IMF, IDB, World Bank Forgive $1.2 Billion of Haiti's DebtBy Bryan Schaaf on Tuesday, June 30, 2009.
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The World Bank and the International Monetary Fund said their boards decided this week to forgive Haiti's obligations to the two organizations, a move that triggered previously announced debt relief from the Inter-American Development Bank.
The actions erased nearly two-thirds of Haiti's outstanding debt. As of April, Haiti owned more than $1.9 billion, according to the Washington-based Center for Economic and Policy Research.
"This is a pretty big victory, definitely. This is what we've been wanting," said Dan Beeton, an analyst with the center, said by phone from Washington. "It's a shame it had to take so long."
Until now, the desperately poor country, where more than 80 percent of its approximately 9 million people live on less than $2 a day, has been paying about $1.6 million each month to the World Bank, according to debt relief advocates at the Jubilee USA Network.
A significant portion of the debt forgiven Tuesday dates back to loans that lined the pockets of Haiti's dictators, especially Francois "Papa Doc" and Jean-Claude "Baby Doc" Duvalier, whose father-son dynasty ended in a 1986 popular rebellion.
Haiti was added to the World Bank and IMF's debt cancellation program for heavily indebted poor countries in 2006. The Inter-American Development Bank previously approved debt relief for Haiti, pending its completion of that program.
But it took several years for Haiti to implement reforms that included auditing government accounts, adopting a law on public procurement and strengthening tax and customs administration, as well as debt reporting. Other steps included approving an AIDS prevention and treatment plan, financing school tuition for children and improving immunization rates.
That was accomplished in spite of years of turmoil, including last year's food riots that toppled the prime minister and four tropical storms that killed some 800 people and caused more than $1 billion in damage.
Finance Minister Daniel Dorsainvil praised the announcement in a statement issued through the World Bank, saying the millions freed up from debt payments "will help us invest in growth and poverty reduction programs."
Others were skeptical about the benefits of the move. Haitian economist Kesner Pharel said debt forgiveness will make it far more difficult for Haiti to get new loans, impeding the government's ability to finance much-needed improvements in infrastructure and other areas.
"I don't see the government for the next five to 10 years having a lot of money. It's a bad idea. It's a cost, not a benefit," Pharel said. Haiti is the 26th country to have its debt forgiven under the initiative, a list that includes Rwanda, Sierra Leone, Honduras and Bolivia.
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United States Cancels 100% of Haiti's Bilateral Debt
WASHINGTON - United States Ambassador Kenneth H. Merten and Haitian Minister of the Economy and Finance Daniel Dorsainvil today signed a bilateral debt relief agreement under the enhanced Heavily-Indebted Poor Countries (HIPC) Initiative. Recognizing Haiti’s successful completion of the HIPC Initiative, approximately $12.6 million – 100% of Haiti’s debt to the United States Government – will be forgiven under the terms of this agreement.
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“I wish to congratulate Minister Dorsainvil and the entire Haitian government for their efforts in favor of fiscal responsibility,” said Ambassador Merten. “I am pleased to announce that we have now signed a bilateral Debt Reduction agreement with Haiti.
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Under this agreement, the United States will erase 12.6 million dollars of bilateral debt, eliminating 100 percent of the Haitian government’s outstanding debt to the United States. “
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Haiti's successful implementation of economic and financial reforms was a critically important factor leading to these international commitments to provide debt relief to Haiti. This summer, Haiti met the requirements to complete the Heavily Indebted Poor Countries (“HIPC”) initiative, qualifying Haiti for over 1.0 billion dollars of debt relief from multilateral and bilateral creditors.
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The agreement signed Friday, Sept. 18th implements the U.S. portion of a multilateral accord that the Paris Club group of official creditors negotiated with Haiti on July 8, 2009, to cancel approximately $62.7 million in official debt. Haiti’s Paris Club creditors, including Canada, France, Italy and the United States intend to provide $152 million in additional debt cancellation beyond the requirements of the HIPC Initiative. As a result, Haiti’s entire debt to Paris Club members – estimated at $214 million – will be fully cancelled.
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This debt forgiveness, combined with other multilateral debt forgiveness measures, will help Haiti bring its external public debt down and invest more in the social needs of the country.
Debt cancellation - only
Debt cancellation - only mixed feelings - Haiti Support Group press release - 2 July 2009
http://haitisupport.gn.apc.org/debt-cancellation.html
Like when a wrongly-convicted prisoner is released after years of incarceration, there can only be mixed feelings about yesterday's announcement of the cancellation of US$1.2 billion of Haiti's US$1.9 billion debt. Yes, it is good news that over 60% of Haiti's debt has been cancelled under the terms of the HIPC. But, on the other hand, it is a scandal that it took so long for the international finance institutions (IFIs) to take this step. Just think what could have been done with the money wasted on debt repayments over the last years... Part of the debt that has now been cancelled was composed of loans made to the Duvalier regimes in the 1960s, 70s and 80s. These loans were never used to develop the country and much of the amount was stolen by the Duvaliers and their clique. It remains an outrage that the Haitian people had to continue paying interest on these amounts until June 2009!
The HIPC debt cancellation announced by the IMF and World Bank is good news indeed, but what about those wasted years when the debt was being repaid and Haiti's economy went from bad to worse?
The debt cancellation means that the US$1m per week that the Haitian people have until now been paying to service the debt can instead be used for other purposes. The Haiti Support Group would hope that this would mean more state support for national production for national consumption. However all the indications are that - under heavy pressure from the IFIs - the Haitian government will instead pursue a development strategy based on the deeply-flawed garment assembly export sector. Without ever providing a convincing argument, the IFIs have been pushing for decades for this sector to be the motor of Haiti's economic development. Despite the fact that this sector exists in a virtual vacuum, with only minimal impact on the wider Haitian economy, only a few months ago UN secretary-general Ban Ki-moon and British economist Paul Collier made yet another proposal for international aid to fund garment assembly production in new Free Trade Zones.
Indeed, commenting on the debt cancellation, Corinne Delechat, IMF mission chief for Haiti, yesterday told Reuters that Haiti is a 'land of opportunity if you're an entrepreneur and an investor," adding, "It is a golden moment for Haiti to start investing in export capacity, particularly in textiles."
It looks like the IFIs' interventions will result in the HIPC debt cancellation being a matter of Haiti taking one step forward, while their focus on garment assembly for export will take the country two steps back.
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