13534: Lafleur: RE: 13465: 37 Gourdes for 1 US Dollar (fwd)

[Bob Corbett <corbetre@webster.edu>]

From: Lourdes Lafleur <lourdeslafleur@videotron.ca>

By Yves Marie Chanel
IPS
11/31/02

PORT-AU-PRINCE - Haitian economists are expressing extreme concern, bankers
are trying to curb the panic, and officials talk of ''invisible hands
plotting against the government'' as rumours circulate that the government
plans to seize all U..S. dollars in the country.
Fearing imminent plans to nationalise their dollar bank accounts, small
account holders earlier this month withdrew a total of 25 million dollars
from banks over a period of less than five days.
Authorities are denying reports that they plan to ban dollar accounts. On
Monday, President Jean-Bertrand Aristide told the nation that such a plan
''has never been and never will be put in place''.
But sources in the banking sector told IPS that ''highly-placed officials in
the government plan to nationalise dollar accounts and pay the holders only
half the actual Haitian market value of the American dollar in local
currency''.
''There are a few government officials who have advised people of this
possibility. They're planning to use this money to pay arrears so they can
unblock the flow of new foreign aid loans'', the source affirmed.
The country's import reserves have dropped from 113 million dollars a year
ago to 50 million today. The government needs to either borrow or
nationalise accounts to have enough dollars to pay arrears on foreign debt.
Payment of arrears was one of the conditions laid down by the International
Monetary Fund (IMF) for the country to receive loans. Debt arrears totalled
about 43.9 million dollars in June 2002, while outstanding discounted bills
were estimated at that time to be 1.2 billion dollars.
Haitian officials, facing serious financial difficulties, may have already
used half the banks' legal dollar reserves on deposit with the Central Bank,
one banking source maintained.
More than 30 percent of the country's monetary mass is in dollars. Last
June, the Central Bank estimated that 457 million dollars were on deposit in
Haitian banks.
The continuing flight of capital is of concern to professionals and other
middle class savers rather than to large entrepreneurs. Major businesses
receive banking credit, but do not maintain bank accounts in Haiti. Their
funds are invested abroad, a bank official told IPS.
The panic that hit two weeks ago has accelerated a drop in the local
currency, from 28.5 gourdes per dollar in September to 32.75. Aristide's
declaration this week stopped the slide.
The price of basic necessities has been skyrocketing on a daily basis. Most
shops no longer even bother posting prices. The government has propped up
the price of gasoline but experts say that strategy will only increase the
budget deficit, driving inflation still higher.
''The banking panic in Haiti is the result of very bad economic policy
management by those who have been in charge over the past two years,'' says
Kesner Pharel, a prominent Haitian economist who is currently a public
policy and management fellow at Harvard University.
''Despite the net reduction in international financial aid caused by the
political crisis, financial authorities have maintained a very high level of
expenditure,'' he added.
''These expenditures, which are non-productive, contributed to a deepening
of the budgetary deficit, which reached record levels in the past two years.
The deficit was more than two billion gourdes during the 2001-2002 budgetary
year, and will break the three billion gourde mark during budgetary year
2002-2003,'' according to Pharel.
The economist says the Central Bank supported high levels of spending by
continuously advancing the government money.
''The effect of the most recent interventions by bank officials and the
government will only be fleeting,'' he adds. ''What's necessary is to stop
the monetary haemorrhaging caused by the unconditional financing of public
expenditures by the central bank.''
His predictions are grim. Net reserves, estimated at less than 50 million
dollars, says Pharel, are not enough for the government to deal with attacks
by speculators. That vulnerability could be fatal if the United States
attacks Iraq and the price of the barrel of oil goes up substantially.
The banking panic, he adds, could make private investors very leery of
Haiti, which could encourage the flight of capital, deepening poverty in the
poorest country in the Americas.