(2025) Ayiti: Premye Revizyon Anba Pwogram Pèsonèl la te Siveye—Kominike pou laprès; ak Rapò Pèsonèl

© 2025 International Monetary Fund IMF Country Report No. 25/113 HAITI FIRST REVIEW UNDER THE STAFF-MONITORED PROGRAM—PRESS RELEASE; AND STAFF REPORT In the context of the First Review Under the Staff-Monitored Program (SMP), the following documents have been released and are included in the package: • A Press Release • The Staff Report prepared by a staff team of the IMF for the Executive Board’s information following discussions that ended on March 19, 2025, with the officials of Haiti on economic developments and policies underpinning the Staff-Monitored Program. Based on information available at the time of these discussions, the staff report was completed on April 28, 2025. The documents listed below have been or will be separately released. Letter of Intent send to the IMF by the authorities of Haiti * Memorandum of Economic and Financial Policies by the authorities of Haiti* *Also include in 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. May 2025 PR 25/126 IMF Management Approves the First Review New Staff Monitored-Program with Haiti FOR IMMEDIATE RELEASE Staff Monitored Programs (SMPs) are informal arrangements between national authorities and IMF staff to monitor the authorities’ economic program. As such, they do not entail endorsement by the IMF Executive Board. SMP Staff reports are issued to the Board for information. • Management of the International Monetary Fund (IMF) has approved the First Review of the Staff-Monitored Program (SMP) with Haiti. • The SMP takes into account Haiti’s fragility and capacity constraints, linked to security. It is designed to support the authorities’ economic policy objectives and build a track record of reform implementation. • Fund management welcomes the authorities’ publication of the Governance Diagnostic Report. Washington, DC – April 30, 2025: Management of the International Monetary Fund (IMF) approved on April 15, 2025 the first review of Haiti’s Staff-Monitored Program (SMP). SMPs are arrangements between country authorities and the IMF to monitor the implementation of the authorities’ economic program and to establish a track record of policy implementation that could pave the way for financial assistance from the Fund under the Upper Credit Tranche (UCT). Haiti faces a multidimensional crisis with a challenging outlook which is highly uncertain. The country is affected by both global and country-specific shocks, which have worsened its fragility, since the negotiation of the SMP. Risks to the outlook are tilted to the downside and include worsening insecurity that would constrain further activity and the ability to implement reforms and attract aid and the foreign direct investment. The supply-side shock caused by the security crisis will continue to suppress growth and feed inflation unless the security outlook improves. Therefore, restoration of security is the priority. Despite domestic and global difficulties, the authorities are firmly committed to implement this SMP and have managed to contain the impact of the various shocks, thereby averting even worse economic outcomes. Net international reserves were valued at over US$1.1 billion at the end of December 2024. Despite the political transition and insecurity both the Ministry of Finance and the Bank of the Republic of Haiti (the Central Bank) have remained continuously engaged. They have consistently attempted to adopt feasible measures to limit macroeconomic imbalances and have been able to demonstrate full ownership and support 2 for the SMP through the high-level Program Monitoring Committee which meets with IMF staff on a continuous basis. Implementation under the SMP has been broadly satisfactory and its objectives remain achievable. All quantitative targets have been met, with a comfortable margin. Of the seven structural benchmarks assessed under this review, six were implemented and one is expected to be met by June (due to constraints related to insecurity). The SMP is an important anchor for signaling the authorities’ commitment to continue making progress toward macroeconomic stabilization and strengthen governance, and locking in macroeconomic gains accumulated over recent years, despite the many headwinds. An urgent government priority is re-starting the mobilization of revenue to support the country’s massive development needs and boost well-targeted spending. The measures under the SMP should help achieve these goals. Continued strengthening of the social safety net is essential to cushion the impact of the shocks on the population and alleviate widespread poverty. The spending commitments previously indicated by the authorities using Food Shock Window resources should be audited in line with SMP commitments. The fiscal and monetary authorities’ commitment to keeping monetary financing of the deficit at zero is commendable and should continue. The FY2023 financial audit of the BRH is urgent and its eventual publication by August 2025 would be important for demonstrating transparency. In addition to addressing insecurity, advancing governance reforms is paramount to help Haiti exit from fragility, ensure macroeconomic stability and build trust with the private sector and development partners. In this vein, the authorities’ publication of the Governance Diagnostic Report and action plan is commendable. The report should provide a road map for reforms to enhance governance and will require capacity development support not only from the Fund but also from development partners. A government-led strategy to continue to strengthen the economy’s resilience to multiple shocks requires the financial support of the international community. This assistance is indispensable to allow quality spending, over the short, medium, and long term. Without it, Haiti will continue to suffer large import compression. External assistance should take the form of grants. The authorities should avoid contracting non-concessional loans, to ensure consistency with the SMP commitments. Non-concessional loans would not only be against SMP commitment. It would also undermine debt sustainability. In line with the Fund Strategy for Fragile and Conflict-Affected States, IMF staff will also continue to coordinate closely with Haiti’s main development partners, particularly on governance and capacity development. HAITI FIRST REVIEW UNDER THE STAFF-MONITORED PROGRAM EXECUTIVE SUMMARY Recent Developments. Haiti is facing exceptional humanitarian, economic, social, and political challenges while the security situation remains dire, and has further deteriorated. The Kenya-led Multinational Security Support Mission (MSS) has struggled to contain gang violence because of understaffing and lack of financing. This has led to the recent accelerated deployment of additional personnel from the Caribbean and Central America. The United States has also reconfirmed its support for the MSS. The Temporary Protected Status for Haitian migrants in the United States is set to expire on August 3, 2025, unless extended. Program Implementation. Implementation under the SMP has been broadly satisfactory and its objectives remain achievable. Nonetheless, uncertainty about future aid flows poses substantial risks. All quantitative targets have been met, with a comfortable margin. Of the seven structural benchmarks assessed under this review, four were met on time, two were implemented with a small delay, and one was not met owing to capacity constraints (but it is expected to be met by June). Policies, supported by the SMP, have moved in the right direction, with monetary financing held at zero and revenue surprising on the upside in recent months, thanks to enhanced revenue administration. The authorities continue to be deeply engaged with staff through the high-level SMP Program Monitoring Committee. Policy Recommendations. • Advance governance and anti-corruption reforms, in line with the recently published governance diagnostic report. • Adopt measures to strengthen revenue collection, expenditure management and increase budget allocations for social spending to protect the most vulnerable. • Implement the supplementary budget in line with SMP objectives. • Strengthen public finance reporting, transparency, and accountability in the use of public funds. • Implement risk-based foreign exchange interventions. • Complete, with no further delay, and publish the audit of the Central Bank for FY2023 by August 2025; and • Continue to provide timely data to the Fund building on strong progress and enhance data transparency through timely publication of core economic data April 28, 2025 HAITI 2 INTERNATIONAL MONETARY FUND Approved By Dora Iakova (WHD) and Jay Peiris (SPR) Policy discussions were conducted remotely during March 10- 19, 2025. The team comprised Ms. Tumbarello (Head), Messrs. Huertas, Kaho, Passadore, Ms. Sun (all WHD), Messrs. Chociay (SPR), Barseghyan (STA), Sung, (FAD) and Messrs. Duvalsaint and Wata (Port-au-Prince office). Ms. Ojo provided excellent research assistance. Ms. Coquillat coordinated all work related to mission scheduling and document preparations. The mission met with Minister of Economy and Finance (MEF) Alfred Fils Métellus, Governor of the Bank of the Republic of Haiti (BRH) Ronald Gabriel, Minister of Minister of Planning and External Cooperation Ketleen Florestal, Minister of Social Affairs and Labor (MAST) Georges Wilbert Franck, Ms. Vanette Vincent (MEF), Mr. Edwige Jean (BRH), other senior government officials, development partners, and representatives of the private sector. Ms. Ludmilla Buteau Allien (Advisor to the Executive Director) participated to all policy and technical discussions. Mr. André Roncaglia (Executive Director) and Mr. Felipe Antunes (Alternate Executive Director) joined the opening and concluding meetings. CONTENTS CONTEXT AND RECENT DEVELOPMENTS ______________________________________________________ 4 OUTLOOK AND RISKS ___________________________________________________________________________ 7 PROGRAM IMPLEMENTATION UNDER THE SMP ______________________________________________ 8 REACHING THE OBJECTIVES OF THE SMP ______________________________________________________ 9 A. Fiscal Policy ___________________________________________________________________________________ 10 B. Social Assistance ______________________________________________________________________________ 14 C. Enhancing Governance and Transparency _____________________________________________________ 15 D. Monetary and Exchange Rate Policy __________________________________________________________ 16 E. Financial Sector ________________________________________________________________________________ 17 STAFF APPRAISAL _____________________________________________________________________________ 19 FIGURES 1. Monitoring Economic Activity Through Satellite Data __________________________________________ 6 2. Revenue Performance, FY2021–25 _____________________________________________________________ 13 3. Real Sector Developments, 2018–24 __________________________________________________________ 36 4. Fiscal Sector Developments, 2018–24 _________________________________________________________ 37 HAITI INTERNATIONAL MONETARY FUND 3 5. Monetary and Financial Sectors Developments, 2019–24 ______________________________________ 38 6. External Sector Developments, 2018–24 _______________________________________________________ 39 TABLES 1. Food Shock Window Spending Priorities Indicated by the Authorities ________________________ 12 2. Selected Economic and Financial Indicators, 2021–29 _________________________________________ 28 3a. Non-Financial Public Sector Operations, 2021–29 (In millions of gourdes) ___________________ 29 3b. Non-Financial Public Sector Operations, 2021–29 (In percent of GDP) _______________________ 30 4a. Balance of Payments, 2021–29 (In millions of US dollars) ____________________________________ 31 4b. Balance of Payments, 2021–29 (In percent of GDP) __________________________________________ 32 5. Summary Accounts of the Banking System, 2021–29 __________________________________________ 33 6. External Financing Requirements and Sources, 2021–29 ______________________________________ 34 7. Financial Soundness Indicators, March 2022–September 2024 ________________________________ 35 ANNEXES I. Nowcasting Real GDP and Revenue Using Big Data ____________________________________________ 22 II. Strengthening Governance to Ensure Macro-Stability _________________________________________ 26 III. Risk Assessment Matrix _______________________________________________________________________ 40 APPENDIX I. Letter of Intent _________________________________________________________________________________ 42 Attachment I. Memorandum of Economic and Financial Policies ____________________________ 44 Attachment II. Technical Memorandum of Understanding __________________________________ 52 HAITI 4 INTERNATIONAL MONETARY FUND CONTEXT AND RECENT DEVELOPMENTS 1. The security situation in Haiti remains dire, and gang violence has further escalated. The presence of the Multi-Country Security Support (MSS) mission, led by Kenya and backed by the United Nations, has recently doubled its size (including with personnel from the Caribbean and Central America regions) and more support may be forthcoming in the near future. But the government has struggled to curb the expanded power of the gangs over the capital, owing to MSS slow deployment and still substantial lack of funding and personnel. The United States has reconfirmed financial support for the MSS operation, and signed waivers to continue disbursing aid flows previously channeled through USAID. 1 If the current security crisis does not improve, elections are unlikely to take place by February 2026. On a positive note, a report by a bipartisan working group, tasked in July 2024 with preparing constitutional reforms to facilitate general elections, has recently been finalized. But it has yet to be published on the official gazette by the Transitional Presidential Council, making the next step (a referendum on constitutional reform ahead of elections) unlikely any time soon. In the interim, Haiti is facing a humanitarian crisis, and food insecurity is pervasive, as confirmed by the World Food Program (WFP). The capital’s main port is subject to periodic episodes of gang control. In January 2025, the government was able to open a new port in the south (Saint-Louis du Sud International Port), a 25-year-long project, and it could, in the future, reduce the region's reliance on gang-controlled areas. 2. Economic conditions remain challenging. Haiti’s economy has contracted for six consecutive years. In FY2024 (ending September), growth was negative 4.2 percent, reflecting disruptions in the production and distribution of goods and services in local markets. Staff estimates that, since the pandemic, scarring from multiple crises has caused Haiti’s potential GDP growth to fall by an average of 2 percent a year owing to crime, the 2021 earthquake, and deteriorating public health (Box 1, 2024 Article IV Staff report). The supply-side shock caused by the security crisis has fueled inflation, which stood at 28.4 percent in February 2025 (well above an average of 5½ percent in other Caribbean countries). The current account deficit narrowed in FY2024 to 0.6 percent of GDP as a result of import compression and strong remittances. In the first months of FY2025 (starting in October 2024), export growth continued to deteriorate while imports remained stable, and remittances grew fast (text table). Balance of payment figures for the past two years (FY2023-24) report large errors and omissions (about 3 percent of GDP). The authorities indicated that imports of goods and outward remittances (from 1 Haiti was among the top 15 recipients of USAID, with total disbursements in 2024 equivalent to US$340 million or 1.2 percent of GDP. HAITI INTERNATIONAL MONETARY FUND 5 Haiti to other countries) may have been overstated. Future data revisions could lead to a higher current account balance (and lower errors and omissions). 