Haïti Demande de Décaissement sous la Facilité de Crédit Rapide - Communiqué de Presse; Rapport du Personnel; et Déclaration du Directeur Exécutif pour Haïti

© 2020 International Monetary Fund IMF Country Report No. 20/123 HAITI REQUEST FOR DISBURSEMENT UNDER THE RAPID CREDIT FACILITY—PRESS RELEASE; STAFF REPORT; AND STATEMENT BY THE EXECUTIVE DIRECTOR FOR HAITI In the context of the Request for Disbursement Under the Rapid Credit Facility, the following documents have been released and are included in this package: • A Press Release including a statement by the Chair of the Executive Board • The Staff Report prepared by a staff team of the IMF for the Executive Board’s consideration on April 17, 2020, following discussions that ended on April 11, with the officials of Haiti on economic developments and policies underpinning the IMF disbursement under the Rapid Credit Facility. Based on information available at the time of these discussions, the staff report was completed on April 13, 2020. • A Debt Sustainability Analysis prepared by the staffs of the IMF and the International Development Association (IDA). • A Statement by the Executive Director for Haiti The documents listed below will be released. Letter of Intent sent to the IMF by the authorities of Haiti* *Also included in the Staff Report. The IMF’s transparency policy allows for the deletion of market-sensitive information and premature disclosure of the authorities’ policy intentions in published staff reports and other documents. Copies of this report are available to the public from International Monetary Fund • Publication Services PO Box 92780 • Washington, D.C. 20090 Telephone: (202) 623-7430 • Fax: (202) 623-7201 E-mail: publications@imf.org Web: http://www.imf.org Price: $18.00 per printed copy International Monetary Fund Washington, D.C. April 2020 PR20/171 IMF Executive Board Approves US$111.6 Million Disbursement to Haiti to Address the COVID-19 Pandemic FOR IMMEDIATE RELEASE • The IMF Executive Board approves the twentieth request for emergency financial assistance to help its member countries address the challenges posed by COVID -19. • The approval of the Board will make available US$111.6 million in emergency financing to help Haiti address the challenges posed by COVID -19. • IMF financing support provides resources to the authorities fo r essential health- related expenditures and income support to ease the impact of COVID -19 on the population. • To address the pandemic, Haiti’s government announced measures to support workers and households, including paying salaries and providing food and cash transfers to the public. Washington, DC – April 17, 2020 The Executive Board of the International Monetary Fund (IMF) approved a disbursement to Haiti under the Rapid Credit Facility (RCF) equivalent to SDR 81.9 million (US$111.6 million, 50 percent of quota) to help cover balance of payment needs stemming from the outbreak of the COVID-19 pandemic. The pandemic has worsened an already weak economic outlook for Haiti. An expected sharp drop in remittance flows, reduction in textile exports, and drop in FDI will put significant strain on the balance of payments. A dditional direct health and social expenditures, together with a further drop in fiscal revenues will add to th e fiscal deficit and financing needs. IMF support will help cover some of this need and allow the government to ease the impact on the population, such as paying salaries of some teachers and workers, providing cash transfers and food rations to households, and providing subsidies to the transport and sanitation sectors. Following the Executive Board discussion. Mr. Tao Zhang, Deputy Managing Director and acting Chair, made the following statement: “COVID-19 poses a major challenge for Haiti, a country in a fragile situation with very limited healthcare services, just emerging from two years of socio- political instability and worsening economic hardship. Measures are being taken by the government to stop the spread of the virus and to cushion the economic impact of the shock. “IMF emergency support under the Rapid Credit Facility will help fill the balance of payments gap and create fiscal space for essential health expenditures, income support to workers, and cash and in- kind transfers to households. “To address the crisis, scarce budgetary resources will need to be allocated to critical spending on disease containment and increased social assistance to the most vulnerable. To ensure the appropriate use of emergency financing, the authorities should prepare monthly budget execution reports on COVID-19 expenditures and undertake an ex -post financial and operational audit of COVID-related operations. While providing adequate liquidity support to the financial sector, the central bank should contain monetary financing of the deficit and limit foreign exchange interventions to smoothing volatility. “Expeditious donor support is needed to close the remaining balance of payments gap and ease the adjustment burden. The IMF intends to further support Haiti through a Staff Monitored Program to help start the process of restoring macroeconomic stability and sustainability, building a better social safety net, and tackling governance weaknesses and corruption.” For information on the emergency financing requests approved by the IMF Executive Board, please see a link to the IMF Lending Tracker: https://www.imf.org/en/Topics/imf- and- covid19/COVID-Lending-Tracker For upcoming discussions on the emergency financing requests, please see a link to the calendar of the IMF Executive Board meetings: https://www.imf.org/external/NP/SEC/bc/eng/index.aspx HAITI REQUEST FOR DISBURSEMENT UNDER THE RAPID CREDIT FACILITY EXECUTIVE SUMMARY Context. From mid-2018 until early 2020, Haiti experienced political instability and intermittent social unrest that paralyzed the economy and impeded the implementation of economic policies. This protracted crisis placed severe strains on th e population. Following the conclusion of the Article IV consultation in late January, the authorities began to take steps towards restoring economic stability and were preparing for discussions with staff on a potential Staff Monitored Program (SMP). Impact of COVID -19. From this difficult starting point, and with Haiti’s limited health services and high levels of poverty, the spread of COVID-19 could prove devastating for the country. Remittances represent over 34 percent of GDP and most textile exports are purchased by the U.S., so the global income shock is expected to have a sharp adverse impact on Haiti’s balance of payments. With demand and fiscal revenues forecast to drop, higher outlays on health expenditures and income support would add to a surge in the fiscal deficit. Request for RCF. Staff propose financing support of 50 percent of quota (SDR 81.9 million, about US$111.24 million) under the RCF ‘exogenous shock’ window. It is not feasible to implement an upper credit tranche-quality Fund- supported program at this time and the country meets the eligibility requirements for support under the RCF. The authorities have indicated commitment to implement policies aimed at progress towards achieving a stable and sustainable macroeconomic position consistent with strong and durable poverty reduction and growth. Policy issues. The authorities will boost spending to mitigate the impact of the COVID - 19 pandemic on the population. A higher fiscal deficit will be financed by external budget support, RCF resources, and domestic borrowing. The authorities indicated a commitment to restoring macro stability, addressing fiscal imbalances over the medium- term, and being proactive in their financial sector oversight. They intend to begin discussions for an SMP directly following the Board review of Haiti’s request for disbursement under the RCF. Staff supports the authorities’ request for a disbursement under the Rapid Credit Facility in the amount of SDR 8 1.9 million (50 percent of quota). April 13, 2020 HAITI 2 INTERNATIONAL MONETARY FUND Approved By Patricia Alonso Gamo and Jeromin Zettelmeyer Prepared By the Haiti team The team comprised Nicole Laframboise (head), Frederic Lambert, Ahmed Zorome, and Paola Aliperti (all WHD), Patrick Petit (FAD), and Chiara Fratto (SPR). Bruno Saraiva and Ketleen Florestal (OED) participated in the meetings. Discussions took place remotely in early April with central bank Governor Jean Baden Dubois, Minister of Finance Michel Patrick Boisvert, other senior officials, and international development partners. Ms. Soungbe (WHD) assisted the team with logistics and contributed to the preparation of this report. CONTENTS CONTEXT AND RECENT DEVELOPMENTS ______________________________________________________ 3 IMPACT OF COVID-19 AND RESPONSE_________________________________________________________ 4 OUTLOOK AND DEBT SUS TAINABILITY ________________________________________________________ 5 POLICY UNDERTAKINGS ________________________________________________________________________ 6 MODALITIES OF SUPPORT UNDER THE RCF ___________________________________________________ 8 STAFF APPRAISAL _____________________________________________________________________________ 10 TABLES 1. Selected Economic and Financial Indicators, FY2018–25 _______________________________________ 11 2a. Non-Financial Public Sector Operations, FY2018–25 (In millions of gourdes) _________________ 12 2b. Non-Financial Public Sector Operations, FY2018–25 (In percent of GDP) ____________________ 13 3. Summary Accounts of the Banking System, FY2018–25 _______________________________________ 14 4a. Balance of Payments, FY2018–25 ( In millions of US$) ________________________________________ 15 4b. Balance of Payments, FY2018–25 ( In percent of GDP) ________________________________________ 16 5. Indicators of Capacity to Repay the Fund (Existing and Proposed Credit), 2018/19–2026/27 __ 17 6. External Financing Requirements and Sources, FY2018–FY2025 _______________________________ 18 APPENDIX I. Letter of Intent _________________________________________________________________________________ 19 HAITI INTERNATIONAL MONETARY FUND 3 CONTEXT AND RECENT DEVELOPMENTS 1. Haiti is facing a major shock in 2020 following an already difficult year in 2019. The country has experienced protracted political instability and sporadic social unrest since mid -2018 (see SM/19/283). Despite efforts by the monetary and fiscal authorities in FY2019, the fiscal deficit widened to 3.5 percent of GDP, domestic arrears surged, and public debt jumped by 8 percent of GDP. 1 Parliament was dissolved and President Moise has been ruling by decree since mid - January. Some stability has returned with the appointment in early-March of a new prime minister—the fifth in three years—and minister of finance. The economic and human toll of the last two years has, however, been significant, with now almost 4 million people living with food insecurity (WFP, 2020). In this context, and with an already vulnerable population, the spread of COVID-19 is a potential catastrophe that c ould wreak havoc on already difficult living conditions. 2. In recent weeks, the authorities have taken preliminary steps toward restoring macroeconomic stability. Since the Article IV staff report in January 2020 (text table 1), the authorities have taken preliminary steps to restore macroeconomic stability, including preparing a new budget framework for FY2020, restarting activity at the statistics agency, resuming publication of monetary statistics, and increasing the availability of fiscal and monetary data . While staff had begun preparations f or discussions for a Staff-Monitored Program (SMP), the arrival of the COVID - 19 shock has given rise to a need f or emergency financing assistance. It is expected that preparations for an SMP will resume following Board approval of the RCF request (¶16). 3. COVID-19 comes at a time of economic contraction and considerable macroeconomic imbalances. With the statistics institute closed from August 2019- March 2020, little data is available on output or inflation. Nonetheless, t he output contraction is likely to have continued during the first six months of FY2020 given continuation of the political stalemate. Based on available fiscal and monetary data for the October 2019- January 2020 period, staff estimate that the fiscal deficit for the first half of FY2020 could reach 3.5 percent of GDP, compared to 1.0 percent of GDP recorded for the same period last year. The external current account deficit declined from 4.0 percent of GDP in FY2018 to 1.4 percent of GDP in FY2019, due mostly to import contraction and a rise in remittances to 35 percent of GDP. Gross international reserves were US$2.1 billion at end-2019 (5.7 months of imports), while the US$/HTG exchange rate was HTG98 at end-March, a depreciation of 5 percent since October 2019. 1 The fiscal year end September 30. 0 20 40 60 80 100 Haiti Central America South America Caribbean small states Basic Sanitation, 2017 1/ (Percent of population using at least basic sanitation services) Sources: World Bank, WHO and IMF staff calculations. 1/ Basic sanitation services as defined by the WHO andWorld Bank. HAITI 4 INTERNATIONAL MONETARY FUND IMPACT OF COVID- 19 AND RESPONSE 4. While Haiti has significant fiscal imbalances and deep-seated structural weaknesses, the COVID- 19 pandemic has contributed to an urgent balance of payments need . With the arrival of this pandemic, Haiti will likely see a major hit to its external accounts, including: (i) a drop in remittances estimated at about US$557 million compared to the previous fiscal year, based on estimated elasticities— a key channel since remittances exceeded US$3 billion; (ii) a decline in textile exports to the U.S. of about US$178 million, or 2.0 percent of GDP and 17 percent of total goods exports; and (iii) a drop in foreign direct investment (FDI) of about 0.4 percent of GDP. On the fiscal front, the country would encounter: (iv) additional direct health, medical, security, and social expenditures to address the virus impact; and (v) an expected decline in fiscal revenues as a share of GDP by 0.6 percentage points, to a level 3.0 percent of GDP below the FY2016 -FY2018 average. Real GDP is forecast to contract by 4.0 percent in FY2020 compared to a 1.2 percent drop in FY2019, due to the combined supply and demand shocks of COVID-19. While the fiscal and external sectors would benefit from the drop -in oil prices expected in 2020, these gains are mitigated by the depreciation in the exchange rate (see text chart ). While there is always uncertainty regarding projections of the amount and timing of external assistance (¶7), this is expected to widen the balance of payments shortfall to an estimated US$338 million from US$190 million in FY2019. Compared to staff’s previous projections (SM/19/283), external financing needs for FY2020 are US$317 million larger (Text Table 1). 