GOVERNMENT’S MOVE TO CONTROL FINANCIAL/FOREX OUT-FLIGHT IS TIMELY By Soko Edmond I fully support governments move to restrict Forex outflow from this country. Why should the investor only excavate Zambia without leaving anything tangible for her children? Zambian Kwacha doesn’t seem to strengthen as a result of too much freedom we have given investors to repatriate all the profits to home countries. We have several local banks in which investors can save part of their profits. It’s high time we see our Central Bank start retaining the much needed forex in our vaults to cushion our deteriorating foreign exchange market.
I hope the BOZ will extend its financial and Forex movements in not only processing markets but also goods and money markets. If supermarkets like shoprite, Game store, PnP,PEP etc have been repatriating all the profits to their home countries, this time around it must be brought to a serious control. These chain stores should be made to save with any local bank and not a foreign Bank whose servers and control systems are in their home countries.
Again Bank Of Zambia should really scrutinize all the movements of Foreign Exchange and a limit of this financial out flight should be limited to a certain amount with a valid reason like payoff the debts or humanitarian reasons. I know some Zambians are very skeptical with this move, but i wish to tell you that Forex and Financial controls have been in existence in many counties like USA, Britain, South Africa etc.No one is allowed to send cash abroad any how without valid reasoning. Certain firms and companies will be gravely affected especially those fully in tax evasion system, mostly by over-bloating the costs against revenues so that they seem to be just breaking even or accruing losses. This time all those finances to be used to pay off loans or any other transaction by these investors will have to be checked.
Prudency in financial management and fiscal policy by the central government must not only mean the wellness in collecting and disbursement of tax, but also the way finances are retained and utilized in the all the financial perimeters which includes Foreign Exchange market. It also entails taking into account and controlling all the finances flowing out of this country. There shouldn’t be freeness in financial repatriation by these investors. Benefits of this Move (in summary) (a) Economic Growth and Development Zambia government has been struggling in organizing funds to develop this country even from the mining sector.
Once the companies start depositing their cash with our local banks, we expect the saving rate to rise hence increase the bank’s ability to provide loans to the citizens of this country at reduced interest rates. Part of these finances will certainly be used for small and medium scale investment which has direct bearing on the level of employment. Since many firms and financial institutions will be involved, the economic activities will certainly increase and this will push up the economic growth and thereby economic development. But this will certainly depend on the financial prudency of the government in allocating the resources. (b) Foreign Exchange Market Improvements Again the much expected benefit is the likelihood of the Zambian Kwacha to appreciate.Currently, despite recording trade surpluses due to mainly huge mineral revenues, very little has found itself on the local foreign exchange to provide an economical cushion to the depreciating Kwacha.
Therefore, when the Bank of Zambia is mandated to directly control the forex movements from this country to the economies in the dispora, it will certainly store enough foreign Exchange in the reserves which can be used to take care of Deteriorating Kwacha. (c) Minimize Worker Exploitation Besides, this move will reduce some level of exploitation of workers in the country. We have been facing labour conflicts between employers and employees more especially on wage adjustments. Employers will mostly declare losses to the state in order to qualify their refusal for any salary increase.
And the government fails to prove this because all the profits by these foreign investors are kept outside the country. But once profits are saved in the local banks, the government will easily detect the falsehood and mendacity in the employers. Our poorly paid workers will certainly start having good deals with their employers. (d) Reduce tax evasion and improve country’s fiscal position Finally, the move will reduce almost all tactics of tax evasion by the investors since the state will be monitoring the movements of cash and amounts of profits being made by the many investors.
With reduced tax evasion, the government will experience a fair rise in tax collection, hence improve the fiscal standing of the nation and this will help in sectoral financing. Thank you. The writer is an Economist and Master of Business Administration Student and Copperbelt University (The in-depth analysis will be found at www.sokoedmond.wordpress.com very soon for reference. For any question and additions use firstname.lastname@example.org)