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Haiti: Third Review Under the Three-Year Arrangement Under the Poverty Reduction and Growth Facility, Requests for Augmentation of Access and Waiver of Nonobservance of Performance Criteria, and Request for Additional Interim Assistance Under the Enhanced Initiative for Heavily Indebted Poor Countries

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International Monetary Fund
Published Date:
July 2008
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Annex I. Fund Relations

(As of March 31, 2008)

I. Membership Status

Joined September 08, 1953; Article VIII member

II. General Resources Account

SDR Million%Quota
Quota81.90100.00
Fund holdings of currency81.8399.92
Reserve Position0.070.08
Holdings Exchange Rate

III. SDR Department

SDR Million%Allocation
Net cumulative allocation13.70100.00
Holdings4.7434.61

IV. Outstanding Purchases and Loans

SDR Million%Quota
PRGF Arrangements35.7043.59

V. Latest Financial Arrangements

TypeDate of

Arrangement
Expiration

Date
Amount

Approved (SDR Million)
Amount Drawn

(SDR Million)
PRGFNov 20, 2006Nov 19, 200973.7135.70
PRGFOct 18, 1996Oct 17, 199991.0515.18
Stand-ByMar 08, 1995Mar 07, 199620.0016.40

VI. Projected Payments to Fund 1/

(SDR Million; based on existing use of resources and present holdings of SDRs)

Forthcoming
20082009201020112012
Principal5.62
Charges/Interest0.490.490.490.490.48
Total0.490.490.490.496.10

When a member has overdue financial obligations outstanding for more than three months, the amount of such arrears will be shown in this section.

When a member has overdue financial obligations outstanding for more than three months, the amount of such arrears will be shown in this section.

VII. Implementation of HIPC Initiative

I. Commitment of HIPC assistanceEnhanced framework
Decision point dateNov 2006
Assistance committed by all creditors (US$ Million) 1/140.30
Of which: IMF assistance (US$ million)3.12
(SDR equivalent in millions)2.10
Completion point dateFloating
II. Disbursement of IMF assistance (SDR Million)
Assistance disbursed to the member0.12
Interim assistance0.12
Completion point balance--
Additional disbursement of interest income 2/--
Total disbursements0.12

Assistance committed under the original framework is expressed in net present value (NPV) terms at the completion point, and assistance committed under the enhanced framework is expressed in NPV terms at the decision point. Hence these two amounts can not be added.

Under the enhanced framework, an additional disbursement is made at the completion point corresponding to interest income earned on the amount committed at the decision point but not disbursed during the interim period.

Assistance committed under the original framework is expressed in net present value (NPV) terms at the completion point, and assistance committed under the enhanced framework is expressed in NPV terms at the decision point. Hence these two amounts can not be added.

Under the enhanced framework, an additional disbursement is made at the completion point corresponding to interest income earned on the amount committed at the decision point but not disbursed during the interim period.

VIII. Implementation of Multilateral Debt Relief Initiative (MDRI)

Not Applicable

IX. Exchange Arrangement

Managed floating with no predetermined path for the exchange rate. The change from a fixed to managed floating regime took place in January 1990. Haiti's exchange system is free of restrictions on the making of payments and transfers for current international transactions. Since September 1991 all transactions have taken place at the free (interbank) market rate.

X. Safeguards Assessment

The safeguards assessment of the Banque de la République d’Haiti (BRH) is in the process of being updated, with recommendations to address remaining vulnerabilities. Some vulnerability remains in the areas of IFRS adoption and implementation, foreign reserves management, the timely conduct of external audits, and timely production of audited financial statements. Priority recommendations from the 2005 assessment were implemented for completion of the first review. Prior to Board consideration of the second program review, a gap analysis comparing BRH accounting and IFRS was undertaken and a recommended external audit committee was established.

XI. Article IV Consultation

The last Article IV consultation was concluded by the Executive Board on July 9, 2007. Haiti is on a 24-month cycle.

XII. Technical Assistance

Haiti has benefited from the following IMF technical assistance missions since 2005:

DepartmentDatesPurpose
FADApril 2005Public financial management
May 2005Tax policy and revenue administration
June 2006Public financial management
MCMMarch 2005Monetary operations
November 2005Implementation of a bond auction mechanism
May 2006Accounting of the central bank
March 2007Banking law (jointly with LEG)
November 2007BRH recapitalization plan
STANovember 2005 and May 2006Multisector statistics
May, October and December 2006,Monetary and financial statistics, Government finance statistics, and General Data Dissemination System.
April-May and November 2007
LEGMarch 2007Banking law

XIII. Resident Representative

Mr. Ugo Fasano has been the Fund’s Resident Representative since October 2005.

Annex II. Relations With The Inter-American Development Bank

(As of May 31, 2008)

1. From 2003 to 2006 the Bank operationalized its development assistance to Haiti through two successive transition strategies. Currently, the Bank is operating under a new country strategy for the period 2007-2011, a multiyear approach to support the consolidation of Haiti’s economic and social recovery.

