Haiti is the poorest nation in Latin America and the Caribbean and among the poorest in the world. Establishment of a functioning and transparent state is vital for the country’s long-term stability and economic growth, as well as for a more efficient allocation of public resources to reduce poverty. Improvements in macroeconomic stability and economic governance are also prerequisites for providing donors with an adequate framework for assistance. While Haiti has made great strides since 2004 toward establishing conditions and programs for sustained growth and poverty reduction, it remains extremely vulnerable, as demonstrated by the shocks that rocked the country in 2008 - a sharp jump in food prices in April triggered violent protests and prompted a change of government; in August and September a series of hurricanes inflicted damage and loss estimated at nearly 15 percent of GDP. Haiti still requires urgent and ample international assistance to recover.

Transparency and efficiency in the use of public resources has improved, and progress has been made toward tailoring the policy environment to get maximum impact from donor resources. Improvements in budget formulation, execution and reporting have been particularly effective.
Highlights:
- Improved macroeconomic stability. Haiti has maintained positive economic growth since FY2005, recording a GDP expansion of 1.2 percent in FY2008 despite a sizable drag from the April 2008 food crisis and a devastating hurricane season that year. Annual inflation fell from 38 percent in September 2003 to 1 percent in March 2009.

- Basic budgetary procedures have been restored and strengthened. The FY2005–08 annual budgets were prepared on time and reflect key poverty reduction and economic recovery priorities. The FY2009 budget has been submitted to Parliament (albeit late), and it, too, incorporates the key priorities of the National Strategy for Growth and Poverty Reduction (Document de Stratégie Nationale pour la Croissance et la Réduction de la Pauvreté, or DSNCRP). The use of discretionary accounts (comptes courants) has been drastically reduced, from 62 percent of nonsalary expenditures during October 2003–March 2004 to less than 3 percent at end-of-February 2009. The share of spending for poverty reduction in the FY2008 budget is estimated at 56 percent, up from 43 percent in FY2007.

- Financial controls have been strengthened, with the supreme audit institution catching up on auditing delays of government accounts (finalizing the audit reports for the FY2002–05 Treasury accounts).

- An automated system for budget information and management has been installed in all ministries and government agencies, shortening the expenditure approval process and increasing transparency and controls in appropriations.

- Improvement of public procurement processes. In early 2005, the government adopted a new Procurement Decree that created the National Commission for Public Procurement (CNMP) and reaffirmed the use of competitive purchasing norms; standard bidding documents and manuals were also introduced to government procurement staff. In June 2009, a new Procurement Law was enacted by Parliament, adapting Haiti’s procurement rules to international good-practice standards.

- Initial steps have been taken toward laying the foundation for a modern, merit-based, career civil service. Both a new civil service law and a law for organization of the central administration were enacted by decree in July 2005, and a census of employment in selected ministries was completed. A Human Resource Management Unit was set up in the Prime Minister’s Office with a mandate to oversee human resource functions, as a first step to promoting implementation of the new civil service law. The government has also launched the process of updating the registry of state employees, starting with completion of the database in February 2009.

- To step up anticorruption efforts, in 2004 the government ratified the OAS Inter-American Convention against Corruption and created an Anticorruption Unit (ULCC). The unit completed a comprehensive diagnostic survey of governance practices and public perception and experiences of corruption in Haiti to inform the design of a national anticorruption strategy, which was adopted by the government in March 2009.

- To improve the management and transparency of key public enterprises, financial audits for the national port authority (APN), the telecommunications company (TELECO) and the national electricity company (EDH) were completed by international audit firms for FY2005. Accounting rehabilitations were also completed for TELECO and EDH. Following the recommendation of the financial audits, APN, TELECO and EDH have developed and are advancing action plans for overhauling their internal systems and procedures. The government has also included expenditure lines for electricity, water and telecoms in the FY2008 and FY2009 ministry budgets to ensure that ministries pay their bills to EDH and TELECO and to the water utility CAMEP. Government audits of public utilities were also extended to CAMEP, with financial, technical and administrative audits for FY2005 and FY2006 completed in July 2007.

- In 2005–06, the government took a number of measures to strengthen the Road Maintenance Fund (Fonds d’Entretien Routier, or FER) as the cornerstone of a national strategy for maintaining roads. FER’s institutional capacity has expanded with recruitment of key staff and the definition of standard operational procedures. To ensure sustainability of large road investments currently under way, the government is planning measures for sufficient funding of essential road maintenance activities. Thus, the FY2008 and FY2009 budget laws include a specific line for recurrent budget allocation for FER as well as a line item for counterpart funds.

IDA played a pivotal role in coordinating and catalyzing donor efforts to reengage with Haiti in 2004 and supporting the government’s overhaul of governance processes. IDA’s extensive technical assistance and analytic work on economic governance helped the government define its reform program.