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afrol News, 1 March - The International Monetary Fund (IMF) and the World Bank Group's International Development Association (IDA) agreed this week to support a comprehensive debt reduction package for Ghana under the enhanced Heavily Indebted Poor Countries (HIPC) Initiative. Total relief from all of Ghana's creditors is worth approximately US$ 3,700 million. Under the decisions taken by the two organisations, assistance committed by IDA will be delivered over a 20-year period and will cover on average 67 percent of debt-service obligations falling due to IDA. Debt relief provided by the IMF will be delivered over the next eight years. Both IDA and the IMF will begin providing debt relief immediately, as will most official bilateral creditors. The bulk of additional assistance under the enhanced HIPC Initiative will be delivered when Ghana completes a number of agreed measures. These measures include the development and implementation of a full Poverty Reduction Strategy Paper (PRSP), enhancement of reforms in macroeconomic management and governance, and strengthening of management in priority sectors, identified as education, health and the energy sector. The Government of Ghana is developing a detailed plan for the use of funds made available through debt relief under the enhanced HIPC Initiative. It is being guided by the draft Ghana Poverty Reduction Strategy (GPRS), which is due to be finalized during the first half of 2002. The draft indicates that the debt relief will be primarily used to increase expenditures on education, health, programs to improve services and infrastructure in the rural sector, and improved governance. A portion of the relief will be used to reduce further the heavy burden of domestic public debt. The government has also developed mechanisms to ensure transparent monitoring of the use of HIPC relief. The existing budgetary accounting framework has been modified to identify budget expenditures which are poverty-related, and that sub-component which is financed by HIPC relief. Ghana has made strides in reducing poverty since the early 1990s, particularly in urban regions and those where exports such as cocoa, gold, and timber are produced. As a result, the overall poverty rate fell substantially between 1991 and 1999, according to the World Bank. Broad economic growth accounted for nearly all of the poverty reduction at the national level, and within most regions. However, poverty remains a systemic problem in the country, particularly in the northern regions where it is closely linked to low access to basic infrastructure, health services, and education. With a per capita GDP of about US$300 in 2001, Ghana's income level remains below the average for sub-Saharan African countries. Even with continued economic growth and a projected recovery in its terms of trade, Ghana is likely to be remaining a country dependent on assistance and debt relief for the foreseeable future. The HIPC Initiative The enhanced Initiative aims at reducing the net present value (NPV) of debt at the decision point to a maximum of 150 percent of exports and 250 percent of government revenue, and will be provided on top of traditional debt relief mechanisms (Paris Club debt rescheduling on Naples terms, involving 67 percent debt reduction in NPV terms and at least comparable action by other bilateral creditors). Some three-dozen HIPCs are expected to qualify for assistance under the enhanced HIPC Initiative, the great majority of which are sub-Saharan African countries. Debt relief packages are now in place for 25 countries under the enhanced HIPC Initiative framework. Ghana joins Benin, Bolivia, Burkina Faso, Cameroon, Chad, Ethiopia, Gambia, Guinea, Guinea-Bissau, Guyana, Honduras, Madagascar, Malawi, Mali, Mauritania, Mozambique, Nicaragua, Niger, Rwanda, São Tomé & Príncipe, Senegal, Tanzania, Uganda and Zambia, for total committed assistance estimated at nearly US$ 40 billion. Sources: Based on World Bank and afrol archives
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