Haiti Debt Relief, House hearing, Mar. 4, 2010, v+64p,


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MARCH 4, 2010

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BARNEY FRANK, Massachusetts, Chairman

PAUL E. KANJORSKI, Pennsylvania
MELVIN L. WATT, North Carolina
BRAD SHERMAN, California
MICHAEL E. CAPUANO, Massachusetts
WM. LACY CLAY, Missouri
JOE BACA, California
STEPHEN F. LYNCH, Massachusetts
BRAD MILLER, North Carolina
GWEN MOORE, Wisconsin
PAUL W. HODES, New Hampshire
RON KLEIN, Florida
JOHN ADLER, New Jersey
JIM HIMES, Connecticut

EDWARD R. ROYCE, California
FRANK D. LUCAS, Oklahoma
WALTER B. JONES, JR., North Carolina
GARY G. MILLER, California
J. GRESHAM BARRETT, South Carolina
JIM GERLACH, Pennsylvania
TOM PRICE, Georgia
PATRICK T. McHENRY, North Carolina
KEVIN McCARTHY, California

JEANNE M. ROSLANOWICK, Staff Director and Chief Counsel

GREGORY W. MEEKS, New York, Chairman

MELVIN L. WATT, North Carolina
GWEN MOORE, Wisconsin

GARY G. MILLER, California
EDWARD R. ROYCE, California


Hearing held on:
M arch 4, 2010 ................... ................................ 1
M arch 4, 2010 .................... ............................................. 33


Adams, Hon. Timothy D., The Lindsey Group ..................................................... 18
Hart, Thomas H., Senior Director of Government Relations, ONE .................. 21
Lee, Nancy, Deputy Assistant Secretary for the Western Hemisphere, U.S.
Department of the Treasury ................................................... ..................... 7
St. Louis, Melinda, Deputy Director, Jubilee USA Network ............................. 19

Prepared statements:
M eeks, H on. Gregory ...................................................... .......................... 34
Adam s, Hon. Timothy D. ................................................... ..................... 37
H art, Thom as H ......................................................... .............................. 39
Lee, N ancy .............................................................. .................................. 46
St. Louis, M elinda ........................................................ ........................... 52

Green, Hon. Al:
Citizens' Petition for Haiti ................................... .............................. 63


Thursday, March 4, 2010
Washington, D.C.
The subcommittee met, pursuant to notice, at 10:02 a.m., in room
2128, Rayburn House Office Building, Hon. Gregory W. Meeks
[chairman of the subcommittee] presiding.
Members present: Representatives Meeks, Waters, Watt, Carson;
and Miller of California.
Ex officio present: Representative Bachus.
Also present: Representative Green.
Chairman MEEKS. This hearing of the Subcommittee on Inter-
national Monetary Policy and Trade will come to order. Without ob-
jection, all members will have 10 minutes for opening statements,
which will be made a part of the record. And then we will get to
our witnesses.
I will start with an opening statement. And I would like to begin
by thanking, of course, the ranking member on the full committee,
Mr. Spencer Bachus, and my colleagues and the ranking member
on this subcommittee, Mr. Miller, for their help in organizing this
very important hearing on Haiti Debt Relief.
I also, of course, want to thank all our witnesses who have taken
the time to come and share their valued experience on the topic of
debt relief for Haiti.
A few notes on procedures before we begin. We are going to have
a tight schedule today, with two panels to testify this morning, and
a mark-up of H.R. 4573 scheduled to start at 1:00 p.m. this after-
noon. And so, therefore, we are going to try to move as quickly as
we can. And I am told we're going to have some votes somewhere
around 10:30.
Today, we will consider an issue that is close to all of our hearts.
Haiti suffered a devastating earthquake on January 12th of this
year, a country which was finally making strides to more stable
economic growth, and whose government was finally showing signs
of becoming more stable, credible, and accountable was rocked by
a natural disaster of historic proportions.
The images from the disaster are fresh in our minds. The imme-
diate needs of the people are clear. And the desire of the global
community and of average American citizens to help Haiti recover
as fast as possible are clear, and give us all hope.

This is a bipartisan issue, because it is a human issue at its sim-
plest. And all of us have come together, as human beings, to deal
with this issue. This is not about Democrats or Republicans, or
about whether or not we are in an election year. This is about
America showing its true compassion and capacity to help our
neighbors in their time of greatest need.
Average American citizens mobilized to help Haiti in a way that
gives me great pride in my country. Our government stepped up to
the challenge in the immediate aftermath. We are now moving to
the second and third phase of the process, namely moving from im-
mediate rescue and survival concerns, though they are still critical,
to a reconstruction and, ultimately, long-term economic recovery.
A critical step to this transition will be providing Haiti with debt
relief, and working with the multilateral development banks and
the IMF to ensure that Haiti will be provided the resources it
needs in the medium- and longer-term, without adding to the na-
tion's debt burden.
I look forward to hearing our witnesses here today, and I look
forward to working with my good friend, Gary Miller-Ranking
Member Gary Miller, from California-on moving a bill to empower
the Administration to promote Haiti's debt relief from the inter-
national institutions in which we are major shareholders, as well
as pushing for bilateral debt relief from other nations holding Hai-
ti's debts today.
Finally, I did want to inform you that this will be just the first
in a series of hearings focused on Haiti. As some of you know, I
chaired a bipartisan, members-only briefing on multilateral aid and
financing coordination in February, at which the Treasury Depart-
ment, the IDB, the World Bank, and the IMF provided clarity into
how they planned to collaborate to ensure efficiency, and to elimi-
nate waste and duplication of efforts in their work in Haiti.
The next hearing is scheduled for March the 16th, and we will
focus on the longer-term prospects of strategy for Haiti's economic
recovery. Long after the news cameras have left, we will continue
to monitor the progress in Haiti, and to provide assistance to en-
sure that the nation can get back on its feet, back on a path to eco-
nomic growth and political stability.
We believe that this is our moral obligation to do, to help one of
the poorest nations, economically, get on its feet by some of the
most resilient people that you will ever see. Because if you just go
to Haiti, they are a resilient and rich people in that spirit. And we
need to stand by them and by their side through this critical period
of time.
With that, I will yield to Mr. Bachus for an opening statement.
Mr. BACHUS. Thank you, Chairman Meeks. And I thank you for
calling this important hearing, to focus on debt relief for Haiti in
the aftermath of the devastating earthquake of January the 12th,
and to consider legislation authored by Representative Waters to
effectuate that relief. And I commend you and Ranking Member
Miller for your strong participation in this effort.
Creditors cannot expect Haiti to service its debt at a time when
the country is lying in ruins. As former Under Secretary Adams,
one of our witnesses today, says, "It is a cruel hoax on both the
people of developing countries and on the taxpayers of donor coun-

tries to pretend that even without an earthquake, a country whose
citizens subsist on a dollar or two a day is ever going to pay back
billions of dollars in loans."
The United States has always been a benevolent and caring
country. Even during our current economic challenges, we have not
lost our compassion. In fact, our present travails have, in some re-
spects, engendered us with an appreciation for the desperation and
suffering of those facing challenges and hardships in other parts of
the world. Of course, to compare what we face here with the strug-
gle to just exist in these countries is really a pale comparison.
Consistent with our principles is forgiving the debt Haiti owes to
multilateral agencies, in which the United States, in most cases, is
the largest single donor. We can lead by example while we lend a
helping hand. And when we do so, we will be doing so consistent
with our principles and values as a country.
I support this legislation, and I yield back the balance of my
time. And I would also-I think it's my understanding that we are
going to move this legislation to the Floor early next week, and
hopefully get it over to the Senate without delay.
Chairman MEEKS. As I said, we thank you for the bipartisanship
of this.
Mr. BACHUS. Thank you.
Chairman MEEKS. And the timeliness in which we were able to
get this done.
I would now like to yield to the gentlelady from California, who
is the author of this bill, Maxine Waters.
Ms. WATERS. I would like to thank you, Mr. Chairman, for orga-
nizing this hearing on Haiti debt relief, and for agreeing to mark
up my legislation on this subject.
I also appreciate the support of several members of the Financial
Services Committee for this bill, including Chairman Barney
Frank, of course, Chairman Gregory Meeks, and Ranking Member
Spencer Bachus.
Haiti was struck by a devastating earthquake on January 12,
2010. According to the U.S. Agency for International Development,
230,000 people were killed, and 1.3 million people were displaced
from their homes. There is a desperate need for clean water, food,
shelter, and basic sanitation. Three million people, one-third of the
country's population, were affected by the quake.
Prior to the earthquake, Haiti was already the poorest country
in the Western Hemisphere. I have traveled to Haiti many times,
and I have seen the poverty and desperation of the Haitian people
with my own eyes. According to the Central Intelligence Agency's
World Fact Book, there is widespread unemployment and under-
employment, and more than two-thirds of Haitian workers do not
have formal jobs. There is a high risk of infectious diseases, includ-
ing diarrhea, hepatitis, typhoid fever, and malaria. The infant mor-
tality rate is nearly 6 percent. Almost half of the adult population
cannot read and write.
One of the simplest but most important things we can do to help
Haiti is cancel its debts.
Haiti's democratic government has worked very hard in recent
years to qualify for debt relief. In order to qualify, the Government
of Haiti successfully developed and implemented a comprehensive

poverty reduction strategy paper under the direction of the IMF
and the World Bank. As a result, multilateral financial institutions
provided Haiti 1.2 billion in debt relief last June. This was a crit-
ical step forward for Haiti.
Nevertheless, despite previous debt relief, Haiti still has a sig-
nificant debt burden that will interfere with relief, recovery, and
development efforts, unless the remaining debts are canceled. Ac-
cording to the most recent figures provided to my office by the U.S.
Treasury Department, Haiti still owes $828 million to multilateral
development institutions. This includes $47 million to the Inter-
American Development Bank-that is, IDB-$284 million to the
IMF, and $39 million to the World Bank Group's International De-
velopment Association, IDA, and $58 million to the International
Fund for Agricultural Development.
I introduced H.R. 4573, Haiti Debt Relief and Earthquake Recov-
ery Act of 2010, to free Haiti from the burden of these debts. H.R.
4573 requires U.S. executive directors at multilateral development
institutions to use the voice, vote, and influence of the United
States to do three things: one, cancel immediately and completely
all debts owed by Haiti to these institutions; two, suspend Haiti's
debt service payments until such time as the debts are canceled;
and three, provide additional assistance to Haiti in the form of
grants, so that Haiti does not accumulate additional debts.
The bill also requires the Secretary of the Treasury to urge other
bilateral, multilateral, and private creditors to cancel the debts
that Haiti owes them.
Chairman Meeks is planning to offer a manager's amendment to
this bill. The chairman worked with full committee Chairman
Frank and myself on drafting this amendment. The manager's
amendment adds a provision directing the U.S. executive director
of the IMF to advocate that some of the excess profits from the sale
of IMF gold, which Congress approved last year, be used to provide
debt relief and grants to Haiti. The amendment also adds updated
statistics on Haiti's debts to the bill's findings, and makes other
technical changes. I support the manager's amendment, and I ap-
preciate the efforts of Mr. Meeks, Chairman Frank, and others.
Debt cancellation will allow the Government of Haiti to focus its
meager resources on essential humanitarian relief, reconstruction,
and development. The people of Haiti are poor, but they are resil-
ient. I know that with the support of the international community,
they will recover from this tragedy and create a brighter future for
their children.
I urge my colleagues to support the debt relief for earthquake re-
covery in Haiti, this act of 2010.
Once again, I thank the chairman for holding this hearing and
mark-up. I look forward to hearing the witnesses' views on the ben-
efits of debt relief for the people of Haiti. And I yield back the bal-
ance of my time.
Chairman MEEKS. I thank the gentlelady, and I now yield to the
ranking member of the Subcommittee on International Monetary
Policy and Trade, Mr. Miller, from California.
Mr. MILLER OF CALIFORNIA. Thank you, Mr. Chairman. In June
2009, Haiti completed the requirements of the enhanced Heavily
Indebted Poor Countries, HIPC, initiative, which made it eligible

for debt relief from multilateral institutions, and for relief of some
of its bilateral debt.
The enhanced HIPC initiative, coupled with the multilateral debt
relief initiative, provided Haiti with $1.2 billion in debt relief. A
particular note, the American Development Bank, Haiti's largest
creditor, forgave $511 million in debt for Haiti. At the time of the
cancellation, Haiti still owed the IDB approximately $429 million,
because the lending occurred outside the agreed-upon debt relief
Also in the agreement, the United States canceled $12.6 million
in Haiti debt relief, relieving Haiti of its entire outstanding bilat-
eral debt to the United States.
Currently, Haiti still is burdened with approximately $1.24 bil-
lion in external debt. This is comprised of debt owed to both multi-
lateral institutions and other bilateral creditors.
On the multilateral side, Haiti owes approximately $165 million
to the International Monetary Fund, IMF; $441 million to the
Inter-American Development Bank, IDB; $38 million to the World
Bank's concession lending arm, the International Development As-
sociation, IDA; and $54 million to other multilateral creditors.
At present, the World Bank is suspending debt service for $38
million debt for 5 years. The IMF will require virtually no payment
from Haiti until 2013. The IDB debt service obligation is, by prior
agreement, paid by the U.S.-supported trust fund.
As the members of this panel know, on January 12, 2010, Haiti
experienced a 7.0 magnitude earthquake centered approximately
15 miles southwest of the nation's capital, Port-au-Prince. What fol-
lowed were 50 aftershocks of magnitude over 4.0, all occurring
within 24 hours. The Haiti Government has estimated 230,000
deaths, and 300,000 injured. Approximately 700,000 people have
been displaced in the Port-au-Prince area.
Damage caused by the quake is estimated between $8 billion and
$14 billion, and speculation to reconstruct will be about $14 billion.
Following this hearing, the subcommittee will be voting on legis-
lation to require the Secretary of Treasury to instruct the U.S. di-
rector of the IMF, the World Bank, and the Inter-American Devel-
opment Bank, and other multilateral development institutions, to
use a voice vote to seek the immediate and complete cancellation
of the debt owed by Haiti in such institutions.
There is a serious situation we are trying to deal with, and we
could all continue to read. But the issue is we have to help these
people. They are good people. They have been devastated beyond
what any of us can imagine. And I am really looking forward to
hearing from our committee, what they have to say. I yield back
the balance of my time.
Chairman MEEKS. I now ask for unanimous consent to allow Mr.
Green from Texas to participate in today's hearings. He is a mem-
ber of the full committee, but he is not on this subcommittee. So
I ask unanimous consent.
There being no objection, Mr. Green is acknowledged for an open-
ing statement.
Mr. GREEN. Thank you very much, Mr. Chairman. Mr. Chair-
man, I especially thank you for hosting this hearing. I thank Rank-
ing Member Bachus, the ranking member of the full committee. I

thank Representative Waters, who has been a friend of Haiti, as
has been the case with you, Mr. Chairman, for many years. She
has been there for Haiti on many occasions, and continues to fight
the good fight for Haiti.
I also thank Chairman Frank, and I especially thank also my
friend, Ranking Member Miller, because he and I have worked on
a bipartisan basis before, and we continue to do so. I look forward
to this bill passing. I support the bill.
I came by this morning to make the moral argument that super-
sedes the monetary argument. The moral argument for passage of
this legislation is one that, in my opinion, must be made for the
record. And if the moral argument is to be made, we cannot escape
some history that we have to understand.
We have to understand that Haiti was in human bondage-it's
no secret; and that it won its independence in 1804. But when
Haiti became the first African nation to win its independence, in
a sense, in the Caribbean, when it did so, France threatened to re-
invade, and would have reinvaded, but for Haiti's agreeing to pay
150 million francs, the equivalent of $21 billion today. And Haiti
has been paying ever since. It has gone from human bondage to
economic bondage.
And this economic bondage is what this really is about today,
eliminating the economic bondage that Haiti has suffered from
these many years.
Until last year, Haiti was forced to pay between $60 million and
$80 million per year in debt service. At a time before the hurricane,
when more than 75 percent of the population was living on less
than $2 a day, when more than 50 percent of the population was
living off of less than $1 per day, when 80 percent of the people
were living in poverty, when the life expectancy of a typical Hai-
tian was 52 years, when there was something called a "hunger sea-
son" that lasts from October through February, at a time when this
country could barely afford to feed itself, it had to pay this debt
It is time to liberate Haiti from economic bondage. And it is also
time for us to understand that if we return Haiti to the status that
it was in prior to the devastation from the earthquake, it would be
sinful. It is time for us to strategize and compromise and work to-
gether, so that Haiti can have the future it richly deserves in this
And, Mr. Chairman, I am so grateful that you allowed me to say
this. I appreciate very you much, and I commend you very much
for what you have done, as well as Representative Waters. And I
yield back any time that I have left. God bless you.
Chairman MEEKS. Thank you, Mr. Green. We will now go to our
first witness, Ms. Nancy Lee, who is Treasury's Deputy Assistant
Secretary for the Western Hemisphere, responsible for managing
Treasury's engagement on economic and financial issues with Latin
America, the Caribbean, and Canada.
In 2008, she spent a year on sabbatical, as a visiting fellow at
the Center for Global Development in Washington, focusing on the
future of regional integration in the Western Hemisphere. She was
Treasury's Deputy Assistant Secretary for Europe, Eurasia, and
the Western Hemisphere from 2002 to 2007.

