Haiti's hard road to travelSunday, July 15, 2018
BY BRUCE GOLDING
Violent street protests erupted in Port-au-Prince last weekend following the Haitian Government's announcement of a reduction in fuel subsidies, resulting in price increases ranging from 38 per cent on gasoline to 51 per cent on kerosene.
The protests continued even after President Jovenel Moïse announced the suspension of the measure. Similar protests had taken place after the approval of the budget last September that included a number of new taxes. All of these measures were in keeping with successive, six-month Staff Monitored Programmes agreed with the International Monetary Fund (IMF) that required fiscal policy to “focus on mobilising domestic revenue to make room for needed increases in public investment, including investments in health, education, and social services”. Principal among the steps to be taken was the removal of fuel and electricity subsidies that account for one-half of Haiti's annual fiscal deficit.
Implementation of the programme is a requirement for accessing US$96 million in financing from multilateral agencies. These agencies argue that given the urgent need for increased expenditure in critical areas, Haiti's revenues, which amount to 14 per cent of GDP, although just below the global average of 15 per cent, cannot afford these subsidies which are enjoyed by rich and poor alike and devour resources that would be better spent in improving education, health and infrastructure.
From a macroeconomic standpoint this argument cannot be faulted. However a better approach, it is contended, would be to target subsidies to those in need via interventions similar to those of Jamaica's Programme for Advancement through Health and Education. Added to that is the leakage occasioned by people from neighbouring Dominican Republic crossing the border to purchase fuel at the much cheaper price.
Haiti's dilemma is multifaceted. Sixty per cent of the Haitian population fall below the poverty line, with 24 per cent living in extreme poverty. Cash-transfer programmes targeted at such a large segment of the population (more than 20 times the number of PATH beneficiaries) require institutional and administrative capacities that Haiti does not now possess.
Haiti's institutional deficiencies
This institutional weakness was evident in the relief efforts following the devastating earthquake in 2010 in which over 200,000 people were killed. More than US$16 billion in financial assistance was pledged by governments, multilateral agencies and private donors. Less than 10 per cent of the monies disbursed reached the Government of Haiti. The bulk of the funds was disbursed to international NGOs and foreign contractors, and because of the lack of proper accounting procedures the net benefit to the people of Haiti has never been satisfactorily established. Haiti's lack of capacity provided a convenient explanation for donors bypassing the government in expending the funds.
Haiti's political infrastructure is also an issue. Its biggest problem is not its poverty or lack of development but the weakness of its political institutions and government apparatus and, hence, the fragility of its government. Even the process of electing a president and forming a government has shown itself to be uncertain, protracted, tortuous and contentious. The last presidential election had a field of 27 candidates-representing almost as many parties — and voter turnout of less than 20 per cent, due as much to apathy as to voter registration difficulties. Political parties are hurriedly put together as each election approaches; few of them survive to the next.
It is not surprising, therefore, that in the face of widespread protests, President Moïse decided that a major policy reversal was his only viable option. Successive Haitian leaders invariably find themselves catching up from behind rather than leading from the front.
One size doesn't fit all
The Haitian experience demonstrates, yet again, that orthodox economic policies do not have universal application. Haiti does need to undertake a serious programme of structural reforms to reorientate its economy toward sustainable management, investment and growth. However, this requires enormous political capital that elected presidents, with the exception of Jean-Bertrand Aristide, have not commanded.
Haiti's situation is not irredeemable, even with the devastating earthquake of 2010 that caused damage estimated at 120 per cent of GDP, and Hurricane Matthew in 2016 that wiped out 32 per cent of GDP.
Example of Rwanda
Rwanda, like Haiti, is one of the poorest countries of the world, with limited natural resources, high levels of illiteracy and weak institutional capacity. It has roughly the same size population — around 11 million. It, too, was devastated, not by earthquakes or hurricanes, but by civil war and genocide that resulted in 800,000 people being killed and a 40 per cent decline in GDP in the 1990s. It has undertaken a far-reaching programme of structural reforms guided by the same IMF and multilateral agencies with which Haiti engages. In the last decade it has recorded annual economic growth of more than six per cent and attracted over US$1 billion in foreign direct investment last year.
