Development partners demand curbs on govt spending

The International Monetary Fund's (IMF) decision to withhold balance-of-payments support for Zambia, causing other major donors to follow suit, has hurt ordinary Zambians, an activist told IRIN on Monday. Charity Musamba, coordinator of the debt relief NGO, Jubilee Zambia, said the decision to punish Zambia for the government's overspending was not solving the problem of budget overruns, nor was it helping the country's efforts to reduce poverty. This follows weekend reports that the government was now committed to getting back on track with IMF programmes. In June the IMF told IRIN the government had exceeded its budget by Kwachas 600 billion (about US $125 million) and had not "sufficiently explained the overspending". The IMF and other donors have withheld about US $175 million earmarked to support Zambia. "The IMF has made it clear to the government that unless it adequately satisfies a number of IMF requirements, which include budget control, the funds will not be disbursed," an IMF official said at the time. A joint statement by the IMF and the government of Zambia on 31 July noted that during discussions the government had presented plans to address the "large projected overrun in the government wage bill and related allowances in 2003". "The government has explained to the IMF staff team that the wage bill, including housing allowances, is projected to be about Kwacha 500 billion, or 2.5 percent of GDP above the 2003 budgeted amount of Kwacha 1.5 billion," the statement said. Both the government and the IMF "fully shared" the belief that payment of "this large wage bill and related allowances would result in significant pressure on domestic prices, interest rates and the exchange rate", jeopardising Zambia's recent economic revival. The IMF was concerned that the wage bill would also divert much needed funding from the government's poverty reduction strategy. The government in turn had agreed to hold talks with the public sector unions to reach a compromise on the wage bill and allowances. However, the government is now involved in a stand-off with unions over this very issue and about 120,000 civil servants launching an indefinite strike last week, demanding the immediate payment of housing allowances. News reports at the weekend quoted President Levy Mwanawasa as saying that Zambia had no choice but to comply with IMF conditionalities for aid as "the United States and Japan are also withholding [financial] aid until we have an IMF programme". "We have no option but to return to the IMF programmes. The IMF is saying it will not agree on any country programme for Zambia until we resolve the budget overrun," Reuters quoted Mwanawasa as saying. He also appealed for an end to the strike by civil servants. Zambia is one of the countries that qualify for the Highly-Indebted Poor Countries (HIPC) debt-relief programme of the IMF and World Bank. However, there are certain conditionalities to reaching the completion point for HIPC debt relief. Musamba told IRIN that while overspending was a problem, the hard stance by the IMF and donors was strange, given that the government had "overspent last year and the year before". She questioned the timing of the withdrawal of assistance, since Zambia was expected to reach its HIPC completion point by December. "The budget was overrun last year, the year before, etc. Yet we did not see any efforts from our [development] partners here, saying they would work with government to correct that. When has government ever spent within budget? When we are about to reach a big point, the HIPC completion point, they move the goalposts - I'm wondering why?" Musamba said. While she could understand the rationale behind IMF and donor insistence on tight budgetary control, she could not understand why the focus was on punitive measures and not on supporting the government to "correct systems and expenditure". "We are quite concerned about how our government utilises resources, but this is the worst kind of response from a group of cooperating partners. Let's rather work to strengthen systems than to wait for government to incur certain costs, and then say this is how we are going to punish government. They are not punishing government - it's the ordinary people who are suffering. We've made this clear to the international community representatives in Zambia," Musamba said. "Every stakeholder who is working in Zambia is generally aware of how our government has been spending. There have been certain issues raised by Zambian people, like the amounts of money we have to spend on all these by-elections we've been having - those cost us money. We all know our government is spending where it's not needed. Why don't we work on these issues and deal with root causes, and not deal with the symptoms," she added. Zambia was hoping to have debt cancellation under HIPC amounting to US $3.8 million by the end of the year, according to Deputy Finance Minister Mbita Chitala.