The United States has cancelled over 30 million dollars in debt that Zambia was expected to pay this year. Debt relief is the option a number of African countries are pursuing because they cannot pay what they owe to developed countries and multilateral institutions.
The debt cancellation agreement was signed in the Zambian capital of Lusaka Monday by US Ambassador to Zambia, Martin Brennan and Zambia’s finance minister Ngandu Magandi.
The agreement cancels $34 million that was due for payment between January 2001 and March 2003. The US embassy says the government is determined to eventually cancel the entire half a billion dollars that Zambia owes it.
Zambia owes the international community over 7 billion US dollars. Despite constant servicing over the years, the debt has remained constant because the country continues to borrow to finance most of its programs.
Zambia’s debt - like that of many countries on the continent - is said to be unsustainable. As a result non-governmental organisations both on the continent and outside have been calling for debt cancellation.
In an apparent response to these calls, the international community of creditor nations decided on a formula to reduce or cancel Africa’s debt. The result was the Highly Indebted Poor Countries initiative or HIPC.
Under HIPC participating countries are expected to demonstrate commitment to good governance and good economic policies. Specific targets are set for the country to attain before debt relief can be given.
Zambia failed to meet some of these requirements resulting in its inability to access debt relief of up to 3.8 billion dollars, the equivalent of half what it owes the international community.
The Zambian government attributes the country’s failure to meet the requirements to factors such as the unexpected decision by the Anglo American corporation to pull its investment out of one of Zambia’s biggest mines.
It has also cited poor prices for the country’s minerals on the international market and drought that has resulted in the government diverting its meagre resources to food relief.
The Zambian government says some creditor nations understand the situation and that they are expected to meet in the next few days to offer Zambia some relief.