Haiti - Current economic position and prospects

r RETURN TOI I RESTRICTED I~EPORTSA E < Report No. WH- 151 f_ 2t~E I ~Ii 'WY>'i~V This report was prepared for use within the Bank and its affiliated organizations. They do no, accept responsibility for its accuracy or completeness. The report may not bepublished nor may it be quoted as representing their views.! INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT IN\TERNATIONAL DEVELOPMENT ASSOCIATION CURRENT ECONOMIC POSITION AND PROSPECTS OF HAITI August 9, 1965 Western Hemisphere Department  CURRENCY EQUIVALENT U. S. $1 = 5 Gourdes There are n.o foreign. pa yen...tS restriction.s of any kind. Throughout the report, years refer to fiscal years (October 1 to September 30 of the year shown), unless otherwise noted.  *1H rl H C1 r1 rJl HI'' r7:1 4~~~~~~-1U 5-4~~~~~~~~~~~~~~~~~~~~~~~- i-I ,,-l~~~~~~~~~~~- r- u C r:~~~~~~~~~~~~~~~~~~~~~- E- E- rr' C , q CH F-i~~~~~~~~~~~~~~~~( t> F HI~~~~~- LO [r.- (U) If r[- U [jz C) H' HIFrl , E-~~~~~~~~~~~~~~~~~~~~F- cJ ~~ H' F--' ! ^ U) 0. (D U C r ~-4 C) H U) -H Q- :, 0) ifl rI * - ~ - F- 0D /) F- F-' Q- ;W -D E - HI U) ~ . U) --- . *r Fi ~ ~ ~ H HI' HI >~ i fr ur~ ~~H HI HIH<ut ; ~a, > ._D > '< 1 kHI  I. BASIC DATA * Area: 10-,r7 sqnre milies Ponnht3tion (estt:ima+e l963): LL A Fl i e4 on Rate of growth 1950-1963 2el% (estimate) Population dtelnsity per sq. mile: 4210 Population density per sq. mile of arable landi About 3000 Gross national _roduct Rate of growth 1950-1960: less than 2% per year recent years- probably declining Per capita 1964: US$66-70 Gross domestic product 1964: iboult US$300 million Sectc-r coTrrsition: Aprirnc tuirne 50G' (Anprcrx) M-lanufacturing 12% (Approx.) Percent of GDP at market prices 1963 1950-60 Gross investmrent 6 (1960) 9 flrrnss s , a i5 Balance of? payments current aec'-nt Adef,c it + 1.-3. , ntn / i Investment inicome payments 2 2 PubliC Sector tax revr,ues 15n.a. ReSource gap as /<0 of- investrale nt 11 Mrone,y and creUVdiLi, The presernt- exch=ange rate nas been maintained since 1919. Relationshlip to large monetary or c-Lstoms area: None Annual rate of change Sept. 1964 1960-1964 Total money supply 104 million gourdes 2.5% Time and savings deposits 33 " 3.5% Commercial bank credit to private sector 26 t r1 7o0% Other lendling to private sector 37 " 4% Rate of change in prices no significant changes (1957-64) * All years shcwn are fiscal years, from October I to September 30 of vep- shcwr  Public sector operations (million gourdes) Annual rate of change 1964 1960 - 1964 Government current receipts 187 2.5% Government expenditures 181 1.5% Surplus 5 Government capital expenditures n.a. n.a. Public investment expenditures About 8 (est.) Declirdng Total external assistance to public Was 45 million in sector(excl.malaria & food grants) none 1960 External public lebt (US $ million) 1960 1964 Total debt 36 35 Total annua:l. debt service 1.0 1.6 Debt service ratio (%0 of exports) 2.6% 3.8, Balance of payments (US $ million) Anr.ua1 rate of change 1964 1951 -- 1963 Total exports 42 -2% Tntal imports (c.i - f-41 -1% Net current account balance 0 Average Co.-modi ity concentat ior. of e s (coffee) 67% 44% Glross frign -4 hg rslve n or 2 monthst or 1 month of imports imports Ex&Lter-nal financial assistance (US $> Im"L_.LU1or Average i955-u0 1964 Commitments Disbursements Commitments Disbursemer,-', Soft assistance 7.0 6.o 5.0 3.2 Hard assistance 2,0 1.0 - - II. IBRD AND IDA OPERATIONS Past operations Amount committed Amount disburse(d IBRD $ 2.6 million $ 2.6 million IDA $ 0.35 $ 0.35 n TOTAL t 2.95 million $ 2.95 million  - '-IJl I1,11 ;-1 1 - f J~~~~~~~~~~~~~1i,jmq -p 11] IjI.JIi - ' A ,1. |~~AL !04ii i T;ftiii, 9 , ;1 | j~~~~~~~~~, =169 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~1. f I1I- IIIvI 'l ..- 'NIIII., 1' J3;e 9 t)it 0 X o | 1 | MI Hi~~~~41 ~~~~~ 9 >5 E  SUIARY AND CONCLUSIONS 1. Haiti is the poorest and most densely populated country in the T.t__I___ TT__j ' __1 _ - C ' _- - . 1_ *. I n -j.1- _ _ _ nn - _ * _-- _ - _ .1 _ _ w - n *~ -_ _ Wiestern Hemsphere. oirice the mid-fifties, v neii coiiee prices begEan Lal 2iig, the economyr has made little progress and per capita income has fallene 2. In the last three years, the economic difficulties of Haiti have been aggravateci by political difficulties and their results, in particular the interruption of most U. S. assistance and the decline of tourism. Also, hurricanes Flora in October 1963 and Cleo in August 1964 destroyed a substantia' proportion of the available coffee crop, and thereby prevented E7aiti from fully- taking advantage of the higher coffee prices prevailing since the end of 1963. 3. Agricultural production, almost entirely dependent on small peasant holdings, has probably fallen in recent years with the spread of erosion (helped by the burgeoning population of goats). An autonomous independently-managed agency, the Institute for Agricultural and Industrial Development, has bcgun a small but well-conceived program of technical assistance and credit to farmers: the program has already had a noticeable effect on cotton production and should, if vigorously continued, begin to produce a noticeable effect within a couple of years on production of food-stuffs. Haiti's manufacturing sector is less small than might be expected. Despite many difficulties, there has been some expansion of manufacturing capacity in the last three years, particularly in labour intensive industries, which deserve to be encouraged, since Haiti apDears to have the lowest wage costs in the Caribbean area and among the lowest in the world. 