates have remained largely unchanged (from an initially high level). ### Creditor participation and HIPC assistance unchanged - Minor upward revisions to the decision point debt stock and goods and services export figures would imply a downward revision in HIPC relief, but the implied reduction equals the 1 percent adjustment threshold. Therefore: - No change is proposed in the amount of HIPC relief; assistance remains US$140.3 million in NPV terms. - Creditor participation: - Creditors accounting for 96 percent of total HIPC assistance in NPV terms have given satisfactory assurances of participation in the Enhanced HIPC Initiative. - All Paris Club and multilateral creditors have confirmed participation. - Staffs encouraged authorities to reach agreements with two remaining bilateral creditors. ### MDRI and nominal reductions in creditor exposures - Upon reaching the completion point, Haiti would qualify for additional debt relief under the Multilateral Debt Relief Initiative (MDRI). - MDRI relief would cover all remaining debt service obligations on eligible credit balances to IDA and the Inter-American Development Bank (IADB). - MDRI relief net of HIPC assistance would lead to a nominal reduction in the stock of debt owed to: - IDA of US$446 million. - IADB of US$395 million. ### Debt sustainability outlook and risks - Effect of HIPC and MDRI on debt ratios: - HIPC and MDRI assistance would bring the NPV of debt-to-exports ratio in FY 2009 from 169 percent (taking only traditional relief into account) to 79 percent. - The NPV of debt-to-exports ratio would rise to 111 percent in FY 2014 before declining in subsequent years. - After taking into account additional bilateral relief, the NPV of debt-to-exports would be just below the HIPC threshold of 150 percent at completion point; after some deterioration this ratio would return below the threshold in the medium-term (after FY 2015). - Staffs view on exceptional topping-up: - Haiti does not meet the requirements for exceptional topping-up under the Enhanced HIPC Initiative. - Remaining risk of debt distress: - Despite significant reductions, Haiti’s risk of debt distress would remain high due to recent and near-term borrowing requirements, a relatively weak export base, and the need for further policy and institutional strengthening. - Sensitivity analysis indicates potential for significant deterioration in debt ratios under adverse circumstances such as growth or export shocks. - These considerations underscore the importance of maximizing grant assistance and borrowing only on highly concessional terms. ### Overall assessment and recommendation - IDA and IMF staffs judge that Haiti has made satisfactory progress toward completion point triggers despite adverse shocks in 2008 (high commodity prices and four back-to-back hurricanes and tropical storms). - IMF staff will recommend completion of the fifth PRGF review in conjunction with consideration of the HIPC completion point. - The staffs recommend that the Executive Directors of IDA and the IMF approve the completion point for Haiti under the Enhanced HIPC Initiative. *Source: Executive Summary, IMF staff report (cr09288).* ### 2. Macroeconomic stability: Maintenance of macroeconomic ### 2. Macroeconomic stability: Maintenance of macroeconomic stability as evidenced by satisfactory performance under the PRGF-supported program ### Macroeconomic performance and outlook - Implemented: The PRGF-supported program has remained on track. The fourth review of the program was completed on February 11, 2009. IMF staff will recommend that the fifth PRGF review be completed together with the discussion of the HIPC completion point. - Growth and inflation: - Real GDP growth: "growth turned positive in FY 2005 and reached 3.4 percent in FY 2007." - Growth in FY 2008: "just over 1 percent." - Growth projections: "2.0 percent in FY 2009 and 2.4 percent in FY 2010." - Consumer prices: "inflation is expected to be in the low single digits for the year" (FY 2009) after rising in 2008 and falling sharply in FY 2009 in line with commodity prices. - Per capita income in U.S. dollar terms: "rose from about $500 in FY 2005 to above $700 in FY 2008." - External sector and reserves: - Current account: "Haiti’s current account deficit (including grants) widened substantially in FY 2008 to more than 4 percent of GDP." - International reserve coverage: "rose from 1.4 months of imports in FY 2005 to 3 months by FY 2008." - Fiscal management: - Government revenue: "fell to 8.9 percent of GDP in FY 2004" and "reached 10 percent of GDP by FY 2006 and has been maintained near that level." - Grants: "increase in grants from about 3 percent of GDP in FY 2006 to about 4 percent in FY 2008." - Central bank financing: reduced reliance, with some recourse in FY 2009 due to exceptional needs after Fall 2008 hurricanes. - Conclusion: Implemented — the trigger on maintenance of macroeconomic stability and satisfactory implementation of the PRGF program has been implemented. ### Key macroeconomic indicators (selected, as presented) - Real GDP (period changes shown in Text Table 1): -0.4, 2.2, -3.5, 1.8, 2.3, 3.4, 1.2, 2.0 (FY 2002-05, 2006, 2004,2005,2006,2007,2008,2009 proj. order as in table). - Consumer prices (period average): 20.3, 10.7, 28.3, 16.8, 14.2, 9.0, 14.4, 5.1 (as shown in Text Table 1). - Exchange rate (local currency per U.S. dollar, period average): 36.6, 39.5, 39.7, 39.0, 41.4, 37.4, 38.3,... - Gross investment (in percent of GDP): 27.6, 29.5, 27.3, 27.4, 28.9, 27.7, 26.0, 35.4 - Exports of Goods and services: 14.2, 12.7, 14.4, 14.0, 14.4, 12.7, 12.0, 11.5 - Imports of Goods and services: 42.5, 41.0, 43.7, 42.9, 44.2, 37.8, 41.4, 40.7 - External current account balance, including grants: -0.3, -2.2, -1.6, 2.6, -1.4, -0.2, -4.2, -3.0 - Net official external financing: 4.9, 7.6, 2.8, 7.6, 7.9, 6.4, 6.8, 9.4 - Total revenue and grants (percent of GDP): 10.6, 15.1, 10.2, 13.1, 13.2, 15.1, 14.3, 17.0 - Total expenditures (percent of GDP): 13.0, 17.5, 11.4, 15.7, 14.9, 14.9, 17.1, 21.7 - Overall fiscal balance (percent of GDP): -2.5, -2.4, -2.4, -2.5, -1.7, 0.2, -2.9, -4.7 ### Public expenditure management — progress and measures - Overall assessment: Implemented/Substantially implemented across several triggers; the government has produced an action plan for public financial management reform based on PEMFAR. - Budget preparation and execution: - FY 2008 budget: submitted to Parliament before the start of the fiscal year. - FY 2009 budget: delays due to five-month political stalemate and exogenous shocks in second half of FY 2008. - FY 2010 budget: authorities committed to presenting to Parliament by end-June 2009. - Coordination between Ministry of Economy and Finance, spending ministries, and Ministry of Planning and External Cooperation improved. - Strengthening budget execution: - Deployment of trained experts in project formulation and implementation to programming units. - Deployment of 34 public accountants and budget controllers to key line ministries. - Extension of SYSDEP to line ministries. - Improved knowledge of public procurement procedures among public accountants and budget controllers. - Use of discretionary current accounts in FY 2008 estimated at less than 3 percent of total non-salary current public expenditures. - Emergency law after hurricanes authorized execution of some spending outside normal budget process (about 3 percent of GDP); such spending is being recorded using normal budget classification and published. - Automated tracking of poverty-reducing spending: - SYSDEP operational since 2005, extended to all line ministries during FY 2008 and FY 2009; now tracks all current spending. - Budget classification improved and relatively close to international standards, facilitating tracking and publication of quarterly reports on poverty-reducing expenditures since FY 2008. - Implemented: Quarterly reports published through December 2008 are available on www.mefhaiti.gouv.ht, with most recent report covering October 2008-March 2009 also on the website. - Government accounts and audits: - Substantially implemented: audited Government accounts for FY 2006 and FY 2007 completed and submitted to Parliament on January 10, 2009; to be published in official gazette after Parliamentary review. - FY 2008 accounts have been submitted to the CSCCA. - Public procurement: - Partially implemented: new procurement law passed by Parliament in June 2009 providing a legal basis for a modern and transparent system; full compliance not achieved due to obstacles in submitting draft law and five-month political stalemate in 2008. Partial adoption of improved procedures by some key entities occurred. - Asset declaration: - Implemented: Law on asset declaration effective since February 2008. A report on the first year was submitted to the Court of Accounts and Parliament in April 2009. ### Structural reforms — tax administration and customs - Customs control and ASYCUDA: - Implemented: ASYCUDA World is operational in Port-au-Prince, Cap Haïtien, Gonaives, Saint Marc, Miragoane, Malpasse, Ouanaminthe and Belladere, including installation of the automated system for customs data (ASYCUDA). - Taxpayer registry: - Implemented: central taxpayer file is being used for all taxes throughout Port-au-Prince metropolitan zone and registering all taxpayers identified in tax centers of Cayes, Miragoane, Saint Marc, Port de Paix, Cap Haïtien and Fort Liberté. ### Social sectors — education, health, and HIV/AIDS - Education: - School fee subsidy mechanism: Implemented. Mechanism established transferring subsidies to schools and supporting an estimated 80,000 children, exceeding the target of 50,000 out-of-school children. Independent audit (preliminary results as of mid-June 2009) verified transfers for over 50,000 children. - Education recurrent expenditure target: Substantially implemented. Actual recurrent expenditures for education reached 19.4 percent for FY 2007 and budget allocations for FY 2008 reached 20.3 percent, just short of the target "at least 21 percent." Basic education expenditures accounted for 50 percent of education spending, in line with the target. - Teacher training and inspections: