Stratégie d'Engagement Pays 2023-25 - Haïti

PUBLIC DISCLOSURE AUTHORISED CARIBBEAN DEVELOPMENT BANK THREE HUNDRED AND FOURTH MEETING OF THE BOARD OF DIRECTORS TO BE HELD IN BARBADOS DECEMBER 12, 2023 PAPER BD 90/23 COUNTRY ENGAGEMENT STRATEGY 2023-25 – HAITI The attached Country Engagement Strategy (CES/the Strategy) sets out the strategic direction for the Caribbean Development Bank’s (CDB/the Bank) engagement with the Government of Haiti for the period 2023-25. The Strategy responds to Haiti’s urgent development needs while the Bank continues to position itself to better engage its only fragile member state. The CES is guided by the objectives of Haiti’s Strategic Development Plan (2012-2030) to propel Haiti towards emerging country status by 2030, and the recovery needs identified in the Southern Peninsula Integrated Recovery Plan 2021-25. 2. The CES maintains the strategic pillars of the previous country strategy, whose implementation was adversely affected by severe and successive crises; an approach agreed on through consultation with GOH. The four strategic pillars are as follows: (a) Enhancing Food and Nutrition Security and Productivity; (b) Increasing access to Sustainable Energy Options; (c) Improving Human Capital and Micro, Small and Medium-sized Enterprise (MSME) capacity; and (d) Strengthening Environmental Resilience and Disaster Risk Management, and cross-cutting areas and themes including gender equality and good governance. The proposed programme of assistance is designed to achieve the following development outcomes: (i) increased investment in the agriculture sector and higher farm production; (ii) increased production and use of sustainable energy; (iii) improved human capital and MSME capacity; and (iv) increased environmental resilience to climate change and disaster risks. A resource envelope of thirty-two million two hundred thousand United States dollars (USD32.2 mn) of Special Development Funds Tenth Cycle (SDF-10) grant resources has been allocated to fund the indicative programme of assistance identified in the CES. 3. The proposed strategy is consistent with CDB’s Strategic Objectives of building social, productive capacity and environmental resilience, and with SDF-10 core themes of: (a) Building Social Resilience and Leaving No-One behind; (b) Building Economic Resilience for Inclusive Growth; and (c) Building Environmental Resilience. 4. The Board is asked to approve CDB’s CES for Haiti 2023-25. PUBLIC DISCLOSURE AUTHORISED CARIBBEAN DEVELOPMENT BANK STAFF REPORT COUNTRY ENAGAGEMENT STRATEGY 2023-25 HAITI This document is being made publicly available in accordance with the Bank’s Information Disclosure Policy. The Bank does not accept responsibility for the accuracy or completeness of the Document. Considered at the Three Hundred and Fourth Meeting of the Board of Directors held in Barbados on December 12, 2023. Director Mr. Ian Durant Economics Department Deputy Director Ms. Christine Dawson Lead Economist Mr. Jason Cotton Country Economist Ms. Beverly Lugay DECEMBER 2023 This Report was prepared by a Team comprising: Jason Cotton, Lead Economist (Coordinator); Beverly Lugay (Country Economist); M. Stephen Lawrence (Country Representative, HCO); Daniel Altine (Operations Officer, HCO), Martin Baptiste (Division Chief, Social Sector Division); Lisa Harding (Ag. Head Private Sector Division); Anthony George, (Staff Consultant, Social Analyst); Luther St. Ville, (Senior Operations Officer, Agriculture); Paul Murphy (Operations Officer, Education); Yves Robert Personna (Senior Programme Manager, ACP/EU/CDB, Natural Disaster Risk Management and Caribbean Action for Resilience Enhancement); Michel Thomas (Senior Operations Officer, CTCS); Paul Saunders (Operations Officer, Environment), Charmaine Gill-Evans (Operations Officer, Sustainable Energy); Piergiorgio Rieder (Legal Counsel); and Sonia Hampden (Coordinating Secretary). Any designation or demarcation of, or reference to, a particular territory or geographic area in this Document is not intended to imply any opinion or judgment on the part of the Bank as to the legal or other status of any territory or area or as to the delimitation of frontiers or boundaries. ABBREVIATIONS AML - Anti-Money Laundering BMCs - Borrowing Member Countries bn - billion BRH - Central Bank of Haiti BSOs - Business Support Organisations CARICOM - Caribbean Community CBARD - Community Based Agriculture and Rural Development CCA - Climate Change Adaptation CCRIF SPC - Caribbean Catastrophic Risk Insurance Facility Segregated Portfolio Company CDB - Caribbean Development Bank CIIF - Cultural and Creative Industries Innovation Fund CES - Country Engagement Strategy CSP - Country Strategy Paper CSPE - Country Strategy and Programme Evaluation CTCS - Caribbean Technological Consultancy Services DRM - Disaster Risk Management DRR - Disaster Risk Reduction EDH - Electricité d’Haiti EEW - Earthquake Early Warning ENAF - National School of Financial Administration EWS - Early Warning Systems FCV - Fragile, Conflict/Violence FY - Fiscal Year GBV - Gender-Based Violence GCI - Global Competitiveness Index GCR - Global Climate Risk GDP - Gross Domestic Product GII - Gender Inequality Index GOH - Government of Haiti HCO - Haiti Country Office HDI - Human Development Index HDR - Human Development Report HISI - Haiti Institute of Statistics and Information HRD - Human Resource Development HTG - Haitian Gourdes IDB - Inter-American Development Bank ILO - International Labour Office IMF - International Monetary Fund IRC - Internal Resilience Capacity km - Kilometre kWh - Kilowatt Hour LAC - Latin America and the Caribbean m - Metres MM - Marginally Mainstreamed mn - million MPI - Multi˗dimensional Poverty Index MSME - Micro, Small and Medium-Sized Enterprise MW - Megawatts NQI - National Quality Infrastructure - ii - PDNA - Post-Disaster Needs Assessment PFM - Public Financial Management PREPOC - Post-COVID Economic Recovery Plan PRIPS - Southern Peninsula Integrated Recovery Plan PSDH - Strategic Development Plan QuPE - Quality Enhancement in Public Education RDA - Recovery