GRi BEF News Ghana 09 - 03 - 2001
AGI suggests alternatives to HIPC
PURC holds hearing on power tariff increase
Takoradi (Western Region) 09 March 2001
The Ghana Bar Association (GBA) has added its voice to the call on the government not to join the highly indebted poor countries (HIPC) initiative proposed by the International Monetary Fund (IMF).
In a statement issued on Friday and signed by its National President, Mr Joseph Ebow Quashie, the GBA said under HIPC, the country would pursue harsh austerity IMF policies and conditionalities for three years before it reaches a decision point of qualifying for debt relief.
The GBA said debtor countries would also have to abide by these conditionalities for another three years before it qualifies for actual debt reduction.
It said if the country defaults in meeting the conditionalities the whole programme might be suspended.
It said the projected percentage of debt reduction after the HIPC is 34 per cent though some countries may enjoy between 10 to 17 per cent.
The GBA noted that the structure within which the HIPC Operates leaves all power in the hands of the G 7 countries, which control the IMF and the World Bank.
It said the HIPC does not really aim at complete debt cancellation, but rather debt reduction to enable the debtor country to maintain sustainable level of debt.
The GBA said the 200 to 250 per cent debt-stock to export- earning ratio and debt service export-earning ratio of 20 to 25 per cent, which constitute the rationale for access to HIPC are not based on any scientific foundation but arbitrary.
It said the debt service to export earning ratio of 20 to 25 per cent is not also supported by the history of debt management in the International Financial Market.
The GBA said it considers the 200 to 250 per cent debt-stock to export ratio as high, compared to the 13 per cent debt service ratio imposed on Germany after the First World War.
It said after the Second World War Germany was asked to use 10 per cent of her export earnings to pay her debt but she resisted it, arguing that it was unsustainable and it was eventually reduced to 3.5 per cent.
British repayment to the United States after Second World War was pegged at four per cent of its earnings.
The GBA said it followed, therefore, that the insistence on debt ratio from 20 to 25 per cent for the poorest countries of the world is "burdensome, harsh and onerous".
The GBA noted that by going HIPC the IMF would be dictating the mode of development and the state's direction and control of development would be minimised.
By accepting HIPC the government will close the door to devising creative policies and the possibility of change in economic policy.
It, therefore, cautioned the government to be wary in accepting HIPC, adding, "the way forward is not HIPC to individual countries but rather collective approach by the debtor countries of West Africa or Africa as a whole, to face the issue of debt collectively".
The GBA urged the government to rather tackle the socio-economic problems of this country from the roots and plug economic leakage in the system.
It suggested to the government to convene a national conference on the HIPC issue before taking any decision.
"What is needed is a moratorium for a reasonable period and not a declaration of bankruptcy. HIPC will slow down long term development," the GBA added.
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AGI suggests alternatives to HIPC
Accra (Greater Accra) 09 March 2001
Mr Prince Kofi Kludjeson, President of the Association of Ghana Industries (AGI), on Thursday urged the government to take stock of the human resource and massive foreign exchange capacity of the country, as these could be Ghana's alternative to the Heavily Indebted Poor Countries (HIPC) initiative.
He said the IMF/World Bank poverty alleviation programme is responsible for the increased indebtedness of the country and urged the government to abolish it and replace it with a private-sector-led wealth creation programme.
Mr Kludjeson was speaking at the last of three symposia organised by the AGI as part of the Ghana Industrial and Technology Exhibition, dubbed INDUTECH '2001.
He said most of the projects undertaken by the previous government, were under the poverty alleviation programme, which increased the debts of the country through exorbitant consultancy fees, mismanagement and corruption.
He said the example of the developed country is that of a local private sector-led infrastructure development with government support.
"This way the wealth created stays in the country, incomes go up and poverty is automatically catered for."
Mr Kludjeson said Ghana has a large stock of human resource overseas who contribute over 400 million dollars to the foreign exchange flow into the country through the formal sector alone.
He said an equal amount is believed to come from other Ghanaians living abroad who transfer money through the informal sector.
