International Monetary Fund (IMF) Managing Director speaks at International Donors’ Conference on Haiti

NEW YORK – Mr. Dominique Strauss-Kahn, Managing Director of the International Monetary Fund (IMF), issued the following statement today at the International Donors’ Conference on Haiti in New York:

“Let me start by thanking the United Nations and the Secretary-General for convening this meeting, and also President Préval and Secretary of State Hillary Clinton for organizing this pledging session. A lot has already been said. I will try to focus on only three points:

“First, I believe everybody agrees this conference is a unique occasion to try to rebuild the Haitian economy. It’ll take ambition, transparency and accountability, and for all this the proposed Trust Fund is the right way to move forward. I’d like to emphasize one point that has already been made here, which is that for all of this to work, the Haitian authorities need to be in the driver’s seat. The IMF experience is that, for such a program to work there needs to be real ownership by the country. And so that is the first point I want to make. We have a forecast that is rather encouraging, that is of an average growth of 8% for the next 5 years, which will lead per capita GDP to grow to US$1000, compared to US$600 just before the earthquake. That’s a real possibility to improve the situation, but it relies upon the Haitian authorities themselves and on the contribution that you’ll be able to give.

“The second point is that it’s right to talk about the medium term, and reconstruction of course has to do with the medium term. But there will be no medium term if we are unable to manage the short term. And the short term is mainly a question of budget support. Budget support this year is absolutely essential. The financing gap, according to IMF forecasts, is about US$350 million. I know that many of you already have made some pledges on budget support and I want to thank you, but there’s more to do. And there will be no way to do all that we’ve been saying this morning if the Haitian authorities need to finance their budget through monetary support. This would lead to high inflation and would destroy all the forecasts we have today. So this closing of the budgetary gap is absolutely critical.

“In this context, it will also be important to monitor carefully with the central bank the fact that all the pledges represent huge inflows of capital to a country like Haiti. And this inflow of capital could lead to upward pressure on the currency and this has to be taken into account. Of course that can be monitored. The main problem is to close the budgetary gap that is in front of us right now.

“Another point that is as important is the involvement of the private sector and resuming credit to the private sector. The IMF is now working very closely with the Haitian authorities to build a partial credit guarantee fund, which will help the private side of the system to get back to work again.

“My third and last point of course has to do with debt relief, and that was absolutely necessary. The debt outstanding to the Fund is US$271 million, including the US$114 million that we have disbursed immediately after the earthquake. I’ve been proud to see that the IMF has been the first institution to disburse within days after the earthquake. That was budget support that was absolutely necessary. Other institutions are doing their duty. We are in a situation now that there are no payments due to the IMF by Haiti before 2012, and zero interest rates. We are also prepared to present, rather rapidly, for the approval of IMF Executive Board a proposal to organize debt relief for the total outstanding debt.

“So, Mr. President, Mr. Prime Minister, the IMF will be on your side in this difficult period. We really believe that the future can be bright and that relies on growth, although not only on growth. We are absolutely ready to help you, and we need your total involvement. I know that Haiti and the IMF are partners. Thank you.”

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