Haïti Sixième revue dans le cadre de l'accord au titre de la facilité élargie de crédit, et demande de prolongation de l'accord et de rééchelonnement des versements

©2013 International Monetary Fund IMF Country Report No. 13/260 HAITI SIXTH REVIEW UNDER THE EXTENDED CREDIT FACILITY ARRANGEMENT, AND REQUEST FOR EXTENSION OF THE ARRANGEMENT AND REPHASING OF DISBURSEMENTS In the context of the sixth review under the Extended Credit Facility Arrangement, and request for extension of the arrangement and rephasing of disbursements, the following documents have been released and are included in this package:  Staff Report for the Sixth Review Under the Extended Credit Facility Arrangement, and Request for Extension of the Arrangement and Rephasing of Disbursements, prepared by a staff team of the IMF, following discussions that ended on June 6, 2013, with the officials of Haiti on economic developments and policies underpinning the IMF arrangement under the Extended Credit Facility. Based on information available at the time of these discussions, the staff report was completed on July 18, 2013.  A Press release. The documents listed below have been or will be separately released. Letter of Intent sent to the IMF by the authorities of Haiti* Memorandum of Economic and Financial Policies by the authorities of Haiti–an Update* Technical Memorandum of Understanding–an Update* *Also included in Staff Report The policy of publication of staff reports and other documents allows for the deletion of market-sensitive information. Copies of this report are available to the public from International Monetary Fund  Publication Services 700 19 th Street, N.W.  Washington, D.C. 20431 Telephone: (202) 623-7430  Telefax: (202) 623-7201 E-mail: publications@imf.org Internet: http://www.imf.org International Monetary Fund Washington, D.C. August 2013 HAITI SIXTH REVIEW UNDER THE EXTENDED CREDIT FACILITY ARRANGEMENT, AND REQUEST FOR EXTENSION OF THE ARRANGEMENT AND REPHASING OF DISBURSEMENTS EXECUTIVE SUMMARY Background: Growth continued to be modest, due largely to long-standing frail capacity, weather-related shocks, and structural weaknesses. Inflation remained in the mid-single digits and international reserves at about six months of imports. Fiscal performance during the first half of the year was weaker than budgeted, mostly on account of lower revenue collection. Program: The arrangement under the Extended Credit Facility (ECF) in an amount of SDR 40.95 million (50 percent of quota) was approved on July 21, 2010, and would expire on August 30, 2013. Program implementation is broadly satisfactory. The authorities met all end-March 2013 performance criteria, but missed two indicative targets. All five relevant structural benchmarks through end-March 2013 remain to be fully implemented. The authorities have requested a one-year extension of the ECF arrangement (to August 29, 2014) to lock in the gains to date and complete key reforms, particularly in the fiscal area. Staff supports this request. Policy Discussions: Discussions focused on the macroeconomic policy stance for the remainder of FY2013, particularly on policy responses to weak revenue collection, and on macroeconomic policies and structural reforms for FY2014 to ensure medium-term external sustainability. The authorities and staff concurred that priority should be given to: (i) increasing domestic revenue and rationalizing current expenditure to generate additional fiscal space for infrastructure and poverty-related spending; (ii) tackling the impediments to public investment, inter alia by improving public financial management and economic governance; and (iii) strengthening the monetary policy transmission mechanism. July 18, 2013 HAITI 2 INTERNATIONAL MONETARY FUND Approved By A. Cheasty (WHD) and M. Muhleisen (SPR) Discussions were held in Port au-Prince during May 29-June 6, 2013. The staff team was comprised of B. Loko (head), O. Sulla, L. Norton, N. Kapoor (all WHD), and E. Bova (FAD) and J. Bouhga-Hagbe (Resident Representative). Ms. Florestal (OED) joined the policy discussions. CONTENTS RECENT DEVELOPMENTS AND PROGRAM PERFORMANCE ___________________________________ 3   POLICY DISCUSSIONS ___________________________________________________________________________ 7  PROGRAM MONI TORING ______________________________________________________________________ 14   BOXES 1. Reclassification of Expenditure Items for the 2014 Budget ___________________________________ 10   2. Domestic Oil Price Mechanism _______________________________________________________________ 12   FIGURE 1. Recent Monetary and Exchange Rate Developments ___________________________________________5   TABLES 1. Selected Economic and Financial Indicators, 2009/10-2016/17 ______________________________ 19 2a. Central Government Operations, 2009/10-2013/14 (In millions of Gourdes) _________________ 20 2b. Central Government Operations, 2009/10-2013/14 (In percent of GDP) _____________________ 21 3. Summary Accounts of Banking system, 2009/10-2013/14 ___________________________________ 22 4. Balance of Payments, 2009/10-2013/14 ______________________________________________________ 23 5. Financial Soundness Indicators of Individual Banks, September 2010-March 2013 __________ 24   6. Indicators of External Vulnerability, 2009/09-2012/13 ________________________________________ 25   7. Proposed Schedule of Disbursements, 2010-2014 ___________________________________________ 26   8. Indicators of Capacity to Repay the Fund, 2012/13-2022/23 _________________________________ 27   APPENDIX I. Letter of Intent _________________________________________________________________________________ 28 Attachment 1. Memorandum of Economic and Financial Policies–Update ___________________ 30   Attachment 2. Technical Memorandum of Understanding–Update __________________________ 42   HAITI INTERNATIONAL MONETARY FUND 3 RECENT DEVELOPMENTS AND PROGRAM PERFORMANCE 1. The political situation remains challenging. Preparations are underway for the forthcoming municipal and partial senatorial elections, which are long overdue but are now expected to take place this year. 1 One third of the thirty-seat Senate and all municipal councils must be renewed. The elections could heighten political and social tensions and further complicate the security situation. In the meantime, despite some improvements, the government’s relations with Parliament remain tense, and the President’s lack of a majority makes the approval of key economic and financial legislation difficult. 2. Recent macroeconomic performance has been mixed:  Growth. Emergency spending to help the agricultural sector has not fully offset the impact of Hurricane Sandy, which hit the country in October 2012. As a result, and due to an ongoing drought, the rebound in agriculture (about 20 percent of GDP) will be slower than expected. Reconstruction and growth in non-agricultural output continues to be constrained by persistently low execution rates of capital spending, rooted in long-standing weak capacity and structural impediments, as well as weak private sector participation.  Inflation. Inflation peaked at 7.7 percent (y/y) at end-March 2013, largely due to pressures on domestic food supplies and prices and also from recent currency depreciation. Inflation declined to 7.3 percent in May 2013.  Fiscal policy. Performance has been weaker than expected. Domestic revenues over the first half of FY2013 were about G4.2 billion (1.2 percent of GDP) below projections on account of (i) lower turnover and income taxes due to weaker economic activity; (ii) lower excise and custom duties due largely to higher-than-expected forgone petroleum revenues and subsidies; (iii) delays in the implementation of some revenue measures; 2 and (iv) continued weak collection, particularly 1 These elections were initially scheduled for November 2011. The constitutional body (Conseil Transitoire du Conseil Electoral Permanent or CTCEP) in charge of overseeing them has recently been installed, after protracted negotiations between the three branches of government. 2 For instance, new revenue collection units on small and medium-size enterprises and on NGOs have been staffed but are not yet fully operational because of the lack of office space. New excise taxes on alcohol and tobacco envisaged in the budget were not implemented because of difficulties in acquiring secured excise stamps. HAITI 4 INTERNATIONAL MONETARY FUND at customs. Grant receipts were also lower than expected. In response to the shortfall in revenue, the authorities reduced non-priority current spending by about G2 billion, especially spending related to the use of mobile phones, cars, fuel, and electricity.  External position. Gross international reserves have fallen slightly since end-December in line with a decline in the overall balance of payments. Nevertheless reserves remained comfortable at 6 months of imports at end-May 2013.  Exchange rate. The gourde depreciated against the U.S. dollar by 3.5 percent between October 2012 and June 2013. This depreciation reflects many factors, both on the demand and supply sides, including increased inflation differentials with the United States, strong credit growth, lower official transfers, a gradual withdrawal of several international NGOs, and the high level of liquidity in the banking system. This also likely reflects an increase in informal imports from the Dominican Republic, as well as some expectation of future depreciation as official transfers are expected to continue to fall. The authorities’ recent prudential requirement that banks maintain 100 percent (up from 70 percent) of their reserve requirements on foreign currency deposits in dollars also contributed somewhat to a lower supply of dollars and increased gourde liquidity.  Monetary policy. Concerned with possible second-round effects of the increase in domestic food prices, and the depreciation of the gourde, the central bank (Banque de la République d'Haïti, BRH) tightened the monetary policy stance. Policy rates remained unchanged since January 2011 (Figure 1). However, in February-March 2013, the BRH raised banks' reserve requirement ratios on local currency liabilities by a cumulative 6 percentage points (to 35 percent), and on foreign currency liabilities by 5 percentage points (to 39 percent). The BRH also increased its intervention in the foreign exchange market, offering about $100 million between October 2012 and May 2013, versus $44 million during the same period the year before. On the administrative side, the authorities decided to allow companies that purchase petroleum products to pay 60 percent of their purchases in gourde (previously they could pay only in dollars) to reduce dollar demand. These policies have helped slow down the pace of currency depreciation, and inflation slowed in April and May 2013. Nevertheless, depreciation pressures and upside inflation risks could reemerge if the economy faces unexpected shocks.  Banking sector. Total credit to the private sector grew by 24.1 percent at end-May 2013 (y/y). While credit has grown at a brisk pace, the banking sector remains sound and profitable. Banks had an average capital adequacy ratio of 16 percent at end March 2013, above the regulatory minimum of 12 percent (see Table 5). Returns on assets and equity are comfortable. Non- performing loans remained low, likely reflecting the fact that credit remains concentrated in a few well-established businesses that are mostly engaged in international trade. HAITI INTERNATIONAL MONETARY FUND 5 HAITI 6 INTERNATIONAL MONETARY FUND 3. The macroeconomic program is broadly on track, but structural reforms continue to lag. All end-March 2013 performance criteria were met. However, the end-March indicative targets on BRH net credit to the Government and on poverty-related spending were not observed. The latter was missed because some resources were redirected to other sectors severely hit by Hurricanes Isaac and Sandy, while the former was not met due partly to a shortfall in budget support. Despite some major achievements, the five relevant structural benchmarks through end- March 2013 have not been fully implemented, largely due to weak capacity and delays in mobilizing technical assistance. Structural Benchmarks Structural benchmarks Timing Status Strengthen the debt unit with fully operational middle and back office functions; Preparation of annual debt sustainability analyses. End-March 2013 Still pending the approval by Parliament of the organic law on the reorganization of the Ministry of Economy and Finance (MEF). Submit to Parliament a public debt law that would establish a sound legal and institutional framework for public debt management. End-March 2013 Approved by the Cabinet but not yet submitted to Parliament. The law was shared with the IMF and is in line with international standards. Reduce the number of domestically-funded imprest accounts to three by ministry or institution (for revenue collection, capital spending, and other transactions); deploy the network of public accounting offices at the line ministries level; and gradually grant signature authority on these accounts to public accountants appointed by the MEF. End-March 2013 Bank accounts have been significantly reduced but not yet to three. The network of public accountants is being deployed, starting with the MEF as pilot which officially installed its public accountant in January 2013. The opening of accounting posts is constrained by lack of office space. Roll out general ledger (GL) software in all ministries; start to record project and imprest account expenditures when they are effectively paid, and no longer when the account is replenished. End-March 2013 World Bank financing to update the software was recently secured and the software has been installed in the MEF. But the roll- out has not been completed in other ministries. Establish unconstrained single-price foreign exchange auctions. End-September 2012 Given the lack of competition, the authorities’ objective is to start by expanding the number of participants in the FX market. HAITI INTERNATIONAL MONETARY FUND 7 POLICY DISCUSSIONS Discussions focused on the macroeconomic policy stance for the remainder of FY2013, particularly on policy responses to weak revenue collection and on macroeconomic policies and structural reforms for FY2014 to ensure medium-term external sustainability. The authorities and staff concurred that priority should be given to: (i) increasing domestic revenue and rationalizing current expenditure to generate additional fiscal space for infrastructure and poverty-related spending; (ii) tackling the impediments to public investment by improving, inter alia, public financial management (PFM) and economic governance; and (iii) strengthening the monetary policy transmission mechanism by reducing excess liquidity and deepening financial intermediation. A. Macroeconomic outlook and risks 4. The near-term outlook is slightly less favorable than envisaged at the time of the fifth review, reflecting a slower recovery in agriculture and delays in public investment. The growth projection for FY2013 has been scaled back significantly to 3.4 percent from 6.5 percent in the Fifth review. With only a modest recovery in agriculture (and food supply) expected in the coming months, end-year inflation has been revised upward from 5 percent to 6 percent. The trade deficit will remain high and largely financed by official transfers and remittances. The overall balance will swing to a deficit of $290 million in FY2013 (versus a surplus of $272 million in FY2012), mostly on account of declining official transfers and lower net financial inflows. 3 In FY2014, real GDP growth is projected to pick up moderately to 4.5 percent, led mainly by agriculture and construction. Food prices are expected to decline and with appropriate monetary and fiscal policies in place, inflation is projected to recede to 5 percent in FY2014. Gross reserves are projected to decline slightly below 5 months of imports at end-September 2014. 