Previously at Treasury, she was the Director of the Office of Cen-
tral and Eastern Europe, Director of the Office of Mideast and Cen-
tral Asia, and Deputy Director of the Office of Asia and Near East
Nations. Also at Treasury, she has served in the Office of Inter-
national Monetary Policy, working on G7 issues and U.S. policy in
the IMF, and in the Office of International Trade Policy. She was
Treasury's negotiator in the Uruguay Round trade negotiations,
and in the early part of the NAFTA negotiations.
Prior to her work at Treasury, she conducted the economic re-
search on U.S. trade and investment relations with developing
countries at the Commerce Department. And in 2002, Dr. Lee be-
came a member of the Council on Foreign Relations. In 2001, Dr.
Lee was a recipient of the Meritorious Executive Presidential Rank
She holds a Ph.D. and an MA in economics from Tufts Univer-
sity, and a BA in economics from Wesleyan College, and she is
married with two children.
Dr. Lee?
Ms. LEE. Chairman Meeks, Ranking Member Miller, members of
the House Financial Services Subcommittee on International Mone-
tary Policy and Trade, Congressman Bachus, thank you very much
for inviting me here today to testify at this important hearing on
I know the leadership role that you and others on this sub-
committee have played on Haiti, both before the devastating earth-
quake and after, and it's a privilege for me to testify today.
I returned early this morning from Port-au-Prince, where I met
with the senior economic team in Haiti's government, as well as a
variety of people from the private sector. And I am pleased to share
my findings.
On the ground, I saw the impact of the earthquake on Haiti's
economy is going to be massive, is already massive and will be
massive. It will vary, though, by region and by sector. It will take
some time before we fully understand the magnitude and nature of
the impact of the earthquake on Haiti's future.
Today, I will provide our best assessment of the economic and fi-
nancial challenges ahead for Haiti, and Treasury's efforts to help
Haiti address them.
For the financial sector, initial efforts were focused on the suc-
cessful restart of the banking sector and the payment system, for
which, I would add, the Central Bank deserves an enormous
amount of credit. An important aspect of the financial system for
Haiti is the transfer of remittances, which are playing a vital role
in helping people in small businesses weather this enormously dif-
ficult period.
The U.S. role-and particularly our military helped-to get fi-
nancial remittance providers access to the physical cash they need-
ed to distribute remittances around the country. Going forward, a
key challenge will be to create the conditions that enable the finan-
cial sector to better meet the needs of the Haitian economy.

Credit growth has lagged in Haiti for many years due to risk fac-
tors, risk aversion, institutional weaknesses, and a variety of
shocks. Post-earthquake, as you can imagine, risk aversion has
only increased. But we know that Haiti's businesses are struggling.
They have lost inventories, they have lost facilities, and they are
going to need access to credit.
On the fiscal side, the government faces a severe financing gap.
The International Monetary Fund estimates that revenues may de-
cline by as much as 40 percent while expenditures will surely rise.
The IMF has also identified a potential balance of payments gap
of upwards of $300 million, which, at the moment, is financed by
approximately $100 million.
As you know, and as several have already stated, these pressures
come on top of a still significant Haitian external debt burden. A
considerable portion of Haiti's external debt was relieved when the
country reached HIPC completion point, as was mentioned. At that
point, the United States forgave 100 percent of Haiti's bilateral
debt to the United States. However, as has also been mentioned,
Haiti's multilateral debt stock stands now at $825 million, with
$447 million owed to the Inter-American Development Bank alone.
So, let me turn now to the efforts Treasury has taken, with our
U.S. Government colleagues, the Haitian Government, and our
international partners, to address these challenges.
First, Treasury is focused on Haiti, to not just restart lending,
but expand access to lending. The rate of credit growth will be a
principal factor, as in any economy, in determining the rate of re-
covery of the private sector, and job creation. To deal with the very
real uncertainties of this period, we are working with the multilat-
eral development banks to develop risk-sharing tools to catalyze
bank lending.
The view of the people I talk to inside the country is that a lot
of Haitian companies are viable, they are resilient if they are af-
forded a breathing space to get through this very tough period. So
this is an urgent and critical challenge.
We can also help Haiti extend a sound regulatory framework to
a broader range of financial services, like microfinance and like in-
surance, to critical sectors, going forward. And these kinds of ef-
forts yield disproportionate benefits, because the public resources
expended leverage much greater amounts of private finance.
Second, to ease the balance of payments pressures, Treasury
strongly supported the January augmentation of the IMF program
by $100 million. We equally strongly support the commitment by
the managing director of the IMF to develop a means of financing
Haiti's remaining IMF obligations-that is, canceling that debt-
using internal IMF resources. And we are working closely with the
multilateral development banks to ensure that they strive to meet
the substantial budget support needs generated by the collapse in
revenues and the rising expenditures.
Third, Treasury has called on donors to cancel Haiti's remaining
multilateral debt. As you know, ahead of the G7 ministerial in
Canada earlier this month, Secretary Geithner announced that the
United States is seeking commitments by donors to relieve Haiti's
debt to the IDB, to IFAD, and to the World Bank, to IDA. In his
statement, Secretary Geithner recognized Congress' leadership on

this issue, including the members of this subcommittee. Secretary
Geithner was able to secure the commitment at that point of the
G7 to cancel Haiti's debt.
Treasury has developed what we think is an innovative debt re-
lief proposal that would relieve Haiti of its debt burden fully, with-
out displacing or using up resources needed for Haiti's recovery. So,
let me briefly describe the three key elements of this proposal.
First, transforming funds provided for debt relief into grant re-
sources available now for Haiti. This would provide an immediate
source of up-front financing for immediate needs.
Second, converting existing loans that haven't been disbursed
into grants, so that this would guard against adding new debt to
Haiti's debt stock, which is something that's reflected in the legisla-
tion that has been proposed.
And separately, we are pressing, in the context of ongoing nego-
tiations in the IDB with respect to a capital increase, for a commit-
ment by that institution to transfer a portion of its annual income
to finance projects for Haiti. This would provide a secure flow of
resources going far into the future for the next decade, because, as
has been said, this is a long-term effort that has to continue after
the television cameras go away.
To be sure, there will be a U.S. component to addressing the cost
of debt relief in Haiti. And our hope is that we can build on the
strong bipartisan support which has been mentioned, and we look
forward to working very closely with you on this proposed approach
on the days ahead.
Let me now just very briefly touch on Treasury's on-the-ground
presence in Haiti. Following the tragedy, Treasury rapidly deployed
staff to work with the Haitian Government to restore budgetary,
tax, and financial functions. We now have a temporary senior rep-
resentative, Treasury representative, in Port-au-Prince. And we
sent two seasoned technical assistance advisors to help the Central
Bank very shortly after the earthquake. Our ability to provide this
kind of advice quickly in crises and in other situations is one of
Treasury's strongest strengths. And I think the governments
around the world very much value that assistance.
After the immediate post-earthquake efforts, our technical assist-
ance team identified some medium-term priorities, in consultation
with the government, and we aim to begin work on those as soon
as possible.
Our senior Treasury representative has been on the ground since
early February, working on an array of urgent issues. He is also
representing the United States in what's called the post-disaster
needs assessment, the PDNA, led by the World Bank, the IDB, the
United Nations, and the European Commission. This is the assess-
ment that is fundamental to understanding the multilateral assist-
ance needed and the bilateral assistance needed for reconstruction
and development. And the results of that assessment will then in-
form the high-level donor conference that will happen at the end
of March in New York.
In conclusion, under President Obama's strong leadership, the
United States mobilized our government to help Haiti weather the
aftermath of the devastating earthquake. In close cooperation with
the Haitian Government, its people, our international partners,

and the rest of our government, Treasury is resolved to play an ac-
tive role in helping Haiti build an economy and a financial system
that can finally meet the needs and aspirations of the Haitian peo-
Thank you again for the opportunity to appear here today, and
I would be happy to answer your questions.
[The prepared statement of Deputy Assistant Secretary Lee can
be found on page 46 of the appendix.]
Chairman MEEKS. Thank you so very much for your testimony
and for your dedication. And I know you're just coming back from
Haiti and seeing what's on the ground.
Let me ask this question. In listening to your testimony, what I
have always been concerned with is how quickly Haiti seems to
incur debt with the IDB. Right after the first round, you see that
their debt is up. Why is that? Can you explain this? And especially
with us being a major shareholder in the IDB, how do we prevent
this from happening in the future? How do we keep a limit there,
so that their debt with the IDB doesn't continue to rise as fast as
it seems it always does?
Ms. LEE. Along with debt cancellation, this is the other key ques-
tion, because it's really-as you're pointing out, it's not just a ques-
tion of paying the cost of canceling Haiti's previous debt, it would
really, truly make no sense to start adding debt, as we move for-
ward, in our desire to get assistance flowing for Haiti. So we really
have to take a look at this in a kind of fundamentally different
way, and we have to create the capacity to mobilize large amounts
of grant resources.
And the direct answer to your question is the reason institutions
lend is that there is always a shortage of grant finance. And in the
IMF case, the IMF does not do grants, and it does highly
concessional lending. So, in the IMF case in particular, there is a
need to cancel the debt that has already occurred, including the
$100 million that was just disbursed, and the IMF will go forward
to do that, using its own resources.
In these other institutions, they were trying to be very active in
the period over the last 5 years. They disbursed a lot of assistance,
a lot more than they had in the earlier period, and it was lent on
concessional terms, but nevertheless, lent.
So, at this point, we need to have a new approach. We need to
clear the decks, with respect to their existing debt, and we need to
find a way to convert future assistance in these institutions to
grants, which is why we framed our proposal in a way that would
take the resources we are using to cancel the debt, and then use
those resources to capitalize a fund for Haiti that would be dis-
bursed in grant form.
So, unlike the usual debt relief procedure in which you cancel the
debt and just provide the institution, as a whole, with the resources
to offset the impact of the debt relief, in this case we want to pro-
vide the resources to the institution, but create a fund for Haiti
alone to use these resources as grants to go forward. And that's
why we can transform the debt relief financing into grant financing
for Haiti. And this is particularly the case in the IDB, which is, by
far, Haiti's largest creditor.

Chairman MEEKS. They have the mechanism set up to do this?
It seems as though all we have to try-as one of the largest share-
holders-to work with them so that a mechanism can be put in
place so we don't have this headache time and time again.
Ms. LEE. Yes. I mean there is a grant facility that can be used,
and we want to convert it into a grant facility for Haiti alone. And
the resources that would be disbursed out of that facility would
only be grants. This is a new proposal. We have just formulated it.
We are just beginning to talk to the institutions, to donors, to Haiti
itself, and to you all, about the nature of this proposal.
So, it will-there will be some discussion on it, and a-
Chairman MEEKS. Let me ask this in the little time that I have
left. The other area that I am always concerned with is whether
or not-what we're doing in regards to capacity-building, whether
it deals with the institutions or individuals, so that they can be
working on the ground, whether it's the government. What do you
see us doing, or Treasury doing, in regards to capacity-building for
the long-term rebuilding of Haiti?
Ms. LEE. Well, I heard a lot about that, actually, in Haiti this
past week from the government, itself. And that's an interesting
aspect, going forward. I think there is a new-there are sort of two
new focuses in Haiti that are worth noting.
One is that-you certainly hear this from the private sector, but
the public sector says over and over again, "Unless we build the ca-
pacity to make our institutions work better, you can give us an un-
limited amount of money, and it's not going to result in develop-
ment in Haiti." So they take that as a fundamental challenge,
going forward. And there is no denial on that point.
The other big issue is this question of decentralization, moving
growth centers outside Port-au-Prince to make more diversified
growth and more job creation.
On the question of capacity building, that will play a key role in
the needs assessment that all these multilateral institutions are-
going forward, which is encouraging, because it will be a focus not
just of Treasury efforts to build capacity in the Central Bank and
in the finance ministry, but of all multilateral donors. So I think
there is really a unity of view in the government itself, that it is
really a central problem, and in the donor community.
Chairman MEEKS. My time has expired. Mr. Miller?
Mr. MILLER OF CALIFORNIA. Thank you. We have been talking a
lot about debt relief and grants and stuff, but I keep thinking
about the people, and seeing their faces. How do we effectively deal
with the impact and loss that the government has faced, the pri-
vate sector has faced, the government being roads, bridges, gas,
electrical, sewer, those type of things that you have to provide to
get the government operating again? Then the amount of clean-up
we have to implement on houses and businesses before we can ever
start talking about reconstruction.
But what are we actively doing today? Is the Army Corps of En-
gineers out there, working on infrastructure to deal with the basic
government needs so the private sector can be dealt with? Or how
are we systematically dealing with this today?

Ms. LEE. Well, as you're basically pointing out, there are a vari-
ety of facets to attack the problem of how do you actually reach
Haitian people.
Mr. MILLER OF CALIFORNIA. That's what this is about. We have
talked about banks, we have talked about monetary policy, we have
talked about loan relief. But the goal here is to mitigate the impact
on the people, the government infrastructure and the actual daily
lives of people. So how are we doing that?
Ms. LEE. I will describe the array of activities, some of which
Treasury is involved in, and some of which Treasury is not involved
in. So let's start with the basic issue of beginning reconstruction.
When you drive around Port-au-Prince, there is just an enormous
amount of destruction. There is rubble everywhere. So, one of the
things that the Administration wants to do is provide jobs for Hai-
tian people in these immediate reconstruction efforts. The USAID
has started up cash-for-work programs. And you see teams all over
the streets-
Mr. MILLER OF CALIFORNIA. Do they have the capacity and the
expertise in those areas of reconstruction that are necessary, with-
out some outside help?
Ms. LEE. Does SAID?
Mr. MILLER OF CALIFORNIA. Yes. Do the Haitian people have
those resources, or do they need outside help from the Army Corps
of Engineers and others to accomplish this?
Ms. LEE. There is the issue of trying to create immediate jobs,
and then there is the issue of where you need technical expertise
to figure out what needs to be constructed and how it needs to be
USAID is also helping to add to engineering capacity. Because,
of course, there is an enormous challenge in determining which
buildings are salvageable and which are not, and which people can
So, there is an enormous U.S. military presence, including our
Army Corps of Engineers. When you go to our embassy, there are
tents all over the grounds of the embassy of people who are work-
ing on this. So, we are supplementing engineering capacity. Of
course, our government is providing relief commodities: water; food;
and shelter.
But we very quickly have to move from these relief efforts to pro-
viding ways for the Haitian entrepreneurs themselves to start pro-
viding goods and services. And one of the things we have to be con-
cerned about is if you give away food and water and shelters for
too long a period of time, you're essentially displacing the small
businesses that do precisely that kind of business.
Mr. MILLER OF CALIFORNIA. Yes, but that's not the question. Yes,
we need to help feed the people. Yes, we need to provide water for
the people. And, yes, we need to provide some type of structure or
But is the heavy equipment there that they own themselves? Do
they have the expertise to repair the sewer, the gas lines, put the
infrastructure back in, repair the bridge rapidly? There is a dif-
ference between repairing a bridge over 4 years and putting a
bridge back into functionality in 60 days. Do they have the capacity
to do that?

Ms. LEE. The answer is no. They have some capacity, but-
Mr. MILLER OF CALIFORNIA. That, Mr. Chairman, is where we
need to be focusing. It's nice to say that debt has occurred, debt re-
lief needs to be dealt with. But if we don't make sure the expertise
and the experience that we have in this country are put to work
there with the people-putting the people to work if they don't
know what they're doing doesn't help anybody. Putting the people
to work with individuals who do know how to accomplish some-
thing is what we need to be focusing on.
And I am not imputing in any way-a lot of the conversation in
this committee has been putting the cart before the horse. And we
need to determine how to get the horse leading, and the expertise
to that country, and the facilities and resources they need to get
this done rapidly with the assistance of the Haitian people, nec-
essarily. But I'm not sure they have the capability themselves, if
we provide all the money they need, to do that without the exper-
And I hope we will get into that as we move along, but I see that
my time has expired. And I thank you very much. If you would like
to conclude in a comment, please?
Ms. LEE. Yes. If I could just link your point with the debt relief,
because there is a very strong link, we need the multilateral insti-
tutions to help add to the capacity, precisely the infrastructure
building capacity that you're talking about. And we need the multi-
lateral institutions that do it well-not all of them do it well-to
come in quickly.
That has to be financed. In the past, it has been financed by
lending-concessional lending, but lending. We want it to be fi-
nanced by grants, going forward. And so we need a lot of up-front
grant finance. And that's what we're trying to do with this debt
Chairman MEEKS. The gentleman's time has expired. Ms.
Ms. WATERS. Thank you very much, Mr. Chairman. There are a
couple of quick questions that I have, and then I want to engage
a little bit in the way that Mr. Miller was trying to deal with the
infrastructure development and the long-term development of
First of all, I want to know whether or not Taiwan and Ven-
ezuela, did they actually do debt relief yet? They had promised, ac-
cording to the information I received. Haiti owes about $295 mil-
lion to Venezuela, and $92 million to Taiwan. President Chavez an-
nounced that Venezuela would forgive Haiti's debt. Do you know if
that has been done?
Ms. LEE. Those are the correct numbers, that's absolutely right.
Those are very large numbers, and so they were substantial addi-
tions to Haiti's debt.
Ms. WATERS. Has it been done?
Ms. LEE. President Chavez has announced the cancellation of
Haiti's debt, as of-
Ms. WATERS. And what about Taiwan?
Ms. LEE. Taiwan, as we understand it, is exploring the question.
It understands that this is a-

Ms. WATERS. Okay, it has not been done. I have to move quick-
Ms. LEE. It has not.
Ms. WATERS. I only have 5 minutes.
Ms. LEE. Okay.
Ms. WATERS. According to the Treasury's justification for appro-
priations, the United States owes more than $478 million in ar-
rears to the World Bank Group's International Development Asso-
ciation. We also owe $75.4 million in outstanding pledges to the
HIPC trust fund.
Do our arrears make it more difficult for Treasury to negotiate
additional debt relief for countries like Haiti? I am very pleased
with the President, with Treasury, with my colleagues. Everybody
would like to do this debt relief. But are we going to be hampered
in any way because of our arrears?
Ms. LEE. Well, I can just say from my personal experience on my
particular region, the -arrears influence-the arrears are raised
with us when we engage with the institutions that deal in this part
of the region-
Ms. WATERS. Can we overcome that?
Ms. LEE. We have to do something about the arrears. But we are
pursing this negotiation seriously, and we wouldn't have proposed
it if we didn't think we could get agreement to do what we pro-
posed to do.
Ms. WATERS. You are planning to do-well, we are planning to
do an appropriations request letter, urging support for the Admin-
istration's request of $1.235 billion for IDA's replenishment, $50
million for IDA's arrears, and $50 million for the HIPC trust fund.
Jubilee USA asked us to do this.
However, I want to know if this is what you want us to do, if
this is what you would urge us to get done.
Ms. LEE. You mean the arrears clearance?
Ms. WATERS. Yes.
Ms. LEE. I'm not quite sure I understand the question. The ar-
rears clearance would not cover these additional debt relief costs.
Is that-
Ms. WATERS. Yes, well, actually, my bottom line concern is that
we are all wanting to do this debt relief. And I am very appre-
ciative for Treasury's support to move forward, to be our voice and
our vote. Are we going to run into any problems doing it?
Ms. LEE. To do this debt relief, this very ambitious proposal as
we proposed it, it will require a substantial cost, somewhere-for
all of the institutions together, the entire-sort of the bill for con-
verting the undisbursed money into grants and for canceling-
Ms. WATERS. Are we going to run into any problems doing this?
Ms. LEE. -all the institutions will be substantial. But we
Ms. WATERS. Is there anything else that we should do to be sup-
portive, to make sure that we don't get bogged down, and we can
actually do the debt relief, particularly by way of grants? That's
really what my bottom line concern is.
I know that everybody wants to do this. Is there anything that
we should be doing to help give support to your voice and your vote
to get this done?

