PIH Applauds Legislation to Eliminate Haiti's Debt and Improve Infrastructure
Posted on Feb 2, 2010
In the past two years, Haiti has faced several crises--from four consecutive hurricanes and tropical storms last year to sharp food and fuel price increases and a downturn in the global economy. During all of this, the international community required Haiti--already teh poorest country in the western hemisphere--to continue paying off a debilitating debt, leaving it stretched far too thin to support the basic economic and social needs of its population. In the light of the recent earthquake, the worst Haiti has experience in at least 200 years, Haiti's economic and social burdents have grown substantially.
Should the international community expect Haiti to continue the same debt payments too?
Thankfully, Senators Chris Dodd (D-CT) and Richard Lugar (R-IN) believe the answer is "No."
Last week, the senators introduced legislation focused on bringing Haiti debt relief in order to speed recovery efforts following the January 12th earthquake. This legislation would instruct the U.S. Treasury to direct representatives to each international financial institution (IFI) to advocate for the cancellation of all of Haiti’s remaining debt obligations, including any additional debt incurred in the recovery. In addition, the legislation would ensure relief for any remaining debt service payments, as well as encourage IFIs to provide future assistance to Haiti in the form of grants, as opposed to loans.
Haiti has long been over-burdened by international debt. Just after Haiti’s birth as an independent nation in the early 1800s, France anchored its warships offshore and demanded 150 million francs ($21 billion in current dollars) to compensate for the loss of its slave colony (the newly independant Haitians). Those debt repayments, required to ensure Haiti’s freedom, took 122 years to pay back. In the late half of the 20th century, the Duvalier dictatorship plunged the country further into debt. In an effort to rebuild the nation after decades of dictatorship, Haiti accepted several loans from IFIs, amassing even more debt. In line with the IFI promoted policies at the time, these loans also came with a strict set of conditions, including requirements to privatize state-owned enterprises, cut spending on social services and liberalize trade policies.
In the last few years, the U.S. government has asked theTreasury Department to help fast-track the cancellation of Haiti’s debts to various IFIs. In 2009, Secretary of State Hillary Clinton pledged $20 million, which was intended to cover Haiti’s remaining debt payments to the World Bank and Inter American Development Bank. On June 30 of last year, Haiti reached the “completion point” in the Heavily Indebted Poor Countries (HIPC) program, making them eligible for further debt relief.
As of today, $1.2 billion in debt has been cancelled, though this only accounts for all debts acquired before 2004. Another $1.05 billion remains; this represents debt acquired in the last five years, mainly to multi-lateral banks. In the next decade, Haiti is projected to pay more that $100 million in debt payments to the IMF and IDB. This money would be better spent on Haiti's own recovery efforts.
PIH believes that it is unethical to allow Haiti to fall deeper into debt as it recovers from the horrific events of the last month. The international community’s effort to aid Haiti should not also handcuff its citizens with debt that will take decades to pay off. The international community's response must come in the form of grants without harmful conditions, not loans. We have seen policies put in place that would hamper Haiti’s long-term recovery. The IMF responded to the earthquake by announcing an offer to loan Haiti $102 million.
Though the decisions both to offer aid through loans and to not cancel Haiti’s outstanding debt has sparked criticism. The IMF stated that it cannot provide grants. Instead, the loan offered to Haiti would be interest-free until 2011.
More work needs to be done to convince creditors to free Haiti of its debt burden and invest in the future of Haiti's citizens. The United States should use its influence to ensure the immediate and complete cancellation of Haiti’s debts. The efforts by Senators Dodd and Lugar are a step in the right direction.
