Dominican Republic and Haiti: Country Studies

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Haiti: The Economy
Bank (Banque Nationale de Credit) and the Haitian People's
Bank (Banque Populaire Haitienne). Other commercial banks
operating in Port-au-Prince include two from the United States
(Citibank and First National Bank of Boston), one Canadian
(Bank of Nova Scotia), and France's National Bank of Paris
(Banque Nationale de Paris). After a new banking law issued in
1979 empowered the Central Bank with monetary-management
responsibilities, it became involved in controlling credit,
setting interest rates, assessing reserve ratios, restraining inflation,
and issuing Haiti's national currency, the gourde (G; for
value of the gourde—see Glossary)
The gourde has been pegged to the United States dollar
since 1919 at the rate of five gourdes to the dollar. The value of
this fixed exchange remained strong for decades, fluctuating
only with the movement of the dollar. No black market existed
for gourdes until the early 1980s, when unusually high inflation
and large budget deficits eroded the value of the gourde
and brought premiums of up to 25 percent for black-market
transactions. The political crises of the early 1990s and the
ensuing uncertainty, however, exerted heavy downward pressure
on the gourde, despite the Central Bank's efforts to halt
the decline. The effects of the international embargo and the
sharp drop in government revenues reduced the value of the
currency by about 80 percent by 1994. In the year after Aristide's
return in October 1994, the gourde fluctuated between
G14 and G15.5 to US$1. Although the Central Bank pumped
more than US$37 million into the foreign exchange market in
1996, the gourde fell from 15 gourdes to the United States dollar
in September of that year to 16.9 gourdes to the United
States dollar in August 1997. The effects of the depreciation,
together with rising food prices, raised the inflation rate from
15.6 percent in December 1996 to 17.2 percent in July 1997.
In an effort to reduce the rate of inflation and to protect the
stability of the gourde without trying to fix the nominal
exchange rate, the government decided to embark on a stringent
fiscal policy and an aggressive tax collection program. The
government took a number of measures relating to the fiscal
program for FY 1996-97. To cite one example: an important
piece of legislation provided for broadening the base of the
sales tax and unifying its rates, reducing tax evasion among
larger companies, minimizing the number of tax and customs
exemptions, and introducing new mechanisms to help control
public expenditures. Although statistical data in Haiti are, in
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