5. The government has moved quickly to respond to the appearance of COVID- 19. The last country in the Americas to report a COVID-19 case (March 20), Haiti had already formulated a national response strategy—Plan de Préparation et de Réponse—for containment and treatment. The government moved to Phase 2 of the plan on March 20 launching a communication campaign to sensitize the population; declaring a state of emergency; instituting a curfew from 8pm to 5am; Measures Millions of HTG Share of GDP (%) Goods and services Health-related expenditures 3,432.9 0.4 Security 1,000.0 0.1 Transfers (non-energy) Dry food rations 1,800.0 0.2 Transfers to poor families 4,000.0 0.5 Transfers to teachers 2,000.0 0.2 Transfers to textile workers 412.5 0.0 Other transfers 233.6 0.0 Capital expenditures (University hospital)500.0 0.1 Total 13,379.0 1.6 Sources: Authorities' data; and IMF staff estimates and projections. Text Table 2. Additional Expenditures Related to COVID-19 SM/19/283RCF requestDifference Current account -75.2 -316.0 -240.7 Trade Balance -3,695.0-3,175.9 519.1 of which textile exports 1,166.1 955.3 -210.8 of which tourism 292.3 258.0 -34.3 of which oil imports -1,065.6 -619.2 446.4 Remittances 3,231.7 2,485.2 -746.5 Capital and financial accounts 54.1 -21.6 -75.7 of which FDI 75.0 44.7 -30.3 Official Disbursements 214.0 253.1 39.1 Overall Balance -21.1 -337.8 -316.7 Financing 21.1 337.6 316.5 RCF 111.2 111.2 Other incl. decline in reserves 21.1 226.3 205.2 Sources: Authorities' data; and IMF staff estimates and projections. 1/ The Article IV 2019 Consultation (SM/19/283) w as concluded on January 24, 2020. Text Table 1. Impact of COVID-19 on Balance of Payments 1/ (In millions of US$ on a fiscal year basis; unless otherwise indicated) FY2020 HAITI INTERNATIONAL MONETARY FUND 5 shutting all land and sea borders to persons (not freight); closing schools, factories, and places of worship; cancelling public gatherings of more than 10 people; and prohibiting any informal trading of medicines and food. 6. The central bank (BRH) and ministry of finance have taken steps to cushion the impact on the population. The BRH has moved to ease liquidity conditions in the financial system, including reducing the refinance and reference rates, loweri ng reserve requirements on domestic currency deposits, allowing 20 percent of treasury certificates held to count against reserves, easing loan repayment obligations for three months, and suspending fees in the interbank payment system. The government announced additional health care spending and transfers to support workers and households, including paying the salaries for one month of most teachers and professors, paying 50 percent of salaries of workers in the textile sector, providing cash transfers and food rations to households, and providing subsidies to the transport and sanitation sectors (Text Table 2). These measures are estimated at 1.6 percent of GDP. 7. The international community may offer additional budget support in the context of a Fund-supported program. International financial institutions (excluding the IMF) and the European Union together are expected to provide financing of about US$253 million in FY2020, mostly in the form of project grants. Of this amount, only US$17 million is in the form of budget support. Additional international support would be required to close the financing gap (Text Table 1) and would likely materialize in conjunction with implementation of a SMP. Details on bilateral support in the form of emergency financing were not yet available. OUTLOOK AND DEBT SUSTAINABILITY 8. The economic outlook assumes political stability relative to recent times but fiscal and external stresses related to the global pandemic. In the absence of firm policy commitments under an SMP framework, the outlook assumes continued modest improvements in policy implementation aimed at restoring macro stability. The near term focus would be anchored by the government’s FY2020 notional budget as the organizing framework, guided by medium-term principles of debt sustainability. For FY2020, this includes a focus on closing the fiscal financing gap while making room for measures to counter the impact of COVID-19 on the population, containing inflation by limiting monetary financing of the deficit, allowing the exchange rate to adjust to market pressures, and enhancing rapidly the provision of social benefits—with the assistance of development partners. The latter aims to contain the spread of COVID-19 and deliver relief to the broader public from associated economic hardships. 170 200 230 260 290 320 350 380 410 440 470 500 -2700 -1800 -900 0 900 1800 2700 Mar-15 Sep-15 Mar-16 Sep-16 Mar-17 Sep-17 Mar-18 Sep-18 Mar-19 Sep-19 Mar-20 Sep-20 Mar-21 Sep-21 Fuel Prices and Revenue Net revenue Gasoline retail price (HTG/gallon) (RHS) Gasoline price without subsidy (RHS) Sources: National Authorities and IMF staff calculations. HAITI 6 INTERNATIONAL MONETARY FUND 9. Political instability in the first quarter of FY2020 and the COVID-19 impact in of the year will weigh on activity in 2020 and 2021. While there is no data on national accounts since September 2018 and no activity data since June 2019, staff project a further contraction in GDP by 4.0 percent in FY2020 before a rebound to 1.0 percent in FY2021. Central bank financing of the government for the whole fiscal year will remain under its current level of HTG 26.7 billion. Inflation is projected to rise to 23 percent (y/y) by September 2020, exacerbated by monetary financing of the deficit and supply constraints related to COVID-19. Without offsetting measures to increase domestic revenues or rationalize spending un related to the COVID-19 crisis, the fiscal deficit is projected to widen to 6.4 percent of GDP in FY2020. If sources of financing fall short, this would lead to a further accumulation of arrears of about 2. 8 percent of GDP. The external current account deficit is forecast to decline to about 0.6 percent of GDP in FY2021 as oil import costs remain low and remittances recover. 10. Risks are varied and primarily on the downside. In addition to the risk of a deeper and more prolonged COVID-19 impact, significant internal risks include a failure to move forward with a comprehensive reform program and stronger governance, return to political instability and social unrest, and natural disasters. Externally, Haiti is vulnerable to a larger -than anticipated interruption in remittance flows. On the upside, continuing low fuel prices would relieve pressure from the government budget. 11. Haiti is assessed as having sustainable debt. The current DSA update (Annex I) and most recent DSA write-up (SM/19/283) assess public debt to be sustainable in the medium term as the debt-to-GDP ratio is projected to remain roughly flat over the next 5-10 years and there exists a feasible set of policy measures that would address the rising debt profile in the long-term. Haiti’s risk of debt distress is still assessed to be “high”, although the model-based risk rating for both external and overall public debt is “moderate.” An application of judgement was applied to raise the risk rating to “high” because of Haiti’s institutional fragilities, vulnerability to natural disasters, and high risk of debt distress in the long- term in the absence of adjustment in the outer years. POLICY UNDERTAKINGS 12. Discussions focused on immediate policies to contain COVID -19, protect and care for the population, and limit the economic deterioration. Staff encouraged the authorities to build on the draft “ Politique Nationale de Protection et de Promotion Sociale” (PNPPS) to support their policy response to COVID -19. Looking forward, the authorities have committed to implement a reform program with the support of an SMP framework that will include policies to strengthen the fiscal and monetary policy frameworks, improve tax administration and public finance management, tackle governance weaknesses and corruption, and focus in particular on a few concrete measures to build a coherent social safety net and reform the energy sector (see ¶ 16). 13. The authorities have worked with staff to prepare a credible budget framework for FY2020. As there has been no budget law passed since 2017/18, this notional budget is needed to guide policies and manage cash needs in the absence of a sitting parliament to approve a budget HAITI INTERNATIONAL MONETARY FUND 7 law. New spending on health, social programs, and security is expected to reach 1.6 percent of GDP and Treasury- funded domestic public investment could rise by 0.5 percent of GDP, albeit from a low base in FY2019. 2 Initial preparations for elections to be held in FY2021 will also add a further 0.5 percent of GDP in expenditures. The authorities do not plan to incur new arrears in 2020 and will prepare for discussions for an SMP by providing a stock-taking of existing budget arrears and proposing a plan for their restructuring. Of the gross financing needs of 6.4 percent of GDP, 21 percent would be met by external budget support from the IMF (1.3 per- cent of GDP, ¶ 19) while financing by the central bank would be limited to the level of HTG 26.7 billion reached in mid- March, or 3.1 percent of GDP. Text Table 3 presents the financing gap compared to staff’s last projections (SM/19/283). 3 If budget support is not sufficient to cover the financing gap, efforts c ould be made to reduce capital expenditures on non-COVID-19 related investment and implement additional revenue measures (see ¶18, SM/19/283). 14. In the short term, staff advised the BRH to contain monetary financing of the deficit and limit foreign exchange interventions to smoothing volatility. While the temporary easing of liquidity conditions is appropriate in the present circumstances, as noted above, s taff expect the BRH to limit monetary financing of the deficit for the whole fiscal year to the level reached in March of HTG 27 billion (excluding the planned on- lending by the central bank to the government of RCF resources). This is more than double the HTG 10 billion agreed in the Pacte de Gouvernance Economique et Financière. The banking supervisor should heighten monitoring of financ ial soundness, enhance the frequency of dialogue with regulated entities, and prioritize discussions on business continuity planning and operational resilience. Banks should be encouraged to use existing buffers and work with affected borrowers to consider prudent loan restructuring. However, loan classification, provisioning rules, and other accounting requirements should not be relaxed. 15. It will be important to consider the implications of short -term emergency measures on the efficacy and integrity of economic institutions. For example, in recent months the authorities took decisions that could undermine laws and the efficiency of resource allocation down the road, 2 Other domestically funded public investment could also rise by 0.2 percent of GDP. 3 There was a massive drop in revenue collection in FY2019 (see ¶ 4). From this low base, the revenue/GDP forecast now for FY2020 is slightly higher than in SM/19/283 due primarily to a lower nominal GDP denominator. FY2019 SM/19/283RCF requestDifference Revenue and grants 12.1 13.4 12.4 -1.0 Revenue 10.8 10.0 10.2 0.2 Grants 1.4 3.4 2.2 -1.2 Total expenditures 14.5 15.6 17.5 1.9 of which: COVID-19 relatedNA NA 1.6 1.6 Transfers (energy)2.4 2.4 1.4 -1.0 Elections NA NA 0.5 0.5 Other 12.1 13.2 14.1 0.9 Central government balance 2/ -2.4 -2.2 -5.2 -3.0 Transfers to EDH -1.1 -1.2 -1.2 0.0 Overall balance incl. grants -3.5 -3.4 -6.4 -3.0 Financing 3.5 3.4 3.6 0.2 Financing gap 0.0 0.0 2.8 2.8 Additional financing NA NA 1.3 1.3 RCF 1.3 1.3 Other donors Remaining financing gap NA NA 1.5 1.5 Sources: Authorities' data; and IMF staff estimates and projections. 1/ The Article IV 2019 Consultation (SM/19/283) was concluded on January 24, 2020. 2/ Including grants. To be determined Text Table 3. Non-financial Public Sector 1/ (In percent of GDP on a fiscal year basis) FY2020 HAITI 8 INTERNATIONAL MONETARY FUND including allowing the government to circumvent existing public procurement standards and reviving the state fuel import monopoly that had been disbanded. Under the current special circumstances, and given limited capacity and the need to promote sustainable reforms, staff stressed the importance of enforcing standard budget execution procedures and reporting regarding the spending chain, starting with COVID-19 expenditures. This would support the general improvement of standard budget procedures and also help the administration keep track, record, and publish monthly all expenditures incurred on an emergency basis so as to limit the risk of misuse of public funds. The authorities agreed to prepare monthly budget execution reports on all COVID-19 expenditures and also to undertake a thorough ex -post financial and operational audit of COVID-19-related operations. This would strengthen sustainable reforms of budget processes, provide assurances on the use of external financing, and help the authorities improve the operational efficiency of emergency responses in the future. 