Ms. LEE. The signal you have already sent is critical, because we
can go to donors and say, "This is an idea that is attractive on the
Hill," so that was a key part of why we proposed what we proposed.
But, of course, we will be coming for resources to finance this pro-
Ms. WATERS. Okay. And I think what my staff is telling me-
that there is an Administration request, and we should be gath-
ering support over here for that request, if that would be helpful
in helping to get the job done.
Ms. LEE. We are evaluating the need for a supplemental budget
request for Haiti's relief and reconstruction and recovery needs.
And a decision will be made very soon about that. So we will then
come back to Congress.
Ms. WATERS. All right. Thank you very much. Mr. Miller-is he
still here? One of the concerns I-oh, my time is up. Okay, thank
you very much, Mr. Chairman.
Chairman MEEKS. I'm going to try to get to Mr. Bachus and Mr.
Carson. Mr. Bachus?
Mr. BACHUS. Thank you. And I will yield part of my time to the
sponsor of the bill, Ms. Waters.
I want to commend the Treasury for your presence on the
ground, and all you have detailed in your testimony. I appreciate
that. I appreciate the Administration's leadership in coordinating
efforts with other countries.
Ms. LEE. Thank you.
Mr. BACHUS. I commend you for that. Let me ask one question.
How aggressive is the Department of the Treasury, in ensuring
that other actors or countries, whether they be private creditors or
sovereign nations such as China, are not saddling Haiti with new
debt, or taking advantage of the nation's resources?
I think there is a history of that happening in other countries.
Would you comment on that?
Ms. LEE. Well, in the context of the HIPC debt relief, we-which
is the bilateral debt-all of the Paris Club creditors get together.
And when the HIPC debt relief decision was taken, all bilateral
debt in the Paris Club was supposed to be canceled. And we use
our voice in that club to urge others to get on with it.
Mr. BACHUS. Sure.
Ms. LEE. As there are some-so-
Mr. BACHUS. Of course what I'm talking about is a country com-
ing in and trying to take advantage-
Ms. LEE. Yes.
Mr. BACHUS. -by buying resources for less than value or by sad-
dling them with new and onerous debt to-
Ms. LEE. Yes. I would say our intervention on that, when Haiti
takes on what we call non-concessional debt, it's really through the
international financial institutions, in particular, because they-
and particularly the IMF, because that is the institution which is
supposed to worry about debt sustainability.
Mr. BACHUS. Yes.
Ms. LEE. Haiti is a sovereign country, and it has decided to take
on this debt. But our role is really to try to fit this into some sort

Mr. BACHUS. But the Treasury, I think, is one of the depart-
ments that could be uniquely positioned to-since you're involved
in the debt relief, not to really keep your eye on this, and at least
come up with a game plan, as opposed to leaving it just to the
international organizations.
Ms. LEE. Yes.
Mr. BACHUS. Or, take a leadership role with them on the-
Ms. LEE. Yes. There are some countries, though, where we have
very-we, in terms of the creditor countries, we have very little in-
fluence. I would say the most effective thing that Treasury can do
is to try to mobilize the grant resources, so that Haiti doesn't have
Mr. BACHUS. Right, and-
Ms. LEE. -go to a country and take on non-concessionary-
Mr. BACHUS. And, I'm talking about somebody coming in or-
Ms. LEE. Yes.
Mr. BACHUS. -taking advantage, going forward.
Ms. LEE. Yes.
Mr. BACHUS. Congresswoman Waters, I will yield my remaining
time to you. And I commend you for your leadership.
Ms. WATERS. And I appreciate the relationship that we have de-
veloped over the years. Many in the Jubilee movement helped to
bring us together years ago, we have been working together, and
it has been very rewarding. And I appreciate that.
Mr. Miller, you asked about the water systems and the infra-
structure and the development. And those are the kinds of ques-
tions that I think that the Congress of the United States is really
going to have to get involved with, some real public policy about
What has happened is we have allowed some of our international
funding organizations to be very slow in the way that they gave out
the money. We have allowed too much of our resources to go to
some-I don't know, it's 6,000 NGOs in Haiti now, rather than
helping to see that there is a strong government, and that there
are contracting systems put in place for specific projects.
They need a water system in Haiti, even if the earthquake never
hit. And they don't have potable water. And that's shameful, for
the length of time that this has gone on. We have had the City of
Gonaives that has been wiped out, promises that are made about
the kind of reconstruction that would divert water that comes down
off of the mountain that flooded out Gonaives, the historic City of
Haiti. We have bridges and roads that were wiped out in the hurri-
Mr. MILLER OF CALIFORNIA. Let me respond to a little of that,
I think it's important. The Haitian people are very hard-working
people, but they don't necessarily have the talent.
Ms. WATERS. That's right.
Mr. MILLER OF CALIFORNIA. We have a tremendous amount of
talent unemployed in this country today.
Ms. WATERS. That's right.
Mr. MILLER OF CALIFORNIA. We are spending-American tax-
payers, to help good people-we're spending their dollars. Why
don't we invest that into American labor, too, to assist the people
of Haiti in reconstructing the areas we need to get their infrastruc-

ture back, providing the basic services they need, and accomplish
it rapidly, rather than some of the ways we're doing it? We're
throwing money out to organizations who are not getting it to the
ground, where it needs to be put.
And I would like to have this committee, whether it be in a for-
mal hearing or on the Floor, talk about investing the talents of the
American people. We are investing their monies, we might as well
put it to the people who need the work in this country, who can
benefit the Haitian people. And I would love to talk to you some
more about that.
Chairman MEEKS. The gentleman's time has expired. Mr. Green?
Mr. GREEN. Thank you, Mr. Chairman. Mr. Chairman, I want to
compliment you. You used a term that I think we need to revisit,
and that term was a "Marshall Plan" for Haiti. I am not sure that
it will be called "Marshall," but I am sure that kind of thinking will
be helpful. I compliment Treasury on what you have done, the cre-
ative thinking, in terms of how you would use grants so as to elimi-
nate debt. I think that's a wonderful thing.
But I see this as compartmentalized into three components.
There has to be this initial response, which is almost an emergency
response that's still continuing. Then you have to have a mid-term
response, because you have to deal with the infrastructure, as Con-
gresswoman Waters has indicated. Contracting. You have to deal
with the constabulary. You have to deal with the transit. You have
to deal with all of the mobility questions that have to be dealt with.
But then, long term, there has to be the leadership provided by
the United States. We are the preeminent leader of the world,
when it comes to helping countries redevelop themselves, and help
themselves to extricate themselves from some of their economic
woes. To do this, I think we have to get the rest of the world en-
gaged in this Marshall Plan, as it were, that the chairman talked
about, a plan that views Haiti as a long-term, independent, autono-
mous nation that can sustain itself in this hemisphere.
I think that aid is great. Aid gives people hope, and they need
hope now. But, in the final analysis, it's trade that provides the
help that they need. And I want us to move from that aid to trade,
so that they will have the help to have the autonomy that they
richly deserve.
I thank you, and I especially thank Mr. Miller. Your words have
warmed my heart, sir. He has been a dear friend, we have worked
together on many things. But this one is exceptional, and I appre-
ciate the way you and Ranking Member Bachus have embraced
I yield back the balance of my time, Mr. Chairman. Thank you
so much.
Chairman MEEKS. Thank you, Mr. Green. And thank you, Ms.
Lee, for your testimony here today, and for your cooperation in
working with us on behalf of the United States of America with
people in Haiti.
At this time, we have three votes. So we are going to-recess and
come back after the three votes, and commence with the second
panel. Thank you.
Ms. LEE. Thank you.
Chairman MEEKS. This committee stands in recess.

Ms. LEE. Thank you.
Chairman MEEKS. I have been informed that Mr. Adams has
time constraints, and so we will start right out, as soon as I get
myself organized here, with Mr. Tim Adams, who is the managing
director of The Lindsey Group.
Previously, Mr. Adams served as Under Secretary of Treasury for
International Affairs. As Under Secretary, Mr. Adams was the Ad-
ministration's point person on international financial issues, in-
cluding exchange rate policy, G7 meetings, and the IMF and World
Bank issues. He regularly interacted with counterparts in key
emerging markets, including China, India, and Brazil, and traveled
extensively throughout Asia, the Middle East, and Europe.
Prior to assuming his post as Under Secretary, Mr. Adams had
served as Chief of Staff to both Treasury Secretary Paul O'Niell
and Treasury Secretary John Snow. He was the Policy Director for
the Bush-Cheney reelection campaign from November 2003
through the end of 2004, and also served as a full-time member of
the Bush-Cheney campaign staff in Austin in the 2000 campaign.
Mr. Adams also served in the White House under the first Presi-
dent Bush at the Office of Policy Development. And he holds a BS
in finance and a master's in public administration and an MA in
international relations from the University of Kentucky. Mr.
Adams, welcome.
Mr. ADAMS. Thank you, Mr. Chairman, and Congressman Bach-
us. It is an honor to be here today to talk about such an important
issue. I obviously can't speak to it with the same eloquence and
passion that I have heard from the members of this committee
today, so I won't even begin to try. And, for the sake of time, I will
be quite brief-and also to create time for my good friends here on
the panel.
I would like to just make three quick points, Mr. Chairman. One
is that I enthusiastically support debt relief for Haiti. The condi-
tions there, as Dr. Lee described this morning, as we have wit-
nessed through various forms of media, certainly demand all that
we can do. And debt relief is an important piece to the puzzle of
support for this country, which has gone through such a terrible
Two is that we shouldn't kid ourselves into believing that debt
relief, however important it is, is a panacea, a silver bullet, for
what ails this country, the challenges it faces in the short-term and
medium- and long-term. It can't substitute for other forms of sup-
port, whether it's in-kind support or grants, or technical assistance,
or humanitarian assistance. It's an important piece, but there are
so many other things that need to be done. And we need to commit
ourselves for a long period of time to provide the resources that
this impoverished country is going to need. It will require our at-
tention for not weeks and months, but years and decades.
And, three, an issue which is important to me and was important
to me in my previous position at the Treasury Department, and
that is to take an opportunity to reaffirm an approach to develop-

ment which tries to move away from excessive lending for the poor-
est countries, and focuses more on grant funding for development.
I was a part of the process, the multilateral development relief-
debt relief initiative, and it was a highlight of my tenure in govern-
ment, and I think certainly one of the highlights of the previous
Administration's tenure.
But I hope that we never have to go through that again, that we
don't find ourselves repeating the lend-and-forgive cycle that we
have seen that has occurred before. It is-as I note in my testi-
mony-a cruel hoax to load up poor countries with debt that we
know they can't sustain, we know they can't pay back, and to find
at some point in the future that we have to cancel that debt. And
it calls into question foreign assistance and development assistance
generally, and it creates enormous cynicism among our voters and
our taxpayers. And you most certainly must feel that and hear it
when you go back to your districts.
So, if I could do anything other than share the concerns you will
hear with this panel-and again, we have heard from the members
of the committee today-to help this country and do everything in
our power, including debt relief, it is to think about how we do de-
velopment assistance in the future, to move away from lending and
to focus more on a grants-focused development assistance strategy,
so that we don't repeat this cycle in the future.
Thank you, Mr. Chairman.
[The prepared statement of Mr. Adams can be found on page 37
of the appendix.]
Chairman MEEKS. Thank you, Mr. Hart. We now will hear the
testimony of Ms. Melinda St. Louis. Melinda St. Louis is the dep-
uty director of Jubilee USA Network, an alliance of more than 75
religious denominations, faith-based organizations, human rights
and environmental groups, and the development agencies dedicated
to the debt cancellation for impoverished countries.
She has more than a decade of experience in policy advocacy,
communications, and nonprofit management both in Washington,
D.C., and on the ground in Latin America and the Caribbean, as
well as a master's degree in international policy and development
from Georgetown University.
Welcome, Ms. St. Louis.
Ms. ST. LOUIS. Thank you. Thank you for having me. Chairman
Meeks and Ranking Member Miller and other members of the sub-
committee, I want to thank you for the opportunity to discuss debt
relief for Haiti today. I would also like to especially thank both
Representative Waters, who isn't here right now, and Representa-
tive Bachus for being such long-time champions of debt cancella-
tion, not only for Haiti, but for impoverished countries around the
world. We have been very gratified to work with you over the
I am pleased to represent the Jubilee USA Network and our alli-
ance of our 75 organizations. It's important for us to be here today
because, as has been said, the people of Haiti have already suffered
so much. And now they face a disaster that the scope is hard to

imagine: 1 in 50 Haitians have died; and millions are affected. And,
as many have highlighted, that means Haiti clearly needs and de-
serves our generosity and solidarity.
A critical first step for Haiti's long-term recovery is 100 percent
debt cancellation for all of its remaining debt. We are gratified by
all the efforts taken thus far, both in Congress and by the Adminis-
tration, to work towards full debt cancellation for Haiti, both in
practical terms and because we all know Haiti can't possibly repay,
but also as a matter of justice.
I say justice, because when we talk about Haiti's current debt
burden, we must not forget the historic legacy of unjust debt that
was so eloquently stated by Representative Green earlier. Dating
back to its independence from France, the legacy continued when
the international community made loans to the Duvalier dictator-
ship, despite widespread reports of brutality and massive corrup-
So, until last year, Haiti was paying $60 million to $80 million
per year in debt service, without any distinction to the 40 percent
of its debt that was incurred under the Duvalier dictatorship.
The injustice of these debts, and the staggering development
challenges facing Haiti as a result, compelled our member organi-
zations, allies in Congress, and the Administration to advocate for
many years for debt relief for Haiti. My written remarks detail how
we accompanied Haiti through the very bumpy ride of the highly-
indebted poor countries, or the HIPC initiative, which finally cul-
minated in June of last year with $1.2 billion in debt relief, which
we celebrated as a victory for the Haitian people.
But, as we have heard, that wasn't the end of the story. Because
the HIPC initiative had set the cut-off date as the end of 2003, and
Haiti had taken out loans since that time, Haiti still owed more
than $1 billion to external creditors when the earthquake hit.
Also, in the days following the earthquake, we have heard the
IMF offered Haiti $100 million in emergency assistance through its
extended credit facility, which was an extension of its previous
loan. We and others reacted with very deep concern at this nearly
doubling of Haiti's debt to the IMF, urging them to not add to Hai-
ti's debt burden, and not to apply the conditions that normally are
placed on IMF loans.
The IMF's managing director's statements, intent to turn the
loan into a grant and to cancel the rest of its debt, is very welcome.
But it does require board action. And we are-but as of now, a
$102 million loan has added to Haiti's debt burden.
But the very good news is that our swift call for full debt can-
cellation for Haiti from members of our network-ONE and many
others-together with allies here in Congress, including the bill
that will be marked up this afternoon, already has had a tremen-
dous impact, as we heard earlier. We saw a high level of commit-
ment from G7 finance ministers. And on February 6th, they indeed
made a strong statement in support of multilateral debt relief for
Haiti, which is an important victory, and it's a critical first step to
assuring its cancellation of Haiti's multilateral debt.
However, as we know, as the devastation in Haiti begins to fade
from the public spotlight, we have to move quickly to negotiate
debt cancellation, to ensure that it actually does happen. The up-

coming meeting, annual meeting of the IDB's board of governors in
Mexico later this month, and the joint spring meetings of the World
Bank and IMF in April, are key opportunities to secure an agree-
ment. We hope the U.S. directors will work with their colleagues
to negotiate without a delay. And I am glad to hear that some of
that is already happening.
As we have heard, how to finance debt relief is clearly a key con-
cern, as debt relief must not replace other donor assistance for
Haiti. Where possible, institutions should use internal resources to
cover the modest reduction in their income from debt relief. The
managers amendment, which was mentioned earlier, would suggest
that windfall profits from IMF gold sales could be allocated to debt
relief for Haiti. I am glad to hear that the U.S. Treasury and the
IMF are pursuing to use internal resources to benefit Haiti.
I also want to underscore what has been said before, in that we
must provide support as grants, and not loans. The United States
needs to play a leadership role. It sounds like we're already doing
that. And to ensure that assistance is provided solely as grants.
And, in addition to these immediate recommendations, I think
the Haiti case should also encourage us to think more broadly
about how to better deal with sovereign debt issues. The fact that
we have to talk about negotiating voluntary debt relief on an ad
hoc basis separately for each institution, and for a country that has
already completed HIPC, highlights the limitations of our current
Interesting ideas for future consideration, which I have briefly
elaborated in my written remarks, include creating a multilateral
disaster global fund, and mechanisms to coordinate debt reduction
in a single process, pursuing procedures for fair and transparent
arbitration for sovereign debt, and establishing international
frameworks for responsible lending and borrowing to avoid build-
ups of odious and illegitimate debts.
I want to conclude by urging support of Haiti debt cancellation
through H.R. 4573, as well as quick passage of the Jubilee Act,
which is H.R. 4405, which begins to address some of these broader
sovereign debt challenges. We really must work to avoid the mis-
takes of the past, and ensure a brighter future for Haiti and for
other impoverished countries. Thanks so much for taking the time
to listen.
[The prepared statement of Ms. St. Louis can be found on page
52 of the appendix.]
Chairman MEEKS. Thank you. And I think I previously misspoke
upon the conclusion of Mr. Adams's testimony. I said, "Thank you,
Mr. Hart, for your testimony." And we know we didn't hear Mr.
Hart yet.
And so, now we will hear the testimony of Mr. Hart. But let me
thank Mr. Adams for his testimony.

