20220630-IMF-Haiti_Staff-Monitored_Program-Press_Release_and_Staff_Report_95页_1mb

HAITI STAFF-MONITORED PROGRAM SUMMARY

Core Content

The International Monetary Fund (IMF) has approved a Staff-Monitored Program (SMP) for Haiti, which runs from June 2022 to May 31, 2023. This program is designed to help the Haitian government restore macroeconomic stability and reduce inflation, which is particularly burdensome for the poor. The SMP does not involve financial assistance from the IMF but is an informal agreement to monitor the implementation of the authorities' economic program.

Main Objectives

• Restore macroeconomic stability and reduce inflation
• Enhance governance in the public sector
• Mobilize domestic revenues and improve public finance management (PFM)
• Strengthen social assistance and address poverty
• Improve the monetary and exchange rate policy framework
• Combat corruption and increase transparency
• Build administrative and institutional capacity

Key Policies and Measures

Fiscal Framework and Short-Term Strategy

• The fiscal stance is driven by financing availability, with the goal of reducing inflationary financing of the deficit.
• The tax-to-GDP ratio is expected to remain low at 5.8% in FY2022, necessitating spending cuts and capital expenditure reductions.
• Fuel subsidies are a significant portion of domestic revenues, absorbing at least one third of it, and are being re-evaluated to reduce their impact on productive spending.
• The government has committed to increasing excises on tobacco, alcohol, and other goods as part of a new Tax Code.
• Revenue administration reforms are being implemented, including the use of tax identification numbers (TINs) and cleaning up taxpayer portfolios.
• The treasury single account (TSA) will be expanded to include all central budgetary units, improving controls and reducing borrowing costs.

Fuel Market Reform and Social Assistance

• Fuel prices were raised in December 2021, but the authorities have not made further adjustments due to the potential for social unrest.
• The government has launched social programs to mitigate the impact of fuel price increases on vulnerable groups.
• The program aims to eventually tackle fuel subsidies, which are highly inequitable, benefiting the top 10-20% of the income ladder.

Monetary and Exchange Rate Policy

• Central bank financing of the fiscal deficit is a major driver of inflation.
• The program aims to reduce monetary financing and stabilize the fiscal deficit.
• The authorities plan to limit foreign exchange interventions to reduce volatility and gradually eliminate the spread with the parallel market.

Governance and Institutional Reforms

• Governance reforms are a central focus, including strengthening the central bank, public finance management, and anti-corruption measures.
• The program emphasizes transparency and accountability, with the aim of increasing ownership of the reform agenda.
• The authorities have committed to revising special tax regimes and finalizing the new Tax Code, Customs Code, and tariffs.

Economic Outlook and Risks

• Growth: Expected to rise modestly to 0.3% in FY2022 and reach 1.5% in the medium term with improved political and security conditions.
• Inflation: Projected to increase to 27.5% in FY2022 and decline to 14% by end-FY2023.
• Current Account: Expected to remain in surplus in FY2022 but show a small deficit in the medium term due to increased imports and remittances.
• Fiscal Deficit: Projected to decrease to 1.5% of GDP in FY2022, but widen to 2.3% in FY2023 before stabilizing at 2.8%.
• Risks: Downside risks include policy implementation failures, worsening governance, political instability, and external shocks such as higher fuel prices and lower remittances. Upside risks include potential lower fuel prices and improved policy frameworks.

Program Monitoring

• The SMP will be monitored by the IMF staff, with the first review expected in September 2022.
• Satisfactory performance could lead to an upper credit tranche (UCT) program requiring Executive Board approval.
• The program includes structural benchmarks and quantitative targets to guide implementation.

Financial and Institutional Support

• The IMF has been the largest external financier for Haiti since 2019, providing around US$360 million in financial assistance.
• The authorities have committed to transparency in the use of the SDR allocation and have signed a memorandum of understanding with the IMF.
• The program is supported by ongoing IMF technical assistance and capacity building efforts.

Conclusion

The SMP is a critical step towards restoring macroeconomic stability in Haiti. It aims to lay the groundwork for future IMF-supported programs by improving governance, reducing inflation, and enhancing public financial management. However, the program faces significant challenges, including political instability, security issues, and governance weaknesses, which could impact its success.