The Zambian Debt Dilemma: A Just Repayment Plan

by Jack B. Strauss, Jr.

Mr. Straus is an attorney living in Dallas, Texas. He previously worked in international finance.

This article appeared in the Christian Century, October 7, 1876, p. 855. Copyright by the Christian Century Foundation and used by permission. Current articles and subscription information can be found at This material was prepared for Religion Online by Ted & Winnie Brock.


If we as Christians are serious about justice, the time to talk about Zambia’s debt and interest dilemma is past. Zambia’s massive debt is contributing to its death. I hope our voices will be heard on the side of life.

Sometimes first impressions are surprisingly accurate: mine were. As happens with visitors to a new country my recent introduction to Zambia was the airport, with its huge, cavernous terminal. Yet I saw only a few employees and guards and virtually no passengers other than those of us who got off the flight from London. Many gift-shop shelves were empty -- a sharp contrast to American airport gift shops. Light bulbs had burned out and had not been replaced. The big clock centered high above the main lobby had stopped. I felt as if the terminal had been built in another era. Or maybe it had been built with the expectation that the country would grow and prosper. I later learned that both assumptions were correct.

I traveled to Zambia, a country of 7 million people in southern Africa, with World Mission Associates, Lancaster, Pennsylvania, as part of a small team of missionaries and businesspeople to see what, if anything, could be done about Zambia’s foreign-debt dilemma. We wanted to look at the problem from two sides. First, what could be done about the debt right now? Second, what could we do to help the small-businessperson succeed, become more self-sufficient, reduce dependency on imports and promote exports?

By international standards, Zambia’s foreign debt isn’t large -- between $4 and $5 billion. But on a per-capita basis the debt is one of the largest in the world. It is oppressive. Most of the money Zambia makes in foreign exchange goes right back to Western bankers, offering Zambians no chance to get ahead. Because of interest payments, funds that are essential for development leave the country. Roads go without repair for years, buses break down and can’t be fixed for lack of spare parts, gas stations are open but don’t have gas, the telephones may or may not work on any given day, and some farmers can’t afford to buy seed to plant. The nation’s economy is unquestionably decelerating because of this burden. It is not an overstatement to say that the choice may soon come down to feeding the people or paying the bankers.

How did this situation develop? During its glory days of copper mining in the mid-‘60s, Zambia was considered a good credit risk. Bankers aggressively marketed their money, since copper prices were strong and Zambia was one of the world’s leading producers. But the copper industry changed when fiber optics and other copper substitutes replaced copper wire, driving down the price. Both bankers and borrowers thought the situation wouldn’t last long, and bankers continued lending money, in the belief that prices would rebound. Though copper prices today are at a six-year high, they are still relatively low. Development in the agricultural industry is inadequate, and convincing people to leave mining areas for farms remains difficult.

Certainly mistakes were made. The bankers were too aggressive in lending money, and the Zambians were too eager to take it. Some of the money was mismanaged or stolen -- many Zambians won’t deny that -- yet the repayment problem remains. In spite of this, exporting precious foreign exchange from a poor nation to a wealthy one is wrong. While Western bankers see it as an economic issue or a profit-and-loss issue for their banks, that view misses the point. For Zambia, the transfer of funds is a justice issue.

The life of the average Zambian is slowly deteriorating. A widely respected pastor of a church in Lusaka, the capital, told me that in recent times riots and strikes have been occurring frequently -- at least once a week. A few days before I arrived, the postal workers went on strike to demand free transportation to their jobs. They got it. While I was in Lusaka the government said it would have to raise fuel prices, but the reaction was so negative that it backed off the next day. Officials apparently had learned a lesson from last year when they had raised the price of mealie meal -- the staple food for Zambians, made of crushed corn cooked in water -- and widespread rioting resulted.

One farmer explained his problem to me -- a problem that reflects Zambia’s dilemma in miniature. Last year he borrowed 3,000 kwacha (the Zambian currency unit) for growing corn. This year the rains stopped early and a drought covered his land. Consequently, his harvest brought him only 1,200 kwacha. He asked me, "How am I going to pay back the loan?" In one respect he is more fortunate than his country, for his loan is denominated in kwacha. Zambia’s loans are denominated in foreign currencies, usually dollars, and this situation is having a devastating effect. When I arrived in Zambia, $1 bought 16 kwacha. Two and a half weeks later it bought 20 kwacha. The principal of a $1 million loan would have gone up by 4 million kwacha, interest not included. The country’s economy is going backward.

