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02.01.2005 Business & Finance

HIPC Initiative reduces Ghana's external debt servicing

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Accra, Jan.2, GNA- Total government expenditure in servicing external debt reduced from 24 per cent to 16 per cent, while the domestic debt burden had been scaled down since Ghana adopted the Heavily Indebted Poor Countries (HIPC) Initiative in 2001.

HIPC, had also reduced the burden of foreign currency obligation as a result of the reduced external debt servicing, Ms Yvonne Quansah, Head of the Aid and Debt Management Department of the Ministry of Finance and Economic Planning, made this known in Accra at the weekend. She was speaking at a symposium organised by the 56th Annual New Year School, at the campus of the University of Ghana (UG), Legon, on the topic: "The Debt Burden, HIPC Initiative and Development Assistance".

Ms Quansah said HIPC had stimulated growth due to the appropriate economic policies adopted by the government to facilitate poverty reduction, leading to the provision of development projects such as rural electrification, agriculture and water and sanitation.

The School being organised by the Institute of Adult Education of the UG, is on the broad theme: "Wealth Creation for Accelerated National Development: Imperatives and Challenges."

Ms Quansah said beyond HIPC required national efforts to ensure prudent borrowing practices and maintaining long-term debt sustainability.

"There is the need to improve on the tax administration to ensure reliance on budget revenue and expenditure."

Ms Quansah said the country's debt sustainability efforts should not be isolated from the general macro-economic management. She said although the volume and terms of borrowing have direct impact on the burden of debt, the fundamental course for the pilling of the debts should be addressed.

Mr Bishop Akolgo, Acting Director of the Integrated Social and Economic Development, a non-governmental organisation, who gave an alternative view of HIPC, said Ghana was trapped in debts and no amount of economic reforms prescribed by the donor community would solve the problem.

He said civil society groups in Ghana were demanding the total cancellation of the country's debt portfolio and not debt rescheduling. "Our problem lies in our inability to develop our production base. We should deal with the debt issue once and for all."

Mr Akolgo expressed the need for Ghanaians to patronise local goods and services to minimise the flight of capital to other countries. Professor Henrietta Mensa- Bonsu, of the Faculty of Law of the UG, who chaired the symposium, called for public education on government initiatives to enlist the support of the citizenry.

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