Provisions of last week’s $4.4 billion IDB
debt relief deal have come under fire at the bank’s annual meeting in Guatemala
City for reducing the impact of the write-off and creating uncertainty about
future funding flows.
Luis Arce, finance minister of Bolivia, the second largest beneficiary of the
write-off, told Emerging Markets: “It is a relief of $1.043 billion [for Bolivia], but
the impact is less than that. We have to repay $300 million to the IDB so the
relief is more or less $800 million, which is important for Bolivia.”
The IDB package for the five poorest Latin
American nations will be distributed over many years, and the amount of
resources to be freed up on an annual basis is relatively small, Arce said.
“The relief is not so much immediate, but
will be around $40 to $50 million annually, this is not that great in annual
terms but any relief is important to for us.”
The IDB is pardoning $1.4 billion for Honduras, $1 billion for Bolivia, $984 million for Nicaragua, $467 million for Guayana, and $525
million for Haiti beginning
in 2009 after the Caribbean nation meets a
series of technical requirements.
“Debt relief is not a panacea,” Ericq
Pierre, senior counselor to the IDB executive director for Argentina and Haiti, told Emerging Markets.
Haiti
sees gaps in the debt relief programme. When parceled out against the needs of
the population, it seems small, officials say. “Of the five poorest countries, Haiti is the one receiving the least debt relief
per capita,” Pierre
says. Per capita income in Haiti
is around $400 annually, against levels up to $1,000 per year for the other
populations included in the debt relief package.
The debt forgiveness measure creates
uncertainty about government finances, Pierre
says. Flows of IDB funding to Haiti
have actually dropped in recent years. In the past, Haiti received between $80 and $100
million in annually in IDB loans. Today, the impoverished nation is receiving
$50 million in grants. “The government is concerned about receiving enough
budget support,” Pierre
said.
Haiti has
$400 million in project loans from the IDB, an amount nearly equivalent to the
amount of debt relief. Those active loans must be repaid.
To qualify for the debt relief, Haiti must
first meet IDB performance standards in disbursing and executing the projects
currently underway. Successful performance may require obtaining a waiver from
the IDB on procedures such as the
requirement that all project bidding processes must have more than one
bidder.
“It is hard to attract international firms
to bid because of security concerns, and their proposals are expensive,” Pierre said.