The big three that need to forgive Haiti's debt

Today, the Paris Club -- an informal group of finance officials from the 19 richest nations, who push for low-income country debt restructuring and relief -- officially called for the cancellation of Haiti's debt.

Earthquake aside, such a prominent call for debt relief for the Caribbean nation is overdue. Haiti is a very poor country. It is also a very indebted one, part of a legacy extending back to the 1820s. Then, France required the former slave colony to pay something like $20 billion in today's dollars for its freedom. The country has struggled ever since, with former dictator Jean-Claude Duvalier raiding the country's accounts and amplifying what it owes.

The debt hurts Haiti, horribly. As of last year, Haiti was paying $50 million a year just to service its debt, not even to pay down the principal. It owed hundreds of millions -- more than a quarter of its GDP.

Last summer, two groups moved to cancel Haiti's debts given improved governance and economic growth under President Rene Preval. In June, an International Monetary Fund program, the Highly Indebted Poor Countries (HIPC) initiative, announced the forgiveness of $1.2 billion of Haiti's $1.9 billion in debt. A month later, the Paris Club followed suit, cancelling $214 million further, with Canada, Belgium, Denmark, France, Germany, Italy, the Netherlands, Spain, Britain, and the United States forgiving what Haiti owed them.

That still left the country -- which has a GDP per capita of around $1,300, the same as Bangladesh -- more than $700 million in the red. Experts have estimated that the earthquake -- which killed an estimated 50,000 and leveled the population, government, and business center of Port-au-Prince -- has wiped away at least 15 percent of Haiti's GDP.

France, under Finance Minister Christine Lagarde, who heads the Paris Club, has led the push for other governments and entities to make Haiti debt-free. This means speeding up the cancellation of Haiti's debts, a process which can take years even when countries and banks have committed to clearing the books. More importantly, it means convincing Haiti's main creditors -- the Inter-American Development Bank (IADB) and the governments of Taiwan and Venezuela -- to forgive it.

Haiti owes Venezuela around $167 million and Taiwan $91 million. Ma Ying-jeou, the president of Taiwan, today signaled that the country will forgive the debt. "I have already asked the foreign ministry to conduct the necessary reviews to help Haiti to pass through this difficult time," he said. Thus far, President Hugo Chavez has not addressed the question.

The IADB forgave $511 million in debt last year, still leaving Haiti owing it more than $440 million. The bank this week approved $128 million in grants -- and the board of governors is convening to discuss further debt cancellations.