WASHINGTON – Treasury Under Secretary for International Affairs Lael Brainard today participated in a signing ceremony at the Inter-American Development Bank (IDB) to mobilize significant new grant resources for Haiti and eliminate all of Haiti’s debts to the institution. The U.S. contribution of $204 million today, along with additional contributions from the IDB’s shareholders and transfers from ordinary capital, will allow the bank to fully cancel Haiti’s $447 million debt to the IDB and provide $2.5 billion in grants for Haiti over the next decade.

“In the days following the earthquake, President Obama pledged the full and continued commitment of the United States in the recovery and reconstruction of Haiti,” said Under Secretary Brainard. “Today marks an important milestone in that effort. Thanks to the steadfast support from Congress, the U.S. is today providing essential cash assistance to lift the lives of the Haitian people.”

Using these funds, the IDB will pursue a comprehensive program for Haiti reconstruction concentrating on six priority sectors aligned with the Haitian Government’s national development plan:

• Agriculture: Improving rural production, productivity and living conditions through financing irrigation and watershed management, improved farming techniques and control of pests and diseases affecting crops.
• Water and Sanitation: Providing sustainable water and sanitation services in urban and rural areas highly-impacted by the earthquake.
• Education: Working with Haiti on the Government-led five-year education reform strategy to rehabilitate schools damaged or destroyed in the earthquake and improve the quality of education.
• Transportation: Focusing on the rehabilitation of damaged roads and thoroughfares and strengthening the institutional capacity of the Ministry of Public Works, Transport, and Communications.
• Energy: Working with members of the international community and the Government of Haiti to increase the capacity to generate electricity and introducing a culture of payment for services.
• Expanding Credit: Unlocking credit for Haiti’s microenterprises and small and medium-size businesses to regain their footing since the earthquake.

“We are grateful for this contribution by the United States, which will allow us to relieve Haiti of all its debt obligations to us,” said IDB President Luis Alberto Moreno. “This will free up millions in assistance for Haiti for development, without creating any future burden for a country that faces enormous challenges. This is an important reaffirmation of the IDB’s and the international community’s commitment to a better future for Haiti.”

In July, following passage by the U.S. Congress and upon President Obama’s signing of the FY 10 Supplemental Appropriations Act, the Treasury Department announced that the United States, the International Financial Institutions (IFIs), and other donors together reached the goal of eliminating the total debt stock that Haiti owed to the IFIs at the time of the January earthquake. The announcement marked one of the fastest multilateral debt reductions in history.  Today’s event marks the formal delivery of U.S. funds that will allow IDB debt cancellation and additional grant financing to proceed.

When the earthquake struck, Haiti owed $447 million to the IDB. With the U.S. contribution to the IDB, the Treasury-led effort to eliminate the entirety of Haiti’s pre-earthquake debt obligations to the IFIs will be fully achieved.

Brainard visited Haiti in July to assess first-hand the assistance efforts of the Multilateral Development Banks and discuss Treasury’s forthcoming deployment of a technical assistance team and Financial Attaché to the country.

http://www.treas.gov/press/releases/tg886.htm

PARIS — The IMF says it has canceled Haiti’s $268 million debt and will lend the earthquake-devastated country another $60 million to help it with reconstruction plans.

The International Monetary Fund said Wednesday the decision is part of a plan for long-term reconstruction after the Jan. 12 magnitude-7 quake, which killed as many as 300,000 people.

The three-year loan carries a zero interest rate until 2011 which then rises to no more than 0.5 percent.

The Washington-based fund says its moves should encourage aid contributions to the impoverished country.

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

In Haiti more than six months after the quake, rubble and collapsed buildings still dominate the landscape.

The number of people in relief camps has nearly doubled to 1.6 million, while the amount of transitional housing built is minuscule. Crime is more prevalent since the quake, with attacks in camps terrorizing thousands, especially women and girls.

Most of the $3.1 billion pledged for humanitarian aid has paid for field hospitals, plastic tarps, bandages, and food, plus salaries, transportation and upkeep of relief workers.

At a March conference, donors pledged a total of $9.9 billion — money that is separate from the humanitarian aid — to help Haiti recover.

