June 16, 2023
- Management of the International Monetary Fund (IMF) approved on May 30, 2023 the second and final review of Haiti’s Staff-Monitored Program (SMP). The SMP has helped the government restore macroeconomic stability and strengthen governance and fiscal transparency.
- The SMP has played an important role in advancing decisive governance reforms to enhance accountability through stronger public finance management, revenue administration, data provision, and anti-corruption measures.
- The program has been designed to take into account Haiti’s fragility and capacity constraints and has helped the authorities build a track record of policy implementation.
Management of the International Monetary Fund (IMF) approved on May 30, 2023 the Second and Final review of the Staff-Monitored Program (SMP) which started in June 2022. The SMP was designed to support the authorities’ economic policy objectives and build a track record of reform implementation. In line with the Fund’s Strategy for Fragile and Conflict-Affected States, staff also coordinated closely with Haiti’s main development partners.
Haiti faces a challenging macroeconomic outlook amid a humanitarian crisis. The country has been hit hard by economic spillovers from Russia’s invasion of Ukraine, with food price inflation triggering a hunger crisis. This global shock has been compounded by a dire security situation, which has heightened the economy’s fragility, hampered activity, and generated supply-side bottlenecks which have further fueled inflation. External shocks and the volatility of the security situation have resulted in a macroeconomic environment that has been worse than had been envisaged at the time of the program’s approval by IMF management in June 2022.
Despite the more challenging domestic and external environment, the authorities have adopted important policy reforms, anchored by the SMP, and displayed a firm commitment throughout. The reforms cover governance and anti-corruption, tax and revenue administration, public finance management (including budget preparation and execution), central bank autonomy and governance, and anti-money laundering. Data provision has also improved during the course of the program. All these reforms have enhanced transparency in public spending and in the financial sector and helped maintain macroeconomic stability. Despite the delicate political situation, thanks to a highly inclusive consultative process, the authorities have taken the necessary ownership and earned public support for the SMP through the high-level Program Monitoring Committee.
The Haitian authorities had adopted a budget for FY2023 that is consistent with agreed targets under the SMP and in the context of a medium-term fiscal framework. Implementation of the budget has been to date consistent with the objective of the SMP of reducing monetary financing of the budget deficit to levels that staff assesses to be non-inflationary. The authorities are striving to ensure that a meaningful budget allocation is used to protect the most vulnerable and are implementing public financial management systems to monitor the use of public funds.
In line with the reforms under the SMP, the authorities also took measures aimed at strengthening revenue administration and boosting revenue mobilization over time. These include the approval of a new tax code and tax procedures code, publication of all codes and tariffs related to customs, adoption of unique Tax Identification Numbers (TINs), publication of the TIN database and of the file of active taxpayers, and stronger oversight of the revenue agency since August 2022. Notably, the new tax code—a primer in the country’s history—entails the rationalization and simplification of the personal income tax and corporate income tax, including through the broadening of the tax base and elimination of many exemptions. Thanks mainly to an improvement of revenue administration, customs revenue has reached a historic high in recent months, although from a low base.
There has been significant progress on governance issues, and corruption and broader financial integrity risks need to continue to be effectively addressed. The authorities have taken measures to strengthen accountability in the use of public resources and have boosted the transparency of public procurement for emergency resources. The recent finalization of revisions to the Central Bank and to the AML/CFT legal frameworks are also critical for improving governance and transparency. They have also recently made a formal request for a Fund Governance Diagnostic, which is a very welcome development.
The Haitian authorities have expressed interest in another SMP, which should help maintain macroeconomic stability and lock in and sustain recent approved reforms to further enhance economic resilience and governance.