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Additionally, there has been substantial reduction in the overall stock of external debt. “Preliminary information indicates that the country's external debt stock stood at $1.5 billion as at end of December 2006, a reduction of 65 percent from the end of 2005 stock of $4.5 billion.” It is worthwhile to note that this on the other hand represents a rise of over 200 percent when considered along side the debt stock of $502 million as at July 2006.
What are the remaining challenges the country faces?
Zambia is currently facing four main challenges:
FIRST, there is a new generation of debt crisis which directly threatens the benefits of debt cancellation and stands in the way of attainment of the MDGs. This is clear in something Zambia is experiencing at just this moment — the impact of the Vulture Funds! Commercial debt creditors like Mr. Michael Sheehan and his company Donegal International are preying off the benefits of debt relief from impoverished countries like Zambia that now find they must be paying huge amounts of money on old debts, even though most debts have been cancelled!
Campaign efforts to shame Sheehan into withdrawing his vulture tactics probably won't bring about much change. But campaigns to get the G8, World Bank, the IMF and other major actors to prevent such harmful tactics must be stepped up. Otherwise, the relief experienced by poor debtor countries will be short-lived!
SECOND, Zambia is going back into debt again, and at a very disturbing rate! Headlines in the local newspapers regularly tell us that "Zambia Lands Big Money," or "China Gives Zambia Many Millions." Well, this "big money" or "gifts" are often not coming by way of grants but by way of loans.
Perhaps highly concessional loans to be paid back over many years, with little interest. But they are still loans, going into the debt side of our national accounting ledgers. Between July 2006 to December 2006 external debt rose from $502 million to $1.5 billion. Through the struggle and sacrifice of the HIPC era, Zambia dropped from a total debt of over $7 billion to around $500 million. But in the space of six months (July to December 2006), Zambia's debt stock grew by over 200 percent, pushing us back beyond the $1 billion-mark.
So campaign efforts are needed for two things: (1) demand for more grants and fewer loans, and (2) more openness about the quality and conditions of any new loans.
THIRD, there is need for greater transparency in the use of resources freed up by debt cancellation.
Going through the turmoil and trials of the HIPC arrangements — e.g., wage freezes, budget austerities, etc. — Zambian citizens were promised better services in health and education because money would no longer be diverted to servicing debts.