Caribbean & Central America - July 2022

Expanded activity by Haiti's criminal gangs is adding to the country's economic problems, marked by rising food insecurity.

Addressing the United Nations (UN) Economic and Social Council (Ecosoc) in June, deputy secretary-general Amina Mohammed listed Haiti as one of the countries “of very high concern” among the world's major “hunger hotspots”.  Canada's representative at the UN, Bob Rae, said that the situation facing Haiti's population was worsening due to poor agricultural harvests, gang violence, and corruption. The Inter-American Development Bank (IDB) said it was working on a US$60m cash transfer programme to support vulnerable populations in Haiti and Honduras. Rose-May Guignard, representing NGOs active in the country, said that the gangs were disrupting market, educational, and health systems. As a result of gang violence, metropolitan areas were witnessing massive displacements of population.

Haiti’s economy has taken a severe battering over the last two years, suffering three major shocks. Starting in March 2020 the coronavirus (Covid-19) pandemic caused major harm. With up to 60% of the 11m-plus population displaying vaccine hesitancy, the virus continues to spread and cause damage. In July last year President Jovenel Moïse (2017-2021) was assassinated, ushering in a still unresolved political crisis. Haiti remains under a caretaker administration with high levels of political uncertainty. Then, in August 2021, a magnitude 7.2 earthquake hit Haiti, killing over 2,200 people, and causing an estimated US$1.6bn in losses (equivalent to 9.6% of GDP). Not surprisingly, GDP is estimated to have contracted for three fiscal years in succession: down by 1.7% in 2018/2019, by 3.3% in 2019/2020, and by 1.8% in 2020/2021. A further fall in 2021/2022 (the year to end-September 2022) is also expected.

These negative shocks came in what remains one of the poorest countries in the Western Hemisphere. Haitian per capital GDP stood at US$1,272 in 2020 on World Bank (WB) figures, compared with the Latin America and Caribbean regional average of US$7,243 in 2020. Meanwhile 59% of the population lives on less than US$2 a day while the majority of the population works in the informal sector. Half the country’s children do not attend school while the latest UN figures estimate that at least 4.5m people are forecast to need urgent food assistance this year.

In late June Haiti’s central bank (BRH) said that the quarter ending last March (second quarter of the 2021-2022 fiscal year) had been marked by rising international inflation and uncertainties over the war in Ukraine. The country’s twin deficits - on the domestic budget and on the current account - had worsened. Higher global commodity prices had raised import costs. Poor harvests and production bottlenecks had increased domestic inflation and weakened the currency. Annual inflation reached 26.7% in April, the highest in 19 years.

In the first five months of fiscal year 2022 (running to end-February) the trade deficit widened with exports of US$472.4m and imports of US$1.932bn. Government spending via the Treasury was G143.378bn (US$1.24bn), of which 40% was raised in taxes and 60% from borrowing, an unsustainable fiscal formula. The BRH said the economic outlook was “mixed”. Higher rainfall might boost agriculture and lift the economy but shortages of inputs such as fertilisers would have the opposite effect, deteriorating security conditions would hit production, increase imports, and weaken the currency.

A more dramatic commentary came from Wilhelm Lemke, president of local private sector group, Association des Industries d’Haïti (ADIH), who in June said that the Haitian government “is helplessly watching the decay of all public institutions. Everything is out of control.” He highlighted the government's “progressive loss of control” over parts of the country, a custom workers’ strike which had disrupted trade and triggered shortages, and a wave of kidnappings. He added that the government should take adequate measures to fight insecurity, to restore confidence among the population, “but also to allow businesses, which provide jobs, to ensure the continuity of their operations”. To date, gang wars are estimated to have displaced at least 17,000 people.

UN Special Representative for Haiti, Helen La Lime, explained the rising gang problem. She said kidnappings were running at an average of seven a day. Victims included schoolchildren and UN staff (one UN staff member had been killed in crossfire between rival gangs). “The pervasive and deepening sense of insecurity, exacerbated by the [national police’s] seeming inability to address the situation and the manifest impunity with which criminal acts are being committed, is dangerously fraying the rule of law,” she said.

The police force says that it has arrested hundreds of gang members and killed more than 120, but that with 12,800 officers in a country of over 11m it remains understaffed and under-resourced. La Lime said that gangs are creating a “state of terror” in Haiti, and she blamed the ongoing instability on what she called a “prolonged institutional vacuum.”

• IMF approves SMP for Haiti

The International Monetary Fund (IMF) has approved a staff monitored programme (SMP) with the Haitian government. SMPs are informal agreements between national authorities and IMF staff to monitor the authorities’ economic programme. According to the IMF, the SMP – which does not include financial assistance – aims to help the government restore macroeconomic stability and lower inflation. It adds that the programme comprises “realistic measures suited to Haiti’s fragility and, if implemented, could pave the way to an upper credit tranche IMF-supported programme”. It notes that the authorities have committed to implementing a series of administrative measures, including measures to simplify the tax system, raise resources for productive spending, and reduce monetary financing of the fiscal deficit.