A Plan For Reducing Poverty Through Debt Forgiveness

1656 Words Mar 11th, 2015 7 Pages
In 1995 James Wolfensohn was appointed president of the World Bank. With this new opportunity he designed a plan in hopes of reducing poverty through debt forgiveness. The plan was called the highly indebted poor countries (HIPC) initiative Countries would be eligible for this plan if they had unsustainable debt, debt ranging from 200-250% of their export earnings. The first stage of HIPC involved a structural adjustment for 3 years until the Decision Point was reached, if the debt was still unsustainable there would be a 67% cancellation. The country would then enter stage two which included another 3 years of adjustment until the completion point, 80% debt reduction and debt owed to the IMF would be cancelled by taking out of the HIPC trust fund. 41 countries were selected for this initiative, Ghana being one of them.

Ghana is a relatively poor country with a per capita income of about and a population of around 20 million people. The average Ghanaian lives on less than a dollar per day. Before the HIPC Ghana implemented an economic recovery plan and structural adjustment program, only to increase their external debt substantially. It faced a debt problem as high as US$577 million which was about 114% GDP. This crisis was the result of many poor economic policies and management of their economy. Ghana has gone through many years of economic recovery and poverty reduction strategies, but a great percentage of its population is poor. External debt has often taken the blame…
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