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15.07.2004 Business & Finance

1.5 billion dollars off Ghana's external debt stock

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Accra, July 15, GNA - Ghana's total external debt stock is to go down by 1.5 billion dollars in nominal terms as a result of the cancellation of the country's debts by the Paris Club creditors. The country also expects to save approximately 230 million dollars annually in debt service costs over the next 20 years.

This follows the reaching of Completion Point under the enhanced HIPC Initiative of the World Bank and the International Monetary Fund (IMF).

Ghana is the fourteenth country to "pass out" of the list of nations with debt sustainability ratio problems.

Briefing Journalists in Accra almost one week after Ghana was given a new lease of life by the IMF and the World Bank, Mr Yaw Osafo-Maafo, Minister of Finance said the implications of the Completion Point included creditors being irrevocably committed to debt relief. Ghana joined the HIPC Initiative on March 9 2001 in the New Patriotic Party Government's maiden budget and reached Decision Point in February 2002.

Mr Osafo-Maafo explained that the Paris Club creditors would provide 100 per cent debt stock cancellation on all loans contracted before June 6 1999.

The Finance Ministers said Japan, Ghana largest creditor, would provide debt cancellation of 800 million dollars, with Germany forgiving 240 million dollars while the United Kingdom would write off 140 million dollars.

He said Ghana had satisfied all the criteria listed by the Bretton Woods institutions and consequently attracted comparable treatment from non-Paris Club creditors and commercial creditors.

"China and our commercial creditors, who have provided us with loans over the years will also cancel their loans to us," Mr Osafo-Maafo said. He indicated that Ghana's multilateral creditors would continue to provide the debt reduction they started at the Decision Point.

"Total relief to be provided by the World Bank alone is 1.45 billion dollars while the African Development Bank gives out 160 million dollars and the IMF 112 million dollars in net present value terms."

He said in line with the significant debt reduction, the debt service- to-revenue ratios will average 4.7 and 6.2 per cent respectively over the next 20 years, adding that, "this compares favourably with the 10-year average pre-HIPC debt service levels of 21 and 30 per cent respectively".

In sum, the total debt relieve from all of Ghana's creditors amount to 3.5 billion dollars in nominal terms, equivalent to a reduction in net present value terms of 2.2 billion dollars.

Mr Osafo-Maafo stressed that the attainment of the completion point under the enhanced HIPC Initiative should not be seen in isolation. "It is a benchmark that has been attained as a result of the sustained implementation of sound economic policies, which have received international recognition."

He mentioned the B+ credit rating by Standard and Poors and the B Positive Outlook by Fitch Ratings, adding that this reflected the good track record that Ghana was building.

He said the credibility of Ghana's policy framework was reinforced when she was selected as one of the 16 nations to benefit from the first tranche of the one billion dollar US Millennium Challenge Account. Mr Osafo-Maafo noted that the current benefits under HIPC showed that it was prudent after all for going into the HIPC treatment, where debt could be forgiven.

"The lessons that have been learnt in this process call for consistent implementation of the macro-economic policy framework to sustain the process, lay solid foundation for robust growth and wealth creation for the benefit of all."

Mr Osafo-Maafo promised Government's commitment to maintain fiscal discipline, saying: "I can promise you that this election year will be very different from the previous three under the Fourth Republic, because fiscal discipline would be maintained at all costs."