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BREAKING News: 3 Zeroes To Be Removed From Kwacha CURRENCY
The Zambian government will rebase the Zambian Kwacha currency by lopping off three zeros Finance Minister Alexander Chikwanda said on Monday 1/23.
Chikwanda told a media briefing today Monday 1/23.
What this actually means is that the rebasing of the Zambian Kwacha will be by dividing the current notes by 1000, consequently knocking out three zeros from all the denominations.
This means the K1, 000 will be K1, K5, 000 will be K5 while K50, 000 will become K50.
The government would also raise commercial banks’ capital requirements to make them more resilient to economic shocks.
Posted by
LIVI
January 24, 2012 at 9:21 am
@popi dats smart
Bakamushi
January 24, 2012 at 9:25 am
The downside to this for the general population centers on the inflation that this in turn causes. Such inflation is yet another benefit for the currency debasing government that then finds that it can pay off government debt or repudiate government bonds easier. The populace’s purchasing power is significantly reduced as a result of this, along with their then lowered standard of living.
Debasing a currency lowers the value of the currency in question. Given enough time and abuse by the governing authorities, this debasing can even lead to a collapse in the existing currency that causes a newer currency or coinage to be created and launched for the nation or state.
TIA
January 24, 2012 at 9:33 am
This move is not a very wise one coz the exchange rate will not change at all,,.it will still be high as it has always been,.If we could improve our economic conditions perform well in our balance of payment we would automatically increase the value of the kwacha against other major currencies,,.
Saint
January 24, 2012 at 9:42 am
I Love the move. Lets have a decent everything for once. We cant have some runaway currency like we are war torn country….what a relief
ICEBERG
January 24, 2012 at 9:44 am
This is just like your wife changing the plates she uses for your food.It doesn’t change your diet or the taste of the food,does it?!!! It will still be the same bad chef and Katapa/bondwe diet.They should just
deal with real issues like exchange rates and inflation and not take advantage of the ignorance of Zambians to window dress the economy.
KIBWELA KASONGO
January 24, 2012 at 9:58 am
May I appeal, through your media, to the government and poulace at large for the enhancement of freedom of expression. I feel that this could teach us all a better way of handling matters. We will take what makes sense and trivialize what does not and trash it. That way we move forward.Zambians are wiser now than before and can choose what makes sense despite campaigns such as Chanda Chimba’s.
I feel it is not necessary to reprint our money for the sake of making people think that the value of the kwacha has improved when not.
I compare this to deceiving the public by adding more yeast to the same quantity of dough because it will expand the fritters or bread when in actual sense it is hollow inside!
Yes, it will be easy to carry but does not warrant spending money on that will not bring back any profit at all. We need tangible development now and not cosmetic antics!
KIBWELA KASONGO
January 24, 2012 at 10:10 am
Change for the sake of it can be costly. Playing to the gallery can also make you leap to heights that will leave you in a wheelchair for the rest of your life when you do what you are not capable of doing. You may not know how to land you know.
Playing rich can actually leave you bruised and impoverished because you are living a life you can not afford.
Imitation is not value driven and can actually embarass you for not being inovative yourself. Let development translate into real value of our currency please!!!
bestone
January 24, 2012 at 10:28 am
it a good move from my man of action.all buried moneys will rot in the ground by our thieves called leaders.that is the way to get our money back.
rasta mbonga
January 24, 2012 at 10:40 am
what about k100 what will it be?
Twili
January 24, 2012 at 10:47 am
Zim tried this…it never works, it is not the Zeros that is the problem…but Zambia’s Economy
ndeke tulibamulomo
January 24, 2012 at 10:53 am
sata is killing ba mambala ba MMD.
sadi
January 24, 2012 at 11:05 am
Yeah lets do away with telephone number sized sums!
