THE business community has challenged Government to come up with a win-win decision on the ban against quoting prices in foreign currencies to boost foreign currency reserves in Zambia.
Zambia Association of Chambers of Commerce and Industry vice-president for the northern region, Raj Karamchand said boosting foreign currency reserves would enhance the economic development in Zambia instead of bringing a blanket ban on quoting of goods and services in dollars.
Mr Karamchand said enforcing stringent currency regulation bans had the potential to send a wrong message to would-be investors and could curtail investments and foreign currency inflows in Zambia.
Finance Minister Alexander Chikwanda signed Statutory Instrument (SI) number 33 of 2012 on May 7, 2012 which came into effect on May 18, 2012, prohibiting the quoting and pricing of goods and services in foreign currency.
But speaking during a chief executive officers’ meeting in Lusaka yesterday, Mr Karamchand said the blanket ban on pricing goods and services in dollars would lead to further depreciation of the Kwacha and increase inflation levels in the country.
“The slowdown in foreign currency investment may naturally lead to a slowdown or may even shut down many industries and associated trades, thereby contributing to unemployment and loss of Government revenues,” Mr Karamchand said.
He said the Bank of Zambia (BoZ) and Government should ensure the gains the country had achieved were not eroded by introduction of abrupt measures and regulations.
“As a country we have scored a lot of successes in the business environment and other countries have learnt from us and have just bettered their systems.
“We should learn from the recent economic experiments and experiences of some neighbouring countries such as Zimbabwe, Tanzania and Malawi where stringent foreign exchange regulations along with other economic measures have led to serious economic slowdowns,” he said.
Mr Karamchand said regulations on foreign currency transaction had the potential to create distortions in the economy and could boost informal activities at the expense of the formal economy.
This would have adverse effects on official sources of foreign currency and Government revenues.
Mr Karamchand said tough measures had the potential of creating a foreign currency shortage in Zambia because there was a likelihood of the business community hiding the foreign currency or taking it away, thereby encouraging informal foreign exchange activities.
He further said banks should be allowed to accept foreign currency deposits until the grace period elapses.
And BoZ director of financial markets, Peter Banda said the central bank was aware of the issues raised by different stakeholders and would continue to listen to their concerns before responding.
“We know the SI has affected different entities in different ways and we are currently in the listening mood, but we must point out that the measure is not aimed at introducing foreign exchange controls,” Mr Banda said.
He said the ban on quoting goods and services in dollars was meant to strengthen the Kwacha as the national legal tender.