5. The outlook remains subject to significant downside risks. On the domestic front, heightened political tensions and lower revenue collection could continue to slow down public investment spending and delay the reform agenda. Vulnerability to natural disasters is a persistent 3 Large errors and omissions in the balance of payments statistics over the recent periods suggest insufficient coverage of current and financial account transactions. FY2013/14 Act. Act. Prov. Prog. (EBS/13/90) Proj. Proj. Real GDP growth -5.4 5.6 2.8 6.5 3.4 4.5 Consumer prices (in percent, end-of-period) 4.7 10.4 6.5 5.0 6.0 5.0 Overall Fiscal balance (excluding grants and externally-financed projects) -5.0 -4.7 -5.0 -6.1 -6.1 -7.0 Overall Fiscal Balance 2.4 -3.7 -5.1 -5.3 -5.5 -6.9 External current account balance (excluding official grants) -29.8 -24.2 -17.0 -17.7 -16.0 -14.3 External current account balance (including official grants) -12.5 -4.6 -4.5 -5.6 -5.8 -5.7 Liquid gross reserves in months of imports of the following year 5.2 6.2 6.8 5.5 5.8 4.7 Total government debt (end-of-period) 17.7 12.2 15.4 20.4 20.4 24.5 Table 1. Haiti: Macroeconomic scenario (In percent of GDP, unless otherwise indicated) (Fiscal year ending September 30) FY2009/10 FY2010/11 FY2011/12 FY2012/13 HAITI 8 INTERNATIONAL MONETARY FUND concern. On the external side, Haiti also remains heavily exposed to a slowdown in global growth, predominantly through remittances, trade, and official transfers. In light of the country’s narrow export base, Haiti’s debt continues to be assessed as high risk. B. Fiscal policy and reforms Discussions centered on the policy stance for the remainder of 2013 and for 2014 and accompanying reforms to: create additional room for social and infrastructure spending; improve the execution rate and quality of capital spending; and consolidate progress in public finance management (PFM) . Fiscal policy stance 6. Revenue collection was significantly lower than targeted in the first half of FY2013, but efforts to strengthen revenue mobilization and some adjustment in expenditure will limit the increase in the overall FY2013 fiscal deficit to 5.5 percent of GDP versus an initial target of 5.3 percent. The shortfall in revenue (2.3 percent of GDP) will be offset by lower non priority current spending (0.7 percent of GDP) and domestically-financed capital spending (1.8 percent of GDP).  Staff and the authorities agreed that the initial annual revenue target of G52 billion is unrealistic in view of the underperformance in the first half of the fiscal year. Both parties concurred that with improvements in controls at borders and in enforcing payment of income and sales tax, the authorities could collect G44 billion for the year (12.3 percent of GDP). Budget support is projected at G2.6 billion (or $60 million), versus G3.5 billion (or $85 million) initially anticipated.  The authorities will maintain non-priority current expenditure below its annual target by about G2.4 billion while protecting social outlays through intensifying efforts to (i) reduce waste and abuse in the public service; (ii) improve procurement of goods and services; and (iii) limit subsidies and transfers . Based on the execution rate over the last five years and the outcome of the first semester, domestically-financed capital spending was revised down by about G6.5 billion (MEFP, ¶ 6). Staff urged the authorities to avoid bunching expenditures (consisting mostly of transfers to project accounts) near the end of the fiscal year, and to retain savings from lower than budgeted capital spending. These adjustments will lead to a deficit of G19.6 billion, closely in line with the deficit ini tially budgeted. 7. The 2014 budget targets an overall deficit of 6.9 percent of GDP. The budget seeks to balance the need for high reconstruction and growth- enhancing investments with safeguards for medium- term sustainability (MEFP, ¶ 11). To improve transparency some expenditures have been reclassified (as listed in Box 1), but macro aggregates remain broadly unchanged. -100,000 -50,000 0 50,000 100,000 150,000 Domestic revenue To t a l Expenditure Overall balance excluding grants Overall balance Budget Re v ised Initial FY2013 Budget vs. Revised Projections (millions of gourdes) HAITI INTERNATIONAL MONETARY FUND 9  Domestic revenue is projected to increase by G6.6 billion (0.7 percent of GDP), reflecting mostly higher revenue on petroleum products (G4 billion) and improved revenue administration.  Budget support would drop to $45 million (0.5 percent of GDP), from $60 million (0.7 percent of GDP) in FY2013, in line with a gradual winding down of the post-earthquake boom.  Current spending would expand to 11.5 percent of GDP. The wage bill is projected to increase by about 13 percent, from G21 billion in FY2013 to G23.7 billion in FY2014. This increase (G2.8 billion) is largely due to reclassification of items from subsidies and transfers (G2.5 billion) (see Box 1). 4 Staff recommended that future increases in the wage bill be determined within the framework of a medium-term strategy for the modernization of the public administration.  Domestically-financed spending will amount to 8.5 percent of GDP in FY2014, from 7.4 percent in FY2013. This increase results mostly from the (i) the inclusion in the budget of G2.2 billion in education spending financed by the National Education Fund (FNE, which is funded from taxes on telecommunications and remittances inflows); and (ii) higher PCDR related spending reflecting an acceleration in the disbursement for many projects that have been launched in FY2013.  The fiscal deficit (6.9 percent of GDP) will be financed through domestic financing (2.4 percent of GDP) and external financing (4.5 percent of GDP), including PetroCaribe resources (4.3 percent of GDP). Domestic financing includes a drawdown of government and PCDR deposits at the central bank, and net placement with commercial banks. This will bring total government gross debt to 24.7 percent of GDP, and government debt net of PetroCaribe deposits to 20.8 percent of GDP. Total government debt-to-GDP, the medium-term fiscal anchor, will remain below 30 percent (the pre-earthquake level). 4 Despite this reclassification the level of subsidies and transfers will not decline; however, the authorities plan to eliminate subsidies to EDH by 2016. FY2013 FY2014 FY2013 FY2014 Treasury 10.1 13.7 2.8 3.5 FNE 2.0 0.5 PCDR 1.7 3.0 0.5 0.8 Petrocaribe 14.2 14.2 4.0 3.7 Billions of gourdes Percent of GDP Domestically-financed capital spending % GDP Overall balance -26,722 -6.9 Financing 26,722 6.9 External 17,304 4.5 o/w Petrocaribe 16,909 4.3 Internal 9,418 2.4 BRH 5,200 1.3 o/w drawdown of gov deposits 2,200 0.6 o/w PCDR 3,000 0.8 Commercial banks 2,543 0.7 o/w Petrocaribe -2,467 -0.6 o/w TBs 5,010 1.3 Other non-bank financing 1,675 0.4 o/w FNE 2,037 0.5 o/w TBs 740 0.2 o/w amortization of TBs -1,103 -0.3 FY2013-14: Composition of Financing Millions of gourdes HAITI 10 INTERNATIONAL MONETARY FUND Box 1. Haiti: Reclassification of Expenditure Items for the 2014 Budget The authorities have improved transparency and accountability of their current spending operations through reclassification of certain expenditure items. The main reclassifications to the wage bill include:  G1.3 billion of staff compensation from autonomous public agencies, previously recorded as subsidies and transfers.  The compensation of 5,700 teachers, corresponding to G200 million.  In-kind allowances received by civil servants, previously recorded as goods and services. The main reclassifications to goods and services include:  G1.5 billion of spending of autonomous agencies, previously recorded as subsidies and transfers.  G1.1 billion of spending previously recorded in capital spending. These changes bring the wage bill to about 6.1 percent of GDP from 5.8 percent in 2013 and goods and services to 3.6 percent of GDP from 3.2 percent in 2013. Within these efforts of enhancing transparency, the authorities now specifically itemize the National Fund for Education (G2 billion) in the budget. Fiscal Reforms 8. Preserving fiscal sustainability will hinge on the authorities’ ability to increase revenue collection, particularly in the face of declining aid. There was agreement on the need to continue enhancing efficiency in tax and customs administration (MEFP, ¶ 14). Efforts in the remainder of FY2013 and FY2014 will focus on: (i) strengthening the large taxpayers’ office; (ii) making the medium-size taxpayers’ office operational, allocating adequate office space to the staff and increasing the number of medium-size taxpayers; and (iii) adopting and implementing a function- FY2013 FY2014 Wage bill 20,923 23,700 Hiring in police 735 Education 200 Health 200 Reclassification of autonomous agency wage bill from subsidies 1,328 Other 314 Goods and services 11,465 13,820 Election 244 Reclassification of autonomous agency current expenditure from subsidies 1,500 Reclassification expenditure from capital spending 1,142 FY2014 Budget : Reclassifications of Expenditure, millions of gourdes HAITI INTERNATIONAL MONETARY FUND 11 based organizational structure for a more efficient tax department; and (iv) promoting the use of E- declaration and establishing an E-payment system. Stronger controls at the border will also be needed, including through greater use of IT in the customs administration. However, the authorities should not rely solely on administrative reforms to achieve their revenue target. Efforts will also be needed to expand the tax base, considerably reduce tax expenditures, and improve and streamline the tax system (MEFP, ¶ 15). The authorities are currently preparing a study on the adoption of the VAT to be completed by December 2013 with the support of FAD technical assistance which will be the basis for a discussion on the tax base (i.e., which goods and services should be exempted), the tax rate, and the implementation procedure. LEG is providing technical assistance in coordination with FAD to assist the authorities in drafting the VAT law which is to be included in the new general tax code, also being prepared with LEG assistance. These revenue measures for the remainder of FY2013 and FY2014 are included in the medium-term strategy and are critical for achieving the authorities' target of an increase in domestic revenue to 15 percent of GDP by FY2017. 9. More flexibility in petroleum prices is needed to avoid volatility in revenue and costly general subsidies. To avoid social unrest and in the absence of a comprehensive and well-targeted safety net, domestic petroleum prices have been kept unchanged since March 2011, mostly through a downward adjustment of fees and taxes collected on petroleum products (see Box 2). Given recent international oil prices, this policy has triggered some revenue losses, which could reach 1.8 percent of GDP in FY2013. The authorities see the importance of aligning retail fuel prices with international levels (MEFP, ¶ 8) and are committed to increase domestic prices to limit revenue forgone and secure at a minimum the level of oil revenue envisaged in the FY2014 budget. It is expected that the planned increase in domestic fuel prices coupled with the projected decline in international prices will enable the authorities to collect at least G4 billion in FY2014. In the medium term, the elimination of the gap between domestic and international petroleum prices will be implemented gradually, accompanied by public outreach and compensatory measures for the most vulnerable so as to minimize any social discontent. To this end, the authorities have requested World Bank advice to design targeted assistance to vulnerable segments of the population that would be affected by an increase in energy prices. The mission stressed the Fund’s willingness to also help the authorities in this area. HAITI 12 INTERNATIONAL MONETARY FUND Box 2. Haiti: Domestic Oil Price Mechanism Since March 2011 prices at the pump for petroleum products have been fixed as follows: G200 (US$4.76) per gallon of Gasoline 95; G195 ($4.64) per gallon of Gasoline 91; G162 ($3.79) per gallon of diesel; and G161 ($3.84) per gallon of jet fuel (kerosene). In principle, pump prices reflect the shipping price, plus a series of charges and taxes. However, when the difference between the price at the pump and the shipping price is not enough to cover charges and fees, the adjustable excise is removed; then petroleum excises and customs duties (custom duties only for gasoline) are also removed. If these corrections to the price mechanism do not reach the fixed-price target, the Treasury subsidizes importers. Given high recent international oil prices, this policy has triggered some losses. Data indicate that, for the first semester, revenue from petroleum products amounted to only G0.7 billion, rather than G2.9 billion that could have been collected without the price mechanism in place, and instead of G2 billion envisaged in the budget. Absent any adjustment in domestic petroleum prices and assuming that international oil prices remain at their current level, the total cost to the budget could reach G6.5 billion (1.8 percent of GDP) for the full year. Of this, about G5.5 is revenue forgone while the remainder is the actual subsidies to the budget. 10. The mission emphasized the importance of continued efforts to strengthen the public investment framework. The authorities acknowledged a need to accelerate ongoing measures to improve the execution rate and the quality of capital spending (MEFP, ¶ 18). To this end, the authorities will set up a task force of local and international experts to review the investment program to differentiate between projects ready to be financed and those that are still at early stages (identifying their status, next steps, and technical assistance to finalize their preparation). Staff emphasized that only projects ready to be executed should be included in the budget. At the same time, the authorities will continue to strengthen the units within line ministries responsible for project evaluation and execution (including by hiring technical experts), enhance the control system, and promote a more dynamic information system. Staff reiterated the need to select and prioritize projects based on rigorous economic cost-benefit analyses. 11. The authorities are committed to consolidating progress in PFM. They are advancing towards a Treasury Single Account (TSA) and have taken important steps by creating new accounting posts and training the necessary accountants (MEFP, ¶ 7, 16). The opening of the government central account at the BRH and the signing of an agreement between the finance ministry and BRH on the modalities and functioning of this central account (MEFP, ¶ 7) will help accelerate the migration to a TSA by end-September 2014. Further progress in PFM reforms and in procurement will ensure greater transparency, accountability, and efficiency in the use of public resources. It will also encourage donors to channel more resources through the budget and better align their assistance with the authorities’ policy priorities. HAITI INTERNATIONAL MONETARY FUND 13 12. Staff emphasized the need to step up efforts to strengthen debt management capacity and policies. To finance the 2014 overall fiscal deficit, the government will need to issue a significant amount of short-term maturity T-Bills (G4.6 billion, as well as roll over previously issued T-bills of G2.7 billion). This will require close coordination between the MEF and the BRH but also efforts to further strengthen debt management. Staff also reiterated the importance of using of PetroCaribe resources only for to growth-enhancing investment projects to preserve debt sustainability. C. Monetary and exchange rate policy, and financial sector reforms Discussions focused on the need to guard against inflation risks and measures to strengthen the financial sector. 13. The BRH will remain vigilant in monitoring inflationary pressures. Staff pointed to the importance of using all available monetary policy tools and urged the authorities to not rely solely on the required reserve ratio. The authorities are prepared if necessary to increase central bank bills and T-bills issuance or to adjust the policy rate to gradually absorb excess liquidity and enhance the traction of monetary policy (MEFP, ¶ 12). However, the authorities expressed concern that high lending rates could jeopardize growth prospects. They noted that with inflation expected to remain in the single digits and projected slow growth, and in light of weak monetary transmission mechanisms, particularly the interest rate channel, raising interest rates may not be the first line of defense. Staff agreed but responded that maintaining low inflation should be the highest priority, and urged the authorities to continue enhancing the monetary transmission mechanism. There is also room to improve BRH modeling and forecasting capacity, and the authorities expressed interest in follow-up IMF TA. 14. The mission emphasized that further exchange rate flexibility would help enhance the effectiveness of monetary policy. The authorities agreed in principle that the gourde should adjust to underlying fundamentals, including the expected drop in official transfers, and reiterated that the BRH will continue to intervene in the foreign exchange market only to ensure a smooth adjustment and limit excess volatility (MEFP, ¶ 13). Staff stressed the need to safeguard foreign exchange reserves and external stability and encouraged the authorities to accelerate structural reforms to promote competitiveness and exports. The authorities have prioritized tourism and textiles as two key growth sectors, but pace of their development will depend on the investment and business environment as well as on infrastructure improvements. 