Anti-foreign currency law nears enactment

Anti-foreign currency law nears enactment
Written by Chiwoyu Sinyangwe
Wednesday, July 29, 2009 3:08:43 PM

THE Bank of Zambia (BoZ) has announced that legislation barring the use of foreign currency in local transactions has undergone review and operation modalities and is expected to be enacted soon.

And the establishment of a supervisory regime for the secondary market in government securities has been postponed from last June to end of September this year because of uncompleted consultations.

According to the BoZ, legislation to prohibit the usage of the United States dollar in domestic transactions was expected to be implemented soon.

The central bank did not however give the time frame.

“The draft Statutory Instrument on dollarisation is undergoing some review and operational modalities are also being developed. This process is expected to be completed soon. Accordingly, the media and the general public will be informed in due course,” the central bank stated.

And the Central Bank said the process of establishing a supervisory framework for the secondary market for government securities in the country was underway.

“In this regard, the Bank of Zambia has prepared a draft supervisory framework, which will be subjected to a consultative process with key stakeholders,” stated the Central Bank. “This consultative process is expected to be finalised by end-September, 2009 upon which the approval process will follow.”

The country currently does not have a secondary market for trading securities, a move which most financial analysts say has hampered the enhancement of liquidity in the domestic financial market.

“To further stimulate the growth of the secondary market, the government will set up a supervisory regime for the secondary market in government securities by end-June 2009 (structural benchmark),” the Ministry of Finance stated recently. “This will entail the issuance of harmonised regulations to govern trading.”

Most key financial players in the country have welcomed the recent decision by the government to establish a supervisory regime for the secondary market in government securities, saying the move will increase liquidity in the market and develop the domestic financial market.

Standard Chartered Bank Zambia head of Financial Markets, Stanley Tamele who described the move as excellent however said it was crucial to get all the fundamentals right before a supervisory regime for the secondary market in government securities was officially launched.

And Bankers Association of Zambia (BAZ) president Saviour Chibiya said the establishment of short-term benchmark rate(s) in the money market was another excellent move as it would lengthen the kwacha yield curve and form a basis for more competitive pricing in the market.