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Conditionality

News

Moving the goalposts: Zambia’s misery prolonged

26 July 2004

Despite intensive efforts to implement the necessary conditions, Zambia has been told that it will have to wait even longer for debt relief.

Zambia had expected to reach the ‘completion point’ of the Heavily Indebted Poor Country (HIPC) initiative, making it eligible for debt write-off, by December 2004. However, due to delays in the approval of its programme with the IMF, the country will now have to wait until its performance against the conditions of the latest loan can be evaluated before it is eligible for debt relief. IMF resident representative Joseph Kakoza said that the boards of the Fund and the Bank would meet in the first quarter of 2005 to consider Zambia’s record of economic reforms and decide whether to approve a debt write-off at that point.

Zambia’s finance minister Ngandu Magande responded that the delay in attainment of HIPC completion point would undermine efforts against poverty. Finance permanent secretary Richard Chizyuka contended that “the issue in Washington has nothing to do with economic performance because we were given a tick on all the numbers”. According to Stephen Lewis, UN envoy for HIV/AIDs, Zambia’s attempts to comply with Fund requirements, including caps on wages in the public sector and increased taxes, have already caused “staggering damage to the social sector”.

In a report on Zambia’s debt crisis, UK-based World Development Movement conclude that the IMF and World Bank’s involvement in Zambia has been “unsuccessful, undemocratic, and unfair”. According to the authors, Zambian economists Jack Zulu and Lishale Situmbeko, HIPC is the lever through which the IMF and World Bank wield influence over Zambia’s economy. Reforms forced on Zambia have resulted in tens of thousands being unemployed, the destruction of industries, social unrest and increased poverty. Trade liberalisation, a key part of Bank and Fund economic policy prescriptions, has wreaked havoc on Zambia’s manufacturing sector especially the textile industry. Reduced tariffs on textile products have resulted in cheap imports of second-hand clothing flooding local markets and crowding out Zambian products.

Fund conditionality, say the authors, has undermined democratic accountability. Conditions requiring the privatisation of the state electricity company and national bank were initially met with enormous public resistance. The IMF’s resident representative, Mark Ellyne, put it simply “if they don’t sell, they will not get the money”. Zambia’s government was subsequently forced to rescind its decision and that of its parliament not to privatise.

Critics have pointed out that unrealistic benchmarks have been set in the Zambian case. Reading deception in the IMF’s postponement of debt relief, a June editorial by the Lusaka Post asked the IFIs to consider “at whose expense their inhumane policies are being implemented”. “Zambia’s experience” they add, “confirms HIPC as an unsuitable substitute to complete debt write-off”.