Marc Zikhalo Roberts
January 24, 2012 at 11:15 am
Changes:
1. Limitations on how much worthy of value. one has at any particular time.
2. Let millionaires live their legacy let on billionaires.
3. Introduction of coins, e.g now K 100 will be point one zero kwacha
No Changes:
1. Purchasing power remains the same.
2. Inflation rate will be determined by activity and not denominations.
zeck78
January 24, 2012 at 11:15 am
rasta bonga,k100 wil become 1ngwe,a coin.
Watchman over Watchdog-Galileo Galilei is back!
January 24, 2012 at 11:25 am
It appears many Zambians do not understand basic economics.
That move is OK. But not the ultimate. Guys tinkering with figures will assist to achieve some aspects like convenience of counting,calculation and carriage. It will also deal with criminals. It will be like a fresh start. But if the fundamentals remain the same we shall start climbing again in a few years. That is why my contention is that the real economy is in activity.
Let’s bring to the table proposals that make our people active. Industries and jobs that transform our infrastructure, technology, services.. etc in terms of product range and their quality. So that whatever I need can be found locally. we reduce spending our FOREX on small things like razor blade but may be spend on heavy industrial machinery that will make us sophisticated. When we are able to export more value and import less valueless items we shall improve on our Balance of Payments.
Let us improve on the active economy. Trading in Salaula is not very helpful. It only helps individuals whoa area able get a profit but economically it does not add value. What adds value is this. 1. A farmer who grows the cotton. Engages workers whom he pays. 2. A ginnery which buys the cotton and turns it into strings or cloth with so many workers. 3. A clothing factory employing so many designers,tailors to sew the trousers. 4. Then the trader who goes to “Serials in Luanshya” to buy and he takes it to his shop before you buy your nice shirt. In this whole process from the cotton grower to the shopkeeper in that shop how many people have been employed? How many families have been supported?
Salaula on the other hand…Shit…the cotton grower, the ginery, the designer, the tailor are all in EUrope. Only to be brought here for recycled use. How can you improve an economy like that? This is well known but issues of cost-benefit and prioritisation….my salary will be ka 5 pin.ubunga 350Kwacha. Zoona….
Watchman over Watchdog-Galileo Galilei is back!
January 24, 2012 at 11:30 am
Ubunga currently at K35, 000 will be bought at K35. wandorbra…Felicitations…
zeck78
January 24, 2012 at 11:37 am
rasta mbonga,k100 will become 1ngwe,a coin.
lol
January 24, 2012 at 11:37 am
Lol, Nice trick MCS and team. Now let all the buried bucks come out. We need it back in circulation.
The Dj
January 24, 2012 at 11:40 am
Guys Guys relax!!!!!!!!!!…..I feel this is a move to fix those who burried cash crops like comrade Liato. Though change may not manifest in terms of strength of the Kwacha, the implication is that those who have hidden money like the vi MMD leaders will bring it forward so that they can exchange it for the new note but thats where the catch is….so bambala bazasokolola mahafu yamene banabisa hence more money in circulation….
Augustine Lombe
January 24, 2012 at 11:44 am
ICEBERG, If you do not like eating bondwe or katapa then my friend you will die early. Ask Mrs Banda of Sylva Catering. Viva vegetables for long life.
Sando
January 24, 2012 at 11:52 am
Waste of time and national resources. Shame. Congo DR did the same and you will agree with me No benefits have been released. Mr minister,please avail us with the details such as 1. What are the economical benefits? 2.Will this help bring in more investors? 3.How will this contribute to job creation?
Please save your energy by stopping making,renaming,re basing issues which have no economical value and start addressing serious national issues.
jimmy
January 24, 2012 at 12:05 pm
i think just as always…… people always draw certain issues out of proportion, infact the article does not mention anywhere that this would improve the economy-and in my opinion this is what happens when you have too many so called economist theorist who have spent time doing theory without practice…. in essence the change in money wont give us any economic boost but its easier for people to carry money and makes more sense given the coutries we trade with am tired of interpreting that for example if you have $1 its equivalent to K5000 and remember am not being delusional please get the facts right than just making blantant comments with no sense for the sake of commenting
David
January 24, 2012 at 12:20 pm
Good show, we shall not be carrying bags and bags of notes when going to Shoprite.