Our group determined that the best solution to Zambia’s economic troubles would be a ten-year interest moratorium on its loans. The Zambians want to repay their debts, so a default was not considered. But in order to repay they need to keep all the development capital they can within the country. This requires time.

Recently the Club of Paris suggested that creditors of sub-Saharan nations consider lowering their interest rates to very reduced levels. But in fact, certain U.S. agencies are restricted by law from making loans at rates below their cost of funds. It would take an act of Congress to do what the Club of Paris suggested.

Another way for Zambia to escape its economic vise would be unilaterally to declare a debt-repayment moratorium, but a small country with a small debt would find it difficult to act by itself. Western countries would impound its foreign capital and freeze its bank accounts. The bankers would probably not willingly write off the debt, being blinded by profit margin concerns. The solution will have to involve politics: Western governments should pressure their banks to accept a ten-year interest moratorium. This will allow Zambia to get on its feet again financially, leaving precious capital in the country. And if we Christians are concerned about justice, we must pressure our governments to help countries like Zambia.

The other side of the debt solution involves helping people of Third World countries such as Zambia to become more self-sufficient. Few Zambians with whom I talked want a handout. They need help to get started, but they don’t want to rely on foreign giveaways for their support.

For the most part, the small-business-person in Zambia has been forgotten by relief organizations and government programs, with most aid going into large projects run by large companies. This seems to be primarily because the administrative cost of funding numerous small programs is too high for undertaking such a plan. Many people simply need a $25.00 or $50.00 loan to get started. They may be market vendors, street food-sellers, seamstresses or farmers. Yet they have an almost total lack of access to credit. For banks it becomes too expensive to make such small loans.

However, some microenterprise development programs are working in other countries. For example, in Bangladesh the Grameen Bank was created to loan up to $200.00 to small-scale enterprises. It now loans over $1 million per month, with a default rate of under 1 per cent.

Another organization that has met with success is the Trickle-Up Program, an independent, nonprofit organization based in New York City. It helps men and women in small-scale enterprises by providing a $100.00 grant for each business. The organization seeks to help people -- whom development planners usually overlook -- who can use their own skills and materials to sell to a local market. The Trickle-Up Program has started or expanded nearly 3,000 business enterprises.

Microenterprise development holds the greatest possibility and hope for the Third World poor. Properly structured and administered development banks or grant programs can have a major impact on the success of import substitution businesses. In addition, marketing African goods abroad could help the export side. If Third World people had a market for their goods and commodities, they could be more self-sufficient. Perhaps some who are concerned could put together a trading company to market African products aggressively in the U.S. SERRV, an ecumenical marketing organization associated with the Church of the Brethren and based in Maryland, is a good model. It currently markets handicrafts from about 200 producers in more than 40 countries. Producers receive an equitable share of the retail price, and numerous individuals throughout the world have the dignity of being gainfully employed.

One group of churches in Kenya has organized a central warehouse and distribution facility for handicrafts. It has representatives who travel around the country locating marketable products such as baskets, wood carvings and fine jewelry. By working closely with various groups and fostering accountability, it has successfully located reliable producers. The distributors are now shipping a fair amount of goods to buyers in Europe.

The week before I arrived at one Zambian village, a relief worker with a Western organization had just left. Because the rains stopped early this year he had been surveying the area in order to predict where the famine would hit so that his group could be prepared. His time would be better spent working on solutions to long-term economic problems. If interest payments were temporarily stopped, Zambia (and other countries like it) could take better care of its citizens and would need fewer relief dollars -- dollars often wasted on interest payments.

If we as Christians are serious about justice, the time to talk about the debt dilemma is past. We need to be involved now, and opportunities of many sorts abound. But in particular we must act on a policy level as prophets and consciences to our governments and businesses. Zambia’s massive debt is contributing to its death. I hope our voices will be heard on the side of life.