PRESS STATEMENT
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Thursday 25th August 2005 With the attainment of the HIPC Completion point in April this year, Zambia is now faced with a great challenge of comprehending the meaning of debt sustainability. The country’s 5 years’ experience of implementing the HIPC initiative continues to show the dangers of basing debt sustainability on a narrow economic and financial definition. Of serious concern are the facts that the Government has continued to contract new loans using the current weak loan contraction system and within the IMF and World Bank designed lending framework. These are the same reasons why countries such as Uganda that have reached the HIPC completion point more than one time have fallen in deeper debts again. For instance, Government has borrowed outside the HIPC arrangement up to US$644.25m from the World Bank and US$581.38m from the IMF between the period 2000 and 2005. Alongside these new borrowings, Zambia is expected to continue servicing debts at an average of US$120m per annum for the next five years. A specific example can be drawn from Government expenditures for the year 2005. This year, debt servicing is expected consume about 23.5% while debt relief savings will only amount to 10% of Government total annual expenditure (10% is equivalent to Government budgetary allocation to health). This situation implies that Zambia will continue to spend twice as much on debt service than on health even after reaching the HIPC completion point. Further, an estimation of 17% of government expenditure on debt service in 2007 is too high for a country that can hardly provide basic health and education services to its citizens. It is for this reason that Jubilee-Zambia has now embarked on a campaign to advocate for a better and effective framework that strongly emphasis the inclusion of human-needs and country-specific realities in measuring whether or not a country’s debt situation is sustainable. The proposed model can only succeed when it is fully supported by positive reforms of making the loan contraction process more transparent, participatory and accountable to the people and their representatives such as Members of Parliament and local Councillors. The proposed model also calls for governments in poor countries such as Zambia to take control of designing and implementing external debt management system. This argument is based on the observation that poor countries will never come out of the debt crisis as long as the responsibility of finding solutions is left in the hands of creditors. The shortfalls of the HIPC initiative, uncertainties around the G8 proposals of the Gleneagles meetings in Scotland and the anticipated response from the World Bank and IMF meetings in September this year must serve as the main reason why it is now time to declare external debt management an urgent national responsibility. In the new proposal “Human-Needs Based Debt Sustainability Analysis”, Jubilee-Zambia is emphasizing the following 3 cardinal considerations in measuring a country’s debt sustainability situation: 1. The framework must be guided by the basic rule that when the projected flow of debt service exceeds the projected net revenue, a country is unable to service external debt and the debt burden should be declared unsustainable 2. Sustainability should take into account the overall picture of financial constraints and budgetary resources such as domestic revenues and liabilities 3. Resources for debt service must only be allocated after spending on key economic sectors especially social investment has been determined Jubilee-Zambia strongly believes that such as an approach not only gives the realistic picture of a country’s debt situation. But more importantly, it promotes national commitments to the fight against poverty, determination to attain the Millennium Development Goals (MDGs) and ultimately, engage in sustainable development processes. Based on these aims, Jubilee-Zambia urges all Zambians to support this advocacy campaign in order to protect the country from deeper debts and promote national responsibility in the management of debts and loans. We are also calling upon Government to use the HIPC completion point to immediately reform the systems on debt and loan management. A transparent, accountable and participatory loan contraction system will only succeed if political will is guaranteed and when Government is determined to build and retain the necessary human resource. Further, the national efforts will only be maintained when the international community truly revise their current debt sustainability approaches to suit the proposal centrally focused on sustainable development rather than sustainable debt situation. For further information, do not hesitate to contact us at the address given above. Thank
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