Haiti’s Fiscal Cliffhanger: Are We Being Shortchanged?
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Haiti’s government budget for 2012-2013 was 3 billion dollars, an incredibly large amount of money when one considers that the country’s Gross Domestic Product (GDP) is only triple that figure at roughly 9 billion dollars. At best, this would mean that the government is able to collect a staggering 33% in taxes on the value of all goods and services produced in the country. At worst, it means that Haiti irresponsibly makes its budget, relying on international handouts and on loans that are such a large percentage of its GDP, that it is unlikely to be able to repay.
Most non-socialist* developed countries have a national budget that fluctuates at around 3 percent of their GDP. The United States, for instance, has a GDP of 150 trillion dollars and its recently proposed federal budget is 3.7 trillion dollars, a figure less than 3% of the country’s GDP. By comparison, Haiti’s budget of 3 billion adds up to a staggering 33% of the country’s GDP. Such a comparatively lavish budget cannot be met by local taxes so it is only made possible by loans, aid, and by other peculiar and at times nefarious arrangements. The various components of Haiti’s sources of revenue is not readily retrievable, leaving the real budget engulfed in obscurity. Once buried in darkness, money moves in ways that can never be accounted for in public forums.
In matters of accounting for the government sources of revenue, the Haitian public is kept in the dark. Rarely does the Haitian government provide transparency in its fiscal affairs. Numerous Haitian governments have been accused of corruption and of using state funds to finance personal ambitions. The current administration is no exception. While many are demanding that the Martelly administration provide information regarding state taxes, particularly those collected on phone calls and remittances, the administration continues to maintain a blur around this issue.
The former Communication Minister, Ady Jean Gardy, explained that the government, had gross reserves of 2.2 billion U.S. dollars, a partial guarantee fund of $ 35 million, and a venture capital of $ 25 million. He also explained that only 3% of the population (approximately 300,000 people) pays taxes annually. If these few tax payers alone were to account for all of the governments revenue, it would mean that on average, each of these 300,000 people pay 10,000 annually in taxes, an impossible scenario. As for the 2.2 billion in reserve funds, could it really be that Haiti has a large reserve just waiting for a rainy day, as though our current situation does not warrant spending emergency funds now. Whether or not these figures are accurate, the Minister’s message seems to suggest that our government is financially beholden to outside institutions that account for the bulk of its budget. Indeed, as reported by the government, tax revenues only make up 39% of the budget.
Haiti borrowed massively to make its 3 billion dollar budget. When debt fails to create development, it is a powerful cause of poverty. In the 1800’s, the Haitian government was forced to borrow heavily from France to pay France an extortion fee of 21 billion it levied for Haiti’s audacious independence. Haiti’s current generation continues to pay dearly for the consequences of this exaction. After Haiti paid this unreasonable debt, foreigners feign ignorance and wonder “Wow! Why is the country so poor?” Today, when we borrow, we must be mindful that it can bind our future generations in poverty by overburdening them with debt payments. It is important to understand the origin of our poverty well so that we can dismiss those who would point to our cultural heritage as the source of the country’s economic shortcomings.
Aside from loans, the government says that nearly 50% of the national budget is from foreign “donations”. This level of assistance is a national security issue. In her groundbreaking book, Dead Aid, Dambisa Moyo argues convincingly that foreign aid can hinder rather than promote development. The aid given often ends up in the hands of the few who either negotiated for the aid or who are connected to those who did. Although counter intuitive, Ms. Moyo argues that good governance will only emerge when foreign aid stops flowing to mismanaged countries like Haiti. Although free money can only add to any countries wealth, but aid is seldom free. It is usually linked to conditions set by the donor. With regards to aid, there is no free lunch. It can even have a lingering aftertaste in the debt that has to be repaid or in the loss of the ability to set national policy independent of the donor’s will. The corrosive nature of loans and aid is that they can enrich a few while leaving the populace poorer, given the debt that they must all collectively repay.
Supporters of foreign aid often use the Marshall Plan as an example of the constructive role that foreign aid can play in the rebuilding of nations. Aid money flowing through the Marshall Plan was able to rebuild much of Europe’s war damaged infrastructure. But the success of the Marshall Plan lay in the fact that it was targeted specifically at infrastructure, it was limited to a finite number of years (5 years), it never amounted to more than 3% of the GDP of the European countries which received it, and it did not have to be repaid.
After the devastating earthquake of 2010, it seemed that Haiti would be the recipient of a kind of super Marshall Plan that would help rebuild the country. Ten billion dollars was pledged by the international community and a steering group was set up to collect and to oversee the disbursement of this emergency fund specifically targeted for rebuilding. Today, Haiti has a mysterious budget of 3 billion dollars that is allocated in a manner that ignores the country’s most pressing infrastructural needs: clean water, sanitation, electricity, and reforestation.
This year, the government announced that the environment will be a priority. Although this is welcoming news, the budget allocates nothing for reforestation. With less than 1% of the budget allocated to the Ministry of the Environment, the published budget is inconsistent with the government’s stated priorities.
Haiti’s huge budget may just be an ambitious effort at development. However, the line items of the budget should be made available so that people can critically review them, and give input in a social discourse that can only be enriching to the country. Each Haitian generation has wondered “Kijan lajan n fè manke? (Are we being shortchanged?) ” To answer this question, the current generation needs to recognize that our government is making fiscal decisions that will impact our lives and that of those to come. In making overzealous budgets (33% of GDP), this administration may be participating in pushing future generations over a fiscal cliff into a bottomless pit.