But less than 2 percent of it has been delivered. The rest is mired in bureaucracy and politics of the more than 60 countries and organizations that pledged to help.

http://www.google.com/hostednews/ap/article/ALeqM5j9JEpiuNr2naxLKUtP4c1n3TfxYwD9H40SNO0

The IMF has canceled Haiti’s $268 million debt to the fund so the country can free up more money for reconstruction.

Washington (CNN) — The executive board of the International Monetary Fund approved Wednesday the cancellation of Haiti’s $268 million debt to the fund.

The board also approved a three-year request by authorities to support Haiti’s reconstruction and growth program.

The decisions are part of an effort to support Haiti’s longer-term reconstruction plans after the January 12 earthquake, which killed more than 220,000 people, destroyed 60 percent of government infrastructure and left more than 180,000 homes uninhabitable.

Six months later, more than 1.5 million remain in overcrowded displacement camps.

“The new program provides a strong and forward-looking framework to support economic stability and reconstruction in the country, and will also help catalyze donors’ contributions,” the IMF said in a posting on its website.

The debt relief is expected to help Haiti meet balance-of-payments needs worsened by the earthquake.

“Improving the business environment and fostering private credit and investment will be essential to support growth,” said Charles Castel, governor of the Bank of the Republic of Haiti. “The fund’s technical assistance will help rebuild economic institutions and build capacity.”

The earthquake resulted in losses estimated at 120 percent of 2009 GDP, the posting said.

It struck at a time when the impoverished country’s outlook was improving. Last year, Haiti’s growth reached almost 3 percent, the second-fastest rate in the Western Hemisphere.

Since the quake, a fragile recovery has been taking place. Agricultural production, construction and textile manufacturing are supporting economic activity, the posting said.

And remittances, which grew by 12 percent between January and May of 2010 over the previous year, are supporting consumption and imports.

Though the trade deficit is widening, exports are recovering, it said.

GDP is projected to expand by 9 percent in fiscal year 2011-12, due mostly to reconstruction activity, and by 6 percent by 2015.

Inflation is expected to reach 8.5 percent during the current fiscal year and to drop to 7 percent by 2013.

In March, the international community pledged $9.9 billion to Haiti’s reconstruction, of which $5.3 billion is to be disbursed over the coming 18 months.

But last week, a CNN investigation found that most governments that had promised money to the special fund had not delivered the cash.

Less than 2 percent of the $5.3 billion promised had been handed over to the Interim Haiti Recovery Commission.

Only four countries had paid anything at all to the commission: Brazil, Norway, Estonia and Australia.

The United States has pledged $1.15 billion but had paid nothing, with the money tied up in the congressional appropriations process.

Venezuela has promised even more — $1.32 billion. It too had paid nothing, though it had written off some of Haiti’s debt.

Still, many governments and aid agencies have given money to Haiti through means other than the Interim Haiti Recovery Commission.

For example, the U.S. State Department said it has given about $675 million through the U.S. Agency for International Development.

Altogether, about $506 million had been disbursed to Haiti since the donors’ conference in March, said Jehane Sedky of the U.N. Development Program.

CNN compiled the information by reviewing commission figures and surveying the donors that had made pledges.

No countries told CNN they do not plan to deliver the money eventually.

The pledges are for fiscal year 2010–2011, so the donors have until the middle of next year to get the funds to the Haiti recovery commission, Sedky said.

http://edition.cnn.com/2010/WORLD/americas/07/21/haiti.debt.imf/#fbid=Y-71bcd4Kwi

The Executive Board of the International Monetary Fund (IMF) today approved the full cancellation of Haiti’s outstanding liabilities to the Fund, of about SDR 178 million (equivalent to US$268 million). The Board also approved a new three-year arrangement for Haiti under the Extended Credit Facility (ECF) requested by the authorities to support the country’s reconstruction and growth program.

Both decisions form part of a broad strategy to support Haiti’s longer term reconstruction plans, following the devastating earthquake of January 12, 2010. The cancellation of existing debt was advocated by IMF Managing Director Dominique Strauss-Kahn in the days following the disaster as part of a concerted international effort to launch a “Marshall Plan” for the reconstruction of the country. The new program provides a strong and forward-looking framework to support economic stability and reconstruction in the country, and will also help catalyze donors’ contributions.