Approximately 2,500 student-teachers enrolled in the teacher training program expected to complete training in 2010. Ministry doubled number of inspectors and acquired motorcycles and small vehicles to facilitate school visits. Full compliance not achieved due to capacity constraints and leadership changes. - Health and HIV/AIDS: - Immunization rates: Substantially implemented for DPT3 and measles; DPT3 increased from 47 percent in 2005-06 to 68 percent in 2007; measles increased from 45 percent in 2005-06 to 54 percent in 2007. BCG remained around 70 percent in 2007 compared to 73 percent in 2005–06. - HIV/AIDS policy: Implemented. National Policy, Strategic Plan and Scale up Operational Plan for HIV/AIDS prevention and treatment approved by the Prime Minister on January 15, 2007 and being implemented. ### Debt management - Centralization of debt data: - Implemented: SYGADE software installed for a centralized database of public external and domestic foreign currency debt; quarterly reports produced with support from UNCTAD. - Publication of external debt reports: - Implemented: report for end-December 2008 generated and on www.mefhaiti.gouv.ht. Second report for end-March 2009 was published in June. ### PRSP (DSNCRP) status and monitoring - DSNCRP approval and structure: - The DSNCRP (Document de Stratégie Nationale pour la Croissance et la Réduction de la Pauvreté) approved by the Government and submitted to IDA and the IMF on November 30, 2007. - Strategic priorities structured around three pillars: (i) enhancing human development; (ii) improving security and the justice system; and (iii) promoting vectors of growth through agriculture and rural development, tourism, and infrastructure. The DSNCRP emphasizes a stable macroeconomic framework and sound management of public resources. - Reviews and assessments: - DSNCRP discussed by IDA and IMF Boards in February 2008. JSAN considered the three strategic pillars appropriate but recommended further work to (i) identify clear specific actions for each sector, (ii) develop a consistent set of indicators and targets, and (iii) ensure an adequate monitoring and evaluation mechanism. Staffs recommended linking three-year costing strategies into the annual budget process. - Monitoring challenges and recommendations: - Lack of up-to-date household statistics hampers assessment; last household consumption survey conducted in 2001. - Recommendation: conduct a new household consumption survey in a timely manner to update poverty measures and provide baselines for DSNCRP indicators. - Implementation progress and shocks: - APR highlights progress in macroeconomic stability, economic governance, and social sector policies. Despite riots over food and fuel prices in April 2008, a five-month political stalemate, and four back-to-back hurricanes and tropical storms in August–September 2008 that caused "60 percent of the Fall harvest destroyed" and estimated damage to infrastructure of "about 15 percent of GDP," staffs concluded progress during the first year of implementation has been satisfactory. - Conclusion: IDA and IMF staffs conclude that the trigger on preparation of a full PRSP through a participatory process and satisfactory implementation for at least one year has been implemented. *Source: _cr09288 - 2. Macroeconomic stability: Maintenance of macroeconomic* ### 19. The IDA and IMF staffs conclude that this trigger has been implemented in view ### _cr09288 - 19. The IDA and IMF staffs conclude that this trigger has been implemented in view ### Alignment of public spending priorities with the PRSP - The Government’s budgets reflect priorities outlined in the PRSP. - Share of poverty-reducing spending: - FY 2008: 56 percent - FY 2007: 43 percent - FY 2009 budget (first after DSNCRP approval) broadly in line with DSNCRP priorities, except infrastructure reflecting post-hurricane reconstruction. - Budget allocations are close to one-third of the three-year DSNCRP spending envelope; some sectors are well above this level. - Staff conclusion: trigger implemented given good alignment between budgets and PRSP priorities. ### Preparation of Government Accounts - Strengthened budget control mechanisms: - Draft budget review laws (Projet de Loi de Règlement) for FY 2006 and FY 2007 prepared by the Ministry of Economy and Finance (MEF) and reviewed by CSCCA. - Drafts accompanied by CSCCA legal opinions transmitted by MEF to Parliament for adoption on January 10, 2009. - FY 2004 and FY 2005 treasury accounts audited by CSCCA and published on the MEF website on April 20, 2009. - FY 2006 and FY 2007 treasury accounts audited by CSCCA; to be published after parliamentary review. - Staff assessment: trigger substantially met; full compliance not possible due to political stalemate in FY 2008 limiting timely production of budget review laws. - Recommendation: staff recommend a waiver for non-observance of this trigger given considerable progress. ### Public Procurement - Progress slower in procurement reforms. - Legal and institutional developments: - Draft Procurement Law passed by Parliament in June 2009. - Creation of Commission National des Marchés Publics (CNMP). - 2005 decree to amend existing procurement law and standardization of procurement procedures. - Implementation timeline and delays: - CNMP submitted draft law to Prime Minister's Office (PMO) in July 2007; in-depth PMO review began May 2008. - Submission to Parliament delayed by social, political, and economic crises and five-month political stalemate in 2008. - Partial improvements despite delays: - CNMP introduced standard bidding documents and a procedures manual via seminars in 2006–2007. - CNMP reviews/approves hundreds of procurement processes annually and provides hands-on training. - Estimated decline in noncompetitive procurement (value of contracts awarded without competition as percent of all contracts awarded): - 2004: 85 percent (estimated) - 2006: 59 percent (estimated) - CNMP estimates six months after law effectiveness to broaden compliance to audit-ready levels. - Implementation readiness: - Implementing regulations are ready. - Satisfactory implementation by all government agencies incorporated in common budget support conditionality matrix with donors. - Staff recommendation: grant waiver based on progress and CNMP commitment. ### Asset Declaration Law and compliance reporting - Asset Declaration Law: - Loi portant Déclaration de Patrimoine par certaines Catégories de Personnalités Politiques, de Fonctionnaires et autres Agents Publics prepared by ULCC, adopted by Parliament in 2007, published in Le Moniteur in February 2008. - Blank Disclosure form released June 2008 and available on ULCC website. - Per Article 20, law became fully effective one year after publication on February 20, 2009. - Compliance reporting: - First-year compliance report submitted by ULCC to President of CSCCA and Parliament on April 24, 2009. - Number of Government officials who submitted asset declarations: 283 (including all ministers, most senators, and a few judges and deputies). - Staff conclusion: trigger implemented. ### Structural reforms — Revenue administration (customs and tax) - Overall context: Revenue collection around 10 percent of GDP constrains priority spending. - Customs modernization: - ASYCUDA World tracking software installed by end-April 2009 at customs posts in Port-au-Prince (air and sea), Cap Haïtien, and Saint Marc. - ASYCUDA also functioning in Belladere, Gonaives, Malpasse, Miragoane, and Ouanaminthe after addressing hurricane-related delays. - Customs process formalized, personnel capacity enhanced, and SGS working in provinces to support collections. - Five-year project launched to modernize and strengthen overall revenue administration with assistance from Canada. - Tax administration: - New software installed and operational for the central taxpayer file in Port-au-Prince. - Central file linked to Cayes, Cap-Haïtien, Fort Liberté, Miragoane, Port de Paix, Saint Marc; Jacmel, Gonaives, Hinche, and Jeremie also linked. - Central file includes taxpayer number and vehicle registration, driver’s license, and registration card information. - Work underway to import old database information for Petionville. - Staff conclusion: structural reform triggers on strengthening customs and tax administration implemented. ### Social sectors — Education - Subsidy transfers to schools: - Mechanism established supporting an estimated 80,000 children. - School year 2007-08: tuition waiver program transferred subsidies to 600 schools representing nearly 30,000 students in grade one in Les Nippes and Artibonite. - School year 2008-09: program continued for same schools (students moved to grade two) and extended to another 605 schools in six additional regional departments. - Preliminary independent audit results as of mid-June 2009 verified transfers for over 50,000 children. - Education financing and targets: - Education spending: - 2006-07: 19.4 percent (of total budget or of target—as reported) - 2007-2008: 20.3 percent (just shy of the 21 percent target) - Basic education accounted for 50 percent of education spending (target met). - Teacher training program: - Design and launch progress: curriculum developed, contracts with public and private training providers signed, testing and recruitment of student-teachers. - Program started Spring 2009 with approximately 2,500 student-teachers enrolled; expected graduation Spring 2010. - School supervision: - Ministry doubled number of inspectors and acquired dozens of motorcycles and other small vehicles. - Database recently created but incomplete; difficult to ascertain whether average of two visits per school met. - Staff view: education trigger substantially implemented; recommend waiver based on significant progress. ### Social sectors — Health and HIV/AIDS - Immunization: - DPT3 immunization rates increased from 47 percent in 2005-06 to 68 percent in 2007. - Measles immunization increased from 45 percent in 2005-06 to 54 percent in 2007. - BCG immunization rates remained around 70 percent in 2007 (compared to 73 percent in 2005-06); target unmet due to lack of increased deliveries in health facilities. - SOG (Soins