Public Information Notice: IMF Executive Board Concludes 2007 Article IV Consultation with Haiti

July 25, 2007

Public Information Notices (PINs) form part of the IMF's efforts to promote transparency of the IMF's views and analysis of economic developments and policies. With the consent of the country (or countries) concerned, PINs are issued after Executive Board discussions of Article IV consultations with member countries, of its surveillance of developments at the regional level, of post-program monitoring, and of ex post assessments of member countries with longer-term program engagements. PINs are also issued after Executive Board discussions of general policy matters, unless otherwise decided by the Executive Board in a particular case.

Public Information Notice (PIN) No. 07/86
July 25, 2007

On July 23, 2007, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Haiti.1


The transitional government that took over following President Aristide's departure in February 2004 implemented prudent fiscal and monetary policies, and significantly improved governance and transparency in public sector operations. These efforts were supported by a staff-monitored program and two successive arrangements under the Emergency Post Conflict Assistance (EPCA) facility between mid-2004 and late 2006. As a result, inflation was reduced to single digits, from almost 40 percent in 2003, the currency stabilized, and gross reserves more than doubled from US$157 million (1.2 months of imports) at end-FY 2003 to US$335 million (1.8 months of imports) at end-FY 2006. Most notably, real per capita GDP has begun to recover, albeit at a modest rate (¾ of a percentage point in FY 2005/06). Based on its strong macroeconomic track record, a new arrangement under the Poverty Reduction and Growth Facility (PRGF) and the Heavily Indebted Poor Countries (HIPC) decision point were approved for Haiti in November 2006.

There have also been significant efforts to restore political stability and improve governance and transparency in public sector operations. President Préval, who took office in May 2006, has espoused good governance and the fight against corruption as central tenets of his administration. The security situation in Port-au-Prince has improved markedly in the last few months, following joint operations by the United National Stabilization Mission in Haiti (MINUSTAH) and the National Police that succeeded in arresting numerous suspected criminals and gang leaders. Notwithstanding these successes, the security situation remains fragile and continues to be a binding constraint to sustained political and social stability, holding back private sector investment and a pick-up in economic growth.

Executive Board Assessment

Executive Directors agreed with the thrust of the staff appraisal. They commended the Haitian authorities for their determined efforts and significant achievements in stabilizing the economy under the PRGF-supported program approved last November, which have resulted in a sharp reduction in inflation, a recovering of international reserves, and the return to positive—albeit still modest—growth. Directors were also encouraged by improvements in security conditions, progress in restoring political stability, and ongoing efforts to strengthening governance and combating corruption.

Directors viewed that the key challenge going forward will be to consolidate stabilization gains while establishing higher, sustained growth. Prospects for an acceleration of growth over the medium-term are positive, but this will depend on the promotion of private sector investment and increased productivity. Directors observed that an improved security situation, infrastructure enhancements, a more reliable energy supply, better education and health services, strengthened financial intermediation and legal institutions would contribute to achieving this objective. They were encouraged by the authorities' initial steps to address these problems and improve the business climate, including through the creation of a one-stop window for investors and by their plans to improve the efficiency of remaining state-owned enterprises. Continued international support, including Fund and donor technical assistance, will be critical to building the capacity needed to achieve these objectives.

Directors observed that further revenue mobilization will create the space needed to finance higher levels of priority expenditures. In this light, they commended the authorities for recent increases in tax collection and welcomed ongoing efforts to strengthen and modernize tax and customs administration. These steps, together with measures to broaden tax bases and adjust some rates and fees, could help raise domestic revenue significantly. Directors observed that decisions to raise taxes should be taken in the context of a comprehensive review of the tax system and with due consideration to social implications. They also noted the importance of strengthening public financial management and budget execution capacity. In light of the current limited capacity for budget implementation, they urged the authorities to exercise caution in approaching new loan financing.

Directors welcomed the somewhat faster-than-anticipated reduction in inflation in recent months, and encouraged the authorities to use the available space for base money growth in the period ahead. As the underexecution of government expenditure has posed challenges for short-term liquidity management, they encouraged close coordination between monetary and fiscal authorities to avoid unwanted tightening of the monetary stance. Directors observed that, while the current approach to monetary policy has successfully supported disinflation in recent years, the further development of the monetary policy framework would contribute to consolidating a stable low-inflation environment and enabling needed financial deepening.

Directors viewed that, on balance, the real exchange rate does not appear to be misaligned. They noted that Haiti faces an appreciating equilibrium real exchange rate, reflecting strong dependence on remittances and other external transfers. Directors agreed that the authorities should maintain a floating exchange rate regime, with interventions limited to the accumulation of reserves in line with program targets and smoothing out seasonal fluctuations. While acknowledging the resulting pressure on the country's export and import-substitution sectors, they encouraged the authorities to boost competitiveness by addressing widespread structural constraints.

Directors agreed that conditions are in place for the continued strong implementation of the PRGF-supported program. In this regard, they noted that two performance criteria for the next review have already been met and that an indicative macroeconomic framework for the coming fiscal year, consistent with program objectives, had already been drawn up.

It is expected that the next Article IV consultation will be held on the 24-month cycle, subject to the provisions of the decision on consultation cycles in program countries.

Haiti: Selected Economic and Financial Indicators
Fiscal Year Ending September 30
  2003 2004 2005 2006 2007


      Prel. Proj.
(Annual percentage change, unless otherwise indicated)

Domestic economy


GDP at constant prices

0.4 -3.5 1.8 2.3 3.5

Consumer prices (end-of-period)

37.8 21.7 14.8 12.4 8.0

Gross domestic investment (in percent of GDP)

30.7 27.3 27.4 28.9 30.9

Gross national savings (in percent of GDP)

29.1 25.7 30.1 28.9 32.1
(In percent of GDP)

Public finances


Central government overall balance (including grants)

-3.5 -2.4 -0.6 -0.8 -0.3

Central government overall balance (excluding grants)

-3.6 -3.8 -4.1 -4.4 -6.0

Public sector savings

-0.2 1.3 1.5 1.6 2.7
(Annual percentage change)

Money and credit


Credit to the public sector (net)

22.8 12.8 0.3 -4.9 0.0

Credit to the private sector

33.4 9.2 21.1 5.5 5.1

Base money

36.2 21.6 0.6 5.5 9.9

Broad money (including foreign currency deposits)

39.8 9.1 20.3 10.0 9.7
(Annual percentage change, unless otherwise indicated)

External sector


Exports (f.o.b.)

21.4 13.5 21.3 7.7 11.9

Imports (f.o.b.)

13.6 8.6 8.0 18.3 5.9

Current account balance (including official grants, in percent of GDP)

-1.6 -1.6 2.6 0.0 1.2

Current account balance (excluding official grants, in percent of GDP)

-6.2 -4.4 -5.0 -7.9 -6.4

External public debt (end-of-period, in percent of GDP)

44.4 36.2 30.9 29.3 26.0

External public debt service (in percent of exports of goods

8.5 9.5 17.5 8.5 5.1

and services)


Net international reserves (in millions of U.S. dollars) 1/

38.8 54.5 70.4 130.3 265.3

Liquid gross reserves (in millions of U.S. dollars)

157.1 207.4 228.5 335.5 534.7

In months of imports of the following year

1.2 1.4 1.3 1.8 2.4

Real effective exchange rate (appreciation +)

-5.9 32.5 -5.8 13.4 ...

Sources: Ministry of Economy and Finance; Bank of the Republic of Haiti; and Fund staff estimates.
1/ Excludes commercial banks' foreign currency deposits with the BRH.

1 Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country's economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board. At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country's authorities.


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