Mwanawasa calls for total debt relief

President Levy Mwanawasa has called on the international community to write off all Zambia's external debts.

"This debt is too gigantic to repay and we are spending all the money we are earning to pay these debts ... there is very little remaining to invest in useful sectors of education and health," Mwanawasa told news channel CNN last week.

In return for the debt cancellation, Mwanawasa was reported as saying that Zambia would give the International Monetary Fund (IMF) a country that promoted good governance, the rule of law and respect of human rights.

Mwanawasa's government has been under pressure from the IMF to cut spending in order to qualify for debt relief under the Highly Indebted Poor Countries (HIPC) initiative. Should Zambia reach the HIPC completion point, which has been postponed until December, it would be eligible for a US $2.8 billion write-off of its US $6.2 billion debt.

The Jesuit Centre for Theological Reflection (JCTR), one of the NGOs on the now disbanded HIPC Tracking and Monitoring team, said it supported Mwanawasa's call. "It seems unlikely that we are going to reach the HIPC completion point by December. Zambia's debt is unsustainable. Our concern now is what are we going to tell the civil servants, who had been promised a hike in their salaries next year," JCTR's Saul Banda commented.

Zambia's Civil Servants and Allied Workers Union has been at loggerheads with the government since February over a decision to impose a six-month wage freeze on the salaries of civil servants, who earn about $100 a month on average.

A UN Conference on Trade and Development (UNCTAD) report released last week said there was "increasing recognition" that, with many African countries struggling to service their debt while striving to reach the UN's Millennium Development Goals (MDGs), all the continent's debts should be written off.

The report, 'Debt Sustainability: Oasis or Mirage?', said Africa had received about US $540 billion in loans between 1970 and 2002. Despite paying back close to $550 billion in principal and interest, it still had a debt stock of $295 billion at the end of 2002.

The report argued that low levels of savings and investment, leading to high poverty and wretched social conditions, were among the biggest constraints on growth in low-income African countries.

If poverty is to be reduced by half by 2015, as called for by the MDGs, growth levels in Africa would have to at least double to some 7 to 8 percent annually for the next decade, according to UNCTAD.

A full debt write-off, however, would only be a first step towards restoring growth and meeting the MDGs. UNCTAD commented that the total debt cancellation would have to be followed up with increased official development assistance grants until the continent increased the level of domestic savings and investment required for sustainable growth.