3. Despite these setbacks, the macro framework has remained well anchored. Reserve buffers have been rebuilt to a comfortable level, the nominal exchange rate has been remarkably stable, monetary financing of the budget has been reduced to zero, and public debt is low. Net international reserves (NIR) exceeded US$1 billion (US$1.159 billion) in December (up from US$920 million in September), and gross international reserves were US$2.7 billion (about seven months of imports). The increase in reserves was supported by remittances and by the central bank’s continued intervention in the FX market, with net purchases of about US$300 million during October 2024- February 2025. The nominal exchange rate vis-à-vis the US dollar remained at about 132 gourdes per dollar over the last year and has even appreciated slightly in recent weeks. The combined effect of a stable nominal exchange rate and high domestic inflation resulted in a strong appreciation of the real effective exchange rate (REER)—28 percent in FY2024 and about 60 percent during FY2022- 24. After averaging 2 percent of GDP a year during FY2020-23, monetary financing of the budget declined and was reduced to zero in FY2024, thanks to the prospective SMP engagement. Public debt is low at 14.6 percent of GDP (at end September 2024), the lowest in the Latin America and Caribbean region, mostly owing to the settlement of Petrocaribe debt in January 2024 of about 6½ percent of GDP. HAITI 6 INTERNATIONAL MONETARY FUND Figure 1. Haiti: Monitoring Economic Activity Through Satellite Data Satellite data clearly indicated in real time that activity fell dramatically beginning in March 2024, as inferred by the collapse in the number of oil tankers and cargo ships… …and it has not normalized yet. Sources: IMF Portwatch (daily data). HAITI INTERNATIONAL MONETARY FUND 7 OUTLOOK AND RISKS 4. Haiti’s macroeconomic outlook remains uncertain, with risks tilted to the downside. The channels through which the impact of the US economy and policies will materialize in the baseline scenario (and risks) are lower remittances and a prospective 10 percent increase in tariffs which will both have a negative BOP impact, while Haiti will benefit from lower oil prices. The recent tightening of US migration policies (e.g., the termination of the Temporary Protected Status for Haitian migrants, affecting half a million Haitians, by August 3, 2025, unless extended, and the termination of parole processes, involving about 200,000 Haitians) would substantially reduce remittances starting in 2026, although remittances could rise in the short term. Haiti has little short- term capacity to reabsorb the former migrants and this could worsen the current crisis, including with possible spillovers to the Caribbean region. Possible change in tariffs and trade and lower aid flows would also have negative consequences, including worsening the current account, reducing foreign reserves, putting pressure on the exchange rate, and lowering consumption and investment. The expiration of the HOPE/HELP (duty free) preferential trade preferences for Haitian textiles (expected by September 2025, if not renewed) would reduce exports and FDI. Haiti is vulnerable to changes in remittance flows—which strongly support consumption—and to reduced external financing from development partners. These risks were already largely incorporated in the SMP at the time of the negotiation. Remittances are projected to lower to 8.7 by 2029 (from 12.7 in 2024). 5. Growth (including downward scenario) and inflation. With security still unsettled, together with other global uncertainties, staff has revised GDP growth down by 1½ percent to negative 1 for FY2025, relative to ½ percent projected at the time of the negotiation of the SMP in December 2024 (Table 2). 2 This revision reflects recent data. Staff projections on remittances are conservative for FY2025 as they point to a 4.5 percent increase year-on-year (y/y), from US$3.3 billion to US$3.5 billion. This implies that, if the security situation improves beginning mid-FY 2025 and for the remainder of the year, remittances would revert to historical levels. Medium-term growth is estimated at 1½ percent, but further social and political turmoil, without sizable external aid, could lower growth. Inflation is projected to ease in the medium term, assuming adequate macroeconomic policies and improvement on the security front, while in the short term, inflation continues to be driven by supply-side security shocks (as analyzed in the recent Article IV Staff report). Staff also used 2 To incorporate the security outlook into the 2025 growth projection, we built upon the model developed in Box 1 on the potential output analysis from the November 2024 Article IV consultation. In that model, the elasticity of total factor productivity (TFP) with respect to the log of the homicide rate is -0.3. Accordingly, we constructed four alternative scenarios for security, each with distinct homicide rate trajectories that influence growth through this elasticity. By assigning probabilities to these scenarios, we derived an expected growth value for 2025 of negative 1 percent, which also assumes an improved security outlook in the second half of the year. HAITI 8 INTERNATIONAL MONETARY FUND nowcasting models that do not assume an improvement of security (downward scenario) nor, as a consequence, the implementation of reforms which point to a possible recession, on average across models, of 2 percent (with negative 4.3 percent being the most adverse forecast, Annex I). Under this scenario, the authorities would need to cut spending further and suffer even larger import compression than in the baseline. 6. Current account and fiscal outlook. The current account balance for FY2025 is now expected to improve (to a surplus of 0.2 percent of GDP) as preliminary data for October-December point to imports being lower than anticipated at the approval of the SMP. The fiscal deficit of the non-financial public sector (NFPS) is projected at about zero in FY2025, but if social and political risks were to worsen, substantial monetary financing of the budget could resume, undermining macroeconomic stability. 7. The risks include intensified political instability, deteriorating gang-related economic and institutional disruption, a prolonged drop in aid flows, and a worsening food crisis (Annex III). The debt sustainability analysis risk rating (both external and overall) remains high, unchanged from the 2024 December debt sustainability analysis. However, the debt outlook has worsened given the downward revisions of macroeconomic projections. Normalization of the security situation could improve the short- and medium-term outlook but will require additional external financing, in addition to sound domestic policies. Official transfers could rise if countries in the region support the Kenya-led MSS operation with additional financing and if Haiti receives added international support for reconstruction—although this upside risk is limited. PROGRAM IMPLEMENTATION UNDER THE SMP 8. Program performance has been broadly satisfactory. Policies, supported by the SMP, have moved in the right direction, with monetary financing held at zero also in the supplementary budget, which was approved by the council of ministries in mid-April 2025, and revenue mobilization supported by the resumption of work at the Directorate of General Taxes after a three month-long strike and enhanced customs verification. Despite the worsening security situation, the authorities continue to be deeply engaged with staff through the high-level SMP Program Monitoring Committee, which meets biweekly. 9. Quantitative and indicative targets. The authorities fully met all QTs and indicative targets by a large margin for December 2024 (Appendix I. Table 2). The mission sought the latest updates with regard to financing from the Afreximbank (with which Haiti signed a protocol of agreement in September 2024), given that the ceiling on the public sector’s contracting non-concessional external debt is zero. The authorities have informed staff that no additional external debt has been contracted (as of end-February) and that they do not plan to contract any non-concessional loans. The indicative targets (ITs) for March 2025 and September 2025 and QTs for June 2025 will be assessed at the time of the second review. HAITI INTERNATIONAL MONETARY FUND 9 10. Structural benchmarks are supported by capacity development assistance (Appendix I. Table 1). Of the seven structural benchmarks assessed under this review, four were met on time (publication of the governance diagnostic, publication of the quarterly report of FAES, all monthly reports on execution of fiscal expenditure through Haiti Food Shock Window account, and more granular central bank balance sheet data); two implemented with a small delay (the publication of all new public procurement contracts, including beneficial ownership information; reporting the internal audits of Food Shock Window spending to the Superior Court of Accounts, but in January, not in December) and one (having the supreme court conduct a financial and operational compliance audit of all expenditure in connection with the RCF (FSW) for 2023/24 fiscal year and publish it) was not met yet due to capacity constraints, and its implementation is expected by end- June 2025. Of the nine benchmarks to be assessed during the second review, two are proposed to be reset from June to September, and one (audit of the central bank for the fiscal year ending September 2023) from June 2025 to August 2025 due to slower-than-expected implementation capacity, due to insecurity. Staff also stressed the importance of initiating the central bank’s audit also for the FY2024 (although this is not a structural benchmark). Should an extended SMP be necessary, pending election timeline, additional QTs (and possibly structural benchmarks) would need to be proposed at the time of the Second Review. 11. Data and reserve management. Provision of timely data for program monitoring has improved greatly. The team emphasized that efforts should continue. The team followed up on the ongoing work to revise data sources and methodology of GDP data and steps needed to implement the reserve template. Improving the timeliness and quality of monetary and reserve data is essential to establish a track record. The Fund will provide further TA on the revision of national accounts, improvement of external sector and monetary statistics, and compilation of reserve template, and on central bank reserve management. REACHING THE OBJECTIVES OF THE SMP 12. The objectives of the SMP remain achievable but uncertainty about the future US financial support poses some risks. Discussion focused on how to support program implementation, despite worsening prospects for external support. First, discussions focused on the need for enhanced revenue mobilization in order to reach revenue targets and expand assistance to vulnerable households. Second, staff highlighted the need to avoid any monetary financing of government spending. Third, staff stressed that the accumulation of NIR should align with program objectives, while limiting other FX interventions to specific instances of liquidity provision. Fourth, technical assistance should focus on increasing the transparency of public spending and central bank operations. Finally, implementing the recommendations of the governance diagnostic report (Annex II) would improve the efficiency and quality of public spending and permit better accounting for aid flows, which will strengthen the trust of development partners. HAITI 10 INTERNATIONAL MONETARY FUND A. Fiscal Policy Revenue mobilization remains an urgent government priority to support large development needs and boost well-targeted spending. Although social spending has grown in recent months, tax revenue performance has been still weak until very recently and it is still at 5 percent of GDP. Increasing the cooperation between tax and customs administration (DGI and AGD), and digitalizing core tax and customs procedures is critical for strengthening revenue mobilization. Enhancing the transparency of public spending is essential to attract donor support and rebuild trust in public institutions. That said, the restoration of security is a precondition for re-starting economic activity, especially for raising taxes and implementing targeted spending. 13. Revenue. After a weak performance in the first two months of FY2025 (beginning in October), revenue has rebounded during December-February, reaching a 35 percent (y/y) increase in February (or 50 percent relative to FY2021-24 average). This positive outcome reflected resumption of Directorate of General Taxes (DGI)’s operation, after a strike which had disrupted collections during September-November 2024 as well as improvements of customs administration (e.g., enhanced control and verification through digitalization, in line with SMP commitments). 14. Spending. Lockdowns triggered by gang violence hampered the authorities’ spending ability in FY2024. 3 But public spending rebounded sharply during December 2024-February 2025 rising on average by 9 percent y/y. Social spending was equivalent to 0.38 percent of GDP during October 2024-February 2025, slightly lower than the previous year. FY2024 supplementary budget (approved in August) allocated 9.2 billion gourdes for the projects to be supported by FSW resources as indicated by the authorities in their spending priority/commitments, with actual spending (amounting to 6.8 billion gourdes executed in October 2024, which is permissible (période complémentaire). By the end of February 2025, 10.2 billion gourdes had been spent since January 2023 (see Table 1), leaving 5.3 billion gourdes (or US$39.7 million) still available to be spent. The authorities allocated 5.7 billion gourdes for FSW in the recently adopted FY2025 supplementary budget, 4.8 billion gourdes more than the initial FY2025 budget. 3 Executing social spending (including through hot meals) was hampered due to schools’ (and sometimes hospital) closures, weak IT connectivity, and limited mobility. HAITI INTERNATIONAL MONETARY FUND 11 15. FY2025 budget and supplementary budget. The FY2025 budget is balanced, and the fiscal balance is in line with staff projections (although staff’s projections are more conservative on the revenue side and spending more contained). It is consistent with the SMP’s goal of maintaining monetary financing at zero while effectively executing social spending for the country’s vulnerable households. The authorities committed to reducing capital expenditures with the least impact on the poor, should revenues fall short. The authorities have passed, in mid-April 2025, the FY2025 supplementary budget to reflect €19.5 million of budget support approved by the EU (to be disbursed later in April 2025) and to support police forces in combating gang violence and restore security. The 2025 supplementary budget would be closely aligned with the SMP (including in the more realistic revenue projections). The authorities have indicated they will continue to have zero monetary financing. They also indicated they are preparing for the implementation of the new tax code possibly in October 2025, including communication with the private sector and finalizing necessary provisions, pending the improvement of the security outlook. 4 16. Policy priorities to enhance revenues. The authorities should sustain their recent efforts to mobilize domestic revenue (structural benchmarks 7 and 8 in Attachment 1, Table 1). In particular, they should: • establish an administrative and technical cooperation protocol between the Directorate of General Taxes and General Administration of Customs (AGD), which should focus not only on the interconnection of IT systems, but also on the (i) the nature, format and frequency of the information and data to be exchanged between the two administrations, and (ii) preventive • launch and implement the digitalization of tax declarations and payments through all commercial banks for the large taxpayers registered at the DGI. 17. Structural benchmarks under the SMP will help broaden the tax base and enhance the transparency of collection through digitalization. Staff urged the authorities to continue strengthening domestic revenue mobilization and avoid monetary financing of the budget. The recent lower spending levels are due to the country’s ongoing security threats, which have prevented full execution of the budget. Such expenditure levels, however, are neither sustainable nor desirable given the economy’s fragility and widespread social vulnerability. As security stabilizes and spending capacity rises, higher revenue mobilization will be essential for financing large investment needs. Staff underscored the importance of sustaining reforms to enhance digitalization, transparency, and accountability in tax revenue collection and in the use of public funds. The authorities indicated that their top priority is fiscal and tax reform, with a goal of increasing tax revenue from 5 percent to 10 percent of the GDP in the medium term. They requested IMF technical 4 Pending provisions to support the implementation of the new Tax Code to strengthen tax revenue mobilization include provisions on: (i) transfer pricing documentation and simplified declaration model, (ii) detailed list of products exempt from turnover taxes, (iii) detailed list of products subject to excise, (iv) application of special regimes (investment code, free zones, and industrial parks), and (v) a decree on the methodology for calculating technical reserves for the taxation of life insurance companies. These provisions should be well designed, with few exemptions from turnover tax and limited application of special regimes, as well as excises whose values reflect their externalities. HAITI 12 INTERNATIONAL MONETARY FUND assistance to support their goal. 18. The SMP is helping the authorities adopt the spending reforms needed to overcome fragility. With Haiti facing