Mr. HART. Mr. Chairman, it is an honor to be confused with Tim
Adams in this regard. So I am happy to associate all my remarks
with him, as well as Melinda. Mr. Chairman and Mr. Bachus,


thank you so much for the honor of coming before you today to talk
about this important issue.
My organization, ONE, is a global advocacy and campaigning or-
ganization backed by more than two million people nationwide,
dedicated to fighting extreme poverty and disease. We are probably
best known by our co-founder, Bono, who actually began his advo-
cacy in the United States working with Mr. Bachus and Ms.
Waters and others 10 years ago on the Jubilee 2000 movement for
the first round of HIPC debt relief.
Members of this committee, frankly, should be proud of all that
has happened in the last 10 years on debt cancellation. Chairman
Frank, Ms. Waters, Mr. Bachus, Chairman Meeks, and so many
others, as well as President Clinton, President Bush, and now
President Obama have all been deeply committed to debt cancella-
tion and bringing the poorest countries out from underneath
unpayable debts.
I am not going to take time this morning to review all that has
happened over the last 10 years. Suffice it to say 35 out of the 40
poorest countries on the planet have qualified for debt service re-
lief, 26 of them have now received both full bilateral and multilat-
eral debt stock cancellation, freeing up $117 billion, so far, of debts
that couldn't be repaid. And, in fact, this freed up around $2 billion
annually, that these countries were paying back to these institu-
tions, and are now going in to service the needs of their countries
and to fight poverty.
We have been pleased to see that the World Bank has tracked
social service spending during the course of this debt relief, and we
have seen a nearly fivefold increase in social sector spending, such
as education and health, for these 35 countries during the HIPC
and MDRI programs.
Last summer, as has been said a number of times, Haiti quali-
fied for this debt relief. They got about $1.2 billion of debt that was
incurred prior to 2005 written off. Venezuela and Taiwan did not
participate in that, which is why their debt remains on the books,
and is a real concern today.
But at the time of the earthquake, Haiti still had more than $1
billion of loans from 2005 to present. And I think the committee
is now well familiar with the major shareholders: the IMF; the
World Bank; the Inter-American Development Bank; the Inter-
national Fund for Agricultural Development; Taiwan; and Ven-
I do want to note that the large volume of debt from the Inter-
American Development Bank in such a short time is of particular
concern. And, Mr. Chairman, you raised this earlier with Treasury.
I think the Treasury Department has a particular burden, as the
largest shareholder at that institution, to seek ways to avoid such
a rapid debt reaccumulation there.
Fortunately, all the major bilateral donors, including the United
States, have gone to grant-only assistance to Haiti, and that should
be applauded.
I want to echo Tim's sentiment that debt relief is not a silver bul-
let. In the immediate aftermath of the quake, of course, urgent re-
lief is the most appropriate and most effective mechanism. Haiti
was actually servicing very little of its current debt. Therefore, debt

relief relieves very little immediately. But, over the long term, that
$1 billion would have to be paid back. And so, we believe debt relief
occupies a very smart and important piece of the long-term recon-
struction puzzle.
I think the case for relieving Haiti's debt really boils down to two
very practical things. First, these loans were taken on with certain
economic assumptions in mind. Haiti appeared to be on the way
up, the IMF thought that it would grow at an annual rate of 4.5
percent, exports were growing, governance indicators were improv-
ing. And so, one might have assumed that some of these loans
could be serviced.
Well, all of those assumptions are no longer appropriate. And to
continue to hold Haiti accountable for a bunch of debts under as-
sumptions that are no longer appropriate makes little sense.
Second, holding Haiti to its international debts diminishes the
impact of the assistance that the U.S. Government is providing,
and the support the American people are providing. Donor assist-
ance will hopefully continue to pour in. And if Haiti is still bur-
dened with debt, some of that assistance will go to repaying those
old debts.
So, this "revolving door" of assistance-we provide assistance
that then gets turned back into debt payments to donor-led institu-
tions-defies common sense. Fortunately, I think common sense is
prevailing, and I really applaud the committee, members of the
committee and the Administration for having moved forward very
rapidly in seeking support for debt cancellation for Haiti.
We experienced a tremendous outpouring of support for this ini-
tiative among ONE's own membership. Over 200,000 people signed
a petition in support of debt cancellation. And we joined with Jubi-
lee and other organizations to collect another 200,000 people's
The G7 finance ministers typically find the most remote location
on the planet to meet, so that people like us don't find them. We
were lucky to have a ONE member, a Haitian-born citizen of the
6,000-person Arctic village where the G7 finance ministers were
meeting a month ago, deliver these 400,000 names to them. It was
a very poignant moment, and also a moment showing broad public
support for an initiative that the United States and Canada and
others were adopting, to relieve Haiti of its debts.
We applaud Secretary Geithner's announcement of this and the
G7 finance ministers' support.
In my written testimony, you will see a chart of all the institu-
tions Haiti owes money to, and who the major shareholders are. Of
course, the G7 countries are the major shareholders in these insti-
tutions. But key players like Argentina, Brazil, and Mexico are key
players in the IDB, for example. And so, securing their support is
going to be very, very important.
Just quickly, on next steps, the IDB board meets in a couple of
weeks in Cancun, where we hope they will deal with this subject
very rapidly. Then, in April, the spring meetings of the IMF and
World Bank meet, where again we hope they will approve cancella-
Another essential step is that each of the donors contribute a bit
to a fund to help cover the cost of the cancellation. The cost of can-

cellation is not usually the face value of the loans that were lent,
but donors do need to contribute in order to secure a global deal.
We expect the Administration to request such funding in their
Haiti package, which will hopefully soon be before Congress. ONE
strongly supports this request.
Let me conclude, given that time is short, by once again thanking
the committee, Mr. Chairman, and my colleagues. I think, again,
the argument in favor of canceling Haiti's debt is compelling and
very, very urgent. And I am happy to answer any questions. Thank
[The prepared statement of Mr. Hart can be found on page 39 of
the appendix.]
Chairman MEEKS. Thank you. Thank all of you for your testi-
mony. And knowing that Mr. Adams is short on time, I think we
will ask him a couple of questions, and then we will let him go.
In your reference to the cruel hoax of a lend-and-forgive cycle to
which we subject many of the world's poorest countries, I wonder
what conclusions you think we should draw from the amount and
the speed at which IDB acquired new loans following the last
round of debt relief for Haiti? Can you give me some thoughts
there? Similar to what I asked the Treasury.
Mr. ADAMS. Yes, Mr. Chairman. Well, it's somewhat troubling,
how quickly the lending was done in the aftermath of debt relief.
Now, I understand the structure of these institutions, they're
there to lend money. It's a wonderful institution just down a few
blocks from here. It's populated with thousands of people who come
in every day trying to do the right, noble thing. But the objective
is to push money out the door. And having been a former official
at Treasury, it's easy to get in the habit of saying, "We need to do
something. Let's use the institutions, let's call in the institutions,
let's do something."
And because of the limited nature of grant-based funding, it's
easy for those institutions to do what they do, which is to lend. And
so, it's not just the IDB-although I think that's worth looking
into-it is a development structure, a multilateral development
structure, that has a bias toward lending, and an incentive toward
lending. And I think we ought to think about that in a much more
systemic way.
Chairman MEEKS. What I'm going to do now is reserve the bal-
ance of my time. But if you-either one-have a question for Mr.
Adams, because I know we had promised him to get out of here by
12:15, you can ask him a question and then let him go. Mr. Miller?
Chairman MEEKS. Mr. Bachus?
Mr. BACHUS. One question. I referred to, in my opening remarks,
and you have referred to in your testimony, that some creditors at-
tempt to take advantage of the country if there is any freed-up bor-
rowing capacity in the wake of debt relief, either countries coming
in or private companies, in trying to take advantage of asset sales,
or their natural resources, or putting more debt on them. How do
we prevent this from happening?
Mr. ADAMS. A great question, Congressman. And I share the con-
cern, because I think we are seeing it happen. And it is unfair to
the American taxpayer to pay the price of debt relief, only to find

that other countries are coming in and loading poor countries up
with debt, and we know they can't afford it.
There are mechanisms in place, in the aftermath of MDRI in
2005. We began something with the IMF and the World Bank that
looks at debt sustainability analysis and models, then also work
with the OECD and the export credit agencies. And Dr. Lee talked
about bilateral assistance, and how it's treated through the Paris
But we need to have a much more broadly encompassing mecha-
nism to pull in those countries that don't participate in these insti-
tutions. And I notice that Jubilee talked about an international
framework for responsible lending. We need to think about new
mechanisms much more broadly encompassing.
And we have a G20 summit that's going to occur in Canada in
just a couple of months. I don't know why the G20 couldn't put this
on the agenda for the things they are looking at. Because I think
if we don't, in 5 years we're going to find a number of countries
in Africa and other places that owe a tremendous amount of debt
to countries who have been out there lending to get at natural re-
sources. And it's a new form of colonialism, and we need to stop
Mr. BACHUS. Let me-if I could, I'm supposed to go to a speech-
if I could just take 1 minute to wrap up, and then I appreciate the
chairman and the ranking-
Chairman MEEKS. Without objection.
Mr. BACHUS. I want to illustrate, and I want to use Tom's exam-
ple. What Tom has reminded us all of, and what the Congress
needs to realize, and I think the American people, is that debt re-
lief is working in these countries. As you say, it's not the total solu-
tion, it's not a cure-all. Their problems were daunting. But there
are more children in school. In many cases, either the life expect-
ancy or the infant mortality has either been reduced or slowed.
Now, some of them would have a famine or there would be some-
thing else, but it has really worked fantastically.
And, as we predicted 8 or 10 years ago, for just pennies, just
what an American would really-pocket change, it's meant the
ability of people to survive and better themselves.
Two countries-and I will close-Afghanistan was one of the
most illiterate countries with the lowest number of children in
school. There was no debt relief. It was a highly impoverished
country. We saw what happened there. You have groups take over,
and they agree to educate the children. And we have a tremendous
loss of life there, and with our troops.
We cannot-I had a Marine brigadier general who told me sev-
eral years ago, "This is a partial solution to our national defense,
because we can't be in all these countries." And so I think Afghani-
stan is a wonderful example of how-I don't know if we could have
avoided it, but I wish we had known.
The other is Namibia. About 6 years ago, I visited there-and I
don't know if it was the president or the prime minister-thanked
me for debt relief. And we had not given debt relief to Namibia.
And no one else had. They had the-I don't know if good fortune,
of being colonized by the Germans. And their debt was wiped out
in World War II, and they apparently never incurred much, unlike

Haiti, their experience, and many other countries, which have just
been in a cycle of debt for hundreds of years.
So, I said, "Well, I didn't realize that you received debt relief."
He said, "We didn't. Our neighbors did." And he said, "There is in-
stability on our borders, disease, there are rebel groups." And that's
one of the most stable countries in Africa. It's a success story. But
part of the reason is that-and he said it was the neighbor to the
north. It had had some stabilizing influence there. I thought this
was a powerful message. And I think, just like Namibia, the United
States-there are may benefits that Americans don't realize.
And then, finally, as Mr. Adams said, if other countries do not
follow suit, or if we don't pass this bill, we will continue to pay the
debt. I am encouraged that the world community is realizing that
this is a problem which not only affects these citizens, it affects all
of us. Thank you.
Chairman MEEKS. Thank you, Mr. Bachus.
Mr. BACHUS. Every one of your testimonies was excellent. I think
everything about it-I thought it was wonderful. I wish every
American could have heard it.
Chairman MEEKS. Thank you, Mr. Bachus. And, Mr. Adams, we
want to thank you. We know that you have to leave. We held you
a little bit longer, but thank you for coming and giving your testi-
Mr. Hart, let me ask you a question really quick. I think that you
have put forward the idea of having like a shock insurance facility
for vulnerable, poor countries that would be able to buffer the fiscal
and balance of payment shock for natural disasters, for example,
among other things.
Such a facility could be mobilized in a coordinated manner,
which would happen automatically, I guess, in the event of a shock,
something of that nature, giving folks like us-policymakers, etc.-
more time to react to them as we are trying to do here today.
Now, a couple of questions on that: One, could such a facility be
financed entirely with existing resources from the international in-
stitutions; two, in your opinion, would the IMF be the best place
to house such a pooled insurance mechanism; and three, has there
been any more substantive discussion about this within the institu-
Mr. HART. Thank you for raising it, Mr. Chairman. Fortunately,
there is a modest form of this idea already in existence. The HIPC
and MDRI processes actually take a look at what they call "topping
up." If countries have gone through the processes, met all the
qualifications of HIPC and MDRI, arrive at the debt cancellation
that they were expected to get, and have experienced some sort of,
as they say, "exogenous shock"-food or fuel price changes, dif-
ference in the commodities, exports-they can receive a topping up
of assistance, or additional debt relief, in order to get them back
to the level that was expected.
So, this idea is certainly not a unique one, not my own. And I
merely wanted to make the point in my written testimony that, of
course, a 7.0 earthquake would certainly qualify as an exogenous
shock. We shouldn't be concerned that now many other countries
would expect additional debt cancellation. Clearly, countries experi-
encing natural disasters such as this one deserve-as I think we

have discussed today, and as so eloquently put by Mr. Bachus a
moment ago-to get that additional relief.
Could such a facility be entirely financed by the institutions
themselves? I think it certainly is possible. Looking at the IMF's
resources, they are going to be able to cover, through their own re-
sources, the cost of the cancellation of Haiti's debt. They-as I
think this committee knows well-sit on millions and millions of
ounces of gold. And that gold can be sold on open markets, as has
been the case in the past, to finance debt cancellation. An amount
of that could be sold and the proceeds of that used to cover this
exogenous shock facility.
I think the IMF certainly could be the place to house this. It
could be housed in a number of places. And so, I think there is dis-
cussion around the additional topping up of debt assistance.
There is not enough discussion of what Mr. Adams relayed,
which is how do we avoid getting back in these circumstances? We
don't want to have to continually top up countries. We want to
avoid getting them in this circumstance in the first place. So we
need to, as a global community, pause before we release another
"X" billion dollars in new debt, and think, "Can we finance this
through grants?"
Chairman MEEKS. Thank you. Ms. St. Louis, let me ask you a
question really quick, before I go to Ranking Member Miller, be-
cause you talked also about establishing a mechanism for more
transparent and accountable debt accrual, and I guess where appli-
cable, debt default for forgiveness.
What agency? Would it be the IMF? Who do you think is best
suited to establish and administer such a mechanism?
Ms. ST. LOUIS. The mechanism for responsible lending and bor-
rowing? Well, there is an interesting initiative that has been
launched, actually, by the United Nations Conference on Trade and
Development, UNCTD, which begins a process of bringing together
legal experts and governments and the nonprofit sector, coming to-
gether to come up with a set of guidelines for responsible lending
and borrowing that could kind of be a code of conduct, initially, and
then kind of build toward responsible-toward more soft law, per-
haps down the road.
And this is an interesting initiative, particularly because China
is at the table, and that has been one of the problems within the
Paris Club and within other institutions. It gets a little bit to the
question that Ranking Member Bachus talked about earlier.
So, having an initiative through the United Nations, which is a
place where some of these other kinds of emerging markets that
are engaging in lending-to get them to make sure that they are
engaged at the table, I think it is more likely to have success more
And so, that's one initiative where we are recommending that the
U.S. Government play a constructive role. It's really getting off the
ground. I think it will take a while. But I think that having those
guidelines in place, and trying to ensure that all of the relevant ac-
tors who are lending are at the table at the beginning will be really
Chairman MEEKS. Thank you. Mr. Miller?

