(Jamaica Observer) The International Monetary Fund (IMF) is expressing concern about the socio-political crisis in Haiti and stressed the urgency of restoring political and macroeconomic stability, addressing poverty and inequality, and tackling corruption.
The IMF executive board is also calling on all stakeholders to work toward a broad-based national dialogue to address the country’s daunting challenges, and to realise the potential scope for much stronger and more inclusive growth.
The board is encouraging continued close cooperation with donors and the fund, including through technical assistance, and welcomed the Country Engagement Strategy as a basis for future fund engagement.
The directors say severe fiscal constraints necessitate shifting scarce resources away from non-priority spending toward social programmes and investment, and underscored the importance of limiting monetary financing of fiscal deficits and preparing a national budget for financial year 2020.
They are encouraging the authorities in the French-speaking Caribbean Community (Caricom) country to focus on measures to boost domestic revenues and reduce exemptions in the near term, while working to strengthen tax administration, prepare a resolution plan for budget arrears, and bolster public financial management.
But they have commended the authorities for progress on the new national plan for social protection, and stressed the need to advance its approval and focus on a limited number of cash transfer programmes.
Last week, the executive board of the Washington-based financial institution concluded the Article IV 2019 consultation with Haiti.
According to the IMF, since March 2019 Haiti has been experiencing a protracted political crisis and prolonged civil unrest that have at times shut down most economic activity in the country.
It said the crisis has taken a toll on the economy and the already vulnerable population – inflation exceeded 20 per cent year-on-year in September, output is estimated to have contracted by an estimated 1.2 per cent in fiscal year 2019, and the exchange rate depreciated by 25 per cent over the same period.
As fiscal revenues plummeted and the cost of energy subsidies increased, the fiscal deficit widened to 3.8 per cent of gross domestic product (GDP) last year and domestic arrears rose sharply.
The public debt-to-GDP ratio jumped from 40 per cent to 47 per cent over the fiscal year, the IMF said.
It acknowledged that the authorities are making considerable efforts to limit the deterioration and that the Ministry of Finance is implementing measures to improve revenue collection and better control spending and, in November, signed a new agreement with the central bank to strengthen fiscal discipline and limit monetary financing of the Government.
The central bank has been adjusting its interest rates to contain inflation while at the same time trying to support the private sector through the recession.
But the IMF noted that without sustained implementation of good policies and comprehensive reforms the outlook remains grim.
“Under the baseline assumption of some political stabilisation in 2020, without major political or economic reforms growth would improve but remain negative this year and below 1.5 per cent over the medium term.
“Inflation is expected to decline slightly before eventually falling to below 10 per cent by 2025. Risks to the outlook are primarily on the downside but political stability could bring important upsides.
A resolution of the current crisis, appointment of a new government committed and able to implement reforms, and return of support from the international community could lead to higher investment and potential growth,” the IMF advised.