The Difficulty of Debt Relief

Aside from the many humanitarian issues that have been ravaging Haiti in the last month, there are many other issues that have been plaguing the small Caribbean nation. Perhaps the most important economic disparity that Haiti suffers is the massive amount of debt they owe to the IMF, World Bank, and other western creditors.

Although debt relief to Haiti was already discussed and passed by the IMF last July, there are many other lingering issues that have yet to be resolved. Before the earthquake, there was no deal brokered between the World Bank and Haiti about the prospect of Haitian debt relief; approximately 27% of Haiti’s external debt is owed to the World Bank.

On February 7 the G7 – the world’s seven richest countries – agreed on a tentative plan that would relieve Haiti of its debt to these nations. This is a gesture that will be of great help to Haiti. On the other hand, it is a short term solution that industrialized nations are using as an excuse to “fix” poorer nations without creating a long term development plan.

In 2005 the IMF went through a process they called the Multilateral Debt Relief Initiative where they cancelled the debt of heavily indebted countries. One of these countries was Nicaragua. Ben Beachy, an independent educator working for Witness for Peace, was working in Nicaragua when these programs were enacted. He noted that, “Just after pledging $201 million of debt relief for Nicaragua, the IMF has also promised to reactivate its stalled economic program with the country, meaning a new IMF loan package of about $100 million.”

This is common neoliberal double speak. They first allow for the cancellation of a debt that was clearly never going to be diminished any time soon, and replaced it with another loan that the country cannot afford. Not only that, but they riddle the loan with stipulations that dictate the social and economic policies of the debtor. These tighter regulations cause impoverished nations to cancel the only social programs they have protecting their people from abject poverty.

In the case of Nicaragua, it lead to an across the board decrease in healthcare. What resulted was a mass humanitarian setback where thousands of sick Nicaraguans could not access public hospitals that they had previously relied on for simple treatments such as infections and broken bones.

With the things that western nations and organizations have pledged to Haiti, upwards of 70% of its debt will be absolved. Although this will allow the Haitian government to focus more on rebuilding its nation, 80% of the Haitian population still lives under the poverty line, 27% live in abject poverty, and the country is posting a negative GDP growth.

After all the cameras leave Haiti, and everyone in the western world feels great for contributing money to such an impoverished nation, they will still be suffering, and they will still be in need. Haiti needs debt relief that does not have predatory stipulations and they need help rebuilding their nation.

-mike