Knocking off zeroes from kwacha needs strong economy – Chigunta
Written by Fridah Zinyama
Tuesday, March 03, 2009 12:20:35 PM
UNIVERSITY of Zambia (UNZA) Development Studies lecturer Dr Francis Chigunta has observed that knocking off zeroes from the local currency will require a strong and growing economy.
Commenting on Bank of Zambia (BoZ)'s intentions to drop off the three zeroes on the kwacha, Dr Chigunta said the country's economic fundamentals such as inflation and production costs needed to be at a lower level.
“In the absence of such, the zeroes quickly climb back,” he said.
Dr Chigunta cited examples of countries like Zimbabwe which had persistently knocked off zeroes from its currency but had experienced no change in the value of its currency because the process lacked a strong economic background.
“The economy is in free fall and inflation is wild and raging. In this case, knocking off zeroes is a non-starter,” he noted.
Chigunta, however, observed that the situation was not the same as Mozambique which had successfully knocked off zeroes from the metical.
“They knocked the zeroes off the metical two years ago and it seems to have worked for them,” he said.
He explained that redenomination had worked in Mozambique because of the country's strong economic fundamentals.
Dr Chigunta said dropping the three zeroes off the kwacha would equally work in Zambia but added that the central bank would have to be cautious bearing in mind the current depreciation of the local currency.
Let me get this clear. So if we were to get rid of the three zeros when the Kwacha was trading 3500 to the dollar I presume according to Chigunta this was the right time to do it. At the current level of 5800 I presume is not the opportune time. The whole thing is just psychological my dear there is no science behind it. Zambia's 2008 GDP is $12.61bn. Malawi's $3.95bn and Mozambique is $9.8bn.These countries have even bigger populations than Zambia. Their GDP per capita is a mere quarter of Zambia's. Can Chigunta explain why in the world these countries currencies are more worthy than the Zambian Kwacha?
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