Haiti's economy growth in 2012 was below expectations. Its GDP growth rate reached only 2.5%, below the projected 4.5%, according to a statement made by an International Monetary Fund (IMF) Mission Chief Boileau Loko, issued last month.

Below are excerpts of the statement issued by Boileau Loko, IMF Mission Chief.

“Preliminary data indicate that the gross domestic product (GDP) growth rate will come in at about 2.5 percent, below the program forecast of 4.5 percent. The lower-than-expected growth is partly due to the spring drought and Hurricane Isaac, which damaged crops, and a slow execution of public spending because of low absorption capacity.

Inflation has accelerated since end of June, reaching 6.8 percent in October, primarily because of rising food prices. The fiscal position deteriorated as a result of lower-than-projected revenue collection and disbursement of budget support, as well as a slightly higher level of current expenditure. Overall credit growth continues to rise while gross foreign reserves reached about six months of imports at end of November 2012.

“The government of Haiti and the mission have reached understandings ad referendum on the broad outlines of a macroeconomic and structural reform program covering the remainder of FY2012-13 (October 2012-September 2013). The authorities’ program will continue to focus on preserving macroeconomic stability, supporting economic recovery, and further reducing poverty.

“With reconstruction gathering speed against the backdrop of political stability and security, real economic growth could be within a 6-7 percent range in 2013. Mobilization of additional resources to fund capital expenditure and poverty reduction spending will depend on continued efforts to raise government revenue. This will be particularly important considering declining external aid and a more efficient management of government expenditures, including through lower subsidies to the national electricity company (EDH). An appropriate combination of budgetary, monetary, and foreign exchange policies should help maintain inflation at around 5 percent, and preserve a strong external position.

“The structural reform program will focus mainly on: (i) raising domestic revenue collection, primarily through a strengthening of the tax and customs administrations; (ii) improving public financial management and economic governance; (iii) strengthening institutional capacity to enhance public investment execution and efficiency; (iv) reinforcing liquidity management and monetary operations; and (v) accelerating reforms seeking to improve the business environment. Continued close coordination between the government and the donor community is important to ensure the success of the program."

A mission from the International Monetary Fund (IMF) headed by Mr. Boileau Loko visited Port-au-Prince from November 27-December 7, 2012 to conduct the discussions for the Article IV consultations for 2012, and the fifth review under the Extended Credit Facility (ECF) arrangement. The mission met with Prime Minister Laurent Lamothe; Minister of Economy and Finance Marie Carmelle Jean-Marie; Minister of Commerce and Industry Wilson Laleau; Minister of Agriculture Thomas Jacques; Minister Delegate responsible for human rights and combating extreme poverty Marie Carmèle Rose Anne Auguste; Governor of the Bank of the Republic of Haiti Charles Castel; Chair of the Senate Finance Commission Jocelerme Privert; other senior government officials, representatives of the banking sector, and development partners. Mrs. Ketleen Florestal, Advisor to the IMF Executive Director, participated in the policy discussions.

The Extended Credit Facility (ECF) has replaced the Poverty Reduction and Growth Facility (PRGF) as the Fund’s main tool for medium-term financial support to low-income countries by providing a higher level of access to financing, more concessional terms, enhanced flexibility in program design features, and more focused streamlined conditionality. Financing under the ECF currently carries a zero percent interest rate, with a grace period of 5½ years, and a final maturity of 10 years. The Fund reviews the level of interest rates for all concessional facilities every two years.