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Haiti: Fourth Review Under the Three-Year Arrangement Under the Poverty Reduction and Growth Facility, Request for Waiver of Performance Criterion and Augmentation of Access

Author(s):
International Monetary Fund
Published Date:
March 2009
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Annex I. Fund Relations

(As of September 30, 2008)

I. Membership Status:

Joined: September 08, 1953; Article VIII member

II. General Resources Account:

SDR MillionQuota
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
Holdings4.7234.44

IV. Outstanding Purchases and Loans:

SDR Million%Quota
PRGF Arrangements67.2882.15

V. Latest Financial Arrangements:

TypeDate of ArrangementExpiration DateAmount Approved (SDR Million)Amount Drawn (SDR Million)
PRGFNov 20, 2006Nov 19, 200990.0967.28
PRGFOct 18, 1996Oct 17, 199991.0515.18
Stand-ByMar 08, 1995Mar 07, 199620.0016.40

VI. Projected Payments to Fund1/

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

Forthcoming
20082009201020112012
Principal5.62
Charges/Interest0.230.570.570.570.56
Total0.230.570.570.576.18

VII. Implementation of HIPC Initiative:

Enhanced
I. Commitment of HIPC assistanceFramework
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 member0.15
Interim assistance0.15
Completion point balance--
Additional disbursement of interest income 2/--
Total disbursements0.15

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 cannot 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 cannot 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 update assessment of the Banque de la République d’Haiti (BRH) was concluded in September 2008. The authorities have made progress in implementing safeguards recommendations, but improvements are still needed in a number of areas. The 2007 audit has been recently completed and is expected to be published in the coming weeks. The qualitative analysis of the main differences between currently used accounting principles and IFRS did not reveal major differences and suggests that a gradual adoption of IFRS by the BRH is feasible. Another significant step was the adoption of the Audit Committee Charter in March 2007, followed by its constitution in February 2008. However, the capacity of this Committee needs to be strengthened. Vulnerabilities remain in the areas of foreign reserves management, the timely conduct of external audits, and timely production of audited financial statements. Since the update assessment in the context of the first augmentation was recently concluded, the conclusions of that assessment continue to be valid for the second augmentation of access.

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 expenditure management
May 2005Tax policy and revenue administration
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
April-May and November 2007GDDS workshop
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 January 2009)

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 2007–11, a multiyear approach to support the consolidation of Haiti’s economic and social recovery.

As of January 2009, the IDB’s active portfolio has 25 investment and policy-based operations for a total of US$712.4 million, including two investment projects receiving Board approval in December 2008. The undisbursed balance, US$362.2 million, represents 50.8 percent of the portfolio total amount, underscoring portfolio implementation as an important challenge. In 2007, disbursements in Haiti reached US$114.4 million, almost doubling the level registered in 2006. This positive trend was reinforced in 2008, as disbursements for 2008 totaled US$125 million, of which US$31.6 million were disbursed in the form of budgetary support.

The IDB has active investment projects in four key areas: a total of US$77.5 million for state modernization and economic governance, US$277.7 million for economic recovery, US$109.3 million for agriculture and the environment, and US$247.9 million for access to basic services. This package is complemented by a US$15.8 million active portfolio in non-reimbursable technical cooperation (including Multilateral Investment Fund operations), and by non-financial products that underpin program and policy support.

In addition, the IDB manages a total of US$75 million from other donors, including the Canadian Agency for International Development and OPEC’s Fund for International Development, while an additional US$36 million is to be approved in 2009.

In March 2007, the IDB approved debt relief for all of the Haiti’s debt with the Bank accumulated prior to December 31, 2004, a total of US$525 million. This relief will be granted when the country reaches the HIPC completion point. 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 allocated US$50 million in grants per year to Haiti in 2007 and 2008. In addressing Government’s key priorities, half of these resources (US$50 million) have been allocated to road rehabilitation and improvement of rural and urban transport, one quarter (US$25million) to budget support, and the remaining quarter (US$25 million) to agricultural development and electricity infrastructure modernization.

Furthermore, interim debt relief of US$14.15 million will be provided in 2009 to increase the Government’s fiscal space to carry out vital social and economic investments and to support the country until mid-2009.

In order to address the soaring food and energy prices earlier this year, and its negative effects on the disposable income of Haiti’s poorest and most vulnerable groups, the Bank approved the transfer of US$10 million from an existing operation to aid the Government in coping with the crisis. The operation was structured as a PBG and the Haitian Government was required to take action on several institutional and regulatory fronts to receive the grant.

In December 2008 the IDB Board of Governors approved the doubling of Haiti’s grant allocation in 2009, from US$50 million to US$100 million. This measure was considered vital in order to help Haiti face the aftermath of 2008’s devastating shocks and cover part of its financing gap, which could increase exponentially in the face of reconstruction expenses and a drying up of external financing.

The additional grants will be used in 2009 to finance reconstruction works and investment projects in key programmatic areas such as social infrastructure, urban drainage and sanitation, access to potable water in urban areas, and nutrition.

Haiti’s Operational Program 2009

NumberName of the ProjectAmount (US$ million)
HA-L1039Water and Sanitation for Intermediate Cities Phase II15m
HA-L1041Natural Disaster Mitigation in Priority Watersheds13m
HA-L1028Rehabilitation of Road Infrastructure III25m
HA-L1029Fiscal Consolidation I25m
HA-L1040Support to Social Infrastructure–Phase I20m
HA-LXXXXNutrition2m
TOTAL100m

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 helped to accelerate the pace of execution, 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 up to US$150 million during the course of this year, ensuring continued positive net flows to the country.

The IDB is committed to providing 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.

Annex III. Relations With The World Bank Group

(As of January 2009)

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 FY 2009–12 is being prepared and is scheduled for completion in

FY 2009 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 14 projects for US$212 million. These comprise: two development policy operations and two technical assistance grants in support of economic governance reform; 9 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 FY 2006 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 FY 2008, 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 FY 2009–12. 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 FY 2005, US$63 million in FY 2006 and US$62 million in FY 2007. In FY 2008, the total has dropped to around US$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 (FY 2009 and FY 2010), 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 2008, 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.

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

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