IMF alters Zambia's payment schedules but fails to cancel more debt

After two months of indecision, the IMF has finally come to agreement on Zambia's treatment under the Heavily Indebted Poor Countries (HIPC) initiative. Zambia, who paid $136 million in debt repayments in 1999, was scheduled to pay up to $90 million more in 2001 - even after receiving debt relief.

On Friday 1^st December, the IMF Board decided to alter rules under HIPC to allow greater front-loading for debt relief to Zambia. But this does not actually provide Zambia with further debt cancellation – it just means that more debt relief is delivered early on, with future payments rising to compensate. The Zambian government had put forward a strong case for 100% debt cancellation appealing to creditors to allow debt repayments to be spent fighting poverty and tacking the AIDS crisis. Twenty per cent of adults in Zambia are now infected with HIV, and life expectancy is dropping to 36 years of age.

Dr Katele Kalumba, in a letter to the IMF last month, wrote: “Our earnest appeal is that the HIPC Initiative should release resources to support comprehensive development and long-term economic growth in Zambia. Failure of the HIPC initiative to respond to this challenge in Zambia's case will negate all the work that has gone into this effort, and raise serious questions about the credibility of the HIPC Initiative in general.” The decisions taken by the IMF Board have failed to address this.

Following the meeting, the IMF are projecting Zambia's scheduled payments to be 153m in 2001 (compared to $170 million in 2000), 144m in 2002, 146m in 2003, 204m in 2004, 194m in 2005, 96m in 2006 and 212m in 2007. This decision has to be accepted by the World Bank board meeting on Thursday 7^th December.

These payments are far more than what Zambia spends on health ($76 million) or on education ($70 million).

Shigemitsu Sugisaki, IMF Deputy Managing Director, defended the decision by saying: "The decision by the IMF Executive Board, combined with a substantial increase in net resource transfer to Zambia, will help give the country the resources that will permit a significant increase in social expenditures in real terms, especially to fight AIDS and poverty." The IMF claimed that that new resources to Zambia would ensure that net flows were around $400 - $500 million. However the IMF also said that they had not anticipated that the HIPC initiative would lead to countries being scheduled to pay after debt relief than before. Tom Dawson, Head of the IMF External Relations Department said in a press conference on Friday 1^st December: “The particular consequences Zambia has now with this so-called hump in payments is something that was, frankly, not anticipated at that time [when the IMF loan was made]”.

Jubilee 2000, who have been supporting the Zambian government in their plea for 100% cancellation, reacted with dismay to the IMF's decision. “If ever there was a clear case for a country who cannot afford to pay a cent to rich creditors, Zambia is it” said Kwesi Owusu, Head of the Africa Initiative at Jubilee 2000.

“The IMF admit that they did not foresee this rise in payments when they made the loan, yet it is the Zambian people who have to take the hit - by giving up hundreds of millions of dollars which could be used to bring them clean water and put drugs in their hospitals. The IMF's solution to an IMF problem is not a solution for the people of Zambia. `Front-loading' relief is not the answer. Zambia cannot afford to pay $153 million next year, and certainly not $200 million in four years time.”

• Hopeless debt deal for Zambia remains an embarrassment to creditors, as Finance Minister Katele Kalumba says new IMF proposals will make no difference and calls for total debt cancellation