IMF Management Approves a Staff-Monitored Program for Haiti
IMF News, June 29, 2022
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- Published: June 29, 2022
SMP purpose and scope
- Staff Monitored Programs (SMPs) are informal agreements between national authorities and IMF staff to monitor the authorities’ economic program; they do not entail endorsement by the IMF Executive Board (with the exception of SMPs under the Heavily Indebted Poor Countries process).
- The SMP for Haiti was approved on June 17, 2022 and runs through May 31, 2023.
- The SMP was designed by IMF staff and the Haitian authorities, keeping in mind Haiti’s fragility and capacity constraints while supporting the authorities’ economic policy objectives.
- SMPs are not accompanied by financial assistance; SMP staff reports are issued to the Board for information and SMPs are only subject to formal IMF management review.
Macroeconomic context and outlook
- Haiti experienced a protracted political crisis, assassination of its president, lockdowns, the global pandemic, a surge in gang-related violence, and an earthquake—shocks that weakened economic and institutional frameworks and administrative capacity.
- After three years of economic contraction, IMF staff expect growth to turn positive in FY2022, supported by an increase in investment, and to recover further to 1.4 percent the next year with continued flows of remittances amidst modest improvements in socio-political stability.
Core policy objectives of the SMP
- Restore macroeconomic stability and lower inflation—a key goal given the heavy burden of high inflation on the poor.
- Enhance governance in the public sector, mobilize domestic revenues, build capacity, and boost social spending.
- Raise accountability and ownership of the reform agenda, with emphasis on strengthening public finance management, revenue administration, transparency, and anti-corruption measures.
- Reduce monetary financing of the fiscal deficit to lower inflation and exchange-rate pressure and to raise resources for productive spending.
Revenue mobilization and tax measures
- The SMP aims to raise domestic revenues, which have collapsed in recent years under social unrest, collection problems, and the security crisis.
- Authorities committed to administrative measures including:
- Strengthening the use of the tax identification number and cleaning up taxpayers' portfolios.
- Revising special tax regimes in a new Tax Code, including by eliminating some exemptions.
- Finalizing and publishing the new Tax Code, Customs Code and the Customs tariff.
- Objective: simplify the tax system, increase transparency, and reduce governance abuses.
Fuel subsidies and social mitigation
- Central bank financing of the fiscal deficit has fueled inflation, increased exchange-rate pressure, and created a cycle of higher fuel subsidy costs and more monetary financing.
- Fuel subsidies have been absorbing at least one third of domestic revenues and crowding out productive spending on investment, health and education.
- Fuel subsidies are highly inequitable, with over 90 percent of the benefits going to the top 10-20 percent of the income ladder in Haiti.
- Authorities plan to prepare the groundwork to eventually tackle fuel subsidies; as a first step, they launched in April several social programs under the Programme d’urgence targeted to the groups affected by earlier fuel price adjustments.
Monetary, exchange rate, and financial sector measures
- The SMP aims to strengthen the monetary policy framework and limit foreign exchange interventions to smooth excessive volatility to gradually eliminate the spread with the parallel market.
- Key steps are planned to improve the financial regulatory framework and update regulations on anti-money laundering (AML/CFT) to meet international standards.
Implementation, technical assistance, and next steps
- IMF staff will work closely with the authorities to support implementation and help build public support; most elements are underpinned by ongoing IMF technical assistance and capacity building.
- The Fund will continue to coordinate closely with Haiti’s other development partners to leverage efforts in support of common objectives.
- The first review of the SMP is expected in September.
- Satisfactory performance under the SMP could lead to an IMF-supported program under a multi-year arrangement that would require approval of the IMF’s Executive Board.
IMF Press Release No. 22/235; IMF Communications Department, PRESS OFFICER: Randa Elnagar; media contact: Phone: +1 202 623-7100 Email: MEDIA@IMF.org