A Ghana News Agency News Feature By Boakye-Dankwa Boadi
Eureka! Eureka! Eureka! Elated Archimedes is reported to have shouted when he discovered a way to determine the purity of gold by applying the principle of specific gravity. The Minister of Finance and Economic Planning, Mr Yaw Osafo-Maafo went into the same mood when he was informed on Friday that the International Monetary Fund (IMF) had decided to award Ghana the completion point of the Highly Indebted Poor Country's (HIPC) Initiative, a feat that would fetch the country varied financial and monetary relieves.
Mr Osafo-Maafo told Journalists in Accra that the Board of Directors of the International Monetary Fund (IMF) at 1605 hours decided to award Ghana the HIPC completion point.
He said the implications of this status "are many and varied and may be known after the World Bank meeting on Tuesday July 13 to confirm the IMF decision".
The HIPC Initiative allows cash-strapped economies limited loan waivers, which in turn are ploughed back into poverty alleviation programmes.
Ghana applied to join the league of HIPC nations in the New Patriotic Party (NPP) Government's maiden budget in 2001 following projections that Ghana's debt of 224 per cent of exports or 709 per cent of budget revenue was unsustainable.
Ghana's debt at the time of joining HIPC was 6,025.6 million dollars of which 3,947.4 million dollars was owed to multilateral institutions and 1,588.1 million dollars was owed to bilateral creditors.
Ghana at the time had medium term debt of 399.7 million dollars and a short-term debt of 150.0 million dollars.
Mr Osafo-Maafo said, "Ghana is the only country that has achieved completion point in the shortest possible time in the history of the World Bank and International Monetary Fund."
Ghana is expected to rake in a total of about 3.5 billion dollars from this feat, with 1.5 billion dollars coming from the Paris Club Members. The rest would come from the multilateral agencies spread over a 20-year period.
This implies that Ghana would be receiving 100 million dollars a year from her multilateral donors.
Mr Osafo-Maafo, who was flanked by Dr Anthony Osei Akoto, Deputy Minister of Finance and Dr Paul Acquah, Governor of the Bank of Ghana, said: "Ghana has been invited to Paris later this month to finalize the process to enable us finish with the exact agreements with our bilateral donors."
Ghana reached the Decision Point in February 2002. The decision point is the stage at which Paris Club members meet over a members' application and approve certain indicators.
The road to HIPC and back was very bumpy and the new Government of the New Patriotic Party was subjected to real grilling for daring to christen the once upon a time Gold Coast a "Highly Indebted Poor Country".
Both political and civil society organisations poked and fanned the embers of criticism.
The Government decided to go HIPC on Friday March 9, 2001 citing the huge debt trap in which the country found itself.
Mr Osafo-Maafo, who made the announcement in his maiden budget, said: "Debt sustainability analysis carried out on Ghana and our inability otherwise to raise enough revenue from our own resources, or attract external inflow beyond the presently committed levels, His Excellency the President of the Republic of Ghana, has decided that Ghana should take advantage of the HIPC initiative immediately." He said the President had further directed him "to take all steps necessary to ensure that Ghana gets the full benefit under the HIPC initiative."
The Finance Minister said the country spent nine per cent of the Gross Domestic Product (GDP) to service external debts. In addition, 5.3 per cent of Ghana's resources were spent on domestic interest payments. "In cedi terms 3.9 trillion cedis out of a total Government expenditure of 9.9 trillion cedis was spent in debt servicing," he said. Mr Osafo-Maafo said, "the Ministry of Finance will organise a National Economic Dialogue involving all stakeholders and major players in the economy by the end of April 2001 to look at the way forward in respect of the economic management of the nation."
HIPC is a framework designed by the International Monetary Fund (IMF) and the World Bank (WB) to provide special assistance for heavily indebted poor countries that pursue adjustment and reform programmes they support, but for whom traditional debt relief mechanisms are insufficient.
