Civil G8 2006

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ZAMBIA: Govt cautious about spending debt savings


LUSAKA, 21 Mar 2006 (IRIN) - Zambia's coffers are $150 million richer after having its debts slashed by G8 countries last year, but despite calls for the opening of the spending taps, the government has adopted a prudent approach to poverty alleviation.

According to finance minister Ngandu Magande, about 95 percent of the US $7 billion external debt will disappear by the end of 2006, following Zambia's selection as one of 19 countries to qualify for debt cancellation from the G8 group of rich nations. When the International Monetary Fund (IMF), and Russia, the last of the Paris Club creditors, confirm their 100 percent write offs, the foreign debt will shrink to just $500 million.

Magande has committed the government to ploughing some of the savings, a reward for sticking with economic reforms under the IMF and World Bank's Heavily Indebted Poor Countries (HIPC) initiative, into priority areas like education and health as part of a poverty alleviation plan.

Zambia's budget, released last month, reflected the government's intentions: education was allocated 26.9 percent, compared to 24 percent last year. A portion of the additional funds will be used to recruit more than 4,500 teachers, and for the construction and rehabilitation of schools in rural and urban areas.

According to the Jubilee Debt Campaign, a global advocacy group that campaigned for debt cancellation, Zambia's debt repayments to the IMF alone cost $25 million in 2004, more than was spent on education, despite 40 percent of rural women being unable to read and write.

The health sector's share of this year's budget has been increased from 12 percent to 19 percent, with the additional funds going to HIV/AIDS control and mitigation programmes, primary and community health care, recruiting medical personnel and purchasing medical equipment and medicines.

Magande noted that although Zambia has initiated measures to meet the UN's poverty-slashing millennium development goals, the benefits would not materialise overnight for a country with some of the worst social statistics in southern Africa.

"The benefits are not immediate, as most Zambians would like to believe. Countries like China started implementing such measures more than 30 years ago and it's only now that their sacrifices are trickling down to their citizens," he warned.

Magande, however, has cautioned that fiscal discipline would be maintained, and spending would only be considered when priority areas had been identified.

In an attempt to create a more proactive role in the process for ordinary Zambians, the government had phased out a HIPC team set up to identify areas for funding, which had been criticised for being too cumbersome. Under a new five-year national economic development plan, communities could now directly identify and prioritise sectors where funds were needed, explained Magande.

Former finance minister and opposition leader, Edith Nawakwi, questioned the government's insistence that - after 20 years of painful economic reforms - it would maintain the tight control on spending expected under HIPC.

"Its disheartening to hear our government asking people to sacrifice. Where is the money we have earned from HIPC going and who are the real beneficiaries?," she asked.

IMF Managing Director Rodrigo De Rato, who was in Zambia earlier this month, warned Zambia and other low-income countries against "misplacing" the money.

"We are happy that Zambia has achieved debt relief under HIPC, but now it's the task of the government to ensure it sets priorities on how it will maximise on the freed resources to better the lives of the people, most of who are living under abject poverty," he told IRIN.

The Jesuit Centre for Theological Reflection (JCTR), a local think-tank, has called on the government to invest 80 percent of the resources in creating pro-poor employment opportunities in rural and urban areas.

Jack Jones Zulu, a JCTR coordinator, said productive programmes were needed to provide hope for households surviving on one meal a day. Zulu, who is also a member of Jubilee Zambia, urged the government to set up welfare schemes to reduce poverty in conjunction with the private sector.

Rich countries should ensure that poor countries have sustainable financing to meet their needs, through an increase in aid and a bias towards giving grants not loans, according to debt cancellation campaigners.

Zulu urged the parliament to play a more proactive role to ensure that Zambia did not borrow again needlessly.

"We have always told the government to consult the people, through parliament before contracting loans to ensure accountability and transparency in the utilisation of the borrowed resources," he said.

Expert opinion

Halter Marek


Halter Marek
Le College de France
Olivier Giscard dEstaing


Olivier Giscard dEstaing
COPAM, France
Mika Ohbayashi


Mika Ohbayashi
Institute for Sustainable Energy Poliy
Bill Pace


Bill Pace
World Federalist Movement - Institute for Global Policy
Peter I. Hajnal


Peter I. Hajnal
Toronto University, G8 Research Group

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