Ghana doesn't qualify for HIPC

A couple of weeks ago, there were concerns among some economic analysts that Ghana’s debt portfolio had gone so high, it qualified the country again for the Heavily Indebted Poor Countries (HIPC) Initiative.

The Graphic Business (GB), therefore, sought some answers from the International Monetary Fund (IMF). Here are the responses to specific questions fielded to an IMF spokesperson.

GB: As per the IMF's analysis, does Ghana's current debt situation fit a HIPC description. That is to say, were it yet to apply for HIPC on current macroeconomic statistics, would the country have qualified?

IMF: We are doing a different sort of analysis now, as eligibility for the HIPC Initiative is not relevant anymore. Our Debt Sustainability Analysis indicates that Ghana is at a high risk of debt distress, meaning that Ghana’s public debt is high and subject to some vulnerabilities. Against this background, we support the key objective of the authorities to reduce the fiscal deficit and bring public debt gradually down in the coming years.

GB: What is the difference(s) between Post-Completion point countries and Pre-Decision point countries as published on your website on September 17? At what point is a country eligible to be enlisted onto the fund’s list of Post-Completion-point countries?

IMF: Countries that have qualified for irrevocable debt relief under the Heavily Indebted Poor Countries (HIPC) Initiative / Multilateral Debt Relief Initiative (MDRI) framework are called post-completion point countries. Countries that are yet to start the process are called pre-decision point countries. Currently, 36 countries have reached their completion point under the HIPC/MDRI.

GB: When did Ghana make it onto the list of Post-Completion point countries?

IMF: Ghana reached it decision point in February 2002 and its completion point in July 2004.

GB: Under the HIPC initiative, how many times can a country benefit from the debt relief initiative from the Fund and the other multilateral institutions?

IMF: Countries are eligible to benefit from debt relief only once under the HIPC/MDRI framework.

GB: Based on the criteria for HIPC eligibility, is Ghana - in its current state - qualified for a debt relief and what would be your advice to the government with regard to that?

IMF: No, Ghana no longer qualifies for the HIPC initiative, given that it has received debt relief before.

GB: Will the fund consider advising Ghana to consider a HIPC debt relief (if the country qualifies to access HIPC for the second time), especially now that its debt-to-GDP ratio is hovering around 65/75 percent mark?

IMF: As stated before, Ghana has already received debt relief under the HIPC initiative and can therefore not pursue further relief under this initiative.

GB: Generally, what are your comments to the Ghanaian authorities as far as HIPC and national debt stock is concerned?

Again, Ghana has already received debt relief under HIPC. With regard to national debt, based on the debt sustainability analysis prepared by IMF and World Bank staff, Ghana is now assessed to be at a high risk of debt distress. In these circumstances, reducing the debt burden and associated vulnerabilities is a priority.

The government’s ambitious and front-loaded fiscal consolidation plans, which are on track, aim at bringing the public debt burden gradually down to a more sustainable level.