IMF debt cancellation for Haiti at last (and a new loan)

30 July 2010 by Nick Dearden

Last week, the International Monetary Fund IMF
International Monetary Fund
Along with the World Bank, the IMF was founded on the day the Bretton Woods Agreements were signed. Its first mission was to support the new system of standard exchange rates.

When the Bretton Wood fixed rates system came to an end in 1971, the main function of the IMF became that of being both policeman and fireman for global capital: it acts as policeman when it enforces its Structural Adjustment Policies and as fireman when it steps in to help out governments in risk of defaulting on debt repayments.

As for the World Bank, a weighted voting system operates: depending on the amount paid as contribution by each member state. 85% of the votes is required to modify the IMF Charter (which means that the USA with 17,68% % of the votes has a de facto veto on any change).

The institution is dominated by five countries: the United States (16,74%), Japan (6,23%), Germany (5,81%), France (4,29%) and the UK (4,29%).
The other 183 member countries are divided into groups led by one country. The most important one (6,57% of the votes) is led by Belgium. The least important group of countries (1,55% of the votes) is led by Gabon and brings together African countries.
finally announced the cancellation of all the debts Haiti owes to the Fund. The cancellation will wipe out US $268 million – by far the largest remaining component of Haiti’s debt.

The cancellation will be given via the newly established Post-Catastrophe Debt Relief Trust Fund, which was set up for this purpose and which can now be accessed by other highly indebted, low income countries hit by disasters. The fund is financed by current debt relief funds and carries a 0% rate until the end of 2011 (as already announced in response to the financial crisis) and thereafter zero to 0.5%.

More worrying is yet another new loan which the IMF agreed on the same day as the cancellation. This is a small $60million, low 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. loan, which Haiti has asked for in order to boost reserves under the IMF’s Extended Credit Facility (ECF). The programme will allow Haiti to prevent exchange rate fluctuations owing to the large inflows of foreign aid into the country.

This seems a somewhat distant prospect at the moment because governments who pledged over $5 billion to help Haiti ($10 billion in the long run) earlier in the year have delivered only a tiny fraction of that aid. It has been reported that only Brazil has delivered its entire aid pledge of $55m.

Although small, the new IMF programme carries conditions. The documents have not yet been made public, but these conditions include “macroeconomic stability”, including an inflation Inflation The cumulated rise of prices as a whole (e.g. a rise in the price of petroleum, eventually leading to a rise in salaries, then to the rise of other prices, etc.). Inflation implies a fall in the value of money since, as time goes by, larger sums are required to purchase particular items. This is the reason why corporate-driven policies seek to keep inflation down. target, and “strengthening fiscal governance” which, amongst other measures, will include “improving the Bank of the Republic of Haiti’s independence”.

In addition, the IMF will set up a technical assistance program to Haiti to “foster private credit and investment”, including enabling Haiti to more easily borrow and lend domestically.

So far, the technical assistance looks very similar to the programme set out by Paul Collier – the man who wrote the US’s ‘recovery plan’ for Haiti. Collier believes Haiti’s recovery should be based on the development of low-cost textile jobs (which elsewhere are called sweatshops) and tourism.

In actual fact, as Haitian campaigners are all too aware, Haiti is owed a debt by the international community for its centuries-long exploitation. Canadian activists – the Committee for the Repayment of the Indemnity Money Expropriated from Haiti – ran a hoax press conference two weeks ago, pretending that the French government officials would repay a $21billion debt to Haiti in return for the slave debt imposed on Haiti by France in the nineteenth century.They pledged to continue their actions in spite of legal threats from the French government.

Published by Eurodad

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