15. Staff encouraged the authorities to improve the functioning of the foreign exchange market. As noted in the recent Article IV staff report (Country Report 13/90), the authorities remain committed to greater exchange flexibility (MEFP, ¶ 13) but wish to move cautiously and gradually to single-price foreign exchange auctions first by increasing the number of market participants. There was agreement on the need to continue improving Haiti’s shallow foreign exchange market. The authorities expressed interest in further technical assistance in this area. HAITI 14 INTERNATIONAL MONETARY FUND 16. Although credit has grown at a brisk pace in recent years, financial intermediation and access to finance remain low compared to regional peers. Staff and the authorities concurred that further improvements in financial intermediation are needed to support the growth agenda (MEFP, ¶ 19). Reforms should be guided by the recently conducted Financial Sector Assessment and by the 2008 FSAP. The most urgent reforms are changes in the legal system, including finalizing a legal framework for the operation and supervision of insurance companies, the law on financial cooperatives, and the law for microfinance institutions. Adopting a legal framework for secured transactions would also improve access to finance. More generally, staff urged the authorities to continue implementing the recommendations of the 2008 FSAP. Efforts to strengthen the financial sector supervisory and regulatory framework should continue. Addressing gaps in data collection will also be also important, particularly to facilitate comprehensive assessments of risks in the financial sector. D. Other issues 17. Poverty Reduction Strategy Paper (PRSP). Ranking 158th out of 187 countries in the UNDP Human Development Index, Haiti is one of the poorest countries in the world with almost 80 percent of the population living with less than $2 a day. There were two recent World Bank- financed household surveys: a survey on living standards (ECMAS), and a joint Demographic and Health Survey (DHS) and Multiple Indicator Cluster Survey (MICS). These surveys will allow a better understanding of the evolution of poverty levels and income distribution in Haiti, and help the authorities update the PRSP. 18. Electricity sector. Sustained reform efforts in the power sector are essential to ensure fiscal sustainability and higher growth. Staff urged the authorities to continue working closely with their partners, including the World Bank, IDB, and USAID, to improve the production and the distribution of electricity, as well as the management of the electricity company (EDH) to achieve better financial viability and gradually end its dependence on government subsidies. Staff welcomed steps taken by EDH to control payments to independent power producers and to put meters in the main industrial user firms, which account for 60 percent of EDH revenues. 19. Anti-money laundering and combating the financing of terrorism (AML/CFT). The draft law was approved by the Senate and is now being discussed in the Chamber of Deputies (MEFP, ¶ 23). At the same time, the authorities are making progress in the implementation of critical aspects of the AML/CFT framework, particularly to support anti-corruption efforts and prevent money laundering and the financing of terrorism. PROGRAM MONITORING 20. The authorities have requested a one-year extension of the ECF arrangement to lock in the gains to date and complete key reforms, particularly in the fiscal area. Since the beginning of the arrangement in July 2010, the authorities have consistently met all PCs and implemented 23 HAITI INTERNATIONAL MONETARY FUND 15 out of 28 structural benchmarks (albeit usually with delays), and continue to meet all continuous structural benchmarks An extension of the program will allow the authorities to implement the remaining benchmarks, which are critical steps in the establishment of a treasury single account and the creation of a strong debt management unit. 21. Program modalities. Quarterly quantitative indicative targets and semi-annual quantitative performance criteria (PCs) in place since the inception of the program will continue to be used to monitor program implementation. The proposed performance criteria and indicative targets are presented in Appendix Table 1 of the MEFP. Appendix Table 2d of the MEFP shows the proposed prior actions for completion of the sixth review and structural benchmarks. Continuous structural benchmarks as specified in Appendix table 2b will continue to be monitored. The authorities requested to discontinue the monitoring of the fifth benchmark related to the move to single-price foreign exchange auctions because of the absence of competition and to avoid significant exchange rate volatility, as lumpy transactions or a dearth of participants could cause jumps in the exchange rate. Staff supports this request but urged the authorities to take advantage of available technical assistance, including from the IMF, to improve the functioning of the foreign exchange market, particularly to increase the number of market participants and promote the development of the interbank foreign exchange market. Taking into account Haiti’s limited capacity and delays in the structural reform agenda, staff propose adding two new macro-relevant structural benchmarks to: (i) set up a task force of experts to review the public investment framework; and (ii) allocate office space to staff of the medium-sized tax payer unit. The latter will enable the unit to become operational and help increase tax administration efficiency and revenue. 22. Access. The remaining access under the ECF (SDR 4.914) will be phased equally into three purchases with test dates at end-March 2013, end-September 2013, and end-March 2014. Semi- annual periodicity of reviews will be maintained for the extended period of the ECF arrangement. 23. Capacity to repay and safeguards assessment. Capacity to repay and safeguards assessment. Haiti’s capacity to repay the Fund is adequate (Table 8). Implementation of the 2010 update safeguards assessment continues, albeit with delays. The completion of the FY2012 audit of the central bank is underway and the BRH intends to publish audited financial statements by end-July 2013 (MEFP, ¶ 22). Staff urged the authorities to accelerate the full adoption of IFRS along with the establishment of a special committee to monitor its implementation. The mission also encouraged the BRH to reconstitute the Investment Committee as an independent oversight body and to appoint a compliance officer to monitor the observance of the authorities’ foreign reserve policy and investment guidelines. HAITI 16 INTERNATIONAL MONETARY FUND Prior Actions and Structural Benchmarks through March 2014 Measures Timing Open a government central account at the BRH. Prior action: met Sign and make operational the TSA agreement between the finance ministry and BRH. Prior action: met Submit to Parliament a public debt law that would establish a sound legal and institutional framework for public debt management. Prior action (previously SB for end-March 2013): met Strengthen the debt unit with fully operational middle and back office functions; Preparation of annual debt sustainability analyses. End-December 2013 (reset from end-March 2013) Reduce the number of domestically-funded imprest accounts to three per ministry or institution (for revenue collection, capital spending, and other transactions); deploy the network of public accounting offices at the line ministries’ level; and gradually grant signature authority on these accounts to public accountants appointed by the MEF. End-March 2014 (reset from end-March 2013) Roll out general ledger (GL) software in all ministries; start to record project and imprest accounts expenditures when these are effectively paid, and no longer when the account is replenished. End-December 2013 (reset from end-March 2013) Set up a task force of experts to review the public investment framework. End-December 2013 Allocate offices to staff of the medium-sized tax payer unit. End-September 2013 HAITI INTERNATIONAL MONETARY FUND 17 E. Staff Appraisal 24. The macroeconomic situation has improved over the last three years, although growth has been modest. Inflation remains in the single digits and the external position has strengthened. The financial sector is expanding rapidly while the banking sector remains strong. Control over current spending remains firm, allowing some flexibility in fiscal policy. However, the post- earthquake recovery has been slow, due predominantly to weak absorptive capacity and a series of natural disasters. 25. Significant challenges still lie ahead. The key challenge for Haiti is to create the conditions for stronger and sustainable growth by maintaining macroeconomic stability and pursuing much-needed structural reforms to improve infrastructure and the business climate. Preserving fiscal and external sustainability in the context of declining foreign assistance will also be a top policy priority. The authorities should continue to promote competitiveness and exports to offset the decline in official transfers and preserve external stability. Strengthened relations between the legislative and executive branches will also be critical to expedite economic reforms needed to rekindle growth, create jobs and reduce poverty. 26. Domestic revenue mobilization is important for medium-term fiscal sustainability. While there have been some gains in revenue collection in recent years, revenue in Haiti remains well below potential and there is scope for higher yield by broadening the tax base, reducing tax expenditure and further increasing the efficiency of tax and customs administration. Aligning domestic petroleum prices with international levels will also limit forgone revenue. The authorities’ commitment to reform in this area is encouraging. 27. Aligning domestic fuel prices with international levels will be challenging, particularly in the absence of a well-targeted social safety net. Some immediate adjustments in domestic fuel prices will be critical to secure revenue targets and create additional fiscal space for infrastructure and poverty-related spending. In the medium term, the appropriate phasing-in and sequencing of price increases will depend on a range of factors, including the magnitude of the price increases required to eliminate subsidies and the time needed to develop an effective communication strategy and a social safety net. 28. Continued strong spending controls will be crucial. Staff welcomes the decisive actions in recent months to contain non-priority current spending and enhance transparency of the budget through a more appropriate reclassification of items. Careful management of the wage bill will also be critical to keep flexibility in fiscal policy and create room for additional infrastructure and poverty-related spending. Sustained reform efforts in the power sector are also essential for fiscal sustainability and growth. 29. Sustaining higher growth critically depends on forceful actions to improve the public investment framework. There is need to accelerate ongoing measures to improve project appraisal, evaluation, implementation, and reporting. Ensuring high quality capital spending will also HAITI 18 INTERNATIONAL MONETARY FUND require a realistic assessment of capacity constraints and improvements in the business climate to promote strong private sector development. 30. Strengthening PFM and governance remains critical. Staff urged the authorities to continue the effort to establish a TSA, which will help improve oversight of all cash flows and strengthen budget control. Staff drew the authorities' attention to the need for further efforts to improve the procurement process and debt management. The authorities are encouraged to swiftly adopt the draft AML/CFT law and ensure that it is in line with the 2012 FATF standard. Effective implementation of the framework will support the authorities’ efforts with regard to tax evasion, corruption, and prevention of financial sector abuse. 31. The authorities are firmly committed to keeping inflation in the single digits. The BRH should remain vigilant and be ready to use all available tools if demand pressures or second-round effects from domestic food price shocks arise. In this vein, the BRH should continue to improve monetary transmission mechanisms, and intervene in the foreign exchange market only to smooth excess volatility. Administrative measures should be taken only as a second line of defense after carefully assessing their impact. 32. Staff supports the authorities’ request for a one year extension and rephasing of disbursements, and recommends the completion of the sixth review under the ECF arrangement. Program implementation has been broadly satisfactory although implementation of structural reforms remains slow. On balance, significant progress has been made and the authorities maintain the commitment and the capacity to implement the program. The requested one-year extension of the ECF arrangement will help to lock in the gains to date and complete key reforms, particularly in the fiscal area. HAITI INTERNATIONAL MONETARY FUND 19 Nominal GDP (2011): US$7.4 billion Population (2009): 9.9 million 2013/14 2014/15 2015/16 2016/17 Act. Act. Pr o v. Pr og . National income and prices GDP at constant prices -5.4 5.6 2.8 6.5 3.4 4.5 5.2 5.8 5.6 GDP deflator 4.7 6.8 7.5 5.3 5.3 3.8 3.6 3.2 2.8 Consumer prices (period average) 4.1 7.4 6.8 6.7 7.1 4.4 4.0 3.7 3.4 Consumer prices (end-of-period) 4.7 10.4 6.5 5.0 6.0 5.0 4.0 3.5 3.0 External sector Exports (f.o.b.) 2.2 36.3 2.2 20.1 17.1 14.8 11.2 10.2 10.0 Imports (f.o.b.) 38.3 7.3 -12.4 14.5 6.7 3.3 5.4 5.4 5.0 Real effective exchange rate (end of period; + appreciation) 0.7 1.6 4.7 ... Money and credit Credit to the nonfinancial public sector (net) -122.7 229.4 41.6 -13.2 -23.7 -60.6 -119.4 435.5 45.6 Of which: Net credit to the central government -104.3 930.9 44.7 0.5 -15.4 -79.1 -289.2 106.8 31.1 Credit to private sector -5.6 24.5 29.8 21.6 21.6 18.0 17.5 17.0 16.5 Base money 31.2 6.0 -3.7 10.9 8.9 8.5 9.0 9.2 8.5 Broad money (incl. foreign currency deposits) 22.7 10.4 6.9 11.8 8.0 7.8 8.0 8.1 7.8 Central government Overall balance 2.4 -3.7 -5.1 -5.3 -5.5 -6.9 -5.4 -4.3 -3.5 Overall balance (excluding grants and externally-financed projects) -5.0 -4.7 -5.0 -6.1 -6.1 -7.0 -5.3 -4.3 -3.4 Domestic revenue 11.9 13.1 12.8 14.1 12.3 13.0 13.6 14.0 14.5 Grants 16.5 16.8 10.6 10.4 8.4 6.8 5.8 5.1 4.4 Expenditures 26.0 33.5 28.4 29.8 26.2 26.7 24.8 23.4 22.4 Current expenditures 11.3 11.8 11.9 11.3 10.9 11.5 11.3 11.1 10.9 Capital expenditures 14.7 21.7 16.5 18.5 15.3 15.3 13.5 12.4 11.5 Savings and investment Gross investment 25.4 28.0 29.1 29.5 25.7 28.6 27.1 27.0 27.0 Of which: public investment 14.7 21.7 16.5 18.5 15.3 15.3 13.5 12.4 11.5 Gross national savings 12.9 23.8 25.1 23.9 19.9 22.9 21.4 21.5 21.7 Of which: central government savings 4.0 2.4 1.2 3.8 2.1 2.0 2.6 3.1 3.7 External current account balance (including official grants) -12.5 -4.6 -4.5 -5.6 -5.8 -5.7 -5.7 -5.6 -5.4 External current account balance (excluding official grants) -29.8 -24.2 -17.0 -17.7 -16.0 -14.3 -13.3 -12.4 -11.4 Public Debt External public debt (end-of-period) 13.2 8.9 13.0 16.8 17.3 20.7 22.8 24.2 25.1 Total government debt (end-of-period) 17.7 12.2 15.4 20.4 20.4 24.5 27.6 29.4 30.3 External public debt service 1/ 1.6 0.6 0.8 1.5 1.5 2.5 4.1 5.1 5.9 Overall balance of payments 1,028 167 272 -290 -290 -259.7 -74.1 -81.7 -109.2 Net international reserves (program definition) 2/ 1,098 1,178 1,302 998 998 738 703 666 602 Liquid gross reserves 1,792 2,000 2,284 2,019 2,019 1,759 1,724 1,684 1,614 In months of imports of the following year 5.2 6.2 6.8 5.5 5.8 4.7 4.4 4.1 3.8 Nominal GDP (millions of Gourdes) 264,039 297,687 329,032 368,991 358,272 388,727 423,625 462,601 502,067 Nominal GDP (millions of US dollars) 6,551 7,388 7,902 8,535 8,287 8,835 9,628 10,514 11,411 1/ In percent of exports of goods and nonfactor services. Includes HIPC, MDRI, and PCDR debt relief. 