Obstetriques Gratuits) program provides free obstetric care and aims to vaccinate every child born in SOG services: - SOG covers 50 institutions, about 60,000 newborns, or about a third of total newborns in the country. - SOG started in 2008 and will run through 2011. - Staff assessment: immunization trigger substantially implemented; recommend waiver based on progress. - HIV/AIDS strategy and outcomes: - National strategic plan for HIV/AIDS prevention and treatment approved January 2007. - Estimated people living with HIV/AIDS: 120,000. - Estimated number on anti-retroviral therapy (ART): 15,000. - Estimated deaths from HIV in 2008: approximately 7,500. - Global Fund funding secured: US$67 million. - Increase in service sites: - ART sites: 33 in 2006 to 46 in 2007. - Prevention of mother-to-child transmission sites: 88 in 2006 to 92 in 2007. - UNGASS 2007 reported nearly twice the number of people on ART at end-2007 compared to end-2006. - Staff conclusion: trigger related to National Policy, Strategic Plan and Scale up Operational Plan for HIV/AIDS met. ### Debt Management - Objectives: create single database for external and domestic debt accessible to MEF and BRH. - Implementation: - DMFAS (Debt Management Financial and Analysis System) installed with UNCTAD support; all public external and domestic debt data centralized in single database. - MEF and BRH have access and staff received extensive UNCTAD training. - Completeness and accuracy verified through end-September 2008 as part of completion point reconciliation; only minor errors being rectified. - Some debt recording, reporting, and analysis functions can be transferred from BRH to MEF over time with additional training. - Reporting: - Quarterly external debt reports produced: - First quarterly report covering quarter ending December 2008 published April 2009. - Second quarterly report covering quarter ending March 2009 published June 2009; amended December 2008 report also published to reflect database corrections. - Authorities preparing a more detailed statistical bulletin on external debt. - Staff conclusion: debt management trigger fully implemented. ### Debt sustainability — updated data reconciliation and revision of assistance - Revision of nominal debt stock at end-September 2005: - Increased from US$1,336.3 million to US$1,337.2 million. - NPV of debt after traditional debt relief at end-September 2005: - Increased by US$0.5 million to US$928.8 million. - Multilateral creditors: no significant revisions to decision point database. - Paris Club creditors: NPV of debt after traditional relief increased by: - Spain: US$0.1 million - Italy: US$0.2 million - Other bilateral creditors: - Taiwan, Province of China: NPV of debt increased by US$0.2 million; debt is post cut-off so no traditional relief provided. - Three-year average of exports of goods and services used at decision point: - Revised from US$525.3 million to US$531.1 million at completion point. - Original HIPC assistance at decision point not revised at completion point. - Upward revisions to NPV of debt and to three-year exports average resulted in downward revision of HIPC assistance in NPV terms at decision point from US$140 million to US$132 million. - Staffs note difference equivalent to minimum indicative threshold of about 1 percent of targeted NPV after enhanced HIPC relief. - Staff recommendation: do not recommend downward revision of assistance under Enhanced HIPC Initiative at completion point. *Source: IMF and IDA staff assessment as presented in the provided document.* ### 52. Haiti has received financing assurances of participation in the enhanced HIPC ### _cr09288 - 52. Haiti has received financing assurances of participation in the enhanced HIPC ### Creditor participation and assurances - Creditors representing 96 percent of the NPV of HIPC assistance estimated at the decision point have provided financing assurances of participation in the enhanced HIPC Initiative. - Multilateral and Paris Club creditors have confirmed participation; staff encouraged authorities to reach agreements with remaining creditors. - Non-Paris Club creditors are assumed to provide HIPC relief in terms comparable to Paris Club creditors. The NPV of debt as of end-September to non-Paris Club creditors is US$37 million (4 percent of the total debt stock). ### Multilateral creditors — commitments, interim delivery, and modalities - Total HIPC assistance committed by Haiti’s five multilateral creditors: US$120.0 million in NPV terms (85.5 percent of total HIPC assistance). - Interim assistance (IDA, IMF, IADB Group) through end-September 2008: US$31.3 million in nominal terms. - OFID: debt relief by restructuring terms of new loans disbursed after the completion point cutoff date of end-September 2008; will provide full HIPC relief via concessional rescheduling of two outstanding loans (agreement concluded). - IFAD: will provide debt relief only at completion point. - IDA: - Debt relief amount: US$52.8 million in NPV terms (decision point), which included concessional rescheduling of arrears in 2005 equal to US$33.1 million in NPV terms, leaving US$19.7 million to be delivered. - Delivered already: US$10.1 million in nominal terms (US$9.9 million in NPV terms) via a 50 percent reduction of debt service during the interim period. - IDA suspended interim relief delivery in January 2008 per guidelines limiting delivery to no more than 50 percent prior to completion point. - Upon completion point, remaining assistance: US$9.9 million in NPV terms via a 51.6 percent reduction of debt service on eligible debt through July 2010. - IMF: - Total IMF assistance under enhanced HIPC: US$3.1 million in NPV terms (about US$4.0 million in nominal terms). - Decision point commitment: SDR 2.10 million (US$3.12 million) in NPV terms. - Interim assistance delivered: about SDR 0.3 million (US$0.45 million) in nominal terms. - Remaining IMF HIPC assistance at completion point (scheduled June 2009): stock-of-debt operation estimated at SDR 2 million (US$3 million) in nominal terms. - IADB: - Committed assistance at decision point: US$60.4 million in NPV terms, including US$9.7 million via concessional rescheduling of arrears in 2003. - Of remaining US$50.7 million in NPV terms, about US$27.3 million provided during interim via reduction in debt service, leaving US$23.5 million in NPV terms to be delivered after completion point. ### Paris Club and bilateral creditor arrangements - Paris Club creditors agreed in principle to provide about US$15 million in end-September 2005 NPV terms. - Interim assistance provided through a flow treatment under Cologne terms (agreed December 12, 2006). - Haiti has signed bilateral agreements with all Paris Club creditors since decision point; all arrears at decision point have been cleared. - Paris Club delivery mechanism: stock-of-debt reduction under Cologne terms, expected to cancel all outstanding obligations of Haiti toward Paris Club creditors. - One ODA loan administered by IDA is funded by multiple EU countries; Ireland and Luxembourg opted to cancel claims on all HIPC countries; remaining creditor countries rescheduled credits with provision for cancellation on reaching completion point. ### Debt stock and structure (end-September 2008) - Nominal external debt stock at end-September 2008: US$1,884.4 million (compared with US$1,337.2 million at end-September 2005). - At end-September 2008 (NPV terms): multilateral creditors accounted for 75 percent of total debt; bilateral creditors accounted for 25 percent. - Largest creditors (shares of total outstanding debt): IDA 24 percent, IADB Group 43 percent, IMF 6 percent, República Bolivariana de Venezuela 8 percent. ### NPV of debt after full delivery of HIPC assistance (end-September 2008) - NPV of external debt after full delivery of assistance committed under HIPC at decision point: US$1,199.7 million, equivalent to 155.8 percent of exports. - Owed to multilateral creditors: US$948 million. - Owed to Paris Club creditors: US$69 million. - Owed to other bilateral creditors: US$183 million. - Comparison with decision point projection: - NPV debt-to-exports ratio projected at decision point after full delivery: 130.4 percent. - Actual ratio after full delivery: 155.8 percent. - Increase: 25.3 percentage points (unanticipated change in the ratio). ### Breakdown of factors behind the 25.3 percentage point increase in NPV debt-to-exports ratio - Total unanticipated change in the ratio: 25.3 percentage points (100 percent of the increase). 1. Due to changes in parameters: 10.1 percentage points (40 percent of total increase) - o/w due to changes in discount rates: 3.6 percentage points (14 percent) - o/w due to changes in exchange rates: 6.5 percentage points (26 percent) 2. Due to unanticipated new borrowing: 23.0 percentage points (91 percent) - o/w due to higher than expected disbursements: 13.8 percentage points (55 percent) - o/w due to lower concessionality of the loans: 9.2 percentage points (36 percent) 3. Due to unanticipated changes in export performance: −13.2 percentage points (−52 percent) 4. Due to changes in HIPC relief and other factors (including revisions to the end-September-2005 database and changes in timing/mechanisms of interim delivery): 5.5 percentage points (22 percent) - Bilateral debt relief beyond HIPC reduced the ratio by 8.9 percentage points. - NPV of debt-to-exports ratio after full HIPC delivery and bilateral debt relief beyond HIPC (actual): 146.8 percent. - Key drivers explained: - New borrowing increased the ratio by 23 percentage points, reflecting borrowing from Taiwan, Province of China (US$50 million) and República Bolivariana de Venezuela (US$167 million). - Exports stronger than projected reduced the ratio by 13.2 percentage points, largely due to increased services receipts related to tourism (daily average tourism expenditure estimates rose from US$104 to US$170 after a November 2006 government hotel survey). - Unanticipated changes in exchange and discount rates increased the ratio by 10.1 percentage points (discount rates 4 percentage points; U.S. dollar appreciation 7 percentage points). - Revisions to the decision point debt database, timing/mechanisms