Press Release: IMF Approves Stand-by Credit for Haiti

IMF News, March 8, 1995

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Date: March 8, 1995
The International Monetary Fund approved a stand-by credit for Haiti up to the equivalent of SDR 20 million (about $31 million) over the next 12 months to support the Government's economic and financial program for 1995-96.

Haiti experienced a dramatic deterioration in economic and social conditions since the military coup in September 1991, accentuating a downward trend evident since the mid-1980's.
Preliminary estimates suggest real GDP may have declined by about 30 percent between 1990-94.
Per capita income was about $260 in 1994.
Inflation rose from an average of 18 percent a year during 1990-93 to 52 percent in the 12-month period ending September 1994.
Central government revenue fell to the equivalent of 3.3 percent of GDP in 1994 from 7.3 percent in 1990.
Exports declined to under $60 million in 1994 from $266 million in 1990.
Total imports fell to $141 million in 1994 from $443 million in 1990.

Objectives of the Government's medium-term strategy:
- Eliminate financial imbalances.
- Reduce the role of the public sector.
- Liberalize the trade regime.
- Eliminate regulations and restrictions that impede private investment.
1995 economic program targets and projections (program supported by the stand-by credit):
- Reduce inflation to an annual average of 15 percent.
- Increase the level of net international reserves by $45 million.
- Real GDP projected to grow by around 4.5 percent, mainly on the basis of a large increase in public investment of 7.2 percent of GDP (from 0.6 percent in 1994) to be financed by external aid.
Fiscal strategy:
- Permits a temporary widening of the fiscal deficit, financed by budgetary grants and concessional loans, to meet immediate reconstruction and rehabilitation needs, as well as poverty relief.
- Measures to address the underlying fiscal imbalance will be introduced.
Monetary and wage policy: the program provides for restrained wage and financial policies.

Program structural measures include:
- A simplified tariff regime with four rates in the 0-15 percent range.
- A new petroleum pricing policy with automatic adjustments for changes in import costs.
- The first phase of a public enterprise divestment plan incorporating the sale or lease of a cement plant and a flour mill.
- Reform of the state electricity company.
Technical assistance and reform agenda with IMF and World Bank support:
- Public sector restructuring and redefinition of the role of the state.
- Monetary policy and bank supervision improvements.
- Foreign investment policy and business deregulation.
Medium-term financing prospects:
- This agenda would underpin a medium-term program which could be supported by IMF loans under its enhanced structural adjustment facility (ESAF) and appropriate World Bank and Inter-American Development Bank financing.

Humanitarian aid programs estimated at $108 million are being financed by bilateral donors and administered by nongovernmental agencies.
The Government established an Economic and Social Fund of about $23 million, financed by the World Bank and the Inter-American Development Bank, to provide financing for small projects conceived by community organizations aimed at rehabilitating social and economic infrastructure such as schools, health facilities, sewerage and water, and irrigation systems.

The measures adopted and the policy commitments made by the Government should pave the way for sustainable economic growth and a much-needed reduction in poverty.
The balance of payments remains vulnerable in the medium-term, particularly to a slow return of foreign investment.
If foreign investment returns slowly, there would need to be a further adjustment effort and additional external assistance.

Haiti joined the IMF on September 8, 1953.
Haiti's quota is SDR 60.7 million (about $89 million).
Haiti's outstanding use of IMF financing currently totals SDR 3.5 million (about $5 million).

International Monetary Fund