Duration Adjuster RE - Renewable Energy RF - Results Framework RTF - Regulatory Trade Framework SDF - Special Development Fund SDG - Sustainable Development Goal SEMANAH - Maritime and Navigation Service of Haiti SIDS - Small Island Developing States SLR - Sea Level Rise SMP - Staff-Monitoring Programme SPSs - Social Protection Systems TA - Technical Assistance TVET - Technical and Vocational Education Training UNDP - United Nations Development Programme UNDSS - United Nations Department of Safety and Security USAID - United States Agency for International Development USD - United States Dollars VRAT - Vulnerability and Resilience Assessment Tool WB - World Bank WBG - World Bank Group WFP - World Food Programme TABLE OF CONTENTS EXECUTIVE SUMMARY 1. COUNTRY CONTEXT 2. KEY DEVELOPMENT CHALLENGES AND PRIORITIES 3. COUNTRY STRATEGY IMPLEMENTATION Country Portfolio CSP 2017-2021: Progress on Outcomes Lessons Learnt 4. COUNTRY ENGAGEMENT STRATEGY 2023-25 Rationale for Maintaining Strategic Pillars Strategic Alignment The Strategy: Thematic Areas and Expected Outcomes Financing the Strategy Implementing the Strategy Coordination with Development Partners Risk and Mitigation APPENDICES APPENDIX 1: GENDER MARKER APPENDIX 2: CLIMATE AND DISASTER SCREENING ANALYSIS APPENDIX 3: STATUS OF THE PROGRAMME OF ASSISTANCE CSP 2017-2021 APPENDIX 4: UPDATED INDICATIVE ASSISTANCE PROGRAMME APPENDIX 5: RESULTS FRAMEWORK APPENDIX 6: DEVELOPMENT PARTNERS CURRENT ACTIVITIES COUNTRY DATA FY2018 FY2019 FY2020 FY2021 FY2022p GROSS D0MESTIC PRODUCT (GDP) Per Capita GDP (current, 2015 USD) 1,441.9 1,277.2 1,235.2 1,765.2 1,702.0 GDP at Current Market Prices (HTG $mn) 1,070,166 1,249,214 1,547,378 1,699,209 2,168,223 GDP at Constant (2012) Prices (HTG $mn) 658,286 647,196 625,558 614,309 603,876 GDP at Constant Market Prices (% change) 1.7 -1.7 -3.3 -1.8 -1.7 Sectoral Distribution of Real GDP (% change) Primary Sector 1.4 -1.8 -2.4 -4.1 -4.5 Secondary Sector -1.9 -7.0 -7.2 -2.4 -0.2 Tertiary Sector 1.9 2.1 -1.2 -2.5 -1.6 MONEY AND PRICES Monetary Base (% change) 23.3 10.7 28.2 20.1 22.1 Domestic Credit to the Private Sector (% change) 12.4 23.0 -7.9 17.5 17.5 Inflation (average; % change) 11.4 18.6 22.8 16.9 33.4 CENTRAL GOVERNMENT FINANCES (% of GDP) Total Revenue and Grants 10.2 8.0 7.0 8.2 8.0 Total Expenditure 11.2 10.1 9.3 10.8 10.2 Wages and Salaries 3.5 3.2 2.9 3.2 2.9 Goods and services 2.4 1.8 2.1 2.1 1.5 Interest Payments 0.2 0.3 0.2 0.4 0.3 Transfers and Subsidies 1.5 2.7 1.8 1.7 2.1 Of which fuel subsidies - 1.0 0.6 0.5 0.4 Capital expenditure 3.7 2.1 1.7 3.4 3.4 Overall Surplus/ (Deficit) -1.0 -2.1 -2.2 -2.6 -2.2 Primary Balance -1.4 -1.4 -2.1 -2.3 -1.8 Gross Public Sector Debt 39.7 28.1 23.3 28.5 30.1 EXTERNAL SECTOR (% change) Exports of goods (fob) 8.8 11.4 -26.3 27.7 13.5 Imports of goods (fob) 16.0 -8.3 -12.5 19.8 7.8 Current account balance (% of GDP) -2.9 -1.1 1.1 0.5 -2.3 Personal Remittances (% of GDP) 18.1 20.2 23.8 20.1 22.4 Net International Reserves (months of imports of goods) 5.1 5.1 5.8 5.4 4.1 AVERAGE EXCHANGE RATE Haitian Gourde(s) per US dollar 68.0 88.7 93.6 89.2 115.7 Sources: Bank of the Republic of Haiti, International Monetary Fund, World Economic Outlook 2023 Database, and Haiti Institute of Statistics and Information (HISI). Notes: p – preliminary. The Fiscal Year represents the period October to September. - ii - COUNTRY DATA 2018 2019 2020 2021 2022e Population Total Population 10,911,819 10,911,819 11,743,017 11,905,897 12,048,768 Male 5,408,465 5,408,465 5,825,352 5,906,934 5,977,817 Female 5,503,354 5,503,354 5,917,665 5,998,963 6,070,951 Crude birth rate (per 1,000 persons) 24.6 24.3 23.9 23.5 23.1 Crude death rate (per 1,000 persons) 8.0 8.0 8.2 8.7 8.5 Life expectancy at birth (years) 64.0 64.3 64.1 63.0 - Male 61.2 61.3 61.1 60.4 - Female 66.9 67.3 67.1 66.1 - Human Development Index 0.541 0.543 0.540 0.535 - Labour Force Unemployment Rate* (% of total labour force) 13.7 13.8 15.1 15.0 14.8 Participation Rate (% of labour force) 66.0 65.9 65.2 65.3 65.6 Male 69.8 69.8 69.2 69.0 69.2 Female 62.3 62.1 61.5 61.8 62.1 Energy Share of Electricity Production from Fossil Fuel (%) 80.0 83.3 88.4 86.8 - Access to Electricity (% of Population) 44.4 45.4 46.3 47.2 - ICT Internet Users (% of Population) 32.0 32.0 36.0 39.0 - Mobile Cellular Subscriptions (per 100 people) 60.0 61.0 65.0 64.0 - Sources: HISI, World Development Indicators, Statista, Knoema, United Nations Development Programme. E ‒ based on HISI forecast. - not available. GENDER MARKER SUMMARY Gender Marker Analysis Design Implementation Monitoring and Evaluation Score Code 0.5 0.5 1.0 0.5 2.5 MM1 1 Marginally Mainstreamed (MM): the project has limited potential to contribute to gender equality. See Appendix 1 for Gender Marker summary. EXECUTIVE SUMMARY 1. Haiti, the largest and most populous of the Caribbean Development Bank’s (CDB/the Bank) Borrowing Member Countries (BMCs) is classified as a fragile state2. This document presents CDB’s Country Engagement Strategy (CES/the Strategy) for Haiti for the period 2023-25. The CES responds to Haiti’s urgent development needs by maintaining the strategic pillars of the expired Country Strategy Paper (CSP) 2017‑2021. The Strategy provides focused support for Haiti’s development objectives and poverty reduction goals consistent with the Strategic Development Plan 2030 (Plan Stratégique de Développement d’Haïti [PSDH]). The Bank has recognised the challenges the fragile state context presents in rolling out its strategic interventions and is working on enhancing the Bank’s operational implementation framework that would yield better outcomes during the CES period. The framework incorporates the support provided by the Haiti Country Office (HCO); collaboration and partnerships with other developments partners and local implementing agencies; and the internal processes and procedures that guide operations in Haiti. COUNTRY CONTEXT AND KEY DEVELOPMENT CHALLENGES 2. During the implementation of the CSP 2017-2021, Haiti experienced severe and successive crises. The assassination of President Jovenel Moise