of interim delivery contributed 5.5 percentage points. ### Topping-up under Enhanced HIPC and eligibility - Enhanced HIPC framework allows exceptional topping-up at completion point if debt indicators deteriorated due to exogenous fundamental changes. - Haiti does not qualify for additional topping-up given its debt level after additional bilateral relief, as assuming full and unconditional delivery of enhanced HIPC assistance and additional bilateral relief drops the NPV debt-to-exports ratio to 146.8 percent, below the HIPC threshold of 150 percent. ### Multilateral Debt Relief Initiative (MDRI) participation and impacts - Contingent on completion point approval, Haiti would qualify for MDRI relief from IDA, IMF, and IADB. - MDRI debt relief (net of HIPC assistance) implies stock-of-debt reduction of US$841.0 million in nominal terms and would save Haiti US$972.7 million in debt service through 2037 for IDA and 2044 for IADB Group. - IDA under MDRI: - MDRI debt service relief amount: approximately US$486.7 million in nominal terms. - MDRI forgives payment obligations for credits disbursed before end-2003 and still outstanding on July 1, 2009. - MDRI debt relief from IDA implies average debt service savings (net of HIPC assistance) of US$16.8 million per year through 2037. - Upon completion point, MDRI would reduce Haiti’s debt stock to IDA by US$446.5 million in addition to HIPC relief. - IMF under MDRI: - IMF is an MDRI participant, but Haiti repaid all MDRI-eligible debt to the Fund prior to the completion point; IMF would only provide HIPC assistance at completion point. - IADB under IADB-2007: - IADB Board of Governors agreed to provide debt relief over and above HIPC, extinguishing all IADB debt accumulated prior to end-2004 outstanding at completion point. - This additional relief would reduce debt service by more than US$486 million in nominal terms and reduce Haiti’s debt stock by over US$395 million. ### Debt sustainability outlook, FY 2009–28 (summary of impacts and projections) - Baseline revisions: long-term GDP growth assumed 4.5 percent; near- and medium-term growth weaker with real growth of 2.0 percent in FY 2009 and 2.4 percent in FY 2010; revenue assumed to rise to about 15 percent of GDP (vs. 16 percent at decision point). - Full delivery of Enhanced HIPC, additional bilateral relief, and MDRI would: - Reduce NPV stock of debt from US$1,320 million at end-September 2008 to US$641 million at end-September 2009. - Nominal debt service relief as of FY 2009: US$1,237.5 million, of which MDRI contributes US$972.7 million. - Lower NPV debt-to-exports ratio to 79 percent in FY 2009 (well below HIPC threshold); ratio increases in medium term due to higher external borrowing needs, then declines over long term and does not breach HIPC threshold again. - Reduce NPV debt-to-GDP ratio to 9 percent at end-September 2009; average about 13 percent over the projection period. - Reduce NPV debt-to-revenue ratio from 188 percent in FY 2008 to 90 percent in FY 2009; increases to 109 percent in FY 2013, then falls to 96 percent in FY 2028. - Cut average debt service-to-exports and debt service-to-revenue ratios in half for the FY 2009 – 2008 period (5 percent for each measure, compared to 10 percent following traditional relief only). - Longer term (FY 2019 – 2028): average debt service savings about 2 percentage points relative to both exports and revenue (5 percent versus 7 percent). ### Macroeconomic assumptions used in completion point DSA (Box 2 and Text Table 3 highlights) - Growth and inflation: - Real GDP growth: 2.0 percent in FY 2009, 2.4 percent in FY 2010, rising gradually to 4.5 percent by 2017. - Inflation: reaches 5 percent by FY 2011. - Fiscal policy: - Revenue: about 10 percent of GDP in FY 2009; expected to grow to about 15 percent of GDP by end of projection period. - Primary spending projected near 20 percent of GDP; fiscal deficit falls to about 2.3 percent of GDP by end of period and averages 2.6 percent of GDP (decision point average was 2.0 percent). - Grants and financing: - Near-term increase in grants for hurricane reconstruction; U.S. dollar value of grants assumed to grow by 2 percent annually in long-term. - Haiti assumed eligible for concessional assistance from IDA and IADB covering 80 percent of external borrowing needs. - Assumed grant element of new external borrowing: 47 percent. - Current account: - Exports fall by about 3 percent in FY 2009, rebound by 7 percent in FY 2010 (reaching just under 12 percent of GDP), and rise to about 16 percent of GDP by end of projection period. - Current account deficit excluding grants falls to about 6 percent of GDP. - Selected numerical projections from Text Table 3 (annual percentage change or percent of GDP as indicated): - GDP at constant prices: 2009 2.0; 2010 2.4; 2011 3.2; 2012 3.3; 2013 3.4; 2014 3.7; 2019 4.5; 2029 4.5. - GDP deflator: 2009 6.3; 2010 8.3; 2011 5.5; 2017 5.0; 2029 5.0. - Exports of goods and non-factor services (growth): 2009 −2.7; 2010 7.0; 2011 8.2; 2019 6.8; 2029 8.0. - Central government revenue (percent of GDP, excluding grants): 2009 8.2; 2010 20.3; 2011 10.8; 2019 12.2; 2029 11.4. - Total revenue and grants (percent of GDP): 2009 29.4; 2010 19.9; 2011 20.1; 2019 17.7; 2029 18.1. - Central government overall balance (including grants, percent of GDP): 2009 −4.7; 2010 −2.7; 2011 −2.6; 2019 −2.3; 2029 −2.3. - Liquid gross reserves (months of imports of G&S): 2009 3.0; 2010 3.0; 2011 2.8; 2019 3.0; 2029 2.9. *Source: _cr09288 - 52. Haiti has received financing assurances of participation in the enhanced HIPC (As of end-September 2008).* ### 73. The sensitivity analysis for Haiti consists of three scenarios to test the ### _cr09288 - 73. The sensitivity analysis for Haiti consists of three scenarios to test the ### Sensitivity analysis: overview - Purpose: Test sustainability of Haiti’s external debt after assuming full delivery of enhanced HIPC assistance, additional bilateral assistance, and debt relief under the MDRI. - Context: Scenarios replicate those used at decision point to assess how Haiti’s debt has evolved (Table 9 and Figure 3). They capture key risks including vulnerability to natural disasters that can create urgent borrowing needs and adversely affect exports, growth, and revenue. ### Scenario 1: Less concessional borrowing - Assumption: Interest rates are assumed to be 100 basis points higher than in the baseline scenario. - Rationale: Sensitivity to less favorable concessionality on new borrowing; demonstrates importance of borrowing on highly concessional terms to keep ratios below the HIPC threshold. - Outcome: Haiti’s NPV of debt-to-exports ratio slowly deteriorates; compared to the baseline scenario, it is higher by 27 percentage points by FY 2028, leaving the ratio at about 129 percent in FY 2028. ### Scenario 2: Lower export growth - Assumption: Exports are assumed to grow at 4.6 percent, an average reduction of 2.5 percentage points compared to the baseline scenario. - Rationale: Lower export growth reduces government revenues through lower GDP and increases need for new financing. - Outcome: NPV of debt-to-exports steadily increases over the medium and long term, crossing the HIPC threshold in FY 2019 to reach 206 percent in FY 2028. This represents a deterioration of approximately 104 percentage points relative to the baseline scenario by FY 2028. ### Scenario 3: Lower GDP growth - Assumption: GDP growth is assumed to be 2 percentage points lower on average than in the baseline scenario. - Rationale: Slower implementation of structural reforms or governance concerns (including inability to maintain and enhance security, improve social and economic infrastructure, and implement structural reforms) weakens private sector confidence and investment, reducing government revenues and increasing borrowing needs. - Outcome: NPV of debt-to-exports rises faster than in Scenario 2 and breaches the HIPC threshold in FY 2018, reaching 255 percent in FY 2028. Compared to the baseline scenario, this represents an increase of 153 percentage points by FY 2028. ### Policy implications from the sensitivity analysis - Need for prudent debt management and further reforms to avoid rising debt ratios following the completion point. - To maintain debt ratios below the HIPC threshold post-completion point, important actions include: - Maximize grant assistance. - Borrow only on highly concessional terms. - Undertake further reforms to achieve higher output and export growth given a relatively weak export base. - Maintain security and ensure public investment and reforms help improve transportation infrastructure, power reliability, port efficiency, resilience to natural disasters, and human capital to catalyze investment, including in export industries. ### Conclusions (selected findings and staff recommendations) - IDA and IMF staffs view that Haiti has met the requirements established in November 2006 for reaching the completion point under the Enhanced HIPC Initiative. - Progress on triggers: Haiti has implemented 11 out of 15 triggers and made good progress on the remaining four (publication of audited government accounts; passage and implementation of a new procurement law; increasing education funding to at least 21 percent of recurrent spending with a majority to primary schooling, training 2,500 new primary teachers, and ensuring an average of two visits per year of primary schools; and increasing vaccination rates for DPT3, BCG, and measles). - Audited government accounts have been submitted to Parliament and will be published after parliamentary review. - Procurement Law was passed by Parliament in June 2009; prior steps included creation of the Commission Nationale des Marchés Publics (CNMP), introduction of standard bidding documents and manuals, and seminars in 2006 and 2007. - Education: Spending level narrowly missed target due to emergency responses in 2008; primary schooling accounted for 50 percent of education spending. A curriculum for teacher training developed, contracts with trainers signed, approximately 2,500 student-teachers enrolled (expected to graduate in spring 2010), and the number of school inspectors doubled; data weaknesses