4. The poor condition of Haiti's roads and electric power supply is a definit.p nbs-t2cl to invetmen*. anrd t.hp growtth of production. Feasiblit;y studies financed by outside agencies are available for some projects in these sectors, bhut foreign fin ncial and technical assistance w;'lr be needed to -r, them out, 5. The total revenue burden of Haiti amounts to about 15% of GDP, a fil high lve fora a conr ofl+s povervy. The finanoi.aly authorities.Va.' doA not control the whole of this revenue, although some effort has been made with the help of t-he I'T-L to capture a greater proportion of reve.nues for bude-tary and related expenditures. The authorities have in the last three years made an effort to adjust expenditures to the virtual interruption of foreignL a:,sist- ance. This adjustment was initially difficult, however, and required some deficit financing fromL the Naional Bankr, which contributed to the drop in foreign exchange reserves over the period. In 1964, a small budgetary surplus was actually generated. At the same time, the authorities have in the last three years managed to carry out a few domestically-financed investment pro- jects, of which the largest is a jet airport put into operation in January 196,. 6. Haitian exports have in recent years become less dependent on coffee, largely as a result of foreign investments in mining and meat productionl for export, and in 1962-64 the level of export earnings was on average higher than in the previous years, although still laoer than in the early and mid-fifties.  Nevert-helo,ss iTh T Cmell 1cap it +.1 nfl Hai - tIi +A has ben able ~p to R1rinmt. only a very low level of imports, with minimal imports of capital goods. 7. The fiscal and balance of payments situation has become extremely diffic-ult in fiscal year- 1965, lar-gely because the abno.rmlally low coffee crop, which coincided with a pronounced fall in the world price of sugar and sisal. Gross forein reserves have fallen to extremely low levels. At the saume stie, a loss of control over a reduced level of customs revenue has made necessary a drastic reduction in government expenditures. O. TThe fiscal and balance of payments situation should improve in 1966 with a better coffee crop. Forecasts of exports beyond 1966 are difficult, although it is likely that the reduction in sisal exports will be made up by increased exports of minerals and minor products. Since the growth of tlhe economy is dependent on an increase in foreign exchange income, it is unlikely that Haiti can look forward to any substantial degree of economic growth in the foreseeable future without some change in the present situation of tcurism and foreign assistance. 9. Haiti's external debt repayable in foreign currency totals $35 million and includes a number of obligations for uncompleted projects which have pro- duced only relatively small benefits to the economy. Service on the external debt has been irregular in the last few years, but in the last year the author- ities have renegotiated service payments to creditors to whom Haiti was in arrears. An agreement with the Export-Import Bank, the major creditor, should be signed shortly. As part of their effort to regularize payments, the author- ities in September 1963 established a Special Fund for Public Debt Service, which is achinistered by the National Bank and is fed by pre-assigned revenues. The amounts accruing to the Fund should be sufficient to meet service on Haiti',' present external debt. including the new navments schedule now being renegotia- ted with the Export-Import Bank, and leave some funds for the service of interne debt- Barring some calamity such ns the hurrir4nP_.q of 196)Q mln 1965j aiti should in the next feox years be able to meet its external debt service, which amounts to about. $ million in 19q anrd rises ton $1 milVlimn by 1970 (or aboui 3.7% of 1964 export earnings). This is approximately the level of service which Habqiti nntmAlly mp+. in 1964.) ln tSm;+4 nnvn"^+ 'km ux;nolowS+.zrSa -P^" pnn7rDn~+4nnell 1^nna: how-z ever, a moderate but well-placed amount of external assistance on extended terms coi-l' dJ ;4 -ade alble under apr-opriate spelli codtos ..aterially.,. prove the proppects for certain areas of the economy. The most needed imDrove- mentfl~ .I.~.0.&.L.L A J.Q in faci le is [oads, anJUc L.& alyls - e.L pV U. L.', JU= lity studies undertaken by foreign consultants exist for important profcts in Ubt Ul o If t.LL wit; Ve-,wULIII!LiU., S.UJLUoVed .L l tL LULLU l,cj.i J perfULiUAance of recent years continues, a sufficient amount of external assistance for such projects would pXrobably' lead to a resumption of economic gruwth.  TN-ROnUlCJTTION 1. Haiti is a desperately poor country. It is the poorest country in the 1.- s-estr- H-mishere and one ofP the poorest ln +he world. Whiwile r.ost other less developed countries are growing, Haiti is becoming poorer. 2. Ever since its independence from France in 180,, Haiti has to a sur- prising degree remained i,,,une to out side cultura-1 -; luences desp- .te + 6L