on July 7, 2021, triggered political and social turmoil which resulted in a long-delayed election. The high political instability weakened social cohesion, which persists to the present. In 2022, Haiti was confronted with a serious security challenge due to a resurgence and proliferation of heavily armed criminal gangs that targeted various locations such as ports, highways, critical infrastructure, customs offices, and businesses, and adversely affected the distribution of humanitarian aid and economic activity. These gangs contributed to the worsening violence, including gender-based violence (GBV) and abuses, and rising instances of kidnapping in the Haitian capital, Port‑au‑Prince, and surrounding areas. Haiti was also battered by natural disaster events including Tropical cyclones Irma in 2017, Laura in 2021, the devastating 7.2 magnitude earthquake which hit the Southern peninsula in August 2021 and, more recently, severe flooding in June 2023. Meanwhile, the country also struggled with the onset of the COVID-19 pandemic in 2020, and deteriorating social conditions related to the reduced supply of food and high fuel prices which led to social protests, violent clashes and looting activity, and a diplomatic crisis with the Dominican Republic. Severe shortages in the delivery of key services, including water and health services, contributed to an outbreak of Cholera in October 2022. 3. Considering the challenges, the Bank had several high-level consultations with the Government of Haiti (GOH/the Government) in 2022 and 2023, to discuss and agree on the way forward for developing a new strategy, among other operational issues pertaining to the implementation progress of CDB’s portfolio. A key outcome of these discussions was confirmation of the continued relevance of the strategic pillars of CSP 2017-2021. STRATEGY PRIORITY AREAS 4. The pillars of the Bank’s strategy will remain unchanged in 2023-25, given Haiti’s lingering long‑term development challenges. The Strategy builds on the progress made and lessons learnt from the 2017-2021 CSP, best practices as recommended in the Mid-term Review of the Special Development Funds Tenth Cycle (SDF-10) and from the country experiences of other development partners. It targets realistic outcomes to improve the lives and livelihoods of the people of Haiti around four strategic pillars: 2 The World Bank Group (WBG) classification system identifies Haiti as a fragile state. All the traits of fragility are present in Haiti: failure of the rule of law; fragile political governance; violence; justice and insecurity; weak economic activity and resilience; strong inequalities; chronic humanitarian crises; persistent social tensions; and high outward migration flow. ii (a) enhancing Food and Nutrition Security and Productivity; (b) increasing access to Sustainable Energy Options; (c) improving Human Capital and Micro, Small, and Medium-sized Enterprise (MSME) capacity; and (d) strengthening Environmental Resilience and Disaster Risk Management (DRM), and cross-cutting areas and themes including gender equality and good governance. The proposed programme of assistance is designed to achieve the following development outcomes: (i) increased investment in the agriculture sector and higher farm production; (ii) increased production and use of sustainable energy; (iii) improved human capital MSME capacity; and (iv) increased environmental resilience to climate change and disaster risks. During the strategy period, the Bank will work to strengthen implementation through enhanced country engagement and collaboration with development partners; augment capacity in the HCO; and develop a framework for operating in fragile states for greater effectiveness. The available resource envelope to support the indicative programme of assistance includes thirty‑two million two hundred thousand United States dollars (USD32.2 mn) of grant resources from SDF-10. RISKS AND MITIGATION 5. There are many risks to strategy and project implementation in Haiti, chief of which is the current state of citizen security which adversely impacts the ongoing operations of the Bank’s HCO and hinders that of implementing agencies already grappling with limited institutional capacity and human resources. Crime and violence also undermine the macro‑economic environment and the operations of the business community. Haiti is highly vulnerable to climate-related natural disasters. As part of its mitigating strategy, CDB will ensure that all interventions are climate screened and provide the necessary project implementation capacity, as required. 1. COUNTRY CONTEXT Overview 1.01 Haiti is the largest and most populous of CDB’s BMCs with a land area of 10,714 square miles and population of 12.0 mn people3. Haiti has comparative advantages including its proximity to major markets, a young labour force, dynamic diaspora, and substantial geographic, historical, and cultural assets. However, the country’s economic and social development continues to be hindered by political instability, weak governance and institutions, inadequate human resource development, and fragility4. 1.02 Amongst the BMCs, Haiti is one of the most vulnerable to natural hazards. Haiti’s susceptibility to exogenous shocks and natural hazards has, in part, contributed to a high level of poverty and inequality. While marginal progress was made in poverty reduction prior to 2019, the combined effect of the political crisis, COVID-19 pandemic, the 7.2 magnitude earthquake in August 2021, and deterioration in the economic and security conditions, have erased earlier gains and reversed this trend. As a result, Haiti remains the poorest country in the Caribbean. In 2022, Haiti had a gross domestic product (GDP) per capita of USD1,247.90, the lowest in the Latin America and the Caribbean (LAC) Region, which averaged USD8,797. Meanwhile, progress on most development indices has lost momentum, raising concerns that the country is unlikely to meet the targets of its Sustainable Development Goal (SDG) Action Plan by 2030. Macroeconomic Context 1.03 Haiti’s economy relies