IRIN Focus on HIPC benefits

- Economic watchers have long blamed Zambia’s inability to feed itself on an agricultural marketing system that shuns highly productive but often remote and inaccessible rural areas as risky and unprofitable. Impassable roads, rickety bridges and a generally poor communications network make many rural areas unattractive for private sector marketing agents - meaning some of the country’s most promising food production centres have little access to inputs and markets. Consequently, Zambia, which was last food-sufficient two decades ago, is increasingly turning to imports and international humanitarian aid to meet its grain requirements. During 2000/2001, for example, the country’s maize production dropped 30 percent to 490,000 mt. Last month, the government launched an urgent appeal for food aid for two million people facing severe shortages. While the drop in maize output is largely the result of erratic weather patterns, including heavy flooding, early this year, economic observers also blame it on an inadequate input delivery system. However, the alienation of rural producers may soon be a thing of the past, thanks to an ambitious, donor-backed programme to link up the rural areas to the crop marketing system. The Ministry of Finance announced on Tuesday that it had released 27 billion kwacha (about US $7.5 million) for the rehabilitation of rural feeder roads ahead of the planting season in October. “The idea is to improve the state of feeder roads before the onset of the rainy season to facilitate the delivery of farming inputs to rural producers,” ministry spokesman Chileshe Kandeta told IRIN. The national feeder roads rehabilitation programme is funded wholly by savings made under the Highly Indebted Poor Countries (HIPC) initiative, a World Bank and International Monetary Fund (IMF) -led programme under which western creditors grant eligible developing countries significant debt write-offs. Savings made under the HIPC programme are expected to be channelled into social service delivery and poverty alleviation programmes. Zambia, which was allowed entry into the HIPC initiative after meeting a set of donor conditionalities last December, has disbursed a total of 88 billion kwacha (about US $24 million) in HIPC savings to social and economic programmes since the beginning of the year. “Among other things, the government has disbursed 20 billion kwacha in HIPC savings to farmer support programmes in the rural areas,” Kandeta said. “Disbursements have also been made for the rehabilitation and construction of dams for village water supply, and to the health and education sectors.” According to IMF and Zambian government statistics, the country’s annual debt service payments this year will more than halve to US $158 million from US $436 million as a result of HIPC concessions. In 2015, the country’s debt payments will be reduced from US $267 million to US $109 million. Both the Zambian government and western donors are confident that, if properly used, the savings under HIPC will go a long away to alleviating poverty. The challenge is enormous. An estimated 80 percent of Zambia’s 10 million population live on less than US $1 per day; 42 percent of Zambia’s children are stunted by malnutrition; 54 percent of the population are unlikely to survive to age 40; and in a country where one-in-five adults are HIV-positive, just US $76 million is spent on health annually - far less than on debt servicing. Zambia’s civil society organisations - while applauding western creditors for writing off part of the country’s borrowings - are convinced that the international community could do more to lift the country out of its debt trap and onto the road to economic recovery. Many are campaigning for a total write-off of the country’s US $6.5 billion debt. “These (IMF) figures mean that even with the write-offs under HIPC, Zambia’s debt servicing will remain at over US $100 million per year, which is not sustainable. The benefits of the initiative are not tangible,” said Jubilee Zambia co-coordinator Chrispin Mphuka. Jubilee Zambia is a non-governmental organisation under the Catholic Church’s Jesuit Centre for Theological Reflection and leads the country’s debt relief campaign. “The HIPC initiative also fails to address the key causes of debt, which go beyond debt cancellation, such as fairer international trade and investment arrangements. At the same time, the some of the conditionalities under the initiative, such as privatisation of the utility companies, will result in massive job losses, leading to higher unemployment and higher poverty,” Mphuku said. Zambia is expected to privatise the state-run Zambia Electricity Supply Corporation (ZESCO) and the Zambia Telecommunications Corporation before it qualifies for the full range of HIPC benefits. The two utilities are part of a handful of state-run enterprises that were not sold off during the nineties, when the reformist government of President Frederick Chiluba privatised over 200 firms, including the country’s strategic copper mines. Thousands of jobs were lost when Zambia Consolidated Copper Mines (ZCCM), which was responsible for over 80 percent of the country’s foreign receipts, was unbundled and sold off to a number of foreign mining houses. Economic watchers have also expressed concern at the fact that the sponsors of the HIPC initiative insist on designing the recipient countries developmental agendas. They argue that while the donors developmental concerns often coincide with those of their protégés - the fight against HIV/AIDS epidemic and the provision of improved health and education services, for example - the fact that they are externally-driven mean that the programmes may not always represent the specific wishes of the people they are meant to serve. “It is not clear how these conditionalities imposed by the IMF and World Bank fit into the ongoing preparation of the PRSP (Poverty Reduction Strategy paper) that has involved participation by civil society,” Oxfam-Zambia said in a report it recently co-authored, entitled ‘Social and Economic Implications of HIPC in Zambia’. “The question that can, therefore, be raised is: who in fact determines the priorities of poverty reduction; the Zambian government and civil society through the PRSP process, or the international financial institutions through the HIPC conditionalities?”, the report asked.