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The International Monetary Fund (IMF) says Haiti faces an unprecedented multidimensional crisis encompassing humanitarian, economic, social, and security problems and that the economy of the French-speaking Caribbean Community (CARICOM) country has a low tax base and a large informal sector that relies heavily on volatile remittance flows.
The IMF, whose executive board has just completed Article IV Consultation with Haiti, said that since the last 2019 Article IV consultation, the country has suffered a series of shocks, including the pandemic; a devastating earthquake in 2021; cholera outbreaks; and the economic spillovers of the war in Ukraine, which led to a food crisis that triggered acute hunger.
“The severe deterioration of security over the last few years has magnified these problems leading to a surge in the number of displaced people within and outside Haiti and to a significant drop in potential growth.”
The Washington-based financial institution said that Haiti’s macroeconomic outlook is challenging and subject to elevated uncertainty.
“The supply-side shock caused by the security crisis would continue to greatly affect growth and feed inflation unless the security outlook improves. Fiscal revenues, which are essential to reconstruct basic infrastructure after years of social unrest and support large development needs, are only slowly recovering”
It said remittances would continue to finance consumption, although this reflects mainly an exodus of human capital which could further undermine a sustainable recovery. Growth is projected to be barely positive in 2025 and will stabilize at only 1.5 per cent over the medium term pending further improvements in the security outlook.
The IMF executive directors acknowledged the severity of Haiti’s multidimensional crisis, resulting from security, economic, humanitarian shocks, and the ongoing political transition.
But despite the “headwinds”, the directors said they recognized the authorities’ achievements over the last few years in implementing reforms aimed at strengthening economic resilience and restoring macroeconomic stability.
They also noted that normalization of security is essential to improve economic prospects, emphasizing the critical role of support from the international community in this regard, as well as in supporting the reform efforts and helping rebuild critical infrastructure.
The directors also called for continued engagement with the Fund, particularly through capacity development, appropriately guided by the Strategy for Fragile and Conflict-Affected States and welcomed the authorities’ interest in a new Staff Monitored Programme, which would provide a useful policy anchor.
The IMF directors commended the Haitian authorities for the timely passing of the budget and their efforts to increase fiscal revenue, emphasising that further advancing the authorities’ revenue mobilization agenda is paramount to address Haiti’s immense development needs, notably through the implementation of the new tax code to broaden the tax base.
Haiti is being encouraged to step up the ongoing efforts to enhance the quality, efficiency, and transparency of public spending and called for continued strong scrutiny and prompt audit of the resources provided through the Fund’s Food Shock Window.
The directors noted the need for sustained efforts to preserve debt sustainability, including by avoiding non-concessional lending. Strengthening social safety nets to protect the most vulnerable and alleviate widespread poverty and continued endeavours to foster gender equality will also be critical.
They welcomed Haiti’s commitment to keeping the monetary financing of the deficit at zero and called for continued efforts to promote price stability and enhance the monetary policy framework.
The directors urged Haiti to conclude and publish the 2023 central bank audit to demonstrate commitment to transparency and limit foreign exchange interventions only to smooth excessive exchange rate volatility.
WASHINGTON, Dec 11, CMC
CMC/df/ir/2024
English (US) ·