Ghana says HIPC initiative paying off

Ghana said on Thursday that it has lodged 36.9 million US dollars in the Highly Indebted Poor Countries (HIPC) account at the Central Bank as funds begin to accrue from the controversial initiative.

Finance Minister Yaw Osafo-Maafo told a news conference in Accra the money is earmarked for infrastructure, basic education, health facilities, water and sanitation.

He said the government expects to receive a total of 253 million dollars in debt relief this year.

The rest of the year's total receipt, which is estimated at 157 million dollars has been deferred for later repayment or cancelled under HIPC terms and, therefore, would not be paid this year.

Ghana opted for the HIPC initiative last year under a hail of domestic protests from labour and opposition parties, which questioned the wisdom of joining the club of "poor countries".

However, Osafo-Maafo argued that the West African country needed to join the IMF-World Bank initiative, to bail it out of "the debt trap in which we found ourselves".

HIPC proponents said the initiative recognised that exceptional debt relief was required for the 41 countries with unsustainable burden of debt.

They said HIPC provides resources to be used for investment in poverty reduction strategies decided by the countries themselves, and to re-establish the country's economic position.

Osafo-Maafo said at the time of the decision, Ghana's total external debt was 6.1 billion dollars and "since President (John Kufuor) took this bold decision, a lot has happened and Ghana has benefited and continues to benefit greatly from that far-sighted decision".

The Minister said loans contracted by the government since it assumed office in January last year attract eight to 10 years moratorium and, therefore, have no effect on the present debt stock.

He said the amount received so far from HIPC constituted about 25 percent of the total debt to be cancelled.

Ghana's debt service to export ratio is about 40 percent and the debt is some 395 percent of revenue.

Last year, it was calculated that if Ghana opted for HIPC, it would receive between 231 million and 257 million dollars relief in 2001, between 277 million and 314 million in 2002, and between 265 million and 304 million in 2003.

This would bring the total relief in the three years to between 773 million and 875 million dollars.