15500: Karshan: Haitian Government Says It Can't Pay Debt Backlog (Haiti Progres) (fwd)

[Bob Corbett <corbetre@webster.edu>]

From: MKarshan@aol.com

Haiti Progres
This Week in Haiti
April 23 to 29, 2003

Haitian Government Says It Can't Pay Debt Backlog

Finance Minister Gustave Faubert said this week that the Haitian government
no longer could continue to make payments on its debt arrears to multilateral
lending institutions because of Haiti's dwindling foreign reserves.

"We have been paying out more money than we are receiving, which is not
something normal," he said in an interview with Radio Galaxie. "The level of
the country's net foreign cash reserves has become untenable, so the
government has taken the decision, particularly for the IDB [InterAmerican
Development Bank] and the World Bank, to use that money instead to carry out
projects which benefit the population, which is suffering a great deal and is
very hungry."

In the 2002 fiscal year, Haiti's foreign reserves plummeted some 50% from
$102 million to a mere $51 million. Over the same period, Haiti paid out some
$21 million in interest payments to foreign lenders, while receiving only $13
million in aid from them, Faubert said.

As of January, Haiti's total foreign debt amounted to $1.248 billion, $1.031
billion of that sum to multilateral lenders and the remaining $217 million
for bilateral loans. Haiti is in arrears on payments for about $61.7 million.

Faubert had particularly sharp words for the IDB, which reneged on releasing
loans under pressure from the Bush administration. "In 2001, there were
projects totaling about $146 million which were ratified and approved but
which could not be released," Faubert said. "The IDB representative came to
us and said that if we paid our debt arrears, the money would be released.
The state tightened its belt and paid the arrears of about $4 to 5 million,
but after we paid, they came to us to say that they were sorry and regretted
that what they thought could be done couldn't be done because of other
factors, in particular the political crisis." Washington's back-room
torpedoing of the IDB loans is a flagrant violation of the bank's internal
rules against political meddling in the loan process. It also violates the
Organization of American States‚ Resolution 822 of Sep. 2002 which called for
the release of embargoed aid to Haiti, saying that the Haitian government
made enough gestures of good faith in dealings with the Haitian opposition.

Despite his tough words, Faubert seemed to cling to hopes that the flow of
aid from the IDB might be resumed. "For the moment, we are on standby, but we
have had some promising signs from the IDB which has told us that as soon as
matters are settled with the International Monetary Fund [IMF], then they
will be ready to go forward," he said. Unfortunately for Faubert, a green
light from the IMF is extremely unlikely, especially in light of the Haitian
government's foot-dragging on debt arrears payments.

The economic situation in Haiti remains dire. The consumer price index surged
to 12.98% in Jan. 2003, up from 1.2 % in Nov. 2002 and 2.28% in Dec. 2002.
The leap was due in large part to the 61.15% inflation rate in the transport
sector and 19.41% inflation in the housing, energy, and water sector.

Energy costs rose dramatically because after Dec. 2002 the government could
no longer continue its long-standing policy of subsidizing fuel prices (see
Haïti Progrès, Vol. 20, No. 43, 1/8/03). With the 60% increase in the cost of
a barrel of oil, the fuel subsidies drained some $13.5 million from the
foreign reserves in the last quarter of 2002.

Fuel costs fell a bit this week. Gasoline dropped from 118 to 98 gourdes per
gallon, while diesel went from 70 to 59 gourdes. But prices have been
fluctuating as erratically in past months as oil prices on the world market.

The exchange rate has stabilized over the last month at about 41 gourdes to
the dollar after spiking to 51 gourdes on Feb. 13. This reflects a
depreciation of about 69% since Dec. 2001. Back in 1986, the exchange rate
was 5 gourdes to a dollar.