Debt Relief Cleared for Latin Nations
WASHINGTON, Mar 16 (IPS) – The Inter-American Development Bank (IDB) said Friday it will cancel 4.4 billion dollars in debt and interest owed by five of Latin America and the Caribbean’s poorest countries.
“This decision represents a historic opportunity for a fresh start for Bolivia, Guyana, Haiti, Honduras and Nicaragua,” said IDB President Luis Alberto Moreno.
The Washington-based Bank says its initiative involves scaling back 100 percent of loans outstanding as of Dec. 31, 2004.
The freed-up money will be diverted for needed health care, education and infrastructure development in the impoverished region, it said.
The agreement includes provisions that would also guarantee five other low-income countries — Ecuador, El Salvador, Guatemala, Paraguay and Suriname — access to 250 million dollars a year in easy-term loans.
The IDB will forgive approximately 3.4 billion dollars in principal payments and one billion dollars of future interest payments.
Honduras will receive 1.4 billion dollars in IDB debt relief, including cancelled loan balances and interest payments. Bolivia will get one billion, Nicaragua, 984 million, and Guyana, 467 million dollars.
The Bank says the programme is linked to the Heavily Indebted Poor Countries (HIPC) debt relief initiative of the World Bank and the International Monetary Fund, which benefits other poor countries across the globe.
HIPC was devised by multilateral lenders such as the World Bank and IMF, and the Paris Club, a cartel of bilateral lenders from rich nations, as a comprehensive approach to reduce the external debt of the world’s poorest nations, which have been ensnared by decades of foreign debts.
Of the five nations that will receive debt relief, Haiti gets only a partial deal. In addition to receiving 423 million of debt relief, the IDB approved HIPC status for Haiti, which will receive interim relief of 20 million dollars over the next two years.
If it complies with economic reforms set by the creditors under HIPC, Haiti could obtain full debt relief by 2009 or by 2010, which in the IDB’s case will total 525 million dollars.
Some anti-debt campaigners have criticised the Bank for not giving Haiti more. They say the country is being asked to wait for too long to complete the HIPC programme when its rampant poverty qualifies it for immediate debt forgiveness.
“Haiti currently pays 56 million dollars a year to service odious debts. A large portion is paid to the IDB, the creditor that makes the largest claim against Haiti,” said Tom Ricker, co-director of the Quixote Centre’s Haiti Reborn programme.
“If Haiti has to wait until the end of fiscal year 2010 for cancellation, that is another 90 to120 million dollars just to the IDB — money that would be far better spent providing health and education services for the people of Haiti,” he said.
The Bank, the principal creditor of all five nations, said in a statement Friday that it hoped its decision would bring those nations closer to achieving the United Nations Millennium Development Goals, which aim to halve poverty by 2015.
The IDB’s decision follows the Multilateral Debt Reduction Initiative launched last year by the Group of Eight most industrialised nations to forgive the debts of the world’s poorest countries.
The U.S. Treasury Department, the main power broker in most international financial institutions, said Friday it had worked closely with the IDB over the past year to develop the proposal.
It said the plan would both provide debt reduction and sustain the financial viability of the IDB for future lending by getting funders to pledge future replenishment to compensate for the funds forgiven today.
The Washington-based lender has come under attack from non-governmental organisations and debt campaigners who say the Bank, like other international financial institutions controlled by the industrialised nations, constrains spending on social sectors in poor borrowing nations.
They charge that its programmes have not helped reduce poverty in the Latin America.
Civil society groups meeting in Guatemala City for the IDB’s annual meetings, which start on Monday, issued a statement saying that Guatemala itself shows the failure of the Bank to offer a viable development policy.
“The choice of Guatemala as host nation for the IDB’s 2007 annual meeting perfectly highlights the bank’s failure to alleviate poverty, protect the environment and, in short, meet the most basic prerequisites of any ‘development’ policy,” the statement said.
Despite 1.5 billion dollars in lending from the Bank over the past 10 years, no noticeable improvement in living standards for ordinary Guatemalans was recorded, the groups said.
The IDB belongs to a species of Western-funded banks called multilateral financial institutions that includes the World Bank and the Asian Development Bank. Their role has been to lend to governments while promoting private investment in developing countries.
The IDB is made up of 47 member countries that include 26 mostly borrower nations in Latin America and their creditors: the United States, Canada, 16 lenders in Europe, as well as Israel, Japan and the Republic of Korea. (END/2007)