## Statement by Murilo Portugal, Executive Director and Vishnu Dhanpaul, Assistant, for Haiti

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**Canonical URL:** [Statement by Murilo Portugal, Executive Director and Vishnu Dhanpaul, Assistant, for Haiti](https://www.imf.org/-/media/websites/imf/imported-publications/external/np/a4pilot/1999/_stm99105.pdf)

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### Recent economic performance and key aggregates
- Real output grew by 3.1 percent in fiscal year (FY) 1997/98, driven by strong export growth, especially from the assembly sector.
- Inflation declined from 17 percent in FY 1996/97 to 8.3 percent in FY 1997/98 and further to 7.6 percent in the 12 months ending last May.
- The central government fiscal deficit stood at 1.3 percent of GDP at the end of FY 1997/98, slightly higher than programmed.
- Central bank policy: interest rate on central bank bills raised from 18 percent to 24 percent in 1998.
- External current account deficit narrowed to 5.9 percent of GDP due largely to export and private remittance surges; overall balance of payments recorded a surplus of a little less than 1 percent of GDP.
- Net international reserves at end-first half FY 1998/99: US$209 million (approximately US$20 million more than programmed); target by end-year US$218 million or 2.3 months of imports.
- FY 1998/99 real GDP growth expected at 2.2 percent; inflation targeted at 8 percent by end of the year.
- Central government deficit at end-first half FY 1998/99: 0.3 percent of GDP (0.4 percentage point less than programmed); end-year target 1.7 percent of GDP.
- The Haitian gourde expected to remain stable.

### Fiscal policy, budgetary measures, and election-related spending
- Authorities plan to increase the revenue-to-GDP ratio through measures to maximize tax collections and enhance revenue agency administrative capacity.
- Expenditure control measures: better targeting of capital expenditure; avoidance of unbudgeted wage increases and hirings.
- External budget support and project assistance expected to fall short of programmed level in FY 1998/99 due to political scenario; projected to increase over the medium term once parliamentary ratification is obtained for World Bank and Inter-American Development Bank loans.
- Election financing: authorities estimate spending US$33 million for electoral process preparation; government allocated G150 million (approximately US$9 million) in the year’s budget.
- Election cost disaggregation: US$17 million for voter registration, US$6 million for publicity and communication, and US$10 million for security.
- Authorities expect a significant proportion of the additional US$24 million to be funded by international donors.
- Authorities emphasize careful control and monitoring of election spending to avoid derailing the economic program.

### Monetary policy and banking sector measures
- Monetary policy focus: controlling inflation and strengthening the balance of payments.
- Tools: open market operations as needed to control money supply; placement of central bank bonds with interest rates that would remain positive in real terms to restrain credit to the private sector and control liquidity.
- Authorities consider it difficult at this time to harmonize the reserve requirement on foreign-currency denominated deposits and gourde-denominated deposits (reasons referenced in the staff report).
- Banking system described as remaining strong.
- Commitments: further strengthening of bank supervision and prudential regulations consistent with international standards; comprehensive audit of individual banks; completion of a new banking law early in the new fiscal year.

### Structural reforms and public sector measures
- Downsizing of the civil service: affected 6,360 employees or approximately 12 percent of government employment.
- Progress made: acceleration of privatization program logistics; introduction of technical support for restructuring state-owned Banque Nationale de Crédit (BNC).
- Acknowledged constraints: further structural reforms hampered by political situation, notably inability to obtain parliamentary approval of critical legislation.
- BNC restructuring: authorities agree problems stem from inappropriate and multiple functions; plans to downsize branches and staff, strengthen managerial and operational capability in preparation for eventual privatization.
- Fund-sponsored expert support: designing restructuring plan, preparing downsizing options, and maximizing nonfinancial assets of the bank.
- Other structural areas: progress in education sector; slower progress in health and justice sectors due to need for parliamentary approval of relevant legislation.
- Ongoing reviews and reforms: trade reform, taxation policy, restructuring and privatization of public enterprises, and the investment and commercial codes.
- Environmental policy: authorities reviewing Environmental Action Plan from the Inter-Ministerial Environment Commission with view to implementing financially feasible measures to manage natural resources and prevent further environmental degradation.

### Political context, elections, and external engagement
- Authorities emphasize strengthening the democratic process as a main priority; published a decree envisioning elections by the end of this year with new parliament to be convened in January 1999.
- Authorities view successful parliamentary elections as critical to regaining international financial community confidence, resuming external aid, and implementing structural reforms.
- Requested Fund follow-up discussions in October 1999 on the staff-monitored program to assist in maintaining fiscal and monetary discipline during the election campaign.
- Authorities view successful implementation of the current program as critical to initiating discussions on a new ESAF immediately following parliamentary elections.
- Authorities agreed to publication of the staff report for the Article IV Consultation as part of the pilot project.

### Poverty, outlook, and international support
- Haiti remains characterized as the poorest country in the Western Hemisphere; continued international community support seen as essential to ensure economic stability.
- Authorities committed to strengthening implementation of policies and reforms to maintain growth momentum and make sustainable impact on poverty.
- Acknowledged adverse factors faced while achieving progress: deteriorating economic and social infrastructure; unacceptable unemployment and underemployment levels; economic dislocation among the most vulnerable; declining disbursements from international donors; impact of Hurricane Georges in September 1998; political instability; and social unrest.

*Statement by Murilo Portugal, Executive Director and Vishnu Dhanpaul, Assistant, for Haiti, September 3, 1999.*

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_Source: https://www.imf.org/-/media/websites/imf/imported-publications/external/np/a4pilot/1999/_stm99105.pdf_