Staff-monitored programs (SMPs) are informal agreements between country authorities and IMF staff to monitor the authorities’ economic program. As such, they do not imply IMF Executive Board approval (with the exception of PMCs under the Heavily Indebted Poor Countries process). SMP staff reports are forwarded to the Board for information.
- The Staff-Monitored Program (SMP) aims to help the government restore macroeconomic stability and reduce inflation, a key objective given the heavy burden of high inflation on the poor.
- Efforts to improve governance in the public sector, mobilize domestic revenue, build capacity and boost social spending are important elements of the SMP.
- The program includes realistic measures tailored to Haiti’s fragility and, if implemented, could pave the way for an IMF-supported upper credit tranche program.
Washington, DC: The management of the International Monetary Fund (IMF) approved a staff-monitored program (SMP) for Haiti after discussions from March to May 2022. The SMP was approved on June 17, 2022 and will run until May 31, 2023 The SMP was designed by IMF staff and the Haitian authorities, keeping in mind Haiti’s fragility and capacity constraints while supporting the authorities’ economic policy objectives. With timely program implementation, the SMP would help the authorities establish a track record of policy implementation, possibly paving the way for an IMF-supported upper credit tranche program.
SMPs are arrangements between national authorities and the IMF to monitor the implementation of the authorities’ economic program, but are not accompanied by financial assistance.
In recent years, Haiti has experienced a protracted political crisis and the assassination of its president, lockdowns, the global pandemic, an upsurge in gang-related violence, and an earthquake. These shocks have weakened economic and institutional frameworks and undermined administrative capacity, while socio-economic and security conditions have deteriorated to a distressing level.
After three years of economic contraction, IMF staff expects growth to return to positive territory in FY2022, supported by increased investment, and to recover to 1.4 percent in FY2022. coming with continued flows of remittances amid modest improvements in socio-political stability.
In this challenging environment, the authorities pledged to implement policies that would begin to restore macroeconomic stability and growth, strengthen governance, and begin to reduce poverty. With a strong focus on governance, the SMP aims to increase accountability and strengthen ownership of the reform agenda across the country, with emphasis on strengthening public financial management, revenue administration, transparency and anti-corruption measures.
The SMP also aims to increase domestic revenues, which have collapsed in recent years under the pressure of social unrest, collection problems and the security crisis. The authorities have pledged to implement a series of administrative measures, including strengthening the use of the tax identification number and cleaning up taxpayers’ portfolios, revising special tax regimes in a new Tax Code, in particular by removing certain exemptions, and the finalization and publication of the new Tax Code, Customs Code and Customs Tariff. This will simplify the tax system, making it more transparent and therefore less prone to governance abuses.
Central bank financing of the fiscal deficit fueled inflation, putting pressure on the exchange rate and leading to a vicious cycle of rising fuel subsidy costs, additional monetary financing of the deficit, and rising inflation . The program thus aims to increase resources for productive expenditure and reduce the monetary financing of the budget deficit to reduce inflation. This is essential for the population given the heavy burden imposed on the poor by the sharp increase in prices.
Fuel subsidies have absorbed at least a third of domestic revenue and crowded out productive spending on investment, health and education. They are also highly inequitable, with over 90% of benefits going to the top 10-20% of the income scale in Haiti. With this in mind, the authorities plan to prepare the ground to eventually tackle this problem. As a first step, in April they launched several social programs under the Emergency Program targeting groups affected by earlier fuel price adjustments.
The Haitian authorities will also strengthen the monetary policy framework and limit foreign exchange interventions to smooth excessive volatility in order to gradually eliminate the gap with the parallel market. Key steps are also planned to improve the financial regulatory framework and update anti-money laundering (AML/CFT) regulations to meet international standards.
During this SMP, IMF staff will work closely with the authorities to support the implementation of their program and help them secure public support. Indeed, most elements of the authorities’ program are underpinned by ongoing IMF technical assistance and capacity building. The Fund will also continue to work in close coordination with Haiti’s other development partners to leverage efforts towards common goals. The first revision of the SMP is scheduled for September. Satisfactory performance under the SMP could lead to an IMF-supported program under a multi-year arrangement that would require IMF Executive Board approval. SMPs are only subject to formal review by IMF management.