IMF Staff Concludes Article IV Consultation Mission with Haiti
IMF News, November 25, 2019
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- Published: November 25, 2019
Crisis overview and recent developments
- Haiti is facing a "grave political, economic, and social crisis."
- Repeated protests and lock-downs since the summer of 2018 have led to recession and high inflation.
- The economic and human costs of the political crisis have surged in recent months, impacting an already poor and vulnerable population.
- The ad referendum program under the Extended Credit Facility (ECF) agreed in March was shelved because of the absence of a government ratified by Parliament and able to commit to an economic reform program; this led to the suspension of most external financial assistance.
Key measurements and recent macroeconomic performance
- Growth for the 2019 fiscal year is expected to be negative, at about -1.2 percent.
- Inflation rose to above 20 percent at end-September.
- Staff estimate potential growth at 1.5 percent per year over the longer term.
Staff economic outlook and scenarios
- Staff outlook assumes a stabilization of the political situation but no fundamental political or economic reforms.
- Under this outlook:
- Output would stabilize over 2020 and resume slight growth to around 0.9 percent in 2021.
- Inflation is expected to remain close to 20 percent over the next two years.
- Alternative scenarios:
- Continuation of the current political crisis would have devastating long-term consequences owing to likely losses of physical and human capital.
- A rapid resolution to the crisis could produce a strong rebound in activity; appointment of a government committed to reform and resumption of international support would permit loosening of budgetary constraints and an increase in public spending, especially investment, reducing the need for central bank financing and helping to lower inflation and boost growth.
Short-term priorities and policy recommendations
- Immediate priority: stabilize the economy.
- Fiscal and budgetary actions:
- In the absence of a formal budget submission to parliament, the government should prepare and publish a budget framework for 2020 as soon as possible (a notional budget).
- The notional budget should include measures to boost domestic revenues by strengthening tax administration and collection and reducing tax exemptions.
- Steps should be taken to rationalize non-priority spending.
- Monetary and governance measures:
- Renewal of the economic governance agreement between the central bank (BRH) and the Ministry of Economy and Finance is key to limiting monetary financing of the budget deficit, a key source of inflation.
- The agreement contributed to stabilizing inflation and the exchange rate over the summer.
Social protection and poverty mitigation
- Staff commend authorities for efforts to finalize the draft of the National Plan for Social Protection and Social Progress (PNPPS) and urge the Council of Ministers to formally adopt it.
- The PNPPS should reduce fragmentation and overlap of existing programs that lead to inefficiencies and hinder effectiveness.
- IMF staff recommend establishing, within the PNPPS framework, a limited number of cash transfer programs for vulnerable groups under the Ministry of Social Affairs and Labor (MAST) and launching a pilot program as soon as possible.
Anti-corruption and rule-of-law measures
- Combating corruption is a short-term priority.
- Recommendations:
- Grant the Anti-Corruption Unit (L’Unité de Lutte Contre la Corruption, or ULCC) the legal and financial means to carry out its mandate in full.
- Set up the Steering Committee conceived under the 2009 National Anti‑Corruption Strategy, with independent representatives from civil society, and participate in drafting the new anti-corruption strategy.
- Enforce asset reporting obligations of elected officials, senior public servants, and judges as stipulated in legislation (February 12, 2008).
- As part of anti‑money laundering measures, banks should meet obligations to "verify and know their customers", particularly politically exposed persons.
Institutional engagement and IMF support
- The IMF continues to provide policy advice and technical assistance and stands ready to help with more intensive support when political conditions permit.
- The mission thanks Haitian authorities, government officials, and representatives of the private sector and civil society for their assistance during the consultation despite the challenging situation.
IMF Press Release No. 19/433 — November 25, 2019 — IMF Communications Department