9713:; IDB Loan Commitment Charges (Add'l IMF comment) (fwd)

[Bob Corbett <corbetre@webster.edu>]

From: Lance Durban <lpdurban@yahoo.com>

Further to my my earlier post where I quoted my friend at the
IMF regarding commitment obligations for IDB loans, he has just
sent me some further clarification on this issue which might be
of interest to Guy Antoine and others interested in this
discussion.  Here is what he writes.

QUOTE:

There's still a bit more here than meets the eye at first sight.
Loan commitment fees are not bad. One function of the commitment
fee on undisbursed loans is to give incentives to the loan
recipient to meet the conditions for disbursement.  There is not
much point, for example, in tying up funds that could be better
used elsewhere for a loan recipient that is not meeting the pre
conditions for the loan to disburse.  Another function of the
loan commitment fee is to provide a positive incentive for loans
to disburse quickly (for projects that are financed by the loan
to be executed promptly.  There are, for example, costs that are
borne by the lender irrespective of whether the loan disburses
or not.  The specific issue with respect to the loan commitment
fee on the idb loans is whether or not Haiti has in fact met all
the commitments it was supposed to meet for the loans to
disburse.  Some observers say all the conditions have been met
and, for political reasons, the idb does not disburse.  Others
say the conditions have not been met.  I don't know who is
correct.

UNQUOTE.

OK, as I read through the above, it seems that both sides may
have some legal argument.  In a purely legal sense, I suppose
one would  normally have to appeal to a higher authority.  Who
exactly would that be?  The World Court??  Obviously, the
Haitian Government shouldn't be paying any such commitment fees
until the legality of the matter is resolved.  If all legal
channels are played out and the World Court STILL rules against
Haiti, then Haiti has to decide if it wants to play this crazy
loan game.  

I think Guy originally advocated that Haiti wean itself from a
dependence on international development loans.  As far as I'm
concerned, if, in the unlikely event Haiti was ordered by the
World Court to pay off a commitment fee on loans not received,
my first inclination would be to default and let the chips fall
where they may.  But that's a big step, and I'd surely want to
look it a bit closer before making a final decision.

Lance Durban

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