Monday, August 04, 2008
It was all fanfare when Ghana qualified for debt relief under the Highly Indebted and Poor Country Initiative (HIPC) in 2004. A state banquet was even organised to celebrate our qualification, as fondly reminisced in an article here. It seemed declaring one’s poverty status was the only option left for the managers of the economy at the time, and more so when there was a reward. The following year saw 80% of our $5.2bn debt cancelled. However, four years on Ghana seems to have nearly doubled its 2004 debt.
Ghana’s Central Bank Governor, Dr Paul Acquah suggests that as far as the population of Ghana stands at about 22 million, it is wise to assume that each Ghanaian owes to the tune of $355 or GH ¢354. He arrived at the figure based on the country’s current debt of $7.8 billion, a 7.1% increase from $7.3 billion dollars at the beginning of the year. So who are those ‘crazy’ creditors still doling out cash at sumptous interest rates? Ghana did borrow US$ 730m from the Euro bond market recently, but then what about Africa’s new found lover- China?
The IMF and World Bank warned African countries to be wary of China’s overtures, lest they saddle themselves with more debt. Much as that admonishing was hypocritical, it did contain some wisdom. But then ,just how does a country get out of its debt trap? It seeems following a path of sensible policies, i.e. running a small but transparent government, decentralising decision making and resource control, a truly impartial judiciary, lower taxes for individuals and businesses, open markets, easy registration and closure of businesses and allowing ordinary people to honestly acquire and dispose off property would be important first steps.