Mr. MILLER OF CALIFORNIA. Thank you, Mr. Chairman. Mr. Hart,
in your testimony, you mentioned the importance of country owner-
ship of programs. I believe, more specifically, you said, "country
ownership of development initiatives where funding supports coun-
try priorities, rather than donor priorities." Then you go on to say,
"country-owned poverty reduction plan increase in ownership," and
in many cases there has been a lack of poverty reduction efforts on
the part of government.
Could you explain that more fully?
Mr. HART. Sure, of course. The HIPC and MDRI initiatives are
built upon the foundation that the amount of payments going to old
debts that is now freed up, that those proceeds, the windfall from
debt relief, would go to poverty reduction.
And so, the World Bank has led a process with these countries
called the Poverty Reduction Strategy Process. It's a process by
which the countries themselves consult with civil society, begin a
national dialogue about what their poverty reduction and develop-
ment plans are, and they put together these strategies, which debt
relief-and other assistance-go to fund. Now-
Mr. MILLER OF CALIFORNIA. How can donor priorities, rather
than country priorities, differ that are in conflict with each other?
Mr. HART. Oh, very often donors-
Mr. MILLER OF CALIFORNIA. We have an initiative to get the
money to the people.
Mr. HART. Right.
Mr. MILLER OF CALIFORNIA. And to help the people. Perhaps if
it went to the government, it might not get to the source we're try-
ing to achieve.
Mr. HART. I think it's not necessarily a case of giving it to the
governments of these countries directly, so much as having a coun-
try plan that says, "We need this number of schools, we need this
number of clinics. It would be great if we had a farm-to-market
road system." If the donor community understands what the devel-
opment priorities of the country are, their donor assistance is going
to be that much more effective.
Oftentimes in the past, our assistance has gone into priorities
that we think we want to achieve, but don't necessarily resonant
with what the countries, themselves, need.
A very innovative example of that new approach is, frankly, the
Millennium Challenge account, which was set up during the last
Administration. It's a negotiation across the table. It's a, "Hey, we
would like to do this. We need this. How can we work together to
get it done?" And that's really the process-
Mr. MILLER OF CALIFORNIA. That can be done, though, without
necessarily country ownership, can't it? Just do bilateral agree-
ments on issues.
Mr. HART. The best bilateral agreements are obviously going to
be where the country and its citizens are fully bought in.
Mr. MILLER OF CALIFORNIA. Okay. Buying in is different than
ownership. I see where you're going, then.
Ms. St. Louis, you talked in here about the flaws of a multilat-
eral debt relief process that is voluntary. How would that impact
shareholders if it were not voluntary, being this is a contribution?

How would you have shareholders involved, and then have their
debt relief be non-voluntary on their part?
Ms. ST. LouIS. Well, what I was referring to in that was the fact
that for sovereign-for countries that are in debt distress, the-
there is no international bankruptcy type of mechanism that, you
know, an individual or a corporation that's in debt distress has.
There is a way for an orderly work-out of the mechanism. And that
doesn't exist in the international framework.
And so, that's one of the things we were talking about. It's not
so much saying that it's going to be involuntary, but that there is
actually a comprehensive mechanism where everybody is at the
table together, and-so that there aren't hold-outs, there aren't
countries, there aren't corporations that, therefore, hold out of ne-
gotiations, and therefore benefit from U.S. taxpayer-or debt relief,
and so forth.
Ms. ST. Louis. So the need to have something that's comprehen-
sive and that-fair and transparent arbitration for countries that
are in debt distress that would benefit both creditors and bor-
rowers, because there would be, again, orderly work-outs.
Mr. MILLER OF CALIFORNIA. How would you do that? Let's look
in the future. We have a country that we want shareholders to in-
vest in. And their company is thinking, "We're going to make loans,
we're going to invest, and we're probably going to get repayment
on our loan, eventually."
How would you structure those prior to that situation occurring
to still encourage donors and shareholders to be involved, if it's not
a voluntary situation?
Ms. ST. LouIS. Well, again, I make the analogy to the-
Mr. MILLER OF CALIFORNIA. I'm concerned about even the debate
would impact countries in the future from receiving assistance that
they might not otherwise receive if shareholders thought they could
be wiped out.
Ms. ST. LOUIs. Right. Well, I guess I would continue to make the
analogy to the bankruptcy, that knowing there is going to be an or-
derly debt work-out is actually beneficial to lenders, as opposed to
thinking there might be a chaotic series of defaults.
And so, the approach is to say-I mean, every lender knows that
there is a risk involved in lending, and that if they could count on
an arbitration mechanism that's fair and transparent, that actually
is beneficial to lenders. And I think that it would not be-that it
wouldn't cause a-
Mr. MILLER OF CALIFORNIA. I would really like to have more in-
formation, because my concern-Mr. Chairman, and you can see
it-is if a bank lends me money, they know that I might go
through bankruptcy or whatever, and it's figured in the rates. But
if a state or government sells bonds, the bond holder doesn't as-
sume that they're going to go bankrupt on them. They're going to
get their bond repayment back.
So, when we talk about anything that's not done on a voluntary
basis, I could see somehow maybe somewhere down the road, that
might hurt the very countries we are trying to help, as it puts their
shareholders in a situation where they feel like they could be put
at risk they didn't otherwise believe they-

Ms. ST. LOUIS. Well, no, I-
Mr. MILLER OF CALIFORNIA. I understand-I know where you're
trying to go, but I'm cautious on how we get there.
Ms. ST. Louis. No, I think it definitely is an idea that's in devel-
opment. It does need to be fleshed out.
The UN commission that was headed by Nobel laureate Joseph
Stiglitz has a whole section, where they actually look at that issue
and address some of them. And they come down pretty strongly
that it would be beneficial. But I think you do have to work out
the details of how that-
Mr. MILLER OF CALIFORNIA. And on that, I am going to close
with, it's very easy for somebody to determine what might be bene-
ficial when it's not their money. When the other group is coming
in and putting their money into it, they look at it from a different
It's always easier to-I'm willing to go out to dinner and spend
his money and have a great time. But when I go to dinner, I'm
going to check the bill, if I'm paying. There is a difference there.
So that's where my cautions arise.
And I really appreciate the testimony. I was not impugning any-
thing you said. Please don't take it that way. It's more of a con-
Ms. ST. LouIS. Sure.
Mr. MILLER OF CALIFORNIA. -that we might hurt the people
we're trying to help in the future by creating a situation that might
cause confusion, more than anything else.
I yield back, and I thank you, sir.
Chairman MEEKS. Thank you, Mr. Miller. And I want to thank
our witnesses. I think that you have been absolutely excellent. And
the line of work that you have chosen is really what I call God's
work, in trying to make sure that you are taking care of those who
really need a hand up and a change around. It's really humani-
And I think that the unfortunate situation that we're dealing
with in Haiti because of the earthquake is just a testament to the
great organizations that you belong to, and on the ground and
hands on.
And again, I thank the ranking member for your steadfastness
and real heartfelt concern on how we really make a difference, we
don't continue to stay in this spin of loaning money without it
changing the reality on the ground for the people. How do we really
get that done? So I really appreciate everybody on this.


The Chair notes that some members may have additional ques-
tions for this panel which they may wish to submit in writing.
Without objection, the hearing record will remain open for 30 days
for members to submit written questions to these witnesses and to
place their responses in the record.
This hearing is now adjourned.
[Whereupon, at 12:38 p.m., the hearing was adjourned.]


March 4, 2010


Haiti Debt Relief Hearing

March 4, 2010

Rep. Meeks Prepared Statement

Before I begin, I would like to thank ranking member Miller for
his help in organizing this very important hearing on Haiti debt
relief. I also want to thank all our witnesses who have taken the
time to come share their valued experience on the topic of debt
relief for Haiti.

Today, we will consider an issue that is close to all of our hearts.
Haiti suffered a devastating earthquake on January 12 of this year.
The country, which was finally making strides to more stable
economic growth and whose government was finally showing
signs of becoming more stable, credible and accountable, was
rocked by a natural disaster of historic proportions. The images
from the disaster are fresh in our minds. The immediate needs of
the people are clear, and the desire of the global community, and of
average American citizens to help Haiti recover as fast as possible
are clear and give me hope. This is a bipartisan issue because it is

a human issue, at its most basic. This is about America showing
its true compassion and capacity to help our neighbors in their time
of greatest need. Average American citizens mobilized to help
Haiti in a way that gives me great pride in my country. Our
government stepped up to the challenge in the immediate
aftermath. We are now moving to the second and third phase of
the process; namely moving from immediate rescue and survival
concerns, though they are still critical, to reconstruction and,
ultimately, long-term economic recovery. A critical step to this
transition will be providing Haiti with debt relief, and working
with the multilateral development banks and the IMF to ensure that
Haiti will be provided the resources it needs in the medium and
longer term, without adding to the nation's debt burden.

I look forward to hearing the testimony of our witnesses here
today, and look forward to working with ranking member Miller
on moving a bill to empower the administration to promote Haiti
debt relief from the international institutions in which we are major
shareholders, as well as pushing for bilateral debt relief from other
nations holding Haiti's debts today.

Finally, I did want to inform you that this will be just the first in a
series of hearings focused on Haiti. As some of you know, I


chaired a bipartisan, members-only briefing on multilateral aid and
financing coordination in February, at which the Treasury
Department, the IDB, the World Bank and the IMF provided
clarity into how they plan to collaborate to ensure efficiency and to
eliminate waste and duplication of efforts in their work in Haiti.
The next hearing is scheduled for March 16, and will focus on the
longer-term prospects and strategy for Haiti's economic recovery.
Long after the news cameras have left, we will continue to monitor
progress in Haiti, and to provide assistance to ensure that the
nation can get back on its feet, and back on a path to economic
growth and political stability.


Testimony by Tim Adams
House Committee on Financial Services
International Monetary Policy and Trade Subcommittee
"Haiti Debt Relief"
Thursday, March 4, 2010

The earthquake that hit Haiti on January 12th is a natural tragedy without scale in modern
history, with over 200,000 killed, hundreds of thousands left homeless and the country's infrastructure
and economy left in shambles. Even before this devastating event, Haiti was one of the world's poorest
and least developed economies, sliding backwards over the past twenty years as other developing
countries experienced noticeable gains. Haiti ranks 149' (out of 182) in the United Nations Human
Development Report, and 80% of the population is estimated to be living in poverty, with most living on
less that $2 a day. The country suffers from high illiteracy, a loss of human capital and abysmal working
conditions for those left behind. It is a cruel outcome that such a poor country would suffer such a
calamitous event.

Fortuntanely, the global community generally and the U.S. specifically responded with
significant humanitarian assistance. I applaud this effort but note that Haiti will need help for years if
not decades to come. The issue before the Committee today is debt relief for Haiti. Allow me to make
three points.

One, is that I enthusiastically support debt relief for Haiti. It is the right policy. Specifically, Haiti
owes approximately $1.1 billion in official bi-lateral and multilateral debt, with the largest balance owed
to the Inter-American Development Bank. Almost all of this debt has been incurred since 2004. The
pre-2004 debt, roughly $1.2 billion, was cancelled in 2009 as part of the Heavily Indebted Poor Country
Initiative (HIPC). While debt servicing costs for 2010 is minor, and thus debt relief will not have much of
an impact this year, it will help over the long-term, and Haiti will need every dollar of support it can get.

Two, debt relief, in and of itself, is just a minor response, and no panacea, to the enormous
challenges that exists today and for the foreseeable future in Haiti. It cannot be seen as a substitute for
substantial and sustainable assistance. We must ensure that Haiti receives a broad range of support,
with long term commitments, so that the Haitian people can rebuild their economy, create jobs, support
the private sector and attempt to put their country on a sustainable development trajectory. More
specifically, the development strategy for Haiti must be much larger, coordinated and comprehensive
with clearly articulated goals and performance milestones. Moreover, future development assistance
should be in the form of cash grants, in-kind grants, technical assistance, trade preferences and support
for remittance flows, but not in the form of new loans.

Three, we should use this occasion to reaffirm an approach to development assistance that
seeks to minimize new lending for the poorest countries, relying instead on more grants-based
assistance, support for trade expansion, private sector development, etc. The "lend and forgive" cycle is
a cruel hoax for both the creditor and debtor countries. In the past we the globally donor community
- have over lent to countries that did not have the capacity to repay, saddling them often with
economically and socially crippling commitments that ultimately had to be forgiven. Such action simply
breeds cynicism among donor countries' voters and taxpayers, reinforcing the unfortunate view that


development assistance is ineffective and should be curtailed. We should not set up for failure recipient
countries and development efforts and organizations.

In 2005, the Bush Administration, in concert with G-8 partners, initiated the Multilateral Debt
Relief Initiative (MDRI), which served as an additional, critical follow on to the Initiative for Heavily
Indebted Poor Countries (HIPC) of the mid 1990s. These two efforts have relieved the crushing burden
of unsustainable debt for dozens of poverty-stricken countries. We should ensure that the poorest are
not again burdened with debt, from either official or private creditors, some of whom are now
attempting to take advantage of countries' freed up borrowing capacity in the wake of debt forgiveness.

In closing, I strongly urge this Committee and the U.S. Congress to provide much needed
assistance to Haiti. Debt relief is a necessary but far from sufficiently component. The U.S. should do
everything in its power, continuing our long tradition of helping those befallen by tragedy, and help our
neighbor to the south recover from this horrific, devastating event.

Statement of

Thomas H. Hart
Senior Director of Government Relations

"Haiti Debt Relief"

Hearing of the

Subcommittee on International Monetary Policy and Trade

of the

Committee on Financial Services
U.S. House of Representatives

March 4, 2010

Mr. Chairman, Members of the subcommittee, thank you for the opportunity to speak to you this
morning about debt cancellation for Haiti and the need for new assistance to be in the form of

ONE is a global advocacy and campaigning organization backed by more than 2 million people
from around the world dedicated to fighting extreme poverty and preventable disease,
particularly in Africa. Here in the U.S., we work to support bipartisan policy solutions to these
tough problems, including more and better development assistance, trade policies and debt
cancellation, as well as efforts to promote democracy, transparency and accountability from
those countries receiving U.S. assistance. We are probably best known for our co-founder, Bono,
the lead singer of the rock band U2. As many of you know, he began his advocacy in the U.S.
focused on debt relief, during the Jubilee 2000 campaign a decade ago.

Congress and the current and past Administrations should be proud of their commitment to debt
relief for the poorest countries. Members of this committee Chairman Frank, Mrs. Waters, Mr.
Bachus, and Chairman Meeks have a long active history of supporting legislation and pushing
the international community to cancel unpayable debts.

Prior Debt Cancellation

As this committee knows well, we have had several rounds of debt cancellation for poor
countries. Ten years ago, the United States and many other large countries cancelled their debts
to the poorest and most heavily-indebted countries, most of which were in Africa. This was
called the Enhanced Heavily Indebted Poor Country (HIPC) Initiative. Five years later, the U.S.
and the U.K. successfully pushed a plan to cancel the multilateral debts still held by these poor
countries, known as the Multilateral Debt Relief Initiative (MDRI).

As of September 2009, 35 poor countries have qualified for some form of debt service relief
under these initiatives and 26 have completed the process and received both bilateral and
multilateral debt stock cancellation. Together, these initiatives have provided over $117 billion in
debt relief,' resulting in approximately S2 billion in debt service saved annually.

With these debt service savings, we have seen increases in social sector spending:
HIPC countries on average have increased their spending on social services like health
and education from $6 billion in 1999 to $27 billion in 2009 a nearly 5-fold increase.
Burundi is using HIPC support to continue to provide free primary education, as well as
free health services for children under 5 and women in childbirth.
Mozambique put its debts service savings to work by vaccinating I million children
against tetanus, whooping cough and diphtheria.

$72 billion under IIIPC, $45 billion under MDRI (nominal terms, current as of fall 2009).


Background on Haiti's Debt

Last summer, Haiti qualified for $1.2 billion in debt cancellation from both bilateral and
multilateral creditors under HI1PC and MDRI. In doing so, Haiti met all the requirements for the
program, such as maintaining macroeconomic stability, carrying out structural and social
reforms, and successfully implementing for at least one year a Poverty Reduction Strategy. This
$1.2 billion is made up of debt incurred through the end of 2004.

At the time of the earthquake, Haiti still had roughly $1 billion of loans outstanding.

IMF $165m
World Bank IDA program S39m
Inter-American Dev Bank $447m
Int l Fund for Agriculture Dev $58m
Taiwan $92m (these loans were not cancelled under IIPC)
Venezuela $295m (these loans were not cancelled under HIPC)
Total S1.1 billion

Haiti's multilateral debt was incurred between 2005 and the earthquake. I note with some
concern the large volume of debt from the Inter-American Development Bank in such a short
time. According to the IDB, $180 million was lent in 2005 and 2006. The remaining $267
million (for a total ofS447 million) was approved prior to 2005, but disbursed after the
HIPC/MDRI cut-off date and therefore not eligible for cancellation last summer. The bulk of this
assistance was for roads, electricity, schools, hospitals, agriculture and other key development
sectors. Since 2007, the IDB has only extended Haiti grant assistance. As the dominant single
shareholder at the IDB, the United States should seek ways to avoid such a rapid re-accumulation
of debt for Haiti, and other poor countries, in the future.