"This amount, which totals over 800 million dollars a year, is twice the revenue this country derives from cocoa annually," he said.
"The kind of houses people build in Ghana and the class of cars they use, are evidence of the fact that there is money in this country."
Mr. Kludjeson said though the AGI is in the process of coming to terms with the core issues involved in the HIPC initiative, it believes Ghana's debts only make her a heavily indebted country but not poor.
"It is widely known that heavily indebted countries are also the masters of debt management," he said. "With the high brains we have in this government and in the private sector, we should be able to manage our debts effectively without joining HIPC."
He said under the previous government, rich people in the country lived in fear of the frustration they would have been subjected to, if they declared their assets and willingness to make heavy investments.
He said this, coupled with other government policies and high interest rate on loans, discouraged local private investor initiatives and hindered the growth of several private sector organisations.
"Now we have a new government, which is a friend to the private sector and is willing to encourage local investors to participate in moving the economy forward.
"It is for the government, therefore, to take stock of what private business persons can offer before taking decisions on HIPC."
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PURC holds hearing on power tariff increase
Accra (Greater Accra) 09 March 2001
Producers and distributors of electricity said on Thursday that consumers would have to pay an average of 310 per cent more for the commodity or the companies would make more losses.
Volta River Authority (VRA), the sole company that produces power is demanding 432 cedis per kilowatt hour and the Electricity Company of Ghana (ECG), the distributor, is demanding 356 cedis per unit as distribution service charge.
Representatives of the two companies told a public hearing of the Public Utilities Regulatory Commission (PURC) in Accra that they have incurred huge loses and debts in their operations as the tariff increase granted them in 1998 were inadequate.
VRA said its losses increased from 105.2 billion cedis in 1998 to 283.2 billion cedis in 1999. The loss in 2000 is expected to exceed 850 billion cedis.
During the same period, ECG's losses increased from 79 billion cedis in 1998 to 81 billion cedis in 1999 and 160 billion cedis in 2000.
ECG said if the increase in tariff is not effected this month, it would lose about 16 billion cedis in revenue for January and February. If it is further delayed the losses would increase.
Both companies presented their case at the public hearing and appealed to the PURC, the public and organised corporate groups to accept and approve the proposals.
Mr Gilbert Dokyi, Chief Executive of VRA, said the increase had become necessary because domestic demand has been increasing at about 10 per cent per annum over the past 10 years.
"The VRA has therefore been faced with the challenge of generating sufficient amounts of electricity to meet the growing domestic demand," he said.
Mr Dokyi mentioned expansion projects that the authority has had to embark on to meet the domestic demand and contractual obligations to VALCO, Togo and Benin in full.
The expansion involved the construction of the 550 megawatts capacity Takoradi Thermal plant.
The present unit costs of generation from available sources of supply are:
Source Cost (cedis per kilowatt hour)
Hydro generation 177.02
Takoradi-simple cycle 779.00
Takoradi-combined cycle 591.73
Imports 357.00
The current weighted average cost of generation from all sources is 364 cedis per kilowatt hour to be added to a transmission service charge of 68 cedis per kilowatt per hour for a total bulk supply tariff of 432 cedis.
Existing tariff is 95 cedis per kilowatt hour approved in 1998.
Mr Dokyi said the amount is even inadequate for the authority to recover even the generation cost alone of the cheapest source in full.
Meanwhile, VRA is indebted to Cote d'Ivoire to the tune of 34 million dollars.
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Accra (Greater Accra) 09 March 2001
Currency Buying Selling
US Dollar 6,948.91 7,152.27
Pound Sterling 10,221.15 10,523.85
French Franc 988.06 1,016.49
Swiss Franc 4,205.37 4,326.17
Deutsche Mark 3,312.96 3,409.97
Canadian Dollar 4,496.57 4,626.89
Japanese Yen 58.09 59.77
Dutch Guilder 2,941.08 3,025.66
S/African Rand 904.81 928.93
Euro 6,483.03 6,669.11
CFA Franc 9.88 10.16
Naira 63.71 65.57
Ecowas/WAUA 8,990.45 --------
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