Washington, DC:
Management of the International Monetary Fund (IMF) has approved a
Staff-Monitored Program (SMP) for Haiti after discussions from
March-May, 2022.
The SMP 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. With timely implementation of the
program, the SMP would help the authorities establish a track record of
policy implementation, possibly paving the way to an IMF-supported upper
credit tranche program.
SMPs are arrangements between country authorities and the IMF to monitor
the implementation of the authorities’ economic program but are not
accompanied by financial assistance.
In recent years, Haiti has experienced a protracted political crisis and
assassination of its president, lockdowns, the global pandemic, a surge in
gang-related violence, and an earthquake. These shocks have weakened
economic and institutional frameworks and adversely affected administrative
capacity, while socioeconomic and security conditions have deteriorated to
a distressing level.
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.
In this difficult context, the authorities have committed to implementing
policies that would begin to restore macroeconomic stability and growth,
strengthen governance, and start to provide poverty relief. With a strong
focus on governance, the SMP is geared to increasing accountability and
raising ownership of the reform agenda across the country, placing emphasis
on strengthening public finance management, revenue administration,
transparency, and anti-corruption measures.
The SMP also aims to raise domestic revenues, which have collapsed in
recent years under the strain of social unrest, collection problems, and
the security crisis. The authorities have committed to implementing a
series of administrative measures, including strengthening the use of the
tax identification number and cleaning up taxpayers' portfolios, revise
special tax regimes in a new Tax Code, including by eliminating some
exemptions, and finalize and publish the new Tax Code, Customs Code and the
Customs tariff. This will simplify the tax system, making it more
transparent and thus less prone to governance abuses.
Central bank financing of the fiscal deficit has fueled inflation, putting
pressure on the exchange rate and leading to a vicious circle of higher
fuel subsidy costs, further monetary financing of the deficit and higher
inflation. The program thus aims to raise resources for productive spending
and reduce monetary financing of the fiscal deficit to reduce inflation.
This is critical for the population given the heavy burden placed on the
poor from the high increase in prices.
Fuel subsidies have been absorbing at least one third of domestic revenues
and crowding out productive spending on investment, health and education.
They are also highly inequitable, with over 90 percent of the benefits
going to the top 10-20 percent of the income ladder in Haiti. In this
light, the authorities plan to prepare the groundwork to eventually tackle
this issue. 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.
The Haitian authorities will also 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 also
planned to improve the financial regulatory framework and update
regulations on anti-money laundering (AML/CFT) to meet international
standards.
Over the course of this SMP, IMF staff will work closely with the
authorities to support implementation of their program and help them build
public support. Indeed, most elements of the authorities’ program are
underpinned by ongoing IMF technical assistance and capacity building. The
Fund will also 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. SMP are only subject to formal IMF management review.
