The New Patriotic Party (NPP) government came under a barrage of criticism from organised labour and civil society organisations in the domestic front for opting for the Heavily Indebted Poor Countries (HIPC) Initiative, which qualifies the country for debt relief and poverty alleviation financial assistance.
The Finance Minister, Yaw Osafo-Maafo argued that Ghana needed to join the IMF-World Bank initiative, to bail itself out of "the debt trap in which we found ourselves". At the time of the HIPC decision, Ghana's total external debt was US$6.1 billion. One of the critical question asked was, should we declare ourselves dogs for the sake of a bone? Two years down the line the voices have fallen silent.
US$253 million in debt relief is expected to accrue from the controversial initiative in 2002. Maafo said $96 million of the amount would be lodged in the HIPC main account at the Bank of Ghana while the remaining US$157 million of total receipts this year has been deferred for later repayment or cancelled under HIPC terms.
US$36.9 million of the amount to be lodged in the HIPC main account had already been received by the government. US$19.2 million would be used to reduce the domestic debt overhang. US$76.8 million for poverty reduction activities, especially for infrastructure for basic education, primary health care facilities and community water and sanitation projects.
Proponents of HIPC said the initiative recognised that exceptional debt relief was required for the 41 countries with unsustainable debt burden. They said HIPC provides resources to be used for investment in poverty reduction strategies decided by the countries themselves, and to re-establish the country's economic position. Of ¢117 billion released for immediate disbursement, the Accra Metropolitan Assembly would receive 3.5 billion Cedis, Kumasi, 2.5 billion Cedis and Sekondi Takoradi, two billion Cedis. Tema, Koforidua, Tamale and Cape Coast Municipal Assemblies would each receive 1.5 billion Cedis while the 103 District Assemblies would each get receive one billion Cedis.
President John Agyekum Kuffour says the criteria for allocating the HIPC money is fair. But Civil Society Organisations in Northern Ghana have decried the criteria by which the funds have been allocated, claiming Northern Ghana has been short-changed. A press statement signed by the Executive Secretary of the Northern Ghana Network for Development, a network of NGOs operating in the three northern regions, the poorest parts of the country, Mr. Ishmael Lansah, said the allocation did not conform to the criteria recommended by the Ghana Poverty Reduction Strategy (GPRS) document.
The GPRS document, according to the statement, prescribes that allocation from HIPC funds will be based on the regional variations in the level of deprivation and the intensity of poverty. "The three northern regions are subject to extreme deprivation. In order significantly to ameliorate the situation in the medium weighting will be used in calculating the distribution of expenditure. The weighting given is based upon allocation in which Group A (the three northern regions, and group B (the other six regions) receive four times and two times that for Group C (Greater Accra) per capital respectively."
According to this formula northern region should have received 18.27 per cent or ¢21.379 billion, of the ¢117 billion. Upper East would have been allocated 9.04% or ¢10.571 billion and the Upper West region, 5.56% or ¢6.614 billion. Eastern region for example which should have received 10.39% or ¢12.152 billion received ¢15.5 billion.
The northern Ghana civil society organisations called on the government to make public the criteria used in making the initial allocation to the assemblies; come out with the criteria of allocation as contained in the GPRS document and make public, criteria for subsequent allocations in order to ensure transparency. The statement said: "it is widely known that the three northern regions are the most deprived and have the highest poverty levels in the country, but the recent allocation did not seem to recognize this and applied a strange formula"
According to The Ghana Living Standards Survey IV, which was used as guide for preparing the GPRS document, "between 1992 and 1999 while poverty reduced at the national level by 12.2 per cent, it significantly increased within this same period in the north. In the Upper East Region for example, poverty increased by as much as 21.3 per cent. While in Northern Region poverty is reported to have risen by 5.8 per cent." Lansah pointed out that in preparing the GPRS document the poverty situation in the north was cited but the area is not being given prominence now that the funds have been allocated.
The statement added that the poverty situation in the north needed to be looked at with all the seriousness and reality it deserves, instead of using it to source funding and relegating it to the background when it comes to allocation. Guidelines for use of the resources from HIPC were approved by Cabinet and would be coordinated by the Ministries of Finance and Economic Planning and Regional Integration.
Apart from the HIPC funds other large sums of money have been made available to the District Assemblies for development purposes. It is the first time such huge sums of money have been released to the assemblies at one go.
The Minister for Local Government and Rural Development, Kwadwo Baah Wiredu said in addition to HIPC funds, government had recently transferred 700 million Cedis to district assemblies for poverty alleviation ventures. Another 500 million Cedis has been transferred to the bank accounts of each assembly from the Common Fund. Whether these monies would be used for the intended purposes or are even going to the right places, remains a subject of cautioned debate.