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View of a shanty town in Port-au-Prince, Haiti. (Photo: Blockchain Land)

IMF suspends financial assistance to Haiti

View of a shanty town in Port-au-Prince, Haiti. (Photo: Blockchain Land)

The International Monetary Fund has indicated that, in addition to discontinuing a credit arrangement with Haiti, it also suspended “most external financial assistance” to that country.

The International Monetary Fund headquarters building in Washington, DC.
(Photo: AFP Photo)

A press release detailing the findings of IMF staff during a consultation mission to the French-speaking country noted, “Haiti is facing a grave political, economic, and social crisis. Repeated protests and lock-downs in the country since the summer of 2018 have led to recession and high inflation.”

“Despite considerable efforts by officials at the central bank and ministry of finance, the economic and human costs of this political crisis have surged in recent months and are taking a heavy toll on an already poor and vulnerable population,” the release continued.

‘A very challenging situation’

There have been widespread protests in Haiti amid suspicions of corruption.
(Photo: Yahoo News)

Last month the IMF team, led by Nicole Laframboise, met with government officials in the Haitian capital, Port-au-Prince, and Washington, DC, to discuss the consultation.

The team, in the press release, expressed thanks to Haitian law enforcement authorities, government officials and representatives of the private sector and civil society for their assistance in what they described as “a very challenging situation” in that country. It added that the crisis in Haiti “is without precedent”.

“Haiti is facing a grave political, economic, and social crisis. Repeated protests and lock-downs in the country since the summer of 2018 have led to recession and high inflation.”

Due to the sporadic “lockdowns” in the country, which began in November last year, the IMF team predicts negative growth of 1.2 per cent, while highlighting that inflation climbed above 20 per cent at the end of September. Outbursts of violent demonstrations also occurred in February, June and September this year.

“These have worsened poverty and insecurity and deprived the Government of the means to make productive investments and support activity,” the document noted.

It continued: “The ad referendum programme agreed with [IMF] staff under the Extended Credit Facility (ECF) in March was shelved because of the absence of a government ratified by Parliament and able to commit the country to an economic reform programme. This also led to the suspension of most external financial assistance.”

People run during a protest to demand the resignation of Haitian President Jovenel Moise, in Port-au-Prince, Haiti September 30, 2019. ({Photo: Reuters/Andres Martinez Casares)

Low growth and high inflation

Notwithstanding, the IMF team is assuming — though they caution it is unrealistic to do so — the political situation will improve and that, over the course of 2020, output will stabilise before growth reaches 0.9 in 2021.

Given the circumstances of low growth, the team expects inflation will remain at 20 per cent over the next two years and predicts 1.5 per cent annual growth over the next five years.

The IMF team assumes the political situation will improve in 2020. (Photo: reuters.com)

“It is important to note that a continuation of the current political crisis would have devastating consequences for the country over the longer-term owing to the likely losses of physical and human capital,” the delegation warned in the release.

However, the document explained that should there “a rapid resolution to the crisis”, it could result in “a strong rebound in activity”.

“The appointment of a government committed to reforming the economy and the resumption of support from the international community would permit a loosening of budgetary constraints and an increase in public spending—investment in particular. This would reduce the need for financing from the central bank, thereby helping to lower inflation and boost growth in the short and medium-term,” the release added.

The IMF said Haiti is facing a grave political, economic, and social crisis (Photo: Telegraph)

Prioritising the economy

To this end the IMF team encourages Haiti’s officials to prioritise restoring macroeconomic stability and, in the absence of a formal budget presented in Parliament, prepare and publish “a budget framework” for 2020. The provisional budget should include measures to mobilise domestic fiscal revenues and reducing corruption.

In particular, the team suggests that the Haitian Government focuses on “strengthening tax administration and collection and reducing tax exemptions” while eliminating non-priority spending.

” We sincerely hope that political stability will return and allow the government to build a consensus with key stakeholders in the country on a package of more extensive reforms…”

– IMF release

IMF commends Haitian authorities

Even so, the IMF delegation praised the Haitian authorities for, among other things, their adherence to an agreement between the Ministry of Economy and Finance and the central bank. While calling for the renewal of the agreement as means to manage fiscal policy, the team said the agreement enabled the stabilising of inflation and exchange rate in the French-speaking country.

The IMF also commended the Haitian Government for concluding the draft of a National Plan for Social Protection and Social Progress.

Haiti Protests
Reuters

In the meantime, the IMF team urges Haitian authorities to prioritise dealing with corruption in the short term by establishing a steering committee, with representatives of civil society, as set out in the 2009 National Anti-Corruption Strategy.

“We sincerely hope that political stability will return and allow the government to build a consensus with key stakeholders in the country on a package of more extensive reforms in the areas of public finance management, governance, the structure and functioning of the energy sector, and the social safety net,” the release stated.

“Haiti has the potential for much stronger and more inclusive growth. The IMF continues to provide policy advice and technical assistance, and stands ready to help with more intensive support when political conditions permit,” it ended.