By Daily Revelation Editor
The Bank of Zambia (BoZ) has announced the addition of two higher notes, the K500 and K200, to the Kwacha family, while downgrading the K5 and K2 notes to the family of coins. The policy measure is due to take effect on March 31, 2025.
BoZ Governor Dr Denny Kalyalya explained that the K200 and K500 notes were introduced because the current K100 function store of value had eroded.
As often happens when a decision as big as this one has been announced, the country is right now debating the effect the same changes will have on everyday life or ordinary Zambians.
Former Economics Association of Zambia president Dr Lubinda Haabazoka, argues that the new currency will have the same value as the old one, and that this is not the first time the country has changed notes.
He said the larger notes have been introduced to help people carry larger amounts of money, for easy transactions. Dr Haabazoka said that depending on the inflation rates in the future, the country may introduce larger notes again to simplify transactions, and that the same could happen in 5 or 10 years, depending on the rate at which prices rise, with a possibility of rebasing in future by removing zeros.
But former Commerce minister Bob Sichinga said the administration has introduced new notes because of the Kwacha’s devaluation, something he said will only accelerate with the introduction of new notes.
Economist Dr John Musantu said this was not the right time to introduce new Kwacha notes, owing to the instability in the macroeconomic fundamentals, such as inflation and the exchange rate.
Regardless of the different views being offered on this matter; the fact is that the new notes have been introduced owing to the erosion in the value of the currency on account of the rising inflation. If the country maintains this trajectory, we shall soon be back to the thousand notes, the same K1000, K5000, K10,000, K50,000 notes we rebased by removing zeros from just over 13 years ago. And the fundamentals are pointing towards the same, with the ever weakening Kwacha that has been on a downward spiral since it embarked on that course around October 2022, with very few but temporary appreciations here and there. The value of the Kwacha to the United States Dollar in August 2021 was K17 to US$1. However, the same was going at over K28 to $1 for bid and offer yesterday, according to the Bank of Zambia website.
Definitely, the weakening Kwacha will continue instigating inflationary pressures upwards, as more Kwachas are needed for every imported item, in this import oriented economy. The same gets to speak loudly from the retail stores, to the markets, and others places where goods and services are secured from, in terms of rising prices (inflation), and the subsequent rise in the cost of living.
Therefore, Dr Haabazoka is right when he says that the country must build a robust export-oriented economy that brings in foreign exchange, in order to maintain very low inflation and avoid currency depreciation. But that may take time. However, there are certain policy measures that could be taken in the short to medium term, including getting a fair share from the mining houses, in form of increased taxes.
Related
By Daily Revelation Editor
The Bank of Zambia (BoZ) has announced the addition of two higher notes, the K500 and K200, to the Kwacha family, while downgrading the K5 and K2 notes to the family of coins. The policy measure is due to take effect on March 31, 2025.
BoZ Governor Dr Denny Kalyalya explained that the K200 and K500 notes were introduced because the current K100 function store of value had eroded.
As often happens when a decision as big as this one has been announced, the country is right now debating the effect the same changes will have on everyday life or ordinary Zambians.
Former Economics Association of Zambia president Dr Lubinda Haabazoka, argues that the new currency will have the same value as the old one, and that this is not the first time the country has changed notes.
He said the larger notes have been introduced to help people carry larger amounts of money, for easy transactions. Dr Haabazoka said that depending on the inflation rates in the future, the country may introduce larger notes again to simplify transactions, and that the same could happen in 5 or 10 years, depending on the rate at which prices rise, with a possibility of rebasing in future by removing zeros.
But former Commerce minister Bob Sichinga said the administration has introduced new notes because of the Kwacha’s devaluation, something he said will only accelerate with the introduction of new notes.
Economist Dr John Musantu said this was not the right time to introduce new Kwacha notes, owing to the instability in the macroeconomic fundamentals, such as inflation and the exchange rate.
Regardless of the different views being offered on this matter; the fact is that the new notes have been introduced owing to the erosion in the value of the currency on account of the rising inflation. If the country maintains this trajectory, we shall soon be back to the thousand notes, the same K1000, K5000, K10,000, K50,000 notes we rebased by removing zeros from just over 13 years ago. And the fundamentals are pointing towards the same, with the ever weakening Kwacha that has been on a downward spiral since it embarked on that course around October 2022, with very few but temporary appreciations here and there. The value of the Kwacha to the United States Dollar in August 2021 was K17 to US$1. However, the same was going at over K28 to $1 for bid and offer yesterday, according to the Bank of Zambia website.
Definitely, the weakening Kwacha will continue instigating inflationary pressures upwards, as more Kwachas are needed for every imported item, in this import oriented economy. The same gets to speak loudly from the retail stores, to the markets, and others places where goods and services are secured from, in terms of rising prices (inflation), and the subsequent rise in the cost of living.
Therefore, Dr Haabazoka is right when he says that the country must build a robust export-oriented economy that brings in foreign exchange, in order to maintain very low inflation and avoid currency depreciation. But that may take time. However, there are certain policy measures that could be taken in the short to medium term, including getting a fair share from the mining houses, in form of increased taxes.
Related
You can share this post!
My own leaders de-campaigned me, says UPND’s Petauke losing candidate
Mpondela applauded for stepping aside
Related Articles
Govt please address Kwacha depreciation
Political will is what is required to appoint…
Increased MP nominations proposed for amendments