APPENDIX 8
Supplementary letter from HM Treasury
The Committee asked for further details on Zambia's
debt service payments following on the IMF's decision to increase
interim relief.
In December 1995, as part of an arrears clearance
operation to make Zambia current with its obligations to the IFIs,
the IMF approved a loan of US$1.3 billion (which accounts for
around one-third of the IMF's loans outstanding covered by HIPC
debt relief). This loan provided a long grace period, and as a
consequence repayments associated with this loan arrangement fall
due between 2001 and 2005.
As this grace period ended, the profile of debt
service payments to the IMF would have risen significantly in
2001. Coincidentally, 2001 was also the year HIPC assistance was
to begin. However, despite the substantial overall reduction in
the net present value of debt relief that the HIPC initiative
would have provided under the existing rules for interim relief,
the profile of prospective debt service payments was still a concern.
Following representations by the UK and others,
the IMF Board considered a number of options to reduce Zambia's
debt service payments further. As a result of these discussions
the IMF's rules governing interim relief were changed to allow
further frontloading of relief in exceptional circumstances. These
new rules, offering up to 75 per cent of final relief during the
interim period, rather than the old ceiling of 60 per cent, were
applied in Zambia's case.
As I explained to the Committee, these changes
mean that the IMF have estimated that Zambia's debt service payments
will now be significantly lower over the next three years. Under
the enhanced HIPC Initiative Zambia will see its debt service
payments lowered by $216 million a year on average over the period
to 2019 as a result of traditional debt relief and enhanced HIPC
assistance (including the further front-loading of interim relief).
1 March 2001
Zambia's Debt Service Payments
(in millions of US dollars)
|
| Year | 2000
| 2001 | 2002
| 2003 | 2004
| 2005 | 2006
| 2007 | 2008
| 2009 | 2010
|
|
| Before Debt Relief | 386
| 606 | 599
| 588 | 554
| 501 | 233
| 262 | 283
| 294 | 289
|
After HIPC (with
additional front-
loading)
| 169 | 158
| 148 | 151
| 211 | 202
| 96 | 121
| 130 | 137
| 135 |
| Savings | 217
| 448 | 451
| 437 | 343
| 299 | 137
| 141 | 153
| 157 | 154
|
|
| Year | 2011
| 2012 | 2013
| 2014 | 2015
| 2016 | 2017
| 2018 | 2019
| | |
|
| Before Debt Relief | 295
| 282 | 270
| 271 | 286
| 278 | 267
| 266 | 275
| | |
After HIPC (with
additional front-
loading)
| 139 | 121
| 101 | 101
| 109 | 119
| 127 | 135
| 144 | |
|
| Savings | 156
| 161 | 169
| 170 | 177
| 159 | 140
| 131 | 131
| | |
|
Source: Zambia's Decision Point Document, 20 November 2000;
table 14.
I attach the Press Release and News Brief from the IMF on Zambia's
debt service relief [Not printed].
Yours sincerely
Stephen Pickford
| 
