THE Economics Association of Zambia (EAZ) has observed that the rebasing of the Kwacha will restore confidence in the currency and the country’s economy. Government has announced its intention to have the Kwacha rebased that will see the currency drop three zeros..
And Standard Chartered Bank says the rebasing of the Kwacha will reduce the cost of doing business and bring about investor confidence in the economy.
The bank has observed that the Kwacha will be easy to convert after it has been rebased.
EAZ national secretary Gibson Masumbu says ther is little confidence attached to a high denominated currency, which is often associated with poor macro-economic performance and high inflation.
In an interview on Tuesday, Mr Masumbu said a currency with too many zeros creates problems in accounting, statistical records, payment systems and cash transactions.
He said a high denominated currency is normally rebased for economic reasons such as an improvement in economic condition or in payment systems where paper money transactions are often reduced significantly.
Mr Masumbu said EAZ believes that this is an opportune time to rebase the currency considering the economic strides the country has achieved in the last six years.
Mr Masumbu cited the country’s economic stabilisation after three decades of stagnation to sustained growth of six percent, inflation below 10 percent and a positive trade balance.
He said rebasing in theory has no effect on the economy because it is introduced to make commercial calculations easier and cheaper.
“There is a chance of restoring the confidence of the currency but we must be mindful that in the initial stages, it may impact on inflation as rebasing creates money erosion. People view the new currency as being strong especially in relation to foreign currency,” Mr Masumbu said.
Mr Masumbu said it is important for people to get the picture right as they re-adjust with time.
He said the EAZ sees a challenge with people in rural areas who participate in the domestic economy and may take time to understand rebasing and its implications on pricing.
Finance Minister Alexander Chikwanda on Monday announced the decision to reduce the unit of the local currency and re-introduce the Ngwee coins on the money market to improve trading efficiency.
Meanwhile, Standard Chartered Bank says the rebasing will further result in significant efficiency gains associated with reduced transaction times and elimination of costs of customising financial systems.
Bank managing director Mizinga Melu said the bank welcomes the rebasing of the Kwacha because the development will not change the value and purchasing power. She said this is the best time to rebase the curency when the country is witnessing a single-digit inflation rate.
“We believe that it will greatly reduce the inconvenience and the risks that are associated with carrying large amounts of money,” she said.
Ms Melu said this during the Chinese New Year dinner on Wednesday in Lusaka.
She said the banks will work with Government to sensitise the masses on the significance of rebasing the Kwacha.
Ms Melu also welcomed the revision of the minimum capital requirement to K104 billion from K12 billion for commercial banks, saying a highly capitalised financial sector will result in the commercial banks having stronger balance sheets.
“We have in the recent past supported policies that are aimed at reducing the interest rates in Zambia. We believe that this will stimulate further growth in the economy and will consequently create more wealth and reduce poverty,” she said.
Ms Melu also said Africa-China trade corridor is set to become one of the most important global economic developments in the future.
She said the trade corridor is a massive opportunity for Zambia as it is generating new businesses, jobs and boosting domestic growth.
At the same function, Chinese Embassy commercial consular Chai Zhi Jing said trade between Zambia and China stood at about US$3 billion as at November last year, adding that China will remain a key partner in Zambia’s economic development.
[Daily Mail]