Why Provide Grants and Debt Cancellation for Haiti?

1. Assistance for relief and reconstruction in the form of grants, not loans. The earthquake has caused unimaginable destruction in Haiti. It will be nearly impossible for Haiti to get back on its feet without massive humanitarian and reconstruction assistance. However, Haiti is already impoverished and struggling. Providing aid in the form of loans will only help the country accrue more debt when it is in a precarious financial situation to begin with. To help with Haiti's long-term recovery, aid should be given in the form of grants which need not be repaid. 

Fortunately, the United States and Canada are committed to providing assistance in grants. But the leadership of our governments is needed to pressure Haiti's creditors--such as the International Monetary Fund (IMF)--to follow this example. On January 27, the IMF Board voted to give Haiti a $102 million loan instead of a grant, and it made no mention of canceling this loan. This new loan almost doubles Haiti's debt to the IMF. While is Haiti certainly in need of massive assistance, a greater debt burden will hinder a sustainable recovery in the long term.  

2. Cancellation of the rest of Haiti's debt. In the aftermath of this tragic disaster, all of Haiti's limited resources should be directed at recovery, not debt repayment. Fortunately, two-thirds of Haiti's debt ($1.2 billion) was already canceled in June 2009. However, the country still owes $891 million in debt, because relief agreements from the International Monetary Fund (IMF) and other creditors only covered debts acquired up until 2004. New loans Haiti has received since then have been adding to its debt, with about half owed to Taiwan and Venezuela, and half to the IMF and the InterAmerican Development Bank (IDB). In 2010, Haiti is projected to pay around $10 million to the IMF and IDB--this is money Haiti simply can't pay in the aftermath of this devastating earthquake. 

Although the IMF announced its commitment to cancel all of Haiti's debts to the institution, it now appears to be backing away from this promise. It made no mention of canceling the new loan of $102 million, or Haiti's previous debt to the institution of $165 million. Both the U.S. and Canadian governments should use their influence in the IMF and the IDB to secure immediate cancellation of these debts. 

Until the cancellation agreement can be reached, the Canadian and US governments should demand a moratorium on all debt payments from Haiti with no accrued interest. This is the same arrangement as was made for countries hit by the Tsunami in 2004. All of Haiti's scarce resources are now need for recovery, not debt repayment. (Learn more about Haiti's debt situation here).  

We made significant progress towards these two goals when G7 countries--including Canada and the U.S.--pledged to work with international financial institutions to ensure that Haiti's multilateral debt is cancelled.  The U.S. Congress now has to pass the Debt Relief for Haiti Earthquake Recovery Act (H.R. 4573/S. 2961) to turn this pledge for debt relief into a reality.