IDB approves $176.9 million in soft loans for Haiti

Inter-American Development Bank press release, 13 November 2003

Resources for programs to repair basic infrastructure, foster community development and boost agricultural output

The Inter-American Development Bank today announced the approval of three soft loans for a total of $176.9 million to Haiti to support a basic infrastructure rehabilitation program, a local development program for poor communities and a project to boost agricultural output.

These are the first new operations for Haiti since IDB lending resumed in July, when the Board of Executive Directors approved the reformulation of a $50 million fast-disbursing sector loan. The Bank has also streamlined four older loans for $145.9 million for health, education, rural roads and water programs.

The new loans reflect the IDB’s strategy of supporting economic recovery, rural development and poverty reduction in Haiti, the poorest nation in the Western Hemisphere. Nearly 80 percent of the country’s rural population is indigent. Its basic infrastructure has deteriorated to critical levels, hindering private sector investments and activities.

The three loans were granted for 40 years, with a 10-year grace period. Annual interest rates will be 1 percent during the first decade and 2 percent thereafter.

Basic economic infrastructure

A $70 million IDB loan will help finance the rehabilitation of basic infrastructure in Haiti, with the goal of stimulating economic recovery.

The pro gram will support the establishment of a transparent and flexible mechanism to provide resources for rehabilitation projects in sectors such as transport, electricity, hydraulic infrastructure, rural development, drinking water and sewerage, and solid waste management.

The fund will finance medium-size projects costing between $200,000 and $1.5 million to repair roads and bridges, modernize ports and airports, rehabilitate public markets and abattoirs, and build irrigation systems and rural storage facilities, among other projects with a high impact in terms of local economic activity.

In order to support the sustainability of investments and the employment of local labor, the program will give preference to projects involving the organized participation of residents, users and beneficiaries, as well as local governments’ contributions towards the construction, operation and maintenance of infrastructure.

The program will also finance a series of administrative, auditing and monitoring activities aimed to ensure the transparent and efficient management of resources, the technical quality of project design and implementation and the evaluation of the operation’s performance and results.

Local development program

A $65 million IDB loan will support a local development program aimed at expanding access to basic social services and improving the income-generating capacity of poor communities and members of the most vulnerable groups of Haiti’s population.

The Economic and Social Assistance Fund (FAES), an autonomous state agency that finances small social and productive projects in poor and isolated communities, will carry out the program. FAES, which has been supported by the IDB, the World Bank, the United Nations and bilateral donors, is widely recognized for its ability to steer resources towards poverty-reduction projects.

One of the program’s distinctive components will help improve the communities’ capacity to plan and manage projects. The program will support the formulation of community development plans using a practical and participative methodology that has been validated through various experiences in Haiti.

Another component will finance social development and assistance projects for poor families and people in vulnerable social groups in areas such as education, water and sanitation, basic health care, nutrition, and programs for at-risk children and adolescents.

Another component will support productive development projects to expand and diversify the sources of income in poor rural and periurban communities. The projects, which will largely stem from the communities’ own development plans, will emphasize sustainable agriculture, environmental management and the technical and managerial capacity of local productive organizations.

Boosting agricultural output

A $41.9 million IDB loan will support a program to increase and diversify agricultural output in the Artibonite Valley, Haiti’s main rice-growing region, through investments in its irrigation and drainage system.

In 1998 Hurricane Georges ravaged the valley, home to nearly 285,000 people living in some 700 villages. The floods triggered by the hurricane damaged its irrigation infrastructure. Several studies suggest that the Artibonite Valley’s basic conditions offer opportunities to achieve short-term improvement and increase and diversify its production of high-value vegetables.

The program is expected to help raise the income of tens of thousands of families by boosting agricultural output, which in turn will stimulate the demand for farming supplies and services such as post-harvest produce handling, processing and transportation. An increase in the production of exportable vegetables could also generate more hard currency income for Haiti.

Resources will be provided to bolster land tenure security by updating and expanding the area’s cadastre. Based on that information, water user groups will be formed in order to collect user fees for the irrigation services.

The program, which will be carried out by the Agriculture, Natural Resources and Rural Development Ministry, will also provide financing for the agencies that manage water resources in the Artibonite Valley.