EXHANGE RATE REQUIRES GOVT TO RETAIN MONEY LOCALLY
By Nobert Mumba
So we are down to the vicious circle I predicted would happen – constraining money supply to artificially hold the kwacha and inflation. BoZ has announced a 2.5 percentage point increase in reserve ratios to arrest depreciation. Bring back SI 33 as amended by SI 55.
The day we will realise that we have at every corner professional street vendors in the name of brick making factories simply moulding our quarry into blocks and exporting millions of dollars out of the country is the day we will realise our financial markets are bleeding.
The day we realise that of the $5-6bn earned by the mines very little returns to Zambia is the day we will realise Zambia will not come out of its economic woes. The story is the same in tourist sector. Lodges are collecting $500/night in Lower Zambezi, Livingstone and South Luangwa and most of it not banked in the country.
Big companies such as hardwares, tile suppliers are asking clients for cash to give so-called discounts which are in essence ZRA tax avoidance. With monthly fuel pricing, oil marketing companies and filling stations can make millions overnight by simply pretending they do not have fuel a day before price hikes. Used car dealing has also been invaded by foreign entities. Buy a Mark X at $2500 and sell it at $8000.
There is also need to monitor investment claims that are designed to bloat expenditure to reduce profitability. If Zambia really received billions of investment inflows a year as claimed we wouldn’t be where we are as a small economy.
Zambia is not short of foreign exchange it is bleeding foreign exchange and the financial system, tax system and law enforcement system are all on go slow. Let us implement effective monitoring of exchange outflows and the kwacha will stabilise. It is monitoring and not exchange control.
Even big countries like America and China are at loggerheads to control means of production in order arrest imbalance. I agree with the concerns of BoZ though increasing ratios is not the solution.