IMF Report on Haiti’s Banking System and Monetary Policy Framework

Key Issues and Recommendations

The International Monetary Fund (IMF) has published a report highlighting several key issues and recommendations for improving Haiti’s banking system and monetary policy framework.

High Business Costs and Risk/Return Tradeoffs

• Haitian banks have limited ability to lend in foreign currency, which may contribute to higher interest rates and a reduced scope for monetary policy.
• This limitation restricts the banks’ capacity to provide loans, making it challenging for businesses to access credit at competitive rates.

Dollarization and Its Impact on Monetary Policy

• Around 80% of deposits are in foreign currency, creating challenges for monetary policy and financial stability.
• The high degree of dollarization makes it difficult for the central bank to implement effective monetary policies, as a significant portion of the economy is not under its control.

BRH’s Balance Sheet Situation and Recapitalization Plan

• The Bank of the Republic of Haiti (BRH) has suffered significant losses due to government financing needs and sterilization requirements, leading to a severely deteriorated capital position.
• A recapitalization plan for the BRH is recommended to ensure more effective monetary policy and long-term financial independence.

Audit and IFRS Application

• There is a need to strengthen audit of the BRH and move toward full application of International Financial Reporting Standards (IFRS).
• This will help improve transparency, accountability, and consistency in financial reporting, enhancing confidence in the banking system.

Prudential Regulations and Oversight

• However, the report notes that banks’ potential exposures to indirect foreign exchange risk require closer oversight.
• Strengthening prudential regulations will help mitigate risks associated with indirect foreign exchange exposure and maintain financial stability.