16. Efforts to strengthen the policy framework are expected to continue with the support of an SMP. The government’s program would focus on: (i) restoring macroeconomic stability and the seeds of growth and employment; (ii) building a better social safety net; and (iii) improving governance and combatting corruption. To reduce fiscal dominance and the negative feedback loop of monetary financing of the deficit on inflation and exchange rate depreciation, policies would aim to limit public sector deficits, including the significant fiscal losses related to the fuel sector and the public electricity company ( EDH). On social policies, the SMP should support implementation of the new national plan PNPPS (not yet approved), continue to expand coverage of the social registry (SIMAST), establish an effective governance structure for social spending , and advance Fintech reforms to help distribute cash transfers and deepen financial inclusion. Finally, a key pillar of the program would include measures to strengthen implementation of the 2009 Anti-Corruption Strategy, advance governance reforms across the public service and the central bank, and support efforts to increase the transparency of public spending. With government ownership and buy-in across a broader set of stakeholders, an SMP-supported program is expected to unlock further donor support to help close the residual financing gap. MODALITIES OF SUPPORT UNDER THE RCF 17. Staff propose to provide support of 50 percent of quota (SDR 8 1.9 million) under the RCF under the exogenous shock window. Haiti meets the eligibility requirements for support under the RCF. It faces an urgent balance of payments need, which, if not addressed would result in immediate and severe economic and humanitarian disruption. It is not feasible to implement an upper credit tranche (UCT)-quality Fund- supported program due to the recent history of political instability and social disruption which has resulted in an erosion in administrative capacity and weakening in policy frameworks. In addition, the re is a high degree of uncertainty regarding the duration and scale of the COVID-19 impact, practical difficulties related to the no -travel environment, including in Haiti, and the need for more comprehensive policy discussions, including with non-government stakeholders, to advance to a UCT level program under an ECF. 18. Staff considers access of 50 percent of quota under the RCF to be appropriate. Haiti HAITI INTERNATIONAL MONETARY FUND 9 does not currently have an IMF arrangement and has outstanding debt to the IMF of SDR 54.6 million, or 33 percent of quota (March 2020). Access of 50 percent of quota is within the applicable access limits under the PRGT. As noted above, Haiti is assessed as having sustainable debt and capacity to repay the Fund (Table 5) at that level of access. A disbursement of 50 percent of quota would be appropriate given the government’s stated commitment to pursue policies to help stabilize the economy and the balance of payments need at this time. The amount would represent about 34 percent and 47 percent of the additional external and fiscal financing gaps, respectively. The remaining external financing needs not covered by the RCF would need to be filled by other donors and some international reserve drawdown (Table 1, Text table 1) . Should the balance of payments need widen significantly in the coming months, the authorities might consider requesting another disbursement under the RCF , provided they had built a solid policy track record under the SMP and met the other eligibility requirements for support under the RCF. 19. The RCF disbursement will be disbursed to the central bank and is expected to be on- lent to the government for budget support. This will help the government finance its response to the COVID-19 crisis, including purchases of medical supplies and cash transfers to the most vulnerable households. The proposed access of 50 percent of quota, equivalent to 1.3 percent of GDP, is not sufficient to cover the full fiscal financing gap of 2. 8 percent of GDP. The authorities are seeking further support to cover the remaining fiscal financing need of US$129 million, or 1.5 per- cent of GDP (Text table 3 ). The remainder of the fiscal financing gap would need to be covered by additional revenue measures and issuance of T-bills. In their Letter of Intent, the authorities confirm that they have a establish ed a Memorandum of Understanding between the ministry of economy and finance (MEF) and the central bank (BRH) agreeing to the terms of the on- lending arrangement, and clarifying their respective roles and responsibilities for timely servicing of the financial obligations to the IMF. 20. The authorities have indicated their intention to cooperate with the Fund and pursue economic policies appropriate for addressing the impact of COVID-19. As noted above, Haiti is expected to undertake discussions for a six month SMP arrangement in the coming weeks with the goal of advancing after that to a comprehensive upper credit tranche-quality economic reform program aimed at lifting Haiti out of fragility and on a path toward stronger growth, employment and poverty reduction. The authorities have also requested debt relief under the Catastrophe and Containment Relief Trust (CCRT). Under the new “tranching” approach, the Fund will provide CCRT debt service relief for a period of up to six months from the date of the request (from April 14 until October 13, 2020), or for as much as is possible from available resources. 21. The authorities have committed to continue implementing the recommendations from the last safeguards assessment of the BRH, completed in August 2019 . Indeed, as prior actions for disbursement under the RCF, the BRH implemented the following two key recommendations from the Assessment on April 10, 2020: (i) completed the financial audit and published the audited financial statements for the year ended September 30, 2019; and (ii) adopted a Board decision to strengthen the governance and accountability arrangements for f oreign reserve management in line with IMF recommendations by revising the composition of the Investment Committee (IC) and HAITI 10 INTERNATIONAL MONETARY FUND amending its charter, establishing strict segregation of responsibilities between the director and staff members within the Foreign Portfolio Department, and establishing a dedicated risk management function. The authorities will continue to provide IMF staff with the required audit reports of the central bank, authorize the external auditors of the central bank to hold discussions with staff. In addition, they intend to follow through on other recommendations from the safeguards assessment in the context of the upcoming SMP. 22. Risks to Haiti’s capacity to repay are moderate, but may be mitigated by the authorities’ intention of committing to policy reforms under an SMP and later UCT-level program . The authorities have expressed interest in a continued close dialogue with the Fund and, as noted in the Letter of Intent, have committed to achieving macro stability and undertaking reforms to strengthen governance, raise employment and growth, and reduce poverty (Box 1). Progress in these areas will help mobilize sizeable external concessional funding and grants that would help ease financing constraints and mitigate risks on capacity to pay (Table 5). STAFF APPRAISAL 23. Haiti faces high risks related to the COVID-19 epidemic as well as monumental policy challenges. Weakened by eighteen months of political instability and intermittent social unrest, the Haitian economy has zero buffers to withstand the current crisis. Monetary financing of the fiscal deficit has grown by one third over the past three months, leading to an acceleration of inflation and further depreciation of the gourde. Without decisive external support, this situation would be unsustainable. 24. Staff support Haiti’s request for financial assistance under the RCF. The authorities have indicated commitment to implement policies that will make progress towards achieving a stable and sustainable macroeconomic position consistent with strong and durable poverty reduction and growth, to be supported by a subsequent SMP. The Fund’s financial assistance under the RCF is expected to be used for budget support to fund the authorities’ response to the crisis, including health and social spending, and will cover a sizeable share of the fiscal financing gap , complemented by the assistance of other development partners. The proposed disbursement of 50 percent of quota would not impair Haiti’s debt sustainability or capacity to repay the Fund. 25. Staff urge the authorities to carefully track, record, and publish all expenditures related to the emergency response. Accurate and transparent recording and accountability with respect to the allocation of financing assistance would be important to build public confidence. In this regard, staff welcome the authorities’ commitment to continue to advance governance and anti - corruption reforms and to move forward with a more comprehensive economic reform strategy. In particular, their proposal to report monthly on COVID-19 expenditures and undertake an ex -post COVID-19 financial and operational audit of the expenditure response is encouraging. This would help strengthen public financial management transparency and accountability while contributing to building capacity on the efficiency of the government’s social spending and emergency response. HAITI INTERNATIONAL MONETARY FUND 11 Table 1. Haiti: Selected Economic and Financial Indicators, FY2018–25 1 (Fiscal year ending September 30) Nominal GDP (2018): US$9.7 billion GDP per capita (2018): $890 Population (2016): 10.847 million Percent of population below poverty line (2012): 58 FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 FY2024 FY2025 Est. Proj. Proj. Proj. Proj. Proj. Proj. National income and prices GDP at constant prices 1.5 -1.2 -4.0 1.2 1.0 1.1 1.2 1.4 GDP deflator 12.8 17.3 22.2 21.3 18.3 15.3 12.9 10.9 Consumer prices (period average) 12.9 17.3 22.2 21.3 18.3 15.3 12.9 10.9 Consumer prices (end-of-period) 13.3 20.1 23.0 20.0 17.0 14.0 12.0 10.0 External Sector Exports (goods, valued in U.S. dollars, f.o.b.) 8.8 11.4 -15.2 1.8 2.6 2.7 3.4 3.0 Imports (goods, valued in U.S. dollars, f.o.b.) 24.0 -6.4 -14.8 1.8 3.9 2.4 2.4 2.4 Remittances (valued in U.S. dollars) 21.1 8.5 -18.3 12.7 7.3 -3.0 -2.8 -0.9 Real effective exchange rate (eop; + appreciation) 2.8 -10.7 … … … … … … Money and credit (valued in gourdes) Credit to private sector (in U.S. dollars and gourdes)12.5 22.6 13.3 22.8 19.5 16.6 14.2 12.4 Base money (currency in circulation and gourde deposits)25.8 21.3 17.3 21.8 19.5 16.6 14.2 11.9 Broad money (excl. foreign currency deposits) 13.7 22.0 16.8 22.1 19.5 16.6 14.2 11.9 Central government Overall balance (including grants) -1.7 -2.4 -5.2 -2.9 -2.8 -2.4 -2.5 -2.6 Domestic revenue 13.0 10.8 10.2 11.4 12.9 13.4 14.0 14.4 Grants 4.3 1.4 2.2 3.8 3.0 3.8 4.6 4.9 Expenditures 19.0 14.5 17.5 18.0 18.7 19.6 21.2 21.8 Current expenditures 12.7 12.4 13.3 12.8 13.6 13.3 13.3 13.1 Capital expenditures 6.2 2.1 4.2 5.2 5.1 6.3 7.9 8.7 Overall balance of the nonfinancial public sector 1/ -2.9 -3.5 -6.4 -4.0 -3.9 -3.5 -3.6 -3.7 Savings and investment Gross investment 29.0 30.8 27.4 27.5 28.0 29.0 30.0 30.4 Of which: public investment 6.2 2.1 4.2 5.2 5.1 6.3 7.9 8.7 Gross national savings 25.1 29.4 23.7 26.9 27.6 27.6 28.0 27.8 Of which: central government savings 0.7 0.9 2.0 2.7 3.2 3.3 3.2 3.3 External current account balance (incl. official grants)-3.9 -1.4 -3.7 -0.6 -0.4 -1.4 -2.0 -2.6 External current account balance (excl. official grants)-7.9 -3.5 -5.8 -4.4 -3.5 -5.1 -6.6 -7.5 Net fuel exports -10.1 -12.8 -7.2 -7.5 -7.9 -8.1 -8.3 -8.3 Public debt External public debt (medium and long-term, eop) 23.5 27.4 28.0 25.8 23.8 22.9 22.5 22.4 Total public sector debt (end-of-period) 39.9 47.7 51.9 49.9 48.6 47.3 46.8 46.6 External public debt service 2/ 6.1 7.3 9.2 9.0 8.8 8.6 8.3 8.6 Memorandum items: Overall balance of payments -39 -190 -338 13 100 105 82 60 Net international reserves (program definition) 677 644 268 279 368 430 469 488 Gross international reserves 2,086 2,100 1,872 1,885 1,977 2,069 2,140 2,190 In months of imports of the following year 4.8 5.7 4.8 4.7 4.8 4.9 4.9 4.9 Nominal GDP (millions of gourdes) 631,829732,545859,2871,054,9761,260,7681,470,0331,679,4661,888,510 Nominal GDP (millions of U.S. dollars) 9,658 8,708 8,601 8,875 9,196 9,531 9,87910,258 Output gap (% of potential) 0.0 -1.4 -5.5 -4.4 -3.5 -2.5 -1.3 0.0 1/ Includes transfers to the state-owned electricity company (EDH). 2/ In percent of exports of goods and nonfactor services. Includes debt relief. Sources: Ministry of Economy and Finance; Bank of the Republic of Haiti; World Bank; Fund staff estimates and projections. (Change over previous year; unless otherwise indicated) (In percent of GDP; unless otherwise indicated) (In millions of dollars, unless otherwise indicated) HAITI 12 INTERNATIONAL MONETARY FUND Table 2a. Haiti: Non-Financial Public Sector Operations, FY2018–25 (Fiscal year ending September 30; In millions of gourdes) FY2018FY2019FY2020FY2021FY2022FY2023FY2024FY2025 Est. Proj. Proj. Proj. Proj. Proj. Proj. Total revenue and grants 109,10788,998106,170159,930200,379252,891313,700363,480 Domestic revenue 82,08979,07187,630120,110162,359197,462235,839271,049 Domestic taxes 56,85853,29960,42284,314117,059145,231175,158198,849 Customs duties 22,53320,09820,85029,53937,82344,10150,38460,432 Of which: fuel taxes 2,884 52 0 0 0 0 0 0 Other current revenue 2,698 5,674 6,357 6,257 7,478 8,13110,29711,767 Of which: FNE 2,105 2,068 2,320 2,848 3,404 3,969 4,535 5,099 Of which: FER 245 169 199 244 291 487 724 1,003 Grants 27,018 9,92718,54139,82038,02055,42877,86092,431 Budget support 1/ 3,467 0 1,68110,084 2,33011,26412,55313,756 Project grants 23,551 9,92716,86029,73635,69044,16465,30878,675 Total expenditure 2/ 119,965106,345150,533190,020235,607287,959356,374412,458 Current expenditure 80,51690,896114,627135,513171,762195,002223,292247,379 Wages and salaries 37,64540,28045,77458,02471,86483,79295,730107,645 Goods and services 25,31223,02232,90537,97944,12751,45158,78166,098 Interest payments 1,936 3,398 2,662 3,933 4,612 5,125 6,044 7,194 External 1,300 1,702 1,748 2,440 2,707 2,881 3,432 4,200 Domestic 635 1,696 915 1,493 1,905 2,244 2,612 2,994 Transfers and subsidies 15,62324,19533,28635,57751,15954,63462,73766,442 Nonenergy sector 11,381 6,76621,13015,82519,16422,63926,20029,838 Energy sector 3/ 4,24317,43012,15619,75331,99631,99636,53736,604 Capital expenditure 39,44915,44935,90554,50763,84492,957133,082165,079 Domestically financed 15,460 5,26412,30219,42123,01328,74339,72348,634 Foreign-financed 23,98810,18623,60435,08540,83164,21593,359116,445 Central government balance including grants -10,858-17,347-44,362-30,089-35,228-35,069-42,674-48,978 Excluding grants -37,877-27,274-62,903-69,909-73,247-90,497-120,535-141,409 Excluding grants and externally financed projects-13,888-17,089-39,299-34,824-32,416-26,282-27,176-24,964 Other transfers to EDH -7,419-8,094-10,290-11,605-13,868-16,758-18,474-20,018 Primary balance of NFPS, including grants -16,341-22,044-51,990-37,761-44,484-46,702-55,104-61,802 Overall balance of NFPS, including grants -18,277-25,442-54,652-41,694-49,096-51,827-61,148-68,996 Adjustment (unsettled payment obligations) 16,764 0 0 0 0 0 0 0 Financing gap 12,893 0 0 0 0 0 Financing, NFPS 35,04125,44241,75941,69449,09651,82761,14868,996 External net financing -3,379-2,836-2,353-6,890-9,084 3,926 9,25715,088 Loans (net) -3,379-6,790-2,353-5,773-7,795 5,37610,85516,819 Disbursements 1,799 259 6,744 5,349 5,14120,05128,05137,770 Amortization -5,178-7,049-9,097-11,122-12,936-14,675-17,196-20,951 Arrears (net) 0 3,954 0 -1,117-1,289-1,450-1,598-1,731 Internal net financing 38,42028,27844,11248,58458,18047,90151,89153,908 Banking system 34,59014,66554,23163,94268,81458,38559,56661,583 BRH 4/ 24,318 9,59137,11412,25114,64017,07019,50221,930 Commercial banks 10,272 5,07417,11751,69154,17441,31540,06439,653 Nonbank financing 5/ 3,83113,613-10,119-15,358-10,634-10,484-7,675-7,675 Of which: domestic arrears 0 23,376 0 -4,675-4,675-4,675-4,675-4,675 Memorandum items Total costs of EDH to public sector 11,66212,55015,54318,07520,33823,22825,01126,622 Forgone fuel taxes and fuel direct subsidies 17,22245,72831,27744,70272,27987,537106,301119,612 Health, education and agriculture spending 20,74418,31417,18624,26430,25836,75143,66650,990 Nominal GDP 631,829732,545859,2871,054,9761,260,7681,470,0331,679,4661,888,510 Sources: Ministry of Finance and Economy; and Fund staff estimates and projections. 