Haiti ... World Bank IDA debt cancelled! What impact on accountability

Dear Colleagues

A Relief Web posting reports that some World Bank IDA debt is being cancelled. The article is at this URL and the text copied at the end of this posting. http://www.reliefweb.int/rw/rwb.nsf/db900SID/EGUA-85VQ7U?OpenDocument&RSS20=18-P

This debt cancellation raises big questions ... not least is how come so much debt in a country with so much poverty. There are clearly substantial issues that need some accounting and accountability.

Accountability is a difficult problem to handle ... especially when the rewards associated with no accountability are huge. My first work with the World Bank was in 1978 ... if you don't count some cost accounting that I did in connection with the Kariba Dam early in the 1960s! I have been interested in debt and development for a very long time ... and have worked on trying to understand the state of sovereign liabilities in a number of developing countries. It is am amazing mess ... the accounting is a mess and, not surprisingly, accountability is impossible.

We now learn that the World Bank is cancelling all the Haiti IDA debt ... some $37 million, which is not very much, but it comes after Haiti won a $1.2 billion in debt relief from the World Bank, International Monetary Fund and other creditors in July 2009. I do not know yet what debt this leaves to be repaid in the future.

The World Bank and the other institutions associated with official relief and development assistance (ORDA) are a central problem in the achievement of any depth of accountability. Cancelling debt may be a good thing to do ... but there should be an accounting that explains how come such a debt restructuring was needed. The World Bank does a huge amount of research and prints more material than most publishing houses ... but when it comes to basic accounting and accountability there is a void ... a silence ... an empty space!

There are around 10 million Haitians. $1.2 billion of debt is equivalent to about $120 per person ... or with 5 people per family say $600 per family. With the general population of Haiti so poor ... exactly what was all the money used for that eventually became a liability of the country. Who did the lending and why? Who did the borrowing and why?

I have done enough practical business ... physical construction ... and know something of the problems that arise. In the companies where I have been involved we made provisions for problems and at the end we had nice credits as we had less problem than we planned and budgeted for. There has to be a reason why this does not happen with ORDA projects ... and part of the reason has a lot to do with the lack of adequate accounting and absent accountability ... and another part of the reason is that a lot of decisions have been made by senior people to serve special interests rather than the public good and needy beneficiaries. Nobody knows much about this, and never will until there is a paradigm shift towards accountability.

My guess is that much of the debt was used to import goods that became needed as a result of the total economic collapse of the country over a good number of years ... but why did the economic collapse take place, and to what degree did imported goods in competition with locally produced goods cause collapse. Was this vicious cycle in play? If not, what other explanation is there? Maybe it is that the Government of Haiti was loaned money to do health and education ... while not having any economic underpinning that would allow for either user fees or taxation to pay for repayment. These are questions for which there should be solid answers ... and a lot of accountability from both borrowing entities and the lenders.

Maybe this information exists ... but where? I would be delighted if someone could show me the data and the relevant analysis!

Peter Burgess
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World Bank Announces Total Cancellation of Haiti's Debt
Source: The World Bank Group
Date: 28 May 2010
Press Release No:2010/439/LCR/CFP

WASHINGTON, May 28, 2010 -- The World Bank today announced that the remaining US$36 million of debt owed by Haiti to the International Development Association (IDA), the Bank's fund for the poorest countries, has been cancelled. Haiti now has no further amounts payable to the World Bank.

"Relieving Haiti's remaining debt is part of our effort to pursue every avenue to help Haiti's reconstruction efforts," said World Bank Group President Robert B. Zoellick. "We will continue to work in close cooperation with the Haitian government and our international partners to support the country's recovery and longer-term development."

This cancellation by the World Bank of Haiti's debt to IDA was made possible by contributions from Belgium, Canada, Finland, France, Germany, Ireland, Italy, Japan, The Netherlands, Norway, Spain, Sweden, and Switzerland.

Since the earthquake that struck Haiti in January this year, the World Bank has made available US$479 million in grants to support Haiti's recovery and development through June 2011. It is also the trustee as well as a partner working to support Haiti's reconstruction and development through the multi-donor Haiti Reconstruction Fund, to which Brazil became the first country to contribute earlier this month.

In July 2009, Haiti won $1.2 billion in debt relief from the World Bank, International Monetary Fund and other creditors.
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For more information on the World Bank's work in Haiti, please visit:
http://www.worldbank.org/haiti

Contacts:
World Bank in Washington:
Sergio Jellinek (202) 458-2841 sjellinek@worldbank.org
Angela Furtado (202) 473-1909 afurtado@worldbank.org