Today, January 1, 2013 it is happy new year and happy Kwacha, Ngwee for all Zambians throughout the country as the rebased currency will become legal tender.
The Government through the Bank of Zambia which is also the central bank, will have a new year present for the whole country in form of the rebased Kwacha or the re-denomination of the currency.
The re-denomination or rebasing of the currency is a unique present because those sending it out- the central bank are not sure of the immediate reaction of its recipients, while the recipients' on the other said are seemingly doubtful whether it will bring the much preached about satisfaction to their daily access of goods and services using money as a medium of exchange.
The central bank through its effort to bring efficiency in its operations as a public institution that manages the country's monitory policy in January 2012 made recommendations to the Government to rebase the country's currency.
A country's monitory policy differs from the fiscal policy which deals with taxation, government spending and associated borrowing which is regulated by the ministry of finance and national planning.
Monetary policy is the process by which the monitory authority of a country controls the supply of money, often targeting a rate of interest for the purpose of promoting economic growth and stability. The official goals usually include relatively stable prices and low employment.
Rebasing or re-denomination takes place when a country changes the face value of its currency. The currency does not lose value, it just uses different numbers.
The transaction has no effects on the value as long as the redenominated currency keeps a consistent exchange rate with foreign currencies.
A re-denomination is usually undertaken as a result of issues with maintenance of statistical and accounting records and sometimes problems with accounting software packages that need to be customised.
Re-denomination is the process of changing the face value of banknotes or coins used in circulating currency.
When redenomination occurs, financial data that spans the change must be correctly accounted for.
Re-denomination is done in a systematic way such that numbers on the bank notes are reduced if these
numbers become excessively large, they can impede daily transactions because of the risk and inconvenience of carrying stacks of bills, or the strain on systems, e.g. automatic teller machines (ATMs), or because human psychology does not handle large numbers well. The authorities may alleviate this problem by redenomination.
Rebasing or re-denomination is not a new concept on the international money market scene.
Various countries have redenominated their currency a total of approximately 70 times within the last five decades, as of 2011.
Most re-denominations involved reducing the face value of the currency by a factor of 10.
In 2005, both Turkey and Romania re-denominated their currencies, removing at least four zeros.
Redenomination was also used in the 19th century to adjust the face value of coins due to shortages of silver or gold.
Research shows that when currency is re-denominated, accounting and financial software must be changed to record data and produce financial statements with the new currency.
The values reported on the financial statements, such as profitability, will remain the same. There may be some cost savings depending on the currency change.
For example, Ghana re-denominated its currency, the cedi, essentially just cutting off a few zeroes.
The smaller numbers resulted in improved accuracy and efficiency, while accounting software packages no longer required special customisation to accommodate the extra digits in the former currency denomination.
The Government through the central bank has categorically stated that it has no ulterior motives for the decision to rebase the national currency.
Bank of Zambia deputy governor Bwalya Ngandu says rebasing of the Kwacha was meant to enhance efficiency in the payment system and also foster confidence in the local currency.
Dr Ngandu says the rebasing of the Kwacha will not result in any loss of value to the currency and will not have any serious impact on inflation.
According to the Bank of Zambia there are a number of factors which have influenced the Bank Zambia Board to recommend to the Government to have the change in the face value of the bank notes and coins used as legal tender in the country.
The need to address costs associated with an accumulated loss in value of the currency that undermines its basic functions as a store of value, medium of exchange and measure of value.
According to experts the loss of value is typically as a result of high inflation rates over a prolonged period of time.
According to the Bank of Zambia the high denominations that characterised the existing currency is a consequence of high inflation rates experienced over a long period of time.
"Zambia experienced high levels of inflation during the 1990's and the early 200 which peaked at 188 per cent in 1993," a BoZ report said.
The fundamental factors which resulted in arriving at a decision to rebase the Kwacha are aimed addressing the pressing need to make the Kwacha a convenient currency when it comes to enhancing efficiency in the payment system and fostering both local and international business community's confidence in it by implementing a number of measures towards realising this.
According to money market experts, rebasing would address the problem of inconvenience and risks inherent in carrying large sums of money for transactions, increasing difficulties in maintaining book-keeping and statistical records and ensuring compatibility with data processing software.
By rebasing or conducting the re-denomination of the Kwacha BoZ hopes to higher costs on the payment system, particularly the delivery of banking services through greater use of technology.
The rebasing of the Kwacha is the right move being done at the right time.
According to the BoZ currency rebasing technical guidelines normally rebasing is done by countries during periods of low and stable inflation.
"In Zambia's case, inflation has generally been in single digit in the last five years such that in December 2011 it closed at 7.2 per cent.
This low level of inflation, coupled with favourable macroeconomic conditions and positive economic outlook, mproviders an opportune time to rebase the Zambian currency," a BoZ currency mrebasing report reads in part.
Over the past one myear the Bank of Zambia have been sensitising members of the public about what they should expect and how to handle the rebased Kwacha.