2/ SDR allocation (liability) is not netted out of NIR. Sources: Ministry of Economy and Finance; Bank of the Republic of Haiti; Fund staff estimates and projections; and World Bank (In percent of GDP; unless otherwise indicated) (Change over previous year; unless otherwise indicated) (In millions of U.S. dollars; unless otherwise indicated) 2012/13 Table 1. Haiti: Selected Economic and Financial Indicators, 2009/10 - 2016/17 2009/10 2010/11 2011/12 (Fiscal year ending September 30) Proj. HAITI 20 INTERNATIONAL MONETARY FUND 2013/2014 Act. Prog. Est. Prog. Prov. Prog. Proj. Total revenue and grants 75,004 86,794 88,801 91,786 76,802 90,197 74,254 77,254 Domestic revenue 31,425 36,459 38,893 44,516 41,970 52,002 44,000 50,642 Domestic taxes 19,393 22,133 24,460 29,387 28,076 34,032 29,987 34,597 Customs duties 11,394 13,512 13,672 15,000 13,721 17,337 13,398 15,378 Other current revenue 638 814 761 129 174 633 615 667 Grants 43,579 50,335 49,907 47,270 34,831 38,195 30,254 26,612 Budget support 8,966 6,875 3,492 2,291 1,124 3,458 2,594 1,980 Project grants 23,924 43,460 46,416 44,979 33,707 34,737 27,660 24,632 Total expenditure 1/ 68,704 104,100 99,811 103,677 93,424 109,838 93,915 103,976 Current expenditure 29,849 33,997 35,231 37,089 39,008 41,538 39,121 44,655 Wages and salaries 14,563 16,590 14,809 17,066 16,706 21,139 20,923 23,700 Net Operations 2/ 7,040 10,237 7,525 9,822 11,406 11,235 11,465 13,820 Other current expenditures 1,023 8,559 0 0 0 0 0 0 Interest payments 1,569 1,394 1,272 1,335 1,360 1,625 1,625 1,476 External 452 154 153 230 230 397 397 581 Domestic 1,118 1,241 1,119 1,105 1,130 1,228 1,228 1,205 Transfers and subsidies 6,677 7,454 11,626 8,866 9,534 7,539 5,108 5,659 Of which: energy sector 3/ 3,793 3,945 8,232 4,492 4,844 2,600 2,600 2,500 Capital expenditure 38,855 70,103 64,579 66,588 54,417 68,300 54,794 59,321 Domestically financed 14,689 25,335 17,621 21,025 19,264 33,067 26,638 33,214 Of which: Treasury 13,475 24,102 16,431 21,025 19,264 32,705 26,286 33,214 Of which: related to PetroCaribe spending 2,991 9,874 7,479 9,500 9,276 14,442 14,442 14,442 Foreign-financed 24,166 44,767 46,958 45,563 35,152 35,233 28,157 26,107 Overall balance 6,299 -18,984 -11,010 -11,891 -16,623 -19,641 -19,661 -26,722 Excluding grants -37,279 -67,641 -60,918 -59,161 -51,454 -57,836 -49,915 -53,334 Excluding grants and externally financed projects -13,113 -22,873 -13,959 -13,599 -16,302 -22,603 -21,759 -27,227 Adjustment (unidentified spending) 1,260 0 1,174 0 0 0 0 0 Financing -5,546 18,984 12,187 11,891 16,623 19,641 19,661 26,722 External net financing 9,050 13,867 13,643 14,719 15,475 16,420 16,420 17,304 Loans (net) 9,050 13,867 13,644 14,719 15,475 16,420 16,420 17,304 Disbursements 9,356 14,079 13,721 14,743 15,602 17,110 17,110 18,384 Of which: Petrocaribe 9,114 12,747 13,214 14,160 14,157 16,613 16,613 16,909 Project loans 3,631 1,307 543 583 1,445 497 497 1,475 Amortization -306 -212 -77 -24 -127 -690 -690 -1,080 Arrears (net) 0 00 00 00 0 Internal net financing -14,596 5,117 -1,456 -2,882 1,148 3,221 3,241 9,418 Banking system -16,904 3,884 -5,383 -640 -2,734 -55 1,787 7,743 BRH -11,248 2,782 -2,926 1,300 -224 2,116 2,305 5,200 Excluding Petrocaribe -11,344 0 -2,926 1,300 -224 2,116 2,305 5,200 Net T-bills for recapitalization 0 4,000 0 0 0 0 0 0 From PCDR account 0 2,782 0 1,025 1,130 1,500 1,729 3,000 Commercial banks -5,656 1,102 -2,457 -1,940 -2,510 -2,171 -517 2,543 excl. Petrocaribe 300 4,000 -300 1,416 0 0 1,654 5,010 Net purchase of T-bills 300 4,000 -300 1,416 0 0 1,654 5,010 Nonbank financing 2,308 1,233 3,927 -2,243 3,882 3,277 1,454 1,675 Amortization 0 -300 -300 -2,400 0 0 0 -1,103 Net purchase of T-bills 0 0 0 157 0 2,915 1,103 -362 Arrears (net) 0 00 00 00 0 HIPC interim relief 0 0 0 0 0 0 0 0 Unidentified financing -506 03 00 00 0 Financing gap (in U.S. dollars) 12 00 00 00 0 Memorandum items Financing from Petrocaribe 9,113.9 13,214.3 14,160.2 14,157.2 16,613.2 16,613.2 16,908.7 Balance of PCDR account (in millions of U.S. dollars) 268 199 268 225 222 165 160 73 Stock of T-bills at end of year (in millions of Gourdes) 300 8,300 0 1,573 0 2,915 2,756 7,404 Transfers to EDH from Petrocaribe resources (million of Gou r n.a. n.a. 3,538 2,499 2,243 0 0 0 Sources: Ministry of Finance and Economy; and Fund staff estimates and projections. 1/ Commitment basis except for domestically financed capital expenditure, which is reported on cash basis from 2007 onwards. 2/ Includes statistical discrepancy. 3/ Includes transfers from Petrocaribe resources in FY2011. Table 2a. Haiti: Central Government Operations, 2009/10 - 2013/14 (Fiscal year ending September 30; in millions of gourdes) Proj. 2012/132009/10 2010/11 2011/12 HAITI INTERNATIONAL MONETARY FUND 21 2013/2014 Actual Prog. Est. Prog. Prov. Prog. Proj. Total revenue and grants 28.4 28.1 29.8 27.9 23.3 24.4 20.7 19.9 Domestic revenue 11.9 11.8 13.1 13.5 12.8 14.1 12.3 13.0 Domestic taxes 7.3 7.2 8.2 8.9 8.5 9.2 8.4 8.9 Customs duties 4.3 4.4 4.6 4.6 4.2 4.7 3.7 4.0 Other current revenue 0.2 0.3 0.3 0.0 0.1 0.2 0.2 0.2 Grants 16.5 16.3 16.8 14.4 10.6 10.4 8.4 6.8 Budget support 3.4 2.2 1.2 0.7 0.3 0.9 0.7 0.5 Project grants 9.1 14.1 15.6 13.7 10.2 9.4 7.7 6.3 Total expenditure 1/ 26.0 33.8 33.5 31.5 28.4 29.8 26.2 26.7 Current expenditure 11.3 11.0 11.8 11.3 11.9 11.3 10.9 11.5 Wages and salaries 5.5 5.4 5.0 5.2 5.1 5.7 5.8 6.1 Net Operations 2/ 2.7 3.3 2.5 3.0 3.5 3.0 3.2 3.6 Other current expenditures 0.4 2.7 0.0 0.0 0.0 0.0 0.0 0.0 Interest payments 0.6 0.5 0.4 0.4 0.4 0.4 0.5 0.4 External 0.2 0.0 0.1 0.1 0.1 0.1 0.1 0.1 Domestic 0.4 0.4 0.4 0.3 0.3 0.3 0.3 0.3 Transfers and subsidies 2.5 2.4 3.9 2.7 2.9 2.0 1.4 1.5 Of which: energy sector 3/ 1.4 1.3 2.8 1.4 1.5 0.7 0.7 0.6 Capital expenditure 14.7 22.7 21.7 20.3 16.5 18.5 15.3 15.3 Domestically financed 5.6 8.2 5.9 6.4 5.9 9.0 7.4 8.5 Of which: Treasury 5.1 7.8 5.5 6.4 5.9 8.9 7.3 8.5 Of which: related to PetroCaribe spending 1.1 3.2 2.5 2.9 2.8 3.9 4.0 3.7 Foreign-financed 9.2 14.5 15.8 13.9 10.7 9.5 7.9 6.7 Overall balance 2.4 -6.2 -3.7 -3.6 -5.1 -5.3 -5.5 -6.9 Excluding grants -14.1 -21.9 -20.5 -18.0 -15.6 -15.7 -13.9 -13.7 Excluding grants and externally financed projects -5.0 -7.4 -4.7 -4.1 -5.0 -6.1 -6.1 -7.0 Adjustment (unidentified spending) 0.4 0.0 0.4 0.0 0.0 0.0 0.0 0.0 Financing -2.1 6.2 4.1 3.6 5.1 5.3 5.5 6.9 External net financing 3.4 4.5 4.6 4.5 4.7 4.4 4.6 4.5 Loans (net) 3.4 4.5 4.6 4.5 4.7 4.4 4.6 4.5 Disbursements 3.5 4.6 4.6 4.5 4.7 4.6 4.8 4.7 Of which: Petrocaribe 3.5 4.1 4.4 4.3 4.3 4.5 4.6 4.3 Project loans 1.4 0.4 0.2 0.2 0.4 0.1 0.1 0.4 Amortization -0.1 -0.1 0.0 0.0 0.0 -0.2 -0.2 -0.3 Arrears (net) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Internal net financing -5.5 1.7 -0.5 -0.9 0.3 0.9 0.9 2.4 Banking system -6.4 1.3 -1.8 -0.2 -0.8 0.0 0.5 2.0 BRH -4.3 0.9 -1.0 0.4 -0.1 0.6 0.6 1.3 Excluding Petrocaribe -4.3 0.0 -1.0 0.4 -0.1 0.6 0.6 1.3 Net T-bills for recapitalization 0.0 1.3 0.0 0.4 0.0 0.0 0.0 0.0 Fr om PCDR account … 0.9 0.0 -0.7 0.3 … … … Commercial banks -2.1 0.4 -0.8 -0.7 -0.8 -0.6 -0.1 0.7 Excluding Petrocaribe 0.1 1.3 -0.1 0.0 0.0 0.0 0.5 1.3 Net purchase of T-bills 0.1 1.3 -0.1 0.0 0.0 0.0 0.5 1.3 Nonbank financing 0.9 0.4 1.3 -0.7 1.2 0.9 0.4 0.4 Amortization 0.0 -0.1 -0.1 -0.7 0.0 0.0 0.0 -0.3 Net purchase of T-bills 0.0 0.0 0.0 0.0 0.0 0.8 0.3 -0.1 Arrears (net) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 HIPC interim relief 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Unidentified financing -0.2 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Financing gap 0.2 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Memorandum item: Balance of PCDR account 4.1 2.6 3.6 2.8 2.8 1.9 1.9 0.8 Stock of T-bills at end of period 0.1 2.7 0.0 0.5 0.0 0.8 0.8 1.9 Transfers to EDH from Petroc aribe resources (million of Gourdes) 1.2 0.8 0.7 0.0 0.0 0.0 Sources: Ministry of Finance and Economy; and Fund staff estimates and projections. 1/ Commitment bas is except for do mes tica lly fina nced ca pita l expenditur e, which is r epo rted on cas h bas is fr om 2007 onwar ds . 2/ Includes statistical discrepancy. 3/ Includes transfers from Petrocaribe resources in FY2011. Table 2b. Haiti: Central Government Operations, 2009/10 - 2013/14 (Fiscal year ending September 30; in percent of GDP) Proj. 2009/10 2010/11 2011/12 2012/13 HAITI 22 INTERNATIONAL MONETARY FUND 2009/10 2013/14 Pr og. Es t. Prog. Pr og. Pr ov. Prog. Proj. Net foreign assets 64,127 55,236 72,469 66,877 76,597 87,436 78,580 78,576 67,136 (In millions of U.S. dollars) 1,606 1,347 1,773 1,592 1,811 2,066 1,786 1,786 1,526 Net international reserves (program) 1/ 1,098 772 1,178 979 1,221 1,302 998 998 738 Commercial bank forex deposits 618 689 706 725 702 874 897 897 897 Net domestic assets -23,344 -8,254 -29,234 -18,669 -29,471 -45,795 -32,400 -33,234 -17,940 Net credit to the nonfinancial public sector 9,520 11,811 5,276 9,049 7,244 3,685 8,161 8,350 13,884 Of which: Net credit to the central government 12,376 14,652 9,466 12,572 10,767 9,235 11,351 11,540 16,740 Of which: T-bills 0 4,000 0 0 0 0 0 0 0 Of which: IMF PCDR Debt Relie f -10,704 -8,200 -10,954 -7,572 -9,510 -9,410 -7,270 -7,036 -3,209 Liabilities to commercial banks (excl gourde deposits) -33,907 -36,756 -35,191 -37,677 -36,938 -42,736 -44,668 -44,668 -43,868 BRH bonds/Open market operations -9,210 -8,500 -6,328 -7,241 -7,241 -5,742 -5,200 -5,200 -4,400 Counterpart of commercial bank forex deposits -24,697 -28,256 -28,863 -30,437 -29,697 -36,994 -39,468 -39,468 -39,468 Other 1,043 16,691 680 9,959 223 -6,745 4,106 3,084 12,044 Base Mone y 40,783 46,982 43,235 48,207 47,126 41,641 46,180 45,342 49,196 Currency in circulation 17,282 19,671 18,401 20,608 20,796 20,232 22,457 22,457 23,559 Commercial bank gourde deposits 23,501 27,311 24,834 27,599 26,330 21,410 23,723 22,885 25,637 Net foreign assets 92,209 86,810 104,581 101,132 111,097 115,977 109,572 109,568 99,008 (In millions of U.S. dollars) 2,309 2,117 2,559 2,408 2,626 2,740 2,490 2,490 2,250 Of which: Commercial banks NFA 703 770 786 816 816 674 704 704 724 Net domestic assets 33,942 64,954 34,744 60,615 43,862 32,961 56,945 51,272 74,374 Credit to the nonfinancial public sector -3,745 -352 -12,336 912 -12,308 -17,466 -15,161 -13,318 -5,242 Of which: Net credit to the centr al gover nment -776 n.a. -7,996 n.a. -8,636 -11,571 -11,626 -9,783 -2,041 Credit to the private sector 40,585 49,370 50,526 59,028 59,929 65,573 79,736 79,736 94,089 In gourdes 21,708 25,472 28,086 32,196 35,358 38,048 47,191 47,191 56,799 In foreign currency 18,877 23,898 22,440 26,832 24,571 27,525 32,545 32,545 37,290 In millions of U.S. dollars 473 583 549 639 581 650 740 740 847 Other -2,898 15,935 -3,446 675 -3,759 -15,145 -7,631 -15,146 -14,473 Broad money 126,151 151,763 139,324 161,747 154,960 148,938 166,517 160,840 173,382 Currency in circulation 17,282 19,671 18,401 20,608 20,796 20,232 22,457 22,457 23,559 Gourde deposits 48,513 57,221 52,164 60,405 55,392 54,933 61,250 61,250 67,731 Foreign currency deposits 60,355 74,871 68,760 80,733 78,772 73,774 82,809 77,133 82,092 In millions of U.S. dollars 1,511 1,826 1,682 1,922 1,862 1,743 1,882 1,753 1,866 Currency in circulation 28.5 13.8 6.5 12.0 13.0 9.9 11.0 11.0 7.7 Base money 31.2 15.2 6.0 11.2 9.0 -3.7 10.9 8.9 8.5 Gourde money (M2) 20.4 16.9 7.2 14.8 11.0 6.5 11.4 11.4 9.1 Broad money (M3) 22.7 20.3 10.4 16.1 11.2 6.9 11.8 8.0 7.8 Gourde deposits 17.8 25.0 7.5 15.8 10.2 5.3 11.5 8.4 10.6 Foreign currency deposits (U.S. dollars) 25.3 24.1 13.9 17.4 14.6 7.3 12.2 4.6 6.4 Credit to the nonfinancial public sector -122.7 -91.7 229.4 -107.4 -0.2 41.6 -13.2 -23.7 -60.6 Credit to the private sector -5.6 21.6 24.5 16.8 18.6 29.8 21.6 21.6 18.0 Credit in gourdes 13.0 17.3 29.4 14.6 25.9 35.5 24.0 24.0 20.4 Credit in foreign currency (U.S. dollars) -20.7 26.6 18.9 19.6 9.5 22.7 18.2 18.2 14.6 Memorandum items: Foreign currency bank deposits (percent of total) 55.4 56.7 56.9 57.2 58.7 57.3 57.5 55.7 54.8 Foreign curr. credit to priv. sector (percent of total) 46.5 48.4 44.4 45.5 41.0 42.0 41.6 41.6 41.2 Commercial Banks' Credit to Private Sector (percent of GDP) 2 / 14.6 15.2 16.2 16.3 17.5 19.1 20.8 21.5 23.4 So urces: Bank o f the Republic o f Haiti; and Fund s taff es timates and projectio ns. 2/ GDP ratio calculated using nominal program figure for 2009 (numerator) and actual nominal GDP (denominator). Table 3. Haiti: Summary Accounts of the Banking System, 2009/10- 2013/14 Pr oj. (12-mo nth percentage change) 1/ Excluding commercial bank forex deposits, letters of credit, guarantees, earmarked project accounts and U.S.dollar-denominated bank reserves. The NIR definition has been changed r elative to that of the pr evio us pr ogr am, with the SDR allo ca tion no longer netted out as a liability. This table r epo r ts NIR under the new definition. The revised projection for 2009/10 reflects the IMF debt relief of SDR 178.1 million approved on July 21, 2010. Act. 2010/11 2011/12 2012/13 I. Centr al Bank II. Consolidated Banking System HAITI INTERNATIONAL MONETARY FUND 23 2009/10 2010/11 2013/14 Est. Prog. (EBS/12/93) Prov. Prog. (EBS/13/90) Proj. Current account (including grants) -821 -339 -341 -359 -479 -480 -507 Current account (excluding grants) -1,953 -1,785 -1,677 -1,346 -1,512 -1,329 -1,267 Trade balance -2,247 -2,246 -2,246 -1,894 -2,080 -1,898 -1,855 Exports of goods 563 768 768 785 943 919 1,055 Of which: Assembly industry 523 714 716 716 885 861 991 Imports of goods -2,810 -3,014 -3,014 -2,679 -3,023 -2,817 -2,910 Of which: Petroleum products -546 -770 -815 -815 -871 -808 -841 Services (net) -1,035 -891 -838 -901 -890 -929 -954 Receipts 239 249 308 261 288 304 348 Payments -1,274 -1,140 -1,146 -1,161 -1,178 -1,233 -1,302 Income (net) 22 41 43 68 56 68 61 Of which: Interest payments 1/ -7 -4 -6 -6 -9 -9 -13 Current transfers (net) 2,439 2,757 2,700 2,368 2,434 2,280 2,241 Official transfers (net) 1,132 1,446 1,336 988 1,033 849 760 Of which: budget support 225 87 55 27 80 60 45 Private transfers (net) 1,307 1,311 1,364 1,380 1,402 1,431 1,481 Capital and financial accounts 991 594 379 631 189 190 247 Capital transfers (HIPC/MDRI/PCDR) 2/ 1,360 656 3 76 3 3 3 Debt stock reduction (HIPC/MDRI) 2/ -334 -486 0 n.a. 0 n.a. n.a. Public sector capital flows (net) 3/ 218 340 351 369 383 383 396 Loan disbursements 224 341 354 375 396 396 418 Amortization 1/ -6 -2 -3 -6 -13 -13 -21 Foreign direct investment (net) 150 181 101 179 112 112 112 Ba nks (net) 4/ -307 -83 -30 109 -30 -30 -20 Other items (net) -96 -14 -46 -102 -279 -278 -244 Errors and omissions 858 -88 0 0 0 0 0 Overall balance 1,028 167 38 272 -290 -290 -260 Financing -1,028 -167 -38 -257 290 290 260 Change in net foreign assets -1,031 -167 -38 -263 280 280 260 Change in gross reserves -828 -211 -60 -289 265 265 260 Liabilities -203 43 23 26 15 15 0 Utilization of Fund credits(net) -146 13 23 22 15 15 0 Other liabilities -57 30 0 4 0 0 0 Debt rescheduling and debt relief 3 0 0 6 10 10 n.a. Memorandum items: Current account (in percent of GDP) -12.5 -4.6 -4.3 -4.5 -5.6 -5.8 -5.7 Excluding official transfers -29.8 -24.2 -21.2 -17.0 -17.7 -16.0 -14.3 Exports of goods, f.o.b (percent change) 2.2 36.3 0.0 2.2 20.1 17.1 14.8 Imports of goods, f.o.b (percent change) 38.3 7.3 0.0 -12.4 14.5 6.7 3.3 Debt service (in percent of exports of goods and services) 1.6 0.6 0.8 0.8 1.5 1.5 2.5 Gross liquid international reserves (in millions of U.S. dollars) 2/ 1,792 2,000 2,060 2,284 2,019 2,019 1,759 (in months of next year's imports of goods and services) 5.2 6.2 5.5 6.8 5.5 5.8 4.7 Sources: Bank of the Republic of Haiti; and Fund staff estimates and projections. 1/ Includes HIPC/MDRI debt relief beginning in 2010. HIPC/MDRI interim debt relief in 2009 is reflected below the line. 2/ Includes operations under the HIPC/MDRI in 2009, PCDR in 2010, and debt cancellations by IDB, World Bank, and Venezuela in 2010-11. 3/ In 2009, including an SDR allocation of $101 million. 4/ Includes NIR and commercial banks' foreign currency deposits with the BRH. Table 4. Haiti: Balance of Payments, 2009/10 - 2013/14 (In millions of U.S. dollars on a fiscal year basis; unless otherwise indicated) Proj.Act. 2011/12 2012/13 HAITI 24 INTERNATIONAL MONETARY FUND Sep-10 Sep-11 Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Size and growth Asset volume (in US$ millions ) 3453.6 3767.5 3858.0 3945.0 4029.9 4173.7 4074.2 Deposit volume (in US$ millions ) 2985.8 3316.2 3394.2 3475.1 3469.5 3487.3 3376.8 Asset growth since beginning of fiscal year 27.8 11.6 4.2 7.5 10.8 15.3 2.8 Credit growth (net) since beginning of fiscal year -11.7 31.5 11.2 21.5 34.0 33.2 31.2 Capital adequacy Regulatory capital to risk-weighted assets 13.4 16.5 16.7 16.7 16.8 16.3 16.0 Assets to regulatory capital 23.8 14.7 13.6 13.9 13.3 14.1 13.5 Asset quality and composition Loans (net) to assets 21.3 25.1 26.8 28.4 33.0 30.9 30.5 NPLs to gross loans 5.7 3.7 3.6 3.2 2.4 2.4 2.6 Provisions to gross loans 4.84.43.0 2.82.32.72.1 Provisions to gross NPLs 84.1 93.1 83.3 88.8 96.7 86.1 81.3 NPLs less provisions to net worth 3.21.12.6 1.70.41.62.5 Earnings and profitability (cumulative since beginning of fiscal year) Return on Assets (ROA) 1.21.41.4 1.31.51.21.3 Return on equity (ROE) 18.4 22.2 22.2 21.7 21.9 18.2 20.2 Net interest income to gross interest income 87.4 91.4 92.2 92.3 92.4 93.2 93.3 Operating expenses to net profits 69.2 67.8 65.6 66.1 66.7 67.3 65.7 Efficiency Interest rate spread 1/ 9.6 8.9 8.2 8.2 7.4 7.5 7.4 Liquidity Liquid assets to total assets 2/ 51.0 49.5 48.2 48.5 45.5 42.7 42.2 Liquid assets to deposits 2/ 59.0 56.3 54.7 55.0 52.8 51.1 50.9 Dollarization Foreign currency loans to total loans (net) 60.1 55.7 53.8 51.8 51.7 48.0 47.8 Foreign currency deposits to total deposits 44.1 62.3 63.9 64.5 62.9 62.8 59.1 Foreign currency loans to foreign currency deposits 31.3 32.6 34.6 35.7 37.3 28.2 31.4 Sources: BRH Banking System Financial Summary; and IMF estimates 1/ Defined as the difference between average lending rate and average fixed deposit rate in the banking system. 