We are heartened that most major bilateral donors, including the United States, have cancelled
Haiti's old bilateral debts and now extend to Haiti only grants. The exceptions are Taiwan and
Venezuela, as noted.

The Case for Cancellation

Prior to the earthquake, things were looking up for Haiti. The IMF projected 4.5% annual growth
rates, and for exports to grow consistently. Over 6 years, HIV prevalence dropped from 6% to
2%. Aid to education more than doubled from an average of $35 million in years 1999 and 2000
to $81 million in 2007. Democracy, political rights and governance indicators were trending
upward according to Freedom House. With the help of outside donors, the country treated 2.8
million people for neglected tropical diseases. Under certain economic assumptions, it was not
unreasonable to think Haiti could service a limited amount of debt over time.

And then of course, these assumptions about growth, exports and ability to repay were shattered
as a result of the earthquake. At this point, it is very difficult to tell when Haiti would be able
economically to repay these old loans. But I do not believe it is difficult to tell whether Haiti

should pay them back. Haiti plainly needs a fresh start, a chance to rebuild, and will need every
dollar over many years to develop. Its current loans were made based on assumptions no longer
relevant and intended for projects that are no longer viable. For example, a loan for a road that is
now destroyed cannot generate the economic returns to pay the loan back.

Holding Haiti to its international debts not only ignores the change in its economic ability to
repay, it would diminish the impact of outside assistance for reconstruction. Donor assistance
will hopefully continue to pour in and, if Haiti is still burdened with old debts, some of that
assistance would be turned around to make loan payments. This "revolving door" of assistance -
donor assistance turned into debt payments to donor-led multilaterals defies common sense.

That is not to say all debt held by every poor country is bad. Lending should be highly
concessional and should have a reasonable chance of being repaid. Unfortunately, these
standards are often too loosely applied and poor countries find themselves unable to pay debts
back. As preferred creditors, multilateral banks must always be paid back, so new loans are given
to cover payments on old loans. A vicious cycle begins. HIPC and MDRI were born out of the
need to break the cycle of indebtedness for many poor countries. Loans can make sense for
activities that directly produce an economic return, such as some infrastructure,
telecommunications and agriculture projects. But this should be the exception. Assistance for
health, education, water and sanitation should always be grants. And in nearly all circumstances,
we believe grants are the most appropriate form of assistance for the poorest nations.

How to Get a Deal Done

Like any bankruptcy procedure, all creditors have to be at the table for it to work. Otherwise,
debt relief from one creditor simply makes it easier to pay back another creditor.

The multilateral institutions are made up of shareholders, such as the United States, Japan, and
others. These nation-state Boards must approve any debt cancellation and often contribute to a
pool of funding to make up for the lost reflows to the institutions. The chart below shows the
major stakeholder countries in the institutions holding Haiti's debt. In other words, these are the
major countries that must approve any relief.

U S \'. rh J |an k i l l .I I F u 1.1Ir .1 IP 1 i r P IFl .D l I
Japan ij B s i<*1 .D [ i IMF I ,l IF -` i' ,.
Germany World Bank (5.9%), IMF (5.9%), IFAD (7.8%)
UK '\ .,rld B.nk (5%), IMF (4.9%/ i F.AD in ,
France \..... IJ BR,,k .i IMF(4.9%)
Canada IDBl 1 .
Italy IFAD (6.7%)
N liherlands IF i)D ; 'i 4
Argentina IDB (10.8%)
Brazil IDB (10.8%)
Mexico IDB (7%)

Support for Debt Cancellation

Momentum in favor of cancellation has built quickly. We were delighted to see quick action
from champions in Congress, such as the Waters bill you will consider today and the Dodd-
Lugar bill in the Senate.

We were pleased to see a strong public reaction as well. Over the course of a couple weeks, we
were in touch with our two million-strong membership to respond to the tragedy. At first, we
urged people to contribute to the many relief organizations in the immediate aftermath. Then, we
launched a petition encouraging Secretary Geithner to use his influence to cancel Haiti's
outstanding debt and ensure all new assistance comes in the form of grants. The response was
overwhelming. During the G7 Finance Ministers' meeting in Canada, we delivered the names of
200,000 ONE members, and another 200,000 names from partner organizations, like Jubilee and
Avaaz, to the Canadian Finance Ministry. The culmination of this effort occurred with the
delivery of these 400,000 names by Michble Bertol a ONE member and a resident of the 6,000-
person arctic town of Iqaluit, who was born in Haiti.

We applaud Secretary Geithner's announcement in support of cancellation on the eve of the G7
Finance Ministers' meeting in Canada a month ago, and for his leadership in securing the support
of the all the G7 countries. G7 endorsement is the essential, and usually decisive, action to spur a
final deal.

We welcome the World Bank's immediate offer of $100 million in grants in response to the
quake. The situation with the IMF is more complicated. It offered, and later approved, a quick
infusion of $100 million in zero-interest loans to Haiti's central bank to increase liquidity. As
stated earlier, we recommend all new resources to Haiti be in the form of grants. In this case, we
do not fault the leadership of the IMF. Lending is the only tool at its disposal, and zero-interest
loans, subsidized in part by the sale of gold which we strongly support, are the cheapest fonn of
assistance it can offer. Also, the IMF staff and U.S. Treasury made a compelling argument that
the IMF was the best, perhaps only, facility to get Haiti this cash quickly. In the aftermath of this
action, we encourage all parties to act quickly on IMF Managing Director Strauss Kahn's call to
arrange cancellation of this new lending as quickly as possible.

As noted, there are two bilateral creditors that have substantial loans to Haiti Taiwan and
Venezuela. Both countries have made positive signals about cancelling these debts, and we hope
these intentions are quickly matched by actions. As the agreements for cancellation are
hammered out, some provision must be made so benefits of multilateral relief do not simply
make it easier to pay back Taiwan or Venezuela.

Next Steps

Next in the process is the meeting of the IDB Board in a few weeks in Mexico. As shown above,
support for debt cancellation from Argentina and Brazil is important. Then in April, we hope the
spring meetings of the boards of the World Bank and IMF will approve cancellation as well.
Taiwan and Venezuela also need to follow through on cancelling their bilateral debt.

An essential component of a final agreement will be for the major donor nations, including the
United States, to contribute to a pool of funds to cover the cost of cancellation. We expect the
Administration to request appropriations for this purpose as part of the anticipated Haiti
reconstruction supplemental request. ONE strongly supports this request.

Key Questions

Despite the broad agreement to cancel Haiti's debt, there are some questions worth addressing.

Moral hazard- As countries go through the sometimes lengthy process of qualifying for debt
relief, there is the theoretical possibility they could take on more debt in hopes of getting it
cancelled. The HIPC process dealt with this potential problem by cancelling only debt incurred
prior to an earlier cutoff date. Haiti, of course, could not anticipate the earthquake and take on
more debt in hopes of getting it cancelled. The "moral hazard" question is not applicable.

Precedent to go beyondlHIPC-Some have questioned whether cancelling Haiti's remaining
debt creates a new precedent to give further debt relief to other HIPCs. The current proposal to
go beyond HIPC and MDRI relief is clearly exceptional. Exceptions are made for "exogenous
shocks" which make the repayment of debt extremely difficult. A natural disaster of this
magnitude is an unanticipated and devastating shock.

Aid vs. Debt Cancellation Is aid or debt cancellation more important for Haiti? In the
immediate aftermath of the quake, direct aid is the most important. Before the earthquake, Haiti
was paying very little to service its current debts, with estimates as low as $9 million in 2009.
Last year, USAID covered Haiti's debt service to the IDB. Since the quake, all major lenders
have suspended any required payments. Therefore, cancelling Haiti's debt frees up very little in
the short term for recovery efforts. But over the long term, Haiti would have to pay off its S1.1
billion debt, which is money better spent on new investments, not on old projects that ceased to
be relevant after the quake hit. Over the long term, debt cancellation is not a silver bullet. Haiti
will need far more long term development assistance and trade income than debt relief. Debt
cancellation is a small but important piece of a complex puzzle.

Looking at the big picture, as Congress is considering reforming our aid system, it is interesting
to note debt relief under the IIIPC program has several features that make it an effective form of

1. Donor Coordination HIPC debt relief, like any bankruptcy proceeding, requires all
creditors to act together in a coordinated fashion. Donor coordination brings efficiency
for the recipient country (limiting the transaction costs of dealing with dozens of different
donors with different rules and paperwork) as well as clearer goals and accountability.

2. Country' ownership Country ownership of development initiatives, where funding
supports country priorities rather than donor priorities, is critical to program success. In
the HIPC process, the recipient government engages in a participatory process with civil

society to design a country-owned poverty reduction plan, increasing the ownership over
that plan.

3. Untiedaid- Because debt relief through the HIPC program provides support directly to
recipient government budgets, the countries themselves make spending decisions, using
local contractors or NGOs, which are often less expensive and more attune to country
priorities than donor-required contractors.

4. Leveraging more assistance In the HIPC program, every dollar of U.S. taxpayer money
was multiplied many times by contributions from other donors. When donors agree to act
together in this way, with each contribution dependent on others, contributions are
multiplied. A similar example of this is the leveraging impact of the Global Fund to Fight
HIV/AIDS, Tuberculosis and Malaria. Every dollar from the United States to the Fund
has been matched by $2 from other donors.

Mr. Chairman and Members of the Subcommittee, on behalf of ONE, I thank you for your
leadership in pursuing debt cancellation for Haiti. It is an important and effective part of the U.S.
response to this tragedy. Haiti's quick re-accumulation of debt since 2005 is cause for concern
and points to the strong need for grant resources for the poorest countries. U.S. leadership in
multilateral institutions is critical to preventing future debt crises and providing the poorest
countries with the resources they need to develop.

Nancy Lee
Deputy Assistant Secretary for the Western Hemisphere
U.S. Department of Treasury
House Financial Services Subcommittee on International Monetary Policy and Trade
March 4, 2010

Chairman Mccks, Ranking Member Miller, members of the House Financial Services
Subcommittee on International Monetary Policy and Trade, thank you for inviting me to testify
at this important hearing on the current situation in Haiti. I know the leadership role you and
others on this Committee have played on the Haiti issue, and it is a privilege for me to testify
before you today.

I returned early this morning from Port-au-Prince, where I had the opportunity to meet with the
senior economic team in Haiti, including Finance Minister Baudin, Central Bank Governor
Castel, and President Preval's chief economic advisor, Gabriel Verret. I also had the opportunity
to meet with the private sector, including heads of several banks and the president of Fonkoze, a
remittance provider doing very important work in Haiti. I am pleased to have this opportunity to
share my findings with you.

In the immediate aftermath of the January 12 earthquake, efforts were focused on providing
urgent lifesaving and life-sustaining relief, as well as restoring essential public services, such as
banking and money transfers. We saw an extraordinary level of coordination, both within the
United States government and amongst the international community. Now -- seven weeks later -
we have moved from the emergency phase to the immediate recovery phase, and are about to
move into the reconstruction and development phase. Yet the Haitian people will continue to
face tremendous humanitarian and recovery needs, and meeting these needs will require a
continued massive multilateral effort.

In my testimony, I will provide an overview of the current macroeconomic situation and
challenges. I will then discuss Treasury efforts to help Haiti address these challenges through
technical and financial assistance, including debt relief.

Current Status and Challenges

Although the earthquake was a catastrophic setback, economic activity is beginning to recover,
boosted by extraordinary international assistance and significant financial flows. Prc-carthquake
projections pointed to 3.6 percent annual growth in 2010 and annual inflation of 8 percent. Post-
earthquake, we can now expect a GDP contraction of at least 10 percent, and a significant
increase in inflation, perhaps to 10-20 percent, as a result of severe shortages in particular goods.
The economic impact of the earthquake is quite varied by sector and region, and it will take some
time to fully understand the nature of these different effects. Today, I will provide you with our
best current assessment of the financial sector, public finances, the balance of payments, and the
debt burden.

Underdeveloped Financial Sector

In the financial sector, the initial concern following the earthquake was re-establishing the
payments systems and ensuring that there was enough physical cash in the system for banks and
remittances providers to open. These cash needs were met through the joint effort of the Haitian
government, the Haitian financial sector, multilateral institutions such as the IDB, and the U.S.
government. The Haitian government was able to pay its employees for January through the
hard work of the Ministry of Finance, the Central Bank, and local banks.

Going forward, a key challenge for the Haitian economy will be to create conditions that enable
the financial sector to meet more effectively the needs of the economy. Credit growth has lagged
for many years due to a combination of risk aversion, periodic shocks, and bouts of economic
and political instability. Post-earthquake, this historical risk aversion has only intensified. At
the same time, we know that Haitian companies are struggling. Their business activities and
revenue streams have been interrupted at a time when they need more resources than ever to
rebuild facilities and restore their productive capacity.

Fiscal Gaps

On the fiscal side, the government faces a severe financing gap. The International Monetary
Fund (IMF) estimates that domestic revenues may decline by as much as 40 percent due to the
shock to economic activity and international trade. This is compounded by the devastating
human and capital losses suffered by the revenue collection agency. Meanwhile, government
expenditures are likely to increase to fund basic needs and reconstruction. The Haitian
authorities have already taken significant steps to restore public financial management systems
and procedures, with the support of technical assistance partners. Priority areas have included:
basic treasury functions, basic audit service and expenditure monitoring, procurement functions
for major purchases, IT services, and taxpayer records, and revenue administration.

Balance of Payments Pressures

With regard to the balance of payments, the IMF has preliminarily identified a potential balance-
of-payments gap of S300 million for 2010, at least $100 million of which is unfinanced. At the
moment, the situation is stable with imports sharply down and remittances up. Haiti is heavily
dependent on imports, but with the Port-au-Prince seaport and airport closed, until recently, to
most commercial traffic, the volume of imports has declined. Moreover, remittances which
represent some 20 percent ofGDP have increased significantly. Given their economic
importance, a smoothly functioning, competitive money transfer system is essential. Evidence of
a short-term balance-of-payments improvement is seen in increased dollar deposits in the banks
and recent purchases of dollars from the Central Bank to reduce the volatility of local currency

Significant Debt Burden

As you know, these looming fiscal and balance-of-payments pressures come on top of a still-
significant Haitian debt burden. A considerable portion of Haiti's external debt was relieved

when the country reached the Heavily Indebted Poor Country (HIPC) Initiative completion point
in June 2009; the United States forgave 100 percent of Haiti's bilateral debt at that time. Despite
these significant strides, $1.1 billion in external debt remains. Of this, the multilateral debt stock
represents $825 million, with $447 million to the Inter-American Development Bank (IDB)

Addressing These Challenges

These challenges are vast and tackling them will require significant resources. Immediately
following the earthquake in Haiti, Treasury began working closely with our government
colleagues and international partners to support assistance efforts. We have seen an
extraordinary level of coordination, both within the U.S. government and vis-a-vis the
international community, and both in Washington and on the ground. The United States has
demonstrated clear leadership in this endeavor. Treasury has played an important role in the
inter-agency and international processes, and will play a role in reconstruction efforts.

Let me briefly describe some of ur efforts to address the challenges I discussed and the
measures we have taken to help the Haitian people.

Financial Sector Development

Development of the financial sector is vital for the economy. Treasury is focusing on helping
Haiti not just re-start lending, but expanding access to finance to a broader range of households
and businesses, especially microfinance enterprises. The rate of credit growth will be a principal
factor determining the rate of private sector recovery, as well as job creation. To address these
problems during this period of considerable uncertainty about Haiti's economic future, we are
working with the multilateral development banks (MDBs) and IMF to develop tools for sharing
risk with Haitian financial institutions. Further, many Haitian companies will be viable in the
long term if they can weather the immediate drop in sales and surge in reconstruction costs.
Accordingly, we are working through MDB private-sector windows to develop solutions to
supply much-needed working capital.

To build confidence and reduce risk aversion, extending a sound regulatory framework to a
broader range of financial services and institutions is key. We can help Haiti establish
supervisory and regulatory frameworks for microfinance, insurance, and pension funds, as well
as develop a deposit-insurance scheme.

These kinds of efforts yield disproportionate benefits for job creation. Relatively small
investments of donor resources leverage much greater amounts of private finance.

Balance ofPayments

With regard to balance of payments pressures, we strongly supported the January 27
augmentation ofl aiti's IMF program by $100 million, which will help close the projected gap.
We commend the IMF for its rapid response. We also strongly support Managing Director



Strauss-Kahn's intention to develop a means of internally financing Haiti's remaining
obligations to the IMF, including the $100 million just approved.

Budget Finance

The combined blow to the fiscal balance of the collapse in revenues and sharp increase in
spending will generate substantial budget support needs. Here the MDBs have a central role to
play. And we are working in close cooperation with them to provide technical assistance in
rebuilding Haiti's revenue system.


