Ghana’s debt stock hit 94.5 billion cedi in June 2015, overshooting the 70 per cent of gross domestic threshold for HIPC.
As at May this year, the country’s domestic and external debt stock stood at 89.5 billion cedi, thus 67.1 per cent of gross domestic product (GDP).
But this shot up to 95 billion (over 70%) in June 2015, according to the Central Bank of Ghana, raising concerns over the country’s debt sustainability level.
Whiles the country’s external debt stood at 58.6 billion cedis from 4.8 billion cedi, between May and June, thus a jump by 44 per cent of GDP, its total domestic debt stock increased to 35.9 billion cedis, an increase by 200 million cedi (26.6 per cent of GDP).
The development led to some economists suggesting that Ghana’s debt was getting to the level of HIPC, a position the government vehemently rejected.
In a recent public statement, Finance and Economic Planning Minister, Mr. Seth Terkper said, Ghana is nowhere near the conditions that took the country to HIPC in 2001, saying the country’s debt stock is backed by strong infrastructural projects that have the capacity to refinance loans acquired by the government since 2012.
“In 2001 our debt was over 180 per cent and it demanded an aggressive approach since the real sectors of the economy were under pressure, this time our debt is invested in social and commercial projects that can pay for themselves”, Mr. Terpker explained in a lecture at the University of Ghana Business School in Accra.
The ministry of finance and economic planning has since released figures which indicated that the country’s public debt has not crossed the HIPC threshold.
For instance, figures for July which were released by the ministry last week stated the public debt stock in relation to the GDP as at July dropped to 62 per cent.
Thus, a drop from 95 billion cedis in June to 83 billion Ghana cedis, as at July this year.
But the IMF has listed Ghana among “countries that have qualified for, are eligible or potentially eligible, and may wish to receive HIPC Initiative Assistance” as of September 2015.
In its September data, Ghana was among 36 countries categorised on the list of countries that have reached Completion Point and were to receive HIPC assistance.
The country was ranked in the same category as Afghanistan, Burundi, Benin, Chad, Sierra Leone, Cote d’Ivoire, Haiti among others.
In a statement, the IMF said: “To date, debt reduction packages under the HIPC initiative have been approved for 36 countries, 30 of them in Africa, providing $76 billion in debt-service relief over time. Three additional countries are eligible for HIPC Initiative assistance.”
The HIPC Initiative was launched in 1996 by the IMF and World Bank, with the aim of ensuring that no poor country faces a debt burden it cannot manage.
Since then, the international financial community, including multilateral organisations and governments, have worked together to reduce to sustainable levels the external debt burdens of the most heavily indebted poor countries.
And to qualify for HIPC, countries must meet certain criteria, commit to poverty reduction through policy changes, and demonstrate a good track record over time.
The Fund and Bank provide interim debt relief in the initial stage and, when a country meets its commitments, full debt relief is provided.
First step of consideration for HIPC assistance is the decision point under which a country must meet four conditions.
Once a country reaches its decision point, it may immediately begin receiving interim relief on its debt service falling due.
For a country to receive full and irrevocable reduction in debt available under the HIPC Initiative, a country must establish a further track record of good performance under programs supported by loans from the IMF and the World Bank; implement satisfactorily key reforms agreed at the decision point; and adopt and implement its Poverty Reduction Strategy Paper (PRSP) for at least one year.
“Once a country has met these criteria, it can reach its completion point, which allows it to receive the full debt relief committed at the decision point.”
The IMF statement explained that Ghana is in the group of countries that have reached this stage.
It said, “…Of the 39 countries eligible or potentially eligible for HIPC Initiative assistance, 36 are receiving full debt relief from the IMF and other creditors after reaching their completion points.”
However, according to the IMF, three countries, which have been identified as potentially eligible for HIPC initiative assistance have not yet reached their decision points.
Ghana is implementing a 3-year programme to enable it get is economic fundamentals back on track.
The country’s economy is in dire straits on the back of an energy crisis, currency fluctuations a drop in prices of major exports like gold and cocoa, shortfall in revenue and ballooned public sector wage bill.
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