IMF and World Bank Approve US$1.2 Billion Debt Relief for Haiti

WASHINGTON, DC – Haiti was granted US$1.2 billion of debt relief by reaching the completion point under the Enhanced Heavily Indebted Poor Countries (HIPC) Initiative approved by the Boards of the International Development Association (IDA) and the International Monetary Fund (IMF). Haiti is now the 26th country to reach the completion point under the Initiative. Debt service savings result from the HIPC Initiative (US$265 million) and the Multilateral Debt Relief Initiative (MDRI) (US$972.7 million).

To reach the completion point, Haiti carried out a number of reforms despite a challenging environment marked by major natural disasters, a food and fuel crisis, difficult political conditions, and the impact of the global economic downturn. These reforms were aimed at establishing a more stable macroeconomic environment and at implementing its national poverty reduction strategy. Haiti strengthened public expenditure management by better focusing poverty reduction spending, producing audited government accounts, ensuring commitment to an asset declaration law, and adopting a law on public procurement.

In addition, Haiti strengthened tax and customs administration and improved debt management and reporting. In education, Haiti established a financing mechanism to allow over 50,000 children to attend school, allocated over 20 percent of recurrent spending to education, and made progress toward implementing the teacher training program. In health, Haiti approved an HIV/AIDS prevention and treatment plan and improved immunization rates for measles and DPT3.

“We are very pleased that the Boards of the Bank and the Fund have granted Haiti debt relief. This will significantly reduce Haiti’s debt burden and effectively free resources for growth and poverty reduction” said Yvonne Tsikata, the World Bank’s Director for the Caribbean. “We congratulate the Haitian authorities on this achievement. Going forward, Haiti must take advantage of this opportunity by managing future borrowing prudently, and continuing its efforts and progress towards stronger public expenditure management and public procurement,” Tsikata added.

Debt relief under the Enhanced HIPC Initiative amounts to US$140.3 million in end-September 2005 net present value (NPV) terms1. Haiti is expected to receive the equivalent of US$265 million of debt relief in nominal terms2 under the HIPC Initiative and expected additional bilateral relief. Haiti’s public debt as of end-September 2008 amounted to 36 percent of GDP, most of which—about 28 percent of GDP—is owed to external creditors. The largest share of Haiti’s external debt is owed to the Inter-American Development Bank (41 percent of total external debt), the World Bank (27 percent), and bilateral creditors (24 percent).

By reaching the HIPC completion point, Haiti now is eligible under the MDRI for further debt relief from IDA and the Inter-American Development Bank (IADB). MDRI relief would save Haiti US$972.7 million in debt service of which US$486.7 million owed to IDA and US$486 million to the IADB. While the IMF is a participant in the MDRI, Haiti does not have any MDRI-eligible debt to the IMF.

“This is a very positive development for Haiti”, said Finance Minister Daniel Dorsainvil. “The debt relief will help us invest in growth and poverty reduction programs. Haiti has demonstrated over the past four to five years that it can commit itself to a menu of reforms and respect this commitment.”

“To reach the completion point under the Enhanced HIPC Initiative is a key milestone, and the authorities are to be commended for this important achievement amid severe external shocks,” said Corinne Deléchat, mission chief for Haiti in the IMF’s Western Hemisphere Department. “Debt relief will significantly reduce Haiti’s debt burden and make it possible to increase poverty-reducing spending, allowing further progress toward the Millennium Development Goals. In spite of the debt relief, Haiti’s vulnerability to shocks remains high. A major challenge ahead will be to lock in the gains of debt relief through prudent fiscal policy, improved quality and efficiency of public spending, strengthened domestic revenue mobilization, and donor grant financing.”

Related Articles

Back to top button