53 Gourdes for one dollar: Haiti’s economy is very unhealthy

By Yves Pierre-Louis, Haiti Liberté, June 10, 2015

Poor governance and corruption under President Michel Martelly’s regime has bankrupted the Haitian economy. Thirty years ago, Haiti produced rice, corn, sugar, coffee, and many fruits. Today this national production has withered; 75 to 80% of the products Haitians consume come from abroad.

The devastation of domestic agricultural production came as Washington forced neoliberal reforms on Haiti following the Feb. 7, 1986 fall of the Duvalier dictatorship. Haiti’s national currency, the gourde, began to lose its value, which for decades was fixed at five gourdes to $1. Today, for the first time, the gourde has sunk to 10 times less value, now exchanging for over 50 gourdes per $1. Worth less than 2 U.S. cents, the gourde is once again being called ''zorèy bourik,'' a donkey’s ear.

In 2003, before the kidnapping-coup against former President Jean-Bertrand Aristide on Feb. 29, 2004, one dollar was worth 25 gourdes. The gourde now exchanges for less than half that.

On Mon., Jun. 8, 2015, although the Bank of the Republic of Haiti (BRH) displayed an official reference rate of 48.40 gourdes for $1, the currency markets were trading the national currency for up to 53 gourdes, depending on the amount of the transaction. Many poor and modest households have been hard hit by the gourde’s precipitous fall.

In its note on monetary policy issued at the end of second quarter of 2015, the BRH noted the "continued depreciation of the gourde in the second quarter of 2015, but at a slower pace... After closing the [2014] calendar year at a depreciation rate of 2.6%..., the exchange rate of the dollar against the gourde increased to 47.17 gourdes to a dollar by Mar. 13 2015, making an increase of 0.9% compared to its level in December 2014. The depreciation of the gourde has been contained because of the interventions of [Haiti’s] monetary authorities on the foreign exchange market and the recovery of private transfers in February 2015. In fact, from January to March 2015 to reduce the pressure on the foreign exchange market, the Central Bank injected $22.9 million. As for private transfers [...] received from abroad, they amounted to $241 million between January and February 2015."

Economic analysts are worried about the Central Bank’s policy of drawing on foreign exchange reserves in an effort to shore up the gourde. Some believe that a healthy exchange rate and trade balance can only be restored through reviving domestic production to reduce imports, which now amount to $4 billion a year. The high exchange rate makes imports more expensive, requiring more and more gourdes to obtain dollars, which drives up prices overall. It is the masses who pay the price.

In addition to the destruction of national production, other factors have contributed to the gourde’s depreciation. Members of Martelly’s family and clique have looted state coffers, and many have transferred their dollars back to the States. The dollar is also strong compared to other world currencies, notably the Euro, there is rampant speculation, and there is great uncertainty brought about by the irregular, chaotic, and fragile advance of supposed elections later this year. Political instability, as always, engenders economic instability.

Even the Central Bank’s former governor, Fritz Jean, noted that, although the country is going through a turbulent time, the state and the BRH have reached their interventionist limits.

Meanwhile, the president of the Association of Haitian Economists, Eddy Labossière, said that fall of the gourde was predictable. He remains convinced that there will be no recovery until the economic model applied in Haiti is changed. According to him, Haiti’s economy will know very dark days in the near future if it stays on its current path. He ridiculed the government’s repeated announcements trying to reassure the public without making any of the structural changes that are necessary.