“Donors must start delivering on their promises to Haiti quickly,” Mr. Strauss-Kahn said, “so reconstruction can be accelerated, living standards quickly improved, and social tensions soothed.” At a high-level donors’ conference in March, the international community pledged US$ 9.9 billion to Haiti’s reconstruction, of which US$ 5.3 billion is to be disbursed over the next 18 months.

Resources freed by IMF debt relief will help Haiti to meet substantial balance-of-payments needs exacerbated by the earthquake. The debt relief is financed by the Post-Catastrophe Debt Relief (PCDR) Trust Fund, recently established by the Fund to help very poor countries hit by catastrophic natural disasters (see attached factsheet).

The new ECF arrangement will provide SDR 40.9 million (about US$ 60 million) over three years to boost Haiti’s international reserves and help the central bank manage potential swings in the value of the local currency — important to avoid raises in the prices of basic commodities consumed by the poor — without adding to the country’s net debt. Financing under the ECF carries a zero interest rate until end-2011 and thereafter zero to 0.5 percent, with a maturity of 10 years and a grace period of 5½ years. The temporary interest waiver is part of the package that was approved in July 2009 to support the IMF’s lending to low-income countries, financed from the IMF’s internal resources, including the use of resources linked to the gold sales, and through bilateral contributions (see Factsheet “Financing the Fund’s Concessional Lending to Low-Income Countries”). The new program also includes important policy commitments from the authorities that will help protect macroeconomic stability, and strengthen fiscal governance.

“The new program will provide a coherent macroeconomic framework to support the implementation of our Action Plan and ensure efficient spending and absorption of aid inflows,” Haiti’s Minister of Economy and Finance Ronald Baudin said.

Technical Assistance

The IMF will also provide a comprehensive medium-term technical assistance program aimed at strengthening state institutions, concentrating in the areas of tax policies, revenue administration, budget preparation and execution, and helping the country in organizing its first ever issuance of government securities.

“Improving the business environment and fostering private credit and investment will be essential to support growth,” Charles Castel, Governor of the Bank of the Republic of Haiti said. “The Fund’s technical assistance will help rebuild economic institutions and build capacity.”

Following the Executive Board discussion on Haiti, Mr. Naoyuki Shinohara Deputy Managing Director and Acting Chair, issued the following statement:

“The January 2010 earthquake was devastating for Haiti, after several years of progress in maintaining economic stability, resuming growth, and implementing essential reforms. The authorities are to be commended for good policy implementation in the six-month period since the earthquake, in spite of limited financial resources and weakened capacity.

“Haiti meets the eligibility and qualification conditions for debt stock relief under the PCDR Trust Fund. Resources freed by debt stock relief under the PCDR Trust Fund are critical to meeting the large and protracted balance-of-payments needs exacerbated by the earthquake and subsequent recovery efforts, and to placing Haiti’s debt on a sustainable path. Debt relief from the Fund is part of a concerted international effort to cancel Haiti’s remaining debt after the earthquake.

“The newly approved ECF-supported arrangement provides a coherent macroeconomic framework to support the authorities’ reconstruction and growth objectives. The macroeconomic outlook, and implementation of the authorities’ reconstruction plan, depends crucially on the timely disbursement of the large donor pledges. Furthermore, improvements in infrastructure and the business environment will be essential to raise medium-term growth, by attracting private investment and expanding the export base. The establishment of a partial credit guarantee fund will help restart private sector credit

“The Fund-supported program aims at smoothing the impact on the economy of large expected aid flows, projected to triple to about 15 percent of GDP over in the next 3 years. Fiscal objectives are to raise domestic revenue, align the budget and its financing with reconstruction priorities, and continue strengthening fiscal governance. Monetary and exchange rate policies will be upgraded to facilitate the absorption of aid inflows, while avoiding large swings in the exchange rate and keeping inflation under control The program is supported by a comprehensive medium term technical assistance strategy, coordinated with Haiti’s development partners.”

