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30.09.2004 Business & Finance

HIPC has not lived up to expectation - UNCTAD

HIPC has not lived up to expectation - UNCTAD
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The United Nations Conference on Trade and Development (UNCTAD) 2004 report on economic development in Africa has criticised the eligibility and debt sustainability criteria of the HIPC initiative, saying they are arbitrary and lacks objectivity. Zeroing on the debt crisis in Africa under the caption: "Debt Sustainability: Oasis or Mirage" the report said the HIPC criteria was based on debt relief cost to creditors instead of the debt relief needs of countries for their sustainable development. Hence several other equally poor countries have been left out because of the exclusion of the vulnerability factors, which has also led to the narrow definition of the term poverty and indebtedness. Summing up the report on Wednesday, Dr Samuel Gayi, a Representative of UNCTAD said, "Clearly HIPC has not lived up to its expectations and therefore, the poverty situations of countries has been worse off than before. The fact was that countries that have reached the completion points did not have much guarantee of debt sustainability. This implies, therefore, that the right panacea to the debt crisis on the continent was a complete write-off of the debt of nations since it was unlikely to cause financial distress to the International Financial Institutions, as the amount involved was relatively small... Mr Gayi said the targets of the Millennium Development Goals should serve as a major benchmark for debt sustainability mainly because of the seriousness with which the international community was addressing the attainment. He said by the end of December last year only 23 African countries have reached the HIPC Decision Point and today only nine African nations out of the 11 have attained the completion stage. The 40 per cent targeted amount of debt relief was also not achieved by the end of 2003. "In Ghana for instance it has been said that the current growth rate of about 4.5 per cent needed to be doubled and sustained for about ten years before it could talk of making headway in the fight against poverty," Mr Gayi noted. The report, he said, called for a moratorium on debt servicing without interest. On the way forward, Mr Gayi said there was the need for governments to pursue prudent macro economic and other related policies and programmes that would catapult the economy to higher trajectory. Contrary to the report's position on HIPC, Dr Samuel Nii Noi Ashong, Minister of State In-Charge of Finance and Economic Planning said the gains the initiative has brought to beneficiary countries should be objectively assessed in the light of the achievements of individual countries. He said when a country that has qualified for HIPC pursued prudent policies and programmes there was no way the initiative would be termed a mirage. "It is only in the other way round that one could say HIPC is a mirage. "It's the creativity of the individual nations which must manifest in their pursuance of prudent policies and negotiation abilities that would make HIPC beneficial or not," Dr Ashong said. He said Ghana in the next 20 years is expected to bank about 100 million dollars due its arriving at the completion point. For conflict nations, the Minister said HPIC would not be prudent for them due to their inability to qualify considering the numerous conditionalities; therefore, a new or an alternative debt relief package or model should be looked at for them. Mr. Alfred Fawundu, United Nations Development Prgramme (UNDP) Country Representative, who launched the report raised a number of development issues and said Foreign Direct Investment inflow in Africa has only targeted oil rich nations and places where mergers and acquisition were present.