Haïti: the Priority of Debt Payment

3 March 2005 by Camille Chalmers

PRESS RELEASE FROM PAPDA (Haitian Platform to Advocate for an Alternative Development)

On 4 January 2005, the Interim Government of Haiti cleared US$ 52.6 million to the World Bank World Bank
The World Bank was founded as part of the new international monetary system set up at Bretton Woods in 1944. Its capital is provided by member states’ contributions and loans on the international money markets. It financed public and private projects in Third World and East European countries.

It consists of several closely associated institutions, among which :

1. The International Bank for Reconstruction and Development (IBRD, 189 members in 2017), which provides loans in productive sectors such as farming or energy ;

2. The International Development Association (IDA, 159 members in 1997), which provides less advanced countries with long-term loans (35-40 years) at very low interest (1%) ;

3. The International Finance Corporation (IFC), which provides both loan and equity finance for business ventures in developing countries.

As Third World Debt gets worse, the World Bank (along with the IMF) tends to adopt a macro-economic perspective. For instance, it enforces adjustment policies that are intended to balance heavily indebted countries’ payments. The World Bank advises those countries that have to undergo the IMF’s therapy on such matters as how to reduce budget deficits, round up savings, enduce foreign investors to settle within their borders, or free prices and exchange rates.

(or 1.946.200.000,00 Gourdes). You don’t need to be an expert to work out the huge investments which could have been carried out for the benefit of our people with a sum which, in comparison to our public finances is colossal. This move, which had been long awaited by the international financial institutions (IFIs) seems to have convinced the lenders to honour, at least in part, their promises of urgent assistance to the country. These were announced to much media fanfare both during and after the Washington Conference of 18 and 19 July 2004.

This transaction, made by the interim authority in the country, shows that yet again public funds are not being used, as we would assume and hope, to respond to the needs of the population - a population which for the most part, is blighted by poverty, illiteracy, insufficient access to primary health care Care Le concept de « care work » (travail de soin) fait référence à un ensemble de pratiques matérielles et psychologiques destinées à apporter une réponse concrète aux besoins des autres et d’une communauté (dont des écosystèmes). On préfère le concept de care à celui de travail « domestique » ou de « reproduction » car il intègre les dimensions émotionnelles et psychologiques (charge mentale, affection, soutien), et il ne se limite pas aux aspects « privés » et gratuit en englobant également les activités rémunérées nécessaires à la reproduction de la vie humaine. and education. Of the government’s 2004-2005 budget, 22% of public expenditure has been ring-fenced for debt service Debt service The sum of the interests and the amortization of the capital borrowed. repayments. In relative terms, this in effect means that debt service actually constitutes the number one priority policy of the present government.

The decision to continue to service an illegal, illegitimate and criminal debt given the country’s current circumstances is both absurd and irresponsible. Our country is by far the poorest in the hemisphere and figures for the fiscal year 2003-2004 show an alarming deterioration. We are a country in fast economic decline with deeply unacceptable social indicators. Our country is in deep political and institutional crisis and furthermore, during 2004, we were hit natural disasters which almost completely destroyed the localities of Fonds-Verettes, Mapou and the town of Gonaïves. One of the country’s most important towns was totally destroyed resulting in over 350.000 people affected. These devastations have had disastrous economic consequences on agricultural production in several regions of the north, north-west and the Artibonite. This has caused rising food insecurity, the unemployment of hundreds of thousands of citizens and people plunged into distress and despair. How can we, in such economic circumstances, dare to ask that our country honour debt service repayments - a debt which, at least in part, has been plundered and used for personal enrichment?

How do we explain that funds, solemnly promised in July 2004, in the framework of a programme which provided evidence of massive and urgent financial needs of our country, were never dispersed during the second half of that year? How can we describe as generous, assistance which took over six long months to become a reality and was only prompted by the transfer of US$ 52 million on 4 January?

However we emphasise that the hypocrisy that characterises the relations between our country and the IFIs is a basic characteristic of the international aid market which aims only to maintain the dependence of southern countries on the north and which increases the pillage of our resources. Let us recall that the volume of liquidities Liquidities The capital an economy or company has available at a given point in time. A lack of liquidities can force a company into liquidation and an economy into recession. transferred by southern countries often represents between seven and eight times the total volume transferred in so-called official development aid. Haïti, despite its depressing economic state, has actually become a net exporter of capital to the World Bank over previous years.

In a press statement published on 8 January 2005, i.e. four days after the payment transferred by Haïti, the World Bank announced that US$ 73 million would be dispersed to the country. Of this sum, US$ 61 million would be devoted to “economic governance” support measures. We note that the famous generosity displayed by the IFIs in fact prioritises sectors associated with the process of privatisation of the country’s main public companies. It is significant that the first tranche of funds, despite a confused message from James Wolfhenson, does not support job creation, support to small or medium enterprises or access to basic social services but in fact supports the putting in place of market procedures designed to accelerate the transfer of capital to transnational corporations. It is a strange and surprising priority given the country’s state of economic collapse and urgent humanitarian need. The World Bank operates in a world dominated by the interests of the great powers and transnational companies which have, over the last two decades, acquired a significant amount of capital following the process of privatisation of our nations’ resources and assets. Many of these privatisations have been sullied with corruption and financial scandal.