Although most of Haiti's bilateral debt including debt to the United States was cancelled in
June 2009, Haiti still confronts large debts to multilateral institutions. It is imperative that we
cancel this additional debt so that Haiti can proceed on a sustainable path to recovery. To this
end, ahead of the G-7 ministerial in Canada earlier this month, Secretary Geithner announced
that the United States is seeking commitments by donors to relieve Haiti's debt to the IDB, the
International Fund for Agricultural Development (IFAD) and the International Development
Association (IDA) in a manner that provides direct and immediate grant support to Haiti. In
making this announcement, Secretary Gcithner recognized the leadership in Congress, including
among the members of this committee, in calling for debt relief for Haiti. At the G-7 meetings,
the Secretary was able to work with his colleagues and secure agreement that Haiti's recovery
should not be burdened by debt to multilateral institutions.

We must not only cancel Haiti's debt, we must do so in the right way. We believe it is crucial
that support for Haiti debt relief not subtract other donor resources that otherwise could have
been made available for urgent reconstruction and recovery priorities. In addition, the benefits
of debt relief must be available to Ilaiti now, not slowly materialize over a long time horizon.

With these considerations in mind, Treasury has developed an innovative proposal for achieving
the full cancellation of Haiti's multilateral debts that augments resources available for Haiti's
recovery. First, we propose transforming the funds provided for debt relief into grant resources
for Haiti. Second, we propose converting existing undisbursed loans into grants to guard against
adding to debt. Separately, we are also pressing, in the context of on-going negotiations related
to the IDB's general capital increase (GCI), for a commitment by the IDB to transfer a portion of
its annual net income to finance projects in Haiti. The Treasury proposal is designed to generate
resources in both the short and longer term. The proposal therefore attempts to accomplish three
critical objectives:

It creates a substantial pool ofupfront grant resources;
It mobilizes a long-term, continuous stream of grant resources; and
It, through continued negotiations, works to ensure that the U.S. contribution
leverages the maximum amount of multilateral resources.

To be sure, there will be a U.S.-component to addressing the cost of providing debt relief for
Haiti. And our hope is that we can build on strong, bi-partisan support for Haiti to translate debt

relief operations into new resources that tile government of Haiti can apply towards the country's
urgent reconstruction and development priorities. We look forward to working with you and
your staffon this proposed approach in the days ahead.

Treasutw Presence on the Ground

In addition to debt relief efforts, Treasury promptly redirected significant human resources to
give high priority to Haiti. We were able to respond rapidly to the tragedy with the deployment
of on-the-ground support focused on enhancing human capital that is, working with the
government of Haiti to strengthen budgetary, tax, and financial management. We now have a
temporary senior Treasury representative in Port au Prince. And we sent two seasoned technical
assistance advisors to help the Central Bank and the Finance Ministry. Our ability to provide
resident and intermittent technical advisors quickly is one of Treasury's specific strengths. We
leverage skilled and timely assistance from a small resource base.

The first goal four technical assistance advisors upon arriving in Haiti was to assess the impact
of the earthquake on the government's ability to carry out its normal economic functions,
including payment of government salaries, implementation of the budget, and ensuring financial
system stability. Their next step was to discuss with Central Bank and Finance Ministry officials
the assistance that they could provide in the medium term. Based on these discussions, our team
has identified several priority areas, the most critical of which are improving the taxation
structure, enhancing debt management and issuance capabilities, and enhancing the stability of
the insurance and microfinance sectors. Work is already underway, for example, to support the
recovery of data and systems housed at the government of Haiti's Directorate General of
Taxation (DGI), the equivalent of our IRS. We hope to augment our technical assistance
footprint to focus on these areas going forward in order to be able to sustain the effort to help
Haiti build capacity to address these challenges.

Since his arrival, our senior Treasury representative has worked on a broad array of financial and
fiscal challenges: facilitating the flow of remittances, restarting the payments system, helping to
recover the government revenue system, and providing support in crafting Treasury's debt relief
proposal. He is also supporting the U.S. Ambassador and advising the Haitian authorities in
formulating their reconstruction and development strategy. He will continue to provide
assistance in areas where Treasury has a core competency and assist in the deployment of future
technical assistance.

Reconstruction Architecture

Another principal duty of our senior representative is to represent the United States, with others,
in the post-disaster needs assessment (PDNA), led by the World Bank, Inter-American
Development Bank, United Nations, and European Commission. This need assessment, to be
competed in mid-March will be fundamental to ensuring that we understand the economic needs
for reconstruction and transition. It will provide the cost figures that will underpin donor burden
sharing and pledging.

We must ensure that the needs assessment envisions a post-earthquake Haiti stronger, more
resilient, and more prosperous than pre-earthquake Haiti and focuses on job creation and
recovery of the productive sector to foster economic growth. Following the completion of the
needs assessment, a high-level donor conference will be held in New York in late March.
Treasury is working closely with our State colleagues on the contours of the needs assessment to
ensure it is an effective instrument for defining the use of donor assistance for the most effective

Regarding the financing of reconstruction activities, Treasury anticipates that a multi-donor trust
fund (MDTF) may be able to play a critical role in this effort and in filling the balance-of-
payments and fiscal gaps I mentioned earlier. Together with our colleagues at the international
financial institutions, we are contemplating a model that builds on the lessons learned from the
2004 tsunami in Acch: a single facility with a steering committee of donors guided by a
government-led national development authority that sets priorities and provides coordination.
We are working with the international financial institutions to establish such a fund, which most
likely would be administered by the World Bank with a strong project implementation role for
the IDB.


In summary, under the strong leadership of the President, the U.S. government has mobilized to
help Haiti weather the immediate aftermath of the devastating earthquake. We must now
effectively manage the transition from the emergency and immediate recovery phases to the
reconstruction and development phase. In close collaboration and coordination with the Haitian
government, its people, our international partners, and the rest of our government, Treasury is
resolved to play an active role in helping Haiti build an economy and financial system that meets
the needs and aspirations of the Haitian people.

Haiti Debt Relief

Testimony of Melinda St. Louis
Deputy Director, Jubilee USA Network

Before the Subcommittee on International Monetary Policy and Trade
of the Committee on Financial Services
U.S. House of Representatives

March 4, 2010

I'd like to thank Chairman Meeks and Ranking Member Miller and all the members of
the Subcommittee for the opportunity to discuss the critical issue of debt relief for Haiti
today, and also to thank especially Representative Waters who has been a long-time
champion of debt cancellation for Haiti and for impoverished countries around the world.

My name is Melinda St. Louis, and I am pleased to represent the Jubilee USA Network,
an alliance of more than 75 religious denominations, faith-based organizations,
development agencies, and labor, environment and community organizations working to
generate the political will for more responsible lending and cancellation of unjust debts
to fight poverty in Africa, Asia, and Latin America. Founded in 1997, Jubilee USA is the
US arm of the global Jubilee debt cancellation movement. We are grateful for this
committee's leadership in addressing debt relief for Haiti and for many of its members'
long-time support for the campaign for debt cancellation for Haiti and other
impoverished countries.

Like all of you, I have watched in horror the images of the aftermath of the 7.1
earthquake that devastated Haiti on January 12. The scope of the disaster is hard even
to comprehend one in 50 Haitians dead, millions homeless, and all this in a country
where, before the earthquake, nearly 80 percent of the population lived in poverty. The
international community has responded with generosity and solidarity, from
governments to ordinary individuals the world over who have given what they could
toward the rescue and recovery efforts. A study by the Inter-American Development
Bank' estimates that the earthquake damage is at least $14 billion.It is indisputable that
massive aid will be needed for the foreseeable future to help Haiti tackle the immense
challenges to recover and rebuild.

A critical first step is 100% debt cancellation of all of Haiti's remaining debt to
international institutions, both in practical terms and as a matter of justice. From a
practical standpoint, as Secretary of State Clinton stated after her visit to Haiti in the
days following the earthquake, "it's just unrealistic to think that Haiti would ever, in the

1 Eduardo Cavallo, Andrew Powell, and Oscar Becerra. Estimating the Direct Economic
Damage of the Earthquake in Haiti, Inter-American Development Bank Working Paper,
February 2010.

far foreseeable future, be able to repay,"2 given the billions of dollars that will be needed
to rebuild. From a moral standpoint, the international community owes Haiti a fresh
start given the legacy of underdevelopment the country has suffered due in part to the
burden of odious and illegitimate debts.

In the months and years ahead, it will be critical to help Haiti rebuild and to ensure that
the country does not fall back into a cycle of unsustainable debt. In addition to the call
for debt cancellation, the Jubilee USA Network is calling for grant not loan support
for Haiti in the wake of this disaster, as well as for the development of new international
frameworks for orderly sovereign debt-workouts and responsible lending and borrowing
to address similar future crises.

Historical Context

A Legacy of Odious and Illegitimate Debt

The origins of Haiti's debt date back to 1804, when the country won independence from
France and abolished slavery. France threatened to reinvade and re-establish slavery,
unless Haiti compensated it for the loss of the "property", including slaves. With French
warships positioned off the coast, Haiti gave in to French demands in 1825, and agreed
to pay 150 million francs (equivalent, with interest, to $21 billion today), financed by a
loan to a designated French bank in return for recognition of Haiti's sovereignty.

This enormous debt equal to fourteen times Haiti's export revenues placed a heavy
burden on the new country. The debt was a primary barrier to Haiti's development. For
almost a century, successive Haitian governments dutifully paid its debt service, being
all too willing to pass the bill onto Haiti's poorest citizens. As late as 1908, 51% of
revenues of coffee went to service the exterior debt, while 47% went to service the
internal debt, leaving 2 percent available for all other expenses.3 In 1915, when U.S.
marines came to occupy Haiti, 80% of custom house revenues were being used to pay
off this debt.4 During this formative period in Haiti's history, the state lacked resources
to develop the educational system, infrastructure, agricultural technology, environmental
protection, or invest in healthcare. The world's first black republic descended into a
spiral of debt and underdevelopment from which it has never recovered. Haiti serviced
this odious debt to France for well over 100 years.

The country became further indebted during the brutal reign of the father/son
dictatorship of Francois "Papa Doc" and Jean-Claude "Baby Doc" Duvalier from 1957 to
1986. For nearly thirty years they spent foreign assistance on fur coats and brutal death

2 "Clinton positive on forgiving Haiti debt", AFP, Washington, January 26, 2010.
3 Gaillard, G-K L'ExpBrience haitienne de la dette ext6rieure. Port-au-Prince: Maison Henri
Deschamps, 1990.
4 Bellegarde-Smith, Patrick. Race, Class and Ideology: Haitian Ideologies for
Underdevelopment, 1806- 1934. New York, N.Y.: American Institute for Marxist Studies, 1982,
p. 15.

squads like the Tontons Macoutes.5 As just one example, in 1980 the IMF made a $22
million loan to Jean Claude Duvalier. Within weeks, $20 million of the total $22 million
was removed from the government's account the IMF recognized that $4 million of
this amount went directly to the Tontons Macoutes, while the remaining $16 million
disappeared into Duvalier's personal accounts.6 These thefts were widely reported, yet
donor countries and international financial institutions continued to make loans to the
Duvaliers during that period. Despite calls from global civil society repudiating these
odious debts, the Haitian people continued to have to service those debts long after the
dictatorship was over. Until last year, Haiti was forced to pay between $60 million and
$80 million per year in debt service, with no distinction made to the 40% of its external
debt that was incurred by the Duvaliers.7

Haiti's Pre-Earthquake Development Challenges

The billions in debt service Haiti has paid to its creditors has come at the expense of
investments in health care, education, and infrastructure, among other essential
investments to ensure development and poverty reduction. The results have been
staggering. Even before the earthquake, more than 70% of the population lived on less
than $2 per day.8 Life expectancy remains low at 61 years9 and HIV/AIDS rates are the
highest in the hemisphere.10 There are only 3 doctors per 10,000 people in Haiti.1 One
in 12 children die before reaching her fifth birthday.12 The maternal mortality rate is the
highest in the hemisphere at 670 per 100,000 births." Only 35 percent of Haitian
children are able to finish elementary school.'4

In addition to its unfortunate legacy of indebtedness and political turmoil, Haiti suffered
recent exogenous shocks that further devastated the economy. In 2008, Haiti suffered
four devastating tropical storms, bringing floods that killed more than 800 people and
caused nearly $1 billion of damage.1 The global spike in prices for fuel and food in
2008, and then the global economic crisis in 2009 hit Haiti and other impoverished
countries hard. Without the means to purchase basic staples such as rice, flour, and
corn that doubled in price, many Haitians driven by extreme hunger resorted to eating

s James Ferguson. Papa Doc, Baby Doc: Haiti and the Duvaliers. Oxford: Basil Blackwell,
6 Ibid.
Eurodad. "Haiti gets $1.2 billion debt cancellation after long wait," July 2, 2009.
8 UNDP Human Development Report 2009, Haiti Country Page.
9 World Bank Data and Statistics, Haiti Country Page, 2008.
1o AIDS Epidemic Update 2009, "Caribbean Fact Sheet." UNAIDS, 2009.
" World Health Organization, "Health Workforce, infrastructure, essential medicines" World
Health Statistics 2009.
12 World Health Organization, "Mortality and Burden of Disease," World Health Statistics 2009.
3 UNFPA Dispatch, "Earthquake in Haiti: UNFPA Concerned Over Critical Situation for
Women." January 13, 2010.
14 Mark Schuller, "Haiti's CCI: The Tail Wagging the Dog?," Haiti Analysis.com. 2007.
15 Joseph Guyler Delva. "Haiti storm damage estimated at $1 billion," Reuters, October 28,

mud pies.'6 Due to the fuel crisis, public transportation became overcrowded because
there simply was not sufficient fuel to power enough vehicles. In one instance, fifteen
people were killed when an overloaded ferry capsized,17 and the closest rescue boat
lacked the gas to respond.

Past conditions imposed on Haiti by the World Bank and IMF had adverse impacts on
poverty reduction in the country, including the imposition of user fees on health care and
education services, at a time when only 35 percent of Haitian children finished primary
school. 18 Prescriptions to drastically reduce tariffs on rice devastated Haiti's domestic
rice farmers, who had been previously self-sufficient. '

Debt Relief: An Effective Tool to Fight Poverty

As it became clear that many the world's poorest nations, like Haiti, had become so
indebted that they simply could not afford to pay their debts without exacerbating
poverty, the global Jubilee debt cancellation movement, of which Jubilee USA is a part,
began to advocate in the 1990s for debt cancellation for impoverished countries. The
international financial institutions responded by creating the Highly Indebted Poor
Countries (HIPC) Initiative in 1996. G8 governments made high level commitments in
support of debt relief through the HIPC Initiative in 1999 and then again through the
Multilateral Debt Relief Initiative (MDRI) in 2005.

Since the creation of the IMF/World Bank HIPC initiative in 1996, more than 35 nations
have now received some form of debt relief, 20 totaling more than $100 billion. 28
nations have received 100 percent cancellation of eligible debt stock. 21 Debt relief has
delivered striking results in the fight against poverty. Total poverty-reducing
expenditures in countries that received debt relief increased from $6.4 billion in 2001 to
an estimated $28.8 billion in 2009, or from six percent to nine percent of GDP on
average.22 For every dollar received in debt relief, African governments have increased
social spending by two dollars.23

Haiti's Debt Relief Process

Despite being the most impoverished country in the western Hemisphere, Haiti was
initially excluded from the HIPC Initiative and MDRI due to a technicality related to its

16 Jonathan Katz. "Poor Haitians Resort to Eating Dirt," Associated Press, January 30, 2008.
" Joseph Guyler Delva. "At least 12 killed as ferry capsizes off Haiti," Reuters, May 12, 2008.
18 Mark Schuller, "Haiti's CCI: The Tail Wagging the Dog?," Haiti Analysis.com. 2007.
9 Oxfam Intemational. "Two-pronged trade attack will destroy poor farmers, warns Oxfam,"
April 11, 2005.
20 IDA and IMF, "Heavily Indebted Poor Countries (HIPC) Initiative and Multilateral Debt Relief
Initiative (MDRI) Status of Implementation," September 15, 2009.
21 List of HIPC Countries on World Bank website.
22 IDA and IMF, September 15, 2009.
23 DATA Report 2007, citing IDA and IMF, "Update on the Assessments and Implementation of
Action Plans to Strengthen Capacity of HIPCs to Track Poverty Reduction Public Spending,"
April 12, 2005.

debt to export ratio.24 At the time Jubilee USA and other civil society organizations
argued that Haiti's exclusion was inappropriate given Haiti's level of poverty. The World
Bank and IMF finally made Haiti eligible for the HIPC Initiative in 2006. But the delay
meant that Haiti waited for debt relief longer than other poor countries in the region such
as Nicaragua, Honduras, and Bolivia.

Once a country is eligible for the HIPC Initiative, the country must demonstrate a track
record of macroeconomic stability, prepare an Interim Poverty Reduction Strategy
Paper (PRSP), and clear any outstanding arrears, in order to reach what is called the
"decision point". Decision point countries receive a limited amount of debt relief while
they work toward "completion point". Countries then must maintain macroeconomic
stability, as proscribed through an IMF Extended Credit Facility (formally the Poverty
Reduction Growth Facility) program, carry out key structural and social reforms as
agreed upon at the decision point, and implement a PRSP satisfactorily for one year, in
order to reach the HIPC "completion point," and receive 100% cancellation of eligible
debt stock.

Jubilee USA and our partners-advocated strongly for Haiti to reach "completion point"
under the HIPC Initiative, which was delayed several times, due to the numerous and
onerous conditions placed on the debt relief by the World Bank and IMF.

