#5003: HOL: New Monatary Policy by Central Bank (fwd)

[Bob Corbett <corbetre@webster.edu>]

From: Max Blanchet <MaxBlanchet@worldnet.att.net>

New Monetary Policy Measures
by the Haitian Central Bank.

Port-au-Prince, 08/29/2000--On Monday August 21,
the central bank of Haiti issued a notice to the
commercial banks announcing its decision to
increase the reserve requirement ratios (3Rs)
on banks' liabilities. The 3R on gourde liabilities
(deposits and others) will move up from 28% now
to 30%, effective September 1st, 2000, and then
to 31% by September 16. The 3R on banks' liabilities
in dollar will go up from its current 17% to 20%
effective September 1st, 2000, and then to 21% by
September 16, 2000. Additionally, the 91-day BRH
bond rate will increase from 22% to 25% annually.

The goal is to stop the rapid depreciation of the
gourde and prevent higher inflation.

What will be the impacts on economic actitivities?

As a result of these monetary policy measures,
the gourde/dollar exchange rate has calmed down
from 24 gourdes last week to 21.50 gourdes as of
today. Another factor that may further contribute to
the reversal of the gourde situation is the fact that the
petroleum companies stopped (momentarily) buying
dollars in the foreign exchange market in anticipation
of an exchange rate decline. For how long? We know
that the fundamentals of the exchange rate haven't
improved. We're still in a political crisis. We have a
substancial amount of fiscal deficit primarily financed
by money creation, and foreign assistance is still
frozen. The petroleum companies will come back to
buy the extra dollars they need to pay their petroleum
bills.

On the other hand, commercial banks will increase
interest rates on both deposits and credit. As a matter
of fact, Unibank, one of the biggest three in the banking
system, is right now offering 20% on 91-day term
deposits (short term CDs)-- against 15% until last week.
Obviously, other banks will follow. And, consequently, bank
loans will be charged higher rates than before, which will
have a contractionary effect on new investments and other
economic activities.

As for petroleum prices, the government has not made a
decision yet: by how much and when?

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