The IMF Board in an executive assessment, said “the crisis has taken a toll on the economy and the already vulnerable population: inflation exceeded 20 percent year-on-year in September, output is estimated to have contracted by an estimated 1.2 percent in fiscal year 2019 (ending September 30), and the exchange rate depreciated by 25 percent over the same period.”
The IMF pointed out that “as fiscal revenues have plummeted and the cost of energy subsidies increased, the fiscal deficit widened to 3.8 percent of GDP in FY2019 and domestic arrears rose sharply. The public debt-to-GDP ratio jumped from 40 percent to 47 percent over the fiscal year.”
The international lending organization said in the absence of any sustained implementation of good policies and comprehensive reforms, the outlook remains grim.
The IMF pointed out that should there be some political stabilization in 2020 without major political or economic reforms, growth would improve but remain negative this year and below 1.5 percent over the medium term. In addition, Inflation is expected to decline slightly before eventually falling to below 10 percent by 2025.
“Risks to the outlook are primarily on the downside but political stability could bring important upsides. A resolution of the current crisis, appointment of a new government committed and able to implement reforms, and return of support from the international community could lead to higher investment and potential growth,” the IMF said.
The Directors emphasized that well‑sequenced reform of the energy sector will be crucial for fiscal sustainability and higher growth and must be accompanied by clear communications and measures to offset the impact on vulnerable groups.
They encouraged the authorities to overhaul the management and performance of EDH, work with stakeholders to reduce electricity costs, improve the reliability and efficiency of energy supply, and lower the related fiscal burden.
“Broader structural reforms are needed to improve the economy’s competitiveness, including efforts to streamline regulations, remove infrastructure bottlenecks, strengthen property rights, and enhance governance. Building resilience to natural disasters is also a priority,” the IMF concluded.
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