2/ Liquid assets comprise cash and central bank bonds. (In percent; unless otherwise stated) Table 5. Haiti: Financial Soundness Indicators of Individual Banks, September 2010 - March 2013 HAITI INTERNATIONAL MONETARY FUND 25 2008/09 2009/10 2010/11 2011/12 2012/13 Est. Debt indicators Total external public debt (in percent of GDP) 19.0 13.2 8.9 13.0 17.3 Total external public debt (in percent of exports) 2/ 133.7 107.6 64.6 98.3 117.2 External debt service (in percent of GDP) 0.6 0.2 0.1 0.1 0.2 Amortization 0.4 0.1 0.0 0.0 0.1 Interest External debt service (in percent of exports) 2/ 3.9 1.6 0.6 0.8 1.5 External debt service (in percent of current central govt. revenues) 4.9 1.7 0.6 0.9 1.8 Other indicators Exports (percent change, 12-month basis in U.S. dollars) 11.6 -13.7 26.8 2.8 16.9 Imports (percent change, 12-month basis in U.S. dollars) -1.7 45.6 1.7 -8.5 6.5 Remittances and grants in percent of gross disposable income 19.9 27.1 27.1 22.9 21.4 Exchange rate (per U.S. dollar, period average) 40.7 40.3 40.3 41.6 43.2 Current account balance (millions of US dollars) 3/ -226.3 -820.7 -338.8 -358.9 -479.8 Capital and financial account balance (millions of US dollars) 4/ 501.2 991.5 594.3 631.1 189.9 Public sector 287.9 218.2 339.5 369.1 382.9 Private sector 213.3 773.3 254.8 262.0 -192.9 Liquid gross reserves (millions of US dollars) 947.5 1792.0 1999.7 2284.1 2019.1 In months of imports of the following year 2/ 2.8 5.2 6.2 6.8 5.8 In percent of debt service due in the following year 7283 30685 22988 12774 5800 In percent of base money 127.4 175.5 189.1 232.1 195.9 Sources: Bank of the Republic of Haiti; and Fund staff estimates and projections. 1/ Reflects HIPC/MDRI relief. 2/ Goods and services. 3/ Including grants. 4/ Includes in the private sector FDI, short-term capital, and errors and omissions in addition to bank flows. Table 6. Haiti: Indicators of External Vulnerability, 2008/09 - 2012/13 1/ (Units as indicated) Proj. HAITI 26 INTERNATIONAL MONETARY FUND Status SDR 8,190,000 July 21, 2010 Executive Board approval of the three-year arrangement Completed under the ECF. SDR 8,190,000 January 15, 2011 Observance of performance criteria for September 2010 and Completed completion of the first review under the ECF arrangement. SDR 4,914,000 July 15, 2011 Observance of performance criteria for March 2011 and Completed completion of the second review under the ECF arrangement. 2/ SDR 4,914,000 January 15, 2012 Observance of performance criteria for September 2011 and Completed completion of the third review under the ECF arrangement. 2/ SDR 4,914,000 July 15, 2012 Observance of performance criteria for March 2012 and Completed completion of the fourth review under the ECF arrangement. SDR 4,914,000 January 15, 2013 Observance of performance criteria for September 2012 and Completed completion of the fifth review under the ECF arrangement. SDR 1,638,000 July 15, 2013 Observance of performance criteria for March 2013 and completion of the sixth review under the ECF arrangement. SDR 1,638,000 January 15, 2014 Observance of performance criteria for September 2013 and completion of the seventh review under the ECF arrangement. SDR 1,638,000 July 8, 2014 Observance of performance criteria for March 2014 and completion of the eighth review under the ECF arrangement. 1/ Other than the generally applicable conditions for the Extended Credit Facility (ECF) arrangement. Table 7. Haiti: Proposed Schedule of Disbursements, 2010-2014 2/ The second and third reviews were combined. Amount Availability Date Conditions for Disbursement 1/ HAITI INTERNATIONAL MONETARY FUND 27 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22 2022/23 Fund obligations based on existing credit (in millions of SDRs) Principal 0.0 0.0 0.0 1.6 4.3 6.7 7.2 7.2 5.6 2.9 0.5 Interest 0.0 0.0 0.1 0.1 0.1 0.1 0.1 0.0 0.0 0.0 0.0 Fund obligations based on existing and prospective credit (in millions of SDRs) Principal 0.0 0.0 0.0 1.6 4.3 6.7 7.7 8.2 6.6 3.9 1.5 Interest 0.0 0.0 0.1 0.1 0.1 0.1 0.1 0.1 0.0 0.0 0.0 Total obligations based on existing and prospective credit In millions of SDRs 0.0 0.0 0.1 1.7 4.4 6.8 7.8 8.3 6.6 4.0 1.5 In millions of U.S. dollars 0.0 0.0 0.2 2.6 6.5 10.2 11.7 12.4 9.9 5.9 2.2 In percent of exports 0.0 0.0 0.0 0.2 0.3 0.5 0.6 0.5 0.4 0.2 0.1 government revenues 0.0 0.0 0.0 0.2 0.35 0.4 0.4 0.3 0.2 0.1 0.0 reserves 0.0 0.0 0.0 0.2 0.4 0.6 0.7 0.7 0.6 0.4 0.1 debt service 0.0 0.0 0.2 3.0 5.8 7.5 7.4 7.0 5.1 2.8 1.0 quota 0.0 0.0 0.1 2.1 5.3 8.3 9.5 10.1 8.1 4.8 1.8 Outstanding Fund credit (end of period) In millions of SDRs 41.0 41.0 41.0 39.4 35.1 28.4 20.2 12.0 5.5 1.5 0.1 In millions of U.S. dollars 62.1 62.0 61.8 59.2 52.7 42.6 31.1 18.8 8.9 3.0 0.8 In percent of exports 6.2 5.4 4.8 4.2 3.5 2.7 1.9 1.1 0.6 0.2 0.0 government revenues 6.1 5.4 4.7 4.0 3.2 2.3 1.6 0.8 0.4 0.1 0.0 reserves 3.1 3.5 3.6 3.5 3.3 2.5 1.8 1.1 0.5 0.2 0.0 quota 50.1 50.1 50.1 48.1 42.9 34.7 25.3 15.3 7.3 2.5 0.7 Memorandum items: Exports 1/ 2/ 1.2 1.4 1.6 1.7 1.9 2.1 2.1 2.3 2.5 2.6 2.8 Government revenues 1/ 3/ 1.0 1.2 1.3 1.5 1.7 1.8 2.0 2.3 2.5 2.7 3.0 Reserves 1/ 4/ 2.0 1.9 1.9 1.8 1.8 1.8 1.8 1.8 1.8 1.8 1.8 Debt service 1/ 0.0 0.0 0.1 0.1 0.1 0.1 0.2 0.2 0.2 0.2 0.2 Quota (in millions of SDRs) 81.9 81.9 81.9 81.9 81.9 81.9 81.9 81.9 81.9 81.9 81.9 GDP 1/ 8.3 8.8 9.6 10.5 11.4 12.3 13.3 14.3 15.3 16.5 17.7 Sources: Haitian authorities; and Fund staff projections. Note: Data covers Haiti's fiscal year, which runs from October 1 to September 30. 1/ In billions of U.S. dollars. 2/ Exports of goods and services 3/ Central government domestic revenues. 4/ Gross liquid international reserves, end of period. Table 8. Haiti: Indicators of Capacity to Repay the Fund, 2012/13-2022/23 (Units as indicated) HAITI 28 INTERNATIONAL MONETARY FUND APPENDIX I: Letter of Intent July 9, 2013 Mrs. Christine Lagarde Managing Director International Monetary Fund Washington D.C. 20431 United States of America Dear Mrs. Lagarde: 1. Our economy continued to recover, although less rapidly than expected owing particularly to weather-related shocks, shortfalls in capital expenditure, and delays in the disbursement of external grants. The macroeconomic situation remained relatively stable, with inflation in the mid- single digits. The external position is relatively strong with official reserves at about 6 months of imports at end-May 2013. 2. Implementation of our program supported by an arrangement under the Extended Credit Facility (ECF) remains broadly on track. All end-March 2013 performance criteria and indicative targets were met, except the end-March indicative targets on BRH net credit to the Government and on poverty-related spending. The latter was missed because some resources were redirected to other sectors severely hit by Hurricanes Isaac and Sandy, while the former was not met due partly to a shortfall in budget support. We also achieve some major structural reforms despite weak capacity, the recent change in government, and delays in mobilizing needed financial and technical assistance. 3. In light of the progress made in implementing the program supported by the ECF arrangement, we request the completion of the sixth review and the approval of the sixth disbursement for an amount equivalent to SDR 1.638 million. We also request that the ECF be extended to August 29, 2014, and that performance criteria be set for September 30, 2013 and March 30, 2014. We also request to rephase the remaining access under the ECF (SDR 4.914) equally into three purchases with test at end-March 2013, end-September 2013, and end-March 2014. 4. The requested extension under the ECF will help us maintain macroeconomic stability and pursue structural reforms to boost productivity and competitiveness and achieve strong and inclusive growth. We believe that the economic and financial policies set forth in the attached MEFP HAITI INTERNATIONAL MONETARY FUND 29 will deliver the objectives of the program. We will regularly update the IMF on economic and policy developments and will provide the data needed for adequate monitoring of the program. We stand ready to take any further measures as deemed appropriate to meet our objectives. We will consult with the Fund ahead of the adoption of these measures and any revisions to the measures outlined in the MEFP, in accordance with the Fund’s policies on such consultation. Sincerely yours, /s /s Wilson LALEAU Charles CASTEL Minister of Economy and Finance Governor Ministry of Economy and Finance Bank of the Republic of Haiti Attachments: Memorandum of Economic and Financial Policies–Update Technical Memorandum of Understanding–Update HAITI 30 INTERNATIONAL MONETARY FUND ATTACHMENT 1. Memorandum of Economic and Financial Policies–Update Introduction 1. This Memorandum of Economic and Financial Policies (MEFP) supplements and updates the MEFPs that have preceded it since July 2010. It reviews recent economic developments and progress in implementing our macroeconomic and structural program under the Extended Credit Facility (ECF) arrangement, approved by the IMF Board on July 21, 2010. It also sets out macroeconomic policies and structural reforms that we will pursue during the remainder of FY2013 and in FY2014. Recent Macroeconomic Developments 2. The economy continued to recover, although less rapidly than expected. Emergency spending helped to partially offset the impact on the agricultural sector of Hurricane Sandy, which hit the country in October 2012. As a result, agricultural output (about 20 percent of GDP) will recover although at a slower pace than projected at the fifth review. Non-agricultural output will continue to grow, but also at a slower pace, mostly reflecting lower than expected execution of public investment and delays in disbursing external financing. On balance, we revised real GDP growth down to 3.4 percent in FY2013 from 6.5 percent envisaged in the last review. In FY2014, we expect real GDP growth to pick up to 4.5 percent, led by agriculture and construction. 3. The macroeconomic situation continued to be relatively stable. Inflation remained in the single digits (7.3 percent at end-May 2013). Fiscal performance during the first half of the year was weaker than budgeted. Domestic revenue was G22 million, 42 percent of the total amount budgeted for the whole year. In response, we restrained current spending, essentially goods and services and subsidies and transfers, by about G2 billion. The execution rate of capital spending continued to be low, though some improvements have been noticed in recent years. The external position remained comfortable with official reserves at about 6 months of imports at end-May 2013. Credit to the private sector continued to increase rapidly but broad money growth remained moderate and well below the program target. The BRH’s policy interest rates have not changed since January 2011, but in February 1, 2013, the Central Bank slightly tightened the monetary policy stance, raising banks' reserve requirement ratios by 5 percentage points to a maximum of 34 and 39 percent on liabilities in local and foreign currency, respectively. In March, 2013, the reserve requirement on gourde deposits was raised further to 35 percent. Financial soundness indicators of the banking system appear sound. Performance under the program 4. Implementation of our program, supported by an arrangement under the Extended Credit Facility (ECF), remains broadly on track. All end-March 2013 performance criteria were met, but the indicative targets on net domestic credit to the central government and on poverty-related spending were not met. The latter was missed as we had to redirect some HAITI INTERNATIONAL MONETARY FUND 31 resources to other sectors severely hit by Hurricanes Isaac and Sandy. Although some progress has been made, none of the five relevant structural benchmarks has been fully implemented, largely due to weak capacity and delays in mobilizing needed financial and technical assistance. The government program for the remainder of 2013 5. The macroeconomic outlook has been revised as follows: real GDP growth is expected to be weaker than projected at the time of the fifth review, at 3.4 percent; the current account deficit would be 5.8 percent of GDP and gross official reserves are expected to fall to 5.8 months of imports. Our monetary policy will continue to aim at price stability with year-on-year consumer price inflation expected to be around 6 percent. 6. Our revenue and expenditure measures will cap the 2013 budget deficit at 5.5 percent of GDP. The revised target takes into account a projected end-year revenue shortfall of G8 billion, some non-priority current expenditure cuts, and a downward revision in capital spending.  Revenue: We recognize the importance of revenue enhancement for creating additional fiscal space and ensuring fiscal sustainability. The lower than budgeted revenue collection in the first half of the year is largely due to: (i) weak fiscal administration capacity; (ii) the high level of international oil prices and the accompanying losses in revenue as domestic prices were kept unchanged; and (iii) delays in implementing some tax policy measures (including higher excise taxes on alcoholic beverages) and in improving tax collection. We have so far adopted urgent measures to improve controls at the borders and strengthen enforcement of income and sales tax collection. We expect these measures to increase average monthly revenue collection to almost G3.8 billion (as opposed to the G3.5 billion collected on average from October to March) during the second half of the year. This will bring domestic revenue to G44 billion for the year versus an initial budget target of G52 billion.  Expenditure: To offset the loss in revenue (G8billion), we will reduce non-priority current spending by about G2.4 billion. Based on the execution rate of the first semester, we have revised down domestically-financed capital spending by about G6.5 billion. 7. Implementation of structural reforms will continue through the remainder of FY 2013.  Treasury Single Account (TSA). Important steps have been made towards the establishment of a Treasury Single Account, including in the creation of new accounting posts and in the training of accountants. The introduction of the TSA in a first wave of ministries is almost ready. As prior actions, we have opened the Central Account related to the TSA at the BRH, and signed and implemented the agreement between the MEF and BRH on the modalities and functioning of the TSA, which will speed up the move to a TSA. These two actions will also help accelerate the implementation of the structural benchmark on the reduction of the number of domestically-funded imprest accounts to three per ministry or institution (end- HAITI 32 INTERNATIONAL MONETARY FUND March 2014 structural benchmark). We will complete the training of new accountants and the roll-over of the GL software in the accounting posts. We will fully implement the agreement on the treasury debt signed in last December. To this end, the MEF and BRH will work together to develop by the end of September 2013 an IT tool to help the reconciliation of the treasury accounts and the government’s financial accounts at the BRH.  Revenue administration. We will take measures to improve revenue collection. Further efforts will be made to improve tax collection at the large taxpayers unit. An action plan designed to monitor tax collection at this unit will be implemented. At the end of each week, reports about the large taxpayers’ unit performance will be prepared. The capacity of this unit that collects 80 percent of DGI revenues will be reinforced by appointing three permanent high- level experts. We will also provide offices for the newly-created units of the tax department that are in charge of medium-sized tax payers and NGOs (end-September 2013 structural benchmark) and enforce tax payments and control at customs.  Reorganization of the Ministry of Finance. A new organic law of the Directorate General of the Budget and the Directorate General of the Treasury and Public Accounting has been submitted to parliament. It will help improve the public investment framework and transition toward result-based public management. We will start implementing these laws as soon as they are passed by parliament. This will pave the way for strengthening the debt unit with fully operational middle and back office functions (end-December 2013 structural benchmark).  Improving debt management. As a prior action we have submitted the new debt law to parliament, which is a key step to continue enhancing our debt management capacity. 8. Current pump prices of petroleum products have generated significant revenue losses and subsidies. This situation is not sustainable and we intend to:  Develop a medium term plan to gradually close the wedge between domestic and international petroleum prices. In the short-run, we are committed to increase domestic prices so as to limit revenue forgone and secure at a minimum the level of oil revenue envisaged in the FY2014 budget.  Launch a communication campaign to explain to the public the reasons for and benefits of aligning domestic and international prices.  Design well-targeted social safety nets to help vulnerable social groups which may be affected by changes in energy prices. HAITI INTERNATIONAL MONETARY FUND 33 The program for FY2014 9. Our overriding priority remains to rebuild the country and maintain macroeconomic stability while creating the conditions for sustainable (broad-based and inclusive) growth, and build resilience against shocks through appropriate macroeconomic policies. Our macroeconomic policies, as well as the structural and institutional reform agenda for FY2014, will address these challenges. 