Controversy over HIPC Disbursements

Controversy over HIPC Disbursements


By Isabella Gyau Orhin

Many were the Ghanaians who did not agree with the current government when it decided rather surprisingly to adopt the Highly Indebted Poor Countries Initiative (HIPC) in March 2001.
The beef of many Ghanaians was that Ghana was not poor, and that the economic hardships the nation faced at the time were out of years of economic mismanagement. This sentiment was indeed reflected in the speech of the president at his inauguration on January 7, 2001 when he said, “Ours is not a poor country and even though we are now a poor people, there should be no room for despondency that has settled on a large sections of the populations.”
While a section of the country believed the country was poor alright, they could not accept the description of ‘highly indebted and poor’ which they found insulting and degrading to their national pride. After much public debate as to whether the country fits into the description or not, and after encourage from some civil society groups including ISODEC, that debt relief was good, the emotions died down, and both government and opposition settled to discuss how the funds would be used to benefit all and sundry.

In February 2002 Ghana reached the decision point of HIPC followed by the completion point in July 2004.
Total relief from HIPC is about 3.7 billion US dollars spread over a 20 year period.
HIPC Funds which is not monies coming from donors outside but internally generated revenue which otherwise would have been used to service external debts is what is expected to be used to provide social amenities at home through the Ghana Poverty reduction Strategy (GPRS I) and currently Growth and Poverty Reduction Strategy (GPRS II).
It appears the implementation of GPRS I did not satisfy all with the government being accused of diverting part of the money for purposes not intended in the document and agreed upon by government civil society and donors.
Recently, SEND Foundation, a non-for profit advocacy organisation issued a report dubbed “Where did Ghana’s HIPC funds go,” under it s HIPC Watch project said the HIPC funds were allocated without clearly stated and transparent guidelines.
Disbursements the report said was at the discretion of the Ministry of Finance and economic planning while there was no specific budget for it either.
The report said as Ministries Departments and Agencies (MDAs) became he channel for spending HIIPC funds District Assemblies within whose jurisdiction the issue of poverty and poverty alleviation measures falls are marginalized and their role subsumed under the local government ministry.

“Allocations to Ministries which are responsible for sectors such as education, health, water and sanitation as well as agriculture declined as more many more MDAs joined the scramble for HIPC funds.

The report also said there was no evidence of a well articulated and holistic policy to cater for the specific needs of the disabled while the three northern regions that are the poorest n the country received the least items of projects and programmes from HIPC Funds. For instance out of the 609 education projects under GPPRS I from 2002 to 2004, the Upper East Region got 22 projects, Northern Region 54 and Upper East Region 22 projects.
This is against 70 educational projects in the Volta Region, 84 in Ashanti Region, 84 in the Greater Accra Region and 83 in the Brong-Ahafo Region. The rests are 69 in the Central Region, 47 in the Western Region, and 59 in the Eastern Region.

Again on health, out of a total of about 194 projects, the Northern region had 27, Upper West Region11, Upper East Region 22, Western region 14, Brong-Ahafo Region 24, Central Region 25, Ashanti Region 17, Volta Region 20, Eastern Region 17, Greater Accra Region 17 projects.

The report further said the expenditure of HIPC Funds was not done with the approval of Parliament. “Nobody accounted for the expenditure of HIPC funds to Parliament; neither did parliament exercise its monitoring and oversight powers in general to hold any MDA accountable for HIPC funds or to ensure that those funds were spent with authority.”
The report said within the context of the GPRS, factors such as population ratio received more weight than the degree of poverty in the weighing system used in calculating the allocation of funds for poverty alleviation among other allegations.


Last Tuesday, the deputy Minister for Finance and Economic Planning Dr. Anthony Akoto-Osei called a Press Conference to provide more information on the disbursement of HIPC Funds. The Minster was quick to explain that the meeting was not to dispute the allegation made by SEND Foundation in its HIPC Watch report.
“Our job is to ensure that the right information is out there in the public gallery as to how HIPC resources have been spent,” he said.
He said allocation of HIPC Funds has been made according to “clearly laid down guidelines and procedures.” “The allocations are reflected in the annual budget and approved by Cabinet and Parliament. Modalities have been put in place for proper monitoring and auditing of the use of the funds.”
He said government is continually streamlining the procedures to ensure transparency and effective use of funds.
“The formula for disbursements consistently has 20 percent for the reduction of domestic debt, and the other 80 percent for Ministries Departments and Agencies (MDAs) and other projects.
“From year 2002 to date, release of HIPC funding comes to a total of 5,568.1 billion cedis out of which domestic payments amounted to 966.3 billion cedis. He said the remainder has been used on education, health, water and sanitation and on growth sectors especially areas where the poor participate most, such as agriculture, informal sector or areas from which the poor stand to benefit from such s micro finance.
Part of the HIPC money is also used to pay the Member of Parliament’s Common Fund which is 200 million cedis per each member.
Dr. Akoto-Osei also disclosed that part of the HIPC money has been used to pay for Ghana’s equity stake in the West African Gas Pipeline project.
He said most of the problems experienced with the disbursement of the HPC funds are as a result of the weaknesses in the decentralisation process in general. According to him, although the Ministry has responsibility to monitor the flow of the funds, t is difficult since they are not in the districts.

He said the National Development Planning Commission (NDPC) is tasked t Monitor the flow of the HIPC funds in ht districts.
“There have been occasions where a DCE has used up an MPs Common Fund, while some people are being prosecuted for misapplying HIPC Funds.
He said an examination of some of audits books reveal that some assemblies have used
HIPC money as sitting allowance for their members. “If there are cases we re not aware of, you can let us know,” he said.
“Until we feel comfortable with the decentralisation process, we will continue to have problems with all monies disbursed at the district level,” he said adding,
“It is a general problem of governance which is not restricted to the HIPC money,” he said.
But Siapha Kamara of SEND Foundation says government can spend money building the capacity of district assembly staff to enable them handle the HIPC funds properly.
He said District assemblies are being sidelined in the disbursements of the funds.
“We do not have to wait for the money to be misapplied before sending people to court for prosecution,” he said.
He also said the government should be careful in its new growth agenda.
“We want to see growth that targets poverty reduction and not growth that aid the rich n society,” he said.