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Haiti - Economy : Strong increase in public spending compared to revenue
23/04/2018 08:37:07

Haiti - Economy : Strong increase in public spending compared to revenue
The Note on Monetary Policy of the Bank of the Republic of Haiti (BRH) analyzes the recent developments in the Haitian economy. Its purpose is to provide information on the direction of the monetary policy and the latest decisions taken by the authorities to identify short-term prospects for the national economy.

Extract from the BRH Note :

In the second quarter of the fiscal year 2017-2018 at the national level, the BRH noted a slowdown in the rate of increase in inflation despite the relatively high level of monetary financing resulting from the sharp increase in public spending compared to State revenue.

At the external sector level, data available for the beginning of the second quarter of fiscal year 2018 indicate a deterioration in the trade balance, an increase in private transfers received from abroad. For the first four months of the year, the trade deficit reached $ 1.03 billion, an increase of 26.78% over the same period last year. This increase in the trade deficit is due to higher imports than exports. For the period under review, imports grew by 24.06% to US $ 1.36 billion and exports grew by 16.24% to US $ 350.50 million.

In addition, during the first four months of the fiscal year, the pressures of the demand for US currency led to a 2.49% depreciation of the gourde, on March 29 compared to December 29, 2017, to bring the exchange rate 65,2715 gourdes.

With respect to public finances, as at March 28, 2018, the situation is marked by a simultaneous decline in government revenues and public expenditures compared to the first quarter of 2016-17. Tax revenues totaled 19,074.12 million Gourdes (MG), which corresponds to a decrease of about 11.79% compared to the first quarter. Expenditure fell by 23.92% to 23,543.93 MG.

Cumulative revenues from October 2017 to March 28, 2018 totaled 40,697.49 MG, or a collection rate of 88.50% compared to the budget forecast for the first 6 months of the 2017-2018 fiscal year. The cumulative expenses during the same period amounted to 54,488.88 MG (111.7%).

The imbalance between the level of accumulated public revenues and that of the cumulative public expenditure induced a monetary financing of 8,959.64 MG [nearly 9 billion Gourdes] as of March 28, 2018 against a financing of 5,874,77 MG in the first quarter.

Despite the poor performance of public finances, the monetary authorities were able to contain the growth of monetary aggregates by the systematic recovery of idle liquidity through the goods of the BRH. Indeed, despite a loan of 8,959.64 MG, the monetary base in the narrow sense decreased by 0.53% in the second quarter against a rise of 9.47% from October to December 2017.

The short-term outlook points to an improvement in macroeconomic conditions under certain conditions. Indeed, an increase in the local food supply could be observed, considering the forecasts of a good spring harvest under the effect of public investments in the agricultural sector. At the same time, the increase in unrequited private transfers, generally observed during the month of March, is likely to strengthen the foreign exchange supply and mitigate the upward pressure on the exchange rate. Prospects for improving local food supply should also have positive effects on price developments. The year-over-year inflation forecast for BRH's technical services is expected to be 13.2% for March, 13.2% for April and 12.7% for May 2018. These forecasts are based on the past evolution of the inflation rate and do not take into account the exogenous shocks likely to affect the economy.

However, the general macroeconomic framework will be strongly influenced by the capacity of the State to mobilize resources to meet its budgetary obligations as well as by the evolution of the socio-political climate. These factors will be key elements in establishing a calm business climate, which is necessary for the recovery of economic activity and for price and exchange rate stability.

Download the full BRH note (PDF) : https://www.haitilibre.com/docs/note_polmon2t18.pdf

HL/ HaitiLibre



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