Haiti’s Turnaround and its Impact on Remittances

Introduction

This blog examines the role of remittances on Haiti’s economy. It points to its growing relevance over time, and the dependence on transfers from the US, while describing Haiti’s deteriorating social, political and economic context. The blog also points to a drop in flows in 2022 — which may influence the economy as a result of less Haitians sending money. The blog also points to the importance of providing support to its payment network and tie the flows to access to financial institutions.

1. Haiti Today

As one of the poorest and most under-developed country in the region, Haiti is also among the most unstable countries in the Americas — it is a weak and fragile state without a functioning democracy and a collapsed economy. Gangs continue exploiting the political vacuum left by the assassination of President Jovenel Moise at his home in Port-au-Prince on July 7, 2021. This situation is also exacerbating Haiti’s food insecurity. The latest Integrated Food Security Phase (IPC) report reported that an unprecedented 4.7 million Haitians — nearly half the population — are experiencing emergency levels of acute food insecurity, including 19,000 people in phase 5 catastrophic hunger.

From a weak to failed state, Haiti’s gradual weakening (see Figure 1 and Table 1) has been shaped by cyclical political problems, as well as natural disasters (refer to Annex 1). As one of the poorest and most under-developed countries in the region, post-Duvallier Haiti heavily rely on its diaspora and their resources. In the midst of this situation, the US is working on implementing the Global Fragility Act, and remittances and its diaspora can be part of a solution.

Figure 1: Haiti’s Chronic Political Instability and Lack of Rule of Law

Source: World Bank

Table 1: Haiti’s Gradual Weakening of the State

Source: Elaborated by author.

2. Migration Trends

Haitian migration is connected to its political crisis and economic dysfunction as well as the devastation of natural disasters in a country whose infrastructure is unprepared to handle regular shocks. The outflow of Haitians increases with the deterioration of the country’s economy in addition to the cyclical crisis that it has had over political rule. But as of 2022 there may be 2 million Haitians living abroad, nearly doubling since the 2010 earthquake (see Table 2).

Table 2: Migration from and Remittances to Haiti

Source: UNDESA

As of December 2022, 120,000 Haitian migrants will have arrived to the US border since January 2021. These entries add to the migrant population overall, even though many come from third countries, as can be seen in Figure 2.

Figure 2: US Border Encounters of Haitian Migrants

Source: DHS

3. Remittances to Haiti

One of the consequences of the economic and political deterioration is not only migration but Haitian migrants sending money to their relatives. As the economy deteriorates with export and foreign assistance decline, natural disasters intensify and migrants leave (most often, in an irregular way). Once they reach their destination abroad, people send money. The participation of remittances increased after the 2010 earthquake, and doubled in 2022 to more than 23 percent of GDP, just as migration also nearly doubled in that period (see Figure 3).

Figure 3: Economic Growth and External Factors in Haiti

Source: Produced by author with data from Central Bank of Haiti

Haitian remittances reached US$ 3.1 billion in 2022. For every US$ 10 remitted back to Haiti in 2022, at least US $8 came from the United States. However, in 2022 remittances will decline 16 percent amid a severe crisis in the country (see Table 3 and Figure 4). This decline may be attributed to in transit migrants unable to reach their destination, as well as by Haitians sending less money than in 2021. Either way, there is a decline in volume and number of transactions (see Table 3). Some companies report a reduction in the principal amount sent, too.

Table 3: Remittance Volume per year in Haiti

Source: Central Bank of Haiti

Figure 4: Remittances to Haiti from…

Source: Central Bank of Haiti

These flows are the key macroeconomic performance, and they have grown to become the main source of foreign exchange. When looking at the main sources of foreign savings, remittances capture more than 60 percent of foreign inflows, as shown in Figure 5. In turn, they serve as a lifeline, but may also influence the country’s currency.

While the effect of remittances on the exchange rate respond more to supply and demand for the Gourde among remittance recipients (see Figure 6), it is critical to remember the importance of tying these flows to the formal financial sector and particularly during a stage of economic stabilization.

Figure 5: Haiti’s Sources of Foreign Exchange

Source: Central Bank of Haiti

Figure 6: Monthly Trend of Remittances (2016-2022)

Source: Produced by author, with data from Central Bank of Haiti

4. The Role of Remittances as a Factor of Stabilization

For remittances to contribute to mitigate state failure they must be considered within the implementation of security, political, administrative, judicial, and economic solutions. The most pressing solution is the urgency to protect the payment network

Haiti’s remittance payment network is led primarily by three private businesses with more than 1,000 locations across the country performing over 900,000 payments a month: 30 percent of locations carry out half of these payments. With continued violence and criminal activity, these mostly bank branch locations will likely fall into problems of bank robbery, and remittance recipient client’s safety may be endangered by extortion or kidnapping.

Accelerating the use of digital transactions through a nationwide payment and commerce ecosystem can mitigate personal and financial risk. Commercial entities that rely on expenditures from remittance recipients need further physical and financial protection. These entities need to rely on a close-knit payment and commercial ecosystem that ensures their continuity by having access to electronic payments (like digital transfers and bank account transfers). It is also important to provide them with credit in order to continue to perform and avoid a disruption in largely food imports.

Family remittances play an important role on the economic front and help provide solutions to reduce the collapse of the state. Specifically, there are several considerations to keep in mind to enhance the impact of remittances. Here are some:

• Securing the safety of payment networks, protecting them from the vulnerabilities of extortion, robbery or bank attacks;
• Ensuring that the flows provide resources for food imports and allow for a minimum operation of merchant stores;
• Leveraging remittance for savings and credit access by banking financial institutions;
• Reaching out to the Haitian diaspora for elite cohesion and consensus building and the country’s future.

Annex 1:

Natural disasters in Haiti

• 1989 Flooding in Gonâve
• 1994 Hurricane Gordon
• 1998 Hurricane George: displaces 170,000 people
• 2004 Hurricane Ivan, Jeanne and rains destroy housing, more than 300,000 people displaced and over 3000 die
• 2005 Hurricane Dennis floods several cities
• 2006 Floods affecting the entire country for a week
• 2007 Floods and rain damage infrastructure
• 2008 Tropical storm fay, hurricane Gustav; Hanna and Ike displace 20,000 people
• 2009 Heavy rains in the capital
• 2010 Earthquake kills over 10,000 people and infrastructure; cholera pandemic explodes
• 2012 Hurricane Sandy affects 200,000 people
• 2016 Hurricane Matthew
• 2018 Earthquake kills 12 people
• 2020 Hurricane Laura kills 32 people
• 2021 Earthquake 7.2 scale, causes infrastructure damages