Economist warns of inflation rise after Kwacha re-basing

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A Lusaka based economist Andrew Sinyange of Consumer Unit Trust has warned that if authorities do not adequately deal with negative effects of re-basing the local currency-the kwacha, the economy could slide back into heavy inflation.
Sinyangwe told the Lusaka Voice in Lusaka on Tuesday that some of the negative consequences of the re-based currency included ballooning of prices which resulted from retailers rounding of commodity prices to the near highest.
His comments come in the wake of major concerns from various sectors of society and the call on the Bank of Zambia to clearly state hidden negative effects re-basing of the Kwacha would bear on the economy.
“ There are some negativities which are associated with this re-basing of the currency. One of them is that these retail shops, mostly those that deal directly with consumers themselves will be rounding off figures in the re-based currency meaning that when they round of figures, these figures will be ballooned, they become large amounts of money for a consumer to buy a product and if that happens there will be an increase in inflation and when inflation is increasing it means that the consumer will be able to buy less with their money,” he said.
Current inflation levels according to Zambia’s Central Statistical Office and the Bank of Zambia stand at close to 7 per cent.
There have been complaints from some citizens following Zambia’s re-basing of its local currency, complaints of difficulties in distinguishing bank new high value notes from the old currency and the basic calculations involved in scaling down old currency to new terms.
“This money is the same, its same value, it is confusing at the same time because if as a young person I have trouble calculating the maths, what about the old people in rural areas, I feel that it was not necessary to have this new kwacha because it has not added any value to our economy, in fact, it has cost us a lot as a country,”, said Melody Muluwe, 24 of Lusaka.
Shortly before launching the new notes, Bank of Zambia project manager for re-basing Morris Mulomba told journalists at a press briefing in Lusaka that the take off with the new Kwacha was likely to be turbulent with some businesses and banks taking longer to adjust their systems for the new currency.
“There would be system failures and of course, some people will have a few challenges to distinguish the old from the new kwacha which are to be used side by side until June when we withdrawal the old notes, but we are doing everything possible to contain such likely eventualities through continued liaison with parties involved,” he said.
For close to two decades, Zambia’s local currency the Kwacha has been high value notes which were introduced during the country’s peak in inflation.
Now, President Sata’s government which has been passionate about the re-basing excises says economic stability and need to bring sanity to the currency has necessitated the launch of new currency which comes in in denominations of 100, 50, 20, 10 kwacha and ngwees.
Some however feel the new money is a breath of fresh air that will help them transact easily.
“I think we have had a situation where especially we have foreign friends when they come to Zambia, it was a bit difficult for them to calculate or to understand the denominations, so I think its a plus on the Zambian government,” said Chilu Kabaso of Lusaka.
According to the World Bank, Zambia’s economy is said to be one of the fastest growing in the region at 7 per cent per annum, its government hopes that the new currency will play a role in sustaining this grow.

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