## Press Release: IMF and World Bank Support US$3.90 Billion in Debt Service Relief for Zambia

_IMF News, April 8, 2005_

## Source details

**Canonical URL:** [Press Release: IMF and World Bank Support US$3.90 Billion in Debt Service Relief for Zambia](https://www.imf.org/en/news/articles/2015/09/14/01/49/pr0580)

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## Bibliographic details
- Published: April 8, 2005

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### Summary of Relief and Financing Commitments
- Debt relief under the enhanced HIPC Debt Initiative from all of Zambia's creditors will surpass US$3.9 billion over time (or US$2.5 billion in net present value (NPV) terms as of the end of 1999).
- IDA will provide debt service relief under the enhanced HIPC Debt Initiative amounting to US$885.2 million to be delivered from 2001 through 2020.
- The IMF will provide debt relief of SDR 468.8 million (equivalent to US$602 million) in NPV terms on payments falling due to the IMF during 2001-08.
- Remaining bilateral and multilateral creditors are expected to provide their share of relief required under the enhanced HIPC Initiative.

### Debt Sustainability Metrics and Projections
- Debt relief was calculated to bring the NPV of debt-to-export ratio down to the HIPC threshold of 150 percent at the decision point.
- Debt-to-export ratios:
  - 174 percent in 2003
  - 140 percent in 2004
- The ratio is projected to decline steadily thereafter.

### Macroeconomic and Poverty-Reduction Context
- Zambia reached the completion point under the enhanced HIPC Debt Initiative and is the 17th country to reach its completion point under the enhanced framework.
- Since the decision point, real GDP growth averaged 4.6 percent a year.
- Fiscal and public finance developments in 2004:
  - Domestic borrowing reduced by more than 4 percentage points of GDP from the previous year.
  - Wage bill held to 7.8 percent of GDP.
  - Revenues strengthened by 0.5 percent of GDP.
  - Other expenditures were trimmed.
- Inflation remained well above the low single-digit range targeted at the decision point, reflecting an initial lack of fiscal support for the programmed lowering of inflation.

### Programmatic and Policy Actions Taken to Reach the Completion Point
- Zambia finalized and adopted a full PRSP covering the period 2002-04; the period covered was extended by one year to coincide with the Transitional National Development Plan (TNDP).
- A new PRSP will be developed during 2005 alongside a new National Development Plan for the period 2006-2010.
- Specific measures and reforms implemented:
  - (i) Integrated HIV/AIDS awareness and prevention programs in the pre-service and in-service programs for at least 10 key ministries.
  - (ii) Strengthened basic health services for the poor, including implementation and scaling up of an action plan for malaria.
  - (iii) Improved availability of and access to education by increasing the starting compensation of teachers in rural arrears.
  - (iv) Improved public expenditure management systems by implementing a Medium-Term Expenditure Framework (MTEF).

### The HIPC Initiative: Rationale and Enhancements
- Purpose: create a framework for all creditors, including multilateral creditors, to provide debt relief to the world's poorest and most heavily indebted countries.
- Three key enhancements in 1999:
  - Deeper and Broader Relief. External debt thresholds were lowered from the original framework, making more countries eligible and increasing relief for some.
  - Faster Relief. Some creditors began to provide interim debt relief immediately at the "decision point," and the new framework permitted countries to reach the "completion point" faster.
  - Stronger Link Between Debt Relief and Poverty Reduction. Freed resources were to be used to support poverty reduction strategies developed through a broad consultative process.
- To date, 27 countries have reached their "decision points" and are receiving debt relief from all sources that will amount to more than $54 billion over time, and an average NPV stock-of-debt reduction of nearly two-thirds.

### Key Definitions (as provided)
- Completion point: when creditors commit irrevocably to debt relief.
- Decision point: precedes the completion point; debt relief is committed and begins on an interim basis.
- Net Present Value (NPV) of debt: the discounted sum of all future debt-service obligations (interest and principal); reflects the degree of concessionality of a country's debt stock.

*Source: Press Release: IMF and World Bank Support US$3.90 Billion in Debt Service Relief for Zambia (April 8, 2005).*

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## References

- [Zambia and the IMF](http://www.imf.org/external/country/ZMB/index.htm)
- [Burkina Faso and the IMF](http://www.imf.org/external/country/BFA/index.htm)
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- [PRESS CENTER](http://presscenter.imf.org/)
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_Source: https://www.imf.org/en/news/articles/2015/09/14/01/49/pr0580_