Posted on 27-5-2004

IMF/World Bank Destroying Zambia's Economy

Economic reforms forced on Zambia by the World Bank and International
Monetary Fund (IMF) in the face of fierce opposition from Zambia's
democratically elected Parliament and civil society have directly resulted
in making tens of thousands unemployed, destroyed key industries, caused
extensive social unrest and increasing poverty says a new report published
today by the World Development Movement (WDM).

Zambia: Condemned to Debt, charts how since the mid 1980s, sweeping trade
liberalisation, deregulation, dismantling of the public sector and massive
privatisation has led to the collapse of Zambia's economy, which combined
with the HIV/AIDS epidemic has left it with the lowest life expectancy of
any country in the world - 33 years.

WDM's report details how:

* Zambia dropped down the UN's Human Development rankings from 130 in
1990 (very poor but one of the most developed countries in sub-Saharan
Africa) to 163 in 2001.
* Since 1990 Zambia has had the worst performing economy of any
country in Africa that has not suffered large-scale conflict. A
'growth' rate of -1.7% per year.

The report, written for WDM by Zambian economists Jack Jones Zulu and
Lishala C. Situmbeko, details how trade liberalisation, a key plank of IMF
and World Bank economic orthodoxy, has been disastrous for Zambia's
manufacturing sector. Lowering of tariffs on textile products, and
particularly the removal of all tariffs on used clothes, led to large
increases in imports of cheap, second-hand clothing from industrialised
countries. The Zambian textile industry could not compete with these
imports, and the sector has all but vanished. There were more than 140
textile-manufacturing firms in 1991, this had fallen to just eight by
2002. Employment in the sector fell from 34,000 to just 4000.

In 2003 President Levy Mwanawa declared that the IMF's privatisation
programme "has been of no significant benefit to the country…privatisation
of crucial state enterprises has led to poverty, asset stripping and job
losses."

In 2002 the Zambian parliament voted to halt the IMF-demanded
privatisation of the Zambian National Commerce Bank. In return the IMF
threatened to withhold $1bn of debt relief. IMF resident representative in
Zambia Mark Ellyne said, "If they don't sell, they will not get the
money."

The authors conclude that: "Poverty and unpayable debt in Zambia have made
the country dependent on the International Financial Institutions and have
allowed these institutions a huge degree of control over economic policy.
For at least twenty years, this has involved a radical free-market
restructuring of Zambia's economy. Yet, contrary to the IMF's stated
purpose of short-term intervention and the World Bank's aim of
development, and despite the degree of control these institutions have had
over Zambia's policies, the country has suffered a long-term economic
crisis, including spiralling debt, and two lost decades of development."

WDM's Head of Policy, Peter Hardstaff said: "Without radical change, it
looks increasingly unlikely that Zambia will achieve most of the
Millennium Development Goals (MDGs) by the globally agreed target date of
2015. The IMF and World Bank's involvement in Zambia has been
unsuccessful, undemocratic and unfair. Yet, despite these failings, the
Bank and Fund are now more influential than ever through conditions
attached to the HIPC initiative. But more of the same simply cannot be an
option. Without radical changes to economic policy, the MDGs will become
yet another broken promise."

"It is time to cancel Zambia's debt and fundamentally rethink the role of
the IMF and World Bank. It is not acceptable that these institutions have
effective control over policy-making in countries like Zambia. Policies
need to be developed which are genuinely home grown alternatives that put
the Zambian people, especially the poor, first.