IMF cancels Haiti debt

WASHINGTON, United States, Thursday July 22, 2010 – The International Monetary Fund (IMF) has approved the full cancellation of Haiti’s US$268 million debt to that institution.

It has also approved a new three-year arrangement for that Caribbean country under the Extended Credit Facility (ECF) requested by the authorities to support the country’s reconstruction and growth programme. 

Both decisions, announced yesterday, form part of a broad strategy to support Haiti’s longer term reconstruction plans, following the devastating earthquake of January 12th, 2010. The cancellation of existing debt was advocated by IMF Managing Director Dominique Strauss-Kahn in the days following the disaster as part of a concerted international effort to launch a “Marshall Plan” for the reconstruction of the country. 

The new programme provides a strong and forward-looking framework to support economic stability and reconstruction in the country, and will also help catalyze donors’ contributions.

“Donors must start delivering on their promises to Haiti quickly,” Strauss-Kahn said, “so reconstruction can be accelerated, living standards quickly improved, and social tensions soothed.” 

At a high-level donors’ conference in March, the international community pledged US$9.9 billion to Haiti’s reconstruction, of which US$5.3 billion is to be disbursed over the next 18 months.

Resources freed by IMF debt relief will help Haiti to meet substantial balance-of-payments needs exacerbated by the earthquake. The debt relief is financed by the Post-Catastrophe Debt Relief (PCDR) Trust Fund, recently established by the Fund to help very poor countries hit by catastrophic natural disasters (see attached factsheet). 

The new ECF arrangement will provide about US$60 million over three years to boost Haiti’s international reserves and help the central bank manage potential swings in the value of the local currency – important to avoid raises in the prices of basic commodities consumed by the poor – without adding to the country’s net debt. 

“The new programme will provide a coherent macroeconomic framework to support the implementation of our Action Plan and ensure efficient spending and absorption of aid inflows,” Haiti’s Minister of Economy and Finance Ronald Baudin said.

The IMF will also provide a comprehensive medium-term technical assistance program aimed at strengthening state institutions, concentrating in the areas of tax policies, revenue administration, budget preparation and execution, and helping the country in organizing its first ever issuance of government securities.

“Improving the business environment and fostering private credit and investment will be essential to support growth,” Charles Castel, Governor of the Bank of the Republic of Haiti said. “The Fund’s technical assistance will help rebuild economic institutions and build capacity.” 

On the same day that the IMF announced the debt cancellation and the new programme, the Inter-American Development Bank (IDB) approved US$118 million in grants to improve electricity and water services in Haiti’s capital, Port-au-Prince, which were severely affected by the earthquake, and to upgrade highways and roads.