Haiti gets $1.2 billion debt cancellation after long wait

 EURODAD

(July 2, 2009) Haiti this week got debt cancellation under the Heavily Indebted Poor Countries initiative. Debts worth $1.2 billion have been written off by the World Bank, Inter-American Development Bank and other multilateral and bilateral creditors which participate in the initiative. Haiti has endured a long, drawn out process of waiting for the World Bank and IMF to include it in the HIPC initiative, then with its ‘completion point’ repeatedly put back.

Haiti, with 76 per cent of its population below the poverty line, has been paying some $60 to $80 million a year in debt service. The country suffered and aid embargo between 2001 and 2004 as part of an apparent attempt by the U.S. government to destabilize and topple the government. Since then the government has drawn up a Poverty Reduction Strategy Paper – one of the conditions for the HIPC initiative, and signed a Poverty Reduction and Growth Facility agreement with the IMF. The latter resulted in excessively tight fiscal and monetary policy. Another condition was the enactment of a new public procurement law and audits of a sample of government contracts.

With these completion point triggers now in place and pressure from US legislators to act, the World Bank and IMF boards this week granted Haiti debt relief. This is not before time. Haiti Support Group commented "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?"

In the last few years the island country has suffered from repeated storms, further devastating agriculture and infrastructure. Last year, following four consecutive hurricanes, Camille Chalmers, secretary-general of the Plateforme Haïtienne de Plaidoyer pour un Développement Alternatif, commented: "it’s really incomprehensible that the Haitian authorities are unlocking only 35 million gourdes (US$875,000) for victims of the recent weather, while they are forced to pay between US$5 and 6 million for a single month (in debt service)". Now Haiti is being affected by the economic crisis in the USA, another event for which it is not in any way responsible. PAPDA also points out that “approximately 40% of the debt was contracted during the Duvalier regimes. This is an illegitimate debt since a large part of it was misappropriated and the funds were not used for the public interest”.

Though it has come late, with tough conditions, and with no recognition of illegitimacy, this debt cancellation will be a further step on the way to economic justice for the long-suffering people of Haiti. The way forward is uncertain, however. Haiti Support Group has raised a red flag, saying they would hope the savings on debt service could be ploughed into "more state support for national production for national consumption". However, they write "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".

EURODAD (European Network on Debt and Development) is a network of 57 non-governmental organizations (NGOs) from 18 European countries working on issues related to debt, development finance and poverty reduction. This article first appeared on the EURODAD website and may be viewed at http://www.eurodad.org/whatsnew/articles.aspx?id=3774

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