15686: Durban (and banker friend) on IMF Agreement (fwd)

[Bob Corbett <corbetre@webster.edu>]

From: Lance Durban <lpdurban@yahoo.com>

P D Bellegard-Smith's analysis of the recent IMF agreement with
the Government of Haiti on Corbett (#15618) is interesting, and
I suspect this agreement has something to do with the recent
strengthening of the gourde.  (The weakening of the dollar on
international currency markets ...down 6% against the Euro in
April alone... is another reason for the gourde's relative
strengthening).

I asked a banker friend for his take on Bellegard-Smith's
analysis, and thought the group might find his comments
enlightening.

He writes, and I QUOTE:
   Past experience suggests that Haiti won't comply with the
   terms of the SMP and that this SMP (like those in the past)
   is simply a smoke screen that the government will use to
   convey the impression that some serious reforms will be
   taking place and that the government is therefore deserving
   of some immediate support from other donors.  In fact, it
   is not necessary to rely only on past history as there is
   a very simple litmus test of the real time credibility of
   government reform efforts and the current SMP:  Does the
   SMP require and is there the willingness of the government
   to publish, on a monthly basis, fiscal revenue, expenditure
   and financing data in a form sufficiently disaggregated to
   permit the public at large to judge the efficacy and
   efficiency of what the government is doing with the people's
   money, where that money comes from and how much is entering
   the pubic accounts and how much should be entering the
   public accounts.  For example, what are government
   expenditure programs?  What are the benefits that the
   public derives from them and is supposed to be deriving
   from them?  Is the public obtaining "value for money" from
   them? Where are funds being misapplied?  Where would funds
   be better applied?  What are government revenues and
   financing, in the aggregate and by source?  Are there gaps
   between revenues and financing recorded as receipts by
   the government and the revenues and financing that should
   be recorded as government receipts on the basis of existing
   tax bases and tax rates and financing sources? If there are
   gaps, how large are they and what explains them?

   All of the observations above are based on two very simple
   ideas.  First, the Haitian people are shareholders in the
   government and they, as shareholders, have the right to
   know what the government is doing with their money.  Second,
   the government, on its part, has the obligation to provide
   this information to the people.  Don't forget that the
   Haitian government is the largest single economic actor in
   the Haitian economy.  What it does --and what it does not
   do--makes and will make an enormous difference and will
   ultimately be far more important to the health of
   the Haitian economy than foreign aid and/or any so called
   embargo on it.

UNQUOTE

My own guess is that the government will make an effort to
comply with the IMF agreement, however, there is no guarantee
that the effort will be successful.  Since so much of the
government budget is tied up in salaries, any serious cutbacks
on the expenditure side will have to mean a reduction in public
payrolls.  How do you do that without contributing to further
political unrest?  Now that's a question I'm just glad I don't
have to deal with.

Lance Durban