2. As of May 2008, the IDB has 23 investment and policy-based operations for a total of US$674.9 million. The undisbursed balance, US$365 million, represents 54 percent of the portfolio total amount, underscoring portfolio implementation as an important challenge. Significant improvements have taken place, nonetheless. During the period 2004–2006 the Bank disbursed about US$163.7 million for ICF-related programs. During 2007, the Bank disbursed US$114.4 million, exceeding all disbursement target indicators. Revised projections for 2008 amount to US$ 133 million, out of which US$31.5 million have been already disbursed in the form of budgetary support.

3. The IDB finances projects in three key areas: US$77.5 million for economic governance and institutional development, US$349.5 million for economic recovery, and US$247.9 million for access to basic services. All the loans of the total approved portfolio have been ratified. This package is complemented by US$124 million in IDB-administered co-financing, a US$22.5 million active portfolio in non-reimbursable technical cooperation (including Multilateral Investment Fund operations), and by non-financial products that underpin program and policy preparation and implementation.

4. In March 2007 the IDB approved debt relief for all of the country’s debt with the Bank accumulated prior to Dec. 31, 2004, a total of US$525 million. This relief will be granted when the country reaches the HIPC completion. Interim relief of US$10 million per year is effective for 2007 and 2008. As part of this debt-relief initiative, the Bank implemented the new Debt Sustainability Framework (DSF) and Performance Based Allocation System (PBA) for concessional financing, which allocates US$50 million in grants per year to Haiti from 2007 to 2009. After 2009 Haiti should be eligible to receive a mix of grants and concessional loans of which the grant element may be US$ 40 million, consistent with the DSF/PBA framework.

5. In the context of the new financial envelope granted to Haiti, the Bank and the Government jointly identified four sectors to focus the Bank’s actions in support of the country’s objectives: transport and energy infrastructure, agriculture, education and economic governance. To reduce transaction costs and obtain greater development impact, larger program interventions will be prioritized in the four sectors led by the Bank. For instance, in transport infrastructure, a top priority that the government has assigned to the Bank, an innovative program structure will be implemented through four annual contributions of US$25 million in order to secure funding over time. In terms of budgetary support, one-fourth of the total yearly grant allocation, US$12.5 million, will be destined through a new Bank instrument, the Policy-Based Grant (PBG).

6. On April 30th, the IDB’s Board of Executive Directors approved the US$12.5 million Strengthening Public Resource Management II Policy Based Grant, and authorized the disbursement of US$14.5 million from a previously approved Financial Sector Policy Based Loan, in recognition of Haiti’s progress in fiscal and financial sector reforms, as well as to support the Haitian government’s efforts to pursue poverty reduction in the face of soaring global food prices. In this context, the IDB and Haitian authorities are also taking steps to accelerate the execution of a portfolio of almost US$100 million in projects to boost agricultural production.

7. To improve program implementation, the Bank has taken specific measures, such as special procurement procedures and delegation of authority to the Country Office Representative. These measures have contributed to the acceleration of the execution pace, yet challenges related to the country’s weak institutional capacity, small local private market, saturation of national firms, and low level of foreign firm participation, remain. Along with these measures to expedite decision-making, the Bank’s staff in the noted sectors has been increased at the Country Office to support the strengthening of the country’s execution and absorption capacity. A financial scenario that takes into account the active portfolio, lending envelope, IDB debt relief, the country’s absorptive capacity and the measures to accelerate execution, envisages disbursements of US$520 millions for the 2007-2011 period, ensuring positive net flows to the country of US$85 millions per year, on average.

8. The IDB is committed to provide comprehensive support to the country and to the priorities set for the Bank by the authorities. The Bank’s programming will be reviewed and updated each year to meet the development objectives and their prioritization in the PRSP.

Table 1.IDB Operational Program 2008–09(Grants)
NumberNameUS$ Million
2008
HA-L1023Strengthening Public Resource Management II (PBG)12.5
HA-L1024Rehabilitation of Road Infrastructure for Productive Sector II25.0
HA-L1032Rehabilitation of Péligre Hydroelectric Central12.5
2009
HA-L1029Economic Governance Program I (PBG)12.5
HA-L1028Rehabilitation of Road Infrastructure for Productive Sector III25.0
HA0033National Watershed Program12.5

Annex III. Relations With The World Bank Group

(As of June, 2008)

1. The World Bank stepped up its engagement in Haiti in March 2004, as part of a broader partnership between the Transitional Government and donors to address Haiti’s social, economic and institutional needs. The government and donors conducted a needs assessment in May 2004 which provided the basis for the Interim Cooperation Framework (ICF). This established a two-year program for reform and recovery and the structures through which it would be pursued. The ICF was presented at an international donor conference in July 2004 at the World Bank headquarters, at which donor countries and international organizations pledged US$1.1 billion for Haiti. At a subsequent conference in July 2006 in Port-au-Prince, Haiti’s new elected Government extended the ICF until September 2007 and revised it to reflect Government priorities. Donors pledged US$751 million for the period 2006–07. Additional budget support resources were mobilized during a follow-up Donors conference held in Madrid (Spain) in end-November 2006.