The country's law mmakers have also done their part by coming up with the Re-denomination of mCurrency Act which was enacted by Parliament on December 3, 2012.
According to the Act Re-denomination is the process of converting the existing currency whereby the mface value of bank notes and coins is divided by a multiplicand of one thousand.
The re-denomination of the existing currency shall be done by dividing the nominal value of the existing currency by a multiplicand of one thousand Kwacha shall yields a face value of one Kwacha.
According to the Re-denomination of Currency Act, the Bank of Zambia has a right to demand that a business entity to provide compliance reports on the their state of readiness for the re-denomited currency.
The law also clearly state that no individual or institution should ask or demand for payments for providing or facilitating for the exchange of the old Kwacha for the rebased one.
The newly enacted Act states that a person shall not exchange exists ting currency for re-denominated currency in contravention of the law.
"A person who breaches any condition or requirement under this Act or contravenes subsection
(1) commits an offence and is liable, upon conviction, to a fine not exceeding five hundred thousand penalty units or to imprisonment for a period not exceeding five years or both," the Act reads in part.
The central banks is determined to make sure that the as the country kick starts the new year all measures aimed at the successful implementation of the Re-denimination of Kwacha Between January 1, 2013 and December 31, 2015.
BoZ Currency Rebasing Project Manager Morris Mulomba said Government has printed K6 trillion to adequately meet the country's rebased currency needs over the next few years.
Mr Mulomba said a total of K3.4 trillion out of the K6 trillion would be used to replace the old currency which was currently in circulation and the rest would be kept in reserves for future use in case of any eventualities arising from the currency replacement exercise implementation over the next few years.
About K3.4 trillion old kwacha notes are also believed to be in circulation within and outside the country.
"As central bank we are just putting in place these measures to see to it that all problems arising from the change from old kwacha to the new ones are adequately addressed. We want to replace the old Kwacha and resolve the various money changing and replacement needs which may arise," he said.
BoZ has put in place measures which would facilitate the recalling of all the Kwacha notes in the diaspora under the Currency Rebasing Exercise which starts on January 1, 2013 and ends in 2015.
He explained that the 3.4 trillion rebased Kwacha was sufficient to meet all the country's currency rebasing exercise which would be implemented between January 1, 2013 and 2015.
Mr Mulomba said earlier during a Media briefing held at the BoZ Regional Offices in Ndola, that Government has made arrangements with the Ministry of Foreign Affairs to ensure that the millions of Kwacha believed to be used in the neighboring Democratic Republic of Congo (DRC) and other countries which shares borders with Zambia, was returned and subjected to the rebasing exercise.
"Apart from the DRC, we know that the Zambian currency is being used as legal tender at both sides of the Nakonde, Mwami and Victoria Falls border posts among other places and the Government through the Ministry of Foreign Affairs has made arrangement to sensitise the people who use the kwacha outside Zambia about the rebasing exercise," he said.
The National Savings and Credit Bank (NATSAVE) and the Zambia Postal Services Corporation (Zampost) had been engaged to act as the main outlets for money changing during the currency rebasing exercise implementation period in all parts of the country.
The chambers of commerce and industry and commercial banks have also been engaged to in sensitising members of the public when conducting the money changing exercise during the rebasing period.
The rebased Kwacha has already been taken to the BoZ currency distribution centres throughout the country.
Mr Mulomba disclosed that the bank of Zambia would see to it that people in all parts of the country were reached during the public sensitisation process.
"We are aware about plans by some people to swindle others by taking advantage of the confusion which can arise from exchanging the old one hundred Kwacha notes which is equivalent to the new 10 Ngwee coin and the new K100 which will be equivalent to the old K100,000," he said.
Consumers have fears that the rebasing of the Kwacha could lead to the increase on prices of various goods and services,
but the Zambia Information and Communications Technology Authority (ZICTA) has assured the public that they would not be subjected to any price increases by service providers in the telecommunication sector arising from the Kwacha rebasing exercise.
ZICTA manager in charge of information technology, Garry Mukelebai said there would be no hikes in tariffs from mobile operators, adding that the regulator did not want to surprise the customers during the change over.
The Zambia Association of Chambers of Commerce and Industry (ZACCI) president Geoffrey Sakulanda says the central bank should monitor the situation during the transition period of the re-denomination of the Kwacha as inflation was expected to be triggered by an increase in the cost of goods and services.
Mr Sakulanda said due to the unplanned and unbudgeted costs on the part of the business community, the cost would be passed on to the consumers in the long run.
Some interests group such as the Jesuit Centre for Theological Reflections (JCTR) have expressed concern over the manner in which the Kwacha Rebasing Project was being implemented.
The JCTR notes that says the Kwacha Rebasing Project was not provided for in the 2012 national budget.
It noted that resources were redirected from other activities to the Kwacha Rebasing exercise or the Government could be forced to borrow outside the budget in order to finance the project.
The JCTR advised Government to depart financing national projects using borrowing outside the budget as this could lead to problems of budget overrun which contributes to poor budget performance and ultimately poor service delivery.