Unsuccessful, undemocratic and unfair? How IMF and World Bank policies have undermined Zambia

At independence, copper-rich Zambia seemed set to become one of sub-Saharan Africa’s richest countries. Today, after almost three decades of continuous intervention by the World Bank and the International Monetary Fund (IMF), it is one of the poorest. Externally-imposed policies have included trade liberalisation, removal of legal restrictions on prices and amount of competition between businesses (deregulation), privatisation, subsidy cuts, reducing public-sector job opportunities and cuts in salaries. The consequence of this - a spiralling debt, very slow economic growth, destruction of key industries and social crisis – needs urgent attention to stop the situation from further deterioration.

A report from the World Development Movement (WDM), written by Zambian economic policy analysts, records Zambia’s economic decline as a result of IMF-World Bank policies. Zambia’s long association with the IMF began in the 1970s when, like many other developing countries, the adverse effects of the oil crisis – with rapidly rising import prices and equally rapidly falling revenue from export of local commodities – required it to seek international help. Economic policies authorised by IMF and World Bank were initiated in return for loans.

Privatisation of government enterprises and services was one of the strongest features of this policy and was claimed by the World Bank as the most successful in sub-Saharan Africa. But, during the 1990s poverty and child mortality increased, primary school enrolment fell and Zambia dropped to a very low rank (163rd) on the UN’s Human Development Index. The copper mining industry – a state concern that generated sufficient wealth to provide workers with health care, safe water, electricity, sewerage, garbage collection and street lighting – has been virtually destroyed. Jobs and welfare schemes previously run by government-owned enterprises have not been continued by private companies.

Trade liberalisation has been disastrous for Zambia’s manufacturing sector. Lowering of tariffs on textiles has led to increased imports of cheap, second-hand clothing from industrialised countries and the collapse of all but a handful of local manufacturers. Removal of subsidies on maize and fertiliser –a condition of structural adjustment loans –has led to a slowing down of economic growth of the agricultural sector. Even the World Bank now acknowledges the poor record of agricultural liberalisation. Several small farmers were impoverished and about half the population are now classed as undernourished.

The authors show that:

• The IMF has failed to achieve one of its core aims for intervention – to curtail Zambia’s trade deficit (i.e. an excess of imports over exports): in the 1990s this grew from around -5 % of gross domestic product (GDP) to between -9 and -15 %.
• Some failing government-run enterprises have become efficient private firms but the majority of privatised firms have collapsed due to loss of assets.
• Rules imposed on least developed countries are waived for industrialised states: while the IMF has insisted that Zambia’s budget deficit (i.e. an excess of government spending over income) must not exceed 1.55 per cent, the USA and UK have budget deficits well in excess of three per cent.
• The much-promoted Heavily Indebted Poor Countries initiative is set to increase external control of Zambia’s economy: in order to qualify for debt relief, Zambia must introduce further privatisation and cuts in public spending.
• Incorporation of local people’s viewpoints into Zambia’s Poverty Reduction Strategy Paper does not extend to macroeconomic policies: these continue to be shaped by IMF via its Poverty Reduction Growth Facility (a low interest loan scheme).
• The IMF has ignored a parliamentary vote opposing privatisation of Zambia’s national commercial bank and has forced the government to press ahead in return for further debt relief.

WDM calls for:

• the immediate cancellation of Zambia’s debt
• the IMF and World Bank to pay greater attention to domestic circumstances in impoverished states
• developed states to allow countries like Zambia to develop genuinely home grown and pro-poor policies.

Zambia is still in the midst of a debt crisis with no prospect of a long term solution or progress towards achieving the Millennium Development Goals. Power must be taken from unaccountable officials and industrialised nation ministers and given back to national governments, parliaments and peoples, for any significant changes to happen.

Source(s):
‘Zambia: Condemned to Debt’ World Development Movement (WDM) by Lishala C. Situmbeko and Jack Jones Zulu,April 2004 Full document.

id21 Research Highlight: 2 November 2004

Further Information:
Jack Jones Zulu
Jubilee-Zambia
PO Box 37774
10101 Lusaka
Zambia

Tel: +260 (0) 1 290 410
Fax: +260 (0) 1 290 759
Contact the contributor: debtjctr@zamnet.zm

Jesuit Centre for Theological Reflection

World Development Movement
25 Beehive Place
London SW9 7QR
UK

Tel: +44 (0) 20 7737 6215
Fax: +44 (0) 20 7274 8232
Contact the contributor: wdm@wdm.org.uk

World Development Movement

Other related links:
'The IMF and World Bank: undermining democracy and rolling back the state?'

'PRSPs investigated: structural adjustment in another guise?'

'World Bank and IMF agricultural reforms: contributing to famine?'

'Making debt relief work: the heavily indebted poor countries initiative'

Bretton Woods Project

'Impoverishing a continent: the World Bank and the IMF in Africa' from ELDIS

'Treacherous conditions: how IMF and World Bank policies tied to debt relief are undermining development' from ELDIS