The HIPC entails a co-ordinated action by the international financial community, including multilateral institutions, to reduce to sustainable levels the external debt burden of these countries. There has been a debate on whether the country should accept HIPC or otherwise.
Those against Ghana going HIPC argue that under HIPC, the IMF on behalf of all creditors, forces the beneficiary country to among other things remove all restraints on the movement of capital and subordinate domestic policy priorities to the interest of foreign capital.
The Ghana Trades Union Congress and the Ghana Bar Association are among organisations that have come out strongly against HIPC, the Ghana News Agency reported.
The GNA had reported on March 9 2001 that the Ghana Bar Association (GBA) had added its voice to the call on the Government not to join the highly indebted poor countries (HIPC) initiative proposed by the International Monetary Fund (IMF).
In a statement issued on Friday and signed by its National President, Mr Joseph Ebow Quashie, the GBA said under HIPC, the country would pursue harsh austerity IMF policies and conditionalities for three years before it reached a decision point of qualifying for debt relief. The GBA said debtor countries would also have to abide by these conditionalities for another three years before it qualifies for actual debt reduction.
It said if the country defaulted in meeting the conditionalities the whole programme might be suspended.
It said the projected percentage of debt reduction after the HIPC would be 34 per cent though some countries may enjoy between 10 per cent and 17 per cent.
The GBA noted that the structure within which the HIPC Operates left all power in the hands of the G 7 countries, which controlled the IMF and the World Bank.
It said the HIPC did not really aim at complete debt cancellation, but rather debt reduction to enable the debtor country to maintain sustainable level of debt.
The GBA said the 200 per cent to 250 per cent debt-stock to export-earning ratio and debt service export-earning ratio of 20 per cent to 25 per cent, which constituted the rationale for access to HIPC were not based on any scientific foundation but arbitrary. It said the debt service to export earning ratio of 20 per cent to 25 per cent was not also supported by the history of debt management in the International Financial Market.
The GBA said it considered the 200 per cent to 250 per cent debt-stock to export ratio as high, compared to the 13 per cent debt service ratio imposed on Germany after the First World War.
It said after the Second World War Germany was asked to use 10 per cent of her export earnings to pay her debt but she resisted it, arguing that it was unsustainable and it was eventually reduced to 3.5 per cent.
British repayment to the United States after Second World War was pegged at four per cent of its earnings.
The GBA said it followed, therefore, that the insistence on debt ratio from 20 per cent to 25 per cent for the poorest countries of the world was "burdensome, harsh and onerous".
The GBA noted that by going HIPC the IMF would be dictating the mode of development and the State's direction and control of development would be minimised.
"By accepting HIPC the Government will close the door to devising creative policies and the possibility of change in economic policy," GBA said.
It, therefore, cautioned the Government to be wary in accepting HIPC, adding; "the way forward is not HIPC to individual countries but rather collective approach by the debtor countries of West Africa or Africa as a whole, to face the issue of debt collectively".
The GBA urged the Government to rather tackle the socio-economic problems of this country from the roots and plug economic leakage in the system.
It suggested to the Government to convene a national conference on the HIPC issue before taking any decision.
"What is needed is a moratorium for a reasonable period and not a declaration of bankruptcy. HIPC will slow down long term development," the GBA said.
The Association of Ghana Industries (AGI) through its President, Mr Prince Kofi Kludjeson had a day earlier on Thursday come out against Ghana going HIPC.
The AGI urged the Government to take stock of the human resource and massive foreign exchange capacity of the country, as these could be Ghana's alternative to the Heavily Indebted Poor Countries (HIPC) initiative.
He said "IMF/World Bank poverty alleviation programme is responsible for the increased indebtedness of the country and urged the Government to abolish it and replace it with a private-sector-led wealth creation programme".
Mr Kludjeson was speaking at the last of three symposia organised by the AGI as part of the "Ghana Industrial and Technology Exhibition", dubbed INDUTECH '2001.
