Haiti starts debt cancellation process

Haiti, the poorest country in the western hemisphere, was yesterday granted entry to the international debt cancellation scheme. However, Haiti will still have to spend several years meeting the onerous conditions set down by the World Bank and IMF before any debts are actually cancelled.

The decision, made by the Boards of the World Bank and International Monetary Fund (IMF), was to allow Haiti to embark on the Heavily Indebted Poor Countries (HIPC) initiative. It is the 30th country to enter HIPC. However, what Haiti needs - and deserves - is immediate cancellation of its huge external debt, much of which was run up by former dictators, without externally-imposed conditions attached.

The HIPC scheme, first set up in the face of pressure from campaigners and poor countries in 1996, allows poor countries to 'qualify' for debt cancellation after they meet a number of criteria and conditions - often including the introduction of controversial economic policies such as spending cuts and privatisation of services - set by the rich world.

The cancellation that eventually comes at the end of the scheme could be very good news for Haiti. More than half of its 8 million people live on less than $1 a day, and only one in five lives on more than $2 a day. Half of all Haitian adults cannot read or write. Meanwhile, Haiti has been servicing a total external debt of $1.3 billion, for instance paying out $133 million in debt service in 2004. When it eventually completes HIPC, it will get cancellation of substantial amounts of debt, which will free resources for spending on health, education and other vital services. As of 2006, countries that complete HIPC also get extra cancellation of World Bank, IMF and some regional development bank debt - thanks to a deal agreed after campaigner pressure at the 2005 G8 summit.

However, this cancellation is still a long way off. Haiti must first meet the conditions set down - and is not expected to do so until late 2008 at the earliest. By then, debt cancellation will be long overdue. Haiti was one of the original 'Jubilee 52 countries' which the Jubilee 2000 campaign highlighted as being in immediate need of debt cancellation in the build-up to the millennium. Moreover, around 40% of Haiti's debt was incurred by the Duvaliers - former dictators, a father and son, who used their time in office to terrorise and steal from Haiti's people. Haitians should not now be made to repay these illegitimate 'debts', which simply served to prop up a corrupt and repressive regime.

Moreover, there is concern about the specific conditions attached to Haiti's debt cancellation. Whilst the final list is not yet available, a 'preliminary' document suggests that, along with a large number of technical conditions about managing finance, Haiti's conditions will include, for instance, the requirement to provide financing for poor families to access private schools. Haiti's state education system is in poor condition: but it should be left up to the government and parliament to decide whether this should be remedied by improving public provision of education or subsidising private education.

All in all, the announcement heralds some future good news for Haiti - but with many reservations. Jubilee Debt Campaign is calling for all illegitimate and unpayable debts to be cancelled immediately, without externally-imposed conditions.