[stop-imf] Zambia asked to pay loans despite debt relief

[robert weissman]

Zambia asked to pay loans despite debt relief
Tue Aug 23, 2005 2:03 PM GMT162

By Shapi Shacinda

LUSAKA (Reuters) - Western lenders want Zambia to continue repaying its
foreign debt for the time being, dashing the nation's hopes that debt
relief would bring immediate savings for poverty reduction, a minister
said on Tuesday.

The request by the International Monetary Fund (IMF), World Bank and G8
rich nations follows their decision earlier this year to forgive part of
Zambia's external debt, estimated at $7.1 billion in May.

Finance and Economic Development Minister Ng'andu Magande said the IMF,
the World Bank and G8 had asked Zambia to continue servicing its foreign
debt despite a $3.95 billion debt relief package approved for the
country by the Fund in May.

Zambia would as a result save only 161 billion Zambian kwacha in 2005,
which would be used to clear arrears owed to road contractors, Magande said.

The government owes the contractors a total of 300 billion kwacha.

Magande said the lenders had asked to be paid until the IMF and World
Bank boards meet in September to approve the mechanics of the debt
relief plan.

"We have been told to be up to date with our debt servicing until the
IMF and World Bank boards approve debt cancellation modalities," Magande
told Reuters in an interview.

"We also expect that the two boards will come up with modalities for the
G8 debt relief plan," he added.

Zambia's President Levy Mwanawasa said in July that the IMF and other
lenders were slow in implementing debt relief promises, preventing the
country from putting its savings into poverty reduction, development and
the fight against the HIV/AIDS epidemic.

The IMF approved a $3.95 billion debt write-off for Zambia in May after
the country reached the completion point for the highly indebted poor
countries (HIPC) initiative -- a global plan to cancel debts owed by
some poor countries.

The G8 rich and industrialised nations also approved an additional 100
percent debt relief for Zambia in July, which the Treasury estimates
would amount to about $2.5 billion.

"The multilaterals have said they will consider giving us more grants
for next year and the future as reward for (continued) debt servicing.
The other creditors will refund us whatever we pay them after the IMF
and World Bank boards decide the final mechanisms for debt relief,"
Magande said.

Magande said that after the debt relief was delivered by lenders, the
ratio of Zambia's debt to gross domestic product (GDP) would decline to
10 percent of GDP from a high of 112.8 percent in 2003.

The country's ratio of debt service to export earnings would drop to
under 5 percent from 173.71 percent in 2003.