1/ Includes previously-programmed multilateral budget support that could be delayed. 2/ Commitment basis, except for domestically financed spending, which is reported on the basis of project account replenishments. 4/ Amounts already include the RCF financing for FY2020 and the full two-year debt-relief under the CCRT. 3/ Comprises payments on behalf of EDH for electricity generation, tax payments remitted to EDH and transfers to fuel distributors to maintain pump i 5/ Includes the net change in the stock of government securities held by non-banks, of checks that are not yet cashed, of supplier credits and of domestic arrears. Reform of the energy sector is assum ed in the outer years. HAITI INTERNATIONAL MONETARY FUND 13 Table 2b. Haiti: Non-Financial Public Sector Operations, FY2018–25 (Fiscal year ending September 30; percent of GDP) FY2018FY2019FY2020FY2021FY2022FY2023FY2024FY2025 Est. Proj. Proj. Proj. Proj. Proj. Proj. Total revenue and grants 17.3 12.1 12.4 15.2 15.9 17.2 18.7 19.2 Domestic revenue 13.0 10.8 10.2 11.4 12.9 13.4 14.0 14.4 Domestic taxes 9.0 7.3 7.0 8.0 9.3 9.9 10.4 10.5 Customs duties 3.6 2.7 2.4 2.8 3.0 3.0 3.0 3.2 Of which: fuel taxes 0.5 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Other current revenue 0.4 0.8 0.7 0.6 0.6 0.6 0.6 0.6 Of which: FNE 0.3 0.3 0.3 0.3 0.3 0.3 0.3 0.3 Of which: FER 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.1 Grants 4.3 1.4 2.2 3.8 3.0 3.8 4.6 4.9 Budget support 1/ 0.5 0.0 0.2 1.0 0.2 0.8 0.7 0.7 Project grants 3.7 1.4 2.0 2.8 2.8 3.0 3.9 4.2 Total expenditure 2/ 19.0 14.5 17.5 18.0 18.7 19.6 21.2 21.8 Current expenditure 12.7 12.4 13.3 12.8 13.6 13.3 13.3 13.1 Wages and salaries 6.0 5.5 5.3 5.5 5.7 5.7 5.7 5.7 Goods and services 4.0 3.1 3.8 3.6 3.5 3.5 3.5 3.5 Interest payments 0.3 0.5 0.3 0.4 0.4 0.3 0.4 0.4 External 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 Domestic 0.1 0.2 0.1 0.1 0.2 0.2 0.2 0.2 Transfers and subsidies 2.5 3.3 3.9 3.4 4.1 3.7 3.7 3.5 Non-energy sector 1.8 0.9 2.5 1.5 1.5 1.5 1.6 1.6 Energy sector 3/ 0.7 2.4 1.4 1.9 2.5 2.2 2.2 1.9 Capital expenditure 6.2 2.1 4.2 5.2 5.1 6.3 7.9 8.7 Domestically financed 2.4 0.7 1.4 1.8 1.8 2.0 2.4 2.6 Foreign-financed 3.8 1.4 2.7 3.3 3.2 4.4 5.6 6.2 Central government balance including grants -1.7 -2.4 -5.2 -2.9 -2.8 -2.4 -2.5 -2.6 Excluding grants -6.0 -3.7 -7.3 -6.6 -5.8 -6.2 -7.2 -7.5 Excluding grants and externally financed projects -2.2 -2.3 -4.6 -3.3 -2.6 -1.8 -1.6 -1.3 Other transfers to EDH -1.2 -1.1 -1.2 -1.1 -1.1 -1.1 -1.1 -1.1 Primary balance of NFPS, including grants -2.6 -3.0 -6.1 -3.6 -3.5 -3.2 -3.3 -3.3 Overall balance of NFPS, including grants -2.9 -3.5 -6.4 -4.0 -3.9 -3.5 -3.6 -3.7 Adjustment (unsettled payment obligations) 2.7 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Financing gap 1.5 0.0 0.0 0.0 0.0 0.0 Financing, NFPS 5.5 3.5 4.9 4.0 3.9 3.5 3.6 3.7 External net financing -0.5 -0.4 -0.3 -0.7 -0.7 0.3 0.6 0.8 Loans (net) -0.5 -0.9 -0.3 -0.5 -0.6 0.4 0.6 0.9 Disbursements 0.3 0.0 0.8 0.5 0.4 1.4 1.7 2.0 Amortization -0.8 -1.0 -1.1 -1.1 -1.0 -1.0 -1.0 -1.1 Arrears (net) 0.0 0.5 0.0 -0.1 -0.1 -0.1 -0.1 -0.1 Internal net financing 6.1 3.9 5.1 4.6 4.6 3.3 3.1 2.9 Banking system 5.5 2.0 6.3 6.1 5.5 4.0 3.5 3.3 BRH 4/ 3.8 1.3 4.3 1.2 1.2 1.2 1.2 1.2 Commercial banks 1.6 0.7 2.0 4.9 4.3 2.8 2.4 2.1 Nonbank financing 5/ 0.6 1.9 -1.2 -1.5 -0.8 -0.7 -0.5 -0.4 Of which: domestic arrears 0.0 3.2 0.0 -0.4 -0.4 -0.3 -0.3 -0.2 Memorandum items Total costs of EDH to public sector 1.8 1.7 1.8 1.7 1.6 1.6 1.5 1.4 Forgone fuel taxes and fuel direct subsidies 2.7 6.2 3.6 4.2 5.7 6.0 6.3 6.3 Health, education and agriculture spending 3.3 2.5 2.0 2.3 2.4 2.5 2.6 2.7 Nominal GDP (millions of gourdes) 631,829724,757859,2871,054,9761,260,7681,470,0331,679,4661,888,510 Sources: Ministry of Finance and Economy; and Fund staff estimates and projections. 1/ Includes previously-programmed multilateral budget support that could be delayed. 2/ Commitment basis, except for domestically financed spending, which is reported on the basis of project account replenishments. Reform of the energy sector is assum ed in the outer years. 4/ Amounts already include the RCF financing for FY2020 and the full two-year debt-relief under the CCRT. of domestic arrears. 3/ Comprises payments on behalf of EDH for electricity generation, tax payments remitted to EDH and transfers to fuel distributors to maintain pump prices. 5/ Includes the net change in the stock of government securities held by non-banks, of checks that are not yet cashed, of supplier credits and HAITI 14 INTERNATIONAL MONETARY FUND Table 3. Haiti: Summary Accounts of the Banking System, FY2018–25 (Fiscal year ending September 30; In millions of gourdes, unless otherwise indicated) FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 FY2024 FY2025 Est. Proj. Proj. Proj. Proj. Proj. Proj. Net foreign assets 111,424145,177132,010157,153194,596233,648270,315302,115 (In millions of U.S. dollars) 1,593 1,556 1,224 1,247 1,351 1,455 1,537 1,597 Net international reserves 1/ 677 644 268 279 368 430 469 488 Commercial bank forex deposits 929 915 960 971 986 1,029 1,072 1,114 Net domestic assets -7,904-21,83512,672 19,031 15,956 11,851 10,160 11,869 Net credit to the nonfinancial public sector 60,682 69,137105,775128,026142,666159,736179,238201,168 Of which: Net credit to the central government 61,939 71,530108,644130,895145,535162,605182,107204,037 Claims on central government 89,566107,087143,191154,431168,061184,122203,624225,554 Central government deposits 27,628 35,557 34,547 33,537 32,527 31,517 31,517 31,517 Of which: IMF PCDR debt relief -5,208 -4,776 0 0 0 0 0 0 Liabilities to commercial banks (excl. gourde deposits)77,597 87,103105,348124,239143,954167,129190,322212,543 BRH bonds/Open market operations 12,695 1,840 1,840 1,840 1,840 1,840 1,840 1,840 Commercial bank forex deposits 64,902 85,263103,508122,399142,114165,289188,482210,703 Other 9,012 -3,86912,244 15,244 17,244 19,244 21,244 23,244 Base money 101,716123,342144,682176,184210,552245,500280,476313,984 Currency in circulation 47,201 60,700 73,631 91,135108,913126,990145,082162,415 Commercial bank gourde deposits 54,514 62,641 71,051 85,049101,639118,510135,394151,569 Net foreign assets 164,520225,441255,452301,395352,306401,383445,223480,804 (In millions of U.S. dollars) 2,351 2,416 2,369 2,392 2,445 2,500 2,532 2,542 Of which: Commercial banks NFA 759 1,111 1,145 1,145 1,095 1,045 995 945 Net domestic assets 142,507147,074179,653229,920282,651338,966400,602466,073 Credit to the nonfinancial public sector 50,807 58,821112,576186,518255,332313,717373,284434,867 Of which: Net credit to the central government 61,071 75,736129,967203,909272,723331,109390,675452,258 Claims on central government 67,221 82,412136,643210,585279,399337,784397,351458,933 Central government deposits 6,150 6,675 6,675 6,675 6,675 6,675 6,675 6,675 Credit to the private sector 124,628152,738172,297210,239250,140290,714331,320371,852 In gourdes 75,426 82,548 92,771112,602133,456154,663175,887197,072 In foreign currency 49,203 70,190 79,526 97,637116,683136,050155,433174,780 In millions of U.S. dollars 703 752 737 775 810 847 884 924 Other -32,928-64,484-105,220-166,837-222,821-265,465-304,002-340,646 Broad money 305,222372,515435,105531,315634,957740,349845,825946,877 Currency in circulation 47,201 60,700 73,631 91,135108,913126,990145,082162,415 Gourde deposits 97,211 97,363114,209139,076166,205193,792221,401247,852 Foreign currency deposits 160,810214,452247,266301,104359,840419,567479,342536,609 In millions of U.S. dollars 2,298 2,298 2,293 2,389 2,498 2,613 2,726 2,837 Currency in circulation 22.7 28.6 21.3 23.8 19.5 16.6 14.2 11.9 Base money 25.8 21.3 17.3 21.8 19.5 16.6 14.2 11.9 Gourde money (M2) 22.0 9.5 18.8 22.6 19.5 16.6 14.2 11.9 Broad money (M3) 13.7 22.0 16.8 22.1 19.5 16.6 14.2 11.9 Gourde deposits 21.6 0.2 17.3 21.8 19.5 16.6 14.2 11.9 Foreign currency deposits 7.2 33.4 15.3 21.8 19.5 16.6 14.2 11.9 Credit to the private sector 12.5 22.6 13.3 22.8 19.5 16.6 14.2 12.4 Credit in gourdes 12.8 8.6 13.3 22.8 19.5 16.6 14.2 12.4 Credit in foreign currency 12.1 42.7 13.3 22.8 19.5 16.6 14.2 12.4 Memorandum items: Foreign currency deposits (% of total private deposits)59.2 66.3 66.3 66.7 66.9 67.1 67.3 67.4 Foreign curr. credit to priv. sector (% of total) 41.0 47.7 47.7 47.7 47.7 47.7 47.7 47.7 Commercial banks' credit to private sector (% of GDP) 19.0 20.1 19.4 19.4 19.4 19.4 19.4 19.4 Sources: Bank of the Republic of Haiti; and Fund staff estimates and projections. bank reserves. The SDR allocation is not netted out of NIR. 1/ Program definition. Excludes commercial bank forex deposits, letters of credit, guarantees, earmarked project accounts and US$ denominated II. Consolidated banking system I. Central bank (12-month percentage change) HAITI INTERNATIONAL MONETARY FUND 15 Table 4a. Haiti: Balance of Payments, FY2018–25 (In millions of US$ on a fiscal year basis; unless otherwise indicated) FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 FY2024 FY2025 Est. Proj. Proj. Proj. Proj. Proj. Proj. Current account (including grants) -373 -123 -316 -52 -41 -131 -195 -264 Current account (excluding grants) -759 -304 -501 -387 -318 -491 -653 -766 Trade balance -3,406 -2,996 -2,557 -2,603 -2,718 -2,780 -2,837 -2898 Exports of goods 1,079 1,201 1,019 1,038 1,065 1,093 1,131 1165 Of which: Assembly industry 987 1,133 955 973 998 1,025 1,060 1092 Imports of goods -4,484 -4,198 -3,576 -3,640 -3,783 -3,873 -3,968 -4063 Of which: Fossil fuels -972 -1,112 -619 -666 -727 -776 -818 -856 Of which: Food products -910 -729 -687 -698 -707 -714 -723 -733 Services (net) -486 -618 -619 -639 -662 -686 -711 -739 Receipts 701 385 258 355 368 381 395 410 Payments -1,187 -1,003 -877 -994 -1,030 -1,067 -1,106 -1149 Income (net) 50 50 26 53 55 57 59 62 Of which: Interest payments -20 -21 -20 -21 -20 -19 -21 -23 Current transfers (net) 3,469 3,442 2,835 3,137 3,284 3,278 3,294 3312 Official transfers (net) 386 181 186 335 277 359 458 502 Of which: budget support 1/ 53 0 17 85 17 73 74 75 Private transfers (net) 2,805 3,043 2,486 2,802 3,007 2,918 2,836 2810 Other transfers (net) 278 218 163 0 0 0 0 0 Capital and financial accounts 353 -113 -22 65 140 236 277 324 Capital transfers 31 15 0 0 30 30 30 30 Public sector capital flows (net) -44 -92 -31 -59 -68 23 58 100 Loan disbursements 28 3 68 45 38 130 165 205 Amortization -71 -95 -99 -104 -105 -107 -107 -106 Foreign direct investment (net) 105 75 45 133 138 143 148 154 Banks (net) 2/ 152 -79 -34 0 50 50 50 50 Other items (net) 109 -32 -2 -9 -9 -9 -9 -9 Of which: repayment of arrears 5/ - - - -9 -9 -9 -9 -9 Errors and omissions -19 45 0 0 0 0 0 0 Overall balance -39 -190 -338 13 100 105 82 60 Financing 39 190 338 -13 -100 -105 -82 -60 Change in net foreign assets (+ is decrease) 36 187 338 -13 -100 -105 -82 -60 o/w Change in gross reserves (+ is decrease) -33 109 229 -13 -92 -92 -71 -50 o/w Liabilities (+ is increase) 69 78 109 0 -7 -13 -11 -11 Changes in arrears 3/ 87 93 0 0 0 0 0 0 Other liabilities -6 0 0 0 0 0 0 0 Debt rescheduling and debt relief 3 3 0 0 0 0 0 0 Memorandum items: Change in US$ denom. reserve deposits at BRH (+ is decrease)22 14 -45 -12 -15 -43 -42 -42 Change in NIR (program definition) (+ is decrease) 153 33 376 -12 -89 -62 -40 -19 Current account (in percent of GDP) -3.9 -1.4 -3.7 -0.6 -0.4 -1.4 -2.0 -2.6 Excluding official transfers -7.9 -3.5 -5.8 -4.4 -3.5 -5.1 -6.6 -7.5 Exports of goods, f.o.b (percent change) 8.8 11.4 -15.2 1.8 2.6 2.7 3.4 3.0 Imports of goods, f.o.b (percent change) 24.0 -6.4 -14.8 1.8 3.9 2.4 2.4 2.4 Increase in Arrears 5/ - 47 - - - - - - Projected average oil price (U.S. dollars per barrel, APSP)68.3 61.4 35.6 37.9 40.9 43.2 45.0 46.4 Debt service (in percent of exports of goods and services)6.1 7.3 9.2 9.0 8.8 8.6 8.3 8.6 Gross international reserves (in millions of U.S. dollars) 4/ 2,086 2,100 1,872 1,885 1,977 2,069 2,140 2,190 (in months of next year's imports of goods and services) 4.8 5.7 4.8 4.7 4.8 4.9 4.9 4.9 Nominal GDP (millions of U.S. dollars) 9,658 8,708 8,601 8,875 9,196 9,531 9,879 10,258 Sources: Bank of the Republic of Haiti; and Fund staff estimates and projections. 1/ Includes previously-programmed multilateral budget support that could be delayed. 2/Change in net foreign assets of commercial banks. 3/ Includes debt to Venezuela for oil shipments already paid by the GOH in local currency but not yet cleared in U.S. dollars. 4/ Includes gold. 5/ Includes arrears on oil imports. HAITI 16 INTERNATIONAL MONETARY FUND Table 4b. Haiti: Balance of Payments, FY2018–25 (In percent of GDP on a fiscal year basis; unless otherwise indicated) FY2018FY2019FY2020FY2021FY2022FY2023FY2024FY2025 Est. Proj. Proj. Proj. Proj. Proj. Proj. Current account (including grants) -3.9 -1.4 -3.7 -0.6 -0.4 -1.4 -2.0 -2.6 Current account (excluding grants) -7.9 -3.5 -5.8 -4.4 -3.5 -5.1 -6.6 -7.5 Trade balance -35.3 -34.4 -29.7 -29.3 -29.6 -29.2 -28.7 -28.3 Exports of goods 11.2 13.8 11.8 11.7 11.6 11.5 11.4 11.4 Of which: Assembly industry 10.2 13.0 11.1 11.0 10.9 10.8 10.7 10.6 Imports of goods -46.4 -48.2 -41.6 -41.0 -41.1 -40.6 -40.2 -39.6 Of which: Fossil fuels -10.1 -12.8 -7.2 -7.5 -7.9 -8.1 -8.3 -8.3 Of which: Food products -9.4 -8.4 -8.0 -7.9 -7.7 -7.5 -7.3 -7.1 Services (net) -5.0 -7.1 -7.2 -7.2 -7.2 -7.2 -7.2 -7.2 Receipts 7.3 4.4 3.0 4.0 4.0 4.0 4.0 4.0 Payments -12.3 -11.5 -10.2 -11.2 -11.2 -11.2 -11.2 -11.2 Income (net) 0.5 0.6 0.3 0.6 0.6 0.6 0.6 0.6 Of which: Interest payments -0.2 -0.2 -0.2 -0.2 -0.2 -0.2 -0.2 -0.2 Current transfers (net) 35.9 39.5 33.0 35.3 35.7 34.4 33.3 32.3 Official transfers (net) 4.0 2.1 2.2 3.8 3.0 3.8 4.6 4.9 Of which: budget support 1/ 0.5 0.0 0.2 1.0 0.2 0.8 0.7 0.7 Private transfers (net) 29.0 34.9 28.9 31.6 32.7 30.6 28.7 27.4 Other transfers (net) 2.9 2.5 1.9 0.0 0.0 0.0 0.0 0.0 Capital and financial accounts 3.7 -1.3 -0.3 0.7 1.5 2.5 2.8 3.2 Capital transfers 0.3 0.2 0.0 0.0 0.3 0.3 0.3 0.3 Public sector capital flows (net) -0.5 -1.1 -0.4 -0.7 -0.7 0.2 0.6 1.0 Loan disbursements 0.3 0.0 0.8 0.5 0.4 1.4 1.7 2.0 Amortization -0.7 -1.1 -1.1 -1.2 -1.1 -1.1 -1.1 -1.0 Foreign direct investment (net) 1.1 0.9 0.5 1.5 1.5 1.5 1.5 1.5 Banks (net) 2/ 1.6 -0.9 -0.4 0.0 0.5 0.5 0.5 0.5 Other items (net) 1.1 -0.4 0.0 -0.1 -0.1 -0.1 -0.1 -0.1 Of which: repayment of arrears 5/ - - - -0.1 -0.1 -0.1 -0.1 -0.1 Errors and omissions -0.2 0.5 0.0 0.0 0.0 0.0 0.0 0.0 Overall balance -0.4 -2.2 -3.9 0.1 1.1 1.1 0.8 0.6 Financing 0.4 2.2 3.9 -0.1 -1.1 -1.1 -0.8 -0.6 Change in net foreign assets (+ is decrease) 0.4 2.2 3.9 -0.1 -1.1 -1.1 -0.8 -0.6 Change in gross reserves (+ is decrease) -0.3 1.3 2.7 -0.1 -1.0 -1.0 -0.7 -0.5 Liabilities (+is increase) 0.7 0.9 1.3 0.0 -0.1 -0.1 -0.1 -0.1 Changes in arrears 3/ 0.9 1.1 0.0 0.0 0.0 0.0 0.0 0.0 Other liabilities -0.