Update - Debt Cancellation for Haiti: No Reason For Further Delays

Publication Date:

Publisher: Center for Economic and Policy Research

Author(s): Mark Weisbrot; Luis Sandoval

Research Area: Banking and finance

Keywords: IMF membership; National debt

Type: Report

Coverage: Haiti

Abstract:

This paper presents an update of CEPR’s December 2007 overview of Haiti’s outstanding foreign debt, and how much of this debt is scheduled to be canceled under Haiti’s participation in the International Monetary Fund (IMF) and World Bank’s Heavily Indebted Poor Countries (HIPC) initiative. The paper examines how soon Haiti may complete the HIPC process, and compares the benefits of debt cancellation for Haiti under HIPC versus expedited debt cancellation.

Haiti is the most impoverished country in the Western Hemisphere, with 76 percent of its population below the poverty line and a life expectancy of 58.1 years. Yet it was originally excluded from the HIPC initiative for debt cancellation in 1996 because of a technicality relating to its debt service burden. Although it was subsequently included (in 2006), because of this delay Haiti is currently struggling to meet the requirements for cancellation of most of its total $1.7 billion foreign public debt. Haiti still has to reach the "completion point" under the HIPC initiative in order to receive debt cancellation, which is now not expected until mid-2009 at the earliest.

Since completion point was not reached by September 2008, Haiti now has to pay an additional $44.5 million in debt service payments to multilateral institutions (mostly the World Bank and the Inter-American Development Bank). This is equivalent to about 26 percent of Haiti's spending on public health, where there are many vital unmet needs. Furthermore, this total does not include bilateral debt service of $11.4 million, some cancellation of which can also be expected.

The paper presents other reasons to avoid delay, and argues that there is little reason to believe that the conditions set by the IMF and World Bank for further debt cancellation are likely to benefit Haiti.