Inter-American Development Bank to offer debt relief for Haiti and four other Latin countries

Hunger Notes

(December 1, 2006) The Inter-American Development Bank (IDB)  announced on November 17  that its governing board reached an agreement on a framework for debt relief for Bolivia, Guyana, Haiti, Honduras and Nicaragua.  

Important details of  the debt forgiveness initiative remain to be agreed upon, including the total amount to be forgiven, which may range between $2.1 and $3.5 billion.  Nor is it clear when actual debt forgiveness will start, though it is planned that arrangements will be finalized in January.

The cost of the initiative will be borne by the bank itself.  Latin American nations had argued for a contribution from the United States and other developed countries because of concerns that the debt forgiveness  would weaken the IDB's ability to provide subsidized loans in the future. The United States evidently  prevailed on this issue, however, and will make no contribution. 

According to the Miami Herald, nations must still obtain the International Monetary Fund's  approval of their monetary and fiscal policies, in order for the debt forgiveness to proceed.  Haiti still lacks this IMF approval, but is expected to obtain it, according to U.S. officials.

Non-governmental organizations have raised several issues relevant to this debt forgiveness. 

• The Jubillee USA network criticized the  agreement for Haiti being conditional on IMF approval.

Debayani Kar, spokesperson for the Jubilee USA Network, said  “Under the terms of the agreement, Haiti will not benefit from IDB debt cancellation until it implements a series of harmful economic reforms mandated by international financial institutions, led by the International Monetary Fund (IMF) and World Bank. Given that more than half of Haiti’s $1.3 billion in debt was contracted by the brutal dictatorships of Francois and Jean-Claude Duvalier, it is unjust that Haiti is being asked to comply with economic policies such as privatization of basic services or increased trade liberalization before obtaining full debt cancellation."

• The general policy, exemplified here by Haiti,  that loans and grants from multilateral institutions and countries will typically not be made without IMF approval for a country's policies, is opposed by the NGO coalition 50 Years is Enough.
• There has also been extensive concern that multilateral institutions and developing countries make promises of assistance which they do not fulfill, which has been true in the case of Haiti.  See Inter-American Development Bank debt cancellation for Haiti--just another promise?   Debayani Kar and Tom Ricker December 7, 2006

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