heavily on remittances from abroad, the agricultural sector, and wholesale and retail trade. Remittances account for more than 20% of GDP on average, while agriculture consists mainly of small-scale subsistence farming although bananas, cocoa, mangoes, and vetiver5 are important export crops. Manufacturing and tourism have been slow to develop, hindering the country’s ability to generate and sustain growth and employment. Over the decade 2012-2022, economic activity grew marginally by 0.7%. However, the past four years have been particularly challenging due to adverse exogenous and endogenous shocks (see Table 1.1). The economy was buffeted by global supply chain constraints due to the global pandemic6, commodity price increases related to the Russia-Ukraine war, and meteorological and geophysical hazard events. The impacts of these international developments were worsened by domestic shocks such as the persisting political and socio-economic crisis and shortages in the delivery of key services including water, electricity, and health services which severely constrained business and economic activity resulting in recessionary conditions. 1.04 In these circumstances, unemployment levels remained high at an estimated 14.8% in 20227. Meanwhile, inflation accelerated due to rising freight costs, the depreciation of the Haitian Gourdes (HTG), and increased international commodity prices – including food and fuel. The annual average inflation for the 2022 calendar year accelerated to 33.4% compared with 16.9% in 2021. The 12-month, year-on-year inflation rate climbed to a high of 48.2% in December 2022. This surge in inflation (the highest annual average inflation rate in approximately 10 years) has adversely affected food security and poverty. 3 Haiti Institute of Statistics and Information (HISI). 4 WBG classification system identifies Haiti as a fragile state. All the traits of fragility are present in Haiti: failure of the rule of law, fragile political governance, violence, justice and insecurity, weak economic activity and resilience, strong inequalities, chronic humanitarian crises, persistent social tensions, and high outward migration flow. 5 A plant from which essential oil is extracted. 6 Haiti reported its first case of COVID-19 on March 19, 2020. Inadequate access to clean water, sanitation facilities, limited surveillance capacity, and conflict and violence raised vulnerability to the pandemic. 7 International Labour Office (ILO) estimate. - 2 - Drought‑related agricultural supply disruptions, monetary finance of the budget deficit, and widespread fuel shortages created from the blockade of a main domestic fuel terminal also impacted domestic prices. 1.05 Fiscal performance remained weak mainly due to the lacklustre economic performance and impediments to revenue administration. Tax collection was impeded partly by gang violence which restricted access to the main customs and tax administration offices. As revenue declined, expenditure increased in response to the COVID‑19 pandemic, high fuel subsidies – although the size of the subsidy was reduced since December 2021 ‒ and spending related to the August 2021 earthquake8. The fiscal deficit is expected to be approximately 1.9% of GDP in fiscal year (FY) 2022/23 and will be partly financed by Central Bank of Haiti (BRH). The central government debt-to-GDP ratio increased to 30.1% of GDP in FY 2022 mainly due to the persistent fiscal deficits and is estimated to rise further in support of the earthquake-related reconstruction activity. TABLE 1.1: SELECTED INDICATORS FY 2018/ 2019 FY 2019/ 2020 FY 2020/ 2021 FY 2021/ 2022 FY 2022/ 2023 Real GDP Growth (%) Average Inflation (%) Unemployment Rate* (%) Overall Fiscal Balance (% of GDP) Primary Balance (% of GDP) Public Debt (% of GDP) (1.7) 18.6 13.9 (1.7) (1.4) 28.1 (3.3) 22.8 15.1 (3.2) (2.1) 23.3 (1.8) 16.9 15.0 (2.5) (2.3) 28.5 (1.7) 33.4 14.8 (2.1) (1.8) 30.1 0.1 n.a. n.a. (1.9) (1.7) 21.3 Sources: BRH, the World Bank (WB), and the International Monetary Fund (IMF). *ILO modelled estimate of the unemployment rate. 1.06 During the period June 2022 and May 2023, the Haitian authorities and the IMF partnered to help restore macroeconomic stability and reduce inflation through a Staff Monitoring Programme9 (SMP) that sought to, inter alia, reduce BRH’s financing of fiscal deficits, decrease the misuse of public funds, and enhance monetary and financial policies. Implementation was broadly satisfactory despite obstacles in meeting quantitative targets. The authorities introduced policy measures10 to strengthen public financial management (PFM), improve social welfare, and strengthen the transparency of public procurement for emergency resources. A second SMP that builds on the progress achieved was agreed for the nine-month period from June 2023 to March 2024. In January 2023, the IMF approved a disbursement of USD105 mn under its Food Shock Window of the Rapid Credit Facility to help the country address urgent balance of payments needs related to the global food crisis. 1.07 CDB’s outlook for the Haitian economy indicates that economic activity is expected to remain weak with growth of 0.1% in 2023. This assumes some improvement in the political and national security situation, and that consumer spending will continue to be supported by strong remittance inflows from 8 In December 2021, GOH increased fuel prices by 74.3% on average, reducing fuel subsidies that have averaged 2.5% of GDP over the past 10 years. 9 The SMP does not provide direct financial support from the IMF, but helped to establish a track record of policy implementation and results that can pave the way for budget support/concessional finance from international donors. 