prevent confirming average of two visits per school. - Health: BCG immunization rate did not increase; linked to births in health facilities not increasing significantly. - Debt relief amounts and revisions: - Minor upward revisions to decision point debt stock and goods and services export figures would imply a downward revision in HIPC relief, but the implied reduction equals the threshold for adjustments (1 percent change in the targeted NPV of debt following HIPC relief), so no change is proposed. - Amount of HIPC relief to be provided will remain $140.3 million in NPV terms. - Haiti has received financing assurances of participation in the enhanced HIPC Initiative from creditors representing 96 percent of the NPV of HIPC assistance estimated at the decision point. - Exceptional topping-up: Staffs view Haiti does not meet requirements for exceptional topping-up under the Enhanced HIPC Initiative; after unconditional HIPC relief and additional bilateral relief the NPV of Haiti’s debt-to-exports ratio is worse than anticipated at decision point but remains under the HIPC threshold as of end-September 2008 and would remain below the threshold in the medium-term (after FY 2015). - Effect of HIPC and MDRI relief on debt burden: - After HIPC and MDRI assistance, the NPV of debt-to-exports ratio in FY 2009 is expected to decline from 169 percent (taking only traditional relief into account) to 79 percent. - The NPV of debt-to-exports ratio would rise to 111 percent in FY 2014 before declining thereafter. - Despite substantial reduction, debt risks remain high as shown by the sensitivity analysis and Appendix II. - Recommendation: Staffs recommend that the Executive Directors determine that Haiti has reached the completion point under the Enhanced HIPC Initiative. *Source: _cr09288* ### 84. Executive Directors may wish to consider the following questions: ### _cr09288 - 84. Executive Directors may wish to consider the following questions ### Key questions for Directors - Completion point: Do Directors agree that Haiti has reached the completion point under the Enhanced HIPC Initiative? - HIPC assistance: Do Directors agree with staff’s recommendation that the same amount of HIPC assistance as called for at decision point (US$140.3 million NPV terms) be provided to Haiti? - HIPC Debt Relief from the IMF: Do IMF Directors agree that the remaining IMF HIPC assistance of about SDR 2 million would be delivered on a stock basis to Haiti’s Umbrella Account? - Creditor Participation: Do Directors agree that Haiti’s creditors have given sufficient assurances to irrevocably commit HIPC Initiative assistance to Haiti? ### External debt composition (selected snapshots) - End September-2005 composition (percent of total): - World Bank 38% - IMF 2% - IADB Group 41% - IFAD 2% - OPEC 0% - Paris Club 14% - Non-Paris Club Official Bilateral 3% - End September-2008 composition (percent of total): - IADB Group 41% - World Bank 27% - IMF 6% - IFAD 2% - OPEC 0% - Paris Club 10% - Non-Paris Club Official Bilateral 14% ### Debt relief amounts and modalities (selected entries from status table) - Total HIPC assistance at decision point (document): US$140.3 million (100.0 percent of total assistance). - Assistance (potential revision): US$132.1 million; required NPV debt reduction/comparable treatment figures shown as 112.9, 19.3, and 14.2 (as listed). - Multilateral creditors — Debt Relief in NPV Terms (US$ mil.) and Percentage of Total Assistance: - World Bank: 52.8 (37.6 percent). Interim debt relief equivalent to US$9.86 million in NPV terms; remaining assistance of US$9.86 million in NPV will be provided through a 51.6 percent reduction in debt service payments. - IMF: 3.1 (2.2 percent). Interim debt relief equivalent to US$0.45 million nominal reduction in Haiti's debt service to the IMF. Upon completion point, remaining US$3 million in HIPC relief will be delivered via a stock of debt operation. - IADB Group: 60.4 (43.1 percent). Interim debt service reduced by about US$27.25 million in NPV terms; remaining US$23.47 million in NPV terms will be delivered at completion point. - IFAD: 3.1 (2.2 percent). 100 percent of debt service relief equal to US$3 million in NPV terms will be provided until the target is reached; relief will begin at the completion point. - OPEC: 0.5 (0.4 percent). HIPC debt relief will be provided through restructuring of existing loans on more concessional terms. - Total multilateral: 120.0 (85.5 percent) of total assistance. - Paris Club creditors: 14.9 (10.6 percent) — provided relief on Cologne terms in interim period. - Non-Paris Club creditors total bilateral: 5.5 (3.9 percent); Taiwan, Province of China: 5.5 (3.9 percent) — marked as "no" for satisfactory reply to participate (Haiti contracted a new loan with Landbank of Taiwan; no interim debt relief provided). - República Bolivariana de Venezuela: 0.0 (0.0 percent) — "no" for satisfactory reply (Haiti made last payment on the loan; contracted concessional external financing from PetroCaribe; no interim debt relief provided). - Total bilateral: 20.4 (14.5 percent). - Total assistance sum: 140.3 (100.0 percent). ### Nominal and NPV debt positions (selected table highlights) - Table 1 (As of end-September 2005): Total nominal debt stock: 1,336.3 (100 percent) and revised figures across creditor groups (World Bank 507.1; IMF 21.4; IADB Group 533.9; IFAD 31.7; OPEC 3.7; Official bilateral and commercial 238.5; Paris Club 192.7; Non-Paris Club Official Bilateral 45.8). - Table 5 (End-September 2008, selected lines): - Total nominal debt: 1,884.4 (100.0 percent); NPV of debt: 1,333.5 (100.0 percent). - Multilateral institutions nominal: 1,428.3 (75.8 percent); multilateral NPV: 1,001.5 (75.1 percent). - World Bank nominal: 503.4 (26.7 percent); NPV: 323.3 (24.2 percent). - IMF nominal: 104.8 (5.6 percent); NPV: 79.1 (5.9 percent). - IADB Group nominal: 776.4 (41.2 percent); NPV: 570.5 (42.8 percent). - Official bilateral and commercial nominal: 456.1 (24.2 percent); NPV: 332.0 (24.9 percent). - Paris Club nominal: 197.0 (10.5 percent); Paris Club NPV: 140.7 (10.6 percent). - Taiwan, Province of China nominal: 91.8 (4.9 percent); NPV: 79.3 (5.9 percent). - República Bolivariana de Venezuela nominal: 167.3 (8.9 percent); NPV: 112.0 (8.4 percent). - Memo items (Table 2 and related notes): - Three-year export average: 531.1. - NPV of debt-to-export ratio (percent): Revised 174.9; Decision point document 176.7. - Despite a lower revised amount of HIPC assistance at the time of the completion point, the amount of HIPC assistance committed at the time of the decision point will not be revised downward and remains at US$140.3 million in NPV terms. ### Debt dynamics and indicators (figures summary) - Figures present projected NPV of External Debt-to-Exports and Debt Service-to-Exports for medium- and long-term public sector debt across scenarios: - Scenarios shown: After traditional debt relief mechanism; After enhanced HIPC assistance; After additional bilateral assistance beyond HIPC assistance; After MDRI and bilateral relief beyond HIPC assistance. - Sensitivity analysis scenarios include: Baseline scenario; Higher Interest Rates; Lower Export Growth; Lower Real GDP Growth. - Time horizons illustrated in figures: 2007/08 through 2027/28 (NPV and debt service time series shown in the figures and tables). ### Exchange rate and discount rate assumptions (select entries) - Exchange Rates (Currency per U.S. dollar), comparisons at decision point end-September 2005 and completion point end-September 2008 (selected entries): - Canadian Dollar: 4.795 (At decision point) and 4.422 (At completion point). - Euro: 4.112 (At decision point) and 5.147 (At completion point). - Great Britain Sterling: 5.505 (At decision point) and 5.705 (At completion point). - Japanese Yen: 1.850 (At decision point) and 2.200 (At completion point). - Special Drawing Rights: 4.349 (At decision point) and 4.580 (At completion point). - United States Dollar: 5.053 (At decision point) and 4.352 (At completion point). - Venezuelan Bolivar: 4.349 (At decision point) and 4.580 (At completion point). - Discount rates used are average commercial interest reference rates (CIRRs) for the respective currencies over the six-month period ending in September 2008 for the completion point and in September 2005 for the decision point. ### Delivery modalities and legal/assumption notes (selected) - IMF HIPC delivery modality: remaining US$3 million in HIPC relief to be delivered via a stock of debt operation to Haiti’s Umbrella Account. - Paris Club: deliver their share of assistance as a group; actual delivery modalities defined on a case-by-case basis. - Naples and Cologne terms referenced in context of hypothetical stock-of-debt operations and interim-period flows/cancellations. - Data caveats: figures based on latest data available at decision point/completion point; NPV calculations use six-month backward-looking discount rates at end-September 2005 and exchange rates as noted. *Source: _cr09288 - 84. Executive Directors may wish to consider the following questions (IMF document content provided).