Explainer: What it means to be a Heavily Indebted Poor Country (HIPC)
On Tuesday, October 27, 2020 there were various social media reports claiming that the Akufo-Addo-led government has led Ghana into the category of Heavily Indebted Poor Countries (HIPC)
Flagbearer of the NDC, and former President John Dramani Mahama while enaging some professionals is reported to have reiterated the claim on Monday, October 26, 2020 that Ghana is back to HIPC status under Nana Akufo-Addo and Ken Ofori-Atta's administration.
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Most people are probably just hearing the term HIPC for the first time, without knowing exactly what it means and how a country is listed onto the initiative.
YEN.com.gh in this article, explains the modalities involved in getting on the HIPC initiative and what exactly it means.
Source: Original
Heavily Indebted Poor Country (HIPC) is a debt relief initiative which was launched in 1996 by the IMF and World Bank, to ensure that no poor country faces a debt burden it cannot manage.
The program was designed to ensure that the poorest countries in the world are not overwhelmed by unmanageable or unsustainable debt burdens.
Ghana’s listing on the World Bank's website as a Heavily Indebted Poor Country (HIPC) dates back to 2002 and has remained so to date.
Ghana completed the HIPC process in 2004 and according to the regulations laid out by the International Monetary Fund, (IMF), there is no way the country can reapply to the initiative. after benefitting from it once.
In 2002 under the John Agyekum Kufuor led NPP administration, Ghana was listed as a HIPC and subsequently was to benefit $3.7 billion in debt relief through the HIPC initiative.
Ghana, however, completed its HIPC initiative process in July 2004.
The initiative reduces the debt of countries that meet the strict criteria for such classification.
To be eligible for the HIPC initiative, the World Bank noted that a country must face sustainable debt situation after the full application of the traditional debt relief mechanisms.
Also the country must be eligible for highly concessional assistance from the International Development Association (IDA) and for the IMF’s Poverty Reduction and Growth Trust (PGRT).
A country must have established a track record of reform and sound policies through IMF and World Bank supported programs.
In addition, a country must establish a track record of reform and develop a Poverty Reduction Strategy Paper (PRSP) that involves civil society participation.
Looking at being classified as a heavily indebted poor country through a political lens is something most parties in power would not like since it would be an indication that the economy has been mismanaged.
Meanwhile, the World Bank’s data portal which is referenced in the claim, lists 39 countries including Ghana as Heavily Indebted Poor Countries (HIPC).
In the December 2014 update of the IMF on HIPC (Page 6), Ghana remained among the list of HIPCs when the NDC led by John Mahama was in power.
Further information in a March 2016 statistical update on HIPC (Page 5) by the IMF showed that Ghana was still in the list of HIPCs.
Although Ghana is duly captured on the World Bank’s data portal amongst HIPCs, that does not prove that the country has opted again to go into the HIPC initiative, in fact, that is impossible.
Ghana and the other 38 countries that have gone through (including those still in the process of) the HIPC initiative have consistently featured on the World Bank data portal as HIPCs.
YEN.com.gh earlier reported that the Information Minister, Kojo Oppong Nkrumah has debunked claims making rounds that Ghana has once again gone back to being in the category of Highly Indebted Poor Countries (HIPC).
Oppong Nkrumah said the numerous publications making rounds on social media claiming that the country has returned to HIPC are false and lake any form of credibility.
Speaking at the a press conference on Tuesday in Accra, he said because the country is approaching the polls, it is a deliberate attempt to thwart the work government has done.
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Source: YEN.com.gh
