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World Bank to waive debt payments for five years

Text by NEWS WIRES

Latest update : 2010-01-22

The World Bank on Thursday announced it will waive payments on Haiti's pre-existing $38 billion debt for the next five years. The IMF is proposing a $100 billion loan with no interest initially and a 0.5% interest rate after 2011.

REUTERS - The World Bank on Thursday announced it will waive payments on Haiti’s debt for the next five years, while the IMF said its proposed loan would be interest free until late 2011 to help the country rebuild.

Such moves by the international institutions would help free up more resources for the impoverished country to spend on rebuilding from the devastating earthquake.

“We are working to find a way forward to cancel the remaining debt,” the World Bank said in a statement. Currently Haiti’s debt to the World Bank is about $38 million.

International Monetary Fund spokeswoman Caroline Atkinson told a regular press briefing the IMF’s proposed $100 million loan for Haiti will be considered for approval on Jan. 27 by its board, made up of the Fund’s member countries.

Haiti’s interest-free loan is part of a move announced by the IMF last year in the midst of the financial crisis to freeze interest payments on loans to all of its poorest borrowers until the end of 2011. After that, interest payments will resume at a low rate of 0.5 percent or less.

The IMF has faced anger from anti-poverty groups that its loan will harm, not help, Haiti in the long-term because it will eventually have to be repaid by a country with so many needs.

Given the destruction from the earthquake, Atkinson said donors may be willing to consider another round of debt cancellation for Haiti. The IMF and World Bank canceled $1.2 billion of Haiti’s debt last year, rewarding it for efforts to stabilize its fragile economy.

World Bank President Robert Zoellick told Reuters in an interview on Tuesday that for Haiti to rebuild, donor aid needs to be in the form of grants, and not loans.

He said donors need to commit to Haiti “for the long haul” if the country has a chance to rebuild properly after the massive earthquake, which has killed tens of thousands of people.

The World Bank announced last week it would provide $100 million in grant funding for Haiti to help the rebuilding effort, and would send a team to evaluate the damage and cost of the earthquake.

IMF chief Dominique Strauss-Kahn on Wednesday called for a Marshall Plan to rebuild Haiti.

“My belief is that Haiti which has been incredibly hit by different things the food and fuel prices crisis, then the hurricane, then the earthquake needs something that is big,” he said in comments published on the IMF website.

Date created : 2010-01-22

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