10 The policy measures were geared toward: broadening the tax base; eliminating exemptions; strengthening governance systems; reducing BRH financing of the deficit; and providing relief to the most vulnerable. GOH is also working to bring Anti-Money Laundering (AML)/Combatting the Financing of Terrorism laws up to international standards supported by IMF capacity development. - 3 - workers abroad. The forecast is subject to significant downside risks. These risks include the prolongation of the war in Ukraine which could lead to further increases in food and fuel prices, increase the current account deficit, and adversely affect the poor and vulnerable. Climate-related disasters could also contribute to large economic and social losses and weaken economic activity. A further deterioration in the domestic security situation also poses significant downside risks. Accelerating economic activity would require sustained momentum in the reform process to enhance economic resilience, governance, and promote macroeconomic stability. Despite the challenging domestic environment, the authorities have adopted important fiscal policy reforms and the second SMP can help to gradually improve the fiscal situation and ease the pressures on public sector debt. Social Context 1.08 Haiti’s demographic features portray a burgeoning youthful population and increasing urbanisation. Despite high infant mortality, with 59 deaths per 1,000 live births, the population grew steadily at an average rate of 1.5% over the last decade. With a median age of 22.7 years, approximately 12.4% of the total population is under the age of 5, and 40% below the age of 18. Also, 61% (6.4 mn) of the population is estimated among the economically active population (15-64 years). The male to female ratio is relatively even (105 males to 100 females), but a relatively high dependency ratio (63.3 persons per 100 persons aged 0-14 and 65+years) coupled with high unemployment and a low skilled labour force are expected to impede development efforts. Population density is very high, with an average of 403 persons per square kilometre (km2), and approximately 55% of the total population residing in urban settlements. Haiti’s population and demographic profiles create unique pressures for governance and environmental sustainability and have significant implications for the provision of social infrastructure and services, economic opportunities and development prospects, and for overcoming poverty, inequalities, and vulnerabilities. 1.09 Poverty in Haiti remains persistent, with high levels of vulnerability and inequality. The United Nations Development Programme (UNDP) Human Development Report (HDR) 2022 estimates poverty at 58.5% of the population, or 6.3 mn people, with poverty highest in the rural areas. The Multi˗dimensional Poverty Index (MPI)11 showed that 41.3% of the Haitian population was multi˗dimensionally poor, with 18.5% living in severe multi˗dimensional poverty and an additional 21.8% vulnerable to multi-dimensional poverty. The HDR 2022 revealed that the main contributor to the multi‑dimensional poverty was the low standard of living among households (57%), whereas health and education deprivations contributed 18.5% and 24.6%, respectively. 1.10 Progress in improving social development outcomes has been slow and uneven, and in 2022 Haiti ranked 163 out of 189 countries on the UNDP Human Development Index (HDI). Haiti’s overall HDI value for 2022 of 0.535 was evaluated among the “low human development” countries. In addition, the inequality adjusted HDI resulted in an overall loss of 38.9% of its value from 0.535 to 0.327. Inequalities in life expectancy (26.6%), education (37.3%), and income (50.4%) continue to undermine the human capital development. The HDR 2022 Index further revealed that the wealthiest 10% of the population held more than 31.2% of the total income of the country, against the 15.8% owned by the poorest 40% of the population. These forms of inequality place Haiti among the most unequal countries in LAC, contributing to and/or exacerbating social disorder, citizens insecurity, activities of criminal gangs, and GBV and abuses. 1.11 Gender-based inequality is a serious development constraint in Haiti. Gender inequality is persistent and exists in the provision of health and reproductive services, employment, political representation, and violence against women and girls (sexual, physical, verbal, and emotional). The Gender 11 Using the MPI 2016-17 dataset, MPI goes beyond income as the sole indicator for poverty by exploring the ways in which people experience poverty in their health, education, and standard of living. - 4 - Inequality Index (GII) for Haiti (HDR 2022) was 0.635 and ranked 163 of 189 countries worldwide. The country’s GII is based on it having very low (2.7%) parliamentary seats held by women and less than a third (27.9%) of adult women with at least a secondary education. The comparative figure is about 41% for their male counterparts. The disparity between men and women in economic activities is a concern, with about 60.7% female labour market participation compared with approximately 68.9% for men. Women receive lower wages than men and account for 82% of workers in the informal sector. The feminisation of poverty also places women and their children in a vulnerable position. Moreover, the WB Assessment (2023) of barriers to gender equality outlined that gender-based inequality fosters significant gaps in risk management policies at the national and community levels. For example, women and girls are more vulnerable to exploitation and GBV in post-disaster situations, their homes, communities, transitional shelters, and during aid distribution. The 2023 Assessment recognises that gender differences must be addressed in risk understanding and behaviour, and appropriate gender considerations in social norms, formal institutions, and policies, including safeguards to mitigate violence against women and girls. 