Dominican Republic and Haiti: Country Studies

Dominican Republic and Haiti: Country Studies
ary ministerial spending accounts. In addition, the lack of oversight
controls in the form of audits and accountability was
bound to result in the misappropriation and misallocation of
public funds. Although the government had agreed to the IMF
structural adjustment program in 1996, Haiti lacked the cash
to implement the program. In view of Haiti's bad financial situation,
the United States advanced it US$10 million in budget
support in 1997. Lack of funding from other foreign sources,
as well as rapidly growing public expenditures, added considerably
to the budget deficit and compelled Haitian authorities to
resort to Central Bank funding. By the end of FY 1995-96,
internal debt was G9.2 billion, about 21 percent of GDP.
In early 1996 at the behest of international financial institutions,
the Haitian government instituted tight controls over the
budget, trying to turn it into a policy instrument. The budget
was under the jurisdiction of two different ministries and was
not treated as a consolidated central government budget. The
Ministry of Economy and Finance was charged with preparing
the operational budget, relying on domestic resources. However,
investment outlays financed from external sources were
not included in the operational budget but rather were the
responsibility of the Ministry of Planning and External Cooperation.
Hence, in order to verify all expenditures, especially
those from the various ministries' discretionary accounts
(comptes courants), the government introduced strict expenditure
control procedures. The verification procedure led to the
closing of two-thirds of such accounts. Another policy decision—to
freeze for three years the government wage bill calling
for pay-scale raises—was designed to divert more funds to
higher priority social programs. The government also started
to seriously implement a fiscal reform agenda that would further
restructure the tax administration system and simplify it in
such a way as not only to raise tax revenues substantially but
also to reduce reliance on external donors.
In an effort to raise the revenue-to-GDP ratio, the government
decided to reduce exemptions from taxes and customs
duties. By the end of 1996, the rates of the sales tax (taxe sur le
chiffre d'affaires—TCA) were unified at 10 percent, and the base
of this tax was extended to cover most goods. (According to
IMF estimates, TCA-related measures would amount to almost
1 percent of GDP annually.) Other taxes and fees were raised,
including airport taxes, car registration fees, and passport fees.
The government failed in 1998 to introduce scheduled legisla-
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