Letter to Ministers Flaherty and Cannon re debt cancellation for Haiti - February 1, 2010

Hon. James Flaherty 
Minister of Finance
Department of Finance Canada
140 O’Connor Street 
Ottawa, ON  K1A 0G5
Hon. Lawrence Cannon
Minister of Foreign Affairs
Foreign Affairs and International Trade Canada
125 Sussex Drive    
Ottawa, ON  K1A 0G2

1st February 2010

Ref: Immediate debt cancellation for Haiti

Dear Ministers Flaherty and Cannon,

We are writing to commend the government’s efforts to date to mobilise emergency assistance for disaster relief in Haiti and for speaking to the urgency and importance of debt cancellation for the country. The call to cancel Haiti’s remaining multilateral debt, including last week’s highly concessional $102 million loan from the IMF, benefits from a strong Canadian voice. We urge you to keep demonstrating such leadership in the government’s interventions at the Bretton Woods Institutions, and at Haiti’s largest multilateral creditor, the Inter-American Development Bank (IDB).

At this week’s discussion among the G7 Finance Ministers in Iqaluit, Canada should push for a decision on debt cancellation by the World Bank and IMF Spring meetings. We understand that the Irish government, who are part of the Canadian constituency at the Bank and Fund are supportive of full debt cancellation for Haiti, and that Ireland’s Joint Parliamentary Committee on Foreign Affairs have publicly called for all outstanding loans owed by Haiti to be cancelled.

As you are aware, in June 2009 Haiti secured $1.2 billion in debt cancellation from its major creditors when it reached completion point in the Heavily Indebted Poor Countries (HIPC) Initiative. Canada, for its part, cancelled $2.3 million. This was a critical step forward. But even after this cancellation, Haiti remains burdened with over $650 million in multilateral debt, the vast majority of which is owed to the IDB.

A significant cause of Haiti’s underdevelopment lies in the accumulation of huge levels of illegitimate debts - granted by international lenders to brutal Haitian dictatorships. While Haiti’s debt cancellation last July wiped out half of this debt, Haiti’s capacity to cope with disasters such as the current one has been significantly undermined by its long history of unjust debts. Postponing permanent cancellation of its remaining debts is morally unjustifiable.

The IMF announced last week that it will provide $102 million in assistance to the people of Haiti. Immediate financial support is certainly urgently required, however, it is deeply inappropriate for Haiti to be saddled with further debt by the IMF. While the loan is interest-free, it is unacceptable that the country is still expected to repay the principal in five and a half years. Minister Flaherty’s call for grant financing over loans is important and must be maintained for Haiti. It is of further concern that the IMF loan is also not free of policy conditions, but rather only free of “any additional conditions” to the existing loan agreement.

We urge you to take a strong stance against the provision of emergency assistance through conditional, debt-creating financial support. In particular we urge you to:

  • Use your voice and vote at the IDB, IMF and World Bank to secure cancellation of Haiti’s remaining debts.
  • Use your influence at multi-lateral levels to ensure that adequate resources responding to the Haitian crisis are mobilised and disbursed swiftly, are free of policy conditions, and are non-debt creating.

Haiti deserves an immediate, debt-free fresh start. We thank you for your consideration of our views on this urgent matter, again commend you on your forward-looking stance on this issue and look forward to your response.

Yours sincerely,

Fraser Reilly-King
Coordinator, Halifax Initiative Coalition

Cc:  Beverly Oda, Minister of International Co-operation
 Samy Watson, Canadian Executive Director to the World Bank
 Tom Hockin, Canadian Executive Director to the International Monetary Fund
 Peter Cameron, Canadian Executive Director to the Inter-American Development Bank