Zambia's central bank has said it will take a cautious approach to banning the use of the U.S. dollar in local transactions to avoid distortions in the economy.
LUSAKA, July 26 (Xinhua) -- Zambia's central bank said on Wednesday that it will take a cautious approach to banning the use of the U.S. dollar in local transactions to avoid distortions in the economy.
Denny Kalyalya, governor of the Bank of Zambia (BoZ), said the central bank is currently getting submissions from various stakeholders before making a final decision.
He said the central bank is collecting views from stakeholders who are for or against the move, saying it wants to have a broader perspective on the issue.
He said it is unfortunate that the central bank comes under attack from some sections of society, but noted that the bank only wants to enforce existing laws which mandate that the local currency, the Kwacha, is the only legal tender for conducting domestic transactions in Zambia.
"We have noted a frenzy of people going out to the media saying we are discouraging the use of the dollar. That is not the case; we just want to reinforce the law," he said during a mid-year budget review meeting.
According to him, the bank commenced the consultations on the draft currency regulations last month, adding that it has held meetings with various stakeholders.
He said businesses should adjust to the decision that will come out of the consultations regardless of how much it will affect them.
According to him, the regulations' goals are to enforce existing laws, strengthen the implementation of monetary policy, enhance the financial system's stability, and moderate the use of the local currency.
However, the move has received mixed reactions, with the International Monetary Fund warning that it could be ineffective and counterproductive.
The Zambia Association of Manufacturers, an association representing manufacturers, also said the move will be counterproductive in the current economic environment.
On the other hand, some stakeholders have welcomed the decision.
The Center for Trade Policy and Development, a local trade and development think tank, said the increasing use of the U.S. dollar in local transactions rendered the monetary policy rate instrument ineffective in curtailing the depreciation of the local currency, according to local media. ■