Press Release: IMF and World Bank Approve US$1.2 Billion Debt Relief for Haiti
IMF News, July 1, 2009
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- Published: July 1, 2009
Debt relief decision and headline figures
- Haiti was granted US$1.2 billion of debt relief by reaching the completion point under the Enhanced Heavily Indebted Poor Countries (HIPC) Initiative.
- 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).
- Debt relief under the Enhanced HIPC Initiative amounts to US$140.3 million in end-September 2005 net present value (NPV) terms.
- Haiti is expected to receive the equivalent of US$265 million of debt relief in nominal terms under the HIPC Initiative and expected additional bilateral relief.
- MDRI relief would save Haiti US$972.7 million in debt service of which US$486.7 million is 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.
Macroeconomic context and public debt composition
- Haiti’s public debt as of end-September 2008 amounted to 36 percent of GDP.
- About 28 percent of GDP of public debt is owed to external creditors.
- The largest share of Haiti’s external debt is owed to:
- Inter-American Development Bank: 41 percent of total external debt
- World Bank: 27 percent
- Bilateral creditors: 24 percent
Reforms and poverty-reduction measures implemented to reach completion point
- Reforms were carried out despite major natural disasters, a food and fuel crisis, difficult political conditions, and the impact of the global economic downturn.
- Public expenditure management:
- Better focusing poverty reduction spending
- Producing audited government accounts
- Ensuring commitment to an asset declaration law
- Adopting a law on public procurement
- Tax, customs, and debt management:
- Strengthened tax and customs administration
- Improved debt management and reporting
- Education:
- Established a financing mechanism to allow over 50,000 children to attend school
- Allocated over 20 percent of recurrent spending to education
- Made progress toward implementing the teacher training program
- Health:
- Approved an HIV/AIDS prevention and treatment plan
- Improved immunization rates for measles and DPT3
Expected impact and policy guidance from officials
- World Bank (Yvonne Tsikata): Debt relief will significantly reduce Haiti’s debt burden and effectively free resources for growth and poverty reduction; urged prudent management of future borrowing and continued efforts toward stronger public expenditure management and public procurement.
- Finance Minister Daniel Dorsainvil: Debt relief will help invest in growth and poverty reduction programs; noted Haiti’s commitment to reforms over the past four to five years.
- IMF mission chief Corinne Deléchat: 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; cautioned that Haiti’s vulnerability to shocks remains high and emphasized the need to lock in gains through:
- Prudent fiscal policy
- Improved quality and efficiency of public spending
- Strengthened domestic revenue mobilization
- Donor grant financing
IMF and World Bank financial assistance and related support
- IMF support:
- First three-year Poverty Reduction and Growth Facility approved in November 2006 in the amount of SDR 73.71 million (about US$114.4 million).
- June 2008 augmentation of SDR 16.38 million (about US$25.4 million) to help cope with high international food and fuel prices.
- Second increase of SDR 24.57 million (about US$38.1 million) approved in February 2009 to mitigate effects from 2008 hurricanes and the global downturn.
- World Bank support:
- Approved a disbursement of US$13 million in June 2009 as the second installment of a US$23 million Economic Governance Reform Operation program (grant approved January 30, 2007).
- Since January 2005, the World Bank has provided a total of US$278 million in grants for Haiti.
- Approximately US$20 million have been granted from trust funds.
HIPC Initiative and MDRI framework summaries
- Heavily Indebted Poor Countries (HIPC) Initiative:
- Launched in 1996 by the World Bank and IMF to create a framework for multilateral and other creditors to provide debt relief to the world’s poorest and most heavily indebted countries.
- Modified in 1999 with three enhancements:
- Deeper and Broader Relief: External debt thresholds were lowered so more countries became eligible and some eligible for greater relief.
- Faster Relief: Some creditors provided interim debt relief immediately at the decision point; permitted countries to reach the completion point faster.
- Stronger Link between Debt Relief and Poverty Reduction: Freed resources were to be used to support poverty reduction strategies developed through broad consultative processes.
- To date, 35 HIPC countries have reached their decision points, of which 26 (including Haiti) have reached the completion point.
- Multilateral Debt Relief Initiative (MDRI):
- Pledged at the July 2005 G8 Summit to cancel debt of the world’s most indebted countries to help them reach the Millennium Development Goals.
- Under MDRI, three multilateral institutions (IDA, IMF, and the African Development Fund) provide 100 percent debt relief on eligible debts to countries having reached the HIPC completion point.
- MDRI is separate from the HIPC Initiative but linked operationally and is not comprehensive in creditor coverage (does not involve official bilateral or commercial creditors, or multilateral institutions other than the three mentioned).
- The IMF also provided MDRI debt relief to non-HIPCs whose income per capita is below US$380 to ensure uniformity of treatment in the use of IMF resources.
International Monetary Fund press release — July 1, 2009