1.12 Poverty, inequalities, and the fractured social order in Haiti are further exacerbated by limited access to, and poor targeting of, social protection systems (SPSs), including income support. The current social context of lower human development indices scores, citizens insecurity, criminal gangs’ violence, and food and nutrition insecurity have contributed to major disruptions in social sector services, including education and health services, as well as economic and livelihoods strategies. The results are loss of learning and the resurgence of growing education disparities, enhanced vulnerability of health care services, unprecedented levels of GBV and abuses, and extraordinary pressures on an already stretched SPS. The continuation of this daunting social (dis)order is expected to have an even greater impact on the poor and most vulnerable populations, including male and female single heads of households, children, youth, older persons, and persons with disabilities. Environmental Context 1.13 Haiti is highly exposed and vulnerable to a large spectrum of hydrometeorological and geophysical hazards. This reflects several factors such as geographical location, poverty, poor land use practices, widespread deforestation, environmental degradation, low levels of education and literacy, inadequate infrastructure, and high density unplanned urban and rural settlements located on, or near to, the coastal areas. Haiti’s geographic location, combined with the steep topography of its western region from which all major river systems flow to the coast, make the country particularly vulnerable to hydrometeorological hazards. The country’s most populated cities are all located along the coast, and this significantly increases the exposure of a large percentage of the population to related hazards. The capital city of Port-au-Prince is particularly vulnerable to flooding, with a large portion of its inhabitants residing on flood plains in poorly constructed housing. The Germanwatch’s Global Climate Risk (GCR) Index (2021), which analyses and ranks the extent to which countries have been affected by extreme weather events, positions Haiti as the fiftieth most vulnerable to climate risks. 1.14 As a result, natural hazard events often result in significant environmental, social, and economic impacts. In 2010, a major earthquake killed over 200,000 people and caused damage and loss estimated at USD7.8 billion (bn) or 100% of GDP (2009). In 2016, Hurricane Matthew caused damage and loss of about USD1.9 bn. More recently, the catastrophic earthquake of 2021 caused damage and loss estimated at USD1.6 bn and over 2,000 deaths. 1.15 Climate change and disaster impacts have adversely affected sectors that are strategically important for Haiti’s economic growth, such as agriculture, water, education, transportation, energy, and tourism (see Appendix 2). Most of the agricultural sector consists of rain-fed subsistence farming on sloping lands with little or no soil conservation practices. Soil erosion and flooding due to extreme rainfall events, combined - 5 - with prolonged drought, have already reduced soil fertility and crop yields12. Pollution of surface and groundwater resources is prevalent and presents a major concern for the development and delivery of potable water already stressed by extreme drought conditions13. While only 65% of Haitian households have access to safely managed drinking water, access to sanitation services is approximately 35%. Extreme weather events frequently affect the substandard school infrastructure, hinder school attendance, and slow progress in improving the education system. Climate change and disaster events also disrupt, damage, or destroy the existing inadequate road infrastructure, thereby further limiting access to social and economic services and opportunities. The natural and cultural environment on which the tourism sector largely depends, is being degraded partly as result of extreme weather events. Climate change is expected to further exacerbate disaster risks and impacts in the coming decades14 and, therefore, represents a major challenge to the achievement of the SDGs. 12 The United States Agency for International Development (USAID) Haiti Climate Risk Profile, 2017, https://www.climatelinks.org/resources/climate-risk-profile-haiti. 13 The World Health Organisation/United Nations Children’s Fund Joint Monitoring Programme for Water Supply, Sanitation and Hygiene 2019. 14 Climate change projections indicate that average annual temperatures could increase by 2.3⁰C by mid-century. Rainfall variability is also expected to result in more extreme droughts in the dry season and more intense rainfall in the wet season. Sea level rise (SLR) is projected to reach 0.56 metres (m) by 2090. - 6 - 2. KEY DEVELOPMENT CHALLENGES AND PRIORITIES Governance 2.01 Governance remains a persistent challenge. The fractious political parties frequently engender instability and accusations of impropriety undermine public trust. The date for Presidential Elections remains uncertain after the postponement of scheduled elections in September and November 2021. Governance structures are likely to remain fractured even after a new president is installed. Notably, political gridlock has been a hallmark of policymaking as the multitude of parties in the legislature struggle to compromise. The country also has weak frameworks for fiscal responsibility, fiscal transparency, and administrative capacity in the areas of budgeting, treasury, and debt management; and limited public sector capacity, high outward migration, and inadequate human capital development are major constraints to sustainable development. Haiti ranks 131st out of 173 countries in the WB Human Capital Index 2020. Haitian children attend 11.4 years of school on average by age 18, which is equivalent to 6.3 years of adjusted learning, and is the lowest score in the Region. These governance challenges are not uncommon in fragile states15 and, notably, Haiti ranks 10th of 179 countries in the Fragile States Index (2023). 