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31.10.2004 Feature Article

The ECONOMY: HIPC -Ghana`s "miracle" wins Election 2004

The ECONOMY: HIPC -Ghana`s
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The Highly Indebted Poor Country (HIPC) initiative was first introduced by the World Bank in 1996 but was modified into Enhanced HIPC initiative in 1999. Ghana joined the Enhanced HIPC intiative in March, 2001 and subsequently progressed to the decision point in February 2002.

There are all indications from my analysis that Ghana reached the completion point (July, 2004) with a little under 30 percentage points achieved for HIPC`s three major (floating) triggers out of the fourteen futuristic targets (goals or plans) thus, sounding more of not implemented. These are a) positive macroeconomic indicators, b) modest gains on enrolment of "girls" in schools, and c) on the energy sector government did not implement the new pricing regime for petroleum at least not for this year 2004, to the disappointment of the IMF.

a) Macroeconomic indicators Tito Mboweni, Governor of the South African Reserve Bank, talking on monetary policy was interviewed by Robin Sherbourne, and he said gMacroeconomic policies on their own cannot be the solution to countriesf problems.h October 7, 2003.

Some academics will rush and call the performance of the NPP government successful. Just as I heard a score of between 70-85 percent from the University of Ghana`s Political Science Department at Legon surely I admit the specialisation is different. If this is the case then we could say, "HIPC-government wins the 2004 elections in Ghana." Unfortunately, who are (or have become) the real power brokers on poverty and human development in Africa today? It is the World Bank (WB) and the International Monetary Fund (IMF) but in the final analysis it is we the electorate who will judge a government.

What do we in Ghana read into this? Well, I will say a fair pass for the New Patriotic Party(NPP) although, the economic growth rate for 2003/04 was hovering around 5.2 percent. It is also very important that (a good thing) for interest rates to fall so as to allow borrowing as well as spending. This was done I believe. The same interest rates become necessary tool to curb inflation.

I can say as an economic analyst that, it will be unfortunate especially the way we read into these figures and to note that mere drops is not the only way out and we could therefore be easily deceived if compared the above to 3.9 and 4.1 percent of the National Democratic Congress (NDC) in the years before 2000. Unemployment rate also plays into the well-being of the people and the nation as a whole.

For the inflation rates well targeted by the NPP and hoped for single digits we actually scored 26 percent (low). There are many causes for this low inflation rate which could be traced to domestic and international or global sources like the oil prices which were not deregulated this year and captured by the IMF as "because of our elections." Whereas, similar direct but "exogenous shocks" were prevalent in pre-2000 election.

Ghanaians only demanded a change hence, it happened and this change should not be cheapened as such but need to come with the deliverables like, real growth which means inflation rate (now at 26%) should be or have been below our current 5.2 percent growth in the economy, such that it should approach zero or null but as we see it is not.

This is an assured way that Ghanaians, "will feel it in their pockets" and there is no better explanation to this phenomena I am afraid. How can we do this? It is both difficult (as in the way we are going about it now) and simple, another way out which incidentally is not the matter for this paper.

b) Education Girls Enrollment is said to have "increased from 72 percent in 2000 to 74 percent. In the 2002/2003 academic year, the primary gross enrollment rate for girls reached almost 78 percent. The results are for the Northern, Upper West and East Regions. Looking at the numbers is a few set of hundreds. It is difficult to ascertain since the emphasis should be enrolment coupled with remaining (zero drop-out rate) in school and this will require providing free meals in school, at least chocolate bars, cococa drink and good drinking water.

Some questions need to be asked by the electorate. When was Ghana said by the NPP to have become a "dollar-country?" How about the forgotten loyalists; the lady porters (kaya ye) and the "shoe-shine boys" (I prefer call them Ghana`s "lone or long range entrepreneurs"). I have interviewed many and the results are clear and I am convinced when given the right tools they will succeed.

Do we know that just a few are probably school drop-outs but majority said they wanted to save money and go for apprentice training? It contravenes ILO convention I agree, but also shows the lapses in our education, teacher training, remuneration and placement systems. It is not the change of names, the lengths or white paper or even school buildings.

