As Zambia rang in the year 2013, all eyes were set on the new re-based local currency, the Kwacha, which was introduced as the legal tender on 1 Jan., replacing all old notes and coins.
The public seemed eager to see the notes following a country-wide enlightenment campaign undertaken by the central bank as well as commercial banks on the new currency, which also has enhanced security features.
The success of the currency re-basing exercise was said to have been largely dependent on the commitment and collaboration of all key stakeholders and the public.
The re-based Zambian Kwacha was introduced after knocking off three zeroes from the old currency, K50,000, K20,000, K10,000, K5,000 and K1,000, while coins – ngwees – were reintroduced.
The lower values of K500, K100 and K50 were divided by 1000 and converted into coins but the K20 was not converted into a coin due to eroded purchasing power and was removed from circulation.
Two new notes were introduced, K100, equivalent to K100,000 and K2 equivalent to K2,000. (1$US = K540).
While all business entities were required to be ready for the adaptation of all systems and related software and infrastructure required for the smooth transaction of the new currency on 1 Jan., some banks however experienced a few hitches with their ATM (Automated Teller Machines) which would not dispense the new currency.
The Central Bank had designated 1 Jan. to 30 June 2013 as the transition period during which both the old and the new currencies circulated simultaneously, and the old Kwacha stopped being in use at the end of June.
Commercial banks were also put on alert to look out for people trying to clean up hidden money during the changeover period to avoid cases where some individuals took advantage of the situation to clean up cash that has been hidden.
“If people want to take advantage of re-basing so that they can try to clean up their money which has been hidden for some time, as long as commercial banks are alert which is normally there because they don’t want to affect their reputation because of one client, that information will come out and appropriate measures will be taken,” Bank of Zambia re-basing project manager Morris Mulomba had warned.
According to the government, the re-basing of the Kwacha was necessary to address costs associated with an accumulative loss which the currency has suffered because of high inflation and also to facilitate business transactions, simplify the arithmetic calculations, understanding, use and management of the currency.
“Re-basing leads to greater confidence in the currency. When there are many zeros, people lose confidence in the local currency,” Mulomba said before the introduction of the new currency.
The re-based Kwacha is expected to provide opportunities for introduction of other technologies such as vending machines and car parking metres.
Apart from the introduction of the new currency, the appreciation of the Kwacha was attributed to the reinforcement of the use of the Kwacha in the economy, following the ban prohibiting transacting in foreign currency for domestic transactions.
According to Bank of Zambia (BoZ) International Reserves Management Manager Kombe Soteli, the introduction of the Statutory Instrument (SI) number 33 has contributed to the increase in foreign exchange supplied on the market, and the appreciation of the local unit.
“With the SI in place, we have taken off the artificial demand of the dollar that was there. All the companies or individuals that were paying services in dollars are complying with the policy,” she said.
The IS 33 was introduced to restore the use of the Kwacha as the main legal tender of the country and control the use of foreign currencies in the economy.