2.02 Despite the challenging environment, the authorities have adopted important reforms to strengthen governance and transparency. The reforms cover governance and anti-corruption, tax and revenue administration, PFM (including budget preparation and execution), central bank autonomy and governance, and AML. All these reforms have enhanced transparency in public spending and in the financial sector, and helped maintain macroeconomic stability. The Haitian authorities have agreed to a second SMP and made a request for an IMF governance diagnostic assessment which should help with learning and with guiding reforms for enhancing economic resilience and governance. Agriculture and Food Security 2.03 Agriculture plays an important social and economic role in the economy. The sector employs 42% of the labour force and contributes more than 20% to GDP (CDB/Food and Agriculture Organisation [2019]). Agriculture accounts for 66% of income in rural areas. It is the dominant economic activity with an estimated 80% of rural households engaged in farming; and for half of all households farming is the sole economic activity. Productivity levels in the agricultural sector are low, with an estimated 45% to 50% of the food requirements covered by domestic production. Large segments of the population depend on imports to meet food and nutrition needs. Haiti imports 17-20 times more agricultural products than it exports. Exports are dominated by mango, coffee, cocoa, and vetiver. The agricultural sector continues to be plagued by: under-investment in infrastructure and services; limited access by farmers and fisherfolks to modern technologies, credit, production, and marketing support; and environmental degradation causing substantial reduction in soil fertility. While women play a critical role in the sector, they experience inequitable treatment – for example, they lack the same land inheritance rights as men and receive lower wages for agricultural work. 2.04 Haiti has one of the highest levels of food and nutrition insecurity in the world, with more than 1 in 3 people (3.7 mn of a population of 11.4 mn) in need of urgent food assistance, and an additional 1 mn classified at emergency levels16 of food insecurity. In 2018, half of the population was under-nourished, and the country’s Global Hunger Index score rose to 35 – up from 28 in 2009 – reaching the alarming threshold. Poor nutritional status among children is a current and future tragedy – 22% of the children are 15 The Organisation for Economic Cooperation and Development defines fragility as the combination of exposure to risk and insufficient coping capacities of the state, system and/or communities to manage, absorb or mitigate those risks across six dimensions: economic; environmental; political; security; societal; and human. 16 World Food Programme (WFP). - 7 - chronically malnourished, 10% are underweight, and 66% of under-5s suffer from anaemia. Poor childhood nutrition results in stunted growth and severe consequences for the country’s sustainable development once these children reach adulthood. These issues have been exacerbated by the poor performance of the agriculture sector, heavy dependence on food imports, regular disruption of the food-distribution supply chain caused, in part, by political instability and social tensions, and the country’s vulnerability to inflation and price volatility in international markets. Energy 2.05 Enormous challenges characterise the energy sector. Notwithstanding the Government’s 2017 commitment17 to electrify the unserved sections of the country using mini-grid and off-grid solutions, only 47% of the population has access to electricity (2021)18. The electricity supply is unstable with frequent power cuts and surges adversely affecting economic and social activities. Business owners cite the lack of reliable electricity supply as the most binding constraint to private sector development. Given the poor service and limited cost recovery, the cost of electricity is among the highest in the Region. Electricity is available to grid-connected customers only 4-8 hours daily at a high tariff, ranging from $0.48 to $0.53 per kilowatt hour (kWh) for large consumers in comparison with $0.23 per kWh in Jamaica, a country with less than one-third of the population of Haiti. 2.06 Per capita consumption of electricity in Haiti is substantially lower than in other Caribbean countries – for example, it is only 2% of the level recorded in the Dominican Republic. The evidence suggests that the poverty rate mirrors the lack of access to electricity or modern forms of energy. Increased access to energy holds enormous opportunities for supporting poverty reduction, economic transformation, and sustainable development in general. Empirical studies have shown that addressing the lack of energy access using the abundant renewable energy (RE) resources (mainly solar, hydro, and wind energy) represents a transformative intervention for unlocking opportunities in a range of productive areas that can significantly impact poverty reduction. 2.07 The operations of the government-owned national electricity utility, Electricité d’Haiti (EDH), are plagued by significant technical, managerial, and financial challenges. Supply coverage is limited mainly to some areas of the capital city, and EDH’s available generating capacity of 176 megawatts (MW) (comprised of 81% diesel generation from independent power producers and self-owned hydropower generation) is inadequate to meet peak demand of 500 MW. The result is thatmany customers operate diesel generators with an aggregate capacity exceeding that of EDH. The technical and commercial losses are approximately 65%, with revenues that are inadequate to cover operational costs and the company therefore relies on government subsidies to fill the annual gap of almost USD200 mn (2015), which accounts for 4% of the Government’s budget. These challenges persist, despite WB and the Inter-American Development Bank (IDB) support for sector reforms, institutional capacity strengthening, and investments in infrastructure to improve EDH’s operations over the period since the 2010 earthquake. Human Capital Development – Education and Training 2.08 Human resource development (HRD) depends on significant long-term investments to improve the quantity and quality of skilled persons to strengthen economic development, engender social cohesion, and reduce poverty. However, the education sector in Haiti remains under-resourced and of low quality, with a significant burden placed on families to provide educational opportunities for children and young people. 