Haiti

Haiti’s low fuel prices unfairly benefit the rich and need to be raised, IMF says

People walk in the street on the second day of a nationwide, general strike in Port-au-Prince, Haiti, early Tuesday, July 10, 2018. While some opposition leaders have called off the strike for Tuesday, most businesses remained closed following days of violent protests against a 50 percent fuel hike, part of a plan endorsed by the IMF to modernize the economy, and calls for the resignation of President Jovenel Moise, whose government suspended the hike. (AP Photo/Dieu Nalio Chery)
People walk in the street on the second day of a nationwide, general strike in Port-au-Prince, Haiti, early Tuesday, July 10, 2018. While some opposition leaders have called off the strike for Tuesday, most businesses remained closed following days of violent protests against a 50 percent fuel hike, part of a plan endorsed by the IMF to modernize the economy, and calls for the resignation of President Jovenel Moise, whose government suspended the hike. (AP Photo/Dieu Nalio Chery)

While Haiti is returning to calm after the government reversed a sharp hike in fuel prices that triggered days of violent civil unrest, the International Monetary Fund is not backing down from its insistence that Haiti needs to raise prices.

The Washington-based IMF, which helps countries stabilize their finances, said Thursday that the Haitian government’s current below-market fuel prices “disproportionately benefit the well-off” and prevent spending on badly needed social programs.

“Generalized fuel subsidies put a significant strain on Haiti’s fiscal accounts,” IMF spokesman Gerry Rice said during a briefing.

Earlier this year, Haiti signed a six-month, staff-monitored agreement with the IMF that would have given Haiti access to $96 million in low-interest loans and grants from the Inter-American Development Bank, World Bank and European Union, initially. The country is facing double-digit inflation, a depreciating currency and slow growth. It also has a budget deficit of more than $150 million.

Under the program, Haiti had agreed to institute several reforms, including raising fuel prices, which was costing it about $160 million a year in uncollected revenues. On Friday, with little notice, the government raised the prices on gas by 38 percent, kerosene by 51 percent and diesel by 47 percent — while many Haitians were distracted by the Brazil-Belgium World Cup game. Minutes after the game ended with Brazil’s loss, Haitians began blocking roads with burning tires and rocks.

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The violence increased the next day and continued even after Haitian Prime Minister Guy Lafontant announced that the measure would temporarily be suspended. At least three people died, businesses were burned and looted, and Haitians and tourists were stuck in their places of employment and hotels, some for as long as three days. U.S. carriers also canceled flights over the weekend, resuming them on Monday.

“Like everyone else, we are saddened by the reports of the violence and the loss of life in Haiti,” Rice said.

Rice said since the unrest, the IMF has been in talks with Haitian officials and is awaiting a revised fuel policy with gradual increases.

“An important part of this reform plan was indeed to strengthen revenues, which would allow the Haitian government to provide for badly needed public investments and a better social safety net,” Rice said. “Going forward we will continue to support Haiti, we continue to stand by Haiti and to cooperate closely with the authorities as they develop a revised reform strategy.”

This time around, the fund would expect that the revised reform program would include at least two important elements, he said.

“One would be a more gradual approach to reducing the fuel subsidies, and two, secondly, would be ensuring the implementation of compensatory and mitigating measures to protect the most vulnerable people,” Rice said. The latter includes such items as transportation vouchers, which were not announced as part of the fuel hikes, and public canteens with free food that the government recently began rolling out.

“We hope that by implementing this revised reform strategy, this can help unlock additional support, continued engagement of the international community and other development partners including the IMF,” he added. “This is a major objective as far as we’re concerned to try and mobilize additional support to help Haiti through this difficult period that it’s facing.”

Under the fuel price increase, public transportation costs also went up, a jump that would likely have the biggest impact on lower-income Haitians. A domestic worker with two children, for example, who makes the daily $4.39 minimum salary and lives in the city of Petionville, would spend almost half of her daily wages just to get the children to and from school at a cost of $1.82.

A gallon of gasoline would have gone up from $3.39 to $4.68. Haiti doesn’t produce fuel and its fuel import bill is a little more than $1 billion a year, which is almost equal to the value of all its exports.

“The estimate we got is, at today’s prices, the deficit is going to rise another half percent of gross domestic product to $40 million, if they do nothing,” said Florida Sen. Marco Rubio, who has been closely monitoring developments and been in talks with the IMF, the World Bank and the Inter-American Development Bank about mitigating measures that can be put in place to blunt the impact of fuel price increases. “You’re going to have another $40 million on top of their existing deficit, which is a lot for a country.”

During his discussions, Rubio said he was told that the Haitian government’s calculations of how much fuel prices would have to rise in order to bring the country’s prices in line with rising global oil prices were correct. But the government’s execution was another matter, say critics and observers.

“The decision is right. It saves almost 2 percent of their GDP a year, which is almost the size of last year’s non-financial budget deficit,” Rubio said. ”Clearly there was not, on the political side of it, enough work done to prepare the country and the population for this and kind of set a path toward absorbing this in a way that was effective.”

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While the IMF is awaiting a revised policy, it’s unclear when that will happen. On Wednesday, Haiti Foreign Minister Antonio Rodrigue was in Caracas meeting with Venezuela’s foreign minister, Jorge Arreaza, to seek help on its fuel imports even as Venezuela’s own oil production drastically drops and its people are going hungry because there is no money for food, medicines or consumer goods. Its crude oil production has gone from 2 million barrels per day at the beginning of 2017 to 1.3 million per day last month. Experts have warned that it could fall to 1 million by the end of the year.

Haiti is among 18 Caribbean and Central American countries that receive discounted oil under Venezuela’s Petrocaribe arrangement, which allows countries to stretch payment for up to 25 years at a 1 percent interest rate. The program, however, has been floundering amid Venezuela’s worsening economic and political crisis, forcing Haiti and others to buy fuel on the open market to supplement their needs.

The Venezuela visit came as public pressure from Haiti’s business community and politicians continued to mount on President Jovenel Moïse to fire Lafontant and his 18-member cabinet for the mishandling of the fuel price hikes, while others have called for Moïse to step down as well. If either Moïse or Lafontant are forced out, the change in government could open yet another new chapter of political uncertainty for Haiti.

In a meeting with business leaders earlier this week, Moïse said he was aware of calls for his resignation but showed no signs of firing his prime minister. Haiti’s Lower Chamber of Deputies has said that if Lafontant doesn’t resign before Saturday, they will hold a 10 a.m. no-confidence vote on him and his 18-member cabinet.

On Thursday, the U.S. Embassy issued a security alert restricting the movement of employees to Port-au-Prince, Haiti’s capital. Embassy personnel also are prohibited from traveling in their personal vehicles, the embassy said.

The U.N. Security Council also released a statement calling on Haitians “to exercise restraint and to avoid acts that could contribute to instability,” while stressing its support for the Haiti National Police and its United Nations Mission for Justice Support in Haiti.





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