January 5, 2005, Zambia Daily Mail

FROM the time Zambia qualified for the Highly Indebted Poor Countries Initiative (HIPC) in 2000, all efforts and programme by Government have been centred around the HIPC agenda. Recently in Lusaka, the Consumer Unity & Trust Society-Africa Resource Centre (CUTS-ARC), in partnership with the Southern Africa Regional Poverty Network (SARPN) organised a one-day stakeholders’ roundtable discussion. Our staffer Nancy Mwape, who sat through the discussion, now reports.

ZAMBIA is this year expected to qualify for the HIPC completion point where the International Monetary Fund (IMF) will cancel US$3.8bn out of the country’s total external debt of US$6.8bn.

However, even after the HIPC completion point, the country’s poverty reduction strategy paper (PRSP) will have to go on until poverty is eventually eradicated. This means that a poverty reduction programme will have to exist as part of the country’s economic structure.

On December 16, 2004, the IMF executive board completed their first review of Zambia’s economic performance under a three year Poverty Reduction Growth Facility (PRGF) arrangement, which was approved on June 16, 2004.

The country has made progress toward meeting the triggers for HIPC initiative completion point and could reach it at the time of the second review under the PRGF arrangements based on performance through the end of 2004.

The nation can only qualify for HIPC provided that performance under the PRGF supported programmes remains strong and implementation of the poverty reduction strategy is satisfactory.

IMF deputy managing director, Takatoshi Kato says Zambia’s performance is particularly encouraging against the backdrop of the economic decline in the preceding two decades.

Kato, nevertheless, states that Zambia still faces significant challenges such as not strong enough growth to make large inroads into widespread poverty, high inflation, even though progress was made in this area in 2004.

Professor of Economics Venkatesh Seshamani, University of’ Zambia, speaking at the round table discussion in Lusaka, questioned whether HIPC is a panacea or old wine in new bottles to debt sustainability, or debt sustainability a myth.

Prof Seshamani stated that at no point did anyone say anything about HIPC being a Panacea, but notes that according to the World Bank, HIPC will make very little difference on the release of new financial resources development.

Jubilee Zambia says it is sure of Zambia reaching its completion point sometime in May or June this year. Jubilee Zambia policy analyst, Jack Zulu, pointed out that consistent failures of HIPC meant that it is not the best response to the debt issue.

Zulu said eight years along the way, HIPC has brought only seven out of’ 42 countries’ highly-debted nations to something close to sustainability and therefore needs to be assessed in the right context.

“Uganda had reached HIPC completion point three times in the past and each time it was extended. Ethiopia too has reached the HIPC completion point but its debt will not be sustainable until after 2020,” he said.

Zulu said HIPC has failed to respond adequately to the debt problem of poor countries because it relies on export-driven growth to calculate debt sustainability, whereas growth, although necessary, has no impact on the poor.

He added that what Zambia needs is a broad based growth as the HIPC initiative only opens up the process in which government contracts new loans without a debt repayment plan.

Zambia has, anyhow, made considerable progress on HIPC benchmarks. Commercialisation of’ Zesco is on course. Government has increased discretionary

budget share to education to 20.5 percent from 18 percent and has issued bidding documents for the sale of Zambia National Commercial Bank.

A bulk of debt relief assistance under the enhanced HIPC initiative is expected, when at completion point the country satisfies a number of specified conditions.

These include commitment to PRGF and the International Development Association’s structural adjustment loans and confirmation of participation of other creditors in the debt relief operation.

International Economic Relations Professor, Oliver Saasa, noted that answers to problems facing the country should be inward-looking and not outward. “We need the right institutions and the requisite personnel at national level, otherwise we can easily become a country of complainers. What is required is both an aid policy and a debt policy,” he said.

The Professor further questioned the wisdom of asking the bank to design the business plan and debt policy for the country, when it was actually a client of the bank.

Prof. Saasa, on the other hand, noted that the only thing that will improve after HIPC is the credit worthiness of Zambia. He added that HIPC does not provide any resources for development and called on the need to improve capacities, both institutional and human, in order to reduce poverty.

The discussants at the end urged Government to be empowered so that it can say no to bad aid. They further stated that the poor are homogenous, thus the need for minimum empowerment levels. As much as it is known by the government that HIPC initiative is not a panacea to debt sustainability, HIPC achievement will reduce government burden of debt servicing.

After the HIPC completion point, the country will need a locally developed strategy as an alternative to foreign constituted strategies.

Government will also need right negotiators with capacity to analyse all issues given to them by the international community.