17 Roadmap for the Electricity Sector issued in April 2017. 18 https://islands.irena.org/-/media/Files/IRENA/Agency/Statistics/Statistical_Profiles/Central-America-and-the Caribbean/Haiti_Central-America-and-the-Caribbean_RE_SP.pdf?rev=44512557a25043ce8338785fd87ab008. Accessed September 21, 2023. - 8 - Notwithstanding gradual improvements, there is limited education access at all levels, particularly in rural areas, and education services are provided mainly by the private sector. 2.09 Enrolment in public educational institutions represents just 25% of all primary school children and 10% of Technical and Vocational Education Training (TVET) students. With such limited public provision of education services, families utilise as much as 20% of their income to finance educational opportunities for learners, and support about 70% of total education funding. A large percentage of non˗public schools, about 75%, lack accreditation or licensing, with the result that their output is of questionable quality. Between 30% and 60% of public schools, depending on the municipality, are in poor condition with large class sizes. With a significant percentage of over-aged students throughout the system (for example, over 70% in upper primary and lower secondary), classes are generally multi-grade, with teachers ill-equipped for instructional effectiveness. Invariably, the system is characterised by low enrolment rates, having not achieved universal basic education. Up to 18% of children eligible for primary education are excluded from school and the net enrolment rate in secondary education approximates 20% with a completion rate of 30%19. Internal efficiency is low with high dropout rates and few children transition to the secondary level. Inadequate quality is also reflected in the low performance on national examinations and high repetition rates caused by factors including: (a) ineffectively trained and unqualified teachers; (b) insufficient teaching and learning materials; (c) outdated curricula; (d) weak school management systems; and (e) inadequate supervision of the large non-public education sector, compounded by excessive centralisation of the decision-making process. Malnutrition and poor health also contribute to low participation and under‑performance. Expanding public provision of basic education remains an urgent priority, especially in rural communities and for girls, to ensure that sustainable development efforts are successful. 2.10 Skills development continues to be critical for the economic and social transformation of Haiti. Haiti has the youngest age structure in the Caribbean. The country is dependent on skilled foreign workers while, at the same time, there is high unemployment and under-employment, particularly among women and out-of-school youth between the ages of 15 and 24. Youths potentially represent an important economic asset for catalysing economic growth, but they need access to skills development programmes to improve employment opportunities that can help break the cycle of poverty and promote economic growth in Haiti. High unemployment rates for urban youths in the city are likely related to the rise of violent street gangs in the slums of Port-au-Prince. Their exclusion from the labour market due to their lack of employability is detrimental to economic development and to social stability. In this context, interest in TVET is high, but the Government has consistently under-invested in this sector resulting in an industry where facilities and equipment are outdated, and curricula and technologies are obsolete. More importantly, there was a mismatch between the training available and the labour market needs, leading to significant skills gaps. Employment and Private Sector Development 2.11 Addressing poverty requires, among other strategies, making significant effort to reduce unemployment and to improve the productivity of factor markets. As large waves of young people continuously enter the labour market, opportunities for jobs are crucial to absorb the demographic boom. Much of this will require providing the appropriate enabling environment and support for the development of the private sector. This notwithstanding, the private sector remains weak, and several constraints impede its development20. These include high cost and inadequate access to finance, the lack of infrastructure, which makes it costly to open and conduct business; lack of technical expertise for establishing and 19 Readiness for Action – The Baseline and Situational Analysis Report for Phase 1 of the Caribbean Community (CARICOM) HRD 2030 Strategy, 2020. CARICOM Secretariat. 20 Insight captured from the 2020 WB's Ease of Doing Business Report which ranked Haiti 182nd out of 189 countries, and the 2018-19 World Economic Forum Global Competitiveness Index (GCI). The GCI ranks Haiti 138th out of 141 countries. - 9 - developing businesses; substantial migration of skilled labour; high security costs associated with business operations; weak tax and revenue administration; onerous requirements of opening businesses; and land tenure issues21. 2.12 The manufacturing sector and the tourism industry have the potential to generate a significant number of new jobs given the low labour cost and the potential to market several attractions. However, developing the tourism industry will require substantial investments and reforms, both public and private, to address infrastructure needs, product development, marketing, and other related constraints such as macroeconomic instability, waste management, security, and human resource capacity. The private sector is dominated by agriculture, light industry and assembly, the textile and garment industry, and services. 2.13 Existing data suggest that the private sector consists mainly of MSMEs with limited potential for achieving economies of scale and scaling up. According to USAID (2019), these MSMEs generate 80% of new jobs and total employment among key sectors of the economy, such as tourism, agriculture, manufacturing, and trade, making MSMEs vital to Haiti’s economy. Through their signif