10. The macroeconomic outlook for 2014 remains positive. Real GDP growth is conservatively projected at 4.5 percent, driven by agriculture, construction, and services. Inflation will remain in the single digits while the external current account deficit should decline slightly, associated with improved exports. The outlook is subject to some downside risks. On the domestic front, upcoming elections could fuel some political tensions and delay the reform agenda. Vulnerability to natural disasters remains a source of concern. On the external side, the highly concentrated export base (textiles to the US) poses risks given the slow recovery of developed economies, particularly the U.S. Fiscal policy 11. The FY2014 budget balances macroeconomic stability and reconstruction and development concerns. Fiscal policy will continue to aim at increasing domestic revenue and containing non-priority expenditure to make additional room for poverty-related and infrastructure spending with a view of enhancing productive capacity. On this basis, the 2014 budget targets a deficit of 6.9 percent of GDP, from 5.5 percent in FY2013.  Domestic revenue would increase to G50.6 billion in the prudent baseline scenario (13 percent of GDP).  Current expenditure is set at G44.5 billion (11.5 percent of GDP).  We envisage a wage bill of G23.7 billion, a 13.3 percent increase over FY2013. The increase includes: (i) the transfer into the wage bill of compensation of staff from autonomous agencies (G1.3 billion) which was previously recorded in subsidies; (ii) the inclusion into the budget of 5700 teachers (G200 million); (iii) the hiring of new police officers (G335 million); and (iv) of medical personnel (G200 million). In order to improve transparency, we are now including in-kind allowances received by civil servants in the wage bill (instead of in goods and services).  To enhance transparency in public financial management, we reclassified some items that were before recorded in subsidies and in capital spending and are now more appropriately registered under goods and services. In particular, we reclassified the spending of autonomous agencies from subsidies into goods and services (G1.5 billion), and some outlays from capital spending into current spending (G1.1 billion). HAITI 34 INTERNATIONAL MONETARY FUND  We will continue to contain budgetary subsidies, particularly to the electricity company (EDH), which will be at G2.5 billion, while increasing poverty-related spending to about G15.5 billion in FY2014.  Domestically-financed spending will amount to 8.5 percent of GDP, of which 4.4 percent of GDP (G18.7 billion) will be financed from treasury resources (including G2 billion from the National Education Fund and G3 billion from PCDR). In order to better assess the impact of public investment spending, we will isolate gross capital formation from our figures, and reclassify the remainder of the project spending envelopes as current expenditures.  The deficit will be financed mostly by external resources (about 4.5 percent of GDP) and treasury bills (about 1.2 percent of GDP). Monetary and exchange rate policies 12. The principal objective of monetary policy remains to support price stability, especially in light of continued rapid credit growth. Consumer price inflation is expected to be around 5 percent, helped by continued discipline in monetary and fiscal policy and a rebound in domestic food production. The BRH stands ready to use all available tools, including T-bills and interest rates, to adjust its policy if needed. We will continue to enhance the monetary policy framework, particularly by improving liquidity management, strengthening market-based operations, and developing macroprudential regulatory mechanisms. Further deepening the domestic T-bill market will also provide an additional tool for managing liquidity. 13. We remain committed to a flexible exchange rate. Therefore, we intend to improve the functioning of the foreign exchange market by allowing more participants in the market and promoting the development of the interbank foreign exchange market. The BRH will intervene in the market only to smooth out excess volatility. Structural reforms Revenue administration and tax policy 14. We will continue our efforts to improve tax policy and revenue administration to support higher revenues. We will adopt measures aimed at expanding the tax base, improving compliance, and enhancing control at the border, including through greater use of IT in both the customs and tax administrations. Key reforms planned for FY2014 include:  strengthen the large taxpayers office;  make the medium-size taxpayers office operational and increasing the number of medium- size taxpayers; HAITI INTERNATIONAL MONETARY FUND 35  draft legislation to legalize organizational changes; enact legislation establishing a function- based organizational structure for the tax department  implement organizational changes with staff and managers appointed; and  begin work on the development of an IT master plan and in implementing an integrated IT system for the tax department. 15. We recognize that other measures must be taken to raise domestic revenue in a sustainable way. Thus, we are committed to start rationalizing exemptions, improving and streamlining the tax system, and accelerating the transformation of the current turnover tax into a full VAT system. We will set up a new working group to prepare the preliminary draft of the new tax code. Public financial management 16. The establishment of a treasury single account (TSA) remains a key priority. We continue to make progress on the establishment of a TSA, which we view as critical to improve cash management, enhance transparency, and strengthen accounting. In particular, we have identified and closed more than 300 dormant government accounts in the banking system, and trained a large group of public accountants. The network of public accountants is being deployed, starting with the MEF as pilot, which officially installed its public accountant in January 2013. We will vigorously continue these efforts in FY2014. Key actions include:  A reduction of the number of domestically-funded imprest accounts to three in all remaining ministries or institutions (structural benchmark for end-March 2014). These entities will have one account for their own revenue, one for current spending, and third one for capital spending. Balances in the revenue account ministries will be transferred to the TSA main account.  Full deployment of the network of public accounting offices at the line ministry level and gradually granting signature authority on these accounts to public accountants appointed by the Ministry of Economy and Finance.  An extension of the TSA to all ministries. 17. The government will continue to strengthen budget formulation, execution, transparency, and reporting, and improve internal and external controls. In particular, we will roll out general ledger (GL) software in all ministries and start to record project and imprest account expenditures when they are effectively paid, and no longer when the account is replenished. HAITI 36 INTERNATIONAL MONETARY FUND Strengthening the public investment framework 18. The Government intends to improve the public investment framework, with the view of increasing the execution rate and quality of capital spending. We plan to review all projects in the public investment program in order to differentiate between those projects ready to be financed and those that are still at early stages (identifying their status and next steps to finalize their preparation). We will encourage all ministries and public entities to submit draft procurement and execution plans along with their project proposals prior to their inclusion in the budget. Technical assistance is urgently needed to help set up and strengthen project and program evaluation units (UEPs) in main spending ministries. We will also continue to work with our partners to improve and accelerate the procurement process. Financial sector development 19. We will continue to promote financial intermediation while safeguarding financial stability. The BRH will continue to strengthen its capacity to monitoring systemic risks and financial stability issues. In line with the recently conducted Financial Sector Assessment, 1 the authorities will submit to Parliament:  the legal framework for the operation and supervision of insurance companies.  the law on Financial Cooperatives and the law for microfinance institutions.  the legal framework for secured transactions. Other reforms 20. We remain committed to our reform agenda aimed at improving the business environment. Reforms in this area are crucial to raise productivity and competitiveness and lift constraints on growth. In addition to putting in place an institutional framework to attract foreign investments, the Ministry of Commerce and Industry is also preparing a range of measures to reduce the cost and alleviate the burden of doing business. We remain committed to continue export promotion and diversification and investment in tourism to maintain external sustainability. 21. Strengthening the country’s resilience to natural shocks is critical to protect growth. We will continue working with our partners, including the World Bank, to further strengthen national risk and disaster management systems. 1 IMF Country Report No. 13/90. HAITI INTERNATIONAL MONETARY FUND 37 Safeguard assessments and AML/CFT 22. We will continue to implement the recommendations of the January 2010 Safeguards assessment follow-up mission. We will publish the FY2012 audited financial statement of the BRH by end-July 2013. Work is underway to (i) adopt the IFRS, including the establishment of a special committee to monitor its implementation, and (ii) reconstitute the Investment Committee as an independent oversight body and appoint a compliance officer to monitor observation of investment guidelines. 23. We are committed to ensuring compliance of our AML/CFT legal framework with FATF standards. The draft law on AML/CFT was approved by the Senate and is now being discussed in the Chamber of Deputies. This law enhances compliance with the Caribbean Financial Action Task Force (CFATF) standards. We have also made progress in the implementation of critical aspects of the AML/CFT framework, particularly in the context of combating corruption, countering tax evasion, preventing financial sector abuse, and improving identification of citizens. These measures include the publication by the Central Bank of two decisions and guidelines that will establish mechanisms and procedures that are in line with the new law on banks and other financial institutions (passed by Parliament on May 14 th , 2012), and help financial institutions (i) properly identify their customers and fund beneficiaries, and (ii) prevent money laundering and the financing of terrorism. Program monitoring 24. Our program will be monitored using the definitions, data sources, and frequency of monitoring set out in the accompanying revised TMU. The government will make available to Fund staff all data appropriately reconciled and on a timely basis, as specified in the TMU. Table 1 shows the quantitative performance criteria for monitoring program execution in 2012/13 and 2013/2014. Structural benchmarks, with corresponding dates and status of implementation, are identified in Tables 2a and 2b. Structural conditionality for the remainder of the program, including new dates for the implementation of the five benchmarks outstanding, is in Table 2c. The seventh review under the ECF arrangement, assessing end-September 2013 performance criteria, is expected to be completed by mid-January 2014. The eighth review under the ECF arrangement, assessing end-March 2014 performance criteria, is expected to be completed by mid-July 2014. HAITI Sept. 2011 Dec . 2012 Dec . 2012 Dec . 2012 Mar. 2013 Mar. 2013 June 2013 Sept. 2013 Dec . 2013 Mar. 2014 June 2014 Actual 1/ Indicative target ( EBS/ 12/ 22) PC Actual Indicative target ( EBS/ 12/ 93) Indic ative targets adjusted for lower budgetary grants in Q1 Actual PC ( EBS/ 13/ 90) Actual Indic ative target ( EBS/ 12/ 93) PC Indicative target PC Indicative target I. Quantitative performance criteria Net central bank credit to the non-financial public sector - ceiling 21,549 -16,273 -8,525 -12,090 -17,864 -13,776 -13,160 -16,034 -13,163 -17,375 -16,178 -13,199 -11,816 -10,432 -9,049 Central Government 2/ 23,118 -13,652 -7,291 -7,742 -13,883 -11,904 -11,289 -11,559 -11,375 -12,129 -11,329 -11,578 -10,278 -8,978 -7,678 Rest of non-financial public sector -1,569 -2,621 -1,233 -1,954 -3,981 -1,871 -1,871 -4,474 -1,788 -5,245 -4,849 -1,621 -1,538 -1,454 -1,371 Net domes tic a s sets o f the centr al ba nk - ceiling 3/ 14,448 -18,314 -15,784 -5,383 -24,874 -13,251 -12,635 -18,936 -10,323 -16,600 -16,595 -9,036 -5,472 -709 2,135 Net international reserves of central bank (in millions of U.S. dollars) - floor 416 762 370 563 886 764 749 751 723 736 709 582 517 422 375 II. Continuous performance criteria Domestic arrears accumulation of the central government 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 New contracting or guaranteeing by the public sector of nonconcessional external or foreign currency debt (In millions of U.S. dollars) 4/ 03333333333 333333333333333333 Up to and including one year 000000 000000000 Over one-year maturity 03333333333 333333333333333333 Public sector external arrears accumulation (in millions of U.S. dollars) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 III. Indicative targets Change in base money - ceiling 31,080 12,156 21,352 17,128 10,561 17,328 17,328 11,113 18,609 12,842 11,750 14,262 15,225 16,189 17,153 Net domestic credit to the central government - ceiling 5/ 19,540 -19,863 -6,067 -6,710 -22,532 -22,221 -21,605 -20,923 -21,615 -11,057 -10,801 -19,270 -16,915 -14,561 -12,206 Poverty reducing expenditures - floor 6/ 17,794 23,689 24,313 24,506 31,175 31,175 26,932 36,446 32,223 35,439 38,656 42,531 46,406 50,281 Memorandum items Change in currency in circulation 13,448 4,953 12,117 7,161 6,784 7,921 7,921 9,813 8,494 7,509 7,729 9,009 9,285 9,560 9,836 Net domestic credit to the rest of the non-financial public sector -1,641 -2,688 -17,582 -2,032 -4,254 -1,948 -1,948 -4,752 -1,865 -5,552 -5,024 -1,894 -1,811 -1,727 -1,644 Government total revenue, excluding grants 29,881 70,319 78,402 117,269 112,289 127,253 127,253 123,357139,283 134,052 144,570 156,289 169,962 182,623 194,331 Government total expenditure, excluding externally-financed investment 42,096 97,390 117,637 162,735 152,263 171,677 171,677 167,180 188,152 180,405 197,565 218,739 235,944 248,752 265,156 Sources: Ministry of Finance, Bank of the Republic of Haiti, and Fund staff estimates. 1/ For performance under the program prior to September 2011, please see the previous staff report (EBS/12/22). 2/ Excluding spending of resources freed by IMF PCDR debt relief. 3/ For program monitoring purposes, NDA is defined as monetary base minus program NIR in gourde terms. Program exchange rate of G40.0 per U.S. dollar for the period June 2010 - September 2013. 4/ Excludes guarantees granted to the electricity sector in the form of credit/guarantee letters. 5/This includes central bank, commercial bank, and non-bank financing to the government. It includes net T-bill issuance for go vernment financing. 6/ Poverty reducing expenditures consist of domestically-financed spending in health, education, and agriculture. Table 1. Haiti: Indicative Targets and Quantitative Performance Criteria, September 2011 - June 2014 (In millions of gourdes, unless otherwise indicated) Actual stock at end- Sept. 09 Cumulative Flows from September 2009 Dec . 2011 Sept. 2012 HAITI INTERNATIONAL MONETARY FUND3838INTERNATIONAL MONETARY FUND HAITI INTERNATIONAL MONETARY FUND 39 Macro-criticality Objective Status Prior Actions Safeguards assessment Improve reliability of program data Completion of the audit of foreign reserves to confirm the levels of end-September 2009 and end-September 2010 level of unencumbered reserves. Completed End-September 2010 1-Improve the tracking of poverty-reducing expenditures Publish regular reports on poverty- reducing spending on the MEF website. 1a Continue publishing quarterly reports on poverty-reducing expenditures on the MEF website, including domestically- financed health, education and agriculture spending. Met 2a Start publishing central government monthly transfers to investment project accounts, project by project, including PetroCaribe projects. Met with delay 2b Start publishing central government monthly transfers by beneficiary entity. Met Improve control of budget execution and fiscal reporting. 2c Start preparing monthly consolidated Treasury balances (TMU ¶38). Met with delay Improve cash management. 2d Prepare an inventory of all government and donor accounts at the BRH and BNC (TMU ¶39). Met with delay Strengthen operation of tax and customs administrations. 3a Prepare quarterly reports with monthly data on the performances of the tax system and the tax administration, including the cost of exemptions and revenue collected in the provinces (TMU ¶40). Met Enhance the transparency of the tax exemption policy. 