In response to the wave of criticism, the IMF has just issued a statement saying that they will try to turn the $100-million loan to Haiti into a grant. This is unprecedented in my experience and shows that public pressure in moments of disaster can seriously subvert shock doctrine tactics. They are also now saying that they will not put conditions on the emergency loan—another popular victory, since this is not what they were saying last week. Of course people have to keep up the pressure to make sure Haiti's debts really are cancelled as the IMF is now predicting they will be. Something to hold them to!

Here is the IMF's statement:

"IMF Chief Calls for 'Marshall Plan' for Shattered Haiti"
January 20, 2010

The head of the IMF has called for a major multilateral aid plan to rebuild the shattered Caribbean island of Haiti where the fight is still on to save lives after a devastating earthquake.

"My belief is that Haiti—which has been incredibly hit by different things—the food and fuel prices crisis, then the hurricane, then the earthquake—needs something that is big. Not only a piecemeal approach, but something which is much bigger to deal with the reconstruction of the country: some kind of a Marshall Plan that we need now to implement for Haiti," said Dominique Strauss-Kahn in an interview in Hong Kong.

Haitian officials say the quake has killed up to 200,000 people, injured some 250,000, and made 1.5 million homeless.

The IMF has promised an interest-free loan of $100 million in initial emergency funds to provide much-needed cash quickly so that the government can support essential activities and finance urgent imports.

Strauss-Kahn, on a visit to Asia, told CNN the top priority now was to save lives. The IMF could disburse funds rapidly to get resources to the country. "The urgency, today, is to save the people. The urgency, in some weeks, will be the reconstruction."

Debt relief for Haiti

"The most important thing is that the IMF is now working with all donors to try to delete all the Haitian debt, including our new loan. If we succeed—and I'm sure we will succeed—even this loan will turn out to be finally a grant, because all the debt will have been deleted. And that's the very important thing for Haiti now," the Managing Director added.

The IMF and other financial organizations delivered about $1.2 billion of debt relief to Haiti in June 2009. That was a major step. The World Bank and Inter-American Development Bank have in the past six months delivered almost $900 million in additional debt relief under the Multilateral Debt Relief Initiative. Other institutions are considering further relief.

Explaining why the IMF was providing a loan to Haiti rather than an outright grant, Strauss-Kahn said that the IMF wanted to act quickly and it has no immediate way to make a grant. "And so, the question was: were we going to do nothing—or give a loan? We decided to give a loan—but a zero-interest loan, with a long grace period."

Asked how resources should be prioritized in order to rebuild the country, Strauss-Kahn said: "This cannot be done just by some simple 'rule of thumb.' We need to go into Haiti, we need to work with the government to see exactly how—from their point of view and from our point of view—things can be done. To do that, we need to take some time."

Getting services functioning

Separately, Nicolas Eyzaguirre, Director of the IMF’s Western Hemisphere Department, said most of the island's productive capacity was located around Port-au-Prince and was destroyed in the earthquake.

"We need to urgently help Haiti to get its economy functioning again. All state and government institutions were badly damaged. Banks were destroyed and the payments system shut down. The Fund, in close coordination with other donors, is assisting the authorities in getting cash to circulate in the economy so people can buy food, and civil servants can receive their salaries. Banks will reopen shortly but the payments system is not fully operational yet."

Eyzaguirre said in an interview with IMF Survey online that some good news was that some transfer houses that receive remittances from the Haitian diaspora have reopened. These remittances will help many desperate families survive the disaster.

He said that in the coming weeks and months, the Fund will participate in its areas of expertise in the reconstruction plan that will be coordinated across the international community. A first donors conference is scheduled to take place in Montreal next week, in preparation for a larger conference in the spring.

Scale of the disaster

Eyzaguirre, making an initial assessment of the scale of the disaster, said the Fund had only very preliminary numbers. "We compare this event to the hurricanes in 2008, which were estimated to have cost around 15 percent of GDP (equivalent to $900 million). The impact of this earthquake could be much larger, but there’s still a lot of uncertainty."