15 January 2013

Zambia: South African Expert Offers Lessons On Successful Currency Rebasing

A South Africa-based financial expert says Zambia should keep its macroeconomic fundamentals healthy to ensure successful implementation of the currency rebasing.

Currency analyst at the Amalgamated Bank of South Africa (ABSA) head office in Johannesburg Michael Keenan said it makes practical sense to rebase the currency because Zambia is no longer saddled with hyper-inflation of previous decades which peaked at 188 per cent in 1993.

Mr Keenan said for the currency rebasing to succeed, Zambia needed to keep its macroeconomic fundamentals healthy, such as inflation, fiscal spending and the country's balance of payment situation.

In an interview, Mr Keenan said Zambia now had surpluses, inflation was about seven per cent 'and everything is kind of back to normal'.

"But you have this currency with all these decimals. It makes sense to drop off these zeros because it will be a lot more convenient and safer," he said.

The rebased Kwacha would fare favourably among other currencies in the southern African region and the international monetary arena as a whole, he said.

"We remain constructive about the Kwacha over the medium term due to our positive outlook for copper which accounts for 80 per cent of Zambia's export receipts and the country's ongoing commitment to sound macroeconomic fundamentals," Mr Keenan said.

Asked what Zambia should do to prevent the Kwacha from re-acquiring multiple zeros, Mr Keenan advised that Zambia needed to learn from how Ghana had successfully managed to rebase the Cedi.

"Zambia should study how Zimbabwe failed to rebase its dollar and how Ghana succeeded. Lessons from Ghana can greatly help," he added.

On January 1, 2013, Zambia introduced rebased Kwacha notes and ngwee coins.

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