Haiti - Economy : Diagnosis of the economy, perspectives, solutions and promises (PM speech)
Address by Prime Minister Jouthe :
"[...] Just a few months ago, the international financial institutions were talking about a resumption of global growth, the consolidation of value oaks and the strengthening of trade. Today, this optimism leaves more and more room for a wave of uncertainties that sweeps along with the duration of confinement and social distancing. In fact, the most optimistic forecasts forecast a contraction of 1% of world growth in 2020, mainly explained by a decline in the growth of large economies, notably the United States of America 3.8%, the European Union 8 % and the People's Republic of China 3%.
Haiti is unfortunately no exception to the rule. Dependent on a year 2019 particularly disturbed on the socio-political and economic level, the year 2020 even before the arrival ofcovid-19 promised to be extremely difficult. Growth forecasts were already around -0.4% after the 1.2% drop recorded in 2019. With the looming crisis, growth is expected to -4%.
This decline in growth is mainly due to :
1) A virtual collapse of the agricultural sector which would see its effective demand dropped considerably. This is by no means harmless given the reduction in the purchasing power of households following the closure of businesses in some cases or the compression of the wage bill in others. There are far fewer outlets for the sale of products. This implies, consequently, an inability for the farmers to reproduce their labor forces and to obtain the necessary inputs for the next campaign if the State does not intervene;
2) A collapse of the service sector due to the slowdown in trade, the closure of businesses in the hotel and restaurant sector, and finally the slowdown in the intermediation of financial institutions;
3) The anticipated decline in public investments in favor of urgent spending to support the health sector, households through cash transfers and dry rations and credit facilities for businesses in difficulty.
This drop in growth is also a consequence of a considerable drop in government revenues. The first 5 months of the year witnessed a 43% drop in imports and 10% in exports. This trend, which is expected to continue, will lead to a systematic reduction in the Turnover Tax (TCA) externally. Combined with the slowdown in business activity on the national territory, we can expect a tax burden of less than 10%.
This fairly low fiscal pressure would contrast with the enormous expenditure that the State must make to support the medical sector mainly, and mitigate the impacts on the economy and employment in general. It follows obviously an increase in the fiscal deficit which could reach by the end of the year nearly 6.4% of the GDP. This level of deficit could hamper efforts to stabilize the macroeconomic framework deployed by our financial institutions, in particular by exacerbating pressure on the exchange rate and, in turn, inflation, which could close this year at 23%. Such a level of inflation increases the risks of food insecurity and precariousness of the population.
To this must be added a possible reduction in private transfers without compensation, resulting from a slowdown in economic activity in the host countries of our diaspora. This will directly impact the balance of the balance of payments and the constitution of reserve requirements which, at the end of March, amounted to only $ 599 million.
Despite this troubled and particularly trying situation, the government team stands firm at the helm, and works tirelessly with Haiti's international partners to mitigate the inevitable negative externalities associated with the pandemic.
As far as international partners are concerned, we are still waiting for the promises of the BIO to materialize, in the context of the fight against covid-19. In fact, the first orders, particularly those for $ 18 million in health equipment, were made using scarce resources from the Treasury. The Haitian state will continue to take care of its people during these difficult times. The IMF recently transferred just over $ 100 million to the BRH as support for rebalancing the balance of payments. Discussions are underway with the IMF to consider relaxing certain criteria for obtaining donor funding in order to:
We would like to strongly thank the International Monetary Fund (IMF) for this support as well as all the American authorities who had accompanied us in this process. An additional contribution of seventy-five million US dollars was also obtained from Usaid, in particular to enable the achievement of sustainable development objectives 1, 2,3 and 4.
Haiti achieves only 3 out of 6 points in the World Bank's budget and financial management quality index. Therefore, additional efforts should be made to improve the management and transparency of public funds. In this sense, we make the solemn commitment to the Haitian people and our international partners to demonstrate the greatest transparency in the management of public funds n general and dan management of funds allocated to covid-19 in particular by modernizing the monitoring system and communicating the results of the use of public funds. It is in these moments of great distress and hardship that women and statesmen must make history, and we are determined to do so.
With particular regard to the funds allocated to the fight against the pandemic, we undertake to publish each month a detailed statement of expenditure and to audit the use of these funds in the long term. Moreover, to ensure that the social programs financed from public funds fully benefit the most needy, we have set up the Social Protection and Promotion Program in order to not only carry out proper targeting of most vulnerable populations, but also in order to formalize the cash transfer circuit and facilitate financial integration through Fintech. The tools of this program were used to launch the distribution of dry rations to the vulnerable population.
Finally, we pledge to also initiate a gradual recovery in public finance in order to gradually eliminate monetary financing in order to curb inflation and the volatility of the exchange rate.
To do this, we have made significant adjustments in the methods of budget preparation as well as in the objectives now pursued:
In terms of resources, we offer, among other things:
The road to development is very difficult and very steep. At each crossroads, some trials are more difficult than the other. However, it is the nature of great women and great men to respond to the problems that plague humanity. We must keep our eyes fixed on the objective, never deviate. Because we have the most sacred mission that exists: to allow each woman and each man living on this earth to find Peace, serenity and bliss."