France on Wednesday joined other Western donors and cancelled 100% of Zambia’s bilateral debt totaling €173-million.
The cancellation followed Zambia reaching the Highly Indebted Poor Countries Initiative (HIPC) sponsored by the International Monetary Fund and World Bank in April 2005.
Under this economic prescription, often described as too harsh for poor countries, Zambia qualified for two-thirds cancellation of its $7,1-billion multilateral debt owed to the IMF, World Bank, African Development Bank (ADB) and other western donors.
As a result of stringent economic reforms, Zambia has since been the recipient of more goodwill, and is receiving debt relief and direct budget support from Western donors following completion of the HIPC initiative.
This has allowed the cash-strapped government to make huge savings in hard currency and increase social sector spending on poverty reduction programmes.
It has also boosted the country’s credit rating and investor confidence, further strengthening the national economy.
Last week, Japan and the IMF cancelled all of Zambia’s foreign debt and the World Bank and ADB are expected to do the same in January 2006.
The Paris Club group of creditor nations cancelled Zambia’s foreign debt in May. To this end, the country’s total foreign debt stock is expected to drop to $500 000.
Zambia is also among the 38 poor countries expected to receive total debt cancellation from wealthy G8 nations.
Cancellation of the foreign debt has contributed significantly to the strong performance of the Kwacha, the local currency, against major currencies in recent months.
High demand for copper by India and China and favourable world prices have further boosted copper production — triggering a significant inflow of foreign exchange.
The Southern African country’s struggling economy has recorded positive growth for the fourth consecutive quarter and is expected to remain buoyant according to the Central Bank. – Sapa-DPA