G7 Countries to Cancel Haiti's Bilateral Debt

by Nathaniel Whittemore · 2010-02-07 14:06:00 UTC
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In a show of support for earthquake-devastated Haiti last night, the leaders of the G7 nations announced that they would be canceling all of the country's bilateral debt.

As the BBC reports, the actual amount in question is small, as Haiti's largest bilateral debts are not held by G7 nations (which include Canada, the U.S., U.K., France, Germany, Italy and Japan). Most of its debt is owed to multilateral institutions like the International Monetary Fund. While such agencies cancelled some $1.2 of Haiti's almost $2 billion in debt last year, the chorus is growing louder for them to eliminate the remainder.

U.S. Treasury Secretary Timothy Geithner welcomed the G7's commitments, and said that the U.S. would help lead the conversations to get outstanding debt to those multilateral bodies canceled.

Yesterday's announcement comes on the heels of decades of debt relief activism -- and controversy.

In the 1990s, a coalition of top NGOs and faith-based organizations came together to advocate for relief, which eventually prompted the creation of the Heavily Indebted Poor Countries initiative. The HIPC program isn't without its critics: Some who oppose the initiative, for example, argue that the conditions placed on debt forgiveness -- from governance requirements to policy adjustments -- make the initiative just another tool for the West to make the economic world in its image.

On the other hand, many critique debt relief programs from another perspective, worrying that such programs reward bad behavior by making governments assume that they can freely spend money in an irresponsible fashion, rather than invest in their country's infrastructure.

It's a complicated debate, but saddling countries with burdens that prevent them from building the infrastructure needed to help people move from the informal to formal sector (and begin paying taxes) doesn't help those who need it most. All it does is force countries into a  "stuck before you start" situation. So for the G7 to take a step toward cancelling Haiti's debt is an important one, even if the actual amounts involved are not the most significant of Haiti's debts. Let's hope international lending institutions step up to match the commitment.

Photo Credit: United Nations Development Programme

Nathaniel Whittemore is the founder of Assetmap. Previously he was the founding director of the Northwestern University Center for Global Engagement.
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