Debt Relief in Zambia: A Report from Jubilee USA

March 1st, 2007

A Jubilee USA delegation traveled to Zambia in January to see the impact of recent debt relief in that country. Members of that delegation were in neighboring Kenya for the World Social Forum in January. They compiled a trip report outlining their observations. Excerpts of the report are given below.

Download PDF of the full report.

Excerpts from the Final Report of the Jubilee USA Network Delegation to Kenya and Zambia

January 19-31, 2007

“Poverty is human made, so it can be eradicated.”

– Emily Sikazwe, Women for Change Executive Director, Zambia

Background

Zambia is an impoverished country. More than 80% of the population lives under the poverty line – up from 58% in 1989. HIV/AIDS is widespread – with infection rates of greater than 20% in many areas. User fees have kept people from accessing health care and education. The compounds or slums of Lusaka face major sanitation problems. While we were in Zambia, fears of a cholera outbreak in the South were reported. Zambia is also a land of incredible natural and mineral resources, especially copper. Its biggest asset is undoubtedly its people.

Impacts of Debt Relief and Challenges

We went to Zambia to see the impacts of debt relief and to understand the remaining challenges Zambia is now facing. Zambia reached decision point in the Heavily Indebted Poor Countries (HIPC) Initiative in 2000, and then it reached completion point in 2005, qualifying the country for 100% debt stock cancellation of its IMF/World Bank debts up to the end of 2004 and end of 2003, respectively. Zambia’s debt cancellation was formally released in 2006.

When we visited, there were already some tangible impacts from the relief of 2006 – most notably, the decision to remove user fees at rural health clinics. But in our meetings with government officials, we learned that more specific uses of the relief will only become apparent in February 2007 when the Zambian government releases the first full budget year when new resources will be available to the government.

Debt relief works, but it’s not enough…On our first full day in Zambia, we drove three hours south of the capital Lusaka to a town called Siavonga, to witness the impacts of debt relief firsthand. After a long, bumpy ride through the Zambian countryside, we arrived at the Siavonga Rural Health Clinic.

As we toured the clinic, Grace Chibanda, a pharmacist, showed us the pharmacy, which was full of Anti-Retroviral and other drugs for malaria and other diseases. “Debt relief is a good thing,” Grace told us. “It is getting medicines for people who didn’t have it before.”

In April 2006, the Zambian government abolished so-called “user fees” in all rural health clinics in Zambia. This meant that while before costs may have deterred the poorest from coming into the clinic, now care was free. Nurses and doctors we talked with confirmed that they had seen an increase in patients since April.

It was good to see the reality of the impacts of debt relief firsthand and to know that debt relief is getting to many Zambians in need. At the hospital, we heard from the nurses and the hospital’s doctor that while debt relief is a good thing, there are still many challenges facing the Siavonga clinic and the health system in Zambia generally.

As the clinic’s only doctor on duty that day, Dr. Evanista Kunka, told us, the biggest remaining challenges include:

• A consistent drug supply: While they were stocked up that day, sometimes they would be out of drugs for months at a time.
• Improved Transport and improved road system: The hospital was not full that day because it is the rainy season and many people who are sick can’t get from the rural areas into Siavonga. Transportation is also needed to get doctors and nurses out to patients who are dying without access to care.
• Adequate pay for doctors and salaries: Doctors or nurses often leave Zambia because they can earn higher salaries in Namibia or South Africa. The “brain drain” of doctors and nurses is a serious issue facing all of Zambia.

What else has debt relief helped to achieve in Zambia? Jubilee Zambia feels that aside from the user fees being removed, the effects so far have not been felt widely amongst the population — yet. But the government plans to recruit 1500 teachers and 5700 health care workers by 2009. Also debt servicing has gone down in 2006 to be about $33 million – significantly lower than in the past.

Pamela Kasese Bwalya with the Ministry of Finance told us that they had only just gotten the relief from the World Bank and the African Development Fund in the past few months.

“Before debt relief, our debt stock was more than $7 billion – which was a tremendous drain on the resources of the economy. We were using money from our cooperation partners to service debt (other funders?). Now our debt stock will be less than $700 million. A lot of room has thus been created for resources to be used on social services. Most will go for health, education, poverty reducing projects, agriculture, and water/sanitation,” explained Bwalya.

Zambia has created its Fifth National Development Plan, which outlines its plans to meet the Millennium Development Goals and outlines key areas and sectors such as the above to which debt relief and aid resources will be devoted.

But is it enough? Our Finance Ministry contact explained that though debt relief is having and will continue to have direct impacts, the amount of new money freed up in 2007 will be only $40 million – and almost all of this is as a result of the IMF cancellation.

Why? According to Kasese Bwalya, since Zambia’s debt has been dramatically reduced, its debt is now considered to be “sustainable” under the IMF/World Bank’s most recent debt sustainability analysis. Practically, because of the way the MDRI (Multilateral Debt Relief Initiative) was set up with a dollar for dollar reduction in IDA (World Bank) resources for each dollar of debt relief, Bwalya said that Zambia will see no net impact – at least not in 2007 — from the World Bank cancellation. This was of great concern to us, and it reflects poorly on the design on the IMF/World Bank Debt Sustainability Framework.

It is a problem because Zambia clearly needs significant additional resources to reach the MDGs (Millennium Development Goals) – the Fifth National Development Plan projects an MDG financing deficit for Zambia of more than $750 million. In other words, debt relief helps, but much more is needed.

As Mulima Kufesika Akapelwa with the Catholic Center for Justice, Development, and Peace (CCJDP) told us, “The need is still too great compared to the monies we are receiving.”

Is debt relief getting to those who need it?

We were fortunate to meet with several extremely impressive organizations that are monitoring government and making sure that debt relief and aid gets to those who need it most. Among them is Civil Society for Poverty Reduction (CSPR), a network of 150 CSOs (civil society organizations), churches, trade unions, and others which tracks and advocates for increased government spending on poverty. It was originally set up to provide a platform for civil society to feed into the development of Zambia’s Poverty Reduction Strategy Paper (PRSP).

Jubilee Zambia and Civil Society for Poverty Reduction told us that government spending on social services reached 30% of the budget in 2006 – the highest level yet. It is a hopeful sign that the government is committed to getting debt relief resources to those that need it the most. But there are still problems – CSPR for instance is concerned that resources provided to the Zambian government in the form of direct budget support do not make it to the community level. Mulima Akapelwa with the CCJDP told us they were concerned that the government is not always specific about where funds released are going – they are told just that it’s going into health, education, and agriculture. And even more hopeful is the presence of robust civil society networks on the ground working to hold the Zambian governments’ feet to the proverbial fire!

Return to Top