04.10.2004 General News

Multiplier Effect Of HIPC?

By Gye Nyame Concord
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FINANCE AND Economic Planning Minister Yaw Osafo-Maafo some weeks ago gave further proof of the spiraling benefits the country is deriving from the adoption of the Highly Indebted Poor Country (HIPC) initiative in 2001.

He said that as a result of reduced debt servicing obligations under HIPC, the country's external reserves – the measure of how long the country could import its basic needs without recourse to borrowing – had reached a level first achieved 30 years ago.

The reserves, which currently stand at $1.4 billion, can buy four months' imports, he said, and that it has become possible because our debt servicing obligation which stood at $392 million between 1998 and 2000 had reduced to $150 million

“The difference comes to the government to be used for economic purposes,” he stressed, adding that the inflation rate, now hovering around 11.6 is expected to come down by the end of the year.

The Minister also predicted some hopeful news about the Gross Domestic Product (GDP) which now stands at 5.2 percent, saying that it would move up.

He said that because of the “sound monetary polices the government was pursuing, the nation had been rated 'B plus' by her creditor nations”, adding: “The government will continue to explore more avenues for the economy to improve even more”.

This, indeed, is another good testimonial for HIPC, at least in our special case. Four months of imports? This is commendable to say the least. There have been occasions in the past when we had struggled to come up with the money for three weeks' import cover, talk less of one month or two months.

GYE NYAME CONCORD also welcomes the news on the falling inflation rate, if the downward trend continues we will soon be able to meet another of the convergence criteria for the second West African common currency, the ECO.

However, we wonder which measure of inflation is being used here: whether it is the monthly inflation rate or the annual rate. We recall the confusion two years ago when the government, which had been citing the annual inflation rate, expediently switched to the use of the monthly rate when the ill-advised 90.4 percent increase in petroleum prices forced the annual rate to regress and cast the government in unfavourable light.

Governments worldwide are consistent in the measure of inflation they use and do not pick and choose for political expediency. May be our doubtfulness is unfair to the government, but it laid its bed for the wilful manipulation of statistical figures and must lie on it, warts and all.

We also wonder if the high levels of external reserves had been achieved simultaneously as debts owned contractors (domestic debt) are paid and District Assembly Common Fund (DACF) allocations are released. Or whether the near-record levels of reserves have been gained at the expense of other statutory financial obligations?

To enable the government to more easily get the fulsome praise that it probably deserves for its “superlative” management of the economy, the GYE NYAME CONCORD would like to appeal to its spokespersons to endeavour to give the full picture of things and not be selective of the rosy aspects to jubilate about.

If the above questions are answerable in the affirmative, then we commend the government for its good management of the Ghanaian economy. And wish more grease to its elbow!

Otherwise, we take it with a pinch of salt, especially when we are dealing with a minister whose spins – IFC, CNTCI, Pay Cuts, etc., etc., - is legendary.

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