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Comment: It’s time to cancel Haiti’s debt

Comment: It’s time to cancel Haiti’s debt

The Haitian earthquake has devastated one of the poorest countries in the western hemisphere. Millions of dollars of aid has been pledged, but Haiti’s future remains unclear as the weight of foreign debt remains.

By Hannah Redmond

The weeks and the months to come will see the international community supporting Haiti on a scale not seen since the Asian tsunami. The need for food, water, shelter and medicines are the obvious priority. But amid the pressing need and longer term rebuilding, the question of foreign debt needs to be raised. Will international institutions and creditors continue pursuing payments from this devastated country?

The debt of Haiti – predominately amassed by the Duvalier dictatorship in the 1960s and 1970s – has never benefited the county’s people, but has prevented its growth for years and ensured 75% of the population live below the poverty line. Now more than ever, it’s time to cancel the debt that guarantees this country remains in poverty. Repayments in excess of $1.2 million a month cannot continue to be paid by Haiti if it is to truly recover from disaster.

Although disputed by creditors, developing country foreign debt should and can be cancelled. This is proven by the significant action and success of the international community to reduce foreign debt in the past. The Paris Club of nineteen creditor nations, including the UK and US, cancelled their collective Haiti debt totalling $215 million last year. This was huge progress, but Haiti’s total debt to other creditors still stands at $890 million and worryingly keeps on rising as interest adds up.

Creditor countries outside the Paris Club, such as Vietnam and Taiwan, are refusing to cancel Haiti’s debt, even with added pressure from the international community following the earthquake. Although it is timely and imperative that every government creditor cancel their debt, these loans are not the biggest problem. International financial institutions (IFIs) like the World Bank and International Monetary Fund (IMF) are the biggest creditors. It’s these institutions that need to drop the debt if we are to see a real difference.

A huge portion of Haiti’s $890 million debt is owed to the IMF, which last week proudly announced it was offering a further $100 million loan to Haiti, whilst dismissing debt relief in the same breath. They’re simply offering financial assistance with one hand only to take it away with the other. Their ‘generosity’ extended as far as offering the loan interest free until 2011, without conditions. In the aftermath of disaster, I think many, including myself, will find the offer of a loan rather than aid deplorable. But at least the IMF has recognised the conditionality surrounding their loan is unacceptable, if only in this one instance.

As we’ve seen across the developing world, the conditions of IFIs loans generally favour developed countries rather than development, often meaning public sector pay is capped or reduced, state support for rural livelihoods cut, and borders to international trade opened. Haiti, too, has been forced through IFIs loan conditions into adopting policy that has adversely affected national growth. You only have to look to trade liberalisation, a condition imposed by the IMF in the 1980s, which destroyed the country’s rice production by reducing import tariffs and allowing cheap, America imports to flood the market and destroy a thriving national industry.

The payments, interest and conditions attached to loans can devastate countries. The repayments ensure people remain in poverty and the conditions often wrongly interfere in economic policy which can hinder national development.

It’s clear debt has and will continue to negatively affect Haiti financially and beyond through wider political and social damage. The debt repayments have undoubtedly been a huge contributing factor to the county’s poverty for decades. As Haiti begins to rebuild after such devastation, it should be allowed to flourish and not be held to ransom by our international institutions. Leading humanitarian agencies and governments, including the UK, are already calling for debt to be cancelled. For Haiti’s independence and future growth, foreign debt needs to be dropped now.

Hannah Redmond works for a leading development charity

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