3b Start publishing a quarterly report that identifies all fiscal expenditure by beneficiary sectors. Met Introduce a new tax code that would increase revenue and rationalize the tax system. 3c Set up a working group that would be tasked to prepare a study to simplify the tax system, increase revenue, improve tax productivity, custom and fiscal administration, establish a work program with specific deadlines (TMU ¶37). Met with delay Improve timeliness of external audits of the BRH; enforce rotation of external auditors. 4a Completion and publication of externally audited financial statements for 2008/09. Met 4-Improve the monetary policy framework and its effectiveness Table 2a. Haiti: Status of Implementation of Structural Reform Measures in 2010 Structural Benchmarks 2-Strengthen fiscal discipline and transparency by improving budget preparation, expenditure control and cash management Strengthen the transparency of expenditure policy. 3-Raise government revenue HAITI 40 INTERNATIONAL MONETARY FUND Macro-criticality Objective Timing Status Continued benchmar ks Continue publishing reports listed under 1a, 2a, 2b, 2c, 3a, 3b End-March 2011 Met Impr ove cash management. 2f Start preparing and publishing monthly cash plans including PetroCaribe spending and financing needs. End-March 2011 Met Improve the tracking of investment spending and improve ability to make multi-year investment projections. 2g Start producing quarterly reports with monthly data of investment expenditure based on SYSGEP and publish them on the MEF website. End-March 2011 Met. Improve the monetary policy framework and its effectiveness Enforce rotation of external auditors to audit BRH accounts. Select an international firm to conduct ISA compliant external audit for the FY 2011 audit, for a period of 3 to 6 years. End-July 2011 Met with delay Strengthen foreign exchange reserves management. Adoption of a global reserves management policy by the investment committee, covering all foreign exchange reserves. End-June 2011 Met Improve the transparency of government transfers to the energy sector 2h Identify and consolidate all sources of transfers to EDH in regular monthly reports. End-June 2011 Met 2i Launch the bids for the selection and hiring of the international consulting agency that will assist UCP and other project implementation units in the government End-June 2011 Met. 2j Prepare a plan of action / operational manual describing: a. Modalities to recruit staff with project management skills and responsibility for ordering payments for project work orders. b. A defined set of information, project lists and accounts to be regularly published online to ensure full transparency on project execution and planning. c. Clear practices to ensure the coordination between the UCP, the Procurement Commission (CNMP) and the Ministry of External Cooperation and Planning (MPCE), in full compliance with national budget execution rules. Continued benchmar ks Continue publishing reports listed under 1a, 2a, 2b, 2c, 2h, 3a, 3b End-September 2011 Met Table 2b.Haiti: Status of Implementation of Structural Reform Measures in 2011 Structural Benchmarks Strengthen fiscal discipline and transparency by improving budget preparation, expenditure control and cash management Strengthen fiscal discipline and transparency by improving budget preparation, expenditure control and cash management Enhance the quality of spending of investment projects, including those financed with PetroCaribe resources and PCDR debt relief. End-September 2011 Met with delay. HAITI INTERNATIONAL MONETARY FUND 41 Macro- criticality Objective Structural Benchmarks Timing Status Complete the setting-up of the debt unit at the MEF and build capacity to prepare a medium-term debt strategy. Strengthen the debt unit with fully operational middle and back office functions; Preparation of annual debt sustainability analyses. Reprogrammed to End- March 2013 from End- March 2012 Not met Strengthen the legal framework for debt management. Submit to Parliament a public debt law that would establish a sound legal and institutional framework for public debt management. Reprogrammed to End- March 2013 from End- March 2012 Not met Improve accounting procedures and enhance transparency. Reduce the number of domestically-funded imprest accounts to three by ministry or institutions (for revenue collection, capital spending, and other transactions) and deploy the network of public accounting offices at the line ministries level and gradually grant signature authority on these accounts to public accountants appointed by the Ministry of Economy and Finance. End-March 2013 Not met Enhance accounting for expenditure management. Roll out in all ministries the GL-software and start to record projects and imprest accounts expenditure when they are effectively paid, and no longer when the replenishment of the account is made. End-March 2013 Not met Exchange rate management Improve the functioning of foreign exchange market. Establish unconstrained single price foreign exchange auctions. End-September 2012 Not met Table 2c. Remainin g Benchmarks Through End-March 2013 Debt management Accounting Conditionality Measure Timing Objective Prior action Open a government central account at the BRH Met Improve accounting procedures and enhance transparency Prior action (previous strucutral benchmark for end-March 2013) Sign and make operational the TSA agreement between the MEF and BRH Met Improve accounting procedures and enhance transparency Prior action Submit to Parliament a public debt law that would establish a sound legal and institutional framework for public debt management. Met Strengthen the legal framework for debt management. Structural Benchmark Allocate offices to the medium-sized taxpayer unit End-September 2013 Improve Revenue Collection Structural Benchmark Strengthen the debt unit with fully operational middle and back office functions; Preparation of annual debt sustainability analyses. End-December 2013 (reset from end- March 2013) Complete the setting-up of the debt unit at the MEF and build capacity to prepare a medium-term debt strategy. Structural Benchmark Roll out in all ministries the GL-software and s tart to record projects and imprest accounts expenditure when they are effectively paid, and no longer when the replenishment of the account is made. End-December 2013 Enhance accounting for expenditure management Structural Benchmark Set up a a tas k force of experts to review the public investment framework End-December 2013 Enhance accounting for expenditure management Structural Benchmark Reduce the number of domestically-funded imprest accounts to three by minis try or ins titutions (for revenue collection, capital spending, and other transactions ) and deploy the network of public accounting offices at the line ministries level and gradually grant signature authority on these accounts to public accountants appointed by the Ministry of Economy and Finance. End-March 2014 (reset from end- March 2013) Improve accounting procedures and enhance transparency Table 2d. Proposed Prior Actions and Structural Benchnmarks Through March 2014 HAITI 42 INTERNATIONAL MONETARY FUND ATTACHMENT 2. Technical Memorandum of Understanding–Update 1. Haiti’s performance under the program supported by the Extended Credit Facility (ECF) will be assessed on the basis of the observance of quantitative performance criteria as well as compliance with structural benchmarks. This Technical Memorandum of Understanding (TMU) defines the quantitative performance criteria, specification of certain structural benchmarks, and indicative targets for the period July 1, 2010- through the end of the arrangement, specified in Tables 1 and 2 of the Memorandum on Economic and Financial Policies (MEFP). It also lays down the monitoring and reporting requirements. Institutional Definitions 2. Central government. The central government comprises the presidency, prime minister’s office, parliament, national courts, treasury, line ministries and “organismes déconcentrés.” It includes expenditures financed directly by foreign donors through ministerial accounts (comptes courants). 3. Non-financial public sector. The non-financial public sector includes the central government plus non-budgetary autonomous organizations, local governments and public sector enterprises (enterprises and agencies in which the government holds a controlling stake of more than 50 percent of the shares). 4. Total public sector. The total public sector comprises the non-financial public sector and the central bank, the Bank of the Republic of Haiti (BRH). Quantitative Targets Net BRH Credit to the Non-Financial Public Sector 5. Net BRH credit to the non-financial public sector equals net central bank credit to the central government plus net central bank credit to the rest of the non-financial public sector. 6. The change in net BRH credit to the central government is defined as, and will be measured using:  Change in net domestic credit to the central government from the BRH according to Table 10R of the BRH.  Change in the stock of project accounts (“Comptes de projets”) included in Table 10R of the BRH will be excluded from the change in net domestic credit to the central government as defined above. HAITI INTERNATIONAL MONETARY FUND 43  Change in the stock of Special Accounts (“Comptes spéciaux”) and seized values (“Valeurs saisies UCREF”) included in Table 10R of the BRH will be excluded from the change in net domestic credit to the central government as defined above. 1 7. The change in net central bank credit to the rest of the non-financial public sector, is defined as, and will be measured using: a. Change in “créances nettes sur le secteur public” (i.e, net credit to the non- financial public sector) minus the change in “créances nettes sur l'état” (i.e. net credit to the central government), according to table 10R of the BRH. 8. The changes will be measured on a cumulative basis from the stock at end September 2009. Net Domestic Financing to the Central Government 9. Net domestic financing to the central government will comprise the change in net banking sector credit to the central government (defined below) plus the change in nonbank financing which includes amortization, counterpart funds, 2 and the net issuance of Treasury bills and other government securities by the central government to non-banks. Net domestic banking sector credit to the central government is defined as, and will be measured, using: a. The change in the stock of net domestic credit to the central government from the BRH according to Table 10R of the BRH, plus, the change in the stock of net domestic credit of the central government from domestic banks according to Table 20R of the BRH, which will include the net issuance of treasury bills and other government securities by the central government for government financing purposes. Securities issued for the recapitalization of the BRH are excluded from this definition. b. The change in the stock of project accounts (“Comptes de projets”), as defined in 6.b above, will be excluded from the change in net domestic banking sector credit to the Central Government. c. The change in the total stock of Special Accounts (“Comptes Spéciaux”) and seized values (“Valeurs Saisies UCREF”), as defined in 6.c above, will be excluded from the change in net domestic banking sector credit to the Central Government. 1 Special Accounts (“Comptes Spéciaux”) refer to U.S. dollar-denominated central government sight deposits at the BRH. The balance of these accounts increases with the proceeds of the sales of in-kind aid (in the form of wheat, maize, rice, etc.) received by the Haitian government; these proceeds are earmarked to finance specific projects and cannot be used by the Central Government without the explicit authorization of respective donors. 2 Counterpart funds are proceeds from sales of grants received in kind. HAITI 44 INTERNATIONAL MONETARY FUND 10. The changes will be measured on a cumulative basis from the stock at end- September 2009. Net International Reserves 11. The change in net international reserves will be measured using: a. Change in net foreign assets (“Réserves de change nettes” of the BRH Table 10R); 3 b. Minus the change in foreign currency deposits of commercial banks at the BRH (“Dépôts à vue en dollars U.S. et en Euros des BCM à la BRH”, and the “CAM transfer” of the BRH Table 10R). c. Minus the change in the stock of project accounts (“Comptes de projets”) as defined in 6.b above. d. Minus the change in the stock of Special Accounts (“Comptes Spéciaux”) in dollars and Euros (and excluding gourdes), and seized values (“Valeurs Saisies UCREF”), the latter as defined in 6.c above. e. Plus the change in the stock of the Special Drawing Rights (SDR) allocation (“Allocations DTS”) from the BRH Table 10R. 12. Data will be expressed in U.S. dollar terms and valued at the corresponding end-period market exchange rate from the BRH Table 10R. 13. For definitional purposes, net international reserves (NIR) are the difference between the BRH’s gross foreign assets (comprising monetary gold, all claims on nonresidents, SDR holdings, and BRH claims in foreign currency on domestic financial institutions) and reserve liabilities (including liabilities to nonresidents of one-year maturity or less, use of Fund credit, and excluding the full SDR allocation, and trust funds). Swaps in foreign currency with domestic financial institutions and pledged or otherwise encumbered reserve assets are excluded from NIR. 14. The changes will be measured on a cumulative basis from the stock at end- September 2009. 3 Letters of credit and guarantee (“Lettres de crédit” and “Lettres de garantie”) are reported in Table 10R as part of BRH foreign liabilities (“Engagements extérieurs”), and therefore are already netted out of NIR. HAITI INTERNATIONAL MONETARY FUND 45 Net Domestic Assets of the BRH 15. The change in net domestic assets of the BRH is defined as, and will be measured using:  The change in base money (program definition according to Section I. below);  Minus the change in the U.S. dollar amount of net international reserves (program definition according to section C above), converted into gourdes at the program exchange rate. 16. The program definition of net domestic assets of the BRH will use a program exchange rate of G40.0 per U.S. dollar for the period June 2010- March 2013. 17. The changes will be measured on a cumulative basis from the stock at end- September 2009. PetroCaribe-Related Funds 18. As of March 2013, the outstanding balance of PetroCaribe funds totaled 293 million dollars held at the BNC state bank. 19. The authorities are planning to channel new PetroCaribe/ALBA-related inflows through a binational Venezuela-Haiti corporation.4 Although the statutes of the new societé mixte have been already published in the “Journal Officiel” (Le Moniteur), the firm is not operational yet. Therefore, PetroCaribe-related fiscal transactions are still considered in the budget and inflows still constitute direct external debt of the central government. These resources are under the direct control of the central government, and, for program purposes, will be fully reflected in the fiscal tables underpinning the program. They will be treated as budget support loans, whose proceeds are partly or entirely deposited in government accounts in the banking system (PetroCaribe deposits). Spending from PetroCaribe resources (up to US$400 million in FY 2012), financed with a drawdown of PetroCaribe deposits in the banking system, will also be fully reflected in program tables. 20. Once operational, i.e., that PetroCaribe resources do not constitute direct external debt of the central government, the annual budgets of the company will be published on the MEF website before the beginning of the fiscal year. Audited annual financial statements will be published within six months of the end of each financial year. 21. Non Concessional Public Sector External Debt. The definition of debt comprises all forms of debt, including loans, suppliers’ credits, and leases, that constitute current, i.e. not contingent, liabilities, which are created under a contractual arrangement through the provision of value in 4 ALBA refers to “Alternativa Boliviarana de las Americas”. HAITI 46 INTERNATIONAL MONETARY FUND the form of assets (including currency) or services, and which require the obligor to make one or more payments in the form of assets (including currency) or services, at some point in the future, as set forth in point 9 of the Guidelines on Performance Criteria with Respect to External Debt in Fund Arrangements, attached to Decision No. 6230-(79/140), adopted August 3, 1979, as amended . 22. A ceiling applies to the contracting and guaranteeing by the public sector of new non concessional debt denominated in foreign currency with original maturities of one year of more. There is a zero ceiling on non-concessional debt of up to and including one year. The ceiling applies to debt and commitments contracted or guaranteed for which value has not yet been received. This covers private debt for which official guarantees have been extended and which, therefore, constitute a contingent liability of the public sector. 