Beautiful school buildings but no pupils (because of high fees) or teachers (low salaries, no bonuses), donors come and we take them for inspection on market days, weekends and farming season to have an alibi for low attendance and absence of teachers.

c) Energy -Gas and Oil (petroleum, crude) Now the IMF/ World Bank "waived the nonobservance of the quantitative performance criterion on the banking sector credit to the Tema Oil Refinery and two structural performance criteria on the adjustment of petroleum prices, and electricity and water tariffs." (Press Release on July 10, 2004)

The new pricing regime has been postponed to February 15, 2005 for obvious reasons (December elections). The IMF/IDA report of June 15, 2004 should not be taken for granted. Since "exogenous shocks" and underway and Ghanaians are going to experience the aftermath in 2005 as it happenned just before 2000 and we cannot wane on our promise to the IMF.

Experts have predicted that world petroleum (oil) prices will be very unfavourable to poor countries especially early next year during the Iraq elections at the end of January, 2005 and the US is already geared against any attacks especially in the "no-go zones" in Iraq said, the US Secretary of State Colin Powell (September 26). Nigerian rebels in Niger delta warned to take over oil fields in October and advised all oil companies to shut production and leave Nigeria. (Reuters; September 27).

The most sensitive issue in our development today. Even hurricanes like Ivan caused oil prices a surge to US$50 a barrel in September 27, 2004. China`s (world`s fifth oil producer) current demand for oil is second to the US in the midst of rising standards of the middle-class in the past three years and economic growth. If is expected that India demand for oil is rising too. So there is fear it put pressure on world oil prices. The prices today have actually risen above the US$50 mark and even got to US$55 on October 15.

As far as Ghana is concerned, we would have just sworn-in our new government. Does Ghana have any contingency plans? The Minister of Energy Dr. Paa Kwesi Nduom said on JoyFM in September 2004, and seemed to be statisfied that theTema Oil Refinery (TOR) has paid (or, is sustainably paying) its debts and have reserves to pay for about four months bills which was as low as a quarter of that or so in 2000 before the NPP come into power. Are we not going to face an even worst situation in 2005?

I can assure you that since we do not live in isolation Ghana will be affected anyway and the four months bonus will sublime easily in the crisis even before 2005 but thanks to the IMF we do not have to de-regulate the oil prices this year. Otherwise in the same manner as before 2000 the macroeconomic indicators improvement preached would have crush and interest rates will have to go high whether we like it or not.

We will actually slip into a worst situation than when the NDC left office. We will not want to admit it but those are the realities. Everyone seem to be suggesting a renegotiation with the IMF to also including the officials of the Bank of Ghana and the Governor appointed by the NPP government. So afterall there is no success with HIPC, the UNCTAD and the IMF admits this fact why won`t our Ghanaian officials do the same for once so that we can work even harder.

Since when did the Bretton Woods Institutions start lowering their standards, when even in Ghana`s BECE it will not be possible. The Veep called on transparency in SSS intakes this year. The University of Ghana could not find a better way but to throw out as much 700 students in 2003/04 for non-performance. I have being to so many Universities in various capacities but never seen anything of the sort. What measures were put in place before hand? It is an undesirably high turnover rate which does not necessarily imply good image though.

Is it making people scape-goats, bullying or just trying to prove a point that will allow another change of system. There was a wiseman (a Chief) from the "mountains," Akwapim who I hear have petitioned the President not to change the system but improve on what has been tested for two decades. But will he be listened to? Its high time children are used as "guinea pigs" with a rising cost to parents. On the other hand Ghana was afforded a huge bargain on its petroleum deregulation.

Lets remember this is going to what in real terms increase our debt-sensitivity to a much worse level and for the calculations let me not scare any one I wish to leave it to the minister. It is not even an issue of knowledge of the debt-sensitivity that is important but the tragedy is that it is the Ghanaian child yet unborn who will have to pay or develop schemes as to how to pay for the country`s debts since a major chunk of such bills accruing are our current oil and gas consumption.

The timeline for them will be immediately after they graduate technical and vocational schools or university and start working and this is how precarious our situation is. There is a need for serious look into scenerio modules and crisis management.

Politicians have come and gone and current once will leave but the debts will remain. So prosperity is reducing the debt burden to reasonable levels and maintaining it there. In order not to oversimplify the issue is, to have the notion to be without debt because there is no such country in any given time. That is to say the US does owe Japan occassionally.

Shall we say the NPP mismanaged the economy Ghana? No, but unfortunately it took the country to HIPC. Should the NDC become the government in 2005? Yes or No, is for the electorate to decide. Whereas, the NPP accussed the NDC of mismanagement in 2000, before the election and thereafter, unless for political reasons it could not be entirely a fair assessment.

