IMF Executive Board Concludes 2019 Article IV Consultation with Haiti
IMF News, January 28, 2020
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- Published: January 28, 2020
Context and recent developments
- Since March 2019, Haiti has been experiencing a protracted political crisis and prolonged civil unrest that has at times shut down most economic activity.
- Economic effects during FY2019 (ending September 30):
- Inflation exceeded 20 percent year-on-year in September.
- Output is estimated to have contracted by an estimated 1.2 percent in fiscal year 2019.
- The exchange rate depreciated by 25 percent over the same period.
- Fiscal deficit widened to 3.8 percent of GDP in FY2019.
- Domestic arrears rose sharply.
- Public debt-to-GDP ratio jumped from 40 percent to 47 percent over the fiscal year.
- Policy responses:
- The ministry of finance is implementing measures to improve revenue collection and better control spending.
- In November, the ministry signed a new agreement with the central bank to strengthen fiscal discipline and limit monetary financing of the government.
- The central bank has been adjusting its interest rates to contain inflation while trying to support the private sector through the recession.
Outlook and scenarios
- Baseline projection (assuming some political stabilization in 2020 without major political or economic reforms):
- Growth would improve but remain negative in 2020 and below 1.5 percent over the medium term.
- Inflation is expected to decline slightly before eventually falling to below 10 percent by 2025.
- Risks:
- Primarily on the downside if political instability persists.
- Upside potential if political stability is restored, a new government committed to reforms is appointed, and international support returns—leading to higher investment and potential growth.
Executive Board assessment and policy recommendations
- Overall concerns and priorities:
- Urgency of restoring political and macroeconomic stability, addressing poverty and inequality, and tackling corruption.
- Call for a broad‑based national dialogue and continued close cooperation with donors and the Fund, including through technical assistance.
- Welcome of the Country Engagement Strategy as a basis for future Fund engagement.
- Fiscal policy:
- Severe fiscal constraints necessitate shifting scarce resources away from non‑priority spending toward social programs and investment.
- Importance of limiting monetary financing of fiscal deficits and preparing a notional budget for FY2020.
- Encourage measures to boost domestic revenues and reduce exemptions in the near term.
- Strengthen tax administration, prepare a resolution plan for budget arrears, and bolster public financial management.
- Commendation for progress on the new national plan for social protection and emphasis on advancing its approval and focusing on a limited number of cash transfer programs.
- Governance and anti‑corruption:
- Urgency of updating anti‑corruption policy priorities, including setting up the steering committee envisioned in the 2009 anti‑corruption strategy.
- Need to enforce the asset declaration system and conduct regular audits of state‑owned enterprises and other public entities.
- Monetary and financial sector:
- Encourage authorities to allow the exchange rate to adjust in an orderly fashion.
- Recommend setting a quantitative monetary target and advancing other institutional reforms.
- Support for the central bank’s efforts to deepen financial intermediation and inclusion, including via fintech.
- Energy and structural reforms:
- Well‑sequenced reform of the energy sector is crucial for fiscal sustainability and higher growth; must be accompanied by clear communications and measures to offset the impact on vulnerable groups.
- Encourage overhaul of the management and performance of EDH, work with stakeholders to reduce electricity costs, improve reliability and efficiency of energy supply, and lower the related fiscal burden.
- Broader structural reforms needed to improve competitiveness: streamline regulations, remove infrastructure bottlenecks, strengthen property rights, and enhance governance.
- Building resilience to natural disasters is a priority.
- Data and capacity:
- Urged steps to improve the quality and timeliness of economic data, with the help of further Fund technical assistance.
Key statistics (Selected Economic and Financial Indicators)
- Nominal GDP (2018): US$9.7 billion
- GDP per capita (2018): $890
- Population (2016): 10.847 million
- Percent of population below poverty line (2012): 58
- Output — Real GDP growth (%):
- 2017: 1.2
- 2018: 1.5
- 2019: -1.2
- 2020 (proj): -0.4
- 2021 (proj): 0.9
- Prices — Inflation, (end of period) (%):
- 2017: 15.4
- 2018: 13.3
- 2019: 20.1
- 2020 (proj): 17.5
- 2021 (proj): 14.5
- Central Government Finances (In percent of GDP):
- Revenue and grants:
- 2017: 17.7
- 2018: 17.3
- 2019: 13.6
- 2020 (proj): 13.4
- 2021 (proj): 14.2
- Domestic Revenue:
- 2017: 14.0
- 2018: 13.0
- 2019: 10.8
- 2020 (proj): 10.0
- 2021 (proj): 11.1
- Grants:
- 2017: 3.7
- 2018: 4.3
- 2019: 2.8
- 2020 (proj): 3.4
- 2021 (proj): 3.0
- Expenditures:
- 2017: 19.0
- 2018: 16.1
- 2019: 15.6
- 2020 (proj): 16.2
- 2021 (proj): (not provided)
- Current expenditures (percent of GDP):
- 2017: 12.2
- 2018: 12.7
- 2019: 12.5
- 2020 (proj): 11.5
- 2021 (proj): 11.4
- Capital expenditures (percent of GDP):
- 2017: 5.3
- 2018: 6.2
- 2019: 3.6
- 2020 (proj): 4.1
- 2021 (proj): 4.8
- Overall balance of the nonfinancial public sector, incl. grants2:
- 2017: -0.9
- 2018: -2.9
- 2019: -3.8
- 2020 (proj): -3.4
- 2021 (proj): -3.1
- Total public sector debt:
- 2017: 38.3
- 2018: 39.9
- 2019: 47.0
- 2020 (proj): 46.1
- 2021 (proj): 44.9
- Money and Credit:
- Broad money (% change):
- 2017: 12.9
- 2018: 13.7
- 2019: 18.9
- 2020 (proj): 18.6
- 2021 (proj): 17.0
- Credit to private sector (% change):
- 2017: 4.5
- 2018: 9.9
- 2019: 14.6
- 3-month BRH bond interest rate (%):
- 2017: 12.0
- 2018: 22.0
- 2019: 19.4
- 2020 (proj): 16.4
- Balance of Payments:
- External current account balance (incl. official grants):
- 2017: -1.0
- 2018: -3.9
- 2019: -2.0
- 2020 (proj): -1.1
- External current account balance (excl. official grants):
- 2017: -5.6
- 2018: -7.9
- 2019: -4.8
- 2020 (proj): -3.2
- 2021 (proj): -4.1
- Foreign direct investment (FDI):
- 2018: 1.1
- 2019: 1.3
- Reserves (in months of imports of the following year):
- 2017: 4.4
- 2018: 4.7
- 2019: 4.9
- External public debt:
- 2017: 24.2
- 2018: 23.5
- 2019: 27.4
- 2020 (proj): 25.4
- 2021 (proj): 24. 2
- Exchange Rate:
- Real effective exchange rate (% change) (+ appreciation):
- 2017: -10.8
- Nominal GDP:
- Nominal GDP (millions of gourdes):
- 2017: 551,911
- 2018: 631,829
- 2019: 732,545
- 2020 (proj): 868,582
- 2021 (proj): 1,015,809
- Nominal GDP (millions of U.S. dollars):
- 2017: 8,409
- 2018: 9,658
- 2019: 8,708
- 2020 (proj): 8,533
- 2021 (proj): 8,842
Source: Press Release No. 20/21, IMF Executive Board Concludes 2019 Article IV Consultation with Haiti, January 28, 2020.
