Address at the World Trade Center of New Orleans

I am pleased to have this opportunity to present a brief overview of the economic situation in Haiti. Unfortunately, the information that you hear about our country is often dominated by a political situation that is complicated, chaotic, and somewhat disheartening. This situation, punctuated with repeated crises, is devastating to the image of our country, and hides an equally entrenched truth – that of a country undergoing profound transformation and solidly engaged on its road of reform and change. Rarely do we have forums allowing us to make the unknown aspects of our country public. I hope that we are able to attract your interest.

 One has a better sense of the current macro-economic situation in Haiti and the extent of the change that has taken place in this arena when you remember the extreme state of crisis the economy was in when constitutional order returned in 1994. At that point there was inflation exceeding 30%; a rapidly decreasing exchange rate; a drastic drop in production; an extreme weakening of the infrastructure; and general weakness of the Administration. Ongoing efforts over the last 5 years have reversed this economic and social decline, in spite of the difficult political context in which we are trying, at the same time, to build a democratic state. The initial results of this sometimes-difficult reform policy undertaken by the government can be felt today, and they allow us to look toward the future with more ambition and more optimism.

 1. The Reform Program

While waiting for a resolution to the political crisis and the negotiation of a real reform program with medium-term financial support from our partners, the government continues with the implementation of an economic reform program with the assistance of the International Monetary Fund. The terms of this program are renegotiated on an annual basis and aim to both assure macro-economic stability and to undertake the structural reforms in the context of the existing legal framework. The most recent program cycle called for a decrease in the rate of inflation to 12% (versus the 17% experienced the previous year), reaching a 2% growth rate, and sustaining the foreign exchange reserves at a level of US $185 million. For the current cycle, in spite of the negative effects of Hurricane Georges, the program aimed for a 2% rate of growth, an inflation rate of approximately 8-10% and a limitation of the loss of the official net international reserves at $10 million. The principal reforms sought are the launching of an administrative reform program which, in particular, undertakes a civil service downsizing, the modernization of the principal public enterprises, and the reform of the financial sector.

 II. The results

 First, the public finances program. Rigorous management of spending and collection efforts undertaken over the last years have allowed for an important reduction of the budget deficit, which went from 2.5% of the GNP in 1996 to 1.3% at the end of the 1997/1998 fiscal cycle. In addition there was a limit on having to seek credit from the Central Bank in spite of a drastic reduction of external aid coming into the country. With equally prudent monetary and budgetary policies, the exchange rate for the gourde, measured in the annual shift at the end of April 1999, grew 9% in real terms against the dollar. The nominal exchange rate has remained basically stable over the course of the last three years, while the rate of inflation has slowed down considerably, with a lower than expected rate of 8.3% at the end of the phase. The real appreciation of the national currency has not, however, had a negative effect on the external competitiveness of the Haitian economy. Exports have actually increased over the course of the last 3 years, with a growth rate of 31% from October 1998 to April 1999.

 In spite of the harmful effects of Hurricane Georges, the objective of having single digit inflation will be met once again this year, validating the structural methods in controlling the program. At the same time, the international exchange reserves continue to be restored, passing $200 million today, despite significant balance of payments support from traditional donors.

 The rationalization of public spending (notably the control of the public payroll which went from 53% of total expenditures in 1997 to 46% and 43% respectively in 1998 and 1999) as well as the increase in internal revenue, have allowed the government to undertake a large public investment program using self-financing or with the support of its principal financial partners. Notably, this includes the construction and/or rehabilitation of agricultural, road, sanitation, and school infrastructures. Nearly $50 million was invested over the course of the 1997/1998 cycle, an increase of 40%. To date, investment in equipment, construction and rehabilitation work is in the neighborhood of $60 million.

 Together, all of these efforts allowed for 3.1% growth in real terms of the Haitian economy during the last cycle, surpassing by far the stated objectives. With the dual influences of favorable rains and important investments undertaken by the Haitian State in the area of land tenure reforms, the agricultural sector has, for the first time in over a decade, experienced a real, positive growth. For its part, the building and public works sector continues to move forward at a stable pace, pulling in its wake diverse secondary industries such as the extractive industry. The most striking development of these last two years remains the excellent performance of the assembly industries, which have been the basis for the strong increase in exports during the last cycle.

 These efforts will be maintained by the Public Treasury in order to create a framework in which private investment can be attracted. This is an indispensable component to the whole if we are to achieve the targeted economic growth.

 Important progress has been made over the last 3 years on the structural reform plan. The most striking elements of the administrative reform program that have been undertaken are: the departure of some 9,000 government workers; the recent implementation of a harmonized salary scale and the granting of new social benefits while awaiting the implementation of an incentive-based salary structure; and the launching of a large decentralization program, allowing for better geographic reach of services offered by the Administration. The Modernization of Public Enterprises program is also underway. The assets of 2 State enterprises, the cement plant and the flour mill, have been opened to private investors; the restructuring of the National Credit Bank is on track with the implementation of a program of recovery of outstanding and unpaid debts and reduction of employees starting last month. The other modernization portfolios are advancing on the technical front, and will be the object of a specific presentation to follow.

 In the financial sector, during the 1996/1997 cycle, monetary policy that had long been driven only by the necessary reserve requirements was improved with a new instrument that allowed for indirect control of banking liquidity. The development of this new instrument was effected by the emission of one-year bonds by the Central Bank. The combined effect of the new monetary regulation policy and the stabilization of public finances are the appreciable reduction of guiding interest rates which have dropped at least 13 points between 1996 and 1999.

 Other reforms are in the area of overall strengthening of bank supervision and of prudential rules, through the adoption of the norms decreed by the Basle Committee. In order to allow two public commercial banks to get in line with the new rules adopted by the Central Bank (specifically those relating to sufficient self-financing and the concentration of credit risk) the Public Treasury contributed to the consolidation of their financial situation through the discharge, in the form of Treasury Bonds, of old debts to the State.

 This overview is aimed at showing you how far Haiti is from the stagnant image which may be seen from the outside. Economic stability, basic infrastructure, and the improvement of the regulatory framework are the sine qua non conditions for the long-term development of our country. We know this, and in spite of the obstacles are working towards it daily. With the upcoming elections that should put an end to the political crisis and settle our institutions, we hope to greet the new millennium with all of the tools in hand to irrevocably secure the reform process, and allow Haiti to make the most of its human resources and its great potential in tourism, agriculture, and industry.