On Debt and the IMF

February 04, 2010

In 2008 the United Nations Human Rights council named Mr. Cephas Lumina as an independent expert on the effect of foreign debt. Today Mr. Lumina called for an immediate cancellation of debt for Haiti and directly addressed the International Monetary Fund ‘s decision to issue a $114 million loan:

“The extension of Haiti’s loan programme in circumstances where the IMF acknowledges the country’s high risk of debt distress, and particularly in view of the fact that the country’s economy has collapsed and its debt service capacity is non-existent, runs counter to the IMF’s own advice and is profoundly inappropriate.”

IMF Managing Director, Dominique Strauss-Kahn, said after the earthquake that:

“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,”

While the Managing Director’s comments are encouraging, when the IMFs Executive Board approved the loan there was no mention of future debt cancellation. Although there is no formal mechanism for the IMF to issue a grant instead of a loan, a strong commitment from the Executive Board in favor of future debt relief would go a long way towards ensuring that Haiti is not subject to additional burdensome debt as a result of reconstruction.

For more information on debt relief and Haiti see Eurodad and Jubilee USA.

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