Today Ghana joined the 13 countries that have so far reached Completion Point under the enhanced Heavily Indebted Poor Country (E-HIPC) initiative, the joint World Bank and International Monetary Fund (IMF) debt relief scheme. The country reached the E-HIPC decision point in the first quarter of 2002 and has since been working towards achieving the completion point, which officially opens the country to more debt cancellation.

Ghana will receive debt relief on its debt service payments of US$782 million in Net Present Value (NPV) terms from the World Bank's International Development Association (IDA) over the period 2002 to 2022, while the IMF is set to provide US$112 million in NPV terms on payments due between 2002 and 2009. As a result of the E-HIPC initiative, the IMF calculates that between 2004-2013 Ghana will save a total of US$230 million annually in debt service costs. Ghana's debt to export and debt to revenue ratios, the criteria used by the International Financial Institutions (IFIs) to calculate external debt sustainability, indicate that Ghana is well within these thresholds. Ghana's debt to export ratio is calculated at 109 percent compared to the IFI critical level of 150 percent while similarly its debt to revenue ratio stand at 189 percent, also substantially below the 250 percent IFI sustainability threshold. This appears to indicate that Ghana's debt is sustainable; however if further indicators of debt sustainability are investigated or less optimistic scenarios concerning macroeconomic performance are taken, the issue of debt sustainability is less than clear cut.

While the move to cancel further Ghanaian debt is welcomed, one has to consider wider issues specific to Ghana's economic and social situation that clearly call for further and deeper cancellation of debt. The above analysis fails to consider the vulnerability to shocks Ghana may face due to its heavy reliance on trade, most notably the export of cocoa and gold and the import of petroleum. In 1999 the rise in oil prices, combined with a fall in the price of gold and cocoa had severe macroeconomic consequences for Ghana. Ghana also suffers from a significant domestic debt burden (26.2 percent of GDP in 2002), which E-HIPC calculations of debt sustainability do not take into consideration, although many of the completion point triggers have focused on attempting to contain domestic debt.

Ghana's average GDP per capita over the past decade was approximately US$300. While poverty rates have fallen over the last decade, 39 percent of the population still lived in poverty in 2000. Furthermore recent surveys show a rise in child and infant mortality and significant regional disparity in poverty rates. In this context committing almost 10 percent of its budget revenue to service its debt is proving a significant burden on Ghana's development. Even following debt relief through the E-HIPC initiative Ghana's external debt stock will still stand at US$5 billion (NPV terms), 38.4 percent of its GDP. 

The final worrying development relating to Ghana's relations with the IFIs is the pressure on Ghana's authorities to push ahead with reforms of petroleum product pricing, which may cause widespread social and political instability. While a waiver was granted on this issue at the completion point, Ghana's PRGF arrangement with the IMF still contains references and conditionalities relating to the energy pricing system.

In summary, while the move to Completion Point for Ghana demonstrates an important step towards debt relief and through this economic development, wider macroeconomic and socio-political concerns are paramount. In the light of the economy's vulnerability to external shocks and the vast domestic debt burden combined with recent human development concerns and high poverty rates, only a 100% debt cancellation will prove effective in delivering human, social and economic development to Ghana.