HT 3rd Econ. Governance Reform Operation

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This program document presents the third Economic Governance Reform Operation Program (EGRO III) for the Republic of Haiti. The single-tranche operation is expected to be followed by a fourth EGRO within the context of a programmatic series. The series of operations will support policies and reforms aimed at: (i) creating fiscal space for priority expenditures by reducing inefficiencies in the electricity sector; (ii) improving public finance management by prioritizing allocations to key sectors in poverty reduction and growth, and improving information system to enhance revenue mobilization capacity; and (iii) strengthening the framework for public procurement. The operation was designed in the context of improved donor harmonization on budget support agreed with the Government in April 2009. The success of EGRO III faces substantial economic, political, natural disaster, and institutional capacity risks. These risks reflect: (i) possible further impact of the global economic slowdown; (ii) the country's exposure to external shocks, including food and oil price rises and natural disasters; (iii) a potential weakening of support for key policy actions together with a weakening of political stability in the context of legislative elections set for 2010; and (iv) weak capacity to implement and oversee reforms. Mitigating factors include the Government's commitment to reforms through satisfactory implementation of the predecessor operations since 2006, fulfillment of the prior actions, and focus on follow-on measures targeting critical areas of economic management and governance as part of a medium-term vision, which have started generating positive results in a limited but important number of reform areas. Lastly, donors' projects in the areas targeted by the operation will help mitigate institutional capacity risk.