Dominican Republic and Haiti: Country Studies

Haiti: The Economy
Another problem facing the government in FY 1996-97 was
the proliferation over the years of tax and customs duty exemptions
given nongovernmental organizations (NGOs) and other
humanitarian and religious organizations. Although recognizing
the valuable contributions of these organizations in
addressing the country's dire social needs, tax authorities have
expressed concern about the effect of the many exemptions on
their revenue. To ascertain that requests for tax exemption
from these organizations are legitimate and that exempt items
are not traded commercially, tax authorities have instituted a
recertification procedure to ensure that only bona fide organizations
are granted exemptions. To ensure the transparency of
the process, the Ministry of Economy and Finance has been
publishing monthly information on exemptions and the resultant
loss of revenue.
Finance
All these revenue-generating programs notwithstanding, as
of 1999 Haiti's budget had failed to reverse a historical trend of
very large deficits—even after adding external assistance as a
source of revenue. As far back as the Duvalier era, public
finances were openly used for the benefit of the president and
his family and friends, without regard to their negative impact
on the economy. In the early 1980s, when Jean-Claude Duvalier
expanded public-sector investments in poorly managed flour
mills, sugar factories, and oil processing plants, these investment
decisions were based mainly on how much they would
benefit him and his entourage. Such gross misallocations of
public finances had a negative impact on the flow of external
assistance, which dropped further after the November 1987
election massacre (see Post-Duvalier Era, 1986-90, ch. 6). As a
result, the government was forced to try to curtail deficit
spending and to reduce further its meager allocations for economic
and social development. But the continuing need to
finance large public-sector deficits and to allocate more
resources to military spending forced the government to
increase its domestic borrowing, thereby adding to the deficit.
The revenue-deficit picture in the 1990s may have been
caused by a different set of circumstances, but it did not differ
significantly. The budget process remained cumbersome and
continued to suffer from poor management and lack of effective
controls. Expenditure control procedures were constantly
being circumvented through the use of at least 250 discretion-
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