INCREASING THE KWACHA AND FOREIGN CURRENCY STATUTORY RESERVE RATIO IS AN ACT OF DESPERATION BY THE UPND.
By Christopher Kang’ombe
From the statement by the Bank of Zambia ( BOZ ) on increasing the Kwacha and Foreign Currency Statutory Reserve Ratio, one does not need to be an economist or financial expert to read between the lines and conclude that this is act of desperation by the UPND in government.
By announcing that the Statutory Reserve Ratio has been increased from the current 9% to 11.5%, BOZ has been authorised by the current government to effectively, mop up liquidity through getting a bigger share of deposits that commercial banks in Zambia receive from all categories of clients.
To simplify this for the public to understand, what will happen is that there will be reduced money supply in circulation.
Legally, BOZ is empowered through an Act of Parliament to take any step they deem necessary but we should all remember that such decisions have to be under the guidance of the political party in power, which decides government policy.
In this case, the UPND does not see anything wrong with the net effect of increasing, both the Kwacha and Foreign Currency Statutory Reserve Ratio.
The BOZ statement which was issued by the Deputy Governor, and its contents demonstrate desperation and a sign of failure by government to put in place, any other measure that will improve the performance of the kwacha against other major Foreign currencies.
Here are my suggestions to President Hakainde Hichilema ;
- Urgently assign a team to brief you on the recommendations in the Industrialisation and Job creation strategy (launched in 2014 by Dr. Guy Scott on behalf of Government) and implement those that are very clear in context.
- Urgently convene a meeting to review all the bad policies made so far by government that are affecting economic growth such as increased cost of fuel and increased electricity connection fees.
- Begin giving incentives to Micro Small and Medium Enterprises to be able to thrive and create the right amount of local jobs.
- Instruct the Bank of Zambia to immediately reverse their guided decision to increase the Statutory Reserve Ratio.
- Immediately assign another team to brief you on the top 10 commodities we are importing as a country that we can actually manufacture locally in large quantities with the right quality. The Engineering Institute of Zambia ( EIZ ) can be engaged on the manufacturing solutions needed.
- Revert to the previous Mining Tax Regime that allowed ;
6.1 Mineral Royalty not to be Tax Deductible
6.2 Mineral Royalty to be calculated using the aggregate formula as opposed to the incremental formula.
Implementing 6.1 and 6.2 will lead to more revenue for ZRA ( which income we lost when the Minister of Finance announced the two above incentives for mining companies in the 2022 and 2023 budget speeches ).
The Author is Kamfinsa MP and PF National Youth Chairperson.