He said most of the projects undertaken by the previous government, were under the poverty alleviation programme, which increased the debts of the country through exorbitant consultancy fees, mismanagement and corruption.
He said the example of the developed country was that of a local private sector-led infrastructure development with government support.
"This way the wealth created stays in the country, incomes go up and poverty is automatically catered for."
Mr Kludjeson said Ghana had a large stock of human resource overseas that contributed over 400 million dollars to the foreign exchange flow into the country through the formal sector alone.
He said an equal amount was believed to come from other Ghanaians living abroad who transferred money through the informal sector.
"This amount, which totals over 800 million dollars a year, is twice the revenue this country derives from cocoa annually," he said.
"The kind of houses people build in Ghana and the class of cars they use, are evidence of the fact that there is money in this country." Mr Kludjeson said though the AGI is in the process of coming to terms with the core issues involved in the HIPC initiative, it believed Ghana's debts only make her a heavily indebted country but not poor. "It is widely known that heavily indebted countries are also the masters of debt management," he said. "With the high brains we have in this government and in the private sector, we should be able to manage our debts effectively without joining HIPC."
He said under the previous government, rich people in the country lived in fear of the frustration they would have been subjected to, if they declared their assets and willingness to make heavy investments. He said this, coupled with other government policies and high interest rate on loans, discouraged local private investor initiatives and hindered the growth of several private sector organisations.
"Now we have a new government, which is a friend to the private sector and is willing to encourage local investors to participate in moving the economy forward.
"It is for the government, therefore, to take stock of what private business persons can offer before taking decisions on HIPC."
Under barrage of criticisms the Government kept its cards close to its chest. Mr Osafo-Maafo announced on the same day: "Government cannot take decision on HIPC now."
He said the Government could not make any pronouncement on whether or not to join HIPC before the budget was read the next day, which was a Friday.
He said in a signed statement that this was because of the public interest shown on HIPC and its implications.
The Minister said the delay in the Government's decision is also because the technical team, which was carrying out a study on the matter, had not completed its work.
HIPC has generated a lot of debate in the country with arguments being advanced for and against Ghana joining.
Britain led arguments for Ghana to join while the TUC and some political parties were against the idea, the Ghana News Agency reported.
The few organisations that supported Ghana opting for HIPC included Integrated Social Development Centre (ISODEC), a non-governmental organisation.
It said Ghana should opt for HIPC and must mount a campaign for Structural Adjustment Programmes to be extricated from it.
The campaign would simplify procedures, speed up HIPC and result in deeper and faster debt relief for the country, Mr Charles Abugre, ISODEC Executive Director, said at a press conference in Accra.
The press conference was to state ISODEC position in the current debate on whether or not Ghana should opt for HIPC.
Mr Abugre said Ghanaians could not run away from the fact that "we are highly indebted and extremely poor."
"This is evidenced by figures that show that about 40 per cent of the average Ghanaian family of six cannot afford 7,000 cedis a day to feed and educate their children."
Mr Abugre said: "One of the most encouraging outcomes of the public discussions is the extent to which Ghanaians value their independence and autonomy and abhor external conditionalities.
"This is healthy. Unfortunately,...it is not HIPC per se, which is the source of the conditionalities but the country itself has been a candidate for a host of IMF/World Bank conditionalities."
Mr Abugre emphasised that HIPC would not negatively affect Ghana's credit rating because it was not a default mechanism. Neither was it a rescheduling mechanism nor a debt discounting mechanism.
"It is more or less a buy-back mechanism where bilateral creditors and donors contribute some money and the World Bank some of its profits into a trust fund," he said.
Mr Abugre said there was no evidence that countries like Uganda that had benefited from HIPC I and HIPC II had had their credit ratings reduced.
"Rather, HIPC debt relief, especially if it is front-loaded and deep enough, acts to improve a country's risk assessment."
