Development & Education

Forgiving Haiti's debt

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The Montana hotel reduced to rubble after last week's earthquake in Haiti. (Image by Flickr user UN Development Programme (CC: by-nc-sa))

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Story by Jason Margolis, PRI's "The World"

Haiti owes the outside world slightly more than $1 billion dollars. Those obligations are spread among five major creditors: Venezuela and Taiwan, along with the World Bank, the Inter-American Development Bank, and International Monetary Fund or IMF.

Venezuela's President Hugo Chavez says he'll pardon Haiti's debt for oil imports, but there's no indication of when that will happen and how much of the debt Venezuela will forgive. Still, advocacy organizations welcomed Chavez's announcement, and they're calling on others to follow suit.

The president of Oxfam America, Raymond Offenheiser, says creditors must understand that Haiti’s billion dollar debt is too heavy a burden to carry.

"At a time when a nation is facing such a dramatic calamity, and is in effect on its back and it's faced with rebuilding its national institutions, its state institutions, as well as its civil society institutions, debt forgiveness I think is a first step, and an important step," said Offenheiser. "And we're hoping the IMF can lead and others will hopefully follow.

The head of the IMF has said his organization should erase Haiti's $165 million dollar debt, but that's easier said than done. 

Tom Hart, of the musician Bono’s The One Campaign, explains that somebody else picks up the tab when international financial organizations forgive debt.

"These are all owned by, and controlled by, their shareholders, which are countries like the United States and France and Great Britain," Hart said. "So it is about convincing those nation states to agree, and then have them vote at those institutions to relieve the debt."

Still, Hart is optimistic that Haiti’s debt will be forgiven. He points out that Haiti has no way of paying back the money anyhow. "These loans were given at a time when things were really looking up for Haiti. They were based on assumptions about Haiti's growths and exports and, of course, all those assumptions are now moot."

In recent years, countries such as Uganda and Bolivia have had debt forgiven. They qualified by demonstrating that they had straightened out their economic policies. 

Homi Khara, with the Brookings Institution, says international financial institutions had insisted on that. "They asked for budgetary reforms so that one could track where the monies that were being saved from debt relief would go. And the donors wanted those monies to go to poverty reducing programs."

Kharas says the Haitian government had made strides in the past three years toward greater transparency and fiscal responsibility. As a result, the IMF and other financial organizations relieved about $2.1 billion dollars of Haiti's debt last year. 

Still, concerns have been raised that Haiti's historically corrupt leadership could mismanage the funds that further debt forgiveness would free up. That's why western countries have been hesitant to write a blank check to the Haitian government for reconstruction. 

Nevertheless, Peter De Shazo at The Center for Strategic and International Studies says you've got to give money to Port au Prince. "If you don't provide more funding to the government of Haiti, it's not going to be able to stand itself up; it's not going to be able to carry out the functions that it needs to, to be effective."

Homi Kharas at Brookings agrees a partnership between a donor nation and the Haitian government is necessary. But he adds that certain projects are better done with outside oversight.

"For example, the airport has to be rebuilt, the port has to be rebuilt," Kharas said. "These are very large, technically complex projects. Everybody agrees on them as priorities. So there I think the international community will have a tremendous role to play in providing both the financial resources and the technical expertise to actually put that infrastructure in place."

Secretary of State Hillary Clinton says the US must work as a partner with Haiti, not a patron. She also says that Haiti's needs must be assessed first and money should be pledged after.

The government of Haiti says reconstruction will cost $3 billion dollars and take five to ten years.

PRI's "The World" is a one-hour, weekday radio news magazine offering a mix of news, features, interviews, and music from around the globe. "The World" is a co-production of the BBC World Service, PRI and WGBH Boston. More "The World.

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