HIPC Will Hurt Government Plan

The Vice-Chairman of Databank, Mr. Kelly Gadzekpo has affirmed that the emphasis of the Highly Indebted Poor Countries (HIPC) initiative on poverty reduction programmes will hurt the government's golden age plan for business vision.

He pointed out that for a country which is pushing for a private sector-driven economy, our emphasis should be on wealth creation strategy rather than on poverty reduction. "We need as a country to begin to create wealth and jobs and so on and so forth.

It is more important to put the emphasis on wealth creation than on poverty reduction," Kelly told the host of an Accra private radio station, Joy FM's current affairs programme, Front Page, last Friday morning, hours before the Finance Minister made known the nation's plan to join the HIPC. Clearly voicing his opposition to the nation going for the initiative, at least not until the figures are thoroughly considered, the Vice-Chairman of Databank said the government should look for ways of making the economy more productive, because it is good for business and not necessarily providing water for a deprived area.

He urged the government not to concentrate on only HIPC as a possible way out of the nation's indebtedness, but also explore other areas, since it is possible that after a careful examination, it might not be necessary to declare the nation HIPC, citing the American example in coming out of the 1960s' economic depression.

As a way of reducing public debt stifling the government which has necessitated the nation declaring itself HIPC, Kelly suggested a shift from public debt to private and commercial debt. Currently, private debt stands at 4%. To him, individuals with projects should be able to negotiate for loans with the backing of government, to reduce that burden on the government. Nana Yeboah Kodie-Asare II of the Private Enterprise Foundation (PEF) also cautioned the government rushing for HIPC, simply on the benefits it promises.

According to him, it is easy to declare oneself bankrupt and wait for the benefits, but the adverse effects are immediate, such as withdrawal of commercial and export credits, because no bank would advance Ghana, an HIPC country any more credit. Refusing to admit that the nation's debt issue is serious, but a short-term problem, Nana emphasised that the solution lies in finding a way to honour our obligation through rescheduling the nation's debt, by restructuring and rearranging our commitment to suit us, like in the 1980s.

Under HIPC, a debt reduction programme, packaged by the International Monitoring Fund (IMF) and the World Bank, the nation is expected to receive an amount of $1 billion over a five-year period to finance its poverty reduction programme. But Nana considered it a gift that was laced with a lot of trapping, which makes it difficult to determine whether it will be in the interest of the nation in the long run to accept it. Prof. Ernest Ayitey of the Institute of Social Statistics and Economic Research of the University of Ghana, was all for HIPC.

He opined that since we have refused to manage our economy well, HIPC offers us the opportunity to buy time, to invest and attract investments to restructure our economy, and warned against squandering the chance as it was done with the SAP. Pushing for a quick decision as to whether the government went HIPC or otherwise, Prof. Ayitey pointed out that the longer it takes for the decision, the more difficult it takes to assess the benefits.

He disagreed with Kelly Gadzekpo that poverty reduction and wealth creation can not be pursued simultaneously. "A lot of the problem with the private sector not growing as fast as we want to, comes from the huge poverty in the country. Because people are poor and can't generate enough savings, we can't get money to invest."

Debunking the misconception, he said most poverty reduction strategies like Ghana's aims at equipping the private sector to link up with the unemployed. "The golden age for business is not to be confined to the big private business, and with a very poor population, we are not going to see the kind of change the private sector will like to have," he pointed out.

He questioned the viability of Kelly's proposal for a shift from public debt to private debt, saying it is not possible now due to the un-affordability of the high economic interest rates of the loans to the private sector. "There is no reason to believe that in future, with our HIPC, we can afford it. The shift will come only after the economy has grown substantially and continue to grow."

Warning: "If you try to force it as was done in some of the South East Asian countries, you are going to get some of the crisis they suffered in the mid-1990s." While supporting Ghana going HIPC, Mr. Charles Abugri of ISODEC was however, worried about the conditionality the nation has to accept in drawing up a micro economic framework that is tailored to suit the aspirations of the Britain Woods Institutions.