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Debt rescheduling and debt relief 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Memorandum items: Exports of goods, f.o.b (percent change) 8.8 11.4 -15.2 1.8 2.6 2.7 3.4 3.0 Imports of goods, f.o.b (percent change) 24.0 -6.4 -14.8 1.8 3.9 2.4 2.4 2.4 Projected average oil price (U.S. dollars per barrel, APSP)68.3 61.4 35.6 37.9 40.9 43.2 45.0 46.4 Increase in Arrears (in percent of GDP) 5/ - 0.5 - - - - - - Debt service (in percent of exports of goods and services)6.1 7.3 9.2 9.0 8.8 8.6 8.3 8.6 Nominal exchange rate 65.4 … … … … … … … Gross international reserves (in millions of U.S. dollars) 4/ 2,086 2,100 1,872 1,885 1,977 2,069 2,1402,190.0 (in months of next year's imports of goods and services)4.8 5.7 4.8 4.7 4.8 4.9 4.9 4.9 Nominal GDP (millions of U.S. dollars) 9,658 8,708 8,601 8,875 9,196 9,531 9,87910,258 Sources: Bank of the Republic of Haiti; and Fund staff estimates and projections. 1/ Includes previously-programmed multilateral budget support that could be delayed. 2/Change in net foreign assets of commercial banks. 3/ Includes debt to Venezuela for oil shipments already paid by the GOH in local currency but not yet cleared in U.S. dollars. 4/ Includes gold. 5/ Includes arrears on oil imports. HAITI INTERNATIONAL MONETARY FUND 17 Table 5. Haiti: Indicators of Capacity to Repay the Fund (Existing and Proposed Credit), 2018/19–2026/27 (Units as indicated) FY2019FY2020FY2021FY2022FY2023FY2024FY2025FY2026FY2027 Fund obligations based on existing credit (in millions of SDRs) Principal 7.7 5.6 8.0 8.4 9.0 8.2 7.7 6.1 3.1 Interest 0.4 0.2 0.4 0.4 0.4 0.4 0.4 0.4 0.4 Fund obligations based on existing and prospective credit (in millions of SDRs) Principal 7.7 5.6 8.0 8.4 9.0 8.2 7.7 22.5 19.5 Interest 0.4 0.2 0.4 0.4 0.4 0.4 0.4 0.4 0.4 Total obligations based on existing and prospective credit In millions of SDRs 8.1 5.8 8.4 8.8 9.4 8.6 8.1 22.9 19.8 In millions of US$ 11.2 8.0 11.6 12.3 13.1 12.0 11.4 32.2 27.9 In percent of exports 0.9 0.8 1.1 1.1 1.2 1.0 0.9 2.5 2.1 government revenue 1.0 0.7 0.9 0.9 0.9 0.7 0.6 1.4 1.1 reserves 0.5 0.4 0.6 0.6 0.6 0.6 0.6 1.5 1.3 debt service 9.8 6.5 9.3 9.8 10.4 9.1 7.8 20.7 16.7 quota 4.9 3.5 5.1 5.4 5.7 5.2 4.9 14.0 12.1 Outstanding Fund credit (end of period) In millions of SDRs 58.4132.4124.5116.1107.0 98.8 91.1 68.6 49.1 In millions of US$ 80.7182.9172.7161.6149.4138.3128.0 96.4 69.0 In percent of exports 6.7 17.3 16.0 14.7 13.2 11.8 10.6 7.5 5.2 government revenues 8.6 19.6 17.1 14.5 12.6 11.1 9.7 6.6 4.5 reserves 3.8 9.1 8.8 8.1 7.3 6.6 6.2 4.5 3.3 quota 35.6 80.8 76.0 70.8 65.3 60.3 55.6 41.9 30.0 Memorandum items: Exports 1/ 2/ 1.2 1.1 1.1 1.1 1.1 1.2 1.2 1.3 1.3 Government revenues 1/ 3/ 0.9 0.9 1.0 1.1 1.2 1.3 1.3 1.5 1.5 Reserves 1/ 4/ 2.1 2.0 2.0 2.0 2.0 2.1 2.1 2.1 2.1 Debt service 1/ 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.2 0.2 Quota (in millions of SDRs) 163.8163.8163.8163.8163.8163.8163.8163.8163.8 GDP 1/ 8.7 8.7 9.0 9.3 9.6 9.9 10.4 11.1 11.5 Sources: Haitian authorities; and Fund staff estimates and 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. HAITI 18 INTERNATIONAL MONETARY FUND Table 6. Haiti: External Financing Requirements and Sources, FY2018–Y2025 (In millions of US$ on a fiscal year basis; unless otherwise indicated) 1/ FY2018FY2019FY2020FY2021FY2022FY2023FY2024FY2025 Est.Proj.Proj.Proj.Proj.Proj.Proj. Requirements 830 399 600 491 423 598 759 871 Current account deficit, excluding grants 759 304 501 387 318 491 653 766 Debt amortization, excluding repayments to the IMF 71 95 99 104 105 107 107 106 Sources 830 399 489 490 423 598 759 871 Capital transfers, excluding official transfers 31 15 0 0 30 30 30 30 Foreign direct investment 105 75 45 133 138 143 148 154 Official disbursements, excluding budget support 361 184 236 295 298 416 549 633 Of which: Project loans 28 3 68 45 38 130 165 205 Other flows, including commercial banks (net) 242 -65 -36 -9 41 41 41 41 Official budget support 2/ 53 0 17 85 17 73 74 75 Change in central bank's NFA (+ is decrease) 3/ 36 187 227 -13 -100 -105 -82 -60 o/w: Change in existing obligations to the IMF (+ is decrease)-12 -15 -2 0 -7 -13 -11 -11 o/w: Change in arrears 4/ 87 93 0 0 0 0 0 0 Debt rescheduling and debt relief, excluding the Fund 3 3 0 0 0 0 0 0 Exceptional Financing 0 0 111 0 0 0 0 0 o/w: IMF disbursement under RCF 0 0 111 0 0 0 0 0 Memorandum items: Gross international reserves 5/ 2,0862,1001,8721,8851,9772,0692,1402,190 (in months of next year's imports of goods and services)4.8 5.7 4.8 4.7 4.8 4.9 4.9 4.9 Sources: Bank of the Republic of Haiti; and Fund staff estimates and projections. 1/ Components may not exactly match up to totals due to rounding. 2/ Includes previously-programmed multilateral budget support that could be delayed. 3/ Excluding exceptional financing. 4/ Includes debt to Venezuela for oil shipments already paid by the GOH in local currency but not yet cleared in U.S. dollars. 5/ Includes gold. HAITI INTERNATIONAL MONETARY FUND 19 Appendix I. Letter of Intent Port-au-Prince, Haïti April 10, 2020 Ms. Kristalina Georgieva Managing Director International Monetary Fund Washington, D.C. 20431 Dear Ms. Georgieva, 1. On March 19, 2020, the Government of Haiti announced a “State of Emergency” to prevent the spread of the global COVID-19 pandemic. Although only 30 cases and 2 deaths were confirmed as of April 9, our health care system is severely underequipped to handle such a pandemic, with only 124 intensive care beds for a population of 10.7 million inhabitants. Given the potential human catastrophe related to the spread of COVID-19 virus, our government decided to close all borders, cease the docking of cruise ships and commercial vessels, and suspend all commercial international flights (with the exception of cargo and humanitarian flights) . An executive decree was also issued by the President, implementing a curfew from 8:00 pm to 5:00 am. All factories, schools and universities across the country are closed, except for essential businesses (pharmacies, medical centers, etc.). The administration is working at half capacity with rotations and telework arrangements wherever possible. 2. This adverse development has and will severely affect the Haitian economy and could have a profound impact on the population, already reeling from economic hardship and poverty. Our preliminary projections suggest that real GDP in 2020 could decline by 4.0 percent—another year of contraction after growth of -1.2 percent in 2019 and down from an already negative pre- pandemic projection of -0.4 percent. This difficult outlook is due largely to a sizeable deterioration in international remittances, which represent over 34 percent of GDP, reduction in textile exports to the U.S., a drop in agriculture production, and further disruptions to transport, financial services, and also the informal sector. 3. To prevent a further downward spiral of our economy and the well-being of our citizens, our government has undertaken various measures, including but not limited to: • Cash transfers to 1,500,000 families. • Distribution of dried food rations to vulnerable families, most of them living with less than US$2 per day, equivalent to about 60 percent of the population. • Payment of half the salary to 58,000 workers in the subcontracting (textile) industry. • Payment of the salaries of most teachers and professors. • Subsidies to the transport and sanitation sectors. HAITI 20 INTERNATIONAL MONETARY FUND • Deferment of the tax returns deadline by three months to June 2020. 4. Also, steps were taken by the central bank to ease liquidity conditions in the financial system. They include reducing the refinance and reference rates, lowering reserve requirements on domestic currency. 5. The fiscal and external sectors will take a major hit including because of measures we are taking to contain the spread of the pandemic. Scarce budgetary resources must be reallocated to critical spending on disease containment and eradication (including medical supplies, equipment, and facilities), preparation for treatment of the sick, and increased social assistance to the most vulnerable. The fiscal deficit is projected to rise to 6. 4 percent of GDP in FY 2020—3.0 percent of GDP higher than earlier projected. The decrease in remittances and textile exports, drop in FDI, and increase in health-related imports will put significant strain on our balance of payments. We estimate that these pressures could drain gross international reserves by as much as US$338 million, despite a projected fall in import values of 15 percent following the drop in fuel prices and the contraction in domestic demand. This is not a tenable proposition given the extreme vulnerability and fragility of the country. 6. Against this background, and in the face of the urgent balance of payments need, the Government of Haiti requests emergency financing from the IMF under the Rapid Credit Facility (RCF) in the amount of SDR 81.9 million, equivalent to 50 percent of quota. This disbursement will help fill both the external and fiscal financing gaps in 2020. We do not intend to introduce or intensify exchange and trade restrictions (for balance of payments purposes) or other measures or policies that would compound these difficulties. In addition, the Ministry of Economy and Finance (MEF) has signed a Memorandum of Understanding with the central bank (BRH) agreeing to the terms of an on- lending arrangement between the BRH and the MEF, and clarifying their respective roles and responsibilities for timely servicing of the financial obligations to the IMF anticipating the disbursement of the RCF. Furthermore, we are confident that the IMF’s involvement in the international effort to assist Haiti in dealing with this pandemic will help promote stability and confidence in our financial sector. In that regard, we are reaching out to other development partners and have indications of support from the European Union, World Bank, and IDB. 7. We would like to stress, however, as we contempl ate higher spending to respond to the emergency pandemic, that we are aware of the need to contain fiscal imbalances that could jeopardize macroeconomic stability. In that vein, we are committed to moving forward with a more comprehensive economic reform program aimed at reducing poverty and fostering stronger and more inclusive growth. We have already begun discussions with your staff on a package of measures that could be supported by a Staff Monitored Program (SMP) that will resume immediately after the conclusion of our request for disbursement under the RCF. Support under an SMP would help us focus on an effective set of core reforms aimed at restoring macroeconomic stability, ensuring fiscal sustainability, building a better social safety net, reforming the energy sector, and strengthening governance across all areas of the public service. HAITI INTERNATIONAL MONETARY FUND 21 8. We are committed to a gradual fiscal adjustment that will ensure fiscal and debt sustainability over the medium term and eliminate monetary financing of the deficit. Indeed, the goal would be to end the fiscal dominance that has caused a negative feedback loop of monetary financing of the deficit on inflation and exchange rate depreciation by limiting public sector deficits, including the significant losses related to the energy sector. To that end, we would work over time to boost domestic revenue collection with customs and tax administration reforms, increase EDH payment collection and strengthen EDH efficiency, curb arrears and adopt a plan to clear/restructure current stocks, and improve public financial management, including with better expenditure control. 9. A key pillar of our planned reform program would include building a stronger social safety net. The program would support the implementation of the new Politi que Nationale de Protection et de Promotion Sociale (PNPPS). We would also seek to deepen financial inclusion with Fintech and the development of mobile money infrastructures as part of a broader effort to strengthen and formalize channel s for the distribution of cash transfers to vulnerable households, as well as other forms of support. 10. We also intend to strengthen efforts to combat corruption and advance governance reforms, notably through more comprehensive, transparent and tightly managed budget processes and improved reporting systems, both at the ministry of economy and finance and the central bank. In this respect, we will immediately strengthen standard budget reporting by better documenting the different phases of execution of public spending of COVID-19 resources, through the preparation of monthly budget execution reports of all COVID-19 expenditures. We will then move to expand such reforms to the rest of the budget under an SMP and eventually a successor Fund-supported program. We will also undertake a thorough ex post financial and operational audit of all COVID-19 related operations. These efforts will contribute to strengthening accountability and transparency in public finance management and also help us draw useful conclusions on ways to build a better social safety net and boost emergency response capability. 11. We hope to continue rapidly the engagement in discussions with the IMF on the SMP the day after the RCF would have been approved, with the aim of reaching agreement and endorsement of an SMP as soon as possible and at the latest in early May. The ultimate goal would be to move from an SMP to a medium-term, upper credit tranche-quality program supported by the Extended Credit Facility (ECF) , after completing the SMP. In light of recent deliberations amongst IMF members, we have also requested Fund assistance under the Catastrophe Containment and Relief Trust (CCRT). 