By David Hess
WASHINGTON (March 4, 2010) — A bill authorizing the Treasury Secretary to “use all appropriate diplomatic influence” to lead an international drive to forgive earthquake-ravaged Haiti’s national debt was approved by a House panel Thursday and sent to its parent committee.
With bipartisan support, the un-amended bill (H.R. 4573) was moved without dissent by voice vote by the House Finance International Monetary Policy and Trade Subcommittee. It sets in motion a bid by the Obama administration to rally Haiti’s creditors behind a massive attempt to rescue the impoverished country’s people and economy from a natural disaster that wrought an estimated $14 billion in damage to its infrastructure and harmed or dispossessed nearly one-third of its population.
In all, according to estimates of the amount owed by Haiti to a bevy of international financial institutions and other countries, the Western hemisphere’s poorest country is indebted to the tune of $828 million — a sum that appears clearly to be unpayable in light of the daunting cost of its social recovery and material reconstruction.
Just nine months ago, the International Monetary Fund wrote off $1.2 billion that Haiti owed to that institution, following a series of pre-earthquake disasters that had wracked the tiny Caribbean island-nation. The bill was vocally backed by subcommittee Chairman Gregory Meeks, D-N.Y., Maxine Waters, D-Calif., Gary Miller, R-Calif., and Spencer Bachus, R-Ala. It would effectively wipe clean Haiti’s debt slate, giving it a leg up in helping to finance its own recovery once its immediate needs — enormous as they are — are addressed.
Before sending the legislation up the ladder, the subcommittee heard testimony from a Treasury deputy, Nancy Lee, and three outside experts on aid to poor countries, who generally agreed that, in addition to loan forgiveness, Haiti would need direct grants from the rest of the world and international institutions to help pay for its recovery. She also said the White House is preparing an emergency supplemental appropriations request to Congress for Haiti relief, but provided no details as to how much it would cost.
In addition to debt relief, Lee said, the Treasury Department is preparing another proposal to Haiti’s creditors to augment the loan forgiveness effort with grants, to convert existing but undisbursed loans to outright grants, and to urge the Inter-American Development Bank to dip into its own reserves to provide grants to Haiti. The aim, she said, would be to “create a substantial pool of upfront grant resources, [supply] a continuous stream of grants, and ensure that the U.S. government’s contribution [to Haiti] leverages the maximum amount of multilateral aid.”
Waters cited Treasury Department findings that the bulk of Haiti’s current debt is owed to the IDB ($447 million), the IMF ($284 million), the World Bank ($39 million), and the International Fund for Agriculture Development ($58 million). Her legislation calls on the IMF to start selling off part of its vast store of gold to provide relief grants and debt-service relief for Haiti’s recovery.
Calling it “a cruel hoax to load up poor countries with unpayable debt,” Tim Adams, director of the Lindsey Group, told the subcommittee that the entire approach for lending to the world’s poorest nations is a “lend-and-forgive game” that simply does not work and needs to be changed. “We must move away from excessive lending and use direct grants to the poorest countries,” he said.
He was joined by Melinda St. Louis, deputy director of Jubilee USA Network, an international relief organization, who praised the subcommittee for moving the legislation and said: “Given the billions of dollars that it will take to pay for recovery, it’s clear Haiti cannot do it. Immediate and full debt cancellation, as well as massive new grant assistance, are critical to it.”
Thomas Hart, chief lobbyist for ONE, a global group for alleviating poverty, cautioned the panel that it won’t be easy to gain the assent of the multilateral institutions in providing the relief that Haiti needs. The “major stakeholders” in those various institutions, he said, include the U.S., Japan, Germany, Britain, France, Canada, Italy, the Netherlands, Argentina, Brazil and Mexico. “All the creditors have to be at the table for it to work,” Hart said. “Otherwise, debt relief from one creditor simply makes it easier to pay back another creditor.”
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