IMF loan hits Haiti
If there was any chance that the IMF’s one-size-fits-all policy toward developing nations has changed over the past 30 years, the emergency loan granted to Haiti has buried all hope under the rubble.
The IMF agreed last week to lend Haiti up to US $114 million after the seven magnitude earthquake devastated the small Caribbean country last month. While theoretically the IMF says debt relief will follow, historically loans granted by the international financial institution have always come at a hefty price.
Developing nations are forced to comply with a three-pronged prescription before they are granted much-needed assistance: privatisation, liberalisation, and public spending cuts.
The IMF has made such demands on the Haitian government in the past, bringing the country’s economy to ruin long before the earthquake hit. In 1995 the Fund forced Haiti to cut tariffs on rice from 35 percent to 3 percent, leading to a massive influx of cheap rice from the US. Having once been a net exporter of rice, Haiti now imports 75 per cent of its rice from America.
Meanwhile USAID invested extensively in Haiti, though none of the money went toward developing the country’s infrastructure. Instead the non-profit organization injected food aid into the country, ensuring Haiti’s long term dependence on foreign hand outs rather than agricultural self-sufficiency.
Already owing a debt of $US 165 million to the IMF, Haiti has been forced to raise electricity tariffs and freeze public-sector wages. Many predict that Haiti’s current debt conditions will continue to apply to the new loan.
As Richard Kim writes in the Nation: “In the face of this latest tragedy, the IMF is still using crisis and debt as leverage to compel neoliberal reforms.”
Charities say that new loans will bring Haiti’s total debts close to the $US1.3 billion level the country was at five years ago, when it qualified for the cancellation of $US 1.2 billion. Even before factoring in the most recent loans, Haiti still owes $US 891 million, of which $US 429 million is due to the Inter-American Development Bank.
Haiti is scheduled to make $10 million in payments to the bank next year, and to date there has been no agreement among the international community on debt relief.
The United Nations’ trade and development body Unctad told the Observer: “Considering the large direct costs of the earthquake, in the absence of further international action a new debt crisis is all but assured.”
Britain and the US support the IMF stance on cash first, debt-relief later. The IMF says that it could not issue a grant because of the lengthy waiting process, while a loan would fit the emergency time-scale. Few have questioned the IMF’s logic, as debt repayments are low on the priority list while people are still being pulled from the rubble.
But in reality, this quick-fix loan is likely to lead to long-term debt bondage. Haiti is not due to make any repayments to the IMF for two years, leaving plenty of time for political will to fade as Haiti drifts away from the media spotlight.
Tags: debt, debt relief, debt restructuring, earthquake, emergency loan, Haiti, IMF, International Monetary Fund, liberalisation, neoliberalism, privatisation, public spending cuts, Richard Kim, the Nation
I discovered your homepage by coincidence.
Very interesting posts and well written.
I will put your site on my blogroll.
Wow, what a lengthy and in depth article but full of useful information
Food Aids are badly needed by third world countries like in Africa in Asia.;,”
food aids are badly needed by third world countries and we really need to give something to the poor.”".