Conditions required for debt relief included selling off of government-owned businesses
such as the power, water, and phone services, as well as the airport administration. 25
The privatization of such services meant a major loss of revenue-generating activities
for the government, an influx in foreign-owned companies, and accelerated capital flight.
As recent as Haiti's current Extended Credit Facility loan with the IMF that spanned the
period of exogenous shocks of 2008 and 2009, requirements included raising prices for
electricity, freezing public sector wages except for minimum wage employees, and
keeping inflation as low as possible. In addition to the delay in receiving relief, the
required focus on macroeconomic stability under the IMF's program may have had a
negative impact on Haiti's economic growth and employment, the two macroeconomic
indicators that most contribute to poverty reduction.

To assist Haiti in achieving needed debt relief, Members of Congress began advocating
for quick progression towards "completion point". On February 28, 2008, 54 members of
Congress signed a letter to then-Treasury Secretary Paulson urging that debt
cancellation for Haiti be expedited. On April 16, 2008, the Jubilee Act (HR 2634), which
included an amendment in support of full debt cancellation for Haiti, passed on the floor
of the House with a strong bipartisan majority. When Haiti's progress through HIPC was
further delayed due to natural disasters, economic shocks, political developments, and

24 Mark Weisbrot and Luis Sandoval, "Debt Cancellation for Haiti: No Reason for Further
Delays." CEPR, December, 2007.
25 International Monetary Fund. "Haiti: Selected Issues," 2002.
6 Analysis of IMF loan documents by ActionAid staff, January 2010.
27 Mark Weisbrot and Luis Sandoval. Debt Cancellation for Haiti: No Reason for Further Delays,
Center for Economic and Policy Research, December 2007.

a number of conditions from the IMF, on February 29, 2009, 72 members of Congress
sent a letter to World Bank President Robert Zoellick, calling for immediate cancellation
of debt owed to the Bank.

In April 2009, Secretary of State Clinton announced that the US would pay Haiti's debt
service payments to the World Bank and the Inter-American Development Bank, up to
$20 million, an important step to finally relieve Haiti of the burden of its debts.

Finally, on June 30, 2009, the World Bank and IMF announced that Haiti had reached
"completion point," and cancelled 100% of the debt to those institutions, incurred before
the cutoff date of 2003.28 As is customary when countries reach completion point, the
Paris Club creditor countries and other international financial institutions, including the
IDB, agreed to cancel their debts to Haiti as well. This amounted to $1.2 billion in debt
cancellation. The international advocacy community celebrated this important step -
which reduced Haiti's debt service from upwards of $50 million to $20 million per year
(of which a large portion would be covered by the U.S. debt service plan).
Haiti's Current Debt Burden

So if Haiti's debts were cancelled in June 2009, wasn't that the end of the story?
Unfortunately not.

Haiti has taken out loans since the end of 2003, the cutoff date for debt relief through
HIPC and MDRI. Therefore, despite the debt relief provided as of last June, when the
earthquake hit, Haiti still owed $1.05 billion to external creditors:

$709 million were in debts to the following multilateral financial institutions:

$447 million to the Inter-American Development Bank (IDB)

$165 million to the IMF,

$39 million to the World Bank, and

$58 million to the International Fund for Agricultural Development (IFAD)29.

In addition, Haiti owed $295 million to Venezuela30 and $92 million to Taiwan.31

Since Paris Club creditors, including the United States, had not provided loans to Haiti
after 2004, Haiti did not hold any outstanding debt to Paris Club members.

28 International Monetary Fund and World Bank, "Haiti: Enhanced Initiative for Heavily Indebted
Poor Countries Completion Point Document." September, 2009.
29 Information on Haiti's multlilateral debt provided by U.S. Treasury officials in January 2010.
30 Reported in the press on January 26, 2010.
1 International Monetary Fund and World Bank, "Haiti: Enhanced Initiative for Heavily Indebted
Poor Countries Completion Point Document." September, 2009.

Debt Incurred After the Earthquake

In the days following the earthquake, the IMF announced it intended to provide Haiti
with a $100 million in emergency assistance through its Extended Credit Facility -
basically an extension of its previous $165 million loan.

Jubilee USA and many allied organizations reacted with deep concern at this near
doubling of Haiti's debt to the IMF, urging the institution not to add to Haiti's debt burden
and not to apply the conditions normally placed on IMF loans. In an interview on
January 20, IMF Managing Director Dominique Strauss-Kahn asserted that the IMF's
intent was to turn the new loan into a grant and cancel the rest of Haiti's debt to the
institution.32 Nevertheless, on January 27 the IMF board approved the $102 million
loan, without mention of debt cancellation.33

Mounting Pressure for Debt Relief

Following the earthquake, Jubilee USA and partners swiftly issued a call for full debt
cancellation. On January 26, more than 80 U.S. faith, labor, and human rights
organizations representing more than 30 million Americans sent a letter to Treasury
Secretary Timothy Geithner urging him to support full debt cancellation for Haiti and to
make grants, rather than loans, when providing relief and assistance. Ninety-four
members of Congress, led by Representatives Maxine Waters (D-CA) and Ileana Ros-
Lehtinen (R-FL) sent a similar letter to Secretary Geithner prior to a meeting of the
Group of Seven Finance Ministers in Canada. Bipartisan bills calling for debt
cancellation for Haiti were introduced in both houses of Congress-S 2961 introduced on
January 28 by Senators Dodd and Lugar and HR 4573 introduced on February 2 by
Representatives Waters, Ros-Lehtinen and 28 others.

More than 400,000 petitions, organized by ONE, Avaaz, Jubilee USA and Oxfam were
delivered to the G7 Finance Ministers meeting in Iqaluit, Canada on February 6.

These successful advocacy efforts by civil society as well as by Congress led officials
within the international financial institutions as well as shareholder governments to
respond. In addition to IMF Managing Director's comments in support of debt relief on
January 20, 4 the World Bank announced a debt service moratorium for five years and
said it would consider debt cancellation. 35 After IDB President Roberto Moreno's visit to
Haiti on January 18, the IDB stated that its Board of Governors may consider debt

32 "IMF Chief Calls for 'Marshall Plan' for Shattered Haiti, IMF Survey Magazine On-line,
January 20, 2010.
33 "IMF Executive Board Approves US $114 Million in Aid to Haiti," International Monetary Fund
Press Release No. 10/17, January 27, 2010.
S"IMF Chief Calls for 'Marshall Plan' for Shattered Haiti," IMF Survey Magazine On-line,
January 20, 2010.
35 "World Bank Statement on Haiti Debt," Press Release No: 2010/236/LAC, January 21, 2010.

relief.36 Because these institutions cannot provide debt cancellation without the support
of their Boards, having the support of the United States government as well as other
large shareholder member governments is critical.

Secretary Geithner's February 5 announcement in support of debt relief for Haiti, where
he plainly stated "Today, we are voicing our support for what Haiti needs and
deserves-comprehensive multilateral debt relief,"37 helped pave the way for a
commitment by the G7 Finance Ministers gathered in Canada on February 6 to support
full debt cancellation for Haiti. This high level commitment from these major
shareholders of the multilateral institutions was indeed a victory for the Haitian people.

The Path Ahead: Policy Recommendations

Jubilee USA and our partners around the globe celebrated the G7's announcement as a
critical step in achieving full debt cancellation and assisting in the country's long-term
recovery. As the devastation in Haiti begins to fade from the public spotlight, we will
need to watch closely how this commitment is implemented.

1. Move quickly to negotiate debt cancellation

As the reality on the ground in Haiti will remain critical for months and even years to
come, it is extremely important that we ensure that all the international financial
institutions (IMF, World Bank, IDB and IFAD) move quickly to cancel Haiti's debt. The
U.S. government holds 16.4 percent of voting shares at the World Bank's International
Bank for Reconstruction and Development, 11.3 percent at the World Bank's
International Development Association, 16.8 percent at the IMF, and 30 percent at the
IDB. Therefore, the U.S. representatives to these institutions must aggressively pursue
Secretary Geithner's February 5 commitment, building support with other shareholders
to ensure full debt cancellation without onerous conditions.

The IDB's Board of Governors will have the opportunity to negotiate debt cancellation
for Haiti at their Annual Meeting of the Board of Governors to be held in Cancun,
Mexico, March 19-23. The IMF and World Bank debt cancellation should be negotiated
by the time of the upcoming joint spring meetings of the World Bank and IMF to be held
in Washington April 24-25.

Because debt relief will provide just one piece of the necessary assistance to the
country, this debt relief must be in addition to other grant assistance for Haiti provided
by donor countries and institutions. Therefore, where possible, institutions should use
internal resources to cover the very modest reduction in their income from Haiti's debt
relief. As Senators Dodd and Lugar suggest in their Haiti Recovery Act (S 2961), the
windfall profits that the IMF has received from the ongoing sale of 12,965,649 ounces of
gold acquired since the second Amendment of the Fund's Article of Agreement could be

36 "IDB President visits Haiti, calls for expanded aid," Inter-American Development Bank.
January 18, 2010.
37 "Secretary Geithner, "Voices Support for International Debt Relief for Haiti, Financing of
Recovery Through Grants," U.S. Department of the Treasury. February 5, 2010.

allocated to debt stock and debt service relief for Haiti.38 The U.S. Treasury should
work with its colleagues in the World Bank and IMF to pursue this suggestion on gold
sales as well as other avenues to redirect internal resources toward debt relief for Haiti
and other poor countries.

2. Provide Haiti Support as Grants, Not Loans

Another necessary, critical piece for Haiti's recovery will be that additional assistance be
in the form of grants, rather than loans. The Haitian people have historically carried
debilitating debt burdens incurred through no fault of their own. In addition to the debts
incurred during periods of dictatorship, Haiti's debt problem was compounded by the
multiple natural disasters and food and fuel crises that wracked the country in recent
years. The United Nations Conference on Trade and Development (UNCTAD) has
found that natural disasters add on average 24 percentage points to the debt-to-GDP
ratio for low-income countries in the three years following the event. UNCTAD
concluded that "shocks on such a scale can lead to a vicious cycle of economic
distress, more external borrowing, burdensome debt servicing, and insufficient
investment to mitigate future sockss."9

Given the immense challenges facing Haiti before the earthquake, the international
community should provide Haiti with a fresh start by ensuring that all aid is provided as
non-debt-creating assistance. Secretary Geithner expressed support for this in his
February 5 statement, and therefore the U.S. should play a leadership role in ensuring
that the $102 million IMF loan approved on January 27 is cancelled and that during the
Haiti donor's conference on March 31, any commitments of assistance should be made
solely as grants until Haiti is strongly on a path to responsible borrowing.

3. Broader solutions

While the HIPC Initiative and MDRI have provided 28 countries including Haiti with
needed debt relief, Haiti's debt situation points to the limitations of current mechanisms
to deal with sovereign debt crises. Some of these limitations include: the often lengthy
delays in providing relief due to the onerous conditions that accompany these initiatives;
the voluntary nature of the relief; and the inability to respond to debt challenges that
arise from external shocks such as Haiti's recent earthquake. Thus, in the wake of the
earthquake, debt relief, and how it will be financed, must be negotiated separately, on
an ad hoc basis, through each creditor institution or government. This can be both
inefficient and inequitable. Furthermore, it does not address broader questions of
responsible lending and borrowing to avoid this type of crisis in the future.

a. A New Mechanism to Respond to Shocks

In a brief released after the earthquake, UNCTAD suggested that the international
community should consider developing a mechanism that would reduce the debt burden

38 IMF, "Questions and Answers: IMF Gold Sales," February 17, 2010.
3 UNCTAD. "Haiti's recovery should start with cancelling its debt," UNCTAD Policy Briefs, No.
11, January 2010.

of disaster-stricken countries. They suggest that an integrated approach could include
the following: a multilateral global disaster fund that would provide predictable financing
without the heavy policy conditionalities often attached to multilateral loans; an
automatic mechanism to extend a moratorium on debt servicing with a meeting of all
creditors to coordinate the process in a single operation; and built-in natural disaster
insurance clauses in loan agreements by international financial institutions.40

The Center for Global Development has recommended a similar contingency facility of
limited duration, based at an appropriate international institution, to provide financing to
reduce debt burdens in the case of exogenous shocks to the economies of low income
countries beyond their control. This would include natural disasters and sharp spikes in
commodity prices.41 We believe that, moving forward, all of these ideas are interesting
and should be investigated and considered by the U.S. government.

b. Towards Fair and Transparent Arbitration

More broadly, given that Haiti continued to face high debt distress even after HIPC debt
relief, there clearly needs to be another way for fair and transparent arbitration of
sovereign debt restructuring outside of the HIPC framework. Both sovereign debtors
and their creditors would benefit from means and procedures to which a country could
resort if balance of payments issues arise. Similar to a bankruptcy proceeding in the
national context, a sovereign debt workout mechanism at the international level is
needed to allow both creditors and debtors the opportunity to seek an orderly workout to
avoid chaotic defaults. Civil society organizations and legal experts have long called for
the establishment of an international insolvency procedure along the lines of ad-hoc
arbitration mechanisms or in the form of a standing insolvency court under the
administration of a specialized UN body. This call was strongly echoed in the findings of
the UN commission chaired by Nobel Laureate Joe Stiglitz and enjoys the support of
developing and developed country governments.

c. Toward Responsible Lending and Borrowing

As previously discussed, the legacy of odious, illegitimate and unsustainable debts has
forced the Haitian people to divert resources away from health care, education and
infrastructure, contributing to the country's underdevelopment and vulnerability to
natural disasters. While debt relief is important, equally critical are needed structural
reforms to change the practices of lending and borrowing globally to ensure these
practices are not repeated.

40UNCTAD. "Haiti's recovery should start with cancelling its debt," UNCTAD Policy Briefs, No.
11, January 2010.
4' Nancy Birdsall and Milan Vaishnav "Getting to Home Plate: Why Smarter Debt Relief Matters
for the Millennium Development Goals", Comments for the Helsinki Process on Globalisation
and Democracy, March 26-28, 2004.
42 Joseph Stigliz (Chair). Report of the Commission of Experts of the President of the United
Nations General Assembly on Reforms of the International Monetary and Financial System,
United Nations, September 21, 2009, p. 123.

As the United States and other world leaders undertake efforts to re-regulate global
finance in the wake of the global economic crisis, a global framework for responsible
lending and borrowing for sovereign countries should be a key element of that reform.
Such a framework should include mutually agreed upon and binding terms for
responsible finance, including enhanced transparency, attention to human rights, and
consumer protection.

The U.S. government could begin by playing a constructive role in a new initiative on
responsible lending and borrowing recently launched by the United Nations Conference
on Trade and Development (UNCTAD).43 UNCTAD's major three-year project will
develop a set of guidelines on responsible lending and borrowing covering new
lending/borrowing as well as evaluation of existing debt. They have put together a
commission of experts from the legal field, academia, governments, and NGOs to draft
the guidelines and have established an "advisory group" of governments who will
ultimately negotiate and approve a set of guidelines for responsible lending and


There is no question that the road ahead for Haiti will be an extremely difficult one and
that our Haitian sisters and brothers will need the solidarity of the international
community as they struggle to recover and rebuild. Immediate and full debt
cancellation, as well as massive new grant assistance, are critical pieces of that
solidarity. The 75 member organizations of the Jubilee USA Network have been very
gratified by the positive response so far from the U.S. government and G7 leaders with
respect to debt cancellation for Haiti. We look forward to working with members of
Congress and officials within the administration to ensure satisfactory implementation of
these promises, as well as to address broader issues related to ensuring that Haiti and
other impoverished countries can break the cycle of unsustainable indebtedness.

In addition to supporting debt cancellation for Haiti through HR 4793, we urge Congress
to move toward quick passage of The Jubilee Act for Responsible Lending and
Expanded Debt Cancellation (HR 4405), which begins to address the broader issues
previously mentioned. We must avoid the mistakes of the past and ensure a brighter
future for Haiti and other impoverished countries.

Thank you for your kind attention.

43 UNCTAD. "UNCTAD to launch project on responsible sovereign lending and borrowing," from
UNCTAD website.

Citizens' Petition for Haiti
To be presented to Members of the United States Congress and President Barack Obama
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Citizens' Petition for Haiti
To be presented to Members of the United States Congress and President Barack Obama
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Citizens' Petition for Haiti
To be presented to Members of the United States Congress and President Barack Obama
Petition summary and background A signed petition stating that as Haiti rebuilds from the temble earthquake, the international community must work to secure the immediate cancellation
of Haiti's debt and ensure that any emergency earthquake assistance is provided in the form of grants, not debt-incurnng loans.
Action petitioned for We, the undersigned, are concerned citizens who urge our leaders to act now, demanding the immediate cancellation of the international debt of Haiti
and all subsequent aid for Haiti to be presented in the form of grant and not loans.

Printed Name Signature ity, State, Zip Code Comment Date

-f& t 4 775'/ /y^ W Ty-tz AA- 2// //o0
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Citizens' Petition for Haiti
To be presented to Members of the United States Congress and President Barack Obama
Petition summary and background A signed petition stating that as Haiti rebuilds from the terrible earthquake, the international community must work to secure the immediate cancellaton
of Haiti's debt and ensure that any emergency earthquake assistance is provided in the form of grants, not debt-incurring loans.
Action petitioned for We, the undersigned, are concerned citizens who urge our leaders to act now, demanding the Immediate cancellation of the international debt of Haiti
and all subsequent aid for Haiti to be presented in the form of grant and not loans.
Printed Name Signature City, State, Zip Code Comment Date

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PJan '7)r __S T T 770-7 If_ l0

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Citizens' Petition for Haiti
To be presented to Members of the United States Congress and President Barjd- Obam3a
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