Don’t quote in dollars, warns BoZ
THE Bank of Zambia (BoZ) has warned business entities against quoting goods and services in foreign currencies because this will increase demand for foreign currency and intensify pressure on the Kwacha.
BoZ says the practice, which is against the Banking and Financial Services Act (BFSA), also undermines the macro-economic stabilisation efforts that are being made.
“It is also likely to lead to a multiplicity of exchange rates, which may differ significantly from competitive market rates and thereby, destabilise the orderly functioning of the foreign exchange market,” the central bank says in a statement issued by the communications division.
BOZ said the adverse effects of pricing and paying in foreign currencies will mainly affect consumers of goods and services, as they have no capacity of hedging against currency depreciation.
The statement further states that most Zambians are not paid in foreign currencies and are therefore bound to bear the full impact of quoting prices in foreign currencies, more if compelled to pay in foreign currency for domestically traded goods and services, such as rentals and school fees.
“The pricing in foreign currencies reduces the price incentive of depreciation in encouraging businesses to engage in the export or production of goods that are currently imported. Such actions, therefore, work against the necessary adjustments which we all must make.
“It should be noted that it is not only the consumers that must adjust, but also producers and business houses if we are to successfully diversify our economy and achieve sustainable economic growth and development,” the statement reads.
The central bank says inflation remains stable and has been declining during the year and, therefore, macro-economic conditions do not warrant pricing in foreign currency for domestic transactions.
And Minister of Commerce, Trade and Industry Margaret Mwanakatwe has warned organisations against quoting goods and services in United States (US) dollars.
Mrs Mwanakatwe told journalists in Lusaka yesterday that the Kwacha is still the legal tender of the country and it is illegal for any organisation to quote in any currency other than Kwacha.
“This is against Government policy because the legal tender for the country is Kwacha. Those quoting in dollars are going against Government policy,” she said.
Mrs Mwanakatwe said Government will issue a comprehensive policy statement on the trading of goods and services in US dollars.
“Those trading in dollars are discouraged and as Government, we will come back and make a policy statement on this matter,” she said.