* ### 4. NPV of new borrowing...98.3199.3291.5402.4533.71,167.41,919.72,945.6611.62,057.8 ### 4. NPV of new borrowing...98.3199.3291.5402.4533.71,167.41,919.72,945.6611.62,057.8 ### Key projections and aggregates - Total debt service including new borrowing (after traditional debt-relief mechanisms): - 2008/09: 68.6 - 2009/10: 73.6 - 2010/11: 75.6 - 2011/12: 89.2 - 2012/13: 102.0 - 2017/18: 141.8 - 2022/23: 159.2 - 2027/28: 220.2 - Average 2008/09 - 2017/18: 109.5 - Average 2018/19 - 2027/28: 169.2 - Total debt service on outstanding debt (after traditional relief): - 2008/09: 67.0 - 2009/10: 72.0 - 2010/11: 71.5 - 2011/12: 81.4 - 2012/13: 91.4 - 2017/18: 96.1 - 2022/23: 77.8 - 2027/28: 68.9 - Average 2008/09 - 2017/18: 79.5 - Average 2018/19 - 2027/28: 76.7 ### Debt service by creditor group (selected lines, after traditional relief) - Multilateral total: - 2008/09: 59.2 - 2009/10: 60.6 - 2010/11: 60.1 - 2011/12: 63.8 - 2012/13: 71.0 - 2017/18: 74.9 - 2022/23: 60.0 - 2027/28: 50.6 - World Bank Group: - 2008/09: 20.0 - 2009/10: 20.9 - 2010/11: 21.2 - 2011/12: 21.2 - 2012/13: 21.1 - 2017/18: 23.8 - IADB Group: - 2008/09: 36.4 - 2009/10: 36.8 - 2010/11: 36.3 - 2011/12: 35.8 - 2012/13: 35.2 - 2017/18: 40.5 - Official bilateral (total): - 2008/09: 7.8 - 2009/10: 11.3 - 2010/11: 11.4 - 2011/12: 17.6 - 2012/13: 20.4 - 2017/18: 21.2 ### Debt-relief scenarios (summaries) - After enhanced HIPC assistance: - Total debt service including new borrowing: - 2008/09: 45.6 - 2009/10: 42.8 - 2010/11: 66.6 - 2011/12: 84.7 - 2012/13: 98.2 - 2017/18: 138.7 - 2022/23: 158.4 - 2027/28: 219.8 - Average 2008/09 - 2017/18: 100.5 - Average 2018/19 - 2027/28: 168.4 - After bilateral debt relief beyond HIPC: - Total debt service including new borrowing: - 2008/09: 44.3 - 2009/10: 40.1 - 2010/11: 63.9 - 2011/12: 82.0 - 2012/13: 95.5 - 2017/18: 135.3 - 2022/23: 154.0 - 2027/28: 212.9 - Average 2008/09 - 2017/18: 97.8 - Average 2018/19 - 2027/28: 163.5 - After MDRI assistance and bilateral relief beyond HIPC: - Total debt service including new borrowing: - 2008/09: 36.0 - 2009/10: 18.0 - 2010/11: 20.3 - 2011/12: 33.8 - 2012/13: 48.0 - 2017/18: 89.5 - 2022/23: 112.7 - 2027/28: 180.1 - Average 2008/09 - 2017/18: 57.5 - Average 2018/19 - 2027/28: 123.7 ### Memorandum key statistics (selected) - Debt service of new borrowing (mem.): - 2008/09: 1.6 - 2009/10: 1.7 - 2010/11: 4.1 - 2011/12: 7.8 - 2012/13: 10.6 - 2017/18: 45.6 - 2022/23: 81.4 - 2027/28: 151.3 - Average 2008/09 - 2017/18: 19.1 - Average 2018/19 - 2027/28: 92.5 - Nominal debt relief (mem.): - Under the enhanced HIPC initiative: - 2008/09: 23.0 - 2009/10: 30.8 - 2010/11: 9.0 - 2011/12: 4.5 - 2012/13: 3.8 - 2017/18: 3.1 - 2022/23: 0.8 - 2027/28: 0.4 - Average 2008/09 - 2017/18: 9.0 - Average 2018/19 - 2027/28: 0.8 - Under the MDRI: - 2008/09: 8.2 - 2009/10: 22.2 - 2010/11: 43.6 - 2011/12: 48.2 - 2012/13: 47.4 - 2017/18: 45.8 - 2022/23: 41.3 - 2027/28: 32.8 - Average 2008/09 - 2017/18: 40.4 - Average 2018/19 - 2027/28: 39.8 ### Key external debt indicators (ratios, percent) - After traditional debt relief: - NPV of debt-to-GDP ratio: - 2007/08: 18.5 - 2008/09: 19.4 - 2009/10: 20.0 - 2010/11: 20.3 - 2011/12: 20.4 - 2012/13: 20.5 - 2017/18: 18.2 - 2022/23: 16.6 - 2027/28: 15.8 - Average 2008/09 - 2017/18: 19.7 - Average 2018/19 - 2027/28: 16.7 - NPV of debt-to-exports ratio 2/ 5/: - 2007/08: 166.4 - 2008/09: 169.3 - 2009/10: 173.6 - 2010/11: 174.7 - 2011/12: 171.8 - 2012/13: 169.8 - 2017/18: 143.1 - 2022/23: 122.0 - 2027/28: 108.5 - Average 2008/09 - 2017/18: 163.7 - Average 2018/19 - 2027/28: 121.7 - Debt service-to-export ratio 5/ (selected): - 2008/09: 8.5 - 2009/10: 8.5 - 2010/11: 8.1 - 2011/12: 8.9 - 2012/13: 9.6 - 2017/18: 9.2 - 2022/23: 7.0 - 2027/28: 6.6 - Average 2008/09 - 2017/18: 9.5 - Average 2018/19 - 2027/28: 7.1 - After enhanced HIPC assistance (selected ratios): - NPV of debt-to-GDP ratio (example years): - 2008/09: 19.0 - 2009/10: 18.5 - 2010/11: 19.5 - 2011/12: 19.9 - 2012/13: 20.1 - 2017/18: 20.2 - Debt service-to-export ratio 5/ (selected): - 2009/10: 5.6 - 2010/11: 4.9 - 2011/12: 7.1 - 2012/13: 8.5 - 2017/18: 9.2 - After MDRI 5/ (selected ratios): - NPV of debt-to-GDP ratio: - 2008/09: 19.0 - 2009/10: 9.1 - 2010/11: 10.3 - 2011/12: 11.2 - 2012/13: 12.1 - 2017/18: 12.9 - 2027/28: 14.9 - Average 2008/09 - 2017/18: 12.4 - Average 2018/19 - 2027/28: 14.4 - NPV of debt-to-exports ratio 2/ 5/ (selected): - 2008/09: 171.4 - 2009/10: 79.4 - 2010/11: 89.6 - 2011/12: 96.8 - 2012/13: 101.7 - 2017/18: 106.7 - Average 2008/09 - 2017/18: 102.5 - Average 2018/19 - 2027/28: 105.0 - Debt service-to-export ratio 5/ (selected): - 2009/10: 4.4 - 2010/11: 2.1 - 2011/12: 2.2 - 2012/13: 3.4 - 2017/18: 4.5 ### Memorandum items (levels, in millions of U.S. dollars) - NPV of debt after traditional debt relief (selected years): - 2008/09: 1,281.8 - 2009/10: 1,367.2 - 2010/11: 1,453.0 - 2011/12: 1,524.1 - 2012/13: 1,605.9 - 2017/18: 1,698.6 - 2022/23: 2,046.8 - 2027/28: 2,574.8 - Average 2008/09 - 2017/18: 3,360.5 - Average 2018/19 - 2027/28: 1,721.7 and 2,686.6 (two averages listed) - NPV of debt after HIPC assistance (selected years): - 2008/09: 1,320.5 - 2009/10: 1,304.2 - 2010/11: 1,417.8 - 2011/12: 1,496.1 - 2012/13: 1,581.1 - 2017/18: 1,676.3 - 2022/23: 2,038.8 - 2027/28: 2,570.2 - Average 2008/09 - 2017/18: 3,358.9 - Average 2018/19 - 2027/28: 1,697.6 and 2,682.4 (two averages listed) - NPV of debt after MDRI and additional bilateral relief 4/ (selected): - 2008/09: 1,320.5 - 2009/10: 641.0 - 2010/11: 749.7 - 2011/12: 844.2 - 2012/13: 950.7 - 2017/18: 1,067.6 - 2022/23: 1,552.5 - 2027/28: 2,219.8 - Average 2008/09 - 2017/18: 3,154.8 - Average 2018/19 - 2027/28: 1,106.7 and 2,348.0 (two averages listed) - Debt service after MDRI and additional bilateral relief (selected): - 2008/09: ... - 2009/10: 36.0 - 2010/11: 18.0 - 2011/12: 20.3 - 2012/13: 33.8 - 2017/18: 48.0 - 2022/23: 89.5 - 2027/28: 112.7 - Average 2008/09 - 2017/18: 57.5 - Average 2018/19 - 2027/28: 123.7 ### Macroeconomic aggregates (mem.) - GDP (in millions of U.S. dollars, selected): - 2008/09: 6,942.8 - 2009/10: 7,039.8 - 2010/11: 7,270.3 - 2011/12: 7,522.7 - 2012/13: 7,879.5 - 2017/18: 8,301.5 - 2022/23: 11,262.6 - 2027/28: 15,467.7 - Average 2008/09 - 2017/18: 21,242.8 - Average 2018/19 - 2027/28: 8,788.6 and 16,232.7 (two averages listed) - Exports of goods and services (levels, selected): - 2008/09: 833.0 - 2009/10: 810.7 - 2010/11: 867.1 - 2011/12: 938.6 - 2012/13: 998.1 - 2017/18: 1,064.0 - 2022/23: 1,544.0 - 2027/28: 2,275.1 - Average 2008/09 - 2017/18: 3,337.0 - Average 2018/19 - 2027/28: 1,132.8 and 2,420.8 (two averages listed) - Government revenue (selected): - 2008/09: 701.7 - 2009/10: 709.8 - 2010/11: 795.2 - 2011/12: 837.3 - 2012/13: 903.4 - 2017/18: 982.5 - 2022/23: 1,475.1 - 2027/28: 2,250.1 - Average 2008/09 - 2017/18: 3,270.8 - Average 2018/19 - 2027/28: 1,053.4 and 2,387.6 (two averages listed) ### Sensitivity analysis (selected scenarios, Table 9 highlights) - Higher Interest Rates 4/ (selected outcomes): - NPV of debt-to-exports ratio 2/: - 2008/09: 81.3 - 2009/10: 94.2 - 2010/11: 103.8 - 2011/12: 111.1 - 2012/13: 118.7 - 2017/18: 128.7 - 2022/23: 129.1 - 2027/28: 129.0 - Average 2008/09 - 2017/18: 114.8 - Average 2018/19 - 2027/28: 129.2 - Memorandum: NPV of debt (millions U.S. dollars) (Higher Interest Rates): - 2008/09: 656.8 - 2009/10: 788.5 - 2010/11: 905.1 - 2011/12: 1,038.5 - 2012/13: 1,187.3 - 2017/18: 1,841.7 - 2022/23: 2,724.3 - 2027/28: 3,996.3 - Lower Export Growth 5/ (selected outcomes): - NPV of debt-to-exports ratio 2/: - 2008/09: 80.1 - 2009/10: 92.2 - 2010/11: 102.7 - 2011/12: 111.2 - 2012/13: 120.3 - 2017/18: 145.3 - 2022/23: 171.6 - 2027/28: 205.6 - Average 2008/09 - 2017/18: 119.4 - Average 2018/19 - 2027/28: 176.1 - Lower Real GDP Growth 6/ (selected outcomes): - NPV of debt-to-exports ratio 2/: - 2008/09: 79.4 - 2009/10: 91.5 - 2010/11: 101.6 - 2011/12: 110.3 - 2012/13: 119.9 - 2017/18: 155.9 - 2022/23: 200.9 - 2027/28: 254.7 - Average 2008/09 - 2017/18: 121.6 - Average 2018/19 - 2027/28: 207.4 ### Delivery of IMF assistance under the enhanced HIPC Initiative (Table 10, selected) - HIPC-eligible debt service due on IMF obligations (pre-MDRI): - Selected entries show small IMF obligation amounts and HIPC assistance coverage percentages, including: - HIPC assistance–deposits into the HIPC Umbrella Account: interim assistance and completion point disbursement items with values such as 0.042, 0.107, 0.140, 2.0, 1.8, 0.2. - Debt service due on IMF obligations after HIPC assistance (examples): 0.04, 0.1, 0.1, -, 0.1, 0.1, 2.7, 5.3, 5.3, 5.3, 5.3, 2.3. - Share of debt service due on IMF obligations covered by HIPC assistance (in percent) examples: 51.5, 56.7, 58.8, -, -, -, 8.8, 6.9, 6.8, 7.0, 6.8, 16.6. - World Bank debt service before and after HIPC relief (selected annual values): - World Bank Debt Service Before HIPC Relief (examples): 49.7, 51.4, 54.5, 13.9, 6.1, 20.9, 21.2, 21.2, 21.1, 20.9, 22.4, 23.8, 24.0, 23.8, 23.6, 23.5, 22.5, 16.3, 6.8, 1.6, 0.8, 25.4, 7.9. - World Bank Debt Service After HIPC Relief (examples): 49.7, 44.0, 51.7, 13.9, 3.2, 12.6, 21.2, 21.2, 21.1, 20.9, 22.4, 23.8, 24.0, 23.8, 23.6, 23.5, 22.5, 16.3, 6.8, 1.6, 0.8, 24.4, 7.9. - World Bank HIPC Assistance examples: 0.0, 7.3, 2.8, 0.0, 3.0, 8.3, 0.0, 0.0, 0.0, 0.0, 0.0, 0.0, 0.0, 0.0, 0.0, 0.0, 0.0, 0.0, 0.0, 0.0, 0.0, 1.0, 0.0. *Sources: Haitian authorities; and staff estimates and projections.* ### 2. Relief under the MDRI 3 ### 2. Relief under the MDRI ### Projected Stock and Debt Reduction - Projected Stock of IDA Credits Outstanding at Implementation Date 4/: 487.1 - Debt Stock Reduction on Eligible Credits 5/: 455.8 - Due to HIPC relief 6/: 9.4 - Due to MDRI: 446.5 - Remaining IDA Credits After HIPC and MDRI Relief: 31.3 ### IDA Debt Service Relief Under the MDRI (series) - IDA Debt Service Relief Under the MDRI 7/: - 3.2 12.5 21.0 21.0 20.9 20.7 21.8 22.8 23.0 22.9 22.7 22.5 12.1 4.7 5.2 0.0 0.0 20.3 6.4 - Debt Service Due to IDA after HIPC Relief and the MDRI: - 0.0 - 0.1 - 0.2 - 0.2 - 0.2 - 0.2 - 0.6 - 1.0 - 1.0 - 1.0 - 0.9 - 0.9 - 1.3 - 1.6 - 1.6 - 1.6 - 0.8 - 0.7 - 1.6 ### Memorandum items: Coverage of Debt Service by Relief (in percent) - HIPC relief — Debt Service to IDA Covered by HIPC (in percent): - 0.0 - 14.3 - 5.1 - 0.0 - 48.6 - 39.9 - 0.0 - 0.0 - 0.0 - 0.0 - 0.0 - 0.0 - 0.0 - 0.0 - 0.0 - 0.0 - 0.0 - 0.0 - 0.0 - 0.0 - 0.0 - 4.9 - 0.0 - Debt Service to IDA Covered by HIPC and MDRI (in percent): - 0.0 - 14.3 - 5.1 - 0.0 - 99.6 - 98.9 - 98.9 - 98.9 - 98.9 - 97.3 - 95.9 - 96.0 - 96.0 - 96.0 - 96.0 - 94.2 - 90.0 - 76.4 - 0.0 - 0.0 - 79.2 - 45.8 ### Interim Assistance (NPV terms) and Ratios - Interim Assistance 8/: 9.9 - Interim Assistance as Percent of Total HIPC Relief 8/: 0.2 ### IDA Debt Service Relief Under the MDRI (in millions of SDR) 9/ - IDA Debt Service Relief Under the MDRI (in millions of SDR) 9/: - 2.1 - 8.2 - 13.8 - 13.8 - 13.7 - 13.6 - 14.3 - 15.0 - 15.1 - 15.0 - 14.9 - 14.8 - 13.9 - 9.6 - 3.4 - 0.0 - 0.0 - 13. - 34.2 ### Notes on Methodology and Conversions (selected footnotes from source) - 1/ For the FY 2006-2008 period, debt service and debt relief is estimated on debt outstanding as of end-September 2005, using end-September 2005 exchange rates. For the projection period, the debt service presented