M.K Agaba
January 24, 2012 at 12:23 pm
Direct more resources to productive sectors of the economy, strengthen value addition, support export promotion, industrialization & tourism the value of the currency will improve otherwise where it is, is its real value no need for removing the 3 zeros
mtonga evans
January 24, 2012 at 12:41 pm
the buying power of the currency is what matters the most. The move sounds smart,like wanting to rid of the usage of bigger figures. the point however is will the market accept that? yes it will accept but that will take time coz there will be opposition. this is true becoz we must realize that the 50000ZMK printed by the other company were being reject as fake which wasn’t suppose to be the case. the point is the market place,circulation pool for the money has become sensitive.
however the currency power wont change.wth time for sure there may be some positive changes to the buying power.
gaddaf
January 24, 2012 at 12:45 pm
bwana minister, lets hope 2moro u wont remove zeros from our ages
JENKEM
January 24, 2012 at 12:48 pm
the idea is right but the time of adaptation will prolong and people will have their money stolen along the way
Morgan
January 24, 2012 at 12:53 pm
I think i love this move,its one good way of starting to improve on our economy..Great move guyz,,bravo!!
dakalenga
January 24, 2012 at 1:11 pm
with or without the so called sangomas,zambia is winning this years afcon.whether u like it or yes.
animal daniez
January 24, 2012 at 1:44 pm
mmuu intresting
Chakaka
January 24, 2012 at 1:49 pm
Liato, you are lucky that your money will not rot in the ground. I know that the guys still burrying cash will start spending on anything to beat the dealine. I hope they will not increase inflation rate or weaken the kwacha by increasing the demand for foreign currency.
umu tombwa tomya kulu!
January 24, 2012 at 1:49 pm
rubbish!! hwzit gonna benefit us? w@s d triple effect on da economy? hw mch of d@ wil i use to get a $45000 car?
Dambiso
January 24, 2012 at 1:53 pm
Where will I take my billion in K50,000 notes. Please advise before 6 months elapses!!!
Kim
January 24, 2012 at 2:01 pm
.thats intrestin buh hp it wont lead us 2 the mugabe error mmd idots unbury ur moni:-D
owen
January 24, 2012 at 2:22 pm
the removing of the 3 zeroes; this will help us to allow those who have put money in the ground like liato to put back in circulation.
Watchman over Watchdog-Galileo Galilei is back!
January 24, 2012 at 3:22 pm
We shall stop mentioning billions but thousands. When you mention millions it will be for mega projects.
Let us attract industries which will make use of the copper in the Multi-Facility Economic Zones (MFEZ)in Chambishi and Lusaka South. Where we can start manufacturing copper based circuits of motherboards or such stuff. Eventually we once more start manufacturing radios and computers. We at one time used to manufacture ITT Supersonic world receiver radios in Zambia. We start to manufacture electric transformers for sale to our neighbours.
Why cant we start to make juice from the abundant mango that goes to waste in the Luapula valley and we export?
Kantwa
January 24, 2012 at 3:25 pm
Nice one…thinking strategically
Born Perfectionist
January 24, 2012 at 3:29 pm
Im not an economist but i do know that value of any currency is judged by its purchasing power, now if a bag of meali-meal costs K50,000 today and three zeroes are knocked K50,000 becomes K50 and a bag of meali-meal also comes to K50, what gain will we get there. Please if there are any ecomists out there please help me understand this.
swililili
January 24, 2012 at 3:34 pm
MMM,Liato,Dora Siliya and ba mudala ba RB you are in shit.This what corruption can do to you guys ukushika indalama kwati ma cash crops
punza
January 24, 2012 at 3:35 pm
the government that it would “rebase the Zambian [currency the] Kwacha by dividing the current notes by 1000”. This will effectively make a K5000 equal K5; a K10,000 will be K10 and so on.
