Today, in the final part of my Discourse on the IMF and third world nations, we will be looking at the case study of a nation hurt and helped by the IMF – Zambia.
Case Study: Zambia
The issue of indebtedness and its dire consequences can be seen vividly in any of the highly indebted poor nations around the world. Each nation has its own unique story filled with similar marco issues and eerily similar
linkages. In 1990, Zambia took on an IMF program for debt repayment that would later lead to the death of 26 Zambian citizens and an attempt at usurping the power of President Kenneth Kuanda. The program required Zambia to end food subsidies for families and allow for the market to take over pricing foodstuffs throughout the country. Prices dramatically rose, causing riots, violence, and eventual death.
linkages. In 1990, Zambia took on an IMF program for debt repayment that would later lead to the death of 26 Zambian citizens and an attempt at usurping the power of President Kenneth Kuanda. The program required Zambia to end food subsidies for families and allow for the market to take over pricing foodstuffs throughout the country. Prices dramatically rose, causing riots, violence, and eventual death.As of the end of 2007, Zambia’s external debt was priced at $2.596 billion, which has likely increased with the recent economic hardships throughout the world that have hit nearly every nation. How did Zambia get to such high levels of external debt? Much like other third world nations, it began in the 1970s. Zambia was actually one of the most economically developed African nations before the 1970s.During this decade, however, Zambia was hit hard by an increase in the price of oil and a decrease in the price of exports, which caused the country to have a relative decrease in overall income. This decline in overall income, coupled with loans that were seeing increasing inflation rates, began what would begun a long, sustained relationship with the IMF for Zambia to attempt reduce its debt burden. The country, similar to other HIPCs, still has a significant amount of external debt that it faces even after years of IMF involvement.
In the late 1980s, the IMF began to introduce more significantly its SAPs to indebted nations seeking financial help. From the beginning of the SAP era till the HIPC Initiative that the IMF has introduced as of late, the country was required to privatize many markets, liberalize trade and remove protective barriers, make cuts on various subsidies, and freeze wages to its public sector. For example, according to Bradshaw and Huang, Zambia, in December 1986, saw “maize prices increase 120% following an IMF mandate that also ended food subsidies (which were later restored).”
One of Zambia’s main industries hit during the 1990s, due to SAPs, was the textile industry.…