here is on end-September 2008 outstanding debt, using end-September 2008 exchange rates. - 2/ Enhanced HIPC assistance until end-June 2009 as approved by the Board of IDA (IDA/R2006-6026/1). After July 1, 2009, HIPC debt relief is based on revised schedule. Total HIPC debt relief amounts to US$52.83 million in NPV terms, including a US$33.1 million concessional rescheduling of arrears in 2005, using end-September 2005 discount and exchange rates. - 3/ Stock of debt and debt service denominated in SDRs are converted into U.S. dollars by applying the end-September 2008 exchange rate. - 4/ Stock of debt outstanding as of June 30, 2009. - 5/ Debt disbursed as of end-December 2003 and still outstanding as of end-September 2008. - 6/ HIPC relief is assumed to proportionally reduce repayments of principal and charges on IDA credits disbursed as of end-September 2005 and still outstanding as of end-September 2008. - 7/ Using end-September 2008 exchange rates. - 8/ In net present value (NPV) terms. - 9/ For SDR-denominated IDA credits, debt relief under the MDRI is estimated as 100 percent of SDR-based debt service minus USD-based debt relief under the Enhanced HIPC Initiative. HIPC debt relief is converted into SDR equivalent amounts by applying the foreign exchange reference rate of 1.52448 agreed by donors under the latest regular IDA replenishment. For USD-denominated IDA credits, Debt relief under the MDRI is estimated as 100 percent of USD-based debt service minus USD-based debt relief under the Enhanced HIPC Initiative. The resulting MDRI debt relief amounts are converted into SDR equivalent amounts by applying the foreign exchange reference rates agreed by donors under the latest regular IDA replenishment. ### Appendix I – Debt Management (Haiti) - 1. Debt management in Haiti has improved since the decision point was reached in November 2006. At the decision point, several issues were identified as priorities for reform in the area of debt management and debt recording and reporting. Two such issues have also been included as the basis for HIPC completion point triggers (see Box 1). - 2. In the area of debt recording, the BRH and MEF recently completed the installation of the most recent version of the UNCTAD DMFAS system, version 5.3, with the help of UNCTAD consultants. While DMFAS version 5.2 had previously been installed, the authorities had relied primarily on a Microsoft Excel database system for debt recording. The upgraded DMFAS system allows for all domestic and foreign currency-denominated debt data to be centralized into a single database, and networked so that it is available to both the BRH and MEF simultaneously. - 3. The new software will ensure secure access to the system and real-time backups between the BRH and MEF, which will facilitate improvements in the availability, quality, and security of debt data. The staffs of both institutions have received extensive training from UNCTAD in the use of the updated software. The completeness and accuracy of the new database through end-September 2008 was also verified as part of the completion point debt data reconciliation, with only minor errors that the authorities have committed to rectifying. - 4. Debt reporting by the government has also improved, resulting in part from the upgrade to the latest DMFAS system. Debt reporting by the BRH has focused on the preparation of monthly, quarterly, and annual reports covering external debt service, the accumulation of arrears, disbursements, new borrowings, and the evolution of the debt stock. Such reports have been circulated within the government to support policymaking and planning, while some of this information was eventually made public after a considerable lag. The authorities have focused on improving debt reporting over the past several years, and the newly centralized database and updated software has helped them to produce and publish detailed quarterly reports that reflect recent debt data (with a three-month lag) in March and June 2009, with the objective of continuing to produce and publish such bulletins in the future. *Source: IDA staff estimates.* ### 5. From an institutional perspective, the improved debt management capacity and the ### _cr09288 - 5. From an institutional perspective, the improved debt management capacity and the ### Institutional debt management reforms and responsibilities - Improved debt management capacity and the use of a new debt recording system will support transfer of some functions related to debt recording, reporting, and analysis from the BRH to the MEF. - Current division of responsibilities: - BRH: maintains primary responsibility for debt data recording and reporting. - MEF: broadly in charge of front office functions and authorization of debt service payments by the BRH in its capacity as the government’s fiscal agent. - With the newly-installed system the MEF intends to: - take over the data-entry responsibilities for external debt; - take the lead in producing and publishing periodic debt data reports. - Expected benefits of access to a complete database for the MEF: - facilitate front and middle office functions with respect to debt management; - support development of regular borrowing strategies and plans; - support negotiating external loan agreements with creditors; - enable analysis of costs and risks associated with new borrowing. - The authorities are working with the Center for Latin American Monetary Studies (CEMLA) to address these issues. - Needed legal and institutional enhancements: - BRH and MEF specific responsibilities for debt management functions need to be further clarified and enshrined in legislation; - coordination and information sharing between the two institutions should be improved; - analytical capacity for preparing annual debt management strategies and related technical analysis must be developed. - These reforms are being considered in the context of the ongoing project with CEMLA. *Key policy recommendation: clarify and legislate BRH/MEF roles, expand information sharing, and build analytical capacity (with CEMLA support).* ### DSA context and background (LIC DSF methodology) - DSA prepared jointly by Bank and Fund staffs in accordance with the standardized Debt Sustainability Framework (DSF) methodology for low-income countries (LICs); consultations with Inter-American Development Bank staff noted. - HIPC and MDRI relief would substantially reduce Haiti’s debt burden, but DSA findings indicate the risk of external debt distress is still high given a present value (PV) of debt-to-exports ratio above the relevant policy-dependent threshold in the baseline scenario and higher in alternative and shocks scenarios. - Haiti’s public debt as of end-September 2008: - estimated at about 36 percent of GDP. - external creditors: 28 percent of GDP. - composition of external debt: Inter-American Development Bank 41 percent of total external debt; World Bank 27 percent; bilateral creditors 24 percent. - Change in domestic debt coverage: DSA covers domestic debt of the central government including borrowing by the government from the BRH but excluding BRH bond issues; this differs from prior DSA coverage and helps explain increase from 29 percent of GDP (previous DSA) to 36 percent of GDP in 2008. - Estimated impact of HIPC and MDRI relief at completion point: - nominal reduction in Haiti’s debt stock is estimated to be $1.1 billion; - annual debt service savings of more than $50 million for the first ten years following completion point. - Steps taken to strengthen debt management capacity: - creation of a single external debt database with help from UNCTAD and the World Bank; - publication of quarterly external debt reports; - engagement with CEMLA under the HIPC Capacity Building Program to enhance debt management capacity. ### Assumptions (Box A1: Macroeconomic and fiscal assumptions) - Growth and inflation: - GDP is assumed to be lower in FY 2009: projected to be 2.0 percent (versus 2.5 percent previously). - Medium-term real rate of growth assumed to converge to 4.5 percent. - GDP deflator assumed to be about 6 percent in 2009 (compared to 12 percent previously) and would reach 5 percent over the medium-term. - Fiscal policy: - After-grants overall fiscal deficit in FY 2009: 4.7 percent of GDP. - After-grants deficit would fall to 2.3 percent of GDP over the long-run. - Revenue collection to just above 15 percent of GDP in the long-term. - Primary spending assumed to reach 19.7 percent of GDP by the end of the period (compared to 18.1 percent of GDP previously). - Grants and financing: - Grants expected to increase substantially in FY 2009 and somewhat in FY 2010. - Long-term U.S. dollar value of grants assumed to grow by 2 percent annually. - DSA assumes only 0.6 percent of GDP in domestic financing in the long-term. - Plans to begin Treasury bill issuance in 2010. - Current account and trade: - Exports of goods and services in U.S. dollar terms expected to fall in FY 2009 by 2.7 percent (versus 4.3 percent decline in the last DSA). - Long-term exports growth assumed about 8 percent annually (compared to 7.6 percent in the last DSA), to reach about 16 percent of GDP by 2029 (compared to 14.4 percent of GDP by 2028 in the last DSA). - Imports of goods and services expected to fall slightly in 2009 (by about 0.3 percent). - Import growth long-term: 6.2 percent annually, with imports reaching 37.6 percent of GDP in 2029 (compared to 36 percent of GDP in the last DSA). - Non-interest current account deficit would be 2.3 percent of GDP by the end of the period, about ½ percent of GDP higher than the previous DSA. - Remittances forecast to fall to 18.7 percent of GDP in FY 2009 (compared to 16 percent of GDP in the previous DSA and 19.7 percent of GDP in FY 2008). - Treatment of PetroCaribe: - The DSA assumes future PetroCaribe-related flows do not contribute to public debt beyond the approximately $197 million transferred in late 2008 and early 2009, as such amounts expected to be liabilities of a private bi-national corporation rather than the government. ### External debt sustainability findings - Baseline scenario: - PV of external debt-to-exports ratio will increase in the medium-term, just