IMF Loan Changed to a Grant
January 20th, 2010
Under pressure, the IMF has changed its US$100 million loan to a grant. Dominique Strauss Kahn, the head of the IMF, has called for a major multilateral aid plan to rebuild the shattered Caribbean island of Haiti where the rescuers are still struggling to save lives after last week’s devastating earthquake.
“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,” said Dominique Strauss-Kahn in an interview in Hong Kong.
He went on to say: “The most important thing is that the IMF is now working with all donors to try to delete all the Haitian debt, including our new loan. If we succeed-and I’m sure we will succeed-even this loan will turn out to be finally a grant, because all the debt will have been deleted. And that’s the very important thing for Haiti now,” the Managing Director added.
Debt campaigners, Eurodad and Jubilee Debt Coalition in Europe, have pointed out that not only is lending the wrong solution for Haiti, but the IMF’s loans have always come with conditions, which is problematic. Current conditions include: raising prices for electricity, refusing pay raises for any public sector employees except those making the minimum wage and keeping inflation as low as possible. The groups argue that Haiti is still suffering as a result of conditions applied to its economy in the past.
In 1995 the IMF forced Haiti to slash its rice tariff from 35% to 3%. This resulted is an increase in imports of more than 150% between 1994 and 2003, 95% of them coming from the US, according to Oxfam UK. This devastated Haitian farmers. Traditional rice-farming areas of Haiti now have some of the highest concentrations of malnutrition, and a country that was self-sufficient in rice is now dependent on foreign imports. This led to rioting and the fall of the Haitian government last Spring when food prices rocketed.
Jubilee USA is pressing for complete cancellation of Haiti’s outstanding debt. The largest multilateral holders of Haiti’s debt are the Inter-American Development Bank ($447 million), the IMF ($165 million, plus $100 million in new lending), the World Bank’s International Development Association ($39 million) and the International Fund for Agricultural Development ($13 million). The largest bilateral loans are held by Venezuela ($295 million) and Taiwan ($92 million).
The US created a trust fund of $20 million earlier this year to cover Haiti’s debt service payments for 2010, but as of now, the country would re-start payments in 2011.