Zambia Reaches Completion Point in HIPC Initiative: Obtains major debt relief from the AfDB
Tunis, 6 July 2005 –The Boards of Directors of the African Development Bank (AfDB) and the African Development Fund (ADF) today agreed that Zambia had effectively met the conditions and reached the completion point under the enhanced framework of the Heavily Indebted Poor Countries (HIPC) Initiative.
The Bank Group will, as a result, provide irrevocable debt relief of US$ 224 million in nominal terms. Zambia will be released from up to 80 percent of annual debt service to the Bank Group until the entire amount is delivered in July 2025.
In reaching their decision, the Boards recognized the fact that Zambia had satisfactorily implemented reforms agreed to when the country reached the decision point in December 2000. In line with the enhanced HIPC framework arrangements, Zambia had to fulfill the following conditions to reach completion point:
- Successful implementation of a complete Poverty Reduction Strategy Paper (PRSP);
- Maintenance of macroeconomic stability;
- Progress in meeting specific social sector targets;
- Satisfactory implementation of key structural reforms;
- Satisfactory implementation of two public expenditure management processes.
The Boards agreed that Zambia has met most of the 15 specific structural and quantitative triggers that were set at the decision point to monitor Zambia’s progress in meeting the completion point conditions under the enhanced HIPC framework. The three conditions which were not met include: the review and implementation of the piloting of an integrated financial management and information system; the restructuring of the international bidding in the privatization of the Zambia Electricity Supply Company (ZESCO); the process of privatization of the Zambia National Commercial Bank (ZNCB).
During the last three years (2002-2004), generally, the Zambian economy has improved as demonstrated by continued positive real GDP growth from 3.3 percent in 2002 to 5.0 percent in 2004, and reduction of inflation from 26.7 percent in 2002 to 17.5 percent in 2004. Government also facilitated private sector investment during that period, especially in the mining, agricultural, and tourism sectors.
In the social sector, Zambia continues to struggle against a rampant HIV/AIDS epidemic and to implement satisfactorily the Education sector reform.
Zambia is the 13th Regional Member Country of the Bank to reach completion point under the enhanced HIPC Initiative. Debt relief from the ADB Group to the country since December 2000 when it reached decision point – the first stage in the HIPC process – amounts to over US$ 61 million in nominal terms.