ANB-BIA SUPPLEMENT

A look at debt and poverty relief

In a provincial administrative rural centre of Solwezi, north-western Zambia, a provincial roads engineer has been sentenced to seven years imprisonment with hard labour by a magistrates court, for theft of Highly Indebted Poor Countries (HIPC) funds involving US $15 million. While the circumstances leading to the fraud are not the subject of discussion, this particular incident speaks volumes about the rampant cases of abuse of HIPCrelief funds, meant to help reduce the high poverty levels in the country, especially in rural areas.

The International Monetary Fund (IMF)’s resident representative in Zambia, Mark Ellyne, is disgusted and disturbed about the frequency of theft of HIPC funds, because of lack of accountability and transparency in the disbursement of the HIPC debt relief funds. He has directed the Zambian Government to submit an official report before the IMF can make a policy decision on the matter. He says that Zambia has received about US $750 million under the HIPC scheme, but there has been no report submitted at the end of each year as required. «As donors, we are not happy with the reported misappropriation, since the funds are meant for poverty reduction and if they are being diverted, then it is sad. It means that the goal of poverty reduction is being thwarted».

«Jubilee-Zambia»

Jubilee-Zambia is encouraged by Ellyne’s outspoken concerns and is stimulated in strengthening its on-going «Debt Mechanism» programme for monitoring the proper application of HIPC funds. Jubilee-Zambia, run by the Jesuit Centre for Theological Reflection (JCTR) in Lusaka, is credited with being the brain-child in championing the cause of cancelling Zambia’s staggering US $7.5 billion. However, because of the high incidence of corruption in the government, Jubilee-Zambia strongly believes that although Zambia qualified for some debt relief in December 2000 under the HIPC framework, there is an urgent need to ensure that the resources are properly utilised for the benefit of the poor.

Jack Zulu is Jubilee-Zambia‘s policy analyst. In several Workshops on «Debt Cancellation for Poverty Reduction», he has frequently emphasised that the call for «Debt Mechanism» serves two main purposes. He explains:

• «Firstly, it sends the correct signals to creditors, that we are determined to address the issue of poverty in our country in a holistic and open approach for the betterment of the poor majority. It will also reinforce the principle of strategic partnership between civil society and the government, which is key to sustainable human development.
• «Secondly, and more importantly, the results of Jubilee-Zambia‘s opinion poll in 2000 and 2002, indicate that many Zambians strongly believe that if the government is left alone to manage debt relief resources, then these resources will not reach the poor».

Ellyne shares similar sentiments with Zulu, and calls on civil society to act in partnership with the IMF and the World Bank to ensure that there is «an effective monitoring programme for the implementation of how to use HIPC money. The IMF does not want to interfere by monitoring the HIPC funds received by the Zambian government, but it is up to the government to ensure that the money reaches the intended goals. Civil society and the donor community are supposed to complement each other even if they operate at different levels».

Current situation

Describing the current debt relief situation, Zulu says that as a result of the enhanced HIPC Initiative and other on-going debt relief programmes, Zambia’s debt servicing payments for the next twenty years will be reduced considerably. In the absence of any debt relief, Zambia would have been paying an average of US $354 million in debt servicing between the period 2000-2019. But with HIPC and traditional relief, the average annual debt servicing over the same period will be greatly reduced.

In 2001, the Zambian government paid US $116.5 million in debt servicing, but without the HIPC debt relief, debt servicing during the same period would have been US $606 million.

Zulu is however concerned that HIPC has failed to tackle some of the main causes of the current debt impasse in Zambia. For example, it does not address the unfair terms of trade at international markets, and the heavy agricultural subsidies in Western markets which tend to make Zambia’s primary commodities uncompetitive.

He proposes an alternative to HIPC relief. External funding to Zambia should be provided in the form of grants with no stringent conditions attached. Furthermore, he calls on the industrialised countries to urgently institute structural and policy reforms in order to facilitate the access of Third World exports to international markets at competitive prices.

• Moses Chitendwe, Zambia, May 2003 — © Reproduction authorised, with usual acknowledgment