Although, it gives a good opportunity the NDC to sit back and re-group for a better challenge. It was not what should be expected to attack for "attacking sake," hear and see such chaos from responsible people who claim they want the good of this country. Which ever party finds itself in government in 2005, will have to apply for a topping-up programme from the IMF.

For the NDC it will be an uphill battle of meetings upon meetings well crafted (so as not to become the Acheampong`s "yen tua" or "min tua") to convince the IMF about an exit strategy because they did not support HIPC in the first place. So, if the fortunes turn in favour of the NDC becoming government, I believe they will have a good case to re-negotiate the tight strings we will be facing especially with respect to our oil bills.

As for the NPP they have no option but to hang in there but it could get extremely difficult for the NPP to re-negotiate anything with the IMF. Whereas the CPP promises free education Dr. Kwame Nkrumah and the grand coalition could be the shape of things to come since they have what they are calling "the Diamond" a man whom all governments should start eying to give a portfolio related to energy. I trust in his passion, experience and knowledge. We really need to test people otherwise we will never get there. In the US they will say "put him on the job."

Why? Because we breached the agreement. The vital point of reaching the completion point was waived (given a pass), this is effect means we actually did not reach the completion point. The document is everywhere unfortunately not many have seen it.

But there was nothing special in those floating triggers since they are just what plan mostly paper work and playing with figures. The only thing that may be quantified is interest rate falling. The burden has been shifted to the lenders (the Banks) or rather government have only subsidized those who borrowed money between 2001 to 2004 with the task payers money.

It means those who had the loans have gained, the lucky few as such are not going to be entitled to pay the right price for it. Lucky isn`t it?

From HIPC to LICUS (not funny!)?

We will be made to take a more difficult path and this is called LICUS. The acronym sounds attractive but worst than HIPC. It is LOW INCOME COUNTRY UNDER STRESS (LICUS). In fact there is almost no money we can borrow from the international multilateral financial agencies. Indirectly we are banned or sanctioned.

To claim to be poor under enhanced HIPC initiative and graduating very soon after is not the solution to Ghana`s problems. We need to create variations in our problem solving techniques and management under different scenarios as a country. What is known as scenario (crisis) management and it is known by anyone who has worked in the US.

The bottom-line is to start increasing what we produce best and export not only to Europe and the US, but for proximity let us target the markets of our closest neighbours from the Francophone countries and especially Nigeria, because we have to pay most petroleum bills to Nigeria by the way.

It was not for nothing that Dr. Nkrumah developed the Tema Industrial Area. Let us think of Japan for a moment, it imports every single raw material including all its energy but have advanced in manufacturing (processing) than anyone in the world.

They later export the manufactured (factory) goods to the same countries with value additions. This feat was achieved by teaching their children at a very age of three that they do not have "anything" (resources) but to develop the skills and love their country. I do not mean mere patriotism the way we know it in Ghana, there is more to it. call it the "Vision of Japan."

There are few problems in Japan`s banking sector and madcow disease but I hope my good friend Prime Minister Junichiro Koizumi who has been in office since April, 2001 will, with his new cabinet (September 2004) reshuffle live up to the task. They have suffered typhoons and earthquakes this year.

With all respect to the achievements of government, including the cocoa boom, the NPP admits its achievement in a process (not instantaneous), the same way comes the pitfalls still with the health and education sectors. As such other considerations will be made by the electorate in the following months including how the government handles the recent impasse in the education sector before reaching some form of settlement with a white paper.

Other policy areas like, the rule of law, freedom of speech, good governance, corruption, decentralisation, audit, etc., are not factored into this analysis since other think-tanks and the media have been dealing with them.

I decided to lay bare the multitude of problems although, still very few, before election 2004 in order for all of us think deeply and ask what is really wrong. In any case we are still the light of Africa in a lot of things so again do not get me wrong.

The fear is we may be sinking too fast at this time and in order not to let that happen those who have the right to vote and are dully registered should turn-out in their numbers, but vote wisely since there isn't any miracle but only what we can build for ourselves with dignity.

I wish all the sick in hospitals across the country a speedy recovery even with our fewer and fewer nurses. also success to all political parties not forgetting Mr. Dan Lartey (Domestication), Dr. Mahama`s Grand Coalition and the CPP for Mr. Aggudey.

I talked more about just two political parties but in my thoughts, I believe the same arguments go across board from A to Z parties in Ghana. See you all again soon. Doe, James W. Until May, 2004 was at Johns Hopkins University Institute for Policy Studies Baltimore, MD USA Views expressed by the author(s) do not necessarily reflect those of GhanaHomePage.

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