huge development challenges, investment opportunities are considerable. Tapping them will require improving the quality of public spending (in health and education) and investing in resilient infrastructure (physical and digital) and in human capital. Unequal access to education could be addressed through targeted social spending, conditional cash transfers that encourage girls’ access to education, and child allowances (also to help reduce the dropout rate of girls). To improve the quality of public spending, Haiti needs to adopt investment practices that maximize value for money in line with the Fund’s Public Investment Management Assessment (PIMA) 2022 recommendations. This requires that projects be evaluated before inclusion Table 1. Haiti: Food Shock Window Spending Priorities Indicated by the Authorities (In millions of gourdes) HAITI INTERNATIONAL MONETARY FUND 13 in the budget and that completion of ongoing projects be prioritized. Improved spending quality would also require strengthening the medium-term fiscal framework (preparing baseline projections and determining fiscal space for new initiatives). This all must be accomplished before involving line ministries in preparing their baseline projections and in identifying priority projects and their implementation timeframe in order to have a multiyear budget framework. A multiyear framework would then allow decision-makers to take a long-term view of public finance, identifying potential cost of projects early on, prioritizing spending across multiple years, better calibrating the pace of development spending, and making more strategic decisions to avoid short-term fluctuations and reactive spending in response to immediate pressures. In addition, it would require reinstating the financial controller’s prerogatives about a priori control of public investment spending. This entails adopting a budgetary control guide and a renovated expenditure execution manual as well as improving treasury cash management, with the help of technical assistance. Figure 2. Haiti: Revenue Performance, FY2021–25 Sources: Ministry of Economy and Finance and IMF staff calculations. As for the top charts and lower left chart: cumulative values, September 2021= 100, real revenue. Lower right chart reports revenue, in nominal terms. HAITI 14 INTERNATIONAL MONETARY FUND B. Social Assistance 19. Efforts to strengthen social safety nets have advanced and should continue. Fuel cards are provided to individuals who own a registered public transport vehicle, which must be designated for either passenger or goods transport. To date, about 3,800 fuel cards have been distributed nationwide. However, the insecure environment has hindered the authorities’ ability to interact with drivers and to collect data, limiting the registration of additional transport vehicles. The fuel cards were accompanied by cash transfers (checks) for the most vulnerable as identified in the SIMAST database which cover 30 percent of the population), which the World Bank and WFP have helped maintain and expand. The authorities’ efforts to improve SIMAST and expand its coverage are ongoing, but progress is slow due to the security condition. Given the critical importance of food security, most social programs are focused on food support. In FY2024, FAES programs included: (i) 94,658 people receiving food kits, (ii) 18,000 people receiving hot meals, (iii) 26,960 vulnerable households receiving 20,000 gourdes, and (iv) 186,788 parents of students receiving 20,000 gourdes. 5 Cash transfers are being implemented through telecom operators, Digicel and Natcom, although use of mobile phones is still limited relative to other Caribbean countries and fragile and Conflict-Affected States (Figure 1, 2024 Article IV Staff report). In FY2024, energy subsidies to the electricity company (EDH) were about 3 billion gourdes, owing to reduced electricity consumption caused by the security situation. The authorities allocated 7.5 billion gourdes in the FY2025 budget, assuming a resumption of economic activity. However, they plan to reduce energy subsidies to EDH in the FY2025 supplementary budget relative to the initial budget. Fuel subsidies have been at zero since FY2023 but only because of lower international oil prices rather than being the result of any systemic reforms (including introducing a smoothing price mechanism, improving energy billing and collection). 20. Progress in reducing fuel subsidies is essential for medium-term fiscal sustainability. Given Haiti’s limited fiscal space, lower fuel subsidies would allow funds to be reallocated to other urgent priorities, including social assistance programs that target the country’s most vulnerable households. Given the political and social challenges of this reform, however, the authorities have moved cautiously. They reviewed the retail price-setting mechanism to allow for changes in international fuel prices and exchange rates to be partly passed on to consumers, with a smoothing mechanism that would cap the monthly variation in retail prices. The authorities agreed on the need to reform this smoothing mechanism to protect the budget from substantial international price volatility, improve public finance management, and encourage the efficient consumption of fuel products. Staff emphasized the importance of an effective communication policy to facilitate implementation. Among reform priorities should be the establishment of a regulatory framework for the petroleum-products sector and strengthening related regulatory institutions 5 In the first quarter of FY2025 (October – December 2024), FAES programs included: (i) 80,000 people receiving food kits, (ii) 23,973 people receiving hot meals, and (iii) 16,976 vulnerable households receiving 20,000 gourdes. HAITI INTERNATIONAL MONETARY FUND 15 C. Enhancing Governance and Transparency 21. Governance reforms are paramount for overcoming Haiti’s fragility. The authorities reiterated their commitment to fighting corruption and strengthening governance, including by implementing the Governance Diagnostic report which they published at end-February (structural benchmark, see Annex II). Progress has been made in enhancing cooperation between the tax and customs offices, including by working toward a technical cooperation protocol between the two offices on the interconnection of their IT systems (June structural benchmark). Improving governance is critical for rebuilding the trust of investors and development partners, given the low levels of FDI and ODA of recent years, which could lower further going forward. 22. Public financial management (PFM) reforms should continue to enhance public finance reporting, transparency, and accountability. The authorities have been providing more detailed monthly data on budget execution (including spending on wages, goods and services, and capital investment by ministry and by project) and publishing (on the website of the Direction Générale du Budget, MEF) all budget execution details and published quarterly financial statements for the Fund for Economic and Social Assistance (FAES). The additional PFM recommendation remains valid including: 1) limit the volume of unspecified spending in the budget, by bringing it down to around 3-5 percent of total government expenditure to improve fiscal transparency ; 2) reinstate the financial controller’s prerogatives about a priori control over public investment expenditures; 3) adopt, and implement a revised expenditure execution manual; 4) revise the procurement law to streamline its internal control mechanisms and make the procurement system competitive and transparent; 5) further strengthen internal and external audits, including by the Inspectorate General of Finance and the Superior Court of Accounts and Administrative Disputes (CSCCA) to produce and publish an annual report). The mission strongly advised: (i) building up an investment project database, setting up an investment project bank, and refining the three-year public investment plan; and (ii) introducing multi-year commitments authorizations and annual credits appropriation to protect funding for investment projects. HAITI 16 INTERNATIONAL MONETARY FUND 23. Staff recommendations related to the tailored safeguard monitoring mission of March 2024 should be implemented urgently. The 2024 mission confirmed that progress in implementing 2019 safeguards recommendations was slower than expected, particularly in strengthening the BRH autonomy and governance, financial reporting practices, and management of foreign reserves. Strengthening the governance and management of foreign reserves is key to enhancing transparency of central bank operations as also highlighted by the 2015 IMF TA. To this end, the BRH is receiving assistance from the WB to address current shortcomings and align with leading practices in the management of foreign reserves, and other areas such as governance, investment, policy, guidelines, strategic asset allocation, and portfolio composition. The BRH’s portfolio should also be subject to an external assessment to determine the actual level of liquidity of foreign assets, the options available for a short-term transition to a reserve portfolio that aligns more closely with the principles of liquidity and security. To address these shortcomings the 2024 SMP introduced a structural benchmark (now reset for end-September 2025, from end-June 2025) on the BRH adopting a medium-term plan for improving the composition of the investment portfolio, a new strategic asset allocation, and updated investment policy and guidelines. 24. Staff discussed issues related to the 2021 SDR allocation. The authorities indicated that after the 2021 SDR allocation, a portion of the SDRs was converted into US dollars to service the government’s external obligations. Since then, SDR holdings have been used to pay obligations to the IMF. All transfers of SDR resources to the Haitian government are usually made in gourde equivalent and are subject to a memorandum of understanding and/or retrocession agreement, depending on the nature of these transfers. Staff underscored the need to maintain strong institutional frameworks governing the fiscal use of the SDR allocation and to avoid potential costs arising from a large gap between SDR holdings and allocations. Staff also underscored the need for transparency measures for SDR-related spending and for communicating publicly on the BRH or MEF websites any future conversion of their SDR allocation into freely usable currencies—and the need to engage Fund staff on future SDR conversions. D. Monetary and Exchange Rate Policy 25. Haiti’s monetary policy framework was strengthened in recent years as financing of the deficit was reduced to zero, thereby enhancing the credibility of the central bank. Despite large negative real rates, monetary policy has been restrictive due to a combination of a drop in monetary financing—which has been brought to zero—and stronger real effective exchange rate. The current policy mix to reduce inflation (through the combination of continued fiscal adjustment and zero monetary financing of the budget) should help bring inflation down from its currently high levels (which have led to large negative real rate of about 15 percent). Nonetheless, restrictive monetary and fiscal policies will not be sufficient to keep inflation under control without a normalization of the security outlook. Monetary authorities remain committed to zero financing of fiscal spending, as per the ceiling on credit to the NFPS. Authorities agreed with staff on the relevance of short-term liquidity-absorbing operations at a fixed rate (policy rate) and full allotments to strengthen the monetary and exchange rate frameworks. HAITI INTERNATIONAL MONETARY FUND 17 26. The BRH’s interventions in the foreign exchange (FX) market should remained focused on smoothing excessive exchange rate volatility and adequately building-up NIR. FX intervention maintained a strong pace in the first three months of FY2025, slowing down afterward; this has helped rebuild a NIR buffer but has not prevented the gourde from gradually appreciating (Figure 5). The authorities mentioned that FX intervention has been mostly reactive to offers from commercial banks, which are required to maintain a zero net foreign position. The stabilization of the nominal exchange rate has not prevented high levels of domestic inflation, attributed by the authorities to the disruptions in the flow of goods and services and shortages of non-tradable goods. Given the increasing real appreciation of the gourde, pressures to the exchange rate could arise from a deterioration in remittances, from the upward risk of a reheating of economic activity and imports, and from a warranted revision of the minimum wage (unchanged for 2½ years). Deposit and credit dollarization remains high (Figure 5), which limits the effectiveness of monetary policy and heightens the economy’s susceptibility to external shocks and financial instability. FX interventions are currently executed through bilateral negotiations with commercial banks. The terms of the transactions are approved by the BRH board. An ongoing project to move to an electronic FX platform is currently on hold due to security constraints. Staff recommended to the authorities: • Implement a risk-based FXI rather than a fixed volatility rule; and • Complete the revision of banks’ net open position limits. Authorities conveyed their interest in a framework for risk-based FXI to provide adequate liquidity during times of excessive market volatility. 27. Multiple currency practices and restrictions on current international transactions. Authorities confirmed and staff understood that no changes in the foreign exchange system have been introduced since the last Article IV that could give rise to new multiple currency practices or exchange restrictions on the payments and transfers for current international transactions. E. Financial Sector 28. Background. The worsening of the security crisis and governance issues have weakened the financial sector, as reflected in the increase in performing loans—from 8 percent in March 2022 to 12.7 percent in September 2024, and a steady decline in real credit growth. The NPL provision coverage, which had exhibited a steady recovery during 2023, decreased by almost 20 percentage points through September 2024. With less provisions to absorb credit losses, commercial banks have grown more vulnerable. In spite of persistent challenges, however, the ratio of regulatory HAITI 18 INTERNATIONAL MONETARY FUND capital to risk-weighted assets has increased for most banks since Q3 2022 (with the ratio for the banking system as a whole increasing from 18.2 percent to 21.5 percent. The BRH has been strengthening banking supervision, with Fund assistance, to upgrade the regulatory framework and move to risk-based supervision. The board of the state-owned National Bank of Credit was replaced in August 2024, following internal investigations, and the new Board was placed under the supervision of the central bank. Following a request for TA on strengthening the resolution framework, IMF staff is reviewing Haiti’s banking law as a starting point for potential future TA. 29. Over the medium term, authorities should focus on strengthening the resilience of the financial sector. Policies would include: a regulation on liquidity that aligns with Basel standards (which has already been initiated), a risk-based supervision approach operationalizing the results from financial institutions' risk assessment grids and rating matrix, and the enhancement of off-site and on-site inspection capabilities. Additional reform efforts should focus on: • Emergency liquidity assistance (ELA). Staff has discussed with BRH the possibility of the BRH providing ELA to banks, as it could prove beneficial given banks continue to retain liquidity for precautionary reasons. The BRH is considering it, but TA will be needed to implement it. • Banking supervision. The BRH has carried out a conclusive test of the new risk assessment grids and rating matrix on two banks. It adopted and published the revised regulation on credit risk concentration. The final version of the revised regulation on credit risk classification and provisioning, recently reviewed by the BRH’s banking supervision department, is expected by end-May 2025. Staff recommended to: (i) finalize the new chart of accounts for financial institutions—submitted to stakeholders for comments—, (ii) reactivate off-site supervision following a quasi-suspension, and (iii) continue the execution of the annual on-site inspection program. • Anti-money laundering/combating the financing of terrorism (AML/CFT). Recent progress was made towards enhancing the effectiveness of the AML/CFT system, including the resumption of some work on the national risk assessment, now expected to be completed in December 2025, and the operationalization of a tool for risk- based supervision of financial institutions by the BRH. The authorities should build on this progress and continue to address the other steps necessary to exit the FATF grey list and ease potential pressures on correspondent banking relationships, including assessing the risks related to the informal cash- based sector and legal persons, further pursuing efforts to implement risk- based supervision of FIs by stepping up on-site inspections (to the extent permitted by the security situation) and applying remedial actions for non-compliance, and ensuring transparency of basic and beneficial ownership information on legal persons. The authorities should also take urgent steps to designate supervisors for high-risk Designated Non-Financial Businesses and Professions such as the gambling and lottery sectors; and notaries and lawyers performing trust and company service provider activities. HAITI INTERNATIONAL MONETARY FUND 19 STAFF APPRAISAL 30. Haiti faces a multidimensional crisis with a challenging outlook which is highly uncertain. The country is affected by both global and country-specific shocks, which have worsened its fragility, since the negotiation of the SMP. Risks to the outlook are tilted to the downside and include worsening political instability and insecurity that would constrain further business activity and the ability to implement reforms. The supply-side shock caused by the security crisis will continue to suppress growth and feed inflation unless the security outlook improves. Therefore, restoration of security is the priority. 