breaching the 100 percent threshold in FY 2014 and FY 2015. - The ratio declines subsequently but remains near the 100 percent threshold throughout the projection period. - Other debt stock and debt service ratios remain well below relevant thresholds throughout the projection period. - Sensitivity and shock analysis: - PV of debt-to-exports is the indicator most likely to exceed the indicative threshold under alternative and shock scenarios. - Haiti is most vulnerable to a combined shock to growth, exports, prices, and non-debt creating flows; in that combined shock the PV of debt-to-exports would rise to 168 percent before declining and would remain above the indicative threshold for the entire projection period. - Other vulnerabilities include lower non-debt-creating flows (grants and remittances), less favorable borrowing terms, and weaker export growth; in each of these scenarios PV of debt-to-exports would rise substantially and remain above the indicative threshold. - An alternative scenario based on historical values shows lower debt ratios primarily due to a smaller current account deficit than in the baseline. ### Public debt sustainability findings - Baseline scenario: - PV of debt-to-GDP ratio rises from 17 percent in FY 2009 to 21.5 percent of GDP by FY 2029. - PV of debt-to-revenue ratio rises from about 99 percent in FY 2009 to about 119 percent in FY 2029. - Debt service-to-revenue rises from about 6 percent in FY 2009 to a high of 7.7 percent in FY 2016 before dropping back to about 7 percent by FY 2029. - Alternative and shock scenarios: - If the primary deficit is fixed at its relatively high FY 2009 level: - PV of public debt-to-GDP ratio would grow to 41 percent in FY 2029 from 17 percent in FY 2009. - PV of public debt-to-revenue ratio would reach 225 percent in FY 2029 compared to 99 percent in FY 2009. - Debt service-to-revenue would rise from 6 percent in FY 2009 to 13 percent in FY 2029. - Using historical values or the most extreme shock (growth for the debt stock indicators and lower non-debt-creating flows for the debt service measure) would also raise debt above the baseline scenario, though less pronounced than holding the FY 2009 primary balance constant. ### Conclusions and risks - Haiti’s risk of external debt distress remains high given a PV of debt-to-exports ratio above the indicative threshold in the baseline scenario. - Alternative and shock scenarios highlight additional risks on the PV of debt-to-exports, while other debt stock and service indicators remain below relevant thresholds in all scenarios. - Public debt risks: there is a risk of steadily rising debt ratios under alternative and shock scenarios, particularly if the primary balance is fixed at the FY 2009 level. *IMF staff and Bank staff joint analysis (June 2009), Debt Sustainability Analysis (LIC DSF methodology).* ### 12. Further steps are needed to safeguard debt sustainability following HIPC and ### 12. Further steps are needed to safeguard debt sustainability following HIPC and MDRI relief ### Key findings and fiscal outlook - HIPC/MDRI relief bring the PV of debt-to-exports ratio below the relevant indicative threshold in FY 2009, but the ratio reaches the threshold by FY 2014, and would be much worse in the likely event of future shocks. - Sustaining debt sustainability will depend on: - maximizing grant assistance; - a prudent borrowing strategy and strengthened debt management; - enhancing Haiti’s small export base through improved security and infrastructure to boost trade and preferential opportunities; - catalyzing higher foreign direct investment flows through better security and infrastructure; - greater resilience to natural disasters; and - sustained reform progress to bolster institutions and policy implementation capacity. ### Macroeconomic assumptions and headline projections (selected) - GDP at constant prices (sequence shown): 2.0; 2.4; 3.2; 3.3; 3.4; 3.7; 4.5; 4.5; 3.5; 4.5 - GDP deflator (sequence shown): 6.3; 8.3; 5.5; 5.2; 5.2; 5.2; 5.0; 5.0; 5.6; 5.0 - Real GDP per capita (local currency) (sequence shown): 0.3; 0.7; 1.6; 1.7; 1.8; 2.1; 3.0; 3.2; 1.9; 3.1 - Consumer prices (period average) (sequence shown): 5.1; 7.7; 5.0; 5.0; 5.0; 5.0; 5.0; 5.0; 5.3; 5.0 - Exports of goods and non-factor services growth (US$ terms, sequence shown): -2.7; 7.0; 8.2; 6.3; 6.6; 6.6; 8.1; 7.9; 6.4; 8.0 - Imports of goods and non-factor services growth (US$ terms, sequence shown): -0.3; 4.3; 3.3; 3.1; 4.4; 4.8; 6.2; 6.2; 4.4; 6.2 ### Fiscal and external indicators (selected) - Central government (value in Gourdes) — Total revenue and grants (sequence shown): 29.4; 19.9; 0.1; 9.8; 10.0; 10.1; 10.4; 9.0; 11.8; 10.1 - Central government revenue 1/ (sequence shown): 8.2; 20.3; 10.8; 11.9; 12.3; 12.4; 12.2; 9.7; 12.2; 11.4 - Central government primary expenditure (sequence shown): 37.7; 8.8; 0.1; 11.2; 10.5; 9.3; 9.7; 9.2; 11.4; 9.9 - Non-interest current account deficit (percent of GDP; selected sequence): -2.9; -3.0; -3.1; -2.9; -2.7; -2.7; -2.8; -2.3; -2.8; -2.6 - Exports (in percent of GDP; sequence shown): 11.5; 11.9; 12.5; 12.7; 12.8; 12.9; 13.9; 15.9; 12.8; 14.9 - Imports (in percent of GDP; sequence shown): 40.7; 41.1; 41.0; 40.3; 40.0; 39.6; 38.9; 37.6; 39.9; 38.3 - External current account balance (in percent of GDP; sequence shown): -12.4; -12.0; -10.5; -9.6; -9.2; -9.0; -8.2; -6.0; -9.8; -7.1 - Liquid gross reserves (months of imports of G&S): 3.0; 3.0; 2.8; 2.9; 3.0; 3.2; 3.0; 2.7; 3.0; 2.9 - Central government overall balance (including grants, percent of GDP): -4.7; -2.7; -2.6; -2.9; -3.1; -3.1; -2.3; -2.3; -3.0; -2.3 ### Debt levels, dynamics, and stress-test outcomes (selected) - External debt (nominal) (selected sequence): 28.1; 24.4; 27.9; 14.7; 16.6; 17.8; 19.3; 20.7; 21.9; 23.1; 24.7 - of which public and publicly guaranteed (PPG) (selected sequence): 28.1; 24.4; 27.9; 13.2; 15.3; 16.6; 18.1; 19.7; 21.0; 22.6; 24.6 - Change in external debt (selected sequence): -6.2; -3.6; 3.5; -13.2; 2.0; 1.2; 1.5; 1.4; 1.2; 0.2; 0.2 - Identified net debt-creating flows (selected sequence): -5.6; -6.9; 0.9; 2.2; 1.9; 1.6; 1.1; 0.9; 0.8; 0.6; -0.4 - PV of external debt (selected sequence): 7.1; 9.8; 11.0; 11.8; 12.6; 13.4; 13.9; 14.2; 15.0 - In percent of exports (selected sequence): 59.3; 84.7; 91.9; 94.7; 99.5; 104.2; 107.9; 101.8; 94.0 - PV of PPG external debt (selected sequence): 7.1; 8.3; 9.6; 10.5; 11.4; 12.3; 13.0; 13.6; 14.9 - In percent of exports (selected sequence): 59.3; 72.4; 80.4; 84.5; 90.4; 96.0; 100.6; 98.1; 93.5 - In percent of government revenues (selected sequence): 70.4; 82.7; 87.7; 94.8; 99.8; 104.0; 106.5; 101.9; 96.6 - Debt service-to-exports ratio (in percent; sequence shown): 5.3; 6.8; 6.5; 4.7; 2.1; 3.2; 4.1; 4.9; 5.9; 5.4; 5.5 - PPG debt service-to-exports ratio (in percent; sequence shown): 5.3; 6.8; 6.5; 4.7; 2.0; 2.7; 3.5; 4.5; 5.4; 5.1; 5.4 - PPG debt service-to-revenue ratio (in percent; sequence shown): 7.7; 8.5; 7.8; 5.3; 2.1; 3.0; 3.9; 4.8; 5.8; 5.3; 5.5 - Total gross financing need (Billions of U.S. dollars; sequence shown): -0.1; 0.0; 0.3; 0.2; 0.2; 0.2; 0.2; 0.2; 0.2; 0.2; 0.3 - Non-interest current account deficit that stabilizes debt ratio (selected sequence): 7.6; 3.8; 0.4; 16.1; 0.8; 1.4; 0.7; 0.5; 0.8; 2.3; 1.8 ### Debt dynamics drivers and stress testing (summary) - Endogenous debt dynamics (selected sequence): -3.7; -5.8; -2.5; -0.3; -0.2; -0.3; -0.4; -0.4; -0.5; -0.7; -0.7 - Contribution from nominal interest rate (selected sequence): 0.0; 0.1; 0.3; 0.2; 0.2; 0.2; 0.2; 0.2; 0.3; 0.3; 0.3 - Contribution from real GDP growth (selected sequence): -0.7; -0.8; -0.3; -0.6; -0.3; -0.5; -0.6; -0.6; -0.7; -1.0; -1.0 - Contribution from price and exchange rate changes (selected): -3.0; -5.2; -2.6 - Residual (3-4) (selected sequence): -0.6; 3.3; 2.6; -15.5; 0.0; -0.4; 0.4; 0.6; 0.4; -0.4; 0.6 - o/w exceptional financing (selected sequence): -0.2; -0.2; -0.3; -15.5; 0.0; 0.0; 0.0; 0.0; 0.0; 0.0; 0.0 - Grant element of new public sector borrowing (in percent; sequence shown for later years): 37.9; 46.1; 47.2; 47.2; 47.2; 47.2; 45.5; 47.2; 47.2; 47.2 - Grant-equivalent financing (in percent of GDP; selected sequence): 7.8; 8.6; 6.8; 6.8; 6.8; 6.6; 5.2; 3.8; 4.8 - Grant-equivalent financing (in percent of external financing; sequence shown): 84.8; 86.5; 85.6; 83.8; 82.2; 81.6; 83.3; 76.7; 81.1 ### Sensitivity and stress scenarios (high-level) - Multiple stress tests and bound tests were run (examples and outcomes summarized in tables and figures): - A2: New public sector loans on less favorable terms in 2009-2029 yields materially higher PV of debt-to-GDP, debt-to-exports, and debt-to-revenue ratios over time (sequences shown in tables). - B5: Combination of shocks (one-half standard deviation shocks) produces substantially higher debt ratios, often exceeding the baseline thresholds in medium term (2009-2029 tables). - B6: One-time 30 percent nominal depreciation relative to the baseline in 2010 is among the most severe single shocks in some panels. - The most extreme stress test is the test that yields the highest ratio in 2019; it corresponds to a Combination shock in most debt indicators and a One-time depreciation shock in at least one indicator, as identified in the figures. ### Policy recommendations (from staff analysis) - Maximize grant assistance and grant-equivalent financing to lower the grant element of financing and reduce debt vulnerability. - Pursue a prudent borrowing strategy and strengthen public debt management to control future borrowing risks. - Expand the export base by improving security and infrastructure to boost trade, leverage preferential opportunities, and attract higher foreign direct investment. - Enhance resilience to natural disasters to reduce shock-related debt risks. - Continue sustained reforms to strengthen institutions and policy implementation capacity to improve Haiti’s ability to handle a higher level of debt. *Source: IMF staff projections, simulations, and analysis contained in the chapter "12. Further steps are needed to safeguard debt sustainability following HIPC and MDRI relief" of the provided document.* --- _Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2009/_cr09288.pdf_