The International Monetary Fund (IMF) has approved a 3,9 billion US dollar (22,3 milliarder DKR) debt relief plan for Zambia, lifting a crippling debt burden on the impoverished southern African country, reports the World Bank press review.
The IMF board approved the debt relief deal on Friday under the World Banks Highly Indebted Poor Countries (HIPC) initiative, aimed at reducing crippling debt loads shouldered by developing nations.
The government in Lusaka has said the debt relief package would enable it to shift funds currently earmarked for debt servicing to the battle against poverty. Zambia has said it spends an average of 123 million US dollar (700 mio. DKR) annually to service its foreign debt. Its total debt is estimated at 6,8 billion dollar – equal to about 170 percent of the copper countrys gross domestic product.
The IMF said the debt relief would be backdated to 2001 and would run through to 2020. The World Bank’s lending arm, the International Development Association, would provide 885,2 million dollar debt relief out of the 3,9 billion dollar debt cancellation.
Zambias Finance Minister Peter Magande said Zambia would proceed to negotiate for debt write-off from the Paris Club group of industrialized lenders in May. – Our credit rating has improved as a result of our attaining the HIPC completion point and the government will only be borrowing money to support private sector production and development, Magande said.
– Most tax revenue will now be directed to community projects and development of infrastructure instead of debt servicing. This will help to reduce poverty, added he.
Zambia has also said it would improve roads, especially in the rural areas, promote tourism and agriculture – two key areas with potential for growth in a country heavily dependent on copper mining.
According to Magande, the debt relief will cut Zambia’s debt service payment from 233 million dollar to 137 million in 2006, and from 262 million dollar to 121 million in 2007. Between 2008 and 2019, the countrys debt service payment will be cut from an average of 280 million dollar per year to 120 million.
The IMF suspended Zambia from its programs in 2002 and withheld aid amounting to 100 million dollar after the country overspent on its budget after awarding wage increases in the public sector. Trade unions have said the funds that will be realized from the debt waiver should be used to pay public service workers who had seen their wages frozen at the behest of the IMF and World Bank.
Civil servants in Zambia will get a wage hike following the agreement by the IMF and the World Bank, the official newspaper Times of Zambia reported Monday. Magande was quoted as saying on Sunday that the salary increment will be above the 17,8 percent inflation rate.
The Post of Zambia meanwhile notes Magande said only economic growth and diversification would solve Zambias problems and that HIPC completion was just one of the means to resolve the countrys development hurdles.
– It is anticipated that Zambia will receive high private sector investment which should increase growth for the country. Reaching HIPC is also expected to increase aid from cooperating partners, Magande said. He declared that the way forward would be to move away from mining, improving efficiency in the delivery of service and managing domestic debt.
The Post of Zambia further writes that the UN resident coordinator in Zambia Aeneus Chuma said that while HIPC was useful and commendable, it was not a solution. Chuma observed that ultimately, the responsibility for long-term development remained with the people of Zambia themselves.
He noted that while cooperating partners had a role to play, they could only compliment and not supplant national development efforts. Chuma called for continued work in the realization of the Millennium Development Goals.
Chuma also said countries such as Zambia needed comprehensive debt cancellation, increase in official development assistance and a fairer trading system to allow the countries to invest in industry and trade their way out of underdevelopment.
Meanwhile, the Zambian government has introduced a new law on the management of public finances, replacing an old one which was considered not effective in guaranteeing transparency, secretary to the Treasury in the Ministry of Finance and National Planning Situmbeko Musokotwane said.
The public finance act of 2004 which has replaced the finance, control and management act of 1969 has new features such as the punishment of controlling officers who fail to manage finances properly in their departments.
The new law will see the introduction of new financial regulations expected to be ready by September this year as well as the establishment of audit committees in various government departments.
It has also given the secretary of treasury power to appoint controlling officers unlike in the past when the minister of finance was responsible for the appointments.
Kilde: www.worldbank.org
