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Thursday, July 29, 2010

IMF Cancels $268 Million in Haiti’s Debt, Approves New Loan

Bloomberg / Business Week

The International Monetary Fund agreed to cancel Haiti’s $268 million outstanding debt to the institution and approved a loan to boost central bank reserves as the country rebuilds its economy after a January earthquake.

The decisions came four months after donors pledged $5.26 billion to Haiti’s reconstruction. The $60 million, three-year loan, which bears no interest until the end of 2011, will help the central bank manage potential currency volatility as donor funds flow in, the Washington-based IMF said in an e-mailed release.

“Donors must start delivering on their promises to Haiti quickly so reconstruction can be accelerated, living standards quickly improved, and social tensions soothed,” IMF Managing Director Dominique Strauss-Kahn said in the statement.

The IMF said it will also provide technical assistance to the poorest country in the Western Hemisphere to strengthen government institutions, including the tax system and the budget.

The authorities for instance agreed to give regular updates on the finance ministry’s website on what the aid money is used for under the IMF program, IMF mission chief Corinne Delechat said on a conference call today.

The interest rate on the loan will be zero through 2011 and as much as 0.5 percent after that, according to the IMF. Haiti’s economic growth will be 9 percent in fiscal 2011-2012, mostly due to the flow of international aid, the fund said.

The temblor killed about 300,000 people, according to a United Nations report this month.

The debt relief was financed by a trust fund established by the IMF last month to help very poor countries hit by catastrophic disasters.

“While it is welcome that the fund is providing Haiti with debt relief, it is deeply concerning that at the same time the fund is risking a build-up of Haiti’s future debt problems with a loan,” Oxfam International Policy Adviser Pamela Gomez said in a statement. “This assistance should be a grant, not another loan,” she said.