31. Despite domestic and global difficulties, the authorities are firmly committed to implement this SMP and have managed to contain the impact of the various shocks, thereby averting even worse economic outcomes. Net international reserves were valued at over US$1 billion at the end of December 2024. Despite the political transition and insecurity both the Ministry of Finance and the Reserve Bank of Haiti have remained continuously engaged with Fund staff. They have consistently attempted to adopt feasible measures to limit macroeconomic imbalances and ensure a reasonable level of economic activity in the country. Despite the delicate political context, and thanks to a highly inclusive consultative process, the authorities have been able to demonstrate full ownership and support for the SMP through the high-level Program Monitoring Committee which meets with IMF staff on a continuous basis. 32. While restoration of security is paramount, it is not advisable to wait for a normalization of the situation before implementing much-needed reforms, especially on the macro and governance fronts. These reforms, however, must also be accompanied by efforts to mitigate insecurity owing to the escalation of gang violence and should be strictly tailored to capacity constraints that have grown more acute because of the brain drain and paralysis of economic activity. An urgent government priority is to continue enhancing mobilization of revenue to support the country’s massive development needs and boost well-targeted spending. The measures under this SMP should help achieve these goals. 33. Continued strengthening of the social safety net is essential to cushion the impact of the shocks on the population and alleviate widespread poverty. To this end, the authorities have sought to implement the fuel reform strategy slowly so that changes in international fuel prices are gradually passed on to consumers, rather than suddenly or in an ad hoc manner as in the past. Staff recommends that the authorities continue to implement this reform, and effectively communicate the strategy, and accompany it with mitigating measures to protect the most vulnerable. The government should also sustain efforts to improve the quality and transparency of public spending. The use of FSW resources for FY2024 should be audited with no delay in line with SMP commitments. 34. A government-led strategy to continue to strengthen the economy’s resilience to multiple shocks requires the financial support of the international community. This assistance is indispensable to allow quality spending, over the short, medium, and long term. Without it, Haiti HAITI 20 INTERNATIONAL MONETARY FUND will continue to suffer large import compression. External assistance should take the form of grants. The authorities should avoid contracting non-concessional loans, to ensure consistency with the SMP commitments. Non-concessional loans would undermine debt sustainability. 35. The authorities’ careful pace of monetary tightening has been appropriate. The fiscal and monetary authorities’ commitment to keeping monetary financing of the deficit at zero has been commendable (despite spending pressures) and it has enhanced the credibility of the policy frameworks. But this restrictive stance will not be sufficient to keep inflation under control without a normalization of security. The adequate foreign exchange (FX) reserves, re-built during 2023-24, remain a valuable buffer given the shocks Haiti faces. Staff recommended to the authorities implementing a risk-based FXI stance as FXI are not a substitute for necessary macroeconomic policy adjustment. The alignment of the foreign reserves framework with best practices is critical for avoiding financial risks. The FY2023 financial audit of the BRH is urgent and its eventual publication by August 2025 would be important for demonstrating transparency. Staff urges the BRH not to delay this exercise further. 36. Addressing financial-sector vulnerabilities is paramount for mitigating financial risks. The worsened security crisis and recession have undermined the financial sector. The risks associated with high non-performing loans (NPLs) warrant close monitoring and underscore the need for an urgent plan to limit their growth. The BRH has been strengthening banking supervision, with Fund assistance, with the goal of upgrading the regulatory framework and moving to risk- based supervision. Such efforts must be sustained, aided by technical assistance. 37. Staff welcomes the authorities’ strong progress in improving data provision to the Fund for program and surveillance purposes as well as the recent publication of central bank data, previously only provided to the Fund. Public dissemination of economic data should continue to be a top priority. MEF data dissemination had already greatly improved under previous SMPs and should continue. The quality and timeliness of monetary and reserve-asset data, and budget execution, should continue to improve capitalizing on recent progress. Real-sector data weaknesses (e.g., underestimation of the destruction in capital stock due to crime) will be addressed with forthcoming technical assistance. 38. Staff commends the authorities for recent timely publication of the Governance Diagnostic Report and associated action plan. The implementation of the reforms identified in the governance diagnostic assessment report is closely intertwined with the SMP. These reforms should be implemented in close collaboration with development partners. Sustaining progress on strengthening governance is essential for ensuring inclusive growth and building the trust of the private sector to attract much-needed FDI. While remittances have greatly helped smooth consumption, ease liquidity constraints, and improve living conditions—especially since the pandemic—they may have created other fragilities, such as dependency and/or delaying reforms that would otherwise have attracted FDI. Strengthening governance is essential for ending the fragility trap and attracting grants at a time when traditional partners are re-thinking their aid strategies. HAITI INTERNATIONAL MONETARY FUND 21 39. Haiti’s strong engagement with the Fund has been important for helping the country deal with protracted and serious difficulties and performance is broadly satisfactory despite the headwinds. Fund staff therefore supports the authorities’ request for the completion of the First Review of the SMP and of resetting the target date for three benchmarks given ongoing capacity constraints due to further deterioration of insecurity. Nonetheless, risks to the implementation of the SMP remain, especially in light of the prevailing security environment, less certain aid flows and potentially lower remittances. This SMP will continue to be supported with Fund capacity development assistance. In line with the Fund Strategy for Fragile and Conflict-Affected States, staff will also continue to collaborate closely with Haiti’s main development partners, which should help mitigate implementation risks, in accordance with the Country Engagement Strategy as part of the recent 2024 Article IV Consultation staff report. Should an extension of the SMP be necessary, depending on the election timeline, additional quantitative targets (and possibly structural benchmarks) would need to be proposed at the time of the Second Review in an extended SMP. HAITI 22 INTERNATIONAL MONETARY FUND Annex I. Nowcasting Real GDP and Revenue Using Big Data 1. Framing the issue 1 Nowcasting provides up-to-date assessments of a country’s current economic conditions by integrating multiple data sources. Due to the scarcity and lag in compiling official statistical data, nowcasting has become an increasingly critical tool for policymaking in developing countries, made it possible by the growing availability of big data (combined with high- frequency official indicators). In Haiti official data on real GDP and GDP deflator are available only on an annual basis, making nowcasting essential for timely economic assessments. In this Annex, we present yearly real GDP estimates that can be updated on a quarterly basis, and a short-term forecasting model for real revenue. Official revenue data are compiled monthly with a one-month lag. Since no other macroeconomic indicators are available at such a high frequency, we rely on real-time satellite data and machine learning methods to fill the gap and nowcast revenue. The GDP growth forecast derived from the nowcasting model(s) represents a downward scenario, assuming no improvement in the security outlook (which prevents the implementation of policy at the same pace as in the baseline). 2 Nowcasting Real GDP 2. Data description. We use quarterly data on revenue, expenditure, secondary income, exports, imports, real base money, and real credit from Haitian authorities. These variables have been available since at least 2001 and are strongly correlated with real economic activity. 3. Methodology. Nowcasting real GDP in Haiti poses two main challenges. First, there is a structural break in Haiti's GDP growth starting in 2019. This structural break is a persistent drop in the GDP growth rate that occurred because of multiple shocks such as: the COVID pandemic in 2020, the assassination of President Moïse in July 2021, the generalized unrest in August-October 2022, and the spike in gang violence of March 2024; and second, satellite data are only available from 2011 onward and, in some cases, only from 2019. 4. To address the first challenge, we introduce a structural break in 2019 within the bridge regression. We also propose an alternative model for the evolution of the factors. To address the second challenge, we focus mainly on macroeconomic drivers and use satellite data in a short-term nowcasting real revenue model. 1 Juan Passadore (WHD) and Iyke Maduako (STA). 2 References: Aruoba, S. Borağan, Francis X. Diebold, and Chiara Scotti, “Real-time measurement of business conditions, “Journal of Business & Economic Statistics 27.4 (2009): 417-427; Chen, X. and Nordhaus, W. D. (2011), “Using luminosity data as a proxy for economic statistics,” Proceedings of the National Academy of Sciences, 108(21), pp. 8589–8594; Giannone, Domenico, Lucrezia Reichlin, and David Small, “Nowcasting: The real-time informational content of macroeconomic data,” Journal of Monetary Economics 55.4 (2008): 665-676. HAITI INTERNATIONAL MONETARY FUND 23 5. We proceed in three steps. Step1 (Principal components). We compute the first three principal components 3 of quarterly real revenue, real expenditure, real secondary income (measured in US dollars), real exports (measured in US dollars), real imports (measured in US dollars), real base money, and real credit. This yields: where X j,t,q is macro driver � on year ������ and quarter ������; F t,q i is the principal component � at year ������ and quarter ������ of the set of macro drivers {X j,t,q} ; and λ j ������ is the loading of factor � for macro driver �; and ϵ j,t,qis an error term. Step 2 (Bridge regression). Next, we aggregate the factors at a yearly frequency by computing their yearly averages F t i,Y =(∑F q,t i4 q=1/4). We then regress the yearly factors on GDP growth: where g t is the growth rate of real GDP in year t, I 2019 is a dummy variable that takes the value of one if the year is 2019 or higher, F t i,Y is the yearly principal component , and u t is a mean zero error term. Step 3. To generate a forecast, at a quarterly frequency, we estimate a VAR for the three factors {F t,q i }, obtain a forecast for the following quarters, and use the bridge regression to compute a GDP growth forecast. To account for the dynamics of the factor in Step 1, we also estimate a Dynamic Factor Model. 6. Results: Real GDP. Figure 1 presents the results of a Dynamic Factor Model with a structural break. The left panel shows that the model performs well in-sample, exhibiting a low mean squared error. Table 1 displays 2025 growth forecasts across four different models, varying based on whether a factor model or a dynamic factor model is used and whether a structural break is included. 3 Given a random vector {X j,t,q}, the first principal component is the linear combination of the variables in the random vector that has maximum variance. The second principal component is a linear combination of the variables in the random vector that maximizes the variance and is orthogonal to the first principal component. The third, fourth, and n-principal components are calculated in the same way. Figure 1. Real DGP Growth and Nowcast Growth (In percent) Table 1. Haiti: Growth Forecasts Across Different Methodologies HAITI 24 INTERNATIONAL MONETARY FUND 7. On average, the models predict an economic contraction of -2 percent, while the median forecast is -2.1 percent, which is less sensitive to outliers. These forecasts do not include an improvement in security as in our baseline projection. Nowcasting Monthly Real Revenue 8. The goal of nowcasting is to generate timely estimates and forecasts of real revenue during the month. The main challenge lies in identifying data sources with a higher frequency than one month that are available in real time. Satellite data meet both criteria. 9. Data description. We obtain satellite data on: • Nighttime Lights (NTL) are satellite-based measurements of the intensity of artificial light emitted at the Earth’s surface after sundown. • Normalized Difference Vegetation Index (NDVI) is computed using the red (R) and near-infrared (NIR) bands of satellite imagery. It is defined as: ������������������������= ������������������−������ ������������������+������ where the red band (about 620–670 nanometers), which is the light that vegetation absorbs, which is the red light for photosynthesis, and NIR band (about 841–876 nanometers), where healthy vegetation reflects a large portion of NIR light. The index scales from -1 to 1. Negative or near-zero values usually correspond to non-vegetated surfaces (water, urban areas, deserts), and high positive values (closer to +1) indicate dense, healthy vegetation. This index measures vegetation health and can be used to proxy agricultural output and land use changes (expansion of cropland, infrastructure development). • Nitrogen dioxide (NO₂) is a pollutant primarily produced by the combustion of fossil fuels by power plants, industrial facilities, and vehicles. Because NO₂ is emitted in large quantities when economic activity is high, satellite-based observations of NO₂ approximate the level and distribution of economic activity on the ground. • Port Watch is a daily frequency published database reporting near‐real‐time shipping or port‐call indicators which track global shipping activity and is constructed by processing raw vessel‐ tracking data (AIS transponders signals) in order to measure port calls, shipping volumes, and congestion in (near) real time. Algorithms match a vessel’s AIS signals to recognized port boundaries or “port polygons” (geographic coordinates that define a port’s area). When a vessel’s track enters that zone, it is recorded as a port call (arrival). • Agricultural Stress Index (ASI) is a satellite-based indicator designed to detect areas of cropland experiencing water stress—such as drought—during the growing season. This index relies on measures from NDVI. HAITI INTERNATIONAL MONETARY FUND 25 • Vegetation Health Index (VHI) is computed using NDVI and Land Surface Temperature as inputs. First, the Vegetation Condition Index (VCI) is derived from NDVI to assess vegetation greenness. Then, the Temperature Condition Index (TCI) is calculated to measure how current surface temperatures deviate from their long-term average, highlighting heat or cold stress. Finally, VHI is obtained by averaging VCI and TCI. 10. Methodology. To forecast real revenue, we use a machine learning methodology called random forests. • Given a training dataset {� ������,� ������} ������=1 ������=������ the random forest algorithm constructs multiple decision trees using subsamples drawn with replacement (bootstrapping). • For each subsample, a subset of regressors is randomly selected, and the data are split based on the feature that minimizes the mean squared error (MSE). Each split forms a node and the process continues recursively. Nodes are further split until additional splitting no longer reduces the MSE or a predefined maximum tree depth is reached. The final splits at the terminal nodes represent predictions, also known as leaves. • To generate a forecast, the model averages predictions across all trees in the ensemble using bootstrap aggregation (bagging). The final forecast is given by: where ������ ������ (�) is the prediction of each tree. • Figure 2 shows that the model exhibits a strong in-sample fit, with an out-of-sample mean absolute deviation of about 10 percent. The most significant predictive features include NO₂ levels and nightlight intensity, both of which are closely linked to fossil fuel combustion and nighttime economic activity. HAITI 26 INTERNATIONAL MONETARY FUND Annex II. Strengthening Governance to Ensure Macro-Stability 1 Strengthening governance issues is vital for restoring public trust, policymaking accountability, and ensuring a resilient future for Haiti. The SMP has already greatly anchored several reforms related to enhancing governance, in the process of being implemented. Going forward, TA from partners to implement the recommendations of the governance diagnostic will be essential. Fiscal Governance: Weaknesses within revenue administration and transparency of public spending pose challenges in Haiti, adversely affecting private sector development and the financing of public spending (by taxes or by attracting aid) to address development needs. Lack of collaboration among institutions produces corruption risks. 