Haiti

Haiti initially continued its long-running fix of its currency to the USD, but central bank financing of government and political instability made that hard to sustain. Monetary policy then shifted towards more emphasis on price stability and, to some extent, the use of indirect instruments, over a period which was interrupted by political crises and civil strife, as well as hurricanes, floods and a major earthquake in 2010.

YearsTargets and attainmentClassification
1974-89currency fixed since 1954 at 5:1 to USD, which is legal tender in Haiti (and accounts for about 40% of currency in circulation); range of mainly foreign-owned banks which focus on foreign trade-related business, plus some kind of informal credit  market; central bank also operates as one of largest commercial banks; central bank lends to government and can use various instruments, but monetary policy is largely passive, with periodic action to regulate interest rates and moral suasion on bank lending, while reserve requirements are high but rarely changed; open and relatively free market economy, in country vulnerable to hurricanes and earthquakes; late 1970s major fiscal reforms tried, but high central bank financing of deficits continues; emergence of parallel forex market with up to 15% premium; 1980-3 commercial bank activities of central bank hived off into new institution, central bank gets more power over interest rates but new commercial bank tends to lend excessively; early 1981 some import controls, eased late 1982; 1982-4 stabilisation efforts but fiscal and monetary slippages, high monetary financing of public sector; new government 1986 tries to change course; 1986-7 some liberalisation of interest rates and of trade, but political instability and repeated military coups lead to falls in external aid and renewed slippages, with parallel premium rising to 50% early 1990augmented exchange rate fix AERF
1990-2017early 1990 parallel forex market authorised, most trades undertaken there, with rising spread vs unchanged official rate; end-1989, early 1992 interest rate liberalisation; high central bank financing of fiscal deficits 1990-4, in effect funded by heavy use of reserve requirements and large currency issue; September 1991 official rate abolished, so exchange rate unified (and floating); late September 1991 military coup leads to trade and payments embargo and steep economic deterioration, with sharp depreciation versus USD; return to democracy late 1994, resumption of external aid; 1995 interest rate ceilings eliminated; 1995-6 reforms to internal operations of central bank and to reserve requirements; late 1996 issues of central bank short term paper (which facilitate primary market OMOs), improvements to bank regulation and supervision; severe political tensions from 1997, deadlock from 2000, and withdrawals of donor aid hold up reforms and result in continued monetary financing of large fiscal deficits; loan and deposit dollarisation complicate monetary policy; 2001 restructuring of reserve requirements on dollar deposits, with adverse effect on central bank profitability; efforts to support exchange rate are ineffective and costly; 2002 collapse of unregulated credit cooperatives; 2003-4 political turmoil including (forced?) resignation and exile of current president; donors pledge new funds, macro stabilisation, central bank financing of government ended by fiscal tightening and excess liquidity by large central bank bond issues (at fixed volumes and prices, mainly to commercial banks); as of mid-2000s central bank aims to control inflation via broad (later base) money with floating but stable exchange rate, however framework is unclear, instruments ineffective, secondary markets shallow and dollarisation high, while central bank lacks independence and has large operational losses; new president elected early 2006; mid-2008 food price spike leads to civil unrest, political stalemate; bond auctions opened to nonbank financial institutions; severe hurricanes 2008; 182-day central bank bond introduced; major earthquake 2010, hurricanes 2012; new central banking law in principle prohibits government deficit financing, new treasury bill market set up (which will help restructuring of government debt to central bank, future government financing and absorption of excess reserves); as of 2015 central bank aims for low inflation and exchange rate stability mainly via reserve requirements, backed up by OMOs, policy rates (as signals) and periodic forex interventions; rising political tensions, uncertainties; major hurricane 2016 contributes to delay of elections; mid-2017 central bank proves unable to avoid financing government; statistical data need substantial improvementloosely structured discretion LSD

Selected IMF references: RED 1973 pp32; RED 1974 pp17, 35; RED 1975 pp27-8; RED 1976 pp22, 52; SR 1976 pp6, 8; RED 1977 pp45-9; RED 1980 p22, 23; RED 1981 pp33-4, 38-9; SR 1981 pp1-3, 11; RED 1983 pp34, 40-1; RED 1984 pp36, 42, 43-4, 56; RED 1985 pp35-6, 56; RED 1987 pp41-2, 52-3; RED 1989 p48; RED 1991 pp1-4, 41-2, 50-1; RED 1995 pp11-13, 16-17; SR 1995 pp2-3; SR 1996 p12; RED 1998 pp10-11, 17, 20-3; SR 1999 pp11-12; SI 2000 pp20-5; SR 2002 pp6-7, 9, 12, 41; SR 2003 pp4-8, 14; SI 2005 pp24-8; SR 2005 pp15-17; SI 2007 pp20-3, 29-31; MEFP 2009 §8; SR 2013 pp20-1, 39; SI 2015 pp34-41; SR 2015 pp11-12; SR 2019 pp6-8, 18.