15 June 2012

Zambia: Law Against Dollar to Strengthen Kwacha

THE Bank of Zambia (BoZ) has said the ban against quoting goods and services in American dollars is meant to enforce the Kwacha as the national legal tender and has warned that those found violating the law will face a prison sentence of up to 10 years.

The Central Bank has said the measure was not aimed at the re-introducing foreign exchange controls but simply to re-inforce the law which recognises the Kwacha as legal tender in the local economy.

And the BoZ has warned that, anyone found transacting in dollar instead of Kwacha would be fined or imprisoned for a period not exceeding 10 years or both.

The statement released by BoZ in Lusaka stated that it was illegal for any business house or institution found quoting, demanding to be paid or receiving foreign currency as a legal tender for goods and services.

The minister of Finance signed a Statutory Instrument (SI) number 33 of 2012 on May 7, 2012 which came into effect on May 18, 2012, prohibiting the quoting and pricing of goods and services in foreign currency.

BoZ clarified that the issuance of the SI does not amount to a re-introduction of foreign exchange controls but to re-inforce the use of the Kwacha as Zambia's legal tender in domestic transactions as practice other countries.

The foreign exchange regime would remain liberal and trading of foreign currency would continue to be undertaken through commercial banks and Bureau De Change outlets.

The BoZ said the measures introduced are aimed at strengthening the use of the Kwacha in the domestic economy and encourage financial innovation in the financial system such as the development of hedging instruments to manage exchange rate risks.

According to provision-number four of the SI, a person shall not quote, pay or demand to be paid or receive foreign currency as legal tender for goods, services or any other domestic transactions.

"Provision 6(1) states that 'a person who contravenes these regulations commits an offence and is liable, upon conviction, to a fine not exceeding one hundred thousand penalty units or imprisonment for a period not exceeding 10 years, or to both".

Commenting on the hotel and car hire firms, the central bank clarified that hotels, car hire firms and all tour operators, would be required to quote the prices of the goods and services in Kwacha.

Tourism Council of Zambia (TCZ) asked the Bank of Zambia on June 8, 2012, to give a clarification to how the tour and hotel operators would be quoting tourists wishing to visit Zambia.

But the central bank said the hotels would continue to buy limited amounts of foreign currency from their residents while credit and debit cards will continue to be used for settlement of bills for goods and services supplied by hotels, car hire firms and tour operators.

It further said that the point of sale machines at hotels, car hire firms and tour operators, where credit cards and /or debit cards are used, would be reset to collect credit in Zambian Kwacha.

Boz said the airlines and travel agencies operating in Zambia would be required to quote, sell and receive payment for tickets and other transaction in Kwacha.

The statement said authorised dealers such as commercial banks and bureau de changes would continue to undertake foreign exchange transactions as per existing foreign exchange regulations.

Domestic transactions amongst companies including related companies would be undertaken in Kwacha.

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