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.