First and foremost, Zambia is not the only country to rebase her currency. Ghana for instance rebased her currency recently. However, knocking off three zeros from the Kwacha raises some serious concerns.
We are cognizant that the Bank of Zambia is in a hurry to finish this work. However, the time frame which is six months allocated for this mammoth task vis a vis sensitization is too little. A massive sensitization in this regard is paramount. Hence the need to postpone the launch. Postponing the rebasing of the Kwacha will give government a sufficient window period for effective country wide sensitization. Sensitization is fundamental in order to avoid the possibility of rampant fraud and swindling activities during the transition period when consumers are not yet sure of fair pricing.
The time frame that has been allocated for this process is not enough. We say this because when the Members of Parliament have been sensitized about it, it needs a bit of time for them to assimilate and understand the whole concept of rebasing.
This is the first time Zambia is going to rebase her currency as such there is great need for the Bank of Zambia to sensitize the members of the public and other stakeholders on the process before implementing it. This would help both BoZ and the stakeholders to reflect and understand the benefit that would come along rebasing and thereby spell over the doubts in many minds.
As a consumer organization, we realize that this process will adversely affect consumers on a number of fronts. In this vein, we propose that the rebasing of the kwacha be delayed until such a time that the following are in place:
- Ensure that all macro-economic variables are stable including exchange rates. At the moment, the exchange rates in the financial markets are far from stable as the Kwacha is currently in a downward spiral and so before government rebases the Kwacha, there is great need that this and other macro-economic variables are in a more predictable and stable state which is not the case at the moment. The local currency has since depreciated by over 10 percent against major convertible currencies the lowest in more than two years trading at K5, 400 to one US dollar.
- Government is also yet to explain to the public its plan on how to handle the short term inflationary pressure that is likely to arise from the rebasing process through speculation and rounding off effects. It is most likely that prices for certain goods that are slightly less than a rounded Kwacha figure will be rounded off cumulatively causing short term inflation. For instance, a retailer selling a good currently priced at K850 will have to adjust it to K0.85. This retailer is likely to round off this figure to K1 for accounting simplicity’s sake but on an aggregate scale this will cause the general price level to rise. Hence, the need for government to set measures to cater for this inflationary bump and mitigate negative consumer effects.
- CUTS further urges government that the rebasing of the Kwacha should also be demand driven and all factors leading to the rebasing should be in place before the process is completed.