IMF Criticizes Haiti For Poor Economic Policies

Dow Jones News of 3 March 2003 and a comment on it from the Haiti list, 21 March 2003

WASHINGTON (Dow Jones), March 3—Haiti, the poorest nation in the Western Hemisphere, must dramatically improve management of its economy, the International Monetary Fund said Monday.

The IMF expressed deep concern about Haiti’s worsening economic and social conditions, and in particular, the widening of the fiscal deficit, the accumulation of external arrears, and further increases in poverty, the IMF said in a press summary of its annual Article IV review of the economy.

Haiti’s economy has worsened during the last two years, with rising deficits financed mainly by the central bank and through accumulation of arrears. International reserves held by the central bank have declined from efforts to support the currency, the gourde ($1=HTG41.00), which has also fallen in value.

Political difficulties have deterred the authorities from taking corrective measures aimed at stemming the loss in international reserves, containing inflation, and promoting growth, the IMF said. Top priorities for 2003 should be rebuilding central bank reserves, now at $45 million or two weeks of imports, and containing inflation.

The government needs to improve transparency and accountability of its spending, the IMF said. The IMF emphasized the importance of strengthening cash management by restricting the use of discretionary ministerial accounts.

The IMF also recommended enhanced banking and credit supervision, and action to privatize state-owned firms in the energy, telecommunications and transportation sectors.

What an ironic piece—IMF Criticizes Haiti for Poor Economic Policies, of 3/3/03.

While it is almost common knowledge that international financial aid regimes have pushed Haiti to accept global economic integration, a recent article by Anna Willard titled IMF: no clear proof globalization helps the poor, which was ran by Reuters on 3/17/02 and carried on the Forbes Magazine web-site, reported a startling IMF admission that undermines the fund’s own critique of and policies for Haiti made two weeks earlier.

In newly published research the fund admitted that, while theoretical models show that financial integration can increase economic growth in developing countries, in practice it is difficult to prove this link. The IMF study admitted that in other words, if financial integration has a positive effect on growth, there is as yet no clear and robust empirical proof that the effect is quantitatively significant. The IMF’s chief economist Kenneth Rogoff, described this conclusion as sobering. The IMF report found that a small group of developing countries have picked up the lion’s share of capital flows as financial links between countries have become more integrated.

It is hard for me not to notice that much of the democracratic movement in Haiti has suspected these sobering IMF conclusions long ago, and wanted to perhaps discover a more endogenous development pathway.

Stephen Ewen