Dominican Republic and Haiti: Country Studies

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Dominican Republic and Haiti: Country Studies
general, of poor quality, there are reliable Central Bank statistics
showing that tax revenues rose by 58 percent from G2.25
billion in October 1996 to G3.54 billion in June 1997. (The
ESAF agreement signed in October 1996 calls for enacting a
new law to strengthen the role and effectiveness of the Haitian
Statistical Institute and the Central Bank.)
The constantly diminishing external budgetary support
especially with US$150 million being frozen pending resolution
of political squabbles—made the Central Bank resort to a
tight monetary policy to counteract the destabilizing effect of
fiscal imbalances caused by high-interest bonds issued earlier.
The salutary outcome was a 3.8 percent drop in the inflation
rate to 11.8 percent by mid-1998 (from 15.6 percent the previous
year) .
1999.
The IMF anticipated a further drop to 9 percent in
Restructuring the country's tax system to increase government
revenues and reduce reliance on external aid is only one
ingredient in the government's fiscal reform agenda. A second
key element is that the growth in current expenditures be consistent
with available domestic and external resources and be
allocated mainly to priority sector programs. Realizing that the
unusually high level of external support for the budget in the
immediate post-crisis period of the early 1990s could not be
expected to be sustained indefinitely, the government feels
that its budgetary savings would need to be increased considerably
from their level of -3.4 percent of GDP in FY 1995-96.
Third, the country's civil service system needs to be restructured,
not only to improve the efficiency of the public administration
but also to reduce its burden on the budget. Civil
service reform legislation proposing a 16 percent reduction of
7,000 jobs from a total of 42,000 jobs was approved at the end
of 1996, but political resistance has stalled implementation.
(The IMF estimate of the needed reduction in civil service jobs
goes as high as 22 percent: "In FY 1996/97 government
employment will be reduced by at least 7,500 persons, plus
3,500 'ghost workers,' from a total of some 50,000 by means of
attrition, voluntary separation, and early retirement.") Fourth,
public investment, which dropped to negligible levels during
the army's three-year rule in the early 1990s, needs to be raised
to a level high enough to rebuild the infrastructure and
encourage private investment. International financial institution
estimates suggest that public investment would need to
total about 6 to 7 percent of GDR
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