12. We commit to continuing implementation of the recommendation from the IMF safeguards assessment concluded in 2019. In this respect, as prior actions, the BRH Board implemented the following two key recommendations from the assessment prior to the RCF Board meeting: (i) completed the financial audit and published the audited financial statements HAITI 22 INTERNATIONAL MONETARY FUND for the year ended September 30, 2019; and (ii) adopted a decision to strengthen the governance and accountability arrangements for foreign reserve management by revising the composition of the Investment Committee (IC) and amending its charter, establishing strict segregation of responsibilities between the director and staff members within the Foreign Portfolio Department, and establishing a dedicated risk management function. We also commit to continue providing IMF staff with the necessary central bank audit reports and authorize the external auditors of the central bank to hold discussions with staff. We intend to follow through on other recommendations from the safeguards assessment in the context of the upcoming SMP. 13. We authorize the IMF to publish this Letter of Intent and the staff report for the request for disbursement under the RCF. Sincerely yours, /s/ /s/ Michel Patrick Boisvert Jean Baden Dubois Minister of Economy and Finance Governor of the Central Bank of Haiti Ministère de l’Economie et des Finances Banque de la République d’Haïti HAITI REQUEST FOR DISBURSEMENT UNDER THE RAPID CREDIT FACILITY—DEBT SUSTAINABILIT ANALYSIS Haiti: Joint Bank-Fund Debt Sustainability Analysis Risk of external debt distress High Overall risk of debt distress High Granularity in the risk rating Debt is sustainable in the medium-term. Long-term sustainability will require fiscal consolidation, including through higher domestic revenue mobilization. Application of judgment Yes: High probability of protracted and substantial threshold breaches from FY2033. Macroeconomic projections Compared to the December 2019 DSA, growth in the short-term has been revised down and inflation revised up. The projected fiscal deficit as a percent of GDP is 3.0, 0.8 and 0.9 percent higher respectively in FY2020, 2021- 24, and 2025- 35. The projected current account deficit is higher in the short term, but 0.5 percent of GDP smaller on average over 2025-35. Financing strategy Future gross financing needs are assumed to be met both internally—by the rollover of central bank advances to the government—and externally. Remaining internal financing takes the form of short-term treasury bills held by commercial banks. External debt financing, contracted or guaranteed, is assumed to be mostly concessional. Realism tools flagged The baseline assumptions are credible, and the projected fiscal adjustment is realistic. Mechanical risk rating under the external DSA Moderate risk Mechanical risk rating under the public DSA Moderate risk Approved By Patricia Alonso-Gamo, Jeromin Zettelmeyer (IMF), and Marcello Estevão (IDA) Prepared by the staffs of the International Monetary Fund and the International Development Association. April 13, 2020 HAITI 2 INTERNATIONAL MONETARY FUND The Debt Sustainability Analysis (DSA) was prepared in accordance with the revised joint Bank- Fund debt sustainability framework (DSF) for low-income countries (LICs). 1 It updates the DSA prepared for the 2019 Article IV Consultation. 2 Haiti’s risk of debt distress is assessed to be “high”, although the model-based risk rating for both external and overall public debt is “moderate.” An application of judgement was applied to change the rating from “moderate” to “high” because of the high probability of threshold breaches under the baseline scenario from FY2033, and by Haiti’s institutional fragilities and exceptional vulnerability to natural disasters. Haiti is an FCV country—a country affected by fragility, conflict, and violence as defined by the World Bank—and tailored stress tests suggest that its debt risk rating is very vulnerable to large natural disaster shocks which are statistically very frequent. Nevertheless, the moderate level of public debt and broadly stable debt trajectory over the next ten years point to sustainable public debt. 1 Guidance Note on the Bank-Fund Debt Sustainability Framework for Low -Income Countries, February 2018. 2 This DSA assumes that debt service to the IMF falling due in the 24 months from April 14, 2020 will be covered under the Catastrophe Containment and Relief Trust Fund (CCRTF), subject to availability of resources and decisions of the Executive Board of the IMF. HAITI INTERNATIONAL MONETARY FUND 3 Figure 1. Haiti: Indicators of Public and Publicly Guaranteed External Debt under Alternatives Scenarios, 2020–40 Sources: Country authorities; and staff estimates and projections. Av g. grace pe riod Note: "Yes" indicates any change to the size or interactions of the default settings for the stress tests. "n.a." indicates that the stress test does not apply. Commodity Prices 2/ Avg. nominal interest rate on new borrowing in USD USD Discount rate Av g. maturity (incl. grace pe riod) No n.a.n.a. Yes No Most extreme shock 1/ No Size Customization of Default Settings Historical scenario External PPG MLT debt Baseline Borrowing Assumptions for Stress Tests* Share s of marginal de bt De fault Te rms of marginal de bt * Note: All the additional financing needs generated by the shocks under the stress tests are assumed to be covered by PPG external MLT debt in the external DSA. Default terms of marginal debt are based on baseline 10-year projections. Market Financing n.a.n.a. Tailored Tests 5.0% 5 23 5.0% 23 5 Combine d CLs Natural Disaste rs 1/ The most extreme stress test is the test that yields the highest ratio in or before 2030. Stress tests with one-off breaches are also presented (if any), while these one-off breaches are deemed away for mechanical signals. When a stress test with a one-off breach happens to be the most extreme shock even after disregarding the one-off breach, only that stress test (with a one-off breach) would be presented. 2/ The magnitude of shocks used for the commodity price shock stress test are based on the commodity prices outlook prepared by the IMF research department. Threshold 1.7%1.7% 100% Interactions No User defined 0 5 10 15 20 25 30 20202022202420262028203020322034203620382040 Debt service-to-revenue ratio Most extreme shock is Non-debt flows 0 50 100 150 200 250 300 350 400 20202022202420262028203020322034203620382040 PV of debt-to-exports ratio Most extreme shock is Combination 0 10 20 30 40 50 60 20202022202420262028203020322034203620382040 PV of debt-to GDP ratio Most extreme shock is Non-debt flows 0 5 10 15 20 25 30 20202022202420262028203020322034203620382040 Debt service-to-exports ratio Most extreme shock is Combination HAITI 4 INTERNATIONAL MONETARY FUND Figure 2. Haiti: Indicators of Public Debt Under Alternatives Scenarios, 2020–40 Baseline Most extreme shock 1/ Public debt benchmark Historical scenario Default User defined 8% 8% 0% 0% 92% 92% 1.7% 1.7% 23 23 5 5 0.0% 0.0% 1 1 0 0 -11.0% -11.0% Sources: Country authorities; and staff estimates and projections. External PPG medium and long-term Domestic medium and long-term Domestic short-term 1/ The most extreme stress test is the test that yields the highest ratio in or before 2030. The stress test with a one-off breach is also presented (if any), while the one-off breach is deemed away for mechanical signals. When a stress test with a one-off breach happens to be the most extreme shock even after disregarding the one-off breach, only that stress test (with a one-off breach) would be presented. Domestic MLT debt Avg. real interest rate on new borrowing Avg. maturity (incl. grace period) Avg. grace period Domestic short-term debt Avg. real interest rate * Note: The public DSA allows for domestic financing to cover the additional financing needs generated by the shocks under the stress tests in the public DSA. Default terms of marginal debt are based on baseline 10-year projections. External MLT debt Avg. nominal interest rate on new borrowing in USD Avg. maturity (incl. grace period) Avg. grace period Terms of marginal debt Borrowing Assumptions for Stress Tests* Shares of marginal debt 0 50 100 150 200 250 300 350 400 450 500 20202022202420262028203020322034203620382040 PV of Debt-to-Revenue Ratio Most extreme shock is Natural disaster 0 10 20 30 40 50 60 70 80 2020 2022 2024 2026 2028 2030 2032 2034 2036 2038 2040 Most extreme shock is Natural disaster 0 50 100 150 200 250 300 20202022202420262028203020322034203620382040 Debt Service-to-Revenue Ratio Most extreme shock is Natural disaster PV of Debt-to-GDP Ratio HAITI INTERNATIONAL MONETARY FUND 5 Figure 3. Haiti: Drivers of Debt Dynamics-Baseline Scenario External Debt Gross Nominal PPG External Debt Debt-creating flows Unexpected Changes in Debt 1/ (in percent of GDP; DSA vintages) (percent of GDP) (past 5 years, percent of GDP) Gross Nominal Public Debt Debt-creating flows Unexpected Changes in Debt 1/ (in percent of GDP; DSA vintages) (percent of GDP) (past 5 years, percent of GDP) 1/ Dif f erence betw een anticipated and actual contributions on debt ratios. 2/ Distribution across LICs f or w hich LIC DSAs w ere produced. 3/ Given the relatively low private external debt f or average low -income countries, a ppt change in PPG external debt should be largely explained by the drivers of the external debt dynamics equation. Public debt -10 -5 0 5 10 5- year h ist or i cal c han ge 5- year projected c han ge R esi du al Pr i ce a nd exch an ge r ate Real GDP gr o wt h N om i na l inte r est r a te C ur r ent acco un t + FDI C ha ng e i n PP G d ebt 3/ 0 10 20 30 40 50 60 70 80 20 15 20 16 20 17 20 18 20 19 20 20 20 21 20 22 20 23 20 24 20 25 20 26 20 27 20 28 20 29 20 30 C ur r ent D SA Pr evi o us D SA D SA- 2 015 proj. 0 10 20 30 40 50 60 70 80 20 15 20 16 20 17 20 18 20 19 20 20 20 21 20 22 20 23 20 24 20 25 20 26 20 27 20 28 20 29 20 30 C ur r ent D SA Pr evi o us D SA D SA- 2 015 proj. -40 -20 0 20 40 5-year historical change 5-year projected change Residu al Ot her debt creatin g flows R ea l Exch an ge r ate de pr eci a ti on Real GDP g r o wt h Real interest r a te Primary deficit Chan ge in debt -1 0 -5 0 5 10 15 20 Distribution across LICs 2/ In ter qu ar ti l e r an ge (2 5- 75 ) C ha ng e i n PPG de bt 3/ Median Cont ribut ion of unexpected changes -10 -5 0 5 10 15 20 D i str i buti on acr oss LIC s 2/ In ter qu ar ti l e r an ge (2 5- 75 ) C ha ng e i n de bt Median C ontr i buti on of unexpected changes HAITI 6 INTERNATIONAL MONETARY FUND Figure 4. Haiti: Realism Tools Gov. Invest. - Curr. DSA Co ntr ibutio n o f o ther fa cto r s Priv. Invest. - Curr. DSA Contr ibution of gover nment capital 1/ Bars refer to annual projected fi scal adjustment (ri ght-hand si de scal e) and l i nes show possi bl e real GDP growth paths under di fferent fi scal mul ti pl i ers (l eft-hand si de scal e). (percent of GDP) Contribution to Real GDP growth (percent, 5-year average) Public and Private Investment Rates 1/ Data cover Fund-supported program s for LICs (excluding em ergency financing) approved since 1990. The size of 3-year adjustment from program inception is found on the horizontal axis; the percent of sam ple is found on the vertical axis. Fiscal Adjustment and Possible Growth Paths 1/3-Year Adjustment in Primary Balance (Percentage points of GDP) 0 2 4 6 8 10 12 14 -4 .5 -4 .0 -3 .5 -3 .0 -2 .5 -2 .0 -1 .5 -1 .0 -0 .5 0. 0 0. 5 1. 0 1. 5 2. 0 2. 5 3. 0 3. 5 4. 0 4. 5 5. 0 5. 5 6. 0 6. 5 7. 0 7. 5 8. 0 Mo re Distribution 1/ Pr ojec t ed 3 -yr adjustment 3-ye a r PBa d j u s tment g rea ter tha n 2.5 percentage points of GDP in approx. top quartile -4 -3 -2 -1 0 1 2 3 -5 .0 -4 .0 -3 .0 -2 .0 -1 .0 0. 0 1. 0 2. 0 3. 0 4. 0 2014 2015 2016 2017 2018 2019 2020 2021 In percentage poi nts of GDP In percent Ba sel ine Multiplier = 0.2 Multiplier = 0.4 Multiplier = 0.6 Multiplier = 0.8 0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 2016201720182019202020212022202320242025 -0.6 -0.4 -0.2 0.0 0.2 0.4 0.6 0.8 1.0 H ist or i cal Projected (Prev. DSA) Projected (Curr. DSA) Table 1. Haiti: External Debt Sustainability Framework, Baseline Scenario, 2017–40 (In percent of GDP, unless otherwise indicated) 2017 2018 2019 2020 2021 2022 2023 2024 2025 2030 2040 HistoricalProjections External debt (nominal) 1/ 24. 2 23. 5 27. 4 28. 025. 8 23. 8 22. 9 22. 5 22. 4 30. 8 55. 8 20. 1 25. 2 Residency-based of which: public and publicly guaranteed (PPG) 24. 2 23. 5 27. 4 28. 025. 8 23. 8 22. 9 22. 5 22. 4 30. 8 55. 8 20. 1 25. 2 No Change in exter nal debt -3.2 -0.7 3.9 0.6 -2.2 -2.0 -0.9 -0.4 -0.1 2.4 0.2 Identified net debt-creating flows -4. 9 -0. 4 3. 1 4. 3 -1. 2 -1. 3 -0. 4 0. 2 0. 8 0. 6 0. 8 1. 6 0. 5 Non-interest current account deficit 0. 8 3. 7 1. 2 3. 4 0. 3 0. 2 1. 2 1. 8 2. 3 2. 4 2. 3 3. 6 2. 0 Deficit in balance of goods and services 36.0 40.3 41.5 36.9 36.5 36.8 36.4 35.9 35.5 36.0 35.8 37. 8 36. 2 Exports 19.8 18.4 18.2 14.8 15.7 15.6 15.5 15.4 15.4 14.9 15.1 Imports 55.8 58.7 59.7 51.8 52.2 52.3 51.8 51.4 50.8 50.8 50.8 Net current transfers (negative = inflow) -34.3 -35.9 -39.5 -33.0-35.3 -35.7 -34.4 -33.3 -32.3 -32.5 -31.8 -33. 6 -33. 4 of which: official -4.6 -4.0 -2.1 -2.2 -3.8 -3.0 -3.8 -4.6 -4.9 -4.8 -4.6 Other cur r ent account flows (negative = net inflow) -0.9 -0.7 -0.8 -0.5 -0.8 -0.8 -0.8 -0.8 -0.8 -1.0 -1.6 -0. 7 -0. 8 Net FDI (negative = inflow) -4. 5 -1. 1 -0. 9 -0. 5-1. 5 -1. 5 -1. 5 -1. 5 -1. 5 -1. 8 -1. 8 -1. 8 -1. 6 Endogenous debt dynamics 2/ -1. 2 -2. 9 2. 8 1. 3 -0. 1 0. 0 0. 0 -0. 1 -0. 1 0. 0 0. 3 Contr ibution fr om nominal inter es t r ate 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.4 1.0 Contr ibution fr om r eal GDP gr owth -0.3 -0.3 0.3 1.1 -0.3 -0.2 -0.3 -0.3 -0.3 -0.4 -0.8 Contr ibution fr om pr ice and exchange r ate changes -1.1 -2.8 2.3 … … … … … … … … Res i dual 3/ 1. 7 -0. 3 0. 8 -3. 6-0. 9 -0. 7 -0. 5 -0. 6 -0. 8 1. 8 -0. 6 -0. 7 -0. 2 of which: exceptional financing -1.7 -0.9 -1.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Sustainability indicators PV of PPG external debt-to-GDP ratio ... ... 16. 1 17. 116. 2 15. 2 14. 9 14. 9 15. 1 21. 6 41. 1 PV of PPG external debt-to-exports ratio ... ... 88. 6 115. 5103. 5 97. 8 96. 6 96. 4 98. 3 145. 1 273. 3 PPG debt service-to-exports ratio 5. 7 6. 1 7. 3 9. 2 8. 9 8. 8 8. 6 8. 4 8. 2 11. 6 19. 8 PPG debt service-to-revenue ratio 8. 0 8. 6 12. 3 13. 512. 3 10. 6 9. 9 9. 2 8. 8 11. 5 19. 6 Gross external financing need (Million of U.S. dollars) -210.9 356.4 142.3 368.7 22.8 8.4 95.6 153.2 215.3 253.7 462.6 Key macroeconomic assumptions Real GDP gr owth (in per cent) 1.2 1.5 -1.2 -4.0 1.2 1.0 1.1 1.2 1.4 1.4 1.4 1. 