23. For program purposes, the guarantee of a debt arises from any explicit legal obligation of the public sector to service a debt in the event of nonpayment by the debtor (involving payments in cash or in kind). 24. For program purposes, a debt is concessional if it includes a grant element of at least 35 percent, calculated as follows: the grant element of a debt is the difference between the present value (PV) of debt and its nominal value, expressed as a percentage of the nominal value of the debt.5 The PV of debt at the time of its contracting is calculated by discounting the future stream of payments of debt service due on this debt, based on the currency specific commercial interest reference rates (CIRRs) as laid out by the Organization for Economic Cooperation and Development (OECD).6 For a debt with a maturity of at least 15 years, the ten-year-average CIRR will be used to calculate the PV of debt and hence, its grant element. For debt with maturity of less than 15 years, the six-month average CIRR will be used. To both the ten-year and six-month averages, the same margin for differing repayment periods as those used by the OECD need to be added (0.75 percent for repayment periods of less than 15 years, 1 percent for 15 to 19 years, 1.15 percent for 20 to 29 years, and 1.25 percent for 30 years or more). 25. Excluded from the ceiling are short-term import-related credits, rescheduling arrangements, borrowing from the Fund, non-resident purchases of treasury bills, and guarantees for the electricity sector in the form of letters of credit. 26. The ceilings for contracting and guaranteeing of non concessional debt by the total public sector (as defined in paragraph 4) will be set at zero continuously throughout the program period. 5 The grant element calculator can be found at http://www.imf.org/external/np/pdr/conc/calculator/default.aspx. 6 The grant element calculations will take into account all aspects of the loan agreement, including maturity, grace period, payment schedule, upfront commissions, and management fees. HAITI INTERNATIONAL MONETARY FUND 47 Arrears of the Central Government 27. External payment arrears are defined as overdue payments (principal and interest) to non-residents on debt contracted and guaranteed by the central government, and will be defined according to the terms of indebtedness of each creditor. The criterion of zero accumulation of external arrears will be monitored on a continuous basis. 28. Domestic arrears of the central government are defined to include: (i) any bill that has been received by a spending ministry from a supplier for goods and services delivered (and verified) and for which payment has not been made within 90 days after the due date of payment; (ii) wage, salary, and other payment to government employees, including direct and indirect allowances, that were due to be paid in a given month but remained unpaid on the 30th of the following month; and (iii) interest or principal obligations which remain unpaid 30 days after the due date of payment. This definition excludes changes in the stock of arrears on account of interest, penalties and valuation changes. Base Money 29. The change in base money is defined as, and will be measured using:  The change in the stock of currency in circulation from Table 10R of the BRH.  The change in the stock of reserve deposits of commercial banks at the BRH, from Table 10R, using gourde sight deposits of commercial banks (dépôts a vue en gourdes des BCM a la BRH) and cash-in-vault of commercial banks (encaisses des BCM). 30. The changes will be measured on a cumulative basis from the stock at end-September 2009. Poverty-Reducing Expenditures 31. The growth in poverty reducing expenditure will be measured as the sum of domestically-financed spending for the Ministries in charge of agriculture, health, and education. This will be a flow measured on a cumulative basis from end-September 2009. Quarterly Adjustments 32. The quarterly performance criteria and indicative targets will be adjusted as indicated below: HAITI 48 INTERNATIONAL MONETARY FUND Adjustment for Domestic Arrears Accumulation 33. The ceilings for net BRH credit to the central government and the net domestic banking sector credit to the central government will be adjusted downwards for the amount of outstanding domestic arrears accumulation. Adjustment for PetroCaribe-related Inflows 34. Until the bi-national company expected to administer PetroCaribe-related funds is legally established, any drawdown of PetroCaribe-related deposits will be considered as central government spending for program purposes. 35. The ceiling for net domestic credit to the central government will include movements in PetroCaribe accounts in the banking system and will be adjusted for the difference between the actual stock of PetroCaribe deposits in the banking system and programmed stock of these deposits in the banking system. The ceilings for net BRH credit to the central government, on BRH net domestic assets, and the floor for NIR will also include movements in PetroCaribe accounts at the BRH. They will be adjusted for the difference between the actual stock of PetroCaribe deposits at the BRH and the programmed stock of these deposits at the BRH. The adjustor will be calculated on a cumulative basis from October 1, 2009. Adjustment for Budgetary Cash Grants in Second Half of FY2012 36. The performance criteria ceilings on BRH net credit to the central government, net domestic financing to the government, and on BRH net domestic assets, and the floor on NIR reflect expected budgetary donor grants of the equivalent of $27 million during FY2012 from the IDB. For FY2013, expected budgetary donor grants total $60 million, including IDB $20 million, IDA$20 million, EU $10 million, and Spain $10 million. If actual grant inflows are lower (higher) than programmed, these performance criteria ceilings and floor will be adjusted upward (downward), and the performance criterion floor will be adjusted downward (upward), by the amount of the difference between actual and programmed inflows.” 37. The adjuster will be calculated on a cumulative basis from October 1, 2009. Clarification of Structural Conditionality Fiscal Sector 38. The prior action on submitting a public debt law requires transmission to Parliament (and sharing with the IMF) of a draft debt law in line with international standards and with the recommendations of development partners’ TA. 39. The prior action on opening a government central account at the BRH will require the opening of one revenue account for DGI and another for AGD, one operating expenditure HAITI INTERNATIONAL MONETARY FUND 49 account at the BRH, the closing of the CSTD (compte special du tresor pour le developpement) and the opening of one investment expenditure account at the BRH. 40. The prior action on signing and making operational the TSA agreement between the MEF and BRH will require both institutions to sign the agreement. 41. As specified in Tables 2a and 2b, the publications of the following items related to benchmarks will continue over the program period: 1a, 2a, 2b, 2c, 3a, 3b, and 2h. Publication should occur on the specified regular basis (i.e. monthly or quarterly), with no gaps or unjustified delay. 42. The structural benchmark on strengthening the debt unit (end-December 2013) will require permanently providing adequate office space and staffing to such unit; nominating the officer in charge of it and setting up its tasks with an official communication from the Minister or the Director General (to be shared with the IMF); the MEF should, by coordination of its services, produce annual debt sustainability analyses and make them available to the Fund, all MEF services, the BRH and the MPCE. 43. The structural benchmark on reducing the number of domestically-funded imprest accounts to three by ministry or institutions (one for revenue collection, one for capital spending, one for other transactions, including current spending) and granting signature power on these accounts to public accountants appointed by the MEF (end-March 2014) will imply the identification of all the accounts as well as the names of the officials currently authorized to sign. On this basis, the authorities will reduce the number of accounts as specified in the benchmark and provide signature power to public accountants designated by the ministry of finance. 44. The structural benchmark on rolling-out, for all ministries, the GL-software in the offices of the government accountants, and starting to record projects and imprest accounts expenditure when they are effectively paid and not any more when the replenishment of the account is made (end-December 2013) requires providing to all ministries a copy of the software and ensuring it is adequately installed. It also requires a follow up on the recording of expenditure at payment level. 45. The new structural benchmark on allocating offices to the medium-tax payer office (by end-September 2013) requires the move of the staff of the newly created medium-tax payer office to a permanent location with the equipment and tools necessary to carry on their day-to- day tasks. 46. The new benchmark on setting up a task force of experts to review the public investment framework will require a decree that establishes a task force of local and international experts and defines as their main responsibility the review of the investment program with the view to differentiating between those projects ready to be financed (including procurement and execution plans), and those that are still at early stages (identifying their status, next steps, and technical assistance to finalize their preparation). HAITI 50 INTERNATIONAL MONETARY FUND Monetary Policy and Financial Sector Provision of Information 47. To ensure adequate monitoring of the program, the authorities will provide daily, weekly, and monthly monetary and fiscal indicators to IMF staff, details of any loan contract or guarantee to be ratified by a non-financial public sector entity, including public enterprises, before signature, as well as other data upon request. Daily The exchange rate. Weekly 48. Monetary Indicators: (a) Stock of BRH bonds; (b) Deposits at commercial banks (in gourdes and U.S. dollars); (c) Credit to the private sector (in gourdes and U.S. dollars); (d) Credit to central government and the public sector (net); (e) Currency in circulation, (f) base money, (g) details of inflows and outflows of gross foreign exchange reserves, (h) volume of foreign exchange transactions, of which BRH sales and purchases; (i) gross international reserves; and (d) net international reserves (NIR). The NIR data will be reported using the following table format: 49. Fiscal Indicators: (a) Revenues (internal, external, other) and (b) Expenditures on a cash basis (wages and salaries, goods and services, external debt, current accounts). 50. These data will be reported with a maximum five-day lag for preliminary data (four weeks for final data). Monthly Monthly data  Table 10 R and Table 20 R from the BRH with a maximum 30-day lag for final data.  Tableau on the comptes courants with a maximum 30-day lag for final data. A. Gross Foreign Exchange Reserves 2,193.0 B. Gross Liabilities 282.9 C. Net Foreign Assets (=A-B) 1,910.1 D. FX deposits of commercial banks and CAM transfer at the BRH 860.9 E. Project accounts 7.8 F. Special accounts in U.S. dollars and euros 7.3 G. Seized values 0.0 H. SDR allocation (liability) 117.7 J. NIR (=C-D-E-F-G+H) 1,151.8 Source: Haitian authorities; and Fund staff estimates. Haiti: Net International Reserves BRH, End-March 2013 (In millions of U.S. dollars) HAITI INTERNATIONAL MONETARY FUND 51  “Project Accounts”, by donor, with a maximum 30-day lag for final data  Tableau de trésorerie de devises with a maximum 30-day lag for final data.  Tableau des Operations Financières de l’Etat (within 20 days after end of month).  Table underlying the TOFE which enables the determination of checks in circulation and the balance on investment project accounts (TOFE-extension).  Set of external debt tables with a maximum 30-day lag for final data.  Report of revenue collection of the DGI (Rapport d'activités), with a maximum 30-day lag for final data.  The aide memoire table, which includes monetary policy indicators (foreign exchange interventions, Gourde and foreign currency credit and deposits, monetary financing).  Tables of revenue collection of AGD (Indicateurs d’activités aux ports, Rapport analytique des perceptions douanières à l'importation), with a maximum 30-day lag for final data.  Balance of Bureau de Monetization accounts, including spending from “fonds de contrepartie” and those movements related with flows linked to the ALBA-PetroCaribe agreement. Balance of PetroCaribe/ALBA-related deposits at commercial banks and the BRH, with a maximum 30-day lag for final data as in the following table. Quarterly 51. Report on poverty-reducing expenditures, with a maximum 30-day lag for final data. 2012/13 Sept. Dec. Mar. Jun. Sept. Dec. Mar. Jun. Sep. Dec. Mar. Jun. Sept. Dec. Mar. Total deposits in government accounts in the banking system Cumulative flows (G mlns) 1804.3 1520.7 2309.4 3204.9 3779.8 3975.9 6144.0 5518.1 6145.6 6773.2 7400.7 8028.3 8373.6 8718.9 in US dollars (US$ mlns) 42.4 43.2 62.4 84.3 99.0 102.1 155.6 137.9 153.0 163.3 180.5 193.1 198.7 204.2 Stocks (G mlns) 3713.2 5517.5 5233.9 6022.5 6918.1 7493.0 7689.1 9857.2 9231.3 9858.8 10486.4 11113.9 11741.5 12086.8 12432.1 in US dollars (US$ mlns) 88.9 131.3 132.1 151.3 173.2 187.9 191.0 244.4 226.8 241.9 252.2 269.4 282.0 287.6 293.1 Deposits in government accounts at the BRH Cumulative flows (G mlns) -90.3 -93.0 -96.1 -96.0 -96.0 -96.0 -96.0 -96.0 -96.0 -96.0 -96.0 -96.0 -96.0 -96.0 in US dollars (US$ mlns) -2.2 -2.1 -2.2 -2.2 -2.2 -2.2 -2.2 -2.3 -2.3 -2.3 -2.3 -2.3 -2.3 -2.3 Stocks (G mlns) 171.0 80.7 78.0 74.9 75.0 75.0 75.0 75.0 75.0 75.0 75.0 75.0 75.0 75.0 75.0 in US dollars (US $mlns) 4.1 1.9 2.0 1.9 1.9 1.9 1.9 1.9 1.8 1.8 1.8 1.8 1.8 1.8 1.8 Deposits in government accounts in commercial banks Cumulative flows (G mlns) 1894.6 1613.7 2405.4 3300.9 3875.8 4071.9 6240.0 5614.1 6241.6 6869.2 7496.7 8124.3 8469.6 8814.9 in US dollars (US$ mlns) 44.6 45.4 64.6 86.5 101.2 104.3 157.8 140.2 155.3 165.6 182.8 195.4 201.0 206.5 Stocks (G mlns) 3542.2 5436.8 5155.9 5947.6 6843.1 7418.0 7614.1 9782.1 9156.2 9783.8 10411.3 11038.9 11666.4 12011.8 12357.1 in US dollars (US$ mlns) 84.8 129.4 130.1 149.4 171.3 186.0 189.1 242.6 224.9 240.1 250.4 267.6 280.2 285.8 291.3 S ources: Haitian Authorities; and IMF S taff estimates and projections. Haiti. PetroCaribe Deposits, 2009-2013 2008/09 2009/10 2010/11 2011/12 HAITI 52 INTERNATIONAL MONETARY FUND Other Information 52. The authorities will share with staff the by-laws of the new binational (Venezuela-Haiti) entity which will manage Petrocaribe flows (as soon as these are enacted), including any and all needed information to assess the nature of such new entity; the authorities will also share with staff the financing terms of any financing received by such entity, including any and all information needed to assess whether any financing flows received by such new entity constitute public debt (direct and/or contingent) of any form. Press Release No. 13/298 FOR IMMEDIATE RELEASE August 2, 2013 IMF's Executive Board Completes the Sixth Review Under Haiti’s ECF Arrangement and Approves US$2.5 Million Disbursement The Executive Board of the International Monetary Fund (IMF) completed the sixth review of Haiti’s performance under its program supported by the Extended Credit Facility (ECF) arrangement on August 2, 2013. The Board also approved an extension of the arrangement until August 29, 2014 and a rephasing of disbursements. The Board's decision was taken on a lapse of time basis. 1 Completion of the review will enable an immediate disbursement equivalent to SDR 1.638 million (about US$2.5 million), bringing total disbursements under the program to date to the equivalent of SDR 37.674 million (about US$56.8 million). Haiti’s ECF arrangement was approved on July 21, 2010 (see Press Release No. 10/299 ) together with the full relief of the country’s outstanding debt to the Fund of about SDR 178 million (equivalent to US$268 million). The debt relief, financed by the Post- Catastrophe Debt Relief (PCDR) Trust Fund, is part of a broad international strategy to support Haiti’s longer-term economic reconstruction plans, following the devastating earthquake of January 12, 2010. The Haitian authorities have developed an economic program for 2013-2014 that will be supported by the extension of the current ECF arrangement and will allow the authorities to secure gains to date and complete key reforms, particularly in the fiscal area. 1 The Executive Board takes decisions under its lapse of time procedure when it is agreed by the Board that a proposal can be considered without convening formal discussions. International Monetary Fund Washington, D.C. 20431 USA