IMF cancels Haiti debt, approves new $60 mln loan

WASHINGTON, (Reuters) – International Monetary Fund  member countries yesterday cancelled the $268 million debt  Haiti owed to the IMF and approved a new loan worth $60 million  to boost international reserves in the earthquake-hit nation.

The IMF said in a statement that both steps will help  Haiti’s reconstruction efforts following the devastating Jan.  12 quake, which destroyed the capital Port-au-Prince and left  1.5 million people homeless.

The new three-year loan carries zero interest rate until  the end of 2011, part of a scheme agreed in July 2009 to help  poor countries needing IMF assistance. After that rates will  remain low.

IMF mission chief to Haiti, Corinne Delechat, said the IMF  financing was not intended to ratchet up Haiti’s debts again  but was intended to help the central bank manage volatility  that could arise from large aid flows going into the country.

“The purpose of the Fund program is not to provide resources  for the reconstruction, because we’re not the best institution  for that,” she said, noting that donor countries and  institutions like the World Bank were able to provide grant  handouts, which would not add to Haiti’s debts. Delechat said the IMF program did not restrict aid  spending. “All the spending that can be financed by donor money is  allowed under the program … the idea is to facilitate the  absorption of the aid,” she said.

The IMF said Haiti’s recovery after the quake was still  fragile and the biggest contributor to economic growth would  come from reconstruction efforts.

It forecast that the economy would expand by around 9  percent in fiscal year 2011-12, slowing to 6 percent by 2015 as  rebuilding tapers off.

In statement, IMF Managing Director Domini-que Strauss-Kahn  urged donors to make good on their aid promises to Haiti, so  that reconstruction can be accelerated and social tensions  soothed.     Donors pledged $9.9 billion to Haiti’s reconstruction at a  conference in March, of which $5.3 billion is to be disbursed  over the next 18 months.

Former U.S. President Bill Clinton, who co-chairs the Haiti  reconstruction commission, has complained that donor funding is  flowing too slowly and holding up the rebuilding process.

Delechat said the IMF hoped that the approval of the  program would be a sign of confidence in the government’s  policies and encourage donors to pay up.

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