The Crazy $1 to HTG Exchange Rate

To add to the already difficult economic outlook in Haiti, the exchange rate there has been fluctuating at a level that is difficult to comprehend. I am not an economist and I do not fully understand the nuances of foreign currency and how/why they fluctuate. I can, however, speak to how certain people will be affected by these fluctuations and especially to the consequences for All Things New. 

Here are the last 2 exchange rates that we have had when sending money down:

 - August 1 = 117HTG to $1 (about the same on the street)

 - September 1 = 116HTG to $1 (about the same on the street)

Here is what you would find if you went to exchange money today:

 - In banks: 96HTG to $1 (with a $50 limit on exchanges)

 - On the Street: anywhere from 70/80HTG to $1 (this is how most people exchange their money)

 - On the International Market: 112HTG to $1

Here are some questions you may be wondering:

How does this affect All Things New?

This greatly affects our buying power in the short term. When we exchange money, we will get less gourdes in return for the same number of dollars. At the same time, consumer goods (and especially what we purchase for the kids to eat and for their schooling) have not dropped in price at all because they are almost all imported. The bottom line is that the next time we will have to send almost 20% more American money (depending on the exchange rate) than we did the last time. This will probably not last long, but it will be expensive while it does. It could also affect our employees because the money that we pay them will exchange for less and in turn purchase less.

How does this affect Haitians?

If everything else was equal, an increase in the strength of the HTG compared to other currencies should do nothing but help the average Haitian. The problem is that a huge percentage of the Haitian GDP is remittances from America and France so that the power of those remittances will lessen. On top of that, only Haitians use the Haitian gourde and it is only used in Haiti. If Haiti was a net exporter or if they at least had a few products that were exported regularly, many Haitians would benefit from this increase. The reality is that Haiti itself is insulated from any gains in currency value because the currency is just not used or traded outside of Haiti. The bottom line is that it will very slightly effect most Haitians negatively in the short-term because most Haitians rely on foreign money to some extent, but there will be very little effect overall.

Why has it fluctuated so much in the past 8 days?

Occasionally the Haitian government "dumps" a huge amount of American money into the system and holds back the HTG in the National Bank. This artificially decreases the market for the dollar and increases the market of the gourde for a short amount of time until the market corrects itself. The market corrects itself because most people and shops will only take gourdes so that the people who get American money will have to exchange that money to use it and eventually American money is back in the banks and Haitian money back on the streets.

What does this mean long term?

Probably nothing. This has happened 2 other times since we have been in Haiti, and each time the short-term effect was annoying and expensive but the long term effect was minimal and the exchange rate will probably go at least back to where it was if not higher.

Is Haiti's economy growing stronger?

No. Most of us would assume if our currency is strengthening compared to other countries, then that means our economy is growing as well. The problem is that the exchange rate on the international market is virtually the same as it was 2 weeks ago and only in Haiti itself has the exchange rate fluctuated like this.