Patriots for Economic Progress (PeP) President Sean Enock Tembo has expressed concern over the Bank of Zambia’s decision to significantly reduce the value limits for both local and foreign currency cheques transactions to K25,000 and $5,000.
The Bank of Zambia (BOZ) recently announced that the maximum transactions for both local and foreign currency cheques should be at K25, 000 and $5,000 respectively, with effect from 5th July 2017 to significantly reduce the value limits in Zambia.
Speaking during a media briefing at Lusaka’s Stay Easy Hotel, Tembo said as much as he appreciates Bank of Zambia’s intention to address money laundering and cheques fraud in the country, the decision by central Bank is misdirected because in the context of the Zambian economy, the informal sector is already significantly larger than the formal sector.
Tembo observed that limiting the values for cheques transactions and over-the-counter bank withdrawals, Bank of Zambia will effectively drive most Zambians away from commercial banks and into the grey informal economy which is cash-based.
The Opposition PeP President said the Bank of Zambia would have done was to work on helping Zambians who are in the informal sector of the economy which is cash-based, to transform to the formal sector which is banked.
“Already, the recent bank failures like Inter-Market Banking Corporation, Cetzam, etc where Zambians have lost their deposits, have made most citizens jittery about utilizing the banking sector, and the added inconvenience of the soon to be introduced Item-Value-Limits by BOZ will just make it even less attractive to keep money in a bank vis-a-vis hoarding the money at home”
“Other disadvantages of promoting an informal cash-based sector include the increased cost of printing currency as a greater amount of currency has to be in circulation as well as faster wear and tear of currency due to more frequent use. A cash-based economy also results in more crime and a greater cost of doing business as well as reduced economic efficiency plus a limited responsiveness to monetary policy. An informal economy also significantly reduces tax efficiency as it is more cumbersome to collect direct tax from the informal sector than it is from the formal sector”
“Our expectation as PeP is that at this stage of our country when the informal sector of our economy is larger than the formal sector, BOZ and other Government agencies must be concentrating on encouraging our citizens to formalize their business operations by utilizing the banking system, instead of discouraging them from doing so by putting in place unnecessary restrictions”
And Tembo has since appeal to Bank of Zambia (BOZ) in particular and the Government in general to reconsider the planned introduction of Item-Value-Limits for cheques transactions and over-the-counter withdrawals which are planned to take effect on 5th July 2017.
“We strongly believe that the disadvantages of this decision to introduce value limits far outweigh any advantages and the inherent consequences on our economy will be dared” Tembo said