1 Problem: Low tax revenue at less than 6 percent of GDP Goal: Enhance revenue administration, improve collection efficiency, and broaden the tax base Diagnosis ■ An inefficient tax system (too many small taxes) and red tape. ■ A narrow tax base due to high informality. ■ Low compliance rates among medium and large businesses. Who face arbitrary interpretations of laws (under-invoicing, under-valuation of imports lowering tariff payments, misclassification and bribery of customs officials). Smaller enterprises pay bribes as a standard practice. ■ Fraud and smuggling practices. ■ Poor traceability of tax and customs revenue due manual systems and lack of digitalization, resulting in leakages in the tax and customs collection system. ■ Low job attractiveness. ■ Weak partnership: poor interaction among taxes and custom offices, and financial intelligence unit; and with the private sector and civil society. Actions ■ Prepare overarching digital strategy and implement e- government services: • Implement modern tax administration practices using digitalization: develop online user-friendly platforms for essential services (e.g., tax filing, business registration), taking advantage of technological solutions developed by the two mobile phone operators to set up tax payments by mobile telephone initially, and subsequently by bank transfer. • Implementing tax and custom codes, and continuing streamlining the number of taxes ■ Rationalize tax expenditure (inefficient tax benefits) ■ Provide training and resources to tax officials. ■ Prepare MOU among tax and customs authorities and financial intelligence unit 2 Problem: Weak public financial management system Goal: Improve transparency of public spending, fiscal reporting and budget planning; enhance access to procurement info for the public Diagnosis ■ Budget process with no multi-year budget planning nor ex- ante public investment assessment. ■ Weaknesses in budget execution persists on 1) spending side, due to excessive allocations of unspecified expenditure items, misclassification of capital expenditure; and 2) cash management where tools are still limited. ■ Consolidation of central government accounts in the single treasury account at the central bank is still in progress ■ Fiscal reporting issues persist (e.g., reporting on expenditure execution is not by ministry nor does it specify the stages of expenditure: commitment, settlements, or payments, making Actions ■ Procurement: implement open and competitive bidding for public contracts and publish information all new public procurement contracts, including beneficial ownership information (the latter is an SMP benchmark). ■ Audit: improve audit process by reinforcing the independence and capacity of audit institutions and regularly publish audit findings and follow up on recommendations. ■ Investment: ex-ante evaluation of investment projects is paramount: this requires strong collaboration 1 This Annex is informed by the Governance Diagnostic report prepared by IMF staff from legal (lead), fiscal affairs, and monetary and financial markets departments, at the request of the authorities of Haiti. HAITI INTERNATIONAL MONETARY FUND 27 unclear if spending has actually occurred; 2) report on execution does not provide info on grants (except for budget support which is rare and very limited), nor the totality of the source of funding, nor the factors justifying under/over-execution. ■ Public procurement: limited competitive bidding (only 40 percent through open tendering). between ministry of economy and finance and ministry of planning and external cooperation. ■ Aid: achieving transparency in managing aid flows is essential. This will require setting up a database with all information which should be published; strong collaboration between Ministry of Economy and Finance and Ministry of Planning and External cooperation; better integration of the information of aid flow in the budget process is key. Enhancing Judicial and Anti-Money Laundering (AML/CFT) Framework 3 Problem: Corruption has severely undermined the rule of law and anti-Money Laundering measures Goal: Strengthen accountability by effective investigation and prosecution of the most significant corruption, organized crime/ and money laundering cases, in parallel to enhancing legal frameworks and institutional capacities. Diagnosis Systemic corruption has undermined the rule of law and has rendered anti-corruption and anti-money laundering frameworks ineffective in addressing macro-critical vulnerabilities within core state functions. Actions ■ Create, based on existing anti-corruption institutions, and operationalize an Anti-Corruption Pôle-an ad hoc mechanism - to investigate and prosecute the most significant corruption, organized crime and money laundering cases, including those involving PEPs. ■ Facilitate investigation of laundering of proceeds of Haitian corruption and organized crime abroad. ■ Implement the September 2023 Decree reinforcing the operational autonomy and independence of the Financial Intelligence Unit (UCREF) providing it with a clear mandate to conduct operational and strategic analyses on money laundering crimes, and ensure it has the power to cooperate and share information with domestic and international counterparts. Enhancing Financial Sector Oversight 4 Problem: Governance frameworks are broadly aligned with international standards Goal: Resolve pending implementation issues Diagnosis The finalization of the prudential regulations, such as the risk-based supervision, are being slowed down due to brain drain. Actions ■ Update the document on the banking supervision framework published by central bank (which does not reflect the 2017 organization of the supervision system), as soon as the risk-based supervision system has been operationalized. ■ Resume the publication of the central bank annual report (last one was in 2018) to ensure transparency on banking supervision (developments, results, main issues, and outlook). ■ Adopt of a risk-based supervision approach. ■ The Directorate of Supervision of Banks and other Financial Institutions of the central bank should establish a system for monitoring the measures taken by financial institutions to comply with new prudential regulations undertaken by the central bank on capital adequacy requirements, internal supervision, IT security, consolidated supervision, and credit risk concentration. HAITI 28 INTERNATIONAL MONETARY FUND Table 2. Haiti: Selected Economic and Financial Indicators, 2021–29 (Fiscal year ending September 30) Table 3a. Haiti: Non-Financial Public Sector Operations, 2021–29 (Fiscal year ending September 30; in millions of gourdes) HAITI INTERNATIONAL MONETARY FUND 29 Table 3b. Haiti: Non-Financial Public Sector Operations, 2021–29 (Fiscal year ending September 30; in percent of GDP) HAITI 30 INTERNATIONAL MONETARY FUND HAITI INTERNATIONAL MONETARY FUND 31 Table 4a. Haiti: Balance of Payments, 2021–29 (In millions of U.S. dollars on a fiscal year basis; unless otherwise indicated) HAITI 32 INTERNATIONAL MONETARY FUND Table 4b. Haiti: Balance of Payments, 2021–29 (In percent of GDP on a fiscal year basis, unless otherwise indicated) HAITI INTERNATIONAL MONETARY FUND 33 Table 5. Haiti: Summary Accounts of the Banking System, 2021–29 HAITI 34 INTERNATIONAL MONETARY FUND Table 6. Haiti: External Financing Requirements and Sources, 2021–29 (In millions of US$ on a fiscal year basis; unless otherwise indicated) 1/ HAITI INTERNATIONAL MONETARY FUND 35 Table 7. Haiti: Financial Soundness Indicators, March 2022–September 2024 (In percent; unless otherwise stated) HAITI 36 INTERNATIONAL MONETARY FUND Figure 3. Haiti: Real Sector Developments, 2018–24 Real GDP has contracted for six consecutive years… 1 …due to a drop in investment and net exports. Conjunctional indicators point to negative growth across all sectors… …in particular construction, manufacturing, and agriculture. Inflation is still very high (just below 30 percent). The output gap has widened since 2018. Sources: Haitian Institute of Statistics and Informatics (IHSI), Bank of the Republic of Haiti, and IMF staff calculations. 1/ On a fiscal-year basis, ending on September 30. HAITI INTERNATIONAL MONETARY FUND 37 Figure 4. Haiti: Fiscal Sector Developments, 2018–24 Tax revenues are extremely low. Spending capacity has declined… …including social spending. The fiscal deficit fell in 2023 due to lower fuel subsidies… …which reduced the need for monetization. Government debt declined in early 2024. Sources: Ministry of Finance, Reserve Bank of Haiti, and IMF staff calculations. Charts on central government deficit, government fiscal balance, and central government debt for 2024 include debt operation with Venezuela. HAITI 38 INTERNATIONAL MONETARY FUND Figure 5. Haiti: Monetary and Financial Sectors Developments, 2019–24 BRH monetary financing of the budget has ceased in FY2024... …with net domestic assets declining. Private sector credit has collapsed since early 2023. Monetary transmission has been weak, with market rates not responding to policy rates FX deposits and loans have been stable since August 2020, after the central bank revalued the gourde… …While excess structural liquidity is rising in the banking system 1 . Sources: Bank of the Republic of Haiti and IMF staff calculations. 1/ Excess reserves are reserves above requirement ratios on deposits; structural excess reserves include excess reserves plus other bank deposits at the BRH minus reserves banks obtain under BRH facilities. HAITI INTERNATIONAL MONETARY FUND 39 Figure 6. Haiti: External Sector Developments, 2018–24 Haiti continues to have structural trade deficits. …Remittances (in dollar terms) are well above pre- pandemic level. Debt agreement with Venezuela reduced Haiti's external liabilities substantially in 2024… …but donor flows reported in the BOP continue to be limited given the large development needs. The REER has greatly appreciated during 2023-24… …And net international reserves (NIR) jumped to over US$1 billion. Sources: Bank of the Republic of Haiti and IMF staff calculations. Notes: REER=real effective exchange rate; NEER=nominal effective exchange rate; GIR=gross international reserves; NIR=net international reserves; NFA=net foreign assets. HAITI 40 INTERNATIONAL MONETARY FUND Annex III. Risk Assessment Matrix Source and Relative Likelihood Impact Policy Response Global Risks Medium Commodity price volatility. Supply and demand volatility (due to conflicts, trade restrictions, OPEC+ decisions, AE energy policies, or green transition) increases commodity price volatility, external and fiscal pressures, social discontent, and economic instability. High ST/MT Persistent inflationary pressures. Eroding real incomes. Worsening fiscal and external balances. Protect the vulnerable through targeted fiscal measures. Continue the fuel subsidy reform to ensure long-term fiscal sustainability. Medium Social discontent. Real income loss, spillovers from conflicts, dissatisfaction with migration, and worsening inequality ignite social unrest, populism, polarization, and resistance to reforms or suboptimal policies. This weakens growth and leads to policy uncertainty and market repricing. High ST/MT Reversal of migration policies leads to lower remittances, creating adverse spillovers to the broad economy. Worsening fiscal and external balances. Protect the vulnerable through targeted fiscal measures. Monitor financial risks closely and strengthen banking supervision. High Deepening geoeconomic fragmentation. Persistent conflicts, inward-oriented policies, protectionism, weaker international cooperation, labor mobility curbs, and fracturing technological and payments systems lead to higher input costs, hinder green transition, and lower trade and potential growth. High ST/MT Delay in renewing or expiration of HOPE/HELP trade preferences (currently in place through September 2025). Lower aid and FDI inflows. Improve competitiveness through structural reforms. Medium Climate change. Extreme climate events driven by rising temperatures cause loss of life, damage to infrastructure, food insecurity, supply disruptions, lower growth, and financial instability. High MT/LT Lower long-term growth and FDI inflows. Seek donor financing to build ex ante structural and financial resilience and enhance post-disaster response. Domestic Risks High Worsening security and political instability. Interruptions or delays in the full deployment of the Multinational Security Support Mission. Intensification of gang criminal activity. A delay in planned elections due to persistent insecurity. High ST/MT Further displacements of people, restrictions to flow of people and supply chain disruption (including fuel shortages), lower FDI inflows and long-term growth. Continue to coordinate closely with development partners and intensify request for international support to enhance security. Prioritize government spending, ensure sound financial institutions, strengthen governance, including AML/CFT publishing timely and accurate data to reassure markets and donors. HAITI INTERNATIONAL MONETARY FUND 41 Source and Relative Likelihood Impact Policy Response Domestic Risks High Natural disasters. Hurricanes, heavy rains, earthquakes, and droughts. High ST/MT Disruption in economic activity, lower FDI inflows and long-term growth. Seek donor financing to build structural resilience and enhance post-disaster response. High Infectious diseases. Depleted sanitation and health infrastructure leads to outbreaks of communicable diseases (e.g., cholera, tuberculosis). High ST/MT Disruption of economic activities and lower long- term growth. Increased pressure on public health system, Increase the health spending targeted at infectious diseases. Seek international donor support for building resilience and addressing emergencies. Medium Insufficient international support. Financial support is delayed and insufficient to address short-term security and humanitarian needs, and to support the medium-term reconstruction and institutional needs. High ST/MT Persistence of insecurity, impediments to economic activity, and worsening of the humanitarian crisis. Increased pressure on fiscal resources. Intensify outreach to donors. Increase international communication on financing needs. HAITI 42 INTERNATIONAL MONETARY FUND Appendix I. Letter of Intent Port-au-Prince, Haïti April 15, 2025 Kristalina Georgieva Managing Director International Monetary Fund Washington, D.C. 20431 Madam Managing Director: 1. Haiti continues to face daunting challenges. The deterioration of the security situation due to the intensification of gang violence has exacerbated the humanitarian and food crisis and driven the country further into economic recession. The ongoing international juncture presents both risks and opportunities in finding a Haiti-driven solution to our current security crisis. The commitment of our partners to continuing supporting the Multi-Country Security Support (MSS) mission is