Dáil Éireann díospóireacht -
Tuesday, 12 Dec 2000

Vol. 528 No. 1

Written Answers. - Third World Debt.

Bernard J. Durkan

Ceist:

182 Mr. Durkan asked the Minister for Finance if his attention has been drawn to the fact that the International Monetary Fund proposals in respect of debt repayments will leave Zambia in a worse off position; and if he will make a statement on the matter. [29566/00]

Minister for Finance (Mr. McCreevy)

I am aware of the difficult situation faced by Zambia where, despite the application of the terms of the heavily indebted poor countries – HIPC – initiative, repayments on loans taken out during the 1990s and which are due to start next year would have lead to an increase in its debt repayments.

I have expressed my concern to the Bretton Woods institutions, through the Irish representatives at both the World Bank and the International Monetary Fund boards, that Zambia would still face an increase in debt service payments even after receiving full debt relief under the current terms of the initiative. I have stressed that Ireland will support any action necessary to ensure that Zambia's debt service obligations are reduced, and that account be taken of the capacity of Zambia to service debt post-HIPC.

I am pleased to note that the International Monetary Fund has now recognised the exceptional circumstances facing Zambia and on 1 December 2000 changed the rules governing IMF assistance under HIPC to permit the fund to accelerate debt relief for Zambia. This action was taken to address a hump in the country's total debt service payments resulting from Zambia's clearance of IMF arrears in 1995. It will buy some time to more fully address the problem of the hump in debt service.

As a result of the IMF board's decision, and coupled with decisions by other creditors under the HIPC framework, Zambia's debt service payments in each of the next three years will now be lower than this year. In the absence of HIPC assistance, Zambia's debt service would have more than doubled next year.

The Deputy will recognise that the IMF and World Bank are constrained by the terms of the HIPC initiative which reflect the willingness of donor countries to meet the cost of whatever measures are to be taken.

Debt relief, however, is not the whole picture. Fresh donor assistance to Zambia is already several times more than debt service. It is expected that overall net transfers to Zambia will rise by about $100 million next year to some 15% of GDP. The IMF too will be putting in more than it is taking out.

The combination of accelerated debt relief and increased aid is expected to allow Zambia to raise social spending from $150 million this year to around $250 million in next year's budget. And that, more than the precise pattern of debt payments, is what matters most.

However, I can assure the House that I will continue to work for the maximum possible degree of generosity to be shown toward Zambia and for the HIPC initiative to be implemented so that it achieves it original objective of giving the countries concerned an exit from the burden of unsustainable debt.