4 0. 8 GDP deflator in US dollar ter ms (change in per cent) 4.2 13.2 -8.7 2.9 2.0 2.6 2.5 2.4 2.4 0.4 0.4 1. 7 1. 4 Effective interest rate (percent) 4/ 0.7 1.0 0.9 0.8 0.9 0.9 0.9 1.0 1.1 1.6 1.9 0. 5 1. 1 Growth of exports of G&S (US dollar terms, in percent) 3.2 6.9 -10.9 -19.5 9.1 2.9 2.9 3.5 3.2 1.8 2.4 4. 9 0. 6 Growth of imports of G&S (US dollar terms, in percent) 11.7 20.9 -8.3 -14.4 4.1 3.8 2.7 2.7 2.7 1.8 1.8 7. 6 0. 9 Gr ant element of new public s ector bor r owing (in per cent) ... ... ... 35.4 35.4 30.7 30.7 30.7 30.7 30.7 ... 31. 6 Gover nment r evenues (excluding gr ants , in per cent of GDP) 14.0 13.0 10.8 10.2 11.4 12.9 13.4 14.0 14.4 14.9 15.2 12. 9 13. 6 Aid flows (in Million of US dollars) 5/ 1186.1 -2965.9-6672.2 253.1380.0 314.8 359.4 458.0 502.1 534.9 607.9 Gr ant-equivalent financing (in per cent of GDP) 6/ ... ... ... 2.9 4.0 3.2 4.2 5.1 5.5 6.1 5.5 ... 4. 9 Gr ant-equivalent financing (in per cent of exter nal financing) 6/ ... ... ... 67.3 92.4 92.3 81.6 81.6 79.9 67.9 72.3 ... 77. 9 Nominal GDP (Million of US dollars) 8,409 9,658 8,708 8,601 8,875 9,196 9,531 9,879 10,258 11,088 13,205 Nominal dollar GDP growth 5.4 14.9 -9.8 -1.2 3.2 3.6 3.6 3.6 3.8 1.8 1.8 3. 1 2. 2 Memorandum items: PV of external debt 7/ ... ... 16.1 17.1 16.2 15.2 14.9 14.9 15.1 21.6 41.1 In percent of exports ... ... 88.6 115.5103.5 97.8 96.6 96.4 98.3 145.1 273.3 To ta l exter na l deb t s er vice-to -exp o r ts r a tio 5.7 6.1 7.3 9.2 8.9 8.8 8.6 8.4 8.2 11.6 19.8 PV of PPG external debt (in Million of US dollars) 1406.0 1474.91441.51401.01423.81471.21548.0 2390.7 5433.7 (PVt-PVt-1)/GDPt-1 (in p er cent) 0.8 -0.4 -0.5 0.2 0.5 0.8 2.2 1.2 No n-inter es t cur r ent a cco unt deficit tha t s ta b ilizes deb t r a tio 4.0 4.4 -2.7 2.8 2.5 2.2 2.1 2.2 2.4 0.0 2.1 Sources: Country authorities; and staff estimates and projections. 0 1/ Includes both public and pr ivate s ector exter nal debt. 3/ Includes exceptional financing (i.e., changes in ar r ear s and debt r elief); changes in gr os s for eign as s ets ; and valuation adjus tments . For pr ojections als o includes contr ibution fr om pr ice and exchange r ate changes . 4/ Current-year interest payments divided by previous period debt stock. 5/ Defined as grants, concessional loans, and debt relief. 6/ Gr ant-equivalent financing includes gr ants pr ovided dir ectly to the gover nment and thr ough new bor r owing (differ ence between the face value and the PV of new debt). 7/ As s umes tha t PV o f p r iva te s ecto r deb t is equiva lent to its fa ce va lue. 8/ Historical averages are generally derived over the past 10 years, subject to data availability, whereas projections averages are over the first year of projection and the next 10 years. Definition of external/domestic debt Is there a material difference between the two criteria? 2/ Derived as [r - g - ρ(1+g) + Ɛα (1+r)]/(1+g+ρ+gρ) times previous period debt ratio, with r = nominal interest rate; g = real GDP growth rate, ρ = growth rate of GDP deflator in U.S. dollar terms, Ɛ=nominal appreciation of the local currency, and α= share of local currency-denominated external debt in total external debt. Average 8/Actual Projections 28 29 30 31 32 33 34 35 36 -1 .0 0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 202 0 202 2 202 4 202 6 202 8 203 0 Ra te o f Deb t Ac cum ul at io n Gr ant -equi valent fin an cin g (% of GDP ) Grant element of new borrowing (% right sc ale) Debt Accumulation 0 5 10 15 20 25 30 35 202 0 202 2 202 4 202 6 202 8 203 0 External debt (nominal) 1/ of which: Private HAITI INTERNATIONAL MONETA RY FUND 7 Table 2. Haiti: Public Sector Debt Sustainability Framework, Baseline Scenario, 2017–40 (In percent of GDP, unless otherwise indicated) 2017 2018 2019 2020 2021 2022 2023 2024 2025 2030 2040 HistoricalProjections Public sector debt 1/ 38. 3 39. 9 47. 7 51. 9 49. 9 48. 6 47. 3 46. 8 46. 6 53. 6 70. 9 35. 6 49. 5 of which: external debt 24. 2 23. 5 27. 4 28. 0 25. 8 23. 8 22. 9 22. 5 22. 4 30. 8 55. 8 20. 1 25. 2 of which: local-currency denominated Change in public s ector debt -2.5 1.6 7.7 4.3 -2.0 -1.3 -1.2 -0.5 -0.2 1.3 1.7 Identified debt-creating flows -5. 4 0. 5 4. 8 3. 0 -1. 7 -1. 0 -1. 0 -0. 3 0. 0 1. 5 1. 7 2. 2 0. 6 Primary deficit 0. 7 2. 6 3. 0 6. 1 3. 6 3. 5 3. 2 3. 3 3. 3 2. 8 2. 2 3. 4 3. 5 Revenue and gr ants 17.7 17.3 12.1 12.4 15.2 15.9 17.2 18.7 19.2 19.7 19.8 19. 1 17. 9 of which: grants 3.7 4.3 1.4 2.2 3.8 3.0 3.8 4.6 4.9 4.8 4.6 Pr imar y (noninter es t) expenditur e 18.4 19.9 15.2 18.4 18.7 19.4 20.4 22.0 22.5 22.6 21.9 22. 5 21. 4 Automatic debt dynamics -6. 0 -2. 1 1. 8 -3. 0 -5. 3 -4. 6 -4. 1 -3. 6 -3. 2 -1. 3 -0. 5 Co ntr ib utio n fr o m inter es t r a te/gr o wth differ entia l -2.1 -2.3 -2.1 -2.1 -4.8 -4.2 -3.8 -3.3 -3.0 -1.8 -1.3 of which: contribution from average real interest rate -1.6 -1.7 -2.5 -4.1 -4.2 -3.7 -3.2 -2.8 -2.3 -1.1 -0.4 of which: contribution from real GDP growth -0.5 -0.6 0.5 2.0 -0.6 -0.5 -0.5 -0.6 -0.6 -0.7 -1.0 Contribution from real exchange rate depreciation -4.0 0.2 3.8 ... ... ... ... ... ... ... ... Other identified debt-creating flows 0. 0 0. 0 0. 0 0. 0 0. 0 0. 0 0. 0 0. 0 0. 0 0. 0 0. 0 0. 0 0. 0 Privatization receipts (negative) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Recognition of contingent liabilities (e.g., bank recapitalization)0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Debt relief (HIPC and other) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Other debt creating or reducing flow (please specify) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Res i dual 2. 9 1. 1 3. 0 0. 3 -0. 8 -0. 7 -0. 6 -0. 5 -0. 5 0. 3 0. 9 -0. 7 -0. 2 Sustainability indicators PV of public debt-to-GDP ratio 2/ ... ... 38. 2 42. 5 41. 3 40. 8 40. 0 39. 7 39. 7 44. 7 56. 9 PV of public debt-to-revenue and grants ratio … … 314. 5 343. 7 272. 5 256. 5 232. 4 212. 7206. 4 226. 4 287. 6 Debt service-to-revenue and grants ratio 3/ 72. 6 73. 1 121. 7 152. 0 139. 5 137. 0 132. 2 122. 3119. 8 123. 3 80. 6 Gr os s financing need 4/ 13.5 15.2 17.8 24.8 24.7 25.3 25.9 26.1 26.3 27.2 18.1 Key macroeconomic and fiscal assumptions Real GDP gr owth (in per cent) 1.2 1.5 -1.2 -4.0 1.2 1.0 1.1 1.2 1.4 1.4 1.4 1. 4 0. 8 Average nominal interest rate on external debt (in percent) 0.7 0.9 1.0 0.9 0.9 0.9 0.9 1.0 1.1 1.6 1.9 0. 6 1. 2 Average real interest rate on domestic debt (in percent) -11.2 -10.6 -13.4 -17.7 -16.6 -14.5 -12.5 -10.7 -9.1 -4.1 -2.9 -6. 7 -9. 6 Real exchange rate depreciation (in percent, + indicates depreciation)-14.7 0.8 16.3 … ... ... ... ... ... ... ... 1. 3 ... Infla tio n r a te (GDP defla to r , in p er cent) 13.4 12.8 17.3 22.2 21.3 18.3 15.3 12.9 10.9 5.0 5.0 9. 2 11. 8 Growth of real primary spending (deflated by GDP deflator, in percent) -4.8 9.5 -24.6 16.6 3.0 4.7 6.1 9.0 4.0 0.9 1.2 -0. 4 4. 6 Pr ima r y deficit tha t s ta b ilizes the deb t-to -GDP r a tio 5/ 3.1 0.9 -4.7 1.8 5.6 4.9 4.4 3.8 3.5 1.5 0.5 -0. 2 3. 0 PV of contingent liabilities (not included in public sector debt) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Sources: Country authorities; and staff estimates and projections. 1/ Coverage of debt: The general government. Definition of external debt is Residency-based. 2/ The underlying PV of external debt-to-GDP ratio under the public DSA differs from the external DSA with the size of differences depending on exchange rates projections. 3/ Debt service is defined as the sum of interest and amortization of medium and long-term, and short-term debt. 4/ Gross financing need is defined as the primary deficit plus debt service plus the stock of short-term debt at the end of the last period and other debt creating/reducing flows. 5/ Defined as a primary deficit minus a change in the public debt-to-GDP ratio ((-): a primary surplus), which would stabilizes the debt ratio only in the year in question. 6/ Historical averages are generally derived over the past 10 years, subject to data availability, whereas projections averages are over the first year of projection and the next 10 years. Definition of external/domestic debt Residency- based Is there a material difference between the two criteria? No Actual Average 6/Projections 0 10 20 30 40 50 60 202 0202 2202 4202 6202 8203 0 of which: loc al-currenc y denominated of which: foreign-currenc y denominated 0 10 20 30 40 50 60 202 0202 2202 4202 6202 8203 0 of wh ich : h eld by residents of wh ich : h eld by non- residen ts Public sector debt 1/ 8 INTERNATIONAL MONETA RY FUND HAITI HAITI INTERNATIONAL MONETARY FUND 9 Table 3. Haiti: Sensitivity Analysis for Key Indicators of Public and Publicly Guaranteed External Debt, 2020–40 202020212022202320242025202620272028202920302031203220332034203520362037203820392040 Baseline 17 16 15 15 15 15 15 16 18 20 22 24 26 28 31 34 36 39 40 41 41 A. Alternative Scenarios A1. Key variables at their historical averages in 2020-2030 2/ 17 18 19 21 22 23 24 25 27 29 31 33 36 38 41 43 45 47 48 48 48 0#N/A#N/A#N/A#N/A#N/A#N/A#N/A#N/A#N/A#N/A#N/A#N/A#N/A#N/A#N/A#N/A#N/A#N/A#N/A#N/A#N/A B. Bound T ests B1. R e a l GDP g r o wth 17 17 17 16 16 17 17 18 20 22 24 26 29 31 34 37 40 43 44 45 45 B2. Primary balance 17 16 16 15 16 16 16 18 19 21 23 25 27 30 32 35 37 40 41 42 42 B3. E xp o r ts 17 18 19 19 19 19 20 21 22 24 26 27 30 32 34 37 39 42 43 43 43 B4. Other flows 3/ 17 23 28 28 28 28 29 30 31 32 33 35 37 39 40 42 44 46 47 47 46 B5. Depreciation 17 21 12 12 12 12 12 13 15 18 21 24 27 31 34 38 42 45 48 49 50 B6. Co mb ina tio n o f B1-B5 17 22 26 26 26 26 27 28 29 30 32 34 35 38 40 42 44 46 47 47 47 C. Tailored Tests C1. Combined contingent liabilities 17 17 16 16 16 16 17 18 20 22 24 26 28 31 33 36 39 41 43 43 44 C2. Natural disaster 17 18 18 19 19 20 21 23 25 27 29 32 34 37 40 43 46 49 51 51 52 C3. Commodity pr ice n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a . C4. M a r ket Fina ncing n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a . Threshold 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 Baseline 116 104 98 97 96 98 104 111 121 133 145 159 174 192 209 227 243 258 268 272 273 A. Alternative Scenarios A1. Key variables at their historical averages in 2020-2030 2/ 116 116 124 133 141 148 162 171 182 196 210 224 240 256 273 288 302 315 323 324 322 0 116 93 78 68 59 52 48 44 43 46 49 54 60 66 72 78 83 86 85 80 74 B. Bound T ests B1. R e a l GDP g r o wth 116 104 98 97 96 98 104 111 121 133 145 159 174 192 209 227 243 258 268 272 273 B2. Primary balance 116 104 100 100 101 104 110 118 128 141 153 167 182 199 217 234 250 265 275 278 279 B3. E xp o r ts 116 133 159 158 158 161 170 179 190 205 219 235 253 274 295 316 335 353 364 367 366 B4. Other flows 3/ 116 144 182 182 182 185 195 202 209 217 225 235 246 259 273 286 297 307 312 312 307 B5. Depreciation 116 104 61 59 59 60 64 70 81 95 108 124 141 161 180 200 218 236 248 254 257 B6. Co mb ina tio n o f B1-B5 116 151 160 183 183 186 196 204 212 223 234 246 260 276 293 309 323 337 344 344 341 C. Tailored Tests C1. Combined contingent liabilities 116 106 102 103 104 107 114 122 133 146 158 173 189 206 225 242 259 275 285 289 290 C2. Natural disaster 116 116 118 123 128 134 145 156 170 186 201 217 235 256 276 296 314 332 344 350 352 C3. Commodity pr ice n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a . C4. M a r ket Fina ncing n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a . Threshold 180 180 180 180 180 180 180 180 180 180 180 180 180 180 180 180 180 180 180 180 180 Baseline 9 9 9 9 8 8 10 10 10 11 12 11 12 13 15 16 17 18 19 19 20 A. Alternative Scenarios A1. Key variables at their historical averages in 2020-2030 2/ 9 9 9 9 9 9 11 12 13 14 15 15 16 18 19 21 22 23 23 24 24 0 9 8 8 7 6 6 7 5 4 3 2 0 0 -1 -1 -1 -1 -1 -2 -2 -2 B. Bound T ests B1. R e a l GDP g r o wth 9 9 9 9 8 8 10 10 10 11 12 11 12 13 15 16 17 18 19 19 20 B2. Primary balance 9 9 9 9 8 8 10 10 11 11 12 12 13 14 15 17 18 19 19 20 21 B3. E xp o r ts 9 10 12 12 12 11 14 15 16 17 18 17 19 20 22 24 25 26 27 28 28 B4. Other flows 3/ 9 9 10 11 10 10 12 15 18 19 20 19 20 21 22 24 25 25 26 26 26 B5. Depreciation 9 9 9 8 7 7 9 9 6 7 8 8 9 10 11 13 14 15 16 16 17 B6. Co mb ina tio n o f B1-B5 9 10 11 12 11 11 13 16 19 19 20 19 20 22 23 25 26 27 27 28 28 C. Tailored Tests C1. Combined contingent liabilities 9 9 9 9 9 8 10 10 10 11 12 11 12 14 15 16 18 18 19 20 20 C2. Natural disaster 9 9 9 9 9 9 11 11 11 12 13 13 14 15 16 18 19 20 21 21 22 C3. Commodity pr ice n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a . C4. M a r ket Fina ncing n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a . Threshold 15 15 15 15 15 15 15 15 15 15 15 15 15 15 15 15 15 15 15 15 15 Baseline 13 12 11 10 9 9 10 10 10 11 12 11 12 13 14 16 17 18 19 19 20 A. Alternative Scenarios A1. Key variables at their historical averages in 2020-2030 2/ 13 12 11 11 10 10 12 12 13 14 15 15 16 17 19 20 22 22 23 24 24 0 13 12 9 8 7 6 7 5 4 3 2 0 0 -1 -1 -1 -1 -1 -2 -2 -2 B. Bound T ests B1. R e a l GDP g r o wth 13 13 12 11 10 10 11 11 11 12 13 12 13 14 16 18 19 20 20 21 22 B2. Primary balance 13 12 11 10 9 9 10 10 11 11 12 12 13 14 15 17 18 19 19 20 20 B3. E xp o r ts 13 12 11 11 10 10 11 12 13 13 14 14 15 16 17 18 20 20 21 21 22 B4. Other flows 3/ 13 12 12 12 11 11 12 15 18 19 19 19 20 21 22 23 24 25 25 26 26 B5. Depreciation 13 16 14 11 11 10 12 12 8 9 10 10 11 12 14 16 18 19 20 21 21 B6. Co mb ina tio n o f B1-B5 13 13 12 12 11 11 12 15 17 18 18 18 19 20 21 22 24 24 25 25 26 C. Tailored Tests C1. Combined contingent liabilities 13 12 11 10 9 9 10 10 10 11 12 11 12 13 15 16 17 18 19 19 20 C2. Natural disaster 13 12 11 10 10 9 11 11 11 12 13 12 13 14 15 17 18 19 20 20 21 C3. Commodity pr ice n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a . C4. M a r ket Fina ncing n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a . Threshold 18 18 18 18 18 18 18 18 18 18 18 18 18 18 18 18 18 18 18 18 18 Sources: Country authorities; and staff estimates and projections. 1/ A b o ld va lue ind ica tes a b r ea ch o f the thr es ho ld . 2/ Va r ia b les includ e r ea l GDP g r o wth, GDP d efla to r (in U.S. d o lla r ter ms ), no n-inter es t cur r ent a cco unt in p er cent o f GDP, a nd no n-d eb t cr ea ting flo ws . 