A Human-needs Based Debt Sustainability Analysis: a Challenge for Zambia

In this report, Jubilee Zambia presents a proposal of a set of guides on the development of a human-needs based Debt Sustainability Analysis Framework (DSA.). This proposal is formulated with a view to stimulate dialogue at national and international levels on the need to develop a human-need based framework on Debt Sustainability Analysis for Zambia. Jubilee Zambia believes that a better and effective DSA framework is one that primarily promotes and upholds sustainable human development in poor countries such as Zambia. In developing this proposal, Jubilee Zambia recognises that the country has made significant achievements in attaining the HIPC Completion Point in early 2005. On one hand, this process has resulted in appreciable debt relief, both from bilateral and multilateral creditors. But on the other hand, research has shown that the IMF's DSA approach upon which debt relief was delivered has serious limitations. Zambia faces numerous social and economic challenges, such as high poverty levels and the HIV/AIDS pandemic. In addition, the experiences of other countries such as Uganda and Gambia continue to show the vulnerability of poor countries to deeper external debt crisis. In view of this, a broader approach is proposed to address some of the limitations inherent in the IMF's DSA. The proposed debt sustainability based on essential needs approach provides an opportunity for the Zambian Government to make concerted efforts at reducing the debt burden whilst providing for the country's pressing development needs, especially if the country is to make important strides towards attaining the Millennium Development Goals (MDGs). This approach rests on promoting economic development, which will nurture long-term stability and prevent continued future indebtedness in the country. In addition, the Zambian government must exercise prudent and coordinated borrowing from the international community to ensure that resources are applied effectively. Contractions of loans for the sake of it must be avoided and the law empowering the Minister of Finance and National Planning to contract debt without Parliament's approval must be reformed. The proposed human development approach involves the following steps: 1. Determine the Resource Envelope available to the Government, excluding grants. Experience has shown that grants tend to flow irregularly as disbursements are subject to delays and dependent upon adherence to certain conditionalities. Thus, inclusion of grants may overly estimate the actual size of the resource envelope available to Government. 2. Costing the Human Development Expenditure based on the simple assumption that resources available to …