The unsurprising question on most Zambian’s minds will be; what does that mean for me? Let us now explore some of the pros and cons of effecting such a decision. To begin with, the implications of the move need to be established.
This move is in effect a REVALUATION (opposite of devaluation) of the kwacha. Its value with respect to other currencies is being increased. The United States dollar will be taken as an example because of its universal use. Before effecting such a decision, about K5000 = $1. However, after implementation of the revaluation about K5 will be needed to obtain $1.
This has a number of implications from the Zambian perspective. To start with, it makes the Zambian Kwacha more expensive relative to other currencies. In the case of the dollar, Zambians would now get more dollars for fewer Kwachas. All else being equal, it also makes Zambian exports more expensive. Taking airtime as an example, currently there are K5000 airtime scratch cards in Zambia. If a solely Zambian company produces and sells these to the U.S, they get approximately $1 for every K5000 card. However, if the Kwacha is now rebased to K5 for every $1, the airtime selling company would now have to get $1000 for K5000 worth of talk time to an American consumer. Hence the conclusion, exports from Zambia will be more expensive to foreign markets (all else being equal). On the other hand, if a U.S producer of airtime currently sells to Zambia, they get approximately $1 for every K5000 of airtime produced. This is assuming the current approximate rate of K5000 per U.S dollar. If this rate suddenly changes to $1=K5, the Zambian importer would get $1 worth of U.S airtime for only K5. Presuming the Zambian’s earnings and all else remain equal, Zambian imports are now cheaper by K4,995. If you are Zambian, do not be excited yet because everything becomes messed up when that ‘all else being equal’ is lifted. For instance, if your salary is K5million before the change, you would expect your employers to ‘rebase’ it to K5000 as well-effectively meaning no real change for you.
In summary, the implications of ‘knocking off’ the zeroes from the kwacha are mainly threefold:
1.The kwacha becomes more expensive relative to other currencies
2.Exports from Zambia become more expensive in international markets
3.Imports from other countries into Zambia become cheaper.
As has been established from the preceding paragraphs, these three only hold true if all other factors are held constant.
Implications aside! What are some of the advantages and disadvantages of such a move.
ADVANTAGES:
Stolen money
There has been public outcry of recent that some people have stolen and hidden away huge amounts of cash. Many people are of the view that introducing new notes based on the ‘rebased’ currency would force those people to try and bring that money back into circulation.
Imports become cheaper
Zambia’s balance of trade has a leaning towards imports. For Zambians a revaluation of the currency would be a chance to import more goods. This may however be argued to be economically wrong in the long run.
Investor confidence
It may also be argued that the psychological ‘increase’ in value of the Kwacha creates an impression to citizens and investors that the Kwacha is a strong currency. Coupled with the relatively stable political and economic environment, such impressions raise investor confidence.
Simplification of statistics
There is no doubt that statistical and accounting/finance calculations may be made easier with lesser zeros on the currency.
DISADVANTAGES
Printing costs
The most obvious cost and disadvantage of this on the Zambian people will be the cost of reprinting the new notes. This is likely to be exacerbated by recent situations where people cry foul over those in governance not following tender procedures in the allocation of public contracts and hence not doing things in the public’s best interest.
Mindset change/pricing
Another foreseeable problem is possibility of failure to change the mindset of the Zambian public. The biggest hurdle here will most likely be teaching the common man how not to be taken advantage of by unscrupulous traders.
Competitiveness of exports
As discussed above, revaluing a currency increases the cost of local products relative to foreign ones. This makes locally produced goods less competitive on the international scene and may suffocate local industries.
Despite all these advantages and disadvantages, various factors influence Zambia and its interactions with the foreign markets. A better analysis of will be possible with the benefit of hindsight. For now, Zambia can only look to China which has re-valued its currency the Renminbi (Yuan) before.
adriano
January 24, 2012 at 4:01 pm
well, a good idea but how much will it cost us.