3/ Includ es o fficia l a nd p r iva te tr a ns fer s a nd FDI. Debt service-to-exports ratio Debt service-to-revenue ratio PV of debt-to-exports ratio Projections 1/ PV of debt-to GDP ratio HAITI 10 INTERNATIONAL MONETARY FUND Table 4. Haiti: Sensitivity Analysis for Key Indicators of Public Debt, 2020–40 202020212022202320242025202620272028202920302031203220332034203520362037203820392040 Baseline 42 41 41 40 40 40 40 42 43 44 45 46 46 47 48 49 50 51 53 55 57 A. Alternative Scenarios A1. Key variables at their historical averages in 2020-2030 2/42 45 48 49 50 50 49 49 48 47 46 45 45 45 44 44 44 45 45 47 48 0#N/A#N/A#N/A#N/A#N/A#N/A#N/A#N/A#N/A#N/A#N/A#N/A#N/A#N/A#N/A#N/A#N/A#N/A#N/A#N/A#N/A B. Bound T ests B1. Real GDP growth 42 44 46 47 47 48 50 52 54 56 57 59 60 62 63 65 66 68 71 73 76 B2. Primary balance 42 44 45 44 43 43 43 45 46 46 47 47 48 49 50 51 51 53 54 56 58 B3. E xp o r ts 42 43 45 44 44 44 44 46 47 48 48 49 50 50 51 52 53 54 55 57 59 B4. Other flows 3/ 42 48 55 54 53 53 54 56 57 57 57 57 57 58 58 58 58 59 60 61 62 B5. Depreciation 42 42 41 39 38 37 37 38 38 38 37 38 37 38 37 38 38 38 39 41 42 B6. Combination of B1-B5 42 42 42 39 39 39 40 41 43 43 44 45 46 47 47 48 49 50 52 54 56 C. Tailored Tests C1. Combined contingent liabilities 42 48 47 45 44 44 44 46 47 47 48 48 49 50 51 52 53 54 56 58 60 C2. Natural disaster 42 66 63 60 58 56 56 57 57 57 58 58 59 60 61 62 63 64 66 68 70 C3. Commodity pr ice n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a . C4. M a r ket Fina ncing n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a . Public debt benchmark 55 55 55 55 55 55 55 55 55 55 55 55 55 55 55 55 55 55 55 55 55 Baseline 344 273 256 232 213 206 209 217 220 223 226 231 235 239 244 248 253 259 268 278 288 A. Alternative Scenarios A1. Key variables at their historical averages in 2020-2030 2/344 292 290 269 247 238 237 236 232 228 226 225 225 225 226 228 230 234 239 247 254 0 152 100 103 109 116 123 129 132 134 133 128 122 118 112 106 99 93 88 85 87 93 B. Bound T ests B1. Real GDP growth 344 285 286 265 247 244 251 263 270 276 283 290 298 306 313 321 328 337 349 362 375 B2. Primary balance 344 287 283 254 230 222 223 229 231 233 236 240 244 248 252 256 260 266 274 284 294 B3. E xp o r ts 344 283 283 256 235 228 231 238 241 243 245 248 252 255 258 262 265 271 278 287 296 B4. Other flows 3/ 344 317 343 312 286 278 281 288 288 288 288 289 290 291 292 293 294 297 302 308 314 B5. Depreciation 344 284 260 230 209 197 193 200 196 196 192 194 191 193 191 194 194 196 202 209 216 B6. Combination of B1-B5 344 276 262 229 210 204 206 214 217 220 223 227 232 236 240 245 249 256 264 274 284 C. Tailored Tests C1. Combined contingent liabilities 344 317 294 263 238 228 229 235 237 239 241 245 249 253 257 261 266 272 281 291 301 C2. Natural disaster 344 436 396 348 309 291 287 290 289 289 291 293 297 301 305 310 315 322 332 343 354 C3. Commodity pr ice n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a . C4. M a r ket Fina ncing n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a . Baseline 152 140 137 132 122 120 122 127 129 128 123 117 113 107 99 92 84 77 72 73 81 A. Alternative Scenarios A1. Key variables at their historical averages in 2020-2030 2/152 151 158 158 148 146 149 150 149 143 134 124 115 106 95 85 76 67 61 61 65 0 152 100 103 109 116 123 129 132 134 133 128 122 118 112 106 99 93 88 85 87 93 B. Bound T ests B1. Real GDP growth 152 144 150 150 143 143 148 156 160 161 157 153 149 144 137 130 123 116 112 114 123 B2. Primary balance 152 140 149 153 138 132 132 135 136 134 128 122 117 111 103 95 88 80 75 77 84 B3. E xp o r ts 152 140 137 133 123 120 122 128 131 130 125 119 115 109 101 93 86 79 74 75 82 B4. Other flows 3/ 152 140 138 134 124 121 124 130 135 134 129 123 119 113 105 97 90 82 77 79 86 B5. Depreciation 152 133 131 123 111 114 113 115 123 118 117 107 107 97 94 82 80 72 68 68 75 B6. Combination of B1-B5 152 137 136 131 121 119 121 126 128 127 122 117 112 106 99 91 84 76 72 73 80 C. Tailored Tests C1. Combined contingent liabilities 152 140 173 160 143 137 136 138 138 136 130 123 117 111 103 95 87 79 74 75 82 C2. Natural disaster 152 141 269 234 200 183 175 171 167 161 151 142 135 126 117 108 100 91 86 86 93 C3. Commodity pr ice n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a . C4. M a r ket Fina ncing n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a .n.a . Sources: Country authorities; and staff estimates and projections. 1/ A b o ld va lue ind ica tes a b r ea ch o f the b enchma r k. 2/ Variables include real GDP growth, GDP deflator and primary deficit in percent of GDP. 3/ Includ es o fficia l a nd p r iva te tr a ns fer s a nd FDI. Projections 1/ PV of Debt-to-Revenue Ratio Debt Service-to-Revenue Ratio PV of Debt-to-GDP Ratio Statement by Mr. Bevilaqua, Executive Director for Haiti and Mr. Saraiva, Alternate Executive Director, and Ms. Florestal , Advisor to the Executive Director for Haiti April 17, 2020 We want to start by thanking management and Ms. Laframboise and her team for their diligence in ensuring that Haiti’s request for a disbursement under the RCF reaches the Board much earlier than initially expected. Dedication and constant availability were also required from the authorities, who personally participated in intense work sessions with their teams, Fund staff and our chair. This demonstrates the sense of urgency arising from the financing needs, as well as the authorities’ determination to strengthen their engagement with the Fund. Moreover, the initial focus on the RCF has provided momentum to further the discussions around the required macroeconomic and structural agenda, including governance issues. The authorities have reiterated their commitment to pursue a medium- term strategy, which comprises agreeing on an SMP immediately, thereby building a track record of macroeconomic adjustment and structural reforms to be followed by an upper-credit tranche arrangement. Haiti has also managed to complete all required prior actions in a timely manner, as stated in the report. They have made important progress on delivering program implementation capacity confidence building measures listed by staff, such as: (i) resuming the publication of real, monetary and fiscal data, which had been discontinued due to disruptions in the statistics agency; and (ii) securing a discussion date of April 23 rd for the approval of the social protection policy (PNPPS - Politique Nationale de la Promotion et de la Protection Sociale) by the Council of Ministers. They are also working on meeting other important actions in the shortest possible timeframe, namely: (i) setting up the Steering Committee envisaged under the 2009 anti-corruption strategy, with broad participation, including several independent representatives from civil society; (ii) resuming the reporting of the total number of people by category required by law to submit asset declarations, as well as the compliance rates; and (iii) providing a stock-taking of budget arrears at end- 2019, or latest available data ( including the total amount and the breakdown by main categories– e.g., wages, external and domestic suppliers). At the time of writing this statement, they were 2 working towards ensuring that by Friday the latest updated available data on billing and recovery rates at EDH were provided to the Fund. Some of the remaining safeguards assessment recommendations were successfully implemented. The Central Bank has: (i) created a Risk Management Unit (UGR) to manage the foreign exchange reserves; (ii) put in place an amended Investment Committee (CI) for the reserve portfolio; (iii) established the CI charter and the development of guidelines; and (iv) published the audited financial statements for 2019 on the BRH website. Socio-political challenges When the Covid-19 crisis hit, Haiti had hardly emerged from the 2019 socio- political crisis. Last year, roadblocks and violence led to weeks of nationwide lockdown. The lockdown had a severe impact on economic activity, particularly in the tourism industry and export sectors. It also led to the decapitalization of an important portion of the private sector, particularly SMEs. In 2019, GDP is estimated to have contracted by 1.2%, while the exchange rate depreciated by 30%, and the fiscal deficit reached 3.8% of GDP. Social indicators worsened, crushing progress previously made towards achieving the SDGs. The ranks of those living in food insecurity and extreme poverty have swollen. At the beginning of 2020, parts of the country were close to experiencing a humanitarian disaster when the UN launched an appeal for an emergency humanitarian assistance that has collected less than 10 percent of the requested amounts. Nonetheless, by the end of November 2019, some hope of pulling out of the political impasse led GDP projections to point to the reversion of the downtrend in 2020, followed by a continuous economic recovery starting in 2021. Fiscal and monetary responses to the COVID-19 crisis Faced with a health and humanitarian crisis, the Haitian authorities had to adopt aggressive measures to prevent the COVID-19 from spreading throughout the country. They acknowledge that coping with the pandemic fallout will be a tremendous challenge. Initial measures include the closing of airports and borders, except for trade purposes. Schools and most of the exporting industrial subsector were shut, and a curfew was declared. Most recently, the population was asked to wear masks. Fiscal authorities also adopted clemency measures that include allowing income tax returns to be completed, as well as real estate taxes paid at end-June instead of end-March. They have also extended the validity of the fiscal compliance certificate to end-June in order to facilitate the smooth continuation of business operations. The response of Monetary Authorities was also immediate. All available tools were used to mitigate COVID-19-induced economic drawbacks on households, businesses and the financial system. The Central Bank of Haiti (BRH) eased monetary conditions by cutting its main policy rate and reserve requirement on local currency deposits by 5 percentage points. Monetary Authorities also allowed for a moratorium of 3 months on credit payments in order to alleviate the financial burden on households and enterprises. Additionally, since cash is a 3 prominent transmission channel of the disease, a wider use of electronic transfers is being promoted, including by requiring that banks waive or reduce fees. Aware of the contractionary forces at play and considering the expected sharp fall in remittances, the authorities adopted extensive measures to safeguard employment, provide some social safety net and prevent extreme stress in the financial sector. Indeed, fiscal support is expected to be significant as the government announced an increase in social public spending. Income assistance to 1.5 million households will be provided through mobile wallets, as well as food kits. Digital means of payments should indeed be prominent not only for sanitary purposes but also because most Haitians have access to mobile phones, allowing for a wider outreach. However, the scale of the intervention has been constrained by the availability of domestic and external resources. It is hoped that the RCF disbursement will not only help to cover a portion of the financing gap, but also signal to donors that Haiti is engaged with the Fund, attracting additional support to close the residual gap. Despite the authorities’ swift response, GDP is projected to contract by 4% in 2020, which could have the devastating effect of increasing the population facing deprivation of basic needs. The urgent need for international financial assistance The timely delivery of the envisaged external assistance is crucial. The authorities remain concerned about the potential delays in project implementation, which would result in a wider financing gap. Moreover, if – despite all the measures – the p andemic continues to spread, additional spending may be required to effectively contain the outbreak. Heightened levels of contagion may increasingly disrupt economic activity and impact severely on interregional and intraregional communications. Hence, the macro-framework is subject to an exceptionally high degree of uncertainty. The authorities count on the IMF to help them monitoring the situation and updating the framework as warranted. The authorities remain committed to implement the needed actions under the medium-term engagement strategy; however, if the situation deteriorates and the gap widens even further, it will be necessary to mobilize additional funding from all financial partners, including the Fund. The macroeconomic strategy going forward The authorities’ macroeconomic policy in the short-term will be anchored around the SMP, with a view to starting the next fiscal year with a medium-term program supported by an ECF. Key objectives for the next few months are: (i) continue the fight against the pandemic; (ii) strengthen governance and increase transparency in the public sector, including to combat corruption; (ii) quell fiscal dominance by working toward fiscal consolidation; and (iii) strengthen social safety nets. Haitian authorities are focusing on raising fiscal revenue and curbing non-priority expenditures. In this regard, curtailing subsidies to the energy sector is a key priority. The IMF staff will be invited by the authorities to discuss the design, timing and sequencing of 4 adequate short and medium-term policy options. Within the SMP framework, the authorities intend to adopt a plan for clearing arrears over the next few years, in line with projected resources and the priorities set during the elaboration of the FY21 budget. Forceful measures to promote transparency and combat corruption are also being adopted. Important steps have already been taken to ensure efficient monitoring, reporting and monthly publication of COVID-19 expenditures. The first such publication was posted on the Ministry of Economy and Finance website on April 15, 2020. Conclusion The Haitian authorities are thankful for the additional liquidity the IMF short-term debt relief will make available for funding their response to the COVID-19 pandemic. In light of the urgent need for additional resources to effectively implement the programs and policies designed to curb contagion and protect economic activity, the authorities request a disbursement under the RCF of the equivalent of 50 percent of Haiti’s quota, which will cover about a third of the currently estimated gap. The Haitian authorities are looking forward to implementing, with the support the Fund, an ambitious but realistic adjustment and structural reform program. In case the financing gap becomes wider than anticipated and additional financing is urgently needed to continue supporting the government’s efforts to proceed with the reforms and required measures, we call on our IMF Board colleagues to stand ready to act swiftly as warranted. Meanwhile, we trust that, with strong ownership and the partnership of the international community, Haiti will pull itself out of a protracted fragile situation.