appreciated and we are very grateful for that. 2. The macroeconomic outlook for FY2025 remains uncertain although progress is expected. Yet economic activity will still drop by 1 percent because of the security outlook. External developments will impact our outlook, and we will need larger development partners’ support to prevent a recession in fiscal year 2025. Inflation, mainly fueled by the supply shock caused by insecurity, is projected to decline slightly. International reserves have been rebuilt at comfortable levels, and monetary financing of the fiscal deficit should be maintained at zero. 3. The implementation of our reforms supported by the SMP is broadly on track. All quantitative and indicative targets for end-December 2024 have been met by a large margin. Progress has also been made in the roll-out of structural reforms, with four structural benchmarks met on time, two missed by the target date, but implemented with delay due to institutional constraints, and one still to be accomplished. We are requesting to reset the target date for three benchmarks: two (the launch and implementation of the digitalization of tax declarations and payments through all commercial banks for the large taxpayers registered at the DGI; and the approval by the BRH Board of Directors of a medium-term plan for improving the composition of the investment portfolio, new strategic asset allocation, updated investment policy, and updated investment guidelines) are proposed to be reset from June to September, and one (audit of the central bank for the fiscal year ending September 2023) from June 2025 to August 2025, due to slower-than-expected implementation capacity, due to insecurity. We are taking appropriate steps to ensure that the reform agenda for the remainder of the fiscal year is duly implemented on time, including with the technical support of the IMF and development partners. Given the satisfactory performance under the SMP, we also request the completion of the First Review of the SMP. HAITI INTERNATIONAL MONETARY FUND 43 4. The attached Memorandum of Economic and Financial Policies (MEFP) describes recent developments and presents the objectives and policies of our economic and social program. The policies set out in the attached MEFP are consistent with these objectives. We stand ready to take further measures as needed and will consult with IMF staff before undertaking any revisions to the policies set out in the MEFP, in line with the practices of our collaboration with the IMF. We will refrain for the duration of the program from: (i) imposing or intensifying restrictions on the making of payments and transfers for current international transactions, (ii) introducing or modifying multiple currency practices, or (iii) concluding bilateral payments agreements that are inconsistent with Article VIII. We will inform IMF staff of any events or developments that may have an impact on the economic program to jointly examine the consequences and optimal measures to address them, without compromising the program’s objectives. We will promptly provide the necessary data and information to enable IMF staff to monitor economic and financial developments and the implementation of the policies set out in the program, in accordance with the attached Technical Memorandum of Understanding (TMU) or upon request. The Internal Audit Unit of the BRH will verify program monetary data as per the TMU at test dates and communicate the results to the Fund. We also give our consent to the IMF to publish the staff report on this SMP, this Letter of Intent, and its attachments. 5. Please accept, Madam Managing Director, the expression of our highest consideration. ___/s/___ Alfred Fils Metellus Minister of Economy and Finance ___/s/___ Ronald Gabriel Governor of the Bank of the Republic of Haiti HAITI 44 INTERNATIONAL MONETARY FUND Attachment I. Memorandum of Economic and Financial Policies (MEFP) A. Introduction and Macroeconomic Framework 1. This This Memorandum on Economic and Financial Policies (MEFP) complements and updates the MEFP signed on December 18, 2024. It outlines recent macroeconomic developments and the medium-term outlook, takes stock of the implementation of our program, and sets out our policy priorities for the remainder of FY2025. The program’s objectives remain focused on: (i) strengthening economic resilience, governance, accountability, and social protection; (ii) enhancing economic stability and laying the groundwork for inclusive, sustainable economic growth; and (iii) reducing poverty and improving living conditions for all Haitian citizens. 2. The deleterious security situation continues to weigh on the country’s macroeconomic performance. Growth in 2024 was negative for the sixth consecutive year at minus 4.2 percent, mainly due to the escalation of violence. In addition, despite ongoing efforts to counter the armed gangs, with the support of the Multinational Security Support mission, growth is expected to be negative at 1 percent in 2025 due to ongoing gang violence, the suspension of airline flights at Port- au-Prince international airport, the intermittent inaccessibility of port areas, and blockades of national roads which prevents the interconnection of the country's different regions. Growth is expected to move to a positive territory (1 percent in 2026) and accelerate moderately in the medium term to 1½ percent thanks to the gradual improvement in security conditions and the implementation of structural reforms. Year-on-year inflation remained elevated in 2024, although down from the previous year, at 27.9 percent. Inflationary pressures are expected to ease further this year and in the medium term as the supply shock caused by gang violence subsides and the policy of zero monetary financing of the budget deficit is maintained. The current account deficit narrowed considerably in 2024 to -0.6 percent of GDP due to the contraction of imports and the increase in the inflow of remittances. The deficit is projected to further improve this year, mainly due to remittances, but would start deteriorating in the outer years with the recovery of imports and the revival of economic activity. The accumulation of gross international reserves, which amounted to 2.5 billion dollars in FY2024 (or 5.7 months of imports), is expected to continue this year and reach 2.7 billion (or 7 months of imports), with a similar trend in the medium term. B. Results Achieved Under The SMP-Supported Program 3. All quantitative targets and indicative targets at end-December 2024 were met with a comfortable margin. Despite the deterioration of the security conditions, the implementation of the program has started well. Net internation reserves amounted to US$ 239 million, exceeding the program’s floor of US$60 million. The primary balance of the nonfinancial public sector posted a 10.2 billion gourdes surplus, well above the program’s deficit floor of -239 million gourdes. Net central bank credit to the nonfinancial public sector reached -6.3 billion gourdes, well below the program’s ceiling of zero monetary financing. Budget allocations for social expenditure totaled 11.9 HAITI INTERNATIONAL MONETARY FUND 45 billion gourdes, exceeding the program’s target of 11 billion. No accumulation of domestic arrears by the central government and no accumulation of external arrears by the public sector were recorded. The public sector did not contract or guarantee new non-concessional debt and the indicative target on central government fiscal revenue was also met with an outturn of 48 billion gourdes, above the target of 40 billion. 4. Of the seven structural benchmarks assessed under this review, four were met on time, two were not met, but implemented with a short delay due to institutional constraints; and one was missed (having the supreme court conducting a financial and operational compliance audit of all expenditure in connection with the RCF of the FSW for 2023/24 fiscal year and publish it) and it is expected to be implemented by end June 2025. All monthly reports on execution of fiscal expenditure through Haiti Food Shock Window account since its first disbursement by February 2023 have been published on the websites of the Ministry of Economy and Finance (MEF) and the General Directorate of the Budget (DGB). The Ministry of Economy and Finance has also published quarterly reports on operations and financial status of the Economic and Social Assistance Fund (FAES), including regular reports from its quarterly meetings of the board of directors. The new public procurement contracts, including beneficial ownership information (name and nationality of the beneficial owners) on contracts awarded to successful bidders, within 45 days after the contract was awarded, starting from the monthly report for contracts awarded in December 2024 on the websites of the National Commission for Public Procurement (CNMP) and the MEF was implemented by delay. The General Finance Inspectorate has also conducted and completed quarterly internal expenditure audits of all ministries involved in the use of the Haiti Food Shock Window account and reported these internal audits to the Superior Court of Accounts and Administrative Disputes (CSCCA) in January; therefore, it was not met on time, but it was still implemented although with delay. The publication of the governance diagnostic report was published on time. C. Fiscal Policy 5. Despite the difficult economic environment, fiscal revenue is expected to grow moderately this year to 4.9 percent of GDP from 4.8 percent in 2024, mainly driven by the continued good performance in customs revenue collection. Domestically financed expenditure is expected to increase substantially to 5 percent of GDP, against 4.1 percent last year, to address increased investment and social assistance needs caused by the ongoing security and humanitarian crisis. The fiscal balance is expected to be on balance. 6. A supplementary budget was endorsed by the Council of Ministries in mid-April 2025 to take account of new budget support expected from donors and extra security spending to fight gangs. The new supplementary budget will be in line with the SMP objectives and does not include monetary financing from the central bank. Reallocations will also be implemented in the new budget with a view to increasing social spending. HAITI 46 INTERNATIONAL MONETARY FUND 7. The priority of the fiscal policy aims to strengthen tax revenues mobilization while improving transparency and accountability in the management of public spending in order to meet the country's huge development needs while maintaining zero monetary financing of the fiscal deficit. The government intends accordingly to diligently implement the following fiscal structural benchmarks (SBs) of the program: (i) Have the CSCCA conduct a financial and operational compliance audit of all expenditure in connection with the Rapid Credit Facility Food Shock Window for the 2022-23 (SB met) and 2023/24 fiscal years and publish, the audit report on the websites of the Superior Court of Auditors and Administrative Disputes (CSCCA), the MEF, and the General Directorate of the Budget (end-March 2025 SB). (ii) Sign and publish on the MEF and DGB websites an administrative and technical cooperation protocol between the Directorate of General Taxes (DGI) and General Administration of Customs (AGD) for the interconnection of their IT systems (end-June 2025 SB) and for the permanent and automated exchange of, and the organization of joint actions to prevent and combat frauds. (iii) The launch and implementation of the digitalization of tax declarations and payments through all commercial banks for the large taxpayers registered at the DGI. (end-September 2025 SB). 8. The government will also continue to implement the other key measures of its fiscal reform agenda with technical assistance from the IMF and other donors. These include: • Stepping up ongoing capacity development of the custom administration, particularly to improve compliance in custom valuation of imports. • Implementing the roadmap for rolling out the Tax Code as well as it supporting regulations. • Gradually completing the implementation of the fuel subsidy reform, including: (i) the introduction of a simple mechanism for adjusting and smoothing prices to variations in international oil prices and the exchange rate; (ii) the establishment of a regulatory framework for the petroleum products sector; and (iii) the strengthening of related regulatory institutions. An appropriate communication strategy will be implemented with a view to promoting public acceptance of the reform. • Strengthening social safety nets to alleviate widespread poverty by: (i) advancing the implementation of the government’s action plan to expand social programs aimed at improving living conditions and strengthening social inclusion for the most vulnerable groups (children, pregnant women, disabled persons, and the elderly), (ii) increasing cash transfers and food rations for vulnerable households; (iii) expanding school feeding programs; (iv) providing hot meals to vulnerable households through community restaurants, (v) eliminating some school fees; (vi) accelerating spending related to the IMF Food Shock Window resources; and (vii) HAITI INTERNATIONAL MONETARY FUND 47 improving the execution and targeting of social expenditure of the Ministry of Social Affairs and Labor (MAST) and the ministries of education, health, and agriculture (quantitative targets). D. Monetary, Exchange Rate, and Financial Policies 9. The monetary policy stance aims to contain inflationary pressures without overly tightening monetary conditions in a context of slowing economic activity. This stance remains anchored on the zero ceiling on net credit to the government, which helps to ease the constraints on liquidity management. The central bank (BRH) will continue to pursue its policy of optimal management of excess liquidity through BRH bonds while maintaining unchanged its key policy rates and reserve requirements. The BRH reaffirms its commitment to pursue ongoing efforts to develop the domestic securities market with a view to strengthening the channels of transmission of monetary policy. We are also grateful to the IMF’s Statistics Department for promptly delivered TA to help the BRH compile for the first time the reserve template, which will be published monthly, when ready. 10. We are committed to implementing the program structural benchmarks aimed at strengthening the transparency of the central bank and bringing the international reserves management framework into line with international best practices within the deadlines. These include: • Provide to IMF staff the full balance sheet of the central bank according to the internationally accepted standardized reporting form (SRF-1SR, with 1SR referring to the central bank) to also include detailed data on government deposit accounts, with two-month lag from the end of the reference period, starting from the balance sheet for end-December 2024, which should be provided by end-February 2025 (end-February 2025 SB). • Publish, on the BRH's web site, the BRH audit report and audited financial statements for FY2023 (ending in September 2023) conducted by an independent international audit firm (end-August 2025 SB). Once this benchmark is accomplished, we will start the process of the audit for FY2024. • Approval by the BRH Board of Directors of: (i) a medium-term plan for improving the composition of the investment portfolio (ii) new strategic asset allocation, (iii) updated investment policy, and (iv) updated investment guidelines, in close consultation with IMF staff (end-September 2025 SB). 11. The BRH foreign exchange policy has so far mainly focus on smoothing excessive exchange rate fluctuations. To this end, the BRH will: • Maintain the adoption of a floor on net international reserves. • Establish an appropriate mechanism for foreign exchange interventions, such as well- designed weekly foreign exchange auctions instead of the foreign exchange allocation system. HAITI 48 INTERNATIONAL MONETARY FUND • Advance the ongoing work to ensure a more risk-based approach to foreign exchange interventions. • Complete the revision of net open position (NOP) limits for commercial banks. 12. We will pursue reforms to strengthen banking supervision and to increase financial inclusion to support growth. These include: • Advancing the design and implementation of a risk-based banking supervision framework with the support of CARTAC. • Closely monitoring the soundness of financial institutions and finalizing outstanding texts on banking regulation. 