Mudenda
January 24, 2012 at 4:29 pm
@ PUNZA, thanx alot for a piece of analysis. I was completely lost with the issue of removing 3 zeros.I now understand perfectly well.Looking forward to hear more from you.
Wanyafye Tigers 1 Profund Warriors 1
January 24, 2012 at 4:33 pm
Good news – short time at Alpha Bar is now 50 ngwee only.
Wanyafye Tigers 1 Profund Warriors 1
January 24, 2012 at 4:46 pm
@PUNZA – thx. This will also help the GRZ establish just how much kwacha there is in circulation and at BOZ now and GRZ plan for any future reprints fairly well.
Watchman over Watchdog-Galileo Galilei is back!
January 24, 2012 at 5:07 pm
Rebasing the Kwacha by dividing by 1000 means in the effort to REVALUATE the Kwacha, the currency will be improved 1000 times. Its value was lost 1000 times from when we last used the figures we want to get to now.
It was say K10 x 1,000 (loss in value) = K10, 000.
We want K10, 000/1,000 (rebasing) = K10.
We need to rebuild industries that really matter in order to sustain this development. We must become more productive. The MMD killed many industries which somehow taught us some skills. We could assemble cars (FIAT), manufacture radios, batteries, assemble Land Rovers. We used to fly Commercial planes using our Zambia Airways. We used to run ZCCM. These efforts were fine. What was wrong was our attitudes not to run those industries with a profit motive. Our people need to get busy, let them acquire skills.We have lost a lot of people who ran these kinds of industries.
The challenge is to redevelop this cadre of skilled people and technicians so that we become innovative. The Zambian economy will not be strengthened by this move alone.
We also have to be recognise the increased population.
The Kwacha will then hold and compete favourably.
Mr wise
January 24, 2012 at 5:10 pm
@Looking at our GDP marked for export,wont the revaluation of our currency make the trade deficit vary invervely as the balance of payment?
bryans
January 24, 2012 at 6:02 pm
people think, there is no need of changing coz the quantity will remain the same. if u carry 10 notes of k1000,to make k10000, you will still carry 10 notes of k1 to make k10. the wise will agree
mainza k
January 24, 2012 at 7:18 pm
firstly maost people must research a bit more to acquaint themselves with what the government is actually trying to do,the govwernment is not carrying out revaluation but rather redenomination.redenomination is defined as ‘the process of changing the face value of banknotes or coins used in circulating currency’.redenomination which the government is trying to undertake doesnt affect neither aggregate supply nor aggregate demand of an economy.in economics any growth in the economy ia as a result of an increase in demand or supply.also note that a country’s ability to produce is mainly determined by 3 main factors resources ,technology and institutions,not a change in currency.furthermore producers respond to changes in relative prices but redenomination does not change the relative prices.what the government is doing is nothing but a recaliberation of our currency.the problem we are facing right now is as a result of the hyperinflation the zambia went through during the 1990′s our kwacha had to be expressed in higer numbers because of the continually decreasing purchasing power of the kwacha,thus with the slow down in inflation it woud be right to recaliberate our curreny,this will ease the strain on systems and the inconvinience of carrying large stacks of money.moreover this will be a good test for the government to see if they will be able to reduce inflation,because if the fail to do so,the zeros will reappear on our kwacha,examples of countries that have carried out redenomination,zimbabwe,though it failed to control inflation,mozambique,china in 1949,taiwan,brazil,yugoslavia after the second world war,turkey,argentina,denmark,germany in 1873,southafrica in 1961,australia in 1966,new zealand in 1967,the euro has also been redenominated in 2008.so lets argue on solid points
CHILE MAN
January 24, 2012 at 9:38 pm
i thank the govenment has though what i was planing because we want to know how many people have stolen the gvernment money
kandi
January 25, 2012 at 1:34 am
thanx punza. alot of confusion cleared in my mind after reading that. I was panicking at the thought of what all this will mean