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Zambia

Volume 400: debated on Wednesday 26 February 2003

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To ask the Chancellor of the Exchequer if it is his policy that increased multilateral debt relief for Zambia be dependent on the privatisation of (a) the Zambia National Bank, (b) the power utility Zesco and (c) the telephone company Zamtel. [98586]

Multilateral debt relief for Zambia is provided through the Heavily Indebted Poor Countries (HIPC) initiative. Under the HIPC initiative a country receives interim debt relief on payments due when it reaches Decision Point and subsequently the debt is irrevocably cancelled at Completion Point. The UK supports this internationally agreed policy.To reach Decision Point and demonstrate its commitment to poverty reduction, a country must prepare an Interim-Poverty Reduction Strategy Paper (PRSP). To reach Completion Point it needs to develop a full PRSP, and usually make progress in implementing it for one year.The PRSP is drawn up by the country, with the participation of civil society, to show how debt relief and other resources will be targeted on reducing poverty. The country must also be on track with its IMF programme for which there will be a range of conditions, for example on macro-economic stability or public sector management. The IMF is committed to ensuring that the social impact of key macro-economic reforms is analysed to ensure that reforms are designed appropriately and negative consequences addressed. For example, the IMF carried out an analysis of the possible social impact of the privatisation of the Zambia National Bank and the Zambian Government plans to develop a strategic plan that will consider the future of rural branches and design an appropriate institutional structure for rural services, which might include seeking technical and financial assistance from donors for the purpose.Hence to reach Completion Point countries must demonstrate a commitment to poverty reduction and economic reform by meeting key conditions (or Completion Point triggers). These conditions may include privatisations or reforms that address the effectiveness and financing of parastatal companies, and thus support the country's strategy for reducing poverty.For Zambia the key conditions, for multilateral debt relief through the internationally agreed HIPC initiative, include progress in combating HIV/AIDs, education and health sector reform along with macroeconomic and structural reforms. The Completion Point triggers in relation to the Zambia National Bank and the power utility Zesco require the issuance of international bidding documents for the sale of a majority (controlling) interest. The telephone company Zamtel no longer has a domestic monopoly, and while the sale of a substantial share is part of Zambia's overall poverty reduction strategy it is not a Completion Point trigger.