Dollarisation

 

THE insistence by China Henan, the company that built Lubama market on a 65-year lease agreement with Government, to demand settlement of rentals in United States dollars by marketeers is unacceptable. This is particularly appalling bearing in mind that China Henan is defying a High Court ruling in favour of the marketeers ordering that it should immediately revert to quoting rentals in the Zambian Kwacha. Such defiance against court orders must not be condoned at all. Foreign investors, like everyone else, must respect the sanctity of constitutionally established institutions of governance in Zambia if they are to conduct their businesses with ease. Contravening Zambia’s laws and disobeying court orders with impunity must compel Government to take over the running of the market unlike allowing the economic exploitation of marketeers. The few countries that have adopted a foreign currency, either partly or fully as legal tender, have done so because they experienced serious economic instabilities arising from galloping inflation and loss of value of their domestic currencies. We are aware that Zambia partly allowed the use of the United States dollar alongside the Zambian Kwacha from the mid-1990s when the economy was liberalised until 2012 after the Patriotic Front government introduced Statutory Instrument No. 33 which prohibited the quoting, paying, demanding or receiving foreign currency for goods, services or any other domestic transaction. The reason for this dollarisation then was mainly twofold: Zambia had a three-digit inflation rate which oscillated between 118 and 183 percent and it was meant to attract foreign direct investment (FDI) mainly from America and Europe. The prevailing economic circumstances cannot be compared to the period the dollarisation was allowed. In the recent past, Zambia has experienced relative macroeconomic stability as reflected in economic growth, falling inflation and stable exchange rates, hence dispels any justification by some business houses to demand use of foreign currency in any domestic transactions. Much as Zambia’s economy is not as stable as that of the United States of America that too does not give business houses an excuse to resort to the use of a foreign currency when settling domestic transactions. It must be underscored that dollarisation if allowed to become the business norm has the capacity to depreciate the Zambian Kwacha and render it worthless because the more citizens prefer using the foreign currency, the faster it will be out of circulation. Going by the foregoing, this would result in loss of an important emblem of national identity and pride, the national currency. Probably this is the reason why Government promulgated the Statutory Instrument Number 33 of 2012. It did not want to lose grip on this important identity and asset. The negative effects of dollarisation on the economy would be so unbearable in that Government would be deprived of its money inflationary powers to direct fiscal policy. This ultimately leads to systematic handover of the economy to the foreign nation whose currency is used, thereby losing political autonomy and sovereignty. For this reason, there is urgent need for Government to put in place extenuating measures to avoid pushing Zambia’s economy into the likes of Zimbabwe crisis. Would a Zambian use the Zambian Kwacha in the United States as legal tender?

 

Categorized | Editorial

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