6752: Haiti and the HIPC Debt Relief Initiative (fwd)

[Bob Corbett <corbetre@webster.edu>]

From: Max Blanchet <maxblanchet@worldnet.att.net>


Haiti and the Heavily Indebted Poor Countries Debt Relief Initiative

Haiti is one of the most densely populated and poorest countries in the
Western Hemisphere. The country occupies one-third of the island of
Hispaniola and is home to about 7.8 million people, of which some 80 percent
live below the poverty line. With a GDP per capita of US$460 in 1999, its
economic and social indicators compare unfavorably with those of many
sub-Sahara African countries and are far lower than the average for Latin
America and the Caribbean. Because of its high poverty rate, people often
ask why Haiti is not eligible for the Heavily Indebted Poor Countries (HIPC)
debt relief Initiative.

The Heavily Indebted Poor Countries (HIPC) initiative was created in 1996
precisely to address the debt crisis in the world's most heavily indebted
poor countries. The program was designed to help the neediest countries,
those whose debt levels are unsustainable, meaning so high that paying their
debt obligations makes it impossible for them to invest adequately in social
programs. The goal of the HIPC initiative is to bring the debt burden down
to sustainable levels and free up a country's resources for social spending,
such as primary schools, basic health care and other programs aimed at
reducing poverty.

HIPC was also designed to be applied only when other forms of international
debt relief (such as what takes place in the organization called the Paris
Club of bilateral official creditors) fail to help a country bring its debt
down to a sustainable level. The HIPC Initiative will then cancel whatever
amount of debt is necessary to do so-no matter how large an amount that may
be (to date some US$50-60 billion in debt will be cancelled for more than 32
countries).

The international community has agreed on three basic criteria for ensuring
that the scarce resources available for HIPC debt relief are channeled to
countries that need it most and are committed to applying the freed-up
resources for poverty and social programs. These criteria call for the
following:


The country must be poor---HIPCs are among the very poorest countries in the
world;
The country must have unsustainable debt, generally measured as any amount
higher than 150 percent of export revenue after receiving debt relief from
traditional sources; and,
The country must demonstrate a commitment to poverty reduction and economic
growth through sustained implementation of social and economic reform
programs.

Despite being very poor and having a relatively significant external debt
level, Haiti does not meet all the critieria for HIPC assistance. Current
projections indicate that after taking advantage of other sources of debt
relief, Haiti's debt will be reduced to well below the 150 percent target
mentioned above, thereby bringing it down to a sustainable level.

More importantly, Haiti needs to make significant strides in strengthening
governance and instititutions, and show a commitment to reducing poverty. In
the meantime, the international community has responded to Haiti's
development needs with large grant assistance that will keep external debt
at manageable levels over the coming years.


More info on:
The Heavily Indebted Poor Countries Initiative
The International Development Association


posted November 2000