G-7 Members To Cancel Haiti’s Bilateral Debt

A boy in Cité Soleil carries away a hard-won bucket of water from a broken water pipe where many Haitians struggled for their share. The shanty town of Cité Soleil has been left with severely diminished water resources after a powerful earthquake rocked the area on 12 January.

The world’s seven wealthiest countries said they will cancel the debt Haiti owes them at a meeting of the G-7 in Canada on Saturday, The BBC reports.

The G-7 also said it would work to cancel the debt Haiti owes to multilateral institutions.

The announcement provides the latest indication that the international community may cancel Haiti’s economically crippling foreign debt to facilitate recovery from the country’s recent hurricane.

The announcement from the G-7 followed a statement by Dominique Strauss-Kahn, the head of the International Monetary Fund (IMF), calling for the cancellation of Haiti’s debt and the promulgation of a far-reaching aid package, based on grants.

“My belief is that Haiti— which has been incredibly hit by different things—the food and fuel prices crisis, then the hurricane, then the earthquake—needs something that is big. Not only a piecemeal approach, but something which is much bigger to deal with the reconstruction of the country: some kind of a Marshall Plan that we need now to implement for Haiti,” Strauss-Kahn said in a press item on the IMF’s Web site dated Jan. 20.

The IMF promised an emergency, interest-free loan of $100 million to Haiti immediately following the hurricane, inviting criticism from groups who wondered why the funds were not disbursed as grants.

“Haiti desparately needs money delivered quickly, but the last thing Haiti needs right now is more debt. Loans for disaster relief are totally inappropriate,” said Jubilee U.S.A., a coalition of 75 religious and humanitarian groups, in a press release last month.

The IMF has said that it has no administrative mechanism for disbursing emergency grants, but that it hopes to cancel Haiti’s debt in the future.

U.S. Congressman are also calling for the dismissal of Haiti’s debt.

“The United States and the international community have already contributed tremendously to short-term relief efforts in Haiti, but it’s critical that we commit to Haiti’s long-term recovery as well,” said Senator Dodd (D-CN), who filed the Haiti Debt Relief Act on Jan. 28. The bill would direct the U.S. to support the cancellation of Haiti’s debt to multilateral institutions.

The bill would also envision the creation of a trust fund established through the U.S. Agency for International Development to make “investments in Haiti’s infrastructure, including electric grids, roads, water and sanitation facilities, and other critical infrastructure projects.”

Infrastructure investments will be key to Haiti’s long-term development and recovery from the earthquake, a group of academics and aid workers recently said at a conference a New York University.

The Jubilee U.S.A. Network wrote an open letter in support of the legislation. “We strongly believe that, for the forseeable future, all available resources must be invested in Haiti’s recovery, not diverted for debt service,” the letter said.

When the earthquake hit, Haiti owed $1.25 billion to international lenders including the International Monetary Fund, the Inter-American Development Bank and foreign governments, according to the IMF.

Image: Logan Abassi, courtesy of the United Nations @ Flickr.