What accounts for the difference in outcomes? Experience has shown that it is extremely difficult, if not impossible, to implement painful but necessary economic reforms within a democratic framework in countries where the democratic culture and institutions are not deeply rooted and well tested. In the case of Rwanda, President Paul Kagame was a military leader who came to office with a legacy of triumph in the civil war and strong support from the armed forces.
Unlike so many others, he used his extraordinary power to pursue a structural adjustment programme that is transforming the Rwandan economy and the lives of its people. It is now one of the fastest-growing economies in Africa. Kagame won re-election last year with over 98 per cent of the vote, albeit the political climate and election procedures fell short of what can be considered conducive for free and fair elections.
President Moïse enjoys no such “luxury”. His hold on power is tenuous and his support base unstructured and fractious. Public confidence in the institutions of Government is extremely low. Multilateral agencies are not oblivious to these realities but their conventional stance has been “we will help you with the economics but you must take care of the politics”.
Pathway for Haiti
The international community and donor countries, in particular, are less than enthusiastic about Haiti's prospects. They feel that financial assistance, other than humanitarian relief, is like pouring water into a leaking bucket. Just before the 2010 earthquake, US$1.2 billion — two-thirds of Haiti's external debt — was written off. More has been written off since that disaster. President Trump's obscene reference to Haiti along with some African countries earlier this year may be a view that is not unique, only superlative and openly expressed.
Yet, Haiti wants no pity from anyone. They are a proud and defiant people who rid themselves of their slave masters and declared their independence long before slavery was officially abolished in other parts of the colonial world. What they lack in natural resources is made up for by their rich culture that could be a huge tourism booster and could support a buoyant culture-based economic sector.
What Haiti needs is meaningful and practical support in ways that have not yet been demonstrated. Social programmes and infrastructure, though important, are not the sole priority. Structural reforms, though necessary, cannot succeed without the institutional framework to support and deliver them and the forbearance of the Haitian people that must be cultivated and nurtured to walk that difficult road.
Caricom must do more
Caricom, of which Haiti is a full-fledged member, can and must do more. We don't have the resources to provide financial assistance but there is much that we can do in terms of institutional development, given our own experiences and accomplishments. The recent Caricom decision to abolish the offensive visa requirements for Haitian nationals entering other Caricom countries is a welcome move. It will give Haitians a sense of community belonging that they should never have been denied. It will also lend credibility to the interventions that, I suggest, Caricom can make in assisting Haiti to develop its political and governmental institutions.
Caricom should offer to assist Haiti in developing and implementing a schematic programme of institution building backed up by a robust programme of public education and engagement, to enable it to be fit for the purpose of the serious undertakings on which it must embark.
France's debt to Haiti
France has obstinately refused to even consider Haiti's claim for restitution for the US$21 billion (in today's values and not including interest) it was forced to pay to France for removing from itself the yoke of French slave masters. This is an even more compelling cause than the wider claim for reparations for slavery.
It is to be recalled that in 1825, French warships blockaded Haiti and forced it to agree to pay 150 million francs (subsequently reduced to 90 million), referred to as the “Independence Debt”, as compensation to the slave owners for being “dispossessed” of their slave assets. The final payment related to this “debt” was only made in 1947.
Contrastingly, France demanded and Russia did repay in the 1990s €330 million representing investments made by French citizens in Russian bonds to build its rail system that were repudiated by Lenin at the time of the Bolshevik Revolution in 1917.
France's refusal to consider Haiti's claim cannot be interpreted otherwise than that it considers, even today, that slaves were legitimate property and the payment Haiti was forced to make was appropriate compensation for it being deprived of its property. It is shameful.
France should pay. It would amount to less than 1.5 per cent of its annual budget. Pay it over 10 years if that 1.5 per cent hurts too much. Let it deduct, if it so chooses, the financial assistance it has given to Haiti since that time and lodge the balance in an appropriate account. Provided the institutional underpinnings are in place, it could create a new horizon of hope and opportunity for the Haitian people who have been victimised and disadvantaged for much too long.
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