Debt relief initiative questioned

Zambia, one of the most heavily indebted countries in southern Africa, could qualify for debt relief in November under a controversial International Monetary Fund (IMF) initiative.

Zambia’s Finance Minister Katele Kalumba said at the weekend that an IMF team will be in the country this week to assess Zambia’s economic performance to determine its qualification for the Highly Indebted Poor Countries (HIPC) initiative. Kalumba, speaking to ‘The Post’ newspaper, said he was confident of a positive outcome after the HIPC review.

In terms of the initiative, a country is expected to have undergone IMF-backed economic reforms for at least six years before qualifying for debt relief under HIPC, which is designed to reduce repayments to a “sustainable” level. Zambia has followed an IMF adjustment model since 1991 when President Frederick Chiluba’s government embarked on one of the most vigorous liberalisation programmes seen in the region.
However, debt cancellation activists claim the HIPC initiative is not a solution to the debt burden faced by poor countries. Zambia, say the activists, needs total cancellation of its estimated US $6.5 billion external debt stock.

According to Chrispin Mpuka of Zambia’s Jubilee 2000, Zambia’s possible qualification for HIPC is no cause for celebration. He said the IMF plans to cancel only about US $2.5 billion of Zambia’s debt under the HIPC initiative and, rather than falling, IMF officials have indicated that Zambia’s debt service obligations will increase next year as some major IMF loan stocks fall due.

Zambia, according to the development NGO Oxfam, currently spends about US $136 million per annum on debt service, which will increase to US $235 million in 2002 because of the upcoming loan repayments. Oxfam added in a statement this weekend that in six African countries, including Zambia, debt payments will outstrip spending on basic education even after these countries have qualified for HIPC. The debt relief package which the IMF and World Bank are offering Zambia is a “fraud”, Oxfam alleged.

According to Mpuka, “there will be no cash savings for the government out of Zambia’s qualification for HIPC.” Moreover, quoting government figures, Mpuka said poverty levels among Zambians have deepened since the introduction of IMF reforms. Sixty-nine percent of Zambia’s nine million people were assessed as poor in 1996, with the figure climbing to 73 percent in 1998 and has increased to 80 percent in 1999.