2. The World Bank Group’s strategy and program in Haiti for FY 2007 and FY 2008 are set out in the Interim Strategy Note (ISN) reviewed by the Bank’s Board on January 30, 2007. A full Country Assistance Strategy (CAS) for FY09-12 is being prepared and is scheduled for completion in FY2009 on the basis of the full Poverty Reduction Strategy Paper (Document de Stratégie Nationale pour la Croissance et la Réduction de la Pauvreté, DSNCRP) that the Government has recently completed and submitted to the World Bank and the International Monetary Fund (IMF). A Joint Staff Advisory Note (JSAN) of the DSNCRP was discussed by the Boards of the IMF and the World Bank in January and March 2008, respectively. The most recent full CAS was discussed by the Board in 1996.

3. Since Haiti’s arrears were cleared in January 2005, IDA has approved 12 projects for U$212 million. These comprise: two development policy operations and two technical assistance grants in support of economic governance reform; 7 investment projects (for disaster response and management, community-driven development, transport and territorial development, electricity, rural water and sanitation; and education); and a catastrophe risk insurance grant. Since FY06 all assistance has been in grant form. All projects but one remain active. In addition, more than US$13 million of trust fund grants, mostly from the LICUS and Post-Conflict trust funds have been awarded, since 2004.

4. In FY08, in the context of a declining IDA envelope, the Bank has narrowed its (non-emergency) assistance to three main areas in Haiti: education, community-driven development and economic governance. The Bank expects this focus to continue, but will determine the scope of future assistance in discussions with authorities and other stakeholders through the preparation of a new CAS for FY09-12. The strategy will align Bank assistance behind Haiti’s PRSP. The country has tapped the maximum of three exceptional allocations allowed for re-engaging countries under IDA 14, having received US$75 million in FY05, US$63 million in FY06 and US$62 million in FY07. In FY08, the total has dropped to around $41 million, including US$17 million of additional emergency assistance (with a post-Tropical Strom Noel grant of US$7.4 million). Under new IDA rules the country will qualify for two more years of special allocations (FY09 and FY10), but this will be a reduced, phased-out amount.

5. In addition, the Bank has completed seven major analytical works, including a Country Economic Memorandum (CEM), a Country Social Analysis, and a Social Protection Strategy, and a joint World Bank-IADB Public Expenditure Management and Financial Accountability Review (PEMFAR). The PEMFAR provides an analytical basis in support of the Government’s medium and longer term public finance reform program. The PEMFAR examines the linkages between public finance, growth and poverty with a view to helping policymakers in Haiti design the new generation of public finance reforms centered on policy actions to promote sustained and equitable growth and reduce poverty. Following the PEMFAR findings and policy recommendations, the Government prepared in November 2007 its action plan, which includes priorities to advancing public finance reforms in the short and medium terms. The action plan will be a unique policy matrix on which donors will base their support to the Government’s public finance reforms in the next three to five years. The Bank has also undertaken a Financial Sector Assessment Program (FSAP) jointly with the IMF in FY 2008.

6. An Interim Poverty Reduction Strategy Paper was prepared by the Government and presented to the IMF and World Bank Boards, together with the Joint Staff Advisory Note (JSAN), in November 2006 at the time of discussion of the HIPC Decision Point Document. A Preliminary HIPC Document, prepared jointly by the Bank and IMF staff in collaboration with the Government, was discussed by the Boards of the IMF and the Bank in September 2006. The final HIPC Decision Point document was discussed by both boards in November 2006. Haiti is scheduled to reach the completion point under the Enhanced HIPC framework in early 2009. World Bank and IMF staffs are closely monitoring progress in implementing the HIPC triggers. Bank and Fund staffs are also monitoring closely Haiti’s debt situation. In this regard, the staffs of the two institutions prepared a new Debt Sustainability Analysis in February 2008.

7. The International Finance Corporation (IFC) is working to identify specific actions to promote a sound business enabling environment, while investing in projects that support the development of a sustainable private sector and income-generating activities. Recent investments have been in cellular telecommunications (Digicel—US$15 million in each of FY 2006 and FY 2007), textiles (Grupo M—US$20 million in FY 2004), and microfinance (MicroCredit National—US$0.4 million in FY 2004). In May, the IFC approved a US$2.0 million trade finance line for Capital Bank. In addition, IFC is discussing with the Government the provision of advisory support in the design and implementation of private sector participation transactions for the airport of Port-au-Prince and for state-owned telecom TELECO. Additional support is envisaged through the IFC LAC Facility and the Foreign Investment Advisory Service (FIAS), possibly in the following areas: (1) business simplification; (2) improving access to finance; (3) investment facilitation (notably textiles); and (4) training, through the SME Toolkit and Business Edge.

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