ZAMBIA: UK's Marshal Plan brings debt relief, more aid

JOHANNESBURG, 9 Feb 2005 (IRIN) - Zambia is to benefit from Britain's new 'Marshall Plan' for Africa through a new debt-relief and aid package totalling £190 million (US $352.4 million).

The United Kingdom's secretary of state for international development, Hilary Benn, announced the package while visiting Zambia on Tuesday.

The UK Department for International Development (DFID) said in a statement that "Benn pledged to cancel all of Zambia's remaining bilateral debt to the UK, once the country reaches completion of the Heavily Indebted Poor Countries' (HIPC) initiative by demonstrating progress in tackling poverty".

"Zambia is expected to reach this point in spring 2005, and will benefit from bilateral debt relief from the UK to the value of an expected £127 million [$235 million]," the department said.

DFID spokeswoman Amanda Kemp stressed that Benn's pledge related only to the debt Zambia owed the UK, and was not linked to any multilateral debt relief Zambia would receive from the World Bank or International Monetary Fund upon reaching the HIPC completion point.

"Benn also confirmed that the UK will provide £60 million [$111 million] of poverty reduction budget support for Zambia over the next three years. Rather than funding disparate aid projects, this investment will be paid directly to Zambia's national budget - helping the government to better plan its long-term spending in areas such as health and education," DFID added.

Kemp noted that "putting aid money through the [national] treasury" had been found to be "more effective" than supporting individual aid projects in a country, "as long as country has a Poverty Reduction Strategy Paper - and Zambia does".

"The debt relief certainly is linked to [Chancellor of the Exchequer Gordon] Brown's 'Marshal Plan for Africa', and so is the additional aid of £60 million in budget support," she pointed out.

Brown's plan aims to stimulate development and reduce poverty in Africa through a series of bilateral and multilateral debt cancellations for poor countries. The chancellor has been actively lobbying developed countries and the Bretton Woods institutions to gain support for the initiative.

Benn noted that although Zambia had made significant progress in reducing poverty, "when one child in six does not even reach primary school age, there are still challenges to be faced".

"It is vital that the international community provides support, and that is why the UK is committed to cancelling all of Zambia's remaining bilateral debt owed to the UK, and will provide additional aid," Benn was quoted as saying. "We will also take the opportunity of our G8 presidency this year to push the case for more and better aid, debt relief and real progress on fairer trade for the whole of Africa," he added.

Zambia has an external debt of $6.5 billion, of which $3.8 billion would be written off once the HIPC completion point is reached.

Many countries still had to choose between servicing their debt and investing in health, education, infrastructure and other necessary areas, to allow them to attain the UN's Millennium Development Goals. Although many donors, including the UK, provided 100 percent bilateral debt relief to the world's poorest countries, DFID noted that in practice only 50 percent or less of multilateral debt was being cancelled.

This was the reason the UK had announced that it would, in addition to its bilateral debt write-off and increased aid, pay 10 percent of the multilateral debt service owed by Zambia to organisations like the World Bank and the African Development Bank until 2015.

"Our objective is to put the multilaterals in a position to match the efforts of many bilateral donors and provide 100 percent relief on existing debts, " the department said. "We therefore hope that other countries will join us in paying their share."

[ENDS]