Zambia launches rebased currency
By Nawa Mutumweno – The new Zambia currency, Kwacha and Ngwee, has been launched with the Minister of Finance Alexander Chikwanda calling on the business community not to increase goods and services prices.
The new currency was launched at a colourful ceremony held at the New Government Complex in Lusaka on December 31, 2012.
Six notes with features such as the African Fish Eagle, Coat of Arms, Freedom Statue, trees and animals and four coins minted with a Coat of Arms, a bird, and animals depicting the country’s abundant wildlife and tourism potential make up the new currency, which became legal tender on January 1, 2013. It will circulate side by side with the old currency for six months up to June 30 to allow the public to completely adjust.
The rebasing of the Kwacha is meant to address the inflationary spirals which over the years have caused the currency to depreciate to intolerable levels which were not cost-neutral in terms of the economy.
The minister added that it is an internationally accepted practice to rebase a currency during the periods of low and stable inflation, adding that in the last five years, inflation has generally taken a downward trend in the country.
Mr Chikwanda dispelled assertions and misconceptions by some sections of society that the rebasing was a ploy by the new Government to bring unscrupulous people to book. It will instead lead to greater confidence in the currency and also simplify book keeping, accounting records and facilitate easier business transactions.
‘’The decision to rebase was further premised on Government’s conviction to restore the intrinsic value of our currency as a medium of exchange by bringing normalcy to the numeration of the local currency. Contrary to popular beliefs and misperceptions in some circles, it was not a gimmick to nab unscrupulous members of society because gimmicks tend to be short-term, unsustainable and often backfire,’’ he elaborated.
It has been clarified that the rebasing will neither bring about revaluation nor devaluation of the Kwacha with prices of goods and services remaining the same.
Meanwhile, Bank of Zambia (BoZ) governor Michael Gondwe announced that following the launch of the new notes and coins, the central bank has made available the currency in all banks and agencies in the country.
Sufficient security features have been embedded into the high value K100 notes (now dubbed KR100) to make them sufficiently different from the current note. BoZ had prior to the launch carried out a vigorous sensitization campaign. It was observed that the two notes could be confused by the public.
The launch was attended by senior Government officials, diplomats accredited to Zambia, officials from both the notes printing firm, Giesecke and Devrient GMBH of Germany, the Mint Company of South Africa (who did the coins), CEOs of banks and public and private institutions.
The highest note after redenomination of the Kwacha will be 100 Kwacha, other notes are 50 Kwacha, 20 Kwacha, 10 Kwacha, five Kwacha, and two Kwacha while coins consist of a one Kwacha, 50 Ngwee, 10 Ngwee and five Ngwee.
During the 1990s and early 2000s, Zambia experienced high levels of inflation which peaked at 188% in 1993 but has declined in recent times to single digit levels.
In December 2011, it closed at 7.2%, while November 2012, the figure stood at 6.9%, closing the year at 7.3%. This relatively favourable inflation created good conditions for the rebasing of the currency.
According to market analysts, the rebasing might be Kwacha positive in that it is continued commitment to low and stable inflation.
The legal basis for the rebasing of the currency is provided by the ‘’Re-Domination of Currency Act, 2012’’. It was presented to the National Assembly as a Bill by Finance minister Alexander Chikwanda on October 31, 2012.
The Act gives legal force to the re-domination of the currency. It was aimed at putting in place an effective date of application (January 1, 2013) of the re-dominated currency and provide for the circulation of the existing and re-dominated currency concurrently until the expiry date.
Other objectives were to provide for the display of prices, both in the existing and re-dominated currency, during the first six months after rebasing, provide for the treatment of debt obligations and rounding off rules and technological adaptation connected with the re-dominated currency.
‘’The re-domination of the existing currency shall be done by dividing the nominal value of the existing currency by a multiplicand of one thousand so that one thousand Kwacha shall yield a face value of one Kwacha. The re-dominated currency shall become legal tender from the appointed date – January 1, 2013,’’ says Sub-section Four of the Act.
‘’From the appointed date (January 1, 2013), the existing currency shall be exchanged for the re-dominated currency in accordance with the directives of the Bank of Zambia (BoZ),’’ it reads.
The Act provides that this exchange should be done by financial service providers or other institutions designated by the BoZ free of charge.
And the central bank has called on commercial banks to ensure that their ATMs produce receipts after every transaction to reduce confusion over their customers’ account balances after currency rebasing.
BoZ says all Automated Teller Machines will only be dispensing the rebased Kwacha notes from January 1, 2012.