13. We will continue to implement the recommendations from the 2019 Safeguards Assessment and the 2024 safeguards monitoring mission. This includes finalizing the transition to International Financial Reporting Standards (IFRS) accounting standards and the development of a medium-term plan to phase out the involvement of the BRH in development finance activities, as well as the alignment of the asset allocation strategy with best practices. It is also our understanding that a new safeguards assessment must be normally completed prior to the approval of any subsequent IMF arrangement with Haiti. E. Governance 14. The implementation of our structural and governance reform agenda is critical to lift potential growth and address the country’s sources of fragility. We published the IMF governance diagnostic report (end-February SB) on time. We are committed to steadfastly implementing, with the technical assistance of the IMF and other development partners, the main recommendations of the report action plan, which will serve as a medium-term roadmap for improving governance and fighting corruption more effectively. 15. We also intend to upgrade our legal framework for Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) with technical assistance from the IMF Legal Department, and take additional steps needed to exit the FATF grey list. This includes completing sectoral risk assessments, implementing an AML/CFT risk-based supervision regime for financial institutions and designated non-financial businesses and professions, and ensuring transparency of basic and beneficial ownership information on legal persons. We will also complete a sectoral risk assessment of AML/CFT risks related to financial institutions, designate supervisory authorities for high-risk Designated Non-Financial Business and Professions (DNFBPs), including notaries and lawyers and the gambling and lottery sectors, and strengthening risk-based supervision of financial institutions, by May 2025. HAITI INTERNATIONAL MONETARY FUND 49 F. Program Monitoring 16. The monitoring of the program will be based on structural benchmarks (Appendix I. Table 1) and quantitative targets (Appendix I. Table 2). These indicators are defined in the attached Technical Memorandum of Understanding (TMU), along with the requirements for reporting data to IMF staff. The authorities will submit to the IMF the statistical data and information in accordance with the TMU, and all other information they deem necessary or that IMF requests for monitoring purposes. 17. A committee responsible for monitoring the program is in place; it includes representatives from the Ministry of Economy and Finance and the BRH. If required, this committee may request the participation of other sectors. It will meet at least quarterly with the Minister of Economy and Finance and the Governor of the BRH to give them a progress report on implementation of the Staff Monitored Program. 18. We undertake to publish this Memorandum, and the accompanying IMF Staff Report on the websites of the Ministry of Economy and Finance and the BRH as soon as the Staff Monitored Program is approved by IMF Management. HAITI 50 INTERNATIONAL MONETARY FUND Appendix I. Table 1. Haiti: Structural Benchmarks under the 2024 SMP Appendix I. Table 2. Haiti: Quantitative and Indicative Targets, December 2024-September 2025 (In millions of gourdes, unless otherwise indicated) HAITI INTERNATIONAL MONETARY FUND 51 HAITI 52 INTERNATIONAL MONETARY FUND Attachment II. Technical Memorandum of Understanding 1. Haiti’s performance under the 12-month Staff-Monitored Program (SMP) ending December 2025 will be assessed based on quantitative targets (QTs) and structural benchmarks (SBs). This Technical Memorandum of Understanding (TMU) defines the QTs established by the Haitian authorities and the staff of the International Monetary Fund (IMF) for monitoring the program. It also defines the arrangements for the transmission of data that will permit staff to monitor program implementation. A.Definitions 2. Central Government. Unless otherwise indicated, central government refers to the central administration of Haiti and excludes local administrations (municipalities), the central bank (BRH), and other public financial institutions, autonomous state organizations of an administrative, cultural, or scientific nature, and state-owned enterprises. Central government expenditures are financed by domestic taxes and other domestic levies and by foreign donors, through, inter alia, foreign grants, ministerial accounts (comptes courants), and domestic and foreign public debt. 3. Special funds and programs. These include the Road Fund (Fonds d’entretien routier, FER) and the resources mobilized to finance the Universal, Free, and Compulsory Schooling Program (PSUGO) for education, in addition to Treasury transfers. Under the Staff-Monitored Program, the resources levied to finance FER and PSUGO (through the National Education Fund, FNE) will be recorded as central government revenues. 4. Economic and Social Assistance Fund (FAES). FAES is an autonomous state financial entity, currently under the supervision of the Ministry of Economy and Finance. The mission of the FAES is to fund short-term, labor-intensive projects aimed at improving the living conditions of poor people in urban and rural areas and increasing their productive potential. It is responsible for implementing social programs financed by the public Treasury and foreign donors. 5. Office for Monetization of Development Assistance Programs (BMPAD). The BMPAD is an autonomous state administrative organization under the supervision of the Ministry of Economy and Finance. The BMPAD ensures the implementation of grant and/or loan agreements concluded between the government and a donor or foreign lender, as part of the monetization of development aid programs in Haiti. In particular, it finances and monitors approved programs and projects from the funds generated by the monetization of aid in kind. 6. Electricité d’Haïti (EDH). EDH is a state-owned enterprise that produces, supplies, and distributes electricity. Flows between EDH and the Central Government (CG) include (i) CG transfers to EDH (including through sales taxes collected on electricity consumption and not devolved to the CG, and the payment of fuel purchase bills); (ii) the payment of letters of credit in favor of independent power producers to settle power generation bills unpaid by EDH; (iii) the payment of bills from independent producers for the purchase of fuel, which are the counterpart of EDH arrears HAITI INTERNATIONAL MONETARY FUND 53 for unpaid generation bills. Under the Staff-Monitored Program, transfers from central government are recorded under operations “above the line,” while letters of credit and financial receivables are entered under the operations “below the line.” 7. Non-financial public sector (NFPS). The NFPS includes the central government, special funds and programs (defined in paragraph 3), other autonomous state organizations of an administrative, cultural, or scientific nature, including the FAES and the BMPAD (paragraphs 4 and 5), EDH (paragraph 6), the Civil Service Pension Plan and the National Old Age Insurance Office (ONA), and local governments. 8. Public sector. The public sector comprises the nonfinancial public sector, state-owned banks, and nonbank financial SOEs (enterprises over 50 percent state-owned), and the BRH. 9. Budgetary grants. Budgetary grants are grants received from Haiti’s bilateral or multilateral partners (including the European Union, the Inter-American Development Bank, the World Bank, the Caribbean Development Bank, and bilateral donors) for general or sector budget support purposes. B. Quantitative Targets (QT) 10. The implementation of the program will be monitored using the following indicators. Unless otherwise indicated, all QTs will be assessed in terms of cumulated flows from a reference date set at the end of the previous fiscal year (end September), as specified in Table 1 of the Memorandum on Economic and Financial Policies. 11. Program exchange rates. For the purposes of the program, all assets, liabilities, and flows denominated in foreign currency (U.S. dollar excluded) will be valued “at the program exchange rates,” as defined below, with the exception of elements that affect the government’s budgetary accounts, which will be evaluated at current exchange rates. Assets, liabilities, and flows denominated in U.S. dollar will be valued in U.S. dollar, the currency used to measure net international reserves. For the purposes of the program, it has been agreed to use the following exchange rates: HTG 132.0563 = USD 1 (BRH reference rate as of September 30, 2024), USD 1.119600 = EUR 1, and SDR 0.737261 = USD 1 (rates as at September 30, 2024 published by the IMF on its website- https://www.imf.org/external/np/fin/data/param_rms_mth.aspx. Net Central Bank Credit to the Nonfinancial Public Sector 12. Net central bank credit to the nonfinancial public sector is defined as the difference between BRH assets and liabilities vis-à-vis the nonfinancial public sector (net claims on the public sector) reported by the BRH to the IMF. This includes the net BRH credit to central government and net BRH credit vis-à-vis other nonfinancial public sector entities. The BRH liabilities toward the central government (i.e., central government assets in the BRH) also include a provisional account of HTG 9.2 billion for government expenses contracted in FY 2024 but not yet disbursed by the end- September 2024. The calculation of the net BRH credit to the nonfinancial public sector is shown in Table 1 as of September 30, 2024. HAITI 54 INTERNATIONAL MONETARY FUND 13. Adjustors to net central bank credit to the NFPS. To prevent unwarranted constraints on NFPS spending, the indicator of net central bank credit to the NFPS will be subject to the following adjustors: (i) The net credit to the NFPS target will be adjusted upward by the amount of disbursements made after September 30, 2024, related to central government expenses contracted in FY 2024, up to the provisioned amount of HTG 9.2 billion, shown in “other gourde liabilities to central government” in Table 1. (ii) The net credit to the NFPS target will be adjusted upward by the amount of disbursements made after September 30, 2024, of remaining resources related to the support from the 2023 Food Shock Window (FSW) and the debt relief from the Catastrophe Containment and Relief Trust (CCRT). The FSW resources held in the central bank, but not yet transferred to the Treasury Single Account, and the remaining CCRT resources are shown under “FX other deposits of central government” in Table 1. (iii) The net credit to the NFPS target will be adjusted upward by the amount of the increase in central government liabilities (i.e., central bank assets) caused by exchange rate differences in the central bank account 172160 (“Avance difference de change FMI”), which is part of the calculation line “loans and advances to the central government” in Table 1. HAITI INTERNATIONAL MONETARY FUND 55 Attachment II. Table 1. Haiti: Components of Net Central Bank Credit to the NFPS (In millions of gourdes) September 2024 (preliminary) September 2024 (revised) December 2024 Net central bank credit to the nonfinancial public sector 240,020.92 240,212.35 233,949.69 Net credit on central government 245,097.04 245,284.26 239,655.63 Claims on central government 349,591.17 349,543.64 331,057.49 Holdings of government debt securities 221,360.50 221,360.50 221,360.50 Loans and advances to the central government 128,230.67 128,183.14 109,696.98 Other claims on central government 0.00 0.00 0.00 Liabilities to central government 104,494.13 104,259.39 91,401.86 Gourde demand deposits of central government 63,710.19 63,475.43 52,225.51 Gourde other deposits of central government 1,230.63 1,230.63 1,230.63 Gourde loans from central government (Public treasury fiduciary in FIDEICOMMI) 126.40 126.40 125.63 Gourde settlement accounts from central government (Bail) 13.95 13.96 14.07 Other gourde liabilities to central government 9,200.00 9,200.00 6,200.00 FX demand deposits of central government 27,021.88 27,021.88 28,414.93 FX other deposits of central government 3,076.21 3,076.21 3,076.21 FX trade credit liabilities to central government (Notes to pay AID) 114.88 114.88 114.88 Other FX liabilities to central Government 0.00 0.00 0.00 Net claims on other nonfinancial public sector entities -5,076.12 -5,071.91 -5,705.94 Claims on other nonfinancial public sector entities 0.00 0.00 0.00 Claims on state and local government 0.00 0.00 0.00 Claims on public nonfinancial corporations 0.00 0.00 0.00 Liabilities to other nonfinancial public sector entities 5,076.12 5,071.91 5,705.94 Demand deposits of state & local governments (Gourde) 234.14 229.93 804.02 Demand deposits of public nonfinancial corporations (Gourde) 527.60 527.60 406.61 Demand deposits of state & local governments (FX) 0.00 0.00 0.00 Demand deposits of public nonfinancial corporations (FX) 0.00 0.00 0.00 Other deposits of state & local governments (Gourde) 0.00 0.00 0.00 Other deposits of public nonfinancial corporations (Gourde) 4,314.37 4,314.37 4,495.31 Other deposits of state & local governments (FX) 0.00 0.00 0.00 Other deposits of public nonfinancial corporations (FX) 0.00 0.00 0.00 Other monetary liabilities to state and local governments 0.00 0.00 0.00 Other monetary liabilities to public nonfinancial corporations 0.00 0.00 0.00 Nonmonetary liabilities to state and local governments 0.00 0.00 0.00 Nonmonetary liabilities to state and local governments 0.00 0.00 0.00 Sources: BRH, IFS, and IMF Staff calculations HAITI 56 INTERNATIONAL MONETARY FUND Net International Reserves 14. The gross international reserves of the central bank are those external assets that are readily available to and controlled by monetary authorities 1 for meeting balance of payments financing needs, for intervening in exchange markets to affect the exchange rate, and for other related purposes such as maintaining confidence in the currency and the economy and serving as a basis for foreign borrowing. Reserve assets must be foreign currency assets and assets that exist. All contingent assets and foreign currency assets pledged as collateral are excluded if encumbered. The gross international reserves reported by the BRH from Standardized Report Forms 1SR or 2SR must conform to this definition. Gross international reserves include monetary gold, liquid external assets, including holdings of Special Drawing Rights (SDRs), and IMF reserve position. For program purposes, holdings of SDRs and IMF reserve position will be calculated based on data from the IMF Finance Department. 15. For program purposes, net international reserves (illustrated in Table 2 below) are defined as the gross international reserves of the central bank, minus: • reserves related liabilities (i.e., liabilities denominated in foreign currency to non-residents), such as: (i) short-term loans (lines of credit) contracted by the central bank, (ii) certified checks in U.S. dollars, (iii) all Haiti liabilities to the IMF, based on data from the IMF Finance Department; 2 • domestic foreign currency denominated central bank liabilities to residents, such as: (i) foreign currency deposits of commercial banks at the BRH (sight deposits in US dollars and euro, including from BCM and the CAM transfer), (ii) other foreign currency denominated liabilities to other depository corporations included in monetary base, (iii) foreign currency demand deposits of other financial corporations, (iv) commitments related to foreign currency swap transactions with domestic financial institutions; • other liabilities in foreign currency, such as: (i) foreign currency special accounts, (ii) foreign currency project accounts, (iii) central bank off-balance sheet foreign currency liabilities. 16. If budgetary grants are lower than expected the floor on net international reserves will be adjusted downwards by the amount of the difference in question. Conversely, the floor will not be adjusted upwards by the amount of budgetary grants exceeding the expected levels mentioned in Table 3. 1 Underlying the concept of reserve assets are the notions of ‘availability for use’ and ‘control’ by the monetary authorities. See Balance of Payments Manual, http://www.imf.org/external/pubs/ft/bop/2007/bopman6.htm and Guidelines for a Data Template, http://www.imf.org/external/np/sta/ir/IRProcessWeb/pdf/guide2013.pdf. 2 As described in the Operational Guidance Note on Program Design and Conditionality (https://www.imf.org/en/Publications/Policy-Papers/Issues/2024/01/30/Operational-Guidance-Note-On-Program- Design-and-Conditionality-544122, Box 8): “For establishing and monitoring Fund-supported programs, all outstanding IMF credit and loans, regardless of their maturity, should be deducted from reserve assets to measure NIR for program purposes.” HAITI INTERNATIONAL MONETARY FUND 57 Attachment II. Table 2. Haiti: Calculation of Program Net International Reserves (In millions of U.S. dollars) September 2024 (provisional) September 2024 (revised) December 2024 A. Gross International Reserves 2,525.2 2,525.2 2,722.0 Monetary gold 153.1 153.1 151.9 Holdings of foreign currency 37.5 36.7 34.4 Demand deposits abroad 444.2 444.1 694.2 Investments abroad 1,769.3 1,769.3 1,726.8 SDR holdings 1/ 93.2 94.2 86.9 Reserve Position in the Fund 1/ 27.9 27.9 27.9 B. Reserve Related Liabilities 306.6 306.6 242.2 Liabilities to the IMF 1/ 2/ 245.1 245.1 239.8 Short-term loans from private non-residents 60.2 60.2 0.0 Liabilities to IFIs 1.3 1.3 2.4 Certified checks in FX 0.3 0.3 0.3 C. Liabilities to Residents Denominated in Foreign Currency 1,263.4 1,263.4 1,286.9 Financial sector FX deposits in the central bank 1,231.0 1,231.0 1,254.2 Swaps with financial institutions 32.4 32.4 32.7 D. Other Liabilities Denominated in Foreign Currency 35.2 35.2 33.9 Off-balance sheet FX liabilities 15.0 15.0 15.0 Project accounts 20.2 20.2 18.8 Special accounts 0.1 0.1 0.1 E. Net International Reserves, 2024 SMP definition (A - B - C - D) 919.9 919.9 1,159.2 Memorandum Items (not included in program NIR calculation) Miscellaneous central bank FX liabilities (including values for adjustment) 25.0 23.4 25.0 Central government FX deposits in the central bank 228.9 228.9 239.5 Short-term central government FX liabilities (next 12 months) 24.8 26.7 29.3 Sources: BRH, IFS, and IMF staff calculations. 