He said problems related with HIPC included inadequacy of debt relief effort and cumbersome and unnecessary procedures that slowed the procedures.
"We should, therefore, provide positive but critical support to HIPC, underscore in particular the comprehensive approach to debt relief and the culpability of the ifs," Mr Abugre said.
"We should redirect our fire on conditionalities to the IMF, the World Bank, the United States and the G7 (the world's richest countries)," the Executive Director said.
HIPC, an approach to debt relief for poor countries, was established in 1996.
The Political Parties were not left out in the debate. The Convention Peoples Party (CPP) had on Monday March 5 2001 called on the Government to move from over reliance on aid to the mobilisation of internal resources to meet the needs of Ghanaians.
It referred to the debate on whether Ghana should join HIPC initiative and said: "this is the inevitable result of economic mismanagement coupled with prostrate dependence on inflows of external resources." In a statement signed by Dr Abubakar Al-Hassan, National Chairman, to mark the 44th Independence Day celebration, the CPP said many Ghanaians had been impoverished to the extent that they couldnot afford one square meal a day for themselves and their families.
"Education and health services are almost in complete ruin," it said. "Unemployment of all categories is on the rise and our industrial capacity is dwindling by the month."
The CPP said "the collapse of the last vestiges of military rule and the restoration of more credible administration" provided some hope that the legitimate aspirations of Ghanaians would become the guiding post in national political and economic endeavours.
"This, we believe, will lead to the emergence of a strong and prosperous Ghana whose citizens will enjoy the fruits of their labour in peace and freedom."
The CPP, whose predecessors under Osagyefo Dr Kwame Nkrumah led Ghana to independence in 1957, said it was committed to ideals of the independence movement world-wide, and pledged to continue the struggle of Africans against an unjust world economic order "responsible for the poverty and misery on the African continent."
It said Africa is confronted with a bleak future mainly because, in spite of its rich mineral resources, ruling elite of the Continent still acted as "house of niggers for their neo-colonial masters in the metropolitan countries."
The CPP said the debt burden was heavily weighing down Africa and continues to be one of the major obstacles to the development efforts of the people.
"Ghana's huge external debt of about six billion dollars is mainly due to unfair trade practices of the developed world."
It said by 1995, IMF and World Bank loans had almost tripled Africa's debt burden from 70 billion dollars in 1983 to 180 billion dollars, a figure that represented more than the Continent's aggregate net income.
"We cannot accept the situation in which after 20 years of the implementation of the Structural Adjustment Program (SAP), the average African has 10 per cent less food to eat and 18 African nations are classified among the world's poorest 20."
The CPP said it "joins the anti-debt movements in Africa, Europe, Asia, North America and Latin America, to call for the complete cancellation of the debts of developing countries.
"These debts have been repaid several times over and constitute a millstone around our necks."
The CPP said if a fairer international economic system were built in place of the existing one, all the world's peoples could realise their full human potential.
"After all it is generally agreed that the world's resources can cater for the needs of 50 billion people and the population on earth is still under the seven billion mark."
The CPP paid tribute to the pioneers of the independence movement and pledged to fight on until Ghana and Africa were free from "the yoke of exploitation and oppression."
This review is meant to bring to the fore the fact that Ghana's democracy and good governance had come to stay. Both schools of thought were free to express their views unhindered.
The Government stuck to its position and in the end Ghana is the winner. It is with this level of healthy expatiation of views in an unrestrained manner that great nations are built.
Indeed it is at the market place of free expression of views that the best ideas are bought.
The return of President John Agyekum Kufuor from Addis Ababa, where he had attended the African Union Summit, should have been delayed a few hours after the announcement of the award of the HIPC Completion Point for mashed yams and eggs to be prepared for him to eat just as he set foot on Ghanaian soil from the gangway of the airline that brought him home.
Indeed HIPC was a gamble well taken. May Ghana continue to be lucky!
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