ECONONOMIST WEIGHS IN ON BANK OF ZAMBIA’S NEW CURRENCY NOTES

The Bank of Zambia’s recent announcement to introduce a new range of currency notes has sparked significant discussion among financial experts and the general public.

Economist, Yusuf Dodia, shared his insights on the implications of this move.

In a statement to Spice Fm, Mr. Dodia highlighted that the public has been increasingly concerned about the rapid wear and tear of smaller denomination notes such as the 20 Kwacha, 10 Kwacha, and 5 Kwacha, which are used frequently for daily transactions. He noted that the Bank of Zambia was under pressure to reprint these smaller notes, but instead, they decided to introduce an entirely new range of notes and coins.

The new currency lineup includes a 500 Kwacha note, 200 Kwacha note, 100 Kwacha note, 50 Kwacha note, 20 Kwacha note, and 10 Kwacha note, as well as a 5 Kwacha coin, 1 Kwacha coin, 50 Ngwee, 10 Ngwee, 5 Ngwee, and potentially a 2 Kwacha coin.

Mr. Dodia expressed concerns about the smaller coins, such as the 5 Ngwee and 10 Ngwee, having zero practical value in transactions. He warned that these coins could be collected and melted down for their metal value, as was seen prior to 2013 before the currency rebasing.

Regarding the new notes, Mr. Dodia pointed out that the introduction of larger denominations, such as the 500 Kwacha and 200 Kwacha, could lead to inflationary pressures. This is because the perception of the value of smaller coins might diminish, causing prices of products to rise. He emphasized that this inflationary pressure is more about perception than actual economic activity.

Dodia also raised concerns about the potential shift from digital to cash transactions due to the availability of higher denomination notes. He explained that this could undermine the government’s efforts to promote a digital economy and could result in a decline in tax collection, as more transactions may occur informally
and outside the banking system.

Additionally, Mr. Dodia warned that larger denomination notes might facilitate corruption, bribery, and illicit activities such as drug trafficking and money laundering. He noted that higher value notes could make it easier to conduct these activities with smaller parcels of cash.

Drawing comparisons to international practices, Mr. Dodia mentioned that the United States has maintained the $100 bill as the highest denomination for decades to discourage illicit activities.

Similarly, the European Union is considering withdrawing the €500 note due to its role in promoting illegal
trade.

Further, Mr. Dodia acknowledged that while the introduction of new currency notes addresses certain issues, it also presents new challenges that could undermine the government’s efforts to build a strong and accountable economy.

©SPICE FM 91.1 Kabwe NEWS