1/ Based on IMF books. For the purposes of the 2024 SMP, between December 2024 and September 2025, the amounts in SDR will be converted to U.S. dollars using the exchange rate as of September 30, 2024 (1 USD = 0.737261 SDR). 2/ For program purposes, all outstanding Haiti liabilities to the IMF are considered, including the January 2023 Rapid Credit Facility (Food Shock Window), disbursed at a government account in the BRH, for an amount of SDR 81.9 million. HAITI 58 INTERNATIONAL MONETARY FUND Attachment II. Table 3. Haiti: Projected Budgetary Grants (In millions of US dollars) Cumulative Flows since end-September 2024 September 2024 March 2025 June 2025 September 2025 0 0 21 39 Primary Balance of the Nonfinancial Public Sector 17. Domestic arrears of the central government refer to expenditure accepted by the Treasury and unpaid after 90 days, despite the delivery of the corresponding goods and services. Domestic arrears of central government do not include unpaid off-budget government commitments. 18. Unpaid off-budget central government commitments refer to liabilities incurred outside the budgetary process (from ministries or other public bodies), which may give rise to contingent claims against central government resources. 19. Net domestic financing of the nonfinancial public sector (NFPS) corresponds to the sum of the following elements: (i) net central bank credit to the NFPS; (ii) net credit from domestic commercial banks to the NFPS (as reported in the Standardized Report Form 2SR), which includes changes in NFPS deposits and the net issuance of Treasury bills and other NFPS securities to commercial banks; and (iii) net nonbank credit to the NFPS, which includes the net issuance of Treasury bills and other NFPS securities to nonbank institutions, the change in the net position of the NFPS vis-à-vis the electricity sector (including independent power producers), and the net change in suppliers’ credit and domestic arrears of central government. 20. Net external financing of the nonfinancial public sector (NFPS) corresponds to the sum of (i) new external loan disbursements (excluding IMF loans) and (ii) the net change in external arrears minus external loan amortizations. 21. For the purposes of the program, the primary balance of the nonfinancial public sector (NFPS) corresponds to the sum of the following: net domestic financing of the NFPS and net external financing of the NFPS, after deducting interest payments on public debt. If budgetary grants do not reach the expected levels, the floor on the primary balance of the NFPS includes an asymmetric adjustor. More specifically, if the amounts of budgetary support are in deficit, the floors on the primary balance will be reduced by the amount of those deficits. Conversely, if external budget support exceeds projections, the floor on the primary balance will not change. Budget Allocations to Social Expenditure 22. The budget decree gives ministries appropriations, i.e., the authority to incur obligations, which become due during the fiscal year up to a specified amount for specified purposes (as indicated in the budget decree) within the fiscal year. For the purposes of the program, the social spending is defined as the budget envelope allocated to Ministry of Social Affairs and Labor (MAST), Ministry of Education, Ministry of Agriculture, and Ministry of Public Health, in the budget decree. HAITI INTERNATIONAL MONETARY FUND 59 23. The floor on the QT applies to the sum of the budget allocations to the Ministry of Social Affairs and Labor (MAST), Ministry of Education, Ministry of Agriculture, and Ministry of Public Health, as executed at end-month, i.e., end-December and end-June for QTs and end-March for ITs. Provisional appropriations, i.e., expenditure that get under way before the actual budget appropriation, if any, will be included. New Contracting or Guaranteeing by the Public Sector of Non-Concessional External Debt 24. Definition of debt. The definition of debt is set in paragraph 8 of the Guidelines on Public Debt Conditionality in Fund Arrangements, adopted by Decision No. 16919-(20/103) of the Executive Board (October 28, 2020). For the purpose of these guidelines, the term “debt” will be understood to mean a current, i.e., not contingent, liability, created under a contractual arrangement through the provision of value in the form of assets (including currency) or services, and which requires the obligor to make one or more payments in the form of assets (including currency) or services, at some future point(s) in time; these payments will discharge the principal and/or interest liabilities incurred under the contract. Debts can take a number of forms, the primary ones being as follows: i. loans, i.e., advances of money to the obligor by the lender made on the basis of an undertaking that the obligor will repay the funds in the future (including deposits, bonds, debentures, commercial loans and buyers’ credits) and temporary exchanges of assets that are equivalent to fully collateralized loans under which the obligor is required to repay the funds, and usually pay interest, by repurchasing the collateral from the buyer in the future (such as repurchase agreements and official swap arrangements); ii. suppliers’ credits, i.e., contracts where the supplier permits the obligor to defer payments until sometime after the date on which the goods are delivered or services are provided; and iii. leases, i.e., arrangements under which property is provided which the lessee has the right to use for one or more specified period(s) of time that are usually shorter than the total expected service life of the property, while the lessor retains the title to the property. For the purpose of these guidelines, the debt is the PV (at the inception of the lease) of all lease payments expected to be made during the period of the agreement excluding those payments that cover the operation, repair, or maintenance of the property. 25. For the purposes of this debt limit ceiling, public sector debt covers public and publicly guaranteed debt. Public sector is defined in paragraph 8 of this TMU. 26. Debt guarantees by the public sector. For the purposes of the program, a debt guarantee by the public sector means an explicit legal obligation to service a debt in the event of non-payment by the borrower (in return for payment in cash or in kind). 27. Concessionally. For program purposes, a debt is concessional if it includes a grant element of at least 35 percent, calculated as follows: the grant element of a debt is the difference between the present value (PV) of debt and its nominal value, expressed as a percentage of the nominal value HAITI 60 INTERNATIONAL MONETARY FUND of the debt. The PV of debt at the time of its contracting is calculated by discounting the future stream of payments of debt service due on this debt. 3 For debts with a grant element equal or below zero, the PV will be set equal to the nominal value of the debt. The discount rate used for this purpose is the unified discount rate of 5 percent set forth in Executive Board Decision No. 15248- (13/97). 4 28. External debt. For the purposes of the ceiling on the contracting or guaranteeing of new non-concessional external debt, external debt is any debt contracted or guaranteed by the public sector on non-concessional terms with non-residents or denominated in foreign currency, i.e., currency other than Haiti’s currency. It includes, where applicable, debt issued domestically by the government and held by non-residents. 29. The public sector undertakes not to contract or guarantee any new non-concessional external debt. It also applies to any private debt guaranteed by the public sector that constitutes a contingent liability. Excluded from the ceiling are short-term (with a maturity of less than one year) import-related credits, rescheduling arrangements, borrowing from the IMF, non-resident purchases of treasury bills, and gourde-denominated BRH bills that are indexed to the exchange rate. This quantitative target will be monitored continuously by the authorities and any non-observance will be immediately reported to the Fund. Public Sector External Arrears Accumulation 30. Arrears on external debt of the public sector. They include all debt-service obligations (principal and interest) on loans contracted or guaranteed by the public sector that are due to non- residents but not paid on the due date as set out in the loan contract; they exclude those arising from obligations being renegotiated with external creditors and (or) those that are litigious. For the purpose of assessing the quantitative target on the non-accumulation of new external debt arrears by the public sector, arrears resulting from non-payment of debt service due to international sanctions preventing payments to the creditor are excluded from the previous definition. This quantitative target will be monitored continuously by the authorities and any non-observance will be immediately reported to the Fund. Domestic Arrears Accumulation of the Central Government 31. Arrears on domestic debt of the central government. They include all debt-service obligations (principal and interest) on loans contracted or guaranteed by the central government that are due to residents but not paid 90 days after the due date set out in the loan contract. The 3 The calculation of concessionally takes into account all aspects of the debt agreement, including maturity, grace period, payment schedule, upfront commissions, and management fees. 4 A tool to calculate the grant element of a wide range of financial packages is available at: https://www.imf.org/en/GECalculator. HAITI INTERNATIONAL MONETARY FUND 61 quantitative target on domestic arrears accumulation will be monitored continuously by the authorities and any non-observance will be immediately report to the Fund. C. Reporting of Data for the Monitoring of the Program 32. In order to facilitate monitoring of the program, the government will provide IMF staff with the information set out in the following summary table. Any data revisions will be promptly communicated to IMF staff. 33. The authorities will inform IMF staff in writing at least 10 working days (excluding public holidays in Haiti) before any change in economic and financial policies that may affect the outcome of the program. Such policies include, for example, changes in tax or customs legislation, wage policy, and support for public or private enterprises. With respect to continuous QTs, the authorities will report any non-observance to the IMF promptly. HAITI 62 INTERNATIONAL MONETARY FUND Attachment II. Table 4. Haiti: Summary o f Data to be Pr ovided Real Sector Public Finances Fiscal revenues (internal, external, other) Monthly Four weeks Expenditures on Cash Basis (wages and salaries, goods and services, external debt, current accounts) Monthly Four weeks Table of government financial transactions (TOFE) Monthly Two weeks Balance on current accounts and operation of projects Monthly One month Table Underlying TOFE, which enables the determination of checks in circulation and balance on investment project accounts Monthly One month Table on budget implementation with breakdown by ministry and other bodies and by type of expenditure Monthly One month Total monthly amount of expenditure executed by transfer letters Monthly One month Report on Revenue Collection of DGI (progress report) Monthly One month Tables of revenue collection of AGD (port activity indicators, analytical report of customs receipts on import) Monthly One month Table of revenue collected and authorized expenditure (TEREDA) Monthly One month Detailed revenue and expenditures of BMPAD Quarterly One month Report on social protection expenditures Quarterly One month Table on the implementation of the PSUGO program Quarterly One month Dashboard of the state electricity utility EDH showing monthly information on the production of electricity, making explicit the composition of production by independent electricity producers, EDH, and by region. Monthly One month EDH commercial data allowing the calculation of EDH's billing and collection rates Monthly One week EDH cash data including all revenues and all expenditures (operating, investment, and other) Monthly One month Information on any off-budget claims presented for payment Monthly One month Sector Data Series Periodicity Timeliness National accounts Annual Three months Quarterly economic indicators (economic cycle) Quarterly Two months Consumer price index (including breakdowns) Monthly Three weeks HAITI INTERNATIONAL MONETARY FUND 63 Attachment II. Table 4. Haiti: Summary of Data to be Provided (Continued) Monetary and Financial Data Exchange rate Daily One day Monetary base and sources thereof and currency in circulation. Weekly One week Aide Memoire Table containing, inter alia: (i) stock of BRH bonds; (ii) deposits at commercial banks; (iii) credit to private sector (in gourdes and U.S. dollars); (iv) details of inflows and outflows of foreign exchange reserves, including budget support received; (v) volume of foreign exchange transactions, including BRH sales and purchases; (vi) gross and net international reserves; (vii) net BRH credit to central government and the non-financial public sector; and stocks and interest rates of BRH bills. Monthly One week Tables showing, inter alia, the average and weighted interest rates on gourde and U.S. dollar- denominated deposits and credit, and the excess reserves in the banking system. Monthly One month Stock of unpaid off-budget central government liabilities Monthly One month Data on all fuel shipments per product giving the CIF import price, the full price structure (including stabilization margin) and import and consumption quantities. Data on actual collections for each month with a breakdown per product and tax type. Monthly One week Table of import prices of petroleum products, by arrival Monthly One month Table of imported quantities of petroleum products Monthly One month “Stabilization margin” table of the Directorate of the Tax Inspectorate Monthly One month “Petroleum product tax” table of the Directorate of the Tax Inspectorate Monthly One month Details of the stock of all government borrowing and debt securities (interest rate, maturity, creditor if known) Annual Three months Full amortization table of domestic and external government debt Annual Three months Statement of stocks and flows of repayment of suppliers’ credits and payment arrears Monthly One week Expenditures made for Food Shock Window program-related expenses Monthly One month Sector Data Series Periodicity Timeliness HAITI 64 INTERNATIONAL MONETARY FUND Attachment II. Table 4. Haiti: Summary of Data to be Provided (Concluded) Balance of Payments and IIP External Debt External debt report prepared by the BRH showing monthly disbursements; debt service, debt forgiveness and rescheduling, arrears, and debt stocks. Monthly One month Details of any external public debt and debt guaranteed by the State Monthly One month Data on stocks, accumulation, and repayment of external arrears Monthly Six weeks Table of complete amortization of external debt Annual Three months Monetary and financial statistics. Standardized reporting form, balance sheets of the Central Bank and other depository corporations. Monthly One month Detailed balance sheet of the central bank (table de passage) with individual account granularity. Monthly One month Information on the composition of gross and net international reserves (Reserve template when available). Monthly One month Banking supervision statistics and commercial indicators on commercial banks. Quarterly One month The calendar and planned placements of BRH gourde-denominated dollar-indexed bills, including in banks and nonbanks. Quarterly One month Audited financial statements of the BRH Annual Three months Balance of payments (first version) Quarterly Six weeks Revised balance of payments Quarterly Three months after the first reporting BRH FX cash flow table; quarterly projections through end of fiscal year. Quarterly One month International Investment Position (IIP) Annual Three months Sector Data Series Periodicity Timeliness