ANNEX

Recent Economic Developments

The earthquake of January 12, 2010 caused unprecedented destruction of human and physical capital, with losses estimated at 120 percent of 2009 GDP. The disaster struck the country at a time when its outlook was improving after several years of prudent macroeconomic management. In 2009, Haiti’s growth reached almost 3 percent, the second-fastest rate in the Western Hemisphere.

A still fragile recovery is taking place after the earthquake. Agricultural production, construction and textile manufacturing are supporting economic activity, while remittances, which grew by 12 percent between January and May of 2010 (over the previous year), are supporting consumption and imports. Exports are recovering, although the trade deficit is still widening.

Main Program Objectives

The program is focused on macroeconomic policies that can support growth and the Haitian authorities’ reconstruction plan, as well as help manage the aid inflows. It includes improving the efficiency and transparency of spending, increasing revenues, modernizing monetary and exchange rate operations, and enhancing credit growth.

Growth: GDP is projected to expand by 9 percent in fiscal year 2011-12, due mostly to reconstruction activity, and 6 percent by 2015.

Inflation: expected to reach 8.5 percent in the current fiscal year and to decline to 7 percent by 2013.

Fiscal strategy: to boost revenue collection to 13 percent of GDP by 2013, from 10% percent currently. The authorities’ objective is to enhance the quality and effectiveness of reconstruction spending and rebuild a more modern and efficient tax administration.

Monetary policy: the program aims at building a sustainable external position while absorbing the reconstruction-related foreign exchange flows. To enhance the effectiveness of monetary policy, further steps will be taken to improve the Bank of the Republic of Haiti’s independence. The authorities also aim at gradually developing a market for government securities.

http://www.imf.org/external/np/sec/pr/2010/pr10299.htm

REPRIEVE: A minister said Taiwan could not fully cancel Haiti’s debts given the nature of the loans, offering instead to take over its interest payments for five years

Minister of Foreign Affairs Timothy Yang (楊進添) yesterday unveiled Taiwan’s debt reduction plan for Haiti, with the Taiwanese government shouldering interest payments to local banks for five years as the Caribbean country struggles to recover from a devastating earthquake in January.

Yang told lawmakers in March that Haiti owed Taiwan, one of its major lenders, US$88 million.

Haiti’s total foreign debt was estimated at US$1 billion before the fatal quake. As the debt-ridden country tries to recover from the disaster, some of its major lenders — including Venezuela and the G7 (Canada, the US, the UK, France, Germany, Italy and Japan) — agreed to cancel all of its debts.

Amid calls from the international community for Taiwan to cancel Haiti’s debts, Yan said the debt repayment plan was the “maximum amount” that Taiwan could “afford.”

“We have told Haitian government about the plan and the Haitian government expressed its appreciation, saying the plan could substantially help it rebuild the country,” Yang said.

The five-year period starts this year, during which Haiti will be exempted from repaying any interest payments and principal to Taiwan. The government will take over the interest payments during this period, which are estimated at US$12 million to US$13 million.

The government and Port-au-Prince will discuss a debt repayment plan after the five-year period.

Yang said Taiwan could not cancel the whole loan owed by Haiti as other lenders did, because the nature and structure of the loan were different from other countries’.

The money lent to Haiti was taken from the nation’s foreign reserves via lending contracts with two commercial banks instead of directly from the treasury. The government could not write off the principal and could only take over payment of the interest, he added.

In related news, President Ma Ying-jeou (馬英九) yesterday met with a delegation heading to the Dominican Republic for a forum on Haiti post-quake reconstruction work.

The delegation, led by Council of Agriculture Minister Chen Wu-hsiung (陳武雄), will leave on Monday to participate in the forum organized by the UN on Wednesday to discuss post-quake relief and reconstruction work in Haiti.

“It’s not easy for us to participate in this international meeting because the UN is involved,” Ma said at the Presidential Office. “We’ve stressed the legitimacy of the international works we participated in. It’s important for us to do this to improve our reputation. We want to make Taiwan both a responsible and respectable nation in the world.”

http://taipeitimes.com/News/taiwan/archives/2010/05/29/2003474132