The gourde (Gde) indeed has been taking a beating over the past week to ten days. From Gde 40 per dollar at the beginning of this month, it hit Gde 52-54 this morning (Thursday, February 13), and it?s not sure how much more it stands to plummet before it stabilizes.
The principal reasons that explain the current situation can be summarized as follows:
§ A huge GOH fiscal deficit so far in FY 2002-03 (same FY as US, Oct 1 to Sep 30). In just a four?month period, to Jan 31, the deficit reached Gdes 1.8 billion. As a point of comparison, for the entire FY 2001-02, the deficit was a record Gdes 2.6 billion, or 3.1% of GDP. So if this rate continues, we’ll wind up FY 2002-03 with a deficit of approximately Gdes 5.5 billion — or some 6% of GDP. (Anything above 2% of GDP, and you?re flirting with economic disaster.)
§ People are losing confidence in the gourde daily, not without reason. So every day, more and more people take their gourdes out of their account (or from under their mattresses) and run to the banks to buy US dollars, driving the price further up. And who?s to blame a person who?s been working hard and has now saved a few gourdes, whether for his first used car, a refrigerator long-promised to his wife, or for his kid?s college tuition, for changing those gourdes to dollars in an effort to safeguard the value of those savings.
§ As the Ministry of Economy and Finance spews out bigger deficits, the ineffectual Central Bank Board is clearly in over its head, has no idea what to do, and/or has no guts to go tell the President that they need to shut off the BRH?s financing spigot to the government. It is that ?write-all-the-checks-you-want-and-BRH-will-pay-them? mentality that has spewed out this ?Lavalas? of gourdes that are running around chasing dollars. Until this Wednesday, they had had their head in the sand and refused to increase interest rates, which would slow down the slide a bit ? but at the cost of further crimping an already-moribund economy, referred to by economists as ?crowding out? of productive private sector activity to finance non-productive government activity.
On Wednesday morning, the Minister of Economy & Finance, Faubert Gustave, and the BRH Governor, Venel Joseph, met with the banking community and promised action soon. Joseph announced that the rate on BRH bonds would move from 15 percent to 23 percent, which should move the prime upward from 22-23 percent to 30 percent or so. But no promises were forthcoming on dealing with the root cause of the problem: the growing deficit!That leaves only one other thing that could slow/reverse the tide: BRH selling dollars from its reserves. The problem with this option is that the BRH has virtually no reserves left. From more than $220 million just a couple of years ago, today BRH has $32 million — the Governor’s number to the bankers at yesterday’s meeting ? a sizable share of which is not even liquid. BRH needs $9 to 10 million per month for the government’s needs: starting with $1 million for the President?s foreign security contract with the Steele Foundation (helicopters are not cheap); then Haitian embassies? budgets; then foreign trips (charters or otherwise); then Ira Kurzban, Ron Dellums, Hazel Ross Robinson, and why not, Mildred Trouillot Aristide (she’s a lobbyist too, remember the US DOJ Foreign Agents list submitted by Kurzban). [Note: An often-repeated misconception is worth correcting here. The GOH/BRH does not provide the dollars for petroleum imports. They merely set the pump price. It is the four petroleum companies that import, including coming up with the dollars to do so on the open market.] With all those needs, and with so little in reserves, it is no wonder that one of the biggest buyers on the open market the past few days has been the BRH itself.