IMF Takes Two Steps Forward and One Step Back on Haiti

Jubilee USA Encouraged by IMF’s Debt Cancellation for Haiti, Concerned by New Loan

Jubilee USA Network www.jubileeusa.org
July 22, 2010

Contact: Melinda St. Louis, Deputy Director, 202-441-7579
Hayley Hathaway, Communications Coordinator, 202-543-0692

Jubilee USA Network welcomes the International Monetary Fund Executive Board’s decision to cancel Haiti’s $268 million debt to the institution in response to the January 12 earthquake.  Yet the IMF’s decision to provide $60 million in financing support as a new loan raises serious concerns.

When the IMF provided emergency assistance to Haiti as a $102 million loan after the earthquake, Jubilee USA and allies world-wide mobilized, calling for all of Haiti’s debt to international financial institutions, including the post-quake IMF loan, to be cancelled.  

The Fund’s launch of the Post-Catastrophe Debt Relief Trust Fund, through which Haiti’s debt cancellation will be financed, represents an important step forward for the IMF as it initiates a concrete framework that provides debt cancellation and grant support to countries which face devastation beyond their control.

“It is indeed a victory that the International Monetary Fund responded to calls from civil society and governments around the world to cancel Haiti’s debts. Now we must raise our voices again to make sure the Fund understands that a loan of any kind is completely inappropriate for a country in such desperate need,” says Eric LeCompte, Executive Director of Jubilee USA Network.

The $60 million loan approved yesterday is the most concessional loan available from the IMF, with zero percent interest until the end of 2011 and a five and a half year grace period.  If it is held as international reserves as planned, the loan may not add to the country’s long-term debt burden. Still, the decision to provide this assistance as a loan risks putting Haiti into debt yet again.

“The IMF is taking two steps forward and one step back. This is a precedent-setting moment as the IMF has agreed to use internal resources to cancel the debt of a country facing extraordinary need. But, unfortunately, this good news is undermined by the IMF’s new loan. The role of the IMF in Haiti has been long criticized, and this new loan could set Haiti on the wrong path toward a new cycle of debt. The IMF must go further by using its new Post-Catastrophe Trust Fund to provide assistance on grant terms and ensure that this comes without harmful conditions,” says LeCompte.

Six months after the tragic earthquake struck the impoverished country, it is clear that Haiti will need massive support for the foreseeable future. 1.6 million Haitians remain homeless, and at the current rate, it will take 10 to 15 years just to clear the streets of Port-au-Prince of wreckage.

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Jubilee USA Network is an alliance of over 75 religious denominations, development agencies, human rights, and other organizations building the political will for poor country debt cancellation and more responsible global finance to fight global poverty.