And on this point, it is important for the provisional government to remain vigilant against all temptation to rapidly privatise public utilities. It is not for the current interim authorities to take such important decisions which serve to alter the economic structures of our country. It is right for them to commission research into the efficiency and profitability of public companies, however only an elected government can decide on what final course of action to take following extended consultation with all relevant actors and consumers. The National Interim Commission on Public Markets must be balanced in its composition to avoid a situation of a clear conflict of interests whereby an individual is at the same time both judge and judged in the evaluation of expressions of interest Interest An amount paid in remuneration of an investment or received by a lender. Interest is calculated on the amount of the capital invested or borrowed, the duration of the operation and the rate that has been set. from potential purchasers.

It is important to highlight to the haitian people that we are in fact talking about the signing of a structural adjustment Structural Adjustment Economic policies imposed by the IMF in exchange of new loans or the rescheduling of old loans.

Structural Adjustments policies were enforced in the early 1980 to qualify countries for new loans or for debt rescheduling by the IMF and the World Bank. The requested kind of adjustment aims at ensuring that the country can again service its external debt. Structural adjustment usually combines the following elements : devaluation of the national currency (in order to bring down the prices of exported goods and attract strong currencies), rise in interest rates (in order to attract international capital), reduction of public expenditure (’streamlining’ of public services staff, reduction of budgets devoted to education and the health sector, etc.), massive privatisations, reduction of public subsidies to some companies or products, freezing of salaries (to avoid inflation as a consequence of deflation). These SAPs have not only substantially contributed to higher and higher levels of indebtedness in the affected countries ; they have simultaneously led to higher prices (because of a high VAT rate and of the free market prices) and to a dramatic fall in the income of local populations (as a consequence of rising unemployment and of the dismantling of public services, among other factors).

IMF : http://www.worldbank.org/
agreement as the full title indicates and as was indicated in the official communiqué of the World Bank (structural adjustment and support for economic governance reform). Annex 2 of the agreement specifies that the government must recruit “international consultants specialised in the field of market procedures”. In its reform of CAMEP, AAN, APN, EDH and Téléco (the state telephone company), the government will engage international experts to manage the financial audit. However during the process of rationalisation of public expenditures, have we in fact checked that no haitian is competent to carry out this work? Indeed Haitian firms that operate in the financial sector are excluded from the calls for expressions of interest process as defined by the World Bank. How do we justify this exclusion?

The documents signed with the World Bank demonstrate very clearly the objectives of the IFIs in the international development aid market. Loans are often extended to a poor indebted country to allow it to continue to make debt service repayments, accelerate the process of unequal integration into the global economic system and strengthen the power of transnational corporations.

PAPDA condemns the transfer of US$ 52.6 million by the current government, US$ 40 million of which was hauled from our reserves to clear these arrears. The improvements in public sector expenditure management will have essentially no impact on our national economy when increasing resources will still be absorbed by debt service repayments. External debt service has more than doubled between 1996 et 2003 and our country has already reimbursed the debt several times over. We condemn the model of development imposed on us by the great powers and the IFIs which keep us in a continued debt trap and in a situation of permanent macroeconomic instability, as is sadly and painfully the case with our neighbours the Dominican Republic who devote 40% of their fiscal revenues to external debt service repayments. The Haitian people have already displayed its support for the complete cancellation of our external debt burden via the Jubilee 2000 Campaign. In 2000, over 135.000 citizens, men and women of our country, signed the global petition demanding the complete cancellation of the debts of poor countries. This demand has been publicly supported by numerous international institutions. The Vatican for example has demanded external debt cancellation on several occasions.

We believe that it is important to take advantage of this period of so-called transition to bring about a definitive solution to the debt problem which currently represents an insurmountable obstacle to our nation’s development. We demand an immediate halt to debt service repayments - a debt that the haitian people never contracted. We also demand the putting in place of a citizen’s audit of the national debt burden which should cover the last 30 years of financing received from the international community in order to shed light on numerous loans which remain shrouded in secrecy. This audit will allow us to apportion blame, identify who is responsible for the plundering as well as begin a process of recovering stolen wealth in order to benefit our nation. A moratorium of ten years should be put in place with the budget for debt service repayments instead being invested in the following sectors: education, health, nutrition, rural infrastructure in the framework of an aggressive offensive against poverty and its structural causes.

We believe that the halting of external debt service repayments and a citizen’s audit are instruments which would encourage a new starting point in relations between the state and the haitian people. Building citizenship requires the putting in place of structures which promote participation and transparency in how public money is spent. The new relationships of trust and confidence that we want to build can only come at a price. We invite the tens of thousands of individuals and organisations who have mobilised for the international campaign for the cancellation of third world debt, as well as all those interested in the process of democratisation in our country to mobilise together to say no the plundering of our resources. Moves such as those of the 4 January are an insult to the poverty and misery of the haitian people and must never be repeated. No to debt, no to corruption and yes to transparency. Life before debt.

Camille Chalmers
Executive Director
(Translation from the French by Gail Hurley, EURODAD)

Camille Chalmers

Économiste, professeur, représentant de la Plateforme Haïtienne de Plaidoyer pour un Développement Alternatif (PAPDA), membre du réseau CADTM-AYNA y CADTM Internacional.



8 rue Jonfosse
4000 - Liège- Belgique

00324 60 97 96 80