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Haiti’s Financial Challenges

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Introduction

Haiti faces significant financial challenges, including high business costs, government deficits, and a deteriorating central bank (BRH). The BRH struggles with severe financial difficulties due to financing and sterilizing government deficits.

Monetary Policy Implementation and the BRH’s Balance Sheet Situation

Monetary Policy Challenges

• The Haitian authorities face challenges in implementing effective monetary policy due to the BRH’s low capital base and lack of autonomy.
• A recapitalization plan is necessary to strengthen the BRH’s financial independence, enabling it to implement effective monetary policy and respond to shocks.

Audit and IFRS Adoption

• Improvements in audit procedures are essential for enhancing transparency and credibility.
• Full adoption of International Financial Reporting Standards (IFRS) is crucial for maintaining a high level of transparency and accountability.

Dollarization

Prudential Regulations

• Regulations aim to contain direct foreign exchange exposures, but potential indirect risks require closer oversight.
• Regulatory Review: The requirement that 30% of reserve requirements on foreign currency deposits be held in gourdes could be reconsidered to simplify FX risk management.

Recommendations

Based on the analysis, it is recommended that:

• Recapitalize the BRH to strengthen its financial independence and enable effective monetary policy implementation.
• Improve audit procedures and adopt IFRS to enhance transparency and credibility.
• Enhance oversight of indirect foreign exchange risks to mitigate potential threats.