Haitian Public Forcing New Approach to Fuel Price Reform

The Government of Haiti on July 6 imposed price hikes for a variety of fuels, sparking violent protests across the country that cost lives, destroyed property, shut down air traffic, and even caused embassies, business, schools, and other entities to restrict transit and activity in the country. The government increased gasoline prices by 38 percent, kerosene by 51 percent, and diesel by 47 percent.

• Currently, gasoline costs $0.88 per liter while diesel costs $0.7 per liter, according to Global Petrol Prices. While a relatively low price globally, as one of the world's poorest nations, the rates are still higher than other wealthier countries in the region, such as Trinidad and Tobago, Panama, Mexico, Colombia, Ecuador, Guatemala, and Bolivia. Haiti neither produces oil or oil products nor has stocks, making it vulnerable to global price fluctuations.

As a result of the violent response to the fuel price changes, the government temporarily suspended the price reform. The measure, which was a part of a reform plan agreed to with the IMF in March, was designed to increase government revenue and support public investment in areas such as health, education, and public safety. Known as a staff-monitored program, this reform was aimed at improving policy implementation to facilitate financial support from other donors, namely $96 million in loans from the Inter-American Development Bank, World Bank, and European Union.

• Currently, the Haitian budget is in deficit; one of the factors behind the expanding budget deficit—which is expected to be 2.5 percent of GDP in 2018—is fuel subsidies. In 2015, post-tax fuel subsidies were about $0.34 billion and accounted for 3.6 percent of Haitian GDP, according to the IMF.
• The IMF and the Haitian government plan to revise the fuel reform so that fuel benefits are reduced more gradually and compensatory mitigating measures can be implemented, such as transport vouchers, to protect the most financially vulnerable citizens.
• The IMF believes that benefits from subsidies that are keeping fuel prices below market level are disproportionately distributed in favor of the wealthy. That is why the IMF suggested reducing fuel benefits in favor of increased social expenditures.