PRESS CONFERENCE
STATUS OF THE HIPC RELIEF PROGRAMME AND THE DISTRIBUTION OF BENEFITS
BY MINISTER OF FINANCE , HON. YAW OSAFO-MAAFO, M.P.
ON
THURSDAY, 29th AUGUST,2002
VENUE
MINISTRY OF INFORMATION & PRESIDENTIAL AFFAIRS
PRESS CONFERENCE HALL

Good morning Ladies and Gentlemen of the media.

In the Budget Statement and Economic Policy of the Government of Ghana for the 2001 Financial Year presented to Parliament on Friday, 9th March, 2001, I reported that
"In view of the debt trap in which we find ourselves, debt sustainability analysis carried out on Ghana and our inability or otherwise to raise enough revenue beyond the presently committed levels, His Excellency the President of the Republic of Ghana has decided that Ghana should take advantage of the HIPC initiative immediately."

Since the President took this bold decision, a lot has happened. Ghana has benefited and continues to benefit greatly from that far-sighted decision.
I am here today to present to you:

1. a summary of events;

2. the benefits accruing from the decision taken by the Government; and

3. announce the immediate release and distribution of HIPC relief funds for development throughout the country.

SUMMARY OF EVENTS

· In the year 2001, when the eligibility of Ghana to apply for interim HIPC relief was confirmed, we were able to suspend debt service payments which brought budgetary savings of about
$190 million dollars or the equivalent of 1.37 trillion cedis for fiscal year 2001.

· In December 2001, Paris Club creditors agreed in Paris to provide further relief of $90 million (equivalent to ¢702 billion) when Ghana reached the Decision Point.

· In February this year, on the basis of our economic performance for 2001, the Boards of Directors of the IMF and World Bank confirmed that Ghana had reached the Decision Point and therefore was eligible for further relief under the Enhanced HIPC initiative.

· In May 2002, the Government successfully negotiated with our Paris Club Creditors to receive debt relief on a more favourable basis (Cologne Terms) as opposed to the traditional Naples Terms.

The Benefits of HIPC

· This year, the Government expects to "receive" a total amount of 253 million dollars or approximately 1.973 trillion cedis in debt relief. $96 million (or approximately ¢749 billion) will be lodged in the HIPC main account at the Bank of Ghana and $157 million or ¢1.225 trillion has been deferred or cancelled and therefore will not have to be paid this year.

· Thus far, an amount of $36.9 (approximately ¢288 billion) of the amount expected to be lodged in the HIPC main account at the Bank of Ghana has been received.

· Government has decided to utilise 20% of that amount, approximately 19.2 million dollars or 150 billion cedis to reduce domestic debt and 80% (the equivalent of $76.8 million or ¢599 billion) on poverty-related activities.

· In preparation for the use of these funds for poverty related activities, Government embarked on an extensive exercise to train staff of various MDAs. The training sessions started in January and are on-going. Workshops were conducted for participants from all ten regions of the nation. To date, over one hundred and eighty (180) people have been trained.

· In the light of the reporting requirements underlying the Enhanced HIPC initiative the training exercises are aimed at ensuring that HIPC funds are properly accounted for.

Release of Funds to Ministries
· To date 6 ministries have applied for these funds. A first tranche of over 8.0 billion cedis has been released to 3 ministries which have met both the programme and tracking requirements. It is anticipated that requests from the remaining ministries will be approved shortly.

Immediate Release of Funds To District Assemblies
In addition, Government has decided to release immediately, a total amount of 117 billion cedis, to be distributed as follows:

a) Metropolitan Areas - ¢8.0 billion
i. Accra - ¢3.5 billion
ii. Kumasi - ¢2.5 billion
iii. Sekondi-Takoradi - ¢2.0 billion

b) Municipalities - ¢6.0 billion
i. Tema - ¢1.5 billion
ii. New Juaben (Koforidua) - ¢1.5 billion
iii. Tamale - ¢1.5 billion
iv. Cape coast - ¢1.5 billion

c) Remaining Districts - ¢103 billion
¢1.0 billion cedis per district

· Each Metropolitan, Municipal and District Chief Executive is to submit a prioritised list of proposed projects to benefit from the 1st tranche of 50% of the approved allocation.
This list must be submitted immediately to inject funds into the system.

· The balance of 50% will be released upon satisfactory progress on the implementation of first tranche projects.

· Projects eligible for funding for this first tranche are infrastructure for Basic Education, Health Facilities (Primary Health Care), Community Water and Sanitation.

· Metropolitan, Municipal and District Chief Executives are to submit the identified projects through their respective Regional Ministers.

· Regional Ministers are also to liaise with the Minister for Local Government and Rural Development.

· The Minister for Local Government and Rural Development will have overall responsibility for the implementation of these district programmes at the national level.

· The use of HIPC resources is being coordinated by the Ministries of Finance, and Economic Planning and Regional Cooperation, under directives approved by Cabinet.

· Persons looking for more information on the disbursement of HIPC funds may contact Dr. A. Akoto Osei of the Ministry of Finance and Mrs. Angela Brown Farhat of the Ministry of Economic Planning and Regional Cooperation.

CONCLUSION

It is the expectation of Government that the release of ¢749 billion HIPC funds into the economy, over and above what has been provided for in the 2002 budget, will immediately create jobs and through that reduce poverty especially in the rural areas as well as energise the economy.

At the end of the day, that visionary decision taken by H.E. The President to take advantage of the HIPC initiative has been more than vindicated.

Thank you and may God bless you all.

29TH AUGUST 2002